For Back Stage. Here’s the piece:
Sometimes what appears at first to be an isolated incident can turn out to have national implications. For example, earlier this month the New York state inspector general published a 127-page report alleging that the artistic director of the New York State Theatre Institute, a 36-year-old not-for-profit children’s theater located in Troy, N.Y., committed such misdoings as nepotism and personal enrichment. NYSTI, it so happens, is a huge recipient of arts funding-more than $3 million a year. New York State Attorney General Andrew Cuomo may or may not pursue civil or criminal charges against Patricia Snyder, the artistic director in question, but with times tough and arts funding tight, it’s no surprise that New York Gov. David Paterson aims to zero out NYSTI funding next year. Approximately 33 full-time jobs and the livelihood of 100 part-time teachers, artists and technicians are at stake.
So what, you say? Think of it this way: Hundreds of not-for-profit theaters across the nation employ thousands-actors, writers, and directors; marketing, publicity, and administrative staff; technical staffs, artists, and crews-each year. As not-for-profits, these groups don’t pay federal income tax, and they offer tax deductions to contributors, and can receive local, state, and federal funding along with ticket income, individual donations, grants from foundations, and corporate philanthropy. To remain eligible for public funding, not-for-profits, just like for-profits, must follow certain guidelines under a law called the Sarbanes Oxley Act, in which the finances of a company are certified to be true, legal, and accurate. Compliance can be costly, but failure to comply, as the possible case of NYSTI shows, can be even more so, with many jobs at stake.
And the bigger a not-for-profit is, the more costly compliance can be. And each dollar spent on compliance is one not being used for hiring actors or other artists. With so many jobs in the balance, the question is, how much scrutiny are not-for-profit theaters under? Are fewer people hired because theaters have to comply with the law? How can not-for-profits avoid the alleged path of NYSTI and keep artists assured of employment?
No one interviewed for this article commented directly on the allegations against Snyder. Indeed, it’s possible Cuomo may take no action if, as recommended by the inspector general’s report, the NYSTI board takes “appropriate action.” Still, it may be some time before we learn the fate of all those jobs. (NYSTI currently mounts six or seven productions a year.)
Audits and Plaudits
According to Virginia Louloudes, executive director of the Alliance of Resident Theatres/New York, the bottom line is fairly easy: Not-for-profit theaters should keep their noses clean. “We’re the most overregulated industry-so I see [NYSTI] as an idiosyncratic situation,” she said. “But anytime an organization has a large source of revenue from one place-like, in this case, New York state-they’re going to be scrutinized.”
As an arts-service organization, ART/NY represents the interests of hundreds of not-for-profit theaters throughout New York City, from large organizations with multimillion-dollar budgets to more modest-sized groups whose coffers are barer. All member companies are offered workshops on proper ways to comply with various laws that govern not-for-profits and should “back up anything that could be a red flag.”
Generally, she added, the money theaters spend on legal compliance doesn’t result in fewer actors or other artists being hired. On the other hand, it’s best not to skirt the law; too many jobs and livelihoods could be at risk.
Asked about one of the allegations against NYSTI-that the organization maintained an apartment in New York City used for personal reasons by Snyder and members of her family-Louloudes took a pass on issuing judgment. But she did note that regional theaters invest in real estate all the time, and actors are one of the reasons. “Owning an apartment to house actors, guest artists, is a lot cheaper than putting them in hotels,” she said. “It makes fiscal sense. It’s more prudent to own something. There is a way to make a case that real estate is a wise investment. But you have to know how to make that case.”
Ken Novice, managing director of the Geffen Playhouse in Los Angeles, agrees. “When I taught theater management at Cal State Long Beach,” he said, “I told my students that board and executive staff checks and balances must exist within LORT theaters and that they should be regularly reviewed.” He added, “They are an integral part of how these organizations function and must provide excellent financial oversight and controls.” When a not-for-profit theater is in compliance with the law, its integrity will remain intact. And with it, the funding for jobs, including jobs for actors.
Brick and Mortar
Robert Honeywell, co-founder and co-artistic director of the Brick Theatre, a cutting-edge production and presenting venue in Williamsburg, Brooklyn-and a bankruptcy attorney by day-says rooting out waste and any appearance of fraud is important, whatever the costs.
“I don’t have a sense of how much scrutiny larger companies are currently under, by either the states or the IRS,” Honeywell said. “But I definitely see where the potential pitfalls are and where any theater, large or small, should make sure to stay away from the line.” Honeywell and his business partner, Michael Gardner, “try to run the Brick on the assumption that we could come under scrutiny for anything we do, either now or in the future,” he said. “Maybe we’re just neurotic…but we try to act like a big, heavily regulated company even though we’re one of the little guys.”
Honeywell also offered advice for theaters looking to avoid the path NYSTI is accused of charting. “A few cardinal rules seem like good guideposts on how to stay away from trouble,” he says. “One is to make sure that you treat all insiders-i.e., your directors, officers, and administrative and artistic staff-just like you would anyone else when it comes to money matters. Make sure everything is arm’s length, market rate, with a clear policy on what your compensation rates are and with outsiders treated the same as insiders. Another basic rule is disclose, disclose, disclose-transparent policies are the key, both to those who deal with you from the outside and to those who work with you on the inside (i.e., your officers, staff, and board).
“It’s when you act like you’re hiding something or treating insiders better than others that you’re asking for trouble,” he concluded. “I would add that sticking by the rules isn’t really that burdensome. There is extra paperwork, especially if you’re at the level of getting audited every year, as we are. But we’ve noticed that running things thoroughly, transparently, and fairly tends to make people want to work with you. Tell artists exactly what you pay everyone, show them what you’re doing, and, most importantly, pay them on time!”