[This is a repost of something I wrote on 12/2/12. No doubt, more has come to light since then, but still some good points.]
There were several things I wanted to rebut from the Tony Ross/Doug Kelley interview on Almanac (http://www.mnvideovault.org/index.php?id=23947&select_index=2&popup=yes#2). Doug made several comments that seem rational, but just don’t hold up.
“We, like every other organization, we have income, and we have expenses. And they are certified by an outside accounting firm every year. And those numbers are given to the musicians. We file a tax return. Everybody knows you don’t lie on your tax return.”
This statement—that you have an audit done every year and are therefore transparent as possible—is brought up continually. Here you make a more forceful version of that statement. This misses the larger point and is somewhat deceptive. Yes, by state law, you file a tax return and those returns are public (the 990 form). They can be accessed by the public in a variety of ways, including Guidestar.org or the National Center for Charitable Statistics website.
The problem is they reveal only the bare minimum of information, usually statistics without context. One can see that a certain dollar amount of income came in from the endowment, but not see what specifically the money was spent on. It lists the most highly paid members of the organization, but little else… not the average salary, lowest paid salaries and so forth. Also, the 990 doesn’t list any context—the assumptions behind the numbers, the rationale, how they fit into a strategy, whether they will change soon, or if they are being held artificially high/low to make the 990 as a whole show a net balance of zero.
And of course they don’t reflect morality—of what, for example, a staff member should make.
This is why, despite your claims to the contrary, there is no transparency. It’s equivalent to simply stating the number “119.” One hundred nineteen of what? Is that good? Bad? Is 120 better? Worse? How did you come with that number? Is it 99 of one thing and 20 of another? To be transparent, you need to give budgets, projections, strategic plans, breakdowns and a budget narrative (similarly to applying for a grant).
You state repeatedly that you have handed over 1,200 financial documents to musicians to underscore your transparency. It is clear, however, that many of these 1,200 “financial” documents were, in fact, board minutes, which means the number of purely financial documents was probably lower.
And the whopper about lying on tax returns. This is a strange contention to make, in that lying on tax documents has been done by individuals, organizations and businesses since taxes were first imposed. It is such a concern that the government created the IRS specifically to track down tax cheats, and to dissuade others from lying on their forms. The concept of individuals passing along dubious deductions or moving funds to off-shore tax havens is well-known and easy to envision; it is therefore not terribly difficult to imagine organizations employing similar strategies on their own returns.
In fact, both these threads show up in the cautionary tale of the Southern Theater, whose failure just happened a couple of years ago here in the Twin Cities. This organization also had a board providing oversight, and filed tax documents every year. It was all a house of cards—money designated for one purpose was shifted around, unwise financial strategies were hidden behind “balanced” budgets, and mounting debts were giving the lie to the “golden age” the theater was loudly trumpeting. And ultimately, the whole apparatus collapsed. This is why there is a broader need to see a comprehensive view of the Orchestra’s finances—vague assurances and abstract safeguards aren’t enough.
“And I think that the musicians should really kind of back off the accusation that we misled the legislature. We gave them every number and were totally transparent with them.”
See above. Note that you could “balance the budget” by having me pledge a $5 million grant to the Orchestra on the eve of your meeting with state legislators. That would not mean, however, that it is prudent to assume this kind of support would come into the general operating budget every year, or even that I have the financial wherewithal to pay such a pledge. But the numbers would sure look good for the lawmakers.
“The orchestra’s 110 years old. It’ll be on for a long time after this dispute is over.”
This is an odd statement to drop in, particularly at that juncture—in response to the interviewer challenging Mr. Henson’s statements to the state legislature that were not quite true. It appears that Doug was trying to take a long-term view and say that whatever minor mistakes have been made along the way, things have been bad before and they’ve always come out good in the end. I appreciate the idea of looking forward, but it does seem to minimize the dangers here and now, and dismiss them as petty and ephemeral.
“The musicians have been shielded from the recession. You had a 25% increase from 2007 to 2012.”
The “25% increase” point is brought up repeatedly, but again removes all context. Broken down over 5 years, this implies a 5% increase every year, which while is still high to someone only getting a 2% or 3% annual raise, is a lot less jarring than the large 25% number. And it ignores key points—who is getting this? Are there differences between musicians? Is that the aggregate number, an average, or simply the top increase? Plus, didn’t the musicians voluntarily take a cut so that the rate did not rise as high as it would have as stipulated in the contract?
And to be fair, have you discussed the compensation increase of the management, which grew at a similar rate over that time? What about the huge raise listed for a VP of Finance, as listed in the 990?
“And that’s why – and not only our orchestra, but orchestras across the country have been saying, we cannot keep kicking the can down the road.”
Tony did a fine job with this. I would add that comparing this orchestra to one of the few cases where an orchestra went under isn’t quite fair. For me, it’s as false as all the rhetoric comparing the economies of Greece and the U.S.—saying that because Greece’s social programs are bankrupting the country, ours are too. A whole slew of variables (our ability to print money, debt rating, size of economy, etc.) ensure that’s an impossible comparison to make. Similarly, bringing up the case of Detroit ignores profound differences between the two examples. Yes we face difficulties in Minnesota, but don’t hold up the worse-case scenario as the only future that lies ahead.
In a labor dispute, you don’t get to choose what the other side values. Plus, it is not just the musicians that have demanded an independent analysis—most outside observers have urged you to provide one. So, although you may think it is a frivolity, there is a good case to be made to have such an analysis. And writing off a key demand in such patronizing language does no good. It insults not just the musicians, but everyone else who has similarly advocated for an analysis.