GAO Says Lifeline Oversight Lax; Critics See 'Massive" Abuse, but Supporters Cite Changes

GAO found continuing "weaknesses" in Lifeline USF program management despite FCC and Universal Service Administrative Co. efforts to improve controls over finances and enrollment by low-income consumers. There are also broader problems in USF contribution system oversight and the commission's use of a private bank account rather than the Treasury Department to store $9 billion in USF net assets, said a May 30 GAO report released Thursday. Policymakers and others disagreed on the extent to which the previous FCC's actions already were addressing some of the issues, but Chairman Ajit Pai made it clear he plans to do more.

Lifeline's current reliance on over 2,000 participating providers to oversee key functions, such as subscriber eligibility, creates a "complex" environment that's "susceptible" to abuse "as companies may have financial incentives to enroll as many customers as possible," GAO said. "FCC's and USAC's limited oversight of important aspects of program operations further complicates the control environment." GAO was unable to confirm whether roughly 1.2 million of the 3.5 million people it reviewed "participated in a qualifying benefit program such as Medicaid, as stated on their Lifeline enrollment application."

The report "shows massive fraud, waste" in Lifeline, said Sen. Claire McCaskill, D-Mo., ranking member of the Homeland and Security and Governmental Affairs Committee, who requested the study. “A complete lack of oversight is causing this program to fail the American taxpayer -- everything that could go wrong is going wrong,” said McCaskill in a release. Senate Commerce Committee Chairman John Thune, R-S.D., also cited "massive fraud and waste" and government "dysfunction." The report "underscores the mistake" the previous FCC "made last year in scuttling a bipartisan reform intended to bring accountability," he said, adding: while the current FCC "inherited this mess," it "falls to them to address the serious shortcomings." House Communications Subcommittee Chairman Marsha Blackburn, R-Tenn., said the report "makes it clear that the previous administration’s oversight of the program fell short and more needs to be done."

Pai said GAO confirmed what he had found in his own investigation: "Waste, fraud, and abuse are all too prevalent in the program." FCC staff and the Office of Inspector General are "developing recommendations to better safeguard taxpayer funds," he said. "I stand ready to work with my colleagues to crack down on the unscrupulous providers that abuse the program so that the dollars we spend support affordable, high-speed broadband Internet access for our nation’s poorest families.” Commissioner Michael O'Rielly said he had "little confidence ... in the changes adopted by the commission over the last number of years, or in the ability of USAC to stem the tide of problems. More significant reform is needed, including completely rethinking USAC.” CTIA said it will work with lawmakers and regulators "to enhance oversight of this program."

The FCC must "root out waste, fraud, and abuse" in all USF programs, including Lifeline, said Commissioner Mignon Clyburn, who cited the agency's "numerous steps to achieve this goal, including setting up a national eligibility verifier, adopting a periodic recertification requirement and ensuring the people who are signed up are actually using their service." She said Lifeline already had a "very low improper payment rate of 0.45 percent" and said many of the GAO concerns would be addressed by the national verifier. Noting Lifeline is the only "means-tested" USF mechanism, she said it would be "catastrophic for those most in need" if "the limited findings of this report" are used to justify cutting back the program.

The commission "has already reined in a billion dollars in waste, fraud and abuse ... allowed under Bush-era changes," said House Commerce Committee Ranking Member Frank Pallone, D-N.J. "In fact, much of GAO's investigation took place before the FCC adopted its latest reforms." The commission last year "modernized the Lifeline program and established new, more rigorous safeguards," emailed Cheryl Leanza, United Church of Christ Office of Communication policy adviser. "The GAO analysis was conducted on protocols that are no longer in place. The Lifeline modernization order should address their concerns about eligibility verification. We continue to urge Chairman Pai to rapidly implement the modernization order." Public Knowledge (here) and Consumer Action (here) also issued statements.

GAO said the FCC's 2016 extension of Lifeline to broadband could face many of the challenges that arose in 2008 when it expanded the program to wireless voice resellers. The commission's efforts to improve the Lifeline database and create a national verifier could help, GAO said, but it was concerned about the decision to set up a Lifeline broadband provider (LBP) designation process bypassing state regulators. Pai plans to roll back the LBP process (see 1703290054).

USAC's oversight is complicated by many factors, including collecting USF contributions from over 6,000 telecom carriers, said the report, calling FCC enforcement actions against violations "inconsistent." GAO urged the commission to give USAC new guidance, including "on whether technologies, such as text services, require USF fees."

The outside bank account for USF assets means the funds don't receive the same protections as other federal programs housed with Treasury, GAO said, citing the Office of Management and Budget. The FCC has a preliminary plan to move the funds to Treasury, but that won't happen until at least next year, the report said. GAO urged the FCC to require commissioners to review any spending above its $2.28 billion annual budget in a timely manner, among other recommendations.