Having awarded a $50 million gift to the Philadelphia Orchestra in 2003, the Annenberg Foundation is now asking for more accountability from the world-famous orchestra, the Philadelphia Inquirer reports.
The gift, the largest ever to the orchestra, came with a string attached: the foundation could recall it and any accumulated investment income if the orchestra ever filed for bankruptcy, which it did in April 2011. Although the foundation, which moved to Los Angeles from a Philadelphia suburb in 2009, has not exercised its right to recall the gift, the bankruptcy did spur the creation of a new, more controlling donor agreement as part of the reorganization plan filed by the orchestra in U.S. Bankruptcy Court last week. In effect, the money will be removed from the orchestra's endowment and placed in trust at the Northern Trust Company, which will manage it for the benefit of the organization.
Orchestra leaders told the Inquirer that the idea of moving the money into a trust originated with the foundation, which was concerned about potential claims on the endowment by the orchestra's creditors. The new agreement stipulates that the orchestra exit bankruptcy by June 30 — sooner than originally projected.
While the agreement gives the orchestra greater flexibility in how the investment income can be spent, it also imposes new conditions. For example, if the orchestra defaults on certain requirements, "the trustee shall, at the written direction of the foundation, distribute the remaining principal and accumulated income" to the foundation. Potential default includes the lack of a balanced budget, failure to make "adequate annual progress" toward fiscal year 2016 goals defined in the orchestra's strategic plan, and failure to find an acceptable replacement CEO within a year of any vacancy, with assurances that any new CEO be able "to operate the orchestra in such a manner as to maintain its status as one of the premiere orchestras in the world."
"While it has some additional benchmarks and milestones, they were related to our plan; it came from us. They are fundamentally investing in the quality of this organization," said PO president Allison B. Vulgamore. "What I would tell you is, this was a little like a family sitting down and saying, 'How do we want to hold our assets. Let's be smart about this.'"