Millions Lost to Mismanagement

by Uncle Paulie

Dateline: Los Angeles

The incredible financial mess continues at Pacifica.  Because they have blown the audit dates for 2 years and have lost about 2 million dollars in funding from the Corporation for Public Broadcasting, the network is danger of financial failure.  The new June 2016 deadline for filing looks like a repeat disaster, possibly blowing close to another million, despite hiring a new Chief Financial Officer, Sam Agarwal, who is facing an uphill battle to literally pry basic financial information from the stations.  Some of the Pacifica stations, like KPFK, do not even have regular bookkeepers at this point, and Agarwal has taken the financial records away from at least 2 stations, it was revealed by Fred Blair in his first KPFK financial report as the treasurer of the Listener Board.

Some serious financial information came out at the recent National Finance Committee, WBAI’s report, and the KPFK Listener Board meeting. Here’s a few bullet points:

—Only 2 of Pacifica’s 5 stations have full-time business managers.  This in itself is insane behavior of management.  They have been unable or unwilling to commit to straighten out the chaotic financial situation.

—Neither WPFW, Washington, D.C., nor WBAI, New York have had their draft FY16 budgets approved yet.  FY16 began on October 1, 2015. 

—The CFO said that cash flow is a major concern now, some stations can’t even meet the National Office’s payroll deadline and are critically behind on health care insurance payments, Central Services fees, and other expenses.

—The Auditors have concerns about WBAI’s rental agreement obligations to the Empire State Building.  This is for transmission antennae and is said to be around $50,000 per month.

—The CFO said that Pacifica should not count on getting Corporation for Public Broadcasting (CPB) grants for four to six months because of the lateness of the audit. He said that meeting the short range cash needs for those four to six months would be a challenge. (And this may not happen if the auditors cannot get the information.)

—The CFO has not been able to even access all the bank accounts, meaning a lot of information is not available.

—WBAI winter fund drive after the entire month of February and an additional week is only 65% of projected budget.

—CFO has not been able to get ANY information from WPFW.  Financially he doesn’t know what is going on there.

—Pacifica has not sent the financial statements to the stations that were due in February.

—The amount of information that has been demanded from the auditors

is “overwhelming”.

Click on Box to view KPFK Treasurer’s Report.  Keep watching entire video as last part is a Supplemental Report by former Treasurer Kim Kaufman.

Former KPFK Treasurer Outlines Dire Conditions

Kim Kaufman, former KPFK LSB Treasurer issued the following report

This is a supplemental report to what you’ve just seen on the video

I have written elsewhere how Lydia Brazon’s majority has approved deficit budgets for KPFK totaling approximately $1 million dollars the last two years. But what’s really telling about this year’s KPFK budget is that the majority of fund drive days – almost 2/3s – come in the first half of the year. There’s mostly smoke and mirrors in the second half. I wonder if they intend for KPFK to be in business in the second half of this fiscal year which starts April 1.

As Fred said, there is a new CFO. His last job was at a San Francisco non-profit. It was largely funded by various state department and law enforcement agencies that are usually associated with regime change in foreign countries. It’s an unusual choice for Pacifica one would think.

The CFO has been at Pacifica for less than two months and said he hasn’t reviewed most of the station’s budgets – but suggested they may be unnecessary and can be replaced by “innovative thinking.” He can’t possibly be familiar with all our operations in this short time and yet he’s decided our business model is no good. And that he and Lydia, without informing the board, have put out proposals for alternate funding. But he’s not prepared to get into specifics yet.

Such “innovative thinking” may be underwriting as was discussed at the last National Finance meeting. This seems to me to be a straw man – a sham argument set up to be defeated. It seems odd that after two years of the national board majority claiming how fantastic they were doing because they were in charge, now suddenly, there’s a financial disaster with the only choice being presented is to take underwriting. And the board saying nothing while the CFO says publicly that listener support should be dismissed as reliable or even desirable.

The majority on the national board have already forfeited $2 million dollars in lost funding because of two late audits filed to the State of CA and the Corporation for Public Broadcasting. The CFO seems really fuzzy about the next CPB deadline which he seems likely to miss which will cost Pacifica another one million dollars in lost grants. It seems odd that making that deadline in June to make sure we get that $1 million dollars isn’t his highest priority.

This is a straw man because first of all, our audience is simply too low to be attractive for any serious underwriting. Any business that would be aligned with our programming is not likely to provide much financial support relative to our low listenership. It won’t bring in significant funding and in exchange, it will upset our listeners at the mere idea of this. But perhaps that is the point. Say no to this scary underwriting and the alternative is… wind up in bankruptcy court? Sell off a license?

But why is no one talking about the real choices? What real management and leadership would do with a radio network would be to improve the programming, which is what we do to serve the public which is why we have non-profit radio licenses in the first place. We would get a plan to do appropriate marketing. And we would clean up the sloppy or outright fraudulent accounting and business practices.

In KPFK’s case, we would ask why is there unqualified management making obviously bad decisions… like taking off KPFK’s most popular programs and replacing them with cronies? Or why did the GM fire the webmaster and allow KPFK’s website to degenerate to a non-functional mess? That has cost us thousands, if not tens of thousands of listeners who used to listen on-line, download shows – and donate through the website. Rather than underwriting, how about re-hiring the webmaster and getting back those listeners?

Lew Hill, the founder of the Pacifica Foundation, which owns the five radio licenses, was very clear in his writings. Popular programs would get listener support. Unpopular ones wouldn’t. This the integrity of listener sponsor radio. That’s why it’s a public service not a private broadcasting club. Why is the national board majority so allergic to talking about this? Why are they allowing management to drive away KPFK’s listeners? Who benefits?

Kim Kaufman

March, 2016

Supplemental Finance Report

Fund drives

As of Wednesday, the February fund drive total was: $261,469 after 15 days/ $17,431 per day. The budgeted goal is $600,000 for 22 days/ $27,272 per day. To reach the goal, the drive would have to be extended to 34 days (assuming per day doesn’t decline).

The budgeted goal for December was $400,000 at 15 days/ $26,666 per day. Two days were added. The pledged amount was $316,752 for 17 days/ $18,632 per day. Novick and the GM assumed in the budget the rest of the days of December would be “quiet drive days” to achieve the goal. That leaves the “quiet drive” magic dust to make up the $83,248 difference.

This February drive is the last drive in this half of the year. 102 fund drive days were budgeted for FY2016, 63 in the first half of the fiscal year (October-March). With the addition of 8 days already added, the total drive days are now up to 110 days with 71 in the first half, assuming no more days are added to the February drive (a not-likely assumption).

There are only 39 budgeted fund drive days in the second half of the year (April-September) at an average of $23,111 per day (an overly rosy number based on actuals). The rest of the listener support comes from 92 budgeted “quiet drive” days at $5,400 per day to raise about $500,000 in the months of April, June, August and September.

The LSB or Treasurer should ask management for the results of the quiet drive days in December. How many days did it run and how much was pledged/ paid per day? This was supposed to all go through the website. It does not show up in MEMSYS.

It’s important to see how realistic these quiet drive number are going forward. My estimate is the December quiet drive brought in something over $1,000 per day which falls far short of the $5,400 per day budget. December is historically the best month for this kind of pitch

This appears to leave a $400,000+/- gap in fundraising for the second half of the year for the quiet drive days, plus the much lower than budget per day $ in these first three drives.

The NFC approved FY2016 budget was created entirely by Treasurer Novick, iED/Chair/NFC rep Brazon and GM Radford on the NFC. An earlier draft was approved by the LSB majority with a $1 million deficit. This draft is an improvement but is still a severely deficit budget.

While I would not preclude a severe financial crisis before the end of March, it appears extremely likely after March.

Kim Kaufman

Secretary, Finance Committee

Former KPFK LSB Treasurer

February 19, 2016