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August 10, 2018

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) 2017. 

The Universal Service Fund’s Lifeline Program (Lifeline) was determined to be out of 

compliance with the improper payment reporting requirements for the FY 2017 reporting year. 

The Inspector General’s auditors reported the estimated gross improper payment amount for the 

Lifeline program to be $336.39 million per year with an improper payment rate of 21.93%. This 

improper payment rate exceeded the limit of less than 10 percent of the program’s gross outlay

as described in the Office of Management and Budget’s (OMB) guidance on compliance 

reporting in Appendix C of OMB Circular A-123. Per the reporting requirements for agencies

on non-compliance contained in OMB Circular A-123, below please find information from the 

FCC on its efforts to bring the agency back into compliance.

1. Measurable milestones to be accomplished in order to achieve compliance for each program 

or activity;

To better strengthen controls to prevent improper payments within the Lifeline Program, the 

FCC has taken or is taking the following corrective actions. It is anticipated that these 

actions will significantly reduce the current improper payment rate.

• To prevent payments for deceased subscribers, the FCC and the Universal Service 

Administrative Company (USAC) implemented an up front, automated validation check 

in November 2017 to prevent deceased subscribers from being enrolled in the Lifeline 

program; 

• To prevent payments for phantom subscribers, the FCC and USAC made changes to the 

calculation of carriers’ claims for Lifeline reimbursement in January 2018, so that USAC 

now calculates claims based on subscribers that have been fully validated by the National 

Lifeline Accountability Database (NLAD), rather than on carriers’ self-validated claims;

Federal Communications Commission

Office of the Managing Director

Washington, D.C. 20554
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• To prevent payments for improperly certified subscribers, the FCC and USAC developed 

standard forms for the Lifeline program’s certification, re-certification, and one-perhousehold worksheets. The FCC and USAC took the necessary steps to ensure this 

corrective action was well underway even before the Inspector General’s report was 

issued. As a result of this corrective action, beginning July 1, 2018, all service providers 

are required to use these forms;

• The FCC and USAC deployed the Lifeline National Eligibility Verifier Database that will 

confirm subscribers’ eligibility to participate in the Lifeline program and prevent 

duplicate enrollments. Six states are implemented as part of the National Verifier as of 

June 18, 2018, with additional states forthcoming; 

• As part of the Lifeline Safeguards Plan and as recommended by the Office of the 

Inspector General, the FCC and USAC are implementing a sales agent registry to better 

track the activity of carrier employees using systems to conduct Lifeline transactions; and

• The USAC Lifeline program integrity team, along with the FCC, instituted new review 

procedures in alignment with USAC’s Lifeline Safeguards Plan. These procedures 

include additional risk-based reviews of various data points.

2. The designation of a senior agency official who shall be accountable for the progress of the 

agency in coming into compliance for each program or activity; and 

Mark Stephens, Managing Director, has been designated as the accountable official for FCC 

compliance. The Managing Director oversees the FCC’s operations group, which includes 

the Chief Financial Officer.

3. The establishment of an accountability mechanism, such as a performance agreement, with 

appropriate incentives and consequences tied to the success of the senior agency official in 

leading agency efforts to achieve compliance for each program and activity.

The FCC is committed to continually improving and strengthening the program integrity of 

its operations and the programs that is oversees. The Managing Director’s performance plan 

will be modified to include measures related to strengthening program integrity and assuring 

compliance with improper payment related laws and guidance.

Please feel free to contact me at 202-418-0817 if you have any questions about this 

correspondence.

Sincerely, 

Mark Stephens

Managing Director