Dirty Laundry

Taking a leaf out of the UK’s Sun newspaper, internationally regarded as the lowest form of pond life when it comes to sensationalising a story, I had to liven up the title for this post with some innuendo because I’m going to talk about tax returns – but stay with me.

A couple of years ago the IRS ushered in some significant changes in their tax-return requirement for non-profits. If you’re an organisation with gross revenue in excess of $200K, you need to complete and submit a form 990Return of Organization Exempt from Income Tax. If you’re an organisation with gross revenue of less than this but more than $25K, you need to fill in its companion form, the 990EZ – an oxymoron if there ever was one. The 990 is not just about reporting financial information, the form requires excruciating detail on issues of compliance, governance,  people and activities – but that’s reasonable because in return, you get tax exemption.

Or do you?

Unless you’ve been living under a rock, you’re probably aware that the U.S. is in dire financial straits, with a national debt in the trillions of dollars. If you think the IMA’s dashboard is impressive, checkout the national debt dashboard at US Debt Clock.org – the mother of all dashboards. The consequence of those alarmingly-high numbers – alarmingly increasing every second, is that the IRS is looking for more tax dollars, despite what the politicians say about reducing taxes – actually because of what the politicians say about reducing taxes. Consequently, you’re starting to see reports like this from The Chronicle of Philanthropy: State Budget Losses Expected to Cause Problems for Nonprofits Through 2013 and headlines like this:

This is not a tax

A “voluntary” payment in lieu of taxes – hmmm… But I digress, I promised you some dirty laundry…

990’s are dirty laundry, filled with expenses, revenues, salaries, trustees, you name it, and they’re freely available. I know, right? Awesome… I sometimes play a game I call Match-the-990-to-the-Annual-Report, but I’ve never managed to succeed at it yet. Anyway, with all that spare time I have, I’ve been capturing a small nugget of information whenever I peruse a 990. In Part IX Statement of Functional Expenses, page 11, in one of the (many)  expense line items, there is one labelled “Information Technology”, which provides some fascinating data. OK, maybe its only fascinating to me and maybe I should get out more and stop playing Match…, but here’s what I found. The names have been removed to protect the innocent… or guilty whichever way you look at it:

Museums in the data set are (in alphabetical order and not in the order above): AHC, AIC, Brooklyn, Clark, CMA, DAM, DIA, DMA, IMA, LACMA, MFAH, MIA, MOMA, MFAB, N-AM, NGA, PMA, PoAM, PxAM, SAM, SFMOMA, SDMA, WAC. Data is 2010. The spread in percentage of total functional expenses (i.e. annual operating budget) spent on IT is 3.2% to 0% with an average of 0.67%. One quarter of institutions reported 0%.

I know for a fact that most of the museums in the list are doing some amazing stuff in the technology-related arena, both on their website, in their galleries and their infrastructure, but it would appear that its either “free” in that there is no capital cost (seems unlikely), funded out of operating expense (good, unless its just whatever is left over at the end of the fiscal year), or funded out of donations (bad, if it means they’ll only do it if someone will give them some money). I’m not sure if any of these are what you would call desirable or sustainable.

So my conclusion from the data is that I don’t really have a conclusion, largely because its all “swings and roundabouts” when it comes to how institutions report on spending. I was hoping that it was going to give me some insight into how much institutions are spending on IT, which may or may not include their websites, in-gallery technologies and technology infrastructure. What it does tell me is that we don’t have any consistent way of reporting on how much we spend on technology, or at the very least expenditure is still ad hoc. Maybe that’s just the nature of the beast, but it feels like its a looming problem.

I’m interested because I get asked, and I see the question being asked of, what is a reasonable dollar figure, or reasonable percentage of budget or reasonable cost per employee that should be spent of Information Technology? There’s no meaningful answer, hopefully you are spending something, but its depressing that the question is being asked in that way. Its the same as asking, what is a reasonable dollar figure to spend on an exhibition? Well, that all depends, as with technology it should be about mission, goals and objectives. But you knew that, didn’t you…


2 Responses to “Dirty Laundry”

  1. Rachel Varon Rachel Varon says:

    You have a really interesting perspective, Nik. I agree that the capital costs for most technology costs are not reflected here. How can one get a more accurate depiction of the amount spent on IT? I assume the person who fills out the forms wants to complete them as quickly and cleanly as possible, so the IT spending that is part of overhead and other fixed expenses is not counted. It seems that the 990 misses the point entirely, adding extra trouble to the museum and not providing accurate information to the pubic.

    • Nik Honeysett Nik Honeysett says:

      There are a number of challenges, so teasing it apart is complicated. Standardised reporting on anything is a challenge in the museum world, let alone this new-fangled technology stuff. At the root, I think is the fact that technology has snuck up on the museum community and it’s not considered a discipline – by most. Consequently, comprehension of technology issues, particularly related to its financial implications, is spread very thinly at the museum senior and executive staff level, so nobody is really sure what is appropriate in our setting.

      A good example would be cost of visitor served, which is defined in AAM’s finance reports – so an institution can benchmark itself against that and know where it stands serving its physical audience. The average is around the $35 range (if memory serves) but its broken up more granularly. What is the equivalent to serve an online visitor? If anyone else apart from me has calculated it, I’d be really interested. A while ago, I did a survey and calculated the average to be about 50c. Less for smaller institutions, more for larger ones. But until there’s an institutional need to know what the number is and why its important, we don’t know what to standardize. (I’ll give it some thought for a future post).

      Personally, I think that until there’s directly-attributable revenue involved the requirement is unlikely to change. It’s possible that at some point museums may get to providing subscription-based content, which may be the catalyst.

Leave a Reply