Sacramento’s CapRadio is still nearly $10M in debt after slashing expenses, new report says

Capital Public Radio released Thursday its financial statement for a year marked by financial turmoil, providing the first detailed breakdown — since the release of two scathing accounting reviews over the past 14 months — of debts the station accumulated mostly through signing two leases for downtown buildings.

The nonprofit broadcaster, an auxiliary of Sacramento State, accumulated nearly $13 million in debt, a large chunk from construction costs out of the total estimated $15 to $18 million in improvements associated with the properties on 1010 Eighth St. and 730 I St. The university backed a loan of more than $8 million for those construction payments, according to the financial statements.

By June 2024, CapRadio stood just shy of $10 million in debt. In the past year, it cut almost $11 million in expenses, including more than $5 million from programming and production and nearly $4 million from management and general expenses.

After an audit by the California State University system and an independent forensic examination commissioned by Sacramento State turned up financial mismanagement at CapRadio, the radio station has overcome some of its financial problems in part by carving out a deal with the university to offset debt, forgoing construction costs on the downtown buildings, and by cutting staff and other expenses.

“We now have … effective financial management, including (for) donations, oversight and accountability in place,” said Chris Bruno, CapRadio’s chief marketing and revenue officer. “So internal controls are all in place.”

CapRadio first signed a lease to move into 1010 Eighth St., announcing in 2019 the building would serve as a headquarters after outgrowing its space on Sacramento State’s campus. That plan eventually morphed into occupying two buildings, with the Eighth Street property set to serve as a live entertainment center. The 730 I St. building had been planned for CapRadio’s new headquarters, but staff never got the chance to use it.

Plans to create a live event center at the Eighth Street building in conjunction with Sacramento State remain underway, with a projected opening in 2025.

Trouble struck as debts mounted. The station in August 2023 laid off more than 12% of its staff and began to cut programming. An audit by the California State University system released in September 2023 projected the station could be financially insolvent by the start of 2024.

Roseville-based accounting firm CliftonLarsonAllen released in August a forensic examination detailing how an unnamed person called “Subject #1” was linked to more than $450,000 in payments “without corresponding evidence of expense reports and/or receipts.” The Sacramento Bee and CapRadio reporters independently determined the identity of “Subject #1” as former general manager Jun Reina. CliftonLarsonAllen also prepared the financial statement released Thursday.

The Sacramento County Sheriff’s Office has been investigating financial improprieties at the station, according to Sacramento State President Luke Wood, the first person to reveal the investigation’s existence in a letter to students upon the release of the August examination.

The California State University system in September 2023 released an audit that first revealed widespread financial mismanagement at CapRadio.

What does CapRadio owe, and how is it paying it?

The financial documents released Thursday provide a glimpse into how the station has managed to operate this past year and move toward financial stability.

Through a memorandum of understanding between Sacramento State and the station, the university pays off more than $200,000 in debt per month through a university-approved 15-second advertisement at the top of every hour for stations across the Sacramento region. That MOU will be re-examined every six months, and only the university is eligible to use that exclusive spot.

“Sacramento State is not giving us money, bailing us out in that kind of capacity,” Bruno said. “They cannot do that. They cannot give a gift of state funds.”

The station paid off more than $3 million in accounts payable by July 2024 and will pay off the remaining $2 million to primarily Sacramento State and its parent, National Public Radio.

Weekly news listenership increased by 25% by the end of the 2023-24 fiscal year compared to the previous 14-month average, CapRadio said in Thursday’s report, citing Nielsen ratings.

The station reported $7 million in total assets as of June 2024. Total assets jumped from $20 million in 2021 to $40 million in 2022 — an increase never seen in the radio’s finances stretching back more than a decade. In 2023, assets decreased to $5.6 million.

Functional expenses were reported at $14 million in 2023-24, down from about $25 million in 2022-23 and $21.7 million in 2021-22.

The drop in assets came after industrywide revisions to accounting practices related to building leases. As a result, the downtown leases were not considered an asset or liability in the most recent fiscal year, though in previous years they were.

Liabilities increased to $17.5 million in 2024 from $6 million in 2023. Liabilities totaled $5 million in 2021 and $27 million in 2022.

CapRadio had not until Thursday released its financial statement for the 2022-23 fiscal year. The CSU audit from last September said the nonprofit has not released its recent annual financial statements in a timely fashion, noting that CapRadio did not provide its 2021-22 statement until July 2023.

This story was originally published November 21, 2024 at 1:26 PM.