http://www.philadelphiacontroller.org/zoo.html
Philadelphia Zoo Performance Audit
Released - November 17, 1997
Purpose
The purpose of this performance audit was to determine if the Zoo was operating in such a manner as to ensure that it would maintain the current level of financial independence from the City and to identify opportunities for increasing revenues and reducing costs to help foster that independence.
Background
The Philadelphia Zoo (Zoo) is operated by the Zoological Society of Philadelphia on a 42-acre site in Fairmount Park. The site is leased from the City for $1 per year. In addition to providing park land at nominal rent, the City also provides water and trash services valued at approximately $2.2 million per year and a capital contribution averaging $900,000 per year. The Zoo employs a full-time staff of 158 people and its 1997 operating budget, exclusive of City contributions, was $16.1 million.
Results in Brief
Accrediting organizations have praised the Zoo's high standards of professionalism, its competent and hardworking staff, and its quality education, conservation, and volunteer programs. This level of performance has been achieved while maintaining a remarkable degree of self-sufficiency. While the Zoo faces a number of significant obstacles, there are opportunities to increase attendance and membership and operate more effectively and efficiently.
Obstacles to Self-Sufficiency
Funding, size, geography, and parking are some of the obstacles facing the Zoo.
The Zoo receives less than half of what the average large zoo receives in government subsidy; operating losses are routine. To bolster gate revenue, the Zoo has raised its prices. From fiscal 1991 to fiscal 1995, ticket prices increased 48% to a level 31% above the industry average. From fiscal 1992 to fiscal 1995, family memberships increased over 30% to a level 29% above the industry average. Attendance has been mixed; however, the overall trend has been a slow decline.
Size and geography place restrictions on the kinds of exhibits and the kinds of animals the Zoo can display. This makes the job of attracting and keeping visitors more difficult. Furthermore, parking is inadequate when attendance is heavy; and the Zoo's location creates security concerns for some.
What Kind of Job Is the Zoo Doing?
Budget analysis highlighted the maintenance and marketing/PR areas.
In most cases we found that (1) expenditure levels (budgeted costs) were roughly equivalent to those of other large zoos, (2) were different due to unique circumstances, or (3) were different and were being brought in-line through ongoing efforts. Two areas caused sufficient concern for us to take a closer look: maintenance and marketing/public relations.
Staffing levels and salaries are below average in most areas.
We found the Zoo to have lower-than-average staffing levels in five of seven areas. Staffing levels in animal care and maintenance could be a problem. We found salaries to be below average in four of seven areas. Where salaries were higher than average, we either did not find the differences to be significant or did not find them to be inconsistent with the Zoo's mission or market-driven environment.
Given the market size, the Zoo could attract even more visitors.
With regard to attendance, the Zoo's market penetration (exploitation of the available market) is below average. With regard to memberships, it is slightly above average. These facts suggest an opportunity to increase both.
Concessions show excellent profit potential and private support has been strong.
Per capita concession revenues are excellent indicating a strong profit potential. Efforts to obtain private support for capital and operating needs have been quite successful. $12 million was raised for several major capital projects, $1.8 million for the Zoo Renewal Fund, and over $2 million, so far, for the Leadership Fund.
Long-range planning is underway as well as innovative marketing ideas.
The Zoo has begun the process of drafting a comprehensive master plan addressing such issues as construction, renovation, funding, development, business forecasting and marketing. A marketing firm was retained which mounted an impressive television campaign this past spring. Management has introduced several public relations and revenue enhancement initiatives including the Zoo bus, the airport Zoo cart, and the Zoo license plate.
Accreditation reports are highly favorable.
The American Zoo and Aquarium Association (AZA) and the American Association of Museums (AAM) recently notified the Zoo of its reaccreditation in reports which were, in general, highly favorable. The AZA commented that "the [Zoo's] volunteer program is a model for any zoo to follow." There are currently over 900 volunteers.
Opportunities to Do Even Better
Maintenance resources are below average.
The Zoo allocates about 9% of its operating budget for maintenance, slightly more than half the industry average. The Zoo also has about half the maintenance staff of the average large zoo.
Our building inspection disclosed a number of maintenance problems.
During our building inspection, we noted deteriorating interior masonry — severe in some cases — and plumbing problems in a number of buildings ranging from leaks to connections which posed a potential or actual health hazard. In three buildings there were conditions which could be structural problems. We also noted a lack of emergency generators, exterior walls needing pointing, possible friable asbestos, and termite and vermin infestation.
Work orders covering serious conditions remain outstanding over a year.
An analysis of 524 outstanding work orders disclosed that more than 50% were over 90 days old; 15% were over a year old. Nearly a third were coded priority 2: high probability of serious injury, illness, or structural damage. Nearly two-thirds of the priority 2 work orders were over 30 days old; 10 were over one year old.
Among the priority 2 work orders was one dealing with an animal health issue (outstanding 28 months) and another dealing with heat trace tape, the suspected cause of the Primate House fire (outstanding 11 months).
Zoo's small size limits exhibit options.
The Zoo's relatively small size limits the size of exhibits the Zoo can create, as well as the kinds of animals it can display. If the Zoo is going to compete with other recreational and educational facilities in the area, it must project the image of a major attraction. Expansion and more efficient use of space need to be considered.
An in-house food service operation could be more profitable.
Our five-year projection (1998-2002) of revenue under two scenarios (in-house vs. McDonald's) indicated that an in-house food service operation would yield approximately $800,000 more to the Zoo. The impact of McDonald's on visitor perception of food services has yet to be determined.
The Zoo has been paying more for advertising and getting less.
Since 1988, the Zoo's cost-per-attendee ratio (advertising cost per visitor) has increased at an average annual rate of 14.5%; the attendee-per-dollar ratio has declined at an average rate of 12.7%. With regard to advertising, the Zoo has been paying more and getting less. Exhibits and events appear to have a much more profound effect on visitor behavior than advertising.
The suburbs are a large untapped market.
Two-thirds of the Zoo's visitors come from the Philadelphia region, and most of these visitors are Philadelphia residents. However, twice as many people in the Philadelphia region live outside the City, and these people have higher per capita incomes. These facts indicate there is a large untapped market beyond the City limits consisting of people who, by virtue of their income, are more likely to become Zoo members and more likely to be frequent visitors.
July attendance receives little advertising support.
Compared to other zoos in the northeastern United States and Canada, the Philadelphia Zoo's attendance is stronger in May and weaker in July. Some of this difference may be explained by advertising patterns. While the attendance for May, July, and August is in the same general order of magnitude, July's allotment for advertising is only about one-fourth that of May or August.
The Girard Ave. corridor is not visitor friendly.
An inspection of the northwest approach to the Zoo along Girard Avenue (the Girard Avenue Corridor) disclosed areas strewn with trash, broken fencing and unkempt vegetation, and abandoned houses and cars. Parking lot attendants told us of vandalism and visitors reluctant to use remote lots.
Parking is inadequate when attendance is heavy.
When attendance exceeds 10,000, the demand for parking space is greater than the current supply. This situation must be remedied before the new primate exhibit opens in the spring of 1999.
Consultants work without contracts and billings are insufficiently detailed.
In a number of cases we found that consultants worked without contracts or commenced work before a contract was signed. In reviewing consultant billings, auditors noted invoices which provided insufficient detail or documentation, gave no indication of having been reviewed or reconciled, or billed for services contrary to contractual terms and conditions.
Fire report did not address management policies and procedures.
The board of directors' report on the Primate House fire did not address possible weaknesses in management policies and procedure which might have contributed to the tragedy. This is a critical component of any disaster review because failure to identify and remedy such weaknesses could lead to similar incidents in the future.
Our analysis of outstanding maintenance work orders indicates management policies and procedures do not ensure that management receives accurate information about critical maintenance issues or that management responds expeditiously to the information it receives.
Recommendations
Consider the need to allocate more resources to maintenance and continue efforts to implement a fully-operational preventive maintenance program.
Review outstanding priority 2 work orders. Reclassify or eliminate those which are erroneous, and concentrate resources on those which are bona fide.
Ensure that critical maintenance issues are addressed before considering new construction.
Consider, as part of long-term planning, expansion into Fairmount Park. One possibility is a 55-acre parcel within one-quarter mile of the Zoo. In the near term, consider moving non-exhibit facilities to the Park. Explore with Park officials the possibility of using the Concourse Drives or other sites for additional parking.
Attempt to negotiate a better deal when the McDonald's contract is due for renewal. Unless a better deal can be obtained or profitability can be increased, consider rebidding the contract or returning food services in-house.
Consider reallocating a portion of the advertising budget to special events, new exhibits, and public relations. Increase outreach to the suburbs and, if suburban membership can be increased, consider reducing ticket prices to make the Zoo more accessible to low-income residents. Assess the need to provide more advertising support for the month of July.
Make every effort, within the limits of available resources, to improve the appearance of the Girard Avenue corridor. Solicit the help of the City, Conrail, and the Pennsylvania Horticultural Society.
Review the contract approval process to reduce the time required to produce a finished product. Amend the payment approval process to require evidence of detailed review, reference to executed contracts, comparison of invoices to contracts, and sufficient evidence of receipt of services. Provide contractors with a copy of the Zoo's tax exemption certificate.
Review management policies and procedures, particularly with regard to maintenance, to ensure that critical issues are accurately identified and appropriately addressed on a timely basis.
What More Should the City Do?
Maintain current level of support and make payments directly.
The City should maintain its current subsidy level and index it. Since the current subsidy is keyed to water usage and the Zoo is attempting to reduce that usage, pass any savings along as a direct operating subsidy. Pay the annual subsidy directly to the Zoo to make the amount of City support clear to the State and suburban counties.
Continue efforts for regional funding.
The City should continue discussions with suburban counties about the benefits of regional funding. The Administration should work closely with the Philadelphia delegation to the Pennsylvania General Assembly to make regional funding of cultural assets a reality.
Support transportation alternatives.
City officials, along with other interested regional leaders, should continue to push for federal funding for transit projects benefiting the region. The Parkside rail station and the Schuylkill Valley Metro are two examples. The City and SEPTA should support, with influence and capital dollars, if necessary, transportation alternatives for the Zoo.
Provide traffic control.
Provide police for traffic control during peak attendance periods to avoid traffic congestion as well as potential safety hazards on the Schuylkill Expressway.
Support the Zoo's self-help efforts.
Support the Zoo's efforts to clean up the Girard Avenue corridor and to expand operations into Fairmount Park.
