THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, April 20, 1996 TAG: 9604200333
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY TERESA ANNAS AND LISE OLSEN, STAFF WRITERS
DATELINE: NORFOLK LENGTH: Long : 173 lines
Outside, The Chrysler Museum of Art is the picture of prosperity, with its sculpture-dotted waterfront grounds and a crane placing steel beams for an addition.
Inside the administrative offices, the books tell another story. Four years of deficits have depleted the only fund the museum can use to help pay its light bills and employees' salaries.
The results: A half-million-dollar accumulated deficit, layoffs, canceled exhibits and the museum's first mandatory admission charge, which takes effect May 7.
While the money has been short for years, the museum's 24-member board - made up of prominent citizens - only this week publicly acknowledged the extent of the debt in a letter to its 9,125 members. Signed by board president Roy B. Martin Jr., the letter described how major reductions in public funding helped build operating deficits tallying almost $500,000 over the past five years. That figure swells to $653,098 when depreciation of assets is added.
The letter said ``earnings on certain fund balances'' had been used to ``pay for these deficits.''
What the letter didn't say was that, partly to cover those debts, the museum has drained $1 million from a rainy-day fund willed to it by the museum's late benefactor, Walter P. Chrysler Jr. The so-called Special Fund is the museum's only major source of unrestricted money for covering such deficits and unexpected operating expenses. To deplete it is tantamount to ``selling off the family jewels,'' Martin said in an interview this week with The Virginian-Pilot.
The Special Fund dropped from $1.8 million in June 1992 to $695,000 in June 1995. ``If it keeps going like this, we're going to pinpoint the day we will close our doors,'' said interim director Catherine Jordan, recounting a trustee's comment last year.
But is the museum's survival really threatened?
The short answer is that the Chrysler is far from broke. The institution's art collection is valued at an estimated $1 billion, Martin said, and its net worth is $11.6 million. In fact, the net worth has risen since June 1991, when it was $9.4 million.
Most of that sum, however, is in restricted funds earmarked for specific purposes, such as art purchases, art library books and building projects.
Consulting comptroller Nancy Lia compared the situation to having a trust fund set aside for education. It's money that can be used for tuition, but not to pay the rent.
That means the museum must be careful in managing its operating budget - which is fed mostly by city and state funds.
Though Martin's letter cited recent cuts in public funding as primarily responsible for the deficit, he said in the interview that he also blamed ``sloppy bookkeeping and poor budgeting'' under former director Robert H. Frankel.
Martin acknowledged that the board acted slowly to cut costs after the deficits first emerged in 1992.
Instead, the board allowed the former director to increase administrative salaries and expenses for promotions, conferences and conventions, according to Internal Revenue Service documents available to the public upon request.
The board also has proceeded with building a $1.5 million education workshop and gallery. Funding already is secured for the addition, expected to open in early 1997. It will be paid for by a $750,000 city grant and a museum fund earmarked for such a capital project.
The deficit was not deepened by a former employee who was accused of misusing funds, Martin stressed, referring to the November firing of Shirley Woodward, the former assistant to the director. ``The fraud audit was completed, and they didn't find anything,'' Martin said.
Had the Chrysler been a private corporation, layoffs and other radical expense-cutting actions might have taken place much sooner, said Lia, who began revamping the museum's budgeting system several months ago.
The newly unveiled financial picture casts a shadow on the tenure of Frankel, who was director from 1989 until October, when he left to direct the Santa Barbara (Calif.) Museum of Art. (Sidebar, A11.)
Martin said that until Frankel's departure, the board was not fully aware of the extent of the deficit, which ballooned from $84,295 in 1992 to $653,098 in 1995.
It was hard to assess the extent of the deficit, Martin and others said, largely because the museum used an ``antiquated and loose accounting system'' that split operating expenditures into two separate funds.
``Some of the budgeting had not been covered by income, and it was sort of washed over,'' Martin said.
However, Frankel, reached Friday at his California office, said ``the board was aware of all deficits. And the board approved all the budgets. They were presented to the finance committee, to the executive committee and to the board.''
Board treasurer Henry U. ``Sandy'' Harris III, who chairs the museum finance committee, declined comment. ``I think the president of the museum should be the one to answer it. I'm a volunteer trustee, and we have paid auditors who oversee the books,'' Harris stressed. Meanwhile, he added, ``this organization is doing its best to get its ship in order.''
Early this year, as the museum foresaw yet another year-end deficit, strong actions were taken to cut expenses:
On a Friday morning in mid-February, seven employees were told that their jobs would be eliminated due to lack of funds, and that they were being laid off. They were given until day's end to clean out their offices. As they left the museum for good, a snowstorm raged. They called it ``black Friday.''
Among those laid-off employees were 20th century art curator Trinkett Clark and head librarian Rena Hudgins. Museum officials called Hudgins at home, where she was recuperating from pneumonia; she had worked for the museum since 1988.
In addition, two employees were demoted - Mark Clark, curator of decorative arts for 20 years, and public relations director Donna Drew Sawyer.
The museum suspended its only contemporary art series, and canceled a major exhibit planned for the fall.
The museum indefinitely cut its Parameters exhibit series to save money: each show cost about $20,000. The shows, mounted every few months, were organized by Trinkett Clark.
The Chrysler saved more than $100,000 by canceling a fall exhibit from the collection of Burghley House, a palatial Elizabethan home in Britain. But it had already spent about $30,000 in preparation for the show, Jordan said, plus Frankel's travel expenses for at least two trips to England.
Despite the cuts in salaries and shows, the museum is still operating in the red. Museum officials declined to estimate how much more the deficit could grow by the end of the fiscal year on June 30.
Martin says he hopes to arrest the deficits through the cuts and by finding new revenues. He also wants to establish an endowment intended to support operations, he said.
Eventually he and other board members hope to rebuild the Special Fund, and then to spend only the interest income. But donations and grants - the Chrysler's main non-government sources of operating income - also have been down.
Still, Martin and others assert the Chrysler will outlast these hard times, and endure for generations. Since last fall, the museum has been crafting an institution-wide strategic plan and is revamping its budget process. Both should be ready for the next fiscal year, which begins July 1. ILLUSTRATION: VP GRAPHIC
HOW THE CHRYSLER'S OPERATING DEFICIT GREW
SOURCE: Chrysler Museum's comptrollerr
[For a copy of the graphic, see microfilm for this date.]
REVENUES:
City and state cuts: The worst cut came in the 1991-92 fiscal
year, when state funding went from $712,500 to zero. Since then, the
state allocation has remained at $471,000 per year. But city funds
dropped from $2.2 million in 1991-92 to $1.9 million for the current
fiscal year, according to a museum budget for 1995-96.
Donations and grants down over past three years: Though the
museum relies most on state and city money, a drop in donations and
grants from 1992-93 to 1994-95 has also hurt. According to audited
financial statements, grants dropped 16 percent from $38,123 to
$31,868; memberships fell 6 percent, from $384,307 in 1992-93 to
$362,001 last year; and annual unrestricted donations dropped 40
percent from $124,918 to $75,081. During the same years, corporate
memberships did increase 12 percent from $186,000 to $208,400.
No data was available for the current fiscal year.
Renting out Huber Court: Instead of making money by renting out
the museum for weddings and parties, the Chrysler hopes to barely
break even this year, according to the acting director.
EXPENSES: (This information is based on comparisons between
1992-93 and 1994-95 expenditures reported in IRS 990 forms. No data
was provided for the current fiscal year.)
Some increases:
Publications and promotions: Up 46.7 percent from $117,932 to
$172,991.
Conventions and conferences: Increased 70 percent from $20,264 to
$34,429.
Modest salary increases: Raises for senior staffers, including
the director, the finance/personnel administrator, chief of security
and maintenance, and the photography curator.
Some spending cuts:
Exhibitions down 37.5 percent: Dropped from $526,079 in 1992-93
to $328,801 in 1994-95.
Benefits for members, such as calendars and art show openings,
down 22.4 percent. Dropped from $102,833 in 1992-93 to $79,765.
Accounting, down 19 percent, from $19,575 to $15,865.
SOURCES: Museum financial statements, IRS 990 forms (available
for public inspection on demand), Chrysler budgets, interviews.
KEYWORDS: BUDGET CHRYSLER MUSEUM DEFICIT by CNB