Our Community's thinker-in-residence, Chris Borthwick, casts a close eye over the financial troubles that threaten to sink the much-loved Castlemaine gallery in regional Victoria, and its chair, Jan Savage, tells editor Matthew Schulz how the board has responded to the challenge.
When it comes to financial sustainability, the theory is easy: "diversify".
But the difficult thing is actually making that happen. And this case study illustrates just how tricky it can be to improve finances in practice.
This is the dilemma faced by the Castlemaine Art Museum (CAM), whose heritage spans more than a century in Victoria's goldfields region.
The gallery is a big tourist drawcard and houses an impressive collection of Australian art from the 1800s, Edwardian times, and later.
It boasts works from Fred McCubbin, Tom Roberts, Arthur Streeton, Rupert Bunny, Margaret Preston, Russell Drysdale, Fred Williams, John Brack and Albert Tucker. Recently it hosted the shocking Graham, by sculptor Patricia Piccinini for Victoria's Traffic Accident Commission (TAC) to demonstrate how humans would look if designed for car crashes.
But even as Graham was pulling in the punters, the gallery announced it would fire staff and shut its doors in the face of a financial meltdown, which featured a revenue gap of about $400,000.
Luckily - and partly as a result of the media frenzy that ensued - the well-loved tourism drawcard in the centre of the picturesque town won a last-minute reprieve thanks to generous art lovers.
On the face of it, the gallery already had a diversified funding base.
It had members, it charged admission, it had a regular largish donor, and it had funding from both local and state governments.
So what went wrong?
Let's look at how the gallery employed the seven funding pillars.
The gallery itself used the seven pillars method to develop its initial fundraising strategy, but as chair Jan Savage put it, "That didn't go so well."
The first pillar: donations
What they had: They had a substantial donor - the SR Stoneman Foundation, which paid about $30,000 annually - and a separate gallery foundation that raises funds for the gallery.
Why that was a problem: The SR Stoneman Foundation's founder had included a "poison pill" in its constitution that said funding would be cut off if the gallery incorporated, which was necessary if it was to get other grants. And most of the gallery foundation's money was tied up with caveats that meant it couldn't be spent on day-to-day upkeep.
What they've done: Last year, the gallery decided to push ahead with incorporation, despite the difficulties, with the aim of sourcing money elsewhere. That money didn't roll in as predicted, or in time.
After the shutdown, a fresh donor came forward to promise $250,000, which will keep the gallery operating for several years more - but the money came with a condition: abolish admission fees. This cuts about $25,000 a year from the budget. So the net gain is about $175,000 over three years, or about $60,000 a year, yet the gap is $400,000. More - much more - is needed.
What chair Jan Savage says: "We're doing a number of things. We're going to a whole range of funders, applying for grants and developing our fundraising strategy. We tried to develop it before, using the seven pillars of fundraising, but that was before we incorporated. That didn't go so well."
The media attention prompted further donations and life memberships, as well as offers of professional help. "It's great having that sort of exposure, so long as it comes with support."
"Incorporating, of course, was meant to be the thing that helped us with our sustainable funding so that we could apply for a much broader range of grants. But there's a cost with compliance and a cost with incorporation, particularly in the short term."
The second pillar: grants
What they had: The gallery got a reasonable amount of money from the Victorian government and some funding from the Mount Alexander Shire Council.
Why that was a problem: Most regional galleries get 20% of their funding from the state and 60% from the council. With Castlemaine, that's 35% and 5%.
The contribution from the Shire was much lower than for comparable galleries in, for example, Ballarat and Bendigo. The Ballarat and Bendigo councils, though, just served their cities. Much of the Mount Alexander Shire Council isn't based in Castlemaine, but spreads across other villages like Porcupine Flat and Welshman's Reef. Is it simply that the sturdy citizens of Porcupine Flat don't want to pay for facilities for "la-di-da" Castlemaine urbanites?
What they've done: The crash has brought to the attention of the council how much the gallery contributes to tourism in the region. This may loosen the council's purse strings - but that's yet to be seen. So far all they've offered is "in-kind support with professional services, provision of Town Hall [for a public meeting] and minute- taking." Minute taking? Get serious.
What the chair says: "Regional galleries are by and large owned by council. We're an independent organisation, a profits-for-purpose NGO (non-government organisation)".
This and the size of the shire - with just 20,000 residents - were partly behind the limited support, but nevertheless, "I would love it if they could give us more".
Ms Savage told a public meeting: "We are working ... to see how we might increase the contribution from the shire".
We think the council is basically playing a pretty dead bat, but you be the judge.
What the council says: Mt Alexander Shire Council mayor Sharon Telford confirmed that for the past ten years, the council's annual contribution to the gallery's coffers had been "nearly $26,000".
However, it also chipped in $40,000 in 2015 for a review; gave $5000 to assist the gallery's latest "business case project"; and provided "promotional support through tourism" and human resources help.
"Dedicated funding to the arts increased by about $5000 in the 2017-18 budget," Ms Telford said.
Ms Telford said the council "recognises the gallery is a valuable asset to the community and in attracting visitors to our shire".
But she also said: "Unlike other regional art galleries, council does not own the Castlemaine Art Museum. The independent museum is governed by private trustees and managed by an elected board."
Asked about how the council might help the gallery now, she said it was too early to say.
"We have not yet received any formal requests, or had the opportunity to consider any requests for additional funding," the mayor said.
The third pillar: community and business partnerships
What they had: Not much.
Why that was a problem: There are largish commercial enterprises in the shire, but they're not necessarily the kind of businesses that benefit from sponsorship. Would you be more likely to patronise a bacon factory if you knew it was a gallery sponsor?
What they've done: Still not much. It doesn't seem to come high up the priority list.
What the chair says: "We have worked to develop partnerships with local businesses and other NFPs, including the hospital, community health and schools."
Size and scale constraints - such as a small and ageing local population - were barriers to converting support into income, Ms Savage said. "This is not Melbourne, or even Bendigo."
The gallery needed a "strategic partnership" to drive its vision. "We see the benefits of tourism, but tourism development is not our core business (although it is) essential to our work".
The fourth pillar: memberships and friends
What they had: They had about 600 members, which in a city of 10,000 isn't that bad, at about $36 a pop - which comes to about $20,000 in revenue. Voluntary labour was a useful supplement to paid staff.
Why that was a problem: Voluntary labor can't substitute for the expensive bits of the art curating business. 600 members, too, while handy, wasn't really enough to provide a mass base.
What the chair says: The organisation has seen a spike in donations and life memberships. Many have come forward to volunteer professional skills in media, technology, strategy, community engagement, governance and grant-writing in response to CAM's troubles, and the organisation aims to make the most of those opportunities.
"We've got to also ensure that with people volunteering their time, we can manage it as a board. We have to do this professionally and ensure that we go through a formal recruitment process."
The fifth pillar: special events
What the chair says: Significantly, "a big fundraising event ... just never happened." "Fundraising for events is really tricky and you need to be really good at it. And it's not always sustainable."
What they had: When you're a gallery, your events tend to be exhibitions. So that runs into the next pillar ...
The sixth pillar: earned income
What they had: The exhibition program seemed to be going quite well. Attendances at exhibitions had increased from about 1000 (at about $5 entry fee) to between 5-10,000 (at $10). That coincided with an income increase from about $5000 to about $70,000 since 2014.
Why that was a problem: A more active exhibition schedule has its own costs, and there's not likely to be a large surplus here. The numbers are more significant when marketing the gallery's contribution to bringing tourists into the area.
What they've done: They've eliminated entry fees. This will build goodwill in the city, but it may be a dangerous long-term strategy, increasing the gallery's reliance on grants.
What the chair says: "It was about access. They [the white-knight donors] wanted the gallery to be more accessible to more people."
"I'm really happy to receive that grant, and you've got to work with what you've got." [Now], we've got the doors open ... and we believe this is going to be short term and we're working towards being more sustainable later."
The seventh pillar: Social media and crowdfunding
What they had: The gallery's social media presence, it has to be said, was lamentable. There's no link on its website to its Facebook page. And the gallery can't accept online donations (and they could easily change that for free simply by signing up to GiveNow).
Why that was a problem: No public institution can afford to be that 20th-century about communications technology.
What they've done: Nothing much. Come on, sign up with GiveNow. There's literally no downside - it's a no-brainer.
What chair Jan Savage says: "Many people suggested we do crowdfunding, and it's a terrific suggestion. But there wasn't the expertise there or capacity on the board to do that."
Online donations were "something that we considered", and she said "GiveNow sounds great and something to follow up." She agreed more work was needed on the social media front.
Foundations for the pillars: Good governance
It's not the fault of the current board, but the situation isn't helped by the dog's breakfast of overlapping memberships and inconsistent governance systems that links all the players. The Castlemaine Art Gallery and Historical Museum (CAGHM) Trust (unincorporated) owns the gallery's paintings and the Castlemaine Art Museum's newly incorporated board runs the budget.
You would hope that this should lead to greater co-ordination, but it seems to have produced only confusion.
What the chair says: "The governance structure is complicated, and change is slow and expensive, even with pro bono legal support." She urged patience from supporters, and said since incorporating in July last year the gallery had focused on work with its trust, operations, and managing risks for an small organisation with limited staff.
The gallery provided a wonderful service in a tough environment for arts funding, but wasn't able to market its value successfully to its stakeholders.
We say:They ought to lift their game on sponsorship, charges, and social media - but the main game is council funding. And blowing up and catching on fire in the middle of main street may prove to be the best strategy. It doesn't seem as if they're going to extract more money from a stingy council any other way.
What the chair says: "Putting up your seven pillars doesn't just mean your capability, but also your capacity, [especially] when you're a tiny organisation".
"It's highly competitive, the arts sector. And you need to have a profile to attract funds. It's not just about getting one-off grants, but getting sustainable funding."
"There is hope for Castlemaine Art Museum. It's a big ask, but there is great goodwill out there that we want to tap."
We wish the gallery well, and hope it can successfully transition through its ordeal to a sustainable model.