L __ x x A- ‘0 Z A- % I: cc -Z A - f - United Statee G&O General Accounting tXYSce Washington, D.C. 20548 Human Resources Division B-234911 January 22,199O The Honorable Daniel K. Inouye Chairman, Subcommitteeon Communications Committee on Commerce,Science, and Transportation United States Senate The Honorable Edward J. Markey Chairman, Subcommitteeon Telecommunications and Finance Committee on Energy and Commerce Houseof Representatives In this report, we respond to your February 9,1989, request, as well as to subsequentdiscussionswith your staffs, for information concerning Corporation for Public Broadcasting (CPB) expenses.We agreedto deter- mine (1) the nature of CPB administrative expensesand whether they were within legislative limits, (2) whether program funds were used for administrative purposes, and (3) the nature and amounts of CPB consul- tant expenses.To obtain this information, we reviewed the accounting records and other documentation for the expenditures that CPB reported in its fiscal year 1988 financial statements; we also discussedexpendi- ture issueswith CPB officials. The details of our methodology are pre- sented in appendix I. The enabling legislation for CPB capped administrative expensespayable B&kground from public funds at 6 percent of the annual federal appropriation through fiscal year 1988. ThebPB 1988 amendments ‘effective in fiscal year 1989, limited administrative expensesto $10.d million (which is less than 6 percent of the appropriation, but more than CPB reported spending in 1988). For 1990 and subsequentyears, the amendmentsper- mit administrative expensesto increase by whichever is greater: (1) 4 percent of the previous year’s allowance or (2) the increasein the con- sumer price index. Discussionson the floor of the Senateindicated that these changeswere intended to make more funds available for program production. It was noted that since CPB had reported administrative expensesof about 4.2 percent in recent years, the 6 percent allowed by its enabling legislation was more than CPB really needed.Further, given CPB’S 1988 reported administrative expensesof about $9.6 million, it was believed that an Page 1 GAO/HBD-90-S Corpmation for public Broadwting administrative expenselimit of $10.2 million for 1989 should be ade- quate for CPB needs.’ Finally, given the present era of scarcefunds, the Congressbelieved that it was inappropriate to allow CPB administrative expenses(capped at 6 percent) to grow at the samerate aa CPB appropriations. categorizesexpenditures into two groups: administrative expenses sults in Brief CPB and program servicesexpenses.Administrative expensesare expendi- tures that support CPB as an organization, such as staff salaries, travel, rent, and printing costs.Program servicesexpensesare expenditures that support individuals or entities in the field of public broadcasting; these expensesinclude grants to and contracts with producers and sta- tions. CPB also includes administrative-type expenditures, such as staff travel, in program servicesexpenses,but only when these administra- tive-type expenditures are incurred (1) to support program services activities or (2) in the administration of certain grants and contracts awarded to producers and stations. As a result, under CPB policy, expenditures such as staff travel will be recorded as (1) program ser- vices expenseswhen they are incurred in the course of carrying out activities that more directly support the public broadcasting industry and (2) administrative expenseswhen they support CPB as an organiza- tion. We observedthat CPB consistently applied these definitions in recording expenses.SinceCPB enabling legislation does not define the term “administrative expenses,”we have concluded that the CPB defini- tion is not at odds with applicable law. The CPB statement of financial activity for 1988 reported administrative expensesof $9.6 million, about $1.2 million less than its 6 percent cap of $10.7 million. About 62 percent of these expenseswere for personnel costs;other expenseswere for costs such as staff travel, printing, rent, delivery services,postage,conferencesand memberships, meetings, and consultants. CPB had additional administrative-type expensesof $732,000 (for example, costs of staff travel, supplies, printing, meetings, and consultants), which were included in program services;CPB reported $319,600 of depreciation separately, as an expenseof the property fund. Adding these amounts to the CPB reported administrative expenses of $9.6 million results in a total of $10.66 million, about $140,000 less than the cap. ‘The $9.6 million for the CPB total fiscal year 1988 sdministrative expenses does not include $319,600 of depreciation. Although depreciation was included in the CPB statement of financial activity, it was not clearly identified ss an administrative expense. With depreciation, administrative expenses for 1988 total about $9.8 million. Page 2 GAO/HRDBM Corporation for Public Broadcasting - Somecongressionalguidance on the expenditures that should be consid- ered dministrative was included in the Senatereport that accompanied the %ublic Telecommunications Act of 1988l’iAdditiona.lguidance may be needed,however, becauseBenate Report loo-444 does not help resolve the question of whether the Congresswants administrative-type expensesrelated to program support to be consideredas administrative expensessubject to the cap. CPB assertsthat the Senatereport doesnot require it to classify all administrative-type expenditures as administra- tive expenses.If you find the CPB practice concerning the recording of expenditures to be inappropriate, you should consider taking action to , clarify which expensesare subject to the administrative expensescap. CPB’s administrative expenseswould be increased substantially if CPB was required to include administrative-type expenditures, currently : classified as program-servicesexpenses.Therefore, in deciding whether ‘ to require CPB to treat as administrative expensessomeor all of the I administrative-type expenditures it has been classifying as program- ( servicesexpenses,you may Wish to consider the potential impact of such a changeon CPB’S operations, taking into account the current cap. The CPB 1988 administrative expensesincluded $827,300 in consultant costs: $746,400 for nonlegal services and $80,900 for legal services. About 64 percent of the nonlegal costswere for servicesprovided by a realty firm that assistedCPB in evaluating the need to relocate its offices; the owner of the new quarters will reimburse CPB for most of these costs.Similarly, about 71 percent of the costs for legal services were provided by one law firm, in connection with congressionaldeliber- ations on the two bills that were enacted as the CPB 1988 amendments. The enabling legislation for CPB limits the amount of appropriated funds Congressional that may be spent on administrative expenses,but doesnot define them. Guidance on CPB defines administrative expensesas expensesthat primarily support Administrative CPB as an organization, such as staff salaries and benefits, staff travel costs,printing, rent, delivery services,postage,conferencesand mem- Expenses Needs berships, meetings, and consultants. In contrast, when these kinds of Clarification expenditures support activities primarily benefitting individuals and others in public broadcasting, these expenditures are consideredpro- gram servicesexpensesand are recorded in the program category, along with grants, contracts, and other types of direct assistanceto stations, Y producers, and others. Our review showed that CPB consistently applied these definitions in recording expenditures. Page 3 GAO/H&D-906 Corporation for Public Broadeadng B-284911 CPB reported spending about $221.4 million in fiscal year 1988: $206.3 million to directly support public television and radio stations as well as programs; about $6.6 million for research,education, training, and other activities; and about $9.6 million for administrative expenses (see app. 11).The amount CPB reported for administrative expenseswas about $1.2 million under the cap of $10.7 million for the year. Our anal- ysis showed that $6.8 million (about 62 percent) of the administrative expenseswere personnel costs;the balance of $3.7 million was for expensessuch as staff travel, printing, supplies, data processing,post- age, and transportation. In appendix III, we summarize these expenses by major organizational componentsand activities. Our analysis also showed that reported program servicesexpenses sometimesincluded the sametypes of expensesthat were reported as administrative expenses:for example, travel, supplies, printing, meet- ings, and consultants. The total amount of these administrative-type program expenseswas about $732,000, including the costs of expert panels, which reviewed television and radio program production propos- als; a newsletter; and CPB staff expenses,supporting education, research, and training, as well as international and other public broadcasting activities. These expensesare summarized in appendix IV. Additionally, although CPB included depreciation as an administrative expensein its budget documents, it excluded the annual depreciation of $319,600 from the amount reported for administrative expenseson the 1988 statement of financial activity (seep. 2). Instead, CPB reported the depreciation separately as an expenseof its property fund. The Senatereport on S.2114,2the Senateversion of CPB 1988 amend- ments,3discussedCPB’~ administrative expenses: “In the future all activities of the CPB, including the administration of the program fund selection panels, newsletters, media relations and promotion, its corporate con- tingency fund, training, research, policy development and planning, international and contracting activities, and all other categories of the staff activities must be paid out of the [amounts] allowed for CPB administrative expenses.” It is not clear from this languagewhether administrative-type expendi- tures related to program support should be considered administrative expensessubject to the cap. CPB officials believe that the Senatereport Y 2SeeS. Rept. loo-444 (Aug. 1988), p.27. 3PublicTelecommunicationsAct of 1988(P.L. 100626). Page 4 GAO/HRD8O-5 Corporation for Public Broadcadng I I I B-284911 language is consistent with their practice of classifying certain costs as administrative expenses in someinstances and as program services expensesin others. This interpretation, officials asserted,requires changesin reporting only expenditures for program panels and the newsletter. Beginning with fiscal year 1080, the officials intend to rec- ord these expenditures as administrative expenses,but will continue reporting someother administrative-type expenditures as program ser- vices expenses.If the administrative-type costs supporting program activities had been considered as administrative, the amount of adminis- trative expensesfor 1088 would have increasedto about $10.66 million: the sum of the amount CPB reported as administrative expenses,depreci- ation, and the administrative-type expenditures CPB defined as program servicesexpenses-about $140,000 less than the cap. Applying this same approach to CPB 1089 expenditures would most likely result in a similar increase in the amount of administrative expensesreported. Servicesby two providers accountedfor most of the consultant costs of C&wltants Provided $827,300 (about $746,400 for nonlegal services and about $80,000 for a variety of Services legal) mentioned earlier. About 64 percent in nonlegal costs ($402,600) represented servicesby a realty firm;,4most other large nonlegal expenseswere for producing a series of radio broadcasts on the 1088 presidential campaign and for evaluating production budgets of various programs (see app. V for details). Some$67,600 (about 71 percent) of the legal costs were for servicespro- vided by a law firm in connection with congressionalconsideration of the House and Senatebills that were ultimately enacted as the CPB 1088 amendments.Most of the balance was for servicesby five other legal firms: one provided similar services for the sametwo bills; the remain- ing four (1) did research and analyses,(2) drafted position papers on other proposed and existing legislation as well as various agreements and contracts, and (3) prepared briefs and court filings (see details in app. VI). Conclusion The CPB 1088 administrative expenseswere within the limits established by CPB enabling legislation, and the CPB practice of considering certain Y 4Since lessors normally pay finders’ fees to realtors, the owner (the lessor here) of the new CPB quarters agreed to pay CPB the amount that the owner would have paid the realty firm for arranging the CPB lease. Thii amount will reimburse CPB about 84 percent of the realty cost. Page 6 GAO/IIRD&M Corporation for Public BroadcakIng “, B-284911 - expenditures as administrative expensesin somecasesand program ser- vices expensesin others was not at odds with applicable law. It is unclear, however, whether CPBpractice is consistent with the discussion in SenateReport loo-444 concerning administrative expenses. If all CPB expenditures in support of its 1088 activities were considered as administrative, the administrative expenseswould have been about $1 million higher than CPB reported, but still under the cap of $10.7 mil- lion. A similar increasein CPB-reportedadministrative expenseswould most likely occur if the sameapproach was applied to CPB 1080 expenditures. / If you find that the current CPB practice of recording administrative Mbtter for expensesis inappropriate, you should consider providing further guid- Cqnsideration anceto CPB. In so doing, you should consider the potential impact of any I changeson CPB operations, taking into account the new cap. I I I A$ency Comments In a November 17,1080, letter, CPB commentedon a draft of this report. CPB agreedthat clarification of congressionalintent concerning the / nature of costs that CPB should classify as administrative expenses would be helpful. CPB also elaborated on (1) classifying somecosts as administrative in someinstances and as program servicescosts in others, (2) using outside consultants for legal and nonlegal services,and (3) reporting depreciation on CPB financial statements as a cost of the property fund. In addition, CPB provided sometechnical comments that we incorporated in the report as appropriate. The CPB written comments are included in appendix VII. We are sending copies of this report to other interested congressional committees as well as membersand will make copies available to others on request. Page 6 GAO/HRD-90-5 Corporation for Public Broadcasting 1, If you or your staffs have any questions about this report, please call me on (202) 276-1666.Other major contributors to this report are listed in appendix VIII. Linda G. Morra Director, Intergovernmental and Management Issues Page 7 GAO/HRDBM Corporation for Public Broadcaetlng 10 Appendix II CPB Expenses as Re’ orted in the Stf tement of Financial Activity (Year Ended se&. 30,1988) Appendix III CPB Administrative Expenses by Orbanizational Components and Activities (Year Ended Sept. 30,198s) Appendix IV GAO Analysis of CPB Administrative-Type Expenditures Included in Program Services Expenses(Year Ended Sept. 30,1988) Page 8 GAO/IUD-99-6 Corporation for Public Broadcasting Contmtn I Adpendix V 16 CFB Nonlegal Consulting Costs by izational ponent or Activity qr /Both (Year Ended Sej$30,1988) I Appendix VI 19 gal Consultant Costs ?In urred by CPB (Year E$ded Sept. 30,1988) Atipendix VII 20 COmmentsFrom CPB Appendix VIII 23 Major Contributors to This Report T&ble Table Vl. 1: Legal Consulting Costs Incurred in 1988, by 19 Provider Abbreviation CPB Corporation for Public Broadcasting Page 9 GAO/HRD-90-5 Cmporation for Public Broadahing 2 *p&mm I i!%opeand Methodology We focused our review on the CPB financial activities for the fiscal year ending September30,1988. We obtained the CPB 1988 audited financial statements and a printout of the general ledger accounts,showing bal- ancesand detailed transactions for the year. Then we reconciled the individual line item expensesin the cpsstatement of financial activity for 1988 with accounting records, identified the nature of the individual expensescharged to each of these accounts, compared the nature of the expenditures that CPB considered as admin- istrative with those it considered as program support, and reviewed all the expensesfor legal services and a judgmental sample of the expensesfor nonlegal servicesin order to identify the individual consultants and the servicesobtained. In addition, we reviewed the controls over the CPB nonfederal funds, rec- onciled CPB expenseswith accounting records, and tested, on a sample basis, certain transactions to identify purpose. In addition, we discussed administrative expenseswith CPB officials and reviewed the legislative history of the CPB enabling legislation, including the Public Telecommu- nications Act of 1988. We carried out our work between February and August 1989 in accord- ance with generally acceptedgovernment auditing standards. CPB pro- vided written comments on a draft of this report. These comments are included in appendix VII. Y Page 10 GAO,/IiRD90-5 Corporation for Public Broadcasting Ekpensesas Reportedin the Statementof ancial Activity (Year Ended Sept.30,1988) - Expenses Amount Expenses for program services: Direct television support Community service grants $109,524,280 Program production 39,932,475 Program distribution 4,035,930 Subtotal 154,292,593 Direct radio support Community service grants 34,107,465 Program production 14,208,920 Subtotal 48,316,385 Other direct support (mostly music royalty fees) 3,696,879 Research, education, training, and other 5,572,190 Total program service8 expense8 211,878,147 Expenses for administrative services:~ Corporate administrationb 9,508,920 Total all expense8 $221,387,067 aCPB uses the term “supporting services.” bThe 5.percent administrative expense cap for the year was $10.7 million. Depreciation of $319,600 was not included in the total administrative expenses, but was reported separately as an expense of the property fund. Page 11 GAO/HRDBO-5 Corporation for Public Bma&adng I Appendix III ’ aPB Administrative Expensesby Organizational ; 40mponents and Aktivities (Year Ended Sept. ’ 3p, 1988) I Administrative expenwW nlzational component and actlvlty Penonnelb OtherC Total CEO: President’s office $158,488 $25,248 $183,736 G 514,442 126,136 640,578 -, t department Policy development -- and planning department 366,353 32 ,320 398,673 Subtotal --- 283 1,039,: 183,704 1 ,222,987 Tel&rion program fund: Direotor’s office 606,118 93,344 699,462 246,847 21,286 268,133 169,717 16,161 185,878 1.022.662 130.791 1.1639473 orate communicatlonr: Dire tar’s office 417,931 47,854 465,785 - Promotion and outreach 2,813 131,337 134,150 a relations and promotion 70,189 70,189 Subkotal 420,744 249,360 670,124 I Vl&presldent and trearurer: + VP-treasurer’s office 95,314 22,440 117,754 Unallocated salaries and benefits. severance accrual 473,827 473.827 Administration department Director’s office 112,857 1,794,661 1,907,518 Computer services 181,087 105,365 286,452 -- Office services 184,851 405,275 590,126 -Print services 96,259 96,259 --.- P~r!mnnnel _ - -. -. 91,663 106,929 198,592 Budget and program analysis department 145,553 39,782 185,335 ksess affairs department 375,408 83,406 458,814 Gtification department 101,207 21,162 122,369 -- Financial management dept. 219,511 68,107 287,618 Subtotal 1,981,276 2,743,386 4,724,664 Senior vice-president, telecommunlcatlon8: --- VP hffim . . “...-- 221.797 17.096 238,893 -- Broadcast services dept. 244,694 46,431 291,125 %%an resources develooment deoartment 387,661 36,671 424,332 654.152 100.198 954.350 Page 12 GAO/HRD-90-B Corporation for Public Broadcasting :, / , .. ., 88, l.“,, I I Adminiatrativo exDanse# anitrtionai component and activity Perronneib OtherC Total Vi)%-preridont, general counsoi, and c~orotary: 356,152 100,500 455,552 79,515 29,274 108,789 Bbard directors’ fees and expenses 104,598 104,598 S+btotai 445,507 234,372 680,039 V[ce-pre8idsnt, government relationa: VP office 84,785 18,499 103,284 35,548,591 $3,000,330 $9,SO8,921’ aThe administrative expenses are as shown in the statement of financial activity (app II). bFlepresents costs of employees’ salaries and benefits, as well as temporary help. %epresents expenses such as employee travel, business entertainment, conference and registration fees, meeting facilities and catering, printing and photography, supplies and materials, membership fees, delivery services, data processing,‘subscriptions and publications, consultant fees and expenses, postage and meter rental, rant, external and internal reproduction, advertising, transportation and stor- age, telecommunications, insurance, and building security. din percentages, the personnel expenses are 61.5 percent; the other expenses, 36.5 percent; and the total, 100 percent. Wiffers from amount shown for corporate administrative expenses in statement of financial activity by $1DO because of rounding of individual amounts. Page 13 GAO/IIBD906 Cmporation for Public Broadcasting Appeedix IV of CPB Administrative-Type Ineluded in Program Services ’ nses(Year Ended Sept.30,1988) T Admin. Wants, Prowam wvicer exoen8eba tvDeb contracts Total Direct teievi8ion support: Program production $96,217 $39,836,258 $39,932,475 Direct radio support: Proaram production 54,198 14,154,722 14,208,920 Rerearch, education, training, and other: Communications activities - 155,969 132,282 288,251 Human resources activities 169.474 1,932.445 2.101.919 Education activities 27,462 l&O,046 1,487,508 Telecommunications activities 79,114 328,262 407,376 International activities 65,569 202,371 267,940 Policy development and planning 39,974 890,449 930,423 Office services (printing) 43,773 45,oooc 88,773 Subtotal 581,335 4,990,855 5,572,190 Total 9731.750 958.981.835 959.713.585 1As found in CPB statement of financial activity. batheadministrative-type expenditures include panelists’ honoraria, staff and nonstaff travel, meeting facilities and catering, postage and meter rental, printing and photography, data processing, delivery services, external reproduction, conference and registration fees, business entertainment, equipment rental, transportation and storage, advertising, consultant fees and expenses, salaries and benefits, and telecommunications. CContract for broadcaster’s liability insurance Page 14 GAO/HID-90-S Corporation for F’ubllc Broadcasting AF/pendix V CPB Nonlegal Consulting Costsby Ckgakzational Componentor Activity Or Both #‘ear Ended Sept. 30,1988) Organizational component/activity cost Communication activities: Promotion and outreach JR. Associates $3,060 Business Communications 1,403 I.L. Strack 175 Subtotal 4,038 Media relations and promotion: Thea Marshall Communications Additional public service child care announcements (see also “CPB audience building,” below) 1,500 M. Sheehan Assoc. Public-speaking coaching to 7 persons 4,855 Business communication 1,073 Subtotal 7,428 CPB audience building: Thea Marshal Communications Distribution of child care public service radio announcements (see also “Private and public sector outreach,” below) Subtotal 10,857 Private and public sector outreach: Thea Marshall Communications Produce and distribute 5 public service radio announcements on child care 10,965 JR. Associates Produce a public relations video to promote public television programming 21,900 Subtotal 32,865 Station information service: Whelan Group Drafting CPB 1967 annual report 7,695 JR. Assoc. 1,500 Editorial Experts 978 Subtotal 10,173 Total communication activities 65.961 Education activities: C. Wellner (encourage educational use of programs) 1,249 (continued) Page 16 GAO/liRIMO-6 Corporation for Public Broadeaethg CPB Nonlegal tinanltlng thata by Qrgenbtlonal C4mponent or Activky or Both (Yesr Bnded Sept. go, l@se) Organiratlonal oomponont/actlvity cost Toloviaion program fund actlvltier? J.R. Assoc. 500 M. Sheehan, Assoc. 1,228 SUbtOtOl 1,728 Qovemmmt affair8 activltle8:~ N. Foltin (assistance with congressional meetings, testimony, board and other meetings) 6,300 Office of the &&stclry:a Westin Hotel 151 Tolecommunicationr actlvitler:a Office of the Senior VP APSARA Systems 300 Radio program fund actlvitka: Sandv Tolan Production of a series of 15 radio reports on the 1988 presidential campaign 72,081 Lkoadcart aervicea: Local TV program awards Beach Associates Produce video about winner of CPB’s 1988 Lowell award for awards ceremony and staoe the ceremony 15,144 Station advisory service N. Rubin -.3,821 J. Mireles --__i 1,734 P. Norton 955 M. Alvar 150 Ft. Karwoski Provide technical assistance to a tv station in Wisconsin and others 3,831 D. Ouzts 3,235 J. Witherspoon 1,581 Tliomas & Clifford 1.500 L. Carr 3,618 B. Mayes 993 J. Capobianco 1,636 D. Dav 2.006 K. Aubry 2,572 R. Sweeney 1,416 VA Dambach 1,709 G. Shivers 1,402 2. Van Otten 1,40d 7. Rathe 1,054 D. Crowe 1.334 (continued) Page 16 GAO/IiRD-M Corporation for Public Broadcasting 4 ., d j Appendix V CPB Nonlegal Conaultlng Cata by Organhtlonal Component or Actlvity or Both (Year Ended f4ept. ilO, lW3) - Organitatlonal componsnt/actlvlty coat Public Radio Program 1,796 A. Marino 1.756 G, Stein 1,462 A. Sinoer 1.450 G. Haertig 3,545 J. Olsson 523 Subtotal 40,479 Radio audience development J. Capobianco 1,294 Total broadcaat 8ervicea 62,917 Policy development and planning? APR 3.085 M. Wagner Subtotal Program and audience research J. Lefkoff 200 NEM Enterprises 200 D. Giovannoni Study feasibility of a system for providing more frequent and comprehensive radio programming and audience data 5,000 F. Tavares 2,500 Subtotal 7,900 Interconnection planning and engineering: J. Dyer Services related to satellite interconnection matters 6,960 Strategic planning: S A I D, Inc. Kevbunchina of CPB’s annual information survev data *. I 5.376 J. Landau ‘327 Subtotal 5,703 Total policy development and planning 23,829 Office of VP-Treasurer activities: Collier-Jackson 2.708 Whelan Group 4,000 ANNIS 2,700 Subtotal 9,408 (continued) Page 17 GAO/liFW~ Corporation for Public Broadcastins CPB Nonlegal Conaultlng Co&a by Orgdmtional Component or Activity or Both (Year Ended Sept. 80,iass) Organltational component/activity cost Certlflcation actlvitier:~ Hay Associates Update data on the fair market value of volunteer services for public tv and radio stations 5,226 Admlnlrtratlon department activltles: Office corporate support Long & Foster Services related to locatina other suitable office space for CPB 402.500 Towers, Perrin, Forster Management consulting services in assisting to revise CPB staff salary proaram 9.800 Lerch, Bates, & Assoc. Info Systems Group 1,000 Computer programming and related services for CPB’s annual informatron survey. ’ 6,050 Heart to Heart 800 M. Garrison 2,580 Biospherics, Inc. 1,140 Subtotal 423.870 Buildina evaluation oroiect Architectural Interiors 4,957 Total administration deoartment 428.827 Bwlnesr affairs department activities9 J. Simson 1,981 R. Raab Evaluation of program production budgets for various Programs 58,000 Video publishing Create computer-based system for tracking status of CPB-funded video programs and CPB income from them 6,250 Video publishing 206 Subtotal 68,437 Total $746.413 sThe expensee under these activities were classified as “corporate support,” that is, administrative expenses. Page 18 GAO/BBD-90-5 Corporation for Public Broadcasting Appendix VI *gal Consultant Cysts Incurred by CPB (Year Ifnded I Sept. 3O,lQss> In 1988, CPB incurred a total of $80,892.49in legal costs.About $76,600 was for servicesprovided directly to CPB and $6,300 was for the CPB share in costs of litigation undertaken by two public broadcasting orga- nizations. About 83 percent of the fees were for servicesby two provid- ers and the remainder by four others, as follows: Table Vi .l : Legal Consulting Coot@ ln~urred In 1988, by Provider cost Provider incurred Percent Brvan. , Cave, McPheeters $57,638 71.2 Paul Mutino 91690 12.0 Verner, Liipfert, Berhard 3,222 4.0 ,/ -- I, Steptoe &Johnson 2,039 2.5 , Staas & Halsey 1,731 2.1 , I Arent, Fox, Kinter 1,272 1.6 CPB share of court-filing costs 75,592 5,300 93.4 6.6 Total 80,892 100.0 The payments to the firm of Bryan, Cave, McPheetersand the firm of Verner, Liipfert, Bernhard were for servicesrelated to congressional consideration of S.2114and I-I.R.4118,the two bills that eventually were enacted as the 1088 CPB amendments.These firms provided a variety of servicesto the CPB general counsel, including (1) legislative research on issuesraised by the bills and the final legislation, (2) arranging for and attending meetings with senators and their staffs concerning the two bills, and (3) drafting CPB discussion and position papers on the bills as well as developing proposed strategies on them. The other legal firms provided the following types of legal services: l research, analysis, and drafting of position papers on existing and other proposed legislation; l drafting various agreementsand contracts; l preparation of briefs and court filings; and l miscellaneousmatters dealing with employment, past due funds, and the CPB lease. Y Page ia GAO/HBD9@5 Corporation for Public Broadcasting I I . I App&dix VII Cchmenti From CPB , 4B CORPORATION FOR PUBLIC BROADCASTING November 17, 1989 Ms. Linda G. Morra Director of Select Congressional Studies General Accounting Office 441 G Street, N.W. Washington, DC. 20548 Dear Ms. Morra; We are pleased to provide our comments on the Draft GAO report entitled w I . prepared by your office. Through the years CPB has strived to accurately and methodically categorize expenses of the Corporation consistent with congressional guidance while using all corporate resources in the best interests of public broadcasting. We are delighted that your draft report has confirmed what we have felt to be consistently true: that CPB has developed and has consistently applied a cost classification procedure that accurately records costs in a manner consistent with our statute and that we do not intentionally violate that system for any parochial interest. A few corrections and clarit’ications that we would like to see addressed in the final report are attached for your consideration. In addition, we would like to make three general points for consideration as you finalize the report. First, we must emphasize that while CPB is primarily an “administrative” organization we directly participate in activities that support public broadcasting. Many CPB costs that are categorized as administrative are costs that directly aid and support public broadcasting ‘and are not “administrative” in the pejorative sense that that term is often used in public discourse. We also want to emphasize that CPB has, by virtue of congressional direction, industry practice or simple national economies-of-scale, undertaken projects that generate costs not usually considered “administrative” as that term in traditionally used. Y Page 20 GAO/HRD-906 Corporation for Public Broadcasting For instance, CPB sponsors industry recognition programs that make prestigious national awards to producers and local stations, and we operate a national jobline designed to help stations establish and retain a diverse work force. These activities ate staffed by CPB employees simply because we have found that to be the least expensive approach. We record staff and related costs for these projects as “administrative” expenses while we charge the costs of program judges, awards materials, 800 phone line charges, and travel costs by awardees as system support activities. Your auditors captured these latter costs in the “admin.type.” column of Appendix III. Only under the “broad” definition of administrative costs as defined in the report, would such costs fall within our “administrative” budget. While we would welcome greater legislative precision in the definition of cost categories, we must strongly reinforce the closing recommendation to Congress made in the report (page 1I, closing paragmph) to adjust the administrative cap if a new definition of “administration” is implemented. CPB develops programs and activities that try to solve problems in the least costly way possible. On occasion we contract for services, and on other occasions we find it less expensive to do more of the work internally. We urge you to strongly encourage Congress to continue to allow us that flexibility. We believe it to bc in the best interest of Congress, public broadcasting, and the American people. Secondly, we maintain an authorized staff of slightly more than 100 full-time employees which compares with staffs over twice that site at the National Endowment for the Arts (NEA) and at the National Endowment for the Humanities (NEH), entities with similar responaibilitics and federal funding levels. Therefore, on occasion we need skills or cxpeticncc that WCdo not have or we need immediate help in areas where recruiting has not been completed. In such cases we retain the services of outside consultants for patticular projects. For instance, during the majority of 1988, CPB’s Office of Government Relations reported to the Generai Counsel. Because of the extraordinary nature and unexpected intensity of legislative activity during that year, the General Counsel determined that outside legal expertise in legislative matters was necessary. These outside legal consultants also assisted in other areas of CPB legal work to supplement reduced staff in both the Office of the Generdl Counsel and Government Relations. The legislative work performed by these consultants was restricted to providing advice and counsel to CPB’s General Counsel. In all cases, when the use of consultants demonstrably benefits stations we charge such costs to program services. When those activities primarily assist CPB directly we charge such costs IO our administrative budget. We believe that this approach is consistent with Y our guidance from Congress. Page 21 GAO/liRD-@O-6 Corporation for PubUc Bronde~tlng ,‘. ‘. ,, APpendlx vu Commenta Prom CPB A third and last technical point concerns your interpretation of our financial statements. While we do separately record depreciation in a Property Fund, we have consistently included depreciation in all representations of our total administrative expenses. Our consolidated financial statements and our budget presentations to Congress uniformly have included depreciation in any totals represented to be “CPB Administration.” The occurrences where this issue affects your draft are noted in the attachment. In conclusion we appreciate the opportunity to review and comment on the draft report, and I am pleased that your staff found us to be.forthright and helpful during their review of our operations. We are particularly pleased that your report vindicates CPB from any implied charges that improper accounting or diversion of program funds is taking place at CPB. Attached are some specific comments that pertain to the draft of your report on CPB. Sincerely, Donald E. Ledwig President and Chief Executive Officer Attachment Y Page 22 GAO/HRD-90-6 Corporation for Public Broadcasting :J */ ( cf Aipendix VIII l/!tajorContributory to This &port William J. Kruvant, Assistant Director, (202) 276-6186 GeorgeF. Poindexter, Evaluator-in-Charge Endel P. Kaseoru, Evaluator 7 ashington, DC. Jonathan H. Barker, Senior Attorney dffice of the General Counsel, \;Nashington,D.C. (118272) Page 28 GAO/EIlUMW Corporation for Public Broadm~ - ,.i.- ._ _’
Corporation for Public Broadcasting: Congressional Guidance Needed on Administrative Expenses
Published by the Government Accountability Office on 1990-01-22.
Below is a raw (and likely hideous) rendition of the original report. (PDF)