Gov’t officials critical of nonprofit Friends units

By Karen Everhart

Ladies in red hats answering phones

In West Virginia’s state-operated network, as in many states, fundraising is a task shared by staffers and volunteers. Pictured: members of the Morgantown Red Hat society answer pledge calls during the June ‘09 drive.

Nonprofit fundraising arms of the state-owned network in West Virginia and the school-board-operated stations in Miami are under fire as public officials scrutinize longstanding financial relationships that underpin their operations.

West Virginia Public Broadcasting and Miami’s WLRN-FM/TV, like many other public radio and TV operations owned by state and local governments, rely on sister nonprofits, often called Friends groups, to raise as much as 40 percent of their annual budgets.

These private 501(c)(3) nonprofits around the country differ in many details but typically have separate governing boards and sometimes their own staffs.

A major reason for their existence is also cause for the complaints: They give pubcasters more flexibility and speed in purchasing and contracting than government procedures usually permit and they can pay for programming or other mission-related activities that the stations couldn’t otherwise afford.

Friends of WLRN, for example, was able to contribute funding to continue the station’s editorial partnership with the Miami Herald when the newspaper’s new owners were cutting costs in 2008, according to Janet Altman, chair of the friends group.

The nonprofits also help assure donors, as well as the stations, that contributions from “viewers like you” — and other private funds such as underwriting grants, major gifts and bequests — are spent on programming or other projects that donors intended to support.

“People are less likely to give to the Miami-Dade schools, because they’re concerned about where their money is going,” Altman said. “We are a separate organization with the exclusive mission to raise money for those stations. We do it really well and we intend to keep doing it.”

From the vantage point of political leaders and watchdogs of public spending, however, these nonprofits have the freedom to spend too freely and remain politically unaccountable for their decisions.

Reining in the Friends

That was the conclusion of auditors for the West Virginia legislature in a report June 9, charging that the public TV and radio network circumvents state regulations through its relationship with the Friends of West Virginia Public Broadcasting Inc. and the West Virginia Public Broadcasting Foundation Inc.

Anticipating the auditors’ criticisms, the Educational Broadcasting Authority on June 2 approved a motion to transfer most foundation underwriting revenues to state accounts. The vote occurred a week before the auditors’ report was released or discussed publicly, and the reasons for the transfer were not clearly explained, according to two EBA members who also serve on the foundation board.

Months earlier, the EBA transferred control of the networks’ CPB Community Service Grants to state accounts, according to minutes of the foundation board’s March meeting.

In Miami, the Friends of WLRN nonprofit is trying to resolve an ongoing dispute with Miami-Dade School Superintendent Alberto Carvalho over its accountability, compensation and staffing.

The superintendent seeks to restore earlier provisions of the Friends bylaws from 1993, including one that would let him appoint the top executive of the Friends group.

The Friends’ continued employment of Executive Director Rick Lewis has been a major sticking point in negotiations to establish an operating agreement between the Friends group and WLRN, according to public documents of the school board’s audit committee.

“Our focus is to bring the superintendent back to the comfort level they have had with us for more than three decades and that allows us to continue our work raising money in the community for WLRN,” said Altman. Contract talks, which missed tight deadlines set earlier this year, are near completion.

“We’re in the middle of negotiating an operating agreement with our Friends group, and we’ve never had one,” said John LaBonia, WLRN general manager. He described the new agreement as “part of our continually professionalizing operations of the station.”

“I don’t want to say anymore because I don’t want to affect the outcome,” LaBonia said.

No bonuses, no perks

In West Virginia, Gov. Joe Manchin III (D) already has a say in who runs the state public broadcasting system. Shortly after his election in 2005, he won passage of a law giving him control of the state Educational Broadcasting Authority. His appointed proxy as EBA chair, Secretary of Education and the Arts Kay Goodwin, established herself as a watchdog for pubcasting accountability during a 2001 clash over a salary sweetener for Rita Ray, then executive director of the state networks.

On top of her state salary of $60,000, Ray received $36,000 from the pubcasting foundation for her fundraising work, according to local news accounts of the controversy. The nonprofit gave Ray the supplemental pay to retain her after she had been offered a better-paying job, but the foundation’s bonus payments ended when Ray retired in 2007. She announced her plans to step aside shortly after Goodwin became EBA chair.

Manchin appointed her successor, Dennis Adkins, a veteran broadcaster who previously managed commercial stations in Charleston and Colorado. The governor selected him from a list of finalists recommended by the search committee, according to local press accounts.

But Adkins was taken to task for a perk in late 2007, shortly after he joined the network. Foundation funds were to provide a car for the new director, rather than requiring him to go through state procedures to be assigned a car from the state’s fleet. Objections by some foundation board members sent the vehicle, reportedly a Chevrolet Impala, back to the dealer.

Now, Adkins is preparing the network’s response to its first legislative audit since 2001, which objects to a fundraising partnership that has existed for decades.

While the Friends group in Miami employs development staffers who work on behalf of WLRN-TV/FM, fundraising at West Virginia Public Broadcasting is done by state employees, which concerns the state auditing team.

The auditors examined the relationships between the network, its foundation and friends group and concluded that the nonprofits’ bank accounts allow the network to circumvent state spending regulations and travel rules, reducing transparency about their spending and decision-making.

“The entities should operate as complete and separate entities with clearly defined and disconnected missions and financial accounts to protect the financial rights of the State and persons affected by the EBA’s activities,” the report said.

The auditors found no instances of fraud or misuse of funds but questioned the handling of meal expenses for employees when traveling and criticized the fundraising operations as inefficient.

When legislative auditor Aaron Allred and his staff presented their report to lawmakers June 9, the hearing became so contentious that Adkins didn’t have time to present his response. Another hearing is to be scheduled for mid-July.

West Virginia Public Broadcasting’s network of three public TV stations and nine radio stations looks to its development staff to raise $2 million to meet its $10 million operating budget, Adkins told Current. “If they don’t raise the money, how else are we supposed to raise it?” he asked. An end to fundraising activities and the revenues they bring in would require “drastic changes.”

Goodwin, chair of the EBA, did not respond to Current’s request for an interview, but endorsed transparency in an e-mail: “The Authority is, of course, reviewing all this information, appreciates the questions and the process, and will be working to answer any concerns with our organization. Our governor insists on accountability and transparent [government] processes, and we strive to comply!”

The auditors called for radical restructuring to bring pubcasting into compliance. The report recommended the EBA “discontinue all fundraising or soliciting activity by its employees,” but it did not address specifics of how private fundraising could continue. “We want a clear delineation between the state and the private entity,” said Allred in an interview.

“It is inappropriate for state employees on state time on state equipment to be running non-state entities,” Allred said. “It is not the role of government to run nongovernmental entities.” It makes no difference to donors if their money goes into government accounts, rather than those of the foundation, because they’ll still be tax-deductible charitable contributions, he said.

“When you donate to a foundation you have the situation that we found with the EBA — where they don’t follow state purchasing rules or comply with state travel regulations,” Allred explained. “The state has rules to ensure honest and fair bidding and that there’s no excessive travel reimbursements that these private entities do not have.”

Allred said the audit was a routine exercise of due diligence. “Our objective is to do an audit in compliance with generally accepted government accounting principles. My staff did that I’m proud they did that.”

But some pubcasting supporters are asking why the EBA board, in a meeting one week before the auditors’ report came out, rushed to transfer foundation monies to state accounts.

“Even those of us in the middle of it don’t know exactly what is happening or why,” said Debra Hamilton, an EBA member who also serves on the foundation board. “I just hope that everyone has good motives and doesn’t do anything to hurt public broadcasting.”

“Some of this money belongs to the foundation and there is confusion of which funds belong where,” said longtime lay leader Ann Brotherton, also a member of the EBA and foundation boards. Brotherton objected to the funds transfer and abstained from the EBA vote June 2. “This needs to be clarified before there is a wholesale moving of the funds — that is why I didn’t vote.”

Brotherton believes politics are behind the recent EBA decision, but she doesn’t question the integrity of the audit. “I understand they’re looking for more explanations as to how the money is handled, and we want to be responsible stewards. The auditors have every right in the world to put in their report what they saw,” and their view of pubcasting’s financial structure is understandably different than those who work on behalf of the stations.

The auditors’ input can end up strengthening the pubcasting system, she said, if people put aside their personal differences. “It just takes some cool, mature heads.”

Paid more than teachers

In Miami, minutes of recent meetings of the school board’s audit committee provide detailed accounts of Superintendent Carvalho’s criticisms of Friends of WLRN.

During a January meeting, Carvalho described compensation for Friends’ employees as “tantamount to insulting” in light of school salaries and the system’s budget problems, according to minutes.

Carvalho didn’t identify the employees he referred to, but cited compensation detailed on the nonprofit’s tax returns. Michael Peyton, a senior sales rep who receives a commission for sales performance, earned more than $315,000 in 2007. Rick Lewis and Patrick Harris, a corporate sales rep, earned more than $120,000 each, according to the nonprofit’s tax returns.

Carvalho also objected that the Friends staff rebuffed his requests for financial statements and other documents and disregarded his concerns about a proposed change to the nonprofit’s bylaws, according to the minutes.

By the end of the Jan. 26 meeting, representatives of the Friends had made several concessions: They would submit to an annual review of the nonprofit’s financial records by the school board’s audit committee and negotiate a formal operating agreement with WLRN. They also agreed to bylaw changes requested by Carvalho, but this is a point of continuing discussion, according to Altman.

“We’re going to have an agreement that gives him some level of control,” she said. “It’s not a bad thing that he be involved on some level . . . , but we’d prefer not to have it in the bylaws.”

The superintendent already has other means of overseeing WLRN, she pointed out. Its general manager, LaBonia, reports directly to the superintendent and is a member of the Friend’s board and its finance and executive committees.

The Friends board defends Lewis, the nonprofit’s executive director for six years. A recent audit committee document stated that “based upon Rick’s past and continued performance, [the board] cannot agree that Rick can or should be terminated or asked to resign as part of the process of creating and reaching an operating agreement.” The May 7 memo by the group’s treasurer, attorney Charles Tatelbaum, requested that Lewis’s employment be placed aside so that negotiations can focus on “constructive issues.”

The focus on Lewis’s job is “more of a personality issue than a personnel issue,” Altman said. “Rick and John have had issues…. That’s become more of an important thing in this than it should have. They’re both very talented, they just don’t mesh well.”

Lewis declined to comment.

Pay levels for WLRN fundraisers are “not really an issue anymore,” Altman said. “We’ve shared information about the work these sales reps do and how they’re compensated based on their results. They’re very successful … and contribute a lot of the money that we’re able to give to WLRN.”

A spokesman for the school board said the Carvalho administration’s intent is to be a “good steward” of the public’s dollars. “When the whole issue of Friends of WLRN came before the audit committee, … it became apparent that work needs to be done to ensure that the dollars raised in support of WLRN are doing just that — maximizing the benefits of public television and radio for the public.”

READ | WRITE

On Friends groups and pay levels: Miami producer Stephen Malagodi objects to $250,000 salaries of top fundraisers when content makers earn a fraction as much.

Questions, comments, tips? karen@current.org

Clarification: The state network’s sister foundation continued to provide a supplemental salary for Rita Ray, former WVPB executive director, until her retirement in 2007.

Correction: An earlier version of this article incorrectly stated that the West Virginia EBA board recommended Dennis Adkins to Gov. Manchin as its top candidate for executive director of West Virginia Public Broadcasting, and the governor approved the choice. But a correction in the local press said an EBA search committee presented two options without expressing preference, and Manchin chose Adkins, according to a local news account and other sources.

RELATED LINKS

While other school boards are laying off hundreds of educators, the Miami school system recently proposed to avoid teacher layoffs, according to the Miami Herald. Since he took charge of Miami-Dade schools in Sept. 2008, Superintendent Carvalho has cut $400 million in school spending.

Minutes of Miami-Dade school board’s audit committee, Jan. 26, 2010. See item No. 4.
An audit of the Educational Broadcasting Authority in West Virginia (PDF) released to state legislators June 9 concludes that the state public broadcasting network is circumventing state spending regulations by operating two supporting nonprofits with separate bank accounts.

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