nonprofitfinancefund.org ©2009 Nonprofit Finance Fund

Nonprofit Finance Fund

March 27, 2009

For more information, please contact Joyce F Jonat at 973.642.2500 x115 or visit nonprofitfinancefund.org.

Data is based on a nationwide Zoomerang survey of nonprofit leaders conducted by Nonprofit Finance Fund, February-March 2009.

Summary Report:Arts Nonprofit Survey Results

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Introduction to the Survey

Nonprofit Finance Fund recently conducted a survey of nonprofits nationwide to assess the real-time financial challenges they face. The survey focused on surfacing the most critical areas of need, both for the immediate and longer-term durability and effectiveness of the sector.

Over one thousand nonprofit leaders responded to our survey; near a quarter of them were arts organizations. Survey respondents stretched from coast-to-coast and from large organizations to small.

What did we learn from their collective reply?

America’s nonprofit sector is financially vulnerable.

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Arts Organizations Comprise 24% of Survey Respondents

Survey Respondents by Sector

Education

Environment and Animals

Health

Human Services

International, Foreign Affairs

Arts, Culture, and Humanities 24%

Public, Societal Benefit

Mutual/Membership Benefit

Religion Related

Unknown, Unclassified

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What is the Annual Expense Size of Arts Respondents?

Most Arts Respondents from Small-to-Mid-Sized Nonprofits

41%

13%

18%2%4%

6%

15%

$0- $250,000

$250,000- $500,000

$500,000- $2,000,000

$2,000,000- $5,000,000

$5,000,000- $10,000,000

$10,000,000- $20,000,000

greater than $20,000,000

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26% of Arts Respondents Primarily Serve Vulnerable Populations

Do you primarily serve low-to-moderate income populations?

26%

74%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Yes No

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What is the Financial State of Arts Organizations?

38%

25%

38%

43%

11%

37%

8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Operating deficit Operating surplus Break- even financial results(revenue matches expenses)

Unable to predict this year'sfinancial results

Most recently ended fiscal year Current fiscal year

Last year, 37% of arts organizations had a surplus; this year, only 8% are anticipating above break-even results

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What Are Arts Organizations’ Revenue Expectations for 2009?

Organizations are bracing for funding cuts from all types of donors

8%

14%

20%

26%

59%

69%

62%

47%

17%

13%

17%

23%

16%

3%1% 2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Government funding Foundation funding Individual donations Earned revenue

Increase Decrease No change N/A

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Plans & Actions to Weather the Recession

Arts nonprofits are taking or considering notable actions to keep their doors open in these difficult times

3%

43%

53%

27%

18%

45%

42%

12%

2%

17%

6%

48%

31%

20%

68%

55%

69%

0% 10% 20% 30% 40% 50% 60% 70% 80%

No change- business as usual

Reduce staff or salaries

Freeze all hires and current salaries

Reduce staff hours (short weeks, furloughs, etc.)

Reduce staff benefits

Reduce or eliminate programs

Collaborate with another NPO to provide programs

Collaborate with another NPO to reduce administrative expenses

Merge with another organization

Reduce or refinance occupancy costs

Sell assets such as a building or securities

Use reserve funds

Delay payments to vendors

Speed up the collection of receivables

Engage more closely with your board

Funder conversations to explain situation and/or use of currentlyrestricted grants

Develop a ‘worst-case scenario’ contingency budget

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What Type of Technical Assistance Would Be Helpful?

Nonprofit arts leaders expressed interest in tools to help them manage through the crisis

17%

57%

55%

11%

32%

36%

0% 10% 20% 30% 40% 50% 60%

Assistance negotiating withbanks or other lenders

Financial scenario planning

Tools to communicate financialpicture to board and/or funders

Merger feasibility analysis

Program finance analytics(revenue/expense breakdown

per program)

Assistance analyzing your currentfinancial situation

% of organizations

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Summary of Key Arts Findings

The Financial State of Nonprofits

Only 8% of arts respondents expect to operate above break-even this year.

Just 12% anticipate being able to cover their operating expenses in both 2009 and 2010.

33% don’t have enough operating cash in hand to cover more that one month of expenses, and another 31% have less than three months’ worth.

In 2009:

– 59% anticipate a decrease in funding from government

– 69% anticipate a decrease in funding from foundations

– 62% anticipate a decrease in funding from individuals

– 47% anticipate a decrease in earned revenue

56% of respondents expect the recession to have a long-term (2+ years) or permanent negative financial effect on their organizations.

49% of arts organizations anticipate an increase in demand in 2009.

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Summary of Key Findings: What Are Arts Nonprofits Doing?

Actions Nonprofits are Taking or Considering

Develop a ‘worst-case scenario’ contingency budget: 69%

Reduce staff or salaries: 43%

Freeze all hires and current staff salaries: 53%

Reduce or eliminate programs: 45%

Collaborate with another organization to provide programs: 42%

Use reserve funds: 48%

Delay payments to vendors: 31%

Speed up the collection of receivables: 20%

Engage more closely with board through more frequent reports and meetings: 68%

Hold conversations with funders to explain situation and projections and/or to discuss the use of currently restricted grants: 55%

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What Actions Can Funders Take?

We encourage funders to be active supporters of the organizations they care about.

Steps that can be taken include:

Ask grantees how you can best help them continue to deliver on the promise of their mission. Be aware of how your grant fits into the overall revenue picture for the organization, and fund at the ‘enterprise’ level. Consider how you might advocate on behalf of grantees, on anything from government funding policy to funder collaboration.

Avoid restrictions that compromise liquidity– unrestricted operating funds may be the best way to ensure organizations are able to continue providing vital programs.

Reduce the paperwork, stress and expense on grantees:

– Think in terms of “net grants” that take into account the cost of grant application and reporting.

– In the application process, ask only for what you need.

– Increase transparency around grant cycle timing and process.

The recession brings a long-standing problem into sharp relief: it reveals the precarious state of a sector that is continually asked to do more with less. This crisis presents funders and government with an opportunity to substantively change practices that perpetuate inefficiency and stymie innovation and growth. The talent, resources, and passion that people in the sector bring to the goal of addressing society’s most pressing issues must be protected and nurtured. This recession is forcing the issue of how to better invest in what works for the benefit of society.

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Thank you.

For the full survey results, please visit our website, nonprofitfinancefund.org

For any questions regarding the survey, please contact Joyce F. Jonat at 973.642.2500 x115