Secret spending habits at Republik media

Organizations are supposed to keep a lot of secrets. But in an annual financial statement everything usually comes out at some point, as an example from the media industry shows.

“The level of knowledge of internals as well as externals is actually the same.” With this statement the CFO of a major corporation once surprised the journalists present at a media conference.

The writing guild often suspects that a lot is being concealed. But for legal reasons important information can hardly be concealed, for example from financial backers.

Tension at media houses

The day of truth is usually the day when the complete annual report is published. The best example of this are the annual financial statements of media companies, but hardly anyone writes about them because it either affects their own publication or could put the direct competition under pressure.

muula.ch simply picks out a current annual report at random, for example from the media project Republik, and interesting things come to light there as well. Hardly anyone has ever heard of the ‘secrets’ there, although the annual financial statements have actually been ‘on the market’ for some time.

Mega annual deficit

First of all it is interesting to note that the consolidated annual result for 2021/22 is actually minus 6.6 million Swiss francs. In fact, this consolidated loss includes the financial statements of Project R Cooperative as the parent organization and Republik AG as its subsidiary.

However, since 5.7 million Swiss francs in membership fees are not reported as income but as cooperative capital, the high loss comes about.

Dwindling equity

“More meaningful is the change in equity compared to the previous year, as it includes the income from membership fees,” Republic therefore skilfully directed the readers of the annual financial statements. However, the consolidated equity still decreased there by almost 900,000 to 1.4 million Swiss francs.

Now outsiders might think that the reason was a lack of money in the media project. But far from it. The main reason for the slump in equity by around 40 percent is the formation of a provision for taxes.

The construction of a cooperative and a stock company (AG) in fact gives rise to numerous problems, which the management of Republik apparently only realized much later.

Wrong company structure?

Some of the donations from 2017 to 2020 probably qualified as gifts and would be subject to gift taxes, it was said. In addition, the Project R cooperative had made payments to Republik AG between 2017 and 2021 to finance the training of female journalists and research.

But these may now be subject to VAT, it said.

The tax authorities rejoice

According to the annual report, corresponding subsequent declarations have been submitted to the tax authorities in order to pay any taxes due retrospectively. However, since the potential tax bills were not yet available, Republic formed the provision of say, almost one million francs.

The patrons of the media project have thus ultimately supported the canton in which they are based as well as the federal government with part of their donations rather than an Internet newspaper.

The construction of the media group is anything but fortunate in view of the tax payments. However, this is probably due to the fact that the Stiftung für Medienvielfalt (Foundation for Media Diversity), which has repeatedly supported Republik with considerable amounts, does not support corporations such as AGs.

Such money thus flowed into the cooperative and was then, however – at least partially – used in the stock corporation.

Happy employees

And while muula.ch is at it, let’s take a look at the largest expense item in the annual financial statements of Republik: The 34.5 full-time positions had created personnel expenses of 4,927,680 Swiss francs just in the past fiscal year.

That’s an average of almost 150,000 Swiss francs in annual costs per 100-percent employee, which is probably exceptionally high in the Swiss media landscape.

Or to put it another way: In addition to the unfavorable construction around a cooperative with a stock corporation, which can trigger tax payments around donations and added value, another secret about the good pay at the Media Project Republic has come into the light of day.

The chief financial officer of the large corporation described at the beginning of this article was therefore right. Secrets eventually do come out.

11/14/2022/kut./ena.