KPFA LAB Treasurer's Report
From: Diane Solomon
Sent: Friday, June 07, 2002 1:34 PM
Subject: KPFA LAB Treasurer's Report for June 2002
Because there won't be much time to discuss finances at the June KPFA LAB Meeting, our Finance Committee asks that you read the below. Please feel free to distribute this report far and wide. Mark Hernandez, would you, kindly, post this on our most excellent web site?
Peace be with you, Diane
KPFA LAB Treasurer’s Report June 10, 2002, Prepared by Diane Solomon 6/10/02
I. Status of KPFA’s Monthly Financial Statement:
Per my prior report, Eileen Carr, KPFA’s Business Manager, has been working to get Pacifica’s books up-to-date so that the centralized accounting system can generate a monthly financial report for KPFA. According to Eileen the books are now current through March and part of April; however, there is now a virus in the National Office’s centralized computer system that is impacting the accounting system. The virus has made it impossible for Eileen to access the system, which makes it impossible for her to update the system to current; to look up information; and to generate reports.
We distributed a budget to actual report through March 30, 2002 at our May LAB meeting. Please excuse me for not getting a "postable" copy to Mark Hernandez for our Web site. I hope to do this as soon as possible.
Please note that all Pacifica member stations’ Finance Staff recently attended a Great Plains software training at the National Office. According to Eileen, all stations are "getting up to speed". Eileen mentioned a new problem is with the Citrix networking tool that is by Finance folks to connect to the centralized system. Users are having difficulty connecting due to problems "at the Pacifica end". Eileen said that National Office Staff are working long hours and weekends in order to resolve this problem.
II. KPFA’s Fiscal Year Ending 9/30/03 Budget:
A budget is an organization’s best estimate of the dollars needed (expenses) to carry out its mission over the course of a specific time period and the revenue needed to pay for those costs. Budgets are sometimes called "plans" as they are a road map of what an organization intends to do over a specific period of time.
The LAB’s Finance Committee met with Eileen Carr on June 5th to discuss KPFA’s FYE 9/30/03 budget. As noted in Section III, below, Pacifica member stations are to submit their proposed budgets to the Foundation in June and July. Eileen presented KPFA's preliminary budget to us. It will likely change as more "actuals" information is received during the course of this year. We will distribute a copy of this budget at our June meeting and will ask Mark Hernandez to post a copy on the Web.
The budget is based upon last year’s actual expenses adjusted to reflect known or estimated changes anticipated for FY 9/30/03.
KPFA FY’03 BUDGET DISCUSSION POINTS:
1. General Comments / Increase in Revenue:
The current version of this budget is preliminary. More information will be available toward year-end that will enable a more accurate projection of fiscal year (FY) FY’03 revenue and costs. Basic expense categories and funding sources are known. The budget reflects a projection that FY’03 revenue will be 33% greater than FY’02.
Phil Osequeta and Eileen believe that this budget is a realistic target. As expenses increase, so must revenue in order to pay for increases in expenses. KPFA has proven it can raise the money it needs to operate.
2. The LAB’s FYE 9/30/03 Budget:
Phil Osequeta will propose to the Pacifica Foundation that the Foundation pay the cost of the annual LAB election out of KPFA’s levy, or Central Services fee. Included in KPFA’s budget is an amount for the LAB. Presently this amount is an estimate of monthly meeting room costs plus $1,200 for a LAB retreat to be held in January of 2003. If LAB committees believe that they will incur costs during FY’03 and would like to be reimbursed by KPFA, please send Eileen an e-mail with as much information as possible about your committee’s projected financial need. Please also include your phone number.
3. Debt Retirement Line Item on Budget:
There used to be a line item on KPFA’s budget for debt retirement. This has been removed and is now on the budget of the Pacifica Foundation.
An increase in utilities was budgeted for FYE 9/30/02. Because utilities costs have not stayed at the high levels that were anticipated, this cost has been reduced for FY’03.
5. Capital Improvements:
The budget includes amounts to improve the transmitter and to replace worn computers.
III. Pacifica Foundation Budgeting Process for FYE 9/30/03 and Year-End Audit:
According to Jabari Zakiya, the Pacifica budgeting process for year-end 9/30/03 is as follows: Member stations’ budgets are to be submitted to Pacifica during the months of June and July. The Pacifica Foundation is also currently developing its own budget. Final budgets are to be approved by October 1st , the first day of fiscal year ending (FYE) 9/30/03. According to Jabari, Pacifica doesn’t yet have a preliminary budget for our review because National Office Finance Staff are currently working with the outside auditors on this year’s independent audit.
FYI, each year an independent accounting firm performs an independent audit of Pacifica’s financial statements. All publicly held corporations and many not-for-profit corporations engage accounting firms each year to perform an independent audit of its financial statements. The purpose of this audit is to "attest" as to whether the audited financial statements are "materially correct" or not. The auditor's end goal is to issue a report where they will issue a qualified opinion or an unqualified opinion. An unqualified opinion is given when the financial statements have been found by the auditors to fairly reflect the financial position of the organization and the results of the organization's operations. During these audits, the auditors perform numerous tests, such as verifying that vendors were paid amounts booked as expended. They also review financial records, contracts, and all manner of documents. Their work requires that Staff be available to provide them with the data, documents, and verbal information needed to perform their audit.
You may recall that the PNB stated at its March 2002 meeting that it wants to hire a special financial expert to monitor Pacifica’s accounting and business practices; this person would serve as Pacifica’s Treasurer. As I have said, I don’t think this would be an efficient use of Pacifica’s money and I don’t think this is the best way for Pacifica to monitor itself. I believe it would be far more efficient for Pacifica’s Finance Committee to write policies and procedures mandating good ethical practices and pay the independent auditors to perform additional tests each year that verify that such policies and procedures were being followed.
IV. Conversation With Interim Pacifica National Treasurer, Jabari Zakiya on June 5, 2002
According to Jabari, our budgeting process is not optimal. Because of the $1.6M debt that Pacifica must service, resources that could go toward planning and improving processes must be used to meet expenses. Jabari believes the budget and budgeting process for FYE 9/30/04 will reflect realistic projections of the finances needed to carryout and to advance Pacifica’s Mission, rather than the FYE 9/30/03 budget, which will reflect trying to stay afloat while the debt is paid off.
Jabari believes that it may take as long as three years for Pacifica to be able to function as a growing unimpeded organization. Jabari referred to the $1.6M debt as a "gorilla on our back". Servicing this debt is a drain on the entire organization. For example, because our credit rating is poor, bills must be paid in a more cumbersome manner utilizing federal express. We have old bills to pay yet we must meet payroll every two weeks. Finance Staff spend a great deal of time monitoring cash balances and determining payment schedules in order to keep the stations going and in order to pay the debt off in accordance with time tables. Pacifica’s priority is meeting its payroll expenses.
As long as we are in debt, it is very difficult to plan for the future. Budgets are tools that reflect a plan for the future. Again, Pacifica is working to stay afloat until the debt is gone. At this time there aren’t enough financial or human resources to do more than this. Jabari believes that Pacifica must develop new revenue streams, as we presently are heavily relying on fund drives. Fund drives are successful yet they have high costs. Such costs could be reduced if our technology was up to speed and we if we had the resources to develop economies of scale within the network. For example, many vendors are used to provide premiums. The more vendors, the more cost. Vendors usually want payment before pledge money has been received. We can reduce fund drive expenses when we can create an improved technical and operational infrastructure.
Jabari spoke of the need for the Foundation to set up an endowment structure and to put in place a plan for long-range revenue generation. He spoke of the need for member stations to own their own buildings; for the archives to be developed; major donors to be identified and cultivated; and for Pacifica to more fully carry out its mission, which extends to much more than radio.
V. LAB Treasurer's Input for KPFA’s LAB Report to the PNB at the June 2003 Meeting:
"At the March 2002 Pacifica National Board Meeting, we asked that you put in place safe guards to ensure that all monies borrowed from Pacifica Stations are accounted for and are paid back within a reasonable amount of time. We also requested that written guidelines be developed so that all may know how such transactions work and so that such transactions may be monitored by the Finance Committee and other interested parties. We hereby respectfully request that you respond to this request when you meet to discuss finances at the June meeting in Berkeley.
We also requested, at the March 2002 Pacifica National Board Meeting, that the Pacifica Foundation provide us with an accounting of what money was taken and an accounting of how all loaned amounts will be returned to us. Because we have not heard from Pacifica on this matter, we passed a resolution requesting that the Pacifica National Board, as soon as possible, direct the Pacifica National Office to provide KPFA with a full accounting of all non KPFA-related expenditures paid by the Pacifica National Office with funds raised by KPFA. We ask that this accounting include the period beginning June 1, 1999 through December 31, 2001.
We hereby respectfully request that you respond to our prior request and this resolution when you meet to discuss finances at the June meeting in Berkeley.
We have also formally requested that the Pacifica National Board specify each member station’s levy before the beginning of each fiscal year as part of the Pacifica National Office’s and member stations’ budgeting process. We asked that levy amounts be determined as part of a process of collaboration between the member stations and Pacifica. So that the Pacifica National Office’s goals and budget are transparent, we also requested that an accounting of how levy amounts are derived be documented and distributed as part of this process. We hereby respectfully request that you respond to this request when you meet to discuss finances at the June meeting in Berkeley."
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