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July 15, 2020

The Honorable Ron Johnson 

Chairman 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

340 Dirksen Senate Office Building 

Washington, D.C. 20510

Dear Chairman Johnson:

The Federal Communications Commission (FCC or Commission) is writing to you to 

follow up on the results of the audit by its Office of Inspector General of the FCC’s compliance 

with Improper Payments Elimination and Recovery Improvement Act (IPERIA) reporting 

requirements for Fiscal Year (FY) 2019.

Summary

The Improper Payments Information Act of 2002 (IPIA, P.L. 107-300), as amended by the 

Improper Payments Elimination and Recovery Act of 2010 (IPERA, P.L. 111-204) and the 

Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA, P.L. 112-248), 

requires each agency Inspector General to review the annual Agency Financial Report (AFR) and 

accompanying materials of the most recent fiscal year (FY) to determine compliance with 

improper payment requirements. 

The Federal Communications Commission (FCC or Commission) Inspector General’s auditors 

determined that one of the FCC’s programs, the Universal Service Fund (USF) Lifeline Program, 

was out of a compliance for three consecutive fiscal years. The FCC reported a gross improper 

payment rate for the USF Lifeline Program of 21.93% for FY 2017, 18.47% for FY 2018, and 

9.32% for FY 2019. 

The FCC does not fully concur with the auditors’ finding that the FY 2019 gross improper payment 

rate of 9.32% reported for the USF Lifeline program was understated and noncompliant with 

IPERIA. Nevertheless, the FCC provides this report to fulfill the requirement under Office of 

Management and Budget (OMB) Memorandum M-18-20 that an agency that is out of compliance 

for three consecutive years must submit to Congress and OMB within 30 days of the Inspector 

General’s report either (1) a reauthorization proposal for the program or (2) proposed statutory 

changes necessary to bring the program into compliance.1

 The FCC notes that the USF Lifeline 

1 Office of Management and Budget (OMB) Memorandum M-18-20, Appendix C to OMB Circular A-123, 

Requirements for Payment Integrity Improvement, Part IV.B.1 (OMB Memorandum M-18-20).

Federal Communications Commission

Office of the Managing Director

Washington, D.C. 20554
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Program is a mandatory program; thus, the requirement to submit reauthorization proposals for 

discretionary programs is not applicable. Nor does the FCC believe that statutory changes are 

necessary at this time. 

The FCC and the Universal Service Administrative Company (USAC), the USF administrator, are 

committed to continually improving and strengthening the integrity of the USF Lifeline program. 

This is evidenced by the substantial reduction in improper payments in the USF Lifeline Program 

since FY 2017. The Commission continues to make significant improvements to the Lifeline 

program that will further prevent and reduce improper payments in the program. A number of 

these efforts are described in detail below. 

USF Lifeline Program 

The following are descriptions of the FCC and USAC’s key efforts to prevent and reduce improper 

payments in the USF Lifeline Program: 

• Standardized Forms: To prevent payments for improperly certified subscribers, the FCC 

and USAC developed standardized forms for the USF Lifeline Program’s certification, recertification, and one-per-household worksheets. Since July 1, 2018, all Lifeline service 

providers have been required to use these forms to verify and recertify subscriber 

eligibility. 

• National Verifier: The FCC and USAC launched the National Verifier in all states and 

territories by the end of 2019. The National Verifier increases program integrity by 

applying a consistent eligibility standard for Lifeline Program participants. California, 

Texas, and Oregon will continue to manage their own eligibility process for most Lifeline 

participants living in those states, in which eligibility determinations are processed by a 

state agency or its administrator, and USAC will monitor these states’ eligibility 

determination processes to ensure compliance with the Commission’s rules. The National 

Verifier will significantly reduce improper payments related to prior program integrity 

issues, such as ineligible subscribers, deceased subscribers, duplicate subscribers, and 

oversubscribed addresses. The National Verifier utilizes a combination of automated and 

manual processes to verify eligibility and confirm whether a consumer is qualified for the 

Lifeline program. To confirm participation in a qualifying program, the National Verifier 

connects to multiple eligibility databases, including connections with the U.S. Department 

of Housing and Urban Development database to verify federal public housing assistance, 

and with the Centers for Medicare and Medicaid Services (CMS) database to verify 

Medicaid participation. The National Verifier also connects to state Supplemental 

Nutrition Assistance Program, Medicaid, Supplemental Security Income, and/or income 

databases in 19 of the launched states and territories. With its existing connections, the 

National Verifier is automatically verifying the eligibility of up to 83% of consumers 

seeking to enroll in the Lifeline program. To further refine the verification process, USAC 

continues to work with states and territories to implement additional automated 

connections to eligibility databases. USAC is revisiting its programmatic review and audit 

procedures to properly address risks in the program, which are changing as a result of the 

National Verifier. USAC’s Office of General Counsel has also stood up the Fraud Risk 
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Group which will continue to refer potential cases of waste, fraud, and abuse to OIG and 

conduct internal investigations to better provide OIG with critical information at the outset.

• Sales Agent Compliance: In October 2019, the Commission adopted a rule prohibiting 

Lifeline service providers from paying commissions to enrollment representatives based 

on the number of applications or enrollments processed by those representatives. In 

addition, the Commission established the Representative Accountability Database to 

identify and register sales agents who assist consumers in applying for Lifeline. The 

Representative Accountability Database, which became mandatory for all Lifeline service 

providers on May 25, 2020, issues unique identifiers to enrollment representatives that 

allow USAC to monitor those representatives’ activities in USAC’s Lifeline systems, such

as the National Lifeline Accountability Database (NLAD) and the National Verifier. As 

part of this monitoring effort, USAC will be able to better detect suspicious activity in its 

systems and restrict the access of enrollment representatives engaged in potentially 

fraudulent activity (e.g., enrolling fictitious subscribers). These restrictions may include a 

permanent lock-out of an enrollment representative from USAC’s systems, and referral of 

individual enrollment representatives to the FCC’s enforcement authorities where 

appropriate. 

• Prevention of Duplicate Support: As part of duplicate prevention, the NLAD continues 

to be the system of record to associate enrollments of consumers with a Lifeline service 

provider. With the launch of the National Verifier, USAC has enhanced the NLAD to 

ensure that no enrollment is permitted in a fully launched state until the NLAD confirms 

that the National Verifier has found the consumer to be eligible. Further, the National 

Verifier itself will not deem a consumer eligible until it confirms that the consumer is not 

already enrolled in the program as recorded in the NLAD. These cross-checks should 

prevent service providers from attempting to enroll a duplicate subscriber.

• Eliminating Phantom Subscribers: Phantom subscribers are described as those that are 

not enrolled in the NLAD and claimed for support, or vice versa. Beginning in January 

2018, all claims for support are limited to only those subscribers that have been validated 

and enrolled in NLAD. As a result, no Lifeline service provider can claim more subscribers 

than have been validated. In the three states that have opted out of the NLAD (California, 

Oregon, and Texas), payment is based on a subscriber listing provided by the state 

administrator. In October 2019, the Commission codified a requirement that ETC 

reimbursement requests be based on the service provider’s claimed subscriber list in NLAD 

or provided by a state administrator in the three states that operate their own duplicate 

checks. USAC also undertook an effort to look back to periods prior to 2018 to recover 

overclaimed amounts. While not all subscribers enrolled in NLAD are eligible to be 

claimed in a particular month based on program rules, if a service provider is not claiming 

a high percentage of its subscribers in NLAD, it may indicate that the subscribers are not 

receiving service. On a quarterly basis, service providers are asked to provide an 

explanation when their unclaimed subscriber count is 10 percent or more of their total 

subscriber base, or when they have not claimed the same active subscriber in NLAD for 

three consecutive data months. The number of subscribers requiring this review dropped 

from an initial review of 5,200 subscribers to less than 300 in the most recent review.
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• Preventing Support for Deceased Subscribers: USAC automatically prevents the 

enrollment of a deceased subscriber through its connection to LexisNexis, which leverages 

the Social Security Administration’s Death Master File, among other source data. 

Beginning in July 2020, USAC will also obtain direct access to the Social Security 

Administration’s death master file. On a quarterly basis, USAC also reviews a statistical 

sample of existing subscribers to verify they are not deceased or did not die after 

enrollment. The most recent reviews have determined less than 2 percent of sampled 

subscribers are deceased. In October 2019, the Commission codified a rule prohibiting 

ETCs from enrolling or claiming for reimbursement a Lifeline subscriber if the National 

Verifier or NLAD cannot verify the subscriber as living.

• Program Integrity Reviews: USAC reviews a statistical sample of subscribers to verify 

eligibility, to confirm the subscriber is not deceased, to review oversubscribed households, 

and to evaluate possible phantom subscribers. Between August 2017 and March 2020, 

USAC has de-enrolled 35,600 subscribers and has identified approximately $769,000 in 

recoveries as a result of these reviews. The result of these quarterly reviews has improved 

the number of eligible subscribers in the program. Based on the results of these audits and 

reviews, USAC de-enrolls consumers, recovers disbursements, and refers non-compliance 

to the FCC where appropriate.2 USAC’s Lifeline Program integrity team will also conduct 

detailed analysis of Lifeline subscribership data to identify potential instances of noncompliance. Based on the analysis, the Lifeline Program integrity team will perform 

targeted program integrity reviews of high-risk areas. The results of these reviews will be 

used to address compliance gaps and enhance preventative controls with the goal of 

reducing improper payments. 

• Improper Payment Analysis: USAC management is performing a deep-dive analysis of 

its improper payments to more thoroughly understand the root cause and to identify 

corrective actions that will address the root cause. Through this analysis, USAC 

management is institutionalizing corrective actions as part of its program integrity efforts 

that will reduce future instances of improper payments.

• Improper Payment Testing Procedures, including Non-Usage Testing: The FCC and 

USAC will work together to determine what procedures can be added or enhanced to better 

ensure that improper payment testing procedures adequately assess the risk associated with 

the USF Lifeline Program. To assist with this initiative, USAC will engage an external 

auditor to test compliance by one or more service providers with the Lifeline Program nonusage rules. The methodology used in such targeted audit will be used by USAC’s audit 

department to test other service providers in the future.

2 In light of the ongoing COVID-19 pandemic, the FCC has paused these reviews until August 31, 2020. See 

Lifeline and Link Up Reform and Modernization, Order, 35 FCC Rcd 2950, 2953, para. 12 (WCB 2020); Lifeline 

and Link Up Reform and Modernization, Order, DA 20-577, para. 12 (WCB June 1, 2020).
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Sincerely, 

Mark Stephens

Managing Director