The Universal Service Fund is collected from all US telephone users, so a tidy pile of cash is available for funding the four main USF programs. These help make Internet and telecommunications services affordable for 1) schools and libraries, 2) low-income families, 3) rural health care, and 4) rural phone companies that operate where costs are high. Sounds good, if the money's going to the right place. But is it?
The FCC oversees the USF program, though all administration is actually handled by the non-governmental Universal Service Administrative Company (USAC). The FCC's Inspector General recently reviewed USAC's audit record to see how many payments had been made "in error," and the results are troubling.
Error is common in all four USF programs. It happened in a mere 9.5 percent of all Low Income program payments, and in a slightly more worrisome 12.5 percent of all Schools and Libraries transactions. But the High Cost Fund had a 16.6 percent error rate, and the Rural Health Care program managed to muck up a truly amazing 20.6 percent of all payments. (The High Cost Fund, being the biggest of the four, is probably the most worrisome number, as we're talking about billions of dollars a year being distributed by the program.)
Now, before you start oiling the torches and sharpening the pitchforks, some caveats: "errors" in payments don't mean fraud. Any time the rules aren't completely followed, the payment is in "error." The FCC also looked at a random sample of transactions, so these error rates may not be representative.In addition, all payments for which the auditors could not determine the status were classified as "errors." Some of these may well have been legitimate.
The point, though, is that we don't know. This has been a problem with USF for some time. As the Office of Management and Budget points out, USAC's charter includes no real controls or performance measures, and the four programs have no internal criteria by which effectiveness can be gauged. They might be helping, but who knows?
The FCC notes that "additional oversight of the management" of various programs may be needed. Despite the problems with oversight, some members of Congress hope to expand the program to subsidize broadband access as well, an idea that was proposed (unsuccessfully) in 2006 as well.