Earned Revenue Ratio: Its Effect on Non-Profit Financial Sustainability

Abstract

Over the last twenty years, sustainability has been a major focus of discussion in the non-profit arts and culture sector: how it is determined, evaluated and improved. Recently, as economic challenges have reduced the overall funding pool for non-profits generally and arts and culture organizations specifically, the buzz around organizational sustainability has grown consistently louder. How that sustainability is achieved, however, appears still to be up for debate.This thesis attempts to discover if there is a connection between organizational revenue mix and financial sustainability by analyzing the audited financial statements of a diverse group of cultural non-profits. I extended an invitation to a varied selection of 35 non- profit arts organizations in the Metro Philadelphia Area to participate in the study by providing as near to 10 years of audited financial statements as possible. Eighteen of those organization agreed to participate for this study. Data was collated and then adjusted to allow for standardized comparison between organizations. Calculations were performed on the data to provide the basis for analysis. With very few exceptions, this research was unable to demonstrate a correlation between earned revenue ratio and the five chosen indicators of financial sustainability. As such, the balance between earned and contributed revenue should not be considered as an indicator of financial sustainability in non-profit arts organizations.%%%%M.S., Arts Administration – Drexel University, 2014