Universal Service Fund - High Cost Legacy

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Program level Payment Integrity results

Sponsoring agency: Federal Communications Commission

View on Federal Program Inventory

PROGRAM METRICS

Did not report

in FY 2022

PROGRAM METRICS

$1,796 M

in FY 2023 outlays, with a

97.1%

payment accuracy rate

PROGRAM METRICS

$1,835 M

in FY 2024 outlays, with a

95.5%

payment accuracy rate

PROGRAM METRICS

$1,911 M

in FY 2025 outlays, with a

96.7%

payment accuracy rate

  • Improper payment estimates over time
    View as:

    Chart toggle amounts:
    Proper payments
    Overpayment
    Underpayment
    Technically improper
    Unknown

Payment Integrity results

Unknown Payment Details

Evaluation of corrective actions

Future payment integrity outlook

Additional programmatic information

For the FY2022 reporting cycle, FCC concluded, with OMB consultation, that it would be best if the Universal Service Fund - High Cost program to remain in Phase 1 in FY 2022 reporting cycle until OIG recommended revised testing procedures could be fully tested in order to determine the most accurate improper payment rate. FCC did not want to mislead any users of this information before our new testing procedures was fully completed. As OMB is very well aware, the High Cost program itself is very complex. To comply with new OIG recommendations in our testing to determine the most accurate improper payment rate, it has taken significantly more time than we had originally anticipated. At this juncture, FCC is comfortable that the new transaction testing will be completed within next few months, which will allow us to provide a more accurate improper payment rate for the High Cost program in the FY 2023 reporting cycle. As stated above, when FCC made this determination, we consulted OMB and OMB informed us that FCC could use a testing period longer than 12-month similar to what other agencies have been doing. Based on our actual experience of testing the new OIG recommended procedures, testing is definitely taking longer to complete. As a result, the FCC determined it should use a 18-month reporting cycle for the High Cost program. We’ll see if we can reduce the testing period as we gain more experience with the new testing procedures.

  • FY 2023 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    01/2021 - 12/2021


    Confidence interval:

    95% to <100%


    Margin of error:

    +/-1.713

  • Actions taken & planned to mitigate improper payments

    Mitigation strategy Description of the corrective action Completion date Status
    Training
    High Cost will conduct its annual Circle of Life webinars to address top common audit findings. The webinar will provide common errors and best practices suggested to avoid these findings.
    FY2023 Q1
    Completed
    Cross Enterprise Sharing
    Through USAC's Risk Management Council meetings, the different USF program teams discussed strategic initiatives and risk that may impact USAC’s goals. The Risk Management Council meetings will continue to provide an opportunity to analyze and respond to identified changes and related risks to maintain an effective internal control system.
    FY2023 Q1
    Completed
    Audit
    Monthly meetings will continue to be held between USAC’s Audit and Assurance Division (AAD) and USAC leadership to discuss findings identified by AAD. During these meetings, corrective actions are discussed to prevent similar findings in the future.
    FY2023 Q1
    Completed
    Training
    High Cost will conduct its annual Circle of Life webinars to address top common audit findings. The webinar will provide common errors and best practices suggested to avoid these findings.
    FY2024
    Planned
    Cross Enterprise Sharing
    Through USAC's Risk Management Council meetings, the different USF program teams discussed strategic initiatives and risk that may impact USAC’s goals. The Risk Management Council meetings will continue to provide an opportunity to analyze and respond to identified changes and related risks to maintain an effective internal control system.
    FY2024
    Planned
    Audit
    Monthly meetings will continue to be held between USAC’s Audit and Assurance Division (AAD) and USAC leadership to discuss findings identified by AAD. During these meetings, corrective actions are discussed to prevent similar findings in the future.
    FY2024
    Planned

Overpayments

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $0 M

The main cause of the overpayments is related to inadequate documentation- assets. The carrier is responsible for maintaining adequate documentation. Documentation, such as invoices, work orders and other documentation related to assets, should be maintained to verify the asset transactions were recorded in the proper amount. Documentation should be kept current and maintained by the carrier to allow for auditor review.
Overpayment root cause Overpayment amount
Amount of overpayments outside the agency's control $40.67 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $40.67 M
The amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $0.0 M

Overpayment type Eligibility element/information needed Eligibility amount
Overpayments Outside Agency Control Financial $40.67 M

Underpayments

Underpayment root cause Underpayment amount
Amount of underpayments $11.04 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $11.04 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $0.0 M

Eligibility element/information needed Eligibility amount
Financial $11.04 M

Mitigation strategies taken Mitigation strategies planned
Audit, Cross Enterprise Sharing, Training Audit, Cross Enterprise Sharing, Training

Technically improper payments

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

Additional information

$11.04 M

Unknown Payment Details

Evaluation of corrective actions

The High Cost Program will continue to focus on program integrity assurance (PIA) activities such as collaborating with our Audit and Assurance Division partners to provide the annual Circle of Life webinars; meeting with NECA monthly; and continue existing analysis and data validation for legacy funds. The High Cost Program will introduce a new compliance layer by developing additional Program Integrity procedures leveraging enhanced analytics and testing capabilities on a sample basis to identify potential violations.

Future payment integrity outlook

Universal Service Fund - High Cost Legacy has established a baseline.

The reduction target is calculated using a three-year average of the improper payment rate. After the average has been established, we review to determine if there are variables that may affect the calculated average.

Out-Year improper payment and unknown payment projections and target
Current year +1 estimated future outlays $2,159.66 M
Current year +1 estimated future improper payments $60.47 M
Current year +1 estimated future unknown payments $0 M
Current year +1 estimated future improper payment and unknown payment rate 2.8 %
Current year +1 estimated future improper payment and unknown payment reduction target 2.8 %

The program's current year improper payment and unknown payment rate of 2.88 % has not been achieved with a balance of payment integrity risk and controls and does not represent the lowest rate that can be achieved without disproportionally increasing another risk, therefore it is not the tolerable rate.

The High Cost program has the internal controls, human capital, information systems and other infrastructure it requires to reduce improper payments to the targeted levels.

The program did not identify additional resources needed to improve the overall structure of the lifeline program in its most current budget submission.

Additional programmatic information

  • FY 2024 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    01/2023 - 12/2023


    Confidence interval:

    95% to <100%


    Margin of error:

    +/-2.83

  • Actions taken & planned to mitigate improper payments

    Mitigation strategy Description of the corrective action Completion date Status
    Training
    High Cost will conduct its annual Circle of Life webinars to address top common audit findings. The webinar will provide common errors and best practices suggested to avoid these findings.
    FY2024 Q1
    Completed
    Cross Enterprise Sharing
    Through USAC's Risk Management Council meetings, the different USF program teams discussed strategic initiatives and risk that may impact USAC’s goals. The Risk Management Council meetings will continue to provide an opportunity to analyze and respond to identified changes and related risks to maintain an effective internal control system.
    FY2024 Q1
    Completed
    Audit
    Monthly meetings will continue to be held between USAC’s Audit and Assurance Division (AAD) and USAC leadership to discuss findings identified by AAD. During these meetings, corrective actions are discussed to prevent similar findings in the future.
    FY2024 Q1
    Completed
    Training
    High Cost will conduct its annual Circle of Life webinars to address top common audit findings. The webinar will provide common errors and best practices suggested to avoid these findings.
    FY2025
    Planned
    Cross Enterprise Sharing
    Through USAC's Risk Management Council meetings, the different USF program teams discussed strategic initiatives and risk that may impact USAC’s goals. The Risk Management Council meetings will continue to provide an opportunity to analyze and respond to identified changes and related risks to maintain an effective internal control system.
    FY2025
    Planned
    Audit
    Monthly meetings will continue to be held between USAC’s Audit and Assurance Division (AAD) and USAC leadership to discuss findings identified by AAD. During these meetings, corrective actions are discussed to prevent similar findings in the future.
    FY2025
    Planned

Overpayments

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $0.0 M

The main cause of the overpayments is related to inadequate documentation- assets. The carrier is responsible for maintaining adequate documentation. Documentation, such as invoices, work orders and other documentation related to assets, should be maintained to verify the asset transactions were recorded in the proper amount. Documentation should be kept current and maintained by the carrier to allow for auditor review.
Overpayment root cause Overpayment amount
Amount of overpayments outside the agency's control $55.18 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $55.18 M
The amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $0.0 M

Overpayment type Eligibility element/information needed Eligibility amount
Overpayments Outside Agency Control Financial $55.18 M

Underpayments

Underpayment root cause Underpayment amount
Amount of underpayments $26.57 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $26.57 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $0.0 M

Eligibility element/information needed Eligibility amount
Financial $26.57 M

Mitigation strategies taken Mitigation strategies planned
Audit, Cross Enterprise Sharing, Training Audit, Cross Enterprise Sharing, Training

Technically improper payments

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

Additional information

$26.57 M

Unknown Payment Details

Evaluation of corrective actions

The High Cost Program will continue to focus on program integrity assurance (PIA) activities to mitigate improper payments. The PIA activities include collaborating with USAC's Audit and Assurance Division partners to provide the annual Circle of Life webinars, meeting with NECA monthly, and continue existing analysis and data validation for legacy funds. The annual Circle of Life webinar references FCC rules and provides common error examples and recommends best practices to avoid these findings. The monthly NECA meeting is used by High Cost to evaluate processes based on audit finding feedback. With the annual data validation, High Cost compares projected and actual cost study data that determines carriers' support. The High Cost Program team will introduce a new compliance layer by developing additional PIA procedures leveraging enhanced analytics and testing capabilities on a sample basis to identify potential violations.

USAC, in collaboration with the FCC, will continue to effectively implement and prioritize strategies to reduce the improper payments. USAC will continue to increase program efforts focused on keeping the policies and procedures updated along with training materials. We will continue to review the strategies to ensure adequate impact to the improper payments.

USAC, in conjunction with the FCC, will continue to implement an Improper Payment Analysis process. Through this process, USAC management performs an analysis of its improper payments to understand the root cause and to identify corrective actions to mitigate the issues. In collaboration with USAC management, the USAC’s Fraud Risk Group will continue to evaluate common root causes in an effort to identify the true root cause to determine if additional corrective action is needed.

During the Risk Management Council Meeting, management will continue to review the improper payments and prioritize the largest monetary impact findings accordingly. During the meetings, management has an opportunity to discuss effective improper payment mitigation strategies. USAC’s Fraud Risk Group has developed a process to evaluate common root causes of improper payments in an effort to identify the true root cause to determine if additional corrective action is needed. This process has enabled USAC management to institutionalize corrective actions as part of its program integrity efforts, which will prevent future instances of improper payments. USAC leadership is implementing a quarterly review process to discuss progress towards executing these corrective actions.

Future payment integrity outlook

Universal Service Fund - High Cost Legacy has established a baseline.

The reduction target is calculated using a three-year average of the improper payment rate. After the average has been established, we review to determine if there are variables that may affect the calculated average.

Out-Year improper payment and unknown payment projections and target
Current year +1 estimated future outlays $1,929 M
Current year +1 estimated future improper payments $69.44 M
Current year +1 estimated future unknown payments $0 M
Current year +1 estimated future improper payment and unknown payment rate 3.6 %
Current year +1 estimated future improper payment and unknown payment reduction target 3.6 %

The program's current year improper payment and unknown payment rate of 4.45 % has not been achieved with a balance of payment integrity risk and controls and does not represent the lowest rate that can be achieved without disproportionally increasing another risk, therefore it is not the tolerable rate.

The High Cost program has the internal controls, human capital, information systems, and other infrastructure it requires to reduce improper payments to the target levels. USAC continues to evaluate to ensure the proper infrastructure is in place.

The High Cost program team did not identify additional resources needed to improve the overall structure of the program in its most current budget submission. USAC continues to work with the FCC to determine the gaps in its overall requirements.

Additional programmatic information

Accountability for detecting, preventing, and recovering improper payments

USAC’s payment recapture audits are the known as Beneficiary and Contributor Audit Program (BCAP). BCAP audits are designed to identify overpayments that must be recaptured, assess compliance with FCC rules, and deter waste, fraud, and abuse. USAC’s improper payment testing program is known as Payment
Quality Assurance (PQA). Through PQA, USAC utilizes a statistical sampling methodology to estimate the annual amount of improper payments in the USF-HC, USF-LL, USF-RHC, and USF-S&L programs. The goal of the PQA assessment plan is to estimate an improper payment error rate based on non-compliance with FCC rules. To recover improper payments, USAC has implemented an enterprise recovery policy to standardize the reporting and recovery of improper payments. All USAC improper payments are deemed collectible and USAC has either recovered or is in the process of recovering the improper payments.

  • FY 2025 improper payment estimates

    Chart legend and breakdown

    Payment accuracy rate

    Improper payment rate

    Unknown payment rate


    Sampling & estimation methodology details

    Sampling timeframe:

    01/2023 - 12/2023


    Confidence interval:

    95% to <100%


    Margin of error:

    +/-1.89

Causes

The major causes of the High Cost improper payments are incorrect depreciation method and inadequate documentation. The major causes make up 80% of the improper payment rate. The minor causes range from lack of documentation to inaccurate loop.

Incorrect depreciation method could be caused by the following: 1) used the ending balance instead of the average monthly balance, 2) used an incorrect rate or 3) there was an error in the calculation. Inadequate documentation - assets could be caused by the following: 1) missing invoices or inventory documents OR documentation didn't support the spread of overhead.

Overpayment root cause Overpayment amount
Amount of overpayments within the agency's control $0.0 M
Amount of overpayments outside the agency's control $32.66 M
Amount of overpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
Amount of overpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $32.66 M
Amount of overpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $0.0 M

Underpayment root cause Underpayment amount
Amount of underpayments $29.59 M
The amount of underpayments that occurred because the data/information needed to validate payment accuracy prior to making a payment does not exist $0.0 M
The amount of underpayments that occurred because of an inability to access the data/information needed to validate payment accuracy prior to making a payment $29.59 M
The amount of underpayments that occurred because of a failure to access data/information needed to validate payment accuracy prior to making a payment $0.0 M

The amount of improper payments that were paid to the right recipient for the correct amount but were considered technically improper because of failure to follow statute or regulation $0.0 M

The amount that could either be proper or improper but the agency is unable to determine whether it was proper or improper as a result of insufficient or lack of documentation $0.0 M

Prevention

High Cost will introduce a new compliance layer by developing additional Program Integrity Assurance (PIA) procedures leveraging enhanced analytics and testing capabilities on a sample basis to identify potential violations. The new compliance layer will be implemented by December 31, 2026.

High Cost continue to take the following corrective actions. Through USAC's Risk Management Council meetings, the different USF program teams discussed strategic initiatives and risk that may impact USAC’s goals. The Risk Management Council meetings will continue to provide an opportunity to analyze and respond to identified changes and related risks to maintain an effective internal control system. The meetings are completed on an ongoing quarterly basis.

High Cost will conduct its annual Circle of Life webinars to address top common audit findings. The webinar will provide common errors and best practices suggested to avoid these findings. The webinars are completed on an ongoing annual basis.

Monthly meetings will continue to be held between USAC’s Audit and Assurance
Division (AAD) and USAC leadership to discuss findings identified by AAD. During
these meetings, corrective actions are discussed to prevent similar findings in the
future. The meetings occur on a monthly basis.

The High Cost Program will continue to focus on PIA activities to mitigate improper payments. The results of the program integrity will have a major impact on the root cause related to the improper payment rate. The PIA activities include collaborating with USAC's Audit and Assurance Division partners to provide the annual Circle of Life webinars, meeting with NECA monthly, and continue existing analysis and data validation for legacy funds. The annual Circle of Life webinar references FCC rules and provides common error examples and recommends best practices to avoid these findings. The monthly NECA meeting is used by High Cost to evaluate processes based on audit finding feedback. With the annual data validation, High Cost compares projected and actual cost study data that determines carriers' support.

The Risk Management Council Meeting provides a collaborative space for programs to discuss efforts used to mitigate improper payments. During the Risk Management Council Meeting, management will continue to review the improper payments and prioritize the largest monetary impact findings accordingly.

During the meetings, management has an opportunity to discuss effective improper payment mitigation strategies. This process has enabled USAC management to institutionalize corrective actions as part of its program integrity efforts, which will prevent future instances of improper payments. USAC leadership is implementing a quarterly review process to discuss progress
towards executing these corrective actions.

Payment type Mitigation strategies taken Mitigation strategies planned
Overpayments Audit, Cross Enterprise Sharing, Training Audit, Cross Enterprise Sharing, Training
Underpayments Audit, Cross Enterprise Sharing, Training Audit, Cross Enterprise Sharing, Training

Eligibility element/information needed Description of the eligbility element/information
Financial The financial position or status of a beneficiary, recipient, or their family

Additional information

Reduction target

3.0 %

The High Cost program has the internal controls, human capital, information systems, and other infrastructure it requires to reduce improper payments to the target levels. The FCC and USAC will continue to expand internal controls as necessary and will develop the human capital to ensure it meets its goals.

The High Cost program team did not identify additional resources needed to improve the overall structure of the program in its most current budget submission. The FCC and USAC continues to work to determine the gaps in its overall requirements.

The FCC works through its program administrator, USAC to complete payment
recapture audits known as Beneficiary and Contributor Audit Program (BCAP). BCAP audits are designed to identify overpayments that must be recaptured, assess compliance with FCC rules, and deter waste, fraud, and abuse. USAC’s improper payment testing program is known as Payment Quality Assurance (PQA). Through PQA, USAC utilizes a statistical sampling methodology to estimate the annual amount of improper payments in the USF-HC, USF-LL, USF-RHC, and USF-S&L programs. The goal of the PQA assessment plan is to estimate an improper payment error rate based on non-compliance with FCC rules. To recover improper payments, USAC has implemented an enterprise recovery policy to standardize the reporting and recovery of improper payments. All USAC improper payments are deemed collectible and USAC has either recovered or is in the process of recovering the improper payments.

$29.59 M