Misspending seen, but IG doesn’t hit board diversity

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archives2KABF, the Arkansas community radio station audited by CPB’s Office of the Inspector General last year after a whistleblower complaint, may be subject to financial penalties of nearly $53,000 for mishandling CPB grant monies and over-reporting underwriting income in fiscal 2007.

KABF didn’t comply with requirements for open meetings and open financial records, for example, nor did it maintain an active community advisory board, according to the IG.

It also failed to provide public information required by the Communications Act, such as Equal Employment Opportunity disclosures and donor lists.

The Little Rock station, long controlled by the left-leaning, grassroots organizing group Association of Community Organizations for Reform Now (ACORN), lacked internal controls to verify the accuracy of its financial records and track how CPB aid was spent during the fiscal year examined by auditors, according to an IG report that described KABF as “materially noncompliant” with CPB requirements.

Station managers and the board of its licensee, the Arkansas Broadcasting Foundation Inc., didn’t establish policies to follow statutory requirements of the Communications Act and CPB eligibility rules for openness and transparency in KABF governance and financial records, yet they certified to CPB that the station was in compliance, the IG found.

The IG report cited sloppy accounting and lack of documentation by KABF’s off-site bookkeepers and questioned the use of nearly $50,000 in expenses paid with CPB grant monies, including restricted funds that were to be spent on national programming and misuse of a special grant to help the station develop its website.

The station also couldn’t produce documents supporting underwriting revenues reported as its nonfederal financial support for 2007, a factor used in calculating its 2009 CPB Community Service Grant (CSG). The undocumented income inflated KABF’s 2009 CSG by almost $3,000, the IG reported.

KABF relies heavily on CPB’s aid, according to a financial statement included in the report. CSGs for the volunteer-run station in 2007 totaled some $84,000, roughly a third of the nearly $238,000 in revenues recorded that year.

The audit, released Aug. 17 and now under review by CPB management, brought new scrutiny to a community radio station hobbled by its association with ACORN, a grassroots advocate or the poor and progressive causes that shut down last year amid allegations of voter registration fraud, embezzlement and political activities that violated its tax-exempt status.

In response to the IG’s criticisms, KABF officials acknowledged that two New Orleans-based ACORN affiliates ran and controlled the station during the audit period because KABF didn’t have an on-site manager. The groups were Citizen’s Consulting Inc., the financial arm of ACORN that’s at the center of investigations of illegal activities of the defunct advocacy group, and Affiliated Media Foundation Movement (AM/FM), a producer of free pubradio newscasts on social justice and labor issues.

In a May 28 memo to CPB’s radio staff, KABF’s top leaders pledged to “formally dissolve and/or terminate all contractual agreements between KABF and CCI, AM/FM, ACORN and all ACORN subsidiaries,” but they made an exception for the Fifteenth Street Corp., an ACORN subsidiary that owns the property where KABF has its studio and office space. Luis Reyes, president of the licensee board, and William Cosme, KABF manager, pledged to relocate the station “as soon as possible.”

The IG’s report didn’t question KABF’s ACORN ties, nor did it call for the station to expand and diversify its board, as claimed last month by KABF volunteers who pushed for those reforms during contentious public meetings (Current, Aug. 23). The report recommends that CPB determine whether KABF takes “sufficient corrective actions” to its governance and then lays out steps for the station to improve its financial controls and operate with more transparency as required under Communications Act and CPB grants rules.

The IG also proposes that CPB consider policy changes that would apply to all pubcasting stations: reducing CSGs for stations that violate the Communications Act until they come into full compliance, and completely suspending CSGs for those that repeatedly violate the act.
Last month CPB initiated its own review of the Little Rock audit report, a standard followup on an IG audit, according to Kevin Martin, v.p. of station grants and television initiatives.

“The IG’s report is a recommendation and not a final determination,” Martin said. “In cases of noncompliance or possible overpayment of a CSG, we have to determine if we agree with IG and follow up with licensee officials to discuss if it’s warranted.”

CPB may consider additional documents presented by the station or to do more investigation, Martin said. CPB generally takes 90 days to decide how to handle such a case, including any penalties or actions the station must take to resume CSG eligibility.

A station that fails to follow CPB’s rules requiring open board meetings, for example, may be required to regularly submit documents that demonstrate that it meets the standards. The audited station has another 30 days to appeal or respond to CPB management’s decision.

The IG’s recommendations for reducing or suspending CSGs to stations that haven’t complied with sunshine provisions of the Communications Act and CPB criteria will be taken up on a different timeline, Martin said. “That is not specific to this grantee — it’s policy.” CPB would consult with stations and make a recommendation to the CPB Board, which would ultimately decide whether to adopt it.

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Factions at odds at ACORN’s KABF in Little Rock, Aug. 23, 2010.


New KABF website.

CPB Inspector General final report on KABF, August 2010.

Website of ACORN, which grew out of antipoverty work in Little Rock.

ACORN declares bankruptcy and plans to go out of business, November 2010.

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