AETN told to repay misused state funds

Audit flags program’s $409,092 outlay

CONWAY — The Arkansas Educational Television Network must pay back nearly half-million dollars in state grant funds that was misused and as a result will be categorized as a “high risk entity,” according to an audit released Friday by the state Department of Education.

The negative findings for the network in Conway comes on the heels of a separate legislative audit in the spring that showed numerous violations.

The Education Department had granted AETN about $2.8 million in fiscal 2019, which ended June 30, to fund the network’s Internet Delivered Education for Arkansas Schools program, also known as IDEAS. The department began investigating after receiving an anonymous tip May 20 alleging misdirection of grant funds.

The audit review report — given to the Arkansas Democrat-Gazette by the department in response to an Arkansas Freedom of Information Act request — found that $409,092 was spent by the network in “non-project related disbursements and

unallowed disbursements” from the grant.

“We at AETN believe that we have operated the Arkansas IDEAS program in the best interests of all educators in the State of Arkansas and that we were following previous guidance,” network Executive Director Courtney Pledger said in an email. “However, we are open to new and revised guidance to continue to operate the highly successful IDEAS program to the benefit of all teachers, administrators and other educators within the State of Arkansas.”

AETN Commission Chairman Skip Holland said the audit report does not at this point “rise to the level” of needing to call a special meeting of the commission. The audit will be on the agenda for its December meeting in Jonesboro.

“We, no doubt, will take notice of the issues that were raised in that audit,” Holland said. “There are probably some extenuating circumstances that we need to delve into and determine if in fact there are any identifiable actions that appear to be consistent with a behavior that will not represent AETN.”

STAFF DEVELOPMENT

The AETN program allows kindergarten-through-12th-grade teachers and administrators to receive Education Department-approved professional development.

The program is in its 14th year. It was created under Act 2318 of 2005, which set up the Arkansas Online Professional Development Initiative.

“All courses are designed to align with the standards and curriculum for K-12 Arkansas licensed educators to maintain required annual professional development requirements,” Pledger said in her email. She also wrote that the program uses “online courses, live streaming and face-to-face events that supports easy, fair and equitable access for educators in all counties …”

Most grants are limited to specific expenditures and uses. An organization is found out of compliance if it strays from the guidelines and requirements.

The internal audit review, which covers disbursements from July 1, 2018, to May 20, showed:

• $333,055.85 in salary and fringe benefits for several employees who did not provide direct services to the program.

• $44,641.21 in nonproject expenditures related to other AETN programs and services. • $20,457.02 in nonproject travel expenses.

• $8,242.13 in promotional items.

• $1,678.51 in nonproject employee communications charges.

• $588.10 in nonproject employee memberships. This and the travel expenditures were attributed to non-program employees attending conferences.

• $429.28 in unallowed costs.

AETN EXPLANATIONS

During the audited period, the grant paid for half of AETN’s education and instruction manager Karen Walker’s annual salary of $57,625. Walker’s position is listed in the grant award as 100% funded by AETN.

AETN maintenance technician James Blake’s salary of $29,045.95 was paid by grant funds, but it was not included in the grant and is assigned elsewhere in the state’s payroll system.

Another six unnamed employees’ salaries and fringe benefits were paid by grant funds even though the employees do not provide direct services to the program.

The audit also noted that several individuals, whose salary and benefits are fully funded by the grant, do not work on the project exclusively.

“We noted several instances in which employees spent approximately 20-50% of their work time on non-IDEAS related projects, which was not appropriately reported to [the Education Department],” according to the report.

Pledger said Walker’s salary was funded primarily from the network’s general revenue except for the last quarter of the year, when 50% of her salary was paid by the grant.

“For the last quarter of FY19 Karen Walker assumed some of the day to day operational management of the IDEAS program and 50% of her salary was then charged to IDEAS funding,” Pledger said. “Since she was temporarily filling the role of IDEAS Program Manager, we believed it appropriate to charge this portion to IDEAS funding.”

Pledger said Blake’s salary was funded by the grant because of a clerical error.

“The cost center for the position occupied by Jim was inadvertently left as an IDEAS cost center when he was hired,” Pledger said. “He was subsequently promoted into a full-time position funded by AETN general revenues.”

The communication charges were for AETN’s education division director Bryan Fields, who is not listed on the grant as working on the funded program. His position, with a salary of $81,520, is fully funded by AETN.

Pledger said Friday that the program is administered by Field’s division.

The audit stated that the $44,641.21 in nonproject expenditures was spent on documentary series costs, newspaper subscriptions, DVDs of documentaries, advertising for the AETN broadcasting network and the web-based Arkansas Citizens Access Network, which allows people to watch government meetings online.

Pledger said almost half of this amount was to pay a training consultant to work with the program and AETN producers on creating “more engaging content” for the programs professional development aspects.

“[Education Department] leadership had expressed to us the need for our courses and other materials to be more engaging and more creative. This training was to meet this directive,” Pledger said.

The program’s producers, in conjunction with outside contractors, produced a series on childhood hunger and feeding programs instituted by schools, Pledger added. The DVDs were given to teachers and libraries for use outside of the program’s online system.

RECOMMENDED ACTION

The Education Department’s grant program coordinator office, which conducted the internal investigation, recommended that AETN either refund $409,092.10 or reduce next year’s grant.

The report also recommended that AETN develop and implement “adequate program controls and expenditure monitoring” in order to prevent “further program abuse.”

AETN also will be labeled a “high risk entity” and monitored by the coordinator’s office next fiscal year.

A copy of the report will be forwarded to Arkansas Legislative Audit and the Department of Finance and Administration’s Office of Internal Audit, according to the report.

Messages left for Elizabeth Smith with the state inspector general’s office were not returned as of late Friday. The finance department’s internal audit office was moved under the state inspector general’s umbrella on July 1.

Pledger said she has been notified of the audit findings, but the network has not reimbursed anything.

“We are still working through this process with [the Education Department],” she said.

LEGISLATIVE AUDIT

Pledger came under fire in May from lawmakers when a legislative staff audit showed Pledger violated state procurement laws when the network entered into a 2018 contract with the Public Broadcasting Service to produce the documentary State of the Art featuring the Crystal Bridges Museum of American Art. The agency also signed a second agreement with the vendor to produce and distribute the film. The contracts totaled $100,000.

Pledger also signed away revenue rights to go to the AETN Foundation — a private fundraising entity — instead of the network. The agency told lawmakers at a May hearing that the issue was corrected and any future revenue from the project would go directly to the network, not the foundation.

Other deficiencies cited in the legislative audit included improper bidding, failure to log use of a state vehicle, hiring outside legal counsel and paying a vendor for training without documentation.

Also in May, the AETN commission members spent nearly two hours in executive session discussing a performance evaluation for Pledger.

Afterward, then-Chairman Annette Herrington said no action would be taken, but the “commission supports the director and we’re proud of the initiatives in the strategic plan she’s developed in the past two years.”

Tensions between Pledger and the foundation have flared since Pledger was appointed in 2017 by Gov. Asa Hutchinson.

The head of AETN typically also acts as the chief executive officer of the foundation, but in February, the foundation board removed Pledger from the foundation after she fired Mona Dixon, the foundation’s director.

Dixon told foundation board Chairman Lynne Rich in a Feb. 26 letter that she was fired because she refused to follow Pledger’s direction to enter into a consulting contract with Team Raney for content development. Dixon said that direction would violate state procurement laws.

The commission has been in negotiations with the AETN Foundation this past year to develop an agreement that dictates the relationship between the network and the foundation.

Pledger said Friday that the agreement has not yet been finalized. Messages left for Rich were not returned as of late Friday.