Greed or Mismanagement?


James F. Eliason, Ph.D.

I was struck seeing that the list done in 2008 of major orchestras in Gramophone, the British based Classical Music magazine, that the Cleveland Orchestra ranked 7th (http://www.gramophone.net/Issue/Page/December%202008/36/999327/). As we all know Cleveland (otherwise known as the “Mistake on the Lake”) is also a rust belt city that has half the population of Detroit in the city as well as the overall metropolitan area. Therefore, if we are to believe the line put out by the DSO management and echoed by the Detroit News, etc., the Cleveland Orchestra should be hurting even more than Detroit from the economic downturn.

So I compared the data listed on Charity Navigator for the two orchestras. The data is from fiscal year 2009 for both.There are some interesting things.

Detroit lost $11 million in 2009, Of expenditures, 73.6% went to programs, almost 20% to administration and 6.5% to fund raising. Anne Parsons received 1.1% in compensation! The numbers are quite comparable for 2008 and 2007 as well showing big losses and 20% or higher for administrative expenses. Over the 3 year period 2007-2009, the DSO lost about $24M. You can also see the drop in net assets (endowment) from $84M in 2007 to $74M (12%) in 2008 to $36M in 2009 (51%). Obviously the drops in 2008 and 2009 are in part due to the economic crash, which started at the end of 2008. However, the 2009 drop is much larger than that seen in Cleveland.

Cleveland on the other hand, in 2009 spent 80.7% on program, 12.5 on administration and 6.6% on fund raising. So, a higher proportion on programs, less on administration and about the same on fund raising. Their executive director while having a nominally higher compensation accounts for only 0.84% of the expenditures and interestingly, the concertmaster is paid more than the executive director! Over the 3 year period 2007-2009, the Cleveland Orchestra has been in the black earning close to $9M in that time. The Assets dropped from $196M in 2007 to $170M in 2008 and to $132M in 2009 (22%).

In summary, over the 3 year period, Cleveland made $9M and Detroit lost $24M. The base pay (2008/2009) for musicians in the Cleveland Orchestra was $115,440 and that for Detroit was $99,250 (http://www.cleveland.com/musicdance/index.ssf/2010/01/cleveland_orchestra_musicians.html)

So I ask, is it the musicians greed or mismanagement?

__________________________________

Detroit
Revenue
Primary Revenue $23,675,302
Other Revenue $-93,967
Total Revenue $23,581,335
Expenses
Program Expenses $26,132,646
Administrative Expenses $7,028,524
Fundraising Expenses $2,307,079
Total Functional Expenses $35,468,249
Payments to Affiliates $26,132,646
Excess (or Deficit) for the year $-11,886,914
Net Assets $36,172,465
Program Expenses 73.6%
Administrative Expenses 19.8%
Fundraising Expenses 6.5%
Fundraising Efficiency $0.15
Name Title Compensation % of Expenses
Anne Parsons President, CEO $392,941 1.10%

Revenue

FYE 2009 FYE 2008 FYE 2007
Primary Revenue $23,675,302 $30,983,271 $28,532,010
Contributions $14,724,030 $20,880,248 $17,829,172
Program Services $8,951,272 $10,103,023 $10,702,838
Membership $0 $0 $0
Other Revenue $-93,967 $1,456,826 $3,199,016
Total Revenue $23,581,335 $32,440,097 $31,731,026

Functional Expenses

FYE 2009 FYE 2008 FYE 2007
Program Expenses $26,132,646 $26,601,452 $28,445,321
Administrative Expenses $7,028,524 $8,557,359 $7,830,310
Fundraising Expenses $2,307,079 $2,550,953 $2,609,238
Payments to Affiliates $26,132,646 $0 $0
Total Functional Expenses $35,468,249 $37,709,764 $38,884,869
Excess (or Deficit) $-11,886,914 $-5,269,667 $-7,153,843

Balance sheet

FYE 2009 FYE 2008 FYE 2007
Assets $111,618,790 $142,941,376 $152,842,051
Liabilities $75,446,325 $68,758,156 $68,577,183
Net Assets $36,172,465 $74,183,220 $84,264,868
Cleveland
Revenue
Primary Revenue $53,760,791
Other Revenue $1,222,114
Total Revenue $54,982,905
Expenses
Program Expenses $39,922,525
Administrative Expenses $6,224,206
Fundraising Expenses $3,295,269
Total Functional Expenses $49,442,000
Payments to Affiliates $0
Excess (or Deficit) for the year $5,540,905
Net Assets $131,562,141
Name Title Compensation % of Expenses
Gary Hanson Executive Director $407,225 0.82%
Other Salaries of Note
William Preucil Concertmaster $467,212 0.94%

Revenue

FYE 2009 FYE 2008 FYE 2007
Primary Revenue $53,760,791 $34,794,819 $32,584,800
Contributions $37,868,783 $19,515,897 $16,464,079
Program Services $15,892,008 $15,278,922 $16,120,721
Membership $0 $0 $0
Other Revenue $1,222,114 $10,223,872 $14,766,046
Total Revenue $54,982,905 $45,018,691 $47,350,846

Functional Expenses

FYE 2009 FYE 2008 FYE 2007
Program Expenses $39,922,525 $37,500,766 $38,126,933
Administrative Expenses $6,224,206 $3,935,832 $3,442,151
Fundraising Expenses $3,295,269 $3,133,442 $3,070,276
Payments to Affiliates $0 $0 $0
Total Functional Expenses $49,442,000 $44,570,040 $44,639,360
Excess (or Deficit) $5,540,905 $448,651 $2,711,486

Balance sheet

FYE 2009 FYE 2008 FYE 2007
Assets $189,207,401 $213,125,921 $240,748,160
Liabilities $57,645,260 $43,599,371 $44,881,414
Net Assets $131,562,141 $169,526,550 $195,866,746
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2 Responses to Greed or Mismanagement?

  1. Mike Wargal says:

    And another thing,

    I checked out the Charity Navigator link from the article and the DSO is rated 1 out of 5 stars. What the hell? That alone should tell the board that management needs to be shaken up or replaced.

  2. Mike Wargal says:

    Can someone please explain what “payments to affiliates’”
    means? It’s a pretty big number in 2009 for the DSO.

    I’m just curious, I’m sure it is legit, probably has something to do with the building, but I bet a lot of people would like to know.

    Thanks!

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