State of the Arts 2014: Breaking the Barriers

An abbreviated version of this blog post was also published in NFF's Money and Mission blog on The Chronicle of Philanthropy. Click here to view.

NFF received more than 5,000 responses to our annual State of the Sector survey in early 2014. Of these responses, the arts and culture sector was represented by 919 organizations covering a broad cross section of artistic disciplines and budget sizes. In addition to questions on financial health and viability, we also asked cultural organizations about sector specific challenges and how they are working to address them.

The story that emerged depicts a sector in flux: amid constant concerns about financial health, arts organizations continue to experiment with new programming and audience engagement tactics.

• Perhaps not surprisingly, “achieving long-term sustainability” was cited by 47% of organizations as a challenge—the leading response to this question by far.
• 71% of respondents are working to develop programs targeted to specific visitors and audiences, 59% are collecting data on audience preferences and behaviors, and 56% are implementing new marketing strategies.

Although these new investments and programs may promise positive results, a number of systemic challenges continue to exert an outsized influence on the viability of the arts sector. Our 2014 survey responses point to the following barriers at play in the arts funding ecosystem.

1. Mismatched funding

Financial reserves are a necessary part of doing business, whether for operations, facilities, artistic risk-taking, or to protect against the unexpected. Yet, organizations often struggle to obtain or even discuss a more balanced capital structure.

2. Missing dialog

While 53% of respondents could have an “open dialogue” with funders about program expansion, only 12% felt the same about operating reserves, and the numbers were even lower for facility reserves (9%) and growth or change capital (9%). A colleague at NFF recently drafted a separate blog on the specific obstacles preventing healthy dialogue and transparent conversation.

3. Misaligned or outsized reporting requirements

Grantmakers often neglect to support the costs associated with managing their grant awards, like proposal writing, ongoing reporting requirements and impact measurement. (For example, a grant of $50,000 with reporting requirements that cost $10,000 is a “net grant” of $40,000).

4. Funding falls short of full costs

Planning for financial sustainability begins with an organization’s ability to truly cover the full costs of operations, for the short- and long-term. Tightly restricted program grants with unrealistic provisions for overhead will often sustain immediate programs, but stymie an organization’s chances for long-term mission success.

For now, the nonprofit creative sector continues living up to its name. Arts leaders have shown incredible creativity and resiliency, piecing together funding and developing innovative ways to support their mission amid financial uncertainty. But for many organizations, there is a real question about how long new programming and revenue strategies can be sustained if they don’t deliver positive financial results—and quickly.

You can download our new brochure to learn more about the full range of program and financial strategies that organizations are pursuing, the systemic barriers they face, and tips to help the sector overcome these challenges (for nonprofits and grantmakers alike).

You can also slice and dice the data yourself using our online Survey Analyzer tool; it’s filtered here for arts organizations. We encourage arts leaders to select the data set—which is sortable by budget size and sub-sector—for their peer group and use this information in making the case for support to funders. Likewise, we encourage funders to filter the data to help understand benchmarks and dynamics affecting the organizations they fund.

Data like this can be an invaluable resource for our sector, but only if we pause to understand its implications and use it to inform our path forward.

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For the most recent survey results, please click here.