Algonquin Arts Theatre presents The Hunchback of Notre Dame in October of 2023. Photo courtesy of Algonquin Arts Theatre.

Based in Manasquan, Algonquin Arts Theatre is a regional performing arts center that presents eight mainstage productions of plays and musicals annually, as well as musical performances, film screenings, and classes and workshops for children and adults.

Algonquin received a $40,000 grant in FY23 to grow its existing cash reserve/working capital fund through the Cultural Trust’ Institutional and Financial Stabilization Grants for Arts Organizations program.

The Cultural Trust was built on the belief that one of the biggest threats to New Jersey’s nonprofit cultural sector is undercapitalization. An organization without a financial safety net may find it difficult or even impossible to navigate programs that generate uneven cash flow, address unexpected expenses, weather economic downturns, and innovatively plan for the future.

According to Algonquin Executive Director Pamela Ward, the negative effects of undercapitalization extend beyond the balance sheet: “While cash on hand is a practical reality, the psychological impacts are just as important.” She added, “You can make much more judicious decisions, better long-term decisions, when you’re not worried about what’s going to happen in the next five weeks.”

The Cultural Trust’s cash reserve/working capital fund grants address undercapitalization directly. A working capital fund is a financial cushion used to improve an organization’s cash flow. It can serve as an internal line of credit to cover costs that fall at low points in an organization’s revenue cycle, and it is replenished with revenue as it is earned. Cash reserves are funds that are set aside to ensure stability when unplanned costs arise or revenue unexpectedly falls.

Algonquin’s fund functions as both a cash reserve and a working capital fund. The theatre taps into it on a routine basis to pay expenses in advance such as royalties for future shows and artist fee deposits for the upcoming season. This allowed Algonquin to make its full 2024-25 season announcement and begin marketing efforts earlier than it had in previous years, all without affecting cash flow. The fund will be replenished over the course of the season with ticket sale revenue. Meanwhile, the fund is also available to cover unexpected costs in the event of an emergency.

Algonquin’s fund has had ripple effects on the entire organization. Ward explained that the reserve not only improves cash flow management and provides a safety net in case of emergencies, but also generates additional revenue in the form of interest income. “The reserve has helped to provide both fiscal and programmatic maturity, providing the opportunity for ongoing institutional advancement,” she said. “The organization has never experienced this level of financial security.”

Learn more about Algonquin Arts Theatre: https://algonquinarts.com/

Cultural Trust Executive Director Izzy Kasdin, left, poses for a photo with Algonquin Executive Director Pamela Ward at the theatre during a site visit in August 2023. Photo by Cultural Trust staff.

In 2020, the Cultural Trust marked its 20th anniversary. A public/private partnership that works in harmony with the New Jersey State Council on the Arts, the New Jersey Historical Commission, and the New Jersey Historic Trust, the Trust is the only state agency with a mission that encompasses the entire nonprofit cultural community: the arts, history, and humanities. In its first two decades, the Trust awarded $14,464,711 to more than 196 organizations to ensure that our cultural community continues to thrive so New Jersey can continue to flourish. Read more about the history of the NJ Cultural Trust in this special anniversary article by Dr. Carol Cronheim, NJ Cultural Trust Board Member and Former NJ Assistant Secretary of State.