As a  result, FCC initiated two programs to make telephone service affordable  for low-income households: Lifeline, which discounts monthly service, and  Link Up, which discounts the connection charges associated with  telephone service installation. Program Participation and Support Payments Have Increased Primarily Due to the Addition of Prepaid Wireless as an Eligible Service, but Barriers to Participation Remain

		While Program Participation and Payments Were Relatively Stable from 2005 to 2008, both Increased in 2009

Both participation in Lifeline (which we used as an indicator of overall  participation in the Low-Income Program), and support payments to  ETCs increased in 2009. As shown in figure 1, from calendar years 2005  through 2008, the total number of Lifeline participants was relatively  stable—between 6.9 and 7.1 million annually—but increased to 8.6 million  in 2009. Likewise, Low-Income support payments to ETCs were relatively  stable from 2005 to 2008—between approximately $802 and $823 million  annually. However, due to increased program participation, support  payments in 2009 increased to approximately $1.025 billion, or 25 percent  more than 2008 (see fig.1). FCC Lacks Performance Data to Manage the Program, but Pilot Programs, if Properly Implemented, Could Provide Improved Data to Make Critical Program and Policy Decisions in the Future

		FCC Has Taken Limited Steps to Develop Performance Goals and Measures for the Low- Income Program

FCC’s overarching goal for the Low-Income Program is to increase  telephone subscribership among low-income consumers, but it has not  quantified this goal. Such  performance goals and measures would be very beneficial to FCC in that  they would enable FCC to assess changes, such as the addition of prepaid  wireless, and more effectively manage the current and future direction of  the program. Furthermore, table 4 demonstrates that, to date, FCC’s efforts generally do  not align with useful practices we have identified for developing  successful performance goals and measures. In the plan, the FCC task force acknowledged that “there  is a lack of adequate data to make critical policy decisions regarding how  to better utilize funding to promote universal service objectives…as it  moves forward on reforms in the plan, it should enhance its data  collection  and reporting to ensure  that the nation’s funds are being used effectively to advance defined  programmatic goals.” Further, FCC has acknowledged that as changes  such as expanding the Low-Income Program to include broadband service  are made to the USF, it may be necessary to develop new metrics for  measuring the success of universal service policies. The broadband pilot programs, if conducted, provide FCC with an  opportunity to improve its information on the telecommunication needs of  and data collection for low-income households. The Low-Income Program Has Established Some Mechanisms to Identify and Evaluate Risks and Monitor Compliance; However the Program Lacks Two Key Features of Effective Internal Controls

		The Low-Income Program Has Some Mechanisms to Identify and Evaluate Risks and Monitor Compliance

USAC has assessed some of the risks and monitors compliance with some  of the internal controls of the USF’s four programs, including the Low- Income Program. The Low-Income Program Lacks a Risk Assessment that Considers All Program Vulnerabilities and a Systematic Process for Considering Audit Results When Assessing Internal Controls

Although the assessments and activities described above provided  mechanisms to identify some risks related to the Low-Income Program,  FCC and USAC have not conducted a risk assessment specific to the Low- Income Program that includes consideration of all program vulnerabilities  and associated consequences that could help identify opportunities to  mitigate those risks. According to USAC officials, each audit report is reviewed  and the extent and causes of audit findings are analyzed. Without a systematic process to analyze findings from audits that are of  sufficient quantity and scope and appropriately targeted based on risk,  FCC and USAC may not have information that could be leveraged to  adequately assess compliance with program rules and strengthen the  program’s internal controls. A  needs  assessment and implementation and evaluation plans are critical elements for the proper development of pilot programs. Recommendations for Executive Action

To improve the management and oversight of the  we recommend that the Chairman of the FCC take the following three  actions:  clearly define specific performance goals of the program and subsequen develop qua determining the program’s success in meeting its goals, ntifiable measures that can be used by Congress and FCC in    conduct a robust risk assessment of the Low-Income Program, and  implement a systematic process for considering the results of ETC audits  and improper payment assessments in evaluating internal controls of the  Low-Income Program. To determine the extent to which program participation and expenditures  have changed in the last 5 years and what factors may have affected  program participation and support payments, we analyzed participation  and disbursement data from USAC and identified key trends including  projections for 2010. To identify the mechanisms FCC and USAC used to identify and evaluate  risk and monitor compliance with program rules, we reviewed relevant  FCC and USAC documents, including comments for the record, fraud risk  assessments, and audit reports, and interviewed officials from both  entities.
Why GAO Did This Study

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.

What GAO Found

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.