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Bigger, bolder . . . and poorer

Ex-trustees say MOCA ignored obvious signs of trouble and tried to spend its way to success. The director's job is on the line.

December 14, 2008|Mike Boehm and Kim Christensen | Boehm and Christensen are Times staff writers.

Audrey Irmas remembers when money was so tight for the Museum of Contemporary Art in 1997 that she drove from one fellow board member's home to another, rounding up $7,000 for building repairs.

Now MOCA's financial house is in shambles -- and this time it reportedly will cost at least $25 million to replenish the endowment and an additional $5 million to cover projected deficits for the coming year.

"This shouldn't have been a surprise to anyone," said Irmas, a life trustee of the museum. "We lived over our budget."

Renowned as one of the world's top museums of post-World War II art, MOCA has overspent by $1 million a year on average since 2000, burning through reserves to pay bills. Deficits continued to mount early in the decade despite spending cuts, leading to a bid to grow out of problems by ramping up exhibitions to attract acclaim and big donors -- a strategy one arts management expert likens to playing the lottery. Since the national economic meltdown, MOCA has retreated again, limiting exhibitions and announcing a six-month closure of its Geffen Contemporary building.

Hastened by the tanking economy, the museum's financial crisis has triggered an investigation by the California attorney general and prompted calls by prominent former trustees to sweep the current board from power and fire Director Jeremy Strick.

Now, with its 36-member board fractured, MOCA faces dramatic changes if it is to survive. Trustees will meet Tuesday to sort through conflicting views and proposals on how to deal with an unprecedented fiscal emergency.

On the table is an offer by billionaire Eli Broad, MOCA's founding chairman in 1979, to shell out $30 million -- if the museum can come up with an additional $15 million on its own. Other bailout options include an alliance with the Los Angeles County Museum of Art, board co-chairmen Tom Unterman and David G. Johnson said in an interview last week. There also has been some discussion of selling artwork, but no action has been taken.

"We promise that we will find a way to stabilize the institution and make it sustainable because we understand how important it is to this country, the art world and this city," Johnson said.

MOCA carries the costs of operating two downtown buildings, the Geffen Contemporary and the main museum on Grand Avenue near Walt Disney Concert Hall. Other than a $1-a-year city lease for each of its two downtown properties, it gets scant government help.

Strick, a low-key curator and scholar who declined interview requests, was brought in as director in 1999 and apparently saw spending as a path to success. On his watch, it rose 35%, from $15.6 million in fiscal 1999-2000 to $21.2 million in 2006-07, according to the most recent IRS returns for the nonprofit museum.

That resulted in average annual shortfalls of about 5.5% in a decade that, until the recent meltdown, was very kind to the wealthy class on whom MOCA and other major arts organizations rely. But as other investors reaped the rewards of a robust stock market, MOCA drew on its investments to pay its bills.

Nonprofit-governance experts, former trustees and others say the museum's officers and volunteer board should have seen calamity coming.

By mid-2001, as the economy slumped toward recession, independent auditors warned that MOCA's reserves had fallen $3.8 million below "the level required by donor stipulations." Indeed, year in and year out, the museum's financial statements included that same ominous disclaimer as the amount borrowed from the endowment ballooned to $17.1 million in mid-2007. (Meanwhile, MOCA's investments had fallen from $38.2 million in mid-2000 to $20.4 million in mid-2007.)

But instead of balancing the books by generating more revenue or dramatically cutting costs, Strick repeatedly dipped into MOCA's reserves -- with the board's approval. Ultimately, nonprofit boards of directors or trustees are responsible for how their organizations operate and spend their money.

"A lot of very bad habits were allowed to build up," said Dean Valentine, a television and Internet executive who left the board in 2006, unhappy with its financial practices. "Obviously, those bad habits led to a disaster."

He and Irmas -- who joined the board in 1992, later served as its president and now, as an honorary life trustee, has no voting rights -- said museum leaders were unrealistically optimistic.

"It was always, 'Oh, well, we'll have our next fundraiser, and we will put the money back in then,' " Irmas said. "There was always going to be the good fairy coming down because where else are we going to get it? It just doesn't happen that way."

'Financial jeopardy'

Susan Bay-Nimoy left the board the same year as Valentine and says she was disgusted with what she saw as excessive spending.

"The exhibitions became more grandiose, more expensive, to try to capture the imagination" of the public, she said. "But they put the institution in financial jeopardy."

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