April 28, 2010; Source: Wall Street Journal | It’s hard to say how often it happens because few organizations are willing to talk about it when it does, but the Metropolitan Opera of New York City claims it’s not the only institution that’s had to tap restricted funds in its endowment to cover expenses. According to the Wall Street Journal, state papers show that the opera company “took the unusual step of unleashing $22 million from its restricted endowment in early 2009 by asking donors to lift regulations on how their contributions could be spent.”
The newspaper said about one-third of the money was spent on operating expenses for the current season. While Met general manager Peter Gelb maintains getting the okay from donors to remove restrictions on their gifts is really not that “unusual,” others say it rarely happens. Frank Kurre, national managing partner of Grant Thornton LLP, said asking donors to lift restrictions on gifts is “highly unusual” but added that a couple of the firm’s clients “have taken that route in the past.”
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One reason cited for not talking about it when organizations dip into their endowments is because, as the Journal notes, they “are reluctant to broadcast financial troubles.” In fiscal 2009, which ended on July 31, The Met’s $282 million in expenses exceeded its $133 million earned revenue.
“The Met was basically trying to look at a short-term strategy that would deal with this crisis mode that we were entering.” Gelb said. “We wanted to make sure that we had funds available in the event we needed them. And so a prudent way to do that, we thought, was to ask living donors who were sympathetic to the situation to unrestrict the gifts that they had made into the restricted endowment. Because the biggest problem the Met faces is cash flow.”—Bruce Trachtenberg