Daily Receives Fees Despite Donation

Like so many of the nation’s newspapers, Stanford’s student-run daily newspaper is now facing extraordinarily financially trying times and an industry with an uncertain future.  For years, however, the Daily generated surpluses and maintained large cash balances, often on the order of hundreds of thousands of dollars.

Though The Stanford Daily Publishing Corporation is a completely independent not-for-profit, since 1991 it has operated a subsidiary non-profit organization known as The Friends of the Daily Foundation.  Although the stated mission of The Friends is to provide financial support for the Daily, the cash flow between the two organizations has recently consisted of large transfers from the Daily to The Friends.

The large cash exchanges between these two non-profit organizations has clouded the financial transparency of the Daily and begs the question as to why there is a need for student fees to support the Daily when they frequently run surpluses and maintain large cash balances.

In an e-mail to the *Review,Daily Editor-in-Chief Devin Banerjee wrote, “The Friends of the Stanford Daily Foundation was established in 1991 as a support organization for The Stanford Daily. The Friends was formed through the joint efforts of Stanford*Daily alumni and current Daily staff members at the time. The primary goal of The Friends is to ensure the long-term viability and independence of the Daily. When requested by the Daily, The Friends has provided the Daily with professional contacts, mentorship, legal counsel, scholarships, fundraising support and financial resources in lean times.”

“The *Daily *has found that it can operate comfortably with a $300,000 cash balance.  In the past decade, The Daily typically has found itself with slightly over $300,000 cash at the end of each fiscal year, and has an informal policy of moving, annually, any cash it holds above $300,000 to The Friends, where it can grow the ‘rainy day fund’ held by The Friends,” continued Banerjee.

This statement, however, differs significantly from information reported in the Daily’s 2007 and 2008 IRS Form 990s.  In those reports, the *Daily *declared a cash balance (cash balance refers to non-interest bearing assets and does not factor into revenue, profits, or deficits) of $481,884 as of June 30, 2007 and $517,022 as of June 30, 2008—this more than half a million dollar 2008 cash balance even factored in a $260,000 gift to The Friends Foundation.

In addition to the $260,000 gift the Daily made to The Friends Foundation in 2008, a gift of $82,000 was made to a University fund set aside to fund the construction of their new building, which officially opened in April of 2009.  These transfers helped to account for a reported $80,408 deficit for the Daily according to their 2008 IRS Form 990, the tax return document filed by non-profits.

Also in 2008, the Daily requested and received nearly $50,000 in student fees according to records provided by Stanford Student Enterprises (SSE).  The ASSU Senate approved the Daily’s student funding in the winter of 2008 under the mistaken impression that the *Daily *had accrued a deficit and without knowledge of an impending $260,000 donation to the Friends Foundation.

Jonathan Kass, a senior and an undergraduate senator at the time the Daily requested student fees in 2008, stated, “Although I, along with all my former colleagues, believe that The**Stanford Daily provides an invaluable service to the student body, it also seemed to many of us that the *Daily *was in a unique position to turn a profit without needing student fee support.”

“The bigger issue, to us, was the principle of whether or not it was fair to ‘tax,’ which is essentially what Special Fees are, the student body for a service that could be, and usually is, self-sustaining. We knew that in past years they had run a profit with or without student group money from their advertising revenue, so why should students have to pay for it?” Kass continued.

Kass said he ultimately was persuaded to vote to approve the funding because the Daily emphasized a unique situation presented by the construction of a new building and a projected financial loss.  Though the Daily portrayed 2008 as an unusual year, they have continued to seek student funding.  Kass did not mention any knowledge of the Daily’s habit of transferring funds to The Friends Foundation.

According to Banerjee, The Friends Foundation has contributed over $3.4 million to the* Daily*, including Daily-related initiatives such as the Daily’s new two-story, 5,000-square-foot building.  The year the Friends received the $260,000 gift from the Daily, the organization gave $666,964 to the University to help fund the construction of the Daily’s new building.

As of June 30, 2008, The Friends reported total assets of nearly one million dollars, receiving very little revenue other than contributions from the Daily in that year.  When combined with the Daily, the two organizations reported $1,735,119 in assets.  The year the Daily made the $260,000 gift, the Friends reported a total of $274,865 in revenues, meaning that the organization received only $14,865 outside of the gift from the Daily and earnings on investments.

Except for reducing transparency, the Daily’s subsidiary organization accomplishes nothing that the Daily cannot accomplish without the aid of The Friends organization.  Banerjee did not explain why it is necessary to transfer funds to the Friends for a “rainy day fund.”  The Daily is itself capable of creating a cash reserve within its own organization.

In response to questions concerning the Daily’s acquisition of student fees, Banerjee wrote, “As an independent newspaper, The Stanford Daily has multiple income streams, including print advertisement sales, web advertisement sales, classified advertisement sales, and subscription fees.”

“ASSU special fees is the mechanism by which The Stanford Daily collects a subscription fee from students. This fee worked out to about $8.51 per undergraduate student in 2009. As The *Daily *prints 145 issues a year, this is equivalent to 5.9 cents per issue, or 2.6 cents per issue for combined readership (undergraduate and graduate),” he said.

Banerjee pointed to the fact that the Daily consistently receives one of the highest approval ratings from students, 82.33 percent in 2009.   As with any organization requesting student funding, a student can request an individual refund from the ASSU if he or she prefers not to fund any or all organizations requesting student fees.

“[If] they were able to turn a generous profit that year, then I think they should be more honest with the student body about their sources of funding and what they are doing with the profits. There is no oversight in our current system to make sure that student groups are holding to the budgets they propose in the middle of the prior year,” concluded Kass.

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