Questions, Answers, and Analysis

On the eve of the Ascension of our Lord, Mr. David Strand, executive director of the LCMS Board for Communication Services, released an 8-page Q&A document dealing with questions arising from the cancellation of Issues, Etc. and the terminations of Pr. Todd Wilken and Mr. Jeff Schwarz.  This document was produced by Mr. Strand at the request of the Board for Communication Services.  We offer the original document together with our analysis.

Why was “Issues, Etc.” discontinued?

The program was discontinued because of fiscal realities and the acute need to cut
expenses at KFUO-AM and move toward operating the station within the budget
provided by the Synod. Since 2001, the accumulated deficits of the KFUO-AM radio
ministry exceed $3.5 million, shortfalls the Synod must pay with unbudgeted funds. In
the last fiscal year, 2006-07, the station’s deficit was $620,000 beyond the budget
allowed for the ministry. The ability of the Synod—which currently is dealing with its
own serious financial challenges—to cover such deficits now and in the near future is
extremely limited.

Though “Issues, Etc.” took up only 18 percent of KFUO-AM’s programming week, its
expenses after revenues in the last fiscal year, conservatively speaking, were $250,000—
more than 40 percent of the station’s total shortfall, or need for subsidy.

Analysis:  Mr. Strand claims here that the sole reason for the cancellation was financial and that Issues, Etc. was a heavy burden to KFUO-AM, which has lost $3.5 million dollars since 2001.  Remember that KFUO-AM is considered a "mission and ministry" of the LCMS, so that cuts reflect the LCMS's priorities in "mission and ministry."  Furthermore, this answer makes Issues, Etc. responsible for the financial situation of KFUO-AM, whereas the actual financials make a case for station mismanagement.

Remember that the LCMS paid out $2.1 million to Ablaze! consultants in 2007.

Remember the salary figures for KFUO:  KFUO-FM employs 18 people to the tune of $1.07 million; KFUO-AM employs 8 people at $780,000.

Remember that KFUO-FM is a commercial station that is supposed to support the "mission and ministry" of KFUO-AM.

Nonetheless, couldn’t you have cancelled some other show?

There were no other programs to cancel that would have resulted in a meaningful step
toward operating within the budget and curtailing the mounting deficits. Every other
program on the KFUO-AM schedule is hosted either by a volunteer or by people who
have extensive other duties at the station. Discontinuing one of these shows would have
resulted in minimal savings. “Issues,” on the other hand, had two dedicated, full-time
staffers devoted exclusively to “Issues.” This accounts, in part, for the unusually high
costs, compared with the other shows, of producing “Issues.”

Analysis:  In effect this is saying that the LCMS prefers to have its "mission and ministry" staffed by volunteers and people who have other extensive duties at the station and can't afford to do a show that requires extensive preparation and the expertise of two full-time dedicated staffers.  Of course this accounts for the comparatively high costs of the show, but are those costs "unusually high"?  What are unusually high are KFUO's excessive overhead costs, salaries, and the 40% development fee charged by the LCMS Foundation.

You get what you pay for, and Mr. Strand is saying that the LCMS is no longer willing or able to pay for quality professional programming on KFUO-AM.

How can one know your financial and accounting numbers are correct?

The numbers are based on the audited financial statements of the Synod and on rational
assumptions used in the internal accounting of KFUO-AM—assumptions described by
the Synod’s Treasurer as “accurate,” “fair,” and “very reasonable.”

Analysis:  While we certainly respect the synodical Treasurer's opinion that the numbers are "accurate," "fair," and "very reasonable," we aren't really sure what question the Treasurer is answering here.  This answer is essentially circular and says, "They are correct because we say so and everyone we talked to about it agrees with us."

Given the extreme state of the Synod's finances and its practice of borrowing from itself against general funds, an independent, outside audit that is not under the direction of synodical officials would not be out of order.

Why were the “Issues” host and producer made responsible for AM’s $3.5 million
deficit since 2001? Why wasn’t management blamed?

The host and producer were not blamed for the overall shortfall. All parts of KFUO-AM
have contributed to the aggregate financial problem and, despite efforts to increase
revenue and decrease expenses, the deficits continue. Responsibility for the $3.5 million
accumulated deficit over the past seven years resides with station management and the
LCMS Board for Communication Services (BCS) throughout that period. In fairness to
those overseeing the station, however, it should be noted that in recent years, while the
station has attempted to raise more revenue and operate more efficiently, it has faced
steep increases in its fair share of “G&A” (general and administrative overhead for
Concordia Technologies, General Services, Human Resources, and Accounting) and
fundraising costs allocated by the Synod.

Analysis:  The host and producer of Issues, Etc. were not blamed but they, and their listeners, suffered the consequences of mismanagement that has been going on since 2001.  The final sentence admits that the synodical drain on its own "mission and ministry" has crippled it with high "G&A" and the 40% development fee charged by LCMS Foundation.  In other words, the Synod itself is to blame for a considerable part of KFUO's financial woes.

Why not make cuts at top-level, higher-paid management at KFUO?

KFUO operates with a lean management structure. Like most radio ministries, there are
considerable regulatory, technical, and administrative tasks that must be performed.
Many of these tasks require expertise and experience specific to the radio industry.

Analysis:  This "lean management structure" employs 26 people to run a radio station.  It has lost $3.5 million since 2001.  It received a vote of "no confidence" from the Board for Communications Services.  Under its watch, KFUO received an "F" rating from Ministry Watch, leading watchdog agency.  The current management has clearly demonstrated its lack of expertise and experience specific to the radio industry, particularly as a "mission and ministry" of the synod.  Based on this track record, changes at the top should have been made long ago.

Besides discontinuing “Issues,” what has KFUO-AM management and the BCS done to
try to improve the financial situation at the station?

Various-cost reduction and revenue-increasing efforts have been undertaken in earnest by
management and its governing board in recent years. These efforts include the
completion of a consultant-led, comprehensive operational audit; appointment of a
financial oversight committee; contracting of a Christian radio fund-raising consultant;
completion of a campaign-readiness study; appointment of a full-time LCMS Foundation
executive as KFUO development director; church-wide promotion of KFUO access via
the Internet; stepped-up gift solicitation; exploration of potential operating partners; and
major fund-raising initiatives and events. Other efforts made on the FM side, for the
good of all of KFUO, include the elimination of three staff jobs in 2007, the automation
of overnight and significant portions of weekend programming, the revision of sales-staff
compensation to incentivize performance, and increased on-air advertising rates.

Analysis:  The Synod's answer is to hire more consultants.  There appears to be a pattern developing here.

The answer does not state how long these measures have been in place and what their result was.  The appointment of a full-time LCMS Foundation executive as the KFUO development director is ironic since the Foundation keeps 40 cents of every dollar it raises.  It's good to hear that three staff positions were eliminated in 2007.  Does that mean a cut from 21 to 18, or from 18 to 15?  Why isn't KFUO-FM automated during the day as it is at night and on the weekends?  It is simply a classical music station.  How many people does it take to play Mozart?  It's good to hear that the sales-staff is presumably on commission to "incentivize" performance, and the station is charging more for advertising time.  How long have these measures been in effect and how effective have they been?

Why was this particular cut made now, before the May Board of Directors' meeting in which an ad hoc KFUO committee was supposed to give a report on programming and the future of the station?  Why not wait until the end of the fiscal year to make necessary adjustments?

The real question behind this question is what is the synodical administration doing to improve the financial situation of the Synod?  This is much like governments cutting key programs such as education while refusing to scale back their own bureaucracies.

Why can’t the Synod transfer money from other ministries or activities to increase
KFUO’s budget?

There are many important ministry priorities competing for finite Synod funds. It is the
role of the Synod’s Board of Directors to decide how best to allocate dollars on behalf of
all 6,044 congregations and the 2.4 million people in these congregations. KFUO is a
media outreach ministry, one of a myriad of outreach programs of the church. Its
managers must work with the dollars budgeted to it and any gifts the radio station can
acquire on its own.

Analysis:  The question is wrongly put.  Of course the synod's budget allocates a certain amount of funds for each "mission and ministry" of the Synod.  The real questions are these:  Why are the Synod's overhead and development costs so high as to undermine its outreach ministries?  Why is so much money paid out to consulting firms?

(to be continued)

Comments

[Adam E.]

Your analysis is spot on.

We must not tolerate selfishness, dishonesty or ineptitude in our Synodical leadership.

[FreeSpeechLutheran]

I agree with Adam. I also like the last two questions you pose.

"The real questions are these: Why are the Synod's overhead and development costs so high as to undermine its outreach ministries? Why is so much money paid out to consulting firms?"

[Nancy K]

Why is so much money paid out to consulting firms? Easy! If “The prophets prophesy falsely, and the priests rule by their own power;(Jeremiah 5:31);and you don't want to do you own dirty work,then you might need a few slick consulting firms to tell you how to pull the wool over the sheep's eyes so you can blame it all on them when it goes wrong.