Surprise, surprise, FY2018 draft auditor’s report isn’t ready . . . M8June PNB Audit Cttee cancelled, to be held F12June, otherwise Tu16June, or . . .

(the WPFW is there for completeness)

At Monday’s PNB Audit Cttee, 1June, Chair Eileen Rosin (WPFW listener-delegate) confidently said the draft auditor’s report was just about to be slipped into the envelopes, to be received by the ctteepeeps Wednesday or Thursday.

https://kpftx.org/archives/pnb/audit/200601/audit200601a.mp3 (29:17 & 47:36)

Obviously another glitch has occurred – maybe principal Jorge Diaz was the worse for having been gassed or ‘peppered’, benefiting from a chemical weapon that he helped pay for. (A different kind of perversion, the US state is legally bound not to use these against foreigners, but it has given itself carte blanche against Joe & Joanna Six-Pack. But the US was tardy: it took 50 years to ratify its 1925 commitment to the Geneva Protocol – after Vietnam, of course. https://en.wikipedia.org/wiki/Geneva_Protocol#Reservations has link to the relevant UN webpage)

As the double-screenshot shows, Audit will meet if not F12June then on Tu16June. The record shows that the changes were made by Chair Eileen, Friday tea-time, EDT.

https://kpftx.org/pacalendar/index.php (click on the # for details & the list of cttee members) & https://kpftx.org/index.php

~~~

Highlights of the M1June Audit meeting:

member intros (5:08);

Chair Eileen was the first officer or employee to publicly disclose (48:40) that the auditors aren’t issuing the management letter, the one telling the PNB, in confidence of course, how f’d up it is, & what it has to do to acquire a semblance of substantive rationality. Nothing new, in other words. Eileen didn’t explain (although she probably knows), but presumably it’s because ED Lydia Brazon (& the inner circle) haven’t agreed to some of its proposed content, not least being told in black & white that (a) bankruptcy protection may be unavoidable (although that triggers defaulting on the FJC contract), & (b) fundamental cost-cutting must be instigated within two months, if not weeks (although that greatly worsens immediate cashflow, given worker payouts). And the cost structure? The last audited figures (FY2016), so almost four years ago, gave personnel as 53% (plus, no doubt, some in the $257k consultants category), & 57% of those personnel costs was spent on the west coast stations, KPFA $2.0m, KPFK $1.7m. The other three stations totalled KPFK + $12k. Some stations, Lew, rely more on volunteers than others. https://pacifica.org/finance/audit_2016.pdf (pp. 5a & 26; pp. 8 & 30 of the PDF); &

a number of Pacifica favourites are crammed into the virtual room, in a self-sacrificing act of solidarity with Viro the Virus:

  • the return of Adriana
  • the elevation of our Bella
  • the serene breaker Lynden “what-a-bunch-of-fucking-bullshit” Foley
  • breaker Darlene of anti-BDSM fame – obviously only some breaking is righteous (https://en.wikipedia.org/wiki/Darlene_Pagano)
  • Marilyn ‘I translated lots of Trotsky’ Vogt-Downey
  • all ably overseen by, in the partisan corner, Grace-for-the-stack, &, in the breaker corner, authoritarian-Akio-the-anti-democrat (& yes, this moniker has also been diligently earnt by schemer Grace)
  • all that’s missing is the paragon of decorum, Cerene.

Chair Eileen better know where the mute button is.

WBAI treasurer’s Feb-Mar2020 report to the WBAI LSB, W11Mar2020

R Paul Martin’s latest diligent endeavour. Mr Martin is the only Pacifica treasurer to publish for members & listeners the report they make to their Local Station Board. Not only that, it’s posted online within hours of the meeting. His courtesy & service is unequalled amongst the $$$ p$$ps of Pacifica.

Also please note that by an accident of the Pacifica calendar, his LSB usually meets less than 24hrs after the PNB Finance Cttee, details of which are always part of his report.

Mr Martin’s dedication is exemplary, his judgment astute.

https://glib.com/treasurers_report_2020-03-11.pdf (downloadable; 4pp.)

The archive, starting Apr2013: https://glib.com/treasurers_reports.html

~~~

[Remarks to be added, esp. re the Tu10Mar PNB Finance Cttee that Paul discusses, one addressed by both Chief Financial Officer Anita Sims & auditor Jorge Diaz of Rogers & Co. With the breakers busy with their breaking, Paul was perhaps at his most pessimistic, wondering whether “this will be my final Treasurer’s Report” (p. 4), a small matter compared with his fearing for the future of WBAI. Unless the breakers pull some stunt, Tuesday’s showpiece was the last national Pacifica meeting on financial/audit matters before the referendum voting ends next Thursday, 19Mar, at 8.59pm PDT, 10.59pm CDT, & 11.59pm EDT.]

WBAI Treasurer R Paul Martin’s W9Oct2019 report

Apologies for posting this so late. Commentary to follow today.

~~~

https://glib.com/treasurers_report_2019-10-09.pdf (six pages)

Additional documentation from the Treasurer: https://glib.com/wbai_coup_2019.html

Mr Martin appended to his report WBAI’s FY2020 cashflow projection, with FY2018 & 2019 comparatives (year-end is 30Sep). This was taken from ICFO Tamra Swiderski’s undated cashflow report presented to the Th19Sep private PNB meeting. (Why private you may rightly ask – but that’s the default obdurate & deep secrecy culture permeating almost everyone occupying a seat on a Pacifica committee.) That report has individual FY2020 cashflows, with the two comparatives, for each of the five stations, the Radio Archives & National Office, & then an aggregation of the seven (consolidation, in the jargon).

Cashflow statements must be interpreted carefully, not least because they ignore both expenses that have accrued (so not yet billed) & revenues that have been deferred (again, not yet billed). Given Pacifica’s activities, especially how revenues are generated, cashflow statements materially underestimate its accrued financial position, & therefore whether creditors are smiling or frowning, & how intensely.

https://mega.nz/#!mmZUkICB!1c74TQ4oTKyQ6dHNB_h5eLYHspltLDujlGFbEcj-X_c (9 pp.)

Please note that given the ICFO’s assumptions, KPFA’s cumulative cashflow deficit for the three years to 30Sep2020 is $1 091 306, more than 2½ times that of WBAI’s. Lest anyone think this is just about the past, KPFA’s deficit for the year just started is projected to be $658 207. They don’t tell you those three facts in quite a few Pacifica forums. Such is the work of ideology, here that of California station chauvinism, exhibited as separatism, not solidarity.

“Wake up before our buildings are sold!” – ex-Chair Grace Aaron, W9Oct2019

. . . and then there was one . . .

This was passed to me by Peter Müller, one of those peeps slaving away in Switzerland, making sacrosanct cheese. He used to live in Gelsenkirchen.

It’s in three sections: Wake Up Before Our Buildings are Sold! … Is there a Solution? … Should We Seek Outside Help, Change the Board Structure, Replace Governance and Follow Experts? https://mega.nz/#!amAygQJK!Ioxsc7_fmq-iHLGpGl2Kqv2M2nmPYeiqPVNAV51kUwI

Cited, & attached, is what’s purported to be ICFO Tamra Swiderski’s cashflow projection for FY2020 (so the year ending 30Sep2020), with FY2018 & 2019 as comparatives. It’s undated, but the original filename includes the phrase “Pacifica Cash Flow Presentation 9.19.19”.

Another worker in Switzerland had passed this to me at the beginning of the month, but that copy lacked explanatory notes, esp. assumptions, so it made no sense publishing it. GA’s copy has the list of assumptions, plus the data for National Office & Pacifica Radio Archives. So here it is: https://mega.nz/#!mmZUkICB!1c74TQ4oTKyQ6dHNB_h5eLYHspltLDujlGFbEcj-X_c.

Note that for WBAI alone, it says “Assumes not funding Central Services FY20” (page 4). Oh. In the absence of a recommendation by the PNB Finance Cttee on the financial dimension of WBAI’s future, & no decision made by the PNB itself, why is this assumption in a fundamental planning document, such as Pacifica’s FY2020 cashflow projection? Who’s doing the planning here for a radically different WBAI?!? If this isn’t evidence of planning between the Interim Chief Financial Officer & the Interim Executive Director, I don’t know what is.

What was that date, again? “Pacifica Cash Flow Presentation 9.19.19”, Th19Sep2019. So perhaps presented at the private PNB session that evening. 2½ weeks later, home invasion station invasion. Will this be raised at the PNB, in a public session, calling these individuals to account? Don’t hold your breath.

I’ll discuss Ms Aaron’s piece in a summary post next week.

~~~

Wake Up Before Our Buildings are Sold!

Pacifica iED, John Vernile, has laid off all staff at WBAI, taken control of their transmitter and is broadcasting shows from other stations.  This was done without Pacifica National Board approval.  John Vernile never gave prior notice or a plan to every member of the PNB.

This action coupled with inaction to remedy financial shortfalls at all of our stations may very well result in the forced sale of our buildings.

Recent weak fund drives at all of our stations indicate that our financial crisis cannot be attributed solely to shortfalls at WBAI.  Bequests in 2019 at KPFA, KPFK, WBAI and the National Office have kept the Foundation afloat.  However, bequests are rare, so income projections cannot include them.  See the attached cash flow report from our iCFO.  Scroll down to see the actual income and expenditures for 2018 and 2019 as well as projections for 2020.  Significantly increased spending on the Pacifica National level in 2019 of about $600,000 above 2018 must be factored in to any financial analysis.  This increase in expenses dwarfs any WBAI shortfalls.  Therefore, even if WBAI disappeared (ie- no income/no expenses) predicted fund drive underperformance at the other stations coupled with out of control spending at the national level will rapidly create a cash crisis that may very well result in the forced sale of our buildings. 

Here’s why:

1) To my knowledge as a PNB Director, Mr. Vernile has neither calculated nor communicated the financial ramifications of the shutting down of operations at WBAI.  Initially, it will mean the loss of at least $200,000 to $300,000 in income from the WBAI fall fund drive.  The laying off of staff without proper notification of the WBAI Union will most likely result in legal expenses, arbitration costs, etc.  Severance payments will have to be made to employees who are laid off.  Where will the money for that come from?  Legal challenges have already ensued.  Travel, hotel and other expenses are being incurred without PNB approval.  Instead of ameliorating Pacifica’s cash flow crisis the shuttering of WBAI has exacerbated it.

2) No income generating mechanism has been put in place to replace the income currently brought in by WBAI.  In order to maintain the WBAI license it will have to be kept on the air.  That means that the overhead of the transmitter rent owed to 4 Times Square of almost $18,000 per month will have to be paid by the National Office or the other stations.  At least one WBAI staff member will have to be paid.  This will most likely mean an additional $10,000 per month in expenses.   Thus, overhead of about $28,000 per month will have to be paid without any income coming in from WBAI unless there is some plan that has not yet been communicated to the PNB for income generation. 

3) The sale or swap of a signal is a lengthy process.  A reasonable estimate is that it would take at least 1 ½ years and is, therefore, not an option that would prevent the forced sale of our buildings if we are not able to meet payroll at one or more of our stations or if a vendor or creditor takes legal action against us, which appears more likely than not in the next few months.  Three National Board Directors, Nancy Sorden from WPFW, Lawrence Reyes from KPFK and myself, Grace Aaron from KPFK spoke with Marc Hand, who is an expert on signal sales and swaps.  He verified that the sale or swap of a radio license is, indeed, a lengthy process.  To explain, first a buyer or swap opportunity for a signal has to be found.  Terms have to be negotiated.  Next, the National Board has to agree to the swap or sale.  Then the exact terms of the swap or sale have to be communicated to all members of the Pacifica Foundation and they must vote to approve the sale or swap.  A 10% quorum has to be reached.  If the membership approves, Pacifica would submit an application for approval of the specific swap or sale to the Federal Communications Commission.  The FCC process takes a minimum of 90 days.  In that 90 days is a 30 day public comment period.  If there are any objections the FCC investigates them which adds at least 2 or 3 months to the process.  Also, it is not legal to borrow money against a potential signal sale or swap.  Bankruptcy would add another layer of approval to any signal sale or swap process, thus lengthening the process not expediting it.

4) Initially, if there is a lack of cash, vendor payments will be delayed.  This is already happening at the National Level.  The next step if income cannot meet expenses will be the inability of more stations or units to meet payroll.  It can be predicted that the first step will be for the National Office to use the $200,000 set aside to make payments on the $3.2 million loan to meet payroll or emergency vendor payments.  After that there will be no buffer whatsoever.  There is no other reserve.  Pacifica will not be able to make scheduled payments on the loan.  Bankruptcy will be the only option.  This will trigger the calling in of the loan by the lender to protect the lender’s interests from a Pacifica bankruptcy filing.  Then our buildings will be foreclosured on and the forced the sale of our buildings will take place to cover the $3.2 million principal owed as well as pay employees and other pressing obligations.

Is there a Solution?

In times of great stress, it is tempting to reach for quick, magical solutions.  Although these can sometimes pan out in rare instances, this would be a very risky course of action.  Staff, Board members, volunteers and others should be encouraged to seek help from major donors, etc., but the most likely way to stave off the forced sale of our buildings is to do the usual, not the unusual.  In that light I propose the following:

1) That the actions taken against WBAI be reversed immediately and that WBAI resume its fall fund drive.

2) That all efforts be made to improve the performance of fall fund drives across the network.

3) Our unions should be consulted and immediate union negotiations be started to help us reduce our salary and benefits expenses in a humane manner. 

4) Plan and execute a network-wide national fund drive to bring in extra resources.

5) When finances permit, consider hiring a National Development Director to pursue grants and major donor fund raising.

Should We Seek Outside Help, Change the Board Structure, Replace Governance and Follow Experts?

Commercial and public radio, newspapers, public TV and internet media are in terrible shape.  Experts galore have not found a solution to the changing media landscape which is causing the rapid decline in income of most traditional media sources with resources moving to social media.

Look at the facts:

The iHeartRadio bankruptcy: https://www.rbr.com/bk-end-for-iheart/

Cumulus Radio bankruptcy: http://www.insideradio.com/free/cumulus-post-bankruptcy-cleanup-may-continue-into/article_2be5180e-d5c7-11e8-9329-db4323e4e460.html

Pew Research on the state of the media: https://www.pewresearch.org/fact-tank/2018/08/21/5-facts-about-the-state-of-the-news-media-in-2017/

There is also the demise of Air America, Current TV and Al Jazeera English. 

I doubt that ‘experts’ are the answer.  But, hey, someone at the LA Times reached out to a billionaire who bought that newspaper and is spending a lot to revive it.  So if anyone knows a billionaire, please reach out!

That’s all for now.

In peace,

Grace Aaron, Pacifica National Board Director from KPFK

Tracy Rosenberg: IED Vernile had turned up with “Foundation board members”

Former Pacifica Treasurer, Tracy Rosenberg, had her take today on what’s happened, & happening, ‘Supreme Court of New York Stops Pacifica’s Attack on WBAI’. She claims that IED ‘Venal’ Vernile turned up at WBAI with (unnamed) Pacifica directors:

In the morning, a crew of Pacifica Foundation board members led by brand new IED John Vernile, locked out the staff at WBAI-FM in New York and then fired them all, told the landlord to rent the space to someone else, and started piping in content from the West Coast over mid-Manhattan [my emphases]

https://mega.nz/#!67QkWSqL!yAPb4N8dPJjKQPs2t5u_eP5dTCqnSh2qbPbeV35Dgh0 (this, unfortunately, lacks live links; got a proper one?)

Accountability requires that these Pacifica directors are named. Perhaps it will take the court proceedings of F18Oct – unless they’re such proud breakers they’ll come clean. It’s been reported that one of them was Bill Crosier, having flown in on Sunday. He’s a former IED & current PNB Secretary, besides being a KPFT listener delegate in Houston.

No expense spared – just keep those charitable contributions rolling in, folks, doesn’t matter whether they’re membership subs or listener donations. The main thing is just keep funding the planned chaos so break-up happens almost organically, in the greenest way possible.

Tracy also notes that WBAI are currently in fund-drive! They’re bigger wreckers than I thought!

The lockout interrupted a fund drive in process that would normally book around $300,000 [my emphases]

Ms Rosenberg has had a blog, https://pacificainexile.org/, since July2015. Regrettably, there have been few posts since Feb2018, when Pacifica was getting ready to borrow $3.7m from the Foundation for the Jewish Community, FJC. I made a few comments there, & tried early last year to get on her mailing list, & I’m still waiting. I tried again the other week, so yes, I live in hope.

It seems that at the mo there’s a lag between a newsletter article & it being posted at Pacifica in Exile. Given circumstances, it makes sense to post the latest one here, today. Hopefully, Tracy will soon put me on her list.

Open letter to Pacifica Executive Director John Vernile: what’s your plan? why’s Maxie gone?

4 August 2019

Subject: The intensifying Pacifica crisis; & the financials archive at pacifica.org

Dear Mr Vernile,

You arrive at a momentous time for Pacifica. The majority of the directors has chosen to reject rationality, in this case, to reject technique. It has chosen to halt the initiative that was underway to create the multi-dimensional necessary & sufficient conditions that can arrest Pacifica’s decline, thereby bringing stability, this as preparation for allowing the network to improve & grow. This initiative was designed, monitored, & managed by Executive Director Maxie Jackson.

Not surprisingly, a public discussion of Pacifica’s irrationality is underway. For example, Ken Mills, a well-known radio professional, published three posts in the space of eight days. One of these posts was visited over 3 000 times within four days. This is public news amongst radio professionals. This is not Pacifica gossip. (For your convenience, one of the posts, that even refers to you, with photo: http://acrnewsfeed.blogspot.com/2019/07/what-its-like-to-work-for-grace-aaron.html.)

When you are better acquainted with the evidence, I’m sure you’ll agree that it was a serious mistake to oust Executive Director Maxie Jackson. And, unfortunately, not least for your own tenure, the consequences are not going away any time soon.

This is the situation you have become part of, & irretrievably so. But mitigation can be made. 

You are currently touring the stations, gathering information, hopefully knowledge. When you have devised your own evidence-based initiative, stated as your plan, the one to be implemented during your six-month tenure, I would very much appreciate you sending me a copy. As you know, being transparent helps make it possible for decision-makers, such as yourself, to be judged in an informed way by Pacifica members, staff, listeners, & others. It also helps generate confidence in your tenure.

The Pacifica Foundation has, bafflingly, chosen not to explain why Executive Director Maxie Jackson is no longer at his post. No-one believes he simply resigned, that he simply gave up. The air needs to be cleared. Honesty needs to be nailed to the Pacifica mission statement, in furtherance of its “educational purposes”. Confidence in your tenure, at this crucial early stage, will be raised if you are able to bring openness here. Pacifica members, staff, & listeners deserve to know the truth. I beseech you to do your best endeavours, if only for your own sake, making your job easier, earning respect through your action.

Finally, I want to raise a National Office matter. I do so with you because an email page or address for ‘National Office’ isn’t at pacifica.org, & you are the principal administrator of the Foundation.

I’m glad that, at last, the financials webpages of pacifica.org are being improved. However, there are a number of deficiencies, currently displayed, that may inadvertently be left there: they include the absence of auditor’s reports; & a crucial page missing from another of these reports, the auditor’s narrative. The deficiencies are listed in a post at PacificaWatch: https://pacificaradiowatch.home.blog/2019/07/18/pacifica-annual-auditor-s-reports/.

All users of these webpages will look forward to the completion of this improvement. Not an immediate priority, but a review should be made of the utility of all Pacifica websites. And wider still, an evaluation of Pacifica’s attempt to communicate using the internet. Yes, the Pacifica radio network needs an evidence-based communications strategy.

Yours sincerely,

Jara Handala

FY2017 auditor refuses to declare that the statements are materially accurate

The auditors of the FY2017 financial statements, Rogers & Company, presented their report, in person, to the M24June Audit Cttee & to the Th27June PNB. The Audit Cttee recommended its acceptance to the PNB, which duly obliged. The published report is dated Th27June. https://pacifica.org/documents/financial/2017/PACIFICA-17-FS_Final.pdf

No member of either the Audit Cttee or the PNB displayed any awareness of how harmful to Pacifica’s fundraising is the decision of the FY2017 auditors to offer no opinion on the material accuracy of the financial statements presented to them. I explained this harm in a piece written 26June (please see the link at the end).

The auditors started their work, then realised that Pacifica was finding it impossible to reconstruct & provide sufficient evidence, both quantity & quality, in support of the figures in the financial statements. Pacifica could have spent another six, nine months on the task, with no guarantee they’d come up with enough of what the auditors needed.

Also, fundamentally, no-one on the Audit Cttee & PNB displayed any awareness of how serious it is that the auditor’s opinion had deteriorated from the FY2016’s “qualified opinion” (also termed a ‘scope limitation’), Pacifica’s first, to FY2017’s “disclaimer of opinion”, again, a Pacifica first. (The third kind of ‘modified opinion’ is an ‘adverse opinion’.) So, no-one displayed knowledge of what’s made plain, made explicit, by AU-C section 705, the auditing clarification re ‘modifications to the opinion in the independent auditor’s report’: https://www.aicpa.org/content/dam/aicpa/research/standards/auditattest/downloadabledocuments/au-c-00705.pdf

The FY2017 financial statements presented by NETA, on behalf of Pacifica, were rejected by the auditor – not because they judged them materially inaccurate (in that case, according to auditing rules, they would have publicly issued an ‘adverse opinion’) but because there was insufficient supporting documentation to allow them to make a judgment (hence the refusal to issue an opinion; in the obscuring ‘diplomatic’ jargon of the profession, they publicly issued a ‘disclaimer of opinion’).

In plain language, not disclaiming, but refusal & hence rejection.

The auditors refused to validate the financial statements, refused to validate them to even the slightest degree.

The statements remain unvalidated. For all the money spent by Pacifica’s listeners, paying NETA to prepare them, and Rogers & Co. to audit them, what are they worth?

The auditors were saying, in effect, three things:

  • take these financial statements as you find them – because they have inadequate support;
  • rationally, one can only take them on faith; &
  • so, how strong is your faith in Pacifica, both in 2016-7 & now?

My three-page discussion, originally sent to Chris Albertson’s blog: http://www.mediafire.com/file/rw9nofuwsbnr3k1/FY2017_Auditors%2527_Disclaimer_of_Opinion_W26Jun19_3pp.pdf/file

The money

Gabito meets Pacifica . . .

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

You have to ask yourself, what brought the organisation to this point.

(adaptation of the words of the customs official, opening Exotica, the best film by Atom Egoyan)

These are the auditor’s reports of the period from 1Oct2004, so from fiscal 2005 (FY2005). The run is 13 years, through FY2017.

Prefatorily, I just want to draw attention to how important it is that basic knowledge is widely accessible. Knowledge of this series is necessary for the possibility of informed, rational discussion of Pacifica, not least because the institutional memory of the organisation is largely not lodged in archives but in people’s heads, those who have been involved in Pacifica, some for many, many decades. An important effect, biasing how discussion proceeds, is that knowledge is not shared, not readily available to all, but instead it’s privileged, possessed by the few.

That’s why, for example, Grace Aaron, more often than most attendees of a meeting, will mention a policy, which no-one else may know exists, she can even call it up on the screen, & say she’s quoting from it. And she can’t be challenged, even as to whether it’s still current. Crucially, Pacifica cttees lack induction for new members, & the cttees lack a rudimentary archive, including one that’s publicly available. As another example, she can claim that problems x, y, & z started in 2012, when in fact the record shows, say, that the tardiness in the production of auditor’s reports started in Oct2009, & annual losses started in FY2007. Knowledge claims & accountability require checking against easily accessible primary sources.

The politico-epistemic condition of Pacifica is oligopolistic, of the few. So no surprise that Pacifica’s form of ruling is the oligarchy, a clique within, & outside, the Pacifica National Board. Knowledge is integral to ruling because politics is inherently about control, here control of access to something important for action. (This is one case of the general nature of control, control over the quality of relations, both between people, & between people & what’s important.) Hence the centrality, & vehement defence, of Pacifica’s secrecy culture for those trying to keep the organisation as it is. So, yes, there’s a politics of the (boring) archive. And conceptually it’s not reducible to Francis Bacon’s claim that knowledge is power.

Zip file of the folder: convenient one-click download: https://mega.nz/#F!6uwhAQIY!-QW2NXuAc6rRdWE5KbNb6w

Individual auditor’s reports: go to the above link, then click on a report; download, or read online by hovering over it, clicking the three horizontal dots, & then ‘preview’. Note that two reports are buried in their PDF: FY2006 is from p. 40; & FY2010 from p. 34. FY2010 also has an important page missing (p. 1), the whole of the auditor’s narrative.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

I had just started writing this paragraph in a slightly different way, but Sa3Aug I went to the financials archive at the Foundation’s website, https://pacifica.org (tab at top), & saw that the archive has been changed significantly, either that day or the day before. I was going to put here, ‘This presentation is more complete & accessible than the audit archive at Pacifica’s site, which has these deficiencies: the FY2009 auditor’s report isn’t there; the FY2010 report lacks a crucial page, the auditor’s narrative (page 1); & the FY2006 & 2010 reports are buried inside the PDF, after the 990. I have sent “National Office” the URL of this PacificaWatch webpage.’ (This topic was appended to a Su4Aug open letter to iED John Vernile on two important matters: his written plan for Pacifica, & the need for Pacifica to explain why Maxie Jackson is no longer at his post.)

The pacifica.org archive index page is obviously being re-written, but on checking the deficiencies I listed, these remain: there is a link labelled ‘FY2009 Audit’ but, unfortunately, it’s to the FY2011 report; the link labelled ‘FY2010 Audit’ leads to “Not Found”; & there’s no link for FY2006, just “Temporarily Unavailable”. I haven’t checked the other links. (The Pacifica worker doing this, perhaps Director & Audit Cttee Chair Eileen Rosin, who’d spoken in Cttee on this topic, can find it at http://pacificana.org/public/files/National/Financials/Audits/PacificaAudit2009.pdf – it’s not at the California Registry of Charitable Trusts; incidently, that records Pacifica’s registry status as “Delinquent”, albeit not giving today’s date but 16Nov2018: pump ‘Pacifica Foundation’ into http://rct.doj.ca.gov/Verification/Web/Search.aspx?facility=Y.) [UPDATE: registry status became “Current” as of Th22Aug.]

Still, I’ve sent the email to the immaterial (in the two senses, regrettably), nominal National Office; hence it had to be addressed to the principal administrator, iED Vernile. He has better things to do, but that’s how it is with an organisational structure that is exemplarily flat, lean, mean.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The FY2018 audit: iCFO Tamra Swiderski had given August as the expected finish date, but her latest report, at the Th1Aug PNB, is that “I don’t know exactly, urgh, what deadline we’re working on now for the audit, um, but I know we’re working to get something to the auditors that’s as complete as it can be, um, as soon as we can. Um, it’s pretty much all that I’m working on right now” – 10:19, https://kpftx.org/archives/pnb/pnb190801/pnb190801a.mp3. Not her finest moment. The Chair of the PNB Audit Cttee is a Pacifica director, so heard all this. Ms Eileen Rosin did ask a question – on a topic Tamra didn’t address (a handbook). So Eileen pointedly refused to ask (1) why is there no current deadline?, & (2) why was the old deadline not met? The answers are obvious. The transaction & transfer records, & the supporting documentation, are still that incomplete & chaotic. So much so that it’s impossible to rationally decide a deadline. A PacificaWorld Deadline is just words – not so much an aspiration, as it is useful as a sop to a Cttee lacking expertise, lacking nous. (Ms Swiderski is a current, & longstanding, employee of NETA: no conflict of interest? https://www.netaonline.org/OurStaff, penultimate row of controllers. Ditto her predecessor, Larry Dankner, who never attended a recorded public Pacifica meeting, although listed on some draft agendas (‘Our Staff’, top row of controllers).

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

NOTES TO THE SERIES OF AUDITOR’S REPORTS

[These will be shortened, with the excised being included in a commentary on this 13-year run of auditor’s reports, & posted below.]

1. Restatements . . . Be aware that financial statements given in one auditor’s report have on occasion been restated by a subsequent auditor’s report. This happened five times, by the reports of FY2007, 2009, 2010, 2012, & 2015. The most striking was a ‘negative swing’ of $1.5m, restating FY2008’s net income of $1 068 901 as a loss of $433 161 (the FY2009 report; d’oh!). Restatement has been of both size of amounts & their categorisation. Reports detailing the restatements: FY2007 (Note 18, p. 15); FY2009 (Note 18, pp. 23-4); FY2010 (Note 19, p. 18); FY2012 (Note 14, p. 15); & FY2015 (Note 22, p. 20).

2. ‘Substantial doubt about continuing as a going concern’ . . . Five times auditors have given this Black Mark: FY2010, FY2011, FY2015, FY2016, & FY2017. That’s five in the last eight. Each time, given the financial statements & knowledge of post-year-end events, the auditors found it necessary to conclude that there is, to use the standard phrase, ‘a substantial doubt about the ability of the organisation to continue as a going concern’. The test here is being liquid without undergoing structural change; as the FY2010 auditor, Ross Wisdom, put it: “the Foundation’s ability to meet its obligations as they become due without substantial disposition of assets outside the ordinary course of operations, or restructuring of debt, or externally forced revisions of its operations or similar actions” (Note 20, p. 18).

3. Auditor’s modified opinion . . . If auditors aren’t ‘happy’ with financial statements they give, in the jargon, a modified opinion. There are three kinds: a qualified opinion (also termed a scope limitation); an adverse opinion; & a disclaimer of opinion. (Note that some PNB Audit Cttee members have, falsely, treated ‘modified’ & ‘qualified’ as synonyms; they also speak of a ‘clean audit’, presumably financial statements given an unmodified opinion by the auditor, that is, they are judged to be materially accurate.) Please see this well-written explication from the professional body of accountants & auditors: https://www.aicpa.org/content/dam/aicpa/research/standards/auditattest/downloadabledocuments/au-c-00705.pdf (AU-C = Auditing Clarification)

a) Qualified opinion: only once have auditors found it necessary to give this to the offered financial statements, FY2016. The auditors that year, Regalia & Associates, gave two reasons.

First, the FY2015 & 2016 pension audits hadn’t been done, so a materially accurate pensions liability amount hadn’t been provided to Pacifica &, therefore, to the general auditor, Regalia. Regalia concluded, “[w]e were thus unable to obtain sufficient appropriate audit evidence”. This formulation includes something they didn’t spell out: they, & indeed Pacifica, were also unable to reliably estimate the pensions liability, something permissible within accounting standards, which would have removed a reason for having to give a modified opinion on the statements. This inability could only have been because of the poor state of the transaction records & supporting documentation (FY2016 auditor’s report, pages 1a & 1b). https://mega.nz/#F!6uwhAQIY!-QW2NXuAc6rRdWE5KbNb6w?mqw32KrI

Second, a familiar refrain, the accounting records & supporting documentation weren’t in the best of health, to put it mildly. Regalia, again: “[a]dditionally, we encountered difficulties in obtaining sufficient supporting documentation from some of the locations. Certain of the stations do not use the same accounting software as the corporate office. Some of the data from these stations could not be fully verified because it was missing.” The next, & last sentence is the killer: “[c]onsequently, we were unable to determine whether any adjustments to the amounts recorded in the accounting records were necessary” (p. 1b, my emphases). Oh.

As mentioned, a qualified opinion is also known as a scope limitation, & the lack of adequate FY2016 accounting records & supporting documentation was limited enough to warrant a qualified opinion, rather than not giving an opinion at all about the material accuracy, & so the fairness, of the financial statements presented to the auditor by Pacifica. FY2017 proved a quite different matter.

b) Disclaimer of opinion: again, only given once, FY2017. This was given by the new auditors, Rogers & Company. Concerning the pensions liability, they replicated wording of the previous year’s auditor’s report, now adding that there were two more absent pensions audits (p. 1). https://mega.nz/#F!6uwhAQIY!-QW2NXuAc6rRdWE5KbNb6w?Hywn2SaY

Moreover, the auditors declared a general deterioration in Pacifica’s record-keeping compared with the previous year: “[a]dditionally, we were unable to obtain audit evidence to support the amounts and disclosures in the financial statements due to difficulties in obtaining sufficient supporting documentation from some of the locations […] As a result, we were unable to determine whether any adjustments were necessary to make to the Foundation’s statement of financial position[,] and the elements making up the statements” (p. 2, my emphases).

The state of affairs required them to conclude that a scope limitation was unwarranted, & that they had no alternative but to offer no opinion on the financial statements provided by Pacifica: “we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion” (p. 2).

The auditors were unable to vouch for the material accuracy, the fairness, of the FY2017 financial statements presented to them by Pacifica.

The FY2018 financial statements are likely to be treated the same way, according to the auditor at the M19Aug Audit Cttee. Please see the next note.

4. The FY2017 financial statements, in not carrying an auditor’s opinion, cannot be relied upon by anyone, not least potential grantors & donors: their material accuracy, & so being a fair representation of Pacifica’s financial position, was NOT vouched for by the auditors.

The statements are effectively worthless – their only worth is deleterious to Pacifica, telling the reader that that year’s financial records & supporting documentation were so incomplete that the auditors couldn’t offer an opinion about the statements. The FY2017 statements can’t be used for any grant applications or sent to potential donors. I have examined this in more detail at https://pacificaradiowatch.home.blog/2019/07/19/fy2017-auditor-refuses-to-declare-that-the-statements-are-materially-accurate/

Worryingly, half a dozen or so members of PNB cttees, speaking publicly, haven’t grasped this.

The FY2018 financial statements are likely to receive the same treatment, according to the auditor, speaking at the M19Aug Audit Cttee. Jorge Diaz, of Rogers & Co, in response to a question from KPFK staff-delegate Polina Vasiliev (18:19), said:

“I would imagine though, for the 2018, you’re still going to receive a disclaimer given that, that the [pensions] progress is really, ur, to my knowledge, is, um, only been complete, I guess, for 2015 & 2016 [not true: the most advanced audit is the 2015, & that’s only in draft], so, um, you know, really making sure we can see in, um, you know, once those reports are finalised I can kind of take a look as well, to see if there’s any way we can certainly lift that disclaimer, but I would anticipate right now you’re still probably going to be receiving a disclaimer in 2018, um, because, um, you know, those, those, those [pension] audits are still in progress”

20:05, my emphases, https://kpftx.org/archives/pnb/audit/190819/audit190819a.mp3

(Mr Diaz made a serious error when also saying, “you’ve had, um, you know, you’ve had, urgh, disclaimers of opinion in the past – we issued a disclaimer last year for the 2016 audit, um – sorry, 2017 – &, um, um, you know, the previous auditor as well” (19:28, my emphases). No: as noted above, Regalia issued a qualified opinion for FY2016, not a disclaimer of opinion. Pacifica has only ever received a disclaimer once, that from Rogers & Co, for FY2017. Surprisingly sloppy.)

To repeat, a disclaimer has a damning consequence for Pacifica: the financial statements offered by Pacifica for that year’s financial performance cannot be relied upon by a possible grantor, such as the Corporation for Public Broadcasting (CPB), or any large donor. Pacifica will have to wait for Jan or Feb2020 at the earliest, when the FY2019 auditor’s report may be published. This reality hasn’t been recognised in any public meeting of the PNB & its cttees.

5. How does recent total income compare with the past? The latest financial statements to be accepted as materially accurate by the auditors are those for FY2016. (Those for FY2017 were, in effect, rejected, it proving impossible for the auditors to judge their worth.) The FY2016 total income is $10 467 112 (p. 3). But note this important qualification: listener support & donations is given as a net figure.

That accounting policy started with FY2013 (p. 4), & the cost here is premiums, jargon for goods & services used as an incentive, a bribe/sweetener, for donors to come up with the cash (Note 12, p. 16). But why is it reasonable to conceptualise, to treat, this fundraising cost alone not as an expense but a contra against income, as an anti-income, as it were? It’s also an odd policy as it lowers the amount immediately associated in people’s minds with the public’s support for Pacifica. And it’s not a small sum: at its peak, $1 245 590 in 2013, & $1 071 315 in 2014, in both years comparable to fundraising personnel costs (pp. 16 & 18, & pp. 15 & 17; Note 12 in each report).

In the period examined, FY2005 to present, the highest gross income was FY2006, $18 015 548 (p. 4). (Not surprisingly, that year was the highest net income, $1 662 532; not much competition, there’s only one other net income, FY2005.) There has been inflation since then, 19.1% for the decade, so in Sep2016 money that’s c. $21 448 000. FY2016 had premiums of $458 914, making gross income $10 926 026 (pp. 8 & 3); this is 50.9%. Thus, in real terms, Pacifica’s gross income almost halved in the decade starting late 2006. That is the scale of Pacifica’s absolute decline.

6. In similar vein, how has recent listener support & donations measured up? Has it effectively halved during the decade? Yes. It’s over 11 years, because the FY2005 amount is greater in real terms than the next year’s, although it’s c. $68k less (in money terms) – p. 4. So the highest in real terms is FY2005’s $13 705 687 (p. 6), which in Sep2016 money is c. $16 843 000, there having been inflation of 22.9%. FY2016 had a net figure of $8 246 789, plus premiums of $458 914, giving a gross of $8 705 703 (pp. 8 & 3); this is 51.7%. So again, in real terms, Pacifica’s gross listener support & donations almost halved in the 11 years starting late 2005. Even sadder is knowing that what’s diminished by much more than half, denuded, in fact, is Pacifica’s reputation.

7. When did Pacifica last have audited net assets at the balance sheet date? That was 30Sep2012, $495 924. It was wiped out by the FY2013 loss of $2 824 046.

The zenith for net assets was $7 684 012 at 30Sep2006. (Note that the higher figure in the FY2008 auditor’s report was restated downwards in the following year’s report.) FY2006 was indeed Pacifica’s last annual net income. Correlatively, net assets have fallen each subsequent year, turning into net liabilities, a cumulative fall of over $12m. The last audited net liabilities were $4 525 638, at 30Sep2016. (The following year’s financial statements were, in effect, rejected by the auditors: they had to do this because they found insufficient evidence to allow them to offer an opinion on the statements’ material accuracy.)

8. When did Pacifica last have audited net current assets at the balance sheet date, also called working capital or liquidity? Current assets are the assets that are expected to be used up, consumed, in the next financial period, usually a year. Current liabilities are the liabilities due to be paid in that same period. The last time Pacifica had audited liquidity at the balance sheet date was 30Sep2009, $1 294 733. Yes, 2009.

The last audited net current liabilities were $6 719 281, at 30Sep2016: current assets were $637 716, & current liabilities $7 356 997. That means $11.55-worth of creditors were chasing every $1 that Pacifica had to pay them. In all honesty, Pacifica doesn’t have a CFO, it has a JIC, a Juggler-in-Chief.

(Pacifica got good news for a change on 12Mar. ED Maxie Jackson told the Finance Cttee (17:53) that Democracy Now! had written-off Pacifica’s broadcasting debt: $2.361m. That’s 32% of the last audited current liabilities figure. Mustn’t grumble. https://kpftx.org/archives/pnb/finance/190312/finance190312a.mp3)

Finally, a worrying development has been instigated by the new bookkeepers, NETA, the National Educational Telecommunications Association. They’ve chosen, no doubt with the agreement of the PNB Chair, to make the balance sheet less transparent: current liabilities are no longer disclosed (FY2017 auditor’s report, p. 4). It means that Pacifica’s high degree of illiquidity is concealed from view. A silly manoeuvre, not least because anyone wanting that figure will simply be prudent, with every chance of over-estimating the illiquidity. D’oh!

Not being prudent but crude, one can estimate the effects of both the DN! write-off & the ESRT/FJC debt adjustment, the latter giving a liquidity ‘bounce’ by stripping rent payable out of current liabilities, & dumping (temporarily) the FJC debt, due 2Apr2021, into non-current liabilities.

At 30Sep2018, taking rent arrears as $2m, makes current liabilities $5.4m, & illiquidity 8.1 (5.4 / ⅔). At 30Sep2019, & so including the DN! write-off, current liabilities become $3m, & illiquidity 4.5 (3 / ⅔ ). Looking better. But at 30Sep2020 it more than doubles, with the FJC loan becoming a current liability on 2Apr2020: 6.265 / ⅔ = 9.4, so $9.40-worth of creditors chasing every $1 that Pacifica has to pay them. Oh.

9. The $625 235 deficit of the aggregated permanently-restricted donor endowment fund. This consists in five separate funds created by donors who gave in good faith, with the correlate of Pacifica promising that the specified donor instructions would be respected at all times by Pacifica officers.

Pacifica has never stated orally or in writing (a) whether this deficit violates donor instructions, (b) why this deficit was allowed to arise, (c) who authorised the deficit, & its subsequent augmentation, (d) what the money was spent on, & (e) what is the plan to eliminate the deficit, & by which date. Successive sets of directors have been in office during this period, with no evidence of fiduciary responsibility being exercised.

$625 235 is the balance of the account (corrected, as it had a typo), according to the latest audited financial statements, those for FY2016. (The FY2017 auditors offered no opinion on the material accuracy of those statements because, as discussed in note 3(b) above, “we were unable to obtain audit evidence to support the amounts and disclosures in the financial statements […] As a result, we were unable to determine whether any adjustments were necessary to make to the Foundation’s statement of financial position[,] and the elements making up the statements” (Auditor’s Report, p. 2, my emphases). So those statements are effectively worthless.)

At year-end, the FY2016 fund account was $1 116 055, but only had assets with a fair value of $490 820 (Auditor’s Report, Note 11, p. 14, typo corrected). [this note will be completed this week (Tu10Sep)]