Sec. 54.701  Administrator of universal service support mechanisms.

    (a) A Federal Advisory Committee (Committee) shall recommend a 
neutral, third-party administrator of the universal service support 
programs to the Commission within six months of the Committee's first 
meeting. The Commission shall act upon that recommendation within six 
months. The Administrator must:
    (1) Be neutral and impartial;
    (2) Not advocate specific positions before the Commission in non-
universal service administration proceedings related to common carrier 
issues, except that membership in a trade association that advocates 
positions before the Commission will not render it ineligible to serve 
as the Administrator;
    (3) Not be an affiliate of any provider of telecommunications 
services; and
    (4) Not issue a majority of its debt to, nor derive a majority of 
its revenues from any provider(s) of telecommunications services. This 
prohibition also applies to any affiliates of the Administrator.
    (b) If the Administrator has a Board of Directors that includes 
members with direct financial interests in entities that contribute to 
or receive support from the universal service support programs, no more 
than a third of the Board members may represent any one category (e.g., 
local exchange carriers, interexchange carriers, wireless carriers, 
schools, libraries) of contributing carriers or support recipients, and 
the Board's composition must reflect the broad base of contributors to 
and recipients of universal service.
    (1) An individual does not have a direct financial interest in 
entities that contribute to or receive support from the universal 
service support programs if he or she is not an employee of a 
telecommunications carrier or of a recipient of universal service 
support programs funds, does not own equity

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interests in bonds or equity instruments issued by any 
telecommunications carrier, and does not own mutual funds that 
specialize in the telecommunications industry. If a mutual fund invests 
more than 50 percent of its money in telecommunications stocks and 
bonds, then it specializes in the telecommunications industry.
    (2) An individual's ownership interest in entities that contribute 
to or receive support from the universal service support programs is de 
minimis if in aggregate the individual, spouse, and minor children's 
impermissible interests do not exceed $5,000.
    (c) The Administrator chosen by the Committee shall begin 
administering the support programs within six months of its appointment. 
The Administrator's performance shall be reviewed by the Commission 
after two years. The Administrator shall serve an initial term of five 
years. At any time prior to nine months before the end of the 
Administrator's five-year term, the Commission may re-appoint the 
Administrator for another term of not more than five years. Otherwise, 
nine months before the end of the Administrator's term, the Commission 
will create another Federal Advisory Committee to recommend another 
neutral, third-party administrator.
    (d) The Committee's and Administrator's reasonable administrative 
projected annual costs shall be included within the universal service 
support programs' projected expenses.
    (e) The Administrator shall keep the universal service support 
program funds separate from all other funds under the control of the 
Administrator.
    (f) The Administrator shall be subject to a yearly audit by an 
independent accounting firm and may be subject to an additional audit by 
the Commission, if the Commission so requests.
    (1) The Administrator shall report annually to the Commission an 
itemization of monthly administrative costs that shall include all 
expenses, receipts, and payments associated with the administration of 
the universal service support programs and shall provide the Commission 
full access to the data collected pursuant to the administration of the 
universal service support programs.
    (2) Pursuant to Sec. 64.903 of this chapter, the Administrator shall 
file with the Commission a cost allocation manual (CAM), that describes 
the accounts and procedures the Administrator will use to allocate the 
shared costs of administering the universal service support programs and 
its other operations.
    (3) Information based on the Administrator's reports will be made 
public at least once a year as part of a Monitoring Report.
    (g) The Administrator shall report quarterly to the Commission on 
the disbursement of universal service support program funds. The 
Administrator shall keep separate accounts for the amounts of money 
collected and disbursed for eligible schools and libraries, rural health 
care providers, low-income consumers, and high cost and insular areas.
    (h) The Administrator shall be subject to close-out audits at the 
end of their terms.

[ 62 FR 32948 , June 17, 1997, as amended at  62 FR 41305 , Aug. 1, 1997]