The Federal Government’s Phone Subsidy Program Is Apparently Rife With Fraud

June 30, 2017, 4:42 PM UTC

One of the federal government’s low income phone subsidy programs is bedeviled by fraud, a watchdog agency investigation concluded.

The Federal Communications Commission’s Lifeline program paid at least $1.2 million to duplicate or deceased recipients and more than one-third of participants out of 3.5 million reviewed appeared not to be eligible, the Government Accountability Office said in a report released on Thursday.

The agency also uncovered problems with the way phone companies were charging their customers fees to cover the cost of the program. The non-profit group that oversees the program, called the Universal Service Administrative Company or USAC, audited only 74 carriers over the past six years out of more than 6,000 that collect fees, the GAO noted. Reviewing the audits, GAO said only 10 carriers reported their revenue correctly while 48 underreported revenue and 16 over reported revenue.

“A complete lack of oversight is causing this program to fail the American taxpayer—everything that could go wrong is going wrong,” Sen. Claire McCaskill (D-Mo.), one of the lawmakers who requested the study, said in a statement. “We’re currently letting phone companies cash a government check every month with little more than the honor system to hold them accountable, and that simply can’t continue.”

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The FCC two years ago sought to revamp the program and create a third-party verification service to help carriers ensure that only eligible households received Lifeline subsidies. But the GAO said the changes didn’t go far enough to halt fraud in the program.

The GAO even went undercover to test whether the telecommunications companies participating in the program, ranging from giants like Verizon (VZ) and AT&T (T) to the smallest rural carriers, were doing adequate eligibility checks. Of fake applications submitted to 19 carriers, 12 carriers approved Lifeline payments. However, when the GAO tried to receive Lifeline payments on behalf of a fictitious phone carrier, the application was rejected by USAC.

To be eligible for Lifeline, participants must have an income less than 135% of the federal poverty level or qualify for one of several other programs for the poor, such as Medicaid or food stamps. Last year, the program handed out $1.5 billion of subsidies to 12.3 million households.

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