the silver guide to non-monetary transactions

about

Objective | Context | Challenges | Considerations

Objective

The Silver Guide to Non-Monetary Transactions guide is a reference tool developed by the Artist-Run Centres and Collectives Conference (ARCA), in partnership with the Independent Media Arts Alliance (IMAA), for people working in non-profit cultural organizations such as artist-run centres. Its purpose is to provide tools to help identify, quantify, and document non-monetary transactions and contributions received in the form of goods and services by a non-profit organization (NPO) and, consequently, to recognize (account for) such transactions and contributions in the organization’s financial statements.

Context

The impetus for developing this resource comes as a response to increased pressure from funders to diversify revenues, a measure believed to bolster resilience by reducing reliance on public funding. Artist-run centres [1] are typically very small organizations, two‐thirds of them with annual budgets less than $250,000, and account for just 10% of the $146 million in public funding received by visual arts organizations that report to CADAC (Canadian Art Data/Données sur les arts au Canada). They have lean infrastructures (particularly with respect to human resources) and spend little of their budgets on communications, public outreach, and fundraising. Artists fees typically make up a significant share (24%) of an ARC’s artistic expenses (compared with 5.7%, on average, for art museums and public art galleries). They are much more dependent on public sector funding (particularly Canada Council funding) than public art galleries or art museums to fulfill their mandates. [2] Since most small organizations have little access to sponsorships and donor income, intense competition exists among organizations seeking private donations as many of them draw upon the same small pool of donors. In contrast to some centres that derive income from production services such as studio and equipment rentals, the value of artist-run centres dedicated to supporting and presenting research-driven artistic practices resides in their intangible assets, such as the production of knowledge and data (IP), expertise and service exchanges, use of commons, professional methods and processes, and historical archives. The The Silver Guide to Non-Monetary Transactions guide represents a first step in addressing the challenge of converting the real and sought-after value of gifted and bartered goods and services into legitimate sources of earned revenue. This is beneficial for two reasons: 1) to dispel the perception that small organizations are overly reliant on public funding, and 2) to better demonstrate the economic scope of such organizations and their activities.

Neither should developing such accounting practices serve to debase the organic processes at the heart of the gift/relational economy that drives artist-run culture, given the degree to which the arts and culture milieu is a community of contacts, and the propensity of artists for collaboration and partnerships (comparable in some ways, perhaps ironically, to the business world). Rather, cultivating such accounting practices is intended to address the under-acknowledged contributions of artist-run centres and support them as they maintain and improve facilities, partner in ambitious annual or biennial events, and provide expertise in support of artists, historians, curators, and administrators, and thereby play a distinct role within a healthy visual art ecosystem. [3]

Challenges

For many cultural NFPs, contributions in the form of goods and services (donations of computers or other equipment, professional services, or advertising) or other non-monetary transactions (loans of exhibition spaces or equipment in exchange for visibility) can be important. However, due to accounting or valuation issues, such transactions are sometimes not recognized in the organization’s financial statements. When an organization relies on the help of many volunteers, accounting for contributions received in the form of services can be difficult, impractical, and time-consuming. Then again, when an organization frequently accepts contributions in the form of goods and services, and when these are easily quantifiable, accounting for them can provide highly relevant information and permit the organization to appreciate the full economic scope of its activities and ensure better comparability with other, similar organizations. For example, the Department of Canadian Heritage considers in-kind contributions as real contributions against the cost of proposed projects.

Considerations

  • A non-profit organization should always make a cost-benefit assessment to determine if the added value of this information (i.e., whether non-monetary exchanges may contribute to diversifying revenue sources) is worthwhile given the costs incurred in establishing and maintaining the necessary accounting records.
  • Once budget estimates have been prepared, it may also be beneficial to try to predict the exchanges in goods and services necessary to carry out the organization’s activities for the approaching financial year. These may then be integrated into the accounting process right from the start.
  • With certain exceptions under the Excise Tax Act, trade in services may be subject to GST, PST, and/or HST, for example, if the payment by the sponsor is made primarily (more than 50%) for advertising on television or radio, or in a newspaper, magazine, or other publication issued periodically. (see section 4. IMPACT OF APPLYING the Goods and Services Tax (GST) and Harmonized Sales Tax (HST) and Provincial Sales Tax (PST) where applicable)
  • In no instance can this document replace government publications relative to sales taxes nor the advice of a professional.

This guide and toolkit have been developed to provide guidelines for managers and administrators responsible for the economic health and growth of small organizations. Great care has been taken to provide accurate information, along with a series of helpful document templates and procedures. Although written and reviewed by professional accountants, this document may not provide all the answers to the laws governing consumer taxes. Any decision to account for non-monetary operations in your organization’s financial statements should first be discussed and negotiated with your auditor, who is ultimately responsible for ensuring compliance with a growing list of accounting norms. The letter, contract, and form templates found in this resource, generously shared by various ARC administrative staff, can readily be adapted to suit the various and changing circumstances encountered at your centre as it carries out its business and programming.


[1] ARCs are characterized by boards of directors typically comprised at least 51% by artists, a commitment to paying (or working toward paying) CARFAC fees, and a focus on the artist and artistic practice over the art object. ARCs also desire to pay curatorial and administrative staff a living wage in recognition of the time they spend working with artists and adapting themselves to the evolving requirements and language of public funding programs as well as to ongoing threats to public arts funding in uncertain economic times.

[2] “The Visual Arts Landscape in Canada as Seen through CADAC, 2011–12,” Research and Evaluation Section, Canada Council for the Arts, March 2014. En français: https://conseildesarts.ca/recherche/repertoire-des-recherches/2014/03/paysage-des-arts-visuels-2011-12?_ga=2.72000275.1643849959.1587643613-1958318394.1586890553

[3] Sarah Thelwall, Size Matters: Notes towards a Better Understanding of the Value, Operation and Potential of Small Arts Organisations, London, Common Practice, 2011.