Did You Know?

The Fiscal Health of Nonprofit Theatres

Each year, Theatre Communications Group publishes Theatre Facts, an in-depth report on the not-for-profit theatre field. Data for this report comes from publicly available information (through the IRS Form 990) as well as a survey of TCG members. Theatre Facts provides a wealth of quantitative information about attendance, productions and performances, and fiscal health. This month’s Did You Know focuses on the financial situation of nonprofit theatres as detailed in Theatre Facts 2007 — just one aspect of this substantial report.

The table below provides a breakdown by budget category of five key financial figures: total income and expenses, change in unrestricted net assets, working capital, and the working capital ratio. These key figures provide a “big picture snapshot” of how organizations have fared over the last year as well as their current fiscal situation.

Nonprofit Theatres: Fiscal Year 2007
	All Theatres	$10 million or more	$5 million to $9,999,999	$3 million to $4,999,999	$1 million to $2,999,999	$500,000 to $999,999	Less than $499,999
Total Income	$5,254,967	$19,117,948	$7,049,646	$4,478,565	$1,863,483	$702,082	$337,539
Total Expenses	$4,792,695	$17,320,454	$6,784,194	$3,712,372	$1,733,985	$655,766	$327,979
Change in Unrestricted Net Assets	9.6%	10.4%	3.9%	20.6%	7.5%	7.1%	2.9%
Working Capital	$(595,733)	$(795,228)	$(1,364,810)	$(683,566)	$(527,580)	$(145,544)	$33,382
Working Capital Ratio	-12%	-4%	-20%	-18%	-30%	-23%	10%
Source: Theatre Facts 2007, Theatre Communications Group. Figures reflect average of survey responses. 196 theatres responded to the survey, though not all respondents answered all questions.

Change in Unrestricted Net Assets is a reflection of the operating surplus or deficit in a given year. In years of surplus, these assets can be used to invest in capital needs (e.g., building repairs, equipment purchases), reduce outstanding debt, or build cash reserves that can buffer an organization during difficult financial times. In deficit years, organizations must increase debt or otherwise reduce their assets to pay for operating expenses. Planning for and managing operating surpluses each year improves an organization’s capital structure and increases its flexibility to meet shifting economic demands. In 2007, nonprofit theatres reported an overall positive change in unrestricted net assets.

Working Capital represents an organization’s ability to meet day-to-day cash needs. The Working Capital Ratio indicates what portion of annual expenses can be covered with current savings. For example, a working capital ratio of 50% indicates that an organization has enough savings to operate for half a year (six months). A negative value for working capital indicates that the organization is borrowing funds to meet daily expenses. In 2007 nonprofit theatres reported negative working capital overall. The severity of this situation deserves serious attention, particularly in today’s economic climate.

Read the full Theatre Facts 2007 report.

Interested in learning more about nonprofit financial statements? Check out NASAA’s materials from the Assembly 2008 preconference workshop, What Do the Numbers Tell You?

Curious to know how state arts agencies assess grantee fiscal health? Read how New Jersey partners with the Nonprofit Finance Fund to do just that.