Unearned Income

Time to look at unearned income. If you don’t often look at numbers like this, that might sound strange or even fishy. But it’s not. Earned income is what you make from providing a product or service – like a theatrical production or glass of wine. Unearned income is contributions and grants and such. For a nonprofit like a theatre, it’s vastly important.

Between 2007 and 2009, the 990 form seems to have changed, and I think it’s a bit easier to understand the newer form. It might have happened in 2008, but we have that pesky 990EZ that year with not much information. So, I’ll consider 2009-2014.

Fundraising appears a couple places on the Part VIII section, where these numbers reside. There’s a whole section devoted to fundraising events. I’m thinking this would be something like the Encore event. Beginning in fiscal year 2011, the income and expenses are shown as identical netting zero income. I don’t quite understand this, but I characterize it as funky accountant math. There is another line for Fundraising events which then does have a non-zero value shown. Why are there two? Got me. I’ll just show one number.

Fundraising events

2009         6,316

2010         7,398

2011       14,900

2012         6,196

2013       17,602

2014         2,640

Nothing to sneeze at, but all together pretty tiny versus the budget. A lot of work for not a lot of income. One holdover probably would bring in more. But remember, holdovers interfere with $1000 rentals, so we don’t like them.

Next is Government grants. I assume this is where the city’s contribution falls. But it’s not just that since the theatre does apply for and sometimes receive other grants from the state. The city could tell us what their contribution is each year. From numbers I’ve seen published in the newspaper, I’d say it is not far from the total shown on the 990. Here are those numbers.

2009         89,770

2010         87,091

2011       174,226

2012       233,312

2013       247,187

2014       237,929

We can see this value dramatically increase over the past few years. Numbers I saw in the paper for the city’s expected contribution this year was in the >250,000 range. Think about this carefully. Read the post showing net income. There is no doubt in my mind the theatre is solvent primarily because of ticket sales for shows and the big increase in city funding. That is, rentals, bringing in other events, all the things the board officers are pointing to saying we need to do these things – they are all but a blip on the radar. This theatre exists in its current form because our city leaders believe it needs to exist and our community enjoys our theatrical productions.

Giving credit where it’s due – because, unlike the board officers, I think that’s important – it is likely this massive increase in support was driven largely by the executive director’s relationships and ability to tell the story of the theatre effectively.

Finally, let’s look at other contributions. This would include business and individual donations (like the one I’ve made every year). I also assume it includes other nongovernmental grants. That probably explains why it jumps around so much. Here they are.

2009         91,040

2010       196,547

2011         79,669

2012         83,959

2013         80,819

2014       121,144

2010 was quite a year. I’m sure whatever big item must be in there was largely responsible for raising the net income from a loss of $143k in 2009 to a loss of merely $35k in 2010. 2011 was a better year with almost $61k in the black, so other income more than filled that gap. Notice 2011, 2012, and 2013 all failed to achieve the same level as 2009.

Regarding grants, many are specific to a particular activity or event. What we probably can’t find in the 990s are the actual grants and, importantly, the expenses incurred specific to each grant. We need both to determine if the grant was a net win or loss. For instance, the theatre received a grant for its free Patio Concerts this summer. But, they have to pay the bands to perform, and no admissions are charged. So the only income is the cut they take from the third party concessions. Net win or loss? We would need the numbers. Not to say a loss is necessarily bad – if it raises visibility and brings people back to paying events, it might be good – like advertising. Does it? Has anyone tried to figure that out? Or maybe it helps with convincing the city to pay up. All good questions and discussions the board should be having.