National Arts Council on its Annual Report and on Audit queries 2009/10: briefing

Meeting report

Introduction
The Chairperson welcomed Members and delegates, and asked all present to introduce themselves.

Adoption of agenda
The agenda was adopted. [Ms F Mushwana (ANC) proposed, Mr S Ntapane (UDM) seconded.]

Apologies
Apologies were received from Ms M Morutoa (ANC) who was in hospital, also from Ms L Moss (ANC), Mr J Smalle (DA), and Mr P Ntshiqela (COPE). Hosi T Nwamitwa-Shilubana (ANC), who was unwell, was expected to arrive later.

Apologies were also received from Ms Veliswa Baduza, Acting Director-General, Department of Arts and Culture.

Dr Mbulelo Jokweni, Acting Deputy Director-General, Department of Arts and Culture, conveyed the Department's best wishes to the Chairperson, who had just come out of hospital, for a full and complete recovery, and to Ms Morutoa.

National Arts Council of South Africa Annual Report and audit queries 2009/10 presentation
Introduction, strategic overview, and legislative mandate
Ms Annabell Lebethe, Chief Executive Officer (CEO), National Arts Council of South Africa (NACSA), introduced the NACSA's presentation with a strategic overview of the NACSA's vision, mission, and legislative mandate (slides 3-5).

The NACSA's institutional background was that the NACSA provided financial support to organisations and individuals in seven sectors, namely, craft, dance and choreography, literature, music, multi-discipline, theatre,  and visual arts. The NACSA received an annual grant from the national Department of Arts and Culture (DAC)  and was governed by a Board which comprised 23 members, 14 of whom were appointed by the Minister of Arts and Culture; the remaining nine members were the provincial representatives. The Board was mandated to approve recommendations for funding from Advisory Panel members who were publicly nominated, appointed by the Board and chaired by a Board member. (slide 6).

Strategic objectives, challenges and interventions
The strategic objectives for 2010/13 were to position the NACSA as ‘the’ arts funding agency in SA that was responsive and committed to advancing the status of the arts nationally and internationally; manage the NACSA brand through reputation-building activities; strengthen coordination among arts funding agencies, and between funding agencies and government at different levels (national, provincial and local); engage in national research that informed the sector development strategies and the work of the NACSA while building the arts intellectual capacity; and improve the position of the NACSA on the continent and build on the reputation of the Summit in the international arts community (slide 7).

Strategic challenges were, firstly, the need a clearly defined policy framework (legislative review pending). The second challenge was  governance and leadership –  the appointment of Council had been raised by the Auditor-General (AG) as an area of concern particularly as this affected governance, accounting and leadership; the organisation was ‘in limbo’ as required decisions sent to the Minister for approval led to operational inefficiencies and delays; the size of Council was unwieldy with 23 Council members as against 28 staff members – this impacted on the NACSA's budget; and the experience and skills of Council members was a critical success indicator.

Thirdly, the relationship between NACSA and DAC was not supportive. This compromised governance and delivery on mandate, and resulted in duplication in funding. Fourthly, as to the NACSA's national mandate, funds were insufficient to meet the needs of the seven sectors. (Slide 8 ). Strategic interventions were national research that informed NACSA funding priorities; the New Funding Model; partnerships with sector organisations, international donor agencies, other government al agencies, and the corporate sector; work with the Provincial Arts and Culture Councils (PACCs) in implementing programmes; and re-prioritising NACSA's focus going forward. (Slide 9).

Annual Report highlights and achievements
Annual Report highlights 2009/10 were listed. Under the heading of governance, these were, firstly, effective executive controls – the Council, the Executive Committee, the Audit and Risk Committee, the Human Resources Committee, and the Bid and Adjudication Committee. Secondly, these were effective internal controls - annual risk assessments and a three-year Internal Audit rolling plan. (Slide 10). Under the heading of human resources, the first highlight was the staff complement.  As to executive management, the CEO, Chief Operations Officer (COO) and Chief Financial Officer (CFO) had been in place from 2008; however, the CFO had been dismissed in September 2010 and the Acting CFO was managing the finance unit. Temporary staff were appointed to assist in finance and grants administration units at required periods. There was an annual human resources (HR) policy review process to ensure legislative compliance. There was a training and development plan to improve performance. Salary increases were based on Department of Public Service and Administration (DPSA) adjustments. (Slide 11).

There was a functioning management/staff representative forum. A staff bursary scheme was in place (R12 000 annual support). Employee benefits included a Comprehensive Provident (Liberty Life) and Medical Aid Scheme (Discovery). 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. (Slide 12).

Achievements noted under the heading of Annual Report highlights were 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; partnership with PACCs in hosting artistic programmes during the Confederations Cup; supporting 61 companies through three-year company funding; initiation of the So You Think You Can Write – a theatre scripting reading and mentoring programme;   working with regional arts organisations such as the Southern African Theatre Initiative and the Arterial Network; partnering with the South African (SA) Post Office during the World Summit to produce a series of Summit postcards, thereby profiling NACSA's funding of visual artists; hosting a craft market during the National Arts Festival in Grahamstown with 10 crafters; a clean audit for Mmino Music Programme; initiating and hosting 3 Artspeak industry dialogue sessions in Johannesburg and Port Elizabeth (Slide 14 ); administering projects on behalf of DAC, namely, Mmino , Downtown Studios – agency role with no support from Department on remedying issues, and the Swedish project (letter of intent) – awaiting agreement from DAC to manage it; and hosting two-day workshop with the PACCs. (Slides 13-15).

Financial overview
Mr Simon Letsoalo, Acting CFO gave a financial overview. This comprised the audited annual financial statements (introduction , statement of financial position , and statement of financial performance ); the basis for qualification; a summary of the NACSA's audit history; surplus funding (surplus for the period, reason for the surplus , and approval of surplus ); and challenges to the 2011/12 budget . (Slide 20 ).

Introduction
Section 16(2)(a) of the NACSA Act stated that 75% of the funding allocated by Government should be distributed as grants in support of the arts, while the remaining 25% would be utilised for operational     expenses.

The NACSA’s current operating budget was 29%, which was more than the 25% determined in the Act. However, the 4% shortfall funded by our passive income (interest earned on call account investment). (Slide 21 ).

Statement of financial position
Table 1.2 indicated the  NACSA's statement of financial position, with a comparison between 2009 and 2010. (Slide 22).

Statement of financial performance
Table 1.3 indicated the NACSA's statement of financial performance, with a comparison between 2009 and 2010. (Slide 23).

Basis for the NACSA's audit qualification
Downtown Studios
 In 2008 former Minister Pallo Jordan requested NACSA to serve as a   conduit in purchasing Fox Street Properties (Pty) Ltd and Downtown Studios. Downtown Studio was regarded as the home of local music    production due to its role in the past, having recorded some major local artists, inter alia, Mahlathini, Mahotella Queens, Lucky Dube, Stimela, and many others. The initial intent was for NACSA to purchase property and business and to later transfer both the property and business to a Special Purpose Entity (SPE) to be established by DAC.

The Board of SPE was appointed in May 2010 by former Minister of Arts and Culture, Ms Lulu Xingwana. NACSA was in the process of finalising accounting and legal requirements to effect the transfer of both the property and business to the SPE (Downtown Studios Music Hub). The whole purchase and transfer process was intended to be completed within a period of six months. (Slide 24).

 In respect of revenue , the NACSA  did not recognise a grant from the national Department of Arts and Culture for the year ended 31 March 2009 in accordance with SA Standards of Generally Recognised Accounting Practice (GRAP) (GRAP 23, Revenue from non-exchange transactions).

Management Action was, firstly, to conclude the prior year adjustment during the audit period.

Secondly, a service provider was appointed to ensure that the purchase agreement entered into by both Downtown studios and Fox Street Properties (Pty) Ltd was accounted for in accordance with all applicable legislative and accounting reporting frameworks. The project was expected to be completed prior to commencement of the 2010/11 annual statutory audit. (Slide 25 ).

In respect of property, plant and equipment, the NACSA entered into a memorandum of understanding with the national Department of Arts and Culture to acquire a business (Downtown Recording Studios) and the property, plant and equipment (Fox Street Properties). The entity did not in 2008-09 recognise the acquisition of business totalling R143 160 in accordance with International Financial Reporting Standards (IFRS 3) and property, plant and equipment totalling R4.6 million in accordance with SA Standards of GRAP.

Management Action was, firstly, to register property, plant and equipment in the NACSA asset register.

Secondly, NACSA appointed a consultant to ensure completeness and accuracy of information. (Slide 26).

Irregular Expenditure
Section 54(2) of the Public Finance Management Act (PFMA) required the NACSA to promptly and in writing
inform the National Treasury of the transaction and submit relevant particulars of the transaction to its executive authority for approval of the transaction to acquire a significant asset. Payments amounting to
R4 743 160 were made without informing the National Treasury and obtaining approval of for the transaction from the executive authority. The amount was not disclosed as irregular expenditure to the financial statements at 31 March 2010, resulting in irregular expenditure being understated by R4 743 160.

Management action recognised that the DAC and NACSA erred in compliance, but this was being rectified.

Management had engaged former Minister Xingwana regarding the approvals. The Office had assumed that since National Treasury had approved request to open separate bank account, it was a de facto approval.

Approval from Minister Paul Mashatile would be sought prior to transfer of asset and business to the SPE set up by the Department. (Slide 27 ).

Rental Revenue
The NACSA entered into a memorandum of understanding with the National Department of Arts and Culture to acquire the property, plant and equipment which was not recognised totalling R4.6 million. The entity did not recognise the rental revenue due to the entity from the lessee of the property, plant and equipment in
 accordance with SA Standards of GRAP (GRAP 9, Revenue from exchange transactions).

Management Action was to acknowledge that the original intent of the request was defined as a ‘conduit’
relationship. Since the inception of the Downtown Studios Hub Board by former Minister Xingwana in May 2010, the NACSA had unsuccessfully tried to retrieve the revenue from the Board. This matter had been brought to the attention of the former Minister and Minister Mashatile. (Slide 28 ).

Mmino
 Mmino was a joint music programme of the Norwegian Ministry of Foreign Affairs and the Department of Arts and Culture. The programme started in 2000 with NACSA as the implementing agency. Funding decisions were made by a Steering Committee which comprised of members from NACSA and the Norwegian Ministry. The AG determined that since NACSA managed the Mmino project account, therefore, it was liable for all Mmino contracts and programme risks. This was the first time the exclusion of Mmino project from NACSA’s books had been raised as a material misstatement in Annual Financial Statements (AFS) of NACSA by the AG. (Slide 29).

Mmino
 The NACSA recognised the grant revenue contrary to the requirements of the Standards of GRAP (GRAP 23, Revenue from non-exchange transactions) as the conditions to the agreement were not met resulting in an understatement of liabilities. The entity’s records did not permit the application of alternative audit procedures regarding the revenue and liability as they were not included into NACSA’s financial records.

Management action acknowledged that the NACSA had been serving an ‘agency role’ and for 10 years did not recognise the grant revenue from the Norwegian Ministry of Foreign Affairs. NACSA had now complied with the requirement of GRAP 17 . Furthermore, the project would end in June 2011 and would not be extended. (Slide 30).

Summary of audit history
Table 3 was a synopsis of the NACSA's audit history from 2005/06 to 2009/10. (Slide 31).

Surplus funding
Surplus for the period 2009/10
In 2009/10 NACSA reported a net surplus of R28 060 206.

Reason for the surplus reported in 2009/10
The reported surplus was a result of project allocations that were not recognised in the Statement of Financial Performance, as conditions attached to the grant contract were not met at the reporting period as well as Mmino surplus included therein.

Approval of surplus
NACSA sent a written request to the National Treasury seeking approval of the surplus to be utilised in 2010/11 to fund all the projects that did not meet the contractual conditions at the reporting period (2009/10) as it was probable that the contract conditions would be met in the next reporting period (2010/11). (Slide 32).

Financial challenges
NACSA’s original budget request was reduced by 17%. Instead of R82 627 000 only R68 485 000 was allocated.

The impact of the reduction affected the project funding allocation as both orchestras and company funding were fixed/committed allocations.

Table 5 analysed the grants budget for 2011/12.

R14 288 750 was available for general funding and was split equally amongst the seven disciplines. Each discipline would receive R2 041 250. (Slide 33)

Funding overview
Funding landscape
Ms Julie Diphofa, Grants Manager, NACSA, gave an overview of funding beginning with the funding landscape. The table Sources of Arts Funding in SA (International, National and Provincial Sources of Grant-based funding indicated overall funding for 2008/09 for all art forms, with a comparison of funds from the NACSA, the NLDTF/Lottery, Business Arts South Africa (BASA), Arts and Culture Trust (ACT), international sources, national DAC discretionary grants, and provincial grants. Total arts funding was R287 029 214 . The source of this information was the research report Human Sciences Research Council and the DAC. An Assessment of the Visual Arts in SA (2010). (Slide 16).

The chart Sources of Arts Funding in SA (International, National and Provincial Sources of Grant-based funding indicated ALL Arts Funding – 2008/9 by source and percentage from each source – NACSA, provincial grants, national DAC discretionary grants, international sources, and BASA, ACT. The source of this information was the research report Human Sciences Research Council and the DAC. An Assessment of the Visual Arts in SA (2010). (Slide 17).

The table Number of Artists Applying for Funds and Success Rates (2007/09) indicated the number of artists who applied, the number who applied as a percentage of all respondents, the number of artists successful, the percentage success rate as a percentage of all respondents, and the percentage success rate as a percentage of respondents who applied. In each line the figures were set against the organisation or sector to which the artists applied: the NACSA, the National Lottery, the DAC, provincial government, local government, BASA, ACT, international arts funding body, private foundation, corporate sponsorship, corporate funding, patron, or arts organisation. The source of this information was the research report Human Sciences Research Council and the DAC. An Assessment of the Visual Arts in SA (2010). (Slide 18).  

NACSA funding activities
Funding sessions
Applications for funding were invited twice a year. The second funding session was only for local post-graduate and institutional bursaries.

The NACSA had three types of funding categories, namely:

Project funding
- Individuals, organisations and community groups engaged in arts projects were eligible for funding.
- Funding was considered for projects that were involved in research and documentation, performances,
exhibitions, workshops, materials, creation of new works, compositions, creative writing, script development, etc. (Slide 35) .

Bursaries
- The NACSA offered national and international bursaries for the arts at tertiary level.
- Bursaries awarded were primarily for tuition fees.
- Block bursaries were awarded to institutions for undergraduate students under criteria specified
by the NACSA.
- Postgraduate students applied to the NACSA directly.
- Students had to prove that they had raised part of the costs towards their studies. (Slide 36).

Company Funding
- Company funding was a three-year funding, which was initiated in 2002 because of savings from restructuring of playhouses.
- Arts companies were invited to apply for a three-year funding cycle.
- The purpose of company funding was to provide companies with stable funding for a period of three years in order to facilitate the creation, performance and exhibition of new works, capacity building, job creation and audience development.
- The aim of the three-year grants was to: encourage and promote excellence in the arts; encourage creation and presentation of indigenous arts; stimulate job creation; enthuse the private sector to match the grant on a 50/50 basis. (Slide 37).

Achievements
These were successful and timely grant disbursement, more visibility of the NACSA 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 . (Slide 38 ).

The table Company funding indicated the number of companies funded as against the amount allocated in each of the NACSA's seven disciplines. The total allocation was R22 000 000 .(Slide 39).

The table Grants awarded indicated the type of funding as against the number of entities and the funding allocated. The funding types were organisational funding, individual funding, institutional bursary funding, individual bursary funding, company funding, surplus funding, and orchestra's funding. The total number of entities was 615. The total funding allocated was R81 394 496. (Slide 40).

The table Grants awarded: amount funded/sector indicated the number of entities and funding allocated in each discipline . (Slide 41).
Number of

The table Grants awarded: funded/province indicated the number of entities and funding allocated in each province . (Slide 42).

The table Ten year fundiing highlights indicated the number of projects funded (2001-2010) as under organisations, individuals, bursaries – individuals, bursaries – institutions,  company funding, Minister's Funding, and own initiatives . (Slide 43).

Challenges to the NACSA's funding activities
These were listed as follows:
Reactive funding model;
Funding project based and therefore funding could only be
allocated once in a financial year;
Limited project funding: less amounts disbursed;
Limited advisory capacity to the Ministry;
Inequitable distribution of funding across provinces;
Ineffective three tier system of funding;
Definition of roles between entities and DAC;
Limited resources and skills to fulfil the NACSA's mandate; and
Funding more accessible to literate artists. (Slide 44)

A table of Interventions indicated provinces, dates, regions or municipal districts, number of participants, venue, and total number of  interventions in each province. (Slide 45).

Operational overview
Mr Goodwin Mnisi, COO, gave an operational overview

New Funding Model
The NACSA developed the funding model specifically to align its operations with its mandate to be able to
make an impact on the lives of the people.

The Funding Model in this regard focused funding more towards funding of community based organisations
and projects and transformation of the sector. (Slide 47).

Weaknesses in the current funding model
The current funding model was not focused or targeted to achieve outcomes. There was a lack of strategic intent.
The model placed greater emphasis on the international policy model of ‘arms length approach’ which limited the NACSA’s ability to make the necessary sector intervention.

It was more reactive (focus on funding) to the needs of communities as opposed to being pro-active (interventionist) to address the needs of the communities.

The NACSA operated in isolation from other entities within the sector thus making its impact less visible in the sector. (Slide 48 ).

Strengths in the current funding model
The governance processes of the current funding model were sound, thus preventing fraud and corruption.

There was no interference with the artistic creativity of the artistic community. The freedom of artistic expression was upheld.

A greater portion of the annual allocation went towards
arts funding than administration on the scale of 75% / 25%. (Slide 49 ).

Assumptions of the New Funding Model
The New Funding Model moved from the premise that:
South Africa was a developmental state – NACSA was to address the imbalances of the past by providing more support to still -marginalised communities.
A number of arts establishments within the sector (arts companies, festivals) needed to be transformed to ensure greater participation and inclusiveness.
The recognition that a wealth of artistic creation had been developed over the years and thus needed to be nurtured and sustained to create jobs within the sector and impart knowledge and skills.
NACSA was a national institution with a national mandate and thus could only achieve its mandate by developing strong partnerships with the PACCs and other sector organisations.
The New Funding Model built on the strengths of the current funding model. (Slide 50 ).

Assumptions of the New Funding Model
Mandate: objects of the Act had been packaged and included in the strategy to achieve outcomes or impact.
Strategy: prioritised to emphasise development in funding which targeted marginalised communities.
Budget: budget had been restructured to emphasise allocation to the areas of priorities.
Programmes: re-prioritised to address the specific needs of communities.
Operations: areas of operations within the funding process made user friendly to allow access to information and funding.
Evaluation: monitor and evaluate the extent to which business processes had delivered on the mandate and
achieved Government's priorities. (Slide 51)

Areas of intervention of the New Funding Model
Budget was aligned to the development strategic approach to allow each programme to achieve specific
output.
Greater funding budget was allocated more towards community based arts organisations and partnerships
projects with an impact on communities.
The allocation would be adjusted incrementally on an annual basis towards community based organisations
and projects on an annual basis.
The call for applications would be specific on what funding wished to achieve without dictating to artists on what artistic output they should produce. (Slide 52).

The table New Funding Model: Allocations indicated allocations to capacity building funding, institutional building and partnerships, and community arts and sector support by percentage and by amounts. (Slide 53).

Progress in implementing the New Funding Model
In 2009, the NACSA hosted a workshop with the PACCs to establish relations and in this regard the NACSA partnered with six provinces in the hosting of 2010 projects.

The 2011 – 2014 strategic plan emphasised 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 as follows:
Project Funding – Community Arts Funding Programme
Bursary Funding – Capacity Building Funding
Company Funding – Institutional Support Funding Programme. (Slide 54).

Relationship building
The new funding model would be fully realisable by strengthening the relations with the PACCs and the National Lottery Distribution Fund to provide coherent service to the arts sector. Slide 55). (Slides 46-55).

Discussion
Dr A Lotriet (DA) asked on the status of Downtown Studios. Had the NACSA been able to resolve the matter with the Department in terms of the revenues that had to be paid back? Surely the Department should respond if there was an agreement?

Ms Lebethe addressed the question concerning Downtown Studios. NACSA had informed the Ministry of the challenges and constraints. The matters had also been raised with the chairperson of the Downtown Studios.  The Committee should also note the institutional challenges of separate entities.  This tripartite relationship with Downtown Studios had to be defined, and the best way to do so was to obtain clarity from the Minister as to how and what he intended to do about Downtown Studios. The Downtown Studios Music Hub Board, especially with regard to income, had not recognised the relationship with the NACSA, the NACSA being the responsible authority to which the Downtown Studios Music Hub Board should report. This relationship was “sour”. The NACSA had repeatedly raised this issue with the Auditor-General and with the Ministry, and with other parties, on how best to collect the revenue. If NACSA failed to claim that revenue, there was the prospect that the matter would again be the basis of an audit qualification for the NACSA. Together with the consultant who was assisting the NACSA, the organisation was trying different approaches to obtain a hearing from the Department. The NACSA was unclear of the Minister's intention on Downtown Studios. The original intent had been for the NACSA to keep Downtown Studios in trust and then transfer it. 

Mr Letsoalo replied that that asset needed to be authorised, since NACSA had irregular expenditure. Without that letter of authorisation from the Department, the NACSA could expect a further qualification. The Minister had to sign off that asset and allow the Department to transfer it. Unfortunately, the NACSA was not receiving much response from the Department.

Dr Mbulelo Jokweni, Chief Director: National Language Services, Department of Arts and Culture, added, on a positive note, that it should be acknowledged that the Special Purpose Entity (SPE) now had a board in place, as noted in the presentation that it had been appointed in May 2010.  Now the three parties, namely the Department, the NACSA, and the board and management of that SPE, should work in the process of finalising the transfer. As indicated on slide 24, in the fifth paragraph, NACSA was in the process of finalising accounting and legal requirements to effect the transfer of both the property and business to the SPE, namely Downtown Studios Music Hub. In Dr Jokweni's view, this was work in progress. However, he affirmed that the work must be expedited. 

Dr Lotriet understood that the NACSA's surplus had a negative effect its budget allocation. For the next few years the NACSA was going to get less from National Treasury. Was that correct? Had NACSA taken up the matter with National Treasury?

Mr Letsoalo replied that it was not an operating surplus, but a surplus that had arisen only through grants. 

Dr Lotriet asked if the NACSA had received any reply to its request to roll over the surplus.

Mr Letsoalo replied that the National Treasury had agreed to a roll-over.

Ms Lebethe replied that it was unrealistic to disburse all funds by 31 March. The AG had advised to record it differently. Although the impression was created that the NACSA was retaining money that it had not spent, in reality the NACSA had allocated this money. The commitment remained, as did the NACSA's work. NACSA was strict in reporting and compliance in order to protect the state's assets, since there were scoundrels who would take advantage of public funds and do as they wished. NACSA wanted to be sure that beneficiaries met the conditions of their contracts before NACSA released funding.

Ms Diphofa added that NACSA expected a progress report from beneficiaries of bursaries after the first instalment. She explained the phasing of instalments into three tranches.

Dr Lotriet asked if the National Lottery could provide funds and noted that the NACSA's budget allocation was extremely limited in relation to the important role that NACSA played.  Dr Lotriet asked about the New Funding Model. She said that she received regularly requests from existing theatres which were, of necessity, about to close their doors, and from the way in which the NACSA had presented its funding model, these theatres would fall into the category of excellence and would not receive much money. Had the NACSA made an impact study of the possible effects of its New Funding Model on the existing theatres and companies?

Mr Mnisi replied that company funding had been designed specifically to assist organisations that were collapsing. However, the NACSA had only R22 million, which was not enough for all these companies. There was much competition in that area of funding. NACSA wanted to enter into negotiation with the National Lottery to finance the large theatres or playhouses. However, NACSA had no control over the National Lottery. The NACSA did assist the majority of applicants, but bore a huge burden with scanty resources, while the National Lottery's budget was three times the NACSA's budget. Entering into an agreement with the Lottery was long overdue. However, the Lottery had responded that its Act did not allow it to fund a funder. Nevertheless, this year the NACSA had revised its approach to the National Lottery by way of asking for money to launch capacity building programmes rather than for funding organisations, and for conferences, research and for local efforts towards building community arts centres. 

Dr Lotriet asked if the former Council had approved the New Funding Model, which would have a serious impact on the arts community. In addition, she asked if the NACSA had consulted more widely with the arts fraternity about the New Funding Model.

Mr Mnisi replied that the New Funding Model had been approved in 2009 and ratified in 2010 by the last Council before its term expired.

Dr Lotriet noted that the NACSA had consulted with the PACCs but it appeared that the NACSA had glossed over many issues.

Mr Mnisi replied that the PACCs functioned independently of the NACSA under the provincial departments of arts and culture. However, some of the PACCs were not independent entities but were under the coordination of a provincial department of arts and culture and did not really exist in reality.  The NACSA's workshops on PACCs had revealed many problems. There was a disjuncture. The other problem was budget, for example, in the Northern Cape, where only R250 000 was available.  On the other hand, the PACCs in the Western Cape, Eastern Cape, KwaZulu-Natal, and Gauteng were functioning optimally. North West was beginning to function better as well, with a separation of the PACC from the provincial department of arts and culture. Limpopo was a particular problem in regard to its PACC. A memorandum of understanding (MOU) was needed between the PACCs and the heads of departments (HODs) in the provinces. The NACSA would continue engaging the PACCs and was hopeful of a positive outcome.
 
Mr S Ntapane (UDM) asked Ms Lebethe about assistance to other artists in the whole continent (slide 7). Now that there was a financial problem, how did the NACSA intend to do that?

Ms Lebethe replied that the NACSA had not promised to fund artists in the continent but rather wanted to assist other countries with a model on how to assist artists. NACSA was working on the issue of whether it could and should assist immigrant artists, including refugees, who had documentation.

Mr Ntapane asked what NACSA's feelings were about the size and capacity of the NACSA's board (Council). (Slide 8).

The Chairperson said that 23 was too high a number of Council members. It was an absurd number (slide 8). Perhaps if some provincial representatives or persons with disabilities were included, it might be more understandable.  The Department must review this number before appointing the Council.

Ms Lebethe replied that the NACSA had, two days previously, made a submission to the Department on the board's size. It was a legal quagmire. Even 18 members was quite large a number. The Minister could not be seen to be non-compliant with applicable legislation.

The Department of Arts and Culture confirmed that until such time as the legislation was amended, the size of the Council would be 23members - 14 appointed by the Minister and nine provincial representatives.

Dr Jokweni added that, if the numbers were to be changed, the Act would have to be amended. He added that the Minister had already written to the new Council members recommended by the advisory panel. In other words, they were already aware that they had been appointed to serve on this Council. However, given the fact that NACSA had appealed to the Minister to reconsider this number, he did not see any conflict and believed that the Minister would consider the matter and would respond accordingly.

Mr Ntapane asked about staff numbers, the numbers of whom appeared to differ from slide 8 to slide 12, and what had happened to the difference.

Mr Ntapane asked how NACSA identified crafters (slide 14).

Ms Diphofa replied on the craft initiative in Grahamstown. Many of the crafters produced goods, but they lacked markets. The NACSA had intervened to take the crafters to another level where they could market their products.  Crafters from different craft genres had been selected by the NACSA's panel. This was based on the marketability of the products.

Mr Ntapane asked about a difference from 2008/09 to 2009/10 in non-current assets in slide 22. He asked if the difference was caused by depreciation.

Mr Letsoalo replied that depreciation was the key issue there. When the NACSA paid grants there would be a reduction. From the income statement, it was an operational expense.

Mr Ntapane asked why NACSA had not recognised a Norwegian grant in its books (slide 30).

Mr Letsoalo replied that not recognising the grant was an oversight. Instead of following GRAP 23 (slide 30), the NACSA had put the money in the bank as it was and had not disposed of it as it should have done. NACSA had now complied with GRAP 17 (slide 30).

Ms Lebethe added that NACSA had for 10 years always seen Mmino as a separate matter and served in an agency role (slide 30). 

Mr Ntapane asked Ms Diphofa if NACSA made a contract with bursary recipients. Could the beneficiaries work anywhere subsequently?

Ms Diphofa replied that NACSA gave bursary recipients contracts. With regard to those who left the country afterwards, it had been an ongoing debate whether they would eventually return to South Africa. NACSA paid only a small portion of expenses and did not give full sponsorship.

Mr Ntapane asked what criteria the NACSA used for disbursement of funding to individuals (slide 43).

Ms Diphofa replied that NACSA had individual funding criteria. Artists were expected to submit proof of previous work.

Mr Ntapane asked about the vastly different levels of funding in the provinces (slide 42). What caused this difference? The province from which he came, the Eastern Cape, was one of those less funded.

The Chairperson asked how the NACSA reached the northern areas. Places such as Soweto and the Cape were well known and received funds.

Ms F Mushwana (ANC) asked about the number of entities in the Western Cape and Gauteng (slide 42), and said that these two provinces were not necessarily the ones with rural communities. Yet they were enjoying the most funding. Why did NACSA capacitate those who were already capacitated?

Ms Diphofa replied that traditionally people migrated from the rural to the metropolitan provinces where they concentrated. Many of them found exposure, opportunities, and success there. This tended to skew the allocation and distribution of the funding. Also many applications from the rural provinces were incomplete. Hence the NACSA had tried, every year; to go back to the rural areas, work with the municipalities and with the PACCs to invite the artists that NACSA had on its database to attend workshops and to be assisted in filling in forms. 

Ms F Mushwana (ANC) asked how the NACSA assisted those who could not read or write, but who were talented. Did it have a strategy, including workshops, to help the uninformed?  She emphasised the necessity of reaching out to the gifted but unrecognised artists in the remote areas.

Hosi T Nwamitwa-Shilubana (ANC) appealed for assistance to the talented and undiscovered artists who could not read or write. She noted that the Department of Trade and Industry officials actually went to the rural areas and helped applicants fill forms.  She asked with particular reference to Limpopo. She noted that many crafters could be helped to form entities, since the market for their products already existed, as could be seen at the airports. However, the crafters whose work she had seen appeared to be controlled by a single white woman. This was just because they did not know how to extricate themselves from that cocoon.

Ms Diphofa replied that the NACSA's operational budget was quite low. The NACSA did not have field workers or the resources to finance them. The NACSA allowed applicants to fill in forms in their mother tongues. Moreover, the NACSA had tried, every year, to go back to the rural areas, work with the municipalities and with the PACCs to invite the artists that NACSA had on its database to attend workshops and to be assisted in filling in forms, but did not have the resources to do this continually, without the assistance of the provincial offices. 

Ms Lebethe added that she had implored the heads of departments (HODs) in the provinces that what might work would be for the Department or the NACSA to allocate a resource person, especially over the funding period, to help applicants fill in the forms.  

Mr Ntapane said to Mr Mnisi that the New Funding Model was superb, but asked if NACSA had communicated this to its panels.

Mr Mnisi replied that NACSA did not yet have the panels. When the panels were appointed, they would undergo a process of inauguration and induction by way of a workshop, and here the New Funding Model would be introduced to them.  There would also be a new funding criteria by which the panels would have to abide. Moreover, these criteria would have to be endorsed by the incoming board (Council), since these criteria could not be imposed on the new Council.

Mr Ntapane asked if the New Funding Model was not open to being challenged, if it should be found inconsistent with the Act. He asked if it would not be better simply to amend the NACSA's Act, rather than pursuing something that might be inconsistent with the Act. 

Mr Mnisi replied that the NACSA had borrowed from the international model. NACSA sought an “arms length” approach, which was not contained in the Act but was just a policy framework that the NACSA had borrowed from international models. When NACSA disbursed funds, it was an open and transparent process.  Applications were assessed by independent panel members. In this regard it was not contained in the Act. However, NACSA sought to avoid any conflict with the Act. However, NACSA recognised that the objects of the Act had not been addressed in the funding model. NACSA, in its New Funding Model, was not violating any law. It was manageable.

Ms T Lishivha (ANC) asked who paid NACSA's consultant.

Ms Lebethe replied to Ms Lishivha that there would be a separate bank account for Downtown Studios. The NACSA did not want its own operational costs to be affected by the transfer. So it had utilised the funding from the Department that had been specifically allocated for Downtown Studios. 

Ms Lishivha asked how many temporary staff members the NACSA had.

Ms Lebethe replied that the two additional temporary staff made up the figure of a total of 28 staff members.

An ANC Member visiting the Committee asked why the NACSA's presentation was silent on the community arts centres. Should they not be the NACSA's partners? He asked how to develop relationships with them.

Ms Lebethe replied that community art centres were a competence of the Department in conjunction with the provincial departments of arts, culture and sports. The provinces received a conditional grant in this respect.

The Department confirmed that the community arts centres were the mandate of the Department nationally. Two weeks previously a meeting had been held to resuscitate the interim task team, established three years previously.   

The visiting Member asked, at length, about the PACCs. There was a need to strengthen relationships with them and other structures, including local government – there was a need for joint campaigns.  

Ms Lishivha asked how the NACSA would assist the PACCs in provinces such as Mpumalanga.

Ms Lebethe replied that the PACCs were a provincial competence. NACSA had little sway. It was necessary, in regard to the PACCs, to follow the applicable provincial legislation in each province. The NACSA could advise but not impose its views.

The Chairperson asked how the NACSA related to the political heads (MECs) in the provinces.

The visiting Member asked if Macufe (Cultural Festival held in Mangaung) could be taken as a model. Surely each province could have such a platform. Perhaps the Minister and the Members of the Executive Council (MECs) in the provinces concerned could conclude agreements. Support for the NACSA's seven sectors could be promoted in a forum in each province.

Ms Lebethe replied that NACSA sought to support such festivals indirectly.

Mr Ntapane observed a lack of communication between the NACSA and the Department and asked what the NACSA was doing about it.

The visiting Member asked if there was no chief director in the Department for the work of the NACSA. Could not such a person attend the NACSA's management meetings in order to close the gap between the NACSA and the Department? Could this not be proposed to the Acting Director-General?

Dr Jokweni appreciated the above comment and promised to implement with immediate effect the presence of a Departmental official to redress the apparent lack of interaction between the NACSA and the Department.

The Chairperson asked about the Swedish project and why the letter of intent was taking so long (slide 15). Moreover, did the partnership really benefit South Africa?

This question was not answered.  

The Chairperson asked why the previous CFO had been dismissed.

Ms Lebethe replied that the previous CFO had been dismissed for financial misconduct and insubordination.

The Chairperson asked if NACSA had any other races in its employment profile, or if any persons with disabilities were employed (slide 12).

Ms Lebethe replied that the NACSA had no staff members with disabilities. The NACSA had two coloured females and one coloured male. The rest were African male or female.

The Chairperson asked what reassurances the NACSA could provide on the progress with the New Funding Model (slide 54).

Mr Mnisi replied that NACSA had included the New Funding Model in the NACSA's strategic plan for 2011/14. Every quarter, the NACSA would submit its quarterly reports, and, at the end of the year, it would be evaluated on its key objectives. NACSA was now calling for arts projects that had a community impact. Although at the initial stage, NACSA was beginning to implement the New Funding Model. Once this Model was in the strategic plan, there was no way that the NACSA would not be able to implement it. It sought an “arms length” approach.

The Chairperson said that it was important to have a meeting with the National Lottery. She asked if the NACSA had any other funding partnerships. 

The Department confirmed that the community arts centres were the mandate of the Department nationally. Two weeks previously a meeting had been held to resuscitate the interim task team, established three years previously.

The Chairperson thanked the NACSA and urged it to strengthen its relationships with the provinces, and, above all, with its political heads.

Adoption of minutes
Past minutes were adopted. [Dr Lotriet proposed, Mr Ntapane seconded.]

Other business
The Chairperson advised that the oversight visit to Robben Island would be postponed to the next financial year.

The Chairperson advised that there would be no meeting next week.

The meeting was adjourned.