The results of an audit on Arlington Independent Media are out, revealing substantial gaps and errors in how the nonprofit handled some $2 million in county-provided funds.
The audit report appears to have been uploaded by Arlington County yesterday, the day after ARLnow reported on delays in its release. It suggests that AIM failed to provide adequate documentation for over $1 million in expenditures, including payments to dozens of third-party contractors.
“The audit findings are deeply concerning,” the current volunteer leadership of AIM said in an email to members today (Thursday). “They highlight significant discrepancies between the County’s expectations, outlined in the December 2023 Grant Agreement, and AIM’s actual operations during the audit period. These issues are painful for all involved — the current AIM Board, our members, the County, and the Arlington community.”
The email noted that staff, board members and contractors who were managing AIM during the 2+ year timeframe of the audit “are no longer involved in the organization’s operations.”
The Arlington County Board is currently determining what its future relationship with AIM will look like, spokesperson David Barrera told ARLnow.
“We are disappointed in the actions and choices of AIM executive leadership and in those of AIM’s past Board of Directors,” he said. “The findings are alarming, and we are reevaluating our relationship with, and future financial support of, AIM. The Board takes very seriously our responsibility to be good stewards of County finances and taxpayer money.”
The audit found that AIM failed to maintain adequate documentation on how it spent $414,763 in costs incurred on credit and debit cards, as well as via checks, wire transfers and mobile payment apps.
This included $29,787 on “restaurants, bars, clothing stores, auto service, jewelers, etc.,” $19,687 in airfare, $18,254 to employees outside of the payroll, and $9,030 to former AIM CEO Whytni Kernodle outside of the payroll.
Kernodle was hired in November 2021. AIM laid off all paid employees in March 2024 after the county froze funding for the nonprofit amid internal concerns about its finances.
Additionally, the audit firm RSM was unable to confirm how AIM spent $536,210 in capital grant funds provided the county. Auditors were only able to substantiate how the organization spent $513,280 of $1,049,490 provided.
That $1.05 million came from federally-regulated Public, Educational, and Governmental funding, to which each cable TV subscriber in Arlington contributes. Such PEG funds, for public access channels like AIM, are intended specifically for capital expenses and certain projects.
The auditors suggested that some or all of this funding may have gone to operating expenditures, as AIM spent $1,829,262 on operating costs during the audited period between January 2022 and March 2024 — despite the county earmarking for operations only $952,302 of the overall $2 million provided during that timeframe.
Moreover, the audit noted a “lack of internal controls over third party agreements.”
“Of the $2,844,968 in expenditures in the operating general ledger account during the audit period, $893,380 (31.4%) are consultant fees,” the report says. “However, at the time of report issuance, AlM could only provide contracts for 12 of the 49 third parties. For the 12 third party contracts reviewed, five (5) included a flat fee per month payment schedule, without requirements over the number of hours worked on behalf of AIM, specific milestones, or deliverables.”
In all, the report paints a picture of Arlington County becoming increasingly worried about how AIM was spending money.
“On December 16, 2023, the County entered into a Grant Agreement for Use of Public, Educational, and Governmental Funds with AIM, which gave the County the right to audit AlM’s books and records, and detailed other requirements around the proper segregation of general ledger accounts related to capital grant funding provided by the County,” the report says.
“The County had concerns over (1) whether AIM was spending the operating and capital funding on associated operating and capital costs, particularly as submitted in AIM’s PED capital funding requests and (2) the adequacy of AIM’s cash management processes due to multiple cash flow crises in a short period,” the report adds.
“The audit confirmed that AIM did not utilize all of the capital funding for the requested items … and that AIM’s financial processes and internal controls were inadequate,” it continues.
Other notable auditor observations include the following.
- AIM used a single bank account for deposits from both county and non-county sources, in violation of a grant agreement with the county.
- AIM lacked an independent approval process for transactions.
- The county failed to establish “proper grant oversight and monitoring practices” with AIM, apparently requiring no reporting “to validate that capital funds were spent by AIM in accordance with the proposals.
- Several items on AIM’s inventory list, including a MacBook Pro, a MacBook Air and an iPad Pro, could not be located.
The audit report lists numerous recommendations to improve AIM’s accounting and recordkeeping policies, along with county oversight of the group. It calls for independent reviews of expense reports, restructuring of AIM’s bank accounts and county controls like required monthly reporting.
AIM’s board members expressed support for the recommendations and has already implemented some of them.
“AIM’s all-volunteer board does not have the institutional knowledge necessary to understand fully how AIM’s previous staff exercised oversight and controls over capital and operating funds provided by Arlington County to AIM,” board members said in a response included in the report.
“Nor should the AIM Board and other volunteers supporting the organization be held accountable for inadequate controls and oversight noted by the auditor,” they continued. “The Board acknowledges and recognizes the observations of the auditor, and commits to working with the County to implement and adhere to all appropriate spending and accounting procedures.”
Despite identified issues in AIM’s past financial management, the group is still eligible for some county funding.
The Arlington County Board allocated $260,000 in “one-time funding to be matched by AIM’s fundraising efforts” in the Fiscal Year 2025 budget. This is about half as much as the $506,579 allocated in Fiscal Year 2024.
The funds can only be released at the discretion of the County Board.
“At this time, the County has not been presented with any fundraising numbers, and no such approval for release of funds is being considered,” Barrera said.
In a letter to members last week, AIM called on members to contact the County Board and request a release of the audit report.
AIM President Amanda MacKaye told ARLnow that delays in releasing the document have limited the group’s momentum in repairing its reputation, embarking on fundraising campaigns and resolving lingering debts.
While the latest news represents a major step forward in the organization’s attempts to rebuild, it is still facing an impending deadline to return its FM radio station, WERA 96.7, to the air.
AIM has until March 21 to begin broadcasting for at least 36 hours each week. If this doesn’t happen, the organization says it will lose its license with the Federal Communications Commission.
“The road ahead is difficult, but with your continued support, we can make a difference,” the organization said in today’s email, which made no mention of trying to bring back AIM’s public access TV channel. “Thank you for your commitment to AIM and for helping keep independent radio alive in Arlington.”
This article has been updated with statements on behalf of the Arlington County Board.
