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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 IN REPLY REFER TO: 1600E RAO Letter 27 DA 98-1106 Adopted: June 10, 1998 Released: June 10, 1998 Responsible Accounting Officer: Re: Accounting for Universal Service Support Payments and Receipts I. Introduction Currently, Part 32 of the Commission's Rules, the Uniform System of Accounts, has no revenue or expense accounts explicitly designated for recording universal service support payments and receipts. Because of recent changes in universal support mechanisms, we are issuing this letter to provide interim accounting guidance to assure that sufficiently detailed records are maintained to meet the Commission's information needs. Subsequently, we plan to initiate a rulemaking proceeding to determine whether Part 32 should be amended to establish new accounting rules for universal service support. II. Background On May 8, 1997, the Commission released the Universal Service Order to implement the requirements of Section 254 of the Communications Act of 1934, as amended (the Act). As required by the Act, the Universal Service Order established new mechanisms for providing universal service support payments to carriers, established new methods for telecommunications service providers to contribute to the universal service support programs, and required that, to the extent possible, universal service support be explicit, rather than implicit. Section 254(d) of the Act requires all carriers that provide interstate telecommunications services to contribute to universal service support mechanisms in an equitable and non-discriminatory manner. To implement this provision of the Act, the Universal Service Order established two contribution assessment methodologies. Contributions to fund the schools and libraries and rural health care support mechanisms are assessed based on a carrier's interstate, intrastate, and international end-user telecommunications revenues. Contributions to fund the high cost and low income support mechanisms are based on a carrier's interstate and international end-user telecommunications revenues. In the past, support specifically designated for universal service was paid for almost entirely by the interexchange carriers and was paid to local exchange carriers with higher than average local-loop costs. Under the Universal Service Order, the definition of universal service has been broadened to include not only the previously explicit support mechanisms of the high cost fund and Lifeline and Link-up, but also implicit support mechanisms, such as DEM weighting, and new mechanisms for schools and libraries and rural health care providers. Because the nature of funding and promoting universal service support has changed significantly, guidance on how to record these receipts and payments is necessary to ensure availability of data at the appropriate level of detail until such time as the Commission issues final accounting rules for universal service support. III. Accounting Classification and Subsidiary Accounting Records 1. Universal Service Support Payments (Expenses) Carriers shall record all universal service support payments in Account 6540, Access expense. Further, carriers shall establish accounting records to identify universal support payments for the following three categories: federal support payments made for schools, libraries, and rural health care mechanisms; federal support payments made for the high cost and low income mechanisms; and all other universal service support payments including those required by the state jurisdictions. Carriers may identify these amounts by establishing subsidiary accounting records, by using tracking codes that are compatible with their existing internal accounting systems, or by establishing subaccounts within each Part 32 expense account. 2. Universal Service Support Receipts (Revenues) Carriers can receive universal service support receipts from one or all of the universal service support mechanisms. Currently, carriers record universal service support receipts in the revenue account appropriate for the service supported. Carriers should continue to account for universal service support receipts in this manner. Carriers shall, however, establish records to identify amounts for each of the following support mechanisms: schools and libraries, rural health care, high cost, low income, and other support mechanisms, including those established by state commissions. Carriers may identify these amounts by establishing subsidiary accounting records, by using tracking codes that are compatible with their existing internal accounting systems, or by establishing subaccounts within each Part 32 revenue account. This letter is issued pursuant to authority delegated under  0.291 of the Commission's Rules, 47 C.F.R.  0.291. Applications for review under Section 1.115 of the Commission's Rules, 47 C.F.R.  1.115, must be filed within 30 days of the date of this letter. See 47 C.F.R.  1.4(b)(2). If you have any questions, please contact Thaddeus Machcinski at (202) 418-0810. Sincerely, Kenneth P. Moran Chief, Accounting Safeguards Division Common Carrier Bureau