Department of Arts and Culture 3rd quarter Expenditure Report

Meeting report

Department of Arts and Culture (DAC) Expenditure in the 3^rd Quarter
Acting CFO, Mr Mike Rennie, said that he was Acting CFO and noted the appointment of a CFO was imminent so this might be the last meeting in which he played this role. The Department had done a presentation in September on second quarter expenditure and it was present today to explain expenditure for the third quarter.

Slide 1 showed the budget allocation per programme. There were certain rollovers and adjustments and the current budget was R2,5 billion. Slide 2 showed budget allocation per economic classification. Slide 3: By the end of 3^rd quarter, 69% expenditure had occurred (against 75%) so there was a variance.

Expenditure Trends
This graph showed how expenditure had gone through the various quarters. He hoped the Department would come close during the last months of the financial year to spend all of the R2.5 billion. He wanted those present to note that in 2009/10 and 2010/11 the Department did underspend. The under expenditure of 2010/11 was less than the year before so they were working to continually reduce expenditure.

Expenditure per Economic Classification
Mr Rennie said that the capital works program had had some problems. It would have been ideal to have expenditure at 71% but at 69%, it was still in a good place.

Mr Rennie said there had been some unbudgeted costs and therefore expenditure had been a little higher. An example was the legal costs that they faced.

Goods and Services
Mr Rennie said that on the Mzansi Golden Economy he did not know the exact number as this was a new program and some factors had been put in that should not have been.

Expenditure Trends: Provinces and Municipalities (Conditional grant on community libraries)
Mr Rennie explained that this graph was strange as the provinces and municipalities were paid on a quarterly basis

Expenditure Trends: Departmental Agencies Accounts (Capital)
Mr Rennie explained that capital works program had been a problem area in the past as one could see the first few months had been slow but it had picked up and the Department was quite confident in terms of this expenditure.

Mr Rennie said that he hoped that the Department would improve in spending more of their budget.

Discussion
Ms M Morutoa (ANC) thanked Mr Rennie for a relaxed, informative presentation that helped her to understand the budget and expenditure.

Under Spending and Over Spending of Budget
Ms Morutoa wanted more of an explanation on how the virements were being dealt with.

Ms F Mushwana (ANC) asked about under spending, saying it was one thing to anticipate and another to actualise things. She was not sure how the Department was going to make spending happen. She expressed concern about the poor spending in the graph showing Expenditure Trends for Capital Assets (page 23). She felt that the Department was not doing things correctly.

Mr Rennie replied that he might struggle to answer the questions as he did not have all the answers. On the virements, he said those were the shifting of funds. For example, the Department would shift funds from one area of under expenditure to where the money was needed.

Mr Rennie said that in terms of over or under expenditure, each time the department did this, they learned from their mistakes, these were allocations to public entities. He said that probably by the next meeting, all these funds would be spent. 100% of the funds would be spent in terms of the allocation as it was listed in the Appropriation Act that the public entities were to be given exactly that amount. Thus next time all the funds in the economic classification would be spent.

Provinces and Municipalities
Ms T Lishivha (ANC) referred to the provinces and municipalities rollovers and adjustments. She asked how much rollover there was per province so could know which had more and which less.

Mr P Ntshiqela (COPE) referred to the information on provinces and municipalities. He asked if the Department was dealing with the municipalities directly.

Mr Rennie replied about provincial rollovers, saying he did not have the information on him at this moment. There were four provinces that funds were rolled over to but he could not find that information at the moment. He offered to forward the information within the week and apologised for the lack of disaggregation. He assured the Committee he had done the desegregation but did not have that information currently with him.

Mr Sibusiso Xaba, DAC Director General, said that he should clarify the role of municipalities. What happened previously was most provinces transferred money to municipalities for grants. The Department had had problems with that, as municipalities were a sphere of government with very little capacity. There had been problems with municipalities not being able to deliver on grants so they had to move away from that. Only in the Western Cape and Gauteng did municipalities have enough capacity to have the grants directly. For the rest of provinces, the provincial department had to actually deliver it themselves.

Vacant Posts
Ms Lishivha asked about the delays and if they were caused by the vacant posts and were these posts filled at the moment? She sought clarity on provincial coordinators that were suspended and were still suspended.

Ms H Van Schalkwyk (DA) asked if posts were being filled and how did the vacant posts impact on service delivery.

Mr L Khoarai (ANC) expressed the concerns of the Committee about the many acting positions. Still today these vacant positions had not been filled. Could the acting CFO explain why these had not been filled?

The Chairperson said that on issue of vacancies the Committee needed to receive information on how far the Department was with improving its vacancy rate of 26% as it stood a year ago.

Mr Conrad Greve, Human Resources Manager for the Department of Arts and Culture, said he would give a broad overview of where the Department was currently in terms of vacancies. The Department had developed a macro structure moving into the new financial year. They would have loved to present this to the Committee but would do so at a later date.

In terms of the current vacancy rate it was just below 10% as of 31 January. The 26% was with the structure as of 2010/11 where the majority of vacancies were unfunded. The Department had decided that unfunded posts had to be done away with as they could not be utilised. The Department initially had a vacancy rate of around 5.9% which had grown to 10%. This was because of the new structure to be effected from April 2012 as the Department did not fill posts automatically that become vacant. There were, however, a few critical positions that needed filling, for example, the CFO. The Department was expediting the filling of this and other keys positions and would be requesting the Minister’s approval shortly. The selection process was underway. There were the two DDG positions as well as the Director in the Director General’s Office. The Head of Legal Services had resigned in December and the Director in the Director General office retired at the end of January. These were a couple of the positions being expedited. These positions were in the old structure and would be appearing in the new structure as well.

In terms of delays in the filling of posts he had tried to explain whether this had an impact on service delivery. He said that when the Department presented the first and second quarterly reports, there had been a note stating that some of the deliverables could not be met due to capacity. However, the Department had decided that this was not an excuse and they were moving towards the optimal use of human resources, thus looking to project teams and even outsourcing.

Mr Greve said that the acting positions were still in place and those were positions needed for the purposes of decision making. For governance purposes these positions would need to remain in place till the new structure was implemented. The date of implementation was 1 April. As he had said before the key positions were the CFO and the two Deputy Directors General and these positions were currently being filled.

Non-Profit Organisations
Mr Ntshiqela asked to what non profit organisations was the Department refereeing. Were they departmental agencies or civil society organisations?

Ms T Nwamitwa-Shilubana (ANC) asked about page 4 and the cultural development which had always been 41%. She wanted to reiterate what had been said about non profit organizations. How did the Department help communities in upgrading cultural activities that fell in that category?

Mr Rennie replied that there was a specific allocation for non profit organisations and those were the three institutions highlighted: Business and Arts South Africa (BASA), Blind SA, and the Engelenburg Art Collection. Those were non-public entities with a specific allocation and they would be given that exact allocation for the year.

Underspending
Ms Nwamitwa-Shilubana asked about the project Mzansi Golden Economy. The Department had explained how money was going to be spent. Was the money for this project not transferable to other projects so as to commit the money and not leave it unused? This would stop underspending. If the Department did not spend all its budget, they could not tell Treasury the money received was not enough.

Ms Nwamitwa-Shilubana asked about under spending in Limpopo. She asked if the Department could explain how they were underspending there whereas other departments say the province had squandered funds.

Ms Nwamitwa-Shilubana referred to Developmental Agencies Accounts and asked if there would be no over or under spending at the end of the financial year.

Department and the use of the Independent Development Trust
Ms Nwamitwa-Shilubana referred to the parastatal, Independent Development Trust (IDT) and asked if the Department was going to use the IDT, how would they ensure that the money was spent wisely?

Community Libraries
Ms Van Schalkwyk referred to Conditional Grant on Community Libraries and asked if this money was set aside for job creation. Once the municipality had that money, what watchdog would ensure the money was spent for library purposes?

Mzansi Golden Economy
Ms Van Schalkwyk referred to the Mzansi Golden Economy and asked what process did an individual have to follow to get hold of money for certain projects. Did they apply within their province or to the Department directly?

Mr Rennie replied that the majority of the Mzansi Golden Economy funds had been committed. Of the R81 million, R58 million had been committed. The rest would be designated to specific household initiatives. It had not been easy to suddenly get money so quickly and have to spend it. It had to be done wisely. The Department had to be smart about whom they gave the money to. The Director General was instrumental in allocating the money. The R58 million would be committed by the end of the financial year. One example was R10 million had been spent on COP17 which had a tremendous impact on bringing visibility to our arts and culture to the international community.

Mr Rennie said the Department did receive allocations in terms of the Mzansi Golden Economy which fell short of what they needed to implement the project. In terms of going forward into the new year there would be a strategy to determine how the funds could be spent and how the Department could reach the people out there to access the money. However, at this point in time, the question could not be answered.

Vacant posts and overtime
Mr N van den Berg (DA) referred to the filling of positions and the fact that there was some delay. He had learned from other departments that if vacancies occurred, people got overtime to do the work of those vacant posts. He asked if this was happening in the DAC.

Mr Greve replied that the Department did work overtime but not as a result of a lack of capacity. This was done mostly because of projects and commemoration events run on weekends and public holidays and where projects needed to be wrapped up. There was a provision in the regulations that states one is not allowed to be paid overtime due to an overload of work or lack of capacity. Overtime was project specific and not because of workload due to unfilled posts.

Provinces proper usage of funds allocated
Mr van den Berg asked if provinces used the money for the purpose that the money was allocated. Did the Department ensure this?

Mr Rennie replied about a watchdog, saying the provinces were audited by the Auditor-General.

Mr Xaba said that where such problems were found, the Department worked with the provincial department and provincial treasury to address the problem.

Capital Works and the Department of Public Works
Mr van den Berg said that the Department of Public Works (DPW) was like a golden string through all such issues. He was sure it was not the Department’s fault but was a problem bigger than DAC. Was there however a contingency plan to remedy the situation as relying on the DPW was not good?

Mr Rennie said the Department of Public Works had been the bane of the Department’s existence especially in terms of trouble with Capital Works, but there was a contingency plan. The Independent Development Trust (IDT) although having its own problems, had fewer than those experienced by DPW. There was approval by National Treasury to fund playhouses for capital works. The Department therefore did not have to go through the DPW process. A public entity like a playhouse was allowed to rollover their money thus they would be able to spend it on their projects when it was needed. In his personal opinion, South Africa would soon have state of the art playhouses that would be able to compete with the best in the world.

Mr Xaba said that the problems that the Department had with Public Works, the provincial sectors had it as well. Public Works was a bit slow or overloaded thus there had been no delivery on the ground. Thus the Department was working with the provinces to find other development agencies that could move faster. Some provinces had begun to use IDT and other agencies. They were being helped to identify other development agencies.

Capital Assets
Mr van den Berg said that the Committee had learnt capital assets were 41% of budget, had this been spent in the 3^rd quarter? Also was that an indication that everything was up to standard or did someone make a mistake in spending money on capital assets.

Mr Rennie replied that in terms of Capital Assets the Department had had a big initiative to upgrade the IT infrastructure and a large portion of that money was committed. It was still being spent and the accounts were still coming through. There was a procurement plan but the Department was still waiting for accounts to actually come in. The Department was nearly there in terms of its IT upgrades.

Voortrekker Monument
Mr van den Berg said that he was glad that the President in his State Of the Nation Address had referred to all cultural sites and that Voortrekker monument would be looked after. He merely wanted to know if there was a budget for new items.

Mr Rennie replied that the Voortrekker Monument was part of a three-year agreement which was concluded in the financial year. There was no further memorandum of agreement but the DDG of Heritage and Mr Rennie had met to discuss this issue to see what plan of action could be given to the Director General. This problem had to be facilitated as they had been given some funds but they wanted more.

Mr Xaba said currently the Voortrekker monument was not a listed heritage site but the declaration making it so would happen around the 16 March 2012. Therefore its operations would need to be fully funded. This work was done by the South African Heritage Resources Agency which did the declaration and the Department did the funds. The Department had spoken to Treasury to get proper funding for heritage sites as they did not feel they were adequately funded. The Department was doing a new funding model for all its heritage sites.

Balancing past history and current commitments
Ms Mushwana referred to page 11 noting that DAC spoke of past history and current commitments. Was there going to be a need for serious balancing? She agreed with the Department but was there any remedy in place to balance past history and current commitments?

Budget amount spent by 31 March 2012
Ms Mushwana asked if the budgeted amount would be spent by 31 March 2012. If all the money was spent by then what would happen?

Mr Rennie replied about the remedying property management that this was an annual allocation that did not end on 31 March. The Department had already received a new allocation in terms of the new financial year to service the commitments that they had as they did not just end on 31 March.

Jobs within the Arts and Culture Sector
Ms Mushwana said that the Committee and Department had promised jobs within arts and culture and broader development. Arts and culture was a potentially big employer so what were the Department’s plans?

Mr Xaba replied that in terms of job creation and opportunities, the Committee was asked to recall that with the Mzansi Golden Economy, the Department had quantified quite clearly all of the job opportunities they believed they could create. There were three areas in which the Department felt they could create job opportunities. The first was within the public service, the Department, the libraries, other public facilities, and community art centres. The second area was through the arts sector. The Department strategy relied on the more there was activity in the in the market the more jobs were created. Whether this happened through festivals or the selling of art or other means money would be generated in the art sector and jobs created. They relied on the fact that they had noticed that a big element of the Mzansi Golden Economy was audience building. This was because if the sector was not able to develop its audiences, the sector would not be sustainable. Thus the department was encouraging people to engage in art by going to the galleries and attending festivals and spend money on the arts. The Department had witnessed some successes in certain areas. For example, a private equity company launched for the first time an art price index in South Africa which showed South African art was quite a lucrative business both in the country and abroad. He had witnessed one piece of South African art valued at R6 million. The more interest that was generated in the arts the more it would create jobs.

Mr Xaba said the third area of job creation was infrastructure projects during both the building phase and operations phase, particularly when it came to heritage. Normally heritage was a big attraction for outside tourists but that job creation was not accounted for within Heritage but included as being part of Tourism. If one looked at the statistics, the biggest attraction for tourists was the heritage and not beaches and wildlife. The Department was generating jobs in this respect, but did not always get credit for it. The President had noted this when he talked about generating tourism by using heritage.

Limpopo and under expenditure
Ms Morutoa referred to page 14 and asked if DAC could explain why Limpopo had under expenditure. Also why was the amount of R23 million withheld and until when would it be withheld?

Mr Rennie said that he could not reply as he did not deal with community libraries and was not sure what the issue would be.

Mr Xaba replied that the underspending in Limpopo could be explained as each year each province gave a business plan on libraries. On the basis of that, the grant was approved. The Department did assessments of the business plan and engaged with the provinces until they were satisfied the business plan was a proper reflection of what could be done. However during the course of the year the Department took the business plan of the provinces and created a cash flow projection to make transfers. However there were times when there was under expenditure or problematic issues and the department adjusted accordingly. What happened in Limpopo was the province was not spending as much as they said they would spend. The regulations that governed conditional grants said that in the Department’s monitoring of the spending of the grants they could withhold money if it was believed there was a problem in the province. It was on this basis that Treasury and the province were informed that these grants were to withheld because of such problems. This was done at beginning of the fourth quarter in January. These problems were pointed out to Limpopo and they returned and proved these problems had been solved thus they were in the process of finalising the paper work and this money would soon be given to Limpopo so they could begin spending. The CFO had mentioned that the Department had met with the head of all the provinces on the issue of the library grant and part of the reason was to get a sense of the kind of problems they ran into. This was the same way the Department had had issues with Public Works. The provincial departments were given grants but did not build the libraries themselves and relied on the Department of Public Works.

Late payments
Mr Khoarai asked if the Department had a problem with late payments.

Mr Rennie said in terms of late payments, the Department had tried their best. He felt that the Auditor General’s report on that had been a little unfair. However they were adamant, the Department did understand that cash flow was everything but sometimes it was difficult if the money did not reconcile with the work that was done. The Department did take the matter seriously in terms of handing in invoices and the like and had tried to address the matter. There was a need to reconcile and make sure services and products were delivered adequately.

Business plan
The Chairperson referred to page 12 that stated the Mzansi Golden Economy business plan was being finalised which would dictate the spending areas and processes to ensure spending by 31 March 2012. She asked if it had it been finalised or not. If it had, then the Department would spend R85 million. If not, what would happen?

Mr Rennie replied that the business plan would be delivered soon to Treasury as it had been finalised. It would indicate that nearly R59 million rand of the funds would be deployed to projects to stimulate the economy and create jobs over a larger spectrum of arts and culture and community.

100 Million in a month
The Chairperson said that the Department need to spend R100 million in a month and wondered if this would do the funds justice. She asked what happened to the interest.

Mr Rennie replied that any interest would go directly to the state revenue account. This could not be accessed.

IT Vacancies
The Chairperson asked why was there never procurement for an IT system. Why did they not have that system in place and if it was in place who would operate it?

Mr Greve said in terms of capacity of the IT unit, DAC had approached Treasury during the third quarter last year and requested the shifting of funds from Goods and Services to Employee Compensation because they used to employ a consultant to do the job normally done by employees. The Department had to employ a consultant because they had insufficient employee compensation. Treasury then approved an amount of about R1.925 million and that money had been shifted to employee compensation and positions were created within IT. They planned to fill those within the next month or so. The Department was thus building capacity within the IT unit and replacing the consultant who fell away.

Provincial Coordinators
Mr Greve said that the provincial coordinators were dismissed from the Department around 2010 and they then declared a dispute against the Department in the bargaining council. There was arbitration and the ruling went against the Department for the reinstalment of these employees. However there was a shift in focus of the Investing In Culture (IIC) programme. It was previously run on a provincial model where each provincial coordinator was allocated a province where they stayed. The Department had now changed the way they ran the IIC program. The Department had been in contact with these provincial coordinators and it was strongly considering imposing the arbitration ruling as opposed to the settlement agreement. The majority had indicated that they were willing to come to the Department. The implications for them was they would have to relocate to Pretoria and would not be in the provinces with the exception of one. This was something that the Department wanted to wrap up in this financial year. The reinstatement of these coordinators would have quite an effect on the budget as according to labour law they had to re-instate them retrospectively from the date of dismissal which was more than a year.

Vacancies
Mr Khoarai said he was concerned about the vacancies, saying the Committee could not accept this. It had even been the call of the President to fill vacancies and it was bad that the Department still had acting DDGs. It made one wonder if the Department and Committee were still on track. DAC’s response had not been convincing either. He understood two weeks from now the Committee would meet and get a report on the matter. He made the appeal that this matter would have been dealt with in that fortnight.

Mr Ntapane asked if there was savings by posts not being filled. Did this not affect the department negatively?

Robben Island
Ms Mushwana commented on Robben Island and the move to improve matters there. She believed the Committee was listening to the Department and thinking things would happen as the Department using terminology that was convincing. The Department said things will happen soon, but when was “soon”? This matter was so serious, the Committee needed to get exact time frames. This was going to be a huge process. Could the Committee be assured that something would be done to ensure there was improvement? Robben Island attracted a lot of people. Something had to be done because everyone wanted to go to Robben Island.

Mr Xaba said Robben Island was a special case because it was a world heritage site and a museum. The management of it needed to be done in terms of a plan approved in terms of the World Heritage Committee. The Department was about to submit a plan to them. Robben Island had a sensitive eco system, so numbers of animals and people had to be closely monitored. It was about how best to balance all of these. The Department would share with the Committee their plan to manage Robben Island, when it was finalised.

Grants and Libraries
Ms Mushwana said the presentation referred to Johannesburg Library but one needed to look at rural library development. The Department needed to improve rural areas especially if we were talking about improving the people of South Africa. It needed to become a serious issue.

Ms Nwamitwa-Shilubana asked when the Department spoke of conditional grants for communities did they speak of giving these grants with reference to libraries only or more generally?

Mr Xaba said the grants covered two things: infrastructure and the actual equipping of the libraries. All this was done in terms of a submitted business plan. The Department monitored that this was followed. However, over the course of a year business plans were sometimes amended due to various reasons. The Department considered and decided whether to approve he amendments. The need for libraries was quite substantial and the Department sought to concentrate on building new libraries as there had been a call from the community for new libraries.

Mr Xaba responded to the comment about libraries in rural areas and said that the mention of Johannesburg had been merely an example of the work done between municipalities and provinces. Most of the library grants when to rural provinces.

The Chairperson said that the explanation by Mr Xaba on libraries was good but should have been done ages ago.

Community Artists
Ms Nwamitwa-Shilubana asked when one spoke of “artists” and the like, people who were not from the sector may not know it included cultural groups in a rural community. Was there a way through the provinces for rural cultural groups to send in a business plan? She had heard from people during oversight visits that the Department of Arts and Culture was nowhere to be found. She felt these people had been neglected because they were not educated and came from a rural community. She argued it was high time that artists, who were not literate, were promoted. Thus if there was a community that wanted to promote a cultural group or the like that wanted to create jobs and promote cultural art could they come straight to the national Department to bring a business plan (like the Tourism department) or did they need to go through the province? They were frustrated.

Mr Xaba said artists could come directly to the Department from communities. The Department implemented different programmes in different ways. This year it would issue calls for proposals for different programmes either directly or indirectly through organisations and bodies such as the National Arts Council.
 
IT Upgrades
Ms Morutoa was not satisfied with the answer on IT. If the Department upgraded its IT, what did this mean? What did upgrading mean as one needed to know South African works were safe.

Mr S Xaba said the upgrade was a bit of a complicated situation. When the Department talked about its own internal upgrade, for example, this was about proper backup systems and upgrading servers. DAC was working with the Department of Communications from a content point of view. They managed the technology and connectivity and DAC provided the content. It was still early days and the work would need to be long term as once digitization kicked in there would need to be 18 new public stations which needed content but the quality was being managed by the Department of Communications.

Ms Morutoa replied that the Committee understood who was responsible for was there compliance with the latest technology? She understood the connection between the two departments. But was the department compliant with the latest technology.

Mr Xaba said DAC was and part of upgrading was so that the Department was able to comply.

Department of Public Works’ Failings and the use of the IDT
Mr van den Berg asked about the domino effect on using IDT and not DPW. He asked if the Department would have to ‘re-spend‘ money on IDT and what would the impact be on the budget.

Mr Xaba spoke on the use of the Independent Development Trust (IDT) and whether the Department was not going to have to pay the Department of Public Works. The projects that the Department had engaged IDT on would be taken out of the list given to Public Works. They were not going to incur additional expenditure by engaging IDT. Thus they were splitting the programs between the two entities.
 
Financial Budget
Mr Ntapane said it was not a good reflection that only 69% of the budget was spent (not 75%) was spent. The financial year ended on 31 March. He was concerned about this. What were the problems in spending this money in our communities as they needed the money.

Carmel Caves
Mr Ntapane mentioned that on television he had heard about sites not doing well one of which was the Carmel Caves. Why were these not mentioned in the report?

Mr Xaba replied that DAC was currently not responsible for the caves. They were managed by the provincial department of arts and culture, sports and recreation but they would follow it up.

Lottery Fund
The Chairperson asked why the Lottery fund had not been mentioned.
 
Mr Xaba replied that the lottery was a problem as it had always operated independently. Treasury felt that the Lottery should be part of DAC budget discussions and they had been invited but had decided not to attend. However Mr Xaba had met with the Lottery Chairperson and they had agreed that there was a need to sit down and agree how funding happened as the lottery funded more projects than the Department. There had not been proper coordination previously. However with the pressure they were now under, they had decided to come to the table to work together.

The Chairperson commented that the last time a presentation involving the Lottery had been done, it seemed there had not been proper coordination between the two entities because sometimes there was duplication of funding. This was why she had raised the question as there was a section in the Lottery fund dealing with Arts and Culture.

Investigations
In terms of the progress with investigations, Mr Xaba said they were almost done. A list of projects had been that needed to be checked on, had been released and these investigations would be done by the end of February

The meeting was adjourned.