CHARLESTON, W.Va. -- The West Virginia Educational Broadcasting Authority is breaking state purchasing rules because it pays for agency expenses with money from two private fundraising organizations that aren't regulated, according to a legislative audit released Wednesday.
Employees of the EBA, which oversees public radio and TV, are essentially running two 501(c)(3) nonprofits on state time, the audit says. The corporations are the Friends of West Virginia Public Broadcasting and the West Virginia Public Broadcasting Foundation.
"We think that this state agency ... has mixed private business -- which is what the 501(c)(3)'s should be -- with state business," Legislative Auditor Aaron Allred told lawmakers. "There needs to be a clear delineation."
The Friends group was created in 1979; the foundation was created in 1992.
The current set-up has led to the circumvention of state purchasing and travel regulations, and to a general lack of transparency, auditors say.
"The EBA's use of the Friends and Foundation bank accounts prevents it from being totally transparent," auditors wrote. "Millions of dollars of the agency's expenses are paid from these outside accounts without oversight by the State."
The audit says state law dictates that funds raised by the two groups should be deposited into state coffers, rather than the groups' bank accounts.
Auditors didn't find purchases that seemed fraudulent, but they say they discovered some expenses that are prohibited by state regulations, and that the agency has skirted purchasing rules.
For instance, in 2006, the EBA paid a firm more than $74,000 for a marketing plan and other services without going through the state Purchasing Division.
Auditors contend that the Purchasing Division should have overseen the contract process. Even though the Friends and the Foundation paid for the services, the EBA's director signed the contract.
Also, the EBA has circumvented state travel regulations because it has access to the nonprofit accounts, which aren't regulated by the state, auditors wrote. Between fiscal years 2008 and 2010, about 12 percent of claims for meals by EBA employees violated travel regulations.
Auditors also say that the Friends account "has an extremely high cost of fund-raising." In fiscal year 2008, it cost them 58 cents to raise each dollar.
CHARLESTON, W.Va. -- The West Virginia
Educational Broadcasting Authority is breaking state purchasing rules because it pays for agency expenses with money from two private fundraising organizations that aren't regulated, according to a legislative audit released Wednesday.
Employees of the EBA, which oversees public radio and TV, are essentially running two 501(c)(3) nonprofits on state time, the audit says. The corporations are the Friends of West Virginia Public Broadcasting and the West Virginia Public Broadcasting Foundation.
"We think that this state agency ... has mixed private business -- which is what the 501(c)(3)'s should be -- with state business," Legislative Auditor Aaron Allred told lawmakers. "There needs to be a clear delineation."
The Friends group was created in 1979; the foundation was created in 1992.
The current set-up has led to the circumvention of state purchasing and travel regulations, and to a general lack of transparency, auditors say.
"The EBA's use of the Friends and Foundation bank accounts prevents it from being totally transparent," auditors wrote. "Millions of dollars of the agency's expenses are paid from these outside accounts without oversight by the State."
The audit says state law dictates that funds raised by the two groups should be deposited into state coffers, rather than the groups' bank accounts.
Auditors didn't find purchases that seemed fraudulent, but they say they discovered some expenses that are prohibited by state regulations, and that the agency has skirted purchasing rules.
For instance, in 2006, the EBA paid a firm more than $74,000 for a marketing plan and other services without going through the state Purchasing Division.
Auditors contend that the Purchasing Division should have overseen the contract process. Even though the Friends and the Foundation paid for the services, the EBA's director signed the contract.
Also, the EBA has circumvented state travel regulations because it has access to the nonprofit accounts, which aren't regulated by the state, auditors wrote. Between fiscal years 2008 and 2010, about 12 percent of claims for meals by EBA employees violated travel regulations.
Auditors also say that the Friends account "has an extremely high cost of fund-raising." In fiscal year 2008, it cost them 58 cents to raise each dollar.
That's compared to a nationwide average of 20 cents per dollar for public broadcasting and media charities, according to the audit. Between 2002 and 2008, the Friends contributions and revenues have decreased while expenses increased.
The report recommends that the EBA stop providing office space and administrative support for the Friends and the Foundation. It also says EBA employees shouldn't solicit donations for the nonprofits.
About 56 percent of EBA funds comes from the state, and 5 percent comes from the federal government. Private funds make up 39 percent.
On Wednesday, several members of the legislative committee questioned how the EBA would raise money without employees' help. Employees, in addition to volunteers, often participate in on-air pledge drives.
After the legislative meeting Wednesday, EBA Director Dennis Adkins said he is concerned about that, too.
"We could do pledge drives, but could we find the people who have the talent to go on air and go on TV?" he said.
Adkins is scheduled to present his agency's response to the audit at a legislative meeting in July.
Last week, the EBA board voted to transfer certain money raised by the Foundation to the state's accounts. Beginning July 1, support from private corporations and other groups will be transferred directly into the EBA's accounts, rather than the Foundation's.
Supporters of the transfer, including Secretary of Education and the Arts Kay Goodwin -- who is Gov. Joe Manchin's designee on the EBA -- said it was in response to the legislative audit, which board members received before the report was released to the public
However, several board members questioned the move, saying it was rushed. Some also questioned whether it would give the Manchin administration too much control over the accounts. In 2005, the governor secured legislation to make him, or a person he appoints, chairman of the EBA and other state boards.
@tag: Reach Alison Knezevich at alis...@wvgazette.com or 304-348-1240.
