Open financial records requirements

I. THE LAW

A. Section 396(k)(5) of the Communications Act provides that:

"Funds may not be distributed pursuant to this subsection to any public telecommunications entity that does not maintain for public examination copies of the annual financial and audit reports, or other information regarding finances, submitted to the Corporation pursuant to subsection (l)(3)(B)."

B. Section 396(l)(3)(B) of the Act requires that each public telecommunications entity receiving funds from CPB shall be required:

"(i) to keep its books, records, and accounts in such form as may be required by the Corporation;

"(ii)(I) to undergo a biennial audit by independent certified public accountants or independent licensed public accountants certified or licensed by a regulatory authority of a State, which audit shall be in accordance with auditing standards developed by the Corporation, in consultation with the Comptroller General; or

"(II) to submit a financial statement in lieu of the audit required by subclause (I) if the Corporation determines that the cost of such audit on such entity is excessive in light of the financial condition of such entity; and

"(iii) to furnish biennially to the Corporation a copy of the audit report required pursuant to clause (ii) as well as such other information regarding finances (including an annual financial report) as the Corporation may require."

C. 1. Section 397(12) of the Act defines the term "public telecommunications entity" as:

"any enterprise which-

"a. is a public broadcast station or a noncommercial telecommunications entity; and

"b. disseminates public telecommunications services to the public."

2. Section 397(7) of the Act defines the term "noncommercial telecommunications entity" as: "any enterprise which-

"a. is owned and operated by a State, a political or special purpose subdivision of a State, a public agency, or a nonprofit private foundation, corporation,

"b. has been organized primarily for the purpose of disseminating audio or video noncommercial educational and cultural programs to the public by means other than a primary television or radio broadcast station, including but not limited to, coaxial cable, optical fiber, broadcast translators, cassettes, discs, microwave, or laser transmission through the atmosphere."

3. Section 397(14) of the Act defines the term "public telecommunications services" as

"noncommercial educational and cultural radio and television programs, and related noncommercial instructional or informational material that may be transmitted by means of electronic communications."

II. INTERPRETATIONS

A. Effect

The provisions of the law in Section I.A., above, prohibit CPB from distributing its federally appropriated funds to any public telecommunications entity unless that entity allows public examination of any annual financial reports filed with CPB, any audit reports or financial statements on the financial condition of the station performed in compliance with Section 396 (l)(3)(B) (which requires at least a biennial audit or, under certain circumstances, a financial statement), and any other information regarding finances that CPB may request of an entity under Section 396 (l)(3)(B). The open records requirement applies to public telecommunications entities that offer public telecommunications services to the public, as those terms are defined in Section II.C., above. It does not apply to PBS, NPR, or independent production entities.

B. Exceptions

1. Financial information provided to CPB to accompany a proposal for funding need not be made available for public inspection before the proposal is accepted for funding by CPB. After acceptance by CPB for funding, the financial information should be made available to the public at the station as a part of the CPB funding agreement. Proprietary information may be withheld. If the proposal is rejected by CPB, it need not be made available for public inspection.

2. Financial support information required by Section 396(l)(3)(C) - (D) to be kept by recipients of CPB funds to substantiate a CPB or U.S. General Accounting Office audit is not subject to the open records requirement.

3. Any financial records that deal with personnel matters and that would be kept confidential under the provisions of the Privacy Act of 1974 (5 U.S.C. 552a), also would not be required to be made available for public inspection.

C. Result of Noncompliance.

The law provides that CPB may not distribute any of its funds to any public telecommunications entity that does not maintain for public examination copies of the records referred to in this provision.

III. MINIMUM COMPLIANCE REQUIREMENTS

All public telecommunications entities must make the following types of records available for public inspection:

A. Annual financial reports filed with CPB;

B. Audited statements or other financial statements filed with CPB. These include the reports from CPB required audits conducted by independent certified public accountants or state-certified independent public accountants, according to the CPB adopted audit standards, and the financial statements which CPB may permit to be submitted in lieu of such audit reports under certain circumstances; and

C. Other information regarding finances submitted to CPB related to any funding agreement with CPB that requires a financial report.

IV. SUGGESTIONS FOR COMPLIANCE

A number of mechanisms are available to comply with these provisions. While the choice of mechanism is left to each grantee's discretion, each grantee should choose the method it believes best accommodates the public.

The basic question is how to make the reports available. Because all stations must maintain a public inspection file by FCC rule, one alternative would be for a station to include publicly available financial records in the same location as this public file for convenient reference. If this information is kept in a different place, the documents should be maintained in a readily accessible location. Another alternative would be for a station to make this financial information available on the station's web site, with arrangements available for providing individuals with this information if they are unable or unwilling to use the Internet to access this information. In any event, arrangements for photocopying the financial records, at cost, could be made in a manner similar to the arrangements for reproducing other documents in the public file. In this regard, the station should refer to FCC regulations. It would not be unreasonable to require an appointment with the station to review the financial reports as long as the process is not burdensome to the public. Stations should note that this is a separate requirement from the FCC's public inspection files requirement. As such, stations should consult the FCC's rules for its provisions pertaining to the public's access to the FCC mandated public inspection file.

V. CPB PROCEDURES FOR COMPLIANCE AND CERTIFICATION

A. Documentation

1. Each station, after reviewing the above information, is to develop documentation indicating the manner of compliance with this requirement. This documentation shall contain information that will indicate, for example, the type of records made available for public inspection (by specific description), the mechanism by which the records are made available (and, if appropriate, the location of these records), the arrangements made for reproduction of the documents by members of the public, and any limitations placed on access to the file by the entity.

2. The documentation shall be kept at a reasonable location by each station and be made available to CPB, upon request, to determine the fact and extent of compliance. The documentation shall also be available to CPB auditors upon request in the course of a periodic audit

B. Certification

1. CPB currently requires that each recipient of a CPB station grant certify its continued compliance with the open records requirements. This annual certification is part of the Certification of Eligibility form(s) which are included in the Integrated Station Information System ("ISIS") and must be filled out by each CPB station grantee.

2. All such Certification of Eligibility forms must be completed in their entirety and executed by two different individuals: (1) an authorized official of the licensee responsible for executing grants and/or contracts for the licensee who has knowledge and authority to certify that the licensee and its station meet or exceed each of the eligibility criteria listed in the Certification of Eligibility (e.g., chairman, treasurer or secretary of the board of directors, university vice president for finance, president of the school board); and (2) the chief executive officer in charge of the operation of the station (e.g., president, general manager, or station manager).

Contact CPB

If you have questions about these guidelines, please send an e-mail to West Smithers, or call (202) 879-9805.

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