GAO-06-858R LOCAL TV Act 

United States Government Accountability Office

Washington, DC 20548 

July 7, 2006 

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 

Subject: LOCAL Television Act: Status of Spending for Fiscal Year 2005 

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

Local Television Act of 2000 (LOCAL TV Act).1

 The act created the Local Television 

Loan Guarantee Program and established the LOCAL Television Loan Guarantee 

Board to finance projects to provide access to signals of local television stations to 

households in areas with limited or no access to such signals from a commercial, forprofit satellite service or other multichannel video provider. The program authorizes 

the board to approve loan guarantees up to 80 percent of loans, totaling no more than 

$1.25 billion in aggregate; however, since inception of the program, no loan 

guarantees have been approved and the program has not been utilized. 

Section 1006 of the act requires 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. In April 2005, we issued to your 

committees our required annual report2

 covering fiscal year 2004. Since there 

continue to be no loan guarantee recipients for GAO to audit, this report primarily 

addresses whether program administration during fiscal year 2005 satisfied the 

provisions of the act. 

 

1

Pub. L. No. 106-553, tit. X, 114 Stat. 2762A-128 (Dec. 21, 2000) (codified, as amended, at 47 U.S.C. §§ 

1101-1110). 

2

GAO, LOCAL TV Act: Administrative Funds May No Longer Be Necessary, GAO-05-438 (Washington, 

D.C.: Apr. 22, 2005). 
To determine the status of the $2 million appropriation for administrative expenses 

and the working group costs incurred during fiscal year 2005, we obtained and 

evaluated information from the board, including budget, contract, and cost data; 

minutes of board meetings; and other related information. We did not independently 

verify or audit the working group cost data we obtained from the board. We 

conducted our work from March 2006 through June 2006 in accordance with U.S. 

generally accepted government auditing standards. We requested comments on a 

draft of this report from the board. The board’s oral comments, which we received 

from the board’s liaison, are discussed in the Agency Comments and Our Evaluation 

section of this report. 

Results in Brief 

Since fiscal year 2002, we have reported annually on the administration of the LOCAL 

TV Act as required by Section 1006 of the act. Since inception of the program, no loan 

guarantees have been approved and there are no current or anticipated budgetary 

resources available for future loan guarantees. On December 13, 2004, the board 

authorized closing out one of two existing contracts. The other contract expired on 

December 31, 2005. Fiscal year 2005 administrative costs totaled about $6,500. Given 

that the President’s Budgets for Fiscal Years 2006 and 2007 both pointed out that the 

unobligated budget authority for this program had been rescinded and the 

administration was not proposing additional funds for this program, we reiterate our 

previous matter for congressional consideration to rescind the balance of the 

appropriation for administrative expenses. In oral comments on a draft of this report, 

the board agreed with our report. 

Background 

In November 2001, the Congress appropriated $2 million for administrative expenses 

to implement the program.3

 The board established a working group4 to assist with 

 3

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

Act, 2002, Pub. L. No. 107-76, tit. III, 118 Stat. 704, 725 (Nov. 28, 2001). The November 2001 act directed

that this amount be transferred to and merged with the appropriation for Rural Development, Salaries

and Expenses. The Consolidated Appropriations Resolution, 2003, provided that any balances

available from prior years for the Rural Utilities Service, Rural Housing Service, and 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, tit. 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, 2005, 

and 2006. See Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, div. A, tit. III, 118 Stat. 3, 21 

(Jan. 23, 2004); Consolidated Appropriations Act, 2005, Pub. L. No. 108-447, div. A, tit. III, 118 Stat. 

2809, 2827-28 (Dec. 8, 2004); and Agriculture, Rural Development, Food and Drug Administration, and 

Related Agencies Appropriations Act, 2006, Pub. L. No. 109-97, 119 Stat. 2120, 2137-38 (Nov. 10, 2005). 

4

The working group costs consist of an estimate of senior-level officials’ salaries and related costs from 

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

program. The program did not have full-time staff but depended on staff from the various agencies

supporting their 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). 

2 GAO-06-858R LOCAL TV Act 
3 GAO-06-858R LOCAL TV Act 

implementing the program and used GovWorks for administrative services.5

 During 

fiscal year 2002, the Department of Agriculture (USDA) obligated the entire $2 million 

appropriation by issuing orders for its anticipated needs to GovWorks, which 

subsequently awarded, on the board’s behalf, two contracts with an estimated value 

totaling about $1.2 million—one to Ernst & Young LLP valued at $727,000 and one to 

Arnold & Porter LLP valued at $500,000. Since inception, GovWorks has obligated and 

disbursed approximately $640,000 to Ernst & Young LLP to develop the underwriting 

criteria and program regulations and approximately $22,000 in fees to itself. The 

Arnold & Porter LLP contract was issued for legal services; however, no obligations 

or disbursements were made for this contract. The Arnold & Porter LLP contract was 

terminated on April 19, 2005. The Ernst & Young LLP contract was extended for 1 

additional year on December 22, 2004, to December 31, 2005, and was officially 

closed out on February 15, 2006. As of March 31, 2006, the remaining unobligated 

balance in the GovWorks account was approximately $1.3 million, as summarized in 

table 1. The unexpended balance in this appropriation has been carried forward each 

fiscal year in the annual appropriation for Rural Development, Salaries and 

Expenses.6

Table 1: Unobligated Balance in GovWorks Account at March 31, 2006

Item Cost

Appropriation for administrative expenses, fiscal year 

2002 

$2,000,000

Less: Disbursements to Ernst & Young LLP (640,000)

Less: Disbursements for GovWorks fee (22,000)

Unobligated balance in GovWorks $1,338,000

Source: GAO analysis based on information from the LOCAL Television Loan Guarantee Board.

In last year’s annual report, we addressed program administration and key activities 

that occurred during fiscal year 2004. Specifically, we reported that the board 

completed the steps necessary to prepare the 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 all prior 

appropriations that had been available to guarantee loans under the program. The 

President’s Budgets for Fiscal Years 2006 and 2007 both pointed out that the 

unobligated budget authority for this program had been rescinded and the 

administration was not proposing additional funds for this program. In our fiscal year 

2004 report, we suggested that if the Congress was not going to provide future loan 

guarantee funding, it should rescind the balance of the $2 million appropriated for 

administrative expenses to carry out the program that had been transferred to 

 

5

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

the Office of Management and Budget to offer administrative services to federal agencies. 

6

See footnote 3. 
GovWorks but remained unobligated by contracts in that account. Since the balance 

of this appropriation has not been rescinded, this report addresses the status of the 

$2 million appropriation for administrative expenses and the fiscal year 2005 working 

group costs. 

Fiscal Year 2005 Program Costs Summary 

Since December 2004, there has been minimal program activity except closing out the 

existing contracts, resulting in working group costs totaling approximately $6,500. 

From the program’s initial funding, which was on November 28, 2001, to September 

30, 2005, the board estimated it incurred expenses of approximately $1.3 million to 

implement the program, as summarized in table 2. 

Table 2: Program Costs from November 28, 2001, to September 30, 2005

Component Cost

Ernst & Young LLP $640,000

GovWorks fees 22,000

Working group costs from inception to September 30, 2005 

(estimated) 604,000

Total $1,266,000

Source: GAO analysis based on information from the LOCAL Television Loan Guarantee Board. 

As mentioned previously, $662,000 in obligations and disbursements were made from 

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

underwriting criteria and program regulations and for GovWorks’ administrative fees. 

Working group costs, which were not paid from the appropriation for administrative 

expenses, have been borne by the respective departments and agencies from within 

their existing budgetary resources (i.e., salaries and expenses appropriations or 

accounts). The board’s estimate of salaries and expenses incurred by the working 

group members to support the board totaled approximately $604,000. Table 3 

provides a summary of the reported estimated administrative costs incurred by the 

working group for the fiscal years ended September 30, 2002, through 2005.

Table 3: Summary of Reported Estimated Administrative Costs Incurred by the

Working Group for the Fiscal Years Ended September 30, 2002, through 2005

Fiscal year 

Entity representing the 

LOCAL Television Loan 

Guarantee Board 

2002 and 

2003

2004 2005 Total

(inception

through 

9/30/05)

USDA Rural Utilities Service $212,077 $166,977 $1,572 $380,626

Department of the Treasury 61,604 59,314 2,932 123,850

Department of Commerce 39,629 21,657 1,090 62,376

Federal Reserve Board 20,432 15,584 892 36,908

Total estimated costs $333,742 $263,532 $6,486 $603,760

Source: GAO analysis based on information from the LOCAL Television Loan Guarantee Board. 

4 GAO-06-858R LOCAL TV Act 
5 GAO-06-858R LOCAL TV Act 

Given that the President’s Budgets for Fiscal Years 2006 and 2007 both pointed out 

that the unobligated budget authority for this program had been rescinded and the 

administration was not proposing additional funds for this program, we reiterate our 

previous matter for congressional consideration to rescind the balance of the Rural 

Development, Salaries and Expenses appropriation for administrative expenses 

transferred to GovWorks that remains unobligated against the GovWorks account. 

Agency Comments and Our Evaluation 

In oral comments, the board agreed with the report and told us that in May 2006 the 

remaining unobligated funds in the GovWorks account were transferred to the 

general fund of the U.S. Treasury. As of the date of this report, the board had not yet 

provided the supporting documentation we requested showing either a cancellation 

of the original interagency orders placed with GovWorks or the transfer of the 

unobligated balance in the GovWorks account. 

- - - - - 

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

the Treasury; the Chairman of the 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 GAO’s Web site at 

http://www.gao.gov. 

If you or your staffs have any questions on matters discussed in this report, please 

contact me at (202) 512-9095 or williamsm1@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last page of this 

report. GAO staff who made key contributions to this report are Casey Keplinger, 

Assistant Director; Tom Dawson; Lauren Fassler; and Jeffrey Isaacs. 

McCoy Williams 

Director, Financial Management and Assurance 

(195079) 
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