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Home My WebLink AboutCAO-15-013 - Arts Sustainability Fund with Appendix1 KY1,(f It I se Staff Report CA0 Office www.kitchener ca REPORT TO: Committee of the Whole DATE OF MEETING: May 11, 2015 SUBMITTED BY: Rod Regier, Executive Director, Economic Development, 519- 741 -2200 x 7506 PREPARED BY: Silvia DiDonato, Manager, Arts & Culture, Economic Development, 519- 741 -2200 x 7392 WARD (S) INVOLVED: All DATE OF REPORT: February 20, 2015 REPORT NO.: CAO -15 -013 SUBJECT: Arts & Culture Sustainability Fund 2015 — Part 2 RECOMMENDATION: That $39,400 from the Arts & Culture Sustainability Fund for 2015 be allocated to Creative Enterprise Initiative for small, emerging and growing mid -sized organizations. BACKGROUND: This report is a second part of the initial report to council submitted January 5, 2015, CAO -15- 001, Arts & Culture Sustainability Fund 2015. The purpose of this report is to recommend approval for the remaining amount of the Arts & Culture Sustainability Fund, $39,400 as part of a total allocation of $239,400 in 2015. Arts Sustainability Grant allocations for established organizations were approved earlier in the year: $120,000 for THEMUSEUM, $40,000 to Kitchener - Waterloo Symphony and $40,000 to Kitchener Waterloo Art Gallery. REPORT: Origin of the Arts and Culture Sustainability Fund The Arts & Culture Sustainability Fund was developed in 2010 as a result of a call to action from the community for the municipalities (local and regional) to help fund, in part, an estimated $2.5 to $5.0 million chronic shortfall for community arts organizations. Headed by the Prosperity Council, 2008 research had shown a funding shortfall of $3.0 million, based on data collected from a survey of 27 arts and 18 funding organizations. The shortfall was estimated using figures from the accumulated debt reported by organizations. Anecdotal information also indicated that significant additional funding would be needed to put these organizations' operating budgets on a sustainable footing. * ** This information is available in accessible formats upon request. * ** Please call 519- 741 -2345 or TTY 1- 866 - 969 -9994 for assistance. 6. -1 0j Further supporting the findings above, the gap suggested by the `Earned Revenue Analysis for the Performing Arts' showed that municipal and senior government funding in the area should be increased by about $4 million, with additional increases for museums, galleries and festivals. Considering the expanded cultural sector, the general magnitude of the gap in financial resources for arts, culture and heritage operating budgets was estimated between $2.5 million and $5 million. The Prosperity Council of Waterloo, through its Task Force On Creative Enterprise, proposed the following to help stabilize arts and culture in the community- 1 . That there be a commitment to increase funding to arts and culture by $3 million annually in order to address the sustainability shortfall to be funded as follows: a. $1 million from increased private sector contributions, b. $1 million from increased municipal support, and c. $1 million in increased support from provincial and federal programs (leveraging the municipal and private sector support). 2. That an "Enabling Organization" be created to support creative enterprises, the budget to be funded as follows: a. 25% by regional government, b. 25% by local governments (pro -rated based on population), and c. 50% other sources (grant applications and private sector). They further suggested that the $1 million of increased municipal support could be realized by each of the municipalities, local and regional, by increasing their annual funding by $1 per capita. 2010 -2014 Arts & Culture Sustainability Fund Allocations The Prosperity Council's research in 2008 identified chronic de- stabilization of the arts sector due to underfunding. Based on this research, the City's allocations were meant to assist with the stabilization of 3 pillar arts organizations: THEMUSEUM, Kitchener - Waterloo Art Gallery and Kitchener Waterloo Symphony. Two other pillar arts organizations, Grand Philharmonic Choir and the Clay & Glass Gallery, are not supported by Kitchener but are supported by other municipalities. Further emerging and mid - career organizations were funded through CEI allocations. The history of Kitchener's allocation of the fund to date is as follows: Organization 2010 2011 2012 2013 2014 THEMUSEUM 120,000 120,000 120,000 120,000 120,000 Kitchener - Waterloo Art 40,000 40,000 40,000 40,000 40,000 Gallery Kitchener Waterloo Symphony 40,000 40,000 40,000 40,000 40,000 Creative Enterprise Initiative (to be invested in new mid- 0 20,000 31,000 27,357 36,000 career organizations) MTSpace (one -time 7,143 allocation) Lost & Found Theatre (one- 1,500 time allocation Held by City of Kitchener 20,000 0 0 0 0 Total $220,000 $220,000 $231,000 $236,000 $236,000 6. -2 3 2015 Approach The City received requests from pillar arts organizations to advance sustainability funding prior to final budget day, in light of the delay in the budget process resulting from the recent election. Arts Sustainability Grant allocations for established organizations were approved earlier in the year $120,000 for THEMUSEUM, $40,000 to Kitchener - Waterloo Symphony and $40,000 to Kitchener Waterloo Art Gallery. The previous report to council submitted January 5, 2015, CAO -15 -001, Arts & Culture Sustainability Fund 2015 summarized benefits as reported by the three pillar organizations, with references to financial statements as appendices. This report is focused on the allocation for emerging or growing mid -sized organizations, recommending continuation for this year to the Creative Enterprise, an amount of $39,400. The City of Kitchener has an expectation that these funds are used to provide complimentary services to smaller organizations to maximize their success, rather than direct investment as is the case with Tier 2 Grants at the City of Kitchener and other municipalities in the region. The City also has an expectation for CEI to play a role in building regional collaboration to benefit the arts community or develop audience, such as achieved through Grand Social, a web site linked here: GrandSocial.ca. This online presence is intended to promote cultural events and connect the arts community. In addition, it is also required that the funds from the City cannot be used to benefit for - profit businesses. Creative Enterprise Initiative financial statements are attached as Appendix A, and the following impact statement is submitted by CEI: The City of Kitchener's Sustainability Funding Grant to Creative Enterprise Initiative (CEI) has, over the past three years, focused on investment in small to mid -sized arts organizations and creative initiatives. By offering professional expertise, tools and methodologies, CEI enables individual artists and arts organizations to focus on what they do best — creating outstanding art and presenting exceptional artistic content for the community. Two of the best examples of how we use our sustainability funding grant are: 1) CEI provides hands on professional support to mentor, coach and assist creative individuals and arts organizations in areas such as grant- writing, communications, project planning, website development and design work. CEI's grant- writing assistance alone has had an incredible impact on our creative community's capacity to drive more revenue into their organizations and projects over the past three years. We accomplish this by directing, supporting and sponsoring grant applications made by small to mid -sized organizations that don't necessarily have the acumen to do this alone. Additionally, since 2011 CEI has used the City of Kitchener's programming grant (total of approximately $114K) to secure approximately $375K in provincial /federal /foundation grants for broader creative community projects such as Cultural Mapping, Grand Social, Digital Media Content Creation Cluster Study, Music Accelerator Program and post- secondary student engagement projects. However, CEI sees more need for grant- writing expertise than we currently have available resources to support, and believes this 6. -3 Il foundation - building training is vitally important toward a sustainable future for the creative sector 2) CEI's online engagement platform, Grand Social (GS), was built to address a call to action to connect the broader community with the creative community, especially small to mid- sized organizations. While still in a start -up phase, GS is proving to be an effective tool that has the ability to endorse the arts and culture sector's offerings by providing promotional and amplification opportunities, audience and revenue development opportunities, as well as a stage upon which we can present our community's dynamic cultural assets for the rest of the world to admire. CEI is consistently seeing results from GS - in little over a year registered and active users has increased by 144 %, Facebook activity is up 100% percent and Twitter is up 148 %. Arts & culture organizations, and creative initiatives throughout the Region are telling us that they are experiencing increased audiences and ticket sales because of engagement with GS. 2015 will see us build upon this engagement success, and will also see the current technical platform strengthened to increase capabilities. The development of a strategic plan for the future growth of GS will be done in collaboration with a team of advisors including CEI staff, municipal staff, technical experts and the creative sector CEI is pleased to facilitate this work, which compliments the arts and culture priorities and goals of the City of Kitchener. Future Allocations: Future allocations will be determined pending results of the Arts Sustainability Grant Review currently underway in collaboration with municipal partners for a review of our combined investment processes to determine future allocation of the fund in context of broader investment in the sector. Specific to CEI, the CEI Review now in progress, along with the Arts Sustainability Grant Review, will assist in determining the City's future decisions. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: Arts and culture make important contributions to "Quality of Life" through creativity, heritage and diversity. "Development" goals are also served through arts and culture adding to urban vitality and downtown development. The Kitchener Economic Development Strategy (KEDs) recognizes arts, cultural workers and content creators (including music, media, film and design) as a vibrant economic cluster in and of itself, comprising a significant segment of the labour force. Arts and culture industries leverage innovation throughout businesses as diverse as digital media and advanced manufacturing design. A critical component to talent attraction, retention and development, support for arts and culture activities helps to develop Kitchener's distinct identity as a desirable place to live and visit. FINANCIAL IMPLICATIONS: This report allocates the $39,400 portion remaining of the Arts Sustainability Grant ($1 per capita fund) $239,400 Arts & Culture Sustainability Fund approved in the final 2015 Budget. 6. -4 5 COMMUNITY ENGAGEMENT: INFORM - This report is posted on the City's website as part of the Council agenda. CONSULT - The Arts and Culture Advisory Committee will be reviewing current and future allocation, and participating in stakeholder consultation of the Arts and Culture Sustainability Fund beginning in 2015. ACKNOWLEDGED BY: Jeff Willmer, CAO 6. -5 �61 CREATIVE WATERLOO REGION SERVICES ORGANIZATION O/A CREATIVE ENTERPRISE INITIATIVE financiat statements >DECEMBER 31, 2013 6.-6 7 CREATIVE WATERLOO REGION SERVICES ORGANIZATION O/A CREATIVE ENTERPRISE INITIATIVE financial statements >DECEMBER 31, 2013 index Independentauditor's report ............................................................................................................ ..............................I - 2 Statementof financial position .............................................................................................................. ..............................3 Statementof changes in net assets ......................................................................................................... ..............................4 Statementof operations .......................................................................................................................... ..............................5 Statementof cash flows ........................................................................................................................... ..............................6 Notesto financial statements .......................................................................................................... ..............................7 - 9 6. -7 C; INDEPENDENT AUDITOR'S REPORT To the Members of Creative Waterloo Region Services Organization o/a Creative Enterprise Initiative: Report on the Financial Statements We have audited the accompanying financial statements of Creative Creative Enterprise Initiative, which comprise the statement of fina ,- statement of operations, the statement of changes in net assets d ended, and a summary of significant accounting policies and ot� e-p Management's Responsibility for the Financial Management is responsible for the preparation and fair Canadian accounting standards for not - for - profit r �jf determines is necessary to enable the preparatio �o whether due to fraud or error. �in. Region Services Organization o/a as at December 3I, 20I3, and the t of cash flows for the year then tese financial statements in accordance with for such internal control as management that are free from material misstatement, %O! / / / %/i, ! / //i Auditor's Responsibility Our responsibility is to express an o on the financial statements based on our audit. We conducted our audit in accordance with Canadian genera �� cceped auditing standards. Those standards require that we comply with ethical requirements and plan and per audit to obtain reasonable assurance about whether the financial statements are free from material misstatement., An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's Judgment including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 6. -8 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Creative Waterloo Region Services Organization o/a Creative Enterprise Initiative as at December 31, 2013, and its financial performance and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Waterloo, Ontario LICENSED PUBLIC ACCOUNTANTS CHARTERED ACCOUNTANTS 'alov "M 6.-9 10 CREATIVE WATERLOO REGION SERVICES ORGANIZATION 0/A CREATIVE ENTERPRISE INITIATIVE statement of financial position >DECEMBER 31, 2013 20I3 20I2 assets current Cash $ 93,062 $ 96,602 Accounts receivable 123,583 - Prepaid expenses 3,620 I2,290 Government remittances recoverable 20,836 25,897 241JOI I34,789 capital assets (Note 3) 37.155 49,385 $ 278.256 $ 184,174 liabilities current /� Accounts payable and accrued liabilities $ 132,979 $ I09,604 / aii commitments Note 5 '0!0 ( ) / /1111111 / ! %j„ 1 net assets I% unrestricted net assets / 145,277 74,570 $ 278.256 $ 184,174 Approved on behalf of the board: Director Director 6■ 3 10 11 CREATIVE WATERLOO REGION SERVICES ORGANIZATION O/A CREATIVE ENTERPRISE INITIATIVE statement of changes in net assets balance, beginning of year Excess of revenue over expenses for year balance, end of year >DECEMBER 31, 2013 2013 $ 74,570 70,707 'F 145 �277 2012 S 104,065 �29,495) S 74570 6.-111 12 CREATIVE WATERLOO REGION SERVICES ORGANIZATION O/A CREATIVE ENTERPRISE INITIATIVE statement of operations >DECEMBER 31, 2013 expenses Amortization Capacity building for sector Conference and meeting Corporate communications Invest back into the sector Office expense Program costs Professional fees Rent and occupancy Secure investment sector Wages, benefits and contracted staff Website excess of revenue '11/1 over expenses for year 828.162 25,386 73,703 3L479 77,026 284,290 25,572 90,788 35XI 43,942 70,098 757,455 $70707 2012 S 373,000 147,000 9,628 61 529,689 14,588 10,331 7,965 30,800 252,849 23,409 33,822 18,532 19,609 89,246 58,033 559,18 6. -� 12 2013 revenue Government grants $ 404J20 Leadersl-dp council 404,850 Community support 18,450 Interest income 742 expenses Amortization Capacity building for sector Conference and meeting Corporate communications Invest back into the sector Office expense Program costs Professional fees Rent and occupancy Secure investment sector Wages, benefits and contracted staff Website excess of revenue '11/1 over expenses for year 828.162 25,386 73,703 3L479 77,026 284,290 25,572 90,788 35XI 43,942 70,098 757,455 $70707 2012 S 373,000 147,000 9,628 61 529,689 14,588 10,331 7,965 30,800 252,849 23,409 33,822 18,532 19,609 89,246 58,033 559,18 6. -� 12 13 CREATIVE WATERLOO REGION SERVICES ORGANIZATION O/A CREATIVE ENTERPRISE INITIATIVE statement of cash f[ows >DECEMBER 31, 2013 operating activities Excess of revenue over expenses for year Adjustments for: Amortization Changes in non-cash working capital: Increase in accounts receivable 1 � Decrease in prepaid, Decrease in government remittances recoverable Increase in accounts payable and accrued liabilities investing activities Purchase of capital assets Net Change in cash for the year Cash Balance, beginning of year cash balance, end of 2013 $ 70,707 25,386 96,093 (123,583) 8,670 5,061 23376 go 9.61 __LU -1-3 1) (3,540) 96.60 $93062 2012 S (29,495) 14,588 (14,907) (8,577) (20,439) � 17,24 ) �61,167) �58,528) (119,695) 216,297 S_ 96,602 6. -� 13 14 CREATIVE WATERLOO REGION SERVICES ORGANIZATION 0/A CREATIVE ENTERPRISE INITIATIVE notes to financial statements >DECEMBER 31, 2013 1. nature of organization Creative Waterloo Region Services Organization o/a Creative Enterprise Initiative, the "Organization ", is incorporated under the Ontario Corporations Act without share capital. The organization is exempt from income taxes as a non - profit organization under section I49(I)(L) of the Income Tax Act. The Organization was established to encourage innovative thinking and foster entrepreneurial business development in the Waterloo region. 2. significant accounting policies /i %04,11,,, Basis of Accounting - These financial statements have /bb n prepared in accordance with Canadian accounting standards for non - profit organizations. Z / / /��/ Revenue Recognition - The Organization follow defe4y` �t� r�, ethod of accounting. Restricted contributions are recognized as revenue in the/ ear which,�the related expenses are incurred Unrestricted contributions are recognized as reve, en received Grants are recognized when received Leadership council support is recog��`zed w� persuasive evidence of an arrangement exists and there is reasonable assurance of collection.''��Jl Financial Instruments Measurement - The Organizations 'gall measui�' its financial assets and liabilities at fair value. The sgkwiOrganization subsequently measures r� s �ial assets and financial liabilities at amortized cost. Financial assets measured a �orti� cosy cash and accounts receivable. Financial liabilities measured ort ed cost include accounts payable and accrued liabilities. )l / / / / //ai'z / The Organization has not design any financial asset or liability to be measured at fair value. Impairment - Financial assets measured at cost are tested for impairment when there are indicators of impairment. The amount of the write -down is recognized as operating cost. The previously recognized impairment loss may be reversed to the extent of the improvement, directly or by adjusting the allowance account, provided it is not greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously. The amount of the reversal is recognized as income from operations. Capital Assets and Amortization - Capital assets are recorded at acquisition cost. Amortization is provided in the accounts using the following methods and annual rates: Asset Method Rate Computer equipment Straight line 55 % Office furniture & equipment Straight line 20 % Leasehold improvements Straight line 40 % Capital assets acquired during the year are amortized at one half the above annual rates. 7 6.-14 15 CREATIVE WATERLOO REGION SERVICES ORGANIZATION 0/A CREATIVE ENTERPRISE INITIATIVE notes to financial statements >DECEMBER 31, 2013 Contributed Services - The Organization is dependent upon many hours contributed by volunteers. Because of the difficulty of determining their fair value, contributed services are not recognized in these financial statements. Disclosure and Use of Estimates - The preparation of financial statements in accordance with Canadian accounting standards for non - profit organizations requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the year. These estimates are reviewed periodically, and as adjustments become necessary, they are reported in earnings in the period in which hey become known. Estimates are used when accounting for certain items suc F�� evenues, useful lives of capital assets and asset impairments.% // 3. capital assets JJlr1l! Computer equipment $ Office furniture & equipment Leasehold improvements 4. bank indebtedn The Organization has a $IOO,C1°1/Ine of credit bearing interest at prime plus 1.50%. The line of credit is secured by a general se purity agreement over assets of the Organization. There was $Nil (20I2 - $Nil) balance at the end of the year. 8 6.-15 ac c ( ulated net net amo� lion 20I3 2012 $7j7p %i' 15,542 $ 5,662 $ 7,765 5,698 17,429 I4,298 20,592 14,064 27,322 $__41 832 $ 37.I55 $ 49,385 The Organization has a $IOO,C1°1/Ine of credit bearing interest at prime plus 1.50%. The line of credit is secured by a general se purity agreement over assets of the Organization. There was $Nil (20I2 - $Nil) balance at the end of the year. 8 6.-15 16 CREATIVE WATERLOO REGION SERVICES ORGANIZATION 0/A CREATIVE ENTERPRISE INITIATIVE notes to financial statements >DECEMBER 31, 2013 5. commitments The Organization is obligated under lease agreements for office space and office equipment. The future commitment under these contracts are as follows: 20I4 $ 23,907 20I5 $ L273 6. related party transaction The Organization receives leadership council investment i from it's charitable arm. During the year these receipts amounted to $404,850 (20I2 - $.� 00). The Organization also provided administrative support to its charitable arm in the amc, of �� (20I2 - $2,500). These transactions are in the normal course of business and are measure at'''exchan� ounts. As at December 3I, 20I3, accounts receivable from its charitable arm was $I �� 6(20I2 7. financial instruments Risk Management - The significant risk to w Liquidity Risk - Liquidity risk is tl associated with financial liabilities. Organization's cash requirem ;W operating line of credit. T 'e ava' meet operational needs a , edge 1 8. comparative figures is exposed to is liquidity risk. k "hat th�rganization will not be able to meet its obligations om operations provides a substantial portion of the nal cash requirements are met with the use of the available op�ing line of credit provides flexibility in the short term to term financing. Certain of the comparative figures have been restated to conform to the presentation adopted for the current year. E 6.-16