(FOX40.COM) — Sacramento State will be taking a larger role in the operations of Capital Public Radio after an audit, that was completed this summer, revealed serious financial and management issues within the local radio station.

According to a news release from the university, former President Robert S. Nelsen called for the audit of the long-standing public radio station in 2022 as Sacramento State’s financial team discovered discrepancies in its financial statements with CapRadio.

“I want to thank President Nelsen for requesting the audit last year, adding Sac State’s chief financial officer to the CapRadio board, and for committing the resources necessary to stabilize the station’s operations,” said current Sacramento State President Luke Wood.

Cap Radio’s Outstanding Loan Repayment to Sacramento State

The audit conducted by The California State University Office of the Chancellor found that on March 1, 2021, the university secured an $8 million loan with a 1.49% interest rate over seven years to assist CPR in completing improvements on a new location in downtown Sacramento.

CPR spent all $8 million between 2021 and 2022 and began repaying Sacramento State in 2021.

On Nov. 1, 2021, CapRadio made its final recorded payment to the university and as of July 2023 is $1.8 million behind on its payments to Sac State.

In order to remain current on the loan, Sac State has continued making payments to the external financing source by using state-provided funding.

CapRadio planned to use this downtown location as its new headquarters and vacate its existing location on the Sacramento State campus.

Unpaid Rent at Sacramento State Location

As the radio station planned to move its operations into its new downtown location, the university and CapRadio terminated their 30-year agreement with the university that began in May 2004 for the on-campus location.

The university planned for CPR to leave the space in September 2022 and for the campus to then begin occupying the building

Construction and other delays led CPR to not only remain at their on-campus location but to also have not made any payments for usage of the space since the termination of the lease agreement in September 2022.

Secured Loans and Agreements Without Approval by Cap Radio Board

Between August 2022 and February 2023 Cap Radio entered into six five-year loans for studio equipment and furniture totaling $1.38 million with interest rates between 8.14% and 13.91%

The auditors found that finance committee minutes only showed one of the loans totaling $245,524 was approved and the other five loans were signed by the executive vice president and general manager, who did not have authority from the board.

The documentation for the agreements were not signed by the third-party vendors so they were not fully executed.

Not Satisfying Educational Mission

According to the audit, CapRadio gained its license in 1965 as a student-operated radio station but has since grown to have limited student engagement within its operations.

“Based on discussions with campus and CPR management, we noted that CPR did not have
hands‐on student involvement in staffing, internships, or programming and therefore did not
appear to provide any instructionally related activities for the benefit of Sacramento State
students,” the audit reads.

How Sacramento State Plans to Move Forward with Cap Radio

While Sacramento State holds the broadcast license for CapRadio they said they plan to oversee the financial and operational means of the station without infringing on its independent reporting.

As part of the mission to support CapRadio and rectify its troubles, the university will be moving all radio operational management under its supervision.

The university plans to put in place a permanent general manager, several upper management personnel and a new chief content officer who will remain as an auxiliary employee.

The station’s accounting department will be overseen and managed by Sacramento State along with endowments and finances.

Sac State will also require a rotating auditing firm to evaluate CapRadio on a biennial basis, an analysis of the causes of CapRadio’s operational and financial troubles and that CapRadio adhere to its educational mission to benefit Sacramento State Students.

“One thing is abundantly clear: We have real and immediate work to do to ensure CapRadio’s financial controls and operational processes are disciplined, sound, and transparent going forward,” Woods said. “The financial implications of CapRadio’s mismanagement have significant consequences for Sacramento State, but we will make it through.”

Woods has already completed one step of the university’s plans to rebuild CapRadio, by having the board appoint Tom Karlo, a 47-year veteran of public media, as interim general manager.

“CapRadio has been part of the fabric of Sacramento and northern California for decades,” Wood said. It is important to us to maintain the health and integrity of such a valuable and beloved media institution.”