[Federal Register Volume 79, Number 75 (Friday, April 18, 2014)]
[Notices]
[Pages 21924-21926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-08906]


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FEDERAL COMMUNICATIONS COMMISSION

[WC Docket No. 11-42; DA 14-450]


Wireline Competition Bureau Announces Release of Final Lifeline 
Biennial Audit Plan

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: In this document, the Wireline Competition Bureau (Bureau) in 
conjunction with the Office of Managing Director (OMD), developed 
standard procedures for independent biennial audits of eligible 
telecommunications carriers (ETCs). By establishing uniform audit 
procedures to review the internal controls and processes of Lifeline 
service providers, the Bureau and OMD are implementing another major 
reform established by the Commission to protect the federal universal 
service fund from waste, fraud and abuse.

DATES: Effective April 18, 2014.

FOR FURTHER INFORMATION CONTACT: Garnet Hanly, Telecommunications 
Access Policy Division, Wireline Competition Bureau at (202) 418-0995 
or TTY (202) 418-0484; or Thomas Buckley, Office of the Managing 
Director, at (202) 418-0725.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Wireline 
Competition Bureau's Public Notice in WC Docket No. 11-42; DA 14-450, 
released April 2, 2014. The complete text of this document is available 
for inspection and copying during normal business hours in the FCC 
Reference Information Center, Portals II, 445 12th Street SW., Room CY-
A257, Washington, DC 20554. The document may also be purchased from the 
Commission's duplicating contractor, Best Copy and Printing, Inc. 
(BCPI), 445 12th Street SW., Room CY-B402, Washington, DC 20554, 
telephone (800) 378-3160 or (202) 863-2893, facsimile (202) 863-2898, 
or via the Internet at http://www.bcpiweb.com. It is also available on 
the Commission's Web site at http://www.fcc.gov/document/release-final-lifeline-biennial-audit-plan-announced.

I. Introduction

    1. By this document, the Wireline Competition Bureau (Bureau) 
announces release of the final Lifeline Biennial Audit Plan, attached 
hereto as Attachment 3 (Audit Plan). In the Lifeline Reform Order, the 
Commission directed the Bureau, in conjunction with the Office of 
Managing Director (OMD), to develop standard procedures for independent 
biennial audits of eligible telecommunications carriers (ETCs) 
receiving $5 million or more annually from the low-income universal 
service support program. By establishing uniform audit procedures to 
review the internal controls and processes of Lifeline service 
providers, the Bureau and OMD are implementing another major reform 
established by the Commission to protect the federal universal service 
fund from waste, fraud and abuse. The appendices to the Biennial Audit 
Plan are available for public inspection at http://www.fcc.gov/document/release-final-lifeline-biennial-audit-plan-announced and FCC 
Headquarters at 445 12th Street SW., Washington, DC 20554.
    2. The independent audit firms conducting these biennial audits 
must plan their engagements by using the approved procedures outlined 
in the final Audit Plan. The independent audit firms must be licensed, 
certified public accounting firms and must conduct the audits 
consistent with Generally Accepted Government Auditing Standards 
(GAGAS). The audits shall be performed as agreed-upon procedures (AUP) 
attestations. In addition, to ensure compliance with the Commission's 
Lifeline requirements, the Universal Service Administrative Company 
(USAC) will conduct training for independent auditors performing the 
AUP engagements to ensure that the audits are performed in accordance 
with the Audit Plan. The independent auditors will be required to 
collect from the ETCs specific documents and completed questionnaires, 
which the independent auditors will inspect before conducting fieldwork 
testing and then preparing attestation reports.
    3. ETCs receiving $5 million or more from the low-income program, 
as determined on a holding company basis taking into account all 
operating companies and affiliates, for calendar year 2013 will be 
subject to the first round of biennial audits. A list of ETCs subject 
to this requirement is attached hereto as Attachment 2. As detailed in 
the Audit Plan, the final attestation report for each audit must be 
submitted within one year after release of the final Audit Plan, which 
is April 2, 2015 for the first biennial audit.

II. Discussion

A. Changes to Audit Plan

    4. In order to promote clarity, transparency and predictability in 
the Lifeline program, the Bureau, in conjunction with OMD, released a 
public notice seeking comment on the proposed Lifeline Biennial Audit 
Plan. The Bureau received several comments addressing the proposed 
Lifeline Biennial Audit Plan. In response to comments, the Bureau and 
OMD hereby revise the Audit Plan in certain parts. Specifically, we 
make the following revisions to the Audit Plan:
    5. Audit Period: The audit period has been revised to cover the 
period of January 1 through December 31.

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Commenters raised concern that the independent audits would cover 
activities that occurred outside of the proposed period of November 1 
through April 30, so we adjusted the period to cover the entire 
calendar year. The first biennial audits will cover calendar year 2013.
    6. Submission of Attestation Reports: To ensure that ETCs have a 
reasonable period of time to submit comments in response to the draft 
attestation reports, the Audit Plan has been revised to state that ETCs 
have 30 days to submit comments in response to the draft report. The 
final Audit Plan also clarifies when the fieldwork is deemed complete 
(i.e., when the audit results are presented to the ETC). Consistent 
with the Lifeline Reform Order, final reports must be provided by 
covered ETCs to the Commission, USAC, and relevant state and Tribal 
governments. For the audits conducted in 2014, the final report will be 
filed no later than April 2, 2015.
    7. Confidentiality of ETCs' Information: To ensure that all of an 
ETC's work papers and communications between the independent auditor 
and the ETC remain confidential, the Audit Plan specifies that such 
communications can be maintained as confidential. The Audit Plan is 
also revised to clarify that the Commission will accept requests for 
confidential treatment of a draft audit report. Whether a draft report 
is, in fact, protected from disclosure will depend on the Commission's 
analysis if and when access to such information is sought. However, all 
final reports are considered public information. In adopting the 
biennial audit requirements, the Commission, when describing the 
process for submission of final reports, specifically states that 
``[t]hese audit reports will not be considered confidential and 
requests to render them so will be denied.'' To maintain transparency 
in the program, the Audit Plan requires all final audit reports to be 
publicly available. Enabling public access to this information promotes 
the public interest of providing greater transparency into oversight of 
the Lifeline program.
    8. Subscriber Data for Testing: The Audit Plan includes procedures 
to require the auditor to use a sampling of subscriber data (Subscriber 
List) to test compliance in key areas. Based on concerns raised by 
commenters that the sample was too broad, we have revised the 
Subscriber List requirement to cover Lifeline subscribers served by the 
ETC in three states or territories for one month. Specifically, the 
independent auditor shall randomly select one of the three states or 
territories where the ETC received the largest amount of Lifeline 
support and two additional states or territories randomly selected by 
the independent auditor. In the event the ETC did not receive Lifeline 
support in at least 3 states or territories, the auditor shall select 
all of the states or territories where the ETC received Lifeline 
support during the audit period. In addition, the Audit Plan has been 
revised to exclude subscribers from the Subscriber List in those states 
or jurisdictions where the state, or a state administrator, is 
responsible for obtaining the Lifeline certification forms and performs 
the annual recertification.
1. Fieldwork Testing Procedures, Objective I Procedures
    9. Review of Marketing Materials. To address commenters concerns 
that ETCs might not have ten (10) different examples of marketing 
materials, we have modified the Audit Plan to require those ETCs that 
have less than ten (10) different marketing materials to submit as many 
as it uses to advertise the ETC's Lifeline service plan.
    10. Customer Care for Lifeline Service. Based, in part, on concerns 
raised by commenters, the Audit Plan has been revised to require 
auditors to review recorded calls involving Lifeline service as opposed 
to requiring the auditor to monitor incoming calls to telephone 
number(s) used as customer care for Lifeline service. This change was 
made because many ETCs use such customer care telephone number(s) for 
non-Lifeline services.
    11. Non-Usage Requirement. We have added a procedure to ensure that 
the auditor performs a thorough review of the ETCs' compliance with the 
Commission's non-usage rules. Specifically, we have revised the Audit 
Plan to require that the carrier explain how it monitors and identifies 
subscribers with no monthly fee who have not used the service for a 
certain period of time.
2. Fieldwork Testing Procedures, Objective II
    12. Testing of One-Per-Household Rule. Given the implementation of 
the National Lifeline Accountability Database (NLAD) as a measure to 
detect and prevent duplicate support in the Lifeline program and 
consistent with information noted in the record, we have revised this 
objective to remove the procedure to check for duplicate addresses. The 
auditor, however, is still required to check for the existence of one-
per-household worksheets in instances where multiple recipients of 
Lifeline service reside at the same address. The Audit Plan also 
clarifies that even if subscribers enrolled in the program prior to 
June 2012, the effective date of the one-per-household requirement, at 
least one subscriber at that address is still required to complete a 
one-per-household worksheet.
3. Fieldwork Testing Procedures, Objective III
    13. The Audit Plan has been revised to require the auditor to 
review the ETC's procedures on how the ETC's employees and agents are 
trained on the use of and interaction with the NLAD, because all ETCs 
are required to use the NLAD to confirm that a consumer is not already 
enrolled in the program.
4. Fieldwork Testing Procedures, Objective IV
    14. To reduce the burden on the ETCs, the Audit Plan has been 
revised to limit the sample for testing each ETC's recertification 
process. The Audit Plan now requires testing of a sample of three 
states or territories. The independent auditor shall randomly select 
one of the three states or territories where the ETC received the 
largest amount of Lifeline support and two additional states or 
territories randomly selected by the independent auditor. Several 
commenters asked that the sampling for the FCC Form 555 be modified to 
limit a sample to a smaller subset of SACs rather than all SACs served 
by the ETC, and we agree that we can meet our auditing goals with the 
smaller sample. We have also clarified that the FCC Form 555 filed by 
ETCs the January following the audit period is the form subject to each 
biennial audit. As such, the FCC Form 555 subject to the first biennial 
audits is the one filed in January 2014.
5. Appendix A, Requested Documentation
    15. Scope of Sample. As discussed in the Subscriber Data for 
Testing section above, to address concerns raised by commenters, we 
have revised the sample size to provide a more measured target of the 
number of subscribers that could be included in the Subscriber List. 
Additionally, we have revised the subscriber samples to test whether 
the ETC's procedures for implementing the recertification process and 
non-usage requirements are effective.
    16. State-Specific Requirements. In the event there are state-
specific requirements that are more restrictive than the Commission's 
requirements described in Appendix F, the Audit Plan has been revised 
to require the ETC to provide such state requirements to the 
independent auditor. This would

[[Page 21926]]

allow the independent auditors to understand such differences between 
Commission and state requirements.
6. Appendix B, Background Questionnaire
    17. We have revised Appendix B of the Audit Plan to require ETCs to 
only list the company's supervisors if there are more than ten 
individuals responsible for determining eligibility and recertification 
of Lifeline subscribers.
7. Appendix C, Internal Control Questionnaire
    18. Recognizing that ETCs may have multiple individuals who would 
complete the Internal Control Questionnaire, we have revised this 
appendix to delete the requirement that only one individual from each 
company is required to complete the questionnaire. Additionally, the 
appendix has been revised to clarify or remove certain questions deemed 
unnecessary for the purpose of this audit. These revisions also include 
the addition of questions relating to the ETC's use of the NLAD.
8. Appendix F, Compliance Requirements
    19. The Audit Plan has been revised to remove the appendix titled 
``Requested Documentation: USAC Management'' as it is no longer 
necessary based on other revisions.

III. Procedual Matters

A. Paperwork Reduction Act

    20. This document does not contain proposed information 
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. In addition, therefore, it does not contain any new 
or modified information collection burden for small business concerns 
with fewer than 25 employees, pursuant to the Small Business Paperwork 
Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

B. Final Regulatory Flexibility Analysis

    21. As Required by the Regulatory Flexibility Act if 1980, as 
amended (RFA), the Wireline Competition Bureau (Bureau), in conjunction 
with the Office of Managing Director (OMD), prepared an Initial 
Regulatory Flexibility Analysis (IRFA) incorporated in the Public 
Notice on the Proposed Lifeline Biennial Audit Plan. The Bureau, in 
conjunction with OMD, sought written public comment on the proposed 
Audit Plan, including comment on the IRFA. This present Final 
Regulatory Flexibility Analysis (FRFA) conforms to the RFA.
a. Need for, and Objectives of, the Lifeline Biennial Audit Plan
    22. This document sets forth the standard procedures for 
independent biennial audits of carriers drawing $5 million or more 
annually from the low-income universal service support program.
b. Legal Basis
    23. The Public Notice, including publication of proposed 
procedures, is authorized under Sections 1, 2, 4(i) through (j), 
201(b), 254, 257, 303(r), and 503 of the Communications Act of 1934, as 
amended, and Section 706 of the Telecommunications Act of 1996, as 
amended.
c. Description and Estimate of the Number of Small Entities to Which 
the Proposed Biennial Audit Plan Will Apply
    24. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed Biennial Audit Plan. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one that: (1) Is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA). Nationwide, there are a total of approximately 
29.6 million small businesses, according to the SBA. A ``small 
organization'' is generally ``any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' 
Nationwide, as of 2002, there were approximately 1.6 million small 
organizations. The term ``small governmental jurisdiction'' is defined 
generally as ``governments of cities, towns, townships, villages, 
school districts, or special districts, with a population of less than 
fifty thousand.'' Census Bureau data for 2002 indicate that there were 
87,525 local governmental jurisdictions in the United States. We 
estimate that, of this total, 84,377 entities were ``small governmental 
jurisdictions.'' Thus, we estimate that most governmental jurisdictions 
are small.

    Federal Communications Commission.
Kimberly A. Scardino,
Chief, Telecommunications Access Policy Division, Wireline Competition 
Bureau.
[FR Doc. 2014-08906 Filed 4-17-14; 8:45 am]
BILLING CODE 6712-01-P