thehighcostprogram.docVIP

The High Cost Program Initial Statistical Analysis of Data from the 2006/2007 Compliance Audits By Office of Inspector General Federal Communications Commission October 3, 2007 Background and Introduction This report contains a statistical analysis of data from the 2006/2007 audit of the High Cost (“HC”) Program of the Federal Communications Commission (“FCC” or “Commission”). The audits examined funding provided during FY2005. The data indicates that the program is at risk and that administrative problems exist within the HC Program of Universal Service Fund (“USF”). The HC program was audited to determine the extent to which HC beneficiaries were in compliance with the FCC’s, orders and interpretive opinions. The audits were also intended to produce data that would provide the basis for statistical estimates of the erroneous payment rate and the amount of erroneous payments as defined in the Improper Payments Information Act of 2002 (“IPIA”). Under the IPIA, estimates of both the erroneous payment rate and amount of erroneous payments may assist the Commission in assessing risk associated with the HC Program. Under IPIA standards, a program is at risk if the erroneous payment rate exceeds 2.5 percent and the amount of erroneous payments is greater than $10 million. To assess compliance and risk, a simple random sample of 65 Service Area Providers (“SAC”) was drawn and compliance attestation examinations/audits were completed. Statistical results from this sample indicate that the program is at risk. The estimated erroneous payment rate is 16.56 percent. High Cost Program Description Overview The Communications Act of 1934 (the “Act”), as amended, requires the Commission to promote universal service by ensuring that consumers in all regions of the nation have access to affordable, quality telecommunications services. In section 254 of the Act, Congress directed the Commission, after consultation with the Federa