How Does a Nonprofit Arts Organization Get Money?
This question comes up because an arts organization in New York City, A Blade of Grass, is going to a model where its board of directors has no philanthropists on it. This is an unusual move. This came up because I saw an article on Artnet about it.
All nonprofit art organization gets revenue—the money it needs for day-to-day operations—in several ways. First is program income. For example, if your arts organization involves performances (like a theater or a music consort) that you sell tickets for, that is program income. Or if you have a museum that has a price it charges attendees to visit. Second are grants—you get these from governmental bodies (say, the NEA) or from private foundations (like the Houston Endowment, which was founded by Jesse Jones). Also, if your organization has an endowment (money invested on behalf of your organization), it will kick out some cashflow every year which you can use for operations. And finally, nonprofits depend heavily on philanthropic donations. The thing about philanthropy is that there is a community of well-to-do philanthropic persons, the proverbial “ladies who lunch.” The old sexist way of thinking about this was the husbands worked at their high-powered jobs making money, and the wives busied themselves with charity work. Obviously this has evolved as our society has become marginally less sexist, but there is a community of givers, and part of the mission of a development office for a nonprofit is to get in good with that community. One way to do so is to give members of this community seats on the board. Typically, board members are expected to kick in a certain amount of money personally every year, as well as tapping their own personal networks.
So if you kick all the rich philanthropists off the board, you have to make up that money from some other source. And in the case of A Blade of Grass, board members will now get paid, so that adds to the total expenses they have to cover by raising money.
The organization, which specializes in socially-engaged art, was founded by Shelley Frost Rubin. She is the wife of Donald Rubin, and the pair have long been involved in arts and social justice philanthropy. Donald Rubin is the founder of MultiPlan, Inc., a major general service PPO health provider.
A Blade of Grass was barely hanging on. According to the Artnet article, “A Blade of Grass, like many art spaces, saw its finances hit hard by the pandemic, and its future was in jeopardy. She could maintain the status quo until reserve funds dried up and the non-profit ceased to exist, likely within six months.”
I looked at A Blade of Grasses 990s (a 990 is the document a nonprofit has to file annually with the IRS.) The most recent one available on Guidestar is 2019, so prior to the pandemic. And they were in trouble then. In 2019, their net income was negative $700,499. They had $1.4 million in investments, which I assume is their endowment.
So given the dire circumstances they found themselves in, the director, Deborah Fischer, laid off the entire staff (except for herself—she took a small pay cut) and rethought how the organization was going to work.
Artnet wrote:
To her, the traditional non-profit board model felt long overdue for an audit. “The essential work of a nonprofit is to accept generosity and transform it into mission-driven work,” she told Artnet News at the time. “In order for this to be effective, the giving really does have to function as a gift—it has to be given freely to support the mission. And the organization… has to have a business model that reduces reliance on each giver, and leadership that is accountable to the mission.
“When these conditions aren’t met,” Fisher said, “gifts turn into transactions and the donors’ needs are met instead of the mission’s.”
So they will still depend on philanthropy, but this way they don’t end up with future Sacklers on the board. I think they need to beef up that endowment, though.
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