BPP kaputt (5): what exactly is a dead body in the closet, or: is 4 million enough?

The dissolution of the Performing Arts Promotion Office continues to stir minds. So another piece, although we are actually supposed to be walking around the Uitmarkt to expensive advertising leaflets to sell.

Enfin.

On 30-08-13 at 07:20, an email arrived from Leo Pot, final boss of the Association of Theatre and Concert Hall Directors and jointly responsible for abolishing the Performing Arts Promotion Bureau. He wrote:

> day webrand,

>If you still don't understand why 3% difference in freefall should lead to "such draconian measures", do some maths:

> around €7 million worth of theatre vouchers/gift cards are sold each year; even more in the past

> 3 per cent thus saves 2 tonnes a year, over a series of years so easily more than a million

> Moreover, what does the phrase "whether grant money is safe with an organisation" etc.????

> both sptc and bpp and vscd get no subsidy at all....

> kind regards

> leo

This letter, which partly responded to a comment under this article, required a response, which actually consists mostly of a lot of questions:

Dear Leo, Dear Mr Pot

This morning, I had a 100% score in my daily test for 'Better Maths' (www.beterrekenen.nl). Let's see if I can apply that success to this email exchange (plus fifth article in the series).

Goes.

So per year, €7 million in revenue came in, thanks to the sale of theatre vouchers. You had budgeted that 1.4 million of that (20%) would be released (not redeemed). Money that you could spend on production and marketing of the performing arts event. So the Performing Arts Promotion Office received 1.2 million of that. Initially.

My first question: what happened (until 2011) to the remaining 200,000 euros?

In 2011, according to the earlier post, you found out that not 20%, but only 17% of the vouchers sold that year were not redeemed. That brings me to a pot of 1,190,000 euros. Which is indeed a decrease of 210,000 euros from the previous year. Yet you then decided to cut the BPP by 400,000 euros. Did the rest (now 390,000 euros) go to losses?

So in 2012, 1,190,000 euros would have come in again (3% less than the 20% budgeted), but that was again grounds for a budget cut of another 400,000 euros. So the tally of the annual loss now stands at €790,000.

A third consecutive year again yielded 1.19 million, according to your story, but was still reason to cut the budget again by 4 tonnes. The annual loss now stands at 1.19 million, equalling the release. The fourth year the budget would go to zero, again because of the declared drop from 20% to 17%. So the loss this year stands at 1.59 million. Cumulatively, I note a gap of €3,960,000. A gap that thus had indeed existed much longer (perhaps a decade longer) than you stated in your previous mail. I quote, "At some point (in about 2011), we (both bpp and sptc) notice that more is being cashed in than usual, but we don't know how much it will be".

The wording 'more than usual' I think you put in to indicate that an isolated, new event took place. That was your response to our formulation that a dead body had been found in the cupboard. I define the term 'dead body in the cupboard' as the unexpected discovery of the result of a serious past event, which went unnoticed all these years because it had been kept hidden.

You found out 'sometime in 2011′ that so there had been miscalculations in all those years before and a deficit of 1.5 million. Now it turns out that the gap was much bigger. Surely I can assume that you made an annual report every year, and looked at how much money came in and how much was spent every year? So why was this not discovered earlier?

Then I can't help but notice that in the years before 2011, there was bad shopping (putting it mildly). And that leads to mortal remains in cupboards.

This builds a poor 'track record' as a club, and so with such a reputation, it is wise to say that a subsidy of 1.7 million for the purpose of foreign promotion awarded by the ministry through the performing arts fund to the BPP, is not safe with you.

With Leo Pot's response below it again:

dear webrand,

things are not going the way you think they are;
you cannot say "in 2011 you find out that not 20%, but only 17% of the vouchers sold that year were not turned in".

it goes like this:
you take the one-year release 5 years later, because you assume that after 5 years just about everyone who wanted to redeem their vouchers or cards will have done so

for example (the figures are equally fictitious):
in a given year, you see that in the year 5 years before, not 80%, but 82% was cashed in
Moreover, you can see that from the year before that again - of which 78% was cashed in at the beginning of last year - vouchers were also cashed in, so that year also passed the 80%
and the same goes for the year before and the year before that, as vouchers from 10 or 15 years ago are being redeemed even now

that means two things: first, that you transfer amounts from your equity to the earmarked reserve for the redemption of vouchers/cards and second, that you gradually start being more cautious about subsidising other activities through bpp and you start phasing out the contribution to it

what exactly the release from, say, the year 2007 will be, you don't know (or maybe not until 15 or 20 years from now), because if 80% from that year has been redeemed now, you don't know what else will be redeemed in the future from vouchers sold in that year

it now looks like the release from the past few years will not be 20%, but 17%
For reasons of prudence, the budgets for future years assume 15% release

that's why it doesn't work as you outlined in your mail, with "fixed" amounts that you keep or fall short in a year because you know what's coming in, but you don't know what's still going out

incidentally, the story is more complicated than I am outlining here, as sales also fluctuate from year to year, and in recent years they have declined somewhat (on average), while many costs have remained the same

in addition: returns also fluctuate, which is linked to the size of your reserves and interest rates

in short, it is quite complex and there is a reason why there are two independent financial experts on the board to help develop the sptc's financial policy

then your question of what happens to the money "left over" in a year:
that either ends up in the sptc's equity, or in the earmarked reserve for voucher/card redemption

sorry, but your calculation makes no sense at all

currently, the sptc has a negative equity of over 1.2 million, but you can decide - so to speak - tomorrow as a board that it is justified to be less cautious in setting the earmarked reserve for cashing and thus make it positive again

but here too the policy of the mother of the china shop is followed

finally, you ("is the grant money safe?") conflate two institutions: the above story is about the sptc, while the money from the performing arts fund and buza was deposited with bpp

by the way, that money is still there and will be retained for international promotion

I continue to find your style of journalism - tendentious, full of innuendo - an unpleasant one

regards
leo pot

Case closed.