Putting The Money Where You Need It The Most

Two recent donation events in the industry point to an important issue that has been hobbling efforts to use contributions to their best effect.  The Detroit and Ft. Wayne organizations have both received large donations geared to underwrite their general operating expenses.

“General operating expenses” is a catch all phrase used by orchestra administrators to include just about everything an orchestra spends money on.  How an orchestra organizes its money is different from one organization to another but most have a general operating account; which is a bank account they use to issue payment for just about every expense they incur.

The trouble begins when orchestras have to take into account certain stipulations which may be attached to financial gifts or economic support.  The orchestra still uses the general operating account to pay for the expenses related to daily operations; however, they have to make sure the money is spent on items in accordance with the donor’s stipulations.  They do this through internal accounting procedures and that’s where the vast sea of gray begins.

In Detroit, the $1.5 million matching grant has no stipulations; it goes directly to the general operating account and may be used to pay for any and all expenses related to running the organization.

But in Ft. Wayne, their $100,000 grant may be used to support the general operating budget but must show that the money is being directed toward strengthening its music programs for children and their families.  How, precisely, Ft. Wayne will be able to show a donor that it’s money is going toward programs it wants funded will be a trick.

In Detroit, the stipulations of their grant will do much more toward strengthening the institution as the money can be directed where it’s needed the most.  In Ft. Wayne, if they have an immediate need to pay musician salaries they may not be able to use any of their grant unless they can show it is being used proactively toward their children and family programming efforts.

The big gray zone in all of this is how an orchestra must show where they are spending their money.  This issue was examined in some detail in two previous articles, Grant Games, and Non Profit Venture Capital.  In the end, a donation such as the one in Detroit will lead to more positive support for the organization since its matching fund structure will also encourage business or large individual donors to give money for open ended use by the orchestra.

Another interesting development regarding Detroit’s situation is the challenge grant is believed to be sponsored in most part from current or past board members.  This is a good sign that the board leadership of the DSO is willing to uphold their end of the agreement they negotiated last year with the musicians which resulted in the players accepting some big concessions.  I hope this campaign is one of more to follow.