PUBLIC BROADCASTING SERVICE AND SUBSIDIARIES

2019-001 Allowable Costs and Cost Principles Information on Federal Program ? U.S. Department of Commerce ? WARN ? Public Broadcasting Service CFDA Number: 11.553 Grant Award Number: 51-51-W10606 Criteria ? In accordance with OMB Circular A-122, Cost Principles for Non-Profit Organizations, direct costs are those costs that can be identified specifically with a particular Federal award with a high degree of accuracy. A cost is allocable to a particular Federal award if the goods or services involved are chargeable or assignable to that Federal award in accordance with the relative benefits received. This standard is met if the cost benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods. Condition ? During our testing of allowable and allocable expenditures, BDO identified two instances in which rent and utilities for the month were charged based on budgeted expenditures instead of actual expenditures, which were allocated using the full-time headcount equivalent. Cause ? The Company did not have a policy in place during the audit period to compare budgeted to actual rent and utility expenditures to determine if a true up was necessary. Effect or Potential Effect - Without a process to ensure that actual costs are being allocated to Federal and non-Federal grant programs, the Company risks overcharging the grant programs. There is a risk that budgeted rent and utility expenditures could be charged to the grant in excess of actual expenditures. Questioned Costs ? No questioned costs or likely questioned costs were identified. The rent and utility expenditures billed to the Federal grant for fiscal year 2019 was less than actual expenses incurred. Context ? This finding was identified during testing of the Company?s compliance with specified requirements of allowable costs. The sample was selected using a non-statistical method. Two instances out of a sample size of 12 were identified. Upon further investigation, it was determined that the allocation of budgeted expenditures was to a limited number of private and Federal grants. Furthermore, we noted that rent and utilities expense was the only expense that the Company allocated using budgeted expenditures. Recommendation ? We recommend that management establish formal policies, procedures and a review process to ensure a true up analysis is performed at year end for its rent and utilities expenditure allocation. Views of Responsible Officials and Planned Corrective Actions - We agree with the auditor?s comments, and the following action has been implemented to ensure a true up analysis is performed on allocated rent and utilities for both Federal and non-Federal grant programs. Beginning July 1, 2019, the Company implemented a policy and procedures to allocate actual rent and utilities expense quarterly based on the proportion of actual grant headcount over the Company?s total actual headcount. For the first quarter ending September 30, 2019, the Company allocated rent and utilities expense on actual expenses incurred prior to receiving BDO?s finding. The Company will require that finance and accounting staff receive training to ensure adherence to all requirements.

2019-001 Allowable Costs and Cost Principles Information on Federal Program: U.S. Department of Commerce ? WARN ? Public Broadcasting Service CFDA Number: 11.553 Grant Award Number: 51-51-W10606 Repeat Finding: No Auditee?s Corrective Action Plan: We agree with the auditor?s comments, and the following action has been implemented to ensure a true up analysis is performed on allocated rent and utilities for both Federal and non-Federal grant programs. Beginning July 1, 2019, the Company implemented a policy and procedures to allocate actual rent and utilities expense quarterly based on the proportion of actual grant headcount over the Company?s total actual headcount. For the first quarter ending September 30, 2019, the Company allocated rent and utilities expense on actual expenses incurred prior to receiving BDO?s finding. The Company will require that finance and accounting staff receive training to ensure adherence to all requirements. Contact Person: Meghan Biggs Phone number: 703-739-7516 Completion Date: June 30, 2020