Interim Pacifica National Board
Finance Committee Meeting - January 9, 2004

MINUTES

Interim Board Finance Committee
January 9, 2004 - Telephone Conference Call


Six Committee Members Present, constituting a quorum: Rob Robinson, Carol
Spooner, George Barnstone, Lydia Brazon, Leslie Cagan, Lonnie Hicks
Five Committee Members Absent: Marion Barry, Pete Bramson, Janice K. Bryant,
Charles Smith, Jabari Zakiya
Also Present: Executive Director Dan Coughlin, and Director Teresa Allen (not a
member of the Finance Committee)

The meeting was webcast via kpftx.org

Rob Robinson chaired the meeting in the absence of the iPNB Treasurer, Jabari
Zakiya.

Briefing from Executive Director: The October and November `03 income
statements are up on the Pacifica web page, and there is a memo for the board
with some financial updates and an
update on the audit. He would also like the board to approve the financial
policies and procedures manual.

He visited WBAI this week. They have raised several hundred thousand more
dollars in November and December, including a $55,000 jump in web income. They
will be revisiting the WBAI situation in early February. Needs to get board
orientation manuals in order,
especially in the finance area. They will be sending the new board orientation
materials as soon as possible. It is important that the CFO be able to go on
the record, especially in high risk situations, so he would appreciate the
board approving him has a voting member of
the finance committee.

Spooner: Would like to know when the finance committee will be able to get
income statements on a station-by-station basis, so that board members can see
how their stations are doing, rather than folding it all into consolidated
statement? Has tried in several memos to explain what is that is motivating her
to try to put some policy guidance/restrictions on what is needed in budget. It
is
because "unbudgeted" expenses over the past two years have required the
national office to go to stations that have money in the bank for emergency
funds. This has created a management problem for the stations who had planned
other uses for that money. We need to do a
better job of planning for "extraordinary" expenses for outstanding or ongoing
litigation and settlements. We have a pretty good idea how much we need to
budget for this. Suggests we determine what percentage of our annual listener
support from each station is
necessary to cover this expense and do a "special assessment" on the stations
to cover it, take it out on a regular basis and put it into a board restricted
fund to use for that purpose only. That will eliminate the confusion, lack of
clarity and also reduce the strain on station managers in planning their own
cash flow. This should be a number one priority in the budget - to cover these
"extraordinary" expenses. We also need to plan for any inter-divisional or
inter-station transfers that may be needed to cover WBAI this year, if they
can't do it. It's not enough to just look at the bottom line and see that
overall network-wide it's positive. We need to show the inter-
division transfers from one place to another that will be needed to cover
deficits at WBAI, the national office, and the Archives. The Archives is
showing a $157,000 deficit that is caused by their not getting their 3% Central
Services money. We have not changed that policy, although the Policies and
Procedures manual that Lonnie and Dan are asking us to approve shows lowering
that to 2.5%. We have not approved that, and the budget doesn't show the
Archives getting
that 2.5%, either. We need our budget to show how much money is coming out of
each station, in addition to central services, to cover debts and legal
expenses.

It is Pacifica policy that the national "units" (including national
programming, affiliates program, and administration) lives within 17% Central
Services, and the Archives gets 3% of central
services. The budget does not show the national office staying within the 17%
for ordinary operating expenses. It is using money that should be going to the
archives for ordinary national expenses (not including the legal expenses and
debt). We need to solve this. We need a plan for the national office that lives
within its central services money, even if they can't do everything they would
like to do this year due to reduced listener-support at some of the stations.

Hicks: That's a lot. The stations are touchy about revealing their bank
accounts, and getting income statements from the stations is somewhat
difficult. Each station has a budget this year
for national debt retirement. Any new unbudgeted expenses need to come back to
the board. WBAI has raised $300,000 since the last report, so their problems
will not be as severe as it looked like in November. PRA doesn't have a
$157,000 deficit in its budget. This was a function of trying to mix operating
and capital expenses in the budget (which the iPNB requested at its March
meeting). We have separated those expenses again, because it is confusing to
mix them
up. The 17% Central Services to the national office history is "murky." But we
have increased PRA on-air fundraising, so they don't need the 3%. The managers
agreed at a meeting that the
national office will get the full 20% central services.

Brazon: Disagrees with Hicks on the Archives issue, and agrees with Spooner.
Critical to have more clarity on the money going out of the stations for debt
retirement and legal expenses.
This money needs to go into a board designated fund, and any that is left over
needs to go back to the stations. The KPFK GM has been asked for "emergency"
unbudgeted funds in the past and there is a great deal of resentment about
this. The GMs were told it was a "loan" to national, and now it's not. Still
believes it would be valuable for the board to have a call with the GMs and the
Archives Director. She has spoken with Brian DeShazor and he does not agree
that the Archives doesn't need the 3% central services.

Coughlin: There are some inaccuracies here. He states "unequivocally for the
record" that the stations have done a fantastic job of rallying together to
tackle that debt. The national
office is facing day-to-day ongoing issues with regard to that debt. Last year
(2002) we decided to contract national operations drastically to tackle the
debt. There were massive staff layoffs
(Pacifica Network News). But station budgets increased, including staffing
increases. It is absolutely untrue that the national office is taking money
from the stations for debt retirement and that this money is somehow "sloshing
around." This allegation impugns the integrity of our finance staff. This is
destructive to the work we are trying to deal with here. Most of the old 1999-
2001 debt is behind us, and we do have some pending litigation costs, but most
of
the problems are behind us now.

Brazon: She was not implying that the National Office has a surplus. But she
does want to emphasize that debt retirement funds contributed by the stations
have to be supervised, and we need some policies about that. She's talking
about the future, if there is a surplus, where the stations contribute more
than was needed, then it needs to be returned to them. She is not trying to
impugn anyone.

Robinson: Wants to move the agenda to the resolutions at hand.

Brazon: Wants a resolution that if there is a surplus, that it would return to
the stations.

Motion by Robinson, Spooner 2nd:
That CFO Lonnie Hicks be allowed to vote as a member of the committee.
4 Yes - Brazon, Cagan, Spooner, Robinson
1 No - Barnstone
Abstain - none
The motion Passes.

Motion by Spooner, Barnstone 2nd:
Resolved:
That the annual budgets presented to the board for approval shall include:
1. A normal operating budget
2. A cash flow budget
3. A capital budget
and the board will not approve any budget unless all three budgets are
presented together for the period.

Will try to do a cash flow budget next week.

Discussion: Hicks says cash flow budget requires him to have access to all bank
statements for each station, but that's touchy. The operating budget and
capital budget is doable. Thinks the cash flow budget is crucial.

Cagan: Supports this and is concerned that it is difficult to get bank records
from stations.

Hicks: Stations are proprietary about what cash they have and don't want to
give him that information. The bylaws emphasize local autonomy. Would like a
companion motion from the board to make this info available.

Spooner: The bylaws do not give the local stations the right to withhold
financial information from the national office. They say that the local board
will approve the local budget. That
is a very different thing. She is shocked to hear that the CFO has trouble
getting this information and will propose a resolution to that effect.

Question called:
6 Yes - Barnstone, Brazon, Cagan, Hicks, Robinson, Spooner
0 No
The motion passes.

Motion by Spooner, Cagan 2nd:
Resolved:
That all station financial records and information, including bank records,
shall be made available to the national financial office on a routine basis.
This is without limitation, and this
information shall also be available to the national board.

6 Yes - Barnstone, Brazon, Cagan, Hicks, Robinson, Spooner
0 No
The motion passes.

Motion by Spooner, Cagan 2nd:
Resolved:
That a new column shall be added to the budget that will include income and
expense for national programming and the affiliates program.

Discussion:
Spooner: This is to implement Board Resolution of 11/12/03, pasted below. that
the budget will include a "responsibility center" for national programming.

Hicks: This is possible, but difficult to include the affiliates with national
programming.

Spooner: This separates administrative from program expense, and allows us to
see whether our affiliates program and national programming are self-sustaining
or not. We do currently show the
affiliates income going to the archives. If that's where we want to use that
money, that's OK, and I believe we have done that for many years. But it would
seem to make more sense to show that money going to the affiliates program, and
raising the Archives Central Services to replace it. Although the Archives
business manager does the accounting and bookkeeping for the affiliates
accounts, and an adjustment would be made to cover that.

Hicks: Will make the attempt and we'll see what it looks like. It would be good
to see if national programming and the affiliates programming are self-
sustaining.

Allen: As chair of the Affiliates Committee, she agrees this is a good policy.

Question called:
6 Yes - Barnstone, Brazon, Cagan, Hicks, Robinson, Spooner
0 No
The motion passes.

Motion by Spooner, Robinson 2nd.
Resolved:
That the "listener support" shall include website income at the stations for
purposes of calculating Central Services due.

Discussion: Spooner, as we're doing a lot more internet broadcasting, we're
getting a lot more internet income. It is immaterial whether the listener-
support comes by phone or over the
internet for CPB reporting purposes. The only station that reports it
separately is WBAI. It's good to show it separately so we can see how
successful our web broadcasting is. But it should still be
included in listener support for purposes of calculating the stations' central
services.

Hicks: Agrees, but needs to see if there is a mix of "commerce" items and
premiums in the web income.

Spooner: On air fund drives offer premiums, web site income also offers
premiums. We're not selling a CD for $200. The donation is listener support,
either way, and the premium expense is shown down in the expense items.

Hicks: Agrees. Has no objection to the resolution.

Question called:
6 Yes - Barnstone, Brazon, Cagan, Hicks, Robinson, Spooner
0 No
Motion passes.

Motion by Spooner,
Resolved:
That "listener support" shall be broken down into subcategories in the station
budgets, showing income generated by DN, FSRN, and other national programming
separately from income generated by local station programming. These
subcategories, and website income, shall be shown on the "Consolidated Budget",
and shall be subtotaled, together with website income, for purposes of
calculating Central Services due.

Discussion: Spooner, all stations are receiving income from national
programming. We hear all the time "why are we paying all this money for
Democracy Now!" This would show why national programming is valuable to the
stations. The stations make money on these programs and national is paying for
it. Showing this would reduce the tensions around the network about this.

Hicks: Isn't sure all the stations can identify income by program.

Spooner: KPFA keeps track of every donation by program in the Memsys program &
they keep track of the fulfillment rate by program. This should be the policy
and everyone can work on getting their record-keeping up to speed.

Coughlin: Maybe this should be an informational report, rather than a budget
matter. Changing the budget format could be difficult.

Hicks: Thinks this report should be done, but maybe not in the budget.

Spooner: Willing to table the motion and let the next board grapple with this.
But budgets and financial statements are public and people can see what is
going on. She gets many questions from the public about this. When she tells
them how much money Democracy Now raises, they don't believe her. If people
have to go to a different report on a different page, it is more difficult for
them to see this income.

Cagan: Perhaps the notion of an annotated budget and annotated financial
statements would solve the problem, so that people don't have to go to a
separate report somewhere to get this
information. Would like Hicks to report back how best to handle this.

Motion Tabled without objection.

Motion by Spooner
Resolved:
That the projected revenue and expenses shall be as accurate as possible. (The
mistake showing a $276,748 "Grant-Non-operating" to the Archives this year
shall be eliminated.) .

Discussion: Spooner wants to withdraw the motion. It's obvious that budget
lines should be accurate. We shouldn't need a resolution in order to get that.

Motion by Spooner, Brazon 2nd:
Resolved:
That the $582,748 "Debt retirement" line in this year's budget shall be broken
out into 2 separate lines -- one line for actual pre-1/1/02 debt retirement
budgeted this year, and -- one line
for current legal expense contingency fund budgeted for this year -- this line
will include anticipated expenses to defend, settle or pay judgments in the
Schubb, Daughtry & Wash litigation this year. These debt retirement and legal
contingency expenses shall be shown as
National Office expenses, not station expenses. Interdepartmental transfers
from the stations to the national office shall be shown in the budget to cover
these expenses. The bottom line "net
surplus/deficit" after these interdepartmental transfers shall not show a
deficit for any station or national department.

Discussion: Spooner wants debt retirement to include only old debt incurred
before this interim board came into being. New legal expenses need to be in
current expenses, not thrown in with the old debt. If there is a deficit at the
national office. But this should be discussed in Executive Session at the end
of this meeting.

Tabled to Executive Session without objection.

Motion by Spooner, Brazon 2nd
Resolved:
That the board shall receive the following financial reports: (note: these are
the recommendations from the California Management Assistance Program
"Nonprofit Genie"
http://search.genie.org/genie/ans_result.lasso?cat=Financial+Management) and
their explanatory notes are included in the motion to clarify the purpose of
these reports.)

Monthly Reports
- Statement of Position (Balance Sheet)
What is our financial health? Can we pay our bills?
- Statement of Activities (consolidated) showing budget to actual information
What has been our overall financial performance this month and to date?
- Departmental and Station Income and Expense Statement, showing budget to
actual information
How does actual financial experience compare with the budget?
Is specific action called for, such as limiting expenses in certain areas?
Does experience indicate a change in the budget is appropriate?
- Narrative report including tax and financial highlights, important grants
received, recommendations for short term loans, or other means of managing cash
flow
An executive summary of financial highlights, analysis, and concerns.

Quarterly Reports
- Fundraising Reports; actuals vs. projections for donations; status report on
all grant proposals.
Are fundraising results on track?
- Cash flow projections for the next six months
Do we anticipate a cash surplus or shortage?

Annual Reports
- Annual Federal forms, including 990 and Schedule A; State Reports
Has the organization fulfilled its reporting responsibilities to federal and
state governments?
- Draft financial statements for year: Consolidated Statement of Activities;
Statement of Position; Statement of Cash Flows; and Income Statement for each
station and department. Aggregated
financial statements with narrative showing key trends
Focus: Internal management decision-making.
What was our financial performance over the past year?
In what ways and for what reasons was performance different from the budget?
What financial implications must be taken into account when planning the
upcoming
year?
- Audited financial statements for the entire organization, including Statement
of Position, Statement of Activities, Statement of Cash Flows, Statement of
Functional Expenses
Focus: External accountability and financial disclosure to funders and the
public
- Management letter from the auditor
What recommendations has the auditor made related to the accounting system,
internal controls, and financial planning?

Who Prepares These Reports and Who Should Review Them?
The CFO prepares and the Executive Director reviews all reports prior to
presenting them to the board finance committee to ensure that the financial
information makes sense and can be
translated into issues and opportunities facing the organization. In addition,
key staff members such as the Controller, General Managers, Development
Directors, Business Managers should have the opportunity to review income and
expense reports for the whole organization.

The board finance committee reviews all financial statements with the CFO and
the Executive Director, and reports on financial activity to the full board.

The finance committee will often review the numbers in greater detail than the
full board. The full board may be better able to respond to aggregated
information with important financial trends and issues highlighted in an
accompanying narrative report. While each board member should have the
opportunity to review organization-wide income and expense reports to
understand the impact their department's activities have on the whole
organization, members who are inexperienced at reading financial statements may
get lost in overly detailed statements. To help the board fulfill its oversight
function, it is important for the executive director and the finance committee
to present the information in as clear and concise a manner as possible.

The audit and management letter are addressed directly to the board of
directors because of its oversight function. The auditor works with the Board
Audit Committee, and the finance staff to
prepare federal and state reports and may be included at board meetings during
which presentations are given.

Discussion: Hicks some of these reports are necessary, but not sure all of them
are. Would like a timetable for implementation. Has enormous implications on
how we do business.

Coughlin: There are also cost implications.

Spooner: Believes that if our accounting system is working properly, and data
is being entered properly and timely, that these reports should be pro forma.
The problems we have in producing these reports now are different from station
to station, but those problems need to be fixed. The board has to have this
information, and the LSBs need it too, to perform our financial oversight
duties. Costs are not a convincing argument. This is what every other
organization she has ever been associated with does, and it will help
tremendously to unsnarl the conflicts around money around the network if
everyone can just see these reports and understand our finances. She is not
unmoved by the difficulties. But the board has been asking for this for about 2
years (most of it not during Lonnie Hicks' tenure). The board has been assured
time and again that we're "almost there" with our financial reporting. The
board has been "flying blind" and that makes Spooner feel anxious and
vulnerable, and possibly liable for negligence for not requiring these
requirements. Wants to pass the resolution, maybe with a final sentence that
the CFO will provide an implementation timetable within 60 days.

Hicks: Will do the work to come up with a timetable in 60 days, telling the
board what can be produced.

Coughlin: In the last 3 months there have been at least 20 comprehensive
financial reports provided to the board. The financial reporting on the web
sites is comprehensive and detailed. Income statements, actual vs budgets are
detailed. We don't need more information, but rather more clarity about what
kind of information is needed and when. We already do narrative reports. He is
frustrated with this denunciation of the business managers and the finance
office, with the implication that they are trying to hide something or are
stonewalling.

Brazon: Yes, we are getting more reports than we got in the past. But we need
to improve on that. She has been approaching major donors, and she needs to be
able to respond to questions she can't answer. We need to restore the
confidence of the people who used to give large amounts to the station. As
board members, we need to be equipped with the kind of clarity that we don't
have yet. We are faced with specific questions that we can't answer.

Robinson: Appreciates the reports we have been getting, and doesn't think
anyone is trying to hide or stonewalling. But financial reporting is a lot like
programming, it is by doing it as a
regularly and routinely is as important as what is there in substance. It's
been a long time that we were not able to get these reports at all. Would like
the CFO to tell the board what reports he
thinks it should get monthly, quarterly, annually, etc., so we can look at it.

Spooner: She is taken aback by the notion that needing monthly, quarterly and
annually evokes such a response here. She knows that a lot of work is going on.
But we don't have monthly
reports, and we don't have quarterly reports, and except for the annual audit
we don't have any reports on the cash flow. So, we are flying blind as a board
and it is our responsibility to get those reports. She likes what Lonnie said
he would do, which is to report back on feasibility and time line within 60
days.

Question called on the motion, with the proviso that the CFO will report back
within 60 days (by March 9th) on the time line and feasibility of producing the
reports.

6 Yes - Barnstone, Brazon, Cagan, Hicks, Robinson, Spooner
0 No
The Motion Passes

Meeting adjourned to executive session without objection.

Respectfully submitted,

Carol Spooner
Secretary, Pacifica Foundation
These minutes were approved on 12/10/2007.