Performing Arts Centre of the Free State (PACOFS) progress report

Arts and Culture

07 November 2012
Chairperson: Ms T Sunduza (ANC)
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Meeting Summary

PACOFS had had to suspend its previous CEO, Artistic Manager and Artistic Development Manager. This was followed by a disciplinary process where the CEO resigned, the Artistic Manager was dismissed and the Artistic Development Manager was dismissed but who had now taken PACOFS to the CCMA. PACOFS had also lacked Finance and Supply Chain Managers. Staffing costs alone took 70% of its funding.  Outreach programmes had been stopped as its stage truck was beyond repair. A qualified audit report had added to its woes.

The Department of Arts and Culture was concerned with the situation facing Performing Arts Centre of the Free State (PACOFS). There had been an attempt this year to have a more effective monitoring system of the Department’s institutions and each had to report quarterly. Despite expressing concern over the state of PACOFS, it said there had been improvement.

PACOFS Board Chairperson said that there had been a culture at PACOFS in which people did not attend to things in a disciplined, formal manner. Those who had come in to take charge refused to be intimidated and there had been a resolve to get things running and move the institution forward. He felt this had been done. The Department was thanked for appointing a representative from the Department to aid the institution. PACOFS was being formalized. Corruption was being fought and some had even been fired because of this. PACOFS was receiving huge support from the Department. Stakeholder relations were also being strengthened and corrected. PACOFS was doing the best they could, given the environment.

The presentation covered the history of the Council. This included new Council Activities including the signing of Share Holder’s Compact with the Minister of DAC, the Strategic Plan & Annual Performance Plan and the Infrastructure Master Plan (Capital Works Projects).

In terms of human resources there was a staff component of 99 (57 males and 42 females). Artistic highlights of the year included International Productions hosted at PACOFS included Smokie (UK Band) and a Chinese/Taiwanese Orchestra Gala Evening. Partnerships / Co-productions hosted at PACOFS included Ms Free State Pageant, Dance Connection & Simply the Best, Andre the Hypnotist, Wielie Wielie Wallie, Amandla and Beauty and the Beast. In-house / own production shows included The Letter, The Passion of Christ & Houtkruis, Cell Number 4 and Money Maker. PACOFS had been made into a receiving and producing house which created jobs and aided the community. There had been challenges as PACOFS did not have systems to be a producing house.

A financial expenditure report was provided for both 2011/12 and the first half of 2012/13. The findings of the qualified audit report were discussed in detail and the action plan to remedy these problems was outlined. Findings included assets not dealt with according to Generally Recognized Accounting Practice, irregular expenditure of R 3 355 792 and fruitless expenditure of R 1 293 026, the internal audit function was absent, over-spending, reconciliations not performed weekly, key leadership positions vacant, budget did not provide for depreciation. Steps to resolve these findings included the appointment of an external Internal Audit company to assist with oversight, risk management and to strengthen the internal controls. Management had procured a new financial system (ACCPAC) to improve reconciliation. In terms of governance Council resolved to appoint the Chief Financial Officer as an Acting Chief Executive Officer.

Members asked question about the gender composition of the organisation, outreach programmes to the rural areas and the stage truck, the success of the highlighted productions, cost of use of radio, under spending, possible over staffing within the organisation, the ownership of PACOFS property, the replacement of Council members, the organogram of PACOFS, the position of the Acting Chief Executive Officer, dismissals, the filling of the supply chain manager position, the dismissal of artistic director, the salary increases to the Acting CEO and Director of Corporate Services without Council approval.

Meeting report

Opening remarks by Department of Arts and Culture (DAC)
Mr Mike Rennie, Director: Good Governance of the Department, said the Department was also concerned with the situation facing Performing Arts Centre of the Free State (PACOFS). There had been an attempt this year to have a more effective monitoring system of the Department’s institutions and each had to report quarterly. The assessment of the third quarter had just finished however it had taken slightly longer than usual. As part of the exercise there was also an audit outcome instrument and an audit improvement plan. There were also forums in which various matters were engaged with. There had been an arts institutional sector forum as well as a Chief Executive Officer and Chief Financial Officer Forums. There would be a heritage institutional sector forum too. Measures were being put into place to help institutions.

Presentation by Performing Arts Centre of the Free State
Mr Teboho Macholo, Acting CEO: PACOFS, said there were only six Council members as the Deputy Chairperson had resigned. All Council members had been invited to attend this meeting and there had been three apologies from various Council members. The union representative had also received an invite to attend this meeting and had declined.

Mr Rudy Rashama, Chairperson of PACOFS, said that there had been a culture in which people did not attend to things in a formal manner. Those who had come in to take charge refused to be intimidated and there had been a resolve to get things running and move the institution forward. He felt this had been done. He thanked the Department for appointing a representative from the Department to aid the institution. PACOFS was being formalised.

Mr Macholo spoke on the vision, mission, background and overview which covered the Council. T
he previous Council’s term (with Chairperson - Ms. Janet Kay) ended August 2011. The new Council had been appointed in October 2011 with Chairperson, Mr Rudolf Rashama. New Council activities included the signing of shareholder’s compact with the Minister of Arts and Culture, the Strategic Plan and Annual Performance Plan and the Infrastructure Master Plan (Capital Works Projects).

Mr Rolihlahla Alexander, Human Resources Manager and Acting Development Manager of PACOFS, spoke on human resources matters noting the following: staff component of 99 (57 males and 42 females), the suspended Chief Executive Officer resigned when Council instituted a disciplinary hearing against him, the suspended Artistic Manager was dismissed and Artistic Development Manager was dismissed and has gone to the CCMA. A salary discrepancy project was in progress with the appointment of the Genesis Group. This group sought to give an overhaul of the human resource management system.

Mr Jerry Pooe, Acting Artistic Director, explained that when he arrived, the artistic plan had already been in place and his job was to ensure that the artistic plan (as approved by the Council) was implemented. The artistic highlights of the year included international productions hosted at PACOFS such as Smokie (UK Band) and a Chinese/Taiwanese Orchestra Gala Evening. Partnerships / co-productions hosted at PACOFS included Ms Free State Pageant, Dance Connection & Simply the Best, Andre the Hypnotist, Wielie Wielie Wallie, Amandla, and Beauty and the Beast. In-house / own production shows included The Letter, The Passion of Christ and Houtkruis, Cell Number 4 and Money Maker.

PACOFS had been made into a receiving and producing house which created jobs and aided the community. This was done by mixing developing and professional artists. There had been challenges as PACOFS did not have the system to be a producing house. These teething problems were being dealt with as this year there had been about eight productions helping local artists. There were also training programmes and the identification of developing shows. PACOFS was also reviving its recording studios as well as scouting talent to perform at smaller venues.

Mr Macholo spoke on planned and completed infrastructure/ capital projects, actual expenditure versus budget for 2011/12 and for the first half of 2012/13. It received a qualified audit report. PACOFS had disputed the finding on depreciation. The audit findings included reporting on property, plant and equipment assets.The entity had not evaluated in all instances the residual values and useful lives of the assets at the reporting date in accordance with Generally Recognized Accounting Practice (GRAP) 17. An action plan was outlined in which management would appoint a qualified service provider to assist with the full implementation of GRAP 17 and management were also to advertise the posts of Finance Manager and Supply Chain Manager. There had also been irregular expenditure of R3 355 792 and fruitless expenditure of R1 293 026. In terms of irregular expenditure, the action plan was to fill the vacant positions and appoint qualified finance and supply chain managers in the current financial year. Council and Management had instituted disciplinary hearings and all suspension cases were resolved by the 2nd Quarter of 2012/13. Management would seek condonement of the expenditure from PACOFS Council. PACOFS had failed to establish an internal audit function. However, a service provider had now been appointed.

In terms of legal and regulatory requirements, the audit findings noted in procurement and contract management that PACOFS had awarded a contract to a bidder that did not score the highest points. PACOFS said the appointment of the service provider had been based on BBBEE. Management had been given a condonement from PACOFS Council for this. T
he budget for the financial year (2011-2012) had seen overspent due to the budget not providing for depreciation. Management would now budget for depreciation as per GRAP 17 requirement. Within leadership, key positions were vacant for a significant period of time. The suspended CEO’s matter had been resolved by Council in 2nd Quarter of 2012/13. The CEO had resigned and the Council intended to appoint a new CEO in the 3rd Quarter of 2012/13. Management appointed an Internal Audit Firm to assist with the over sight, risk management and to strengthen the internal controls. Management had procured a new financial system (ACCPAC) to improve the process of bank and all reconciliation. On the issue of governance, Council resolved to appoint the CFO as an Acting CEO.

Institutional challenges included leadership gap (Appointment of CEO & Artistic Director), lack of capacity (Finance & SCM Managers), Personnel / Staff Costs coming to 70%, Production Funding/Grants (In-House Shows), Building & Maintenance Budget (Ownership) and Theatre / Stage Truck (Outreach Programmes). These would be spoken to during the discussion.

Discussion
Gender equality
The Chairperson said she was disappointed to see only men in the delegation.

Ms F Mushwana (ANC) said she was also concerned about the ‘gender insensitivity’ within the organisation as seen by the composition of the delegation. There was a need to get the house in order.

Mr Macholo replied that one female Council member had resigned and the others had tendered their apologies for not being here. There were 3 females and four males. The tendering of apologies had made the delegation a ‘boys choir’. Within management there was only one female which was a problem but PACOFS was looking into the matter, especially through the filling of vacancies.

The Chairperson said that gender and race groupings were important. She was not happy with what had been happening.

Mr Rashama replied that if he appointed a man tomorrow and increased the number of men, he would be accused of having too many men. But if there was a man who was suited for the job and a woman who was good for the job but the man scored higher points in terms of qualifications, it was his responsibility to balance this and look at the facts. Sometimes it was not best to ignore the challenges that the country faced. Sometimes it seemed that preference was given to black people which he felt they had to do and would continue to do. This was what had been argued with the Auditor General. It was one thing to say that there was black economic empowerment and the legislation but in terms of policies when the institutions were audited the Auditor General did not consider them.

Monies spent
Ms Mushwana says she did not understand when it was stated there had been R4 million instead of R6 million.

Mr Macholo replied that he had noted that in the allocated budget, they had put aside R4 million and R6 million was what they had anticipated to spend for productions. That was how the amount of R2 million had come up as it was the amount that had to be raised to cover costs. This had been done through such things as ticket sales. If this was not raised, then this was how the under spending came about.

Rural areas and stage
Ms Mushwana said that she had not heard the plan to deal with the challenge of getting a stage to rural areas.

Highlights
Mr S Ntapane (UDM) asked if the artistic highlights had actually been a success and, if they were not, had it been anticipated before that they would not be a success and had action been taken?

Radio employment
Mr Ntapane asked how much had ‘the radio employment’ cost and had a tender been sent out?

Under-spending
Mr Ntapane asked on page 8 if the monies given were supposed to be used up the first two quarters 2012/13. And if this was the case, had there not been underspending? Or were the amounts intended to be used over the whole year?

Mr Macholo said that he was not disagreeing with the notion of under-spending but it needed to be taken into account that the 60% would cover the last 6 months of the year. The expectation according to the cash flow roll out plan was that half of the money would be spent within the half year. So far R24 million of the R51 million had been spent. There had not been overspending on the current budget as yet.

Internal Audit
Mr Ntapane asked if the internal audit company was working for the institution, what about having an internal audit function rather than an external one?

Ms H Van Schalkwyk (DA) said that the chosen internal audit company had submitted their documents late, were from Pretoria and were rated fourth in terms of excellence. Could more be explained on why it was chosen?

Mr Macholo replied that the internal audit company was performing to task and were assisting PACOFS with building the risk management strategy of the institution. PACOFS had already received the audit plan for the next three years which the audit committee still had to ‘ok it’. PACOFS was ‘work-shopping on risk management’ to build a risk assessment risk register. One of the points that had been raised by the Auditor General was there had been no risk register for the financial year. He was not sure whether it was against specifications that the internal audit company was from Pretoria as the specification had covered companies from around the country. It had been checked that the firm had branches around the country and in all provinces. They had offices in the Free State, North West, Gauteng and other provinces. Thus the allegation that they were based in Pretoria and the specification was distinctly for Free State was unfounded. The motivation for deviation had been that the company was 100% black owned which was based on the BBBEE Act in which if they scored the higher score on the ownership aspect, then they won the contract.

Mr Rashama replied that one needed to look at how much was being given to the company. Some larger companies such as Deloittes had big accounts and sometimes there was a need to make decisions in terms of this. Sometimes within a democracy, people did not look at the long term goal the government was trying to achieve.

Mr Rennie replied he agreed with the internal audit being outsourced as it gave a wider range of expertise.

Depreciation
Mr Ntapane said it would be best to add depreciation into the budget as this would be given justification for PACOFS arguments to the Auditor General.

Mr Macholo thanked Mr Ntapane for the comment on depreciation and would consider including it in the budget.

Mr Rennie replied in terms of depreciation there had been attempts by the Department to meet with the Office of the Accountant General but it had been continually postponed. The Department had given them until Monday 12 November 2012.

Staffing at PACOFS
Mr Ntapane asked if PACOFS was overstaffed.

Ms Van Schalkwyk said a personnel cost of 70% was a challenge. There had been the allegation that the Human Resources manager had promoted himself to the position of Director of Corporate Services. Also the Acting CEO and Director of Corporate Services had raised their salaries without Council approval. Could more be said on this as this sounded irresponsible?

Mr Alexander, Human Resources manager and Acting Development Manager of PACOFS, replied that it was difficult to say whether they were over staffed and there were steps to look into this. PACOFS was looking at what everyone was doing and how they could all best be utilised. There was a need for the services of an internal auditor.

The Chairperson said that something needed to be done about the fact that 70% of the budget went to staff salaries. She did not want to say ‘fire people’ as the point at the end of the day was to create employment.

Mr Jerome Mthembi, Council member on the PACOFS Council, replied that it was not good that an institution spent 70% of its money on salaries and 30% on core functions. It was a concern that had been raised by the incoming Council. However it had been stated that no firing should happen which put the ‘organisation between a rock and a hard place’. The question was how was the organisation to bring the salary bill down without firing people? There was a need to look at the staff complement. The majority of the workers were artisans and skilled and semi-skilled employees. If one looked at workers such as the sound and light people, between 8-4:30 pm they did very little, and only worked when there was a production going on. Over and above that they were paid overtime for having to attend to the sound and lighting needs of shows which usually ran in the evenings. This was something that needed to be addressed as it would go towards helping reduce the salary fee. There were also maintenance workers who were fully employed however maintenance was not done on a daily basis. Perhaps a solution was to put them on contract. However this was not necessarily in line with government policy. He felt that there was a way of coming to some sort of arrangement with these employees whereby they were kept around but the salary bill was lowered.

Mr Rennie replied that other playhouses were running at 68% so PACOFS was running a little high at 70% but not that much higher.

Ownership
Mr Ntapane asked what the situation was with the ownership of the property.

Mr D Mavunda (ANC) asked if clarification could be given on the notion of being a ‘receiving house and producing house’. The ownership of this building also needed clarity. What had been the agreement with the Department of Public Works in terms of maintenance and the like?

Mr Macholo replied that ownership was the responsibility of the Department and not of PACOFS. Certain playhouses had ownership rights but this was not in all cases. PACOFS did not have ownership.

Mr Rennie replied that the ownership of the playhouses specifically lay with the Department of Public Works at provincial level. The provincial DPW had not given the state theatre to PACOFS but PACOFS had official use of it which was a problem.

The Chairperson said that it was time the Department took seriously the issue of Public Works and its relationship with various entities.

Mr Rennie replied that the Department would try and assist institutions as far as possible and would engage with management soon.

Council members
The Chairperson asked how a Council member had been appointed whilst also being an employee of the Department.

Mr Rennie replied he did not work for the national Department but the provincial Department.

The Chairperson said this was still a problem and was a conflict of interest. The message needed to be sent to the Minister, saying the person could not form part of the Council. Also, the fact that the unions were not present undermined the Committee.

Mr P Ntshiqela (COPE) asked if there were any moves to replace the Council member who had left.

Mr Alexander replied that the posts had been advertised a month ago and there had been a process of shortlisting, however candidates had not yet been called for an interview.

Mr Rashama replied that the Council member who had resigned, had been the former chairperson of the Council. There had been several requests asking her to attend meetings when she had been appointed deputy chairperson and there had been no formal handover and the Council had had to find their way. This was one of the inherited problems. One could not force the former Council member to assist in the handover and the filling of positions.

Mr Jerome Mthembi added that the former Council member was not often at meetings and did not tender an apology.

Ms Van Schalkwyk said it was pity that the Council was not better represented at the meeting as it seemed as if it was deeply divided. The presentation seemed one sided.

Declining of invitation
Mr Ntshiqela asked if there was a reason the union had declined to come.

Organogram
Mr Ntshiqela asked if there was an organogram that showed the link of management to the rest of staff.

Mr Alexander replied as there was re-engineering there was an organisational structure (organogram). What the process in place was doing was to ensure there was a not a great deal of turnover at the managerial level. One of the problems was the human resources system was not in place. The structure was trying to address this so that PACOFS operated correctly. Moving forward there was going to be a clear organisational structure so that when reporting was done, it was clear what the composition of the institution was at various levels.

Acting Chief Executive Officer (CEO)
Mr Ntshiqela asked when there would be a permanent CEO.

Mr Mavunda said that he felt the acting CEO was putting the facts “of what was on the ground and was not lamenting the issues”. Even the PACOFS chairperson had said that the challenges were inherited. Mr Mavunda felt that he could take the word of those in charge that they were taking the institution forward. The Committee expected them to do their best. There were ‘human elements’ that made institutions fail and he understood this.

Mr Rashama said that a long term view was very important. Various issues took time such as that of the CEO. A great deal of work being done was ‘catch up’ work and this would be impossible to do if there was not a long-term view. The matter of the CEO would be over soon as the matter was concluded in October so it was ‘all systems go’.

Mr Jerome Mthembi replied that he was certain within the next three months the process of the CEO would have unfolded. The tenure of the Acting CEO had been extended for six months but that did not mean he would be working for all six months.

Mr Mavunda asked how the Chief Financial Officer had been appointed as acting CEO; the two positions were regarded as critical positions. Read literally, it seemed that when the Board had appointed the CFO, he had automatically been given the role of CEO as well.

Mother institutions
Ms Van Schalkwyk asked who were the mother institutions who helped with maintenance.

Stage truck
Ms Van Schalkwyk asked what had happened to the truck that took art to rural places. Was it old or broken down? This truck was very important.

Mr Macholo replied that there had been various issues with the stage truck, to the extent that some had even contributed to the suspension of the previous CEO. Its maintenance had not been budgeted for by the institution and when it had broken the CEO had wanted Transnet to fix it. It was so broken, it could not be used and so Transnet had fixed it and kept it. Thus at the moment there was not truck to take services to the people in rural areas. PACOFS had approached the Department and had been promised R2.5 million to sort out the problem. However PACOFS had later been informed that only immovable property was being funded and not moveable property. He had been informed that thus the truck would not be funded which had come as a shock. This meant they had to return to the drawing board on the matter.

Mr Mike Rennie stated that there was a need to consider this in terms of the R2 million. There was an Act that made the Department responsible for the expenses of buildings and other immovable assets. In terms of this Act there was a need to be responsible and that was probably why the truck request had been denied but it would be looked at again. It came down to the maintenance costs. If the truck was given, then PACOFS would have to fix it.

Mr D Mavunda (ANC) said that the truck was of vital importance. This needed to be looked at in terms of service delivery. There was a need for steps to be taken to revive the truck.

Dismissals
Mr Mavunda said that there was a need for clarity on the issue of the dismissals and where the situation was at the moment.

Supply Chain Manager
Mr Mavunda asked when would there be a finalising of the filling of the supply chain manager and finance manager posts.

Auditor General findings
Mr Mavunda said there was a need to try and adhere to legislation that would avoid arguments and discussion with the Auditor General and audit committee and the like.

Mr Ntshiqela said that the Committee, although having understood the motivation behind challenging the qualified audit, would still find it difficult to completely accept the situation. Would it not be best to deal with the small things that cause the qualified audit?

Artistic Director
Mr Mavunda asked if they expected to fill the Artistic Director post or if this post had been filled permanently filled by the person commissioned by the Department?

Mr Jerry Pooe replied that when he arrived, he had asked for the artistic plan and whenhe saw it, he saw it was not aligned with government priorities. This had been expressed this in the management meeting and he had presented ideas to try and align it which had been met with resistance. This had led to management stating that he did not understand the Free State and this had led to an artistic committee to deal with the matter. He had written a recommendation to the Department and ‘stepped back’ as there was nothing he could do. The artistic committee then took over the artistic plan of the institution which had been a big challenge and remained a challenge. He was unable to do anything artistically as everything was done by that committee. It was not a conducive environment to be in.

Mr Ntshiqela said that he was shocked at the way in which Mr Jerry Pooe worked with the artistic committee. He wanted to know what the Council and the Acting CEO were doing in terms of this relationship and what was being done? Was this outside their powers?

Mr Ntapane asked how long the artistic manager had been on suspension and whether it was with or without pay?

Mr Jerome Mthembi replied there was nobody who was on suspension. There were only cases pending at the CCMA. The artistic manager had not attended her hearing at the CCMA.

Mr Ntapane asked when the artistic manager had last been at work.

Mr Alexander replied the employee had been suspended since May 2012 and the matter had been finalised recently.

Mr Jerome Mthembi, Council member on the PACOFS Council, replied that the dismissed artistic manager’s case was now pending at the CCMA and an arbitration date was being waited upon.

Clarification on Figures
Mr Ntapane noted on page 9 there was a negative figure and then operating costs appeared as a negative figure. Could this be explained?

Timeline
The Chairperson said that PACOFS would be given four months to produce changes and it was also important to have an organogram produced.

Marketing Manager
The Chairperson said the marketing manager was undermining the Committee as she was not present.

Corruption
The Chairperson said there was a need to fight corruption.

Mr Rashama replied that corruption was being fought and some had even been fired because of corruption. What had been done was in the best interests of the institution. PACOFS appreciated what had been said here and PACOFS was receiving huge support from the Department. Stakeholder relations were also being strengthened and corrected. PACOFS was doing the best it could, given the environment.

The meeting was adjourned.

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