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We refer to your article published on MaltaToday of 27 August 2006 entitled L-Istrina 2004 cost PBS Lm85,000.
We welcome public review of the PBS accounts which is a healthy sign of the transparency and public accountability that the Board and Management of PBS are constantly striving to increase. On this basis we would like to respond to a number of claims made in your article to insure that the general public has a better understanding of our operations.
PBS refutes the allegation that it has retained or used any of L-Istrina funds in its operations. PBS is the owner of L-Istrina and manages separate bank accounts for L-Istrina as required by proper accounting practice. There is no way any of the funds can be considered as having passed through or were part of PBS operations as your correspondent alleges. During the event all monies received are routed to these accounts and this is monitored by a team of lawyers and accountants from reputable firms. Furthermore, a separate report and statement of income and expenditure of the Istrina 2004 was prepared, and was audited by an independent audit firm. This report was presented on 29 October 2005 during a press conference.
Should your correspondent have checked the profit and loss account he would have noted that the operations of L-Istrina are not included precisely because its operations are not part of PBS’S trading activities. In view of the fact that L-Istrina Bank Accounts are administered by PBS and included with bank balances in the balance sheet with a corresponding amount shown also with creditors, the movement in these balances has to be reported in the cash flow. The cash flow reflects cash movements and not actual expenditure. If Strina paid some of its previous editions’ expenses in the current year these would appear as a cash out flow. In no way can one conclude, assess or comment on income and expenditure from a cash flow statement. Such comment should be made from a Profit and Loss Account. As already stated since the Strina operations are not part of PBS’s trading activities these are not included in the operations are not part of PBS’s trading activities these are not included in the profit and loss account. For detailed information about the Strina operations one should view the Strina Accounts.
Your correspondent also states that Strina costs PBS Lm85,000, and chooses to highlight cash outflows without giving the same prominence to the cash inflows which exceed Lm1 million. If we are to go by your correspondent’s accounting interpretation, this is still less than 7% of cash receipts. Should your correspondent have checked the facts as reported in the last audited L-Istrina accounts distributed to the press, he/she would have realised that L-Istrina requires a team of over 1500 volunteers. If one were to cost the event in full without the voluntary element and cost reductions obtained on the various goods and services, the cost would read in excess of Lm250,000.
Your correspondent then chooses to comment on the health of the enterprise before and after the restructuring and makes the following statements.
1. Turnover is lower after the restructuring:
Turnover is actually lower as your correspondent states. However the restructuring was happening during the year ended 30 September 2004 and turnover includes some Lm1.4 million in TV Licence revenue. In the current year reported, the year 2005, PBS received no TV licence revenue but an EPSO contribution of Lm0.5 million. This is administered by the Ministry for Tourism and Culture (MTAC), and goes for supporting the Public Service Contract of PBS. In actual fact, therefore, government funding has decreased by Lm0.9 million. Since turnover has decreased by only Lm0.4 million, operating revenue of PBS is therefore higher by Lm0.5 million after the restructuring. Therefore PBS is less dependent on government funding, and has significantly increased its revenue from advertising and ancillary activities.
2. Cost of Sales are higher and Gross Profits are lower:
Gross profit is lower for the same reason turnover is lower and by the same arguments, operationally, gross profit is higher. Proportionately, cost of sales would be higher as government funding do not carry any cost of sales.
3. Revaluation and Sale of property to engineer profits and prop up a balance sheet.
A full revaluation of property is necessitated by accounting standards at least every five years and this was due in 2004. The revaluation in property has not happened due to restructuring. During 2004 property belonging to PBS was sold at a profit as indicated in the accounts. The essence of the restructuring exercise was to outsource production and release some of the excess resources including property.
The release of the property financed some of the previous dues of the Company. Human and other resources were also streamlined to make the operations at PBS viable as detailed in the broadcasting policy.
This is the norm in any restructuring exercise and the end result is a healthy balance sheet where we can highlight two basic indications:
- Assets are significantly higher than liabilities
- Current assts are also higher than current liabilities denoting the fact that PBS can now generate its funds for operation without the need of any overdrafts or bank loans. It is doing this without the TV licences revenue and solely from its operations.
It should be noted that that PBS has a much smaller staff complement after the reduction, healthier finances while at the same time has continued to increase its audience share and build on its no.1 station spot.
Albert Debono
CEO PBS
G’mangia
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