The festival trust yesterday reappointed founding director Nicholas McBryde, after posting a loss at last year's event.
It was the first time in its 12-year history the biennial festival had posted a deficit, which the Otago Daily Times understands could be up to $150,000.
Trustees had to secure significant donations to offset the loss and the festival also exhausted its $60,000 cash reserves.
''It could have died,'' Mr McBryde (55) said yesterday.
''I'm relishing this as a new challenge, which is strange, because I left after 12 years feeling that I had nothing new to give and that it was time for someone else to have a turn.
''This is the Otago Festival of the Arts Mk 2, not a repeat of what's been before. The market has shifted and things are different now and people's expectations are different, too.''
Mr McBryde was the founding director when the festival debuted in 2000.
''We're absolutely delighted with the appointment. He is a tried and proven director who brings a lot of experience to the role,'' festival trust chairman Malcolm Farry said yesterday.
''Nicholas' background, history and passion takes a lot of pressure off the trust. He has a history of success and it gives the board a lot of confidence, having been through what it has,'' Mr Farry said.
The festival was mired in controversy when previous director Alec Wheeler suddenly resigned in December after the 2012 festival. It emerged many performers had not been paid.
Mr Farry said the delay was caused by poor administration. A report on the 2012 festival released yesterday was critical of the event.
''It was discovered after the festival, that organisation, staff relations, relationships with performers and record-keeping was not up to the usual standard of the Otago festival. Budgets had not been adhered to and cost overruns had a significant negative impact on the festival's finances.''
Reconciling the 2012 paperwork and documentation had been ''a difficult and time-consuming exercise'' which had taken board trustees more than 1000 volunteer hours, the report said.
''The festival was not a financial success. Audited accounts are not yet available, but the work carried out by trustees and the funds raised in sponsorship has allowed the festival to move forward without any debt.''
Mr McBryde will leave his position as Fortune Theatre general manager, which he has held for just four months, to take over from interim festival manager Kerry Buchan at the end of May.
''We are very disappointed to lose Nicholas,'' Fortune Theatre Trust chairman Peter Brown said yesterday.
''We had high hopes he would be able to take us up a couple of levels. However, the arts talent pool is shallow in Dunedin and what benefits one institution is often to the detriment of another,'' he said.
''The Fortune board understands someone with Nicholas' skill set is needed to restore the festival's credibility.''
The Fortune Theatre would advertise for a new general manager immediately, Mr Brown said.
