The previously secret report has been leaked against a backdrop of fresh scrapping between Motat volunteers and staff and a walkout two weeks ago of about 20 volunteers.
One volunteer, who operates an historic boiler, issued a warning about safety of its future operation by people without proper qualifications.
Ken Pointon, the former volunteer and operator of the historic beam boiler, said: "In the worst case scenario you'd blow the whole place up. You'd kill everyone. The potential danger is horrific and that's why [operators] had qualifications."
The departure of the steam section after a clash with management has deprived Motat of volunteers qualified to run steam equipment, which Mr Pointon claims has been used since the walkout in mid-February.
The fighting between the members of the Motat Society, which started the museum decades ago, and the professional management, installed in 2000 after financial problems, was a fundamental rift highlighted in Dame Cheryll's report, titled A Critical Moment.
The report from Dame Cheryll, founding chief executive of the national museum Te Papa, said the management structure was "not fit for purpose".
It had created "damaged people, pushed beyond reasonable levels" in a place with "no clear single organising idea" and "an almost total lack of clarity of Motat's reason for being, its direction, its core story and its role in either the cultural or visitor economy".
She criticised the 2012 board - and predecessors - for a failure of leadership, saying an inability to function and deliver value to Auckland ratepayers was "deserving of ratepayers' opprobrium".
The lack of vision created issues which showed through "antagonistic, inappropriate and disruptive behaviour". It was "highly inappropriate for anyone with a duty of responsibility to deliver services and value to the ratepayers of Auckland in return for substantial funding".
She said Motat needed to change its offering to the public and move beyond its 1960s industrial roots. It needed a connection with modern New Zealand companies like Fonterra and Mainfreight.
"If Motat's only ability to engage with these companies ... relates to an ability to passively accept gifts of old trucks and vehicles which could then be considered artefacts, never to be touched or sat in again, it is hard to understand what value this represents, and to whom."
Motat chairwoman Lesley McTurk said there was acceptance on the Motat board, Auckland Council and its regional facilities body that ratepayers didn't get a fair return on $12m investment.
"The status quo is not sustainable nor is it defensible. The museum exists for the benefit of the Auckland community and it is not delivering on its promise to them. We are funded by ratepayers and we have an obligation to deliver a social dividend to them."
A new strategic vision for the museum was weeks away from being launched and would change Motat's focus towards fresh and interactive exhibits which would better engage visitors, she said.
New Motat director Michael Frawley said the strategic plan would also engage Motat staff and volunteers. "Not everyone will want to come on this journey. Some will be threatened by it. You get an element of disaffection or insecurity that comes out of change. There are some people who will feel exposed."
It was also hoped it would end the cycle of conflict which had coloured Motat's operation.
Mr Frawley acknowledged the beam boiler - a "key display object" - required special qualifications and Motat was searching for someone to employ fulltime to operate it. He said it had not operated since before December. "Nobody is going to be operating that particular boiler ... without having the requisite experience and knowledge because to do that would be dangerous."
Mr Taylor, who was on the board when the report was produced, said the treatment of Mr Pointon and volunteers was "dreadful". "I think he's been treated extremely badly. It's just an appalling situation."
Mayor Len Brown said he believed the problems to be historic. "It is well known that Motat has faced some longstanding challenges."
The appointment of Mr Frawley and a new board meant Motat was addressing issues.
Getting back on track
• Opened in 1964, run by 10 members.
• Six are appointed by Auckland Council's Regional Funding Authority.
• Four are appointed by the Motat Society.
• Gets $12 million ratepayer money each year.
• Motat draws 250,000 visitors a year. Auckland Zoo attracts 700,000.
What it could become
Museum of things - A collection of exhibits from the past, displayed for visitors to view.
• Examples: Smithsonian National Air & Space Museum (US), Beamish, The Living Museum of the North (England).
A light bulb institution - A place with tools and experiences which interact with history, the present and the future.
• Examples: The Eden Project (England), Exploratorium (United States).
