|
|
 |
|
| Best Practices: Philanthropy |
Saving a Spendthrift
Matthew Schuerman
08/01/2005
|
Joyce Veterane dialed her husband’s cell phone and caught him as he was
rushing through an airport on the way to a business meeting. “My first reaction
was, ‘What the heck is going on?’ ” says David Veterane, a founding partner of
an investment firm, of that morning in February 2003. His wife, at home in
Seattle, had just read the news that the nonprofit known as A Contemporary
Theatre (ACT), which the couple had been supporting for 30 years, had debts of
$2.7 million, only $3,000 in its checking account and needed to raise $1.5
million immediately or face bankruptcy. Joyce also called ACT’s managing
director, Susan Trapnell, and learned that the theater had repeatedly racked up
deficits, year after year, but usually found angel donors to bail it out at the
last minute. The Veteranes decided the only right thing to do was write it a
check for $10,000.
 Philanthropists—and their friends—in cities all over the
U.S. are receiving similar panicked phone calls from their charities. A number
of cultural institutions have neared or actually declared bankruptcy in recent
years, only to be rescued at the last minute. Sometimes one individual or family
takes on the role of knight-errant, as Jack Taylor, the founder of Enterprise
Rent-A-Car, and his two grown children did when they pledged $40 million as a
challenge grant to save the St. Louis Symphony Orchestra five years ago. More
often the trustees reach into their own pockets and cut a wide fund-raising
swath through other existing benefactors and the community at large. ACT managed
to collect its $1.5 million from a variety of sources. Board members alone gave
$600,000. As the saying goes, the number one reason that people give money is
because someone asks.
Crisis situations may offer donors an opportunity to
feel particularly generous, but those versed in the basics of money management
might well ask, as David Veterane did, what the heck is going on?
The
problems many nonprofit institutions now face began, as they did with ACT, well
before the economy foundered in 2001. Indeed, the easy money that flowed into
nonprofits in the late 1990s cast a strange curse over the sector, tempting
organizations to expand beyond their means. Particularly in the arts, many
institutions discovered that they could afford to become larger, more
sophisticated and more expensive to run, so they did. At the same time, because
corporate supporters and audiences are increasingly national, small humble
institutions that once were happy being small and humble suddenly were not. “It
is hard to be just a neighborhood or regional institution now,” says Clara
Miller, the president of the Nonprofit Finance Fund. “To some extent they have
to create themselves as national destinations. Audiences are not as local.”
These larger infrastructures and more extravagant programs naturally cost more
to maintain, and a combination of roller-coaster economic conditions and
increased competition have complicated their financial prospects.
The
Veteranes had observed, in the years before the near-bankruptcy, that ACT seemed
to be playing out of its league. A new artistic director, Gordon Edelstein,
arrived in 1998 and began putting on excellent, but obviously expensive, shows.
“It was as if he had a champagne diet on a beer budget,” David says. Still, he
was happy to support the theater with a $10,000 annual corporate donation and
several thousand dollars more in personal contributions, saying, “I guess the
artistic talent available through ACT was worth the risk.”
For ACT and other
nonprofits in similar straits, however, the most generous gift of all might be a
dose of tough love. Because a production like the type staged by ACT costs about
twice as much as it raises in ticket sales, a theater is a losing venture unless
its fund-raising accelerates along with its budget. When Sheena Aebig joined the
ACT board in July 2002, deficits had become such a way of life that trustees
paid little mind to them. “There had been talk that the theater had been in
financial trouble for a number of years, and I think there was this expectation
that it would get resolved once again by year end, like it had before,” she
says. “I think it was partially that the staff would deliver news that was
sugarcoated. They would say, ‘Well, we’re a little thin, but we just got a big
donation.’ ”
Recruiting Believers
Aebig happens to be a bankruptcy lawyer, so she had
some idea about what it takes to get backers to believe in a failing venture. It
was not enough to rattle a tin cup—that had been done before, too many times,
and it was exactly that sort of stopgap fund-raising that had led to ACT’s
serial deficits in the past. Aebig began to accompany the theater’s new
president, Kate Janeway, to meetings with potential donors, explaining to them
that a new team with a fiscally conservative approach was on board.
|
|
|
|
|
|
|
