02 December 2008

Audit of US "High Cost" Universal Service program

This item, the report of an audit of the US "High Cost Support" program, is a bit obscure and technical, but nonetheless points out some of the problems with centrally funded and managed universal service programs. In the executive summary, the document reports the following:

To assess compliance and risk, a stratified random sample of 390 service area providers (represented by unique Study Area Codes, or "SACs") was drawn and compliance attestation examinations/audits were completed. Audit data were provided for 384 auditees. Under IPIA standards, a program is "at risk" if the erroneous payment rate exceeds 2.5% and the amount of erroneous payments exceeds $10 million. The estimated erroneous payment rate for this HC audit cycle was 23.3% and the margin of error was 2.3% at the 90% level of confidence. The statistical estimate of erroneous HC payments during FY 2006 is $970.3 million. The rate of overpayment out of total disbursements was 22.8% with a margin of error of 2.3% at the 90% confidence level. As a consequence, statistical results from this sample indicate that the HCF USF program is "at risk" as defined by the IPIA.

Elsewhere in the report (p. 21), this was elaborated further:

The rate of improper over payment is 22.8%, and the proportion of improper over payments out of total improper payments in 98.2%.

So, basically, when there was an improper payment, it almost always was an over payment (Are you surprised?). We (users of the telephone network) paid almost 23% more than we needed to. Put another way, almost 1/4 of the collected funds (approximately $4.4 billion in FY07) were over payments!

The US Inspector General, in their report to Congress, noted

The results from Round 1 and the preliminary results from Round 2 have not lessened our concern about the possibilities for fraud, waste, and abuse in the Commission's USF programs as administered by USAC.

Thus, this is an ongoing problem that hasn't (apparently) gotten any better since the last audit!

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