Sec. 53.209  Biennial audit.

    (a) A Bell operating company required to operate a separate 
affiliate under section 272 of the Act shall obtain and pay for a 
Federal/State joint audit every two years conducted by an

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independent auditor to determine whether the Bell operating company has 
complied with the rules promulgated under section 272 and particularly 
the audit requirements listed in paragraph (b) of this section.
    (b) The independent audit shall determine:
    (1) Whether the separate affiliate required under section 272 of the 
Act has:
    (i) Operated independently of the Bell operating company;
    (ii) Maintained books, records, and accounts in the manner 
prescribed by the Commission that are separate from the books, records 
and accounts maintained by the Bell operating company;
    (iii) Officers, directors and employees that are separate from those 
of the Bell operating company;
    (iv) Not obtained credit under any arrangement that would permit a 
creditor, upon default, to have recourse to the assets of the Bell 
operating company; and
    (v) Conducted all transactions with the Bell operating company on an 
arm's length basis with the transactions reduced to writing and 
available for public inspection.
    (2) Whether or not the Bell operating company has:
    (i) Discriminated between the separate affiliate and any other 
entity in the provision or procurement of goods, services, facilities, 
and information, or the establishment of standards;
    (ii) Accounted for all transactions with the separate affiliate in 
accordance with the accounting principles and rules approved by the 
Commission.
    (3) Whether or not the Bell operating company and an affiliate 
subject to section 251(c) of the Act:
    (i) Have fulfilled requests from unaffiliated entities for telephone 
exchange service and exchange access within a period no longer than the 
period in which it provides such telephone exchange service and exchange 
access to itself or its affiliates;
    (ii) Have made available facilities, services, or information 
concerning its provision of exchange access to other providers of 
interLATA services on the same terms and conditions as it has to its 
affiliate required under section 272 that operates in the same market;
    (iii) Have charged its separate affiliate under section 272, or 
imputed to itself (if using the access for its provision of its own 
services), an amount for access to its telephone exchange service and 
exchange access that is no less than the amount charged to any 
unaffiliated interexchange carriers for such service; and
    (iv) Have provided any interLATA or intraLATA facilities or services 
to its interLATA affiliate and made available such services or 
facilities to all carriers at the same rates and on the same terms and 
conditions, and allocated the associated costs appropriately.
    (c) An independent audit shall be performed on the first full year 
of operations of the separate affiliate required under section 272 of 
the Act, and biennially thereafter.
    (d) The Chief, Common Carrier Bureau, shall work with the regulatory 
agencies in the states having jurisdiction over the Bell operating 
company's local telephone services, to attempt to form a Federal/State 
joint audit team with the responsibility for overseeing the planning of 
the audit as specified in Sec. 53.211 and the analysis and evaluation of 
the audit as specified in Sec. 53.213. The Federal/State joint audit 
team may direct the independent auditor to take any actions necessary to 
ensure compliance with the audit requirements listed in paragraph (b) of 
this section. If the state regulatory agencies having jurisdiction 
choose not to participate in the Federal/State joint audit team, the 
Chief, Common Carrier Bureau, shall establish an FCC audit team to 
oversee and direct the independent auditor to take any actions necessary 
to ensure compliance with the audit requirements in paragraph (b) of 
this section.

[ 62 FR 2926 , Jan. 21, 1997]