The Bigger Story the Numbers Tell

Why was Issues Etc. cancelled?

The reason that we've been given is that KFUO AM has been losing money (business reasons).

We were told that KFUO AM lost $620,698. But we were not given any explanation as to why the station was losing money? We were just given a number without a context and we were told that Issues Etc. generated 40% of that loss.

But, as we've stated before, when companies experience shortfalls the first place to look is MANAGEMENT.

The sloppy bookkeeping we brought to light yesterday is just ONE symptom of the greater problem that KFUO suffers from and that problem is failed management.

Look back again at the KFUO financial document and look now at the bigger picture.

The numbers reveal that the management of KFUO AM spent $1.5 million in 2007. Yet the station only broadcasted Focus on the Family, Issues Etc. and a handful of home grown programs.

In the post entitled "These Figures Just Don't Add Up" we pointed out that the costs associated with running KFUO AM were outrageously high. And they are! Look again at the distributed costs.

The question everyone needs to be asking is, "Why on earth does it cost so much money to produce and broadcast these shows"?

When you look back at the AM Station's finances two particular expense lines jump out at you because when combined they exceed the station's entire revenue for the year. They are Personnel Costs ($779,131) and a line called Development Effort ($180,802). The combined total of these two expense lines was $959,993 but the total revenue for the station was only $931,223. So, before a single office supply was purchased and before a single phone bill was paid, with ONLY TWO expense lines, "Personnel Costs" and "Development Effort" KFUO AM was already in the hole $28,710.

Let's look deeper at the Personnel Costs associated with KFUO AM in order to provide greater context.

Here is the AM Station's Employee count for 2007:

4 full-time Announcers
1 full-time Producer
1 full-time Operations Manager
1 half-time Engineer
1 half-time Receptionist
1 half-time LCMS Foundation Development Director
1 half-time General Manager and Broadcast Director
1 half-time Administrative Assistant

The Total Reported Annual Price Tag for this Team was $779,131

Let's estimate some salaries and benefits for this crew. For this excersise we'll leave out the half-time General Manager and half-time LCMS Foundation Development Director.

Here are some good ball park salary figures.

$65,000 + Benefits for Announcers - Total Cost per Announcer being $76,700 per year
$45,000 + Benefits for the Producer - Total Cost for the Producer being $53,100 per year
$75,000 + Benefits for the Operations Manager - Total Cost for the Op. Manager being $88,100 per year
$20,000 for the half-time Engineer
$12,000 for the half-time Receptionist
$15,000 for the half-time Administrative Assistant

Let's now plug in some of these numbers and get a Sub-Total for these employees.

$306,800 per year for Announcers
$ 53,100 per year for the Producer
$ 88,500 per year for the Operations Manager
$ 20,000 per year for the half-time Engineer
$ 12,000 per year for the half-time Receptionist
$ 15,000 per year for the half-time Administrative Assistant
----
$495,400 Sub-Total

That still leaves $283,731 that needs to be divided between one half-time General Manager and one half-time LCMS Foundation Development Director.

If we divide this amount 50-50 then each of them made $141,865 per year working ONLY half-time for KFUO AM. That's a sweet deal!

This is the point where we start asking about that second line item in the expenses, the one labeled "Development Effort".

If you look closely at the station's expenses you will see that both the AM and FM station were charged $180,802 EACH for 'Development Effort' for a combined total of $361,604.

That is the money that KFUO agreed to pay the LCMS Foundation for their fund-raising activities. It should also be noted that the management of KFUO agreed to pay this amount whether or not the LCMS Foundation met their fundraising targets. The fund-raising target for that year was $1,260,000 which meant that KFUO would get to keep $900,000 of the money raised while the LCMS foundation pocketed $360,000.

This now leads us to ask an important follow up question.

Who was paying the salary of the LCMS Foundation Director that worked at KFUO?

If KFUO was paying the salary then KFUO paid even more than $360,000 for 'development efforts' to the LCMS Foundation because KFUO was paying the salary of a Foundation employee.

BUT, if the LCMS Foundation was paying the salary for their Development Director then that means the General Manager of the station was being paid roughly $283,731 a year for being the half-time General Manager of KFUO AM. President Kieschnick doesn't even make that much.

Here's Some further perspective regarding this $283,731.

President Kieschnick, in his letter to the Wall Street Journal, stated that Issues Etc. was responsible for $250,000 or 40% of the losses for KFUO AM.

Yet our calculations show that this questionable $283,731 is equal to 47% of the losses for KFUO AM.

From the moment we first saw the financials for KFUO the Personnel Costs appeared to be inappropriately high. Something doesn't add up and someone needs to take a hard look at the details of these expenses and give a comprehensive accounting of how much each individual member of the KFUO AM team was being paid so that we can make sense of these expenses.

After taking the time to scrutinize these figures, one thing is ABSOLUTELY CERTAIN. Neither Todd Wilken NOR Jeff Schwarz had any say in the decisions pertaining to employee salaries and expenses. Nor were they the ones who struck the deal with the LCMS Foundation whereby KFUO agreed to pay 40% of all the monies raised to the LF.

A careful examination of the financial details of KFUO irrefutably demonstrates that the MANAGEMENT TEAM of KFUO was clearly responsible for the station's financial problems not Issues Etc.

This story is still developing.

Comments

[Bob]

Yes. Management.

Wasn't there another post on here or somewhere, that the station managers were given a vote of "No Confidence." Not sure what it means in context, but there it is.

[Susan]

Is there anyway to force the Synod to produce thier books of records so they can be independently audited by the members of the synod? And I mean the actual accounting records not the reports.

[FreeSpeechLutheran]

I agree. Thanks for the constant clarity.

[FreeSpeechLutheran]

Not to mention doing a lot of the work here, and posting Mollie's new blog !

[Concerned Lutheran]

Where are the external auditors? Where are the internal auditors, although their concerns may have been dismissed by management?

Athanasius has done an outstanding job in analyzing the situation at the KFUO level and overall LCMS level. At the KFUO level, it is essential the "Gifts and Grants" revenue line on the AM & FM sides be confirmed by auditors WITH THE DONORS. It breaks basic accounting guidance to misapply Issues, Etc. restricted gifts to LCMS or to any other KFUO program other than Issues, Etc.

Although many questions need to be answered by KFUO management and LCMS management relating to the finances, the overall decision to cancel Issues, Etc. when it purely was preaching the Word to the nations while only comprising a miniscule amount of LCMS expenses must be reversed.