The Center for Cultural Exchange is in more serious financial difficulty than anyone outside the organization may realize, and is likely to shift its focus away from its past efforts to bring relatively unknown, but culturally significant, performers to Portland for shows with low ticket prices. What will come instead is anybody’s guess, but it will be less expensive to put together.
The news that it would sell its building just four months after vowing to remain in its landmark Longfellow Square home is just the tip of the bad-news iceberg. Even more troubling is a look at the group’s tax returns, which are public records because of the group’s nonprofit status.
The returns show that since at least 2002, the center’s managers have been spending far beyond the center’s revenues. Board president Jay Young and center co-founder James “Bau” Graves say this was because grant money is hard to come by. Graves, who left in December 2005, says it got harder in more recent years as governments cut back on funding for social-service agencies, forcing them to seek donations from the same individuals and foundations that had long funded arts and cultural groups.
The tax records show, however, that revenues weren’t the problem: income was largely flat from 2002 to 2004, even as the center’s spending increased 12 percent during those years. By 2004, the most recent year for which tax records are available, the group’s operating deficit was $188,390.
Young says 2005 “wasn’t great, either,” and acknowledges that while “various substantial grants from national grant-making organizations came to an end ... even with that level of support we had trouble breaking even.”
Rather than cutting back on expenses, the group’s “budgets were optimistic,” Young says, based in part on the past success of co-founders Graves and Phyllis O’Neill at landing significant grants from national organizations. “Though ’04 and ’05 we continued to apply for similar grants,” but when, “for whatever reason, they just didn’t come in ... we just didn’t adjust our budget as quickly as we should have in hindsight,” Young says.
Grant-revenue plans were supplanted by “plans that assumed more success in local fundraising” than actually occurred, and when the losses kept mounting, the center kept covering its costs. “We’ve borrowed out the equity in the building” by taking money from the endowment in exchange for additional mortgages on the building, Young says.
“The idea of what an endowment can be used for has changed” over the years, says Michael Nilsen, public-affairs director for the Association of Fundraising Professionals, a national organization promoting responsible stewardship of money donated to charities. “Typically an endowment is for a particular purpose,” and using that money for another purpose might violate the goals the money’s original donors had in making the gift. But Nilsen says that if the board talked about the decision — which Young says they did — and agreed the risk of never getting back the money being taken from the endowment was acceptable given the circumstances (including, in this case, a mortgage to the endowment), it “might pass the test,” though he cautions, “I don’t think it’s necessarily a practice that charities should be doing all the time.”
