The Inspector General of the Corporation for Public Broadcasting reports that KNME-TV kept shoddy financial records, overstated revenues, failed to comply with open meetings laws, and should reimburse $130,000 of its grant funds.

Since we posted this story, the Corporation for Public Broadcasting has disabled the link to the report on their Office of Inspector General reports page.  We will obtain this report from KNME, scan it, and post a working link to the document so it can be read in its entirety by the public.

UPDATE:  We found another link that still works. You’ll find it in the next paragraph.

The thirty page July 24, 2012 report by Kenneth A. Konz, Inspector General of the Corporation for Public Broadcasting, was addressed to Robert M. Winteringham, CPB’s General Counsel.   CPB provided approximately $3.5 million to KNME from 2007 to 2010.  The Inspector General audited KNME’s financial records to determine whether the New Mexico PBS affiliate had (a) complied with CPB financial reporting guidelines, (b) complied with the Communications Act of 1934, and (c) expended CPB funds in accordance with grant requirements.

Related:  A lawsuit filed by Joanne Bachmann, former KNME general manager, says the University of New Mexico fired her for reporting that the school since 1992 had been siphoning millions of federal and state dollars intended for the station.  Bachmann worked at the station from 2001 to 2009.  The case is pending in Albuquerque District Court and will be examined in detail in a future New Mexico Watchdog report.

$130,000 Grant Funds to be Reclaimed

The CPB Insptector General found that KNME had overstated non-federal fund income of $1,059,026.  As a result of the overstatement, CPB made excessive payments to KNME in fiscal years 2010-2012 of $112,810.  The Inspector General has recommended that CPB recover those overpayments from KNME.

The Inspector General also found that KNME had improperly used CPB funds to pay a penalty of $18,000 when it failed to give a contractor–Nielsen’s rating service–notice within the period required by the contract.  Under the terms of CPB’s grant, the money could only be expended “to augment the station’s capability to expand the quality of its services to its community.”  KNME said that by incurring the penalty to cancel the contract it saved money that would have been spent over the original term of the contract.  The Inspector General said that incurring a contract penalty did not augment the quality of KNME’s service to the community.

KNME incorrectly reported hundreds of thousands of dollars in federal and state revenues and private charitable donations, according to the report.  Funds from non-profit organizations were reported as state revenues.  CPB funds were incorrectly reported as stimulus funds from the 2009 American Recovery and Reinvestment Act, even though KNME did not receive or disburse any ARRA funds.  KNME did not dispute this finding but has resisted the corrective action requested by the Inspector General.

The Inspector General found multiple instances of shoddy record keeping, such as inadequate documentation of in-kind donations, including complete failure to document that donations had actually been received.  In other instances, fees generated from services and private donations were classified as state revenues.

Noncompliance with the Communications Act

KNME has failed to comply with open meetings and open records requirements of the federal Communications Act, the Inspector General found.   In response, KNME officials said they were not completely aware of the various statutory requirements, including the requirement to prepare documentation to inform the public of what information is available for review and the methods they should use to obtain this information. KNME officials acknowledged the need to comply with these requirements and agreed to develop procedures that comply with the Act’s requirements.

The Inspector General found that KNME had been doing no more than placing a notice in the lobby of its offices in Albuquerque of upcoming board meetings.  Federal law, however, requires that notice be provided by three methods KNME had not been employing:

1. Notice placed in the “Legal Notices” or the radio and television
schedules section of a local newspaper in general circulation in the
station’s coverage area; or, notice is available through a recorded
announcement that is accessible on the station’s phone system; or,
notice is available through an announcement that is accessible on
the station’s web page.
2. Notice communicated by letter, e-mail, fax, phone, or in person to
any individuals who have specifically requested that they be notified.
3. On-air announcements on at least three consecutive days once
during each calendar quarter that explain the station’s open meeting
policy and provides information about how the public can obtain
information regarding specific dates, times, and locations.

“The station’s lack of compliance with the open meeting requirements deprives the public
of the required information envisioned by the Act,” the Inspector General wrote.  He issued three remedial recommendations:

a) Document that 7 days advance notice is given to the public of upcoming
meetings of the Board of Directors.
b) Make on-air announcements for at least three consecutive days once each
calendar quarter that explain the station’s open meeting policy and provide
information on how the public can obtain information regarding specific dates,
times, and locations of public meetings. Maintain documentation of station on-air
announcements aired, including the date and time of each announcement.
c) Establish written implementing policies on the station’s practices for all of the
Act’s requirements, including open meetings; maintaining open financial records;
making EEO information available to the public; and maintaining and protecting
donor information (pledge donor cards) addressing CPB’s minimum compliance
requirements.

In response, KNME’s Board has adopted open records and open meetings policies.  For the first time the station has been broadcasting quarterly on-air announcements running at least three consecutive days explaining its open meeting policy and how to obtain information on its next public meeting.

KNME Management Response

KNME acknowledged the accounting errors, but disputed the Inspector General’s recommendation that CPB be reimbursed for any grant funds. A sometimes vociferous response signed by KNME general manager Polly Anderson and Karen Mann, finance and administration director is attached to the report.  They complained that KNME was being made a “test case” by CPB for implementation of new policies.

The disputed issues remain unresolved pending action by the CPB  Board on the Inspector General’s recommendations.

Related report:  Public TV, Private Gain:  KNME’s General Manager Rakes It In