The amount you have in Liquid Unrestricted Net Assets (LUNA) is often the key to sustainability, according to the financial experts at Fiscal Management Associates (FMA).
Here’s a quick recap of LUNA for current participants in this year’s MacArthur Arts and Culture Loan Fund workshop series — and a sneak peek if you’re considering participating in 2020:
LUNA represents the portion of an organization’s unrestricted net assets that can be converted to cash relatively easily. It’s an important financial cushion for guarding against downturns and pursuing new opportunities.
How much LUNA do you need? There’s no one-size-fits-all answer — not even for organizations that are all in Chicago’s arts and culture space. But factors often include:
- Revenue sources. If most of your revenue comes from just a few sources, higher LUNA balances will mitigate potential funding declines.
- Source predictability. LUNA can be used to fill cash flow holes when waiting for grant or contract payments.
- Operating circumstances and goals. LUNA can represent a source of flexible capital when pursuing artistic risk or innovation in your programming.
Building LUNA calls for proactive planning. Try setting a LUNA goal and then budget to raise operating reserves.