VFH finds ways to thrive in recession

About this series

The recession of the past several years has taken a toll on nonprofits in the community. The impact of the downturn — and how local institutions have responded — have varied widely, though.

Sunday: The recession pounds the Paramount but forces the nonprofit to reexamine its mission.

Today: The Virginia Foundation for the Humanities not only survives these tough times, but thrives in them, thanks to a diversified approach to funding.

Tuesday: How has Monticello, the area’s crown jewel of culture, weathered the economic storm?

If a diverse stock portfolio can hedge an investor’s income, diverse funding sources can do the same for nonprofit agencies supporting the arts and humanities.

The Albemarle County-based Virginia Foundation for the Humanities weathered plummeting investments during the Great Recession of 2008 and 2009 thanks to a variety of private donors, foundation gifts and government grants that support its multitude of programs, from the Virginia Festival of the Book to the Virginia Folklife Program, officials said.

The income sources, including increased corporate support, helped the foundation maintain a positive income margin and even increase its monetary grants to local artists.

That doesn’t mean leadership wasn’t worried, however.

“We were wary. We’re still wary,” said Robert C. Vaughan III, president of the VFH. “We took a big loss in that fiscal year [2008-2009] and ended with about a million dollars less than the year before. We had to take steps to increase donations and asked people who supported the foundation to advocate for us.”

Vaughan said the nonprofit survived and is thriving because of a mix of funding from government agencies, corporations, private individuals and charitable trusts and foundations.

“’Diversity’ is maybe the key word,” he said. “We’re trying to spread the income over several different organizations.”

According to the Associated Press, the recession sunk such institutions as the Las Vegas Art Museum, which closed after 59 years, and the Baltimore opera after 58 years. It also pushed Charlottesville’s restored Paramount Theater into red ink.

The foundation has a different purpose, however. It funnels money from corporations, foundations and government into the hands of individuals and other programs. In 2010-2011, the foundation provided for Randolph College’s ancient-drama performance program, The Museum of the Confederacy teachers’ institute, the Eastern Shore of Virginia Barrier Islands Center and the Pamunkey Indian tribe.

Still, the recession rocked the foundation’s boat. According to tax records filed with the IRS, the foundation saw publicly traded investments plummet in value during the depths of the recession from $2.17 million to $1.6 million — a loss of income on investments of $422,000, the tax forms state. Government grants and other donations only increased by $40,000 during the year.

The VFH ended the 2007-2008 fiscal year, which began July 1 and ended June 30, with fund balance of $3.1 million over expenses. The 2008-2009 fiscal year, which included much of the recession’s impact, saw that balance drop to $2.18 million over expenses.

“That was the hardest year and we’ve been rebuilding since then,” Vaughan said. “There was so much talk and volatility at the local and national levels in funding that we didn’t know what might happen next.”

It was a tough time. According to Giving USA, a publication of the Giving USA Foundation, researched and written by the Center on Philanthropy at Indiana University, charitable giving in 2008-2009 dropped by 6.5 percent, with individuals giving 3.6 percent less and foundations 2.7 percent less. Corporations in the same period increased giving by 11.4 percent.

“We did some increased fundraising in the corporate sector,” Vaughan said.

Donations to arts-specific nonprofits made up 5 percent of charitable contributions nationwide, according to Giving USA.

Figures released by the Center on Philanthropy show that donations to arts-specific nonprofits increased in 2010 by about 3.8 percent after dropping a combined 13 percent in 2008 and 2009. Donations rose nationally by 5.7 percent in 2011.

What kept the VFH in the black is the foundation’s variety of funding sources and the variety of programs it provides. Unlike the Paramount Theater, which presents a variety of entertainment acts and movies for the community and education programs for schoolchildren and functions as an entertainment/arts venue, VFH programs run from producing public radio shows to the book festival to grants given to artists, writers, historians and others.

As the economy stabilized, so did the foundation’s finances.

The fund balance at the end of 2009-2010 was $3.8 million. Investment income, while not lucrative, was nonetheless positive at $980. Total publicly traded investments owned by the foundation saw values increase from 2008-2009’s $1.6 million to $1.8 million at the end of 2009-2010.

The 2010 fiscal year tax returns have not been processed yet.

“We’ve found new, private sources of funding and have been aggressive about finding new sources,” Vaughan said. “There seems to be money available for specific programs but the problem comes when you’re stuck trying to pay for the lights and people to make the foundation work.”

The effort pays off not just for the VFH but for the community, Vaughan said. He noted that events such as the Virginia Festival of the Book provide many free programs.

“People have suggested that we monetize that program but we chose to provide as many free programs as possible,” he said. “It requires fundraising and support from the community to do something like the book festival. That’s where a lot of sponsors come into play.”

Those sponsors, and others in the community who support the foundation, have helped to improve its financial footing by word of mouth.

“We’ve had extraordinary response in 2009-2010 when we asked people to advocate for us, to put in a good world and make the case for supporting the foundation, whether private or public,” Vaughan said. “It really pulled us through.”