Here’s More….

This story began over a month ago with information that the December layoffs at WHQR were not a result of the current economic situation…but instead, a result of internal problems.

I began looking into this by calling and emailing the Board at WHQR for a copy of their 2008 financial report and their by-laws. It was hard to reach anyone. Then one afternoon, a few days later, Board member Rob Zapple was at WECT’s door with copies.

He reiterated the stress that the economic downturn had placed them under…how they had forecasted for major growth…and the economy had undercut that dream. He said reducing staff – a large portion of expenses – was a difficult decision to make, but it was necessary in order to reduce their deficit. He asked me why I was inquiring and what my story was about. At that time, I didn’t completely know. I would need time to study their financial data and learn more about how WHQR operates…and how they are funded.

Soon after, I received a tip to look into their plans to go digital..specifically, about the purchase and installation of a new transmitter. I was told the grant money for the transmitter was received last spring…but the station had yet to go digital…why?

In order to research their grant, I filed a Freedom of Information Act request with the National Telecommunications and Information Administration. The NTIA “assists public and non-profit entities in effectively using telecommunications and information technologies to better provide public services and advance other national goals. In addition, the office is administering programs that are helping the nation’s transition to digital television.” They also offer PTFP grants (Public Telecommunications Facilities Program) which is what WHQR received to purchase their digital equipment.

That application was received by the NTIA on October 31st, 2006 with the Federal Share of Cost: $110,250 and the Recipient Share of Cost: $36,750.

Also included in the files are Quarterly Reports that WHQR sent to their grant officers, updating them on their progress. The reports frequently cite problems with the transmission building as the cause for delay. Their analog transmitter (what they currently broadcast from) is in WECT’s transmission building. They wanted to install their digital transmitter at the same time that WECT was going HD. As I understand it, there was indeed room for WHQR to put their transmitter, but WECT needed to focus its attention on our own conversion because, unlike radio, going HD was mandatory for television…and Wilmington was the first city to do so. Our parent company, Raycom Media does not charge WHQR for use of its facility.

I made frequent calls to WHQR’s grant specialists asking for more information and clarification on the $110,250 being withdrawn by WHQR last spring…where was that money, where is the transmitter was? I called again on February 21st and spoke to grant specialist, Husai Rahman. Husai said that they had received an update from WHQR….

“Dear Ms. Rahman,

Pursuant to the conversation on February 19, 2009 pertaining to the aforementioned grant and the holding of the funds in an interest-bearing account, the following actions will be completed…Funds of $93,960.11 will be expended for the HD transmitter equipment within 30 days…the interest earned on the unexpended Federal funds will be returned to the Federal Government…Sincerely, J. Griff Weld, Treasurer WHQR…”

In the writing of the grant…there is a stipulation that says that if the money is not used within 30 days or the withdrawal…the money must be put into an interest-bearing account. At this point, I asked grant officials if they could confirm that this was the case. Did WHQR submit proof of deposit? What kind of account was it in? Could they pull from that account? What bank? Where is the paper work that demonstrates this? Here is the exact response I got:

Ms. Roman: A grantee’s bank documents would not be records NTIA or the Grants Officer would typically request or maintain.

So, no…there is no paper trail…following the money trail. They also told me that:

The recipient is not required to submit an itemized list of their expenses for each withdrawal.

WHQR withdrew the grant funds, but were not required to say what they spent it on.

On May 21st 2008 they had the full amount of the grant in their control. In the April 1st – June 30 2008 Quarterly Performance Report they say, “our HD Transmitter is currently being held in storage here in Wilmington pending the completion of our Transmitter site colleagues WECT TV installation of their HD equipment….We will complete installation as soon as the space is cleared and available (expected August 15th).

After that they report delays and filed for project completion extensions. No where on the grant documentation does WHQR say that the transmitter had been returned (or why)…or if the transmitter never actually made it to Wilmington….

Which would lead to hypothesis, based on these records….. that the transmitter is here…in Wilmington…sitting on the shelf waiting to be plugged in….

I made another FOIA request to the grant officials asking if there was any paperwork that documented that the transmitter was NOT in Wilmington (note: they have just told WECT that the transmitter will be arriving this week…so it obviously was not in storage the whole time…) or what had happened to the money that they later said had been in an account the whole time. They never responded to that request, although, I know from a Delivery Receipt that it was received.

During this investigation, I had contacted Board President Anup Sharma, Treasurer Griff Weld and Finance Manager Barbara Bush to request an interview about their financial matters. There was no response to my first round of emails and calls.

I did finally get a reply from Barbara Bush, who said that I should talk to Anup Sharma. After a few calls to Mr.Sharma, he told me that they were upset over the “sensationalism” of earlier reports (Star News and Wilmington Business Journal had both run stories). He said that he would not discuss financial matters, especially before their pledge drive and noted that Board members were very busy planning. I said that I thought a discussion of their financial situation would be important before their pledge drive. He reiterated that it simply would not be possible due to the many tasks they had undertaken to organize the drive.

I then called Griff Weld. Griff also said that I should refer to Anup Sharma. He repeated that they were indeed very busy. I said I would keep the interview to a half hour. We had a very similar dialogue about discussing money matters right before the pledge drive. His response was that the station would be hesitant to do so because it might affect contributions to the drive.

Because of their financial situation (a large deficit and questions surrounding the use of grant money) there did seem to be a need to bring these matters to a clear…to reassure the public about both the obstacles they had faced and also…what they were doing to get back on their feet. It seemed important for the public to know these answers before being called upon to make donations. It also seemed important for the station to take the opportunity to address the public that supports them.

I sent the following letter with both a Read and Delivery Receipt to be sure that my request was clear:

From: Roman, Casey

Sent: Thursday, March 05, 2009 3:11 PM

Subject: Interview

March 5, 2009

Mr. Anup Sharma,

On Wednesday March 4th I requested an interview with WHQR Board Treasurer Griff Weld, Finance Director Barbara Bush and yourself.

Board member Rob Zapple provided us with the financial statements from 2008 along with his explanation as to the challenges facing WHQR. Based upon those documents and our conversation, I feel now is a critical time to address the financial concerns surrounding your organization. In airing my report this month, I think it would behoove the board to be available for comment.

WECT will proceed with presenting our research thus far. If these Board members will not make themselves available for comment until after the Pledge Drive, I will report the situation as such.

If you are able to find time to address our questions, I hope that we can meet early next week.

Casey Roman

WECT Investigative Reporter

 

 

I never received a response to that letter. Last night in my report, we did say that the Board was not available for comment before or during the pledge drive when this investigation was taking place. Just last week I sent an email to those individuals again…inquiring about an update on the transmitter…I again received conformation that that letter had been both delivery and read. Again, there was no response. I can’t tell the Board’s side of the story if they will not make themselves available to do so.

John Milligan, the station’s former General Manager who was laid off in December did agree to go on the record. I think it is important to note that Milligan did not pursue an interview with us. He accepted my invitation. John spoke at length about the past, present and future of WHQR. He acknowledged the use of the government’s grant money to back up the line of credit at the bank.

John Milligan was a major advocate of the station going digital. Digital transmission for radio is still optional (it was mandatory for TV). John said it was the future of radio. Even though multi-channel broadcasts existed, at the time, in only large markets (where larger audiences and larger sums of underwriting can pay for more programming..)…John said it was part of the vision of the station and the inevitable horizon for radio. I’m told that when they formally started pursuing this vision…with the grant….digital radios weren’t even available for sale in Wilmington. I questioned John about undertaking such an expensive and large project when it didn’t seem that it was even in demand here….he reiterated that it was the future…and WHQR would be in front of the movement.

The conversation with John touched upon MANY different topics. For the purposes of this entry…I will focus on our conversation about the use of the government’s grant money. Here is more from my interview with John Milligan…

In regards to the decision to use grant money for operating expenses…

He says, “That decision was made by the Finance and Audit committee.” He said the station was running a line of credit with local bankers and, “That money went against a line of credit at the bank. It paid off that amount of credit completely.” He then went on to explain that the line of credit was for, “operating expenses, paying programming fees, things like that.”

In regards to the Board understanding that this was not stipulated as an allowable use of grant money….

He agreed and said, “It violates the purposes of the grant.” He also said that they were in fact allowed to keep that money in an account (see above about the “interest-bearing” account) at which point I asked about whether or not that account could back up expenses and whether or not it was interest-bearing…he said, “I doubt it was in an interest-bearing account. It was just in one of those general accounts sitting at the bank.”

All of this…I tried to confirm with the grant officials. DID this violate the grant? How much “grey” area do they allow? The grant says its for EQUIPMENT….what are the consequences for using it elsewhere? The grant official read me the letter that I received from the Freedom of Information Act request…that basically said, “here is the information you have requested”…but he would not comment specifically about the rules of WHQR’s grant.

Yes…frustrating.

John also said that despite being the General Manager…there was no consultation with him on important personnel and financial matters regarding the station.

Let me switch now to addressing the conversation I had with their auditor, Chuck Earney.

Although the Board cites the economy as the reason for their struggle…underwriting (advertising) for WHQR has increased over the years. What’s also increased…is expenses.

To compare:

                        2001                             2005                  2008 (unaudited)

Revenue    $886,010                  $1,035,165                  $1,150,157

vs.

Expenses $864,322                      $1,155,380                       $1,520,782

Earney said that they hired more staff to bring in more underwriting ($$). The marginal benefit (the extra dollars brought in per new staff member) were not high enough to justify the amount of money being brought in. As a result, they ended up in the red.

Earney showed on their financial statements where the grant money was recorded…under “temporarily restricted funds.” He also said that he was not aware of the specific stipulations of the grant and that the rules surrounding the interest-bearing account were unusual.  Earney says that this looks like a situation where the “legal responsibility gets mixed up with the cash flow.” 

Meaning…organizations take the money the government gives them…drop it into their bank account and it ends up getting used “in the mix” of their cash flow…with the underlining assumption that they will still fulfill the contract. He says in his “seasoned opinion, delivering the equipment, putting it in place, solves any problem.” He said WHQR may get a “slap on the wrist” but the most important thing is staying afloat and “focusing on the mission”…getting the equipment installed.

Again, I tried to confirm whether this was indeed a major violation…or…instead “slap on the wrist”…but grant officials would not comment specifically. They would only issue a statement that they….

“carefully review and audit every grant to help eliminate waste, fraud and abuse of public funds.”

Board member Jeff Hovis sent an email to the station last night saying that the transmitter would arrive by Thursday of this week. They told WECT that they would like to move forward with installing it as soon as possible. Again, note that their transmitter is in a Raycom/Brunswick Tower owned building (Raycom is our parent company). Because the contract between WHQR and Brunswick Tower hasn’t been renewed in a few years…the two will have to negotiate a new contract before installation can proceed. I do not know if that will effect the revised construction completion date of June 2009 that was last reported to grant officials.

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