Image courtesy of SMU Meadows School of the Arts, Dallas, TX. Meadows at the Winspear. Photo by Kim Leeson Photography (2019).
Both revenue and expenses declined in 2024, with average revenue hovering slightly above expenses. Average total revenue fell 25% while expenses decreased by 23%, leaving organizations with an increasingly smaller cushion between available revenue and spending. In 2024, the median surplus for organizations was only 1% of total expenses.
Average revenue and expenses.
The percentage of organizations running a deficit, or spending more than they earned, was higher in 2024 than at any point in the previous six years. Before the pandemic, it was common for arts nonprofits to run small budget deficits or barely break even, but at the height of the pandemic, many experienced higher surpluses due to reductions in operations and relief funds. Now, this period of widespread surplus appears to have ended, with a greater percentage of the sector in deficit in 2024 (44%) than in 2019 (36%).
Deficits are not always cause for concern and can be sustainable in certain circumstances, such as during a strategic shift when an organization pursues changes that will lead to financial sustainability while maintaining a financial cushion to fall back on. However, a pattern of deficits or barely breaking even over time can leave an organization with depleted reserves and limited flexibility.
Working capital continued a multi-year decline, falling to the equivalent of 4.2 months of expenses in 2024. Working capital—calculated as current assets minus current liabilities—is in indicator of the savings organizations have to draw upon in the short term and serves as a key indicator of short-term financial health. Despite this trend of decline, working capital remains higher than it was in 2019, illustrating the ongoing effects of increased levels of contributed revenue from pandemic relief programs.
As median working capital declines, a growing portion of the field has only three months of expenses or less—42% in 2024. While concerning, this is still lower than the pre-pandemic level of 56%.
Lower levels of working capital can leave organizations vulnerable to cash flow issues, especially when faced with unexpected expenses or delayed funding disbursements. It can also limit an organization’s ability to make strategic shifts or respond quickly to new opportunities.