a

GAO

United States Government Accountability Office

Report to Congressional Committees

April 2005 LOCAL TV ACT

Administrative Funds 

May No Longer Be 

Necessary

GAO-05-438
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-438.

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and methodology, click on the link above. 

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McCoy Williams at (202) 512-6906 or 

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Highlights of GAO-05-438, a report to 

the Committee on Banking, Housing and 

Urban Affairs, United States Senate and 

the Committee on Financial Services, 

House of Representatives 

April 2005

LOCAL TV ACT

Administrative Funds May No Longer Be 

Necessary 

During fiscal year 2004, the LOCAL Television Loan Guarantee Board 

completed the steps necessary to prepare the LOCAL TV Program for 

implementation by issuing the mandated underwriting criteria and operating 

rules. On December 23, 2003, the board provided applicants the first 

opportunity to apply for a loan guarantee. The board received one 

application, which it returned with the related fee because the board 

determined that it was incomplete. On December 8, 2004, the Congress 

passed the Consolidated Appropriations Act, 2005, one provision of which 

rescinded appropriations that would have been used to guarantee loans 

under the LOCAL TV Program. The President’s Budget for Fiscal Year 2006 

pointed out that the unobligated budget authority for this program had been 

rescinded and the administration was not proposing additional funds for this 

program. 

The LOCAL TV Act authorizes the LOCAL TV Board to approve loan 

guarantees until December 31, 2006. An amendment to this act provides for 

an earlier cut-off date with regard to most of the funding if the Secretary of 

Agriculture were to determine that at least 75 percent of the designated 

market areas (DMA) not in the top 40 had access to local television 

broadcast signals for virtually all households. During fiscal year 2004, there 

were 210 DMAs throughout the United States. To satisfy the requirement 

that at least 75 percent of the remaining 170 DMAs have access to local 

television signals, 128 DMAs would require local television access. 

Using available industry data, the board’s analysis showed that as of 

September 30, 2004, 114 DMAs were receiving local television signals from at 

least one of the two major direct broadcast satellite (DBS) providers. These 

data further indicate that nationally, the number of U.S. television 

households without access to local television signals from DBS decreased 

from approximately 23.4 million in August 2003 to about 4.8 million as of 

September 2004. The board also pointed out that, during the same time 

period, the number of television households without access to local 

television through DBS or cable television dropped from 2.9 million to 

.6 million. 

The board’s estimated cost to implement the LOCAL TV Program from its 

initial funding on November 28, 2001, to September 30, 2004, is just over 

$1.2 million, composed of contractual and in-house services. The contractual 

services include $662,000 in obligations and disbursements made from the 

$2 million administrative appropriation, primarily for an independent 

public accounting firm to develop the underwriting criteria and program 

regulations. Salaries and expenses incurred by the Working Group members 

to support the LOCAL TV Board were approximately $597,000 from initial 

program funding through September 30, 2004. These costs were borne by the 

staff’s respective departments and agencies. 

This is GAO’s third report 

addressing the LOCAL TV 

Act’s requirement that GAO 

perform an annual audit of the 

(1) administration of the provisions 

of the act and (2) financial position 

of each applicant who receives a 

loan guarantee under the act, 

including the nature, amount, and 

purpose of investments made by 

the applicant. Although the LOCAL 

Television Loan Guarantee 

Program (LOCAL TV Program) was 

implemented in fiscal year 2004, 

there were no loan guarantee 

applicants for GAO to audit. 

Therefore, this report primarily 

addresses whether program 

administration during fiscal year 

2004 satisfied the provisions of 

the act. 

What GAO Recommends

Should the Congress decide not to 

provide future loan guarantee 

funding, it may wish to rescind the 

balance of the $2 million 

appropriated for administrative 

expenses to carry out the LOCAL 

TV Program that remains 

unobligated by contracts. In oral 

comments on a draft of GAO’s 

report, the board generally agreed 

with the report and provided 

technical comments that have been 

incorporated as appropriate. 
Page i GAO-05-438 LOCAL TV Act

Contents

Letter 1

Results in Brief 2

Background 4

Scope and Methodology 7

Program Prepared for Implementation but Funding Rescinded 8

The Board’s Analysis Showed That Access to Local Television 

Signals Using DBS in Rural Areas Improved 9

Program Development Costs Total More Than $1.2 Million 11

Conclusions 13

Matter for Congressional Consideration 13

Agency Comments and Our Evaluation 13

Appendix

Appendix I: GAO Contacts and Staff Acknowledgments 15

Tables Table 1: Status of DBS Local TV Access for Designated Market 

Areas and Television Households as of 

September 30, 2004 10

Table 2: Summary Estimate of Reported Administrative Costs 

Incurred by the Working Group for the Fiscal Years Ended 

September 30, 2002-2004 12

Figure Figure 1: Program Activities from Inception to 

September 30, 2003 7
Contents

Page ii GAO-05-438 LOCAL TV Act

Abbreviations

DBS direct broadcast satellite

DMA designated market areas

LOCAL TV Act Launching Our Communities’ Access to Local 

Television Act of 2000

LOCAL TV Board LOCAL Television Loan Guarantee Board

LOCAL TV Program LOCAL Television Loan Guarantee Program

OMB Office of Management and Budget

RUS Rural Utilities Service

USDA Department of Agriculture

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Page 1 GAO-05-438 LOCAL TV Act

United States Government Accountability Office

Washington, D.C. 20548

A

April 22, 2005 Letr

The Honorable Richard C. Shelby

Chairman

The Honorable Paul S. Sarbanes

Ranking Minority Member

Committee on Banking, Housing and Urban Affairs

United States Senate

The Honorable Michael G. Oxley

Chairman

The Honorable Barney Frank

Ranking Minority Member

Committee on Financial Services

House of Representatives

To facilitate access to signals of local television stations for households 

located in nonserved and underserved1

 areas, the Congress passed the 

Launching Our Communities’ Access to Local Television Act of 2000 

(LOCAL TV Act).2

 The act created the LOCAL Television Loan Guarantee 

Program (LOCAL TV Program), which provides for loan guarantees of up to 

80 percent of loans totaling no more than $1.25 billion in the aggregate to 

finance projects to enable local television signal access to communities 

where distance and topography limit access to over-the-air television 

broadcast signals or cable service. The act called for establishing the 

LOCAL Television Loan Guarantee Board (LOCAL TV Board or board), 

which is composed of the Secretary of the Treasury, the Chairman of the 

Board of Governors of the Federal Reserve System, the Secretary of 

Agriculture, and the Secretary of Commerce, or their designees, primarily 

to approve loan guarantees. It also established the Department of 

Agriculture’s (USDA) Rural Utilities Service (RUS) Administrator as 

Program Administrator (Administrator) to issue and administer approved 

loan guarantees.

1

 The act defines nonserved areas and underserved areas in terms of the ability to receive 

local television broadcast signals serving a particular designated market area. Nonserved 

areas do not have access to such signals by any commercial, for-profit multichannel video 

provider. Underserved areas have access to local television broadcast signals from not more 

than one commercial, for-profit multichannel video provider.

2

 Pub. L. No. 106-553, title X, 114 Stat. 2762A-128 (Dec. 21, 2000) (codified, as amended, at 

47 U.S.C. §§ 1101-1110).
Page 2 GAO-05-438 LOCAL TV Act

This report, our third3 since the program’s initial funding, addresses 

the act’s requirement4

 that we perform an annual audit of the 

(1) administration of the provisions of the act and (2) financial position of 

each applicant who receives a loan guarantee under the act, including the 

nature, amount, and purpose of investments made by the applicant. 

Although the program was implemented in fiscal year 2004, there were no 

loan guarantee applicants for us to audit. Therefore, this report primarily 

addresses whether program administration during fiscal year 2004 satisfied 

the provisions of the act.

Results in Brief During fiscal year 2004, the LOCAL TV Board completed the steps 

necessary to prepare the LOCAL TV Program for implementation by 

issuing the mandated underwriting criteria and operating rules. On 

December 23, 2003, the board provided applicants the first opportunity to 

apply for a loan guarantee. The board received one application, which it 

returned to the applicant with the related fee because the board 

determined that it was incomplete. Then on December 8, 2004, the 

Congress passed the Consolidated Appropriations Act, 2005,5

 which 

rescinded6

 the unobligated balances of prior year appropriations that were 

available for guaranteeing loans under the LOCAL TV Program. The 

President’s Budget for Fiscal Year 2006 pointed out that the unobligated 

budget authority for this program had been rescinded and stated the 

administration was not proposing additional funds for the program.

3

 GAO previously issued Local TV Act: Progress Made, but Timeliness and Cost Accounting 

Issues Need to be Addressed, GAO-04-134 (Washington, D.C.: Oct. 31, 2003) and Local 

Television Act: Status of Spending for Fiscal Year 2003, GAO-05-18R (Oct. 15, 2004).

4 See Local TV Act, Pub. L. No. 106-553, title X, § 1006, 114 Stat. 2762A-128,-138 

(Dec. 21, 2000) (codified at 47 U.S.C. § 1105).

5

 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies 

Appropriations Act, 2005, Pub. L. 108-447, div. A, § 775, 118 Stat. 2811, 2849 (Dec. 8, 2004).

6

 A rescission consists of legislation enacted by the Congress that cancels the availability of 

budgetary resources previously provided by law before the authority would otherwise lapse.
Page 3 GAO-05-438 LOCAL TV Act

The LOCAL TV Act, as amended, authorizes the LOCAL TV Board 

to approve loan guarantees with all appropriated funds until 

December 31, 2006, or by an earlier cut-off date, with regard to most of the 

funding, if the Secretary of Agriculture (Secretary) determines that at least 

75 percent of the designated market areas (DMA)7

 not in the top 40 have 

access to local television broadcast signals for virtually all households. 

During fiscal year 2004 there were 210 DMAs throughout the United States. 

To make this statutory determination for early termination of loan 

guarantee authority, the Secretary would have had to determine that at 

least 75 percent of the remaining 170 DMAs (i.e., at least 128 DMAs) have 

access to local television signals for virtually all households. At the end of 

the fiscal year 2004, the RUS analyzed which DMAs had access to local 

television signals using two major direct broadcast satellite8

 (DBS) 

providers. Using available industry sources, the board’s analysis showed 

that as of September 30, 2004, 114 out of the 170 DMAs were receiving local 

television signals from DBS. Thus, the criterion for early termination under 

the act was not yet satisfied.9

 These data further indicate that nationally the 

number of television households that have access to local television signals 

using DBS has increased since August 2003 from approximately 

83.2 million out of 106.6 million U.S. television households, or 78 percent, 

to approximately 103.5 million out of 108.4 million U.S. television 

households, or 95 percent, as of September 30, 2004. Conversely, the data 

indicates that the number of U.S. television households without access to 

local television signals from DBS providers has decreased from 

approximately 23.4 million in August 2003 to about 4.8 million at 

September 2004. The board also told us that the number of television 

households without access to local television via DBS or cable television 

dropped from 2.9 million in August 2003 to .6 million in September 2004.

The LOCAL TV Board’s estimated cost to prepare the LOCAL TV Program 

for implementation from its initial funding on November 28, 2001, to 

September 30, 2004, is just over $1.2 million and is composed of contractual 

and in-house services. The contractual services include $662,000 in 

7

 A DMA is an area designated as such by Nielsen Media Research and published in the most 

recent Nielsen Station Index Directory and Nielsen Station Index United States Television 

Household Estimates. 

8

 DBS service is a nationally distributed subscription service that delivers video and audio 

programming via satellite to a small public parabolic dish antenna located at the 

subscriber’s residence.

9

 See table 1 on the status of DBS local TV signal access for DMAs as of September 30, 2004.
Page 4 GAO-05-438 LOCAL TV Act

obligations and disbursements made from the November 2001 $2 million 

administrative appropriation, primarily for an independent public 

accounting firm to develop the underwriting criteria and program 

regulations, in anticipation of making one or more loan guarantees in 

accordance with the act. Salaries and expenses incurred by the Working 

Group members to support the board were approximately $597,000 

through September 30, 2004. The LOCAL TV Program did not have full-time 

staff but depended on staff from the various agencies supporting the board 

as a collateral duty. The respective departments and agencies of the 

Working Group members absorbed these costs from their own existing 

budgetary resources.

Given the congressional rescission of funding to support loan guarantees 

under this program, we are submitting a matter for congressional 

consideration to rescind the balance of the $2 million appropriated for 

administrative expenses to carry out the LOCAL TV Program and 

transferred to GovWorks, that remains unobligated by contracts in that 

account, if the Congress decides not to provide future loan guarantee 

funding.

In oral comments on a draft of this report, the LOCAL TV Board generally 

agreed with our report and provided technical comments that we have 

incorporated, as appropriate.

Background The Launching Our Communities’ Access to Local Television Act of 2000 

created a guaranteed loan program to facilitate access to signals of local 

television stations for households located in nonserved and underserved 

areas of the United States. The act established the LOCAL Television Loan 

Guarantee Board. The board’s primary function is to approve loan 

guarantees to finance projects to provide local television signal access for 

communities in remote areas throughout the United States. The act 

authorized the board to approve loan guarantees up to 80 percent of the 

value of each loan and provided that total guaranteed lending was not to 

exceed $1.25 billion. Loan repayment was to be made during the lesser of 

(1) 25 years from the date of the execution of the loan or (2) the 

economically useful life of the primary assets to be used in the delivery of 

the signal involved.
Page 5 GAO-05-438 LOCAL TV Act

The act set forth specific provisions and requirements for the LOCAL TV 

Board to implement this new program. Specifically, the act requires the 

board to: (1) direct the Administrator10 to prescribe regulations and 

develop underwriting criteria in consultation with the Director of the Office 

of Management and Budget (OMB) and an independent public accounting 

firm within 120 days after the Congress appropriated funds; (2) establish 

and collect loan application and loan guarantee origination fees to offset 

the cost of administering the program under the act, including the costs of 

the board and the Administrator; and (3) consider other numerous 

specialized technical and business requirements prior to approving a loan 

guarantee. Further, the act, as amended in 2002, restricts the time period 

during which the board may approve loan guarantees. The act provides for 

terminating the board’s authority to guarantee loans (1) by December 31, 

2006 with all appropriated funds or (2) by an earlier cut-off date with regard 

to most of the funding if the Secretary of Agriculture determines that at 

least 75 percent of the DMAs not in the top 40 DMAs have access to local 

television broadcast signals for virtually all households (as determined by 

the Secretary of Agriculture).11

The act directs the Administrator of RUS, an agency of the USDA’s Rural 

Development, to develop the regulations and to issue and administer loan 

guarantees that have been approved by the LOCAL TV Board. This is 

consistent with RUS’s mission of administering loan and grant programs, 

including those to finance projects so rural areas can have, among other 

things, more modern affordable electricity, telecommunications, public 

water, and waste removal services.

Based on authority granted in the act, the LOCAL TV Board established a 

Working Group, consisting of senior level officials from the various 

departments and agencies that represent the board, to assist it with 

implementing the program.

10 The act established USDA’s RUS Administrator as Program Administrator.

11 These two criteria for ending the lending period for approving loan guarantees did not 

apply uniformly to the funding available. The December 31, 2006, date applied to all 

amounts appropriated. However, the earlier cut-off date applies to $80 million of funds of 

the Commodity Credit Corporation made available in the Farm Security and Rural 

Investment Act of 2002, Pub. L. No. 107-171, § 6404, 116 Stat. 134, 429 (May 13, 2002).
Page 6 GAO-05-438 LOCAL TV Act

Initial program funding was provided in November 2001 through the 

Agriculture, Rural Development, Food and Drug Administration, and 

Related Agencies Appropriations Act, 2002.12 This act provided $2 million 

for administrative expenses and a $20 million appropriation which, based 

on estimated subsidy costs, would have supported $258 million in loan 

guarantee authority over the life of the loans. In May 2002, the Farm 

Security and Rural Investment Act of 200213 appropriated an additional 

$80 million to support guaranteed lending. In August 2002, the 

Supplemental Appropriations Act for Further Recovery from and Response 

to Terrorist Attacks on the United States14 rescinded the $20 million credit 

subsidy appropriated in November 2001 and appropriated an additional 

$8 million credit subsidy. Cumulatively the LOCAL TV Program had an 

$88 million credit subsidy to finance expected costs to support $1.07 billion 

in loan guarantee authority, at the end of fiscal year 2002.15 The program 

retained this budget authority until December 2004, when the Congress 

rescinded the entire $88 million credit subsidy in the Consolidated 

Appropriations Act, 2005, thus eliminating all authority for the LOCAL TV 

Board to approve loans pending a future appropriation for this purpose. 

Figure 1 provides a listing of key activities from program inception through 

September 2003.

12 Pub. L. No. 107-76, title III, 115 Stat. 704, 725 (Nov. 28, 2001).

13 Pub. L. No. 107-171, § 6404, 116 Stat. 134, 429 (May 13, 2002).

14 Pub. L. No. 107-206, 116 Stat. 820, 822 (Aug. 2, 2002).

15 Hereafter, any discussion regarding budget authority to support loan guarantees will be 

referred to as “the act, as amended.”
Page 7 GAO-05-438 LOCAL TV Act

Figure 1: Program Activities from Inception to September 30, 2003

Scope and 

Methodology

To evaluate how the provisions of the act were administered, we focused 

primarily on program activities and related obligations and administrative 

expenses that were incurred on behalf of the LOCAL TV Program during 

fiscal year 2004. We analyzed the LOCAL TV Act to obtain an understanding 

of its provisions and reviewed legislation concerning the program’s 

funding. We obtained and evaluated information from the LOCAL TV 

Board, including minutes from board meetings and other budget and cost 

information, to obtain an understanding of the activities that occurred to 

implement the program during fiscal year 2004. We did not independently 

verify or audit the cost data we obtained from the board. Also, we did not 

independently review the program regulations or underwriting criteria. 

Therefore, we do not provide any assurance on them. We did not obtain the 

loan application received by the LOCAL TV Board, nor did we review the 

Dec 

00 

Jan Feb Mar Apr Ma Mar Apr May Jun Aug Sep Oct Nov Dec Feb Mar Apr Ma y Jun Aug Sep Oct Nov Dec Feb y Jun Aug Sep 

01 

FY 2001 FY 2002 FY 2003 

Jul 

01 

Jul 

02 

Jul 

03 

Jan 

02 

Jan 

03 

12/21/00 

11/28/01 

2/07/03 

9/15/03 

5/05/03 

8/15/03 

5/13/02 

Source: GAO analysis.

120-day 

period 

following 

USDA 

appropriation 

Local TV Act passed: 

Established program 

No congressional 

appropriation 

FY 2002 USDA 

appropriation 

Provided initial 

program funding 

FY 2002 Farm Bill 

passed: Provided 

sufficient program 

funding 

Board submitted 

draft of underwriting 

criteria to OMB for 

consultation 

Board submitted 

draft of prescribed 

regulations to OMB 

Board issued 

proposed rule in 

Federal Register

Public comment 

period on proposed 

rule ended
Page 8 GAO-05-438 LOCAL TV Act

board’s assessment of the application. Further, we did not independently 

audit or verify the board’s analysis of local television coverage by DBS for 

the DMAs not in the top 40 DMAs. We conducted our work from September 

2004 through March 2005 in accordance with U.S. generally accepted 

government auditing standards.

We requested comments on a draft of this report from the Local TV Board. 

The board’s comments are discussed in the Agency Comments and Our 

Evaluation section of this report.

Program Prepared for 

Implementation but 

Funding Rescinded

During fiscal year 2004, the LOCAL TV Board completed the steps 

necessary to prepare the LOCAL TV Program for implementation by 

issuing the mandated underwriting criteria and operating rules. On 

December 23, 2003, through a notice published in the Federal Register,

16

the board provided applicants the first opportunity to apply for a loan 

guarantee. The board received one application during the application 

period, which opened on December 23, 2003 and closed on April 21, 2004. 

The board reported17 that the application lacked essential components 

required by the program regulations and returned it to the applicant with 

the related fee.

16 Notice of Application Filing Deadline, Local Television Loan Guarantee Program, 

68 Fed. Reg. 74,434 (Dec. 23, 2003).

17 Notice of Applications Received, Local Television Loan Guarantee Program, 

69 Fed. Reg. 41,552 (July 9, 2004). 
Page 9 GAO-05-438 LOCAL TV Act

On May 24, 2004, the LOCAL TV Board considered opening another 60-day 

application window for the program. However, it later decided against 

doing so because of the limited response to the first application 

opportunity and the pending congressional action to rescind the program’s 

entire loan guarantee authority. On December 8, 2004, the Congress passed 

the Consolidated Appropriations Act, 2005,18 one provision of which 

rescinded the program’s unobligated balances which were available for 

guaranteeing loans. Further, the President’s Budget for Fiscal Year 2006 

pointed out that the unobligated budget authority for this account had been 

rescinded and stated that the Administration was not proposing additional 

funds for the Local TV Program.

The Board’s Analysis 

Showed That Access to 

Local Television 

Signals Using DBS in 

Rural Areas Improved

The LOCAL TV Act authorizes the board to approve loan guarantees funded 

with appropriated funds until December 31, 2006. Furthermore, as 

discussed earlier, for most of the funding, the board’s authority to approve 

loan guarantees would terminate before then if the Secretary of Agriculture 

determines that at least 75 percent of the DMAs not in the top 40 have 

access to local television broadcast signals for virtually all households. 

During fiscal year 2004, there were 210 DMAs throughout the United States. 

To make this statutory determination for early termination of loan 

guarantee authority, the Secretary would have had to determine that at 

least 75 percent of the remaining 170 DMAs (i.e., at least 128 DMAs) have 

access to local television signals for virtually all households.

The LOCAL TV Board provided us with written documentation showing 

how RUS staff tracked market developments through industry sources, 

including press releases and trade news reports. Using these sources, the 

board’s analysis showed as of September 30, 2004, that 114 of the 170 DMAs 

were receiving local television signals from at least one of the two major 

DBS providers. Based on that data, the criteria for early termination under 

the act were not satisfied. Therefore, at the end of fiscal year 2004, 

56 DMAs, or approximately 4.8 million U.S. television households, were not 

receiving access to local television signals from DBS. Based on the criteria 

established by the act, as amended, and the board’s analysis as of 

September 30, 2004, it would appear that at least 14 more DMAs would 

need access to local television signals for virtually all households. 

18 Agriculture, Rural Development, Food and Drug Administration, and Related 

Agencies Appropriations Act, 2005, Pub. L. No. 108-447, div. A, § 775, 118 Stat. 2811, 2849 

(Dec. 8, 2004).
Page 10 GAO-05-438 LOCAL TV Act

This need would be met if DBS providers began delivering local signals to 

those markets. Based on data received from the LOCAL TV Board, this 

would involve approximately 470,000 to 2 million additional television 

households, depending on which DMAs are provided access. Table 1 shows 

the status of the local television signal access by DBS for DMAs and 

television households as of September 30, 2004.

Table 1: Status of DBS Local TV Access for Designated Market Areas and Television Households as of September 30, 2004

Source: GAO analysis based on information from the LOCAL TV Board.

From a national perspective and based on the board’s analysis, we 

determined the number of television households that have access to local 

television signals using DBS has increased since August 2003. In August 

2003, approximately 83.2 million of 106.6 million television households had 

access to local television signals. During fiscal year 2004, the board 

analyzed the extent to which direct broadcast satellites were currently 

providing access to local television signals in DMAs. The board’s estimate 

of U.S. television households with access to local television signals using 

DBS was approximately 103.4 million out of 108.4 million as of 

September 30, 2004. This represents an increase from 78 percent to 

95 percent in U.S. television households that had access to local television 

signals from DBS between August 2003 and September 2004. Conversely, 

these data indicate that the number of U.S. television households without 

access to local television signals from DBS has decreased from 

approximately 23.4 million in August 2003 to about 4.8 million in 

September 2004. This represents a decrease of approximately 18.6 million 

U.S. television households, or a 79 percent reduction. The board also told 

us that the number of television households without access to local 

television via DBS or cable television dropped from 2.9 million in August 

2003 to .6 million in September 2004. Because all of the appropriated funds 

Number of DMAs

Equivalent number of

television households (millions)

Total DMAs 210 108.4

Less: Top 40 DMAs 40 66.1

Television markets not in Top 40 DMAs 170 42.3

Requirement of the act, as amended (170 ×75%) 128

Number of DMAs receiving local TV access through DBS 114 37.5

Number of DMAs not receiving access to local television signals through DBS 56 4.8
Page 11 GAO-05-438 LOCAL TV Act

for the LOCAL TV Program were rescinded, the board advised us that it has 

no plans to conduct additional market analyses.

Program Development 

Costs Total More Than 

$1.2 Million

The LOCAL TV Board’s estimated cost to implement the program from its 

initial funding on November 28, 2001, to September 30, 2004, is over 

$1.2 million. This estimate is composed of two components. First, it 

includes $662,000 in obligations and disbursements made from the 

$2 million administrative appropriation for Ernst & Young LLP to develop 

the underwriting criteria and program regulations and related GovWorks19

administrative fees. The second component includes the board’s estimate 

of salaries and expenses incurred by the Working Group members to 

support the board20 that totals approximately $597,000.

The Agriculture, Rural Development, Food and Drug Administration, and 

Related Agencies Appropriations Act of 2002 provided $2 million to USDA 

for administrative expenses.21 During fiscal year 2002, USDA obligated the 

entire $2 million by issuing an order for its anticipated needs to GovWorks, 

which subsequently awarded, on the board’s behalf, two contracts totaling 

about $1.2 million. The first contract was awarded to Ernst & Young LLP 

for approximately $749,000 (including GovWorks fees). Of this amount, 

GovWorks obligated and disbursed approximately $640,000 to Ernst & 

Young LLP to develop the underwriting criteria and program regulations 

and $22,000 in fees to GovWorks. The second contract was issued to Arnold 

and Porter LLP for legal services in the amount of $500,000. No obligations 

or disbursements were made for this contract, and during the first quarter 

of fiscal year 2005, the board decided to terminate it. As of December 31, 

2004, the remaining available balance was approximately $1.3 million, 

19 GovWorks is a franchise fund established within the Department of the Interior by the 

Congress and the OMB to offer administrative services to agencies.

20 GAO-04-134, p. 9.

21 The Consolidated Appropriations Resolution, 2003, provided that any balances 

available from prior years for the Rural Utilities Service, Rural Housing Service, and the 

Rural-Business Cooperative Service salaries and expenses account be transferred to and 

merged with the fiscal year 2003 appropriation. Pub. L. No. 108-7, div. A, title III, 117 Stat. 26, 

28 (Feb. 20, 2003). Pursuant to this provision, the balance of the $2 million appropriated in 

fiscal year 2002 was carried forward to fiscal year 2003. Similar provisions with the same 

carry-forward effect occurred for fiscal years 2004 and 2005. See Pub. L. No. 108-199, div. A, 

title III, 118 Stat. 3, 21 (Jan. 23, 2004) and Consolidated Appropriations Act, 2005, Pub. L. No. 

108-447, div. A, title III, 118 Stat. 2809, 2827-28 (Dec. 8, 2004).
Page 12 GAO-05-438 LOCAL TV Act

including $800,000 that was never awarded and $500,000 from the 

terminated Arnold and Porter LLP contract.

Separate from the $2 million administrative appropriation, based on 

authority granted in the act, the LOCAL TV Board established a Working 

Group, consisting of senior level officials from various departments and 

agencies that are represented on the board, to assist it with implementing 

the LOCAL TV Program. The program did not have full-time staff but 

depended on staff from the various agencies supporting individual board 

members as a collateral duty. The costs incurred by the Working Group 

members to support their board members have been borne by the 

respective departments and agencies from within their existing budgetary 

resources (i.e., salaries and expenses appropriations or accounts). The 

LOCAL TV Board estimated that the Working Group incurred a total cost 

from initial funding of the program through September 30, 2004, of 

approximately $597,000. Table 2 provides a summary of the reported 

estimated administrative costs incurred by the Working Group for fiscal 

years ended September 30, 2002 through 2004.

Table 2: Summary Estimate of Reported Administrative Costs Incurred by the Working Group for the Fiscal Years Ended 

September 30, 2002-2004

Source: GAO analysis based on information from the board.

Fiscal year

Entity representing the LOCAL TV Board 2002 2003 2004

Total (inception through

9/30/04)

USDA Rural Utilities Service $53,586 $158,491 $166,977 $379,054

Department of the Treasury 11,202 50,402 59,314 120,918

Department of Commerce 8,506 31,123 21,657 61,286

Federal Reserve Board 5,155 15,277 15,584 36,016

Total estimated costs $78,449 $255,293 $263,532 $597,274
Page 13 GAO-05-438 LOCAL TV Act

Because no applications were accepted and no loan guarantees were 

issued, none of the costs in Table 2 were recovered by fees charged to loan 

guarantee applicants.22

Conclusions The Congress has rescinded the funding to support loan guarantees under 

the LOCAL TV Act, and the President’s Budget for Fiscal Year 2006 did not 

propose additional funds for the LOCAL TV Program. Unless the Congress 

appropriates additional budget authority for loan guarantees, USDA may 

not need the balance of the administrative funds (about $1.3 million) 

transferred to and remaining unobligated by contract in the GovWorks 

account.

Matter for 

Congressional 

Consideration

Should the Congress decide not to provide future loan guarantee funding, it 

may wish to consider saving budgetary resources by rescinding the balance 

of the $2 million appropriated for administrative expenses to carry out the 

LOCAL TV Program that has been transferred to GovWorks, but remains 

unobligated by contracts in that account.

Agency Comments and 

Our Evaluation

In oral comments, the LOCAL TV Board generally agreed with the report’s 

findings and provided technical comments, which we incorporated as 

appropriate. 

We are sending copies of this report to the Secretaries of Agriculture, 

Commerce, and Treasury, and the Chairman of the Board of Governors of 

the Federal Reserve System, members of the Local Television Loan 

Guarantee Board, and the Director of the Office of Management and 

22 The Local TV Act and implementing regulations required the LOCAL TV Board to 

charge applicants a loan application fee and a loan guarantee origination fee. See Pub. L. 

No. 106-553, title X, § 1005(n), 114 Stat. 2762A-128, 137 (Dec. 21, 2000) (codified at 47 U.S.C. 

§ 1104(n)); see also 7 C.F.R. §§ 2201.11 (m), (n), 2201.21 (2005). The act established the loan 

application fee “to cover the cost of the board in making necessary determinations and 

findings with respect to the loan guarantee application under this act.” The act established 

the loan guarantee origination fee to cover the administrative costs, including the costs of 

the board, in association with the issuance of a loan guarantee. However, the act limits the 

board to imposing fees that in the aggregate do not exceed the actual amount of 

administrative costs under this act.
Page 14 GAO-05-438 LOCAL TV Act

Budget. We will also make copies available to others upon request. In 

addition, the report will be available at no charge on the GAO Web site at 

http://www.gao.gov.

Should you or your staff have any questions on matters discussed in 

this report, please contact me at (202) 512-6906 or by e-mail at 

williamsm1@gao.gov or Alana Stanfield, Assistant Director, at 

(202) 512-3197 or stanfielda@gao.gov. Major contributors to this report 

are acknowledged in appendix I.

McCoy Williams

Director

Financial Management and Assurance
Page 15 GAO-05-438 LOCAL TV Act

Appendix I

GAO Contacts and Staff Acknowledgments ApApenednxidexiIs

GAO Contacts McCoy Williams, (202) 512-6906

Alana Stanfield, (202) 512-3197

Acknowledgments In addition to those named above, the following individuals made 

important contributions to this report: Lisa Crye, F. Abe Dymond, 

Lauren S. Fassler, Jeff Isaacs, and Christina Quattrociocchi.

(195057)
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