United States General Accounting Office 

GAO Report to Congressional Committees 

October 2003 LOCAL TV ACT 

Progress Made, but 

Timeliness and Cost 

Accounting Issues 

Need to be Addressed 

GAO-04-134


a
Highlights of GAO-04-134, a report to the 

Committee on Banking, Housing and 

Urban Affairs, United States Senate and 

the Committee on Financial Services, 

House of Representatives 

The LOCAL TV Act required 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. 

In fiscal year 2002, the LOCAL TV 

Program was funded; however, 

because it was not fully 

implemented in that year, there 

were no loan guarantee applicants 

for GAO to audit. Therefore, this 

report primarily addresses whether 

program administration during 

fiscal year 2002 satisfied the 

provisions of the Act. 

GAO is making recommendations 

to the Board that it work with the 

Administrator to help ensure that 

(1) program regulations and 

underwriting criteria are issued 

expeditiously, and (2) loan 

application and origination fees are 

sufficient to cover certain costs of 

administering the Program and that 

these costs are accumulated, 

documented, and reported in 

accordance with federal 

accounting standards. In response, 

the Board stated that every effort is 

being made to ensure that the 

program regulations and 

underwriting criteria are issued 

expeditiously and that as 

applications are received, it will 

account for administrative 

expenses in accordance with 

federal accounting standards. 

October 2003 

LOCAL TV ACT 

Progress Made, but Timeliness and Cost 

Accounting Issues Need to be Addressed 

In December 2000, the Congress passed the Launching Our Communities’ 

Access to Local Television Act of 2000 (LOCAL TV Act or Act). The Act 

created the Local Television Loan Guarantee Program (Program or LOCAL 

TV Program) and established the Local Television Loan Guarantee Board 

(Board) to approve guaranteed loans, totaling no more than $1.25 billion, to 

finance projects that will provide local television access to households with 

limited over-the-air television broadcast signals or cable service. The Board 

is comprised 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. The Department of 

Agriculture (USDA) Rural Utilities Service serves as Program Administrator 

(Administrator). 

The LOCAL TV Program has not been established in an expeditious fashion 

as specified by the Act. Given that funds were appropriated in November 

2001, thus starting the clock on the 120 days allowed for completing program 

regulations and underwriting criteria, the Program should have been ready 

for implementation by March 2002. According to the Board and 

Administrator, three factors contributed to program delays: (1) initial 

uncertainties over program funding, (2) inadequate dedicated staff resources 

for program activities, and (3) the decision to issue a proposed rule. As of 

the end of August 2003, neither of these key documents, which provide the 

overall framework for the Program, was ready for implementation, thus 

delaying lending activities and ultimately, realization of improved television 

reception in target areas throughout the United States. 

Further, the full costs of administering the Program, including those 

incurred by the respective agencies and departments providing support to 

the Board, were not accumulated and charged to the program as called for 

by federal accounting standards. Statement of Federal Financial Accounting 

Standard No. 4, Managerial Cost Accounting Standards requires federal 

agencies to capture the costs of federal programs to assist the Congress in 

authorizing, modifying, and discontinuing programs and to provide agencies 

with reliable cost data for making informed managerial decisions and 

evaluating performance. Further, the capacity to capture these costs going 

forward is key to fully recovering certain costs of administering the Program 

through loan application and loan guarantee origination fees. 

www.gao.gov/cgi-bin/getrpt?GAO-04-134. 

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact McCoy 

Williams at (202) 512-6906 or 

williamsm1@gao.gov. 
Contents


Letter 1 

Results in Brief 2 

Background 3 

Scope and Methodology 5 

The LOCAL TV Program Has Not Been Implemented in a Timely 

Manner 6 

Policies and Procedures Needed as a Basis for Collecting User Fees 

Have Not Been Established 9 

Conclusions 11 

Recommendations 12 

Agency Comments and Our Evaluation 12 

Appendixes 

Appendix I: Comments from the LOCAL TV Board 14 

Appendix II: GAO Contacts and Staff Acknowledgments 16 

GAO Contacts 16 

Acknowledgments 16 

Table Table 1: Summary Estimate of Other Administrative Costs Incurred 

by the Working Group During Fiscal Year 2002 to 

Implement the LOCAL TV Program 

Figures Figure 1: Entities Involved in Implementing the LOCAL TV 

Program 5 

Figure 2: Timeline for Key Activities to Implement the LOCAL TV 

Program 7 

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Page i GAO-04-134 LOCAL TV ACT 

11 
Page ii GAO-04-134 LOCAL TV ACT 
Page 1 GAO-04-134 LOCAL TV ACT 

A

United States General Accounting Office 

Washington, D.C. 20548 

October 31, 2003


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


Today, approximately 23.4 million households in the United States have 


limited or no access to local television broadcast signals. To facilitate


access to 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 or Act).2

 The Act 


created the LOCAL Television Loan Guarantee Program (Program or


LOCAL TV Program). The Program provides for loan guarantees of up to 80


percent of loans totaling no more than $1.25 billion to finance projects to 


enable local television access to communities where distance and 


topography limit access to over-the-air television broadcast signals or cable 


service. The Act established the LOCAL Television Loan Guarantee Board 


(Board), which is comprised 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 and the Department of Agriculture (USDA) 


Rural Utilities Service (RUS) 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, Dec. 21, 2000. 

Page 1 GAO-04-134 LOCAL TV ACT 
This report addresses the Act’s requirement 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. Because the Program was not funded during fiscal year 2001, we 

agreed with your offices that we would revisit the mandate in fiscal year 

2002. The Program was funded in fiscal year 2002; however, because it was 

not fully implemented in that year, there were no loan guarantee applicants 

for GAO to audit. Therefore, this report primarily addresses whether 

program administration during fiscal year 2002 satisfied the provisions of 

the Act. 

Results in Brief	 The LOCAL TV Program has not been established in an expeditious fashion 

as specified by the Act. Given that funds were appropriated in November 

2001, thus starting the clock on the 120 days allowed for completing 

program regulations and underwriting criteria, the Program should have 

been ready for implementation by March 2002. According to Board and 

RUS officials, three factors contributed to program delays: (1) initial 

uncertainties over program funding, (2) inadequate dedicated staff 

resources for program activities, and (3) the decision to issue a proposed 

rule. As of the end of August 2003, neither of these key documents, which 

provide the overall framework for the Program, was ready for 

implementation, thus delaying lending activities and ultimately, realization 

of improved television reception in target areas throughout the United 

States. 

Total costs of administering the Program, including those incurred by the 

respective departments and agencies providing support to the Board, were 

not accumulated and charged to the Program as called for by federal 

accounting standards. Statement of Federal Financial Accounting Standard 

No. 4, Managerial Cost Accounting Standards requires federal agencies to 

capture the cost of federal programs to assist the Congress in authorizing, 

modifying, and discontinuing programs and to provide agencies with 

reliable cost data for making informed managerial decisions and evaluating 

performance. The capacity to capture these costs going forward is key to 

satisfying federal accounting standards and fully recovering certain costs 

of administering the Program through loan application and loan guarantee 

origination fees. 

Page 2 GAO-04-134 LOCAL TV ACT 
We are making recommendations to the Board and the Administrator to 

help ensure that (1) program regulations and underwriting criteria are 

issued expeditiously, and (2) loan application and loan guarantee 

origination fees are sufficient to cover, but not exceed, certain costs of 

administering the Program. 

In commenting on a draft of this report, the Board stated that every effort is 

being made to ensure that program regulations and the underwriting 

criteria are issued expeditiously. The Board further stated that as it begins 

accepting applications, it will ensure that the recording of administrative 

expenses adheres to managerial cost accounting concepts in accordance 

with federal accounting standards and related guidance. For additional 

information see the Agency Comments and Our Evaluation section of this 

report and appendix I. 

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 (Board) whose primary function is to approve loan 

guarantees to finance projects to provide local television access for 

communities in remote areas throughout the United States. The Board is 

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

value of each loan. The Board may not approve loan guarantees after 

December 31, 2006,3

 and the aggregate of all loans guaranteed may not be 

more than $1.25 billion. The repayment of the loan(s) is required to be 

made with a term of the lesser of 25 years from the date of the execution of 

the loan or the economically useful life of the primary assets to be used in 

the delivery of the signal involved. 

The Act set forth specific provisions and requirements for the Board to 

implement this new program. Specifically, the Act required the Board to: 

(1) direct the Administrator to prescribe regulations within 120 days after 

the Congress appropriated funds, (2) develop underwriting criteria in 

consultation with the Director, Office of Management and Budget (OMB) 

3

The Board may stop approving loan guarantees the earlier of (1) the date the Secretary of 

Agriculture determines that at least 75 percent of the designated market areas (DMAs) not 

in the top 40 DMAs have access to local television broadcast signals (as determined by the 

Secretary) or (2) December 31, 2006. (P.L. 107-171, §6404, May 13, 2002). 

Page 3 GAO-04-134 LOCAL TV ACT 
and an independent public accounting firm (IPA) within 120 days after the 

Congress appropriated funds, (3) establish and collect loan application and 

loan guarantee origination fees4 to offset the cost of administering the 

Program under the Act, including the costs of the Board and the 

Administrator,

5

 and (4) consider other numerous specialized technical and 

business requirements prior to approving a loan guarantee. 

In addition to developing the regulations, the Act directed RUS, an agency 

of the Department of Agriculture’s Rural Development, to issue and 

administer loan guarantees that have been approved by the 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 Board established a Working 

Group, consisting of senior level officials from the various departments and 

agencies that represent the Board, to assist it with activities to implement 

the Program. The costs incurred by the Working Group members to 

support the Board have been borne by the respective departments and 

agencies from within their existing budgetary resources (i.e., salaries and 

expense appropriations or accounts). 

Although the Act was passed on December 21, 2000, which required the 

establishment of program regulations and underwriting criteria, initial 

funding for the Program was not provided until November 2001 through the 

Agriculture, Rural Development, Food and Drug Administration, and 

Related Agencies Appropriations Act, 2002.6

 The Act provided $258 million 

in loan guarantee authority and $2 million for administrative expenses. 

Later in the fiscal year, two additional pieces of legislation7

 resulted in 

USDA receiving approximately a combined $1.07 billion in loan guarantee 

4

The Board shall charge and the Administrator may collect the loan guarantee origination 

fee with respect to the issuance of a loan guarantee under this Act. 

5

The authority of the Board to charge and use the fees is effective only to the extent 

provided in advance in appropriation acts. 

6

Pub. L. No. 107-76, Title III, Nov. 28, 2001. 

7

Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-171, May 13, 2002, and the 

2002 Supplemental Appropriations Act for Further Recovery from and Response to Terrorist 

Attacks on the United States, Pub. L. No. 107-206, Aug. 2, 2002. 

Page 4 GAO-04-134 LOCAL TV ACT 
authority available for providing access to local TV stations through direct 

broadcast satellite (DBS) or some other means. 

Figure 1 illustrates the relationships between the Congress, federal entities 

involved in implementing the LOCAL TV Program, and the public. 

Figure 1: Entities Involved in Implementing the LOCAL TV Program 

Congress funds 

LOCAL TV 

program through 

USDA Report to public 

Public 

Congress establishes 

LOCAL TV Board 

Administrator prescribes 

regulations and 

issues/administers 

loan guarantees 

USDA 

Rural Utilities Service 

Staffing provided by 

board members' 

respective departments 

and agencies 

LOCAL TV Board 

working group 

Secretaries of 

Agriculture, Commerce, 

Treasury and the Chairman 

of the Board of Governors 

of the Federal Reserve 

or their designees 

Develops underwriting criteria 

and approves regulations 

and loan guarantees 

Directs Administrator to 

prescribe regulations 

LOCAL TV Board 

Congress 

To determine 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 Program during fiscal year 

2002. 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 its 

internal operating regulations, minutes from Board meetings, the IPA’s 

technical and price proposals, the solicitation to obtain information related 

to the legal advisory services for the Board, and other budget and cost 

information to obtain an understanding of the activities that occurred to 

implement the Program during fiscal year 2002. We reviewed OMB 

circulars and federal accounting standards, as applicable. We did not 

independently verify or audit the cost data we obtained from the Board. We 

did not review the proposed regulations or draft underwriting criteria 

Source: GAO analysis. 

Scope and 

Methodology 

Page 5 GAO-04-134 LOCAL TV ACT 
because they were not made available to us while OMB was completing its 

review. We conducted our work from February 2003 through August 2003 

in accordance with generally accepted government auditing standards. 

We requested comments on a draft of this report from the Chairman of the 

Board and the Department of Agriculture. The Department of Agriculture 

chose to have the Board incorporate its views into the Board’s overall 

response. The Board’s comments are discussed in the Agency Comments 

and Our Evaluation section of this report and are reprinted in appendix I. 

The Board also provided technical comments on our draft report, which we 

incorporated as appropriate. 

The LOCAL TV 

Program Has Not Been 

Implemented in a 

Timely Manner 

Under the requirements of the authorizing legislation and the timing of the 

available appropriation, the Board was to have had the program regulations 

and underwriting criteria completed and ready to implement within 120 

days after funding was available. Since funds were appropriated in 

November 2001, the target time frame was March 2002. However, as of the 

end of August 2003, neither of these key documents had been finalized. 

Since these documents provide the overall framework for the Program, 

including operating procedures and lending criteria, lending activities 

cannot proceed. 

Figure 2 provides a chronology of the key activities pertaining to the Act 

and its implementation as discussed in the following paragraphs. 

Page 6 GAO-04-134 LOCAL TV ACT 
Figure 2: Timeline for Key Activities to Implement the LOCAL TV Program 

Board held its first 

meeting 

Board issued proposed 

rule in Federal Register 

Board submitted draft 

of underwriting criteria 

to OMB for consultation 

Board submitted draft 

of prescribed 

regulations

to OMB 

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 

Dec 

00 Jan Feb Mar Apr May Jun Aug Sept Oct Nov Dec Feb Mar Apr May Jun Aug Sept Oct Nov Dec Feb Mar Apr May Jun Aug Sept Oct 01 

FY 2001 FY 2002 FY 2003 

Jul 01 Jul 02 Jul 03 Jan 

02 Jan 03 

12/21/00 

11/28/01 

9/13/02 

8/15/03 

2/07/03 

5/05/03 

120 day 

period 

following 

USDA 

appropriation 

5/13/02 

Public comment period 

on proposed rule ends 9/15/03 

Source: GAO analysis. 

The Act established the Board for the primary purpose of approving loan 

guarantees. Further, the Act required, prior to the Board’s approving loan 

guarantees, that (1) the Board approve regulations prescribed by RUS that 

provide the overall operating procedures for the Program, and (2) the 

Board, in consultation with the Director, OMB, and an independent public 

accounting firm, develop underwriting criteria relating to the guarantees, 

including appropriate collateral and cash flow levels. Each of these key 

documents was to be completed 120 days after program funding was 

provided, which, given the timing of the appropriations, would have been 

over a year ago. 

Page 7 GAO-04-134 LOCAL TV ACT 
According to Board and RUS officials, three factors contributed to program 

delays: (1) initial uncertainties over program funding, (2) inadequate 

dedicated staff resources for program activities, and (3) the decision to 

issue a proposed rule. Each of these reasons is discussed in the following 

paragraphs. 

In the fiscal year 2002 appropriation approved in November 2001, the 

Congress provided $258 million in initial loan guarantee authority for the 

Program and $2 million for administrative costs.8

 RUS officials told us that 

they had deferred action on developing the Program at that time because 

the $258 million in loan guarantee authority was insufficient to fund the 

technology needed to implement the Program. In April 2002, RUS issued a 

Notice of Inquiry in the Federal Register to obtain information needed to 

assist in drafting the proposed regulations such as changes in technology or 

new developments in the industry. In the notice, RUS specifically requested 

comments on the proposed merger of two major DBS providers that, if 

approved, could have noticeably affected the Program and virtually 

fulfilled the Act’s purpose. However, any substantial movement on the 

Program was delayed until the Farm Bill was passed on May 13, 2002,9 

when RUS believed that sufficient funding for the Program was available. 

The Board determined that it needed the $2 million in appropriated funds 

to procure the statutorily required IPA as well as other outside consultants 

and experts needed to implement and administer the Program. Therefore, 

the Working Group members have been supporting the Board as a 

collateral duty. Because the members have been unable to focus 

exclusively on Board activities, this resulted in further program delays. 

The Board held its first meeting on September 13, 2002, and on September 

26, 2002, awarded a $677,000 contract to Ernst and Young, an independent 

public accounting firm, to assist in drafting the underwriting criteria. As of 

8

Pub. L. 107-76, Title III, Nov. 28, 2001. 


9

Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-171, May 13, 2002.


Page 8 GAO-04-134 LOCAL TV ACT 
the end of fiscal year 2002, approximately $1.3 million of the $2 million 

remained available for contracting with outside consultants.10 

The third contributing factor to the delay of the Program was the Board’s 

September 2002 decision to issue a proposed rule11 to provide the public an 

opportunity to comment on the proposed regulations to ensure that the 

Program’s objectives and mission were consistent with congressional 

intent. Although the Act did not explicitly require formal rulemaking 

procedures, the Board believed it necessary given the complex and 

precedential issues raised in the statute. On February 7, 2003, the Board 

submitted the underwriting criteria to OMB for consultation. The first draft 

of the proposed operating regulations was submitted to OMB on May 5, 

2003. OMB approved the draft regulations on August 8, 2003, and the Board 

issued the proposed rule in the Federal Register on August 15, 2003, with a 

closing date of September 15, 2003. The Board will issue a final rule after 

considering and incorporating comments from the public and receiving 

OMB’s approval of any revisions to the proposed rule. The Board plans to 

begin accepting loan guarantee applications once the final rule is issued. 

The Board stated they believe this process will begin by February 2004. 

Policies and 

Procedures Needed as 

a Basis for Collecting 

User Fees Have Not 

Been Established 

Total costs of administering the Program, including those incurred by the 

respective departments and agencies providing support to the Board, were 

not accumulated and charged to the Program. Statement of Federal 

Financial Accounting Standard No. 4, Managerial Cost Accounting 

Standards (SFFAS No. 4) requires federal agencies to capture the costs of 

federal programs to assist the Congress in authorizing, modifying, and 

discontinuing programs and to provide agencies with reliable cost data for 

making informed managerial decisions and evaluating performance. Also, if 

relevant costs of administering the Program are not accumulated, the 

10The Consolidated Appropriations Resolution, 2003, Pub. L. No. 108-7, Feb. 20, 2003, 

provided that any balances available from prior years for the Rural Utilities, Rural Housing, 

and the Rural Business-Cooperative Services salaries and expenses accounts be transferred 

and merged with the fiscal year 2003 appropriation. Pursuant to this provision, the balance 

of the $2 million appropriated in fiscal year 2002 was carried forward to fiscal year 2003. The 

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

Agencies Appropriations Act for 2004 contains similar language as that found in the 2003 

appropriation. 

11The purpose of the proposed rule was to establish eligibility and guarantee requirements, 

the application and approval process, and the administration of guarantees approved by the 

Board. Further, it proposed the process under which the Board will consider applications. 

Page 9 GAO-04-134 LOCAL TV ACT 
Board will not be able to support the establishment of loan application and 

loan guarantee origination fees that are sufficient to recover, but not 

exceed, certain costs of administering the Program. 

According to SFFAS No. 4, costs of federal resources required by programs 

are an important factor in making policy decisions related to program 

authorization, modification, and discontinuation.12 SFFAS No. 4 also states 

that to fully account for the costs of the goods and services they produce, 

reporting entities should include the cost of goods and services received 

from other entities.13 Further, the standard states that, “Ideally, all interentity costs should be recognized. This is especially important when those 

costs constitute inputs to government goods or services provided to nonfederal entities for a fee or user charge. The fees and user charges should 

recover the full costs of those goods and services.”14 

During fiscal year 2002, the Board did not have a process in place to fully 

accumulate and report costs, including those of the IPA, the Board, and 

Working Group in conformance with SFFAS No. 4. As mentioned earlier, in 

fiscal year 2002, the Congress appropriated $2 million for costs to 

implement the Program, which the Board decided to use exclusively for an 

IPA and other consulting services. During fiscal year 2002, the Working 

Group participated in a number of organizational meetings, coordinated 

the Board’s initial meeting, and participated as technical evaluation staff on 

the procurement for the IPA. The Working Group also worked with Ernst 

and Young to develop the underwriting criteria and with the Board to assist 

in the development of the program regulations and other procurement 

activities. Because the Board did not request additional funding in fiscal 

year 2002 to support Working Group activities, the respective departments 

and agencies of the Working Group members absorbed these costs. We 

requested that the Board estimate the costs that the Working Group 

incurred during fiscal year 2002 in support of the Program’s administrative 

activities. The Board estimated that the Working Group incurred $78,000 in 

administrative expenses. Table 1 provides a summary of these cost 

estimates. 

12SFFAS No. 4, para. 39. 

13SFFAS No. 4, para. 105. 

14SFFAS No. 4, para. 111. 

Page 10 GAO-04-134 LOCAL TV ACT 
Table 1: Summary Estimate of Other Administrative Costs Incurred by the Working 

Group During Fiscal Year 2002 to Implement the LOCAL TV Program 

Estimated costs incurred FY 

Entity representing the Board 

USDA/Rural Utilities Service $53,586 

Department of the Treasury 11,202 

Department of Commerce 8,506 

Federal Reserve Board 5,155 

Total estimated costs $78,449 

Source: GAO analysis based on data obtained from the Board. Information is unaudited. 

Without accumulating and reporting the costs of administering the 

Program, the Board will not comply with SFFAS No. 4 or have the cost 

information needed to make informed decisions about the Program. The 

Board acknowledged that if the costs incurred by the Working Group were 

accumulated and reported, it would more accurately reflect the total cost 

of this program. 

More importantly, the Act directed the Board to charge and the 

Administrator to collect loan guarantee application and origination fees to 

cover, but not exceed, certain costs of administering the Program such as 

reviewing and approving applications. The Board has proposed in its draft 

regulations an application fee of $10,000 to $40,000, depending on the size 

of the loan, and a loan guarantee origination fee equal to the lesser of 2 

percent of the loan amount or $500,000. Without knowing the costs of 

administering the Program, the Board cannot determine whether the 

aggregate amount of fees collected is sufficient to recover, but not exceed, 

certain costs of administering the Program. It is expected that the Board 

will approve a small number of loans; therefore, it has a limited opportunity 

to charge the appropriate fees. 

Conclusions	 The LOCAL TV Program has not been implemented within the time frames 

specified in the LOCAL TV Act. Notwithstanding considerable delays 

already incurred, it is important that the Board begin to put the Program in 

operation in an expedient fashion. Further delays in completing regulations 

and underwriting criteria will postpone lending activities necessary to 

carry out the Program. Additionally, without instituting cost accounting 

practices in conformance with federal accounting standards, the Board will 

not have the information needed to manage and report on the Program or 

Page 11 GAO-04-134 LOCAL TV ACT 

2002 
to support the full recovery of certain Program costs. If the Board does not 

set adequate fees, a government subsidy to program applicants may result. 

Recommendations	 To help ensure future timely implementation of the Program, we 

recommend that the Board and the Administrator work collaboratively to 

issue the Program regulations and underwriting criteria in an expeditious 

manner. 

To help ensure better program management and that loan application and 

loan guarantee origination fees are sufficient to fully cover certain costs of 

administering the Program, we recommend that the Board and the 

Administrator develop a process to ensure that future costs of the Program 

are accumulated, documented, and reported in accordance with federal 

accounting standards and related guidance. 

Agency Comments and 

Our Evaluation 

In written comments on a draft of this report, the Board described its plans 

for implementing our recommendations. The Board stated that it continues 

to work with the Administrator and every effort is being made to ensure 

that the Program regulations and underwriting criteria are issued 

expeditiously. Further, the Board informed us that as it begins accepting 

applications, it will ensure that administrative expenses adhere to 

managerial cost accounting concepts in accordance with federal 

accounting standards and related guidance. The Board also provided 

technical comments on our draft report, which we incorporated as 

appropriate. 

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

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

Federal Reserve System, members of the Local Television Loan Guarantee 

Board, and the Director, Office of Management and 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 email at 

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

Page 12 GAO-04-134 LOCAL TV ACT 
(202) 512-3197 or stanfielda@gao.gov. Major contributors to this report are 


acknowledged in appendix II. 


McCoy Williams


Director


Financial Management and Assurance


Page 13 GAO-04-134 LOCAL TV ACT 
Appendix I 

Comments from the LOCAL TV Board


Page 14 GAO-04-134 LOCAL TV ACT 
Appendix I


Comments from the LOCAL TV Board


Page 15 GAO-04-134 LOCAL TV ACT 
Appendix II 

GAO Contacts and Staff Acknowledgments


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, Jeff Isaacs, Jeff Jacobson, Jason 

Kelly, Hannah Laufe, and Christina Quattrociocchi. 

(190054) Page 16 GAO-04-134 LOCAL TV ACT 
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