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OMD addresses USF financial statement audit engagement results.

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Released: August 16, 2013
Federal Communications Commission
Washington, D.C. 20554
August 16, 2013

DA 13-1767

Scott Barash
Acting CEO
Universal Service Administrative Company
2000 L Street, NW
Washington, DC 20036
RE:
Request for Corrective Action Plans for the 2012 Part 54 Financial Reporting
Findings
Dear Mr. Barash:
This letter addresses the results in the Management Letter associated with the Financial
Statements Audit engagement performed by the independent auditors, DP George & Company
LLC (DP George), of the Universal Service Administrative Company (USAC) for the year
ending December 31, 2012. This audit was performed as required by section 54.717 of Title 47
of the Code of Federal Regulations.1 The Commission's current Memorandum of Understanding
(MOU) with USAC provides that USAC "promptly take steps to implement all recommendations
arising from USF-related audits"2 and "ensure that it has an action plan to address all
recommendations arising from such audits and will submit the action plan to OMD."3
The Federal Communications Commission (Commission) has received the results of this
engagement and requests that USAC provide the Commission's Office of the Managing Director
(OMD) with the corrective action plans for each reported issue within 30 days from the date of
this letter. USAC's corrective action plans should state the specific action that it will take to
implement each noted issue, steps taken since notice of the issue, the operating unit within
USAC that will be responsible for implementing the corrective action, and an estimated date for
completing implementation of the corrective action. Additionally, you should explain any
inability to fully implement an audit recommendation. According to DP George's
recommendations, USAC should:
Ensure that its backup financial application processing facility be located further from its
main site in case of environmental disruption or disaster. USAC should adopt procedures
to ensure that processing continues in the chance that both centers suffer a disruption in
processing (modified repeat finding);
Adhere to proper procedures for granting and reviewing user access to financial systems
to ensure that unauthorized users do not gain access (modified repeat finding);

1 47 C.F.R. 54.717.
2 Memorandum of Understanding between FCC and USAC, 2008, Section IV.F.2.
3 Id.

Ensure proper documentation of controls for interface schedules, assignment of
responsibilities, and security requirements during the transmission of data between
financial applications (modified repeat finding);
Review fixed asset tagging procedures, review the current asset management system,
consider implementing interim floor to book sampling, and review capitalization
thresholds for the purpose of tracking all fixed assets (modified repeat finding);
Consider whether to implement monitoring systems for modifications of financial
applications and whether the current system of collecting those events and logging them
in a separate system is the most appropriate method of recording unauthorized changes;
Ensure that, during the year-end financial statement review process, USAC's accounting
team obtains and follows an updated disclosure checklist;
Ensure proper documentation and procedures for recording assets within the general
ledger, specifically for transactions that arise out of special circumstances;
Request and obtain annual reports from external providers regarding the effectiveness of
their system controls;
Develop policies and procedures surrounding the year-end annual leave liability accrual
process to reconcile any issues with their payroll processing system;
Review existing internal controls, specifically for bank and cash reconciliation, to ensure
that deadlines do not conflict with reconciliation timeframes; and
Update audit findings and recovery amounts in a timely manner and thoroughly review
audit accrual balances.
Thank you for your attention to this matter. We look forward to reviewing your
corrective action plans. Please feel free to contact me if you have any questions.
Sincerely,
Mark Stephens
Chief Financial Officer
2

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