Federal Communications Commission
Washington, D.C. 20554
February 16, 2011
DA 11-298
Mr. Scott Barash
Acting CEO
Universal Service Administrative Company
2000 L Street, NW
Washington, DC 20036
Dear Mr. Barash,
This letter requests additional information from the Universal Service Administrative Company 
(USAC) detailing its accounting of fixed assets for the universal service fund (USF).  Specifically, in its 
2009 Annual Report, USAC categorized fixed assets (furniture, equipment, leasehold improvements, 
computer hardware and software), totaling approximately $16.5 million, as assets held for the USF but 
recorded on the USAC books of account.1 The FCC has treated property and equipment purchased with 
USF monies as assets of the USF for purposes of the FCC’s financial statements.  In addition, for several 
years, USF was billed based upon USF profit and loss (P&L) expenses rather than USAC’s actual cash 
disbursements.  According to USAC, this methodology understated USF expenses and resulted in a 
cumulative adjustment to USAC’s administrative expenses and a reduction in USAC’s Due To/Due From 
balance. 2 As a result, USAC has proposed modifying its methodology for calculating the invoice 
between USAC and USF.  In order to reconcile the Due To/Due From balance between USAC and USF, 
USAC has suggested an entry that will correct its invoicing methodology when recording USF fixed 
assets on the USAC books of account.  
Given USAC’s past accounting practices for USF fixed assets, and to further consider USAC’s 
proposal, we are requesting that USAC provide us with a legal and accounting justification for recording 
all fixed assets purchased with USF monies on the USAC books of account rather than the USF books of 
account.  In doing so, please explain how the practice of recording USF assets on the USAC books of 
account complies with section 254 of the Communications Act of 1934, as amended, Part 54 of the 
Commission’s rules, Commission orders, and with appropriations law principles.3 Finally, please 
describe, in detail, the accounting method used by USAC to record all property purchased by USAC 
contractors (including intellectual property) for which the USAC contractor is entitled to be reimbursed 
from USF monies.  Please provide your response within 30 days of the date of this letter.
  
1 See 2009 Universal Service Administrative Company, 2009 Annual Report, at 18, 25 (available at 
http://www.usac.org/_res/documents/about/pdf/usac-annual-report-2009.pdf) (USAC 2009 Annual Report).
2 See E-mail from James Gallagher, Universal Service Administrative Company, to Mark Stephens, Federal 
Communications Commission (Aug. 6, 2010). 
3 47 U.S.C. § 254; 47 C.F.R. Part 54.  See e.g., Changes to the Board of Directors of the National Exchange Carrier 
Ass’n, Inc., Order, 12 FCC Rcd. 18,400, 18,443, n.166 (1997).
2
Thank you for your attention to this request and please let us know if you have any questions or wish 
to discuss these issues further.
Sincerely,
Steven VanRoekel
Managing Director
Cc:  Dana Shaffer
Sharon Gillett