Does a Strong Arts Balance Sheet = Artistic Freedom?

December 10, 2013
balanceIn 2008, Grantmakers in the Arts (GIA), Technical Development Corporation (TDC) and Nonprofit Finance Fund began leading discussion and research around capitalization and arts organizations. In 2012, MCF hosted a one-day workshop on the topic, and on Dec. 3, 2013, MCF presented a follow-up to fifty staff members of arts grantmakers and arts organizations alike at the McKnight Foundation. Here’s a recap.

Kate Barr, executive director of Nonprofits Assistance Fund, facilitated a mix of presentation and discussion to help participants gain a common understanding of the capitalization of arts organizations. Barr recapped the 2012 workshop by providing definitions of different types of capital, the role and purpose of each and how each fits into an organization’s business model.

All organizations need operating revenue and working capital. Most organizations need mission-appropriate fixed assets, operating reserves and risk/change capital. And some organizations need building and building reserves and endowments.

Healthy capital versus weak capital
Healthy capital should evolve with an organization’s current needs, while weak capital is universally destabilizing to an organization. Barr walked the group through reading a balance sheet. She provided clear tools and formulas to help understand if an organization has healthy capital or not. These included the Unrestricted Net Assets Tool (Instructions on the Unrestricted Net Assets Tool here) and the Days of Cash on Hand Tool.

Barr advocated for strategic plans that include a 4 to 5 year capitalization plan. This would include clearly assessing and understanding the starting point and determining the needs and potential sources. It is critical that boards are provided with education, so they can read and understand balance sheets and other financial documents.

Capitalization obstacles
The top six obstacles to capitalization are:

  1. Knowledge
  2. Planning
  3. Best practices
  4. Leadership
  5. Financial standards
  6. Access to capital

How can funders advance financial health?
Cindy Gehrig, president, Jerome Foundation, and Vickie Benson, arts program director, The McKnight Foundation, shared their thoughts on what funders can do to advance financial health and strong capitalization. Key points included:

  • Funders are learners too, just like nonprofits, and it is important to learn together
  • The importance of understanding the story behind the numbers
  • The grantmaking sector is and will continue to move away from penalizing nonprofits for having operating reserves

Weak capitalization results in arts organizations that are risk-adverse and play it safe. Strong capitalization makes an organization healthier and more willing to take creative risks.

“A stronger balance sheet means more artistic freedom,” said Ben Cameron of the Doris Duke Charitable Foundation.

- Jennifer Pennington, MCF member services fellow

Photo cc Philippe Put


Good Data = Better Arts Organizations

April 29, 2013

cdp1The Cultural Data Project (CDP) — now in use by 7 Minnesota-based funders and 200 Minnesota arts and culture organizations — can lead to better arts organizations. In addition, use of the CDP can help foundations and corporate giving programs streamline their grantmaking and help nonprofits better understand their programmatic and financial health.

When the CDP launched in Minnesota on June 1, 2012, MCF members The McKnight Foundation and Target were the first two Minnesota-based funders to require that grantees enter data in the CDP.

Their early and enthusiastic support has resulted in data collection from several hundred arts organizations in less than a year. And, naturally the more funders that require grantseekers to use CDP, the richer the database and its usefulness for grantmakers, grantseekers and arts advocates.

While writing an article for the spring issue of Giving Forum, online now and in your mailbox soon, I was surprised by one example of CDP data use from Michigan.

In 2012, ArtServe Michigan, Michigan’s statewide arts organization, used CDP and other data to demonstrate that for every $1 invested by the state, the arts sector contributed $51 to the state’s economy. That informed efforts to increase arts funding and led to the tripling of the budget appropriation for Michigan’s arts board.

Wow! Think what that might mean for Minnesota in a few short years.

To learn more, don’t miss “Good Data Can Create Better Arts Organizations” in the spring issue of Giving Forum.

- Susan Stehling, MCF communications associate


Minneapolis Develops New Index to Measure Creative Vitality of City

March 5, 2013
The Minneapolis Creative Index 2013 is filled with graphics, like this one on nonprofit art organizations.

The Minneapolis Creative Index 2013 visually showcases the strength of the local arts community.

The Arts, Culture and Creative Economy program for the City of Minneapolis has released a new study using the Creative Vitality Index (CVI), commissioned by the city and developed by Western States Arts Federation (WESTAF). CVI is designed to capture the impact of the creative community in Minneapolis and the Minneapolis Metropolitan Statistical Area (MSA) and to measure annual changes in the economic health of highly creative industries.

This system of measurement will provide a new resource for policymakers, arts professionals, artists and community arts advocates. Grantmakers may utilize the index to provide a more in-depth analysis of Minneapolis’ creative sector, including measuring the city’s creative employment by ZIP code. This will allow grantmakers to focus funding on the specific needs of the creative community in their target geographic areas.

According to the Minneapolis Creative Index 2013 report, the economic impact of the Minneapolis creative community on the economy is large, accounting for 1% of the overall retail economy and posting performing arts revenues almost ten times the national average.

On average, the MSA creative sector injects $700 million into the Minnesota economy each year. By comparison, this is approximately 70% of Minneapolis’ sports sector revenue without the benefit of publicly subsidized stadiums. Arts patrons spend on average an additional $20.40 per person on event-related purchases like parking and food.

The creative sector has also been crucial to Minneapolis’ job growth, employing nearly 20,000 residents, or about 5% of all jobs in the city. Creative employment in the MSA represents 74% of Minnesota’s creative occupations, the sixth highest CVI score in the country.

The report also detailed the effects of the creative sector on Minneapolis’ nonprofit community and the greater creative arts ecosystem. Despite recent losses in overall nonprofit revenue, contributions to nonprofit arts organizations increased 10% over the two year period ending in 2011. Increased revenue from the Clean Water, Land and Legacy Amendment also fueled growth in the nonprofit arts community.  The amendment specified that 19.75% of $7.5 billion dollars to be generated statewide over the next 25 years will go to fund arts and cultural activities.

Although the new CVI measurement system has proven to be a valuable tool for measuring the economic benefits of art in Minneapolis, the system has some limitations. It relies is heavily on business transactions and employment, and does not capture non-commerce related impacts like community cohesion and safety, feeling of well being, expressions of identity or rates of attendance. Also not captured in the measurement are nonprofit organizations with annual budgets under $25,000 or demographic traits like race, age or gender. As looking for arts funding has become more competitive, proving the impact of the arts remains a difficult but crucial part of arts advocacy.

Minneapolis plans on releasing core CVI data annually, with a full report to be published bi-annually.

-Kaitlin Ostlie, MCF administrative assistant


Nominate Your Favorite Distinguished Minnesota Artist

February 28, 2013

logo_mcknight_200It’s time to tell The McKnight Foundation about your favorite artists — those who you believe have really made an impact in Minnesota. McKnight is accepting nominations for its 16th Distinguished Artist Award, with a $50,000 prize for the winner.

Annually the award honors one artist who has had a substantial impact on the arts in Minnesota over his or her lifetime. Artists in all disciplines—including ceramics, dance, film, literature, music, theater and visual arts—may be nominated.

After nominations are received, a panel with representatives from a variety of artistic disciplines who are well versed in the history of the arts in Minnesota reviews nominations and recommends a candidate to the foundation’s board of directors. Considerations include the quality of an artist’s work, the artist’s commitment to his or her field and ways the artist has enriched life for audiences and the community.

Past winners include:

Learn more about the award and how to make your nomination at The McKnight Foundation website.

Start thinking now! Nominations are due March 31.


Funding Diversification Needed for Culturally Specific Theaters

February 21, 2013
penumbra

Penumbra is the largest theater representing African American experiences in the Twin Cities

A recent Minnesota Public Radio (MPR) piece examines the unique fundraising challenges faced by culturally specific and ethnic theater groups. These theaters present work by and about particular groups. Two local examples are Mu Performing Arts, representing Asian American experiences, and Penumbra Theater, representing African American experiences.

As art funding starts to rebound, most individual donors continue to support large, culturally western groups serving audiences who are whiter and wealthier than the American average. This trend, along with the reduction of foundation, government and corporate support for theater, has placed many culturally specific theaters in jeopardy. To survive, small arts groups must expand revenue sources, diversify funding and do a better job of networking with individual donors.

As Minnesota’s population diversifies, engaging diverse individual donors continues to be a challenge. According to MPR and Michael Kaiser, president of the Kennedy Center for Performing Arts, the average white theater company gets 60% of its funding from individual donors. That compares to (less than) 26% of funding that Penumbra receives from individuals. Two factors are cited as contributing to the gap: available wealth in the theater’s community and the history of philanthropy within the culture.

Another factor contributing to the decline is the diversification of offerings from mainstream theaters. As large theaters start to embrace multicultural programming, they attract support that may traditionally have gone to small ethnic theaters, which may have trouble competing for grants against large, more established groups. And, even with a shift toward more mainstream multicultural theater, criticism about a lack of representation from women and communities of color on America’s stages continues, as a backlash against the Guthrie’s 2012-2013 season showed.

However, Penumbra has also demonstrated that there is hope for building and diversifying fundraising capacity. After cutting staff and suspending programming indefinitely as a result of a major 2012  budget short fall, Penumbra focused all its energy on raising the $340,000 needed to keep its doors open. According to MPR, by the end of 2012, the theater had raised $359,000 from more than 1,400 individuals, corporations and foundations. To grow future sustainability, Penumbra is now developing a new business plan and examining ways to maximize revenue streams.

Culturally specific theaters are worth supporting. They provide ethnic and minority communities with a place to express their cultures using their voices. In addition, they bring another group’s individual and shared experiences to broader audiences. Funding diversification is key to making these theaters sustainable.

For more on a similar topic, read a post I wrote a year ago for Philanthropy Potluck on the need for arts giving to contribute more to the common good.

-Kaitlin Ostlie, MCF administrative assistant


McKnight Open Letter Forecasts Its 2013 Grantmaking

January 23, 2013

mcknight-foundationIn an open letter to its grantees and program partners, The McKnight Foundation announced its grantmaking plans for 2013.

These plans includes core giving of $79 million in the coming year, about on par with previous years, as the foundation continues to recover from the economic downturn. McKnight will also finalize $25 million in grants that will go toward addressing climate change and developing renewable energy.

The foundation also celebrated some key 2012 achievements, and tied them back to its new strategic framework grounded in adaptive leadership, meant to infuse new agility in how the foundation serves the community. These 2012 milestones include:

  • Co-funding a University of Minnesota report on ensuring a network of 14 Twin Cities transitways planned for 2030 reaches its full potential.
  • New grants to Twin Cities school districts and charter schools to create a seamless pipeline from pre-kindergarten through grade 3, and increase the percentage of successful third grade readers. McKnight also funded a case study that examines the impact in Minnesota from investments in early education.
  • Loans that helped the State of Louisiana purchase coastal wetlands important to the native environment.
  • The launch of the State of the Artist blog, which provides a new platform for important conversations about and among regional and national thought leaders in the arts.

Congratulations to The McKnight Foundation on these accomplishments, and on the recent launch of its new website! You can head over to it to read President Kate Wolford’s full open letter.


Integrity and Respect in Grantmaking Relationships

November 15, 2012

In the fall issue of Giving Forum, Vickie Benson, arts program director at The McKnight Foundation, shares her views on the importance of establishing and constantly renegotiating crucially important and necessarily imbalanced grantmaking relationships.

In Giving Forum, Benson recalls a 2001 Foundation News & Commentary article about Anna Faith Jones, then president of The Boston Foundation, that resonated with her and continues to inform her grantmaking.

Benson addresses the importance of staying mindful of the power differential inherit in the funder/fundee relationship and consistently acting to minimize it. She also acknowledges that doing so is “easier said than done.”

But Benson believes that money isn’t the only currency in the relationship, saying, “Foundations require partners.”

She says, “When everyone realizes that, the power shifts almost immediately and a relationship that truly cultivates constructive dialogue and engagement can begin.”

Don’t miss the full article where Benson goes in-depth and shares additional wisdom. Giving Forum is online and in your mailboxes now.

- Susan Stehling, MCF communications associate

Photo: cc glsims99


Individual Giving Up; Minnesota Grantmaking Stable

October 16, 2012

Giving in Minnesota 2012MCF today released its Giving in Minnesota, 2012 Edition research, the most comprehensive analysis of charitable giving in the state.

The report shows giving by individuals, foundations and corporate giving programs totaled $5.2 billion for the 2010 research year, a modest 2.6% increase over 2009.

The 2010 research year, the most recent time period for which complete data are available, includes financial information from foundations and corporate giving programs with fiscal years ending between June 1, 2010, and May 31, 2011.

Individual giving grew 3.4% to $3.8 billion and accounted for most of the overall increase. The majority of the state’s charitable giving — 73% in 2010 — comes from individuals.

Grantmaking accounted for 27% — $1.41 billion — of total 2010 giving, an increase of less than 1% over 2009. The total includes grantmaking by MCF member Greater Twin Cities United Way, which was included in the research for the first time to create a more comprehensive picture of charitable giving in Minnesota. Without that addition, total 2010 grantmaking would have declined 4.1% from 2009.

Foundation Assets Growing
While grantmaking has not fully recovered from the economic downturn, foundation assets are beginning to rise. Assets grew 3.8% to $16.9 billion in 2010, but are still slightly below the pre-recession 2007 level of $17 billion.

Corporate Grantmakers Lead Giving
The Giving in Minnesota research indicates that corporate foundations and giving programs, which comprise 9% of the 1,467 grantmakers in the state, gave 45% of all 2010 grant dollars. Private foundations — 85% of Minnesota’s grantmakers — gave 38% of grant dollars. Community/public foundations accounted for the remaining 17%.

Education Received Largest Share of Grant Dollars
The three subject areas receiving the largest shares of Minnesota’s grant dollars were education (27%), human services (23%) and public affairs/society benefit (16%).

Funding for arts, culture and humanities rose 20% to $129 million, while giving to education, human services, environment/animals and religion was up more modestly – between 3 and 6% each.

Subject area information is based on analysis of grants of $2,000 or more made by a sample of 100 of Minnesota’s top grantmakers. These grants represented about two-thirds of the state’s philanthropic giving for the year. Overall, grantmaking by the sample increased 3% from 2009 to 2010.

Trends for Geographies, Beneficiaries & Types of Support
In 2010 51% of dollars given by Minnesota grantmakers went to organizations and programs serving Minnesota. The Twin Cities metro area received 31% of the total grant dollars, with Greater Minnesota and Minnesota statewide each receiving 10%.

Organizations serving other parts of the country and world received 49% of grant dollars. A majority (67%) of corporate grant dollars went out-of-state, reflecting businesses’ goals of distributing support between Minnesota, where they are headquartered, and other parts of the nation and world where they have facilities and customers.

Based on available data, 55% of the sample’s grants could be coded to a specific beneficiary group. Of those, the largest share of dollars — nearly 25% — went to organizations serving children and youth.

Grantmakers continued to devote the largest share of their giving — 62% in 2010 — to program support. Twenty percent of grant dollars went to general operating support and 9% to capital projects.

MCF conducts Giving in Minnesota research annually to examine long-term trends in charitable giving. For the Giving in Minnesota, 2012 Edition summary and full report, see www.mcf.org/research/giving.

- Susan Stehling, MCF communications associate


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