[Federal Register Volume 69, Number 25 (Friday, February 6, 2004)]
[Rules and Regulations]
[Pages 5718-5720]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-2531]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 54 and 64

[CC Docket Nos. 96-45 and 03-123; FCC 03-232]


Application of Federal Accounting and Auditing Standards to the 
Universal Service Fund and Telecommunications Relay Services Fund

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission amends its rules governing 
certain financial reporting and auditing requirements applicable to the 
Universal Service Fund and the Telecommunications Relay Services Fund 
to ensure that the Commission can maintain its obligations under 
federal financial management and reporting statutes and directives of 
the Office of Management and Budget. The Commission also clarifies its 
rules regarding compensation limitations for employees of the Universal 
Service Administrative Company.

DATES: Effective March 8, 2004.

FOR FURTHER INFORMATION CONTACT: Cara Voth, Attorney, 
Telecommunications Access Policy Division, Wireline Competition Bureau, 
(202) 418-7400.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
in CC Docket Nos. 96-45 and 03-123, FCC 03-232 released on October 3, 
2003. The full text of this document is available for public inspection 
during regular business hours in the FCC Reference Center, Room CY-
A257, 445 Twelfth Street, SW., Washington, DC 20554.

I. Introduction

    1. By this Order, we amend our rules governing certain financial 
reporting and auditing requirements applicable to the Universal Service 
Fund and the Telecommunications Relay Services (TRS) Fund (collectively 
referred to as the Funds) to ensure that the Commission can maintain 
its obligations under federal financial management and reporting 
statutes and directives of the Office of Management and Budget (OMB). 
Specifically, we will require the administrators of the Funds 
(hereafter ``Administrators'') to prepare financial statements for the 
Funds consistent with generally accepted accounting principles for 
federal agencies (Federal GAAP) and to keep the Funds in accordance 
with the United States Government Standard General Ledger (USGSGL). We 
will also require the Administrators to conduct audits of the Funds 
pursuant to generally accepted government auditing standards (GAGAS). 
Further, because the Funds are agency programs included on the 
Commission's annual financial statement, the Funds may be subject to a 
number of federal financial and reporting statutes. We revise our rules 
to reflect this, and to note that, where appropriate under relevant 
law, the Funds may be subject to similar statutes that are enacted in 
the future. We also clarify our rules regarding compensation 
limitations for employees of the Universal Service Administrative 
Company (USAC).

II. Discussion

    2. The Universal Service Fund and the TRS Fund are components of 
the Commission's annual financial statements. In preparing these 
financial statements, the Commission is required to follow Federal GAAP 
and maintain its accounts according to the USGSGL pursuant to the 
Federal Financial Management Improvement Act of 1996 (FFMIA). Because 
the OMB has concluded that all components included on agency financial 
statements must comply with Federal GAAP, we direct the Administrators 
of the Universal Service Fund and the TRS Fund to prepare financial 
statements for those funds consistent with Federal GAAP and to keep any 
related accounts in accordance with the USGSGL as of October 1, 2004. 
Similarly, as discussed more specifically below, because audits of the 
Commission's financial statements are conducted according to GAGAS, we 
direct the Administrators to conduct certain audits of the Universal 
Service Fund and the TRS Fund according to GAGAS.
    3. The modifications we make to our rules regarding audits are 
intended to reflect the distinction between audits of the Funds and 
audits of the Administrators of the Funds. When the Administrators of 
the Universal Service Fund or TRS Fund, or any independent auditors 
hired by such Administrators, conduct audits of the beneficiaries of 
the Universal Service Fund, contributors to the Universal Service Fund 
or TRS Fund, or any providers of service under the universal service 
support mechanisms and the TRS program, such audits shall be conducted 
in accordance with GAGAS. For example, audits conducted of 
beneficiaries of the schools and libraries support mechanism pursuant 
to Sec.  54.516 of the Commission's rules must follow GAGAS. In 
contrast, audits conducted of the Administrators may be conducted 
according to generally accepted auditing standards (GAAS). For example, 
the required audit of the Universal Service Fund Administrator pursuant 
to Sec.  54.717 of the Commission's rules may continue to be conducted 
according to GAAS. Similarly, any audit of the TRS Fund Administrator 
may be conducted pursuant to GAAS. Because the TRS Fund will be audited 
as a component of the Commission's financial statements, we find that 
the yearly audit of the TRS Fund pursuant to Sec.  64.604(c)(5)(iii)(D) 
is no longer necessary, and we delete Sec.  64.604(c)(5)(iii)(D) from 
the Commission's rules.
    4. Because the Funds are components of the Commission's financial 
statements, the Administrators, in their capacity as administrators of 
the Funds, may also need to comply with relevant provisions of certain 
federal financial management and reporting statutes and rules. We 
therefore amend our rules to reflect the fact that the Funds are also 
subject to certain existing legal requirements, e.g., the Debt 
Collection Improvement Act of 1996 and relevant portions of the Federal 
Financial Management Improvement Act of 1996. As appropriate under 
federal law, the Commission will also apply relevant provisions of 
similar federal laws that may be enacted in the future.
    5. Finally, we take this opportunity to clarify our rules by adding 
a note to Sec.  54.715(b) of the Commission's rules. Section 54.715(b) 
provides that the annual rate of pay for officers and employees of the 
Administrator of the universal service support mechanisms may not 
``exceed the annual rate of basic pay for level I of the Executive 
schedule.'' The note we add clarifies that the compensation to be 
included when calculating whether an employee's rate of pay exceeds 
Level I of the Executive Schedule does not include life insurance 
benefits, retirement benefits (including payments to 401(k) plans), 
health insurance benefits, or other similar benefits,

[[Page 5719]]

provided that any such benefits are reasonably comparable to benefits 
that are provided to employees of the federal government. To the extent 
any of these clarifications require adjustments to benefits that are 
currently provided to employees of the Administrator, they shall be 
applied prospectively.
    6. We understand that the Administrators will need time to update 
accounting systems and train accountants, auditors and other relevant 
employees in order to comply with the rule changes adopted herein. To 
ensure adequate time for implementation of these new rules, the 
Administrators will have until October 1, 2004, to update their 
financial accounting and audit procedures for financial reporting for 
fiscal year 2005. These rules will go into effect March 8, 2004. We 
find for good cause that these rule changes may be adopted without 
affording prior notice and an opportunity for public comment because, 
for the most part, the rules merely reflect existing legal 
requirements. Other parts of the rule amendments are exempt from the 
notice and comment requirements of the Administrative Procedure Act 
because they concern interpretations of existing rules. The Commission 
will send a copy of this Order in a report to be sent to Congress 
pursuant to the Congressional Review Act. In addition, the Commission 
will send a copy of the Order to the Chief Counsel for Advocacy of the 
Small Business Administration. A copy of the Order will also be 
published in the Federal Register.

III. Ordering Clauses

    7. Pursuant to sections 4(i), 225, 254, and 303(r) of the 
Communications Act of 1934, as amended, 47 U.S.C. 154(i), 225, 254, and 
303(r), parts 54 and 64 of the Commission's rules are amended, as set 
forth, effective March 8, 2004.

List of Subjects

47 CFR Part 54

    Reporting and recordkeeping requirements, Telecommunications, 
Telephone.

47 CFR Part 64

    Communications common carriers, Individuals with disabilities, 
Reporting and recordkeeping requirements, Telecommunications, 
Telephone.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

0
For the reasons discussed in the preamble, the Federal Communications 
Commission amends 47 CFR parts 54 and 64 as follows:

PART 54--UNIVERSAL SERVICE

0
1. The authority citation for part 54 continues to read as follows:

    Authority: 47 U.S.C. 1, 4(i), 201, 205, 214 and 254 unless 
otherwise noted.


0
2. Amend Sec.  54.702 by adding paragraph (n) to read as follows:


Sec.  54.702  Administrator's functions and responsibilities.

* * * * *
    (n) The Administrator shall account for the financial transactions 
of the Universal Service Fund in accordance with generally accepted 
accounting principles for federal agencies and maintain the accounts of 
the Universal Service Fund in accordance with the United States 
Government Standard General Ledger. When the Administrator, or any 
independent auditor hired by the Administrator, conducts audits of the 
beneficiaries of the Universal Service Fund, contributors to the 
Universal Service Fund, or any other providers of services under the 
universal service support mechanisms, such audits shall be conducted in 
accordance with generally accepted government auditing standards. In 
administering the Universal Service Fund, the Administrator shall also 
comply with all relevant and applicable federal financial management 
and reporting statutes.

0
3. Amend Sec.  54.715 by adding a note to paragraph (b) to read as 
follows:


Sec.  54.715  Administrative expenses of the Administrator.

* * * * *
    (b) * * *

    Note to paragraph (b): The compensation to be included when 
calculating whether an employee's rate of pay exceeds Level I of the 
Executive Schedule does not include life insurance benefits, 
retirement benefits (including payments to 401(k) plans), health 
insurance benefits, or other similar benefits, provided that any 
such benefits are reasonably comparable to benefits that are 
provided to employees of the federal government.

* * * * *

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

0
4. The authority citation for part 64 continues to read as follows:

    Authority: 47 U.S.C. 154, 254(k); secs, 403(b)(2)(B), (C), 
Public Law 104-104, 110 Stat. 56. Interpret or apply 47 U.S.C. 201, 
218, 225, 226, 228, and 254(k) unless otherwise noted.


0
5. In Sec.  64.604, remove and reserve paragraph (c)(5)(iii)(D) and 
revise paragraph (c)(5)(iii)(H) to read as follows:


Sec.  64.604  Mandatory minimum standards.

* * * * *
    (c) * * *
    (5) * * *
    (iii)* * *
    (H) Administrator reporting, monitoring, and filing requirements. 
The administrator shall perform all filing and reporting functions 
required in paragraphs (c)(5)(iii)(A) through (c)(5)(iii)(J) of this 
section. TRS payment formulas and revenue requirements shall be filed 
with the Commission on May 1 of each year, to be effective the 
following July 1. The administrator shall report annually to the 
Commission an itemization of monthly administrative costs which shall 
consist of all expenses, receipts, and payments associated with the 
administration of the TRS Fund. The administrator is required to keep 
the TRS Fund separate from all other funds administered by the 
administrator, shall file a cost allocation manual (CAM) and shall 
provide the Commission full access to all data collected pursuant to 
the administration of the TRS Fund. The administrator shall account for 
the financial transactions of the TRS Fund in accordance with generally 
accepted accounting principles for federal agencies and maintain the 
accounts of the TRS Fund in accordance with the United States 
Government Standard General Ledger. When the administrator, or any 
independent auditor hired by the administrator, conducts audits of 
providers of services under the TRS program or contributors to the TRS 
Fund, such audits shall be conducted in accordance with generally 
accepted government auditing standards. In administering the TRS Fund, 
the administrator shall also comply with all relevant and applicable 
federal financial management and reporting statutes. The administrator 
shall establish a non-paid voluntary advisory committee of persons from 
the hearing and speech disability community, TRS users (voice and text 
telephone), interstate service providers, state representatives, and 
TRS providers, which will meet at reasonable intervals (at least semi-
annually) in order to monitor TRS cost recovery matters. Each group 
shall select its own representative to the committee. The 
administrator's annual

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report shall include a discussion of the advisory committee 
deliberations.
* * * * *
[FR Doc. 04-2531 Filed 2-5-04; 8:45 am]
BILLING CODE 6712-01-P