0.12 Chapter nine: the liabilities of nonprofit assets  (Page 5/5)

The linkage between an institution's mission and the value of its cultural assets offers another perspective on the deaccession debate. Up to this point, this inquiry into the value of cultural assets has asserted that the financial value of a cultural asset is generally negative. The reasons are that cultural assets consume resources and cannot be sold. Introducing the possibility of deaccessioning changes these assumptions by making the asset fungible. The total value of that asset now has two components: one continues to be cultural, determined by the broad importance of the asset to society, but the other now becomes financial, deter­mined by the estimated market price of the asset. Unfortunately, once the asset has a financial value attached to it, its cultural value can be obscured. It is very difficult for most people to value what cannot be measured. It is this disregard for the cultural value of a nonprofit asset that critics of deaccessioning properly decry.

Even in cases where it is accepted that deaccessioning of collections is war­ranted, a second controversy revolves around the proper use of the financial proceeds from those sales. For the simplicity of this discussion, consider the ques­tion of selling paintings from a museum.

The generally accepted practice among museum professionals is that proceeds from deaccessioning should be used only for new acquisitions. In fact, for some museum professionals, it seems that almost any deaccession decision is justified if proceeds are used to purchase more art. Although this logic is both understand­able and appealing, it raises an important question: if it is acceptable to trade one painting for another, why is it unacceptable to trade one capital good, a paint­ing, for another capital good? It is clearly irresponsible to sell a painting and then use the proceeds for operations; that would be liquidating capital. But what if the value—cultural, financial, or a combination of the two—that resides in a piece of art is transferred to another capital item like endowment, the principal of which must be held in perpetuity? If investment proceeds from that endow­ment were used to fund an important curatorial position, would that be a misuse of funds? Which use of the capital goes further toward allowing the institution to fulfill its basic mission? Presumably the mission of an art museum is more than just amassing paintings. It has to do something with them.

In the final analysis, the decision about whether an item should be deaccessioned depends on many factors. The nonprofit community would benefit greatly from a thorough and objective investigation of the complexities. As part of such an assessment, one useful framework for identifying both when deaccessioning is appropriate and what should be done with the proceeds might be to focus on the source of the cultural component of a nonprofit asset's value, that is, its relevance and importance to the mission of the nonprofit entity.

Conclusion

There are dangers in translating terms and concepts between the for-profit and nonprofit sectors. For example, the for-profit definition of assets is misleading when applied to collections held by nonprofit institutions. Due to restrictions on the fungibility of those collections and their limited capacity to generate revenue, most of these "cultural assets" are actually long-term financial liabilities to their owners. Knowing that, when one hears that the Society owns an important and valuable collection of more than six million cultural assets, one should not be surprised that the Society faces a present and future of financial hardship.

In addition, there are also concepts that are important in the nonprofit sec­tor but have no direct counterparts in the for-profit realm. For example, the notion of the cultural value of an asset has little, if any, meaning in a profit-maximizing economic environment. It is therefore a concept that is difficult for most people to understand. That is why, when a nonprofit asset is considered for deaccessioning and is tagged with a dollar value, the emphasis on its cultural value is often lost. Retaining focus on the cultural value of collections requires a thorough understanding of the mission of the nonprofit "owner" and the relevance of the asset to it.

There is little doubt that the financial environment surrounding nonprofit institutions with large collections is becoming increasingly difficult. If nonprofit lead­ers are to be successful in guiding their institutions through the difficult times that lie ahead, they will need to have a clear understanding of the distinctive charac­teristics of "cultural assets"—and to recognize them as financial liabilities.