USF Participants Urge More Efficient Fund Management

Carriers want more clarity, administrative efficiency and audit consistency, they said. The FCC “must more clearly define the goals of the federal universal service programs and establish performance measures for evaluating progress towards those goals,” Qwest said. Verizon said “USF audits should be better targeted, and audit procedures should be better defined, so that auditors and carriers have consistent expectations.”

Many slammed USF administrative procedures. NECA members “have expressed concerns regarding unnecessary administrative burdens imposed by Commission and USAC audits,” including high compliance costs, inflexible and inexperienced auditors and “demands for extensive production of documents,” NECA said. The American Library Association said the E-rate program “has become so complex with so many nuances that it is almost impossible for the typical school or library to be 100% accurate” in filings.

USF’s auditors are green, some groups said. “Auditees have expressed concerns that their audits were more burdensome and difficult because the auditors were not familiar with the rules and with communications industry practice,” USTelecom said. “It takes an applicant three years and two complete applications cycles to grasp the very basics of the [E-rate] program,” the American Library Association said. But auditors get “less than three days of training,” it noted.

The FCC should standardize USF audits, USTelecom said. “Auditees have reported wide variations in the audit plans employed by various private auditors employed by USAC,” it said. “Auditors appear free, for example, to request different data for the same type of audits, review and base their opinions on different data, apply different interpretations of [FCC] rules, evaluate the same factual situations differently, and make different recommendations in response to the same factual situations.”

USAC should publish its administrative rules and methods and the FCC should seek comment on them, said the Organization for the Promotion and Advancement of Small Telecommunications Companies. That would help USF recipients and contributors “avoid unintentional errors that could result in adverse audit findings,” the organization said.

The FCC Inspector General should issue administrative subpoenas when audits require confidential information from customers, Sprint Nextel said. Some carriers have declined to disclose information for fear of privacy rules that can result in “severe” penalties for unauthorized disclosure, the carrier said. Subpoenas would eliminate that problem, it said.

USAC should remain the permanent USF administrator, to ensure that the fund is run by a body with “thorough knowledge and understanding” of telecom, NECA said. Qwest agreed, saying changing administrators “would be a lengthy process and undermine any predictability” in USF management. But USAC should handle only administrative duties, TracFone Wireless said. “USAC should not establish enforcement or regulatory policy.”

Qwest urged “better transparency” in USAC’s relationship with parent NECA. The FCC should “clearly set out the division of responsibilities” among that agency, NECA and USAC, the carrier said. Prior to 1998, NECA ran USF, but after the 1996 Telecom Act expanded USF the FCC directed NECA to create USAC. The commission imposed rules separating the NECA and USAC boards to avoid conflicts of interest.

USAC and NECA want to part ways altogether, they said. “While NECA is confident that the existing rules provide a level of transparency and separation between USAC and NECA that has served both parties and the Commission well over the years, divestiture may well be appropriate” because corporate and accounting standards require the groups to “maintain a minimal level of interaction,” NECA said. Divestiture would “definitively and appropriately resolve any lingering questions” related to transparency, USAC said.