September 21, 2006 Issue                                       

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©2006 The Chestnut Hill Local

CHCA wrestles with a Local left in debt
by KRISTIN PAZULSKI

In the wake of threats from the Local’s printer to stop printing the newspaper for a week, the Chestnut Hill Community Association’s executive committee, at its Sept. 14 meeting, discussed ways of raising the $12,000 needed to pay about half of the paper’s printing bill by Sept. 22.

Pete Mazzaccaro, editor of the Local, said Joseph Sukle Jr, president of Press and Journal, the paper’s printer, could be forced to stop printing the Local unless it pays approximately $25,000 in unpaid invoices.

At the meeting, Mazzaccaro told the board members that Sukle has agreed to print and deliver the Local as usual if $12,000 was delivered to the printer by that date, and if the Local covered the balance, either by paying two invoices a week or three invoices in a two-week period.

Mazzaccaro, who became editor in late June, discovered the past-due bills a month ago when P&J’s bookkeeper faxed him a list of outstanding invoices that dated back to February. Mazzaccaro took over the editor’s position after months of controversy, both in the CHCA and in the Local. Since October 2005, the in-house contention has resulted in the resignation of a Local editor, a staff writer, an accountant, a sales manager, and — most recently — the CHCA’s community manager, Betty Brady, this past week.

Mazzaccaro said the printing bill, as well as one from the insurance company, which is owed more than $26,000, have been left unpaid, racking up a newspaper debt of more than $50,000.

“For whatever reasons, the bills weren’t paid,” Mazzaccaro told the executive committee.

He pointed out that, historically, the Local had never been more than three weeks in debt to P&J, which has been the Local’s printer for about five years. If the Local were forced to skip a week, as P&J has threatened, Mazzaccaro said it would cost the paper about $20,000 in display advertising, the largest source of income for the paper.

“We need the money to pay P&J and settle this situation,” Mazzaccaro said.

But the mismanagement of the Local’s bills are not the only financial problems the community association is facing, which is why the executive committee voted to approach the association’s trustees about paying off the printing bill.

Ed Budnik, oversight committee member, estimated that in the past three years, the CHCA, the Community Fund and the Local have together created a debt of $150,000.

“We are in a major deficit situation,” Ned Mitinger, CHCA treasurer, said in Thursday’s report. “We’re staying afloat, but just barely. Our nose is above water.”

At the meeting, CHCA President Ron Recko said he would meet with the trustees on Sept. 19, and asked the executive committee’s permission to ask the trustees to liquidate $30,000 of the CHCA’s $182,000 invested in a Merrill Lynch account to pay the printer’s bill. The CHCA has already borrowed $130,000 of these investments over the years; the account used to have $310,000.

Despite the apparent growing debt, records show the Local has actually made a modest profit in the past four years, though no one seems to know where the money is. According to year-end financial statements for the past four years, the Local has produced operating profits totaling $40,000. If the Local had this money, it would have the funds to pay the debt, which should be non-existent.

Mazzaccaro said that in 2001, the end-of-the-year statements indicated that the Local was $100,000 in debt, so the money could have gone toward that deficit, though he added that he was not sure what contributed to such large deficit when in the years following the Local had made a profit.

Mazzaccaro speculated that it could have been the CHCA’s history of “borrowing” money from the profit-making newspaper to cover its budget deficits.

Until 2003, when the community organization became a separate financial entity from the Local, the CHCA regularly took about $35,000 a year from the Local’s profits, even if the Local did not make a $35,000 profit that year.

It is unclear whether the CHCA continued this practice after 2003, although this year, the CHCA budget and finance committee actually budgeted $8,000 of the borrowed money to pay back the Local.

Still questions remain: Where has the money gone and how have three organizations ended up with a debt of $150,000?

The CHCA is trying to answer that, but its new administration, voted into office this April, has found the prior accounting system in disarray, with money and checks having been sent out, but with little or no recording and filing.

An unofficial audit is planned by the recently hired bookkeeper and soon-to-be hired interim community manager, to examine how funds in the CHCA, the Community Fund and the Local have been spent in the past few years. At the meeting Recko estimated that this could take about two months.

Accusations and speculation are rife about the previous administration’s handling of CHCA funds, but nothing has been proven. At the meeting, however, one questionable expense was discussed by the committee.

Former Local accountant Kari Ghezarian and former community manager Betty Brady signed a $20,000 contract for a year-long organizational membership with the Training Center for Sales and Business Development in Layfette Hill. Budnik said the contract is like membership in a health club, where anyone from the CHCA or Local could go to the center and use the training services.

Brady and some of the Local’s advertising staff attended a session or two, but, other than that, the membership has not been used, although $12,500 has already been paid to the company. After a $5,000 scholarship that the center offered the CHCA as a non-profit organization, the CHCA still owes $2,500 on the contract.

Nancy Hutter, a member of CHCA’s oversight committee, volunteered to write a letter to the center’s owner, Robert Sinton, asking to be forgiven the $2,500 owed for membership, which Budnik admitted did not serve the community organization’s needs.

Contact staff writer Kristin Pazulski at 215-248-8819 or Kristin@chestnuthilllocal.com.