The State Opera, a body corporate established pursuant to subsection 5(1) of the State Opera of South Australia Act 1976, promotes the art of the opera and related theatrical arts by presenting performances; commissioning the scoring and writing of operas; training people concerned in operatic presentations; and establishing and conducting educational programs.
The State Opera Ring Corporation was established pursuant to the Public Corporations Act 1993, as a subsidiary of the State Opera. Its primary functions were to produce and stage in Adelaide during November and December 1998, four major Wagner operas comprising Der Ring des Nibelungen (The Ring) and to market and promote The Ring within and outside the State.
The structure of the State Opera is:
A decision to wind up the State Opera Ring Corporation (SORC), was made on 31 May 2000 and it was subsequently agreed to distribute the remaining surplus of $22 000 to the State Opera. The process of legally winding up SORC is the responsibility of the Department for Transport, Urban Planning and the Arts and is expected to be finalised during 2002-03.
The operating result was a surplus of $1 120 000 ($143 000).
Box office and production revenue increased by $789 000 to $1.8 million, while production costs increased by $1.9 million to $4.1 million reflecting the increase in the number and scale of performances staged.
Cash assets and investments increased by $617 000 to $1.8 million, mainly as a result of $703 000 Special Purpose Commonwealth funding and donations of $109 000 received in advance for the 2004-05 Wagner Ring Cycle.
Subsection 23(3) of the State Opera of South Australia Act 1976 provides for the Auditor-General to audit the accounts of the State Opera in respect of each financial year. The authority for the Auditor-General to audit the State Opera Ring Corporation is provided by subclause 13(3) of the Schedule to the Public Corporations Act 1993 which relates to subsidiaries.
The audit program covered all major financial systems and was directed primarily towards obtaining sufficient evidence to enable an audit opinion to be formed with respect to the financial report and the adequacy of internal controls.
The specific areas of audit attention included:
budgetary control and management reporting
accounts payable
payroll, including employment contracts
revenue, including cash receipting and banking
general ledger.
During the year a management letter communicating issues arising from the audit was forwarded to the General Director. The main issues related to opportunities to improve the control environment through enhanced segregation of responsibilities within the finance function. A satisfactory response was received.
Further details relating to these issues are contained in ‘Audit Findings and Comments’ hereunder.
Audit noted that there was room to improve the State Opera’s level of segregation of duties associated with the banking of money, completion of monthly bank reconciliations, authorisation of electronic fund transfers and the recording of transactions in the general ledger.
Management responded that enhanced segregation of responsibilities would be established.
Audit noted last year that the State Opera had not established a formal process for identifying, assessing and managing risk as required by the Financial Management Framework.
During 2001-02 the State Opera developed a draft Risk Management Policy which provides a formal basis for the identification, assessment and management of risks. The Risk Management Policy was approved by the Board in June 2002.
Audit noted last year that there was room for improvement in respect of the provision to the General Director of regular assurance that controls over management and financial reporting have been operating effectively.
The State Opera has implemented an internal controls checklist certified by the Finance Director that is provided to the General Director each month.
As required by subsection 36(1)(a)(ii) of the Public Finance and Audit Act 1987, the audit of the State Opera of South Australia (including the State Opera Ring Corporation) included an assessment of the controls exercised in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities. The assessment also considered whether those controls were consistent with the prescribed elements of the Financial Management Framework as required by the Treasurer’s Instruction 2 ‘Financial Management Policies’.
Audit formed the opinion that the controls exercised by the State Opera of South Australia in relation to the receipt, expenditure and investment of money; the acquisition and disposal of property; and the incurring of liabilities, were sufficient to provide reasonable assurance that the financial transactions of the organisation were conducted properly and in accordance with law.
Box office and production revenue increased by $789 000 to $1.8 million reflecting the increase in the number and scale of performances staged.
Revenues from State and Commonwealth grants (net of payments to the Adelaide Symphony Orchestra) increased by $1.2 million to $3.0 million mainly as a result of special purpose funding received from the State Government for the opera Parsifal ($200 000) and special purpose funding from the Commonwealth Government for the 2004-05 Wagner Ring Cycle ($703 000).
The special purpose funding of $703 000 includes $203 000 provided by the Australia Council under a funding agreement between the Australia Council and the State Opera for the production of Wagner’s Der Ring des Nibelungen (Wagner’s Ring Cycle) in 2004-05. Contributions provided by the Australia Council pursuant to this agreement have been provided on the basis that, if for any reason whatsoever the State Opera fails to carry out the 2004-05 Wagner Ring Cycle, any unexpended moneys provided by the Australia Council for this opera must be refunded.
State and Government grants represent 50 percent of total revenues and indicate the extent of the economic dependency of the State Opera on Government grants. The Australia Council and Arts South Australia have, through a funding agreement with the State Opera, agreed to maintain grants at their current levels or better for the period 1 January 2001 to 31 December 2003.
Revenues from other sources increased by $1.7 million to $3.0 million.
Production costs have increased by $1.9 million to $4.1 million reflecting the increase in the number of major performances staged in 2001-02.
Cash assets have increased by $458 000 due mainly as a result of Special Purpose Commonwealth Funding ($703 000) received in advance and Special Purpose State Funding ($200 000) received as referred to under revenue previously, offset by the decrease of $466 000 in advance box office sales reflecting the expected decrease in the number of performances staged during 2002-03.
The State Opera have transferred $1.1 million of accumulated surplus to reserves, reflecting a desire to set aside amounts for future events including the 2004-05 Wagner Ring Cycle.