-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-858R
TITLE: LOCAL Television Act: Status of Spending for Fiscal Year 2005
DATE: 07/07/2006
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GAO-06-858R
* Results in Brief
* Background
* Total estimated costs
* end of correspond & Test.pdf
* PDF6-Ordering Information.pdf
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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, for-profit 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.
1Pub. L. No. 106-553, tit. X, 114 Stat. 2762A-128 (Dec. 21, 2000)
(codified, as amended, at 47 U.S.C. S:S: 1101-1110).
2GAO, 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 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
3Agriculture, 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).
4The 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).
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 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.
5GovWorks 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.
6See footnote 3.
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 604,000
(estimated)
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 2002 and 2003 2004 2005 Total (inception
LOCAL Television Loan through 9/30/05)
Guarantee Board
USDA Rural Utilities $212,077 $166,977 $1,572 $380,626
Service
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.
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 [email protected] .
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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