Magical Accounting at KPFA?

Magical Accounting at KPFA?

Does KPFA have a solid financial plan?

This discussion, reposted from Facebook, is between current and former LSB (Local Station Board) members at KPFA, and other KPFA activists.

Tracy Rosenberg asserts that KPFA's budget is unsustainable; that the station is losing a quarter million dollars a year. Sharon Adams, the LSB treasurer, vehemently denies that. Carol Spooner joins the discussion affirming, "KPFA is really losing money." and cites the auditor's report which Tracy also refers to. Sharon responds: "So many words with so little proof."

"If you do not accept the independent auditor's reports as proof, then there is no such thing as proof for you," Carol tells her. "just peoples' assertions and what you want to believe."

The participants of this discussion are on opposing sides in the current (2019) local station board (LSB) election. Tracy Rosenberg endorses RESCUE PACIFICA, while Sharon Adams is a candidate from the UIR (United for Independent Radio) coalition. Rather surprisingly, considering what Carol Spooner says here, she supports the UIR, Sharon Adam's group.. So Tracy then asks Carol why she is endorsing Sharon.

This and more comes up in the below discussion. It's quite long, but well worth reading.

THE PARTICIPANTS: Tracy Rosenberg and Carol Spooner are former board members. Sharon Adams is a current board member and is running for re-election. Others in this discussion are: Ann Garrison, an independent journalist and programmer on KPFA's Saturday evening news, and John Sheridan, a longtime activist at KPFA.

January 24, 2019

TRACY ROSENBERG: I haven't seen an agenda for Saturday's [1/26/2019] meeting, but does the LSB [Local Station Board] plan to do anything about the budget plan for 2019 that has KPFA spending more than a quarter million dollars more than 2018 revenue based on the inflated numbers presented in August? I'm at a loss about the nature of "solid financial plans" if the LSB can't even balance KPFA's own budget. Losing over a quarter million dollars at KPFA again next year should not be an option. Is it on the agenda?

ANN GARRISON: Akio Tanaka and Sharon Adams are more likely to know than anyone else on this page.

JOHN SHERIDAN: Perhaps the staff at good old community radio (unless the community wants any input) KPFA are doing what the Congress and society are doing to public schools and the post office: making sure they eventually fail so that insiders can then privatize and make off with the carcass.

TRACY ROSENBERG: Answer to the question is nope, not on the [LSB] agenda. Why not?

SHARON ADAMS: Interesting comment. I wonder why WBAI is hundreds of thousand of dollars behind on its central services payments to Pacifica while its GM is the highest paid GM. Yet KPFA pays all is central services payments and is up to date. I wonder why some people choose to criticize the most financially stable station = KPFA, while ignoring the fact that WBAI keeps two sets of books, which is illegal.

TRACY ROSENBERG: Sharon, you are KPFA's treasurer. Do you not understand what your job is? You presented financials in August that misrepresented actual revenue numbers at KPFA as $600,000 higher than they actually were. Based on that bad information, the KPFA board approved a budget that spends more than a quarter million dollars in excess of 2018 revenues. KPFA lost $315,000 in the last audited year of operations and is projected to lose at least $235,000 in the last completed year. That's at least half a million dollars that you don't have. That is not financially stable. Why don't you get your head out of political campaigning and do your job which is to present and execute a balanced budget, which you have not done. If you want to run for WBAI's LSB, you are free to resign from KPFA's LSB and do so. Otherwise, you need to do your job.

TRACY ROSENBERG: And since Sharon just wants to argue instead of balancing KPFA's out of whack budget, I will say that this exchange is why Rescue Pacifica is the right choice. That is the treasurer of the board. She doesn't know or care that KPFA's budget is a quarter million dollars of whack and that KPFA is on target now to lose at least three quarters of a million dollars it doesn't have between 2016 and 2019. Any group that thinks this is an appropriate way to oversee KPFA's finances and keep the station alive is plain and simple, not doing their jobs.

SHARON ADAMS: Since Tracy Rosenberg wants to argue -- Let's talk numbers. Let's talk about the $1 million that Pacifica "borrowed" from KPFA. Then through accounting maneuvers made it so Pacifica doesn't have to pay back any of that to KPFA. Let's talk about how KPFA pays its Central Service payments all the time. Let's talk about how KPFA pays ALL ITS BILLS EVERY YEAR, year after year. That is only possible when the books are balanced. Period. Tracy Rosenberg believes in magical accounting, where only some numbers are used, and for some strange reason, the numbers that she chooses to use always make KPFA look bad. KPFA is the most financially healthy station in the network

TRACY ROSENBERG: Sharon Adams, the magical thinking is yours. The FY 2016 audit is posted and KPFA lost $315,000 in local operations, the second largest loss in the network. You gave out a piece of paper at the December local station board meeting showing an anticipated loss for KPFA's 2018 operations of $232,000. The FY 2019 operating budget based on 2018 actuals projects another $300,000 loss. You cannot put your fingers in your ears and pretend you cannot hear. Successive annual losses of hundreds of thousands dollars will lead to having to cut 20% of the station's staff again, just like in 2010. The LSB owes it to the members to do better.

SHARON ADAMS: Tracy Rosenberg why don't you care about the MASSIVE debts at other stations? Why do you attack KPFA constantly? KPFA has paid all its bills and all its central services payments for the 3 years I've been on the LSB. More than you can say for other stations. But attack you must.

TRACY ROSENBERG: I'm a KPFA member, Sharon, and in a discussion of the KPFA local station board and its election, what is relevant is KPFA. I continue to be startled by your defensiveness about KPFA's significant operating losses. Those are people's jobs and it is a big deal. KPFA can't keep losing a quarter million dollars every year and shuffling bills over to the next fund drive over and over again. It will eventually not work and sooner rather than later. It's your job to not produce red ink and even try just maybe, to save a little for a rainy day, because KPFA is very vulnerable. One bad fund drive and KPFA won't be paying anything, including its payroll. In December, the LSB announced KPFA had $250K in the bank. That is one month of expenses. Barely gets you to the February fund drive. You and the LSB should do much better than that and you'll have to in order to survive long-term. WBAI will do better now that it is out from under ESB and in theory KPFK should recover from the horrible manager Leslie Radford that Margy Wilkinson stuck them with. I'm not aware of any massive debts in TX, although they need to grow. DC, well that is a long story but I've heard they are doing a bit better. I hope so. There are some nice things about that station, although I wish it did more PA than music myself.

SHARON ADAMS: Tracy Rosenberg - Pacifica "borrowed" $1million from KPFA. All your magical numbers don't take that into account. Similarly, KPFA MEMBERS (like you) paid for Nakapon building which was just sold and the money was again given to Pacifica. Let me know when you start taking these figures into your "magical" accounting method.

ANN GARRISON: KPFA/Pacifica had decades to turn Nakapon into a café. It had enormous potential to support the station, but KPFA-management, the LSB, and whomever else had any power-just let it rot.

I was shocked when I walked past the space with doors open while the new owners were rehabilitating it and saw how large a space it is. All the latté etc. money that KPFA staff and guests drop every day at Au Coquelet could have been plowed back into KPFA. It's tragic. When he was on the LSB, Max Blanchet found some architecture students at Cal to draw up a plan pro bono, but it was just ignored.

SHARON ADAMS: I agree. It's too bad. But like I wrote above, perhaps if Pacifica had not taken $1million from KPFA, then KPFA would have had the money needed to repair the building. Instead, Pacifica took the $1million, and then took the profits from selling the building that KPFA members paid for.

TRACY ROSENBERG: KPFA had the money, Sharon. A million dollars in a CD as recently as 2009. It was spent on operating expenses to cover $500k plus overruns in 2009 and 2010. That was the crisis that led to laying off 15 percent of the staff in 2010 and the Morning Mix. That is why you don't run at a deficit year after year as I am suggesting the KPFA LSB stop doing. Nakapon had to be sold, if only to pay off the delinquent property taxes on KPFA's building, which had not been paid by the station from 2013 to 2017.

SHARON ADAMS: OMG, more misinformation. Nakapon was NOT sold to pay off delinquent property taxes. What is the goal of constant misinformation? The property taxes were not paid because KPFA was trying to re-instate the charitable exemption that it was entitled to. The reason the exemption was lost was because PACIFIC (again, it's Pacific) changed its name so many times that the tax exemption documents did not reflect the current corporate name. So KPFA/Pacifica couldn't get the tax exemption until the name issue was straightened out. I guess, with your accounting wizardry, you think it's better to pay more than is necessary. Fact is, Pacifica gained several hundred thousand dollars from the sale of Nakapon and used that money to pay for the many consultants that it has recently hired. You know the truth, but you love to cast shade on KPFA. Again, I ask, what is your real motivation behind doing that. Looks suspicious.

TRACY ROSENBERG: Sharon, there is no such thing as a property tax exemption. There is a property tax DISCOUNT for nonprofit organizations if it is applied for timely, which KPFA did not do from 2013 to 2017. And in some previous years as well. I believe it was settled with the assessor as part of the FCJ loan. The application is when it came out that KPFA was 4 years delinquent in paying any property tax and had fines and penalties totaling more than $200,000 on it's Berkeley properties. Nakapon was part of that bill, but only a small part.

TRACY ROSENBERG: Sharon. You need to focus on KPFA losing $232,000 last year and budgeting to lose another $300,000 this year because you won't adjust the budget to the actual revenues instead of the made-up ones. You're talking about fundraising from literally 2001-2002 or almost 20 years ago. As I already explained, funds that were donated by KPFA listeners after the hijackers left and left large security and legal bills behind were happily and willingly supplied to support the newly democratized Pacifica network. That was the fundraising pitch, and people were happy and excited to help Pacifica clear the debt incurred by the regime they helped to expel. I'm also sad about Nakapon in the sense that it is an asset no longer present, but as I said, given how KPFA allowed the space to deteriorate with a rodent infestation since at least 2011 and the significant structural modifications needed to get it up to code, selling Nakapon was really the best thing that could have happened. Got us out from under years of unpaid property taxes, a possible citation for neglect of an abandoned property, and the need to bring the building up to code, all of which would have cost a bunch of money. Now when do you address the situation today and right now and the need to base KPFA's 2019 operating budget on real revenues and not the made up ones that are hundreds of thousands of higher than 2018's actual receipts?

SHARON ADAMS: Tracy Rosenberg You keep saying the same words over and over, but the facts on the ground show your words are wrong. If KPFA was *really* losing money it wouldn't be able to pay its bills and it wouldn't be able to pay its Central Services payments. KPFA has paid all its bills, and is fully paid up in its Central Services payments -- UNLIKE OTHER STATIONS THAT ARE REALLY LOSING $$$. Please stop your magical accounting from the outside.

CAROL SPOONER: KPFA is really losing money. The station had $1.3 million in unrestricted cash and $200k in pledges receivable on 9/30/07, per the auditor's report. On 9/30/16 KPFA had $375k in cash and $614 in pledges receivable. Basically, that shows that all of KPFA's reserves were used up to cover expenses over that period, because current income didn't cover expenses. The reason KPFA is currently paying it's bills and Central Services is because (1) it is spending it's depreciation expense money to pay bills rather than putting it in a replacement fund for capital expenses as it is supposed to be, and (2) the pension fund contributions have not been collected by Pacifica since 2015. Per the 2016 audit KPFA owed $182K for 2015 & 2016. Presumably they owe approximately the same amount for 2017 & 2018. This is a problem that needs to be acknowledged and addressed. Quincy appears to be trying to do that. He has hired a development director. Those efforts and more should be supported.

SHARON ADAMS: so many words with so little proof. Again I repeat, IF the station is actually losing money, then HOW is it paying all its bills. Until you Carol Spooner and Tracy Rosenberg can explain that, then you need to stop spreading mis-information.

ANN GARRISON:: Is it paying its property taxes and pension fund? Also, it is possible to get deeper and deeper in debt before the debt's called in, as happened on the WBAI tower rental. I don't blame the tower rental on WBAI because a Pacifica Executive Director from WPFW signed it and a majority on the PNB at the time must have voted for it, but that's what happened. They got deeper and deeper into debt before the debt was called in.

SHARON ADAMS: it's tiresome to be triple-teamed on this FB page, since I don't have all day to respond. I answered the pension question in the debate. The taxes could have been paid, if KPFA wanted to pay more than was necessary. Pacifica changed its name, therefore lost its tax exemption with the CA Board of Exemption. But it's a moot point now, since the taxes were paid in full when the Nakapon property was sold. And contrary to what TR said, there was money left over. That is what is being used to pay the consultants that Pacifica hired.

ANN GARRISON: Sharon Adams I'm glad that at least a necessary amount of the property taxes were paid.

CAROL SPOONER: If you do not accept the independent auditor's reports as proof, then there is no such thing as proof for you ... just peoples' assertions and what you want to believe. The proof is there right in front of you, and it's not someone's partisan or ignorant assertion -- it is the independent auditor's reports. It is necessary to take the time to understand them. It's difficult, I know. But there is no more important or accurate report anywhere in Pacifica. And we need them to come out within 4 months after the end of the fiscal year. And we need to fix Pacifica's accounting system so that the unaudited reports in quasi-real time are as accurate and complete as the audits, or close to it. That's the responsibility of the finance committee and boards.

CAROL SPOONER: And, I should say that NO finance committee in the past 16 years has done their job to set the standards and require that they be met ... that full and timely monthly income and expense reports and balance sheets be produced every month ... with written narrative explanations of significant deviations from budgets and plans. And the unaudited year-end financial reports should be compared to the audited reports with an explanation by the CFO of any discrepancies and the reasons for them and what they plan to do to make the real time reports more accurate.

TRACY ROSENBERG: Well, I will comment that although it was quarterly, not monthly (and monthly would have required a significant investment in accounting staff and Pacifica cut national staff for the last 15 years, not increased them), that at least when I chaired the NFC "written narrative explanations of significant deviations from budgets and plans" was exactly what we did. Every quarter for years on end. It is all in the minutes and on all the phone call archives. That does not seem to have continued, but that was the practice in 2011 and 2012. 2013 was harder because the CFO Salvador was uncooperative and MIA most of the time. I guess I would also add that that I don't really get endorsing someone for re-election while at the same time scolding and acknowledging that they are unwilling to do their job as you define it. Isn't the nature of an endorsement that you believe they are able and willing to do the job? Be that the job of an LSB member or the job of LSB treasurer? This conversation started because I asked the LSB to address that the 2019 KPFA budget spends $300K more than the total 2018 receipts. The LSB is refusing to do so. That is where we are. Either the budget is a joke or it gets adjusted. Which is it going to be?

CAROL SPOONER: I am endorsing a slate that I believe will work well together and with others ... that's very important. Sharon has not been permitted to join the finance committee this year, so she takes none of the blame for that committee not doing its job. I think the main reason it hasn't is the lack of CFO. You really need a good CFO who wants to make the reports meaningful and useful and wants the committee members to understand them.

CAROL SPOONER: I think playing offence and playing defense on the budget/finances are both destructive. What is needed is that people let their guards down and start with inquiring minds about their questions ... I think Quincy and Maria are quite aware of the budget being greater than last year's income ... Maria is the one who put the report together. In the past there has never been a formal budget adjustment process ... so it's not surprising that no one is taking that up. But they have tried to cut expenses by leaving staff vacancies unfilled and things like that ... so it will be interesting to find out what they are thinking ... if people would quit attacking and defending and just engage in civil and productive discussions then problem solving might occur much more easily.

TRACY ROSENBERG: Carol. The inflated numbers that caused the KPFA budget to be out of whack by $300K were presented by Maria and Sharon. I've already posted the LSB handout here. One month before the end of the last fiscal year, they projected KPFA's income as $4.5 million dollars in FY 2018. That was $1.3 million dollars too high. Either nobody was aware of anything or it was purposefully inaccurate. I am not saying or implying one or the other. But it has to be addressed. The budget allocates money that does not exist. I don't think you can say that anything is working well when the board treasurer says KPFA is not really losing money while handing out an income statement that says KPFA just lost $232,000.

CAROL SPOONER: The budgeting process itself is deeply problematic. They try to make projections based on some faulty premises that may be difficult to detect in real time and only come out in retrospect. The process and the templates need to be redesigned by a GOOD CFO. That will take some doing. I don't believe we have seen a first quarter budget vs actual report for this fiscal year. So it remains to be seen whether they are actually spending the money allocated in the budget for the first quarter or not. There is a lot of missing info due to missing personnel at the national office. There has been too little financial reporting for too long. I don't believe that is a local problem.

TRACY ROSENBERG: There's nothing problematic about the budget process at all. You just can't project a million dollars more than you have and expect it to work. The actuals were not unknown. The crazy number was given out 6 weeks before the end of the fiscal year. Look at the bank deposits. Add them up. Project six more weeks. Not 1.3 million more dollars. Stop making excuses for it. KPFA hasn't made $4.5 million dollars in a year this decade and anyone who was paying any attention and was doing even a mildly professional job should have called it out in one minute flat as totally inaccurate. It is beyond dysfunctional that 24 board members didn't. It indicates that a major culture change is needed. When things are not reality-based, you are in big trouble.

CAROL SPOONER: Because the fund drives are often straddling the fiscal years -- part in one year, and part in the next -- and it may not be known until the last minute, the end of year projections are very difficult to make. This situation should never have been allowed. The Fall fund drive always used to start in October in the new fiscal year, and budgeting was done accordingly. Now they sometimes move some fund drive days to the previous fiscal year in September, and sometimes they don't. That's just one of the problems.

TRACY ROSENBERG: The Fall fund drive was moved into 80 percent September 6 or 7 years ago and it's been exactly the same every single year since. It is not difficult at all to project. A month with a fund drive will earn about $450k, a month without one between $100 and $200k depending on events scheduled. None of that remotely explains the $1.3 million dollar over projection in August that distorted the budget, which was completely without any reasonable explanation.

CAROL SPOONER: The over-projection in August does require an explanation. Adjustments are frequently made after the end of the fiscal year ... income moved from one year to the next based on when the credit cards were processed, write-offs of unfulfilled pledges; and other oddities. It's easier to get answers to these questions when asked with curiosity and desire to learn and understand, rather than suspicion and accusation. That's why the defensive response comes up so often, and that's not helpful either ... but it is human nature. It's easier to help people if you actually want to help them. If you just want to call them out and embarrass them and accuse them, it's difficult to build the kind of collaborative trust needed to solve problems. There are and have always been MANY, MANY problems with the accounting system, procedures, and training. This comes down to the lack of CFO oversight control of the processes and training that the PNB has failed to deal with despite being told many times by the auditors that the CFO needs the authority and support of the board and ED to get this done. This started back in 2002 when I was on the PNB and has continued for almost 2 decades. I complained about it back then. Few people really understand accounting well enough to appreciate the severity of the problems ... the fact that Pacifica cannot produce a balance sheet is really outrageous ... yet that has been the case since 2002. The only balance sheets are produced at the time of the audits. This is NOT the fault of the local business manager at KPFA, who appears to have learned to do that job better than most around the network. But the system doesn't work.

TRACY ROSENBERG: Carol. I don't want to go back and forth with you indefinitely, but you are not helping by summoning imaginary CFO's who don't even exist at the moment. We're not talking about a balance sheet. We are talking about correctly reporting KPFA's income at KPFA to KPFA's LSB. The funds are remitted to KPFA and deposited into KPFA's bank account. That figure is used to project likely income for budgetary planning for the following year. When those numbers are presented as being $1.3 million dollars more than they really are than a) it is a local problem and b) it is the responsibility of the LSB to get to the bottom of it and repair the broken process. If you prefer to pretend that revenues are $1.3 million dollars more than they are as because it is nicer, then I don't really think you are helping the station sustain itself. I think you are hurting its ability to do so, as is the current local station board. KPFA's LSB needs to go back and revise the 2019 KPFA operating budget using the actual revenue figure from the previous year $3.19 million as the starting point, not the made-up figure of $3.86 million. I am not going to back off that request, and no member should, unless they intend to personally make up the difference from their own pocket. In 2010, when KPFA faced missing a payroll and did not contribute to shared expenses for 7 months in a row, KPFT and KPFK were able to financially assist with KPFA's operations. KPFT in Houston provided a short-term loan to prevent a payroll from being missed, and KPFK in Los Angeles advanced several months of central services to cover KPFA's portion of several shared expenses. In 2019, those stations are not in a position to be able to offer that kind of help again.

CAROL SPOONER: I am talking about what is needed to fix the accounting system and the reporting system. How did that $1.3 million discrepancy occur is the question? There are so many flaws in the system from Memsys to Great Plains, reconciliations, write-offs, mistakes, moving income from one fiscal year to another at the time of the audit, and so on. I really don't believe anyone wants to "pretend" there was $1.3 million more income. There was a mistake. What is being done to fix it"? Both so it won't happen again, and reducing expenses this fiscal year to live within income. (And, yes, I know of KPFA's long history of overspending its income. I believe the reality has hit that they can no longer do that and they are trying ... I'm not aware of KPFA needing to borrow from another station in a number of years. And more recently, the shoe has been on the other foot, where KPFA has leant money to national to cover other stations' expenses.) Those discussions must be had, and they really can only be had in a productive and collaborative environment. That's why I say both going on the offensive and on the defensive are counter-productive. I really don't have more to say about this, either. So no more back and forth would be good. I think we've both made our points of view clear enough.

TRACY ROSENBERG: How do you intend to find out what is going on if there is no discussion of it? It's a serious question. When I pointed out, civilly enough, that the $4.5 million dollar projection of 2018 income did not square with the fund drive totals, KPFA's business manager and LSB treasurer simply said I was "wrong". I was not wrong. They were wrong. When the actuals were released in December with the real numbers, there was no explanation provided for the huge discrepancy, and there has been no discussion about the starting point for the budget exceeding the total 2018 income by a huge amount. So yes, what is being done to fix it?

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KPFA 94.1 FM is one of five stations of the Pacifica radio network located in major cities across the country. The other stations are WBAI 99.5 in New York, WPFW 89.3 in Washington, DC, KPFT 90.1 in Houston, and KPFK 90.7 in Los Angeles. There are also about 250 affiliate stations.

DISCLAIMER: This is not an official Pacifica Foundation website nor an official website of any of the five Pacifica Radio Stations (KPFA Radio, KPFK Radio, KPFT Radio, WBAI Radio, WPFW Radio). Opinions and facts alleged on this site belong to the author(s) of the website only and should NOT be assumed to be true or to reflect the editorial stance or policy of the Pacifica Foundation, or any of the five Pacifica Radio Stations (KPFA Radio, KPFK Radio, KPFT Radio, WBAI Radio, WPFW Radio), or the opinions of its management, Pacifica National Board, station staff or other listener members.