Local TV Act
Progress Made, but Timeliness and Cost Accounting Issues Need to be Addressed Gao ID: GAO-04-134 October 31, 2003The LOCAL TV Act required 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. In fiscal year 2002, the LOCAL TV Program was funded; however, because it was not fully implemented in that year, there were no loan guarantee applicants for GAO to audit. Therefore, this report primarily addresses whether program administration during fiscal year 2002 satisfied the provisions of the Act.
In December 2000,the Congress passed the Launching Our Communities' Access to Local Television Act of 2000 (LOCAL TV Act or Act). The Act created the Local Television Loan Guarantee Program (Program or LOCAL TV Program) and established the Local Television Loan Guarantee Board (Board) to approve guaranteed loans, totaling no more than $1.25 billion, to finance projects that will provide local television access to households with limited over-the-air television broadcast signals or cable service. The Board is comprised 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. The Department of Agriculture (USDA) Rural Utilities Service serves as Program Administrator (Administrator). The LOCAL TV Program has not been established in an expeditious fashion as specified by the Act. Given that funds were appropriated in November 2001, thus starting the clock on the 120 days allowed for completing program regulations and underwriting criteria, the Program should have been ready for implementation by March 2002. According to the Board and Administrator, three factors contributed to program delays: (1) initial uncertainties over program funding, (2) inadequate dedicated staff resources for program activities, and (3) the decision to issue a proposed rule. As of the end of August 2003, neither of these key documents, which provide the overall framework for the Program, was ready for implementation, thus delaying lending activities and ultimately, realization of improved television reception in target areas throughout the United States. Further, the full costs of administering the Program, including those incurred by the respective agencies and departments providing support to the Board, were not accumulated and charged to the program as called for by federal accounting standards. Statement of Federal Financial Accounting Standard No.4, Managerial Cost Accounting Standards requires federal agencies to capture the costs of federal programs to assist the Congress in authorizing, modifying, and discontinuing programs and to provide agencies with reliable cost data for making informed managerial decisions and evaluating performance. Further, the capacity to capture these costs going forward is key to fully recovering certain costs of administering the Program through loan application and loan guarantee origination fees.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-134, Local TV Act: Progress Made, but Timeliness and Cost Accounting Issues Need to be Addressed
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GAO Highlights:
Highlights of GAO-04-134, 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:
The LOCAL TV Act required 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. In fiscal year 2002, the LOCAL TV Program was funded;
however, because it was not fully implemented in that year, there were
no loan guarantee applicants for GAO to audit. Therefore, this report
primarily addresses whether program administration during fiscal year
2002 satisfied the provisions of the Act.
What GAO Found:
In December 2000, the Congress passed the Launching Our Communities‘
Access to Local Television Act of 2000 (LOCAL TV Act or Act). The Act
created the Local Television Loan Guarantee Program (Program or LOCAL
TV Program) and established the Local Television Loan Guarantee Board
(Board) to approve guaranteed loans, totaling no more than $1.25
billion, to finance projects that will provide local television access
to households with limited over-the-air television broadcast signals
or cable service. The Board is comprised 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. The Department of Agriculture (USDA)
Rural Utilities Service serves as Program Administrator
(Administrator).
The LOCAL TV Program has not been established in an expeditious
fashion as specified by the Act. Given that funds were appropriated in
November 2001, thus starting the clock on the 120 days allowed for
completing program regulations and underwriting criteria, the Program
should have been ready for implementation by March 2002. According to
the Board and Administrator, three factors contributed to program
delays: (1) initial uncertainties over program funding, (2) inadequate
dedicated staff resources for program activities, and (3) the decision
to issue a proposed rule. As of the end of August 2003, neither of
these key documents, which provide the overall framework for the
Program, was ready for implementation, thus delaying lending
activities and ultimately, realization of improved television
reception in target areas throughout the United States.
Further, the full costs of administering the Program, including those
incurred by the respective agencies and departments providing support
to the Board, were not accumulated and charged to the program as
called for by federal accounting standards. Statement of Federal
Financial Accounting Standard No. 4, Managerial Cost Accounting
Standards requires federal agencies to capture the costs of federal
programs to assist the Congress in authorizing, modifying, and
discontinuing programs and to provide agencies with reliable cost data
for making informed managerial decisions and evaluating performance.
Further, the capacity to capture these costs going forward is key to
fully recovering certain costs of administering the Program through
loan application and loan guarantee origination fees.
What GAO Recommends:
GAO is making recommendations to the Board that it work with the
Administrator to help ensure that (1) program regulations and
underwriting criteria are issued expeditiously, and (2) loan
application and origination fees are sufficient to cover certain costs
of administering the Program and that these costs are accumulated,
documented, and reported in accordance with federal accounting
standards. In response, the Board stated that every effort is being
made to ensure that the program regulations and underwriting criteria
are issued expeditiously and that as applications are received, it
will account for administrative expenses in accordance with federal
accounting standards.
www.gao.gov/cgi-bin/getrpt?GAO-04-134.
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 williamsm1@gao.gov.
[End of section]
Report to Congressional Committees:
October 2003:
LOCAL TV ACT:
Progress Made, but Timeliness and Cost Accounting Issues Need to be
Addressed:
GAO-04-134:
Contents:
Letter:
Results in Brief:
Background:
Scope and Methodology:
The LOCAL TV Program Has Not Been Implemented in a Timely Manner:
Policies and Procedures Needed as a Basis for Collecting User Fees Have
Not Been Established:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Comments from the LOCAL TV Board:
Appendix II: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Table :
Table 1: Summary Estimate of Other Administrative Costs Incurred by the
Working Group During Fiscal Year 2002 to Implement the LOCAL TV
Program:
Figures:
Figure 1: Entities Involved in Implementing the LOCAL TV Program:
Figure 2: Timeline for Key Activities to Implement the LOCAL TV Program:
Abbreviations:
Letter October 31, 2003:
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:
Today, approximately 23.4 million households in the United States have
limited or no access to local television broadcast signals. To
facilitate access to 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 or Act).[Footnote 2] The Act created the LOCAL Television
Loan Guarantee Program (Program or LOCAL TV Program). The Program
provides for loan guarantees of up to 80 percent of loans totaling no
more than $1.25 billion to finance projects to enable local television
access to communities where distance and topography limit access to
over-the-air television broadcast signals or cable service. The Act
established the LOCAL Television Loan Guarantee Board (Board), which is
comprised 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 and the Department of Agriculture
(USDA) Rural Utilities Service (RUS) as Program Administrator
(Administrator) to issue and administer approved loan guarantees.
This report addresses the Act's requirement 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. Because the Program was not funded during fiscal
year 2001, we agreed with your offices that we would revisit the
mandate in fiscal year 2002. The Program was funded in fiscal year
2002; however, because it was not fully implemented in that year, there
were no loan guarantee applicants for GAO to audit. Therefore, this
report primarily addresses whether program administration during fiscal
year 2002 satisfied the provisions of the Act.
Results in Brief:
The LOCAL TV Program has not been established in an expeditious fashion
as specified by the Act. Given that funds were appropriated in November
2001, thus starting the clock on the 120 days allowed for completing
program regulations and underwriting criteria, the Program should have
been ready for implementation by March 2002. According to Board and RUS
officials, three factors contributed to program delays: (1) initial
uncertainties over program funding, (2) inadequate dedicated staff
resources for program activities, and (3) the decision to issue a
proposed rule. As of the end of August 2003, neither of these key
documents, which provide the overall framework for the Program, was
ready for implementation, thus delaying lending activities and
ultimately, realization of improved television reception in target
areas throughout the United States.
Total costs of administering the Program, including those incurred by
the respective departments and agencies providing support to the Board,
were not accumulated and charged to the Program as called for by
federal accounting standards. Statement of Federal Financial Accounting
Standard No. 4, Managerial Cost Accounting Standards requires federal
agencies to capture the cost of federal programs to assist the Congress
in authorizing, modifying, and discontinuing programs and to provide
agencies with reliable cost data for making informed managerial
decisions and evaluating performance. The capacity to capture these
costs going forward is key to satisfying federal accounting standards
and fully recovering certain costs of administering the Program through
loan application and loan guarantee origination fees.
:
We are making recommendations to the Board and the Administrator to
help ensure that (1) program regulations and underwriting criteria are
issued expeditiously, and (2) loan application and loan guarantee
origination fees are sufficient to cover, but not exceed, certain costs
of administering the Program.
In commenting on a draft of this report, the Board stated that every
effort is being made to ensure that program regulations and the
underwriting criteria are issued expeditiously. The Board further
stated that as it begins accepting applications, it will ensure that
the recording of administrative expenses adheres to managerial cost
accounting concepts in accordance with federal accounting standards and
related guidance. For additional information see the Agency Comments
and Our Evaluation section of this report and appendix I.
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 (Board) whose primary function is to
approve loan guarantees to finance projects to provide local television
access for communities in remote areas throughout the United States.
The Board is authorized to approve loan guarantees up to 80 percent of
the aggregate value of each loan. The Board may not approve loan
guarantees after December 31, 2006,[Footnote 3] and the aggregate of
all loans guaranteed may not be more than $1.25 billion. The repayment
of the loan(s) is required to be made with a term of the lesser of 25
years from the date of the execution of the loan or 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 Board to
implement this new program. Specifically, the Act required the Board
to: (1) direct the Administrator to prescribe regulations within 120
days after the Congress appropriated funds, (2) develop underwriting
criteria in consultation with the Director, Office of Management and
Budget (OMB) and an independent public accounting firm (IPA) within 120
days after the Congress appropriated funds, (3) establish and collect
loan application and loan guarantee origination fees[Footnote 4] to
offset the cost of administering the Program under the Act, including
the costs of the Board and the Administrator,[Footnote 5] and (4)
consider other numerous specialized technical and business requirements
prior to approving a loan guarantee.
In addition to developing the regulations, the Act directed RUS, an
agency of the Department of Agriculture's Rural Development, to issue
and administer loan guarantees that have been approved by the 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 Board established a Working
Group, consisting of senior level officials from the various
departments and agencies that represent the Board, to assist it with
activities to implement the Program. The costs incurred by the Working
Group members to support the Board have been borne by the respective
departments and agencies from within their existing budgetary resources
(i.e., salaries and expense appropriations or accounts).
Although the Act was passed on December 21, 2000, which required the
establishment of program regulations and underwriting criteria, initial
funding for the Program was not provided until November 2001 through
the Agriculture, Rural Development, Food and Drug Administration, and
Related Agencies Appropriations Act, 2002.[Footnote 6] The Act provided
$258 million in loan guarantee authority and $2 million for
administrative expenses. Later in the fiscal year, two additional
pieces of legislation[Footnote 7] resulted in USDA receiving
approximately a combined $1.07 billion in loan guarantee authority
available for providing access to local TV stations through direct
broadcast satellite (DBS) or some other means.
Figure 1 illustrates the relationships between the Congress, federal
entities involved in implementing the LOCAL TV Program, and the public.
Figure 1: Entities Involved in Implementing the LOCAL TV Program:
[See PDF for image]
[End of figure]
Scope and Methodology:
To determine 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 Program
during fiscal year 2002. 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 its internal operating regulations, minutes from
Board meetings, the IPA's technical and price proposals, the
solicitation to obtain information related to the legal advisory
services for the Board, and other budget and cost information to obtain
an understanding of the activities that occurred to implement the
Program during fiscal year 2002. We reviewed OMB circulars and federal
accounting standards, as applicable. We did not independently verify or
audit the cost data we obtained from the Board. We did not review the
proposed regulations or draft underwriting criteria because they were
not made available to us while OMB was completing its review. We
conducted our work from February 2003 through August 2003 in accordance
with generally accepted government auditing standards.
We requested comments on a draft of this report from the Chairman of
the Board and the Department of Agriculture. The Department of
Agriculture chose to have the Board incorporate its views into the
Board's overall response. The Board's comments are discussed in the
Agency Comments and Our Evaluation section of this report and are
reprinted in appendix I. The Board also provided technical comments on
our draft report, which we incorporated as appropriate.
The LOCAL TV Program Has Not Been Implemented in a Timely Manner:
Under the requirements of the authorizing legislation and the timing of
the available appropriation, the Board was to have had the program
regulations and underwriting criteria completed and ready to implement
within 120 days after funding was available. Since funds were
appropriated in November 2001, the target time frame was March 2002.
However, as of the end of August 2003, neither of these key documents
had been finalized. Since these documents provide the overall framework
for the Program, including operating procedures and lending criteria,
lending activities cannot proceed.
Figure 2 provides a chronology of the key activities pertaining to the
Act and its implementation as discussed in the following paragraphs.
Figure 2: Timeline for Key Activities to Implement the LOCAL TV
Program:
[See PDF for image]
[End of figure]
The Act established the Board for the primary purpose of approving loan
guarantees. Further, the Act required, prior to the Board's approving
loan guarantees, that (1) the Board approve regulations prescribed by
RUS that provide the overall operating procedures for the Program, and
(2) the Board, in consultation with the Director, OMB, and an
independent public accounting firm, develop underwriting criteria
relating to the guarantees, including appropriate collateral and cash
flow levels. Each of these key documents was to be completed 120 days
after program funding was provided, which, given the timing of the
appropriations, would have been over a year ago.
According to Board and RUS officials, three factors contributed to
program delays: (1) initial uncertainties over program funding, (2)
inadequate dedicated staff resources for program activities, and (3)
the decision to issue a proposed rule. Each of these reasons is
discussed in the following paragraphs.
In the fiscal year 2002 appropriation approved in November 2001, the
Congress provided $258 million in initial loan guarantee authority for
the Program and $2 million for administrative costs.[Footnote 8] RUS
officials told us that they had deferred action on developing the
Program at that time because the $258 million in loan guarantee
authority was insufficient to fund the technology needed to implement
the Program. In April 2002, RUS issued a Notice of Inquiry in the
Federal Register to obtain information needed to assist in drafting the
proposed regulations such as changes in technology or new developments
in the industry. In the notice, RUS specifically requested comments on
the proposed merger of two major DBS providers that, if approved, could
have noticeably affected the Program and virtually fulfilled the Act's
purpose. However, any substantial movement on the Program was delayed
until the Farm Bill was passed on May 13, 2002,[Footnote 9] when RUS
believed that sufficient funding for the Program was available.
The Board determined that it needed the $2 million in appropriated
funds to procure the statutorily required IPA as well as other outside
consultants and experts needed to implement and administer the Program.
Therefore, the Working Group members have been supporting the Board as
a collateral duty. Because the members have been unable to focus
exclusively on Board activities, this resulted in further program
delays.
The Board held its first meeting on September 13, 2002, and on
September 26, 2002, awarded a $677,000 contract to Ernst and Young, an
independent public accounting firm, to assist in drafting the
underwriting criteria. As of
the end of fiscal year 2002, approximately $1.3 million of the $2
million remained available for contracting with outside
consultants.[Footnote 10]
The third contributing factor to the delay of the Program was the
Board's September 2002 decision to issue a proposed rule[Footnote 11]
to provide the public an opportunity to comment on the proposed
regulations to ensure that the Program's objectives and mission were
consistent with congressional intent. Although the Act did not
explicitly require formal rulemaking procedures, the Board believed it
necessary given the complex and precedential issues raised in the
statute. On February 7, 2003, the Board submitted the underwriting
criteria to OMB for consultation. The first draft of the proposed
operating regulations was submitted to OMB on May 5, 2003. OMB approved
the draft regulations on August 8, 2003, and the Board issued the
proposed rule in the Federal Register on August 15, 2003, with a
closing date of September 15, 2003. The Board will issue a final rule
after considering and incorporating comments from the public and
receiving OMB's approval of any revisions to the proposed rule. The
Board plans to begin accepting loan guarantee applications once the
final rule is issued. The Board stated they believe this process will
begin by February 2004.
Policies and Procedures Needed as a Basis for Collecting User Fees Have
Not Been Established:
Total costs of administering the Program, including those incurred by
the respective departments and agencies providing support to the Board,
were not accumulated and charged to the Program. Statement of Federal
Financial Accounting Standard No. 4, Managerial Cost Accounting
Standards (SFFAS No. 4) requires federal agencies to capture the costs
of federal programs to assist the Congress in authorizing, modifying,
and discontinuing programs and to provide agencies with reliable cost
data for making informed managerial decisions and evaluating
performance. Also, if relevant costs of administering the Program are
not accumulated, the Board will not be able to support the
establishment of loan application and loan guarantee origination fees
that are sufficient to recover, but not exceed, certain costs of
administering the Program.
According to SFFAS No. 4, costs of federal resources required by
programs are an important factor in making policy decisions related to
program authorization, modification, and discontinuation.[Footnote 12]
SFFAS No. 4 also states that to fully account for the costs of the
goods and services they produce, reporting entities should include the
cost of goods and services received from other entities.[Footnote 13]
Further, the standard states that, "Ideally, all inter-entity costs
should be recognized. This is especially important when those costs
constitute inputs to government goods or services provided to non-
federal entities for a fee or user charge. The fees and user charges
should recover the full costs of those goods and services."[Footnote
14]
During fiscal year 2002, the Board did not have a process in place to
fully accumulate and report costs, including those of the IPA, the
Board, and Working Group in conformance with SFFAS No. 4. As mentioned
earlier, in fiscal year 2002, the Congress appropriated $2 million for
costs to implement the Program, which the Board decided to use
exclusively for an IPA and other consulting services. During fiscal
year 2002, the Working Group participated in a number of organizational
meetings, coordinated the Board's initial meeting, and participated as
technical evaluation staff on the procurement for the IPA. The Working
Group also worked with Ernst and Young to develop the underwriting
criteria and with the Board to assist in the development of the program
regulations and other procurement activities. Because the Board did not
request additional funding in fiscal year 2002 to support Working Group
activities, the respective departments and agencies of the Working
Group members absorbed these costs. We requested that the Board
estimate the costs that the Working Group incurred during fiscal year
2002 in support of the Program's administrative activities. The Board
estimated that the Working Group incurred $78,000 in administrative
expenses. Table 1 provides a summary of these cost estimates.
Table 1: Summary Estimate of Other Administrative Costs Incurred by the
Working Group During Fiscal Year 2002 to Implement the LOCAL TV
Program:
Entity representing the Board: USDA/Rural Utilities Service; Estimated
costs incurred FY 2002: $53,586.
Entity representing the Board: Department of the Treasury; Estimated
costs incurred FY 2002: 11,202.
Entity representing the Board: Department of Commerce; Estimated costs
incurred FY 2002: 8,506.
Entity representing the Board: Federal Reserve Board; Estimated costs
incurred FY 2002: 5,155.
Entity representing the Board: Total estimated costs; Estimated costs
incurred FY 2002: $78,449.
Source: GAO analysis based on data obtained from the Board. Information
is unaudited.
[End of table]
Without accumulating and reporting the costs of administering the
Program, the Board will not comply with SFFAS No. 4 or have the cost
information needed to make informed decisions about the Program. The
Board acknowledged that if the costs incurred by the Working Group were
accumulated and reported, it would more accurately reflect the total
cost of this program.
More importantly, the Act directed the Board to charge and the
Administrator to collect loan guarantee application and origination
fees to cover, but not exceed, certain costs of administering the
Program such as reviewing and approving applications. The Board has
proposed in its draft regulations an application fee of $10,000 to
$40,000, depending on the size of the loan, and a loan guarantee
origination fee equal to the lesser of 2 percent of the loan amount or
$500,000. Without knowing the costs of administering the Program, the
Board cannot determine whether the aggregate amount of fees collected
is sufficient to recover, but not exceed, certain costs of
administering the Program. It is expected that the Board will approve a
small number of loans; therefore, it has a limited opportunity to
charge the appropriate fees.
Conclusions:
The LOCAL TV Program has not been implemented within the time frames
specified in the LOCAL TV Act. Notwithstanding considerable delays
already incurred, it is important that the Board begin to put the
Program in operation in an expedient fashion. Further delays in
completing regulations and underwriting criteria will postpone lending
activities necessary to carry out the Program. Additionally, without
instituting cost accounting practices in conformance with federal
accounting standards, the Board will not have the information needed to
manage and report on the Program or to support the full recovery of
certain Program costs. If the Board does not set adequate fees, a
government subsidy to program applicants may result.
Recommendations:
To help ensure future timely implementation of the Program, we
recommend that the Board and the Administrator work collaboratively to
issue the Program regulations and underwriting criteria in an
expeditious manner.
To help ensure better program management and that loan application and
loan guarantee origination fees are sufficient to fully cover certain
costs of administering the Program, we recommend that the Board and the
Administrator develop a process to ensure that future costs of the
Program are accumulated, documented, and reported in accordance with
federal accounting standards and related guidance.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, the Board described its
plans for implementing our recommendations. The Board stated that it
continues to work with the Administrator and every effort is being made
to ensure that the Program regulations and underwriting criteria are
issued expeditiously. Further, the Board informed us that as it begins
accepting applications, it will ensure that administrative expenses
adhere to managerial cost accounting concepts in accordance with
federal accounting standards and related guidance. The Board also
provided technical comments on our draft report, which we incorporated
as appropriate.
We are sending copies of this report to the Secretaries of Agriculture,
Commerce, and Treasury, and the Chairman of 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 the GAO Web site at [Hyperlink,
http://www.gao.gov.] h [Hyperlink, http://www.gao.gov] ttp://
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 email at
[Hyperlink, williamsm1@gao.gov] w [Hyperlink, williamsm@gao.gov]
illiamsm1@gao.gov or Alana Stanfield, Assistant Director, at (202) 512-
3197 or [Hyperlink, stanfielda@gao.gov] s [Hyperlink,
stanfielda@gao.gov] tanfielda@gao.gov. Major contributors to this
report are acknowledged in appendix II.
[See PDF for image]
[End of figure]
McCoy Williams
Director
Financial Management and Assurance:
[End of section]
Appendixes:
Appendix I: Comments from the LOCAL TV Board:
LOCAL Television Loan Guarantee Board
Room 2919-S, Stop 1575
1400 Independence Ave., S.W.
Washington, DC 20250-1575:
October 20, 2003:
Mr. McCoy Williams
Director:
Financial Management and Assurance
General Accounting Office:
Room 5089 441 G St. NW Washington, D.C. 20548:
Dear Mr. Williams:
The General Accounting Office (GAO) recently asked the LOCAL Television
Loan Guarantee Board (the Board) for the Board's comments on the GAO
draft report to Congressional Committees on the administration of the
provisions of the "Launching Our Communities' Access to Local
Television Act of 2000." In response to this request, on behalf of the
Board, I am hereby submitting the Board's comments on the report. (See
enclosure).
I hope this information is helpful. Please do not hesitate to contact
me if GAO has any questions concerning the Board's comments on the
report or any issue involving the LOCAL Television Loan Guarantee
Program.
Sincerely,
Signed by:
Brian C. Roseboro:
Chairman:
Enclosure:
LOCAL Television Loan Guarantee Board Comments on GAO's Recommendations
in the Draft GAO Report on the LOCAL TV Act:
To help ensure future timely implementation of the Program, we
recommend that the Board and the Administrator work collaboratively to
issue the program regulations and underwriting criteria in an
expeditious manner.
The Board continues to work with the Administrator and every effort is
being made to ensure that the program regulations and underwriting
criteria are issued expeditiously. We note that the statute required
the Board to procure the service of an independent public accounting
firm to develop underwriting criteria and other such matters as the
Board considers, appropriate. Timing was therefore compromised because
the Board followed Federal procurement law in procuring the services of
the independent public accounting firm. Timing was further compromised
because of the need to develop the underwriting criteria in accordance
with the proposed regulations.
The proposed rules were published on August 15, 2003. We received a
number of comments that are currently under review. We anticipate that
the final rules will be issued shortly.
To help ensure better program management and that loan application and
loan guarantee origination fees are sufficient to fully cover certain
costs of administering the Program as authorized by the Act, we
recommend the Board and the Administrator develop a process to ensure
that future costs of the Program are accumulated, documented and
reported in accordance with federal accounting standards and related
guidance.
The Board has used the $2 million appropriated for the program's
administrative expenses to procure an independent public accounting
firm, as required by the statute, as well as outside legal counsel
which the Board requires to implement and administer the Program. These
funds have been accounted for through the usual government procurement
process. To ensure that the implementation of the program continued in
an expeditious manner, the Board decided that all other administrative
expenses would be bome by the respective Departments and agencies that
comprise the Board from within their existing funds and resources. In
each case, this spending was consistent with the responsibilities of
the member agencies under the Act.
As the Board begins to accept applications, it will ensure that these
administrative expenses adhere to managerial cost accounting concepts
in accordance with federal accounting standards and related guidance.
[End of section]
Appendix II: 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, Jeff Isaacs, Jeff
Jacobson, Jason Kelly, Hannah Laufe, and Christina Quattrociocchi.
(190054):
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, Dec. 21, 2000.
[3] The Board may stop approving loan guarantees the earlier of (1) the
date the Secretary of Agriculture determines that at least 75 percent
of the designated market areas (DMAs) not in the top 40 DMAs have
access to local television broadcast signals (as determined by the
Secretary) or (2) December 31, 2006. (P.L. 107-171, §6404, May 13,
2002).
[4] The Board shall charge and the Administrator may collect the loan
guarantee origination fee with respect to the issuance of a loan
guarantee under this Act.
[5] The authority of the Board to charge and use the fees is effective
only to the extent provided in advance in appropriation acts.
[6] Pub. L. No. 107-76, Title III, Nov. 28, 2001.
[7] Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-
171, May 13, 2002, and the 2002 Supplemental Appropriations Act for
Further Recovery from and Response to Terrorist Attacks on the United
States, Pub. L. No. 107-206, Aug. 2, 2002.
[8] Pub. L. 107-76, Title III, Nov. 28, 2001.
[9] Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-
171, May 13, 2002.
[10] The Consolidated Appropriations Resolution, 2003, Pub. L. No. 108-
7, Feb. 20, 2003, provided that any balances available from prior years
for the Rural Utilities, Rural Housing, and the Rural Business-
Cooperative Services salaries and expenses accounts be transferred and
merged with the fiscal year 2003 appropriation. Pursuant to this
provision, the balance of the $2 million appropriated in fiscal year
2002 was carried forward to fiscal year 2003. The pending Agriculture,
Rural Development, Food and Drug Administration, and Related Agencies
Appropriations Act for 2004 contains similar language as that found in
the 2003 appropriation.
[11] The purpose of the proposed rule was to establish eligibility and
guarantee requirements, the application and approval process, and the
administration of guarantees approved by the Board. Further, it
proposed the process under which the Board will consider applications.
[12] SFFAS No. 4, para. 39.
[13] SFFAS No. 4, para. 105.
[14] SFFAS No. 4, para. 111.
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