Gift Me Your Project!

Before Burning Man starts telling Burners how to raise funds, they should clean their own act up internally.

Burning Man’s transition to a non-profit has sure been raising some eyebrows at Burners.Me HQ. The latest we hear, from Burning Man’s Social Alchemist Bear Kittay, is that the Burning Man Project is going to be the new, non-profit entity that encapsulates all of our values. We donate our money to it, and it owns the rights to all the content we provide to it.

The party in the Black Rock desert, known as Burning Man, will continue – as a subsidiary division of the project. Right now, according to what we can piece together of Burning Man’s “almost transparent” finances, this event costs $8 million a year to put on, and brings in about $24 million in revenues. So, it should be contributing $16 million a year in tax-free donations to it’s new parent company.

Then, we have Black Rock City, LLC. Aka the BMOrg. This is currently the company with an exclusive monopoly to monetize our culture. Right now that comes mostly from photo agreements for their desert event. Presumably, in the future, the division of “The Project” that is getting the royalties from movies, albums, calendars etc will be a separate operating entity from the division that puts that one party on. In this structure the non-profit parent company would  own and monetize the Intellectual Property, not the party. The legal threats and lawsuits would be initiated by the non-profit company, not the party.

So, let’s think positive and believe BMOrg and their statements. This is being done for “us”, to preserve our culture into the future. Now that it’s going to be a non-profit, spreading Burner culture to the world, we can all participate by donating, we don’t have to even go to the party any more to save the world. Yes, we will be the new owners of our culture, through the non-profit Burning Man is planning to create for us “soon”, and our appointed representatives the 17-person Board of Directors (some of whom are married to each other, which good corporate governance suggests is a potential conflict of interest).

BMOrg’s financial statements say that the corporation itself costs $2.7 million a year to run; the “overlap”, the expenses that possibly relate to the party but also occur year round, are $10.6 million. And the non-party expenses, the “Outreach” that is going to bring Burning Man to the world, are only $264,000 – about 1% of the money they take in.

From what we know, Black Rock City LLC has about 50 full-time employees, splitting salaries of $8.6 million and eating $1.3 million of food every year (we believe most of this food is for volunteers at the event). They’ve just moved from multiple floors of an office building close to City Hall, to a new building in the hipster-friendly Mission district.

What that means, is that this organization costs $13.3 million to operate: a pretty freaking big overhead for a charity that’s raising $16 million a year. In fact, at 83 cents of every dollar being spent on overhead, that would be a new record for BMOrg. It even beats the atrocious performance of the Black Rock Arts Foundation, which despite all the millions of dollars of overhead costs that get billed to the party or the BMOrg, managed to spend 73 cents out of every dollar it raised on overheads, passing a mere 27% on to artists. Here’s the SF Chronicle writing about it:

 A combination of record ticket sales and a more efficient business helped create what [Larry Harvey] called “the nest egg we needed.” The profit, he said, will go back into the company.

Some of it will also go to the festival’s nonprofit arm, the Black Rock Arts Foundation. The charitable organization, which was founded in 2001 after Harvey loaned it $30,000 in cash according to tax documents, is dedicated to providing grants to artists who “promote and support community-based interactive art.”

But in an analysis of the organization’s tax filings by Charity Navigator, a New Jersey-based nonprofit watchdog group, the Black Rock Arts Foundation earned an “exceptionally poor” rating. The analyst found errors in reporting, a low revenue-to-grant ratio that showed artists receive on average 27 cents for every $1 spent – less than half the industry standard – and a conflict of interest involving David Best, a local artist best known for his intricate temples that rise at Burning Man.

Sandra Miniutti, an analyst at Charity Navigator who reviewed the filings at the request of The Chronicle, said donors to the foundation should be concerned by its poor practices.

“This is not a financially healthy organization,” Miniutti said. “If I were a donor, I’d think long and hard before I sent money their way.”

It seems somewhat unusual to create a new charity, and then “loan it” money. Why not donate? Was there interest involved? Does the charity still have this, or other outstanding liabilities to insiders? What sort of loans have gone between the existing organizations and the new charity? As a donor to a number of charities, these are all things that would cause me concern. We do not yet have any clarity on how the relationship between The Project and The Event will be managed in this new structure; the last interview of note was Scribe’s in the Chronicle earlier this year, which made it seem like even the founders weren’t sure. When in doubt, get it out! Since profit is no longer the motive behind Burning Man, will we finally get financial transparency?

Looking forward into the future, how big does this overlap have to be? Surely, some of the expenses that go on during the year, are needed for the party? Well, maybe so. And some, maybe not. I question, if the expense is really needed for the party, then why not account for it with the other party expenses?

I’m speculating here, so if anyone has more concrete information about the new operating plan and org structure, please share. I like charities that use most of the money they raise for the causes they support. A new, lean, focused organization, taking $16 million a year in profits from the annual spectacle Burners create for them, and using that to spread Burner culture and values could be a real positive force for the world. Just another charity, that takes our donations as “Gifts” and then spends the money  on fancy offices, travel, and entertainment for its workers – well, the world has enough of those already.