Basic Analysis of the Louisiana Philharmonic Orchestra
Joi Chadwick
Case Western Reserve University
SASS 425: Nonprofit Financial Management
Joanne Montagner-Hull
February 8, 2022
Go to Part 1-3, Part 5, Part 6, Part 7, Presentation
Introduction of Louisiana Philharmonic Orchestra
The Louisiana Philharmonic Orchestra (LPO) is located in New Orleans, Louisiana. As the only full-time professional orchestra in Louisiana and “the only full-time collaboratively governed and operated orchestra in the United States” it presents concerts “in five municipalities across the Greater New Orleans area” as well as “education and community engagement programming serving a 12-parish region” (Louisiana Philharmonic Orchestra, n.d.-a, par 4-5). The orchestra’s stated mission is “to transform people and communities through music” (Louisiana Philharmonic Orchestra, 2020, p. 1).
The orchestra presents more than 120 performances during each 36-week season and “collaborates with and provides orchestral support for other cultural and performing arts organizations, including New Orleans Opera Association, New Orleans Vocal Arts Chorale, New Orleans Ballet Association and Delta Festival Ballet” (Louisiana Philharmonic Orchestra, n.d.-a, par. 2) LPO’s repertoire includes chamber music, classical, and pops selections that “[balance] boundary-pushing, exploratory repertoire with established masterworks” (par. 5). The orchestra engages in concert performances and educational programs for all ages in the 12-parish region (as well as virtual subscribers in any location) during the season but does not tour outside the region or sell recordings or merchandise. According to the Statement of Program Service Accomplishments on the most recently available 990:
The Louisiana Philharmonic Orchestra is a full-time professional orchestra presenting 100 performances a year and our programming fills a void in education and community services with regard to orchestral music exposure and hands-on interaction with or beside orchestral musicians. We pride ourselves on developing programs that are responsive to identified community needs for life-affirming arts and arts-integrated programming at little or no cost. LPO programming also supports youth development both in and through the arts, an approach to learning correlated with cognitive, emotional, and social growth and measurable student achievement (Louisiana Philharmonic Orchestra, 2020, p. 2).
Following the closure of its predecessor the New Orleans Symphony Orchestra in 1991, musicians and donors in the area formed the Louisiana Philharmonic Orchestra in September of that year with the “sole initial goal […] to maintain live, professional symphonic music in New Orleans” (Louisiana Philharmonic Orchestra, n.d.-a, par 7). To facilitate and protect artistic freedom and transparency, they instituted an organizational model in which the musicians act as governors and the only corporate members of the organization. This ensures musicians are not ignored in administrative decision-making and that they are involved in defining bylaws and electing board members. The 67-musician orchestra’s goals for the future include leveraging this unique orchestra governance structure “to be adaptive and responsive to community needs” so it might “anchor this community and help to build it” (par. 6).
Basic Financial Analysis
The LPO’s fiscal year is from July 1 through June 30. Concert seasons generally open in the fall sometime between September and November and end in late Spring around mid-May. Educational programs are also presented within the timeframe of the concert season. It makes intuitive sense for the organization’s fiscal year to run through June because this allows a little over a month for the season to end, the organization to collect and record revenues from ticket sales and educational programs, and management to close out the books. It also allows a period of two or more months in the new fiscal year to plan and gather revenues for the new season.
For the fiscal year ending June 30, 2017, the LPO filed their 990 on January 29, 2018. For the fiscal year ending June 30, 2018, the LPO filed their 990 on May 14, 2019. For the fiscal year ending June 30, 2019, the LPO filed their 990 on July 14, 2020. The elapsed time frames between year-end and filing for these years were seven months, 10.5 months, and 12.5 months, respectively. Since their fiscal year ends June 30, LPO’s due date for filing would be November 15 of the calendar year with an extended deadline of May 15 the following calendar year if they filed form 8868. It is unclear if they filed form 8868, but if they had done so each of the three years discussed, they would have met the extended deadline each year except fiscal year 2019.
Neither the forms 990 nor the orchestra’s website lists finance or budgeting administrative staff, so this may be an area where more resources are needed. According to the audited financial statements during fiscal year 2020 (June 2019 to July 2020), LPO underwent a change in leadership from Chief Executive Officer James Boyd whose tenure ended December 31, 2019, to Chief Executive Officer Mimi Kruger whose tenure began January 1, 2020. The organization also changed preparers from Aaron Ready at the Hymel and Ready accounting firm to John S. Wiles at the LaPorte accounting firm. While there are no clear answers in the tax filings or audited financial statements, a potential lack of internal staff to support financial management and changes in key financial management roles may have contributed to the pattern of later filings – particularly for the fiscal year 2019 filing that missed the extended deadline during a leadership transition.
Financial net income for LPO trended downward from a positive net of $101,133 in 2017 to -$60,081 in 2018 and -$211,772 in 2019. The size of net income compared to expenses declined from 1.82% in 2017 to -0.97% in 2018 then to -3.7% in 2019 but was considered in the range for “break even” for each of these years. This indicates LPO faced some challenges and operated outside its means for fiscal years 2018 and 2019 and either lacked an adequate plan to adjust to challenges/new opportunities in these years or planned for a strategic deficit. While LPO broke even these years, should net income continue to trend downward, it could threaten the sustainability of the orchestra in the future.
The Louisiana Philharmonic Orchestra’s cash and equivalents as a percentage of its annual income also decreased from an already small percentage of 1.61% in 2017 to 0.42% in 2018 to 0.04% in 2019. This means the orchestra had less than enough cash on hand to cover one month of expenses (8.3%), and in fact lacked a sufficient cash balance to cover half a month. Annual expenses were between $5.5 million and slightly over $6 million each year which calculates to approximately $460,000-$520,000 in monthly expenses. However, cash and equivalents were only $89,551 in 2017 and decreased each year to just $2,305 in 2019. This is an inadequate cushion for the organizations which, like the downward trend in net income, could threaten the orchestra’s sustainability. Contributing factors to the decrease in cash may have been a cumulative effect of an increase in “Grants, pledges, and other receivables” income category (from $1.7 million to $2.1 million) and fluctuation in “other” income (which jumped from over $650,000 to $1.1 million then dropped to about $44,000) coupled with a rise in personnel costs from $3.6 million to $4.4 million. This might have led the orchestra to draw from its modest reserves to cover its operating expenses as cash flow in from certain streams wavered and the organization waited to receive promised income.
Overall, the Louisiana Philharmonic Orchestra’s financial condition as of fiscal year 2019 is somewhat poor due to a negative net income and lack of liquidity. Even when the orchestra achieved a positive net income at the end of fiscal year 2017, it only had enough cash on hand to cover five to six days of operating expenses. As net income decreased, this figure dropped to 1.5 days then less than one day at the end of the 2019 year. At that rate, the organization could cease to exist due to lack of operating funds. The positive news is the organization is within breakeven margins for net income compared to expenses and has consistent public support and new financial leadership may be able to turn the tide for the Louisiana Philharmonic Orchestra. If the orchestra develops better financial plans to increase income and/or decrease expenses, monitor cash flow, and reverse its current financial heading, it can shore up its ability to pay debts, decrease its financial leverage, and continue to provide its programs.
References
LaPorte. (2020). The Louisiana Philharmonic Orchestra Audits of Financial Statements June 30, 2020 and 2019. Retrieved from https://app.lla.state.la.us/PublicReports.nsf/0/A01C8636F8FD9F2486258685006EC461/$FILE/00022C31.pdf
Louisiana Philharmonic Orchestra. (n.d.-a) About the LPO. Retrieved from https://lpomusic.com/about-section/about-the-lpo/
Louisiana Philharmonic Orchestra. (n.d.-b) About – Contact the LPO. Retrieved from https://lpomusic.com/about-section/contact/
Louisiana Philharmonic Orchestra. (2018). IRS Form 990. Retrieved from https://pdf.guidestar.org/PDF_Images/2017/721/189/2017-721189023-0ee8aeb9-9.pdf
Louisiana Philharmonic Orchestra. (2019). IRS Form 990. Retrieved from https://pdf.guidestar.org/PDF_Images/2019/721/189/2019-721189023-202021969349304662-9.pdf
Louisiana Philharmonic Orchestra. (2020). IRS Form 990. Retrieved from https://pdf.guidestar.org/PDF_Images/2019/721/189/2019-721189023-202021969349304662-9.pdf
joi chadwick 