Shooting Yourself in the Foot

I make it a practice not to criticize other arts organizations by name in my column. I appreciate how difficult it is to serve arts organizations as a manager or board member; the theory of arts management might be simple but the practice is not. And while many of the problems facing arts organizations are similar -- a difficult economy, reduced arts education in public schools, increased competition from electronic media, etc. -- each arts organization also has its unique circumstances that may not be evident from outside of the institution. Over the almost 30 years of my arts management career, I have been asked to advise dozens of organizations whose issues seemed far more complex after I learned more about the institution than they did when I simply read press reports. It would be unfair of me, therefore, to make matters worse for the leaders of any arts organization by naming them in my weekly Huffington Post column.

So I will not identify the arts organization that was recently featured in a major newspaper in a story that truly got me angry. This arts organization appears to provide important service to its community but its existence is threatened. This organization is facing a challenge maintaining its earned income and has seen contributed income fall precipitously. This would not be anything noteworthy in our current economy; many arts organizations that do good work are facing reductions in earned and contributed income. If these had been the only factors mentioned in the article it would be a cause for sadness but not for comment.

But buried in the story was a salient fact: the arts organization in question had lost its not-for-profit (501c3) status because it had failed to file its tax returns for several years. As a result, it could no longer offer tax deductibility to donors and had, not surprisingly, seen contributions vanish.

The journalist recounted this as fact but did not seem to appreciate the ramifications of this (lack of) action. Few serious donors are likely to fund an arts organization that does not do its proper paperwork. I know of no government agency or professionally-managed foundation that will consider granting funds to an organization that has lost its 501c3 status. And individual donors expect their gifts to be tax deductible. More important, in this day and age, when there are so many worthy organizations in need of funding, which donor would be willing to invest in an organization that does not do the minimal paperwork required to maintain its legal status? (And let's remember that filing a tax return for a not-for-profit institution does not imply having to pay taxes unless income was generated that was unrelated to the mission of the organization.)

I have tremendous sympathy for arts organizations that are facing fiscal challenges. Indeed, I have spent my entire career trying to aid these organizations and to develop techniques for avoiding these challenges. But it is difficult to feel much sympathy for an organization that causes its own demise by failing to fill out basic paperwork.