Tumblelog by Soup.io
Newer posts are loading.
You are at the newest post.
Click here to check if anything new just came in.

September 20 2010

16:00

A warning to nonprofit news organizations: Government funding may not boost the bottom line much

At a time when some Americans are talking about increasing government support for journalism, here’s an interesting new study that adds a useful data point to the discussion: When governments provide financial support to nonprofit organizations, 73 percent of the extra money is counterbalanced by a decline in support from private donors. In other words, the value of government money received is decreased by a reduction in funds from elsewhere.

The paper is by Jim Andreoni of UC San Diego and A. Abigail Payne of Canada’s McMaster University, and it examines over 8,000 nonprofit organizations. The idea that government funding reduces private giving is not new, but this paper attempts to figure out why — and how — the trade-off occurs. Is it because private donors think that government grants eliminate their own need to give — the idea that they “already gave at the office” through their tax dollars? Or is it because getting government money causes nonprofits to relax, to reduce how aggressively they pursue outside money through fundraising?

Andreoni and Payne come down squarely on the side of the latter — it’s primarily nonprofits’ own reduction of their own fundraising efforts that lead to less outside support, not any change of heart by donors. When the government gives, nonprofits take that as an opportunity to cut back on fundraising, even though fundraising is highly cost-effective; the paper finds an average $5 return in gifts for every $1 spent on raising money. Reducing fundraising may save some cash in the short term, but it doesn’t appear to be a smart strategy.

If charity managers find fund-raising a “necessary evil,” or fear it may hurt their evaluation from charity watchdog groups, then a government grant will allow them to redirect efforts from fund-raising to providing charitable services. This means that after getting a grant, charities may simply cut back fund-raising.

The paper finds that for every $1,000 given through a government grant, nonprofits reduce their spending on fundraising by an average of $137. But that decrease leads to a drop of $772 in donor gifts. (The paper found that, contrary to the fears of some, government grants encourage outside donors to give instead of discouraging them — but the impact is small, only about $45 per $1,000 in government grants.)

In other words, adding it all together, $1,000 in government money only nets out to $410 in the end, on average.

The study didn’t look specifically at nonprofits engaged in journalism, and it’s difficult to apply its findings directly to the ongoing debate over government support for news. Check out the full paper for much more detail. But if I were in charge of a nonprofit news organization, here’s what I’d take away from Andreoni and Payne:

Government help is not a cure-all. Even setting aside the very legitimate arguments over the wisdom or ethics of government support for news, it doesn’t appear to be quite the financial boon some are foreseeing, at least for nonprofit organizations more broadly.

Fundraising is worth investing in. Andreoni and Payne say it’s surprising to economists that $1 spent on fundraising could lead to $5 in revenue, but it’s a robust finding that lines up with what the industry reports internally. They also point out that not every nonprofit approaches fundraising with the same sort of enthusiasm (the “necessarily evil”); those who find the task distasteful will pay for it in the pocketbook.

Success in one source of revenue can’t lead to the abandonment of others. The smartest nonprofit news organizations are busy trying to build a multi-pronged model for financial sustainability — often blending advertising, sponsorship, small individual donors, money from big foundations, content-sharing alliances, and more. Over-reliance on any one source is dangerous; just ask the publisher of a major metro newspaper about classified advertising circa 1995.

Photo by Thomas Hawk used under a Creative Commons license.

September 15 2010

17:00

Government-free* nonprofit journalism, asterisk included

Here’s a test for nonprofit journalism and its stakeholders.

The following sentence comes from the “Contribute” page of a nonprofit journalism organization. What’s wrong with it?

The [organization] neither accepts nor receives any government or taxpayer-financed grants and relies solely on the generous support of our donors.

The answer is…nothing is wrong.

Ha! It was a trick question. The website belongs to a news organization that says it helps produce independent journalism and doesn’t like the idea of government supporting its work. No problem.

But in the same breath, the organization informs its potential donors: “Your donation…is tax deductible to the fullest extent of the law under Internal Revenue Service Code Section 501(c)(3).”

Now we have a problem.

The organization I am zinging here, the Franklin Center for Government and Public Integrity, believes that tax deductions for donors aren’t the same thing as government support. “Our generous contributors are not funding government support of journalism when they donate to the Franklin Center,” Jason Stverak, the group’s president wrote in an email. (Complete response below.)

Economists disagree. Charitable deductions are known within the realm of economics as “tax expenditures,” and according to Stanley Surrey, the former assistant Treasury secretary who coined the term, they’re no different than direct government spending.

“Whatever their form, these departures from the normative tax structure represent government spending for favored activities or groups, effected through the tax system rather than through direct grants, loans, or other forms of government assistance,” Surrey wrote with coauthor Paul McDaniel (emphasis mine).

The Heritage Foundation offers a similar definition. It says in part: “The word ‘expenditure’ is used to highlight the similarity between the use of the tax code to provide advantages to a select group and the more traditional method of giving the group a slice of the federal budget.”

Last month, I took WikiLeaks to task for promoting itself as a cutting-edge proponent of transparency in government while failing to disclose much of anything about its own funding and expenditures. My gripe, in a nutshell, was that WikiLeaks’ adherence to a double standard undercuts not only its own credibility, but also that of the entire nonprofit sector in journalism.

Like WikiLeaks, the Franklin Center seeks to “advance the cause of transparency in government” while it also withholds information about its own finances. But it slides further down the slippery slope when it condemns the idea of government support for journalism and then makes that condemnation a central selling point in its case for philanthropy — tax-deductible philanthropy, no less.

The Franklin Center isn’t alone. In Idaho, the Idaho Freedom Foundation, publisher of the nonprofit Idaho Reporter says this on its “Donate” page:

The Idaho Freedom Foundation relies solely on the generosity of individuals, foundations, and corporations that share its commitment to freedom. IFF does not accept any government funding. IFF is a tax-exempt organization under section 501c3 of the Internal Revenue Code. U.S. citizens will find their contributions to be tax-deductible to the extent allowable by law.

Some of the biggest names in the world of Washington think-tankdom commit the same offense. They include the Progress and Freedom Foundation and the Heritage Foundation, both of which oppose the idea of government policy changes to support journalism.

I’m not here to flog the Franklin Center or any of these other organizations for their ideology. I know from a decade of reporting on Capitol Hill that it’s darned hard to maintain one’s purity when money is involved. But those who count themselves among the nonprofit sector in journalism should walk their own talk: Tax deductions for donors are government support. Any nonprofit organization that says it “relies solely on the generous support of our donors” while also promoting the charitable tax deduction available to its donors is issuing, at best, what the late Ron Ziegler might have called an inoperative statement.

The fact is, government subsidies for journalism are everywhere. In addition to the charitable tax deduction, they include mechanisms such as favorable postal rates and revenue-producing legal-notice requirements. Geoffrey Cowan and David Westphal of USC identified these government subsidies to journalism in a report earlier this year and argued that they were intended by our founding fathers to help support a vigorous press.

If you don’t buy their argument, another proponent of the view that tax deductions constitute government support is view is Sen. Chuck Grassley. The Iowa Republican has been a tireless watchdog over the nonprofit sector, and the charitable tax deduction has been his entry point to investigations of hospitals, athletic booster clubs and other 501(c)(3)s.

So what to do in a world of ambiguity?

One solution would be for journalism nonprofits that oppose government support to refund the value of donors’ tax deductions to the U.S. Treasury. The Franklin Center recently named an advisory council that includes well-known journalists such as Tucker Carlson, and maybe that body could take up the idea at their next meeting. But I’m not holding my breath for that to happen.

Here’s another scenario: What if Grassley slipped in a legislative rider ending the charitable tax deduction for organizations involved in journalism? I bet the nonprofits mentioned above would howl like holy heck.

Perhaps the best thing would be for these organizations to acknowledge the reality of their dependence on government support and focus instead on journalism. They have a lot to contribute from their point of view, and that should be reason enough for readers to support them. Until then, a little more transparency might be in order. If journalism nonprofits want to denounce government support while promoting tax deductions for donors, they should add an asterisk and a disclaimer to their solicitations for support. It’s the transparent thing to do.

I asked representatives of several journalism nonprofits whether they thought tax deductions constituted government support. Here is the full response I got from Jason Stverak of the Franklin Center.

Our generous contributors are not funding government support of journalism when they donate to the Franklin Center. In fact, the Franklin Center strongly believes that government intervention in media will create greater problems than the struggling newspaper business is currently enduring. If government intervenes in the news industry, journalists will no longer be able to report credibly on stories that matter to the people, but ultimately only on what matters to officials. Journalists may ignore scandal and corruption for fear of losing government funds. They could become political flacks and write to appease government instead of investigating it.

Drawing the conclusion that every donation to a non-profit 501 c3 is supporting the government in some way is incorrect. Tax deductions for gifts to houses of worship are not funding government support of religion and tax deductable donations to health care associations are not supporting government healthcare.

Photo by Jacob Kearns used under a Creative Commons license.

June 11 2010

14:00

Bill Buzenberg on Center for Public Integrity’s aim to “catalyze impact,” fundraise in a competitive field

Nonprofit news organizations may be all the rage, but they’re not a new animal. Last week, 20-year-old Center for Public Integrity announced a round of recent hires. Since January, CPI has brought on nine new journalists, including reporters, editors and a database expert. For a team of about 50, it’s a significant expansion.

New hires include John Solomon, long-time investigative reporter and the former executive editor of The Washington Times, as “reporter in residence,” Julie Vorman, former Reuters Washington editor as deputy managing editor, and Peter Stone of National Journal.

CPI is known for its investigative projects that appear in major print and broadcast outlets. A recent year-long project on campus sexual assault was picked up by outlets around the country, reaching what CPI said was an audience of 40 million. Last week CPI partnered with The New York Times in publishing Coast Guard logs suggesting authorities knew about the severity of the BP oil spill much sooner than announced. The logs were also published on the Center’s website and were widely used by newspapers across the country.

I spoke with Bill Buzenberg, CPI’s executive director about his expansion and the organization more broadly. Buzenberg says CPI does not fall on one side of the “impact v. audience” question, but acknowledged that their latest strategic plan emphasizes the organization’s desire to “catalyze impact.” He thinks it’s an exciting time for nonprofit journalism, but sees challenges in an increasingly crowded fundraising field. Here’s a lightly edited version of our conversation.

Is this a new team you’re hiring for a specific project or a general expansion of your editorial capacity?

It’s a general expansion of our editorial capacity. We have a very strong push on: The top major newspapers are all using our content, even online at The Huffington Post. The work is being used more than ever. Lots of places want to partner with us. There is so much watchdog work to be done.

Some nonprofits, like MinnPost, are focused on drawing a regular audience to their website. Others are looking for other outlets to pick up their work and reach an audience that way. Could you talk about where Center for Public Integrity fits?

I think from the beginning the Center has had the same trajectory. In the beginning, actually, it did reports, held news conferences and handed out those reports, and they were reported on by other publications. That is still part of our operation. We very much do reporting work — sometimes it’s a year, sometimes it’s months, sometimes its a few days — and we make it available to other organizations very broadly. And it gets used very, very broadly.

One example: We did a project on campus assault, just recently. We worked on it for a year. We collected the data from 160 universities, we did an investigation, we did a lot of FOIAs, which we increasingly do here, we get the documents and the data. Then we did a number of reports. And we look for a specific partner on each platform: online, print, radio, and television. That’s what we’ve done. ABC did a story on it. NPR did a number of reports on it. Huffington Post carried a number of reports. And we made a specific plan to provide a toolkit for campus newspapers: 65 campus newspapers have used that report. We made it available in an ebook. The sum total of that we can now say that 40 million people have heard, watched, seen, or read some part of our campus assault project. It is on our website. And there’s a community interested in this work, that’s concerned about what’s going on with campus assault. So we have a resource on our website. And it’s in the other publications.

So we’re both. We want people to come read it and get our work here, and we love it when it’s published elsewhere and linked back to us. There is always going to be more on our site — more data, more documents, more photographs. We want traffic to our site, as well as have it used elsewhere.

We also run the International Consortium of Investigative Journalists. The consortium is 100 journalists in 50 countries. We are working on, right now, three major cross-border investigations. We’ve been working on global tobacco for quite a while and issuing reports. Those reports are running in publications all over the world where those reporters work or have connections. For example, in July we have a project coming out with the BBC. The BBC has planned two documentaries and several programs. They’re using all of the work that we’ve started. We’re all doing it at the same time. It’ll come out the third week in July and it’ll run all over the world. Not just the BBC World Service, but in countries where we’ve been working. So we work internationally. We work in Washington, increasingly covering federal agencies. And we work at the state level, where we’re able to do 50-state projects. So that’s our model. It’s unique in how it operates. We’ve spent 20 years building this up. We’re very much pushing to do more, do it better, and do it widely.

You mention audience — is that how you measure success? There’s this debate happening right now: Is it audience, or is it impact? How do you define success at CPI?

Increasingly, the real way we measure success is impact. That is a huge part of our strategic plan: We want to catalyze impact. That means we want hearings to follow. We want laws to change. We want actions to happen. We are not an advocacy organization. We don’t go out and say “here is what you should do” in any way shape or form. We’re an investigative journalism organization. We do the reporting, but we love to see actions happen because of our reporting. A few years ago, when we reported on all the lobbyist-paid travel, where the records were kept in the basement of Capitol that no one had ever looked at — that took a year to do, with students. [Disclosure: I was one of those students.] But we listed every single trip taken by every single member of Congress for five years, and every staff member of every member of Congress. We showed every trip, every expense. The minute that was published, the travel started down. Then the new Congress came in and said, “oh, we have to close this loophole.” It was a loophole because it was public and transparent. We love that that’s an action that comes out of it.

But of course we like audience and we like engagement. So audience is a part of it. Engagement is increasingly a part of it. Are people writing comments, giving us ideas? How is the audience engaged? I was just up in Minnesota — the university there had just done a day-long session on campus assault, which came out of a public-radio interview they did with our reporter there. That’s an engagement in an issue at a local level that is very important.

[Buzenberg said that CPI's site attracts more than 1 million unique visitors per year, but declined to release exact traffic statistics.]

Nonprofit journalism is a hot topic right now, but there have been outlets like yours for a long time. I’m wondering, in terms of fundraising, does that give you a leg up right now, given that you’re established, or is it becoming difficult in a more crowded field?

I was in public radio for 27 years, both at National Public Radio and local. I was the head of news at national for seven years and then went to Minnesota Public Radio, now called American Public Media nationally. We raised a lot of money in both places. That’s nonprofit journalism with an important audience and it does great work.

Right now, I think, many funders have understood that the watchdog work, the investigative work, it’s expensive, it’s difficult, it’s risky. It’s the first thing often that gets cut when newspapers are declining, or magazines, or television, when they don’t have as many people out doing it. I think it’s been a period in which foundations and individuals have seen the importance of the kind of work that we do and we’ve gotten some strong support to continue to do this work. Yes, it’s competitive. It’s difficult.

We’re raising money in three ways. We do have foundation support. We’re talking with something like 86 foundations, many of whom do support us. We also are raising money from individuals — small donations with membership, much like public radio. Larger donations from people with resources. We do have a strong base of individual donors. And the third way is earned revenue, and we’re working on various scenarios of how we can earn that. We just did research for BBC. We sold our map on the global climate lobby to National Geographic. We’re selling ebooks. We do have various small revenue streams we want to grow. Those are three ways we raise the money to do this work. It’s important work and it’s not free. Public radio’s not free either. They get government resources — a small amount really. But at the Center we don’t take government money, direct corporate money, and we don’t take anonymous money. We make transparent, which is a very important thing, who is supporting us. It’s difficult. It’s not easy. With all the new centers popping up, there’s competition. There’s a lot going on, but I think many foundations, locally and nationally — and increasingly internationally, because we’ve gotten some good international support — have understood that this kind of work needs to be supported.

One thing I wanted to circle back to is your expansion. It seems like your recent expansion is into financial coverage. How did you come to that decision to expand in such a focussed way?

It came when the financial crisis hit the fall of 2008. We felt like no one was really saying who had caused the subprime problems — who was behind that? So we did a project. We started with 350 million mortgages. The mortgages are public information. From that, we named the 7.5 million subprime mortgages and we picked the 25 top lenders. Who they were, who supported them, where they did their lending, at what interest rates. We put it into a report. It took us six months. It’s “Who is behind the financial meltdown?” It still gets traffic. We put it out as an ebook. It’s being used by attorneys general. It’s being used by all sorts of people. No one had done the definitive work. That’s a project I’m really proud of. From that we grew a business and finance area. We thought there was so much more.

We’re tracking financial regulation and financial regulation issues in a way other people aren’t doing. That’s what our three-person team is doing. Financial is one area — money and politics is obviously one area we work in at the state and the national level. I might add when we did the global climate lobby before Coppenhagen, we were working globally. The other area is environment. The stories we’re working on with the BBC are environment. We’re doing a big project on the 10 most toxic workplaces and the 10 most toxic communities in America. It’ll take us six months.

How big are you? How many people work at the Center?

Right now, with the additions, we’re about 40. With fellows, we have 5 fellows and 6 interns, so we’re close to 50 people, if you add in fellowships and interns. It’s a major investment, there’s no question about it. That’s how we’re able to focus on these new projects.

This is a little touchy, but it jumped out at me. When I looked at the press release for the expansion I noticed that the eight new editorial hires are all men, I’m just curious about your struggles with diversity and bringing on women?

Well, first of all, the corrected version of the press release we sent out has Julie Vorman. We hired a deputy managing editor whose name should have been on there and it’s not on there. It’s not all the hires at the center — the six interns we hired, for example, are all women. We had 350 applicants for our internship program and we picked six, the best six. There are women at the Center. If I looked at the overall Center numbers, it is diverse, and it does have women. My COO and the head of development are in there, and on and on. There are many women here. It looked more male than it should have in the latest hires. It’s a fair question, but I think if you look at the overall numbers of the Center both with diversity and women reporters.

[After our conversation, Buzenberg looked up a breakdown of all staff at the Center, finding 43 percent are women and 23 percent are minority. Their staff page, showing individual positions, is here.]

Older posts are this way If this message doesn't go away, click anywhere on the page to continue loading posts.
Could not load more posts
Maybe Soup is currently being updated? I'll try again automatically in a few seconds...
Just a second, loading more posts...
You've reached the end.

Don't be the product, buy the product!

Schweinderl