USAC Audits Are ‘Kafkaesque,’ Industry Tells FCC

WASHINGTON, May 19, 2026 – Industry groups urged the Federal Communications Commission to overhaul the nation's universal service fund auditing system, arguing reviews have become slow, inconsistent and disproportionately burdensome.

The comments came Friday in response to a broad FCC inquiry into possible reforms to the Universal Service Administrative Company's operations, governance and oversight framework. 

The dominant theme was audits, designed to assess compliance with FCC rules and safeguard the Universal Service Fund, are dysfunctional. Providers described multi-year reviews, contradictory findings and response deadlines measured in days, even as audits themselves dragged on for years.

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WTA, which represents rural broadband providers, called the process “Kafkaesque,” or nightmarish.

The group said one carrier's audit produced a finding of 14 cents while costing nearly $150,000 in consulting fees to defend. Another auditor requested documentation for plant placed in service in 1995, requiring staff to scan physical boxes because no digital records existed.

“It is not unusual for audits to take as much as three years to complete,” WTA said.

USTelecom said one provider received notice of a Lifeline audit in March 2023 that remained unresolved more than three years later.

“Delayed findings leave providers in an untenable position,” the group said, noting that relevant staff may depart, billing systems may change and historical records become harder to retrieve during prolonged reviews.

USTelecom also argued that different audit firms have taken inconsistent positions on the same rules and that some auditors lack sufficient telecommunications expertise.

NTCA–The Rural Broadband Association described the process as “audit roulette,” with outcomes depending more on which contractor handled a case than on the underlying facts. 

One member faced successive data requests with 48-hour turnaround times, a Monday request due Wednesday, followed immediately by a Wednesday request due Friday, sometimes covering information auditors had already received. Another  provider spent roughly $500 in audit hours to resolve a $30 misallocation.

The National Rural Electric Cooperative Association proposed exempting providers receiving $50,000 or less annually from random audits entirely, saying one cooperative received roughly $21,000 in Lifeline support but spent an estimated $29,000 responding to an ongoing review.

CTIA called USF rules “an increasingly complex thicket of requirements” and urged USAC to implement a warning system before placing companies on "Red Light" enforcement status, arguing companies often do not understand why they have been flagged before penalties take effect.

WISPA said prolonged deployment verification reviews force providers to maintain letters of credit at elevated levels for months longer than necessary.

“USAC can take as long as it wants, can repeatedly ask for more information, and faces no deadlines, shot clocks or consequences,” the group said, warning the delays could discourage future participation in broadband programs.

Rural healthcare providers raised similar concerns. Elevate, a Colorado-based provider, said Rural Health Care funding decisions averaged 271 days in fiscal year 2025, compared with E-Rate's standard of resolving 95 percent of workable requests by September, with some invoices taking more than a year to be paid.

The Broadband Rural Health Group, representing more than 5,000 rural health care sites, said some participants fear retaliation, including extra scrutiny or deprioritized processing, if they raise concerns with USAC, though it said it does not believe retaliation occurs institutionally.

"USAC's sudden and unannounced changes to how it interprets rules make program participation a constant and ongoing challenge," the group said.

Several commenters pushed for structural changes. Carol Mattey, a former senior FCC wireline official, called the board structure “grossly out-of-date” and proposed shrinking it from 19 members to 11 with a majority of independent directors, while moving USF contribution billing and collection in-house to the FCC's Office of Managing Director.

“It is the FCC, and not the Board members, that tells USAC what to do,” she wrote.

Summit Ridge Group, a telecom consulting firm, urged the FCC to outsource Rural Health Care administration to a third-party administrator under fixed-price contracts and eventually apply the same model to Lifeline, acknowledging it would welcome the opportunity to compete for such a role.

Not all commenters sought an overhaul. Funds For Learning, a major E-Rate consulting firm, said applicant satisfaction with USAC has reached nearly 87 percent and warned that aggressive structural reforms could reverse hard-won operational gains, recommending targeted procedural fixes instead.

“Reforms that destabilize current operations risk reversing hard-won gains,” the group said.

The proceeding marks the FCC's broadest review of USAC operations in years.