NATIONAL ARTS COUNCIL OF SOUTH AFRICA PRESENTATION TO PORTFOLIO COMMITTEE ON ARTS AND CULTURE

NATIONAL ARTS COUNCIL OF

SOUTH AFRICA

PRESENTATION TO PORTFOLIO COMMITTEE ON ARTS AND CULTURE

6 NOVEMBER 2007 – 10H00VENUE: ROOM V226, SECOND FLOOR OLD ASSEMBLY WING,

120 PLEIN STREET, CAPETOWN.

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NATIONAL ARTS COUNCIL OF SOUTH AFRICA

INDEX PAGES

1. Background of the National Arts Council of South Africa. 3 - 5

2. Review of the Annual Report 2007 year.

2.1 Financial Review and Audit Report, and 6 - 10

2.2 Funding Allocations. 11 - 13

3. Background to Accumulated Surplus. 14 - 17

4. Highlights. 18

5. Challenges. 19

6. Thank you note. 20

7. Summary of Budget 2008 / 2009 Year. 21

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1. BACKGROUND OF THE NATIONAL ARTS COUNCIL OF SOUTH AFRICA

OUR VISION

To promote, through the arts, the free and creative expression of South Africa’s cultures.

MISSION

To develop and promote excellence in the arts.

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1. Background of the National Arts Council of South Africa.

• The NAC was established through Act no 56 of 1997. Its vision is to promote through the arts, the free expression of South Africa’s cultures, while its mission is to promote excellence in the arts.

• The NAC receives its annual grant from the National Department of Arts Culture. The NAC is governed by a Board which comprises 23 members, 14 of whom are appointed by the Minister of Arts and Culture, the remaining 9 members are the provincial representatives.

• The Board is mandated to approve recommendations for funding from Advisory Panel members. Advisory Panel members are publicly nominated and appointed by the Board.

• The National Arts Council currently offers financial support to organisations and individuals involved in dance and choreography, literature, music, theatre, multi-discipline, visual arts and craft projects. Each discipline is chaired by a Board member.

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Appointment of New Council

• The NAC operated without a Council for approximately 18 months and a new Council was only inaugurated in September 2006, 6 months into the year under review.

• The Council had to prioritise its plans and the top three priorities and key deliverables for the year under review were identified as:-

1. An improved Audit Report,2. An improved Staff moral,3. An improved Public image.

• Whilst the Council recognised that funding remains an integral part of the NAC’s work, it is clear that this is not the only role for which it was established.

• The key aspect of the NAC’s strategy relates to the development of an integrated model that will ensure harmonious work between the Provincial Arts and Culture, the Provincial Department of Arts and Culture as well as the NAC. This will necessitate the overhaul of the funding model and the Council plans a series of consultative meetings with all stakeholders over a period of time.

• The three year strategy will include improved grant making processes, transformation in the arts research and policy, broader cultural participation and audience development, international liaison and fostering a shared South African identity.

1. Background of the National Arts Council of South Africa

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NATIONAL ARTS COUNCIL OF SOUTH AFRICA 2.1 STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31 MARCH 2007

Note 2007 2006 R R

REVENUE 83,288,180 53,033,458

Grants received 62,081,000 47,894,000

Grants and initiatives expired 8 16,935,180 2,170,508

Interest received 3,892,448 2,614,774

Other income 379,552 354,176

EXPENDITURE 58,517,648 54,510,482

Agreed distribution transferred toproject and bursary creditors andinitiatives 10 48,202,957 45,571,768

Operating costs 10,314,691 8,938,714

Surplus / ( Deficit ) for the year 24,770,532 (1,477,024)

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NATIONAL ARTS COUNCIL OF SOUTH AFRICA2.1 STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 31 MARCH 2007

Accumulated Total surplus

R R

Balance at 1April 2005 6,646,635 6,646,635

Net deficit for the year (1,477,024) (1,477,024)

Balance at 31 March 2006 5,169,611 5,169,611

Surplus for the year 24,770,532 24,770,532

Balance at 31 March 2007 29,940,143 29,940,143

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NATIONAL ARTS COUNCIL OF SOUTH AFRICA2.1 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2007

Note 2007 2006 R R

ASSETSNON - CURRENT ASSETSProperty, plant and equipment 3 3,324,401 3,405,649

CURRENT ASSETS 64,052,512 51,901,035

Accounts receivable 4 684,824 1,373,000Cash and cash equivalents 5 63,367,688 50,528,035

TOTAL ASSETS 67,376,913 55,306,684

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NATIONAL ARTS COUNCIL OF SOUTH AFRICA2.1 STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2007

Note 2007 2006 R R

NET ASSETS

TOTAL NET ASSETS 29,940,143 5,169,611

Accumulated surplus 29,940,143 5,169,611

LIABILITIES

CURRENT LIABILITIES 37,436,770 50,137,073

Accounts payable 6 199,956 262,877Provisions 7 276,134 142,827Projects and bursaries payable 8 34,502,249 45,568,187Administered Funds 9 2,458,431 4,163,182

TOTAL NET ASSETS AND LIABILITIES 67,376,913 55,306,684

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2.1Summary of the Audit Report History for the past 4 years.

• Over the 3 years preceding the year under review, the institution’s

governance and compliance record grew steadily worse.

• However, the audit outcome for the 2006/7 year is evidence

of a comprehensive turnaround in this area.

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Applications Received Funding Requested

1620 R 253 756 900

2.2 FUNDING ALLOCATIONS 2006 - 2007


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2.2 FUNDING ALLOCATIONS – PER DISCIPLINE 2006 - 2007


Theatre & Musical , 8,281,913

17 %

Music & Opera, 20,740,710

43 %

Multi-Discipline, 6,725,920

14 %

Literature, 2,145,449

4,5 %

Crafts, 1,203,367

2,5 % Visual Arts, 1,826,498

4 %

Dance & Choreography,

7,279,100 15 %

Crafts

Dance &Choreography

Literature

Multi-Discipline

Music & Opera

Theatre & Musical

Visual Arts

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2.2 FUNDING ALLOCATIONS PER PROVINCE 2006 - 2007


Gauteng, 20,061,878

41,6%

Western Cape, 13,636,178

28,3 %

Kwa-Zulu Natal, 6,373,665

13,3 %

Eastern Cape , 4,042,856

8,4 %

FreeState, 2,245,000

4,6 %

Mpumalanga, 574,3601,2 %

Limpopo Province, 768,920 1,6 %

North West, 185,1000,4 %

Northern Cape, 315,000 0,6 % North West

Northern Cape

Mpumalanga

Limpopo Province

FreeState

Eastern Cape

Kwa-Zulu Natal

Western Cape

Gauteng

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• Over the period, 2004 to 2007, the NAC has cumulatively allocated in excess of 75% of its annual parliamentary appropriation to grants to the arts in accordance with S16(2)(a) of the NAC Act.

• Over the 4-year period 86% of the parliamentary appropriation was allocated as grants. These grants allocations are held in a current liability account from which actual grants disbursements are drawn down and are then reflected in the performance statement as expenditure. While the grants allocations were allocated to applicants in each year, not all applicants were actually paid their allocated funds. This is accumulated surplus is a result of :

(1) Applicants that did not claim their allocations because they became defunct or the projects for which they applied were no longer viable,

(2) Applicants whose allocations were withheld due to contractual non-compliance and

(3) Interest earned, rental income and savings on administration costs. The result is that a grants surplus developed and accumulated over the years.

•These surpluses were not immediately apparent since they were held as part of the overall current liability owed to applicants. It was only after an analysis of grants undertaken during March 2007 to May 2007 that expired grants were identified and quantified as set out in the table below. Note that expired grants are defined as grants that have either not been claimed for period of 1 year after the allocation decision was taken; or have not satisfied contractual terms by the due date.

3. Background To Accumulated Surplus


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Historical analysis of grants to the arts Prior YearsR’m

2004R’m

2005R’m

2006R’m

Parliamentary allocation - 42.1 44.7 47.9

Grants allocation per NAC Act (75%) - 31.6 33.5 35.9

Grants allocated (R’m)Grants allocated (% of appropriation)

--

28.467%

46.5104%

45.695%

Grants actually paid out - 25.5 29.4 40.0

Balance of Grants Allocated - 2.9 17.1 5.6

Expired Grants 7.1 6.9 2.9 0.1

Accumulated operating surplus as at 31 March 2006 5 169 611

Operating surplus for the period 2006/7 8 235 340

Accumulated expired grants as at 31 March 2007 17 003 130

Total accumulated surplus as 31 March 2007 30 408 081

Less: Fixed Assets (3 324 401)

Accumulated surplus available for re-allocation 27 083 680

3. NATIONAL ARTS COUNCIL OF SOUTH AFRICA

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Projected three year strategic budget 2008 to 2010 (Part 1)

Arts Investment Funds Managed 2007/8 2008/9 2009/10

DAC grant income 66,926,000 71,398,000 75,682,000

DAC Arts Investments 50,194,500 53,548,500 56,761,500

- DAC Ringfenced Investments 10,719,000 11,634,000 12,332,000 - Company Investments 20,000,000 20,000,000 20,000,000 - Project Investments 15,475,500 17,414,500 19,429,500 - Bursary Investments 4,000,000 4,500,000 5,000,000

DAC funds for operating costs 16,731,500 17,849,500 18,920,500

Operating expenditure

Total operating expenditure income 18,091,500 19,209,500 20,280,500

- Operating expenditure grant 16,731,500 17,849,500 18,920,500

- Interest received 1,000,000 1,000,000 1,000,000

- Rent received 360,000 360,000 360,000

Operating expenditure 20,005,700 21,430,502 22,622,792

- Staff costs 9,750,000 10,335,000 10,955,100 - Honoraria 959,000 959,000 959,000 - Council, Panel, Committees costs 2,352,000 2,493,120 2,642,707 - Depreciation 300,000 600,000 600,000 - General operating costs 6,644,700 7,043,382 7,465,985

Operating Surplus/Deficit (1,914,200) (2,221,002) (2,342,292)


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Projected three year strategic budget 2008 to 2010 (Part 2)

Strategic and mandated pojects and interventions

World Summit of Arts and Culture Agencies

World Cultural Summit 2009 confirmed income - - 2,500,000

- NAC contribution - - 1,000,000

- Gauteng contribution 500,000

- Conference fee from delegates - - 1,000,000

World Cultural Summit 2009 expenses 200,000.00 500,000 6,000,000

Summit Surplus/Deficit (200,000) (500,000) (3,500,000)

Other strategic project costs 5,500,000 6,300,000 4,606,186

- Research projects 2,000,000 2,000,000 2,000,000

- SADC Art and Culture Summit 1,000,000 - -

- Africa Art and Culture Summit - 2,000,000 -

- Grants management system revamp 1,000,000 750,000 500,000

- Sectoral projects and awards 1,000,000 550,000 606,186

- 2010 projects 500,000 1,000,000 1,500,000

Total projects Surplus/(Deficit) (5,700,000) (6,800,000) (8,106,186)

Overall

Overall Surplus/(Deficit) (7,614,200) (9,021,002) (10,448,478) Surplus carried over from previous year 27,083,680 19,469,480 10,448,478 Reserve fund 19,469,480 10,448,478 (0)


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» NAC delivers its first unqualified audit report in four years

» NAC allocates R48,2m to 426 arts entities

» NAC allocates 78% of annual parliamentary appropriation as grants to the arts. This is in excess of the legal requirement of 75%.

» NAC wins bid to host 2009 the IFACCA (International Federation of Arts Councils and Cultural Agencies) World Summit on Arts and Culture.

4. HIGHLIGHTS 2006/2007


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The strategic challenges that the NAC will need to address inthe coming year and beyond are as follows:

» The NAC needs to provide leadership in the sphere of public funding of the arts. Currently, the NAC is a small player in an arts funding landscape that is confusing and inefficient. There is now an opportunity, given the NAC’s improved governance environment, to consider centralizing the management of public funds to arts at the National Arts Council.

» There is a need for equity and balance of funding across our various communities, the arts disciplines and across our provinces. However, the treatment of this issue should not be approached naively but should take account of the inherent complexities of resource allocation in the arts.

» There is a dire need for intervention in the arts at the sectoral level. Such intervention – which would include sector research, advocacy, policy input and the like – is very much a part of the NAC’s mandate and the NAC must step intothe breach.

» The NAC must identify its stakeholders and engage more effectively with them – such engagement should not emphasize the promotion of the NAC but should seek to add value to the NAC’s stakeholders through the dissemination ofinformation and knowledge. … Budget

5. CHALLENGES OF THE NATIONAL ARTS COUNCIL OF SOUTH AFRICA

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6. THANK YOU The National Arts Council of South Africa wishes to thank the PortfolioCommittee on Arts and Culture. Mr Nicholas Motsatse, Chairperson of the NAC Board.

Ms Brenda MadumiseDeputy Chairperson of the NAC Board.

Mr Navin Lakha,Chairperson of the Audit Committee.

Mr Kiran Isvarlal,Chief Financial Officer.

Mrs Julie Diphofa,Chief Operating Officer.

Presentation prepared by : Mr Kiran Isvarlal (Chief Financial Officer),Mrs.Julie Diphofa ( Chief Operating Officer ), Mrs Nazlie Walters(Finance Officer) and Mr Andy Perumal ( IT and Database Officer).

Documents

NATIONAL ARTS COUNCIL OF SOUTH AFRICA PRESENTATION TO PORTFOLIO COMMITTEE ON ARTS AND CULTURE