Background

In the fall of 2002, long-time director Mike Agranoff reached a certain life threshold and wanted to pass on some of his financial good fortune. At the time, he explained that his needs were few, and he'd like to see some of his money do more than sit in a bank. He assembled a team of eight advisers, and that team met at the home of Liz Pagan and Dave Kleiner on 2 November 2002. (Notes of that meeting are attached as a PDF to this entry, below.) As the meeting notes show, it was a matter of some controversy. Some felt the Folk Project could do a lot of good with a big infusion of cash, but others feared it might change the organization in unanticipated ways.

After some reflection, Mike brought the matter to the board in January 2003. His stated intent was to establish a fund that for the first five years would be used to augment the performer budget for our weekend Festivals (now "Getaways"). After five years, the Festival support provision would expire and the funds would be free for any purpose the board might deem fit. At first, Mike was thinking of an endowment in the form of securities worth about $50,000. He later realized it would need to be closer to $70,000 to generate the income he had in mind, which was about $1,000 per weekend. In his model, each Festival would draw 1.5% of the total value of the account, and the funds would continue to appreciate with a projected annual growth of about 6%.

The Board gratefully accepted Mike's generous offer, and there was much rejoicing. (Note that the January 2003 meeting predates the point when minutes moved to the wiki, but a PDF of those minutes is attached below.)

Evolution of the Endowment

For five years, the endowment continued as defined. The money was invested in municipal bonds with Ramat Securities, Mike's broker, which let him keep an eye on things. Each Festival was issued a check from Ramat representing 1.5% of the endowment's total value, and that was counted as Festival income. An internal grant.

In the spring of 2007, we felt it would be appropriate to transfer the funds to an account that was actually owned by The Folk Project, rather than an account under Mike's name. And since the Folk Project pays no taxes, having tax-free, municipal bond income offered no particular advantage. There were a lot of ideas in play, including a basic money market account, a CD "ladder," and a Wachovia investment account (our bank at the time). To sort this out, the board appointed Andy Koenig, as chair of an ad-hoc Finance Committee. After some research, he recommended that we cash out the bonds and transfer the money to an account at Vanguard.

That's what happened next. Andy developed an investment strategy document (available in the Library section of the wiki), The Folk Project opened an account with Vanguard's Wellington Fund, and Andy took on a management role. The value of the initial Vanguard account was $74,000.

In April 2008, the Festival stipulation expired, but the board passed a motion to "institutionalize" Mike's vision, agreeing to continue the Festival-oriented policy with no defined expiration date.However, there was a twist.

The fund was split into two portions by pumping the total into a local spreadsheet: a larger portion (designated for use at the Festival weekends only) and a smaller portion (which could be applied to non-Festival projects).Twice a year, Andy would “transfer” 1.5% of the balance of the festival account into the general-funds account. That accomplished several things.

• It let the general funds money be invested in a way that would earn a substantial return over the long run.

• It encouraged the board to be more thoughtful about spending it, since these "strategic" funds appear in a different section of the P&L

• It eliminated the need to move subsidy funds out of Vanguard. We cover the Festival's expenses out of our operational and reserve accounts and simultaneously move the amount that would have been issued as a check into the general funds portion.(Note that this apportionment of funds is only a spreadsheet concept. There's a single fund on the Vanguard side, although it is represented as two accounts within QuickBooks.)

In the next dozen years, the fund would perform exceedingly well, reaching a value of over $136,000 by 2019 Q1. That $136,000 represents about $115,700 for Getaway and $20,300 for general use. Subsidies have gone from $1,000 to $1,700 per weekend as the value of the underlying fund has increased.

Managing the fund is mainly a matter of watching its progress and reporting on same to the board. Andy continued in this role for roughly ten years.

Vanguard Guidelines

As mentioned above, funds are not actually withdrawn from Vanguard to subsidize the Getaways, the way they had been with Ramat. Since the Project has no cash flow problems, the Getaway is granted expense relief using a journal entry. We pay for it out of our usual accounts, but give the Getaway a break on its expenses in the amount that used to be covered via a check.

Moving funds from Vanguard to Wells Fargo checking would only mean that they'd move back to the Wells Fargo Money Market fund and ultimately back to Vanguard itself. A fair amount of work that would serve no real purpose. In that way, Vanguard subsidies are a Getaway budgeting concept, not a cash concept.

There have only been two withdrawals in the history of the Vanguard account. One to address a cash-flow emergency in January 2015 and a second to help finance a hardware investment for Horses Sing None of It in January 2017.

Transition of Responsibility

In February 2017, Andy opted to step down as the Folk Project's ad-hoc Financial Adviser and transferred the fund management responsibility to the Folk Project Treasurer.

As of this writing, the job involves only a few minutes a month: taking the fund value reported by Vanguard each quarter, plugging it into the allocation spreadsheet and updating the values in QuickBooks accordingly. Andy also turned over the spreadsheet he'd been using to calculate the Festival allotments and fund apportionment, and that sheet is still in use by the current Treasurer.