NEWS Federal Communications Commission 445 12 th Street, S.W. Washington, D. C. 20554 This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974). News Media Information 202 / 418-0500 Internet: http://www.fcc.gov TTY: 1-888-835-5322 FOR IMMEDIATE RELEASE: CONTACT: Kent.Nilsson@fcc.gov December 12, 2008 OFFICE OF INSPECTOR GENERAL RELEASES STATISTICAL ANALYSIS OF AUDIT OF UNIVERSAL SERVICE LOW INCOME FUND Washington DC – During October, 2007, the Federal Communications Commission's Office of Inspector General ("FCC-OIG") released its initial analysis of audits of the Universal Service Fund ("USF") Low Income Program. The USF is administered by the Universal Service Administrative Company ("USAC") on the Federal Communications Commission’s behalf. The Low Income Program supports the provision of discounted telecommunications services by providers to recipients who meet certain requirements that have been set by the FCC. The payments are made by USAC directly to telecommunications service providers who have applied for those payments and not to the Low Income Program support recipients. This report contains a reassessment of the erroneous payment rate and amount of erroneous payments for the 2006-2007 audits as well as an assessment of the erroneous payment rate for 2007-2008 based upon administrative deficiencies in the management of the Low Income Program, rather than a statistical analysis that had initially been planned. An "erroneous payment" is defined by the Office of Management and Budget under the IPIA to be "any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. Incorrect amounts are overpayments and underpayments (including inappropriate denial of payment or service). An improper payment includes any payment that was made to an ineligible recipient or for an ineligible service, duplicate payments, payments for services not received, and payments that are for the incorrect amount. In addition, when an agency's review is unable to discern whether a payment was proper as a result of insufficient or lack of documentation, this payment must also be considered an error." During the 2007-2008 investigation the OIG determined that under USAC's management of the Low Income Program, monthly disbursements (i.e., payments to carriers) were amounts that projections by USAC for carrier services rather than reimbursements for actual expenses incurred. In seeking to understand the basis for those payments, USAC was not able to provide documentation that would permit verification of the calculations for each payment that was made. Under IPIA standards, a program is "at risk" when the basis for the program's payments cannot be discerned and where the erroneous payment rate exceeds 2.5 % and erroneous payments exceed $10 million. As a consequence, all Low Income Program payments that were made by USAC during 2007-2008 ($810.6 millions) and during 2006-2007 ($795.8 millions) must be considered erroneous payments. The OIG has accordingly concluded that the Low Income Fund is ‘at risk’ under applicable IPIA criteria.