What Is the State of Your Orchestra’s Finances?

August 1, 2024

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by Jane Owen, AFM Symphonic Services Division Negotiator

Keeping track of your orchestra’s finances should be an ongoing process, and not something to be considered solely in the months before contract negotiations. Many committee members are tracking finances already. For those who are new to an orchestra committee (OC), or have never looked at an orchestra’s financial records, here are a few suggestions to get started.

First, some basic terms:

IRS Form 990­—An annual tax form that nonprofit organizations with annual revenue of $500,000 or more must file by the 15th day of the 5th month after the end of the organization’s fiscal year.

Audited financial statement—The orchestra’s revenues and expenses, plus its endowment funds, audited by an independent accounting firm. The statement does not always agree with the Form 990 because the categories may be different or they are done at a different time, but the numbers should be in the same ballpark.

Endowment, restricted and unrestricted funds—Basically, a large savings account made up of donations and bequests from orchestra patrons with rules to restrict withdrawals. Funds can either be designated for a specific purpose (restricted) or for general operations (unrestricted). A small percentage (typically 4-5%) of the unrestricted funds can be drawn for general operating expenses each season.

Budgets—Financial plans created by orchestra management to plan for and keep track of revenue and expenses during a season. The state of the budget is reported to the board of directors in monthly or quarterly financial statements, which are a good way to track the current financial state of an orchestra.

Revenue—All money brought in during the season: ticket sales, donations, grants, and earned income. Deferred revenue refers primarily to revenue from ticket subscription sales sold in one season, which are deferred for use in the next.

Expenses—Production costs for concerts: musician salaries and benefits; music director, conductor, guest artist salaries; and payments for hall rental, stage crew, and more. Also includes administrative, advertising, and fundraising expenses.

Deficit—When expenses are greater than revenue. Accumulated deficits are deficits from multiple seasons.

The OC and/or local can ask for financial information from prior seasons and the most current season. Many orchestras provide financial information automatically every year to the musicians or will provide it willingly to the OC or local upon request. According to federal labor law, however, they are not obligated to provide detailed, nonpublic financial information, unless they officially state that they cannot afford to give musicians a raise in wages or benefits.

There are ways to work around this. Previous committees or the local may have kept historical financial records. If you have a musician as a representative to the board of directors, and they have received the periodic budgetary reports, be sure they are sharing that information with the OC, and that those reports are kept in a shared file. Check websites like GuideStar, ProPublica, and some state agencies that track the financials of nonprofit organizations. They will have Form 990s, which will be a year or two behind the current season but are still useful. Orchestras often file their audited financial reports with these organizations as well.

As AFM members, you have access to the AFM website and the wage charts of Regional Orchestra Players Association (ROPA), Organization of Canadian Symphonic Musicians (OCSM/OMOSC), and International Conference of Symphony and Opera Musicians (ICSOM), where you can find a wide range of financial information from member orchestras. The AFM also offers professional financial analysis and pays half the cost, with the local paying the other half. The local must request this service with a form on the AFM website at https://members.afm.org/ssd/fin-analysis.

The best means for keeping track of your orchestra’s financial situation may be to have musicians as nonvoting representatives to the board of directors. They should be nonvoting because voting members may have fiduciary responsibilities, requiring them to keep financial information confidential. Some boards have a musician representative on the financial committee of the organization.

Monitor budgets reported at board meetings. If there are significant deficits and/or lines of credit being used, find out how they came about. Are fundraising efforts actually raising funds? Look at the audited reports and see how much money was spent on fundraising, versus how much money was generated.

What is the percentage spent on musician salaries and benefits, compared to the total expenses of the organization? Has that percentage changed over the years, and why? How does it compare with orchestras of a similar budget size? How are investments of the endowment handled? What is the annual percentage draw from the endowment? Answers to all these questions will help you judge the health and direction of your orchestra’s financial stability now, and ability to grow later.

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