Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | CC Docket No. 96-45          |
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| Federal-State Joint Board on     | ) | CC Docket No. 97-21          |
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| Universal Service                | * |                              |
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| Changes to the Board of          | * |                              |
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| Petition for Rule Change of      |   |                              |
| Section 54.717(f) of the         | * |                              |
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**ORDER**

**Adopted:** March 19, 2003 **Released:** March 26, 2003

By the Commission:

1.  In this Order, we amend section 54.717(f) of the Commission's rules
    to extend the filing deadline by which the independent auditor hired
    by the Universal Service Administrative Company (USAC) must submit
    its draft audit report to the Wireline Competition Bureau (formerly
    known as the Common Carrier Bureau).[^1] At USAC's request, we
    extend the filing deadline from 60 days to 105 days after the end of
    the audit period.[^2]

2.  Under section 54.717 of the Commission's rules, USAC is required to
    designate 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.[^3] The independent auditor is
    required to submit a draft audit report to the Wireline Competition
    Bureau audit staff within 60 days after the end of the audit
    period.[^4] Because USAC's fiscal year is the calendar year, the
    draft audit report is due by March 1.

3.  USAC seeks a permanent waiver of this requirement or, in the
    alternative, a rule change that would allow the independent auditor
    to file the draft audit report on or before April 15 instead of
    March 1.[^5] USAC explains that because it closes its books in early
    February and its parent, the National Exchange Carrier Association
    (NECA), does not close its books until mid-February, the 60-day
    deadline leaves the independent auditor only two weeks to complete
    its draft audit report. Specifically, USAC asserts that meeting the
    March 1 deadline is extremely difficult because it provides the
    independent auditor with just two weeks to complete six financial
    audits and five program reviews.[^6] As a result of this short
    timeframe, it has been difficult for the independent auditor to meet
    the deadline during the last five years.[^7]

4.  We amend section 54.717(f) of the Commission's rules to require
    submission of the independent auditor's draft audit report within
    105 days after the end of the audit period.[^8] We are persuaded
    that the time frame specified in the existing rule does not provide
    adequate time for the independent auditor to complete its draft
    audit report. Since this rule's inception, the independent auditor
    has had difficulty meeting the deadline every year. In fact, USAC
    has received extensions on behalf of the independent auditor for the
    1998, 2000, 2001, and 2002 annual audits.[^9] A permanent change of
    this deadline therefore is warranted. We are persuaded that no harm
    will result by providing the independent auditor an additional 45
    days to submit the draft audit report. We find that the change in
    the audit deadline still gives sufficient time for the Wireline
    Competition Bureau audit staff and the independent auditor to review
    the draft audit report and comply with the other provisions of
    section 54.717 of the Commission's rules. [^10]

5.  Accordingly, IT IS ORDERED that, pursuant to sections 1, 4, and 254
    of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151,
    154, and 254, the rule set forth herein is ADOPTED to allow
    submission of the draft audit report within 105 calendar days after
    the end of the audit period.

6.  IT IS FURTHER ORDERED that section 54.717(f) of the Commission's
    rules is AMENDED as set forth in Appendix A, effective 30 days after
    publication of the text thereof in the Federal Register.

    FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

**APPENDIX A -- FINAL RULE**

Part 54 of Title 47 of the Code of Federal Regulations is amended as
follows:

**PART 54 -- UNIVERSAL SERVICE**

**Subpart H -- Administration**

1\. Section 54.717 is amended by revising the first sentence of
paragraph (f) to read as follows:

**§ 54.717 Audits of the Administrator**

\(f\) Within 105 calendar days after the end of the audit period, but
prior to discussing the audit findings with the Administrator, the
independent auditor shall be instructed by the Administrator to submit a
draft of the audit report to the Wireline Competition Bureau Audit
Staff.

\* \* \* \* \*

[^1]: 47 C.F.R. § 54.717(f).

[^2]: *Universal Service Fund Administrator's Petition for Permanent
    Waiver of 47 CFR § 54.717(f) Regarding Audit Report Deadline or, in
    the Alternative, for a Rule Change*, filed July 26, 2000 (July 2000
    USAC Petition). In subsequent petitions filed with the Commission,
    USAC renewed its request for permanent waiver of section 54.717(f).
    *See Universal Service Fund Administrator's Petition for Limited
    Waiver of 47 CFR § 54.717(f) Regarding Audit Report Deadline*, filed
    January 8, 2003, at 5 (January 2003 USAC Petition); *Universal
    Service Fund Administrator's Petition for Limited Waiver of 47 CFR §
    54.717(f) Regarding Audit Report Deadline*, filed February 19, 2002,
    at 4 (February 2002 USAC Petition).

[^3]: 47 C.F.R. § 54.717.

[^4]: 47 C.F.R. § 54.717(f).

[^5]: July 2000 USAC Petition at 1.

[^6]: *Id.* at 3*.*

[^7]: *Id.*; February 2002 USAC Petition; January 2003 Petition.

[^8]: *See* Appendix A.

[^9]: *Federal-State Joint Board on Universal Service*, Order, CC Docket
    No. 96-45, 14 FCC Rcd 4350 (Acct. Pol. Div. 1999); *Federal-State
    Joint Board on Universal Service*, Memorandum Opinion and Order, CC
    Docket No. 96-45, 16 FCC Rcd 4715 (Com. Car. Bur. 2001);
    *Federal-State Joint Board on Universal Service*, Memorandum Opinion
    and Order, CC Docket No. 96-45, 17 FCC Rcd 3698 (Com. Car. Bur.
    2002); *Federal-State Joint Board on Universal Service*, Order, CC
    Docket No. 96-45, DA 03-614 (Wire. Comp. Bur. rel. Feb. 28, 2003).
    The Commission granted USAC a 45-day extension for the last three
    annual audits. *Id.* Although USAC was able to meet the deadline for
    submission of the 1999 draft audit, it was only with great
    difficulty, and the independent auditor supplemented the report
    after the deadline. *See* July 2000 USAC Petition at 3.

[^10]: We note that, because this order merely changes a rule of agency
    procedure and does not alter any substantive rights or interests,
    the Commission is not required to perform notice and comment
    procedures. 5 U.S.C. § 553 (b)(3)(A).