The act established the LOCAL Television Loan  Guarantee Board. Specifically, the act requires the  board to: (1) direct the Administrator 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. 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). Program Prepared for Implementation but Funding Rescinded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,  the board provided applicants the first opportunity to apply for a loan  guarantee. On December 8, 2004, the Congress passed  the Consolidated Appropriations Act, 2005, one provision of which  rescinded the program’s unobligated balances which were available for  guaranteeing loans.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President’s Budget for Fiscal Year 2006  pointed out that the unobligated budget authority for this account had been  rescinded and stated that the Administration was not proposing additional  funds for the Local TV Program. 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. 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. During fiscal year 2004, the board  analyzed the extent to which direct broadcast satellites were currently  providing access to local television signals in DMAs. 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. 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. 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. 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  administrative fees. The second component includes the board’s estimate  of salaries and expenses incurred by the Working Group members to  support the board that totals approximately $597,000.
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.