Takeaways and Recommendations from the Shambhala Financial Report

The August 15 “Finance Report to the Shambhala Community,” by Ryan Watson and Susan Engel, is a first look at the financial situation of Shambhala, which was previously largely opaque.

This document responds to the report in two sections:

A. Takeaways, which draws on the information in the report to identify important trends and conclusions about the state of Shambhala overall.

B. Suggestions, which builds on the Takeaways section to offer recommendations for steps that Shambhala’s leadership should take moving forward.

A. Takeaways

This section synthesizes elements of the report to draw broader conclusions about the current state of Shambhala.

1. Report is Encouragingly Competent

It was truly encouraging to see a lucid, clearly written, well-referenced, thorough report delivered on time by the Shambhala finance team.

This level of basic competence, transparency, and accountability were rarely shown to the Shambhala community in the run-up to the current crisis. In that sense, the report itself feels like a proof-of-concept for the much more competent, practical, sanely governed Shambhala that we must develop moving forward.

2. Report is Replete with Helpful Facts

The report is full of clearly stated facts that were not widely available prior to its publication.

Legal Structure of Shambhala

“Shambhala” is not a single legal entity. Its most central administrative functions and financial flows exist within four primary legal entities:

1. Shambhala Canada Society, a Canadian charity that oversees Shambhala’s operations in Canada.
2. Shambhala USA, a 501(c)(3) religious nonprofit registered in Colorado that is the USA analogue to the Shambhala Canada Society.
3. The Sakyong Potrang, a 501(c)(3) religious nonprofit corporation registered in Colorado that “holds the copyright and trademarks for core Shambhala teachings, practices, religious texts, and iconography.”
4. The Sakyong Potrang Canada, a registered Canadian charity that “owns Kalapa Valley in Cape Breton, Nova Scotia and the Kalapa Court residence in Halifax, Nova Scotia,” and “rents the Kalapa Centre office space in Halifax until the lease expires in March, 2020.”

In practice, these four entities have been “managed as a single unit” by substantially the same core group of people, “with funds flowing between them as needed.” This management and managing group represent the core administration of Shambhala.

The clearest functional division within this administration is between Shambhala Global Services, which refers to the management of Shambhala USA and Shambhala Canada Society, and the Sakyong Potrang, which refers to the management of the two Potrang organizations.

Shambhala also has other legal organizations that handle various aspects of its operations. Shambhala Europe GmbH is a subsidiary of Shambhala USA that handles management and administration of Shambhala’s European presence; Shambhala Mountain Center is registered as an independent 501(c)(3) educational nonprofit; and so on.

Financial Scale of Shambhala

The overall financial scale of Shambhala is around $20 million in net assets and $20 million in gross annual revenue:

Shambhala in North America has net assets of $22.5 million USD and gross annual revenue of $18 million USD.

Shambhala makes around a third of its money in donations, and most of the rest in program fees:

In 2016, members, donors, and patrons of Shambhala gave over $6 million USD. Program fees and merchandise sales brought in over $10 million USD.

Shambhala’s biggest expense is personnel, followed by direct program expenses and facilities expenses:

The largest consolidated expense line was the almost $5 million USD spent on salaries and contract staff expenses across the 130+ divisions. Direct program expenses and cost of merchandise sales totalled $4 million USD. Rent and facilities expenses were $3.5 million USD. Total expenses were $18 million USD.

These and numerous other practical facts are extremely helpful in understanding the present situation of Shambhala, and I appreciate the Finance Team summarizing them as clearly as they have.

3. Shambhala is Not Growing

As many people have long suspected, Shambhala is almost totally stagnant in terms of growth. This is not the picture painted in the words of the report, but the numbers themselves indicate otherwise:

The overall financial trajectory of Shambhala has been one of gradual growth since the founding of its corporate entities in the mid and late 1980s, as demonstrated by a few net asset (total equity) numbers for the North American Shambhala corporations in USD:

2002: $18 million

2010: $20 million

2016: $22.5 million

Taken at face value, this would imply an already-anemic annual growth rate of 1.6% during that period. However, these numbers have apparently not been adjusted for inflation, as there is no language to indicate that they have. Translating these figures into 2002 dollars to compare the real (as opposed to nominal) value of Shambhala’s assets gives the following totals instead:

2002: $18 million

2010: $16.5 million

2016: $16.9 million

This is not “gradual growth” or “steady growth” as described in the report, but rather well over a decade of negative growth. In other words, once we take into account that a US dollar was worth 33.4% less in 2016 than in 2002, Shambhala itself has actually lost value since that time.

If we follow the report in using net asset value as the measure of growth in Shambhala, we can conclude that Shambhala itself is certainly not growing, and is instead almost perfectly stagnant — which, in my opinion, better matches the overall intuitive picture of the mandala itself than does the more optimistic “steady growth.”

4. Shambhala is in a Financial Crisis

From the report:

Slowly building financial challenges have reached a tipping point. Unrestricted cash balances in all four entities are critically low, and this cash flow emergency is the most urgent financial issue currently being faced by the Department of Finance and the Boards of Directors of Shambhala Global Services and the Sakyong Potrang.

Despite the generally calm tone of the report, this “cash flow emergency” is clearly operating at the level of days. Presumably Shambhala is unable to make its September 1 payments with the cash on hand:

With insolvency months, and then just weeks away, a mortgage process was initiated on the Nalanda Translation Committee building as bridge financing. This loan has not been finalized, and every effort is being made to find other options to hold off insolvency.

As the report describes, Shambhala’s first response, not yet finalized, has been a quick and unceremonious move to mortgage the Nalanda Translation Committee house, possibly against the express wishes of the person who donated it.

5. Over 60% of Shambhala’s Debt is for the Mortgage on One Mansion in Halifax

To the extent Shambhala is facing a cash flow crisis brought on by debt obligations, it’s noteworthy that by far Shambhala’s single largest source of debt is the mortgage on the Kalapa Court building in Halifax.

As of August 31, 2018, the total long and short term debt of Shambhala Global Services and the Sakyong Potrang is projected to be approximately $1.4 million USD. Most of this debt is cross guaranteed by both the Shambhala and Sakyong Potrang corporate entities.

$858,000 USD mortgage (Sakyong Potrang Canada)

$412,000 USD line of credit debt (Shambhala Canada).

$150,000 USD miscellaneous loans (Shambhala USA)

Approximately $250,000 USD of this debt has been added in the past 12 months, and the remainder over prior years.

The $858,000 mortgage on the Kalapa Court in Halifax represents just over 60% of the entire debt being cited as plunging Shambhala International into a financial crisis. The Sakyong spends about one month per year at this residence, whose overall market value is around $2 million.

To state the obvious, this appears to be a serious misuse of Shambhala’s funds. Shambhala’s central management are making large monthly payments on a multimillion-dollar mansion that sits largely vacant, while virtually everything else across the mandala is starved for resources.

One thing that is not clear from the report is whether the mortgage on the mansion is actually new — that is, newly taken out to cover financial gaps in Shambhala. This seems possible, as 2016 contained a $1.9 million dollar transfer of the asset to the Sakyong Potrang, which seems likely to have been the full paid-off value of the house. If anyone knows the history of this mortgage, I would appreciate clarification.

Whatever the provenance of the mortgage, using an empty mansion as a glorified debt instrument seems irresponsible, and it seems clear that Shambhala could invest the wealth tied up in this property into channels that are much better positioned to yield a financial return, as I discuss later.

6. On “Parsonage” and the Interconnectedness of Everything

It seems important to confront the report’s carefully structured, and frequently repeated, insistence that the Sakyong’s “parsonage” and “lineage” expenses are paid only by direct donation, not by “Shambhala funds.” This is phrased first, and most succinctly, as the report summary’s fourth bullet point:

In 2017, no Shambhala funds were used to pay compensation for the Sakyong or Sakyong Wangmo or lineage or parsonage expenses. These expenses are currently funded by direct donations to the Sakyong Potrang entities.

This may be technically true as a standalone statement. However, what it clearly intends to imply, which is that the Sakyong’s personal expenses are not borne financially by the general Shambhala sangha, is certainly false, for several reasons.

First, as the report itself says, most of the debt facing the Shambhala central administration “is cross guaranteed by both the Shambhala and Sakyong Potrang corporate entities.”

That means that we are on the hook for the Sakyong’s living expenses, whether we donate to the Sakyong Potrang or not. If those expenses create an unsustainable debt burden, Shambhala’s management will not — and, in fact, legally cannot — simply cut that debt loose and let the Potrang relate to it. On the contrary, Shambhala will do exactly what it has already started to do: fire core staff, reduce operations, and mortgage and sell properties elsewhere in the mandala.

This is not merely technical or speculative: again, remember that an absolute majority of Shambhala’s debt is the mortgage on a single house that hosts the Sakyong for less than one-tenth of the year. Shambhala is, very practically and very much in the present situation, being forced into closing down other functioning parts of itself to service that debt.

Second, the details of the $500,000 annual transfer from Shambhala Global Services to the Sakyong Potrang are, by the report’s own admission, almost completely nontransparent:

In recent years, these four entities have been managed as a single unit, with funds flowing between them as needed. [emphasis added] It has always been a challenge to unambiguously define the different functions and activities of Shambhala Global Services and the Sakyong Potrang. While Shambhala Global Services is community-focused and the Sakyong Potrang is oriented around the activity of the lineage, the specific allocation of any individual expense between these two is not always cut and dried. [emphasis added]

The report itself admits what is clearly the reality: no one has been carefully monitoring financial flows between Shambhala Global Services and the Sakyong Potrang. For the report to argue, in effect, that Shambhala has not been paying the Sakyong’s expenses belies the fact that Shambhala itself doesn’t know who pays for what, and that until July of this year no one had an incentive to look closely. (The following section discusses this piece of the report in more detail.)

7. Shambhala’s Annual $500,000 Transfer to the Sakyong Potrang is a Bastion of Nontransparency

The report is clearly and lucidly written throughout, with one exception:

In 2017, Shambhala USA and Shambhala Canada transferred a little under $500,000 USD to Sakyong Potrang entities. These transfers funded leadership functions, teaching support, and business expenses related to leadership and management roles that provided services to both Shambhala and the Sakyong Potrang.

Whatever a “leadership function” that is “related to leadership and management roles” which, themselves, “provided services” might be, it seems clear that the report doesn’t wish to get into specifics.

The clear general picture is that the Sakyong Potrang was spending money from Shambhala freely to support both Shambhala’s broader goals and the Sakyong’s personal expenses. In the previous environment of total operational and financial intimacy between the lineage and Shambhala’s central administration, no one saw an issue with expenditures being intermingled in this way. That environment persisted until the present crisis — so, as a practical matter, it is probably difficult for the report authors themselves to track down how each piece of that $500,000 was allocated.

However, that this section should be totally lacking in detail supports the speculative conclusion that this $500,000 contains known expenditures that the community would find objectionable were they made public. Another line in the report gives circumstantial basis for this suspicion:

Another round of cuts of approximately $500,000 has been made in the past two months, to take effect between July 31 and October 31. The majority of these cuts have occurred within the Sakyong Potrang entities, including the positions of the Kalapa Councillors themselves, some of whom were paid, and the termination of much of the teaching, writing, and administrative support for the Sakyong.

Only a few of the Kalapa Councillors were paid; the Kalapa Council’s yearly personnel expense was surely not close to the $500,000 cut from the Potrang’s budget. The cut also matches, almost exactly, the amount of the yearly transfer to the Potrang from Shambhala; and the cut has been both quick and relatively frictionless, with little or no sense within the broader community that services or roles that are vital to the normal operations of the Shambhala mandala itself are being suspended.

In sum, it seems reasonable to suspect that the just-removed several hundred thousand dollars of Shambhala-funded personal support for the Sakyong included expenses and personnel positions that the community would not approve of if it knew their nature or cost.

The report authors would do best to stem this sort of speculation (which is also ongoing on social media) about the “mystery $500,000” by revealing anything they know about how that money was actually spent. The report is a wonderful first step toward transparency, and should go the full distance.

8. Shambhala’s Leadership Culture Has Prevented Growth and Produced the Current Crisis

The present crisis is not merely, and in fact not primarily, a result of the specific expenses discussed above. Rather, it results from many years of comprehensive mismanagement by Shambhala’s central leadership.

The report itself contains enough information to draw this conclusion. In describing Shambhala’s present “cash flow emergency,” the report outlines contributing factors:

Many factors combined to create this situation, including but not limited to:

-An investment in increased staff in 2016 and 2017 that did not generate the expected revenue to cover the increased costs of these positions.

-Increased revenue generation was an expectation of increased staffing in 2016, however it was not specifically assigned to any particular Department, Pillar, or group to manage.

-Starting in 2016, accounting complexity increased. The Department of Finance took on accounting for the Sakyong Potrang Canada in January 2016 and Sakyong Potrang in January 2017. Regular management reporting to combine the results of all four entities and to understand the full combined operations of the Sakyong Potrang and Shambhala entities was not developed in a timely manner.

-Shambhala’s volunteer Treasurer retired in mid-2017 after 15 years of service.

-Shambhala’s Director of Finance was on leave or part time status for much of 2017 due to a family tragedy.

Every one of these first five bullet points (there are others) points clearly to mismanagement as the root cause of Shambhala’s financial crisis. Statements like the ones above have become normalized within Shambhala, but they are deeply dysfunctional.

Remember, Shambhala is a global network of nonprofits with around $20 million in annual revenues, servicing a spiritual community with many thousands of active practitioners. The following conversation should not be happening in that context:

“Why is your organization in a cash flow emergency?”

“Many reasons; here are the first five. First, we hired staff, but their hiring didn’t increase revenue by enough to cover the expense. Second, and relatedly, we realized that we’d made it no one’s particular business that the new hires increase revenue, despite really hoping that this would happen. Third, we couldn’t get it together to do any financial reporting for around two years, so we were flying blind. Fourth, our Treasurer, who worked as a volunteer for 15 years, finally retired and wasn’t replaced. And fifth, our Director of Finance was not present for most of last year, and we made no attempt to replace or supplement that person’s work to ensure a continuity of effective financial administration.”

These patterns of dysfunction are not localized to Shambhala’s present financial situation: they are systemic. They reflect a thoroughly paralyzed leadership culture that is the single root cause of Shambhala’s failure not only to secure itself financially, but also to relate properly to sexual abuse within the sangha, to grow the Shambhala center network or practitioner base, to forge connections with other communities, to innovate — or, more broadly, to meet any meaningful goal of any kind that would require steady and effective central leadership.

To pick one example from among the 2016–2017 hires the report references: Aarti Tejuja was hired and salaried to lead the newly established Shambhala Office of Social Engagement.

In the years prior, Aarti had helped nurture a previous project, Speak Up Chicago, into an extremely impactful community resource built around an innovative new way of offering the vision of basic goodness to an underserved population.

Enmeshed in Shambhala’s leadership culture, however, Aarti’s first two years in her role resulted in many grassroots connections, but few tangible results — certainly none approaching the scale of what she was able to accomplish in less time at Speak Up Chicago. Numerous details of Aarti’s employment during this time clearly indict the Shambhala leadership’s culture of paralysis as the problem. For example, SOSE has endured a massively protracted — and ultimately unsuccessful — campaign to secure a simple informational website.

This example of the “Shambhala hug of death” — Shambhala’s power to almost totally frustrate the aims of driven, competent individuals by ensnaring them in a stagnant, dysfunctional organizational culture — is one of dozens of possible case studies that demonstrate the fundamental principle of Shambhala’s central leadership over the past several years: nothing can get done.

B. Recommendations

This section builds on the information in the report to outline suggestions for how Shambhala should move forward.

1. Sell the Kalapa Court Mansion in Halifax

We outlined the financial picture of the Kalapa Court mansion above, in Over 60% of Shambhala’s Debt is for the Mortgage on One Mansion in Halifax.

In my opinion, we should not be mortgaging or selling other, functional assets to pay for this mansion. Rather, we should sell the mansion. The Sakyong could rent a $1,000-a-day mansion during his stays in Halifax, and Shambhala would still pay less than it does in mortgage expenses on an $800,000 mortgage (which come to approximately $50,000 per year).

Shambhala would also immediately receive many hundreds of thousands of dollars in proceeds from the sale. Those should go to fund personnel expenses to pay a robust and competent core team that can get Shambhala on its feet operationally; see “Grow, Don’t Cut, the Leadership Team,” below. Shambhala can benefit much more from hiring five additional full-time staff for a period of five years each (which is approximately how much the proceeds from selling the mansion would likely fund) than it can from keeping the mansion itself.

As a last thought on this topic, supporting Shambhala in liquidating the Kalapa Court mansion as part of a process of creating real operational stability would be a wonderful gift by the Sakyong — a way to show that, when given the opportunity, he wishes to put the community’s interests before his own. He doesn’t have many practical opportunities to show that generosity right now, and this is one possible step that also has important earth-level implications for the mandala itself.

2. Grow, Don’t Cut, the Leadership Team

As the report indicates, Shambhala is currently trying to cut its way to stability:

The immediate goal of the current leadership is to create a more stable footing at the centre of the mandala through budget cuts and potentially asset sales.

“Budget cuts,” so far, have largely meant cuts to personnel. It’s easy to imagine this trend continuing, cutting the core leadership team down below even the 13.2 full-time equivalent positions that will be Shambhala Global Services’ staffing complement at the end of October.

There are discouraging indications that this mindset pervades not only the report, but thinking by the current transitional leadership team more broadly.

For example, from the August 18 message from the Shambhala Transition Team: “Members of the Interim Board will be volunteers and part-time” — exactly as were the outgoing Kalapa Council.

In my opinion, these leaders, who will be “ultimately responsible for all global services and activities of Shambhala” during the next year, should be paid to look after Shambhala’s best interests during a time of crisis.

We as a community need to begin asking ourselves whether volunteers or paid people are more likely to:

• Be professionally qualified and trained in their role.
• Be able to rely on a secure personal situation when carrying out their role.
• Prioritize doing the best job in their role over competing life priorities.
• Be available to go “above and beyond” in their role when needed.
• Hear and adapt to oversight, feedback, and criticism from others in carrying out their role.

Shambhala doesn’t need to shrink the leadership team; it needs to grow, pay, and empower that team. The money is there — it’s impossible to argue otherwise when Shambhala brings in $18 million a year and is voluntarily paying an $800,000 mortgage on a mostly unused property. The only question is whether Shambhala can find the organizational will to finally resource its leadership properly.

We are not going to starve ourselves to growth. Transitioning Shambhala to another underresourced, overmatched, volunteer-led leadership team will lead us back only to the paralysis from which we’re just emerging, and which we now have a once-in-decades opportunity to disrupt.

3. Empower the Team, Do Things Right, and Grow Revenue

The report mentions that Shambhala’s recent hires have not generated revenue for the organization. As we have already covered, this is not because growing revenue is impossible — or even necessarily difficult — but because Shambhala’s leadership team and culture had the effect of blocking all attempts by the new hires to improve Shambhala’s situation.

In the past year, I have spoken to two people who, separately, effected major (over 20%) improvements to top-line revenue at Shambhala Mountain Center and the New York Shambhala Center in the space of months. They did this by following basic strategic principles, such as offering popular, well-attended programs more often. These and other commonsense practices represent a great deal of “low-hanging fruit” across almost every aspect of an organization that has for years or decades simply failed to look at practicality. They are immediate, and immediately realizable, opportunities to grow revenue and improve operations.

In other words, Shambhala should not understand its present financial situation as a given. Rather than trying to get comfortable with a steadily shrinking pie, it should grow the pie.

Growing Revenue: Being Strategic at the Center Level

Each of the the two conversations I had with people who helped grow center revenue indicated that almost every center can take simple steps toward a more strategic approach to programming. For example, city centers can make sure to offer sequential programs in the proper sequence; and both city centers and land centers can be more rigorous in using past attendance data to inform programming decisions — in particular, to ensure that popular, well-attended programs are offered regularly.

So one function of Shambhala’s central leadership should be to help centers operate more strategically. Center directors need, and for years have not gotten, support from the center of the Shambhala mandala in the form of financial literacy training, actionable pricing and fundraising strategy, marketing best practices, and so on. A central leadership team that is large, properly resourced, and empowered to act should be finally able to begin providing this support, and this should significantly improve the financial performance of individual centers.

Growing Revenue: Lots of “Low-Hanging Fruit” by Doing the Fundamentals Right

Again, because Shambhala has not been relating to fundamentals, a huge amount of “low-hanging fruit” exists across every aspect of its operations. If Shambhala’s incoming leadership team is able to begin relating properly to these fundamentals, Shambhala’s financial performance should rapidly improve. This, again, argues for a larger — and better resourced, more empowered, more focused, more professional — leadership team, not a smaller one.

I’ll take a few examples of this “low-hanging fruit” from my own profession, which is web development. A first example is Shambhala’s search engine optimization (SEO). SEO means how readily a webpage or website comes up in Google search. Although I’m not an SEO professional, I know enough to be able to evaluate whether Shambhala has been following a clear SEO strategy.

The first result in a Google search for “Shambhala” is now the Shambhala Music Festival, an annual festival in British Columbia first held in 1998. For this festival to outrank the entirety of the Shambhala lineage — which has more than a hundred land and city centers across three continents, as well as an entire spiritual lineage worth of unique content, organized around multiple bestselling books — indicates a clear, and reversible, failure by the organization to relate strategically to search engines.

When I lived in Boston, the local young meditators’ group at that time would receive drop-in attendees every week who had Googled “meditation Boston” and found the Boston Shambhala Center. That center now ranks third for “meditation Boston,” behind a beginner meditation studio called Mindful Boston and another result. The New York Shambhala Center ranks sixth for “meditation New York” — behind, among others, MNDFL, the recently founded for-profit meditation studio by former Shambhala teacher Lodro Rinzler.

Hiring a paid SEO expert — not a willing volunteer — to implement a coherent SEO strategy across the Shambhala mandala would almost certainly do more than pay for itself, in the form of significant increases in first-time visitors to both land and city centers. Organic search is one of the most powerful marketing tools in existence, and Shambhala has clearly not had a vigorous SEO strategy in the recent past.

As a second example of the ramshackle quality of Shambhala’s online presence: the first three program results in a Google search for “Shambhala Level II” are for programs whose dates have already passed (1 2 3) — including two from 2015.

In other words, Shambhala students are not being systematically encouraged to take the next step on their practice paths, and made aware of upcoming opportunities near them. On the contrary, they have to first go proactively looking for this information, and then to fight against Shambhala’s carelessly cluttered online presence to find it.

As it turns out, Shambhala’s program search tool (which itself is difficult to use and often incorrectly returns “No results found”) reveals 19 upcoming Level IIs, including one that is offered next weekend and within driving distance of my house. However, that information is difficult to find using the methods, such as Google, which are most familiar and easiest to use. The opportunity cost of those missed connections — that is, the potential revenue foregone — is difficult to quantify, but must be appreciable.

Any number of fixes for this problem are possible. One might be to create for each standardized offering in Shambhala (for example, “Shambhala Level II,” “Rigden Weekend,” and so on) a dedicated page on shambhala.org, which all past offerings of that program, from any land or city center, would forward to. The page would describe the program in enticing language that is also optimized for search, and then present a list (pulling from the same data as the Shambhala program search tool) of upcoming offerings of the program. This proposed solution would take several months for a trained, paid professional to implement — and, again, should more than pay for itself in increased program revenues across the Shambhala mandala.

The point is not that addressing these two opportunities is what will reverse Shambhala’s financial situation. The point is that there are dozens of similar opportunities— across practical topic areas like marketing, advertising, financial planning, social media, and technology — that are simply “sitting there” waiting for attention from a paid, trained, competent team that is also truly empowered to make positive changes.

Thank you for reading; and my thanks to the report authors for an important first step toward a better Shambhala. I would love to hear your thoughts on any of the ideas presented here in the comments below, or on Facebook.

Image credit: shambhalaimages.com