Why Your CPA Cares About Your PSA

You successfully distributed a public service announcement and were thrilled with its results. Stations and networks across the country aired it for free and it was seen or heard by millions of people. You generated a great deal of awareness for your organization’s mission and even saw an uptick in website donations because of it.

 

Just when you were ready to break out the champagne to celebrate a successful marketing effort, in walks your finance team. They tell you it’s the organization’s fiscal year-end and their CPA needs your help.  “What,” you think, “Why does our CPA care about my PSA?”

 

As it turns out, your PSA was more than a communications effort. It was also an income generator.

PSAs are In-Kind Revenue Generators

There are two good things a PSA campaign does for an organization. First, it generates a huge amount of awareness for a nonprofit’s marketing message. Second, because it uses free, donated advertising time provided by TV and radio stations, it is a source of in-kind donations. These donations are what your financial team and CPA are interested in.

 

Like all in-kind donations a nonprofit receives, PSA air time must be valued and reported on your audited financial statements.  In fact, it is so important that it must be shown separately from cash donations. Sometimes the value can be quite large.

 

For example, from our experience a typical Connect360 TV PSA  generates over $5 million in donated advertising revenue  in the first twelve months after distribution. Best-performing campaigns can often receive over $40 million in in-kind donations.

 

Put another way, a typical TV PSA generates free, donated advertising valued at 150 times what a nonprofit spends to distribute it. When CPAs see numbers like this, it gets their attention.

 

Are the Reporting Rules Something New?

The rules go back many years, however, in 2020 the Financial Accounting Standards Board (FASB,) the organization that sets Generally Accepted Accounting Principles (GAAP) tightened its accounting requirements for in-kind donations like PSAs. They did this by issuing a pronouncement called ASU 2020-07 with the goal of increasing the level of transparency surrounding gift-in-kind contributions.

 

As a result, CPAs understand they have to pay more attention to PSA donations and make sure they are reported correctly. In doing this, they found that a successful PSA campaign can have a big impact of the financial results of some nonprofit organizations, because in-kind contributions can make up a major portion of the resources and revenues the organization has at its disposal.

 

What is the Dollar Value of a PSA?

Calculating fair market value of donated airtime for a PSA is not an easy thing. That is because the stations and networks that air a PSA do not provide any information to the nonprofits whose PSAs they air. As a result, organization needs to determine three important things on their own:

 

  • What stations aired the PSA
  • When they aired the PSA
  • What the PSA would have sold for if it had been sold to a paid advertiser

 

Considering that a typical PSA often airs thousands of times on hundreds of stations across the country at different times during the day you can see how arriving at a value can become a complex puzzle to solve.

 

Fortunately, there are marketing research companies like Nielsen and others that capture the pieces needed to solve this puzzle. Nielsen has a technology that allows it to watermark each TV PSA to detect when and where it aired. Media Monitors, a radio research company, has a technology that can do similar things for radio.

 

Nielsen measures TV viewership and radio audiences for all programs, and a company called SQAD has the ability to determine what actual media buyers spend to purchase advertising time similar to that used to air PSAs. The SQAD data provides the kind of fair market values GAAP requires to value individual PSA airings. When the thousands of pieces of airing, viewer impression, and spot value data are combined, it is possible to calculate the value a PSA campaign.

 

Not All Distributors Are Valuation Specialists

Pulling this all together is a big job and requires access to these specialized media databases. What most nonprofits do not realize is that not all PSA distribution services are valuation specialists. Many use simplified formulas or, frankly, guesswork, to determine the value of donated PSA airtime.

 

GAAP has specific requirements that must be complied with and requires CPAs to review the valuation process. Then it requires CPAs to describe the valuation process in a footnote that accompanies the audited financial statements.

 

Because I am a CPA, we take our responsibility to provide GAAP and FASB compliant valuations very seriously. That is why we have licensing arrangements with all the key data providers and built custom computer systems designed to provide GAAP compliant valuations that can be audited by CPAs.

 

Over the last ten years Connect360 has valued more than one thousand PSA campaigns. In addition, since the new requirements were introduced, we have worked with many of the nation’s most prominent CPA firms in their due diligence review process.

 

Communications and Marketing Results Are Still Paramount

At the end of the day, generating huge awareness and attention for communications and marketing campaigns is always our key objective. According to Nielsen, Connect360-distributed TV PSA campaigns received 1 in every 5 (non-Ad Council) detected airing in 2023. In total Connect360 distributed TV PSAs were aired over 2.5 million times in 2023 and had a total media value in excess of $800 million (valued in accordance to GAAP).

 

There are many so many other benefits to having a well-managed PSA campaign. For example, did you know that a PSA can improve your organization’s ranking by some of the nation’s top rating agencies like GuideStar, Charity Navigator, and the Better Business Bureau?  To learn more see our Essential Guide to Broadcast PSA Success.

 

So the next time you have an important message to share, think about using a broadcast PSA to do it, and make sure you have a distribution and valuation specialist in your corner. Contact the experts at Connect360 to make the most of your next PSA campaign.

 

 

© 2024 Connect360 Multimedia

About The Author

Steven Edelman

Steve Edelman is a Partner and President of Connect360. He is a leading expert on the measurement, valuation, and financial reporting of Public Service Announcements by not-for-profit organizations.

About Connect 360

Connect360 is a leading media placement agency driving measurable results for some of Charity Navigator’s highest-ranked nonprofits, well-known associations, government agencies and public relations/marketing firms.

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