Mr. VAN DEERLIN. Mr. Swift.

Mr. SWIFT. I wanted to ask one brief question with regard to the accounting principles. Can you anticipate any serious problems in setting those up?

Mr. FLEMING. May I ask Mr. Cardwell, who is the vice president of management and information?

Mr. CARDWELL. I think there will be problems. I think it is very difficult to undertake, as we said earlier. There is not established within the accounting profession itself, or among various nonprofit institutions, a set of national uniform accounting principles that are applied in the accounting practices in such institutions. This includes large colleges and universities, and governmental agencies at the State and local level.

Colleges and universities have tended to evolve their own set of principles, and one of the problems we think we will encounter which will be most difficult to solve will be the case of the station that is the subunit of the colleges or universities, with the universities holding the license. We are going to have to try to evolve some bridges between accounting principles we may establish for public telecommunication entities and the principles that that college or university may be practicing.

That is going to be a very difficult hurdle to overcome. We do not think it is insurmountable, but that is one of the areas of difficulties we anticipate.

It so happens, and I think this is fortunate for this particular objective, that the American Institute of Certified Public Accountants has now for several years been working on a set of accounting principles that they have now under consideration for application by the profession to nonprofit organizations. There again, that is an area where we will have to build some bridges.

Very frankly, we assume that their work will provide a significant base for the work we are trying to do. One of the requirements that we will impose on a contractor who does this work for us is that he establish a relationship, a liaison, with the AICPA for that purpose.

I do not want to paint a picture of something insurmountable, but on the other hand, I want to make quite clear that this is a difficult undertaking, particularly, too, when you realize that many of the stations to which these will be applied are very small. They do not have well-established business practices to begin with, and in many cases, quite frankly, they lack an appreciation of why such practices are necessary.

They see themselves as having very limited resources. They tend to think first of applying those resources to broadcasting, and only secondarily to business management. And here is a requirement that they see coming at them which would require them to apply some of those resources to business management. I must say I am not sure they all appreciate the gains we think will follow.

So we have a very difficult job, I think, to try to indoctrinate and help develop staff and capacity at the local level as well as to establish standards. In the final analysis, establishing the standards is only the first step. Their application by the public telecommunications entities, essentially on a voluntary basis, is the ultimate.

Mr. SWIFT. Thank you.

Mr. VAN DEERLIN. Mr. Mottl.

Mr. MOTTL. Thank you, Mr. Chairman.

Mr. Fleming, this may not be the subject of this hearing, but I just wondered if you had any thoughts on the Carnegie report as far as the financing of public television to the licensure of the spectrum of television stations, and also the cable televisions.

Mr. FLEMING. I have said publicly that the idea of a spectrum fee seems to me to be both a reasonable and equitable idea. I like the fact that it is not in the rewrite bill proposed as a designated tax, that it is a general revenue measure rather than specific tax for

this purpose.

Otherwise, as to the mechanics of it and exactly how one applies it, I have not tried to think about or work on that. I have only thought in terms of the general idea.

Mr. MOTTL. You do agree with the concept that commercial television, cable television, should help pay for public television. Mr. FLEMING. I think that the idea of a tax on the use of the spectrum for the commercial segment is a reasonable idea.

Mr. MOTTL. Thank you very much, Mr. Chairman.

Mr. VAN DEERLIN. Thank you.

Are there any further questions for Mr. Fleming?

Mr. COLLINS. I would like to ask a couple, Mr. Chairman.
Mr. VAN DEERLIN. Mr. Collins.

Mr. COLLINS. Have you been successful in any programs which have been prepared by the corporation in selling those? Has the corporation sold any? We buy them from England. Do any of our programs have any demand? Does anyone want to buy our programs?

Mr. FLEMING. There are, of course, American programs. When you say "ours," do you mean the public broadcasting segments? Mr. COLLINS. I am talking about the ones you have given grants for, that you have financed.

Mr. FLEMING. I would have to refer to some of those with longer experience than I on the names of those programs.

Mr. LINN. We do not have the rights, Mr. Collins, but Sesame Street has been very successful.

Mr. COLLINS. Why should you put up money for grants and not own the shows? In other words, let's put it this way. If a guy works for the Ways and Means Committee and prepares the tax law, he doesn't get a royalty on all the taxes the country collects.

Mr. VAN DEERLIN. That is an interesting idea.

Mr. COLLINS. If we give money for grants, it would seem to me that they should belong to the foundation, and in turn create a permanent endowment for you. Why should they own them if we paid for you?

Mr. FLEMING. Mr. Linn.

Mr. LINN. Presently the corporation negotiates for every single program funding contract it enters into. And by the way, we do not have any editorial control over those programs. It is a funding support for a program that is produced by either an independent or a station, and the station controls the editorial content.

However, we do enter into a rights agreement with the stations that secures for us-and not for the corporation but for the use of

public telecommunication entities, stations throughout the country-the rights to rerun those programs. We negotiate the best rights arrangement we possibly can, sometimes up to 3 years. Mr. COLLINS. Let me go into another subject. It has been suggested in this new bill being considered that we move toward one-third of the funds going to PBS. You say they now get 58 percent, and I would think it would be better to give 95 percent, probably, to PBS. How do you justify keeping two-thirds in the corporation? How do you justify this additional funding coming into the corporation? Mr. FLEMING. Are you talking about the new bill?

Mr. COLLINS. The new bill. But you will be moving toward that if

we

Mr. FLEMING. No. What we would be moving toward under the present system is what the present congressional mandate to us is. Mr. COLLINS. That is only 50 percent.

Mr. FLEMING. Yes.

Mr. COLLINS. Would you be moving toward reducing from 58 to 50?

Mr. FLEMING. Yes, but the reason for that is to attempt to achieve your other congressional mandate, which is that we expend at the CPB 25 percent of our funds for programing purposes. We cannot do both at this point in time. What the proposal we have made to our board attempts to do is to say, well, let us try to follow the congressional mandate that we send out at least 50 percent to the stations and that we spend 25 percent on programing out of CPB.

Now, if you do that you have got to change some internal allocation. That is what the proposal said.

Mr. COLLINS. One other one. In section 396 of the bill we passed last year, it called upon you to concentrate your activities. I think they used the word "minimize administrative costs."

Mr. FLEMING. Yes.

Mr. COLLINS. And you are coming in fresh, and I really do not know the general structure. I am just speaking objectively. But I was in business a long time and I cannot imagine how they would need over $1.25 million to administer the allocation process. In other words, I can't figure out what they are doing with all those people down there.

Mr. FLEMING. At CPB are you talking about?

Mr. COLLINS. Yes, I am. Has CPB ever had a GAO review? Mr. FLEMING. Yes.

Mr. COLLINS. And what did they say?

Mr. LINN. They said we were up to shape.

Mr. COLLINS. On what?

Mr. LINN. The last GAO review, I think, was

Mr. FLEMING. Mr. Cardwell will explain it.

Mr. CARDWELL. I think we need to try to break down the figures that have been used in the discussion so far. We talked about something called an administrative budget of $8 million.

Mr. COLLINS. That is right.

Mr. CARDWELL. That sounds like a very high figure to you, as well it should. I tried to point out in the answer, but I think it got lost, that included in that amount is the money that goes to the conduct of research on technological changes and developments in

the industry as they may be applied to public broadcasting, the gathering of statistics and data about audience preferences and listening and viewing practices, the training of manpower at the station level, the development of broadcasting and management capacity at the station level.

Normally I would not think of any of those things as being overhead in the business sense. Something less than $3 million of that $8 million is going for what you would normally think of as routine, regular administrative expenses associated with business management, general direction and leadership of the organization. Mr. COLLINS. Thank you. There is one other subject I have never understood, and that is how this volunteerism got into the matching funds formula, how do they justify volunteer efforts. And I certainly encourage that. I think it is the greatest thing and we ought to encourage it in every way, but I don't see how you get that into a matching dollar formula. To what extent are you all doing that?

Mr. FLEMING. We at CPB don't do it at all. It is out in the stations where they do it.

Mr. COLLINS. Do you determine the policy? Do you have anything to do with the policy?

Mr. FLEMING. Congress accepted the concept of a value placed upon volunteer services, and then you said to us: You find out now how to value those. We have got an accounting firm working now on how to evaluate such services, and we have got a large committee that has been studying that problem. They are about to come forth with a report. Fairly obviously, what they will attempt to do is to see what kind of categories of work those volunteers are doing and then place a unit value on those. Those then count against the match.

Mr. COLLINS. Thank you, Mr. Chairman.

Mr. WIRTH [presiding]. Thank you very much, Mr. Collins.

For the record I would like to enter just one other question related to public radio if I might, Mr. Fleming. The subcommittee and the conferees had, as I remembered, settled on a figure of approximately 25 percent of support from funds going to public radio, and I was hoping you might submit for the record first where we are at this point, what you are planning for fiscal years 1980 and 1981, and what your long-term plans are for support for that quickly expanding and, I think, very valuable public radio we have in the country.

Mr. FLEMING. My understanding of that, Mr. Wirth, is that in fact the 25-percent goal was in the House committee report as that went through. As it came through ultimately in the agreed version in the conference between House and Senate, that language disappeared. There is now no formal commitment to that kind of figure, and we would be glad to submit to you the language as we follow it through.

[The following material was received for the record:]

RESPONSE OF THE CORPORATION FOR PUBLIC BROADCASTING TO QUESTIONS POSED BY CONGRESSMAN WIRTH

Several issues have been raised by National Public Radio regarding CPB's interpretation of certain provisions of the Public Telecommunications Financing Act of 1978 (PTFA), as they relate to public radio. Specifically. NPR believes that the

legislative history provides that approximately 25 percent of CPB's annual budget for radio and TV by fiscal year 1981 should be allocated to public radio.

NPR's position stems from relationship established between Section 396(k)(3)(B)(iv) which directs CPB:

"In determining the amounts of funds which shall be made available for radio programming and operations under this subparagraph, the Corporation shall take into account the increased financial needs relating to radio programming and operations resulting from the expansion and development of noncommercial radio broadcast station facilities through the use of funds made available pursuant to Section 393(d).”

And that portion of the PTFA dealing with the Public Telecommunications Facilities Program which provides in Section 393(d):

"Of the sums appropriated pursuant to section 391 for any fiscal year, a substantial amount shall be available for the expansion and development of noncommercial radio broadcast facilities."

NPR contends that the language in 396(k)(3)(B)(iv) should be interpreted by relying on the language found in the report of the House Committee with respect to both the CPB title of the PTFA and the facilities title.

The House version of the bill contained language for 396(k)(3)(B)(iv) which was identical to the final statutory language. However, the House version of Section 393(d) read:

"Of the funds appropriated pursuant to Section 391 for any fiscal year, not more than 25 percentum shall be available for the expansion and development of noncommercial radio broadcast station facilities."

NPR argues that these two provisions are tied together by a portion of the House report which comments on what was then 393(k)(3)(B)(iii):

"Under the new facilities program, the Committee is authorizing nearly twice as much for radio facilities over the next 3 years as was appropriated over the last 8 years combined. The Committee's amendment to Section 396(k)(3)(B)(iii) provides that the Corporation is to insure a level of funding for radio programming commensurate with the expansion in facilities. The two must be viewed as directly linked. Accordingly, it is the Committee's hope that over the duration of this legislation the Corporation will increase (to approximately 25 percent) the share of its funds it provides public radio through both the CSG's and the programming grants to NPR and other producing entities." (Housing report at page 26).

However, NPR overlooks a critical paragraph in the same document from which they seek support the House report. The first paragraph in the report commenting on 396(k)(3)(B)(iii) states explicitly:

"Paragraph (3) of subsection 396(k) also is amended to direct the Corporation to take into account the increasing financial needs of radio in determining the division of funds between radio and television. No particular percentage is specified because it is intended that the Corporation should retain the flexibility to assess and respond to needs which may change from year to year." (Italics added.) (House report at page 26).

This Congressional intention, flexibility for CPB in the allocation of funds, was codified in 396(k)(3)(B)(iii) and, as indicated above, survived the conference to appear unchanged in the final bill. The need for CPB discretion in this area has thus remained consistently recognized by the drafters.

The 25 percent requirement for funds for the expansion and development of facilities for radio did not fare as well. In the conference, where no Senate position on the matter was represented, the House managers receded from their provision of a specified 25 percent funding level, and agreed with their Senate counterparts that: a priority of this program should be to strengthen public radio through the provision of adequate levels of funding for expansion and development. While the conferees agree that a specific set-aside would remove necessary discretion in the administration of the program, the conferees expect that the funding received by public radio should approximate the percentages received during fiscal years 1977 and 1978, or should be greater if eligible radio expansion and development applications so justify. In addition, the conferees expect that the Secretary of Commerce will coordinate activities in this area with those of the Corporation for Public Broadcasting." (Conference report at page 25.)

Thus the nondiscretionary limit of 25 percent was eliminated from the facilities provisions and replaced with the words "a substantial amount." It is clear from the legislative history that this 25 percent level was the nexus between the facilities title in the bill and the CPB budget section. Accordingly, the House Report language relating to a specific percentage applicable to the CPB budget was vitiated, so as to give the Corporation flexibility in determining the amounts of its funds to be allocated to radio and television. In any event, the language guaranteeing CPB