Being well-endowed isn’t necessarily a good thing, argues Liz Hill
A DCMS press release headline saying ‘Thirty four organisations across England set to get a £162m funding boost’ is certainly one to get pulses racing in the arts sector, but read the small print (p1) and the gloss immediately starts to fade. The Culture Secretary may think this scheme will set grant winners on the road to long-term financial stability, but these organisations must be acutely aware that it’s an uphill path they’re taking, with no guarantee of a pot of gold at the end of it. It will be interesting to see what proportion of the £56m fund is ultimately claimed by the 34 successful Catalyst applicants (and what happens to any unclaimed funds). A match-funding scheme of this scale places a heavy burden on development departments, not least because only a small fraction of the cash they need to raise will be available in the short term to spend on arts projects. The money will remain in the endowment fund for at least 25 years during which time someone must attempt to generate more cash by investing it. If they’re successful, that’s the money that can be spent. As Kara Larson points out (p1), in times of low interest rates, the chances are slim of making a decent return on the investment without taking significant risks to bolster returns. More worrying still is the permanent ringfence around the funds. Rick Moyers’ blog raises a key issue: “Nonprofits need operating reserves that can be used to weather tough times and unexpected financial setbacks. They need working capital that can be used to build organisational infrastructure and take advantage of unanticipated opportunities, such as expansion or merger. An endowment doesn’t help with any of these things.”
It’s all very well Jeremy Hunt thinking of 25-year timescales and looking enviously at The Met, but having £millions tied up in a long-term fund is cold comfort when the baliff is knocking on the door for the rent. Endowments may bring benefits to those who are already financially secure: those who aren’t may do better looking elsewhere.
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