Plants ready for sale in the nursery quarters at the Yarralumla Nursery.

Plants ready for sale in the nursery quarters at the Yarralumla Nursery. Photo: Jeffrey Chan

Years of alleged mismanagement and misuse of government property costing taxpayers millions of dollars has been uncovered at Yarralumla Nursery.

The ACT government-run business is under new management and the entire nursery operation has been overhauled after failing to make a profit for a number of years.

A Canberra Times investigation found the list of failings included:

Only two of the 28 heritage-listed glass houses  at the Yarralumla Nursery are in full working order. Click for more photos

Yarralumla nursery left to rot

Only two of the 28 heritage-listed glass houses at the Yarralumla Nursery are in full working order. Photo: Jeffrey Chan

  • Only two of the 28 heritage-listed glass houses  at the Yarralumla Nursery are in full working order.
  • One of the older glass houses  at the Yarralumla Nursery that are no longer used.
  • Damaged glass in one of the older glass houses.
  • Mounds of soil at the far edges of the Yarralumla Nursery.
  • One of the mist propagation rooms at the Yarralumla Nursery.
  • Operations manager Martin Zierholz inspects the progress of plants in one of the mist propagation rooms.
  • The old sand beds in the older glass houses at the Yarralumla Nursery.
  • Plants ready for sale in the nursery quarters at the Yarralumla Nursery.
  • A temporary nursery.
  • One of many drainage pits at the Yarralumla Nursery to prevent flooding, this one is 5 metres deep.
  • One of the older glass houses  at the Yarralumla Nursery that are no longer used.
  • Moveable benches in one of the newer glass houses.

■ the destruction of more than 133,000 plants and trees worth $1.5 million last financial year

■ nutrient-rich water, which feeds algae blooms, was running off the property and into Lake Burley Griffin

■ Only two of 28 heritage listed glasshouses in complete working order with 18 closed for safety reasons and an inquiry into an employee confirmed six breaches of the Public Sector Management Act leading to the staff member's dismissal.

The executive director of Business Enterprises Division at TAMS Phillip Perram said the government first became aware of problems at the nursery when it sought financial assistance in 2010 and installed a new manager Stanislaw Leszczynski and horticulturalist Martin Zierholz this year to fix the floundering business.

The Territory and Municipal Services annual report 2011-2012 does not list an individual result for Yarralumla Nursery - instead three government-run businesses, the Capital Linen Service, the nursery and ACT Property Group's profits and losses are reported together.

The three business lost $7.8 million last year, up from $4.4 million the previous year and despite predictions of a modest profit to the tune of $428,000. TAMS said it would not release the individual nursery results as they were commercial-in-confidence. In the financial year ending June 2009 the three businesses as well as Tourism and events made a profit of $35.6 million.

Mr Perram said the business would not have been restructured if it was performing and expects the business turn a profit in 2014.

He said an audit by consulting and technology firm Oakton looked at the financial and business practices and all the recommendation from this report were being addressed. The Canberra Times was refused access to the document on the grounds it was commercial-in-confidence but Mr Perram described it as a ''wake-up call''. The ACT government received the report in September last year.

''The government is the one that makes policy decisions in respect of how government businesses operate … [the Oakton report] was looking at the financial position and current business practices,'' he said.

As part of the overhaul the number of plant species the nursery will carry has been cut from 4000 to about 400. It will be a gradual decrease through attrition.

Mr Perram said previous managers had underreported plant losses leading to the $1.5 million writedown of plants stocks this year. But according to a spokesman from TAMS plant write-offs in 2009 and 2010 and 2010 to 2011 were approximately 7 per cent in each year, just below the industry standard of up to 10 per cent. But the TAMS annual report for those years indicate that write-offs were less than 10 per cent in 2009-2010 and in 2008 and 2009 it was 10 per cent.

Last year plant write-offs were 20 per cent and the $1.5 million figure was the cost of the plants while the wholesale and retail value would be much higher. The plants were mulched and Mr Perram said it was not possible to gift them to schools or charities.

Mr Zierholz said his biggest concern on starting the restructure was water contaminated with nutrients and nitrogen leaving the site. Water flowing towards the lake has scarred the landscape and damaged fences are visible on the 10-hectare site.

To fix the problem, which occured during heavy rain, 18 five-metre-deep pits flowing into a closed drain system have been completed and two clogged pits leading to an overflow pond were cleaned, linked and reopened.

''It is basically called a close hydrological cycle and like in Europe it is by now a law that you must design places with a closed hydrological cycle to prevent nutrient washing for example into Lake Burley Griffin,'' Mr Zierholz said.

But Mr Perram said as no tests of the run-off had been done and there was no proof the water was nutrient-filled despite the nursery using fertiliser and weed killers.

He said he did not know how long the two pits were clogged or how often water from the nursery was flowing into Lake Burley Griffin.

Mr Perram said a decision to stop a large-scale propagation operation was made about six years ago.

However, under the new business plan more than 80 per cent of plants would be grown either from seed or cuttings.

Mr Zierholz described the old propagation and species selection techniques as antiquated. ''I was called in to assist in a difficult nursery and one of the things that I found was that propagation was simply done ad-hoc and without plan or program - just with a bit of this, a bit of that there,'' he said.

''More than 90 per cent of production was actually not produced in the nursery but brought in from other nurseries. This is where the nursery incurred [costs] - this is not profitable. This is not sustainable in the long term - this is where the money is made.''

In the past the propagation that was done through cuttings averaged 100 per person per day, well below the average of 1000 per person per day. Now staff are meeting the industry standard.

''They were in the past propagated on sand beds - this is an old method that is very time consuming and also unhygienic in the sand. There is a build-up of fungal diseases,'' Mr Zierholz said.

Mr Leszczynski said the sand needed to be replaced about 10 times each year costing more than $1000 a time, while the new heated mats can be wiped by one worker with a rag dipped in bleach.

Mr Perram said the unused glasshouses would be restored. A number of the glasshouses are dangerous as glass falls down in strong winds. This year the government allocated about $200,000 to restore two glasshouses.

''As part of a review of the process we are going to do more seeds and cuttings and we need more glasshouses, we'll get these two and then next year we hope to get another two,'' Mr Perram said.

According to the ACT government a staff member who was dismissed for irregularities over many years allowed a commercial operator to use government plant, equipment, materials and utilities without proper process or records, failed to follow proper procedure in contracting a commercial operator for services and failed to keep adequate records.

The staff member also disposed of a government vehicle without adequate records, failed to charge rent for use of space at Yarralumla Nursery, used a government mobile phone for personal calls and used a government credit card for personal purposes. The charges on the credit card were repaid.

''There is a matter of fraud that is reported in the annual report related to Yarralumla Nursery,'' Mr Perram said.

Mr Leszczynski said the business plan had changed. ''We have to make sure there is transparency in how taxpayers money is spent,'' he said.

''We are going to specialise in grown cool climate stock and I stress cool climate because we are not going to the Sydney markets but we are definitely going to go to Wagga, Bathurst, Albury.''

He said the nursery was back on track since Mr Zierholz started at the beginning of this year. ''The transformation will take a couple of years to come into effect. But at this stage we needed to reduce the varieties to get the nursery into a better position to implement all these changes … We need to adjust strategy, we need to increase sales.''