Retired Gannett Chairman and CEO Al Neuharth started Freedom Forum in 1991 with a $650 million endowment from Gannett profits that employees piled up over 50 years. This is part of a series about what happened to some of that money.Homeowners across the nation have learned that taking on too-big mortgages can cause huge problems if they suffer income losses through layoffs or other misfortune. That brings me to the Freedom Forum foundation's newly released annual report.
One figure that pops up: the amount the non-profit journalism foundation has spent annually on interest payments. As recently as 2005, those expenses were $3.6 million -- only 10% of the $35.7 million in total operating and administrative expenses that year, according to public documents.
Now, compare that to 2008, the most recent year available, when they totaled $20 million -- about half the organization's $42.8 million in operating expenses, the documents show.
Why the big increase? The foundation more than doubled the amount of mortgage debt it took on, the documents show. Following are those figures, drawn from the organization's annual Forms 990, filed with the Internal Revenue Service:
2005
- Beginning book value of mortgages: $125.1 million
- Ending book value: $336.2 million
- Interest expenses: $3.6 million
2008
- Beginning book value of mortgages: $362.4 million
- Ending book value: $393.8 million
- Interest expenses: $20.0 million
Related: High debt plagues many more newspaper publishers
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What's the bottom line in all this? According to the documents:
ReplyDelete* In 2005, Freedom Forum reported $91 million in revenue, and $62.2 million in expenses -- producing a $28.8 million gain.
* By 2008, the foundation recorded a $12.3 million revenue loss, plus $85.2 million in expenses, for a $97.5 million loss.
As always, I'm very interested in any comments from Freedom Forum. I have not heard from them about yesterday's post on the $1.4 million in bonuses paid to top executives at the foundation and the Newseum.
Here's another footnote:
ReplyDeleteThe Freedom Forum foundation has a long history of big spending on construction projects, first-class travel and other executive perqs -- expenditures that spurred an investigation by New York's attorney general nearly 20 years ago, resulting in large penalties paid by the board of trustees and promises to curb spending in the future.
In 1991, trustees paid nearly $175,000 in restitution to the journalism charity, and agreed to institute cost controls "to curb lavish spending practices in the future," according to public documents that I obtained from the New York Attorney General's Office. The AG's inquiry was launched that year after press reports criticizing the construction and decoration of the foundation's new $15 million headquarters in Virginia. The foundation spent $120,000 decorating its boardroom, equipped Founder Al Neuharth's office with a massage table, and bought a $40,000 desk for his use, press reports said.
At the time, the foundation was still incorporated in New York, home to its predecessor organization, the old Rochester-based Gannett Foundation.
The new cost controls included curbs on first-class travel spending for foundation officials and their spouses, and required the foundation to look for ways to limit construction costs on future projects. "In considering whether to approve the opening of any new offices," the settlement says, "the board shall consider whether the programmatic objectives for opening the new office can be achieved through less expensive means."
Yet, the settlement's terms were effectively binding for only three years after the agreement was signed by then-foundation president Charles Overby, who is now its board chairman and CEO, the documents show. Moreover, Neuharth and other trustees "expressed disagreement with almost every aspect of the settlement,'' The Washington Post reported at the time. They said they signed the agreement merely to avoid an expensive court fight.
"The agreement seems to say that they haven't found very much," Neuharth, the former Gannett chairman and CEO, told the Post. He described the attorney general's investigation as "a matter of judgment over expenditures, and different people have different judgments," the Post said.
Indeed, a decade later, the foundation embarked on a far more expensive project, a new complex in Washington, D.C., that was to house the Newseum, a museum about news, plus new offices for the foundation, an apartment building and other facilities. The complex was initially expected to cost $250 million. By the time it opened in spring 2008 -- three years late -- the price tag had nearly doubled, to $450 million, my research has shown.
In 2008, public documents show, the foundation and museum paid $1.4 million in bonuses to Overby, then-president Peter Prichard and other officials upon "successful completion" of the museum complex.
Correction to above: the investigation began in 1991, but the settlement was reached and signed in 1994.
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