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CPB’s TV Future Fund was illegal, GAO finds
Money allegedly taken from the wrong pot

Published in Current, May 24, 2004
By Karen Everhart and Jeremy Egner

A long-anticipated report on public television by the General Accounting Office, released May 21 [2004], advises Congress that CPB illegally diverted money intended for stations into the now-defunct Television Future Fund.

GAO sealThe report, "Issues Related to Federal Funding of Public Television by the Corporation for Public Broadcasting," says CPB operated outside its authority when it took money from the part of its appropriation that Congress designated for station grants and used it for Television Future Fund projects.

Between 1996 and this year, the Future Fund made grants for R&D projects to improve public TV operations and fundraising. But GAO said CPB can't legally make selective grants from funds allocated for station grants.

CPB President Bob Coonrod rebutted that conclusion in a statement printed as an appendix in the report. He said the corporation believed it stayed within the law when it established and administered the Future Fund.

CPB nevertheless has been moving to make the Future Fund a moot point. It announced in January that it will discontinue the fund after this year and said in April it will return half of the unspent Future Fund monies to the CSG pool. But the four House members who called for the GAO study are pressing the corporation to move all of the fund's remaining money into the station grant pool.

GAO didn't discuss the Radio Future Fund, which CPB created and funded in the same manner as its TV counterpart. It has had fewer critics and is continuing to operate (story).

In another section critical of CPB, the report found CPB lagged in distributing some of the special appropriation for public TV's move toward digital transmission. The delays prevented many stations from meeting FCC digital construction deadlines. GAO also recommended that CPB broaden the scope of its digital grants program beyond its emphasis on transmission equipment to include support for digital content and production equipment.

The 137-page document is available online at
PBS and APTS received copies of the GAO's report on Friday but declined to comment immediately.

The four House Republicans who requested the GAO study and released it late Friday said in a letter to Coonrod that they are troubled by some of the GAO's conclusions.

Reps. Joe L. Barton (R-Texas), Richard Burr (R-N.C.), Ralph Regula (R-Ohio) and Fred Upton (R-Mich.) are dissatisfied with CPB's plans for what's left of the Television Future Fund. CPB announced April 29 that it would return $3 million of the money to the CSG pool. "It is our opinion that the entire $6 million balance should be returned to licensees," the congressmen wrote. With the exception of Regula, all co-signers are members of the House Energy and Commerce Committee, which oversees media regulation and CPB. Barton is chairman of the committee.

Poaching in CSG pool?

CPB created the Television Future Fund in 1995 to help public TV find new ways to operate more efficiently and expand its revenues. To aggregate money for the new grants program, the corporation took about half the money from its System Support Fund and half from the Community Service Grant pool, which is the primary source of federal funds distributed to local stations.

At the time, many station leaders questioned the legality of diverting money from the CSG pool, but CPB pushed ahead. Federal aid to the field had come under attack on Capitol Hill, and CPB saw an urgent need to fund projects that would help public TV streamline and develop new revenue sources.

Between 1996 and 2004, the Television Future Fund used $30.5 million from the System Support Fund and $28.5 million from the CSG pool, according to GAO. CPB consulted advisory panels of station leaders in awarding 204 grants from the fund. It invested in a broad range of projects in the areas of public TV fundraising, digital technology, new service models, management information and operational consolidation. But some ambitious projects foundered, including OnCourse, a digital video service for classroom teachers, and Infinite OutSource, a service bureau planned to take routine fundraising tasks off the backs of station staffers.

In 2002, CPB suspended grantmaking from the Future Fund to review its effectiveness and an advisory panel developed new criteria to guide future grant decisions. Review of the Future Fund coincided with a CPB-commissioned financial analysis of public TV, and last fall CPB moved to concentrate Future Fund money on three major projects responding to recommendations by McKinsey & Co. consultants. One of these, the Major Giving Initiative led by former PBS development chief Robert Altman, has already been established to help stations attract financial support from major donors.

With those changes to the Future Fund, CPB did not address what GAO describes as the "legal deficiencies" of the Fund--namely that it receives money from the CSG pool.
"Although we often defer to an agency's interpretation of a statute it is charged to administer, we cannot do that here because the corporation's interpretation of its authority is neither consistent with statutory language nor Congress' policy choice favoring local, not corporation, control of the expenditures" of federal funds, GAO reported.

In a letter March 12, CPB's Coonrod responded to a draft of the GAO report, explaining that the corporation consulted with public TV leaders and outside law firms before establishing the fund. He said its officials believed they were acting within the law in doing so. CPB's outside counsel at the firm of Covington & Burling noted that the Future Fund operated for eight years "under the watchful eyes of CPB's congressional oversight and appropriations committees," and Congress continued to appropriate money to CPB without limiting its ability to administer the fund.

Delays of DTV aid

In its analysis of CPB's aid for public TV's digital transition, GAO said delays in distributing grants from its Digital Distribution Fund and Digital Universal Service Fund prevented many stations from meeting the FCC's digital construction deadlines.

Roughly $24 million in digital grant money remained in the fund's accounts at the end of 2003, the report said. By then most stations needed support for digital production equipment and content, but these purchases weren't covered by CPB's grant program.

CPB generally agrees with the GAO's recommendations regarding digital transition funding. CPB officials developed new guidelines for the Digital Distribution Fund, and last month the CPB Board set aside $4 million of CPB's $34.7 million DTV spending this year for creation of digital programming and other content.

In a GAO survey, public TV stations cited digital master control, digital content and production equipment as their three highest priorities for funding. Under CPB's new guidelines, the digital fund will support station purchases of master control equipment, as well as translators and repeaters.

The GAO report was not thoroughly critical of pubcasting's leadership. The agency's survey of public TV station execs found three-fifths are satisfied with the present allocation of federal funds within public TV. Of the CPB funds devoted to public TV, 75 percent goes to stations and 25 percent to national program production. Not surprisingly, those who favored a change proposed a bigger share for stations.
Nearly three-quarters of survey respondents agreed CPB should continue funding PBS's National Program Service. Station leaders almost universally agreed that PBS's children's and primetime programs help their stations meet their mission to a great or moderate extent.

But GAO noted that 58 percent of respondents say PBS's program selection process should be changed. Station leaders suggested that the network solicit more input from them in program decision-making.

Seventy-nine percent of respondents said their local programming is not sufficient to meet the needs of their communities, and slightly more than half of those surveyed agreed that CPB should have the authority to award grants for local productions.

Web page posted May 22, 2004
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Copyright 2004


CPB's competitive grant program for public radio is not under fire, but it is partially funded in the same way as the now-defunct TV Future Fund.


Download GAO reports from agency's site.

Statement by CPB President Bob Coonrod.


CPB creates Future Funds in 1995, prompting headline: CPB allots seed money for the coming transition; Some stations question diversion of CSG cash...

Infinite OutSource, major effort to help stations share fundraising staff and expertise, started with high hopes in 1997 and came apart in 2003.

OnCourse, another major Future Fund initiative, aimed to offer a digital service for classrooms, but didn't raise the private capital expected.

Five southern state networks collaborated with help from the Future Fund.

The Future Fund backed research to create a second public TV network, but PBS declined to move ahead.

With Future Fund money, Wisconsin PTV developed an arts calendar for the Web, but the hoped-for replication elsewhere didn't not come immediately.

CPB rushed to change its grant rules when a station complained to Congress, 2001. The congressman who intervened, Rep. Richard Burr (R-N.C.) later called for the GAO study released in May 2004.

Another House leader who called for the GAO study, Rep. Joe Barton (R-Texas), is the new chair of the committee that oversees CPB and other telecom issues.

With GAO looking into the TV Future Fund issue, CPB announced in January 2004 that it will discontinue the grant program at year's end.