Financial Impact of a Lost Season

[garfield]

3 minutes ago, N.E. Brigand said:

I work in non-profit theater, and in our world, most don't have an endowment anywhere near that size.

I've looked at a few drum corps 990s in my day and I can't name a single corps that does.

 

[N.E. Brigand]

17 minutes ago, N.E. Brigand said:

There are lots of best practices that non-profits like drum corps should follow. For instance, you often hear that non-profits should maintain an endowment (investment portfolio) worth two to three times their annual operating budget, upon which they can draw down the earnings each year or each quarter. You often see 5% as the annual draw down figure. You draw based on the average value over the previous three years. And you can draw down that amount even when the market tanks, as long as you behave consistently.

So a corps who has a budget of $3 million and an endowment whose average value since 2017 is $6 million would be able to count on $300,000 over the next year, regardless of their activity in that period. That might be enough to stay solvent in this down time.

BUT it takes a lot of work to raise that money in the first place. And if you're always struggling just to scrape together enough money to fund your season, you don't have the time to raise these funds yourself, nor the money to pay a fundraiser to do it.

Normally the principal in an endowment is classified as "restricted", as opposed to an organization's regular income and expenses, which are "unrestricted".  In other words, you can't touch them.

BUT when the situation gets dire, as now, organizations may reach out to the donors and ask them if they will "unrestrict" the funds, making them available for the organization to withdraw if necessary. Obviously you only do that as a last resort.

Edited March 27, 2020 by N.E. Brigand

[IllianaLancerContra]

4 hours ago, HockeyDad said:

And wouldn’t this be the perfect moment for a coordinated effort led or supported by DCI office, on behalf of all the corps?  I’ll answer my own question:  yes.  Of all the many things that are not Dan Acheson’s job, it seems like this is one area where a coordinated, global effort would benefit the entire DCI family of corps. Otherwise it becomes an *every man for himself* situation. 

Kind of like it was in the early days of DCI.  If you have the Brass Roots video (I have the vhs somewhere), Bonfligio, Warren, Kampschroer, et al discuss how they literally put their family finances on the line.

[mjoakes]

40 minutes ago, garfield said:

Can anyone name a single drum corps that maintains an endowment account that's even twice annual expenses, let alone three times?

I sure can't.

You'll know better than most @garfield. The 990s show a few corps with strong balance sheets, many corps with weak balance sheets. No one has any major endowment that would cover all of operations, even though that would be good practice for a nonprofit.

FWIW, what I've seen on the 990s suggests many corps will struggle to sufficiently reduce costs over the next several months. The tour itself, however, is largely all expenses. (That's a general comment. "Largely," not totally.) But I don't think it's obvious that several organizations must fail or fold. They should get creative about cash flow related to membership for 2021 programs.

Some genuine disruption and pain for many individuals involved in the activity, however.

[Terri Schehr]

40 minutes ago, IllianaLancerContra said:

Kind of like it was in the early days of DCI.  If you have the Brass Roots video (I have the vhs somewhere), Bonfligio, Warren, Kampschroer, et al discuss how they literally put their family finances on the line.

Sooo many people leveraged their homes back then.  Sie Lurye sold his flat lots to Keep RA going. 

[HockeyDad]

1 hour ago, N.E. Brigand said:

I work in non-profit theater, and in our world, most don't have an endowment anywhere near that size.

So you’re saying none of the non-profit theaters are well endowed?

I’ll let myself out. 

[keystone3ply]

47 minutes ago, HockeyDad said:

So you’re saying none of the non-profit theaters are well endowed?

I’ll let myself out. 

 

[TwoValves]

I believe DCI itself just had to swallow a suicide capsule.  

[garfield]

1 hour ago, TwoValves said:

I believe DCI itself just had to swallow a suicide capsule.  

Really?  Please describe.

Serious question.

[garfield]

1 hour ago, TwoValves said:

I believe DCI itself just had to swallow a suicide capsule.  

I'm wondering: what you're hearing/feeling/thinking: could it be a red pill/blue pill situation and not cyanide?