Joined: Mon Mar 04, 2013 6:36 pm
Posts: 3490
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My goodness, it looks like a case of the voodoo accounting that they're using for East of Colfax's P-formn' Artz Center pro formas. 
Just weeks after Dan Berman was appointed interim CEO of the Carolina Theatre, he notified Durham’s city manager the historic venue was days away from shutting down. “Without an immediate injection of cash, the theater will have no choice but to shutter its doors next week,” Berman said in a Feb. 29 memo to City Manager Tom Bonfield. That never happened because the city and private investors stepped up to help the Carolina Theatre of Durham, the nonprofit that manages the historic building, address a cash-flow shortage tied to a $1.2 million debt. In March, the City Council met in a closed session and advised staff to move forward with giving the nonprofit up to $500,000, Bonfield said.
The money is on top of $100,000 the city had already provided to carry the theater through February and the $654,000 a year it pays the nonprofit to run the complex on Morgan Street. The money will help the Carolina Theatre address a surprise debt that board chairman Scott Harmon and the former CEO Bob Nocek blamed on faulty accounting.
The agreement, Bonfield said, calls for the city to give the money as a dollar for dollar match to money raised from other donors. So far the nonprofit has received $290,000 in city funding, which includes the $100,000 in February. The money came from the city’s fund balance. In exchange, the nonprofit must provide weekly information about its cash flow, income, expenses and each show’s financial performance. Other conditions include letting the city appoint three members of the nonprofit’s board. The nonprofit also has to obtain a theater consultant to advise the board rather than just relying on the executive director, Bonfield said. Bonfield is moving forward with the verbal agreement while city staff are finalizing an amendment to the management agreement that will have to be approved by the City Council in a public meeting.
As frustrated as city officials are about a situation that “should have never of happened,” the city still owns the theater, Bonfield said. “The continuation of the Carolina Theatre is really, really important,” Bonfield said. “That is at the forefront of all of this.” If the doors are locked, then downtown loses a public asset. Closing would also hurt ticket holders and Durham’s reputation. “There really wasn’t any good reason, other than to just be mad, to not be a partner in figuring this out,” Bonfield said.
By reaching out to major donors, the nonprofit has raised $300,000 in cash with another $100,000 in pledges, Berman said. It has until June 2017 to raise its share of the money, but Bonfield said city officials will be monitoring the weekly reports and will only disperse money if needed.
In December, Harmon and Nocek said the theater had run up a significant debt instead of the surpluses it had previously announced. In April 2015, it appeared, after years of losing money, that the nonprofit had a surplus of $37,639, when in reality it had a deficit of $627,746. Harmon and Nocek said they learned of the errors in May 2015 when the state put a levy on the organization’s bank account seeking unpaid sales taxes on ticket sales. The two linked the debt to faulty accounting and spending decisions based on financial figures reviewed by an outside auditing firm that didn’t reflect that organization’s actual position. Director of Finance Sam Spatafore has declined to comment. He was fired in May 2015 after management learned he had set up a payment plan with the N.C. Department of Revenue that he didn’t ultimately follow, said Aaron Bare, the theater’s former chief operating officer.
Nocek and Bare resigned in January. Nocek and Harmon have said they would have made many different decisions if they’d had accurate financial reports. Nocek said in an email that he is limited in what he may say publicly. Under Nocek, the theater had shifted the focus from renting the facility to the community to ramping up live shows, from about 60 to 100 per year. But the business model and 1,000-seat concert hall made it hard to make much money on those shows. A previous consultant report had expressed concern about the strategy.
The theater reported a record $5 million in revenue last fiscal year, but it was paying current expenses with future show revenue, digging itself deeper into the hole, according to Berman’s memo. Berman, a former Full Frame Documentary Film Festival board chair, helped the festival through financial challenges about 10 years ago. He’s volunteering his time.
Even if the theater’s initial budget figures were correct, the previous administration’s spending was excessive, he said. “They were spending on a champagne budget when we are a craft beer organization,” he said.
Bare said it easy to be critical in hindsight, but they were working to support and promote shows on what they thought was a budget with a surplus. Berman put an end to booking additional events unless the director of programming provided a high level of confidence the event would be profitable. The move left the Carolina without cash to cover expenses, such as payroll.
“As as I understood the scope of the problem, I reached out to the city immediately because I knew without city involvement there was no plan that could work,” Berman said. Berman’s plan for the theater includes doubling donations and focusing on the nonprofit aspect of the theater. It also includes fewer in-house produced events and an increased emphasis on rentals, which will reduce the nonprofit’s risk.
The changes allow the organization to focus on its role in the community, which includes providing the educational and arts programming. Berman said it’s more appropriate for the theater to lose money on programs such as the Dance Theatre of Harlem, which had an afternoon show for school children who paid $6 for tickets, than taking a risk on a national commercial act. “We are not here, in my opinion, to lose $15,000 on LeeAnn Rimes,” he said.Read more here: http://www.newsobserver.com/news/local/ ... rylink=cpy
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Although the organizers are trolling for a good number of corporate sponsors to pick up the tab. There are quite a bit more "techie" operations near Durham/RTP that could be hit on for some cash. Here's recent news on the move.
I gotta say #3 Kalamazoo surprised me. 
