Audit: Thousands of fake or dead people enrolled in government phone program

Lindsay Wise
McClatchy Washington Bureau (TNS)
Sen. Claire McCaskill (D-Mo.) at a news conference in Washington, D.C., on April 26, 2016. McCaskill requested an investigation into the Federal Communications Commission's Lifeline program, finding one in three people enrolled in the government-subsidized phone program might not qualify for the service. (Ron Sachs/CNP/Sipa USA/TNS)

WASHINGTON — One in three people enrolled in a government-subsidized phone program might not qualify for the service, with thousands of accounts belonging to either fake or dead people, according to a government audit released Thursday.

The oversight is costing taxpayers more than $100 million worth of improper payments per year, according to the audit by the Government Accountability Office, a nonpartisan federal watchdog.

Created in the 1980s, the Federal Communications Commission’s Lifeline program helps low-income people pay for phone and internet service.

The federal government reimburses telecommunication companies that offer discounts to eligible subscribers through a fund made up of fees collected from consumers’ telephone bills.

Lifeline paid $1.5 billion in subsidies last year to more than 12 million households. But an estimated 36 percent of the program’s subscribers might be ineligible for enrollment, according to the audit.

The GAO reviewed 3.5 million Lifeline accounts during its three-year probe and was unable to confirm eligibility for 1.2 million.

Investigators also found that thousands of active Lifeline accounts belong to non-existent or dead people, and that the FCC has provided little to no substantive review of the program during its 30 years of existence.

As of December 2016, Lifeline program subscribers were eligible to receive $9.25 per month toward their voice telecom services, or $9.25 toward broadband costs.

Eligibility is determined through participation in other federal benefit programs, such as food stamps, Medicaid, public housing assistance, Supplemental Security Income and veteran pension and survivor programs. People who make at or below 135 percent of the federal poverty line also qualify.

“A complete lack of oversight is causing this program to fail the American taxpayer — everything that could go wrong is going wrong,” said Sen. Claire McCaskill, the Missouri Democrat who requested the GAO investigation.

McCaskill, a former Missouri state auditor, has been pushing for stronger scrutiny of Lifeline for years. She asked the GAO to look into the program in 2013 in her role as chairwoman on a Senate panel on financial and contracting oversight.

“We’re currently letting phone companies cash a government check every month with little more than the honor system to hold them accountable,” McCaskill said.

The GAO’s findings are in line with the results of an investigation FCC Chairman Ajit Pai conducted last year that revealed “serious weaknesses” in the Lifeline program’s federal safeguards, said Brian Hart, an FCC spokesman.

“Today’s GAO report confirms that waste, fraud and abuse are all too prevalent in the program,” Hart said in an email.

“Chairman Pai looks forward to working with his colleagues to crack down on the unscrupulous providers that abuse the program because every dollar that is spent on subsidizing somebody who doesn’t need the help by definition does not go to someone who does,” Hart said.

During the GAO’s three-year probe, undercover investigators applied to work for a company that contracts with Lifeline providers to verify applicants’ eligibility. The company, which the audit does not name, hired them without background checks or interviews and then paid them as they enrolled fake applicants in the program using fabricated eligibility documentation.

Auditors said they plan to refer this company “for appropriate action” to the FCC and to the private nonprofit corporation that administers the Lifeline program, the Universal Service Administrative Company, or USAC.

USAC is supposed to audit telecom providers to make sure they’re paying their share of contributions into a fund for the Lifeline program. In its audit, the GAO reported that the corporation never audited more than one half of 1 percent of providers.

USAC also keeps $9 billion in taxpayer funds for the Lifeline program in a private bank account rather than the U.S. Treasury, against the GAO’s longstanding recommendation, auditors reported.

The FCC has a preliminary plan to move the funds from the private bank account to the U.S. Treasury, but until that happens, “they do not enjoy the same rigorous management practices and regulatory safeguards as other federal programs,” according to the GAO.

Chris Henderson, resigned in May as USAC’s CEO after Pai sent him a scathing letter criticizing the corporation’s administration of another FCC program, E-rate, which subsidizes internet connections for schools and libraries.