Citing persistent errors, CPB’s IG recommends changes to stations’ reporting of in-kind funds

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CPB’s Inspector General has recommended that CPB end the crediting of in-kind donations toward stations’ nonfederal financial support after the IG’s office found six stations had overstated NFFS by claiming invalid donations and incorrectly valuing the contributions.

The IG’s office said in a Sept. 30 report that it found stations had inappropriately claimed in-kind donations such as venue space, merchandise and services as NFFS, amounting to misclassifying of hundreds of thousands of dollars.

“CPB should evaluate the practicality of continuing to allow stations to claim in-kind trades as NFFS given the historical and continuing challenges in valuing trades and documenting that trades were received by the stations,” the report said.

CPB uses NFFS to calculate the annual Community Service Grants it doles out to public broadcasters. The more NFFS a station claims, the higher its CSG.

Stations should be on alert about any potential changes to calculating NFFS, said Robert Winteringham, a consultant with Public Media Consulting Group and former CPB deputy general counsel. In-kind support “is a significant type of nonfederal financial support, and the implications of this recommendation are pretty serious,” Winteringham said.

The IG’s office also said that CPB should shoulder some of the blame for the problem because it has not clearly explained what it expects from pubcasters. The report recommended that if CPB continues to allow in-kind support to count toward NFFS, it should clarify how pubcasters value such donations and what qualifies.

Many stations would likely agree that they would benefit from clearer guidelines, said Andy Schwartz, executive director of the Public Media Business Association. Stations are stretched thin and doing the best they can to comply, he said.

“If things were clearer, it would be much more helpful for everyone,” Schwartz said. “I don’t think anyone is trying to get away with anything or beat the system. They’re doing what they can with the information they have.”

In-kind “a big deal”

The pubcasters discussed in the Sept. 30 report are ideastream in Cleveland; Brigham Young University Broadcasting in Provo, Utah; KLRU-TV in Austin, Texas; and KOCE-TV, KCRW-FM and KPCC-FM in Los Angeles. Only BYU was found to have correctly stated its in-kind support.

Among the other stations, inspectors found that a “significant” number of transactions reviewed, 59 percent, were not in compliance. After stations submitted more documentation, inspectors whittled the noncompliance rate to 15 percent. The disputed overstatements of NFFS amounted to $413,569 during fiscal year 2013.

“This rate of noncompliance highlights the challenges stations experience interpreting and complying with CPB’s requirements for in-kind trades and the need to revisit CPB’s procedures for in-kind trades,” the report reads.

Of 12 mishandled transactions, half suffered from errors in documentation. The remainder violated CPB policy by counting items like clothing and tickets toward NFFS, promotional items that inspectors said should have been excluded.

KQED-FM in San Francisco was the subject of a separate IG report released Sept. 29, which alleged that KQED overestimated in-kind claims for fiscal year 2013 by $89,914. KQED has challenged some of the findings.

Kevin Martin, who joined KQED as c.o.o. in April, said that he hoped CPB would do more to educate stations and clarify its regulations instead of no longer allowing stations to count in-kind contributions toward NFFS.

“It’s a big deal,” Martin said. “We rely on in-kind. It’s very important to us. I don’t think the right answer is to throw the baby out with the bathwater.”

In fiscal year 2013, KQED reported $32,540 in in-kind trades, roughly 4 percent of its total NFFS of $787,028 that year.

Excluding counting in-kind trades as NFFS could impact “all ends of the industry,” said Timothy Appel, a colleague of Winteringham’s at the Public Media Consulting Group and a former CPB senior financial review specialist. Because the IG’s office pointed out problems with in-kind donations at multiple stations, he said, pubcasters should take seriously the possibility that CPB could eliminate in-kind funds from NFFS calculations altogether.

“Now that the report has been issued, I am emphasizing even more than before that [stations] need to look at this” and take care to comply with CPB guidelines, Appel said. “I think it was always important, but now that the IG has zeroed in on it, it’s even more important.”

CPB management has up to six months from the release of the Sept. 30 report to respond to its recommendations.