Government auditors oppose exempting USF from Anti-Deficiency Act

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WASHINGTON-Government auditors Monday spoke out against a proposal to permanently exempt the universal-service fund from the Anti-Deficiency Act.

“It is our opinion that a permanent exemption from the Anti-Deficiency Act should not be granted at this time,” said Patricia Dalton, managing director of physical infrastructure issues of the Government Accountability Office. “One option is for Congress to grant the USF a two- or three-year exemption from the act. This option would allow time for Congress and the Federal Communications Commission to consider whether structural changes in the universal-service program are called for. A comprehensive decision could then be made to determine which policies and procedures including the ADA should apply to the universal-service fund. You could at that time determine whether a permanent extension to the ADA is warranted. Alternatively, crafting a limited exemption to the ADA or other financial-management requirements may be more appropriate. Based on what we learned in 2004, a limited exemption would recognize the program’s unique aspects and provide flexibility for the program.”

GAO was appearing at a Senate Commerce Committee hearing on a bill that would permanently exempt the E-rate program from the ADA.

Earlier this year, the two champions of E-rate, Sens. Olympia Snowe (R-Maine) and Jay Rockefeller (D-W.V.), introduced legislation to permanently exempt the universal-service fund from the ADA. E-rate is the part of the USF that pays to connect schools and libraries to the Internet.

Just before Congress adjourned last year, it temporarily exempted the universal-service fund from the ADA.

The telecom industry became concerned when the Universal Service Administrative Co. halted E-rate subsidies last year because of an accounting change.

USAC is a quasi-governmental organization created by the FCC to administer universal-service subsidies. As part of its efforts to tighten control on the much-derided E-rate program, the FCC ordered USAC to begin using Generally Accepted Accounting Principles, which meant it had to comply with the ADA. Because it couldn’t comply with the new accounting standards, USAC suspended E-rate payments in August.

Congress said USF subsidies were not subject to ADA for a year.

Sen. Ted Stevens (R-Alaska), chairman of the Senate Commerce Committee, has co-sponsored the bill to permanently exempt the E-rate. He indicated that two years would not be sufficient, and he would rather suspend the application of the ADA until a legislative fix can be found.

While wireless carriers are not generally recipients of E-rate funds, the brouhaha over the E-rate/ADA caused the telecommunications industry to fear drastic increases in universal-service contributions and/or application of the ADA to the high-cost fund, which is used to subsidize rural telephone service. Wireless carriers have recently become recipients of the rural subsidies.

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