If Sac State’s Audit of CapRadio Isn’t a Cover-Up, Then Name Names and File Appropriate Charges

In October 2023 the Globe reported on Sacramento’s public radio station Capital Public Radio (CapRadio), a NPR affiliate, when it laid off 12% of its staff and canceled four shows because of “ongoing financial issues.”

Those “ongoing financial issues” stem from the “$3.3 million in outstanding bills CapRadio did not pay from the 2022-23 and 2021-22 fiscal years,” and this:

“CapRadio announced the layoffs the same day the board approved the budget for the 2023-24 fiscal year, two months after the year began. Of the $21 million in expected revenue, at least $5 million are one-time funds, according to information Board Treasurer Bena Arao presented during the public meeting Wednesday. Operating expenses are projected at $19.2 million, an increase of 8% compared to the prior year.”

The California State University Chancellor’s office turned up “numerous instances of financial mismanagement at the Sacramento-based NPR member station.”

By December 2023 the remaining employees of CapRadio announced plans to unionize, which they claimed was a result of the mismanagement of the public radio station.

Now it is being reported that an independent audit of CapRadio’s dubious finances found that a former executive and board members benefitted personally at the expense of the station.

“A deep ‘forensic’ audit by Sacramento State of its Capital Public Radio station raises more questions than answers, mainly why the review is so uninformative to its listeners to the point of withholding the names the key players who were subject to the investigation,” The Sacramento Bee reported.

The accountants’ CliftonLarsonAllen audit found hundreds of thousands of credit card charges (below) that CPR paid for the redacted “Subject #1” without receipts or any documented substantiation. “Missing entirely is what the listeners’ money was spent on.”

The audit reports:

By September 28th, an audit of CapRadio by the California State University Chancellor’s office turned up “numerous instances of financial mismanagement at the Sacramento-based NPR member station.”

Ya think?

It gets worse. Those “numerous instances of financial mismanagement” include:

• failure to make payments the past two years on an $8 million loan the station’s FCC license holder, Sacramento State, assumed for tenant improvements to the station’s planned downtown Sacramento building.
• failure to pay rent for the past year on the building the company now broadcasts from on the campus of Sac State, according to the report released on Wednesday.
• specific instances of poor financial practices and record keeping, adding CapRadio “lacked complete and current policies and procedures in almost every financial and operational area reviewed.” Those included processes such as cash handling and disbursements, the issuing of gift receipts and procurement.
• CapRadio took out more than $1.1 million in loans for studio equipment and furniture that had not been approved by the station’s board of directors.
• In one notable case, auditors reviewed a vehicle donation transaction and found that the station listed the vehicle’s gross value, not its net value — a $5,480 difference — in their reports to the Corporation for Public Broadcasting.
• incomplete records found several financial discrepancies. In one notable case, CapRadio purchased a piano for $90,000 that was appraised to be worth $175,000, with the station recording the difference as a “gift in kind.” The audit found the appraisal did not meet IRS requirements.

The Globe asked, What about the fiduciary responsibility of the CapRadio Board members? When you join a board of directors, you also accept fiduciary responsibility.

By October 2nd, Sacramento State appointed its CFO, Jonathan Bowman, to oversee the operations of Capital Public Radio, who apparently had questioned financial inconsistencies back in 2021.

How did the CFO questioning inconsistencies with CapRadio finances in 2021 not get addressed by the Board?

By October 4th, 14 CapRadio Board of Director members resigned blaming Sac State for “failing to inform and engage with the board in a good faith effort to resolve CapRadio’s financial issues.”

The Bee continues: “In its report, auditors stated that they conducted public record searches as part of their investigation, but then produced a report that keep key public information secret about spending and potential conflicts of interest.”

The Bee is correct to be skeptical:

“The most glaring omission in this audit is how the investigators failed to ask Sacramento State the fundamental question about a radio station headed toward financial insolvency after deciding to leave campus and relocate into expensive leased office space downtown. Why did the leadership of Sacramento State think this was a good idea? And why didn’t they insist that the university’s radio station stay on campus?”

This story isn’t over. There are plenty of conclusions to draw but the most obvious is that some of the board members saw their board positions as opportunities rather than responsibilities.

According to the National Council of Nonprofits: “Board members are the fiduciaries who steer the organization towards a sustainable future by adopting sound, ethical, and legal governance and financial management policies, as well as by making sure the nonprofit has adequate resources to advance its mission.”