$//  MO&O, SWBT: Release of Information obtained during Joint Audits, FCC 94-114   //$

$/ 300.220,   Accounts, Records, and Memoranda; Depreciation Charges  /$


                                Before the
                     FEDERAL COMMUNICATIONS COMMISSION
                          Washington, D.C. 20554
     
                                                            FCC 94-114

In the Matter of                        )    
                                        )
SOUTHWESTERN BELL TELEPHONE        )    
COMPANY                            )         AAD 94-57    
                                             )    
Public Release of Information                )
  Obtained during Joint Audit           )

                                     
                          MEMORANDUM OPINION AND ORDER

         Adopted:   May 18, 1994              Released:  May 19, 1994

By the Commission:

                              I. INTRODUCTION

     1.   By this Memorandum Opinion and Order, we release to the public certain
financial information obtained jointly by Commission and state regulatory agency auditors during
a joint federal/state audit of Southwestern Bell Telephone Company's ("SWBT's") transactions
with its affiliates.  The information to be released is contained in the Joint Audit Report package
prepared by the joint audit team at the audit's conclusion.  Pursuant to Section 220(f) of the
Communications Act of 1934, as amended, we release this Joint Audit Report package to the
public.  Although this will disclose information the joint audit team obtained from SWBT, we
emphasize that we are not adopting the Joint Audit Report package or endorsing the analysis and
conclusions in it.      

                              II. BACKGROUND

      2.    This was the first joint audit of Regional Bell Operating Company ("RBOC")
affiliates in which the audit team was staffed by Commission auditors and by auditors from the
regulatory agencies in all the states (Arkansas, Kansas, Missouri, Oklahoma and Texas) having
jurisdiction over the RBOC's local telephone services.  The audit examined transactions between
SWBT and its affiliates occurring from 1989 to 1992.  The audit team's objective was to
determine compliance with the Commission's affiliate transactions rules, as codified in 47
C.F.R.  32.27, which prescribes federal accounting requirements for recording transactions
between regulated carriers and their nonregulated affiliates on the carriers' regulated books of
account.   The auditors also evaluated whether telephone ratepayers had been adversely affected
by potential cross-subsidies flowing to nonregulated affiliates as a result of noncompliance with
these rules. 
      
      3.    At the audit's conclusion, the audit team prepared a Joint Audit Report package
that contains the following: (1) a Preface; (2) a letter from SWBT; (3) an Executive Summary;
(4) the Joint Audit Report; (5) SWBT's Comments on the Joint Audit Report; and (6) the audit
team's Reply Comments.  SWBT makes no confidentiality or proprietary claims for the
information contained in this package.  The Joint Audit Report and Reply Comments provide
the audit team's final conclusions regarding the audit. 

                              III. DISCUSSION

      4.    Section 220(f) of the Communications Act prohibits Commission personnel from
disclosing publicly facts and information obtained during an audit, absent a Commission or court
order.  This Commission does not routinely publicly release audit reports prepared by
Commission staff.  Under the circumstances of this joint audit, however, we believe that it is
in the public interest to disclose to the public the Joint Audit Report package.  The Joint Audit
Report and Reply Comments within that package set forth the audit team's final conclusions
regarding the first joint audit of RBOC affiliates that included all state commissions having
jurisdiction.  Publication of those conclusions will enable the public to learn about the joint audit
process and its inherent benefits, which we believe are substantial.  By combining the expertise
of federal and state agencies, joint audits enable both this Commission and the state commissions
to use their auditing resources more effectively.  Joint audits can also ensure that this
Commission and the states act consistently in the pursuit of common goals and ideals.  For
example, here, the joint audit team reviewed SWBT's accounting for affiliate transactions.  This
is a matter of mutual federal-state concern that could become the subject of further investigations
or other actions by this Commission and its state counterparts.  Lastly, disclosure will alert
interested persons, including customers, to the audit team's conclusions and thus promote further
scrutiny to the benefit of ratepayers and the public.  Accordingly, we disclose to the public the
Joint Audit Report package.

      5.    We emphasize that in disclosing this information, we are not adopting any portion
of the package or endorsing any of the analysis or conclusions contained in it.  We, however,
direct the Common Carrier Bureau to complete its review of the Joint Audit Report promptly
and to prepare its recommendations regarding any possible further actions based on the Report
within 90 days.

                           IV. ORDERING CLAUSES

      6.    Accordingly, IT IS ORDERED, pursuant to Section 220(f) of the Communications
Act of 1934, as amended, 47 U.S.C.  220(f), that WE HEREBY DISCLOSE to the public
certain financial information obtained during the joint audit of Southwestern Bell Telephone
Company and its affiliates.  

      
                                    FEDERAL COMMUNICATIONS COMMISSION 
                         




                                    William F. Caton
                                    Acting Secretary