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Report to Congressional Committees:

April 2005:

Local Tv Act:

Administrative Funds May No Longer Be Necessary:

GAO-05-438:

GAO Highlights:

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.

Why GAO Did This Study:

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 Found:

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provision of which rescinded appropriations that would have been used 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for this program had been rescinded and the administration was not 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.

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.

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-438].

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 
[Hyperlink, williamsm1@gao.gov].

[End of Section]

Contents:

Letter:

Results in Brief:

Background:

Scope and Methodology:

Program Prepared for Implementation but Funding Rescinded:

The Board's Analysis Showed That Access to Local Television Signals 
Using DBS in Rural Areas Improved:

Program Development Costs Total More Than $1.2 Million:

Conclusions:

Matter for Congressional Consideration:

Agency Comments and Our Evaluation:

Appendix:

Appendix I: GAO Contacts and Staff Acknowledgments:

Tables:

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

Table 2: Summary Estimate of Reported Administrative Costs Incurred by 
the Working Group for the Fiscal Years Ended September 30, 2002-2004:

Figure:

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

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:

[End of Section]

April 22, 2005:

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 underserved[Footnote 1] areas, the 
Congress passed the Launching Our Communities' Access to Local 
Television Act of 2000 (LOCAL TV Act).[Footnote 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.

This report, our third[Footnote 3] since the program's initial funding, 
addresses the act's requirement[Footnote 4] 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,[Footnote 5] which 
rescinded[Footnote 6] 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.

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)[Footnote 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 satellite[Footnote 8] (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.[Footnote 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 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.

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 Administrator[Footnote 10] 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).[Footnote 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.

Initial program funding was provided in November 2001 through the 
Agriculture, Rural Development, Food and Drug Administration, and 
Related Agencies Appropriations Act, 2002.[Footnote 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 
2002[Footnote 13] 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 States[Footnote 14] 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.[Footnote 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.

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

[See PDF for image]

Source: GAO Analysis.

[End of figure]

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 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,[Footnote 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 reported[Footnote 17] that the application lacked essential 
components required by the program regulations and returned it to the 
applicant with the related fee.

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,[Footnote 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. 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:

Total DMAs; 
Number of DMAs: 210; 
Equivalent number of television households (millions): 108.4.

Less: Top 40 DMAs; 
Number of DMAs: 40; 
Equivalent number of television households (millions): 66.1.

Television markets not in Top 40 DMAs; 
Number of DMAs: 170; 
Equivalent number of television households (millions): 42.3.

Requirement of the act, as amended (170 ¥75%); 
Number of DMAs: 128; 
Equivalent number of television households (millions): [Empty].

Number of DMAs receiving local TV access through DBS; 
Number of DMAs: 114; 
Equivalent number of television households (millions): 37.5.

Number of DMAs not receiving access to local television signals through 
DBS; 
Number of DMAs: 56; 
Equivalent number of television households (millions): 4.8.

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

[End of table]

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 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 
GovWorks[Footnote 19] administrative fees. The second component 
includes the board's estimate of salaries and expenses incurred by the 
Working Group members to support the board[Footnote 20] 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.[Footnote 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, 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:

Entity representing the LOCAL TV Board: USDA Rural Utilities Service;
Fiscal year: 2002: $53,586; 
Fiscal year: 2003: $158,491; 
Fiscal year: 2004: $166,977; 
Total (inception through 9/30/04): $379,054.

Entity representing the LOCAL TV Board: Department of the Treasury;
Fiscal year: 2002: $11,202;
Fiscal year: 2003: $50,402;
Fiscal year: 2004: $59,314;
Total (inception through 9/30/04): $120,918.

Entity representing the LOCAL TV Board: Department of Commerce;
Fiscal year: 2002: $8,506;
Fiscal year: 2003: $31,123;
Fiscal year: 2004: $21,657;
Total (inception through 9/30/04): $61,286.

Entity representing the LOCAL TV Board: Federal Reserve Board;
Fiscal year: 2002: $5,155;
Fiscal year: 2003: $15,277;
Fiscal year: 2004: $15,584;
Total (inception through 9/30/04): $36,016.

Entity representing the LOCAL TV Board: Total estimated costs;
Fiscal year: 2002: $78,449;
Fiscal year: 2003: $255,293;
Fiscal year: 2004: $263,532;
Total (inception through 9/30/04): $597,274.

Source: GAO analysis based on information from the board.

[End of table]

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.[Footnote 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 
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 [Hyperlink, 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 
[Hyperlink, williamsm1@gao.gov] or Alana Stanfield, Assistant Director, 
at (202) 512-3197 or [Hyperlink, stanfielda@gao.gov]. Major 
contributors to this report are acknowledged in appendix I.

Signed by:

McCoy Williams:
Director Financial Management and Assurance:

[End of section]

Appendixes:

Appendix I: 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, F. Abe Dymond, 
Lauren S. Fassler, Jeff Isaacs, and Christina Quattrociocchi.

(195057):

FOOTNOTES

[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).

[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.

[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.

[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).

[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."

[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). 

[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).

[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).

[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.

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