Telecommunications: Improved Management Can Enhance FCC Decision Making for the Universal Service Fund Low-Income Program
Highlights
The Federal Communications Commission's (FCC) Low-Income Program, administered by the Universal Service Administrative Company (USAC) and supported by the Universal Service Fund (USF), provides low-income households with discounts on installation costs for new telephone service and monthly charges for basic telephone service. In this requested report, GAO examined (1) how program participation and support payments have changed over the last 5 years (2005-2009), and factors that may have affected participation; (2) the extent to which goals and measures are used to manage the program; and (3) the extent to which mechanisms are in place to evaluate program risks and monitor controls over compliance with program rules. GAO surveyed state public utility commissions; reviewed key policies, procedures, and rules; and interviewed agency officials and stakeholders.
Low-Income Program participation and support payments have increased since 2005 due to many factors. Program participation was stable from 2005 to 2008, from 6.9 million to 7.1 million participants, but increased to 8.6 million in 2009. Likewise, support payments were relatively stable from 2005 to 2008, from $802 million to $823 million annually, before increasing to approximately $1 billion in 2009. The increases in 2009 were primarily due to the addition of a prepaid wireless service option in certain states, which allows program participants to obtain a free wireless handset and an allotment of free minutes each month. The Low-Income Program has no funding cap and USAC officials project its support payments to reach $1.4 billion in 2010. They said participation and payments will likely continue to increase beyond 2010 as prepaid wireless service options become available in additional states. FCC has taken limited steps to develop performance goals and measures for the Low-Income Program, however, these steps do not fully align with useful practices for developing successful goals and measures. While performance goals and measures specific to the Low-Income Program would enable FCC to more effectively manage the program and determine its success, FCC has not made developing such measures a priority and, as a result, has limited insight on the intent of the program and what it is accomplishing. FCC might conduct pilot programs as it considers expanding the Low-Income Program to include broadband service (high-speed Internet access), as proposed by the National Broadband Plan. For the broadband pilot programs, if conducted, it is important that FCC develop a needs assessment and implementation and evaluation plans to increase confidence in the results. If implemented properly, the pilot programs would enable FCC to improve its data collection for low-income households and could help facilitate program and policy decisions for the Low-Income Program in the future. Although FCC and USAC have some mechanisms in place to identify and evaluate risks and monitor compliance with program rules, the Low-Income Program lacks key features of effective internal controls. FCC and USAC primarily use audit findings to monitor compliance with program rules. However, the number and scope of USAC's audits have been limited and there is no systematic process in place to review the findings of those audits that are conducted. Further, FCC and USAC have not conducted a risk assessment specific to the Low-Income Program that includes consideration of all program vulnerabilities, such as the possibility that multiple carriers may claim support for the same telephone line and that households may receive more than one discount, contrary to program rules. According to GAO standards, FCC should identify all risks to meeting the program's goals and objectives and have a process to systematically consider audit findings when assessing the effectiveness of its internal controls. Without these mechanisms, FCC and USAC may not be capturing and addressing programmatic risks and collecting information that could be leveraged to assess compliance with program rules and strengthen internal controls. FCC should (1) clearly define performance goals and develop quantifiable measures that can be used to determine the program's success, (2) conduct a needs assessment and develop implementation and evaluation plans for the proposed low-income pilot programs, (3) conduct a robust risk assessment, and (4) implement a systematic process to consider audit results. FCC agreed with GAO's recommendations.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Federal Communications Commission | To improve the management and oversight of the Low-Income Program, the Chairman of the FCC should clearly define specific performance goals of the program and subsequently develop quantifiable measures that can be used by Congress and FCC in determining the program's success in meeting its goals. |
In 2010, GAO found that FCC took limited steps to develop performance goals and measures for its Low-Income program, however, these steps did not fully align with useful practices for developing successful goals and measures. Without fully developed performance goals and measures, FCC has limited insight on the intent of the program and what it is accomplishing. GAO recommended that FCC clearly define specific performance goals of the program and subsequently develop quantifiable measures that can be used to determine the program's success in meeting its goals. In response, FCC adopted the following performance goals and measures for both voice and broadband service: (1) Goal: Ensure the availability of voice service for low-income Americans; Measure: Voice service penetration levels of low-income households; (2) Goal: Ensure the availability of broadband service for low-income Americans; Measure: Broadband penetration rate of low income consumers; and (3) Goal: Minimize the contribution burden on consumers and businesses; Measures: (a) Inflation-adjusted Lifeline/Link Up subsidy expenditures per American household; (b) Extent of savings from elimination of these duplicative payments; and (c) Increases in the percentage of low-income voice subscribership relative to the amount of funding spent per household receiving a Lifeline subsidy. As a result, FCC has information on performance goals and measures that it needs to more effectively manage the program and determine its success.
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| Federal Communications Commission | To improve the management and oversight of the Low-Income Program, the Chairman of the FCC should conduct a robust risk assessment of the Low-Income Program. |
In April 2020, FCC awarded a contract for a company to assess the risks in the Lifeline program (previously known as the Low-Income Program). According to the contract, the goal of risk assessment is for the contractor to evaluate whether FCC's administrative resources are structured to provide reasonable assurance that Lifeline program goals are met in a cost-effective manner and that risks are appropriately targeted and addressed. The Lifeline Risk Assessment will (1) identify all risks to FCC meeting the Lifeline program objectives, and (2) assess the effectiveness and efficiency of the Lifeline program's internal controls. By conducting the risk assessment, FCC will be better positioned to capture and address programmatic risks and obtain information that could be leveraged to strengthen internal controls.
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| Federal Communications Commission | To improve the management and oversight of the Low-Income Program, the Chairman of the FCC should implement a systematic process for considering the results of ETC audts and improper payment assessments in evaluating internal controls of the Low-Income Program. |
FCC's Low-Income Program provides low-income households with discounts on installation costs for new telephone service and monthly charges for basic telephone service. In 2010, we found that FCC had some mechanisms in place to monitor compliance with Low-Income Program rules; however, the program lacked key features of effective internal controls. In particular, we noted that while FCC primarily uses audit findings to monitor compliance with program rules, the number and scope of these audits have been limited and there is no systematic process in place to review the findings of those audits that are conducted. Therefore, we recommended that FCC implement a systematic process for considering audit results and improper payment assessments in evaluating the Low-Income Program's internal controls. In 2014, we confirmed that in response to our recommendation, the Universal Service Administrative Company (USAC), the not-for-profit administrator of the Low-Income Program under a Memorandum of Understanding with FCC, instituted a systematic process requiring its audit staff to develop action plans that address the root causes contributing to common audit findings. Previously, the primary focus for audit staff was on correcting individual audit and assessment findings, rather than understanding the root cause of repeat findings and implementing actions to prevent the root cause from occurring across all beneficiaries. The root cause action plans will include actions within USAC's control and a description of potential items to be addressed by FCC related to program rules and administration, and will identify any impediments that may hinder correction of issues. USAC will require audit staff to evaluate the effectiveness of the root cause action plans each year and modify them as needed. As a result, FCC has a process to systematically consider audit findings when assessing the effectiveness of its internal controls.
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| Federal Communications Commission | If FCC conducts pilot programs as it considers adding broadband to the Low-Income Program, the Chairman of the FCC should conduct an assessment of the telecommunication needs of low-income households to inform the design and implementation of the pilot programs. |
In 2012, FCC launched a pilot program to collect data on how the low-income program (now called the Lifeline program) could be best be structured to provide support for broadband. However, FCC did not conduct a needs assessment of low-income households prior to launching its pilot program to help inform the program's design and implementation. Given that FCC launched its pilot program, called the Low-Income Broadband Pilot Program, without first conducting a needs assessment, GAO is closing this recommendation as not implemented.
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| Federal Communications Commission | If FCC conducts pilot programs as it considers adding broadband to the Low-Income Program, the Chairman of the FCC should develop implementation and evaluation plans for the pilot programs. |
FCC's Low-Income Program is a Universal Service Fund program that provides low-income households with discounts on installation costs for new telephone service and monthly charges for basic telephone service. In October 2010, we reported that FCC lacks performance data to manage the Low-Income Program, but pilot programs, if properly implemented could provide improved data to make informed decisions about the future of the program. We noted that FCC might conduct pilot programs as it considers expanding the Low-Income Program to include broadband service, and recommended that if FCC did so, it should develop implementation and evaluation plans for the pilot programs. Our past work has shown that implementation and evaluation plans are critical elements for the proper development of pilot programs and that such plans would help FCC effectively target funds based on data-driven information. In 2015, we confirmed that FCC created the Low-Income Broadband Pilot Program, and in response to our recommendation, developed implementation and evaluation plans for the pilot program, including setting the objective of the program, specifying the entities that would be eligible to conduct pilot projects, setting a duration for the pilot projects, specifying the services to be offered, listing variables on which data should be collected, defining broadband for purposes of the pilot projects, and encouraging the use of control groups. FCC designed the pilot program so that each project tested different subsidy amounts, conditions to receiving service, and different outreach and marketing strategies. Additionally, the entities conducting the pilot projects were required to collect and submit a large amount of data for FCC. For example, the entities were required to collect subscriber data regarding demographics and service usage throughout the course of the pilot projects. In May 2015, FCC issued a report on the pilot program that highlights several important patterns in the data relevant to any consideration of using Low-Income Program funds for broadband. By implementing our recommendation, FCC obtained robust data that provides an important perspective on how various policy tools can impact broadband adoption by low-income consumers.
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