This month, NFF released its fifth annual State of the Nonprofit Sector Survey. Of the nearly 6000 respondents, more than 900 hailed from the arts and culture sector, representing 47 states.

The data provide a wealth of information about how arts and culture organizations are managing through an unprecedented time of economic and artistic flux. Current trends point to lasting changes in the way the sector operates and is funded. The arts specific survey results are available in their entirety here. I also encourage you to check out our online Survey Analyzer, where you can further filter the data by state, sector, operating expense and other dimensions.

These are the headlines.

Arts & culture organizations continue to operate with thin margins and low liquidity: 

“As the economy declined, we chose to sustain programs as much as possible to help maintain our local economic impact and community service. Consequently, we depleted our cash reserves that were normally used for capital maintenance and expansion projects. Today, these reserves are completely wiped out and our capital needs are mounting up.”

--Arts, Culture & Humanities NPO, FL

  • 42% of survey respondents reported an operating surplus in 2012, compared to 44% in the previous year.
  • The outlook for 2013 is more uncertain: just 28% predict ending the year with a surplus. 50% say 2013 will be the same as or harder than 2012.
  • The sector remains divided between the 'haves' and 'have nots': 60% of arts organizations reported three months or less of cash on hand. While 20% added to reserve funds in 2012, an equal number drew down already limited liquidity.

Arts groups that receive government funding face particular challenges:

“We found out in the 7th month of our fiscal year that our State funding was reduced by 40%, and that contracts would be delayed another six weeks. This news is just another blow to our already taxed budget and means more fundraising and less time to advance our mission. Our board has completely lost confidence in public funding, and we are proceeding as if that funding will be gone within 5 years. Advocacy is at an all-time low in the arts field in NY.”

—Arts, Culture & Humanities, NY

  • Only 13% of survey respondents that receive state and local funding are paid for the full cost of government funded programs; 21% of recipients of federal funds receive full reimbursement.
  • Government is late to pay: among those organizations with state or local funding, over 50% reported overdue payments; 40% reported late payments from the federal government.

Arts respondents report greater comfort discussing their capitalization needs with funders than organizations in other nonprofit sectors, but the sector still struggles:

“Funders are not open to conversations about capital funds or general operating funds… funding cuts affect projections and planned growth.”

—Arts, Culture & Humanities, IL

  • 40% say they are comfortable talking with their funders about the need for reserves. This compares favorably to just 28% in the broader nonprofit sector.
  • 39% of arts groups can discuss their facilities challenges with funders, compared to 33% for all nonprofits.
  • Still, a small minority of organizations can talk to supporters about working capital, cash flow and debt. This remains a worrisome trend given current liquidity challenges.

Arts organizations are changing the way they do business to adapt to the new reality:

“Most funding for our field is based on an outdated model. We are trying to shift the culture of our field and it takes a tremendous amount of community/funder education. We eliminated our high interest debt in 2011-12 and are presently trying to build a reserve. Cash flow is our second biggest problem.”

—Arts, Culture & Humanities, CA

  • 46% have added or expanded programs or services; 15% reduced or eliminated programs or services.
  • 37% increased the number of people served; 53% expect to do so this year.
  • 35% hired new staff and 38% made replacement hires.
  • 38% engaged more closely with their board.
  • 34% collaborated with another organization; 46% anticipate partnering in 2013.
  • 38% have upgraded technology to improve organizational efficiency; 28% have done so to improve programs.

Thank you to all of you who found the time to help us assemble this picture by responding to our survey. These results provide an opportunity for the field to start difficult but productive conversations about the funding and finances arts and culture organizations require to survive and thrive in an uncertain environment.