USTelecom, CTIA Say FCC’s USF High-Cost Audit Program is Broken
The FCC must fix its audit program for the Universal Service Fund high-cost program, USTelecom and CTIA said Friday in a scathing letter to commissioners. The associations queried the accuracy of a November audit report from the FCC Office of Inspector General, which said the high-cost fund had an error payment rate of 23.3 percent. “The current audit program … results in misleading statistics generated as improper payments under the” 2002 Improper Payments Information Act, “which undermines the credibility of the audits and the USF,” they said.
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The OIG’s more than 1,000 annual audits of high-cost support recipients have sapped $100 million yearly from the USF, the associations said. “Only a tiny fraction of those costs are recovered through refunds to the USF of improper payments identified during the audits.” The FCC should scale back the program and base selection of carriers for audits “on an actual assessment of likely risk,” they said. Fixing the program requires timely audit reports, better auditor training, and “uniform standards” that take into account the auditee’s size and the number of companies being audited, they said.
The OIG report’s finding that there were $970.3 million in improper payments from July 2006 to June 2007 is a “vast overstatement,” the telecom associations said. About 47 percent of improper payments were attributed to “a lack of documentation resulting in the auditor being ‘unable to discern’ whether the payments in questions were proper,” they said. But during the auditing period, the FCC didn’t require high-cost fund recipients to keep specific documentation, they said. Even so, in 83 percent of those cases, “the entire amount of the high cost payments during the audit period to a provider were characterized as improper,” they said.
The commission never gave auditors guidance on what documentation carriers need, either, the groups said. The OIG report “supplies no informal guidance as to how the sufficiency of documentation was assessed, what efforts an auditor should undertake before concluding that it is “unable to discern” whether a payment was properly made and how judgments about sufficiency were linked to the amount of a payment deemed to be ‘improper,'” they said.
Many other reasons given by auditors for improper payments are similarly hazy, CTIA and USTelecom said. “Included in that listing were imprecise FCC rules, contradictory FCC rules, overly complex FCC rules, USAC procedures, and errors by third parties such as USAC and NECA.”
The OIG report “ignores” a discrepancy between the purpose of the Improper Payments Act and the OIG’s audit program, added CTIA and USTelecom. The Act requires agencies to report on vulnerabilities in their own program, but the OIG report doesn’t include this as an objective, they said. Instead, the OIG report states that its objectives are to determine compliance with FCC rules and estimate the amount of erroneous payments, they said.
Members of CTIA and USTelecom “have reported wide variations in the audit plans of various private auditors employed by” USAC, the associations said. Auditors have requested different data in similar audits, based opinions on different data, and applied different readings of FCC rules, they said.
The Rural Cellular Association raised similar questions before the House and Senate Commerce committees earlier this month (CD April 17 p7). An FCC official from OIG didn’t immediately reply to a request for comment.