You Can Have All The Charity Golf Tournaments You Want When You Own The Courses

Generous donations to a non-profit can often become more of a burden than a blessing which is why it is important to have a good donation policy and properly evaluate the impact of the donation upon the organization.

According to a story in Non Profit Quarterly, this is exactly the challenge being faced by the Great American Songbook Foundation in Carmel, IN.  The organization with a budget of less than $1 million was approached with a non-strings attached donation of an estate valued at $30 million.

….includes a couple of golf courses, a pool, a fully furnished 50,000-square-foot main house, and a clubhouse—all set on 107 acres. There are no conditions on the contribution.

The upkeep alone could easily eat up the entire current budget of the organization, what with the nine staff required to maintain the property, and it should be pretty darn clear to any manager or board who have taken a trip or two around the block that such a gift could potentially ruin the organization.

[…]

This isn’t the first time the Simons have tried to move the property, which has covenants that disallow certain kinds of development. In fact, the property has been on the market since 2014 at $25 million with no takers. Additionally, a previous attempt to contribute the property to the Indiana University Foundation in 2008 fell through.

The Songbook Foundation Board is going to take three years to study the use of the estate which is probably a wise course of action. The NPQ article notes that since they accepted the donation of the estate, they will bear the costs associated with maintaining the estate during that time.

There are a number of options available to the Songbook Foundation according to another article.

The foundation could decide to use the main house as a museum and center of operations, subject to a rezone. The golf course land could be sold in a plan similar to Estridge’s but with lot sizes that meet the covenants. That money could be used to support operation of the museum.

The entire property, including the main house, could be sold to a developer. That money could be used to support the foundation or build the Great American Songbook Museum closer to The Palladium, possibly next to the soon-to-be-built luxury hotel, The Carmichael.

[…]

“It’s a very generous gift,” Brainard said. “It’s an asset that could be used by the Foundation to leverage for future donations. It’s very important to include neighbors in any conversation about any use and then proceed in such a way that enhance’s property values in the area.”

…He [McDermott] said charity events could be held on the golf course and added that a donation this size is a signal to other potential donors who were thinking of writing a check.

I have to admit, given the number of fundraisers that occur on golf courses, I was amused by the thought that these guys may be the only non-profit to own part of their “supply chain.”

If they decide to keep the properties, they will almost definitely need to set up a separate administrative body to keep themselves from getting bogged down in the business of overseeing the estates. Not to mention there might be issues that conflict with their non-profit status. The unrelated business incomes from the estates could potentially be 25+ times greater than that of the non-profit. It will be really interesting to see what they decide to do.

I made a post on the ArtsHacker site about two years ago that included lists and links to various resources one can use to create a gift acceptance policy and to evaluate the suitability of accepting gifts when donors approach the organization.

Sending Love To Those Calling Attention To Important Theater Issues

Gotta give a shout out to Non-Profit Quarterly for putting up two theatre related articles yesterday. I wanted to call attention to it to show appreciation for to them for covering arts concerns.

(n/b – slight mistake -during editing I noticed Ross Jackson’s article was published on Jan 29, 2016, though it appeared in my social media feed today.)

The first piece by Ross Jackson on Blackness in Nonprofit Theater reinforces a lot of the conversations that have been occurring lately about the recognition and opportunities afforded people of color.

It’s publication is timely just as we move into February when many arts organizations offer their Black History Month programming. Jackson rightly criticizes this approach, (or having any sort of “ethnic slot”), as tokenism. I think many more arts organizations recognize this than had 10-15 years ago and have taken steps to remedy this.

Jackson goes on to point out some less obvious, but equally problematic choices that are made in casting and programming decisions.

More troubling is that the lone black cast member is usually male. Black women are often cast only when the script calls for them or to fill promiscuous and degenerate roles…for example, auditioning a black actor who has the talent to play Rosalind, the witty, courageous leading lady of the court from Shakespeare’s As You Like It, whom the audience is made to feel deserves love, and casting her instead as Phebe, the entitled, arrogant, shepherdess who is criticized for having too many lovers. Rosalind stays white.

[…]

Furthermore, when casting black actors in nonspecific roles, it is not at all necessary to reimagine or reconceptualize the production by placing it in the inner city or adding what a middle-aged white male thinks of as a “Hip-Hop influence,” in order to “excuse” the decision to have black bodies present onstage. We don’t all walk around with a bassline underscoring our every action; there is no reality to that, so do not try to insert it for us.

He goes to provide other examples which place black actors in the status of otherness. He proposes ways in which organizations can examine their choices and processes.

The other mention of theater on Non-Profit Quarterly was about how theaters are becoming more effective at cultivating individual donors to support their work as corporate support wanes. The piece draws from an article in American Theater.

The American Theater article is worth reading because it goes into greater detail than the NPQ piece. However, Eileen Cunniffe does a good job summarizing on NPQ. The reason why many theaters have become more effective is because they are using predictive analytic tools and engaging in one-on-one relationship building to a much greater degree than in the past. That isn’t necessarily good news for every theater company who lack the resources to keep up.

…the newer approaches to donor cultivation that have been successful for nonprofit theater companies are also more labor-intensive—sometimes requiring additional development staff, other times requiring more flexibility from development staffers in terms of when they work, adding more evening and weekend hours to woo donors—again, including board members—before and during theater performances. He also notes that fundraisers must pay more attention than ever to generational differences among individual donors.

Finally, these approaches are likely to bear more fruit for larger theater companies that can afford to invest more in fundraising; they may be unnecessary for the smaller companies, which already know most of their individual donors quite well; and the better they work for the larger companies, the more they may disadvantage midsized companies, which may not be able to invest in additional staff or bells and whistles like predictive modeling.

If They Can Be A Successful Non-Profit, Why Can’t You?

If you feel like you don’t have a clue how to run a successful non-profit and are just winging it, you probably know that you are in good company.

If you are wishing there was a book someone could give you for Christmas that explained the process to you, according to a recent piece on The Conversation, such a book doesn’t exist because no one really knows the answer.

The reason why it doesn’t exist is due to the way the successes of non-profits are studied. The author of the piece, Fredrik O. Andersson, basically blames human nature and biases for this.

When people want to know what works, they tend to focus on the successes which means they learn very little about what contributes to failures. This is known as selection bias, the most famous example being Abraham Wald’s counter intuitive suggestion to armor the parts of WWII bombers without bullet holes since presumably that is where the planes that did not return got hit.

Or as Andersson writes:

Imagine that researchers want to investigate and isolate the factors that make gamblers successful. If they study only the gamblers who win all the time, they would reach the obviously false conclusion that gambling is always profitable

Carter Gillies who frequently comments on the blog has often brought up selection bias as a problem in the mindset and approach to non-profit problems. Now here I am writing about it, validating the point he has long held. I hate it when he is right so often and identified these issues so far in advance.

Except, Carter would point out this is an example of selection bias and one of the other problems Andersson identifies- flawed memory. I am only focusing on those times Carter was right and only remembering those times because I have later come across someone else reinforcing his view.

Andersson notes that any research performed directly on non-profits only provides a snapshot view of what is making them successful (or not) at this moment of time and doesn’t really provide insight into the process leading to that success. The researchers are left to ask the non-profit board and staff  to relate what factors lead to their current state. The problem is, their memories of how things evolved is often very flawed.

This is a huge issue because everyone from founders to donors and other funders are likely to look at successful examples and determine that is the path to success that should be followed either by themselves or those they fund.

Andersson writes about working with non-profit entrepreneurs where he asked them a series of questions and then followed up 6-14 months later and asked them to recall their answers. (my emphasis)

I asked participants in the workshop about three things: why they wanted to start a new nonprofit, where they anticipated getting funding and how likely they believed it would be that they might actually launch a new organization.

[…]

Three out of 10 recalled having a different reason for wanting to start a new nonprofit than they asserted in the first survey. And both of those reasons, of course, could not be accurate.

Nearly half incorrectly recalled the source of funding they had anticipated. The expected chances of a successful launch also differed. The people who did launch a new nonprofit were somewhat more likely to say they had anticipated this success during their second interview. The people who failed to get a new nonprofit up and running were nearly 20 percent less likely to say they expected to succeed during their later interview.

[…]

Since stories are malleable, the best way to reduce the risk of hindsight bias is to observe startups from the very beginning and follow them over time.

Some people forget, others get the details mixed up and others ascribe a rationale they didn’t have in mind at the time when they’re asked about events that have already transpired.

While his sample size is admittedly small, I suspect that this general trend would be observable with larger numbers. I have written about this general issue before with artists mis-remembering the amount of work that went into their first success and attributing a big break to luck rather than effort.

Breaking Even But We’ll Be Broke If Something Breaks

The National Center for Arts Research (NCAR) released the results of a study last week that, while not the most cheery news to release during the holiday season, is not terribly surprising.

Looking at the data of 4800 arts organizations, they found that it is becoming increasingly difficult for arts groups to meet expenses. They based these assertions on an evaluation of three data measures: unrestricted surplus before depreciation, operating surplus before depreciation and operating surplus after depreciation

Looking at unrestricted surplus (before depreciation), the average organization saw an unrestricted surplus of 2.1% of expenses in 2016. In the same year, overall operating bottom line (before depreciation) was 0.4% of expenses—virtually break-even. However, surpluses fell to a negative 4.2% when factoring in depreciation, meaning that the average organization is not reserving sufficient funds to repair and replace their fixed assets, which can lead to future challenges, particularly for organizations with high levels of fixed assets.

Somewhat surprising, smaller organization were doing better than larger ones when the three measures were applied.

  • Smaller-budget organizations, with lower fixed assets and less fixed costs, demonstrate the highest surpluses by all measures, continuing a four-year upward trend. Conversely, larger organizations tend to end the year with deficits, continuing a four-year negative trend.
  • Across all sectors, small organizations buck the overall sector trend—i.e. even in sectors where bottom lines trended downward, the smaller-budget organizations within the sector actually grew, sometimes by over 50%.

However, it should be noted that these three criteria aren’t necessarily the only ones that matter in organizational financial health. NCAR’s next step is to:

…take a look at working capital and access to available cash. It may turn out that organizations with high fixed costs and fixed assets also have sufficiently high levels of cash reserves to cover annual shortfalls and future asset repair and replacement. If not, organizations might consider how they can become more nimble if a break-even budget is a goal.

It is worth looking closely at the study data and methodology to get a better sense of what this all means.

For example, when deciding what budget size constituted a large, medium or small organization, they used different numbers for each artistic discipline. A $2 million budget makes a large theater or dance company, but a small art museum and a very medium sized opera or performing arts center.

Their notes on trends in the Opera sector say that one organization heavily skewed the results for the whole sector and that if left out, there would be a more positive trend. There are similar notes in other sections, especially breakdown by geography where nearly every metro region had an outlier skewing the data.

The other area of the report that was interesting was their Driving Forces section which left me asking “Why Is That…?”

Total Unrestricted Revenue Drivers

  • Having more arts education organizations, music organizations, and opera companies in a community tends to raise the unrestricted revenue tide for all organizations in these sectors in a market, while having more performing arts centers tends to lower the unrestricted revenue for all organizations in this sector.
  • As the level of individual philanthropy in the market increases, unrestricted revenue goes down.  The fact that there is more giving in a market does not necessarily mean that it is being directed to arts and cultural organizations.  Unrestricted revenue also tends to be lower in more densely populated communities and those where with proportionally more Asian Americans.

Operating Revenue Drivers

  • Operating revenue tends to be higher for organizations that target young adults or African Americans, and with higher levels of local and state funding.
  • More public broadcast activity in a market tends to drive down arts and cultural organizations’ operating revenue.

I am making a broad assumption that the observation about public broadcast activity is a result of competition for donated revenue. What I wondered was if there was a benefit to underwriting sponsorship on public broadcasting that helps offset that effect by providing additional earned revenue. Or is there no sense that one should support the activities of cultural organizations that support public broadcasting?

What I wondered about the observation regarding unrestricted revenue tending to be lower in densely populated areas was if this meant people in densely populated areas placed greater restrictions on the way funds were used or if they simply gave less. In the context of the sentence that precedes it, the answer would seem to be that people give less, but that doesn’t necessarily need to be the case.

It would be interesting to know if people in less densely populated areas placed fewer restrictions on their donations, perhaps implying a higher level of trust in the organization or a confidence in their ability to evaluate the effectiveness of the organization.

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