oversight

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)

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            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
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                        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)




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 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




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     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~
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