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Focus on Not-For-Profits: Strategies and Updates for the New Year for Arts and Cultural Organizations

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For many arts and cultural organizations, the winter months mark the halfway point in their year and provide a good opportunity for management to review the results of last year and make sure they are on target to meet this year's revenue and budget goals as well as strategic objectives.
January 31, 2011

For many arts and cultural organizations, the winter months mark the halfway point in their year and provide a good opportunity for management to review the results of last year and make sure they are on target to meet this year's revenue and budget goals as well as strategic objectives.

Below are industry trends, as well as strategies, that your arts and cultural organization may want to consider for 2011:

Status of the Industry

2010 proved to be a rebound year for many arts and cultural organizations, with improving financial portfolios, proactive and successful cost controls, and increased program revenue from increased attendance, ticket sales, class enrollment, etc.

Contributed support continues to be a struggle faced by all not-for-profit organizations, not just arts and cultural organizations. However, arts and cultural organizations have been hit particularly hard by the continued decline in much needed support from federal, state and local arts funding agencies. These agencies' ability to give continues to be negatively impacted by the economic downturn of 2009 and 2010, resulting in reductions in previously awarded funding.

Your organization should proactively discuss what funding you can expect to receive from these revenue sources during your budgeting process to ensure you are managing the organization from a realistic perspective. The collectibility of any outstanding promises to give related to previous grant awards should also be reviewed to ensure proper valuation.

Strengthening Your Internal Controls

During this time of year, many arts and cultural organizations handle a significant amount of cash from ticket and concession sales, admissions, etc.

Due to the sensitive nature of cash and the ease with which it can be misappropriated, take time now to review your organization's procedures for handling cash and ensure that you have strong controls in place, such as:


  • Change for cash boxes should be kept at a minimum and should be counted by two individuals before being distributed to the employees / volunteers using the cash box.
  • Only one employee or volunteer should be assigned to each cash box.
  • Cash should be counted at the end of each day or after every event and reconciled to sales data, if available.
  • If not immediately deposited, cash should be stored in a safe.


If your organization can afford it, consider purchasing and installing a Point of Sales system (POS) which will track your sales, act as a credit card terminal, secure cash and credit card information, act as a theft deterrent, as well as allow you immediate access to sales results.

Staying Up on Technical Issues

A common theme across many arts and cultural organizations is holding collections of art, historical treasures, or similar assets for public display.

If the objects meet the following criteria, they are considered "collections" under generally accepted accounting principles (GAAP) and are accounted for differently:

  • Held for public exhibition, education, or research rather than financial gain,
  • Protected, cared for, and preserved, and
  • Held under a policy that the organization will use the proceeds from the sale of collection items to acquire other collection items.

Under GAAP, organizations can elect a policy to either capitalize or expense collection items. If capitalized, the items are recorded at their fair value upon acquisition and should be presented as a separate line item, such as "collections," on the Statement of Financial Position. Capitalized collections are generally not depreciated because they are expected to be held indefinitely in their current condition.

If your organization chooses to expense collection items, the purchase and sale of collection items should be shown as revenue and expense but reflected "below the line" as "changes related to collection items not capitalized" at the bottom of the Statement of Activities. Whichever way your organization decides to treat its collections, this policy must be disclosed in the footnotes to the financial statements.

What to Expect in the Future

On September 1, 2010, the FASB issued an exposure draft which would drastically increase the required disclosures for non-governmental entities that participate in multi-employer pension plans.

A multi-employer plan is defined by GAAP as "a pension or post-retirement benefit plan to which two or more unrelated employers contribute, usually pursuant to one or more collective-bargaining agreements."

The proposed changes would require separate disclosure of the following for each multi-employer plan an organization participates in:

  • Narrative description of risks and uncertainties arising from participation, how benefit levels are determined for participants, consequences to the employer if it ceases contributing and any funding or rehabilitation plans
  • Total assets and accumulated benefit obligation of the entire plan, in comparative format
  • The employer's contributions as a percentage of total contributions to the plan
  • Percentage of the entity's employees covered by the plan
  • Contributions made during the current period, minimum required contributions for future periods, and expected future contributions, if different than the minimum
  • Details regarding any amounts the organization would be potentially liable for if it withdraws from the plan or the plan terminates

If your organization participates in a multi-employer plan because of union membership by some employees, affiliation with a national organization, or otherwise, begin the process of contacting plan administrators and obtaining the required information.

The FASB accepted comments on this exposure draft through November 1, 2010 and a final decision is expected soon. The effective date for this proposed standard is not yet known.


Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.

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For further information, contact:

  • Amy Altholz
  • Manager-in-Charge
  • Arts and Other Cultural Organizations Segment, Not-For-Profit Services Group
  • 314.290.3369