Missy Sue Mastel, CPA
760 Market Street, Suite 315 San Francisco, CA 94102
Tel. (415) 820-9070
Fax (415) 820-9075
Auditors Report: FCC Order 96-128
We have examined the accompanying description of the controls at NG, Inc. (NG) applicable to recordkeeping, reporting, and payment provided to payphone service providers serviced through the switch. Our examination included procedures to obtain reasonable assurance about whether (1) the accompanying description presents fairly, in all material respects, the aspects of NG's controls as it related to PSP compensation, (2) the controls included in the description were suitably designed to achieve the control objectives specified in the description, if those controls were complied with satisfactorily, and (3) such controls have been in place since December 31, 2005. Our examination was performed in accordance with standards established by the American Institute of Certified Public Accountants and included those procedures we considered necessary in the circumstances to obtain a reasonable basis for rendering our opinion.
In our opinion, the accompanying description of the aforementioned controls of NG, presents fairly, in all material respects, the relevant aspects of NG's controls that are in operation for the quarter ending December 31, 2005. Also, in our opinion, the controls, as described, are suitably designed to provide reasonable assurance that dial around compensation objectives, as documented in FCC Order 96-128, would be achieved if the described controls were complied with satisfactorily and third parties applied those aspects of internal control contemplated in the design of NG's controls.
This information has been provided to all interested parties. In our opinion, the controls that we tested are operating with sufficient effectiveness to provide material and reasonable assurance that the control objectives were achieved during the period between October 1, 2005 and December 31, 2005.
The relative effectiveness and significance of specific controls at NG and their effect on assessments of control risk for PSPs are dependent on their interaction with internal control and other factors present at PSPs and PSP aggregators, as well as the internal controls of third parties involved in NG's processing of PSP dial around compensation. We have performed no procedures to evaluate the effectiveness of internal controls at any third party associated with this process.
The description of controls at NG is as of December 31, 2005 and information about tests of the operating effectiveness covers the period from October 1, 2005 to December 31, 2005. Any projection of such information into the future is subject to the risk that, because of change, the description may no longer portray the system in existence. The potential effectiveness of specific controls at NG is subject to inherent limitations and, accordingly, errors or fraud may occur and not be detected. Furthermore, the projection of any conclusions, based on our findings, to future periods is subject to the risk that: (1) changes made to the system or controls, (2) changes in the processing requirements, or (3) changes required because of the passage of time may alter the validity of such conclusions.
This report is intended solely for use by management of NG, PSPs and other vendors of interest, the FCC in verification of fulfillment of Order 96-128, and the independent auditors associated with such organizations.
Missy Sue Mastel, CPA
Section I: Overview of Operations and Internal Control Features
Overview of Operations
DAC is the system whereby owners of payphones are compensated when a user places a calling card or other dial-around service to place a long distance call. Every time a person uses a payphone to place a long-distance call and dials a long-distance company other than the one assigned to the payphone, the dialed company must pay the payphone owner. Payphone service providers and aggregators bill the SBR by providing a list of ANIs, and the SBR matches those ANIs to Call Detail Records (CDRs) from the switch, and pay on all calls that require compensation. Since payment is only due on completed calls of a certain duration when dial around services are used from specific payphone ANIs or phone numbers, the carrier's CDR program captures all relevant data pertaining to whether the call requires DAC or not.
While NG has been operational since 1999, procedures for compensating the PSPs were the responsibility of the underlying interchange (IXC) carriers through December 2003, and afterward by the first switch-based reseller handling the call. Thus, the underlying IXCs continued to bill for PSP compensation through June 2004. As such, NG has only recently begun to perform DAC activities.
In the quarter under review, NG was invoiced by thirteen separate PSP consolidators for all DAC requests. All carriers and their associated PSPs were reconciled and paid using in-house processes. We will perform procedures on these processes as it pertains to the accuracy, timeliness and completeness of the records for DAC.
NG sells prepaid calling cards under a variety of affinity programs through four separate carriers, although the predominance of traffic is carried by MCI. Each type of product has its own 800 number provided by the underlying carrier, which connects to the NG switches. These 800 numbers are printed on cards and sold to end users. Thus, all the calls processed through the NG switch are coinless calls, although both payphone and hotel phones are common service providers. At the time an end user places a call, the 800 number connects the call on the underlying carrier network, directs that call to the NG switch, where the call is received, authenticated, and then sent for termination over a Least Cost Routing mechanism to complete the call. The NG switch authenticates both the user, via PIN, and the termination number, via answer supervision, before it registers the call as connected.
NG uses 12 switches maintained in the Houston, TX area, processed by two separate outsourced platforms. We have not performed any testing to determine the accuracy of the processes at the outsourced vendor platforms, since their only function is to take the calls and map the information generated by the system into .csv field formats. As call records are processed, the information relating to origination, requested termination, header time, and talk time are filed in the switches platform database, and then downloaded either real-time or in daily batches to the mainframe database. NG is currently transitioning all traffic to the real-time processor.
As a switched based reseller, NG had limited direct relationships with PSP or PSP aggregators prior to 2004. Overall, payphone service providers have relationships with the LEC, and process claims for DAC with the LEC servicing the phone. The LEC, in turn, invoices the SBR or facilities-based reseller by tracking the delivery of the call to the switch. NG reconciles the amount against completed and compensable calls in their switch and pays the LEC who, in turn, reimburses the PSP. For APCC and other PSP aggregators, invoices of all ANIs in operation are sent directly to NG, who then reconciles this list against calls made to determine earned compensation. ANI ownership disputes between PSPs are, by federal guidelines, to be managed by the LEC, although in-house procedures for ANI dispute resolution have been developed.
General Reconciliation Process
NG's reconciliation processes include managing the PSP vendors, receiving invoices relating to the BTNs under management by the various payphone providers and their associations and submitting payments and claim reports to PSP and PSP aggregators. The PSP submits their ANIs and invoices, if available, to NG. Since NG is an SBR, and not the LEC, they do not validate ANI ownership records or databases.
PSPs and LECs invoice their payphone surcharges quarterly, in one of three formats:
For APCC, PSPs and the disk billers, a list of phone numbers, or ANIs, is sent representing the phone numbers that are owned and operated by the PSPs and are thus eligible for DAC. The carrier or PSP representative lists all possible numbers and leaves it to the reconciliation process to locate those phone numbers on CDRs and verify compensable calls.
For switch reconciliation
Each switch downloads the CDRs to the .csv database, which then prepares and processes the call detail for bill reporting. These daily loads are saved into two databases and the databases and related queries are stored on magnetic tape on a monthly basis. These reports are backed-up monthly and kept in the system for three months at a time. Every quarter, the PSP invoices are loaded and cross-referenced against the quarterly CDRs and generates the Payphone Summary Report, using parameters that ensure that all eligible compensation calls appear. These reports generate CDRs that originate from invoiced ANIs, come in on carrier specific trunks, and have a 27 or 70 in the info ID field. 29 is an uncommon digit identifier since it indicates a prison payphone, 00 files are also reviewed for payphone services in case these digits are forced over to accommodate a programming mismatch for a COCOT line. As files are sorted, mainly on the ANI look-up and call date (to fall within the appropriate quarter), 00 calls are called out and further investigation is performed.
The database generates the payphone flag from the info digit field, so that while a payphone indicator field is present, it is not used to filter the calls that are then compared to the ANI look-up table for DAC. Thus, NG uses a complete database of call detail records for comparison with the invoices from the PSP. Appears reasonable.
NG performs reconciliation on a quarterly basis, whereby they compare ANIs reported by the PSPs to the database of calls provided by the switch reports, and validate the claims for payment by the PSPs. Since the PSPs invoice the carriers, the database used to determine which ANIs belong to which payee are the PSP invoices themselves. When two PSPs or aggregators file disputing claims for the same ANI, the item is paid to the first PSP and notification is sent to the alternative PSP in case they want to file a dispute. Dispute procedures are published to the NG website and PSPs are required to provide third-party validation for their ownership. Appears reasonable.
Claim reports sorted into various spreadsheets by carrier, by check, and by submission are available and are reviewed by the financial directors of the SBR and, once the carrier validates the report and the total, the agreed-upon amount is paid via wire transfer. NG makes payment to the PSPs and aggregators accordingly.
Reconciliation is an automatic process, and summary reports detailing the ANI and all associated compensable calls are prepared. A brief summary report totaling calls per biller is prepared and checks are cut from that report.
NG is in compliance with procedures to identify CIC codes for the calls processed. We note that the PSPs use this information to prepare inaccurate invoicing based on the number of calls sent to the SBR by the underlying carrier. While there are discrepancies between the call count that was sent from the carrier and the final paid amount, most of the discrepancies between the carrier invoice and the CDRs stem from complete vs. incomplete calls. The reporting received from the underlying carriers are unable to capture call completion information, which is why the FCC has mandated that the proper DAC can only be determined by the completing SBR. Appears reasonable.
We noted that NG does not perform any review of the ANI payment to ensure against calling fraud. Per discussion with Software Engineering, NG relies on the PIN authentication process to establish the validity of each call, and thus does not review their reconciliation work for fraud. We reviewed the last two reconciliations and reports and did not see ANIs with excessive usage. We noted that CDRs that do not have infodigits were, in prior quarters, considered questionable, and that these ANIs were sent back to the PSPs to inquire as to why the ANIs did not send over payphone infodigits. While this may or may not be fraudulent billing, we trended these types of underreported calls, noting that they represent less than 1% of total payphone calls. Given that the PSP is given the opportunity and information required to correct the information collected and thus get paid, and the immateriality of the exposure, we believe that either the current fixit procedure or payment are both reasonable reconciliation procedures. We did, however, recommended a potential fraud check in their system, currently set to 720 calls per ANI per month - any ANI reported that has an excess from is called out as an exception and further investigation is undertaken. As failure to detect this fraud would result in overpayment to the PSP, we have suggested that they perform this review each month. Appears reasonable.
As end-users dial calls using the 800 numbers on the prepaid calling cards from NG, the Excell switches receive the calls from the originating carriers based on capacity and 800 number provider programming. When the 800 provider sends the call to the NG switch, it sends the info digit and the 10 digit ANI + DNIS. The switch control host controls the switch and authenticates the call and the user PIN, and accepts the terminating number. Once the termination number is entered and validated, it is sent out over Least Cost Routing programming. A call record generates at the time the call hits the NG switch, recording the header information, including origination, routing, time stamp, program, product rate and termination information. If answer supervision is attained, then the talk time begins to record. The call record completes when the call is terminated, and is updated to the switch database in real time. Calls are attempted for 60 seconds before the call is considered incomplete.
If the connection between the Switch Control Host and the Switch Database is broken, switch control maintains the CDR in backup until it can reconnect with the database. The Main database server imports new calls and transaction records from all 12 Excell switches in real time. The number of imports running in real time is also monitored, and discrepancies are notified. Daily CDRs are collected in a .csv database.
On the third of each month, Subba Katikreddy, Billing Analyst, runs reports out of the Excell switch sorted by carrier and date. These reports are run from the database servers. PSP contact and ownership information is relayed to the SBR as part of the invoicing process, and thus cannot be third-party validated by NG. We further note that disconnects and ANI reconciliation are not the responsibility of NG. When ownership of an ANI is in dispute, NG will pay the first owner noted. In the case of PSP aggregators, NG leaves the reconciliation of ownership to the aggregator and the LEC. Appears reasonable.
Per Joey Harrott, Network Engineer, all records have been kept since inception. Information related to CDRs is maintained live at the switch database for three months and the main databases keep records for three months. After this period, all files are compressed and burned to CD and stored at an offsite location. Regular testing of the back-up data integrity, including uploading the offline database to an archive server and restoring the data to a server which is running .csv, is not performed regularly, however we recommended that procedures be implemented to test back-up data. Appears reasonable.
Reconciliation Process Detail of DAC for PSPs
The Payphone Service Providers submit their ANI information either directly to NG or through aggregators and IXCs. PSPs are able to make claims against the current and prior 6 quarters.
As the LEC does not send ownership information for the payphones, the LEC and the aggregators remain responsible for validating the ownership and payment information coming in from the LEC and the PSPs. Ownership information sent to the carrier by the PSP is trusted to be accurate, and is only questioned when competing claims are received for the same ANI. NG updates existing ANI look-up tables with new invoices sent in each quarter by the carriers/PSPs for changes to the information and disconnects that are processed each quarter. A utility program is used to process the disconnect files and updates to the ANI data.
NG then runs the updated ANIs against the CDRs for the quarter to match ANIs and the payphone detail reports are created. The reports created are stored and archived to CD. All the invoices are processed together as one look-up table to prevent duplicate payment for a dual-paid ANI Calls are sorted into categories by PSP and LEC, or SBR, and invalid claims, or calls for which ANI invoicing has not been received, are kept in suspense account in case the PSP will make a later claim on them.
Discrepancies in ANI reporting, as when a number is claimed by more than one party, are attempted to be resolved first by comparing the data to prior quarter data to identity the owner. If there is no way to substantiate one claimant over another, the first claimant is paid. The PSP is then able to file a dispute with NG by providing documentation of their claim.
Once the errors have been corrected, ANI status report files are created for each PSP summarizing the ANI, and the amount paid, and the underlying carrier, satisfying the reporting requirement to the PSP. NG relies on the PSP aggregator, LEC, or IXC to distribute payments to their constituency. An ANI Master List File is not provided by the LEC, and thus NG cannot validate ANIs assigned to PSP IDs and other ownership information. We suggest that ownership information needs to be validated by the LEC or materials to validate ownership need to be provided by the LEC.
At any time during the quarter, the PSP aggregator or LEC may submit new information relating to the ownership of certain ANIs, and they are incorporated into the quarter being processed and run against the prior 6 quarters, as noted above.
NG ensures the completeness and accuracy of the call records through their CDR gathering process.
NG sells 800 service for calling cards to their customers, including LECs, private companies, and other SBRs (switch based resellers) who want to offer 800 based calling cards to their customers. These numbers are then printed on cards and sold to end users. Thus, all the calls processed through the Excell switches are coinless calls, although both payphone and hotel phones are common service providers.
Each 800 DN1S that hits the switch is preprogrammed to a single customer's account for a specific product. If an 800 number is dialed, sent over the carrier and the NG switch does not recognize it, it is not processed by the Excell Switch. All 8XX calls that originate on the carrier's network are routed via LCR for termination of the dialed number.
Per Joey Harrott, each group of the Excell Switches is managed through a Switch Control Host, which controls the actions of the switch and begins documenting the CDR with the receipt of the info-digit and ANI+DN1S. When calls are terminated, the CDR is recorded as complete and sent real-time or in daily batches to the switch vendor database, where it is converted to daily field .csv files. For each CDR, the system generates fields to identify the origination and completion information on the call. These are set up through logic that is programmed into the switch vendor software:
We note there are no dial-around fields since the caller has already selected NG as the prepaid carrier, and NG uses least cost criteria to route the end-user call. Appears reasonable. The Switch Control Host will attempt completion for up to 1 minute before determining an incomplete call, which is recorded in the duration field.
The call records sent over are then run against the ANI invoice look-up tables for the quarter, and the calls are allocated to PSPs and LECs, as required. Quarterly reports are generated 65 days after the quarter close to indicate what, is being paid out to the LECs, IXCs and the aggregators on behalf of the PSPs.
When PSP payments are approved via the report, the payment schedule files are used to create a spreadsheet that is sent to the accounting department to process checks. The files are also used to create Payment Summary Reports that are sent to the PSPs with their check.
Once payments are sent, the CDRs are marked as paid in the system, archived and closed out of the open item reports, thus recording which calls have been paid upon, and which remain outstanding due to no claims or disputes. Disputed calls are generally paid to the vendor of record, whenever prior claims can be used to determine proper ownership. All NO CLAIM calls, where the CDR reflects an ANI that is not appearing on any invoice are accrued and left in the same file for possible prior quarter billing.
When a quarter becomes ineligible for payment request, unpaid Call Records are marked as Expired on the open item report, and all unclaimed call records are expired by the program. Per Joey Harrott, NG was historically overbilled by the carriers through July 1, 2004, as they cannot discern complete v. incomplete call records. As such, expiration of unclaimed calls has not been an issue to the date of this report.
Quarterly information is stored indefinitely. Stored databases should be analyzed periodically to ensure that the data remains intact. The switch records are stored by NG, and need to be analyzed to ensure that they remain intact.
If a PSP or aggregator has a dispute about the payment made, the PSP can request that its original file (or a newly submitted file) be checked in greater detail. As stated above, most disputes are related to either ANI ownership or incomplete calls. NG has a process by which they will request the disputing PSP provide ownership documentation and submit signed documentation from both the overpaid and the underpaid parties that agree upon the ownership of the payphone. If this information is not available, NG requests the PSP pass on the dispute to the LEC to try to obtain additional information and resolution. Appears reasonable.
NG currently has disputes that result from billing of incomplete calls. We have performed agreed-upon procedures to report on the completion rate of calls, noting that the completion rate for payphone calls does not vary materially from the completion rate for other types of calls, and total calls.
Control Environment and Organizational Chart
Joey Harrott, Database Engineer, and Network Telco and Rubix, the switch control vendors, are responsible for programming the switches and the switch control hosts, and ensuring that the network remains up and running. No one at NG has access to the programming of the CDR records, although requests for different fields can be added via requests to Network Telco and Rubix. Only 5 people have access to the Excell switch interfaces and the .csv database, including Mr. Subba Katikreddy, Billing Analyst. Mr. Katikreddy builds the look-up ANI reconciliation functions for locating info digits and other information relevant to the DAC system. All programming is limited, specific, user-profiled, and secure. Personnel with programming access for the database are not the same as personnel with network control. No one at NG has access to change payphone logic.
Zee AR, Controller, receives the invoices from the carrier/LECs and the PSPs, and forwards the invoices to Mr. Katikreddy for processing. The invoice disks are used to update the ANI Master Lists by Mr. Katikreddy's staff for changes in ownership and disconnects, and then are processed against the quarterly CDRs. The invoice payment report is sent to Mr. Harrott for review, who reviews the reports before sending them out to ensure that they appear materially accurate and that there are no large or unusual aspects to the report before they are sent over. If there are discrepancies, Mr. Katikreddy is asked to rerun the report, and then the report is reviewed manually. Mr. Zee AR, Controller, then processes for payment via check.
The payment detail report is received within 65 days after the quarter end. It is reviewed by Zee AR and is both trended against prior quarters for reasonableness and reconciled against summary monthly reports on payphone records collected. Additionally, a completeness percentage report is run to ensure that the percentage of call complete trends accurately from one quarter to the next. Payments are made to the PSPs by the end of the month. As approval and preparation of reporting information are kept separate, there appears to be little room for internal employee fraud outside of collusion. Invoices from the PSP are due by 30 days after the quarter end, so that the PSP can be paid by the last day of the next quarter. Appears reasonable.
We note that the NG reconciliation process and the overall integrity of the DAC system rely on several internal controls to ensure the integrity of the system. These controls are communicated and complied with by NG in the following:
General Contract and Regulatory Requirements
NG has warranted via letter signed by senior staff that the company and their representatives are responsible for maintaining compliance with laws, regulations, tariffs, and other general requirements in the course of doing business. NG has provided documentation that they recognize these requirements and understand their responsibilities to comply with them. The integrity of the compensation system requires that NG remains in compliance with all their attestations under the agreement. We also obtained and reviewed an executed copy of this letter, which indicates that the parties understand their obligations. Appears reasonable.
NG has maintained sufficient controls over who has access to switch and the reporting systems and under which circumstances changes and updates can be performed. The controls in place include:
File Completeness and Timeliness
NG provides complete files, including completed call records for payphone originated calls, and is responsible for the completeness, accuracy, and timeliness of the call record files. The controls in place to provide such files are:
NG reviews reports for reasonableness and makes payments to PSPs and aggregators from the summary payment documents submitted. Proper approval is controlled by Zee AR, Controller.
Completeness of Records Processed
The Excell switches collect data which is transferred into the switch database real time, and tags all information to ensure that the transfer is complete. NG does not filter the CDRs for a payphone flag or infodigit, but processes the ANI look-up tables against all CDRs for ANI matches. Completion rates are tracked to ensure that the trend of call completion is consistent. Appears reasonable.
The FCC requires that a standardized process be in place to settle disputes that is data reliant. NG requires consensual documentation from all interested parties that the resolution is fair and accepted, and has posted requirements on their website. PSPs and their aggregators are required to provide whatever detail support may be necessary to validate any particular claim against a CDR or its DAC status. Appears reasonable.
All NG customers use the default rate with their PSPs, there are no exceptions. Because the reconciliation is done quarterly and each CDR is time and date stamped, the rate calculations are performed on the individual CDR. Internal controls testing relating to rate verification include validating on NG's summary report that all calls are included at the .494 per eligible call rate.
Fraudulent Call ID
NG relies on the authentication of the call via the PTN. Since the card needs to be bought to be used, the hidden PIN authenticates the user as a purchaser of the prepaid phone service, and has its own limitations in the amount of service available on that card. Thus, threshold per ANI are not considered necessary, and all calls made from a payphone are considered compensated. Appears reasonable.
The switch information and CDRs are backed internally in the switch control host if connection between the switch database and Excell switch is broken. The switch databases back up to the .csv database in the main server, and communications failure between these two systems resets the system to reload any untagged CDRs. Appears reasonable. Reconciliation processes are automatic and do not require special services or systems to perform, since the reconciliation is performed between raw data CDRs and billed ANIs in a lookup table. Since reconciliation procedures are performed in house, data and applications can be run from any server which is large enough for the data being processed, and thus could be replicated in the event of disaster. Appears reasonable.
Section 2: Significant Control Objectives
The principal objectives of the system of internal controls pertaining to recordkeeping, reporting, and payment verification are as follows:
Description of Controls and Tests Performed
Our test of the effectiveness of the policies, procedures, and controls included tests we considered necessary to evaluate whether those controls, and the extent of the compliance with them, is sufficient to provide reasonable, but not absolute, assurance that the specified control objectives were achieved during the period between October 1, 2005 and December 31, 2005. Our tests of the operational effectiveness of controls were designed to cover the period from October 1, 2005 through December 31, 2005.
Test procedures performed in connection with determining the operational effectiveness of controls are described as follows:
Key Control Objectives Key
Control Objective #1
Payment rates can either be a rate negotiated between the user and the PSP or the FCC default rate.
We reviewed the DAC summary reports, noting that the calls paid for the quarter for PSPs of carriers, processed by NG, were at the default rate of .494, based on the date. Appears reasonable.
Key Control Objective #2
Policies and procedures are in place relating to reporting elements as required by FCC Order.
Policy or Procedure
Per discussion with Joey Harrott, Database Engineer, reports are prepared on a quarterly basis for use by LECs, SBRs, and PSPs, detailing the calls that originate by ANI, the amount paid per ANI, and carrier ID information. Additional reports may be constructed for any party, including ANI Master Lists, potentially fraudulent calls, dispute items, and others, as deemed necessary by any party.
Key Objective #3
Data is stored for a period at least as long as required by FCC rules.
Policy or Procedure
Through interviews with key personnel, we noted that all records are kept on the switch platform for three months, and live in the .csv database for three months. All CDRs are downloaded each month to text files, compressed and stored on CDs. Duplicate copies are made and kept forever. Per Subba, data integrity on these CDs has not been recently tested, but regular testing of the back-up data, including uploading historical databases to an archive server and restoring the data to a server which is running an appropriate version of .csv, will be performed regularly.
Key Objective #4
Procedures are in place to establish proper PSP ownership
Policy or Procedure
NG has only recently begun dealing with the PSP directly, and thus does not validate PSP ownership independent of the invoices received from the PSPs. When disputes arise, a PSP or aggregator can provide authenticated ownership information as necessary to validate ownership, including LEC affidavits.
We note that NG informs a PSP when there are duplicate claims for the same ANI, and posts all dispute procedures on their website for access by all parties as necessary.
Key Objective #5
System reporting for all eligible calls is both accurate and complete.
Policy or Procedure
Because NG runs the ANI look-up tables against all CDR records for the quarter, the payphone flag is not used as a filtering system that might remove potentially compensable calls. Since NG is a pure facilities-based reseller, all calls with matching ANIs are considered compensable. These programs produce a matched report which is then sorted for consistency with the APCC reporting requirements. CDRs with 00 infodigits that cannot be determined to be payphones are held for further validation. ANIs with duplicate claims are processed to the initial claimant, with notification being sent to the subsequent claimant. The CDRs are also trended to ensure that the completion rate for all calls and the completion rate for DAC calls from prior quarters are consistent with the current DAC completion rate. Checks are processed following final review by Zee AR.
Key Objective 6
Specific personnel have bean identified as responsible for drafting and maintaining necessary business requirements relating to NG system requirements.
Policy or Procedure
NG has substantially segregated and assigned responsibility for drafting and maintaining necessary business requirements, like switch program logic, report preparation and formatting, validation of payment to PSPs and validation of reporting to various parties within the NG organization.
We interviewed various personnel to understand their roles in the DAC process, noting:
Key Objective #7
Quarterly reports are verified for payphone call counts, PSP identities, numbers and infodigits.
Policy or Procedure
NG uses switch CDRs to compare to ANI invoices from PSPs and generate payments for compensable calls. NG keeps monthly files of CDRs with payphone flags, ANIs, numbers called and infodigits so that originated calls with eligible DAC can be determined, and validated ANIs, non-validated ANIs, potentially fraudulent calls and calls with ownership issues can be identified.
With the exception of ANI ownership testing, quarterly reports are reviewed for pertinent information and exceptions and unusual items are pulled for further investigation. We reviewed two quarters of reconciliation to determine the basis for disputes, which were all related to incomplete calls. Appears reasonable.
We tested the quarterly reports against the statistical sampling of data for the quarter, noting that the information from the CDRs was captured accurately as compensable or non-compensable calls. No exceptions.
Key Control Objective #8
Procedures are in place to identify and investigate potentially fraudulent calls and are resolved.
Policy or Procedure
All calls passed to the NG switches require a PIN authentication and are limited in their abuse, given the nature of the prepaid phone card. Review procedures should include checking for ANIs with a high number of calls in a given month.
We inquired of personnel whether any fraudulent usage had yet been identified, and there has been no abuse or customer service complaints relating to non-authorized calls. Given the pre-use authentication required, appears reasonable.
Key Control Objective #9
Policies and procedures are in place to properly compensate all compensable calls originated from validated payphone ANIs. In addition, switch reports are maintained for the period required by the FCC.
Policy or Procedure
See the narrative on DAC reconciliation and payment process above for greater detail. In summary, CDRs from the switch are sorted for matching ANIs, and these records are summarized in the appropriate format for the PSP or aggregator. Raw CDR data is used for determining compensable calls, LEC information related to ANI ownership is not gathered. The results are tested for consistency with historic completion rates. NG reviews the report before processing checks for the PSP.
All data is now stored on CD offsite, and 3 months are stored live on the system. Per discussion with key personnel, this data will be taken out and restored to an active, but not live, server to test control integrity and ensure that the call records remain unchanged.
Key Control Objective #10
Policies and procedures are in place, regarding controls over changes to applicable software, including persons responsible, management of the changes, and validation of such changes, ensuring that the changes do not negatively affect integrity of the records processed.
Policy or Procedure
NG has established policies and procedures regarding system changes, including specific policies regarding:
We interviewed key personnel and reviewed the logic associated with generating payphone flags, as well as authentication of calls and completed calls. We reviewed documentation with regard to the above and noted that it was consistent with stated policy. Appears reasonable.