We often talk about philanthropic organiztions rewarding nonprofit entites for "good behavior," like sound financial management. Well, recent news pertaining to the Pittsburgh Symphony takes this logic to the extreme. The stakes are high in the Iron City, where the symphony is working to eradicate their $1.5 million budget deficit by 2015 to qualify for a $5 million grant from Heinz Endowments.
As you can imagine, it's a calculated gamble, and you can be sure other non-profits are paying attention. So let's take a closer look at the symphony's plan.
Reading the fine print. First and foremost, the operative word here is "qualify." Balancing the books won't guarantee that the symphony will get the grant; they'd simply be one of many other nonprofits vying for the funding. But there's another element of payoff in play: The symphony is in line to receive $12 million from the R.P. Simmons Family Foundation if it balances its books for three consecutive years. Again, it's important to pay attention to the fine print, namely, the part about "three consecutive years." In other words, the symphony needs to be in the black every year until 2018 before they can get the $12 million from the Simmons Family Foundation.
A roap map to cost-cutting (the 2012-2013 version). Trimming $1.5 million will be easier said than done. On the bright side, the symphony has the wind at its back since it has already managed to remove $1.5 million from their previous year's budget. On the not-so-bright side, a majority of that reduction came from a $1.2 million private gift. The rest of the cost savings came from interest on investments, higher ticket sales, rental income, state grants, and contract renegotiations.
How will they do it? (And it is feasible?) Can the symphony replicate this previous year's model for the upcoming fiscal year? From our standpoint, the answer is "hopefully." Certain fund-raising channels are, relatively speaking, guaranteed. For example, the symphony can continue to count on accrued interest and rental income. But can it afford to raise ticket prices in the short term? Can they cross their fingers and hope for more state funding and the occasional private grant?
The bottom line is that the symphony has no choice. Their possible financal windfall — potentially $17 million in funding over the course of five years, plus a closer relationship with the Pittsburgh-based Heinz Foundation — is too good to pass up. The worst-case scenario? The symphony fails to reach their goal. But even then, the wheels are in motion for short-term solvency, and that is rarely a bad thing.