The Magazine of
Culture and Community

Fall 2007

An Ongoing Series of Free Lectures and Presentations that Celebrate the Creative Okanagan

Okanagan Institute

4:30pm Thursdays
at Hanna's Lounge

Click here for schedule
and information.

Arts Council of the
Central Okanagan
8-1304 Ellis Street
Kelowna BC Canada V1Y 1Z8
Email: Click Here.
Elke Lange, Executive Director
Wendy McCracken, Coordinator

Copublished by
Wheat King Publishing
Jeff Pexa, President
Telephone: 250.491.0169

Produced in association with
Okanagan Bookworks

Okanagan Arts, Fall 2007

Julia Trops: The Art of Charity

Most artists get requests from charitable organizations to donate art for a raffle or a silent auction as a way of raising money for their causes. Charities recognize art as a desirable commodity and are aware that the local community will respond favourably to artwork as something worth obtaining. Charities also request items from retail stores, such as kitchen and garage appliances, jewellery, or services that include housekeeping or personal grooming among others.

It makes it all the more unfortunate then when charities often do not realize that there is a difference between a widget, such as a coffee pot, and an artwork. The difference is that retailers pay wholesale prices to obtain coffee pots and the rest of their inventory from wholesalers and manufacturers, who also deliver the merchandise. Retailers then process the merchandise and display it for sale with a suitable retail markup.

Artists on the other hand, have to conceive the idea, purchase and transport the necessary materials, and then create the final piece by painting, drawing, or sculpting their vision. There is also time, energy, and human experience, which they translate into something tangible through artwork; a process that can take days, weeks, months, or sometimes years.

The merchant and the artist would be on equal terms if the merchant were to create his own coffee pot, through his own vision and unique design, from materials that he had to purchase and transport, on his own time, and through his own experiences. Therefore, until this day occurs, there can be no correlation and comparison between regular merchants and artists in terms of the value of their donations to fundrais-ing events. At such events, at the end of an auction, the final result may be that the coffee pot received a price close to its wholesale price, but seldom does the artwork achieve a price even close to half of its retail value. This hurts the artists both in terms of self-worth and because their work is devalued financially.

Why Donate?

As a business person, artists ask themselves why they should donate their art to charities. Is it just the satisfaction of being asked? Do they expect to get some exposure out of it? If so, what kind of exposure? What are their expectations are they reasonable for the artists' location and size of business? What are the timelines the charity gives in terms of raising funds is the event next week or next year? What kind of advertising will be used: public or community TV, radio, websites, newspapers, newsletters, magazines colour or black-and-white ads? Is advertising going to be focused on an individual or a group of artists? Is there any long range impact of the donation? Is the charity registered with the Canadian government? Will a tax receipt be issued that can be used for income tax deduction? For what amount? If the artist is not being paid for the artwork, is the media attention received enough to cover the cost of the item or service? Is it an equal exchange? These questions are necessary to consider when it comes to making a business decision to donate to such events.

Charities and societies used to be loosely managed organizations which emerged to fill needs as they arose. Today, many have adopted a business model of operating, complete with strategy and visioning sessions, business managers and executive directors, accountants and bookkeepers and others. They realize that goals must be set, funds invested in advertising, operating expenses tracked, and evaluations conducted of their fundraising ventures in order to ensure they reach their financial goals. In short, they have become a business.

Fundraising Events

Charities, as part of business planning for the year, conduct a number of events to raise funds and awareness of their cause. Two of the most popular are Silent Auctions and Raffles. Less well known, but considered by some the way of the future, are Cooperatives (which includes Art Markets) and Experiential Exhibitions. For the Artist, these fundraising events have possibilities as well.

Silent Auctions seem to be the method of choice for many charities as part of their effort to raise funds. If such auctions are handled in a sensitive manner, both the artist and the organization could benefit from this venture. Here are some guidelines for mutually beneficial relationships:

Reserve price on the artwork set at 50% of its retail value. For example, if the artwork is valued at $1000, the reserve price would be $500.

Both the artist and the non-profit association share the revenue generated by the artwork 50/50. A tax receipt would be written for the value of the artwork minus the 50% revenue portion paid back to the artist. If the artwork was $1000 and $700 was raised, with the artist and non-profit each receiving $350, the tax donation to the artist would be $1000 - $350 = $650.

The non-profit organization purchases the artwork outright for $1000 (plus taxes), and the artist immediately gives them back $500 (50% of the value). The non-profit organization has a reserve price on the silent auction of $500. The artist receives a clean sale for the books, the non-profit immediately registers a clean donation of $500 from the artist; plus, if the artwork is sold for even the reserve price, they have made their funds back. If they do not sell the artwork at that time, it is available for another revenue-generating event.

Raffles reach the general public who can afford to pay $2/ticket or 3/$5 and generate much more income than a silent auction. There is also a better chance of media attention with a raffle because prizes are generally limited to 3 or 5 items. There is more work for the charity when doing a raffle, but the return is proportional. Raffles can also work in conjunction with Cooperative ventures.

Art Market Cooperatives:The charity creates an Art Market with focus and emphasis on the charity. Booth fees are collected from the artists (clean revenue). If the artist donates an artwork of $100 or more, the booth fee is reduced by $100. Also, participation is encouraged when a percentage from sales goes to the non-profit organization for which the artists would receive a tax receipt.

Experiential Exhibition Cooperatives: Artwork is on display and available for sale, with a percentage of sales returning to the non-profit organization. When artwork is purchased, the client receives a "relevant" piece of art and supports both an artist and a community organization. A win-win all around for such an obvious mix of talents. This is the way of the future as we become more and more experiential. No longer are people just going to a musical event, they go through a musical and a visual experience. This combination has obviously a greater impact, which translates to greater value, which in turn renders more attendance.

A CV entry: When an artist is asked to donate an artwork, or the time in creating an artwork, there exists something far more beneficial for the artist rather than just an immediate fund exchange. The long range impact of an artist donating an artwork to a collection, or a public art gallery exhibition/fundraiser, which may then be listed as a CV entry, could have far reaching implications for an artist's future career. An example of this would be the recent City of Kelowna "Spirit of Kelowna" workshops, led by internationally reknowned sculptor Gert Maas, where artists and the public were asked to create medallions celebrating their idea of the Spirit of Kelowna. These medallions will be on permanent public display in City Hall, will be in the City's Public Art Collection, and can now be listed on the artist's CV under Public Art Collections. The CV is an artist's ambassador when applying for grants, exhibitions or gallery representation, and the more rounded it is, the better.

Taking Care of Business

There are two ways to approach the business of donating to a charity. This should always be done with an eye on the possibility of being audited sometime in the future. Auditors like really clean and simple equations. It makes their jobs easier; and if they have an easier job, you will have a smoother audit.

Both the artist and the charity face a number of advantages and disadvantages to each method of donation.

The outright donation

The advantages to the artist: outright donations enable an artist to help and be useful, to have a positive impact on one's community, to support a cause one believes in, and possibly create a CV entry. The disadvantages: the value of the artwork is nebulous and unclear, and the work may be sold for less than its retail value.

The advantages for the charity: they have a community member supporting their cause, and they have an item that will raise funds to help achieve their goals. The disadvantages: they have a one-sided relationship with the artist.

Tax implications: If a tax receipt is given for an outright donation, artists are obligated to enter into their records a sale of equal value to the tax receipt. Taxes must be paid on this amount as well. For example, if the artwork is $1000, and the artist receives a tax receipt of $1000, the entry on their books will be $1000 plus applicable sales taxes (i.e., GST/PST). If the artwork is valued at $1000 and they receive a tax receipt of $500, the entry on their books will be $500 plus sales taxes. These taxes must still be paid by the artist to the government.

The outright purchase

The advantages to the artist: outright purchases enable them to help, be useful, to have a positive impact in the community, to support a cause one believes in. The artist has a sale on record, and the work is not devalued. There are also no negative feelings, such as being taken advantage of; it provides valuable income for that month; and there are no misgivings regarding the value of the artwork. There are happy auditors and happy artists.

The advantages for the charity: they have a community member actively supporting their cause, they have plenty of available items that will raise funds, they can recoup 50% of their cost right away from a clean donation. They also have a two-way relationship with the artist the charity supporting the artist and the artist supporting the charity. Additionally there is no ambiguity to the fact that the charity respects the artist's work, the value of the donation is absolutely clear, and there are happy auditors and happy directors. The disadvantages for the charity: there is an initial outlay of funds.

Tax implications: if, for example, the charity purchases the artwork outright for $1000 (plus taxes), and the artist immediately gives them back $500 (50% of the value), then when the non-profit association uses a silent auction for the artwork as a method of raising funds, the non-profit will register a reserve price on the silent auction of $500. The artist receives a clean sale on their books, the non-profit organization registers a clean donation of $500 from the artist; plus, if the artwork is sold for even the reserve price, they have their investment of $500 plus the artist's cash donation of $500. They will have helped a member of their community, and that member will have helped them.

In five years, when the auditor comes calling, all the amounts on the books are clear and precise and substantiated. Numbers in, numbers out all on a piece of paper that allows minute tracking.

The Gallery Factor

Galleries have a wider business base than an artist, with a larger leeway for donation possibilities. However, even they have an eye on the bottom line, and seldom do they donate outright, unless it is to their largest clients.

There are many more ways galleries can have an impact on non-profit associations. Sometimes the gallery can approach the artist to donate on their own, or can pay the artist outright (usually 50 or 60% of the retail price) then donate their commission (50 or 40% of the retail price). The gallery can ask artists to donate the artwork and they will donate their commission, with two receipts being issued from the non-profit society; one to artist, one to gallery. Galleries can work in partnerships with other businesses such as a framing shop and all of the above would apply, plus the framer may donate a frame. And lastly, the charities would pay the gallery a percentage of the raised revenue.

The impact on the artist of losing a piece of saleable work and possible revenue is much reduced by the broader base of the gallery. And, regardless of the manner of funds being raised, the tax implications remain the same as those for an artist. Clean donations are preferred because they are solid and concrete evidence of funds exchanging hands between two parties.

The True Bottom Line

What does an artist want from his/her work? Respect. Credibility. To be appreciated. To be an independent, viable thriving business. One way this usually manifests is by financial return, financial success. An artist's reputation and credibility is built upon public recognition. We all try to do what we can to support non-profit organizations. But most people don't realize that while artists are recognized as being abundant, the financial support by their local community and the respect for the artwork is simply not there.

Many people I have talked to either wait for the silent auctions to come up or go to outside centres "for real art" because they have to "pay" for it. This has proven a detrimental impact of artists donating to the charities in trade for exposure. The return has not been equal, and it is time to change this. In an ideal world, artists would donate with no strings attached, out of the goodness of their hearts, for an altruistic reason. But we are a business as well, just as the charity is.

Author's note: The above information is based on the requirements outlined in the Canada Revenue Agency's Information Pamphlet P113, Gifts and Income Tax Pamphlet and Bulletin IT-504, Visual Artists and Writers. Tax receipts used for income tax calculation may only be from charities registered with the Canada Revenue Agency.