24.09.2008: New Communal Financial Management (NKF)

Opportunities for culture with the New Municipal Finance Management, NKF

Culture in times of the introduction of professional operational management in municipal administration.

This story began with a discussion in a municipal office at the beginning of this year, where an association of visual artists was presented with the future cuts to municipal services for joint exhibitions. At the same time, this conversation revealed fundamental changes in the municipal view of cultural engagement, as well as a vision for cultural work in Germany.

In 2007/8, the so-called NKF, New Municipal Financial Management, will be introduced in NRW. Nothing will actually change. Expenditure should remain the same as before, only now it will be recorded differently. Everything will be more modern, more transparent, more precise and, of course, better. Municipal administration is being given a modern operational management system. -
It's not quite like that, but it is a little different: the administrative apparatus will appear somewhat more bloated in future due to the internal billing of services, and of course local authority balance sheets will be available, just like in a commercial enterprise. Why should culture concern itself with this? The answer is obvious: in future, local authorities will be able to formulate exactly what culture costs in the area of culture, those little-anchored, so-called voluntary services. Cultural professionals in NRW will soon be hit hard if they do not deal with the consequences in good time and prepare for the counterattack. Because within one or two years, the municipal treasurers will be able to tell us cultural workers and art producers exactly what a square meter of culture or art exhibition in which venue costs; per exhibition, per day or even per hour. - and that is: Costs!

It would be much more important, more correct and more decisive to regard culture as a benefit of a municipality. This is at least the only way to understand the concept of funding mentality if we want to continue to distinguish culture in terms of the stage and the visual arts from amusement parks.

Despite discussions to include it in the Basic Law, culture is still a voluntary service and only represents a cost in a municipal administration.  The state of NRW has increased the budget for culture, but why? A lot is also invested in education. Why? Is it about the future?

In a modern society that is becoming more and more market-oriented, it is not acceptable that we only look at culture in terms of costs and report deficits. The aim must be to make culture and the cooperation between artists and associations with the municipal administration fit for the future and to see each other as partners in cultural work. After all, more people work in the cultural sector in Germany than in the entire automotive industry, including suppliers.

The opposite is currently happening. This year, previous services provided by the city organizers are being blithely cut, with the argument that the coffers are empty and that this should be borne by volunteers in future. - Wait a minute? Wasn't there talk of strengthening voluntary work? Surely it wasn't meant as a fitness booth that would enable volunteers to take on even more social activities and tasks in the future, or was it?
The punch line follows on the heels of this: the previous costs of culture will remain virtually unchanged, but will no longer be shown in NKF in the future. Excuse me? What is happening? At present, services once provided by the city are being cut, outsourced to volunteers and will no longer be recorded in the future. - But things should be better and more transparent! Once again in plain language: If someone donates a cupboard, an art collection or something material to the city, taxes are of course due as these are goods. The cabinet is therefore given an inventory number and a value and is entered in the balance sheet. However, a service provided, such as the supervision of an exhibition, which was previously organized and paid for by the city, is no longer recorded, even though we are no longer talking about an industrial but a service society, if the artist now does the supervision himself. It goes even further: in future, the so-called "free provision of services, materials or premises" will be recorded by NKF. This will certainly not be done on a "zero" basis, but rather internally these services or uses will be assigned values that independent cultural organizations or artists will soon have to record as gains from non-cash benefits. Consequently, this means that the city expects higher profits, fewer reported deficits and, of course, higher income taxes. Art associations that, for example, do not hold exhibitions in their own premises but are given premises by the local authority for this purpose will then have the problem of no longer being able to make a profit from the non-cash benefit of using exhibition space. However, the condition for non-profit status is not to want to make a profit. A paradox of the system.

This is not equal management between partners. Culture that is put at the service of others, namely the artists, is also a gain! On the one hand, the inclusion of culture in the Basic Law is being discussed at federal level, but regionally this system seems to have a counterproductive effect.

At the same time, the Federal Administrative Court confirmed a few years ago that artists and their work contribute to economic value creation and that value creation is to be regarded as a higher good than economic profit. So where should culture be placed? Only on the cost side of an administration, or in the value chain?

In NKF, however, we are running into precisely this danger, namely that only business calculations are made, any thought of the importance of culture and the need for support is ignored and, moreover, no account is taken of a modern service society. In an economy, now that we have successfully made the environment accountable in various ways (from the deposit on cans to trading in emissions certificates), it should also be possible to account for art and culture. If the environment is understood today as a basic condition, as a resource, culture, as one of the main drivers of social development, should also be calculable. Dear scientists in the disciplines of mathematics, business and economics and culture, we need you - now - it's time!

Culture is value creation and should be included in economic calculations. Companies in Germany like to talk about the soft economic factors, which cannot be calculated or mapped, but can still be decisive. We need you, now! These are good times for culture and now we can create cultural profit!

It could be so simple.
In future, the treasurer of a city must present a balance sheet. From this, if it is done well, I can read the costs of, for example, a four-week art exhibition with absolute precision and all the facts. That will come, absolutely certain. What do the artists have to say against it? Culture profit calculation in the 21st century: KGE21.
You provide us with the figures, we should be able to answer with figures. It's actually very simple: the artist contributes 4 things:
1. working time contributed and concrete material expenditure for the exhibition, or the same as a lump sum.
2. value of the artwork according to the insurance and/or sales list linked to the artist's ranking (e.g. artfacts.net)
3. image rights for the exhibition according to VG-BildKunst
4. media analysis of advertising or publicity gain in the media.

If the local authority now deducts the costs, it has calculated the cultural profit and finally proven that an exhibition made available is not just a service provided but also part of the value chain. And in this way it could be offset against the costs of cultural events and art exhibitions.
The same calculations are made elsewhere in the economy. Don't be surprised at the figures that await you if you want to show originals and not cheap art prints. If a painter exhibits originals in a municipal gallery or museum, this is an exclusive presentation! In the world of exploitation of image rights, a very clear distinction is made between, for example, "use only in Germany" or "worldwide exclusive". A painting is only available once in the original, or thousands of times as an art print, or billions of times as a digital image on a flat screen. GEMA charges fees for music in public spaces; VG-Bildkunst should proceed in a similar way, as it already does for images on the Internet. Even if fees or royalties have not been possible for years, the values are already known, aren't they?

This could be further refined, elaborated on and, of course, taken even further.

Based on the number of exhibitions and the artists exhibited, a ranking could be developed for each exhibition venue and in future show the artist whether it is worth exhibiting here or not. On the other hand, exhibitors can already look up artist rankings on the Internet and thus substantiate the quality of their own work. Culture can't just be a luxurious indulgence, it has to represent a profit, otherwise I can no longer support the idea of promotion. Because if I promote something or invest in something, then I must have the intention of making a profit in this state. And that cannot be shown as a deficit, neither in business terms nor in economic terms. Because it's all about profit! So revenue minus expenditure equals profit. Up to now, people have only talked about costs, forgetting about income and turning profit into an unknown variable with x to the power of infinity, then replacing income with the number of visitors and justifying per capita expenditure with the beauty of art or the beauty of this mathematical formula.If cultural profits for an exhibition venue or a city were to be collected in full, cities could actually verify cultural figures in their arguments about location factors, justify funding via profits, etc.

This is actually not that difficult and times are good for creative artists.

Thomas Kellner on September 2008