Our recent studies have identified a group of neurons in the basal forebrain (BF) region that encode motivational salience using robust bursting responses (Lin & Nicolelis, 2008), which we refer to as BF bursting neurons. Such bursting responses lead to faster decision speed (Avila & Lin, 2014) and generate an event-related potential (ERP) response in the frontal cortex (Nguyen & Lin, 2014). During the current reporting period, we have begun applying the analytical framework from human ERP literature to study ERPs in rodents, with the goal of elucidating the relationship between BF neuronal activity and local field potential (LFP) and electroencephalogram (EEG) responses in the frontal cortex. This has led to significant improvements in the functional coupling between the frontal cortex ERP and BF activity by increasing the signal to noise ratio of LFPs and EEGs, and the development of better methods to analyze LFP and EEG signals in behaving rodents (Whitmore & Lin, 2016). Specifically, we show that when LFPs are recorded in awake behaving animals against a distal reference on the skull as commonly practiced, LFPs are significantly contaminated by non-local and non-neural sources arising from the reference electrode and from movement-related noise. In a data set with simultaneously recorded LFPs and EEGs across multiple brain regions while rats perform an auditory oddball task, we used independent component analysis (ICA) to identify signals arising from electrical reference and from volume-conducted noise based on their distributed spatial pattern across multiple electrodes and distinct power spectral features. These sources of distal electrical signals collectively accounted for 23-77% of total variance in unprocessed LFPs, as well as most of the gamma oscillation responses to the target stimulus in EEGs. Gamma oscillation power was concentrated in volume-conducted noise and was tightly coupled with the onset of licking behavior, suggesting a likely origin of muscle activity associated with body movement or orofacial movement. The removal of distal signal contamination also selectively reduced correlations of LFP/EEG signals between distant brain regions but not within the same region. The removal of contamination from distal electrical signals preserved an ERP response to auditory stimuli in the frontal cortex and also increased the coupling between the frontal ERP amplitude and neuronal activity in the basal forebrain, supporting the conclusion that removing distal electrical signals unmasked local activity within LFPs. Together, these results highlight the significant contamination of LFPs by distal electrical signals and caution against the straightforward interpretation of unprocessed LFPs. These results also provide a principled approach to identify and remove such contamination to unmask local LFPs.