When I spoke to you a year ago we were looking forward to celebrating the MFA’s 150th anniversary, and to what we hoped would be another year of strong operating performance. It was not the year we planned.
We had been forecasting for some time that the Museum would see deficits in FY 21 and forward, and that cash flow projections indicated the need for a review of the Museums operations to establish a sustainable model. Financial management wrote a detailed financial assessment in the summer of 2019 and, we spent the December Board meeting, as well as an off-site retreat in February, reviewing in detail the operating structure and levers to achieve long-term sustainability. However, in March the Museum closed due to the COVID-19 pandemic, which exacerbated all of our financial challenges.
We immediately began working on financial projections with a subcommittee of the Budget and Finance Committee to help financial management review forecasts and cost containment efforts. Subsequently, the Museum’s management and Board engaged Boston Consulting Group (BCG) for the review process, to address both the pandemic, and its impact on the Museum’s operations, and the pre-existing structural deficit.
While all aspects of MFA operations were reviewed, it was also obvious that immediate cost containment was necessary, including, unfortunately, staffing actions. We reviewed and approved recommendations from management to furlough staff near term so that they might, in most cases, benefit from the incremental remuneration offered by the US federal government for unemployment assistance. We also approved management’s recommendation of a voluntary early retirement program as we reviewed all aspects of our operating model. We also had a reduction in force in August 2020, necessitated by the pandemic and challenges to our long-term business model.
BCG has helped management define and refine revenue and expense levers forward that if achieved, assuming the pandemic abates and we return to a normal attendance level in FY 23, will place us on the road to break even financially. The deficits between now and then are forecast to be substantial, but we will be vigilant in both the execution of BCG recommendations for our business model and our monitoring of key performance indicators going forward versus plan. The Museum is currently operating under an interim budget, and a full FY 21 budget that incorporates BCG findings is currently being prepared for Budget and Finance Committee review and Board approval.
To insure our liquidity needs, the Museum has kept a larger than normal percentage of the endowment in cash and bonds and approved the establishment of a $20 million operating line of credit, should the need arise. Key to our positioning through this period has been our fundraising, with substantial contributions from the “MFA family” now in the tens of millions to partly offset our gap in a very uncertain environment. It has been truly inspiring to see these commitments to sustain the Museum at a historically challenging time.
A few statistics for the year: the endowment for the year ended June 30, 2020, ended at $585 million with a preliminary break-even performance return. We continue to reduce the spend rate on the endowment by .01% until we achieve our goal of a 5% spend rate. We did achieve an operating surplus of $25,000 through the help of cost containment and the major gifts just mentioned.
Final attendance was 765,000. Our total net worth increased by $60 million during the year, driven by the strong fundraising including the receipt of a material gift of illiquid shares that will benefit the Museum long term.
Finally, I want to thank the Leadership team, the Finance team, the dedicated members of the Budget and Finance Committee and its emergency working groups, and the Executive Committee for their collective, untiring effort. It seemed that we met multiple times a week since the pandemic occurred—and in fact, in most weeks we did. Your constancy, advice, and counsel have been invaluable as the MFA continues to chart these uncertain times.
Respectfully submitted,