FROM: Rob Robinson and Carol Spooner

RE: Notice of iPNB Finance Committee Meeting

Pursuant to Bylaws Article Eight, Section 5, Meetings and Actions of Committees,:"Special meetings of committees may be called by resolution of the Board or by the committee Chair or by any two committee members and notice of special meetings of committees shall also be given to all alternate committee members, who shall have the right to attend all meetings of the committee. Any committee member shall have the right to place a matter on the agenda for discussion by the committee."

Rob Robinson and Carol Spooner hereby give notice that a Special Meeting of the Board Finance Committee will take place

Date: Monday, December 22, 2003 Time: 6 PM Eastern time

The meeting will be webcast, as required by CPB rules. If staff believe there is any portion of this agenda that needs to take place in executive session, please notify Carol Spooner right away.

Agenda 1) Election of Committee Chair Pro Tem
2) Update on implementation of WBAI "Core Recovery Plan" approved by iPNB
3) Discuss revised budgets to be submitted in January, especially regarding deficit spending, central services, and interdepartmental transfers
4) Discuss financial reporting cycle and protocols for publication of financial reports
5) Q&A to clarify information contained in Income Statements, Operating Budgets, Capital Budgets, Cash Budgets 6) Other items -- Committee Members please submit other agenda items to Carol Spooner for circulation to the full committee at least 4 days prior to the meeting. Please refer to the list of financial questions/issues previously circulated by Carol Spooner.

Policies to be considered:.

I would like the Finance Committee to consider the following policies that, if approved by the committee, would be recommended to the full board for approval. These policies would set some requirements for budgets presented to the board for approval: (1) to prevent deficit spending and preserve the operating reserves at stations, (2) to put some controls on unbudgeted staff expansions, (3) to implement the board's previous resolution requiring the budget to have a "responsibility center" for national programming.

Resolved:

1) That the board will not approve budgets for any station, or any national department, that show a net deficit below the Central Services transfers from the stations to the national departments.

1a) That for this fiscal year, WBAI's Central Services payments to the national office shall be reduced in an amount necessary to meet the above requirement (and the Central Services income to the National Departments will be reduced by that same amount).

2) That the Central Services payments from the stations shall be distributed between the Archives, National Programming/Affiliates, and National Office Columns in such a manner as to comply with Resolution #1, above.

(Note: It is Pacifica policy that all stations pay 20% of their listener support in Central Services to support national administration, national programming, the affiliates program, and the archives -- except KPFK, which pays 19% -- and that 3% of listener support (2% at KPFK) allocated to the Archives, with the remaining 17% allocated between national administration, national programming and affiliates program. It is noted that for this year, the Archives will not receive its full 3% (2% from KPFK) of listener support, but will receive sufficient Central Services monies to eliminate the net deficit from its budget below the Central Services line.)

3) That the board will not approve any budget, for any station or national department, that is not accompanied by a list of staff positions and salaries that matches the salaries line in the budget.

4) That no added staff positions may be added that are not included in the budget unless the board approves a budget adjustment for the remainder of the year. The board will not approve budget adjustments for added staff positions without an explanation of what increased revenue or reduced expenses during the year will cover the new expense.

5) 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.

6) That a new column shall be added to the budget that will include income and expense for national programming and the affiliates program.

(Note: This is to implement Board Resolution of 11/12/03, pasted below. that the budget will include a "responsibility center" for national programming. This column will include Democracy Now and FSRN expense, as well as the CPB grant money for FSRN, the salaries for national programming and affiliates program staff, and other associated income and expenses, so that program expenses can be analyzed separate from administrative expenses.)

7) That the "listener support" shall include website income at the stations for purposes of calculating Central Services due. 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.

(Note: This will clarify that, although National Programming is an expense to the Foundation, it is also a major fundraiser for the stations -- a point that many do not understand, and that is not clear in the current budget presentation format.)

9) 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 should be eliminated.) .

10) 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 -- 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.

11) 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)

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.

Note:
Board resolution passed unanimously on 11/12/03 mentioned in Resolution #6 above:

Resolved that the Pacifica budget will include an ongoing responsibility center for National Programming whose long-term funding and staffing will be an ongoing priority of the institution. Additionally, the Board will immediately establish a committee to include and work with local station boards, national and local management, the Pacifica Radio Archives, program staff and affiliates to explore the following:

[description of committee work omitted here]