Low-profile Inspector General Report includes recommendation with potentially serious budgetary repercussions.
Noncommercial (NCE) stations that receive grants from the Corporation for Public Broadcasting (CPB) should pay attention to a recommendation made recently by CPB’s Inspector General (IG). She thinks it may be time for CPB to “evaluate the practicality” of continuing to allow CPB grant recipients include in-kind trades as part of the calculation of their grant amounts.
If this recommendation gets any traction, it could seriously rock the bottom line of many CPB grantees.
NCE stations receiving CPB grants rely on funding from various sources. Private support, in particular, is critical to a public station’s success. Such support can influence a station’s bottom line in two ways. First and most obviously, contributions are revenues which the station uses for continued operation. But second, private contributions are used in part to determine the size of the CPB Community Service Grant (CSG) that is made available to the station.
CSG amounts are based, in large part, on a matching principle pegged to the amount of private support each station raises in “non-Federal financial support” or “NFFS”. Not all forms of local support count as NFFS, and the CPB match is far less than 100% of a station’s NFFS. (For example, in Fiscal Year 2015, the CPB match starts at approximately 13 cents for every dollar in NFFS that a public television station reports it raised in Fiscal Year 2013.) But you get the idea: the more NFFS a station can show, the more CPB money may be made available.
NFFS is a statutorily defined term. (Check out Section 397(9) of the Communications Act if you don’t believe it.) NFFS can come in many forms, including: individual gifts (from viewers and listeners like you!); corporate underwriting; grants from private foundations and state or local governments; and in-kind support (e.g., donations of property, the use of property or professional services, and indirect administrative and occupancy support from an institution, like a university, that owns a public station).
The problem the IG found is stations aren’t correctly reporting the value of their in-kind transactions claimed as NFFS.
In a limited scope audit of in-kind contributions claimed as NFFS by eight stations for Fiscal Year 2013, the IG identified a high rate of non-compliance with CPB financial reporting requirements. (The IG is recommending that those stations be required to submit revised documentation and corrected tallies of their in-kind NFFS amounts. The IG is also recommending CPB reduce those stations’ future CSG payments to permit recovery of any CSG overpayments resulting from the overstated NFFS.)
The apparent cause for the inaccurate reporting? CPB’s own financial reporting guidelines. While CPB has established policies and documentation requirements covering all kinds of NFFS reporting, the IG – who routinely audits CSG compliance and therefore is familiar with such things – concluded that those policies and requirements are “extensive and less than clear”. That complexity and lack of clarity have led to “historical and continuing challenges” in valuing and documenting in-kind trades. Having had first-hand experience in reviewing stations’ efforts to meet those challenges, the IG has concluded that CPB should re-visit including in-kind trades in grant calculations.
Since CPB grantees may rely on in-kind support for a significant portion of their NFFS, such a re-think could be very bad news. If there is a set dollar amount available for all CSGs, how much each station receives from the pool will be based on its NFFS amount in relation to the other stations in that pool. For a station that relies heavily on in-kind support, if CPB were to decide to not allow (or greatly restrict) the value of in-kind trades as NFFS, that station could easily see a decrease in its CSG.
The mere fact that the IG has seen fit to initiate a conversation along these lines is a Big Deal that could have a serious eventual impact – to put it mildly – on CPB grant policy and, ultimately, stations’ operating budgets.
Of course, the IG’s recommendation is only that – a recommendation which the IG has made to CPB management. CPB is free to ignore the IG, or not. It remains to be seen how CPB will react. Check back here for updates.