LOCAL TV Act: Administrative Funds May No Longer Be Necessary	 
(22-APR-05, GAO-05-438).					 
                                                                 
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.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-438 					        
    ACCNO:   A22560						        
  TITLE:     LOCAL TV Act: Administrative Funds May No Longer Be      
Necessary							 
     DATE:   04/22/2005 
  SUBJECT:   Audits						 
	     Federal funds					 
	     Funds management					 
	     Loans						 
	     Program evaluation 				 
	     Reporting requirements				 
	     Television broadcasting				 
	     Program management 				 
	     Television and television stations 		 
	     LOCAL Television Loan Guarantee Program		 

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GAO-05-438

                 United States Government Accountability Office

                     GAO Report to Congressional Committees

April 2005

LOCAL TV ACT

                Administrative Funds May No Longer Be Necessary

                                       a

GAO-05-438

[IMG]

April 2005

LOCAL TV ACT

Administrative Funds May No Longer Be Necessary

  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rescinded appropriations that would have been used to guarantee loans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.

                 United States Government Accountability Office

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

1 2 4 7 8

9 11 13 13 13

  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                        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                               

Contents

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

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
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copyright holder may be necessary if you wish to reproduce this material
separately.

A

United States Government Accountability Office Washington, D.C. 20548

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 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. S:S: 1101-1110).

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, S: 1006, 114 Stat.
2762A-128,-138 (Dec. 21, 2000) (codified at 47 U.S.C. S: 1105).

5 Agriculture, Rural Development, Food and Drug Administration, and
Related Agencies Appropriations Act, 2005, Pub. L. 108-447, div. A, S:
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.

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.

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 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, S: 6404, 116 Stat. 134, 429 (May 13, 2002).

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, S: 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."

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

                             Source: GAO analysis.

  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,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).

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, S:
775, 118 Stat. 2811, 2849 (Dec. 8, 2004).

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

Equivalent number of Number of DMAs television households (millions)

                              Total DMAs                            210 108.4 
                          Less: Top 40 DMAs                         40  
                Television markets not in Top 40 DMAs               170 
            Requirement of the act, as amended (170  *75%)          128 
         Number of DMAs receiving local TV access through DBS       114 
Number of DMAs not receiving access to local television signals  56  
                             through DBS                                

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

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).

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

                                  Fiscal year

                                                             Total (inception 
                                                                      through 
    Entity representing the LOCAL     2002     2003     2004         9/30/04) 
              TV Board                                       
    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 

           Source: GAO analysis based on information from the board.

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

may wish to consider saving budgetary resources by rescinding the
balanceCongressional of the $2 million appropriated for administrative
expenses to carry out the Consideration LOCAL TV Program that has been
transferred to GovWorks, but remains

unobligated by contracts in that account.

Agency Comments and 	In oral comments, the LOCAL TV Board generally agreed
with the report's findings and provided technical comments, which we
incorporated as

  Our Evaluation 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, S: 1005(n), 114 Stat.
2762A-128, 137 (Dec. 21, 2000) (codified at 47 U.S.C. S: 1104(n)); see
also 7 C.F.R. S:S: 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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McCoy Williams
Director
Financial Management and Assurance

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.

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