Valley PBS is on the hook to reimburse the Corporation for Public Broadcasting nearly $300,000 in community service grant overpayments as well as pay nearly $39,000 in penalties.

The financial hit to Valley PBS comes after CPB upheld an audit that detailed problems with the station’s financial recordkeeping and noncompliance with the Federal Communications Act and CPB Transparency requirements.

The audit of the station from July 1, 2019, through June 30, 2021, had been prepared by CPB’s Office of the Inspector General and released as a draft in January but was finalized after CPB’s review of the audit and the station’s responses.

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It marks the first time since the station was founded in 1977 that Valley PBS, also known as KVPT, has had to repay CPB grants and incurred penalties. It also appears to be the first time the station faced the scrutiny of the Office of the Inspector General.

In an April 21 letter to station president and CEO Jeff Aiello, CPB’s deputy general counsel and vice president for compliance, Jackie J. Livesay, said the CPB was overruling the objections the station had raised to the audit’s findings.

Some of those problems had been earlier reported by GV Wire in a story detailing the turmoil that had beset the station. Among the issues: a revolving door of CEOs and chief financial officers, massive staff cuts, a too-small board of directors, lack of transparency, and promotion of ag interests in local programming.

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Grant Allocation Will Be Cut

The CPB said Valley PBS will lose a portion of its fiscal year 2024 community service grant allocation equal to the overpayments identified in the audit that totaled $294,456.

That’s nearly one-third of what the station typically receives annually, according to an email sent out last week by Aiello.

In his email to station viewers and supporters, Aiello acknowledged the station is taking a financial hit after the CPB audit detailed how the station had incorrectly claimed some revenues as nonfederal financial support.

The Corporation for Public Broadcasting factors in a station’s nonfederal financial support when calculating the station’s annual community service grant. Presenting fees are paid by a show producer to a station to serve as the show’s “presenting station,” which can help the producer sell the show to other stations.

As to how the errors cited in the audit occurred, Aiello wrote in the email: “Several errors and misconduct in practices by former station management were found. Most of the issues revolved around a lack of understanding of the rules set forth by the CPB, over-reporting of non-Federal funds, and basic accounting and business practices that lacked the transparency and detail needed by the CPB to fully access the CSG award.

“As I’ve said to our friends at the CPB in charge of this audit, I’m personally thankful Valley PBS went through this process. It needed to happen. Weak management and outdated business practices needed the full focus of an audit like this to get Valley PBS back on the right track.”

Aiello noted that the station has taken corrective actions, including hiring NETA Business Center for its main financial accounting. NETA is the National Educational Telecommunications Association, and its Business Center specializes in providing accounting services for public broadcasting outlets.

The overpayments found in the 2019-21 audit totaled $214,339. In addition to requiring the station to reimburse those overpayments, CPB required the station to review two prior fiscal years in 2018 and 2019 for similar errors. The station provided documentation of misreporting an additional $80,117, raising the overpayments to $294,456.

Overpayments Come with Penalties

The CPB also fined the station 10% of the overpayments, for a total of $29,446.

In addition, the CPB levied $13,000 in penalties because of noncompliance with CPB regulations requiring the annual audit be posted on the station website, failing to post employment statistics, failing to update its diversity statement, failing to provide annual harassment and bias prevention training, and failing to use unique accounting codes to track community service grant expenditures.

Three of the five penalties were halved in recognition of the station’s actions to become compliant, reducing the noncompliance penalties to $9,500.

The station has 45 days from the April 21 letter to pay the penalties, which altogether total $38,946.

In response to queries from GV Wire, Aiello said Wednesday morning in a text message that the station has set aside reserves and is taking “other expense management measures” to compensate for the upcoming reduction in CPB funding. He also said that the reductions would not impact programming.

The station has enough cash on hand to pay the penalties by the 45-day deadline, and the payments will not come from viewer donations or pledge support, he said.

Aiello said that the audit was the first full audit by the Inspector General’s Office “to my knowledge” and identified items that had been previously cleared by CPB desk audits.

As for the business practices that Aiello had criticized in his email last week, “the practices in place prior to 2017 and later adopted by subsequent administrations lacked the detail and transparency required by the CPB,” he said in Wednesday’s text message. “My team and I have updated those practices and our corrective actions have been accepted by the CPB.”