The Minnesota Orchestra will return approximately $960,000 to the State Arts Board.

Orchestra management last December pledged to sequester its fiscal 2013 state grant until a contract was reached with locked-out musicians. There is still no deal, so when the state’s fiscal year ended on Saturday, the funds were returned. Grants cannot be carried over to new fiscal periods.

Sue Gens, Arts Board executive director, said $357,000 in general funds would go to the state treasury. About $605,000 was from the Arts and Heritage legacy fund. That money will be returned to the fund and be regranted in 2014.

In June, the Office of the Legislative Auditor reviewed the orchestra’s use of public money and determined that between 2010 and 2013, all state funds, including $14 million in bonding for a renovation of Orchestra Hall, were used appropriately.

The report also indicated that the orchestra and Arts Board should consider whether any of the 2013 grant could be applied to general operations. It appears that none of the grant was allowed.

Orchestra CEO and President Michael Henson said he anticipated “no further changes in the administrative staff at this moment” because of the loss of money.

Henson anticipates the $960,000 will represent about seven percent of the fiscal year budget, but because of the uncertainty in this year’s expenses and revenues, the precise figure will not be known until the end of August.

“We have substantial challenges that we will try to address through fundraising and managing the situation,” he said.

In the past few years, the orchestra has reduced its administrative staff by 20 percent and frozen salaries for most of those who remain.

The orchestra’s board and musicians started contract negotiations 14 months ago. Talks broke off last Sept. 30, and musicians were locked out the following day. Since then, there has been one formal bargaining session, in early January.

Management’s original proposal was to cut minimum salaries by 32 percent.

The musicians have said they will not return to bargaining unless the lockout is lifted, a demand that management so far has refused.