“Practical Steps in a Time of Uncertainty.” — A note to arts and cultural administrators from our firm

March 18, 2020 News

My colleagues Michael Kaiser (Chairman) and Brett Egan (President) have penned a message to arts and cultural administrators in response to the current pandemic:

March 16, 2020

Dear Friends:

We write in recognition of the severe hardship faced by many Americans in the wake of the Coronavirus pandemic, and in solidarity with our colleagues in the arts and culture sector who face an increasingly daunting array of challenges.

Not only have ticket sales and entry fees been lost, but many organizations have mounted entire productions that now must be cancelled. Others have cancelled spring fundraising galas – vital sources of contributed income. As 401Ks, endowments, and corporate profits falter, immediate and near-term fundraising efforts are all but certain to suffer.

Like many small and mid-sized businesses nationwide, the average arts organization in the United States has scant reserves to cover these losses. A 2018 report from the National Center for Arts Research at SMU found that the average US-based museum or performing arts organization had less than two months of working capital; the average orchestra, only 15 days. This means that cash disruptions grow more likely, by the day, for all but the wealthiest cultural organizations.

For many, it is a lack of clarity on the duration of the crisis that causes the most anxiety. Should we proceed with rehearsals for a new production scheduled for May? Do we issue next season’s subscription brochure? Should we move forward with our capital campaign? Will our reserves outlast the downturn, or are more drastic measures necessary? These are some of the sensible and challenging questions we have heard from arts leaders across the nation.

There is no easy solution. But we recommend the following steps be considered:

Ask donors of restricted funds to relax those restrictions, freeing capital for general operating needs

Develop extended payment plans with vendors; solicit payment forgiveness from vendors owed money

Ask ticket buyers of cancelled performances and fundraising events to forego a refund and, instead, contribute the value of their ticket, allowing artists and employees to be paid

For those in city-owned facilities, ask for delayed payment or payment forgiveness

Seek to renew external lines of credit, or begin discussions with one’s foundation supporters, loyal donors and board members about the formation of low- or no-interest loans

Activate the greater organizational “family” – more of whom are likely home from work – to support the organization in a volunteer function

If circumstances demand increased liquidity, borrow, judiciously, from endowments and restricted reserves (recognizing that many organizations will not have this option).

Read more on our firm’s website.