NAC & Downtown Studios

1. NAC & Downtown Studios Presentation to Portfolio Committee 29 August 2012

2. Presentation Overview • Summary of Progress Made since last appearance • NAC Council position on Downtown Studios • Institutional Framework • MOU • Funding • NAC Council position • Matters impacting on the transfer & progress made in resolving these • Financial viability • Corporate governance • Other matters • Resolving the Audit Issues

3. Summary of Progress • Chairperson and Deputy Chairperson hosted by Chairperson of Downtown Music Hub and the CEO for a site visit. • There is a good understanding of the challenges and the way forward between the parties. • Condonation received for the purchase from the Minister. • Audits have been conducted for 2009/10, 2010/2011 and 2011/2012 based on compete annual financial statements for Downtown Studios and Fox Street properties. Unqualified audit reports received. • The audited financials have been integrated into the NAC Annual Financial Statements for 2012/2013.

4. For the Committee’s Information • The NAC did invite Fana Mokoena to make a presentation to the NAC Council meeting on 27 and 28 July 2012 • Unfortunately Mr Mokoena did not respond to the invitation

5. The Institutional Framework: Role Department of Arts & Culture Initiates discussions with AVUSA Establishes the SPV Instructs NAC to purchase from AVUSA Downtown Music Hub National Arts Council (NAC) AVUSA (Gallo) Transfer Fox Street Properties Downtown Studios Building @ 62 Goud Street Business & Assets

6. Institutional Framework: MOU • MOU signed between DAC & NAC in 2008 • NAC to act on behalf of the DAC in the purchase of the property and the business • Property & the business to be transferred to a Special Purpose Vehicle (SPV) which would be established in 2009 • Funds were transferred to the NAC as follows:

7. Addendum to MOU signed in 2010 • Expands the role of the NAC to include the appointment of the staff members as independent contractors and payment of staff and creditors

8. Funding through NAC to date utilising DAC Funds held for transfer DAC provided R3 million directly to the Downtown Music Hub in 2010/2011 and 2011/2012 for operations and programmes

9. NAC Council Position • Downtown Studios led to: • A qualified audit for the NAC in 2009/10 • An adverse audit opinion in 2010/2012 • The new Council of the NAC took office in March 2011 • Recognising the implications of the ongoing challenges presented by Downtown Studios for the NAC, a task team was established to investigate matters and prepare comprehensive recommendations for Council • On the basis of this report, Council resolved that Downtown Studios should be transferred to the Downtown Music Hub as a matter of urgency

10. A meeting was held with the DAC to agree on a joint approach, supported by the Downtown Music Hub, to the management of the issue. • It was agreed to: • Engage with the short and medium term financial viability of the organisation • Deal with corporate governance matters impacting on the NAC regularity audit • Finalise all matters pertaining to the transfer of Downtown Studios

11. Matters impacting on Transfer

14. Resolving the Audit Findings

17. NAC Audit Outcome for 2011/2012 • The NAC received a qualified audit for 2011/2012 due to: • Material misstatements in the AFS due to the incorporation of the Downtown Studios and Fox Street Property trial balances which impacted on accumulated surplus and expenses • While disappointing this is an improvement on the adverse audit finding of 2010/2011 • The work reported on in this presentation has also laid the foundation for the transfer of Downtown Studios and Fox Street Properties to the Downtown Music Hub in 2012/2013 and also laid the foundation for an improved audit outcome for 2012/2013

18. Thank you