§ 54.420   Low income program audits.

   (a) Independent audit requirements for eligible telecommunications
   carriers. Companies that receive $5 million or more annually in the
   aggregate, on a holding company basis, in Lifeline reimbursements must
   obtain a third party biennial audit of their compliance with the rules
   in this subpart. Such engagements shall be agreed upon performance
   attestations to assess the company's overall compliance with rules and
   the company's internal controls regarding these regulatory
   requirements.

   (1) For purposes of the $5 million threshold, a holding company
   consists of operating companies and affiliates, as that term is defined
   in section 3(2) of the Communications Act of 1934, as amended, that are
   eligible telecommunications carriers.

   (2) The initial audit must be completed one year after the Commission
   issues a standardized audit plan outlining the scope of the engagement
   and the extent of compliance testing to be performed by third-party
   auditors and shall be conducted every two years thereafter, unless
   directed otherwise by the Commission. The following minimum
   requirements shall apply:

   (i) The audit must be conducted by a licensed certified public
   accounting firm that is independent of the carrier.

   (ii) The engagement shall be conducted consistent with government
   accounting standards (GAGAS).

   (3) The certified public accounting firm shall submit to the Commission
   any rule interpretations necessary to complete the biennial audit, and
   the Administrator shall notify all firms subject to the biennial audit
   requirement of such requests. The audit issue will be noted, but not
   held as a negative finding, in future audit reports for all carriers
   subject to this requirement unless and until guidance has been provided
   by the Commission.

   (4) Within 60 days after completion of the audit work, but prior to
   finalization of the report, the third party auditor shall submit a
   draft of the audit report to the Commission and the Administrator, who
   shall be deemed authorized users of such reports. Finalized audit
   reports must be provided to the Commission, the Administrator, and
   relevant states and Tribal governments within 30 days of the issuance
   of the final audit report. The reports will not be considered or deemed
   confidential.

   (5) Delegated authority. The Wireline Competition Bureau and the Office
   of Managing Director have delegated authority to perform the functions
   specified in paragraphs (a)(2) and (a)(3) of this section.

   (b) Audit requirements for new eligible telecommunications carriers.
   After a company is designated for the first time in any state or
   territory the Administrator will audit that new eligible
   telecommunications carrier to assess its overall compliance with the
   rules in this subpart and the company's internal controls regarding
   these regulatory requirements. This audit should be conducted within
   the carrier's first twelve months of seeking federal low-income
   Universal Service Fund support.

   [ 77 FR 12974 , Mar. 2, 2012, as amended at  77 FR 38534 , June 28, 2012]

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