The Financial Perspective (Part 1)

The financial perspective is seen as an enabler in the not-for-profit arts presentation field. Financial performance provides the means to pay artists and staff, secure facilities and market programming. Arts presenters on average receive 52 percent of their revenue from earned income (ticket sales, concessions, rentals) and 48 percent from contributions by individuals, foundations and government entities. Over half of unearned income comes from individual donations (Hager & Pollock, 2002). Both earned and unearned revenue sources are lagging measures indicating whether or not the presenter is achieving the value proposition that is attractive to its target audiences. Individuals will attend events more frequently and make contributions to the arts presenter in proportion to level of benefits experienced. Private and public institutions will also act in their self interest by funding presenters that are perceived as providing community benefits not available from other sources.

Although financial returns are not the stated goal of mission driven arts presenters, financial measures are a clear and objective measure indicating how well the presenter is providing the intrinsic and instrumental benefits its target audiences want. The long term sustainability of any arts presenters is dependent on responsibly managing its financial perspective resulting in a positive net income over an extended period of time. Kushner and Pollack (2004) identify net income as a significant indicator in their study of the financial health of performing arts organizations; highlighting a drop in net income from 5.3% in 2001 to 4.2% in 2002 as a percentage of expenses. The same study indicates that over half of the organizations studied reported negative net incomes. A similar measure is also indicated in the Theatre Communication Group Study (2011) of 1876 theatre organizations that filed Form 990’s. Change in Unrestricted Net Assets (CUNA, total unrestricted income – total unrestricted expenses) increased by 24% from 2007 to 2009; resulting in a CUNA of 7.7% of expenses in 2011. Positive net income is seen as the overriding financial objective of arts presenters for sustainability.