Professor Elam

Sat April 3, 2010

We touched on this topic Nov 22 2009 and Jan 23, 24 2010. We recounted that money from the Ford Foundation intended for capital use had been used for operations, the musuem has never come close to initial projections on attendance. And finally, the successful Museum of the Americas is down the street,  why fund a failure?

To its credit, the Express News has been keeping tabs on the story.  Employees are complaining of unpaid bills and later payrolls. And the city is on the hook for the rent. But, rather than pull the plug, the City has signed up for another $450,000 (a good deal of this may be rent for which the City is stuck anyway) AND another $2.1 Million in debt. Our point from the cost accounting angle is that the rent is a sunk cost, no matter what, that is gone so it should be ignored. Supposedly the money will not be extended unless and I quote ' a viable business plan is not developed in the next 30-60 days.'  Gee, why wasn't a viable business plan in place after attendance was 50% below expectations the first year?  We wondered in January if there would be any accountability, 60 days and counting…..no doubt there are many worthy organizations in SA that would appreciate the City paying their rent. 

Again to the Express News credit they are reporting and calling for an end to this but, 

what constitutes a viable business plan for a bankrupt company nowhere near its expectations?

This is what we teach in mangerial accounting, the plan must have specific  outcome measures, without them it is a matter of conjecture.