Summary: In response to a congressional request, GAO reviewed the financial operations of National Public Radio (NPR) and the significant financial crisis that it underwent in 1983 which culminated in the need to seek a loan of $7 million from the Corporation for Public Broadcasting (CPB). GAO found that the NPR financial problems occurred because the organization was not properly prepared for and failed in the ambitious plan by which it hoped to eliminate its need for Federal funds by 1988. NPR management operations were not properly structured to undertake the major expansion envisioned in the project. In addition, the NPR capability to raise funds from private grants and contributions had not been fully developed and, as a result, its grant revenue goals were not realized. The NPR financial position was not adequate to sustain the increased operations and commercial joint ventures if these activities did not begin producing revenues as planned. NPR did not have a formal contingency plan to compensate for any revenue deficiencies. Finally, NPR did not have a functioning financial management system to provide essential reports to enable management to monitor operations during a period when vital financial management decisions needed to be made. Since April 30, 1983, the peak of the crisis period, numerous changes and controls over operations have been instituted internally by NPR management, externally by CPB through the loan agreement, and on the advice of an accounting firm hired as a consultant, including: (1) drafting and implementing formal budget policies; (2) changing a number of administrative policies; (3) instituting revenue controls to tighten the billing and revenue collection procedures; (4) the adoption of improved purchasing controls; (5) strengthening of CPB oversight; (6) redrafting of NPR bylaws to incorporate control over the budget and internal control systems; and (7) implementing a new financial management information system. GAO found that NPR has made substantial progress in bringing operations under control and it concurred with the recommendations made by the consulting firm, the new NPR management, and the controls currently required by the CPB loan agreement. GAO recommended the completion of the implementation of these recommendations and regular review of the improved controls.
