EXECUTIVE DIGEST

This special review report reflects the results of work that was performed by the Office of 
Inspector General (OIG) related to Commercial Mobile Radio Service (CMRS) licensing 
and fee collection databases.  Our findings reflect that licensing data maintained by the 
Wireless Telecommunications Bureau (WTB) and the associated regulatory fee collection 
data base maintained by the Billings and Collection Branch (BCB), Office of the 
Managing Director (OMD) are not reconcilable.  Thus, the auditors were unable to 
determine which FY 1996 licensees had paid the required fees within the designated 
filing period per the schedule published in FCC Public Notice 75516 dated August 1, 
1997 .

The condition cited above results from the lack of a mechanism to reconcile the 
segregated data bases maintained by WTB and OMD which do not have a common data 
entry feeder stream.  OIG efforts to perform such a reconciliation were offset by the lack 
of any common data fields other than station call sign which proved to be unreliable.   
Accordingly, the FCC cannot attest to which FCC CMRS licensees have paid annual 
regulatory fees per Public Law 103-66, "The Omnibus Budget Reconciliation Act of 
1993."  

In a joint response to the draft report (see Attachment 1), the Chief WTB and Managing 
Director (MD) indicated concurrence with OIG findings.  They stated that "the regulatory 
fee collection database maintained by OMD and the CMRS database maintained by WTB 
cannot be reconciled."  And, while they note that the two databases "were never designed 
to be reconciled" they concur with the OIG that  "with revenue falling short of 
expectations.it is an ideal time to create links " between the CMRS licensing database 
and the collections database.

BACKGROUND

Section 9(a) of the Communications Act of 1934, as amended, authorizes the 
Commission to assess and collect annual regulatory fees to recover the costs, as 
determined annually by Congress, that it incurs in carrying out enforcement, policy and 
rulemaking, international, and user information activities.  For FY 1997, Congress 
required that the FCC collect $152,523,000 through regulatory fees to offset the 
Commission's costs. 

Once the Commission determines the amount of fee revenue needed to be collected from 
each class of licensee, the individual revenue requirements are divided by the number of 
associated payment units to obtain actual fee amounts for each fee category.  For CMRS, 
in FY 1997 this permutation translated into a fee of $.24/unit.

On October 29,1997, the MD transmitted a memorandum to the OIG entitled "Audit of 
Selected CMRS Regulatory Fee Payers."  In that memorandum, the MD noted that the 
FCC had exceeded its overall Congressionally mandated fee collection goal in FY 1997, 
however, with regard to CMRS, the FCC had witnessed a "continued shortfall in receipts 
from CMRS licensees.."  Given this fact, the MD went on to state that "it would be 
appropriate to perform an audit of these payments to identify which companies, if any, 
have failed to pay their regulatory fees, or which have failed to pay 100% of their 
legitimate fee liability."

The OIG incorporated the request of the MD in the FY 1998 Audit Plan and held an 
entrance conference on February 11, 1998.  At that entrance conference the Deputy 
Managing Director-Operations requested that, due to the volume of work being 
experienced by BCB, audit fieldwork be delayed until a later date.  The Inspector General 
honored this request and delayed audit fieldwork until June 1998.

OBJECTIVE  

The established objective of the audit was to determine whether the FCC received FY 
1997 regulatory fees consistent with PL 103-66 and Public Notice 75516 and whether 
related data maintained within the FCC was captured in a timely and accurate manner 
with sufficient documentation to support the transaction.  The objective was to further 
identify internal FCC policy and procedures used to validate accuracy of licensee 
payment amounts.  

Specifically, the auditors' sought to internally:

1. Identify cost accounting basis for regulatory fee formulation.

2. Obtain records as to CMRS fee payments received during the filing window and 
outside of the filing window.  These records were to be compared to data residing 
on FCC form 159-Remittance Advice. 

3. Match CMRS licensing database records maintained by WTB to fee payment 
records maintained by OMD in order to validate data or detect irregularities.

4. Perform late payment analysis to identify whether licensees submitting outside the 
filing window were assessed (and paid) a 25% late-payment penalty.

Subsequent to performing steps 1 through 4 above, the audit plan incorporated the 
auditors utilizing statistical sampling techniques to select licensees for further 
examination.  Specifically, Report and Order FCC 97-384 adopted October 17, 1997 
required CMRS licensees "maintain, and submit upon request, documentation supporting 
the calculation of their fee payments."  OIG auditors during survey work had been made 
aware that the MD had not instituted a program to: (1) request licensee submission of fee 
payment supporting documentation; and, (2) assign and train personnel to perform 
appropriate analysis of data submissions.


RESULTS OF SPECIAL REVIEW

The FCC does not have a methodology in place to ensure compliance with Public Law 
103-66.  The CMRS licensing database maintained by WTB is not reconcilable to the 
collection database maintained by OMD.  The Commission has focused on meeting 
congressionally mandated regulatory fee collection thresholds and has not established a 
system of records which would allow the Commission to validate CMRS regulatory fee 
payments to ensure that they are current, accurate, and complete.  Thus, the Commission 
lacks the basis to identify CMRS licensee compliance with Public Law 103-66 and 
annual Public Notices that establish regulatory fee filing fee requirements and payment 
windows. 

Government Auditing Standards, promulgated by the General Accounting Office (GAO), 
establish requirements for determining the reliability of computer-based information.  
The GAO "yellow book" states that "(w)hen computer-processed data are an important or 
integral part of the audit and the data's reliability is crucial to accomplishing the audit 
objectives, auditors need to satisfy themselves that the data are relevant and reliable."

To ascertain the integrity of Commission records associated with CMRS licenses and 
regulatory fee payment information, we attempted to match CMRS licensing database 
records maintained by WTB to fee payment records maintained by OMD.  As part of our 
review, we requested CMRS licensing information from the WTB and CMRS payment 
information from the BCB.  In June 1998, OMD and WTB provided electronic copies of 
the requested database material. OMD provided all CMRS payment records in one (1) 
database.  WTB provided five (5) databases containing CMRS license information.  
Following receipt of the material, we conducted the following procedures:

? developed record layouts for each of the database files provided;

? examined each database to ensure an understanding of the structure and 
content and to identify fields to be included in the assessment;

? used Microsoft Excel to merge CMRS database files into a common file 
and sort the merged file by field = "callsign";

? used Microsoft Excel to re-structure the CMRS payment file to include 
only information relevant to the assessment and to sort the file by field = 
"callsign";

? printed a significant portion of each of the modified databases and 
manually compared the data using the callsign identifier.

During our initial assessment, we identified a significant number of discrepancies 
between the payment and licensing databases.  For example, when we attempted to verify 
that payments had been received for licenses reported in the WTB licensing database, we 
determined that only sixteen point nine percent (16.9%) of the twenty-five hundred 
(2,500) licenses examined had corresponding payment information in the payment 
database (422 matches divided by 2,500 records = 16.9%).  In addition, when we 
attempted to verify that licenses existed for each payment received, we determined that 
only fifty-nine point one percent (59.1%) of the seven hundred twelve payment (712) 
records examined had corresponding license information (421 matches divided by 712 
records = 59.1%).  We forwarded the results of our preliminary assess to representatives 
from WTB and OMD.  After discussing the steps taken to conduct the assessment, OMD 
and WTB agreed to evaluate the data to determine the cause of the discrepancies.

Following review, OMD and WTB provided a series of explanations for the 
discrepancies.  OMD reported that they reviewed "200 of the items listed on the WTB 
report" and that they were able, by searching the collection system, to identify a small 
number of the licenses we were unable to locate.  In addition, OMD reported that they 
searched manual submissions for companies for which we were unable to identify 
payments.  They reported that, in some cases, it appears that Mellon Bank did not enter 
all relevant information or that companies would provided a listing of callsigns and 
Mellon Bank would not adequately enter all of the listed callsigns.  OMD also provided 
an updated database of FY 97 CMRS payments in which errors identified in their 
assessment were corrected.

In addition to the reasons cited by OMD in their response, WTB reported a number of 
reasons for the discrepancies.  WTB reported that the data provided in the original extract 
for our review did not, for some CMRS services, include licenses cancelled after 
December 31, 1996 (i.e., licensees for which a payment was identified with no 
corresponding license in the WTB database).  In addition, WTB identified several cases 
in which payments were received even though no payment was required.  As a result of 
their evaluation, WTB agreed to re-pull a data extract for FY97 CMRS licenses.

Following receipt of "corrected" CMRS license and payment databases, we performed 
the same set of procedures as during the original assessment except that we did not 
combine the various license databases.  In this way, we attempted to determine if 
discrepancies were associated with the CMRS service.  We evaluated FY 1997 CMRS 
Cellular Radio Licenses and Paging Licenses.  We reviewed one-thousand two-hundred 
eight-eight (1,288) CMRS Cellular Radio licenses which were reported to be valid as of 
December 31, 1998 and were unable able to identify payment for forty-three point one 
percent (43.1%) of those licenses (555 with no record of payment divided by 1,288 
records evaluated = 43.1%).  We reviewed one-thousand seventy-seven (1,077) FY 1997 
CMRS Paging licenses which were reported to be valid as of December 31, 1996 and 
were unable to identify payment for seventy-nine point six (79.6%) of those licenses (858 
with no record of payment divided by 1,077 records = 79.6%).

Based upon the results of this assessment, we concluded that we could not place reliance 
on the CMRS data contained in either the licensing system maintained by WTB or the 
collection system maintained by OMD. 

When reliable data is available within the FCC, the OIG will initiate audit activity.  This 
activity will entail (1) contacting CMRS licensees to request submission of fee payment 
supporting documentation and, (2) performing appropriate analysis of data submissions 
necessary to arrive at an audit opinion as to entity compliance with applicable rules and 
regulation.
  Licensees, whose fee payments were due in September 1997, were to base 
their payment upon telephone number or unit count as of December 31, 
1996.  Any data omission, erroneous or incomplete data submission, or 
payment deficiency per the Public Notice "may result in a 25% monetary 
penalty, dismissal of pending actions, and/or revocation of ant 
authorization."
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