Sac State president says CapRadio finances are dire, but focus is ‘making sure public media lives on’

Click play above to hear Sacramento State President Luke Wood’s full conversation with CapRadio Insight Host Vicki Gonzalez.

A day after 14 Capital Public Radio board members resigned, Sacramento State President Luke Wood said the station’s finances are “dire” and that it could be under investigation by the Corporation for Public Broadcasting.

But he also said he's focused on “making sure that CapRadio can survive for the future” and that he is “very invested in making sure that public media lives on.”

Audit finds CapRadio mismanaged funds, questions station’s ability to pay for costly downtown projects

Last week an audit released by the California State University Chancellor’s Office found numerous instances of financial mismanagement at the Sacramento-based NPR member station, which is an auxiliary of Sac State. The audit also comes one month after CapRadio laid off 12% of its staff and canceled four music shows.

Wood said he found out about the audit — and the “major concerns” about CapRadio’s finances — during transition meetings with the university’s former president, Robert Nelsen, who retired in July. 

“Soon after, I learned that those concerns were really of the highest order and that this is one of the worst audits that the system has ever seen,” he said. “And I continued to hear the same things from other individuals [who have] had a chance to review the audit.”

The audit found 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, which Wood pointed to as a cause for concern, among other discrepancies.

Possible new investigation from CPB

The audit also said CapRadio kept incomplete records. 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.

“In conversations with CPR, we learned that this was their standard practice for recording vehicle donations,” the audit reads. “By recording the gross amount in the donor system, CPR received higher funding from the Corporation for Public Broadcasting (CPB), which provides matching funds for gifts raised by CPR. It was unclear whether this method of reporting [gift in kind] values to CPB was appropriate.”

Wood said Sac State has been in communication with the Corporation for Public Broadcasting, which could launch an investigation or audit of their own.

“We've just had informal communication, and the informal is basically a heads up that we have a responsibility to look into this, especially given what we know about the car donations,” he said. “And that was in, again, the state audit that the values were essentially inflated to receive higher matching funds.”

Board members resign, citing lack of university support and inclusion 

On Wednesday, 13 CapRadio board members announced they would resign in a letter sent to Wood and CapRadio Interim General Manager Tom Karlo. They cited “a failure of Sac State to inform and engage with the board in a good faith effort to resolve CapRadio's financial issues” as the reason for their resignation. 

14 CapRadio board members resign following devastating audit, some citing lack of support from Sacramento State

Board Treasurer Bena Arao, a director of the business and administrative services at Sac State, also resigned from his board position Wednesday. He did not sign the letter sent to Wood and Karlo, university officials told CapRadio. 

After the audit was published, Sac State announced it would take over operations and financial management of the station. That included appointing Jonathan Bowman, the university's chief financial officer, to oversee CapRadio. 

Sac State also announced it did not support the station’s decision to move forward with hiring a new general manager on Tuesday, just hours after the board voted to do so in a closed meeting.

In the resignation letter, the board members contend that Sac State leadership has rejected multiple requests to meet to "better understand the decisions that were made" and felt uninformed with announcements that were made to the public.

Wood said he wanted to “thank the board members for their service.” 

“I believe that they were committed to public media,” he said. “And at the same time, we had an audit that showed that millions of dollars in loans and lines of credit were taken out without awareness of the university, and in some cases, even awareness of the board … And so many other high level egregious issues.” 

Wood said a new board will take over, and that the community has expressed an outpouring of support and desire to participate.

“Lots of folks are reaching out right now saying they want to be part of the board, and so we’re looking at that,” he said. “But the first things that we need to be able to do is look at the operating agreement with the university. That was one of the things that was called out in the audit … But that’s the first and next step.”

Potential conflicts of interest in downtown projects

The audit also raised significant questions about whether CapRadio can afford to pay for its current and future office spaces, including two long-delayed downtown Sacramento buildings that cost “$218,245 per month,” auditors wrote.

CapRadio’s downtown projects include a new headquarters at 730 I Street — which Wood described as "opulent" — and a separate live event space at 1010 8th Street.

“I'll say this, I don't think the situation would be as acute as it is right now if it wasn't for moving into the downtown headquarters,” Wood said. “Think about the expensive furniture purchases. Think about the renovations that took place, think about the lease — and the cost of all those things put together far outsize the budget of CapRadio.”

Earlier this month, Karlo, the station’s interim general manager, said “we are going forward like we are moving down there. We are thinking that we will begin moving down in early 2024.”

But when asked if the station would proceed with the costly projects on Thursday, Wood said, “I think that's a decision for CapRadio.”

“How I think about it is like this: CapRadio already has a pair of shoes, but it wants to buy some expensive Jordans and it's doing great work with the shoes that it has,” Wood added. “If it can afford those Jordans then, yeah, I have no problem with that. But right now, $70,000 a month in rent — and it will go up to, I believe, 90-something thousand dollars of rent per month — that's a very costly lease.”

In an interview with the Sacramento Bee Wednesday, Wood also flagged possible conflicts of interest between some former board members and the costly projects.

CapRadio’s new downtown headquarters are located in a building owned by 730 I St. Investors LLC, the Bee reports, composed of several local developers, including Bay Miry. The station announced the plans to move in early 2019, and a lease wasn’t officially signed until 2021.

Also in 2019, Katherine Bardis — Miry’s wife — joined the CapRadio Board of Directors. In a statement sent to the Bee, former board chair Andrea Clark said that Bardis was asked to recuse herself from a late 2019 discussion about the lease.

Wood also flagged concern over invoices for furniture at the new building, from the Western Contract furniture store. Its president is former CapRadio board member Bill Yee, according to the Bee. 

“I think any reasonable person would have concerns with that,” he told the Bee. “I’m a reasonable person.”

Though the audit doesn’t touch on building or furniture conflicts of interest specifically, it does flag that no conflict of interest statements had been collected from board members.

“The COI policy states that members of the board should complete an annual COI statement,” the audit reads. “However, CPR could not locate signed statements during the audit period because the staff member responsible for maintaining the statements was on sabbatical leave.”

When asked if any of the audit’s findings could rise to criminal charges, Wood said “we don’t know” and that though he was not a lawyer or accountant, “the math ain’t mathing.”

He said more audits of the station have been ordered at local, state and federal levels, including possibly with the Corporation for Public Broadcasting.