Common Findings: Contributors
Some of the most common problem areas identified in contributor audits are as follows:
Audit Findings
Relevant FCC Rules
- 47 CFR § 54.709
- 47 CFR § 54.706
Description of Finding
This finding arises when a contributor misclassifies revenue by reporting it under the wrong line item on the FCC Form 499-A. The contributor may incorrectly report non-telecommunications or non-information services revenue under a telecommunications service line or fail to report revenues from private line services and interconnected VoIP services correctly. Contributors must accurately classify each revenue type to ensure proper reporting of their contribution base. Misreporting can lead to inaccurate contribution calculations, which could either underreport or overreport the contributions owed to the Universal Service Fund (USF).
Relevant FCC Rules
- 47 CFR § 54.712(a)
- 2024 Instructions, §§ IV.C.5.b at 28-29, IV.C.3.e at 34; IV.D at 44
Description of Finding
Contributors that assess the federal USF fee on their customers may incorrectly collect an amount that exceeds their actual contribution obligation. This situation typically occurs when a contributor applies the USF surcharge to exempt resellers, to intrastate revenues, or to non-telecommunications products, which are not subject to the same contributions as interstate telecommunications services. Additionally, some contributors may fail to update the USF contribution factor in their billing systems, leading to customers being billed incorrectly. Contributors are responsible for ensuring that they are collecting only the appropriate amounts from each customer and should regularly review their billing systems for accuracy to prevent over-collection and potential refunds to customers.
Relevant FCC Rules
- 27 FCC Rcd 13781-82, para. 3 (Wholesaler-Reseller Clarification Order)
- 12 FCC Rcd 18400, 18507 (Changes to NECA Board Order)
- 2024 FCC Form 499-A Instructions, § IV.C.4.a-e at 37-40
Description of Finding
This finding occurs when a contributor erroneously categorizes a customer as a reseller when the customer does not meet the FCC’s definition of a reseller. According to FCC rules, a reseller must have a legitimate resale arrangement and should be purchasing services with the intention to resell them to end users. When a contributor incorrectly classifies an end-user as a reseller, it impacts the reporting of revenues, which can lead to incorrect revenue attribution and contribution amounts. Contributors must properly classify resellers and end-users to ensure that only the appropriate revenues are included in the contributor’s base for USF purposes.
Relevant FCC Rules
- Contribution Collections Order (FCC 00-118)
- 2002 Contribution Methodology Order (FCC 02-329)
- BT Americas Order, DA 22-812 at para. 1, 6-7, 10-11
- 2024 FCC Form 499-A Instructions, §§ IV.C.5.b at 28-29, IV.C.3.e at 34; IV.D at 44
Description of Finding
This finding refers to the omission of uncollectible revenues or bad debt expenses from the contributor’s reported revenue on Lines 421, 422, and 513 of FCC Form 499-A. Filers are required to adjust their gross revenues to account for amounts that are uncollectible due to customer non-payment or other financial issues. If a contributor fails to report bad debt expenses, it could lead to an inflated contribution base, resulting in higher-than-required contributions to the USF. Accurately reporting uncollectible revenue is essential to ensuring that the contributor’s USF contribution is based on the correct revenue figure. Contributors should establish and follow internal procedures for identifying and documenting uncollectible amounts.
Relevant FCC Rules
- Contribution Collections Order (FCC 00-118)
- 2002 Contribution Methodology Order (FCC 02-329)
- BT Americas Order, DA 22-812 at para. 1, 6-7, 10-11
- 2024 FCC Form 499-A Instructions, §§ IV.C.5.b at 28-29, IV.C.3.e at 34; IV.D at 44
Description of Finding
This finding involves issues related to the collection and reporting of revenues that contributors recover through charges on customers to cover their USF obligations. These recovery charges, which are often passed through to customers, must be reported accurately on the FCC Form 499-A. Contributors may fail to correctly report the full amount of USF contributions recovered through surcharges or omit these recovery revenues altogether. Contributors must properly report these revenues to ensure that both the contributor’s financial records and the USF program’s accounting are accurate.