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Executive Summary of the Auditor General for Wales's report on the Centre for Visual Arts     

<b>Introduction </b>
The Centre for Visual Arts was the first large lottery funded project supported by the Arts Council of Wales. It was conceived as a major visitor attraction, providing thelargest venue in Wales for exhibiting the best of Welsh and international contemporary and historical art, as well as an interactive gallery for children. It was located in the Old Library, a large Victorian building in the centre of Cardiff.

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The total cost of opening the Centre, including the extensive refurbishment of the Old Library building, was almost £8.8 million. Of this, the Arts Council of Wales contributed over £3.2 million (some 37 per cent of the total cost) in lottery funding.

The Council also provided more than £200,000 per annum to help finance the Centre's annual running costs.

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The Centre opened to the public in September 1999. Due to financial difficulties caused primarily by visitor numbers being significantly lower than forecast, it closed only 14 months later in November 2000.

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This report examines the role of the Arts Council of Wales in providing lottery and grant-in-aid funds for the Centre for Visual Arts, and specifically:

<ul>
<li>whether the decisions to provide funding to the Centre for Visual Arts were soundly based; and</li>
<li>whether the Arts Council of Wales protected its investment in the Centre for Visual Arts during the construction and operation of the Centre and how it managed the recovery of its funds and equipment on closure of the Centre.</li>
</ul>

<b>The decision by the Arts Council of Wales to fund the Centre for Visual Arts</b>

The key risk to the financial success of the Centre of Visual Arts project concerned the visitor numbers target. Any significant shortfall in visitor numbers would inevitably mean that the Centre would fail to raise the expected income from charging visitors leading to unsustainable operating losses. Achieved visitor numbers depend crucially upon the nature of the visitor attraction provided and the admission charging policy.

The National Audit Office Wales found that the decision by the Arts Council of Wales to fund the Centre for Visual Arts was based on unsound data which inflated projections of visitor numbers and revenue forecasts, in particular that:
<ul>
<li> the first lottery application assumed 250,000 visitors a year, which was significantly
more than all but one cultural and artistic tourist attraction in Wales (St Fagans).

This inflated visitor projection, based on assumptions about the nature of the attraction and charging policy which were later changed, led to an over ambitious revenue target at all stages including the lottery grant application stage.

There were only 47,000 visitors in the first year compared with the 250,000 forecast in the grant application;</li><li> the Arts Council of Wales did not challenge the fundamental assumptions made about the likely numbers of visitors to the Centre for Visual Arts. Nor did it assess the potential ipact upon the financial viability of the project if these targets were not met;</li><li> moreover, when the applicant revised its estimates of visitor numbers to the Centre for Visual Arts at key stages throughout the project, the Arts Council of ales did not question the revised estimates, or assess the impact of this upon he forecast admissions income for the Centre; and changes were made to the proposed visitor entrance charging structure and to he opening programme and content of the Centre for Visual Arts. The Arts Council of Wales did not assess the potential impact of these changes upon the projected visitor numbers. Neither did it press the applicant on how the Centre for Visual Arts would compensate for any fall in the visitor numbers.</li>
</ul>

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There were other important weaknesses in the way that the Arts Council of Wales handled this large lottery grant application:

<ul>
<li>the Arts Council of Wales' external assessor alerted the Council to weaknesses in the project, in the marketing of the project and in the lack of private revenue sponsorship. But the Council failed to act on these, for example by pressing the applicant to address these weaknesses as a condition of grant; and the first application for £2 million of lottery funding was not supported by robust or reliable information but the Council did not challenge the grant applicant on this. Many of the key decisions about the viability of the project were based on a feasibility report undertaken in 1992, nearly three years before the first lottery application. Furthermore, the estimates of the building costs were seriously inadequate, and resulted in a further application for lottery funding to meet the substantial increase in construction costs.</li>
</ul>

<h3>The Arts Council of Wales' monitoring of the development, operation and closure of the Centre for Visual Arts</h3>

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Once the decision had been taken to fund the Centre for Visual Arts, the Arts Council of Wales had a duty to protect that investment. The National Audit Office Wales found that the Council's monitoring of this project was weak. When the Centre experienced difficulties, the Council was not in receipt of the full facts and had difficulty in obtaining the necessary information to enable it to act quickly to ensure maximum recovery of assets.

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Key weaknesses in the Arts Council of Wales' monitoring of the Centre for Visual Arts project were:
<ul>
<li>the Arts Council of Wales did not assess the key risks to the successful delivery and operation of the Centre for Visual Arts to ensure that these were monitoredclosely. Nor did the Council ensure that there was adequate contingency planning in the event of these risks materialising;</li>
<li>throughout the construction phase of the project, and when the Centre for Visual Arts was operational, the Arts Council of Wales found it difficult to obtain regular and timely financial information about the Centre, which hindered its monitoring of the project; </li>
<li>the Council's monitoring of the Centre for Visual Arts was ineffective in that it was not aware of a key change to the plans until it was too late to amend the construction design;
</li>
<li>the Arts Council of Wales did not act on important concerns raised by the project monitor, even though it was at that same time considering a further application for lottery funding for the Centre for Visual Arts;</li>
</ul>

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When the Centre for Visual Arts closed in November 2000, the Arts Council of Wales did not seek to invoke the clawback conditions whereby it could seek to recover its funding of the Centre. Instead it has negotiated with the applicant to transfer assets totalling some £104,000 to third party charitable organisations. As at September 2001, nearly £110,000 of items part-funded by the Arts Council of Wales, as listed on the Centre for Visual Arts inventory, have not been recovered. Of this, assets totalling some £87,000 are still located in the Cardiff Old Library building and consist of items that are not easily removable such as the custom built reception desk. The remaining assets totalling some £20,000 are missing or have been sold off to staff.

The Arts Council of Wales is awaiting the Cardiff Old Library Trust&#8217;s response as to what has happened to them.

<h3>Concluding comments and recommendations</h3>
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No lottery funded arts project is free from risk. These findings demonstrate the need for the Arts Council of Wales to be more rigorous in its assessment of the key risks associated with individual lottery projects; and more robust in its monitoring of projects to manage these risks so that potential problems may be avoided or resolved quickly. In particular, where the financial success of the project is dependent upon generating income from visitors, as was the case with the Centre for Visual Arts, the Council needs to ensure the business case for the project is based upon realistic and prudent judgements about likely visitor numbers. The Council should be alert to these risks in monitoring the project and act vigorously on concerns raised about the project. Furthermore, there should be adequate contingency plans in place in the event that the risks materialise.

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Te Arts Council of Wales has assured the National Audit Office Wales that the weaknesses in its processes and procedures inrelation to this lottery grant award have been recognised by the Council and action has either been taken or is in hand to remedy them.
Auditor General for Wales  
web site
: www.agw.wales.gov.uk/publications/2001/agw2001_9es.pdf

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Friday, November 16, 2001back

 

 

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