From its modest ground-floor offices at 700 Main St., the Arts Council in Buffalo and Erie County has operated as a fixture on Western New York's arts scene for more than 36 years.

The Arts Council, which distributes funding and provides assistance to artists and small arts groups, advocates for the support of the arts in the corporate and political arenas. It has long been the go-to agency for questions about the arts in Western New York.

Celeste Lawson, the council's executive director since 1996, is a major contributor to the cultural conversation in Western New York. She appears at City Council meetings, hosts discussions among arts leaders and legislators, and passes out eloquent quotes to the media like so much Halloween candy.

But in June, when the New York State Council on the Arts slashed its contributions to the local council's budget by 75 percent amid allegations of mismanagement and lax accounting practices, Lawson's legendary largess suddenly dried up.

"We have pledged to focus on the positive aspects of our work and of our arts and cultural community," Lawson wrote in a terse reply to an e-mail requesting an interview in August. Since then, speculation has continued to mount among local arts supporters about the council's ability to survive this latest in a series of large funding cuts.

With the loss of operational funding from New York State, the Arts Council is now in major financial trouble. According to a 2008 audit, the Arts Council has a deficit of $137,718. The audit also indicates that funding from the state council made up 44 percent of its revenue in 2008. Without that support, it is unclear how the Arts Council will continue to operate.

The state council also decided it will wrest its major arts granting program from the agency's control because of concerns about its fiscal stability and doubts about Lawson's competence as a manager.

On a rating scale the New York State Council on the Arts uses to evaluate funding applications, the local arts council received a score of just 2 out of 9 for managerial competence, a direct judgment of Lawson's performance.

The rating was tied closely to the Arts Council's submission of an incomplete audit and the difficulty the state council had in reconciling accounting discrepancies it found in the Arts Council's filings.

"The Arts Council runs an insurance program, and they collect insurance premiums. Those weren't listed as restricted, which made the panel very, very concerned," said Heather Hitchens, the state council's executive director. The audit in question lists $114,828 from the insurance program as unrestricted revenue.

At a June meeting of the state council, which can be seen online at the state council's Web site, panelists raised a range of issues, from the mislabeling of restricted funds to longstanding concerns about the strength of the Arts Council's board and an administrator who was not "on the ball."

>Cuts beget cuts

Concerns about the Arts Council's management have begun to emerge even from within the organization. Jerry Burgin, the council's part-time business manager, raised doubts about the organization's ability to continue in its current financial state.

Asked if those doubts extended to Lawson herself, Burgin responded, "Let's just say the board needs to make a serious change if we are to continue." He went on to say that the council's "lack of effectiveness" is the result of "not the right people running the show."

The state council's move comes as the latest and largest in a series of cuts from key funding sources over the past five years. Those have included a major cut from Erie County, on the advisement of its Cultural Resources Advisory Board, and the retraction of a three-year grant from the John R. Oishei Foundation only halfway through its administration.

Edmund Cardoni, executive director of Hallwalls Contemporary Arts Center since 1991, has been a vocal supporter of the Arts Council's role in the Western New York arts scene, but an occasional critic of its effectiveness. Because of the state council's funding cut in June, he said, the organization has hit a major obstacle it may not be able to overcome.

"An arts council I don't think can exist without a very favorable opinion at NYSCA," Cardoni said. "Celeste is always an eloquent and principled advocate. But having to manage the business side of an organization with too small of a staff and not enough funding, that's preventing the organization from being as effective as it could be if it had adequate resources. I think this has been a problem for a long time. It's really undermined and weakened them as an organization. And it may be irreparably."

Paul Hogan, vice president of the Oishei Foundation, which provides funding to a wide range of community, arts and academic initiatives in Western New York, agreed that the Arts Council's current predicament has been brewing for years. Without going into specifics, Hogan acknowledged concerns with Lawson's management, but stressed that the problem is rooted in a deeper lack of focus that has dogged the organization throughout its history.

"Celeste has her own set of problems, but so did other directors and so did other boards," Hogan said. "One of the problems that has existed at the Arts Council for many years has been a sort of mission creep. It wasn't really clear what they were doing. Not to say they weren't doing anything, but it wasn't really clear to many people what they were supposed to be doing."

>A new model?

The Arts Council's scattershot array of activities, from art exhibitions and publications to its insurance program and its efforts to advocate for the arts with politicians, has led many in the Western New York arts community to accuse the Arts Council of being spread too thin.

"An Arts Council is supposed to be an arts service organization for other organizations and individual artists. Trying to do exhibitions, trying to do fund-raisers, that's been part of the problem," Cardoni said. "Who can organizations go to to get a helping hand, if the Arts Council, which is supposed to lend a helping hand, needs a helping hand?"

Lawrence Brose, executive director of CEPA Gallery, praised the Arts Council for its role in helping organizations find funding, but said that a new approach is needed.

"I think that, and I've been saying this for some time, that we need to see a new model for what an arts council can be," Brose said. "I don't know what that model is. I know that there are arts councils in other parts of the country that function differently."

In New York State, other arts councils function with much the same broad mission as Buffalo's council, but they are generally better staffed. The Arts and Cultural Council for Greater Rochester, an organization with a similarly broad mission and a nearly identical collection of programs and initiatives, has five full-time employees. The Buffalo council has one. Sarah Lentini, president and CEO of the Rochester council, said the Rochester community hasn't expressed a concern about the council's mission being too eclectic.

Lawson, for her part, noted that the Arts Council's work usually happens far beneath the radar and therefore doesn't receive the same level of attention as more high-profile arts groups.

"We are largely a 'behind the scenes' organization in a lot of what we do, which can certainly have its drawbacks," Lawson wrote in a recent e-mail to The News.

>'They had issues'

There is no question that the Arts Council has now alienated its main sources of funding. Erie County, which released its proposed 2010 budget last week, allocated only $7,000 for the organization out of its arts and cultural budget of more than $5 million. Compare that to 2004, when the county provided $165,000 to the organization.

Representatives from the county's Cultural Resources Advisory Board, which makes funding recommendations for arts groups to the county executive, were not authorized to speak about their past decisions to slash the Arts Council's funding. County spokesman Grant Loomis wrote in a statement that the board's recommendations for funding arts groups "are based, in part, on the financial viability and accounting practices of the organization."

Hogan, of the Oishei Foundation, said that the county's decision to cut funding for the council was "absolutely performance-based."

"They had their own set of issues and standards that they said the Arts Council wasn't performing. That happened after [the Erie County advisory board] had been complaining about the Arts Council for years," Hogan said. "It's not like they made a snap decision about that."

For Francisco M. Vasquez, chairman of a three-year-old organization called Advancing Arts and Culture, based at Buffalo State College and funded in part by the Oishei Foundation, the Arts Council's problems are symptomatic of a larger issue among Western New York arts and cultural groups: a pervading lack of direction, vision and strategy.

"It's very frustrating to operate an arts and cultural organization in this community," Vasquez said. "You deal with so much uncertainty, and when resources are low, people tend to be more competitive. Sometimes that competition is positive; sometimes it's negative. It manifests itself in finger-pointing and so on. It doesn't need to be like that."

In a step aimed at preventing the finger-pointing -- and situations like the failure of Studio Arena Theatre and the current problems at the Arts Council -- Advancing Arts and Culture is participating in a state-wide database project. Under Executive Director Florine Luhr, the organization aims to profile and catalog the region's entire arts and culture community and identify its strengths, weaknesses and points of overlap.

"We engage in so much intuition," said Vasquez, an executive vice president at Amherst-based non-profit People, Inc. "We kind of look at this and say, 'The problem is not enough funding, OK. Let's go to [Erie County] and see if we can get more funding, or let's go to the foundations and see if they'll pay attention to us this time.'"

"When does the madness end?" Vasquez asked. "These are all symptoms of not having a comprehensive picture of what the cultural community is really about.

Vasquez continued: "It's time to stop the madness and really understand what the arts and cultural community is really like and what it needs to do."