CapRadio releases audited 2024 financial reports, revealing $10M in debt and its repayment plans

Capital Public Radio management released audited financial statements for the 2023-24 fiscal year on Thursday, revealing roughly $10 million in debt.

CapRadio’s Chief Marketing and Revenue Officer Chris Bruno called the report a “standard annual financial audit” in a media briefing earlier this week. He added that it is the first opportunity for people to review the station’s audited financial data — and its efforts to dig itself out of a major hole — after two previous audits found severe financial mismanagement and significant debt.

After an initial audit was released in September 2023 and found significant accounting problems, Sacramento State took over CapRadio’s financial operations. The university worked with the station over the past year to prepare its financial statements for the audit released on Thursday. 

The most recent financial statements were audited by CliftonLarsonAllen, the same accounting firm which released a forensic analysis of CapRadio’s finances in August. (That report found the station made roughly $760,000 in unsupported payments between July 2020 and June 2023, a large portion of which went to the station’s former General Manager, Jun Reina.)

In the audit released on Thursday, a separate group of CLA auditors found that the radio station — an auxiliary organization of Sacramento State — accrued a $10 million deficit at the end of the 2024 fiscal year, which ended on June 30.

The station was reported to have over $40 million in net assets at the end of the 2022 fiscal year, according to audited financial statements prepared by a different accounting firm, Propp Christensen Caniglia LLP. 

“Essentially, we’ve corrected some of the accounting practices,” Bruno said of the change from surplus to deficit.

He explained that things like donor pledges, tenant improvement projects and the station’s Downtown leases had incorrectly been counted as assets in the 2022 audit, but were not classified as such in recent fiscal years. 

That practice of accounting “is all in the past,” Bruno said.

Bruno also confirmed an investigation into Propp Christensen Caniglia LLP was taking place, but would not give further details about a timeline or focus of the investigation, nor who was conducting it.

“We are actively exploring all avenues to ensure that there is remediation and accountability for past issues that have impacted CapRadio,” he said in an emailed statement. 

Bruno outlined several efforts the station has made to reduce debt, including reducing payroll by $2.5 million — CapRadio laid off or lost about 15% of its staff last year — in addition to completing or stopping over $7 million in construction projects, and cutting back on consultants and marketing agencies. 

The audited financial statements also revealed that the station owed an estimated $9.7 million in debts to a number of organizations, as of the end of the most recent fiscal year. Of that debt, $2 million is owed to CapRadio vendors while $7.7 million is owed to Sac State, Bruno said. 

That debt to the university stems from an $8 million loan Sac State backed to help the station pay for tenant improvements at two costly Downtown projects.

One of the two projects is a Downtown office space CapRadio had planned to make its new headquarters. The station scrapped plans to make that move this year. The other project is a live event space on 8th Street that CapRadio and the university now share and plan to open in the future. 

CapRadio has started to pay back a portion of the $7.7 million debt to Sac State by using hourly on-air messaging promoting the university in the form of 15-second announcements. The agreement does not technically require CapRadio to spend any actual money, in what is called an “in-kind” service. 

Bruno called the agreement a “win-win” for both parties, and added that the station reduces its debt by an estimated $220,000 monthly under the new system. He did not give a timeline for when the full debt to Sac State would be paid off. 

He added that from July through this month, CapRadio has reduced the overall $9.7 million debt by about $2 million. 

“We are pleased with the progress that CapRadio has made to stabilize its finances in the 2023-2024 fiscal year,” said Lanaya Lewis, a spokesperson for Sac State. “The strong community support and rising listenership continues to show that CapRadio’s trusted, independent local journalism is critical to communities throughout Northern California.”

In a summary of the audited financial statement, auditors expressed concern over CapRadio’s ability to make enough money to stay afloat. 

Auditors cited “ongoing investigations” and “a significant net asset deficiency” as the reason for these concerns. 

Bruno said the ongoing investigation is one being conducted by the Corporation for Public Broadcasting. CapRadio usually receives around $1 million per year from CPB, but those funds are on hold until the investigation is complete. Bruno said he could not share updates on the status of that investigation. 

But CLA auditors also said the station is on track to stabilize its financials, and that their opinion about financial solvency does “not include any adjustments that might result from the outcome of this uncertainty.”

Looking ahead, CapRadio management officials have expressed cautious optimism about the station’s future, despite the financial hurdles ahead. They say recent accomplishments have set the station up for success.

Some of those steps, as detailed by management officials on page 18 of the new financial report, include submitting compliance updates for all 42 recommendations from last year’s Cal State audit. They also cited a 9% increase in membership support during the past fiscal year and the hiring of several additional reporters to increase news production. 

“CapRadio staff have actively engaged with the community,” station officials said in the report,  “holding dozens of donor convenings, station tours, community gatherings and one-to-one discussions with community leaders about the future of the Station.” 

CapRadio management’s budget for fiscal year 2025 has been approved by both the board and Sac State administration. The budget projects sustainable operations for the station, with $13.5 million in revenue compared to $13.2 million in expenses.

Disclosure: This story was reported and written by CapRadio’s Assignment Manager Claire Morgan and Politics Editor Chris Nichols. It was edited by Insight Host Vicki Gonzalez and Producer Sarit Laschinsky. 

Following NPR’s protocol for reporting on itself, no CapRadio corporate official or news executive reviewed this story before it was posted or broadcast.

Editor’s note: CapRadio is licensed to Sacramento State, which is also an underwriter.