For 23 years, Charlie Humphrey ran Pittsburgh’s best-known film and photography school. Wealthy and unconventional, Mr. Humphrey developed a reputation as a mender of finances for struggling arts groups and enjoyed the coveted favor of foundation leaders.
With Mr. Humphrey at the helm, Pittsburgh Filmmakers grew from a humble equipment-sharing collective formed by artists in 1971 to a vibrant organization integral to Pittsburgh’s arts scene that serves more than 50,000 people. In 45 years it has taught two generations of students how to make photographs and movies. A decade ago, it expanded by merging with the Pittsburgh Center for the Arts, a struggling nonprofit that teaches adults and children how to paint, draw, sculpt and make jewelry. Mr. Humphrey, who wrote a recovery plan and sought funding for the center, oversaw its reopening.
But with that merger came rapid growth — so fast that Mr. Humphrey and the organization’s board of 23 directors could not keep pace
“After the merger we moved from a $1 million to a $5.5 million organization in a few years, and we didn’t change the infrastructure of the organization,” Mr. Humphrey told his board on Sept. 2, according to minutes of the meeting.
Last June, Mr. Humphrey’s tenure began to unravel. On June 2, with the organization under mounting financial pressure, he laid off 20 people — a third of his staff. To many, it was August 2004 all over again. Back then — two years before the merger — the Pittsburgh Center for the Arts laid off 13 employees and temporarily closed because it was $1 million in debt.
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One week after last June’s layoffs, the board discussed the nonprofit’s unexpected capital expenses and lagging revenues, Mr. Humphrey told the board the organization needed to raise a total of $1.2 million in fiscal years 2016 and 2017. He said he hoped to return to the arts group’s “best” days when it had three months’ worth of cash flow in reserve, according to the minutes.
During an emergency staff meeting held the day after June’s layoffs, Mr. Humphrey told employees to “expect chaos,” according to three people who were present.
He could not have been more prophetic.
Six months later, just before a three-hour December board meeting, 35 of the remaining 39 employees presented a signed document to the board. The letter said the employees had no confidence in then-board president Doug Gouge or Mr. Humphrey’s leadership. The board suspended Mr. Humphrey with pay; he resigned less than a week later.
Into the breach stepped Peter Mendes, a former audit partner at major accounting firm KPMG. Mr. Mendes is considered a turnaround specialist for struggling nonprofits. He is plugged in to local foundations and was recruited to aid Pittsburgh Filmmakers by Lucia Campriello, a former development director with the arts group, after she heard him speak in June at a seminar on cash management for nonprofit executives.
“She told me that a lot of the things I talked about in my seminar were relevant to what her organization was going through,” Mr. Mendes said.
Now the nonprofit’s interim executive director, Mr. Mendes is tasked with making the arts group fiscally stable, viable and relevant in the digital age.
Mr. Mendes is nearly done with a rigorous financial analysis. He is dealing with a smaller board after it whittled itself down to nine people in January — “It wasn’t my idea,” he said — a move he endorsed. He is trying to restore the confidence of local foundations, which annually help cover the crucial gap between revenue and expenses. He is struggling to fill the void left by former large clients, such as Point Park University, which once sent droves of students to Pittsburgh Filmmakers but now teaches them in-house. And he is grappling with how best to keep up with technology in an era when full-length movies, such as “Tangerine,” can be shot on iPhones and reviewed in The New York Times.
Mr. Mendes said there are no plans to close the nonprofit.
“Money is tight,” Mr. Mendes said, but ”that’s not an option that we’re talking about.”
“We are considering everything,” he added. “I don’t expect anything radical to happen.”
Nevertheless, some significant changes recently have occurred.
On May 2, artist members voted 33-1 in favor of changing the organization’s bylaws. Now, power is held by a board of directors, not voting artist members. On May 6, Mr. Mendes fired Gary Kaboly, the organization’s longtime director of exhibitions, and Chris Smalley, manager of the equipment office.
Mr. Mendes declined to discuss specifics.
“Any savings we might have from changes I expect to redeploy by hiring other people in other positions. I don’t know if I’m going to hire somebody else to manage the theaters or run the theaters. We have no plans to sell or shut down the theaters or change the programming,” he said, adding that the Three Rivers Film Festival will be held in November.
Financial problems
The Pittsburgh Post-Gazette reviewed tax returns, audits, funding applications to the Allegheny Regional Asset District Board plus minutes of select board meetings obtained by the newspaper.
Mr. Mendes refused to turn over minutes of all board meetings. He would not disclose his salary. And he would not provide the latest IRS tax return — which will be publicly available later this month — saying the board is still reviewing it before today’s deadline. He said, however, that losses for the fiscal year ending June 30, 2015, were about $700,000, compared to a $464,000 loss a year earlier.
An audit completed in October states that cash flow continues to be a problem. The audit by Maher Duessel, certified public accountants, shows the nonprofit’s net assets dropped by nearly $700,000 to $4.4 million for the fiscal year ending June 30, 2015, compared to a $400,000 fall to $5.1 million for the same time period a year earlier.
”With cash flow concerns for the fiscal year ending June 30, 2016, the organization’s management has reduced staffing levels in order to reduce expenses,” the auditors wrote.
IRS documents that are available show the arts group’s operations such as exhibitions, a gift shop and marketing, all lost money between fiscal 2010 and fiscal 2013. The only program that made money was the Filmmakers education program, which generated a profit of $147,000, according to the latest available results.
“The problem with the exhibitions is that it costs us money, and there’s virtually no revenue related to it,” Mr. Mendes said.
Looking at the overall organization, fiscal 2013 showed a shortfall of more than $463,000 — a dramatic drop off compared to a $10,000 surplus a year earlier.
Meanwhile, total salaries, compensation and benefits for all employees grew to $2.9 million, a 53 percent jump from $1.9 million in fiscal 2009. Mr. Humphrey’s compensation increased by 37 percent, to $156,541 in 2013 from $113,905 in 2010. “My contract was renewed that year, and my salary rose in accordance with the contract,” Mr. Humphrey said.
Keeping balanced financially wasn’t the only challenge. Mr. Mendes described an organization rife with inefficiencies and one that failed to regularly perform a rigorous cost-benefit analysis of its programs.
After the shock of the overnight expansion from the merger, the arts group entered a long period of gradual change that it had trouble handling.
“Things snuck up on us,” Mr. Mendes said. “Things gradually changed over time, and it wasn’t recognized enough.”
While the organization struggled to keep pace with advances in film and computer technology, it was saddled with maintaining five old buildings: two movie theaters, a 104-year-old Point Breeze mansion with an annex and a warehouse in Oakland. Despite having five locations spread across the city, the organization had no single facilities manager.
Mr. Mendes pointed to other areas ripe for improvement, such as a need to streamline the arts group’s expensive marketing program, consolidate its purchasing decisions and put one person in charge of education.
Mr. Humphrey declined an interview request, though he responded to questions by email. Asked what he wished he had done differently, he wrote: ”I would have brought Pete Mendes on a year earlier. And I would have done what I was trying to do before I left, which was to question every aspect of every program, measure its benefit to the community and ask if we were the right people to manage those programs. This approach made a few people on staff nervous, who in turn were able to make others nervous.”
Mr. Humphrey maintained that the post-merger organization was indeed more efficient; he cited combined service contracts and a streamlining of development, accounting and marketing.
“My belief is that because of increasingly complicated programming, our financial reporting was not as keen as we would have liked. That is why Pete was brought on, so we could get a more accurate financial picture, and to understand how we could have underestimated cash flow the way we did.”
Loss of tuition revenue
According to the most recent tax return, about 39 percent of PF/PCA’s annual revenue came from tuition paid by nine local schools, including the University of Pittsburgh, Carnegie Mellon University and Point Park University.
By the end of 2011, Point Park had created a photography major in its journalism program. At a January 2012 meeting, the board learned that Point Park had suddenly severed its relationship with Filmmakers and was not going to send any more students, leaving a $206,000 hole in the budget.
In an email, Mr. Humphrey said, “The Point Park decision, which was delivered to us the day before we were supposed to sign a new contract with Point Park administrators, was indeed devastating. ... We always knew we were overexposed with one particular school, despite contractual relationships with Pitt, CMU, Carlow, LaRoche and several others.”
Point Park’s withdrawal had been brewing for a decade. In 2002, when Point Park announced plans to start its own film and video program, Mr. Humphrey told the Post-Gazette that the loss of that tuition revenue would cost his organization $600,000 annually.
In his written responses, Mr. Humphrey insisted that Point Park’s decision to start its own film and video program in 2002 is not relevant today.
“To say the loss of Point Park all those years ago is now somehow negatively affecting the organization in 2016 is absolutely wrong,” he said.
Many projects, many distractions
More than a dozen current and former board members contacted for this story refused to comment for the record. Longtime employees, who said they fear retaliation because Mr. Humphrey is so well connected, say a series of projects distracted him from doing his full-time job.
“Charlie basically checked out after the merger with the Pittsburgh Center for the Arts. He wasn’t paying any attention,” said Kathleen Rebel, registrar at Pittsburgh Filmmakers from 1997 to 2014, the only person willing to speak critically for attribution.
Mr. Humphrey took on numerous projects over the past decade.
In the summer of 2007, while earning a salary at PF/PCA, Mr. Humphrey became executive director of the Pittsburgh Glass Center, which was in financial trouble.
By the summer of 2008, Mr. Humphrey was dividing his time among Filmmakers, the Center for the Arts and the Glass Center. In the fall of 2010, he announced the Glass Center would merge with PF/PCA. But in 2011, the Glass Center’s board rejected the merger.
Still another project that claimed Mr. Humphrey’s time was Duquesne University’s sale of public radio station WDUQ-FM. The sale began in 2009 and ended in 2011. As the deal progressed, Grant Oliphant, a friend of Mr. Humphrey’s who at the time headed the Pittsburgh Foundation, asked Mr. Humphrey to conduct research and assist with marketing the station.
In 2011, again with the backing of Mr. Oliphant, other local foundations and a grant, Mr. Humphrey set up PublicSource, an online news website that does investigative reporting.
“I have been spread thin my entire adult life. It’s part of who I am,” Mr. Humphrey wrote in an email. “Do I think I managed priorities adequately? Yes, I do.”
A leaner arts group
Mr. Mendes is busy analyzing programs but always with an eye on the arts group’s core mission: providing exhibitions and education.
“We need to re-look at all of our programs,” Mr. Mendes said. ”It’s a question of how we do them and how well we do them.”
In February, Mr. Mendes and the board eliminated a $200,000 artist services program, an Arts in France program and a third initiative designed to teach artists how to exhibit, market and sell their work.
Besides poring over the nonprofit’s financials, Mr. Mendes is also expending considerable effort to restore trust with the foundation community. That is crucial, because foundations provide money for new initiatives, and nonprofits rely on them to close the gap between revenue and expenses. Leaders of nonprofits such as Pittsburgh Filmmakers/Pittsburgh Center for the Arts accept that their programs will run at a loss and understand that they must find the revenue elsewhere.
Mr. Humphrey’s sudden departure shook foundation leaders’ confidence.
“I was very surprised” by Mr. Humphrey’s exit, Mr. Mendes said, adding that he and his predecessor “were on the same page” and had “very good conversations.”
”The whole way that it was handled was extremely unusual and rare. Unfortunately the foundations were very upset about the way it was handled,” Mr. Mendes said. “To pull him out of the middle of that, or have him walk out of the middle of the situation, for whatever reason, was not a good thing and created a very difficult situation. ... The foundations were clearly upset at the thought that Charlie was no longer with the organization and it happened quickly and suddenly and without any notice to them or warning.”
Mr. Mendes said earlier this year that he had almost daily contact with foundation leaders, and with good reason.
In December, the Heinz Endowments slowed down the release of a $250,000 operating grant so the foundation could assess the situation. And Maxwell King, president and CEO of the Pittsburgh Foundation, said at that time that foundations pay “careful attention to a situation where things seem to be in turmoil. ... [Mr. Humphrey] enjoyed a special level of confidence” because of his experience. “It concerns us that he’s not the person in charge anymore.”
Regardless of who leads the organization, it will continue as a merged entity. Mr. Mendes, as well as Mr. Humphrey, both said they believe that the synergies that brought the groups together more than a decade ago still exist and provide a compelling reason for the organization to remain whole. Any concerns about the merger have more to do with how it was executed.
“What should have happened,” Mr. Mendes said, “was a lot more integration of the two organizations.”
Marylynne Pitz: mpitz@post-gazette.com, 412-263-1648 or on Twitter @mpitzpg. Jonathan D, Silver: jsilver@post-gazette.com, 412-263-1962 or on Twitter @jsilverpg.
First Published: May 15, 2016, 4:00 a.m.
