1 NAC & Downtown Studios Presentation to Portfolio Committee 29 August 2012

  • View
    213

  • Download
    0

Embed Size (px)

DESCRIPTION

3 Summary of Progress Chairperson and Deputy Chairperson hosted by Chairperson of Downtown Music Hub and the CEO for a site visit. There is a good understanding of the challenges and the way forward between the parties. Condonation received for the purchase from the Minister. Audits have been conducted for 2009/10, 2010/2011 and 2011/2012 based on compete annual financial statements for Downtown Studios and Fox Street properties. Unqualified audit reports received. The audited financials have been integrated into the NAC Annual Financial Statements for 2012/2013.

Text of 1 NAC & Downtown Studios Presentation to Portfolio Committee 29 August 2012

*

NAC & Downtown Studios

Presentation to Portfolio Committee

29 August 2012

*

*

Presentation Overview

Summary of Progress Made since last appearanceNAC Council position on Downtown StudiosInstitutional FrameworkMOUFundingNAC Council positionMatters impacting on the transfer & progress made in resolving theseFinancial viabilityCorporate governanceOther mattersResolving the Audit Issues

*

Summary of Progress

Chairperson and Deputy Chairperson hosted by Chairperson of Downtown Music Hub and the CEO for a site visit. There is a good understanding of the challenges and the way forward between the parties.Condonation received for the purchase from the Minister.Audits have been conducted for 2009/10, 2010/2011 and 2011/2012 based on compete annual financial statements for Downtown Studios and Fox Street properties. Unqualified audit reports received.The audited financials have been integrated into the NAC Annual Financial Statements for 2012/2013.

*

For the Committees Information

The NAC did invite Fana Mokoena to make a presentation to the NAC Council meeting on 27 and 28 July 2012Unfortunately Mr Mokoena did not respond to the invitation

*

The Institutional Framework: Role

Department of Arts & Culture

National Arts Council (NAC)

Downtown Music Hub

AVUSA (Gallo)

Fox Street Properties

Downtown Studios

Building @ 62 Goud Street

Business & Assets

Instructs NAC to purchase from AVUSA

Establishes the SPV

Initiates discussions with AVUSA

Transfer

*

Institutional Framework: MOU

MOU signed between DAC & NAC in 2008NAC to act on behalf of the DAC in the purchase of the property and the businessProperty & the business to be transferred to a Special Purpose Vehicle (SPV) which would be established in 2009Funds were transferred to the NAC as follows:

ItemBudgetPurchase of propertyR4,600,000Purchase of businessR 143,160Operations R1,500,000Development of a business planR 400,000Transfer costsR 200,000VATR 666,400TOTALR7,509,560

*

Addendum to MOU signed in 2010Expands the role of the NAC to include the appointment of the staff members as independent contractors and payment of staff and creditors

*

Funding through NAC to date utilising DAC Funds held for transfer

DAC provided R3 million directly to the Downtown Music Hub in 2010/2011 and 2011/2012 for operations and programmes

DateItemBudget2008/2009Purchase, operations & business planningR7,509,5602009/2010Operations and further business planningR3,000,0002012/2013Auditing, operations & settling of debtsR1,823,4412012/2013Operations & additional audit costsR2,000,000TOTALTOTALR14,333,001

*

NAC Council Position

Downtown Studios led to: A qualified audit for the NAC in 2009/10 An adverse audit opinion in 2010/2012The new Council of the NAC took office in March 2011Recognising the implications of the ongoing challenges presented by Downtown Studios for the NAC, a task team was established to investigate matters and prepare comprehensive recommendations for CouncilOn the basis of this report, Council resolved that Downtown Studios should be transferred to the Downtown Music Hub as a matter of urgency

*

A meeting was held with the DAC to agree on a joint approach, supported by the Downtown Music Hub, to the management of the issue.It was agreed to:Engage with the short and medium term financial viability of the organisation Deal with corporate governance matters impacting on the NAC regularity auditFinalise all matters pertaining to the transfer of Downtown Studios

*

Matters impacting on Transfer

IssueInterventionFurther Actions StatusFinancial viabilityFunds secured settle outstanding debtsFunds secured for 2012/2013DAC and Downtown Music Hub to determine further short to medium term funding arrangementsWorkshop between DAC, NAC and Downtown Music plannedProgress as plannedFinancial Reporting3 year management accounts preparedPFMA principles and NAC policies to be applied to all transactions relating to Downtown Studios and Fox Street PropertiesProgress as planned

*

IssueInterventionFurther Actions StatusPreparations for 2011/2012 auditEstablishment of appropriate treatment with regard to NAC AFS in consultation with Treasury & AGApplication of treatment in 2012/2013Progress as plannedUnqualified audit outcomes for 2009/10, 2010/211 and 2011/2012Fox Street Properties and Downtown Studios to be included in NAC regularity audit conducted by the AG for 2012/2013 financial yearProgress, however audit delayedOther mattersSigning over of provident funds and finalisation of outstanding taxation mattersNone required

*

IssueInterventionFurther Actions StatusEmployee taxationPayment of outstanding funds owing to SARSNot applicableProgress as plannedSettling of debtsAll outstanding rates and taxes and other accounts settledNAC to transfer rates and taxes accounts to Downtown Music Hub on transferProgress as planned

Approval from MinisterCondonation of purchase receivedCondonation required from Minister for transferProgress as planned

*

Resolving the Audit Findings

YearCategoryActionsStatus2009/10Irregular expenditureApproval not obtained for the purchase of Downtown Studios from the relevant Executing Authority Condonation received from Minister

Resolved

2009/10Rental revenueRental revenue not recognised in NAC AFSDowntown Studios & Fox Street Properties integrated into NAC AFS in 2011/2012 based on audited financialsRental revenue recognised

Resolved

*

YearCategoryActionsStatus2010/11Non-Current Asset held for TransferAssets not measured in accordance with GRAP 17Treatment of assets agreed to with Treasury and AGTreatment applied in NAC AFS for 2011/2012

Resolved

2010/11Revenue from Non-Exchange TransactionNon-exchange revenue not recognised contrary to GRAP 23Appropriate GRAP standard agreed to with Treasury and the AGNon-exchange revenue recognised in NAC AFS for 2011/2012

Resolved2010/11Expenditure ManagementIrregular expenditure as condonation for purchase of the asset not received from the Executing AuthorityCondonation receivedIrregular expenditure reported in 2011/2012 as expenditure at Downtown Studios not in terms of PFMAPartially Resolved

*

YearCategoryActionsStatus2010/11Business Combination & Consolidated Financial StatementsPurchase not correctly accounted for in terms of International Financial Reporting Standards and GRAP 6 AFS prepared for Downtown Studios and Fox Street Properties for 2009/10, 2010/11 and 2011/2012Integration of trial balances into NAC AFS in accordance with agreed approach between NAC and AG

Resolved

2010/11Material Misstatements in AFSMaterial Misstatements identified during the audit.Integration of trial balances into NAC AFS in accordance with agreed approach between NAC and AGLed to material misstatements and prior year errors in the 2011/2012 AFSPartially Resolved

*

NAC Audit Outcome for 2011/2012

The NAC received a qualified audit for 2011/2012 due to:Material misstatements in the AFS due to the incorporation of the Downtown Studios and Fox Street Property trial balances which impacted on accumulated surplus and expensesWhile disappointing this is an improvement on the adverse audit finding of 2010/2011The work reported on in this presentation has also laid the foundation for the transfer of Downtown Studios and Fox Street Properties to the Downtown Music Hub in 2012/2013 and also laid the foundation for an improved audit outcome for 2012/2013

*

Thank you