CPB finds fault in Latino consortium spending practices

Originally published in Current, May 4, 1998

By Karen Everhart Bedford

In an audit of the National Latino Communications Center, CPB found that the Los Angeles-based group violated its contract by using restricted programming funds to cover administration costs, and misrepresented its need and use of a $150,000 grant to establish a fundraising department.

NLCC's office has been officially closed since March, when a financial shortfall forced the board to lay-off the entire staff and cease operations [earlier story]. The consortium's executive director, Jose Luis Ruiz, will not return to his job.

A 33-page report issued by CPB Inspector General Joseph Arvizu last month pointed to apparent conflicts of interest in the center's dealings with its board--including the award of a program grant to one board member and a legal services contract to another. The IG cited an additional conflict when the same board member who won the legal contract chaired a committee reviewing the executive director's compensation package. The committee recommended a 25 percent pay increase for Ruiz, plus a $35,000 bonus.

The report listed 20 recommendations for the NLCC to tighten up its financial procedures, operations and governance. CPB should monitor NLCC program spending more closely, Arvizu said, and attempt to collect the misdirected programming and fundraising monies.

"The weaknesses observed during our review indicate a disregard for CPB's desired programming outcomes," the report stated. It calls on CPB to withhold further funding until NLCC provides written assurances that it will comply with CPB contracts.

The consortium's volunteer board has found it difficult to respond to the audit because none of its members were responsible for NLCC's day-to-day operations, said Jay Rodriguez, chairman. The person who was--Ruiz--responded to the IG's draft report, but his comments were not well received.

The IG "didn't like the tone of the responses," explained Rodriguez. "It's created more problems for us than it's solved." He declined to release the document.

In an interview with Current, Ruiz did not question the audit report's validity, but took issue with its "spirit." "It takes a totally negative tone," he said, and doesn't examine the "actions of the system itself, including CPB," that contributed to the organization's financial troubles.

Ruiz said he will not reapply for his job as executive director when NLCC goes back into business. "CPB would like me out of the picture, and I will comply. Stop punishing this organization."

"Questioned costs"

NLCC received about $1 million a year from CPB, and by contract only $300,000 was to be spent on administrative costs. The balance, about $700,000, was restricted for development, production, postproduction or acquisition of programs by and about Latinos.

But the IG's audit found that the NLCC was living beyond the means of its administrative budget, and developed "creative ways" to cover its costs. NLCC classified 12 percent of its restricted programming funds as "programming administrative costs," and charged conference, training, travel and promotional expenses to these restricted funds. The IG determined that NLCC used only 51 percent of its fiscal 1996 restricted programming grant as CPB intended--to develop or produce programs.

"The CPB-NLCC grant contracts stipulate its mission as one of programming efforts, while NLCC envisions its mission as one of programming, plus publicity, promotion ... and distribution," the auditors conclude. "Obviously, NLCC can perform the additional functions, as long as it does not use CPB programming funds."

The audit report also details NLCC's request for and receipt of $150,000 to establish a full-time three-person underwriting staff when its budget already provided salaries for two full-time staff--a discrepancy that CPB itself did not catch. NLCC never hired the staff, but reported to CPB that it had.

Additionally, in its original grant proposal, NLCC did not disclose the activities and successes of a consultant in raising outreach funds for the Chicano! documentary series. NLCC later reported that CPB's grant was used to raise monies that the consultant had secured before NLCC had formally requested the grant.

CPB eventually canceled the grant, which was proposed as a three-year effort to help NLCC become more self-sufficient, when it learned that the consortia had not hired the development staff.

"We still consider the entire $150,000 grant to be a questioned cost, as NLCC requested the funds without making a full disclosure and the grant funds were not used as stated in the ... solicitation," the report states. The IG calls on CPB to "attempt to collect as much of the funds as possible."

In its extensive audit, the IG's office also found fault with NLCC's use and accounting of employee credit cards, financial reporting and record-keeping.

The raise fell through

NLCC is one of five minority consortia that receive CPB funds to develop public TV programs by and about ethnic minorities. In 1994, the groups pressed CPB to substantially increase their funding, and they eventually negotiated an agreement, the "Principles of Partnership," that responded to their demands. But after Congress made deep cuts to CPB's annual appropriations in 1995, the corporation backed away from the deal.

Ruiz, a leader of those 1994 negotiations, blames the failure of that agreement for NLCC's trouble. When NLCC learned that CPB had canceled the partnership, it had a "very short window" to raise funds for outreach activities tied to Chicano!, he said. "We thought the principles of partnership would come into effect at that time. What we thought we were going to have, we didn't have."

As the IG report noted, Ruiz had a much larger vision for NLCC than CPB's funding could support. He pointed out that producing stations wouldn't be viable if they were required to reduce their administration costs to below 12 percent--the amount NLCC allocated to "program administrative costs." His goal for the consortium was to fund promotion and outreach activities along with the related programs. "It doesn't do any good to fully fund the project if you don't have the infrastructure to support it," said Ruiz. "We were trying to do something that would impact system-wide."

"Historically, the consortia have always had difficulties getting contracts and responses from CPB in a timely manner," added Ruiz. And as CPB's programming staff has changed over the last few years, NLCC and other consortia have found it to be an "extremely difficult" transition.

NLCC's board is committed to working through its difficult relations with CPB, according to Rodriguez, and was to meet last weekend in Denver to discuss the audit and assess the organization's future. "In effect, we're going to put everything on the table," said Rodriguez. "We'll dissect NLCC and the business we do with CPB, set priorities and goals and timetables."

"The board is trying to correct past errors, adopt all procedures and begin to start producing the programming we're supposed to be doing," he added.


Earlier story
Out of cash and under scrutiny, Latino center closes

Originally published in Current, March 16, 1998

By Karen Everhart Bedford

National Latino Communications Center, one of five CPB-funded groups that aid programming to serve minority audiences, laid off its staff and ceased daily operations March 12.

NLCC cited a "delay in funding from the Corporation for Public Broadcasting" in a news release announcing the closing. The organization recently came under CPB's scrutiny for past spending "discrepancies" as CPB Inspector General Joe Arvizu completed an audit of NLCC's books. Arvizu is awaiting NLCC's response to his draft report, and could not comment on his findings.

Many--if not all--of the minority consortia are financially strained by unusual delays in finalizing their fiscal 1998 CPB contracts, five months into the fiscal year, according to several sources.

The delay worsened NLCC's already dire fiscal situation. Last year, CPB withheld $135,000 of the Los Angeles organization's programming funds after questioning three expenditures, according to Jay Rodriguez, chairman of the NLCC's board.

"We thought it would be prudent to close our doors and wait and regroup when we have some money," Rodriguez said. He couldn't predict when that would be.

CPB did not run to the NLCC's rescue with a carry-over loan last week, as it had done in January. "We are aware of the NLCC's financial difficulties. We are also mindful that their past management decisions have led them to this point," CPB said in a March 12 statement. "We understand that ultimately it's their choice."

CPB said NLCC had not adequately responded to its queries about "discrepancies in reported salary, finance and expense statements" and had not delivered "adequate assurances" that restricted programming funds would be used for programming. "Future funding of the NLCC is contingent upon results of [the IG's] audit, and satisfactory answers to our questions."

"CPB and the CPB Board of Directors remain committed to supporting programming that reflects the rich diversity of our nation," the statement added.

On March 6, NLCC Treasurer Bea Stotzer requested an extension until March 31 to respond to the IG's draft audit. Arvizu said he had hoped to issue the report by then. "We're trying to see if we can't speed it up."

NLCC is working on the answers CPB seeks, said Rodriguez. "We hope to clarify all the issues that seem to be in dispute. We plan to cooperate fully and will get back to them as fast as we can."

The center has been "going back and forth for several months now" with CPB, trying to respond to its questions, said Jose Luis Ruiz, executive director. "Every time we do, there's just more questions." CPB could have expedited the inquiry process if it had wanted to, he contended. "Whether there's a game being played to string us out as long as they want, I don't know," Ruiz said. "I have a gut feeling that no matter what we say, we can't satisfy them."

CPB did not receive NLCC's proposed 1998 budget and workplan until Jan. 21, noted Jeannie Bunton, CPB spokeswoman. "Since that period, we have been in a contract negotiation process."

"Status quo no longer prevails"

CPB clearly is reexamining its relationship with the minority consortia--which include the National Black Programming Consortium, Native American Public Telecommunications Inc., the National Asian American Telecommunications Association, and Pacific Islanders in Communications.

In an interview with Current this month, CPB President Bob Coonrod said the minority consortia would be included in a comprehensive strategic review that he recently initiated at the corporation.

"The strategic review is an opportunity to look at the best way to support programming that reflects the diversity of this nation," Coonrod said, responding to a question about consortia funding. "Things are going to be different; the status quo will no longer prevail."

In a letter dated Feb. 27, Coonrod reported on a review of all five consortia budgets for fiscal 1998, and listed expenses that CPB would not accept as program costs. The list included board meeting expenses, salaries, rent and printing and office supplies. CPB also set a cap on the amount that the consortia can spend to support programs through promotion and outreach--20 percent of the consortia's programming budget.

"We are all best served when we can be very precise and specific about how funds are used for administration and programming," said Bunton. She said the spending guidelines were not new, but that CPB was "clarifying" them and "being more precise."

An NLCC board member balked at the rules. "They don't want the consortia to function in any way other than what they feel is appropriate," said the board member, who declined to be quoted by name. "CPB has never given us the support to perform at the level they demand."

It was unclear last week how delays in finalizing their 1998 contracts had affected the other consortia. Several consortia leaders declined to discuss their situation.

In San Francisco, NAATA was in the midst of its 1998 film festival. CPB had approved the association's 1998 workplan back in December, according to Eddie Wong, executive director, but he has yet to see a copy of its new contract. Cash flow became so constrained that Wong requested and received a "bridge loan" from CPB.

"Like everyone else, we're in a tight financial bind," said Wong. "It's a pretty dire circumstance when you have to ask for money to meet payroll."

"We need to change this way of working, it is not the most productive way," he continued. "We're almost half-way through the year, our programming is set to go, and we're working on thin air."

Bunton predicted that the other consortia's contracts would go "out the door" by the end of the month. "We want the consortia to be successful," she emphasized.



To Current's home page

Later news: CPB assigns NLCC's role to group headed by actor Edward James Olmos, November 1998.


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