September 5, 2006

WEITZMAN: CRADLE OF AVIATION MUSEUM WILL
RUN OUT OF CASH BY NOVEMBER

Nassau’s Cradle of Aviation Museum at Mitchel Field will be out of cash by the end of November unless it raises substantial funds in the next two months, Comptroller Howard Weitzman said today.

The Comptroller’s warning is based on a new cash flow analysis of the museum, provided today to the Nassau County Legislature.  The cash report was prompted by concerns about the Cradle of Aviation’s financial condition, following a limited financial review of the museum issued in July.

“The Cradle of Aviation has roughly an eight-week window to solve its financial crisis,” Comptroller Weitzman said.  “This museum, celebrating Long Island’s pivotal role in world aviation, is one of Long Island’s great cultural resources, but it has suffered from poor stewardship by its Board and management team.  They need to act immediately to raise the funds necessary to keep from going under.

“Simply put, our report shows that the Cradle of Aviation is generating insufficient revenue to pay its bills and meet its payroll,” Comptroller Weitzman said.  “It is running on fumes. The museum has not paid most of its creditors for months. And this is despite the county’s approval of a generous bailout package in April 2006 that provided sharply increased subsidies.”

The bailout package forgave the museum’s $2.5 million debt to the county and provided a cash infusion of $500,000, of which $350,000 has been paid to date. The agreement required the Cradle of Aviation’s operator, Museums at Mitchel (MAM), to meet certain revenue and fundraising targets. “The museum’s management and Board should have realized that the additional subsidies and the revenue targets stipulated in the agreement were never going to be enough to save the museum,” Comptroller Weitzman said.

In the months since the April agreement, the Cradle has failed to pursue the aggressive fundraising necessary to right its finances.  “Our analysis shows that even in the best case scenario the museum will have a negative cash balance of approximately $174,000 by the end of November,” Comptroller Weitzman said.

Deputy County Executive Peter Gerbasi said, “We agree with the Comptroller that the Cradle’s management and Board need to do a better job of raising private funds to help keep the museum open.  We’ve been working with them to provide key assistance, including the recent infusion of $500,000 and the forgiveness of up to $2.5 million in debt.  But now it is up to the Cradle’s management and Board to take the lead in bringing in private sector money, which is the model that successful museums around the country use to achieve their goals.”

The Comptroller’s analysis takes into account the Museum’s recent initiative to reduce part-time staff in September, but that measure does little to forestall the crisis.  “The cash shortage is too severe to be solved by simply cutting expenses,” Comptroller Weitzman said.

“What can be done to rescue this cultural resource?   Fundraising is the key to the Cradle’s survival, as we pointed out in our July report on the museum.  But the current management and the Board have treated fundraising as a secondary priority.  If the Cradle is to survive, its Board must act at its September 13 meeting to address the crisis. They must secure new contributions on an emergency basis and prepare an aggressive fundraising campaign for 2007 and 2008. If the museum’s leaders are themselves incapable of effective fundraising, they need to bring in a new team that can generate substantial contributions, and quickly.”

The Comptroller’s report concludes that expected revenues from attendance, building rentals and contributions are inadequate to cover monthly expenses, even with the county subsidies. The analysis notes that the museum’s accounts payable total more than $600,000 as of July 31. That amount, however, does not include other current liabilities, one of which is a debt of approximately $434,000 to Nassau County to cover utility costs dating back to 2004, “the recovery of which is now highly unlikely,” Comptroller Weitzman said. “This means the county taxpayers will also be stuck with the utility bill,” he said.

The report discloses that as of July 31, 2006, the museum:

• had cash available for operations of $185,177;
• had an accounts payable balance of $606,026, approximately one-half of which is more than 120 days old;
• had drawn down its full bank line of credit of $1.75 million and does not have the resources to repay the loan;
• had other current liabilities in addition to its accounts payable, including $434,000 for utility payments to the county and $385,000 in disputed payments in litigation over the museum’s simulator ride; and
• has only $30,000 in pledges receivable to be collected in the upcoming year.

The report notes that the Comptroller’s office is unaware of any additional grants or contributions that will bring in the needed funds over the next three months.

The Comptroller’s limited financial review of the Cradle of Aviation issued in July found that drastic operational changes were necessary if the museum is to achieve viability.  The audit found that:

• the museum has been ineffective in its fundraising efforts;
• its attendance has been declining;
• it has spent down almost all of its past donations and pledges and has not generated new pledges;
• it has not aggressively pursued state or federal funding;
• its management was to a significant degree “dysfunctional,” with key staff apparently unwilling to speak to each other; and
• it suffers from a lack of competitive procurement and an absence of appropriate financial controls.

The museum retained an independent consultant, Lord Cultural Resources, which gave its recommendations to the Board in May. “I would like to believe that changes are under way as a result of that report, as well as our audit, but to date we have had no indication of a major change in direction as a result of either,” Comptroller Weitzman said.

The Cradle of Aviation is operated under an agreement with the county by Museums at Mitchel (MAM), a not-for-profit organization. The museum was built with a $40 million investment from Nassau County.

The complete Comptroller’s cash report may be read or downloaded from the Comptroller’s Web site, http://www.nassaucountyny.gov/agencies/comptroller/index.html or linked below.

Cradle Cash Letter (3 pages ~ 71.6 kb .pdf file)