BEFORE THE NEBRASKA PUBLIC SERVICE COMMISSION
In the Matter of the Nebraska )
Public Service Commission, on )
its own motion, to investigate ) Application No. NUSF–33/PI-68
the audit requirements related )
to the Nebraska Universal )
Service Fund. )
COMMENTS OF ALLTEL NEBRASKA, INC.,
ALLTEL COMMUNICATIONS OF THE MIDWEST, INC.
ALLTEL SYSTEMS OF THE MIDWEST, INC.
ALLTEL COMMUNICATIONS OF NEBRASKA, INC.
ALLTEL Nebraska, Inc., Alltel Communications of the Midwest, Inc., Alltel Systems
of the Midwest, Inc., and Alltel Communications of Nebraska, Inc. (“ALLTEL”) hereby
submit the following comments to the questions contained in the Commission’s November
26, 2002 Order entered in Application No. NUSF-33/PI-68.
Question No. 1:
Do either LB 1211 or the Commission’s rules and regulations now require the
Commission to require audits from companies rather than agreed upon procedures or other
types of reports? If not, then what other report in lieu of audits would meet this requirement?
Response to Question 1:
ALLTEL does not believe that LB1211 or the Commission’s rules and regulations
require an audit to the exclusion of other attestation procedures such as agreed upon
procedures. ALLTEL believes a reasonable interpretation of the law and rules can be made to
allow companies to submit other forms of certified public accountant reports, such as agreed
upon procedures reports, to comply with the statute and Commission rules.
Resolving these issues revolves around the meaning of certain accounting terms such
as “audit”, and “attestations”, including “agreed upon procedures”. With regard to
remittances to the NUSF Fund, the revised statute in section 86-324(2)(d) states “the
commission shall require, as reasonably necessary, an annual audit of any telecommunications
company to be performed by a third-party certified public accountant to insure the billing,
collection, and remittance of a surcharge for universal service.” Regarding payments to the
NUSF, the revised statute states in section 86-324(2)(e) the Commission “shall require an
audit of information provided by a telecommunications company to be performed by a third-
party certified public accountant for purposes of calculating universal service payments to
such telecommunications company.”
The statute does not define the term audit, nor does it address any specific accounting
profession rules and regulations. The statute does, however, specifically require the audit to
be performed by a certified public accountant (“CPA”). With regard to remittances to the
NUSF Fund, audits are required as reasonably necessary and specifically to “insure the
billing, collection and remittance of a surcharge.” With regard to payments to the NUSF
Fund, the statute defines the purpose of the audit to be for “calculating universal service fund
payments”. Thus, the statute does not define audit, but it does require a report to be submitted
by a CPA and specifies the purpose of the report.
CPAs are bound by professional standards. For example, the American Institute of
Certified Public Accountants (“AICPA”) has both auditing standards and attestation
standards. Any CPA engaged by a company to issue a report for the company’s NUSF
remittances or payments is bound by AICPA standards and must comply with those standards.
AICPA standards do include definitions for the terms audit and attestations, including agreed
upon procedures and contain other specific guidance for practitioners performing audits and
agreed upon procedures.
ALLTEL’s current outside CPA firm has informed ALLTEL that such firm does not
believe the AICPA auditing standards allow the issuance of an audit report for the information
to be included in a report regarding NUSF remittances and payments. Engagement activities
required to prepare such a report do not conform to the AICPA Section 623 auditing
standards. In general, an audit report is the auditor’s opinion on entire financial statements
rather than components of the financial statements or specific compliance procedures
performed by a company. However, the AICPA Attestation Standards in Section 601 do
allow CPAs to issue either an agreed upon procedures report or an examination report.
AICPA Attestation Standard Section 601 provides guidance to CPAs for engagements related
to an entity’s compliance with requirements of specified laws, regulations, rules, contracts or
grants. Compliance requirements may be either financial or non-financial in nature. In this
regard, a practitioner may perform agreed upon procedures to assist users in evaluating the
entity’s compliance with specified requirements. The tasks noted in AICPA Attestation
Standard Section 601 do conform with the purposes the Nebraska statute requires in insuring
the billing, collection and remittance of the surcharge and in calculating the universal service
The audit language of the statute initially appears to place the companies in a no win
situation of a requirement to submit a CPA audit report of their remittances and payments and
yet CPAs are precluded by their professional standards from issuing such an “audit” report.
But, CPAs can issue an agreed upon procedures report that meets the purposes of the statute
and complies with these engagement standards. ALLTEL believes that an agreed upon
procedures report issued by a CPA meets the audit requirements of the statute.
As noted above, the statute does not specifically define the term audit other than it
must be performed by a CPA and delineates the purpose of the audits. As such, the statute
does not mandate the term audit be defined per professional accounting standards. Persons
not trained as CPAs generally associate any report issued by a CPA engaged to perform
certain tasks involving portions of a company’s financial records as an audit report. A
layman’s view of the term audit is reasonable as an interpretation of the statute. At the same
time, the law cannot reasonably require companies to engage CPAs to issue reports that are in
conflict with professional accounting standards. However, the companies can submit an
agreed upon procedures report that is issued by a CPA and meets the purposes outlined in the
statute. A CPA agreed upon procedures report submitted by a company for its NUSF
remittances or payments in compliance with the purposes stated in sections 86-324(2)(d) and
(e) is a reasonable interpretation of compliance with these statutory sections. In addition,
Section 86-324(2)(d), regarding audits of surcharge remittances, allows the Commission to
require audits “as reasonable necessary”. This language does not mandate audits, but
certainly allows the Commission leeway to reasonably interpret that agreed upon procedures
are reasonable compliance with the statute.
Question No. 2:
Does LB 1211 require the Commission to make any changes to its current policies and
procedures with respect to third party independent audits and what is currently required in the
Commission’s Universal Service Fund Rules and Regulations?
Response to Question 2:
ALLTEL recommends that NUSF Rules Sections 003.05 and 004.06 be amended to
clarify that companies can submit a CPA prepared agreed upon procedures report.
Question No. 3:
Please outline the concerns you have with respect to the Commission requiring audits
of universal service remittances and of payments.
Response to Question 3:
Please refer to the concerns noted in ALLTEL’s response to Question 1 above through
which it is pointed out that ALLTEL cannot engage an outside CPA firm to issue an audit
report regarding ALLTEL’s NUSF remittances and payments. Another concern arises at
times when a company changes accounting firms. When a company engages a new CPA firm,
that firm cannot issue an audit opinion for accounting periods it has not audited, even though
those periods audited by another firm. However, the newly engaged audit firm can issue an
agreed upon procedures report for the periods they have not audited. Therefore, agreed upon
procedures reports are necessary for instances when companies have engaged new external
Question No. 4:
Negotiating agreed upon procedures has been administratively burdensome and has
resulted in substantial delays. The Commission does not wish for the NUSF Department to
continue negotiating agreed upon procedures on a case-by-case basis. If agreed upon,
procedures should still be used, the Commission intends to streamline this process with one
policy or formula applicable to all carriers and their accounting firms. Please provide any
comments or suggestions, which the Commission should consider when drafting this policy.
In addition, interested parties may submit draft polices for the Commission to consider which
will be made applicable in all cases. Application No. NUSF-33/PI-68 PAGE 3
Response to Question 4:
ALLTEL supports the Commission’s efforts to reduce the NUSF Department’s administrative
burden of having to negotiate agreed upon procedures on a case by case basis by streamlining
the process with a pre-approved sample form. On September 5, 2002 the NUSF Director sent
a letter to ALLTEL with sample payment report forms attached. ALLTEL recommends these
reports be adopted as the industry standard. Copies are attached. Similar reports should be
established as standard surcharge remittance report forms.
Question No. 5:
Should companies that have restated their financial statements be required to re-submit
their audit and if so should they be required to perform an audit rather than an agreed upon
Response to Question 5:
ALLTEL does not believe that a restatement of financial statements should
automatically require companies to re-submit their NUSF outside accountant’s reports.
Restatement of financial statements is an unusual occurrence for most companies. When such
a situation might occur, the restatement may involve another affiliate’s or the parent company
books and not the company itself. Or the restatement may involve portions of the financial
statements not included in any of the NUSF remittances or calculation of payments.
Resubmission of NUSF outside accountant’s reports should only be considered when the
changes on the restated financial statements impact the company’s NUSF remittances or
ALLTEL respectively requests the Commission’s favorable consideration of the
Dated: January 29, 2003.
ALLTEL Nebraska, Inc., ALLTEL
COMMUNICATIONS OF THE MIDWEST,
INC., ALLTEL SYSTEMS OF THE
MIDWEST, INC., and ALLTEL
COMMUNICATIONS OF NEBRASKA, INC.
Paul M. Schudel, No. 13723
James A. Overcash, No. 18627
WOODS & AITKEN LLP
301 South 13th Street, Suite 500
Lincoln, Nebraska 68508
(402) 437-8558 Facsimile
CERTIFICATE OF SERVICE
I hereby certify that on the 29th day of January, 2003, the original and five (5) paper
copies, together with an electronic copy, of the foregoing Comments were served upon Andy
S. Pollock, Executive Director of the Commission, by hand delivery.
James A. Overcash
We are providing this letter in connection with your performance of the procedures relating to
the NUSF-REV and NUSF-EARN forms (the “Forms”) for the calendar years ended 1998,
1999, and 2000 for ___________________ (company Name), in accordance with Application
No. NUSF-1, Progression Order No. 5, of the Nebraska Public Service Commission.
We are responsible for the Forms for the calendar years ended 1998, 1999, and 2000 for
________________ (Company Name), in accordance with Application No. NUSF-1,
Progression Order No. 5, of the Nebraska Public Service Commission.
We and the Nebraska Public Service Commission are responsible for (a) selecting the criteria
to be used in the determination of the findings, (b) determining that the criteria are appropriate
for our purposes, and (c) taking responsibility for the sufficiency of the procedures you
performed for our purposes.
We confirm, to the best of our knowledge and belief, as of July 31, 2002, the date of your
report, the following representations made to you during your engagement:
1. We have made available to you all significant information that we believe is relevant
to the subject matter or assertion and the agreed-upon procedures, including, if applicable,
information about actions taken at meetings of the board of directors and committees of the
board of directors.
2. The applicable calendar year data supporting the NUSF-EARN form was included in
the consolidated financial statements of ____________ (Company Name) audited by other
3. We are responsible for the completeness and accuracy of the information supplied to
4. There are no known matters contradicting the subject matter or the assertion.
5. There are no known communications from regulatory agencies affecting the subject
matter or assertion.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: (company name) and the
Nebraska Public Service Commission
We have performed the procedures enumerated below, which were agreed to by
_____________ (Company Name) and the Nebraska Public Service Commission (“PSC”),
together defined herein as the Specified Users, with respect to the accuracy of the
information provided in the NUSF-REV and NUSF-EARN forms (the “Forms” for the
calendar years ended 1998, 1999 and 2000 for ____________ (Company Name), in
accordance with Application No. NUSF-1, Progression Order No. 5, of the Nebraska PSC.
This engagement to apply agreed-upon procedures was performed in accordance with
standards established by the American Institute of Certified Public Accountants. The
sufficiency of the procedures is solely the responsibility of the Specified Users of the report.
Consequently, we make no representation regarding the sufficiency of the procedures
described below either for the purpose of which this report has been requested or for any
1. Obtain copies of the Forms submitted in 1999, 2000 and 2001 for __________
(Company Name) containing 1998, 1999 and 2000 calendar year data, respectively.
2. Verify the clerical accuracy of the Forms by recalculating all applicable amounts,
rows and columns.
3. Trace and agree all amounts included in columns A (“form M”) and B (“Excluded
Services”) shown on the NUSF-EARN forms obtained in step 1 above, to the applicable
calendar year data supporting records of ____________ (Company Name). Management of
__________ (Company Name) has represented to us that such data was included in the
consolidated financial statements of _____________ (Company Name), which were audited
by other independent accountants.
4. Regarding the amounts and balances included in Column A (“1998 Base Period
Demand”) on the NUSF-REV forms obtained in step 1 above.
We are not engaged to perform an audit or an examination, the objective of which would be
the expression of an opinion on the accuracy of the information provided in the Forms
containing data for the calendar years ended 1998, 1999 and 2000 for ____________
(Company Name), in accordance with Application No. NUSF-1, Progression Order No. 5, of
the Nebraska PSC. Accordingly, we do not express such an opinion. Had we been engaged
to perform additional procedures, other matters might have come to our attention that would
have been reported to you. *In addition, it should also be noted that we were not
independent accountants for _____________ (Company Name) for the years ended December
31, 1998, 1999, 2000 and 2001 and thereby did not perform any audit for the consolidated
financial statements of _______________ (Company Name) during such periods.
This report is intended solely for the use of the Specified Users and should not be used by
those who have not agreed to the procedures and taken responsibility for the sufficiency of the
procedures for their purpose.
Company Name and Signature Date