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SUMMARY
The Office of the Auditor General has conducted a
performance audit and Sunset review of the Arizona Commission on the Arts
(Commission) pursuant to a June 16, 1999, resolution of the Joint
Legislative Audit Committee. This audit was conducted as part of the Sunset
review set forth in A.R.S. §41-2951 et seq.
Established by executive order in 1966 and by statute in
1967, the Commission’s main purpose is to encourage the presentation and
appreciation of the performing and fine arts throughout Arizona. The
Commission largely fulfills this purpose by providing financial support in
the form of grants to help pay arts organizations’ administrative expenses
and to help fund arts education and other artistic projects throughout the
State. The Commission’s existence also makes Arizona eligible to receive
and disburse federal funding for the arts from the National Endowment for
the Arts (NEA). The NEA has consistently ranked the Commission as one of the
best arts commissions in the country.
The Commission’s Grants
Provide Varied Benefits to
Organizations and Projects
Statewide
(See pages 11 through 20)
The Commission provides grants that benefit arts
organizations and projects throughout the State. The Commission estimates
that in fiscal year 2001, nearly two-thirds of its spending will be for
grants to arts organizations, schools, and other community organizations. It
issues grants to both large and small arts organizations to help pay
administrative expenses. It also issues grants to organizations for arts
education and other arts projects. These grants provide different but
important benefits, according to grant recipients auditors spoke with.
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General operating support grants to large organizations (approximately
$1.14 million in fiscal year 2001)—These
grants fund 2.3 percent of administrative expenses for 13 large arts
organizations, such as the Arizona Theatre Company and the Museum of
Northern Arizona. These organizations said the grants provide more
flexibility than most other funding they receive, which is often earmarked
for specific projects. They also said a Commission grant acts as a “seal
of approval” that gives them added credibility with the public and helps
them raise additional funding from private sources.
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General operating grants to smaller organizations (approximately $1.1
million in fiscal year 2001)—These grants went to more than
120 smaller arts organizations for operating expenses. Grant recipients said
the grants were important to their core operations, such as covering a
substantial portion of a director’s salary, maintaining current projects
and services, and making the arts more accessible to children and rural and
ethnic communities.
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Arts education project grants (approximately $425,000 in fiscal year
2001)—These grants support 260
education-specific projects throughout the State for such things as
arts-related after-school programs or hiring artists to work in schools.
Many of these programs target particular populations, including rural
communities and minorities.
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Other arts project grants (approximately $471,000 in fiscal year 2001)—These grants funded artistic projects such as theatre
productions, festivals, and music performances throughout the State. Some
grant recipients said that without the grants, programs would have to be
canceled or scaled back.
The Commission Needs to
Improve Its Management of the
Endowment Program
(See pages 21 through 24)
The Commission needs to improve its management and
oversight of the State’s arts endowment program. In 1996, the Legislature
established the State’s arts endowment program, known as Arizona ArtShare,
to establish a public-private partnership for the long-term funding of the
arts in Arizona. ArtShare consists of state monies placed in the Arizona Arts
Endowment Fund (Endowment Fund) to generate investment income to benefit the
Commission and donations made to foundations under contract with the
Commission to receive such donations on its behalf. The Commission contracts
with private foundations because private donors are sometimes reluctant to
donate to government-run endowments. The Commission also considers donations
to private arts endowments as contributions to ArtShare. Auditors found two
problems with the Commission’s management and oversight of and use of
investment income from one foundation contracted to collect private donations.
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A
foundation under contract with the Commission to receive and invest private
donations to the endowment program charged three times more than it should
have for its administrative fees in 1999 and 2000. The Commission did not know
that the contractor had deducted $17,550 more than it should have because the
Commission did not review the quarterly statements the contractor submitted.
The Commission recovered these monies from the foundation in March 2001.
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The
Commission inappropriately used approximately $3,000 of investment income from
private donations managed by the contractor. The money was used to create a
database and to pay phone and promotional expenses. While these expenditures
were related to the endowment program, they were inappropriate because they
were not used in conjunction with interest earned from state contributions to
the Endowment Fund, as required by statute. In addition, the Commission’s
policies state that such monies should be used to support specific purposes,
such as management training and administrative expenses for arts
organizations.
Sunset Factors
(See pages 25 through 34)
The Commission appears to be effectively meeting its
objective and purpose and generally operates efficiently. However, one
statutory change is needed to resolve certain outstanding issues.
The Legislature should consider amending the
Commission’s statutes to establish the position and responsibilities of the
Commission’s executive director and to clarify the role of the
Commission’s chairperson. Current statutes state that the Governor-appointed
chairperson shall be the Commission’s chief executive officer. Although the
Commission has employed an executive director for most of its history, the
statutes do not allow the Commission to delegate discretionary
responsibilities to the executive director. As a result, many day-to-day
decisions, such as spending and personnel matters, must be approved by the
Commission members.
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