National Arts Council state of governance: Department Arts & Culture briefing

Arts and Culture

07 February 2017
Chairperson: Ms X Tom (ANC)
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Meeting Summary

The Chairperson, in her opening remarks, noted her dissatisfaction with the state of affairs of many of the entities under the Department of Arts and Culture (DAC), especially in relation to their governance and expressed the hope that these matters would improve, including the interpersonal relationship between employees.

The Acting Director-General of the Department of Arts and Culture gave a short briefing to the Committee on the National Arts Council (NAC) performance, and although the Chief Executive Officer of the NAC was also due to give a presentation, Members expressed their dissatisfaction and concern that the newly-appointed board of the NAC was not present, finding this disrespectful, and did not feel that it was correct for the Chief Executive Officer to speak to the Committee. Instead, she answered some of the questions.

The mandate of the NAC was outlined, essentially around allocation of public funding to promote the creation, teaching and dissemination of a wide variety of arts, as also to provide study bursaries. It was noted that the NAC had, after receiving a qualified audit in 2013/14, since obtained clean audits and that its performance had also improved, and it had achieved all of its targets for the last financial year. A new board had been appointed at the NAC, with eight of the final nine nominees accepting their appointment. The board was appointed effective from 1 January 2017, although board members had not yet received an official induction and had not held any formal meetings with the CEO. The financial situation was described, and it was noted that in the last three financial years there had been a deficit, largely attributed to the method of accounting that carried over defrayment of expenses from one year to the next. The Council currently had 34 staff members. the accounting method that is applied by the National Arts Council. Due to the nature of the projects that were funded by the National Arts Council, the entity defrayed the previous years and current year expenses from the current year allocation, resulting in greater spending being recorded. Other legislative concerns related, firstly, to the large numbers prescribed to sit on the main board and subcommittees, and secondly to the prescribed division of grant funding so that 75% must be put to disbursements and 25% to administration, which posed a challenge to efficient administration. There were several queries posed to both the Department and the Minister, relating to allegations of maladministration and a formal response would be provided to the Committee in due course.

Members were quite critical of the board, saying that the impression was that it was not effective, and questioned whether the refusal of one nominee to take up the position, and the fact that it was not formally inaugurated, threatened its legal standing. It was clarified that the CEO is the accounting officer, but Members still felt that the board should have been present at this meeting to answer queries. Several Members expressed the view that the Department was not proactive enough in dealing effectively with its entities, and needed to address fruitless expenditure, although the Chairperson did point to improvements in its oversight. However, she addressed at some length the question why incorrect figures had been presented to the last meeting, which was explained as a misunderstanding as to whether financial information from the DAC, or the NAC's own spending, was being sought. The split of expenditure between the DAC and NAC in the appointment process was explained. Members discussed how the induction process should work, recommending outsourcing in this specific instance, and the role of the Company Secretary. They asked about bonuses paid to executive staff and who was to answer to questions posed, as well as calling for more detail on the interview process and costs. It was agreed that a full report would be provided in around a week.

Meeting report

Chairperson's opening remarks
The Chairperson, in her opening remarks, reminded the Members that several questions were raised during the last meeting with the Department of Arts and Culture (DAC or the Department), and commented that she was unhappy with the state of several entities falling under the Department and hoped that issues would be improved so that the entities would be able to discharge their duties as intended. She also frowned at the internal wrangling amongst the staff. Reminding the DAC and NAC of their constitutional mandates, she referred them to Chapter 10 of the Constitution which speaks to sound public management and administration. The Chairperson also stressed the need for those making presentations to the Committee to be absolutely honest and open with the Committee otherwise serious consequences would follow.

National Arts Council state of governance: Department Arts and Culture (DAC) briefing  
Mr Vusithemba Ndima, Acting Director General, Department of Arts and Culture, made a presentation on the National Arts Council (NAC or the Council). He told the Committee that the National Arts Council was established in terms of the National Arts Council Act, Act 56 of1997, and is mandated to:allocate public funds to artists, cultural institutions, non-governmental organisations, and community based organisations, in order to promote the creation, teaching and dissemination of literature, oral history and storytelling, music, dance, theatre, opera, design, visual arts and craft which fully reflect the country’s diversity. It is also mandated to provide study bursaries in the fields of arts and culture to practitioners, administrators and educators. 

As at 30 December 2016, the National Arts Council had achieved all its 20 planned targets for the second quarter of the 2016/17 financial year. This was an improvement; in the 2013/14 financial year 76% of targets were met, and in 2014/15, 87% of targets were achieved, with a final improvement in 2015/16 to 100% achievement against all targets.

He then described the financial situation. Income and expenditure trends were:
- in 2013/14, income of R95 650 000, and expenditure of R103 714 000
- In 2014/15, income of R96 084 000 and expenditure of R99 411 000
- In 2015/16, income of R98 983 000 and expenditure of R102 567 000 .

In all three years there was thus an end “deficit”, respectively of R8 064 000, R3 327 000 and R3 584 000 for the three financial years reported. These discrepancies between income and spending  were attributed to the accounting method that is applied by the National Arts Council. Due to the nature of the projects that were funded by the National Arts Council, the entity defrayed the previous year and current year expenses from the current year allocation, resulting in greater spending being recorded in each of the financial years.

The audit outcomes for the 2014/15 and the 2015/16 financial years were clean audits compared to the qualified audit received in the 2013/2014 financial year.

The National Arts Council team is operating under the guidance of a Chief Executive Officer (CEO) who is assisted by a team of five managers who report directly to her. The Council has also appointed a Chief Financial Officer to administer its financial affairs. In total, there are 34 employees at the Council. The Board of the NAC was appointed by the Minister on 22 December 2016. Appointment letters were sent to successful candidates. Eight out of nine candidates accepted their appointment. A member from the outgoing board indicated that he would be unavailable to serve on the new board. The induction of the newly appointed board is scheduled to take place in February 2017.

Mr Ndima noted the legislative constraints affecting the NAC. The National Arts Council Act provides for a huge number of members serving on both the board itself and the board subcommittees. This is threatening the ability of the National Arts Council to sustain its governance structures. The Act states that the grant received from the Department of Arts and Culture must be divided into the ratio of 75:25 for both disbursements and administration respectively. In his view, the above provision implies that more money is available for disbursements, and very limited funding is provided for the day to day operations of the National Arts Council.

Mr Ndima then addressed some of the queries received by the National Arts Council from the print media, dealing with allegations of maladministration in the funding of flagship projects, as well as the salary increment of the Chief Executive Officer and Chief Financial Officer. He noted that a formal response on the allegations will be furnished on a later date, as requested by the Portfolio Committee.

Although it was intended that the Chief Executive Officer of the NAC, Ms Rosemary Mangope, was to present to the Committee, this did not take place and instead the Committee engaged with her during the discussions.

The Chairperson noted that the impression of the Committee was that there is no effective board in place at the NAC.

Ms Rosemary Mangope, Chief Executive Officer, NAC, assured the Committee that the new board was appointed and would be effective from 1 January 2017. Nine members were approached to sit, and only one declined the offer. The full inauguration would be taking place shortly.

The Chairperson, hearing that the board had not yet been inaugurated, asked who the Accounting Officer would be, in terms of the Public Finance Management Act (PFMA) requirements.

Mr Ndima responded that the CEO is the accounting officer.

Ms V Mogotsi (ANC) raised concerns about the status of the appointed board, since it had yet to be formally inaugurated, one month after appointment.

The Chairperson further asked if the appointed members had met with the CEO and if they were aware of the presentation being made today.

Ms Mangope said that there had not been a meeting, but the board members were aware of the presentation, and she had written proof of this. She believed that the meeting today was intended, rather than being a presentation, to be largely a formal response to the issues raised by the Committee in the last meeting.

The Chairperson said that she was not impressed by this statement.

Ms Mogotsi agreed with the Chairperson that it would have been incorrect of the Committee to listen to a presentation by the Chief Executive Officer when the newly appointed board was not present.

Mr L Mokoena (EFF) also agreed with the earlier speakers and expressed dissatisfaction with the fact that the new Council was not present. He suggested that this amounted to disrespect. He agreed that the Chief Executive Officer should not make a presentation on behalf of the NAC board.

Mr J Mahlangu (ANC) also agreed that it was inappropriate for the presentation to be accepted when the members forming the board were not present at the meeting. He also pointed out that the board f the Council, having been appointed, is a legal entity and the fact that it had not been formally inaugurated did not mean that it was powerless.

Mr Mokoena was critical of the NAC, and suggested that the DAC did not seem to be in control of the entities under its jurisdiction. He believed that the Committee needed to do something about that.

The Chairperson responded to Mr Mokoena, noting that the Department has improved in its oversight function over the entities. She concurred with members of the Committee that the presentation should be made by the board. She requested that the NAC delegation excuse themselves from the meeting.

Ms Mangope assured the Committee that all governance at the NAC was being carried out in a transparent way, and that the books were open for the Committee to examine, should it wish to do so. She thanked the Committee for the assurance that there would be an opportunity for the NAC to come back to the Committee.

The delegation from the NAC was excused.

Departmental entities: Department's duties
The Chairperson stressed the need for the Department to advise the entities reporting to it properly. She asked that the Department applies its mind to the issues. In particular, it should take steps to avoid fruitless expenditure being incurred by the entities. She spoke to a recent presentation by the Auditor-General about the costs and expenditure in running the entities. She asked for a further explanation on some of the figures and information presented at the last meeting, which she said had been incorrect.

Mr Ndima responded that the costs presented related to specific expenditure items, such as advertisements, transportation and accommodation. The NAC had its own expenditure in addition to this. The response to the Committee at the last meeting to these questions had been based on the total costs incurred by the DAC on behalf of the NAC, rather than the running costs of the NAC itself, and miscommunication had resulted from this misunderstanding.

The Chairperson asked for clarification on the processes involved in getting the board in place at the entities, and the kind of costs incurred by the DAC, and, if applicable, also by the NAC, during this process.

Mr Ndima explained that the DAC will firstly advertise the position, and that in itself incurred some costs. All applications and nominations received would be collated, and would be published so that there was an opportunity for public comment. After this, a panel would be set up to take the process forward to the interviews. The final approval of the recommendations is given by the Minister. He summarised that the kinds of costs incurred by the DAC will the include the costs of advertisements, transport, accommodation, and after the appointment, the DAC would also pick up the bill for the induction costs for the new board. After the induction had been completed the day-to-day running and administration costs for the NAC would then be for the account of the NAC itself.

The Chairperson clarified that she wanted to know what the costs implications were of the “illegal” board which had been put in place prior to the official dissolution process of the former structure.

Dr Sakiwo Tyiso, Chief Director: Coordination, Monitoring, Evaluation and Governance, DAC, explained that there was a miscommunication between the DAC and the Committee. The Department had assumed that the questions raised earlier related to the expenditure of the DAC, rather than the costs incurred by the NAC, as just explained by Mr Ndima.

Mr Mokoena again reiterated his concerns at the perceived lack of action by the DAC in relation to the entities. He stressed that the DAC had a responsibility to give more holistic information on the expenditure of the NAC.

Mr Mahlangu asked the DAC who was responsible for its induction programmes. He asked where the mandate of the Company Secretary derived. He asked how outstanding allocations were spent. He wanted more information on who had declined the appointment to the board of the NAC, and for what reason. He also wanted more information on the personal profiles of the NAC board members. He asked for more detail on the concerns about the legislation as mentioned earlier and wanted to know when the queries raised would be answered.

Mr Ndima responded that the induction would concentrate on the NAC Act and the Public Finance Management Act. He would give further details on the board members as requested. The main concern around the legislation was that the NAC felt that the 25% allocated to it for administration was too little to operate effectively. In relation to questions addressed to the Minister, he said that the Minister himself would give the answers, apart from the queries raised by the media.

Ms Jabi Dlamini, former Deputy Chair, NAC, added, in relation to the induction, that certain materials were being used for the induction, although there was as yet no single comprehensive induction manual. However, such a manual was being prepared and would be made available to the Committee once it is ready.

She confirmed that it was the former Chairperson of the NAC board who had declined to accept a re-appointment into the current board.

Dr Tyiso clarified the position on the funding. He said that any funding that had not been spent in one financial year was not appropriated into the next financial year as incoming funds. This made it appear that the DAC was operating with a deficit, although this was not in fact so.

The Chairperson asked the DAC how it would be aware whether there is a deficit.

Mr G Grootboom (DA) disagreed with the DAC on the issue of unspent funds. He stated that the legislation required all departments and entities to apply for roll overs if they have unspent funds, so that such unspent funds could be incorporated into the budgets for the following financial year. He also questioned the increment in the salary of the CEO, and asked who was responsible for that.

Mr Mahlangu recommended, although he was not entirely in agreement with the principle of outsourcing, that in the case of the NAC, the induction should be outsourced to professionals, who could help the board members to get their feet firmly on the ground in the running of the board. He noted that the Company Secretary role was quite clearly spelt out. The Company Secretary was supposed to advise the board, and he commented that this then surely meant that this person should be able to handle the board's induction. He stressed that there was a need for the DAC, when disbursing funds, to adhere strictly and fully to the law, and there was no room for any compromise on that point. In relation to the queries, he asked why the presentation showed bullet points – the Minister should have been responding to the questions.

Mr Mokoena wanted to know why there was no apology received from the Minister. He remarked that the board of the NAC was supposed to consist of no less than nine people, and he felt that in view of the current numbers, the forthcoming induction of the board was in fact illegal and therefore unconstitutional. He asked if it was the case that essentially the previous board was being reappointed. He asked for details of the public interview process.

The Chairperson agreed with points made by Mr Mahlangu, and stressed that the induction process should be made more efficient, to assist the board members in discharging their functions.

Mr Ndima spoke to the process of the appointments. He noted that the names of those nominated were published and were in the public domain once the applications were made in response to the DAC advertisements. The public had the opportunity of objecting to any of the nominees. The interviews had been conducted in public, at the premises of the DAC.

Dr S Tyiso confirmed to Mr Mokoena that the board was already in place.

Dr Tyiso also spoke to the problem around unspent money in the organisations, commenting that the accounting systems being used by the entities were problematic, and needed to be sorted out. On the issues of performance bonuses and salary increment, he told the Committee that the board is the authorized body to deal with those matters and the outgoing board had already decided upon the performance bonus of the CEO before completing its term.

Mr Ndima told the Chairperson that a week should be sufficient for the DAC to prepare responses to all the issues raised and make a report to the Committee. With respect to the Backstage Academy, he told the Committee it must happen but there was the need to go about it scientifically. He emphasised the need for a feasibility study to determine the viability of the project. According to him, there were plans to conduct a feasibility study on that. This week we have appointed people who are going to be assisting us in conducting the feasibility study and we are also going to be asking the sector to participate because our view is this should be a sector matter rather than a matter that belongs to an individual.

The Chairperson advised the DAC that when the Committee asked for information from the entities, it was not to assume that this was problematic; if nothing was wrong with the entities then the DAC should not panic about the requests. She also cautioned the DAC against victimisation of people who provided information to the Committee.

Mr Mokoena stressed the need for the DAC to standardise accounting systems so that it could conform to the requirements of the PFMA.

The meeting was adjourned.


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