Episode Transcript
Jane Needles: [00:00:00] Hello, bonjour, kwei, and welcome to the latest episode of At the Mic, au micro, a podcast brought to you by the Arts Consultants of Canada, l'Association de cosultants canadiens en arts.
In this edition of At the Mic, We bring you Heather Young, of Young Consultants.
Heather is an expert in financial management for the arts, and has just published two books on the subject, which are something that should be on every consultant's bookshelf and in every arts administration teacher's required reading lists for their students.
My name is Jane Needles, and I've been a board member of the ACCA for the past five years.
ACCA recognizes the generous support of Unity Design Studio for sponsoring this podcast. Unity Design Studio is a high ranked B Corp architectural firm with over 50 years experience designing many arts and culture venues, including the new Canadian Canoe Museum, which you heard about in our last podcast. [00:01:00]
Heather Young is known throughout the arts milieu, and her expertise includes leadership roles, with a variety of arts and heritage organizations. She has completed consulting assignments with an array of arts organizations in Toronto and across Southern Ontario, frequently in collaboration with First Stage. She teaches at Humber College and University of Toronto and has delivered numerous workshops and seminars on a variety of topics ranging from budgeting, to sales tax, to reading financial statements.
Hi, Heather. What a delight to be with you today to talk about finances and the arts.
First of all, I just have to say that your two books are amazing, I wish I'd had these books to teach with in my arts administration courses at Bishop's University. They speak in layperson's language and are simple and easy to follow. Let's start with the publishing of these two books. and why they are important for the Canadian perspective [00:02:00] on accounting and financial management of the arts here.
Heather Young: Thanks so much for the opportunity to be here, Jane. It's a real pleasure to come and talk about these things. I was inspired to publish these books because there's a real lack in the art sector. I find of a deep down understanding of the technical aspects of finance. It's. Often the case, it seems to me, partly from my teaching career, that a lot of people in our sector don't really like talking about money.
They don't feel comfortable talking about money. They don't really know the mechanics of it, and the same can actually be said of a lot of board members. So I wanted to make a contribution to the sector of documentation of how exactly finances work, how accounting works, how financial statements come together, and how those things share in providing a good foundation for financial decision making.
Jane Needles: Yes, and I think we'll talk in a bit too about the fact that there are many people who are embarrassed to try to say [00:03:00] they actually really don't know a lot about finances, and yet they're supposed to. so what is your perspective about how the arts have been affected since the end of the pandemic?
Heather Young: Oh boy, it's, definitely, it's a truism to say that we were hit first and hit hardest and hit the longest. That's really the case. It's been very interesting working with organizations coming out of COVID. A lot of organizations, as we know, continue to suffer. People are still struggling out there to try and figure out what the path needs to be.
It was interesting seeing the first steps. coming out of lockdown because people gravitated to what they knew. They gravitated to what they had done before, which was the sensible thing to do. We knew what worked. Let's try that again. But the result for a lot of organizations was a deficit year. There were widespread deficits across the arts.
There still are as people try to figure things out. Now, it has not been a uniform impact across the arts. [00:04:00] different organizations have been affected in different ways. There are many factors at play. the visual arts seem to have been affected less than the performing arts. different types of performing arts organizations, different locations, different sizes have been affected differently depending on, what they do, what their personal network is, who, what the circle of support is around the company.
one of the things that I've seen that, makes me think about how people make decisions. and. A lot of organizations have come out of COVID feeling that they have a revenue problem. It's been characterized as a revenue problem. Audiences aren't coming back. Donors aren't coming back.
We have a revenue problem. maybe that's the case, but you can always look at these things in more than one way. The other way of looking at it would be that you need to tailor your expenses to the revenues that are available. So I see a lot of that kind of, push and pull within organizations as they try to figure out what next, [00:05:00] right?
What next, how to plan for themselves, how to get past, the losses that they've been seeing.
Jane Needles: Yeah, this is certainly a very good way of putting it. The other thing too is that the regions have a different perspective in all of this.
I've heard a figure thrown at me a while ago and I can't remember from where, but that after COVID, there were about 45 percent of the arts organizations in the country that had to close down.
They just couldn't continue. What is your take on regions versus urban centers versus large organizations versus smaller ones, etc? How are they all beginning to cope now?
Heather Young: Boy, it's, Talking about statistics, that becomes very interesting. There have been a few high profile cases that are widely known across the sector because they attracted a lot of media attention. The closures of small community based organizations have not necessarily been widely [00:06:00] reported. The whole thing is complicated by the difficulty of getting accurate statistics.
the two main sources of data that we tend to turn to are T3010s, which are publicly available, that is, the charities returns of those organizations that are registered charities, and CADAC, the Canadian Arts Database, Bas d'Anais au Canada, which is the aggregate data of organizations that receive operating funding.
So it's important to recognize that both of those data sources are quite incomplete. Not every organization is a registered charity. I think it's probably true to say that the bulk of organizations that we think of as the arts community, in fact, are registered charities and therefore they're filing T3010 data.
But there's a whole echelon of community level grassroots organizations that do not have charitable status. So if they just slipped away quietly [00:07:00] and stopped producing, there would be no trace in the statistics that the sector keeps of their demise. Same thing with CADAC, it's an even smaller pool of organizations, the ones that actually receive operating funding.
A lot of organizations would receive Arts Council funding, but on a project basis, so they're not captured in CADAC. And then there's an entire echelon, again, of organizations that don't receive government funding at all. So it's very difficult to, arrive at hard and fast numbers of exactly what's been going on.
It's compounded by the fact that, indie artists and community organizations may come and go anyway, right? It depends on the people that are involved. people may not have come back after the pandemic that may still intend to come back, we hope. it's very difficult to arrive at actual figures of what's going on.
Jane Needles: And that's, it's so true because in the smaller organizations without charitable status, [00:08:00] they are one very strong element of community building and community social interaction, and that tends to be overlooked. I find a great deal in the work that I do, and, it would be an interesting challenge to find out how we can make the governments more aware, or the funders more aware, of this particular problem, because these are the social foundations of these smaller, rural, regional type communities.
Heather Young: Yeah, you're making a very good point, because, in terms of advocacy for the arts and advocacy for arts funding, the voices that tend to be advancing those causes come from the kind of core of the community that are fairly substantial organizations that are registered charities that do get funding.
So those voices tend to predominate, but you're absolutely right. A lot of what politicians seem to want is to know that Art exists throughout the country, specifically in their [00:09:00] home writing. So there is art across the country, and a lot of it at the local level would be community led volunteer organizations, and we don't necessarily have good insight into what's happening there.
There are often people also that lack the knowledge. expertise, right? They may not have anybody within their group that feels comfortable with numbers, with financial reporting, with documentation, with all of the things that actually go into preparing information for the sector. So we're probably missing a lot of information on that level.
Jane Needles: Yeah, and to compound that, many of these smaller communities, in the regions especially, are becoming part of the creative economy. because they are outside of the urban centers, but there are many people who migrate to these smaller communities because they're quiet, but they have something to give.
So it's, what is their entertainment outside of the office? So they have theater groups, and they have poetry readings, and they [00:10:00] have music, and bars and restaurants. So the creative economy is something that's very important to, to try and show how much this means. to the overall sector in terms of finances, for the arts that are needed, because that's how we're going to grow smaller communities.
let's turn to another direction to think in here, Heather. there's a new line of thinking that's starting to evolve. if you look at the books written by Alex Sarian, which has just come out, The Audacity of Relevance, it's fascinating here because he's talking about getting community involved and whatnot, and not by telling the community what they want.
but asking them what they want, it's reversing the trend. And as a result, the finances are going with that trend too, because [00:11:00] they're getting audiences coming from different areas. What is your thought on that?
Heather Young: it is, so important for organizations to have a sound financial footing. It's always a number of things that go together, right? If the community isn't behind you, you're going to fail. If your finances aren't solid, eventually you're going to run into serious trouble. So it seems to me that a lot of, what Alex Sarian was proposing was to go back to the community and to draw on that source and find what people want to see and try to find new ways of unifying the vision of the organization with the desires of the community to come up with a new model of, service. So arts in service to the community. the finances would have to follow along with that. There's not necessarily a particular financial model that would have to go along with that.
but every organization has to find its, financial [00:12:00] sweet spot. the, revenue base that allows it to spend what it needs to spend to survive.
Jane Needles: And then coupled with that, you have the realities of what the governments are facing, where all the funders are facing, and that all that their income or their monies, the envelopes that they have to spend, are cut. And so they have to do more with less, and so that it becomes a vicious circle. which brings me to Max Wyman's book, The Compassionate Imagination, which talks about the community, of the arts community, developing a cultural contract with the government funders.
What the arts mean to the community. And that's all tied in with the financial base too. it's a very interesting evolution. What kind of impact is this going to have? Alex's book has just come out. Max's has been out for about a year. But it's [00:13:00] catching that message as it's going into the larger community.
And couple that now with Michelle Chawla's recent letter to the arts community as a whole, of, we've got to stop begging for money, because we're all tired of that message. Change the message. What the arts do for the community and community building. And in order to do that, they need financial support. They've all, the arts for centuries have required the mécénat, the funders, the dukes and the duchesses and, the amadeuses of this world. so that's a reality that we all have to deal with. How do we keep getting that message across?
Heather Young: Yeah, it's an important message. from, thinking from a financial point of view, looping back to something that you said, it's true that during the pandemic at the height of the pandemic, money [00:14:00] was gushing out of government. Government put a lot of money back into the economy to try to stabilize things to try and keep things from getting worse and the arts were definitely huge beneficiaries of that.
So what I saw was, at the top end of the community, the very largest organizations tended to suffer a lot during COVID because there, a lot of the COVID subsidies were based on, having payroll, having employees on payroll. And at the very largest organizations, they had loads of employees on payroll, it's true, but their government funding is only a small portion of their total revenue base.
So when earned revenue and fundraising revenue went away, the subsidy that they were awarded based on the staffing that they had wasn't really sufficient to replace what they lost from earned revenue. At the bottom end of the community, the very smallest organizations, they tended to lose out a lot during COVID because they simply had nobody on payroll, [00:15:00] and so they were, unable to qualify for the wage subsidy and the rent subsidy, and that took a lot of players out of the game.
That's what caused a lot of small organizations to, either fold or go dormant. And in the middle of the community, What happened with those organizations was they had people on payroll. And if you looked at the complexion of their revenues, earned revenues didn't necessarily predominate. So when earned revenues and fundraised revenues went away, but the COVID subsidy continued, and we know that the arts councils maintained their subsidies throughout COVID, those organizations actually built up huge surpluses.
So a lot of organizations came out of the pandemic with a lot of money in the kitty. So when they. It came back from lockdown and we all started up again, going back to the tried and true was the first line of thinking. But what you're referring to, Jane, with Alex Sarian's books and Max Wyman's, is, a new model of thinking that says it's just not [00:16:00] necessarily going to work.
It's not necessarily going to work anymore. The thing that we're selling is not what people are buying. It's not what people want to buy right now. So there's no point flogging that horse and saying we have a revenue problem, we need to find more donors, we need to sell more tickets. It's getting at the programming model itself and trying to figure out what is it that our audiences are willing to support at the moment.
How can we be there for audiences? How can we actually participate? And trying to come up with a model through that. Now, I can't really comment on the programming side of it, that's not my expertise. But I do know that if you run out of money, that's it, you're done. If you, I think we've seen at least one, one widely publicized, incident of this, where an organization simply ran out of money and had to stop.
They didn't have anything in the kitty to keep going and people Simply left. The organization ceased operations. that's, the real danger. That is the danger that a lot of [00:17:00] organizations are facing. It's how long can we stay in business? What can we do? How can we try and find a new normal for ourselves?
how many different things can we try? And from a financial perspective, what that really comes back to is understanding what your financial statements are telling you. How much money do you have? What are your resources? What's sitting on your balance sheet? And what's the complexion of what's on your balance sheet?
You need to be able to review the resources that you have with a view to what's already tied up, what's restricted, what's already committed somehow, and what do I actually have left to go on with? At a very minimalistic level, organizations may have nothing left in reserve, in which case their ability to go on depends on what they're raising right now.
I'm raising money right now, I'm spending it right now, and that's what's keeping me going. In a healthier situation, an organization would have reserves to fall back on. So you're still making and spending [00:18:00] money every single year, But if you have losses here or there, they're less crucial because you've got something in reserve to fall back on to get you past that point.
So what we're seeing in the community is organizations, not all, but some, who are blowing through those reserves. They're expending their reserves on current year programming and they're going to hit the point where they just simply have nothing left. They're running on fumes and they'll be trying to keep themselves going based on whatever they can raise right now.
So that kind of situation flies in the face of what Alex Sarian is suggesting, where going out to the community, figuring out what people want, figuring out how to adapt, how to meet people's needs, that might take some time. And the amount of time that you have to make those experiments and try something new is a function of what kind of reserves you have, what kind of resources you have within the organization.
So understanding that becomes more critical than it ever was.
Jane Needles: And one of the [00:19:00] challenges there, too, Heather, is the fact that After COVID was the, regulations were lifted, people were expected to do more, to produce more, to present more, more, and the burnout rate was unbelievable. And especially at the, the direction générale, the, executive director level, who were expected to be able to pull rabbits out of hats and keep things going.
And in many cases, they just burned out and left the profession altogether. And there's not a lot of people to replace them, because there's a gap in the training. And, you teach at Humber, and you teach at University of Toronto, I taught at Bishops, etc. But there's a gap between my age group and the age group we're teaching of people who didn't have that access necessarily to be able to soundly financially manage the organizations they're put in charge of.
So [00:20:00] that's another challenge that we're faced with as well.
Heather Young: I think it's always been the case in arts management. Like I remember early in my career, looking around and going, where are all the older people? Where are the people retiring from this profession? And a lot of people do seem to leave in their middle age, right? They get to a point where they realize that they need to make money somewhere else.
But COVID has certainly exacerbated that. And the burnout rate truly has been a problem. through the roof. People are feeling a tremendous amount of pressure. I had described the situation of, those mid range organizations who actually came through COVID with large surpluses. some of them experienced pressure from their funders to say, spend that, money.
You shouldn't be hoarding money. True, fair enough, but the pressure to expend that before people really understood what the new environment was has disadvantaged organizations. Organizations that sort of stepped up and said, yes, we're going to expand our [00:21:00] activities. We're going to do what you ask. We're going to spend down our COVID surplus.
They've lost that edge. So if audiences didn't come back for those organizations immediately, the reserves that they had at the. end of the pandemic, are now gone.
Jane Needles: exactly. And that's, the biggest problem that we face now is they're gone. Now what? And so are those organizations going to be able to rebuild? The question remains in the air. But there's a lot of new organizations that are taking over, but it's really interesting, the whole concept of arts administration as a whole has, gone into a whole different level, a whole, it's had to, a whole different way of thinking. So that's a, reality check that we all have to face,
Heather Young: I think it's true that a lot of people wound up stepping up into executive director roles that had never foreseen that for themselves. People coming from the production side, for instance, [00:22:00] or people coming from the marketing side. They wound up being the person that was available to step into the executive director chair and they're not necessarily equipped.
Learning finance at a point when your organization is in crisis, it's a desperately difficult time to have to learn it. It's hard enough for people to learn a technical skill like accounting or finance. And then you add the pressures that organizations are facing right now where, the consequences can be dire.
If you don't figure it out, the organization could wind up in a terrible financial spot.
Jane Needles: as many of them are finding, because that's, as a subject I mentioned at the sort of beginning is, the There is many times that you have persons who, in the position of administration, management, that are embarrassed that they don't know. And so hence, your books are so valuable, because it tells you all these things that they need to know, but in [00:23:00] language that's much easier to understand.
It's user friendly, and it takes you through the processes. as I said, these really have to be on arts administration course, courses, reading lists as an absolute essential, thing that people have to be able to get, have access to.
Heather Young: Thank you so much for saying that, Jane. I think, people can do a lot for themselves just by trying, right? Like I've definitely seen it when I've been giving professional development seminars. people, don't want to confess how little they know. They are truly embarrassed, right?
So you see people who I know are very intelligent, insightful, at the top of their game in so many ways, but there's this huge hole where the finance piece should be and they're very cagey about letting on how uncomfortable they feel about making financial decisions. And so what's interesting about this all of a sudden, is that we have a global community of [00:24:00] folks who are involved with website development.
we have a lot of folks in the digital world, and we have a lot of folks in the tech community, but in terms of how we communicate with them, it's about using their financial statements, which is one of the most important things. And so not only have these folks been very active, in their decision making process.
They are as interested in using their financial statements and in making decisions, right about using their financial statements. impossible and people can get there by just trying. What you need to do is work with your bookkeeper, work with your accountant, read the reports. Even if the reports feel like gibberish, apply your basic common sense, keep reading them month after month.
A lot of learning happens by just persevering. So the secret when I try and sell to my classes is that a great deal of accounting and financial acumen can be built using the sort of thing that I learned as an English literature major back in the day when all of my essay assignments [00:25:00] started with the words compare and contrast.
If you want to learn how to read financial statements, that's what you have to be able to do. And most people that have come out of a liberal arts degree or humanities or social sciences background will have done that kind of essay in the past. Compare and contrast two different things. That's what you need to do.
Look at your budget against your accounting reports. What we planned, what's really happening. Compare the two of them, you can draw all sorts of conclusions. Look at this year's results against last year's results. Better, worse, it's easy to start making those value judgments. And if you just practice with that, you will actually improve over time.
Jane Needles: yeah. That's something I try and explain to my students. I, my own education was hands on because I was born into the theater. and learned by making mistakes and just figuring it out and getting my bookkeeper to show me how to make two and two really make four, not [00:26:00] five or four and a half, and exactly.
So the, advantage that the younger people have today is that there are people who can train them because we built the courses to be able to train them. And finance is one of the major courses that really need to be in the mix. Heather.
I just want to say what a wonderful opportunity it was to work with you and speak with you and share your insights and your knowledge in this field. You are so highly respected and I really look forward to another edition of Finance for the Arts of Canada.
Heather Young: Thank you so much, Jane. It's a pleasure being here with you.
Jane Needles: And that wraps up this edition of At the Mic Omiko, a podcast of Arts Consultants Canada, with a very deep thank you to Heather for joining me and sharing her ideas and thoughts on the future of financial directions in our milieu. For more information on ACCA and our members, visit [00:27:00] acca. ca. ca. please check us out online at artsconsultants ca. To send feedback or questions on anything you hear in this podcast series, please email us at podcast at artsconsultants. ca and you can check out our show notes on this for links mentioned during the program. Thank you so much for joining us. Remember to subscribe to this podcast on Arts Consultants Canada YouTube's channel, as well as Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
Et notez bien que quelques épisodes sont en français. Until next time, thanks for listening. À la prochaine!
