Crisis seen in WAMU spending

Originally published in Current, Oct. 20, 2003
By Dan Odenwald

When WAMU Executive Director Susan Clampitt went on the Kojo Nnamdi Show Oct. 9 to ask for pledges, she probably didn't expect a call like the one she received from Forbes Maner, former president of the station's community advisory council.

Maner voiced a growing concern among former and present employees and volunteers that the ordinarily robust public radio station was overspending its way into financial crisis.

Clampitt was making the case that WAMU's finances are healthy, that it's focused on the bottom line and that she has a "fire in her belly" for good management.

That didn't ring true to Maner, a corporate attorney, who called the live call-in pledge break to discuss some financial trends he's noticed since Clampitt joined the station in 2000.

According to WAMU's audited financial statements, Maner said, expenditures for management and fundraising between 2000 and 2002 have both increased about 110 percent. By fiscal 2002, those expenses exceeded 45 percent of station income, he said.

In contrast, expenses for programming, production and broadcasting together rose only 29 percent.

In each of the years under Clampitt's leadership, Maner continued, the station suffered substantial losses, cutting deeply into a $4 million to $5 million cash reserve she inherited. In 2000, the station lost $153,000. In 2001, losses reached $878,000. And in 2002, it was $1.4 million. In 2003, Maner has learned, losses will amount to about $1.5 million--virtually wiping out any rainy day funds WAMU once had, he said.

While revenues from contributions and corporate underwriting increased 31 percent during the same period, expenses grew far more quickly.

"What are your plans for bringing WAMU back to financial health?" Maner asked Clampitt on the air. "And how do you plan to control spending that appears to be out of hand?"

"Our spending is not out of hand," Clampitt responded. "It's been a difficult time for many, many nonprofit organizations. We've had a slip in the economy, but we're doing very well."
With that, Maner's line went dead, he told Current in an interview the next day. "I don't understand how she can say the finances are good, given the performance of the last two years," he said. "There may be an explanation for that, but the station needs to address that rather than deny it's a problem."

The problem may be substantial. Several sources close to WAMU told Current that Clampitt approached NPR President Kevin Klose this fall to explore the possibility of reducing NPR fees for the station because it couldn't afford them.

NPR waives fees only under extraordinary circumstances. WNYC, for example, won a reprieve after the 9/11 terrorist attacks. An NPR spokeswoman declined to discuss whether the station had asked for a waiver.

WAMU denies its leaders spoke to Klose about reducing its NPR fees or extending its payment deadlines, according to spokeswoman Ruth Thompson.

But documents obtained by Current indicate that WAMU did indeed ask for a break from the network, though it's unclear whether it was granted. Clampitt declined to be interviewed for this article.

"If this were a private company, and it had financials like this, the c.e.o. would have been booted out by its stockholders," said one former employee, who left the station voluntarily and is forbidden from speaking to the press by a confidentiality agreement.

WAMU's licensee, American University, concedes that "expenditures are out of line in terms of overspending," said David Taylor, chief of staff for AU President Benjamin Ladner.

But Taylor says the spending includes strategic investment in the station's future. The plan includes increased spending on administrative reorganization, payment of increased programming fees to NPR, better direct mail and better communications through a revamped website. Sources also said the station staff received a much-deserved raise when Clampitt joined the station three years ago.

While revenues and membership have risen, overall income has not increased as quickly as projected, according to Thompson. Nor has it kept pace with the costs of the station's increased investments, she adds.

The bad economy is to blame, Thompson said, and the station is seeking to balance its spending with more realistic predictions of income. In a worst-case scenario, WAMU could always lean on American University for support, Taylor added.

"It is no secret that public radio and television stations throughout the country have been significantly affected by the nation's economic woes over the past few years," WAMU told Current in a statement. "Even as it has made dramatic increases in ratings, listening audience and industry awards, its operating costs have exceeded revenues during this period."

The station's cash reserves are down to virtually nothing from a previous high of $4 million to $5 million, according to Maner. But Thompson and Taylor said cash reserves aren't a good test of the station's fiscal health. That money was designed to be spent, they said.

Booming success, booming spending

Indeed, Clampitt is continuing to build WAMU into a news-talk station worthy of the nation's capital and its political junkies. She's invested heavily in beefing up the local news staff and providing more talk programming in the afternoons, which comes at greater expense than the bluegrass music it replaced in a 2001 schedule shift.

Even WAMU's most vocal critics don't deny the unprecedented growth in the station's popularity. It's the top-rated news station in the Washington market, and its audience has grown by 38 percent over the past three years--an all-time high, according to the station. It also ranks among the top five public radio stations nationwide in total listeners, WAMU says.

These statistics don't comfort Maner and Victoria Zuckerman, another former member of the station's community council. "It's such a fine station, and it's distressing to me to see it in such financial trouble," Maner said. He and Zuckerman met with Ladner last month to discuss some of their concerns:

• In fiscal 2000, the former lay leaders say they told Ladner, it cost $16,590 a day to run the station. By 2002, that cost had jumped to $24,860, a nearly 50 percent increase, according to their analysis of the station's financial reports.
• In fiscal 2000, management and fundraising costs as a percentage of contributions and corporate underwriting were 28 percent. By 2002, it was more than 45 percent.
• Since fiscal 1999, the station's net assets have declined from $6.9 million to $4.4 million, a drop of 35 percent, largely a result of spending cash reserves.

The numbers were so disturbing that the regional Combined Federal Campaign, which seeks donations from federal employees on behalf of many charities, contacted WAMU about its high fundraising costs, according to sources. In general, a charity is eligible for the CFC if it keeps its fundraising costs below 25 percent, according to the CFC.

Ultimately the CFC kept WAMU as a beneficiary of its campaign. Thompson said fundraising costs were below the acceptable level but appeared to be excessive because of the way the university reports the figures.

Sources also said station management added to expenses by hiring a call center instead of using volunteers to answer phones during pledge drives. The station formerly invited hundreds of volunteers into the station during pledge, said Mike Byrnes, WAMU director of engineering from 1983 to 2000, who now works at WETA. But that link to the community vaporized after the volunteers were canned, he added.

Though WAMU uses fewer volunteers than it once did, Thompson said, the station continues to use some to answer phones during pledge, relying on the call center only to handle overflow calls. In a further show of its commitment to volunteers, WAMU also hired its first full-time volunteer coordinator this year, she added.

AU: part of the problem?

Multiple sources maintain that the university is partly to blame for the station's economic troubles. Rather than subsidizing station operations, as many colleges do, AU requires WAMU to pay the university 16 percent of its annual revenue for back-office and administrative support.

Station insiders say that figure far exceeds the real costs of university-provided services, including what the station owes the university for such things as legal services, building space, maintenance and handling of payroll and benefits.

Zuckerman and others claim WAMU listeners are being tricked into supporting a source of profits for the university.

One insider argues it's impossible for AU to measure the exact dollar amount the station owes the university. Even if it could, the source asks, shouldn't that be a fixed cost rather than a percentage of revenues that vary from year to year?

Far from being an excessive charge by AU, 16 percent is too low, Taylor said. The university has always spent more on WAMU than it has paid back, he said. During the station's early years, the university regularly swallowed WAMU's financial losses.

Sources say the university's database policies also have contributed to the station's high costs. Since the university insists on using its own financial software rather than software designed for public broadcasting fundraising, it's like trying to fit a square peg into a circular hole, said one former employee.

When the university took charge of the database, it couldn't get the mail out on time or record how on-air donors behaved toward certain programming, staff sources said. The system was littered with bugs, resulting in wrong addresses and incorrect donation amounts, according to a former employee. When station management complained to the university, the objections were ignored.

Taylor said integrating WAMU's membership database into American's fundraising shop was part of a larger project at the university to get "computers to talk to one another." Despite objections that it unleashed havoc on WAMU's donor program, Taylor said it was important for the university to consolidate its fundraising activities.

Some donors aren't happy with the unintended consequences of the systems integration, Zuckerman reports. Several donors, including herself, have received unwanted solicitations from the university. As a member of WAMU, she has no interest in becoming an American University booster.

For her part, Thompson said the university doesn't use the WAMU donor database for soliciting contributions. If a person appears on a different American University list, it's conceivable that he or she might be contacted by other divisions of the university, she added.

Posted Oct. 20, 2003
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