To Give, or Not to Give?

Arts organizations are feeling the pinch as private donors cut back. It's more important than ever to be generous -- but do some checking first

By Thane Peterson

Oil giant ChevronTexaco recently announced that, after the 2003-04 opera season ends, it will stop sponsoring the New York Metropolitan Opera's weekly Saturday afternoon radio broadcasts. Pulling support for the broadcasts, which cost about $7 million a year and reach an estimated 10 million people in 42 countries, will end the longest commercial sponsorship in broadcast history -- one that started in 1940.

Chevron (CVX ) isn't alone. With the stock market, the economy, and corporate earnings all lagging, charitable giving is in a huge slump. Total U.S. giving by individuals, companies, and foundations is likely to fall this year by about 22%, or about $47 billion, to $165 billion, estimates Charity Navigator, a New Jersey-based organization that tracks and rates charities according to their financial efficiency. Museums and other nonprofit arts organizations are being slammed the hardest: Gifts to such organizations are expected to fall by one-third, to $8 billion this year, down from $12 billion in 2002.

The reason arts organizations are being clobbered so hard is pretty obvious. When faced with having to pare their giving, most people and companies reduce arts donations before they cut back on support for organizations such as the Salvation Army that help the poor and disadvantaged, notes Trent Stamp, Charity Navigator's executive director.


  Understandable as that is, the trend is deeply distressing. We all need to think twice before reducing our support for cultural organizations. The plunge in charitable giving is only one of the many external pressures on arts organizations right now. The post-September 11 slump in travel and tourism is still pinching. Government funding is in the tank, too, as strapped state and local governments struggle to close widening budget deficits.

One way to feel good about giving is to do at least a cursory financial assessment before giving money to any arts organization -- or to any charity, for that matter. Before making a donation to an organization, I always do a news search to see if any questions or even scandals have cropped up I don't know about, and if I've missed any management changes or other big events during the year. You can get also get an assessment -- on a 1 to 100 scale -- of how efficiently a nonprofit organization manages its finances from Charity Navigator's Web site.

If you believe in a troubled organization's mission, the efficiency rating may encourage you to help out. But if there's evidence that poor management and overspending are as much to blame for the organization's troubles as the slowing economy, you may decide to send your donation elsewhere.


  Even the most well-run organizations can have some financial troubles, of course. For instance, the Metropolitan Museum in New York may be losing money right now, but it still rates a top four-star rating from Charity Navigator as one of the nation's most efficiently run museums.

Chicago's Lyric Opera is running in the red, too, but its deficit is only about $1 million -- and it generated surpluses in the previous 16 years. The Lyric is also still filling an enviable 97% of its seats. That's down from 100% in past years, but the falloff is understandable given the weak economy. Little wonder that the Lyric still rates a solid three-stars from Charity Navigator.

And some of the better-managed arts organizations are defying the general negative trends. For instance, I checked back in with the Detroit Institute of Arts, about which I had done a column two years ago (see BW Online, 1/17/01, "An Art Rebirth in Motown"). Director Graham W.J. Beal took some flak in February when he laid off 55 staffers. But the DIA also stayed in the black last year and hopes to do so again this year. And it continues to earn a top four-star financial rating from Charity Navigator.


  One reason: In a year when many museums are half-empty, the DIA's attendance was up 30%, to 476,318, in the 12 months that ended on Apr. 30. Part of that increase is due to a blockbuster Degas exhibit. But the DIA is also reaching out to minority groups with exhibits such as last year's major retrospective of the work of African-American artist Jacob Lawrence. The DIA also stays open until 9 p.m. on Fridays and has discovered that the late hours draw in minorities, young people, and other groups many museums have trouble appealing to. About 15% of total attendance -- some 60,000 people annually -- now visit the museum on Friday evenings.

The DIA has also kept a tight rein on spending. Its planned $32 million budget for the fiscal year that starts in July is down $2 million from the current year's budget. And the museum is plugging away at a 10-year, $331 million fund-raising campaign that started in 1999 to increase its endowment, create a rainy-day emergency fund, and do some capital expansion. Meanwhile, the museum is reorganizing its fund-raising department to more effectively court donors.

"Museums that stay in contact with [potential donors] through good times and bad are going to come out of this slump in good shape," says John Brown, founder of John Brown Ltd., a New Hampshire-based consultancy that advises nonprofit organizations, including the DIA. In contrast to the DIA, many nonprofits are slacking up on their fund-raising efforts "because they know people are feeling poor right now," Brown says. Such shortsightedness could end up hurting these organizations.


  Indeed, you have to wonder whether poor management isn't a major culprit when a nonprofit organization suddenly shuts down, as the Florida Symphony Orchestra in Boca Raton did recently. "The problem invariably is management's inability to run an organization on a budget," contends Jan Gippo, a flutist and piccolo player at the St. Louis Symphony Orchestra. Gippo is also chairman of the International Conference of Symphony & Opera Musicians.

The St. Louis Symphony Orchestra -- whose financial crisis came to a head two years ago -- is a case in point. In retrospect, the organization is lucky that the Taylor family, which owns Enterprise Rent-A-Car and gives gobs of money to St. Louis charities, asked for an audit of the books before making a $40 million challenge grant to the symphony. The audit showed that the symphony was actually in rough financial shape. Among other things, the "pops" concert series that everyone thought was wildly profitable was losing money.

Since then, new management has struggled mightily to turn things around. The money-losing "pops" series has been dropped and the annual concert schedule has been pared back to 42 weeks. After much haggling, the musicians agreed to cuts that reduced their annual pay by about 11%, to around $72,000. Meanwhile, about $30 million has been raised toward the Taylor family's grant. "We're not out of the woods yet," Gippo says. "But we are starting to redefine 'the woods'" to assure the orchestra's survival, he adds.


  Deciding whether to give to an arts organization is rarely based solely on whether the institution needs money. For instance, I visited the Milwaukee Art Museum last year and can attest that the new wing designed by Spanish born-architect Santiago Calatrava is indeed magnificent. But cost overruns also pushed the museum deep into debt. That makes me think twice about writing a check.

Do you make a donation in support of a daring project -- or hold off because of the museum's financial extravagance? Your call. Just be sure not to give up on all arts organizations in these troubled times.

Peterson is a contributing editor at BusinessWeek Online. Follow his weekly Moveable Feast column, only on BusinessWeek Online

Edited by Patricia O'Connell

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