National Public Radio yesterday announced that its deficit now stands at $6.5 million as auditors reporting on the first seven months of the current fiscal year warned that NPR may have to shut down.
Myron Jones, chairman of the NPR board, disputed the gloomy forecast at a press conference, saying, "We are wounded, if you will, but we are not mortally wounded. We will survive."
A further report forecasting the results for the rest of fiscal '83 is due next week.
The audit, conducted by Coopers & Lybrand, reported a net loss of $4.5 million for the period from Oct. 1, 1982 (the beginning of the fiscal year) to April 30, l983. The audit disclosed a working capital deficit of $6.5 million and an overall deficit of $1.2 million.
Said Jerry Strong, a partner in the auditing firm, "These factors, among others, indicate that the National Public Radio Inc. and subsidiary may be unable to continue in existence."
The audit team emphasized that NPR owes a number of creditors, as well as the federal government, money which, "if demanded, could not be presently satisfied by NPR."
Ronald Bornstein, acting chief officer of NPR, sounded much more optimistic: "The task ahead will not be easy but the task ahead is well worth it."
The most serious abuse disclosed by the audit was the deliberate use of federal and state withholding taxes, totaling $850,000, to fund the deficit. Jones said "the decision was made to defer taxes and wait for the cash flow to pick up, so in effect it was a holding over. It is not a good decision. The government frowns on it."
No one would say if any individual would be held responsible for that and other accounting irregularities, but Jones said "questions of members of management" would be taken up at next week's full board meeting.
Frank Mankiewicz, the former president of NPR, said he was first told of the witholding-tax abuses on June 2.
Jones also described a $9,000 salary advance Mankiewicz had received as an "interest-free loan." Because of a salary freeze, the NPR board gave Mankiewicz an advance in lieu of a raise that they had approved for him. When salary increases went into effect in January, Mankiewicz began to pay back the advance.
A series of irregularities and errors in the budgeting system, mainly stemming from undisciplined or nonexistent internal accounting controls, were cited. Strong said the "inability of the accounting system to produce timely and accurate reports" went beyond the seven-month period under study. He cited late billing of $320,000 to satellite customers.
The lack of controls, said officials, led to faulty recording of expenses, such as $800,000 for "travel and entertainment." Further, "American Express card usage was poorly monitored."
Jones has ordered all cards returned.
Until a full financial picture is available, said Bornstein, no exact measures for retiring the deficit or future fundraising can be implemented.
Jones said, "We know we need loans and grants, know we need backup from CPB Corporation for Public Broadcasting , we need an accurate and sound financial system."
In an effort to solve the financial crisis, which officials said was caused by a reduction in federal funds and declining general revenues, NPR has cut its work force by 154 people, reduced its budget from $26 million to $17 million, eliminated the news portions of the NPR Plus package and The Sunday Show, whittled the arts and performance staff to a skeleton crew and targeted popular programs such as "Jazz Alive" for elimination after Sept. 30. Officials said they didn't foresee further staff cuts.
Yesterday, NPR officials said 88 percent of the stations were responding positively to a request from NPR that they transfer funds from CPB grants to the network.
NPR is paying $110,000 for the audit and $300,000 to $500,000 for the interim management team, Bornstein said. Those costs will be reflected in the May to September budget.