ELi Current Finances Explained

Wednesday, November 23, 2016, 7:00 pm
By: 
Alice Dreger, Publisher

ELi is a public service non-profit serving the people of East Lansing. Although the IRS has only required us to file a short-form nonprofit tax report (990) while our annual income has not exceeded $50,000, it’s important to us to be transparent with you about ELi’s finances, because ELi exists for you. So here’s an update, along with our thanks to those who have supported this unique community project.

What’s the basic financial structure of ELi?

East Lansing Info (ELi) is a non-profit corporation recognized as a 501c3 charitable organization by the IRS. It operates as a public service organization whose mission is to provide the people of East Lansing with timely, accurate, nonpartisan news and information. We were recognized by the IRS in July 2014 and we started regular publishing in September 2014.

No one owns ELi. ELi exists specifically to be a public service charity organization. ELi’s fiduciary responsibility is managed by a volunteer Board of Directors. Our accountants are Layton & Richardson, P.C., and we pay them to manage our payroll, review our books, and file our tax forms.

What is the source of ELi’s income?

To date, we have operated entirely on donated money and donated labor. In our first fiscal year, which ran July 1, 2014 through June 30, 2015 we obtained $30,842 in financial donations. (See our report about our first fiscal year.) In our second fiscal year, which ended June 30, 2016, we obtained $47,526 in financial donations.

We conducted a successful Kickstarter fundraiser in June 2016, but since then, donations have been very low in the current fiscal year (since July 1), including during the current fundraising push.

How do ELi’s expenses break down? Our expenses in our second fiscal year came to $41,265, compared to $25,979 in our first fiscal year. Here is how ELi’s expenses broke down in our first and second fiscal years:

As you can see, the great majority (83-84%) of donations to ELi have gone to pay local people to edit, report, manage, and upkeep ELi’s services. With the exception of fees we pay to large-scale assistive online technologies like PayPal and Facebook, almost all donated funds remain in the local economy—90% or better.

As a nonprofit, ELi has extremely low administrative costs. This is true mostly because I donate all my administrative services. (As a board member, the publisher, the Government editor, and at-large reporter for ELi, I have donated all my labor. My husband and I are the lead financial donors to ELi.) What ELi does have to pay in administrative costs mostly comes down to what we have to pay to manage money—for example, to PayPal, Kickstarter, and our accountants. This year that came to only 6%, which is very good for a nonprofit organization.

Who gets paid to work for ELi?

When we started ELi, about half of our reporters donated their labor and about half were paid. Today, about four-fifths of our reporters opt to be paid. In general, reporters are paid $50 for a published article unless it has involved something more substantial, like having to attend one or more public meetings or having to do extensive research and interviewing. In those cases, a reporter might be paid $100 for a published article. We also pay for tech and editing work, two absolutely critical components of running an online news site. As noted, we also pay local accountants Layton & Richardson to do our payroll and tax filings.

You can see, given that our total annual budget is only about $45,000, that no one gets paid very much to do ELi. The people who do get paid are underpaid and do the work because they are excited by the public service mission. In the case of our high school and college student reporters, they also work for ELi because they are resume-building. (They get paid at the same scale as everyone else. There have been no “unpaid internships” at ELi.)

How does income compare to expenses?

As you can see from the chart below, the amount obtained in our first and second fiscal years were enough to sustain operations. For our current fiscal year, we are currently raising money at only about one-third the rate of what we need to keep ELi alive at the same level of expenses as the last fiscal year. In other words, we are running out of money to meet expenses.

This is why we are currently pushing people to donate and to become Patreon monthly supporters. We have not achieved income predictability or sustainability for ELi, in spite of only needing about $45,000 per year to operate this service. The fundraising we have done has been pretty exhausting when we have had to add it on top of all the service. Right now, we’re focusing on fundraising even though we would much rather be doing regular reporting for you.

What other sources of revenue are you considering?

We have looked into grants for this work, but unfortunately there are not currently local or national organizations that have philanthropy targeted at local news provision. About five years ago, there were several national organizations funding this kind of work, but all have moved on to other types of projects.

The Board is currently considering taking corporate sponsorships at ELi’s site. (As a 501c3 nonprofit, we can accept sponsorships but not conventional ads.) This is not without cost, including potentially the loss of donors who might think that our advertising corporate sponsorships means we don’t need donations or who might not want to donate to an organization that accepts these kinds of sponsorships. Another potential disadvantage of this is the creation of financial conflicts of interest, so this would require close management, as with all potential conflicts of interest.

We should note that online news sources (local and national) have not found it possible to sustain themselves on advertising or corporate sponsorships, as most readers have learned to “read past” ads, so while accepting corporate sponsorships may bring in some income, it is unlikely ever to provide a significant proportion of our income. For-profit news organizations that require paid subscriptions and that take advertising are still hemorrhaging money and laying off reporters.

Based on extensive reading and consulting about local news, we think a nonprofit public service model sustained by local financial partners (donors) is the only one that will currently work for East Lansing. Right now, even this isn’t working financially in terms of sustainability, although that may turn around. (If it doesn't by January 31, 2017, we'll shut down operations; read more.)

Why don’t more people donate?

While ELi enjoys upwards of 15,000 readers per month, only about 300 people have donated to ELi in its entire history. So far as we can ascertain, the reasons people do not donate are:

  • They don’t understand that the production of high-quality, accurate, well-edited, well-presented news requires funding.
  • They don’t understand the difference between real news and blogging/commentary.
  • They are content to only have news that someone else is paying for, even if that means most of the news they get is corporate-sponsored and/or “infotainment.”
  • They do not give to charities and non-profit organizations, with the possible exceptions of their faith organizations and schools.
  • They think ELi should not require any money to operate. They think everyone at ELi should work for free.

 

Why do people donate?

The people who donate tell us they do so:

  • because they cannot imagine having to live without the news, information, and calendar that ELi has been steadily providing;
  • because they appreciate our hard work and dedication to the community;
  • because someone they love works for ELi;
  • because they are doing well enough economically to donate to this local public service effort;
  • because they want the tax deduction;
  • because they believe local news functions as a critical check on local government.

 

Have a question about any of this?

Please contact us.

Want to help us keep this service going in 2017?

Then step up now to help us meet our sustainability goal by January 31, 2017.

 

 

 

 

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