Audit Overstated Improper Payments by $418 Million, USAC Says
The Universal Service Administrative Co. overestimated “improper” payments for high-cost universal service by almost 700 percent, it acknowledged in a follow-up audit. A November 2008 report by the FCC’s inspector general found about $472 million in improper payments. The actual amount was $54.5 million, USAC said.
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The initial findings also overstated an improper payment rate, USAC said. The November 2008 analysis found that more than 23 percent of high-cost USF payments were improper; in fact, less than 3 percent were, USAC said in its follow-up, dated Wednesday. With a corrected percentage, the extrapolated amount of improper payments changes, too. FCC officials at first estimated about $970 million in overpayments. The new estimate is $113 million. The initial amounts reported “did not reflect the results of a standard quality assurance review process,” USAC’s follow-up audit reported.
The revised audit of “improper” payments has identified about $48 million in recoverable payments and another $6.3 in underpayments, USAC said. Two industry officials said the initial audits costs about $42 million to carry out. That means the commission spent about a dollar for every recoverable dollar, the officials said. An FCC spokeswoman didn’t respond to requests for comment.
"And that doesn’t count the companies that had costs managing the audits,” said Senior Vice President of Legislative Affairs Paul Raak of the Independent Telephone & Telecommunications Alliance said. “It only validates what we've been saying through the audit process” -- that the audit process was unfair.
Three industry officials said that the FCC was too aggressive in its initial review, trying to find waste, fraud and abuse in the USF. Neither former Chairman Kevin Martin nor his inspector general, Kent Nilsson -- who oversaw the initial audit -- responded to requests for comment. Efforts to reach current Acting Inspector General David Hunt were unsuccessful.