[Federal Register Volume 71, Number 129 (Thursday, July 6, 2006)]
[Rules and Regulations]
[Pages 38266-38267]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-10481]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[FCC 06-89]


Amend the Commission's Rules To Align Oversight of the Universal 
Service Fund (USF)

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, we amend our rules to align oversight of the 
Universal Service Fund (USF) with the responsibilities of the Office of 
the Inspector General (OIG) and the Office of the Managing Director 
(OMD). Specifically, we assign certain audit activities formerly 
assigned to the Wireline Competition Bureau (WCB), including oversight 
of the annual part 54 audit of the Universal Service Administrative 
Corporation (USAC), to the OIG and assign calculation of the quarterly 
USF contribution factor to OMD. The Commission has in place a number of 
mechanisms to oversee the USF and its current Administrator, USAC. In 
this document, we shift responsibility for two of these mechanisms, the 
annual audit of USAC and calculation of the USF contribution factor, to 
the OIG and OMD, respectively. These changes better align these USF 
oversight functions with the divisions within the Commission that can 
execute them most effectively.

[[Page 38267]]


DATES: Effective August 7, 2006.

FOR FURTHER INFORMATION CONTACT: Mika Savir, Office of the Managing 
Director at (202) 418-0384.

SUPPLEMENTARY INFORMATION:

Adopted: June 20, 2006; Released: June 23, 2006

By the Commission:

    1. By this Order, we amend our rules to align oversight of the 
Universal Service Fund (``USF'') with the responsibilities of the 
Office of the Inspector General (``OIG'') and the Office of the 
Managing Director (``OMD''). Specifically, we assign certain audit 
activities formerly assigned to the Wireline Competition Bureau 
(``WCB''), including oversight of the annual part 54 audit of the 
Universal Service Administrative Corporation (``USAC''), to the OIG and 
assign calculation of the quarterly USF contribution factor to OMD.
    2. The Commission has in place a number of mechanisms to oversee 
the USF and its current Administrator, USAC. In this Order, we shift 
responsibility for two of these mechanisms, the annual audit of USAC 
and calculation of the USF contribution factor, to the OIG and OMD, 
respectively. These changes better align these USF oversight functions 
with the divisions within the Commission that can execute them most 
effectively.
    3. First, we amend Sec.  54.717 of our rules to give the OIG 
oversight of the annual USAC audit. Section 54.717 of the Commission's 
rules requires USAC ``to obtain and pay for an annual audit conducted 
by an independent auditor to examine its operations and books of 
account to determine, among other things, whether [USAC] is properly 
administering the universal service support mechanisms to prevent 
fraud, waste, and abuse.'' \1\ Under the Commission's part 54 rules, 
the Wireline Competition Bureau (``WCB'') has been the staff unit 
responsible for overseeing the conduct of the audit. The purpose of 
this annual audit has been to oversee the operations of the USF 
Administrator and to safeguard the USF from potential waste, fraud, and 
abuse. Because a principle purpose of this audit is to deter waste, 
fraud, and abuse, we amend the Commission's rules to delegate oversight 
authority to the OIG. This amendment is consistent with the OIG's 
responsibility to conduct audits of Commission programs \2\ and detect 
and prevent fraud and abuse.\3\ As an essential part of this 
responsibility, we also amend the audit requirements applicable to the 
part 54 audit of USAC to allow the OIG to determine the type of audit 
to examine USAC's administration. The Commission's decision adopting 
the part 54 independent audit requirement specified an agreed upon 
procedures (``AUP'') form of audit.\4\ Although the codified Commission 
rules do not specify the type of audit, the order establishing the 
annual independent audit requires the use of an ``agreed-upon 
procedures'' engagement.\5\ We recognize that the OIG may conclude that 
other types of audits would better assist in carrying out its mission 
to detect potential waste, fraud, and abuse in the USF. We therefore 
clarify that, going-forward, the OIG may use whatever type of audit it 
concludes would be better suited to evaluating USAC and its operations. 
We also clarify that the OIG may require the use of government auditing 
standards for these audits.\6\
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    \1\ 47 CFR 54.717.
    \2\ 47 CFR 0.13(a).
    \3\ 47 CFR 0.13(c).
    \4\ USAC Order, 12 FCC Rcd at 18440, paragraph 76. In an agreed-
upon procedures attestation engagement, the auditors perform testing 
to issue a report of findings based on specific procedures performed 
on subject matter. See ``Government Auditing Standards,'' section 
6.02(c), GAO-03-673G, June 2003.
    \5\ See 47 CFR 54.717(a)-(k).
    \6\ See Application of Generally Accepted Accounting Principles 
for Federal Agencies and Generally Accepted Government Auditing 
Standards to the Universal Service Fund, Order, 18 FCC Rcd 19911, 
paragraph 5 (GovGAAP Order) (requiring the use of government 
auditing standards for audits of USF beneficiaries and 
contributors); see also General Accounting Office, Government 
Auditing Standards: 2003 Revision, GAO-03-673G (June 2003) (``GAGAS 
Handbook'') (specifying government auditing standards). We note that 
government auditing standards incorporate the auditing standards of 
the American Institute of Certified Public Accountants (AICPA). Id. 
at 6.01, 6.05.
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    4. Finally, we revise section 54.709 of our rules to require USAC 
to submit to the OMD projections of demand for USF support mechanisms, 
projections of revenue, projections of administrative expenses, and the 
contribution base. Contributions to the universal service support 
mechanisms are determined using a quarterly contribution factor 
calculated by the Commission.\7\ We now revise our internal processes 
to require the OMD, instead of the Wireline Competition Bureau, to 
calculate the contribution factor and release the public notices 
pertaining to the contribution factor, consistent with the OMD's 
general responsibility over the Commission's financial matters.\8\ We 
are therefore revising Sec.  54.709(a)(3) to require USAC to submit the 
above information to the OMD.
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    \7\ 47 CFR 54.709(a). We release a public notice quarterly, see, 
e.g., ``Proposed First Quarter 2006 Universal Service Contribution 
Factor,'' CC Docket No. 96-45, Public Notice, 20 FCC Rcd 19933 
(2005).
    \8\ 47 CFR 0.11(a)(8).
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    5. The rule amendments adopted in this Order involve rules of 
agency organization, procedure, or practice. The notice and comment and 
effective date provisions of the Administrative Procedure Act are 
therefore inapplicable.\9\
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    \9\ 5 U.S.C. 553(b)(3)(A).
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    6. Accordingly, it is ordered, that pursuant to sections 4(i), 
4(j), 5(c), 303(r), 47 U.S.C. 154(i), 154(j), 155(c), 303(r) of the 
Communications Act of 1934, as amended, 47 CFR part 54 is amended, as 
set forth below, effective August 7, 2006.

Federal Communications Commission.
William F. Caton,
Deputy Secretary.

Final Rule

0
For the reasons discussed in the preamble, the Federal Communications 
Commission amends 47 CFR part 54 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.


Sec.  54.709  [Amended]

0
2. In 47 CFR 54.709 (a)(3) remove the words ``Wireline Competition 
Bureau'' and add in their place, the words ``Office of the Managing 
Director'' each place it appears.


Sec.  54.717  [Amended]

0
3. In 47 CFR 54.717 (a), (b), (c), (d), (e)(1), (e)(2), (f), (g), (h) 
and (i) remove the words ``Wireline Competition Bureau'' and add in 
their place, the words ``Office of Inspector General'' each place it 
appears and in paragraph (k) remove the words ``Chief of the Wireline 
Competition Bureau'' and add in their place, the words ``Inspector 
General''.

 [FR Doc. E6-10481 Filed 7-5-06; 8:45 am]
BILLING CODE 6712-01-P