IBMA Addresses Finances and Clarifies Net Fan Fest Proceeds Have Always Been Shared 50:50 with the Bluegrass Trust Fund

By: Stan Zdonik Recently an article written by David Morris appeared in Bluegrass Today addressing IBMA's financial circumstances ("IBMA at the Crossroads" February 13, 2012). IBMA appreciates the interest shown by Bluegrass Today and by Mr. Morris and welcomes further dialogue on this important topic. In follow-up to Morris's article IBMA would like to offer the following additional information, and in one important respect, a clarifying correction. IBMA has a history of conservative financial management that has allowed it to accumulate substantial reserves over the course of its history, with reserves in 2006 of more than $500,000. This put IBMA in the enviable position of having reserves of approximately 50% of its annual budget, where reserves of 10% are typically considered quite good. Many things have happened since 2006 to cause a reduction in these reserves. As of 2010 the reserves were approximately $300,000. Key factors causing IBMA to spend reserves to balance its budget included the dramatic economic downturn in 2008, declining attendance at World of Bluegrass, an up and down trend in membership (revenue from membership dues was $170,461 in 2006 and $171,409 in 2010), and other factors. IBMA still has reserves in excess of $250,000, or more than 25%, of the approximately $900,000 budget for 2010; we’re not in any immediate peril. However, it is true that changes need to be made. IBMA cannot continue to live off its reserves indefinitely, but must use those reserves prudently while making necessary changes to balance the budget on an ongoing basis. The IBMA board and staff are fully aware of this situation and are 100% committed to making the necessary changes. Progress in that regard is being made. Some important changes have already been made, and further changes are either under study or underway. •Significant cost cuttings have been carefully put in place over the past few years without impairing the delivery of core services and programs. Since 2006 total expenses have been cut from $928,876 in 2006 to $880,040 in 2010, a cut of $48,836. Preliminary figures show a further reduction of expenses for 2011 to approximately $789,000, a further cut of a little more than $90,000, reflecting a total reduction in expenses since 2006 of more than $139,000 or about 15%. •Surveys of the membership and of attendees at World of Bluegrass were undertaken and with this feedback in hand changes were made to World of Bluegrass 2011 and more changes are expected for 2012, all with an eye towards improving the event and its bottom line. •A program of revenue generating webinars has recently been established. •IBMA has transitioned from a paper to an electronic newsletter with substantial cost savings. •An aggressive lifetime membership campaign along with other discount membership programs has been pursued to bolster membership. •Staff expenses have been cut back. •IBMA renegotiated its contract with the Renaissance Hotel and the Convention Center to reduce food and beverage expenses from $131,000 to $53,000 for a savings of $78,000. •IBMA has embarked on a first-ever full independent audit of IBMA's finances and of those of the Trust Fund, along with an audit of the financial relations between IBMA and the Foundation for Bluegrass Music. These are some examples of changes already made, with even bigger changes in the works. IBMA is about to launch a beta version of its Bluegrass Nation online project. Bluegrass Nation will help position IBMA as a major on-line presence in the modern cyber world, will serve as a location for all things bluegrass, and is expected to increase IBMA membership and revenues even though participation in Bluegrass Nation will be free. IBMA is also about to hire a new Executive Director. While IBMA will miss its longtime Executive Director, Dan Hays, who contributed much to IBMA during his 21 years at the helm, Dan's departure is also an opportunity to bring in new leadership that can help guide IBMA into the future. Likewise, 2012 is the last year of IBMA's contractual commitment to keeping World of Bluegrass in Nashville. A very talented site selection committee is hard at work evaluating proposals both to stay in Nashville and also to move to other suitable locations if it is determined that a move out of Nashville would be better for IBMA, for the membership, and for IBMA's bottom line. The input of the membership has been actively sought through surveys and other strategies and the input of the membership remains key. IBMA Members and non-members interested in IBMA's future can take heart that IBMA's board is committed to improving IBMA's ongoing finances as a priority in the hiring of a new executive director and in making the decision on a site for World of Bluegrass post 2012, just as it will be the driving criterion in all of IBMA's decision-making until we are again running in the black. IBMA and its board and staff are grateful to the many talented members and non-members who have contributed their time and talent to IBMA by serving on committees and in a myriad of other ways. IBMA recognizes that its members and supporters are its greatest asset. It is hoped that others will agree there is a new spirit of transparency and openness at the leadership level of IBMA. No one likes an economic downturn like the one IBMA is experiencing, but in some ways the downturn may be just the wakeup call that the organization needs to really focus and prepare for a long-term sustainable future by making careful and well thought out changes . In this respect we are grateful to Bluegrass Today and to Mr. Morris for taking the time to study IBMA finances and to write about them. We look forward to further such discussions, to sharing the audit results when they are available, and to continuing a dialogue with our members and the public about IBMA finances, the changes being considered, and about the future of our organization. There is one issue raised in the Bluegrass Today article that needs a clarifying correction. In his article Morris reports that based upon his review of IBMA finances as reported to the IRS, prior to 2008 IBMA donated all of the net revenues from Fan Fest to the Bluegrass Trust Fund, but that this practice changed in 2008 when IBMA started keeping 1/2 of the net proceeds. This conclusion is incorrect. A detailed review of the records reveals that IBMA has always shared net Fan Fest proceeds with the Trust Fund 50:50 and that what occurred in 2008 was simply a change in the reporting methodology. Prior to 2008 the record shows that IBMA's accountants treated the donation of 50% of Fan Fest revenues to the Trust Fund as an IBMA/Fan Fest "expense.” Under this method of reporting, 50% of the profits of Fan Fest went to the Trust Fund as an "expense" and the other 50% was retained by IBMA as the "net proceeds" after expenses. Starting in 2008 IBMA reported net proceeds from Fan Fest without deducting the 50% contribution to the Trust Fund as an "expense,” instead reporting that 50% contribution to the Trust Fund as a "grant" from net proceeds. The important point remains, however, that under both reporting methodologies, and both pre- and post- 2008, the split of revenues has always been 50:50. This conclusion is supported by a review of the annual financial reports made public each year by IBMA in its newsletter International Bluegrass, by a review of IBMA's internal financial records, by review of IBMA's formal financial filings with the IRS (form 990), by the memories of long term IBMA and Trust Fund staff and board members, and by the financial records of the Trust Fund. IBMA is and always will be grateful to all the great bluegrass artists who donate their services free of charge to perform at Fan Fest with the understanding that Fan Fest revenues will be shared equally between IBMA and the Bluegrass Trust Fund to support their respective non-profit missions. IBMA has not changed this program since its inception and continues to stand 100% behind it. To give an idea of the importance of this program, the donation of 50% of Fan Fest revenues to the Trust Fund has contributed more than $330,000 in donations to the Trust Fund since 2000. The Trust Fund is a separate non-profit corporation from IBMA which manages these funds and makes grants under its bylaws to musicians and others in the bluegrass community in times of hardship and need. This program is one of the most important activities supported by IBMA.