GAO Report: Obamaphone Program Riddled with Fraud

A program begun under the Reagan administration to give poor people access to a telephone, and then expanded under the Obama administration, is riven with fraud and abuse, according to a report by the General Accountability Office, a government watchdog,


Known as the Lifeline Program, it’s funded by a small fee charged each consumer by the telecom companies. The telecoms take in far more money for the program than they can possibly use, as evidenced by the astonishing $9 billion stashed away in various bank accounts.

The GAO found that up to 36% of recipients may not be eligible to receive a phone.

Washington Times:

The report, requested by Sen. Claire McCaskill, Missouri Democrat, also says the program has stashed some $9 billion in assets in private bank accounts rather than with the federal treasury, further increasing risks and depriving taxpayers of the full benefit of that money.

“A complete lack of oversight is causing this program to fail the American taxpayer — everything that could go wrong is going wrong,” said Mrs. McCaskill, ranking Democrat on the Senate’s chief oversight committee and who is a former state auditor in Missouri.

“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,” she said.

The program, run by the Federal Communications Commission, predates President Obama, but it gained attention during his administration when recipients began to associate the free phone with other benefits he doled out to the poor.

Some 10.6 million people have an Obamaphone, but 36 percent of them may not qualify, investigators said after sampling the population and finding a huge chunk of people couldn’t prove they were eligible.

More than 5,500 people were found to be enrolled for two phones, while the program was paying for nearly 6,400 phones for persons the government has listed as having died.

Investigators also submitted fraudulent applications to see what would happen, and 12 of the 19 phone carriers they applied to approved a phone.

The theory behind the program was that poor people needed a phone to apply for a job or conduct other business in the modern economy, so they were provided with what was supposed to be a low-cost, limited-service benefit.

Though the program is administered by the federal government, funding comes from cellphone carriers, who pass the costs on to customers through the universal service fee charge that many see on their monthly bills.

Thursday’s report is just the latest warning from the GAO, which is the government’s chief watchdog. Previous reports had warned the Obama administration the program was susceptible to double-dipping, and that the FCC didn’t even have a good yardstick to measure whether the program was meeting its goals.

The FCC had promised to make changes, but the new report says those have fallen short.


There is zero incentive for telecoms to sufficiently vet recipients to keep ineligible people from taking part in the program. In other words, for the most part they’re not even trying. And yet the government pays them to administer the program.

Although no taxpayer funds go directly to poor people to pay for phone service, the fraud is still costing the government. And the hell of it is, the program may not even be needed anymore:

GAO investigators questioned whether the program is even needed anymore. The price of phones and service on many plans have dropped dramatically, making them affordable for nearly everyone, the GAO says. Investigators also found that without the free government phone, many recipients would gladly pay for the services on their own anyway.

As is typical of government assistance to the poor, a program that meant well ends up being riddled with fraud and abuse. I doubt very much whether there will be significant hardship for the 10.6 million recipients of this program if the FCC were to end it.





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