Metro Detroit Arts and Culture Not-for-profit Sector Financial Overview Part 2 – Tax Returns

This report analyzes how economic and cultural capital circulates in the Metro Detroit not-for-profit arts and culture ecosystem by analyzing the tax returns of the 50 biggest art and culture nonprofit organizations. It asks questions such as how big is the sector? What % of it comes from philanthropic sources? What does this fund? What are the prevailing investment strategies?

The overall objective of this project is to identify ways in which philanthropic funders can spend their resources more productively, and arts and culture organizations can use these resources more productively.

1.0 How big is the not-for-profit arts and culture ecosystem?

The above image shows the average annual revenue of the 50 largest Arts and Culture nonprofits based on their average annual revenue from 2016-2020. The overall combined Grand Total is $301.2M/year.

Assuming an additional 10% to cover the “tail” of smaller recipients, provides an Adjusted Grand Total of ~$330M/year. Hence, we estimate that the total size of the arts and culture nonprofit sector in Metro Detroit is approximately one third of a Billion dollars a year.

The above curve of annual revenue drops off sharply:

The two largest organizations (The Edison Institute (known as “The Henry Ford” museum, and the Detroit Institute of Arts) represent ~50% of the top 50 revenues.

The six largest organizations (the above plus the Detroit Symphony Orchestra, Detroit Educational Television, Michigan Opera, plus Allied Media Projects) represent ~75% of the top 50 revenues.

The fifteen largest organizations represent ~90% of the top 50 revenues.

Notes: (i) data for this analysis is based on I990 reporting obtained from the ProPublica Nonprofit Explorer, (ii) the following arts and culture organizations are part of larger nonprofits the Arab American Museum, Cranbrook Art Museum, Macomb Center for the Performing Arts, Kresge Arts in Detroit, Dlectricity, and Design Core so do not file separate I990’s; in this case surrogate organizations are chosen based on scale and nature of operation; WDET is also part of a larger nonprofit but does publish its own annual audits which were used instead of data from I990’s.

2.0 What Proportion Comes from Philanthropic Support?

The above diagram shows the breakdown of the $301.2M combined total annual revenue from the I990 reporting structure.

The data shows that direct contributions and grants equal ~60% of the total revenue, program revenue (earned income) is ~20% of the total revenue, investment incomes and other revenue (both of which may have their basis in historical philanthropic giving) together come to the remaining ~20%. Hence philanthropic giving results in 60-80% of the total revenue.

3.0 What are the trends?

From 2011-2019, the total revenue of the top 50 increased steadily by 8.1% YOY from $183M in 2011 to $341M in 2019. Total revenue declined to $274M in 2020, the first year of the pandemic.

From 2011-2019, program revenue (earned income) and contributions as a % of total revenue remained fairly static at around ~20% and 60% respectively.

Overall, the trend is for program revenue to slowly fall, and for contributions to slowly rise as a percentage of total revenue.

4.0 What does this philanthropic funding support?

Based on an analysis of publicly reported, ongoing, arts and culture funding initiatives documented in Part 1 of this study:

93% of funding goes to large (>$1M) not-for-profits
5% of funding goes to medium size ($100k-$1M) not-for-profits
2% of funding goes to small (<$100k) not-for-profits, individual artists and sponsored projects.

91% of funding goes to unrestricted (general operating) support
9% of funding goes to restricted (project) support.

Combining these two findings, based on the research to date, ~90% of ongoing public and philanthropic arts and culture funding goes to provide unrestricted support of large (>$1M) not-for-profit organizations.

This indicates that the prevailing investment strategy in Detroit’s nonprofit arts & culture sector is Capitalization, which, in its present form, says funders should provide cultural institutions with unconditional financial support and “allow them to do what they do best.” 

5.0 Where does the funding go geographically?

$157.1M (52.2%) goes to organization located in Central Detroit

$8.6M (2.9%) goes to organizations located in Detroit neighborhoods

$79.4M (26.4%) goes to organizations elsewhere in Wayne County

$13.1M (4.3%) goes to organizations in Oakland County

$1.6M (0.5%) goes to organizations in Macomb County

$41.4M (13.7%) goes to x-regional organiztations

Copyright Essay’d 2023

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