National Arts Council Annual Report 2009/2010

The National Arts Council briefed the parliamentary committee on its annual report and audit queries for 2009/10 on 16 March 2011.

The National Arts Council of South Africa briefed Members on its Annual Report and audit queries for the 2009/10 financial year, beginning with a strategic overview, strategic objectives and challenges. There was need for a clearly defined policy framework. A legislative review was pending. The delay in the appointment of Council had been raised by the Auditor-General as an area of concern particularly as this affected governance, accounting and leadership. The size of the Council was unwieldy with 23 Council members as against 28 staff members: this impacted on the organisation’s budget. Moreover, and the experience and skills of Council members was a critical success indicator. The relationship between the organisation and the Department was not supportive. As to the organisation’s national mandate, funds were insufficient to meet the needs of the seven sectors. Strategic interventions included, in particular, the organisation’s New Funding Model, and also partnerships with sector organisations, international donor agencies, other government al agencies, and the corporate sector, and work with the Provincial Arts and Culture Councils. Annual Report highlights and achievements included effective executive controls, for example, the Audit and Risk Committee. Also there were effective internal controls - annual risk assessments and a three-year internal audit rolling plan. There was a functioning management/staff representative forum. A staff bursary scheme was in place. There was a stable staff complement of 26: 98% Black and 2% White. There were three women in middle, senior and executive management. A performance management system was reviewed and policies were developed to be effected in the new financial year. Achievements included the successful hosting of the Fourth World Summit on Arts and Culture in Newtown, Johannesburg, provision of financial support to over 700 organisations, projects and individuals, provision of training support to 69 students and 40 training institutions, and partnership with Provincial Arts and Culture Councils in hosting artistic programmes during the Confederations Cup.

A financial overview comprised the audited annual financial statements (introduction , statement of financial position , and statement of financial performance ); the basis for qualification; a summary of the organisation’s audit history; surplus funding (surplus for the period, reason for the surplus , and approval of surplus ); and challenges to the 2011/12 budget. By law, 75% of the funding allocated to the organisation by Government should be distributed as grants in support of the arts, while the remaining 25% was to be utilised for operational expenses. The organisation’s current operating budget was 29%. However, the 4% shortfall was funded by interest earned on call account investment. The organisation’s original budget request was reduced by 17%. Instead of R82 627 000 only R68 485 000 was allocated. This affected the project funding allocation as both orchestras and company funding were committed allocations. R14 288 750 was available for general funding and was split equally amongst the seven disciplines. Each discipline would receive R2 041 250.

The bases for the organisation’s audit qualification were explained. The first four qualifications were connected to Downtown Studios. Firstly, In respect of revenue, the organisation did not recognise a grant from the national Department of Arts and Culture for the year ended 31 March 2009 in accordance with South African Standards of Generally Recognised Accounting Practice 23. Secondly, the organisation did not in 2008-09 recognise the acquisition of business totalling R143 160 in accordance with International Financial Reporting Standards 3 and property, plant and equipment totalling R4.6 million in accordance with South African Standards of Generally Recognised Accounting Practice. Thirdly, irregular expenditure was incurred. Fourthly, rental Revenue was not recognised in accordance with South African Standards of Generally Recognised Accounting Practice 9. The fifth qualification related to Mmino, a joint music programme of the Norwegian Ministry of Foreign Affairs and the Department of Arts and Culture.  The Auditor-General determined that since the organisation managed the Mmino project account, it was therefore liable for all Mmino contracts and programme risks. This was the first time the exclusion of Mmino project from organisation’s books had been raised as a material misstatement. Management action taken   was indicated in each case. A summary of the organisation’s audit history was provided.

An overview of the organisation’s activities in funding the arts was provided, based on a Human Sciences Research Council and Department of Arts and Culture research report. The organisation had three types of funding categories, namely, project funding, bursaries, and company funding. The organisation achieved successful and timely grant disbursement, more visibility of the organisation through road shows, the formation of partnerships to meet strategic objectives, skilled advisory panels whose members were subject matter experts, and funding 61 companies nationally in all disciplines. Challenges to the organisation’s funding activities were the reactive funding model, limited project funding, limited advisory capacity to the Ministry, inequitable distribution of funding across provinces, ineffective three tier system of funding, definition of roles between entities and the Department, limited resources and skills to fulfil the organisation’s mandate, and that funding was more accessible to literate artists.

An operational overview included an explanation of the organisation’s New Funding Model to align its operations with its mandate to be able to make an impact on the lives of the people, and focus funding more towards community based organisations and projects and transformation of the sector. Weaknesses and strengths in the current funding model, and assumptions of the New Funding Model were explained. The new moved from the premise that South Africa was a developmental state and built on the strengths of the current model. Progress in implementing the New Funding Model included emphasis in the 2011/14 strategic plan on the developmental approach as a strategic imperative with budget allocated in this regard. The Grants Management System was developed and would improve turnaround time in processing application forms and capturing statistical data. The arts funding programmes were restructured. The New Funding Model would be fully realisable by strengthening the relations with the Provincial Arts and Culture Councils and the National Lottery Distribution Fund to provide coherent service to the arts sector.

Members asked if the organisation had been able to resolve the matter of Downtown Studios with the
Department, if the organisation had received from National Treasury any response to its request to roll-over its surplus, if the National Lottery could provide funds, and noted that the organisation’s budget allocation was extremely limited. Members also asked about the New Funding Model and if the organisation had made an impact study of the possible effects of its New Funding Model on the existing theatres and companies. Members asked if the organisation’s former Council had approved the New Funding Model,  about the size and capacity of the organisation’s Council, about staff numbers,  how the organisation identified crafters, why a Norwegian grant had not been recognised, if there was a contract with bursary recipients and if beneficiaries could work anywhere subsequently, what criteria was used for disbursement of funding, about the vastly different levels of funding in the provinces, and observed a lack of communication between the organisation and the Department: could not a chief director attend management meetings in order to close the gap? Members asked if it would not be better simply to amend the Act, rather than pursuing the New Funding Model that might be inconsistent with it, and thought that 23 was too high a number of Council members. The

For read full minutes or to listen to an audio recording of the presentation see the Parliamentary Monitoring Group website. A copy of the annual report is attached below.

Source: Parliamentary Monitoring Group

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