Step Up Universal Service Oversight, IG Tells Congress
“Closer scrutiny” of the Universal Service Fund is needed, the FCC’s Office of Inspector General said in a report to Congress released Monday. An audit of the high- cost fund released last week concluded that the program is “at risk” because of an error rate of 23.3 percent in payments (CD Nov 28 p7), well above the 2.5 percent considered the most acceptable. The Inspector General’s Office said the commission’s Wireline Bureau needs to work more closely with the Universal Service Administrative Co., which oversees the funds, to reduce payment errors.
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“It has become increasingly apparent that a sharper focus on USAC’s administrative processes, internal controls and management will be necessary,” the report said. Meetings with FCC and USAC revealed a “lack of effective and candid communications” among officials, it said. Concern also was raised about USAC’s “limited accountability” to the FCC. The Office said it has hired auditing firms to study USAC’s management, staff and board of directors subcommittees that oversee the high cost, low income and E-rate programs. It also started an audit of USAC travel and professional services expenses.
The report prompted a rebuke of the program from longtime USF critic Rep. Joe Barton, a Texas Republican and the ranking member of the House Commerce Committee. “For years, I have been sounding the alarm that the Universal Service program takes the wrong approach,” Barton said. “We now have evidence that the program can’t even get the wrong approach right.” The Office’s reports indicate nearly $1 billion in improper payments from the high-cost fund July 2006 through June 2007, Barton said.
Payment errors also plague the USF schools and libraries “E-rate” fund (CD July 3 p1), the subject of a Commerce Committee oversight investigation in 2005. That probe uncovered “widespread fraud,” Barton said. “Today we have evidence of many times that waste in the High-Cost Fund, the largest of the four funds in the program.” Barton introduced legislation (CD April 29 p1) that would cap the fund and require more professional management. “It is long past time for the FCC and Congress to bring this fund under control.”
Results from two rounds of audits of the high cost and E-rate funds “have not lessened our concern about the possibilities for fraud, waste, and abuse in the Commission’s USF programs as administered by USAC,” the report said. The Inspector General’s office has increased supervision of the programs by increasing the audit staff to 18 from five. A “subject matter expert” in the high-cost fund was brought in to help review the problems. A new training program aimed at improving auditors’ expertise has started, the report said. Many have complained that inexperienced auditors lacking basic knowledge of the industry are contributing to the problems (CD Nov 17 p6).
Payment problems also have surfaced in the ballooning Telecommunications Relay Service Fund, which compensates telecom providers for services to people with hearing and speech problems, the report said. When it started in 1999, the fund paid $30.8 million, but costs have risen 50 to 80 percent a year and reached $637 million in the year through June 2008. Costs are projected to rise to $805 million the 12 months through June 2009, a 26 percent gain, OIG said.
An audit of seven TRS providers that together received about 15 percent of payments in 2006-2007 found that some providers received improper payments, the report said. “Processes for accumulating and reporting minutes of services provided and related costs were not always adequate,” the report said. Steps are needed to control costs, along with stronger penalties for fraud and abuse, it said.