$// Order, Ameritech Cost Allocation Manual, AAD 94-59, DA 95-17 //$

$/ 32.23 Nonregulated Activities /$
$/ 64.901 Allocation of Costs /$
$/ 64.903 Cost Allocation Manuals /$




                                Before the
                     FEDERAL COMMUNICATIONS COMMISSION
                          Washington, D.C. 20554
                                                                                       DA 95-17
In the Matter of                   )
                              )
Ameritech Operating Companies'          )
Cost Allocation Manual Revisions        )         AAD 94-59
to Utilize a Statistical Sampling       )
Process for Technician Time        )
Reporting                     )

                       MEMORANDUM OPINION AND ORDER


     Adopted:   January 6, 1995;        Released: January 12, 1995

By the Chief, Accounting and Audits Division:
 

          1.        On April 29, 1994, the Ameritech Operating Companies ("Ameritech")
filed revisions to their cost allocation manual ("CAM") to utilize a statistical sampling process
for technician time reporting.  Ameritech proposed this process, which it refers to as Enhanced
Time Distribution Process ("ETDP"), to replace its positive time reporting for assigning certain
technician expenses to accounts and cost pools.  Under positive time reporting, all technicians
prepare time reports while under ETDP, only a sample group of technicians file time reports. 
Section 64.903(b) of our rules required Ameritech to quantify, as part of its CAM filing, the
impact ETDP would have on its cost apportionment results.  Ameritech attempted to estimate
that impact by comparing results under both positive time and ETDP reporting for January and
February 1994.  Ameritech estimated that the implementation of ETDP would shift $9.6 million
from nonregulated to regulated operations annually. 

          2.        From Ameritech's submission, it appeared that most of the $9.6 million
shift to regulated operations was attributable to an increase of $12.8 million in the regulated
portion of Account 6534, Plant operations administration expense.  Ameritech claimed that most
of this increase was the result of Ameritech technicians' incorrectly reporting their nonproductive
time under positive time reporting.  While such a reporting error may have explained why ETDP
would increase the balance in Account 6534, Ameritech could not explain why 90 percent of the
increase would be assigned to regulated operations.  As a result, the Accounting and Audits
Division issued an Order on August 8, 1994, conditionally approving Ameritech's ETDP
process, but capping the regulated amounts in Account 6534 at the levels recorded for 1993
pending further study by Commission staff.  The Order instructed Ameritech not to make any
changes to its ETDP system without prior notification and approval of the Commission and
required the review of ETDP to be made part of the overall CAM review conducted annually
by the independent auditors under Part 64.904 of the Commission's rules. 

          3.   After release of the Ameritech ETDP Order, the Commission staff
reviewed the company records that had led Ameritech to estimate that ETDP would increase its
regulated costs by $9.6 million annually.  As part of that review, the staff compared the
technicians' activity logs reported under positive time reporting with the corresponding activity
logs reported under ETDP.  This comparison revealed that in estimating the effects of ETDP,
Ameritech had failed to include any nonproductive time in its positive time reporting results for
Accounts 6534 in Illinois and Michigan.  This error made it appear as though nonproductive
time reported under positive time reporting was significantly less than under ETDP.  Correcting
this error changed the $9.6 million annual shift to regulated activities under ETDP to a $0.4
million shift to nonregulated activities.

          4.   Based on the above, we are removing the restriction related to the capping
of the regulated amounts in Account 6534 at the levels recorded for 1993.  However, we caution
Ameritech that it is responsible for the accuracy of all data submitted to the Commission.  We
also remind Ameritech that it has the burden to fully explain and justify the data reported.  We
intend to review carefully Ameritech's Joint Cost Report (43-03) for 1994, especially to examine 
the relationship of its regulated and nonregulated costs.  We expect that the relationship of
regulated and nonregulated portions of Account 6534 will be similar to the results for this
account in 1993.  If not, Ameritech must fully explain why the relationship of the regulated and
nonregulated portions of Account 6534 has changed since 1993.  We remind Ameritech that the
other requirements specified in the Ameritech ETDP Order remain in effect. 
 
          5.   Accordingly,  IT IS ORDERED, pursuant to Sections 4(i), 4(j) and 220
of the Communications Act, as amended, 47  U.S.C. 154(i), 154(j) and 220, and Sections
0.91 and 0.291 of the Commission's rules, 47 C.F.R. 0.91 and 0.291, that restrictions to
Ameritech's Account 6534 ARE REMOVED as stated above.



                                   FEDERAL COMMUNICATIONS COMMISSION



                              Kenneth P. Moran
                              Chief, Accounting and Audits Division