[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
CONTINUED OVERSIGHT OF
INADEQUATE COST CONTROLS AT THE
U.S. DEPARTMENT OF VETERANS AFFAIRS
=======================================================================
HEARING
before the
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
JULY 28, 2010
__________
Serial No. 111-95
__________
Printed for the use of the Committee on Veterans' Affairs
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COMMITTEE ON VETERANS' AFFAIRS
BOB FILNER, California, Chairman
CORRINE BROWN, Florida STEVE BUYER, Indiana, Ranking
VIC SNYDER, Arkansas CLIFF STEARNS, Florida
MICHAEL H. MICHAUD, Maine JERRY MORAN, Kansas
STEPHANIE HERSETH SANDLIN, South HENRY E. BROWN, Jr., South
Dakota Carolina
HARRY E. MITCHELL, Arizona JEFF MILLER, Florida
JOHN J. HALL, New York JOHN BOOZMAN, Arkansas
DEBORAH L. HALVORSON, Illinois BRIAN P. BILBRAY, California
THOMAS S.P. PERRIELLO, Virginia DOUG LAMBORN, Colorado
HARRY TEAGUE, New Mexico GUS M. BILIRAKIS, Florida
CIRO D. RODRIGUEZ, Texas VERN BUCHANAN, Florida
JOE DONNELLY, Indiana DAVID P. ROE, Tennessee
JERRY McNERNEY, California
ZACHARY T. SPACE, Ohio
TIMOTHY J. WALZ, Minnesota
JOHN H. ADLER, New Jersey
ANN KIRKPATRICK, Arizona
GLENN C. NYE, Virginia
Malcom A. Shorter, Staff Director
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Veterans' Affairs are also
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C O N T E N T S
__________
July 28, 2010
Page
Continued Oversight of Inadequate Cost Controls at the U.S.
Department of Veterans Affairs................................. 1
OPENING STATEMENTS
Chairman Bob Filner.............................................. 1
Prepared statement of Chairman Filner........................ 28
Hon. Steve Buyer, Ranking Republican Member...................... 2
WITNESSES
U.S. Government Accountability Office, Susan Ragland, Director,
Financial Management and Assurance............................. 4
Prepared statement of Susan Ragland.......................... 29
U.S. Department of Veterans Affairs, Edward Murray, Deputy
Assistant Secretary for Finance................................ 16
Prepared statement of Mr. Murray............................. 35
MATERIAL SUBMITTED FOR THE RECORD
Post-Hearing Questions and Responses for the Record:
Hon. Bob Filner, Chairman, Committee on Veterans' Affairs to
Gene L. Dodaro, Acting Comptroller General, U.S. Government
Accountability Office, letter dated July 29, 2010, and
response from Susan Ragland, Director, Financial Management
and Assurance, U.S. Government Accountability Office,
letter dated September 9, 2010............................. 39
Hon. Bob Filner, Chairman, Committee on Veterans' Affairs to
Hon. Eric K. Shinseki, Secretary, U.S. Department of
Veterans Affairs, letter dated July 29, 2010, and VA
responses.................................................. 42
Hon. Steve Buyer, Ranking Republican Member, Committee on
Veterans' Affairs to Hon. Eric K. Shinseki, Secretary, U.S.
Department of Veterans Affairs, letter dated July 30, 2010,
also forwarding questions from Hon. Cliff Stearns, and VA
responses.................................................. 55
CONTINUED OVERSIGHT OF
INADEQUATE COST CONTROLS AT THE
U.S. DEPARTMENT OF VETERANS AFFAIRS
----------
WEDNESDAY, JULY 28, 2010
U.S. House of Representatives,
Committee on Veterans' Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 10:04 a.m., in
Room 334, Cannon House Office Building, Hon. Bob Filner
[Chairman of the Committee] presiding.
Present: Representatives Filner, Michaud, Herseth Sandlin,
Donnelly, McNerney, Adler, Kirkpatrick, Buyer, Stearns,
Boozman, and Roe.
OPENING STATEMENT OF CHAIRMAN FILNER
The Chairman. Good morning. The Committee on Veterans'
Affairs will come to order.
Before we get started, I ask unanimous consent that all
Members may have 5 legislative days in which to revise and
extend their remarks.
Hearing no objection, so ordered.
The U.S. Department of Veterans Affairs (VA) is the second
largest agency in our system of government and each year they
are authorized billions of dollars to care for our Nation's
veterans.
Miscellaneous obligations, as they are called, are used by
the VA to obligate funds in circumstances where the amount to
be spent is uncertain. They are used to reduce administrative
workload and to facilitate payment for contracted goods and
services when quantities and delivery dates are unknown.
In 2008, the Subcommittee on Oversight and Investigations
held a hearing to assess the Department's inadequate controls
of these funds, shedding light on material weaknesses in VA
financial management systems.
Today, we will examine exactly what actions the VA has
taken since 2008 to ensure that these financial material
weaknesses are corrected and that improvements are being made
in its internal financial control reporting.
The Secretary's recent decision to cancel the Integrated
Financial Accounting System project effectively eliminates the
FLITE Program, that is the Financial and Logistics Integrated
Technology Enterprise Program. FLITE was intended to integrate
and standardize the agency's financial and asset management
processes across all offices of the Department by 2014 at a
cost of $570 million.
Though the FLITE Program was not the ultimate end all, VA
had parallel efforts under way to fix the material weaknesses.
We are here today to make certain that the process is
credible and ensure integrity of that process.
In fiscal year 2009, the VA spent almost $12 billion on
miscellaneous obligations, which was doubled from the reported
2007 levels.
The U.S. Government Accountability Office (GAO) reviewed
VA's financial reporting system and cited that the Department
has made some improvements, but still have not fully addressed
the specific control design flaws.
The GAO made four recommendations to the VA to develop and
implement policies and procedures intended to improve overall
control, including better oversight of miscellaneous
obligations; segregation of duties; improved supporting
documentation of these obligations; and, oversight mechanisms
to ensure control policies and procedures were fully
implemented.
We will hear today that the VA is making significant
strides in its financial accounting employing policies and
procedures to improve the oversight of the miscellaneous
obligations and implement GAO's recommendations, but I am
anxious to hear from the VA when they plan to fully implement
these policies.
Effective oversight and review by trained, qualified
officials is a key factor in identifying potential risk for
fraud and waste.
It is obvious that without basic controls over these
billions of dollars, the VA is at a significant risk of fraud,
and effectively designed internal controls would help mitigate
those concerns.
As we ensure there is more accountability in miscellaneous
obligations, we do not want to infringe on VA's abilities to
provide quality care to veterans.
While the VA's mission is to care for those who have
sacrificed so much, we must ensure proper use of taxpayer
money, and financial accountability.
I will now yield to our Ranking Member, Mr. Buyer.
[The prepared statement of Chairman Filner appears on p.
28.]
OPENING STATEMENT OF HON. STEVE BUYER
Mr. Buyer. Thank you, I appreciate you holding this hearing
today, and as you know the Subcommittee on Oversight
Investigations has held a number of hearings on cost control
over the years.
During the 108th Congress, we held a series of three
hearings, both at the Subcommittee and the full Committee level
on eliminating the waste, fraud, and abuse, and mismanagement
in veterans programs at the VA. Included in these hearings were
discussions on the VA's purchase cards, as well as third-party
billing.
In July 2008, the Subcommittee on Oversight Investigations
followed with another hearing on the use of miscellaneous
obligations and the problems that the VA has in accounting for
funds spent when using this type of purchasing of products and
services.
It remained clear that VA still did not have a means to
determine where and how its funds were being spent. All VA
could tell the Subcommittee at that time was that it had spent
$5.7 billion through miscellaneous obligations and the use of
the VA Form 4-1358.
I understand the fixes that VA tried to put in place to
reduce this have failed, and now miscellaneous obligations have
more than doubled to $12 billion. So we have gone from the $5.7
billion in 2008 to now $12 billion being spent under
miscellaneous obligations.
Any business in the private sector would cease to exist I
think under those types of conditions.
How does the VA have any confidence that it is not
deficient on any given day?
The hearing today is truly timely in light of the VA's
recent announcement to our offices that they plan to halt the
development of what the Chairman just talked about, our
Integrated Financial Accounting System, continuing the lack of
adequate controls over the cost of the Department.
I frankly was surprised that the VA would take this step
with the supposed blessing of the Office of Management and
Budget (OMB), but without any real plan for the future other
than to limp along. That is what surprised me most.
I anticipate hearing today what the VA is going to do to
rectify the issue, and I am always interested in not only where
you were now, but what your over the horizon vision is with
regard to these cost controls.
Without a working financial system to track the spending,
how can the VA get a grip on their expenditures? It is almost
as if the VA is purposefully refusing to integrate transparency
into its budget and does not want Congress or the public to
know exactly how inefficient its procurement practices are.
If a chief financial officer (CFO) in the private sector
didn't use a system to track where the money is going, that
person would no longer be the chief financial officer. The
government should take the same type of care and precaution
when using funds it takes from the Nation's treasury. We should
treat these funds as sacred trust and invest them wisely and
full accountability is warranted.
By the continuing use of miscellaneous obligations and the
overuse of VA Form 4-1358 when making purchases, the VA has
absolutely no idea where it is spending its funding, opening
itself to a widespread fraud, waste, and abuse that the
Chairman referred to, and I think we can better utilize these
dollars.
And where is the transparency in government? What is the VA
doing in the cost controls when it doesn't even know where the
funds are being spent? I think this is unacceptable.
Mr. Chairman, I want to thank you for working with my
staff, along with the Subcommittee--your Subcommittee staff on
the Acquisition Reform Bill.
In your statement that you just made, you talked about the
need for better oversight and its mechanisms, and I think the
Acquisition Reform Bill that we are working on puts together
the structure and hopefully the internal controls for which you
are referring.
I yield back.
The Chairman. I hope we do that before we adjourn for the
year in September.
Mr. Buyer. We have to get it to the Senate.
The Chairman. All right, I will work with you.
Mr. Buyer. Okay.
The Chairman. We will keep him in.
If the first panel will please come forward? Ms. Susan
Ragland is the Director of Financial Management and Assurance
at the U.S. Government Accountability Office, and she is
accompanied by Mr. Glenn Slocum, the Assistant Director for
Financial Management and Assurance at GAO.
Thank you both for being here today. Your complete written
statements will be made part of the record. You will be given 5
minutes for an oral statement.
Ms. Ragland.
STATEMENT OF SUSAN RAGLAND, DIRECTOR, FINANCIAL MANAGEMENT AND
ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; ACCOMPANIED
BY GLENN SLOCUM, ASSISTANT DIRECTOR, FINANCIAL MANAGEMENT AND
ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
STATEMENT OF SUSAN RAGLAND
Ms. Ragland. All right.
Thank you Chairman Filner and Members of the Committee. I
am pleased to be here to discuss the findings from our work
relevant to this hearing on VA's internal controls.
I will discuss our reports on the Veterans Health
Administration's (VHA's) use of miscellaneous obligations and
VA's plans to correct financial reporting control deficiencies,
and I will also provide a brief update on VA's internal
inspections in its fiscal year 2009 financial audit report.
Starting with miscellaneous obligations.
In September 2008, we reported that VA policies and
procedures were not designed to provide adequate controls over
the authorization and use of miscellaneous obligations.
We made four recommendations, and VA developed policies and
procedures in these areas in January of 2009.
The first area is oversight by contracting officials.
Without control procedures for contracting review and approval,
VHA is at risk that procurements do not have the necessary
safeguards.
The second area was inadequate segregation of duties. Key
duties and responsibilities need to be divided among different
people to reduce the risk of error or fraud.
Third, VA's policies and procedures were not sufficiently
detailed to require information such as purpose, vendor, and
contract number that are needed to document that the obligation
was for a legitimate use of Federal funds.
Our fourth area recommended that VA establish an oversight
mechanism to ensure that the control policies and procedures
are fully and effectively implemented.
VA's Management Quality Assurance Service (MQAS) evaluated
compliance with VA's policies and procedures for using
miscellaneous obligations, and they found that continuing
control problems exist in each of these areas that we
identified.
Many miscellaneous obligations were not submitted for the
required contracting review and approval, there was inadequate
segregation of duties, a lack of supporting documentation, and
facilities still needed to institute quarterly reviews of their
miscellaneous obligations as VA policies call for.
According to VA officials, VHA facilities are in the
process of taking corrective actions to address these
recommendations.
Turning to VA's long-standing material weaknesses.
In November of 2009, we reported that VA had three long-
standing material weaknesses in internal control over financial
reporting.
Financial management oversight has been reported as a
material weakness since fiscal year 2005. This includes
recording financial data without sufficient review and
monitoring.
Financial management system functionality has been reported
as a material weakness since fiscal year 2000. That is linked
to VA's outdated legacy financial systems and affects VA's
ability to prepare and analyze financial information that is
timely and reliable.
The third weakness, information technology (IT) security
controls, has also been reported since 2000. That includes the
need for better controls over access and changes, and as well
as for segregation of duties.
While we found that VA had corrective action plans, the
plans did not contain detail needed to provide VA officials
with assurance that the plans could be effectively implemented
in a timely manner on schedule.
A rigorous framework for designing and overseeing these
plans and top leadership support will be essential in ensuring
the timely resolution of VA's internal control weaknesses.
VA concurred with the three recommendations that we made
and said it is taking action to address these.
VA's most recent financial report, fiscal year 2009, again
included these three material weaknesses. Furthermore, the
timetable for correcting them has slipped.
VA reported in its 2009 performance and accountability
report that the financial management oversight weakness will be
resolved in 2012, and the IT security controls weakness in
2010; however, in 2008 VA had anticipated that these two
weaknesses would have been resolved in 2009.
So in summary, VA's internal inspections and most recent
financial audit report indicate that the serious, long-standing
deficiencies that we discussed in our 2008 and 2009 reports are
continuing.
Effectively addressing the root causes and resolving these
issues will require well designed plans and diligent and
focused oversight by senior VA officials.
Until VA's management fully addresses our recommendations
VA will continue to be at risk of improper payments, waste, and
mismanagement.
This concludes my prepared statement. I am pleased to be
accompanied by Glenn Slocum, the Assistant Director, who worked
on both of these reports, and we are happy to respond to any
questions that you may have.
Thank you.
[The prepared statement of Ms. Ragland appears on p. 29.]
The Chairman. Thank you very much.
Before I call on Mr. Donnelly, if you had to give a grade
between your initial report and now what would you give? I am a
teacher, so----
Ms. Ragland. I guess I would say somewhere C plus or B
minus, somewhere in there.
The Chairman. Sounded like an F to me, but what do I know.
Mr. Donnelly, do you have any questions?
Mr. Donnelly. No questions, Mr. Chairman.
The Chairman. Mr. McNerney.
Mr. McNerney. Well, thank you, Mr. Chairman.
One of the things that I have heard over and over this
morning is the risk. I mean there is a certain risk of fraud,
things aren't well controlled, there is going to be opportunity
for abuse.
Is there any evidence of actual abuse, or is this just
speculative at this point?
Ms. Ragland. Well, there has been a combination of factors.
Because if you have--on the miscellaneous obligation side--if
you are not checking from the contracting review and then you
have one person who was able to make all of the decisions about
what to purchase and is authorizing that and signing off on
that, which is a very basic tenant of internal controls, then
that is very risky. And so VA is working to address that, but
that would be one area that I would say is a clear risk. And so
that would be an important area to fix.
Mr. McNerney. I mean, it seems obvious to me that if there
is that level of risk then there is going to be some fraud
going on now that is unacceptable. I mean any fraud is
unacceptable, but a level that would be scandalous and would
reflect badly on the VA and this Committee and the whole bit,
so, I mean we need to look into that and find out who those
people are, if there are people committing fraud and bring that
to light before the press does, before outside activities do.
What steps will require Congressional action as opposed to
regulatory action to improve the situation?
Ms. Ragland. Well the basic thing that I would say is the
continuing oversight. Because one of the things that we see
generally is that if there is top level attention to an issue
then there is improvement, but it is uneven.
And so progress, even though some of the areas may be
declining in terms of non-compliance at that point, it is not
just a straight line down, it is uneven, and sometimes it may
be coming back up.
And so having the focus and the ongoing attention I think
is very important.
Mr. McNerney. Okay. Well, what did the GAO find regarding
the extent to which the VA has adequate plans and timetables
for fixing them? I mean you mentioned 2012 and 2011. I mean
those seem a little bit far off.
Ms. Ragland. Yes, sir. Well, what we found was that the
corrective action plans that VA had didn't have the necessary
information. They didn't have milestones in some cases for
specific actions. And we also, as you say, we saw that the
plans had slipped.
So one of the things is that for the financial management
oversight area, that is going to be 3 years longer than they
had said it might be in 2008.
There is also another material weakness that has been added
in fiscal year 2009, and there is no timetable yet set that we
know of to address that area of compensation, pension, and
burial liabilities.
And as Members here have said, it is too soon to tell what
the impact of the cancellation of FLITE components will have on
VA's ability to fully remediate some of these financial
management weaknesses.
Mr. McNerney. Okay. So your written testimony has specific
recommendations and guidelines, is that correct?
Ms. Ragland. Yes, sir.
Mr. McNerney. So I assume that the Committee is going to
make sure that the VA follows up on this.
The Chairman. Well, they will be on the second panel, so we
will be checking with them.
Mr. McNerney. Okay. Oh, that is right. Okay, I yield back.
The Chairman. Mr. Roe.
Mr. Roe. Thank you, Mr. Chairman.
Just a couple of things. One, a little bit of frustration.
Yesterday we hear--I took an amendment to the bill we are going
to vote on today to the Rules Committee, and it was to use some
unused funds from the FLITE Program to adequately fund the
Office of Inspector General (OIG). If you looked at what the
OIG returned us last year in oversight and fraud, or I guess it
was 2009, it was $38 to $1.
So you are correct, Ms. Ragland, that there were--and I
guess the bill was ruled--the amendment was ruled non-germane.
But I think we should have increased--used some unused funds to
be able to get some accountability and oversight.
What Ranking Member Buyer just said a moment ago about
accountability is extremely important. And what are the
penalties if you recognize these things?
And I think you ought to set reasonable timelines. I think
it is unfair to give an organization as large as the VA, here,
by 6 months you have to have it done, but some reasonable
timelines to get it done with, and if that doesn't happen what
happens to the people who are in charge of this when it doesn't
happen?
And then you find out when--for instance in CBOCs
(Community-Based Outpatient Clinics) we don't review them but
once every 20 years in the VA.
So the question is what happens to those? Who is
accountable and what happens to them when we find out these
problems exist?
Ms. Ragland. Well, I think that is an excellent question.
I know on some of the corrective action plans one of the
elements that we called for was to have a person who would be
responsible so that you would be able to identify who should
you go to to find out what happened and why isn't progress
being made on that?
Mr. Roe. Now, I would think when you have a--and obviously
$12 billion is a lot of money and it is a lot to look after,
but there should be a plan that when this isn't implemented and
you don't find it, someone ought to be held accountable and
heads ought to roll.
And clearly what Congressman Buyer said in the private
sector, that is clearly what happens. People get fired.
Ms. Ragland. Yes.
Mr. Roe. Is that what happens here or do we just don't do
anything or what do we do?
Mr. Slocum. I would just say that OMB circular A-50
addresses this point. You know, one of the things that it talks
about is holding people accountable for the remediation of
these problems, but we have not looked at the extent to which
that is actually has taken place. It is part of a monitoring
mechanism that should be there, but we haven't looked at that.
Mr. Roe. And I agree with Congressman McNerney, my
colleague, is that it reflects poorly on the VA, which they
don't want to be. I mean, I understand that they want to do a
good job, and this Committee, if we allow that to happen, and
if we come back a year or 2 years from now and the same thing
is going on what happens?
Ms. Ragland. Yes.
Mr. Roe. Is there any corrective action that can be taken
in your recommendation, Ms. Ragland?
Ms. Ragland. I think that the only thing that we have is to
come back to you all and point that out, that is our role.
Mr. Roe. Okay. Thank you.
I yield back, Mr. Chairman.
The Chairman. Thank you. Mr. Roe, if you would get that
amendment to us I want to track that down. It sounds good to
me.
[Congressman Roe provided the Chairman with a copy of the
amendment later in the day.]
The Chairman. Mr. Donnelly.
Mr. Donnelly. Thank you, Mr. Chairman.
Given the various compliance issues that GAO found and the
problems that we have seen and the attempt to fix it, what--do
you have a new timeline as to when these problems can get
resolved, what we are looking at?
Ms. Ragland. We don't have a new timeline. We would look to
the VA to set a timeline----
Mr. Donnelly. Have they given you any information on that?
Ms. Ragland. Just the information about the material
weaknesses dates. That is the basic information that we have.
Mr. Donnelly. With various components of FLITE being
terminated, what financial management initiatives are being
considered instead?
Ms. Ragland. That is a question that we would ask VA.
Mr. Donnelly. And they haven't given you any information?
Ms. Ragland. No, we have just seen that they do have
initiatives in place that were intended to remediate some of
these weaknesses, but we have a question in terms of how fully
they will be able to do that without the implementation of
FLITE
Mr. Donnelly. So there is still a whole bunch of
information that you need that the VA has not gotten to you at
this time?
Ms. Ragland. Right. We just got general information.
Mr. Donnelly. Okay. Thank you, Mr. Chairman.
The Chairman. Thank you, Mr. Donnelly.
Mr. Stearns.
Mr. Stearns. Thank you, Mr. Chairman.
Ms. Ragland, you gave this exercise a B minus. Now the
report in 2008 was roughly $5.7 billion miscellaneous
obligations that were unable to be identified as how they were
spent, and now it is $12 billion in 2009. I mean, so it looks
like it has jumped twice. So the problem has gotten twice as--
--
Ms. Ragland [continuing]. Twice as big.
Mr. Stearns. Twice as big. And wouldn't that mean that they
flunked? I mean, wouldn't you have to be honest to yourself and
say it appears to me that nothing has been done?
I mean if the thing had--if you couldn't get $6 billion and
find out where it was spent in 2008 and now it is $12 billion,
following this extrapolation it will be $24 billion, $25
billion when you come back here again with your GAO report.
At what point don't you think that they are--how can you
say they are passing?
Ms. Ragland. Well, you are making a very good point, and
really the thinking that I had behind my response was that I do
think that VA is making efforts in these areas. And so even
though the risk may be----
Mr. Stearns. So they get a B minus because they are making
efforts when it doubles?
Ms. Ragland. Well----
Mr. Stearns. Would you have a student that----
Ms. Ragland. They do have the policies and procedures in
place, and they are taking actions to monitor them, and that is
the information that we got from the Management Quality
Assurance Service service--that they are doing inspections and
finding these things, which is what we would look for.
Mr. Stearns. Well, I understand you are being diplomatic.
In reading the summary in your report, you said there are
serious long-standing deficiencies we identified that are
continuing. So here in 2008-2009 you say these deficiencies--
serious long-standing deficiencies are continuing.
Ms. Ragland. Yes.
Mr. Stearns. And that is not very optimistic to me.
And then you went on to say that there are serious
weaknesses that continue to raise questions concerning whether
VA management has established the appropriate tone at the top
necessary to ensure that these matters receive the full,
sustained attention.
So in both the statements I gave you it appears that the
management is not connecting, that you have identified long-
standing deficiencies that continue, and these serious
weaknesses raise further questions.
So I think you have done your job, I think you have to be
woman enough to say these folks are flunking, and you have to
be a little bit more draconian in your statement.
Now let me ask you this question. You mention in your
report they have outdated systems. Does the VA have the
technological capability to do this? What do you mean by
outdated systems?
Mr. Slocum. VA's systems sometimes revert to manual
processes in order to produce its year-end financial----
Mr. Stearns. So they haven't used computers, they haven't
used the internet, they haven't----
Mr. Slocum. No, they do have all that, but some of the
reconciliations that they may need to do at year end, they have
a MINIX system, which is used to produce their year-end
statements. They have----
Mr. Stearns. They are done manually then?
Mr. Slocum. It is not manually, but there is--it is not
totally manually, but there are reconciliations that take place
that in a better world would be more automated, and it effects
their inventory systems at pharmacies, and that is what we are
talking about.
Mr. Stearns. In 2008, did you bring that to their attention
with this same statement that they had outdated systems?
Mr. Slocum. Well, there are two reports. You know, there is
one with miscellaneous obligations, and I think that is the one
that----
Mr. Stearns. Okay.
Mr. Slocum [continuing]. Ms. Ragland gave them a B minus
on. The other report dealt with a financial reporting control
deficiencies, and those with the problems that have been around
since 2000 or longer, and maybe there would be a--maybe you
would give them a lower grade on that. I am not sure.
Mr. Stearns. Okay. Well, then the statement says lack of
sufficient personnel.
Have you found that the personnel is one of the serious
problems that they have? Personnel that either don't have the
appropriate knowledge and skills, or they just don't have the
personnel?
Ms. Ragland. That has been one of the independent public
auditor's findings in the financial reports.
Mr. Stearns. Uh-huh.
Ms. Ragland. And that has been over years.
Mr. Stearns. And was that true in 2008, that same
conclusion?
Ms. Ragland. I am not positive. I believe so.
Mr. Stearns. Okay.
Mr. Buyer. Mr. Stearns, would you yield?
Mr. Stearns. Yes, I would be glad to yield to the Ranking
Member.
Mr. Buyer. Based off of the question just asked. Do you
believe there would be any value in doing an updated audit of
the VA's controls over its contracting?
Ms. Ragland. I believe that it would be valuable to look at
VA's contracting procedures and the organizational structure.
Mr. Stearns. Well, I will just close, Mr. Chairman.
You know, this might be something that we would ask the VA,
since they have had a continuing long-term problem here, is to
maybe subcontract this out so that we get a little bit more
efficiency and this problem doesn't continue.
Because, Ms. Ragland, based upon what these reports would
indicate, in another year it could be $25 billion in
miscellaneous obligation, and we can't have that.
Thank you.
Ms. Ragland. Thank you.
The Chairman. They may subcontract it out under
miscellaneous obligations.
Mr. Stearns. Right.
Mr. Buyer. Mr. Chairman, may I do a followup on that?
The Chairman. Please.
Mr. Buyer. The reason I asked this question about an audit,
this is about the contracting officers. So we are all talking
here in almost the nebulous. We are talking about oversight and
we are throwing all these words around. These are the
contracting officers that are overusing the miscellaneous
obligations and they are doing it without sufficient
documentation. This is not surgery, I am sorry, doctor. You
know, this isn't really complex.
That is why I said every business out there, they have to
know how they are spending their money and they have to
document it. This isn't hard is it?
I mean, I am just getting annoyed here at the moment.
Ms. Ragland. Well, one of the things is that--one of the
problems that VA's material weaknesses bring to bear is that
they have to take heroic efforts at the end of the year to get
the balances to account. And so what that really means is that
for the day-to-day management information they need better
financial management information to use to manage their
programs.
The Chairman. Mr. Michaud.
Mr. Michaud. Thank you very much, Mr. Chairman and Mr.
Ranking Member for having this very important hearing this
morning. I have a few question.
When you talk about the serious weaknesses that the VA has
constantly had it is a big concern that it appears and they are
not addressing those weaknesses go all the way back to 2000.
So we have this hearing today, they will say they will do a
better job, but we are back here again next year with the same
weaknesses that they currently have.
Has the GAO looked at other agencies within the Federal
Government? And if so, have other agencies had the similar
problems, or are they willing to address it? And what is the
root of the problem? Did you look at, for instance, the root of
their problem?
I have heard that the U.S. Department of Defense (DoD) has
an extensive standardized acquisition training and
certification process that individuals involved in procurement
and process must complete.
Did you look at that within the VA system? And if so, are
they lacking there as well and that is what has caused the root
of the problem?
Ms. Ragland. Well, we haven't looked at that at VA. I do
know that, other agencies have different situations and
circumstances, and so we, don't have a comparison across
agencies, but other agencies experience similar kinds of
internal control problems. And so it is just a question of what
pressures or resources can be brought to bear to ensure that VA
management does give the attention needed to fix the issues
that they face.
For example, the miscellaneous obligations is a tool that
VA has used for decades, and if they choose to use that tool
then the important focus needs to be put on having the controls
that they need to manage appropriately.
Mr. Michaud. Now, Mr. Slocum, you had stated in answering
Mr. Roe's question about accountability, and you mentioned the
A-50 as a way for it to be accountable. Exactly, can you
explain what is A-50 and what can we do to make sure that VA is
held accountable in those regards as it relates to the A-50?
Mr. Slocum. Well, A-50 speaks to setting up a monitoring
framework that would begin with having a positive tone at the
top for addressing these issues, having a framework to make
sure that recommendations are addressed with good corrective
action plans, having senior officials in place to monitor the
implementation of those plans to make sure that the problems
have been addressed and remediated and fixed and having
validation activities. And the final thing that is laid out in
A-50 is holding people accountable to make sure that this is
being done.
Mr. Michaud. Thank you.
Once again, Mr. Chairman and Mr. Ranking Member, one of the
things that I have been talking with staff about is my concern
is the fact that when you look at pharmacy, you look at nursing
homes, and look at all the money that we are putting into the
VA system, that it be used effectively and efficiently. My
concern is that has not been the case.
And we have been discussing with the private sector ways
that they have been working, particularly in pharmacy and the
nursing home areas, and what we should do in the VA area as
well. I'm not asking for an internal review within the VA
system, because my concern is we are going to get the same old
stuff that we have been getting over and over again, but
actually have an outside group look at what is happening
internally on a pilot program to see where we might be able
actually to do things differently.
We are still in the early discussion stages of that, but I
think it is very important that we actually look at the outside
as far as have a different set of eyes to look at these issues
versus what is happening currently, and that is one of the
problems I see we are having here today when you look at some
of the recommendations that were made way back in 2000, they
are still not being complied with.
Mr. Buyer. Will the gentleman yield?
Mr. Michaud. Yes.
Mr. Buyer. We have, the Chairman and I and some others are
working on the Acquisition Reform Bill. I think that is a
vehicle for us. Why don't we get it to you and put your eyes
into it. Because there might be an opportunity here to do what
you are seeking.
And Mr. Stearns also had mentioned that, Mr. Chairman, from
an outside view. I just throw that out on the table.
The Chairman. We should work on that before, or after the
August recess.
Mr. Buyer. Yeah, during the August recess.
The Chairman. Where we can look at the acquisition issue.
The Secretary has proposed legislation and we have legislation.
That will be the time, I think. That is a very good suggestion.
Mr. Michaud. I would like to thank the Chairman and Ranking
Member as well.
Mr. Buyer. Yeah, we are building the framework and the
structure and you are going right to a specific detail, so if
you get it to us we can talk to the Administration too and see
if it can be part of the bill.
Mr. Michaud. Great. Thank you very much.
The Chairman. Thank you.
Mrs. Kirkpatrick.
Mrs. Kirkpatrick. Thank you, Mr. Chairman.
You know, it sounds to me like there is just a complete
lack of internal checks and balances. And as Mr. Buyer said,
you know, any business owner has a standard accounting policy
or procurement policy, and so I am trying to just understand.
Is it the lack of policy? Is it the lack of trained
personnel or sufficient personnel?
For instance, I am thinking about the Form 4-1358, which
you mention and that is used for miscellaneous obligations and
you cite some examples of very, very vague language in that
form. Is no one reviewing those forms? So is it lack of
personnel to actually review those?
The fact that there is not documentation astounds me. How
hard is it to attach a vending order or a receipt or something
to the form? So could you address that for me, please?
Ms. Ragland. Okay. Well, one of the things that we found is
that is still the case. And so, part of it is that VA does have
policies and procedures, but when you go to look at the
implementation, when VA went and looked at the implementation,
they found that the policies and procedures weren't being
followed in all cases and that people didn't have a good
awareness of what they should be doing. That is one of the
things that needs better explanation, better communication.
Mrs. Kirkpatrick. So that sounds like a training issue. So
they have personnel, they have policies, but the personnel are
not following the policies, and maybe because they don't know
what they are.
Ms. Ragland. Yes.
Mrs. Kirkpatrick. So a training component has to be part of
this.
Ms. Ragland. That is a good point.
Mrs. Kirkpatrick. Now does the VA have an internal system
for auditing that is effective? Or do they just gloss over the
problems when they find them?
Mr. Slocum. No, VA has these inspections that Ms. Ragland
was referring to. They are through an Office of Business
Oversight (OBO). And so once the policies and procedures were
put in place, the Office of Business Oversight, and within that
office there is a Management Quality Assurance Service, (there
are three services within that office) and that particular
service had done a number of inspections as part of their work.
During fiscal year 2009, they went to a number of facilities
and found these types of problems.
So they do have that internal mechanism to followup to see
if policies and procedures are being implemented, and that is
how we know that there has been some progress, but not enough
progress.
Mrs. Kirkpatrick. All right. And so they find that they are
not being implemented, but it sort of stops. As you said, there
is no accountability in terms of personnel.
Mr. Slocum. They found problems with implementation, and
then they make recommendations.
And we haven't been able to verify this, but we have
received some information that they make recommendations to
each of the facilities where these problems have been found,
and then the facility is responsible for putting together
corrective action plans. The corrective action plans are to
address the specific problems that each of the inspections
identified. And the OBO tracks when the corrective action plans
are coming in and if the facilities are accepting or concurring
with the recommendations.
And it seems--from the preliminary information we have
gotten--that they have concurred with the recommendations and
they are taking actions to address them. The problem is that
that just hadn't happened yet, and so those problems are still
out there.
Mrs. Kirkpatrick. Okay. Well, thank you very much for
reporting to the Committee.
And Mr. Chairman, I share the sentiment of the other
Members of the Committee, this is a serious problem that we
really need to stay on top.
Thank you.
The Chairman. Thank you, Mrs. Kirkpatrick.
Mr. Buyer.
Mr. Buyer. Let me ask a question about the--we are in a
decentralized model without controls or accountability to the
degree for which we would desire. I mean right now if you look
back in the last three or four secretaries, I mean they have
since 2000 increased these directives without execution.
So if you moved from a decentralized to a more centralized
model in contracting is that something that you would endorse?
Ms. Ragland. We haven't done work on that issue. I will say
that that is something that the auditor has reported as being
one of the root causes is decentralization.
Mr. Buyer. Thank you very much for that answer.
Let me ask about the--with regard to the canceling of the
FLITE Program. You want to talk about that a little more,
please?
Ms. Ragland. Well we----
Mr. Buyer. Let me just say this, I don't have a problem if
someone with authority is going to cancel out the program, but
tell me what you are going to do to replace it. What is your
plan? And I am kind of in the nebula.
Ms. Ragland. Well, I think that is a good question, and
that is the same question that we have.
We have seen some press releases that FLITE has been
canceled. We have very little sketchy information in terms of
what the initiatives are that VA has in mind to be able to
continue to address the serious problems that exist.
Mr. Buyer. Why do you think the VA's own audits have been
showing a continuing disregard for your recommendations?
Ms. Ragland. I think that, as I said initially, I think
that VA is making some efforts. We have seen a memo from top
management on the segregation of duties issue. So I feel that
they are making efforts to try to address the recommendations
that we have made. I don't think they are there yet, but I do
think that they have made some efforts.
Mr. Buyer. But two really big issues. Transparency and the
lack of documentation on miscellaneous obligations. You know, a
lot of these dollars--I am quite certain, I am confident--I
don't know if I should use the word confident--but I feel
comfortable that a lot of these dollars are being spent for
exactly what they are being spent for. But when you don't have
the documentation then it just--right? Opens the VA up to all
types of----
Ms. Ragland. Right.
Mr. Buyer [continuing]. Allegations.
Ms. Ragland. Right.
Mr. Buyer. And then there are the bad apples----
Ms. Ragland. Right.
Mr. Buyer [continuing]. Who can then take advantage of
that, you know.
Ms. Ragland. That is right.
Mr. Buyer. And so bringing in the internal controls, having
the transparency is a pretty good thing, wouldn't you agree?
Ms. Ragland. Definitely. Definitely agree.
Mr. Buyer. All right.
The Chairman. Thank you, Mr. Buyer.
I would like to thank the GAO for its efforts and the
questions it continues to ask and the reports it gives us.
I would just say as an introduction to the next panel, we
have all been polite here and we have a lot of bureaucratic
words and processes. I would not underestimate the anger that
my colleagues feel on this--on both sides of the aisle.
When an account doubles that was under scrutiny for
unaccountability, and other things that GAO has mentioned
today, I would not underestimate the sense that we are pretty
mad. There has to be some answers. For some of the legislation
that is coming forward you might see things that you won't like
but that we have to do in order to get some control over this.
Mr. Buyer. Mr. Chairman, may I ask just one quick question?
The Chairman. I will yield, yes.
Mr. Buyer. There has to be something here. I don't know, I
am not getting it.
The miscellaneous obligations, these contracting officers,
in other words when the medical director of the medical center,
I don't know, they are out of something or they need something,
right? Chief of medicine has come to them and said I have to
have blah, blah, and I got to have this tomorrow. Great. Go to
the contracting officer, get it done, get satisfied. How do
they do it quickly? We will just put it under miscellaneous
obligations. Right? Fine.
You know, if it makes you do your business--I don't know
the details. The VA is going to be up here, they can tell us
all that, but there has to be something going on out there in
the operations--within operations to have such a doubling of
the miscellaneous account.
And we are just asking questions about what is happening
out there, how is this happening? And when you don't have these
directives being followed, that is why we are all upset.
When you did your review are you finding something out
there that is--why did this double like this? What is going on
in operations in the medical centers?
Ms. Ragland. You know, we haven't done that work so we
don't know.
Mr. Buyer. Okay.
Ms. Ragland. That is the question that we would like to
hear the answer to.
Mr. Buyer. We will ask the next panel then.
All right, thank you.
The Chairman. Thank you, Mr. Buyer.
Okay, thank you again for your----
Ms. Ragland. Thank you.
The Chairman [continuing]. Contribution today, and we will
call the next panel forward.
Joining us from the Department of Veterans Affairs is the
Deputy Assistant Secretary for Finance, Mr. Edward Murray, who
is accompanied by Paul Kearns, who is the Chief Financial
Officer, Fred Downs, the Chief Procurement and Clinical
Logistics Officer, and Mr. Jan Frye, the Deputy Assistant
Secretary of the Office of Acquisition and Material Management.
We have your written statement, Mr. Murray, and look
forward to your oral presentation.
STATEMENT OF EDWARD MURRAY, DEPUTY ASSISTANT SECRETARY FOR
FINANCE, U.S. DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY W.
PAUL KEARNS III, FACHE, FHFMA, CPA, CHIEF FINANCIAL OFFICER,
VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF VETERANS
AFFAIRS; FREDERICK DOWNS, JR., CHIEF PROCUREMENT AND LOGISTICS
OFFICER, VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF
VETERANS AFFAIRS; AND JAN R. FRYE, DEPUTY ASSISTANT SECRETARY
FOR ACQUISITION AND LOGISTICS, U.S. DEPARTMENT OF VETERANS
AFFAIRS
STATEMENT OF EDWARD MURRAY
Mr. Murray. Mr. Chairman, Mr. Ranking Member, and Members
of the Committee, thank you for inviting me to appear before
you today to discuss what VA has done and plans to do to
continue improving its oversight of miscellaneous obligations.
The Chairman. Is your microphone on? You have to press that
button in front of you. It is a first step toward transparency.
Mr. Murray. Thank you, sir.
Mr. Chairman, Mr. Ranking Member, and Members of the
Committee, thank you for inviting me to appear today to discuss
what VA has done and plans to do to continue improving the
oversight of miscellaneous obligations. These issues are cross-
cutting, corporate issues that affect multiple VA
organizations, as reflected in the witnesses invited to appear
today.
VA primarily uses two different document types to obligate
funds for goods and services; a VA Form 2237, a standard
procurement requisition document; and a VA Form 1358, commonly
known as a miscellaneous obligation. However, the word
miscellaneous can be misleading.
In most cases we can clearly identify the purpose and
vendor of these obligations. These obligations are supported by
valid requirements.
I will note, however, that Form 1358 does not enforce
internal control strictly.
The Chairman. I don't mean to interrupt, sir, but you said
in most cases we can track back. Why is that not in all cases?
If everybody has to fill out a form why isn't it in every case?
You only said in most.
Mr. Murray. In a small number of cases, the supporting
documentation cannot be located. We are working on that.
Form 1358 compliance relies heavily on review and oversight
to identify a violation and is dependent on field mangers to
review the compliance reports and take corrective actions where
compliance problems are identified.
To address the two key Form 1358 findings in the Government
Accountability Office's September 2008 report, VA has provided
new tools for management and staff to use to monitor
compliance.
VA has modified its Integrated Funds Distribution Control
Point Activity System, known as IFCAP, to distinguish if a
transaction originated on a Form 1358 or a Form 2237.
As of September 2009, this data is now sent to VA's
financial management system to distinguish between these two
types of transactions in our agency financial management
system.
VA has developed two new IFCAP reports to help facilities
accomplish their oversight responsibilities.
The Segregation of Duties Violations Report is used to
ensure appropriate segregation of duties for approval functions
involved in using a Form 1358, and an additional Missing Fields
Report identifies where the vendor, contract number, or purpose
data fields have not been entered.
In January 2009, VA's Office of Finance reissued policy for
the use of miscellaneous obligations, including a prohibition
against one individual performing more than one approval
function.
Our policy also prohibits the use of miscellaneous
obligations for other uses unless the head of the contracting
authority's approval is obtained.
We are also ensuring that compliance with the policies is
applied consistently throughout VA.
VA has established two review programs to mitigate the
risks involved with miscellaneous obligations and to ensure
adequate oversight and reviews are regularly performed.
The Management Quality Assurance Service, discussed
previously, has expanded its site reviews to include
miscellaneous obligations. The financial quality assurance
managers at each VHA network review a percentage of all VHA
station miscellaneous obligations for segregation of duties and
documentation purposes.
Due to VA's efforts, current fiscal year 2010 results--and
I think you all can see the graph--show an overall trend of
substantial improvement since GAO's original report in 2008.
The percentage of completion of required fields on Form
1358 has improved. Segregation of duty violations have
decreased, as have instances where miscellaneous obligations
that require head of contracting review have not been sent as
required.
The management quality assurance reviews in fiscal year
2010 have substantiated improvements in the separation of duty
compliance rates.
For fiscal year 2010 to date Management Quality Assurance
Service data indicates that 71 percent of sample transactions
met the four person separation of duty standard, while 99
percent of sample transactions met the three person separation
of duty standard.
In fiscal year 2009, only 49 percent of sample transactions
met the four person standard, while 90 percent met the three
person standard.
VA is also evaluating modifications to IFCAP, including
changes to systematically enforce the segregation of duty
requirements and route, where appropriate, miscellaneous
obligations to the contracting office.
We are also considering requiring that our IFCAP system
uniquely identify the type of obligation. If our IFCAP system
uniquely identified the type of obligation we would effectively
remove the ``miscellaneous'' aspect of these obligations.
VA is also taking interim action----
[The prepared statement of Mr. Murray appears on p. 35.]
The Chairman. So your solution to the problem is you are
going change the way you call it, right?
I am going to stop your testimony. Is there anybody from
Congressional Relations at VA here?
You know, we put you on a later panel so that maybe you
will listen to what happened on panel number one and respond to
it, and you are reading the same stuff that we all read.
Why don't you respond to a lot of the questions that our
colleagues raised instead of reading this stuff?
The only reporter in the room walked out because he was so
bored. You are not telling us anything.
Respond to the anger that I mentioned, respond to the
questions that all my colleagues raised that were really good
questions. We don't hear anything except that you are going to
change now, take the name miscellaneous off the obligations.
We will go to questions, because you know your statement is
just not very helpful.
I have a fantasy based on what you said, that the very
people who did not fill out the Form 1358 are going to get a
bonus because they decreased the excess paper that you are
going to have in the VA bureaucracy. That is my fantasy in how
you guys work.
Mr. McNerney.
Mr. McNerney. Thank you, Mr. Chairman. Thank you for coming
here to testify this morning.
We have heard a lot about the risks, but I don't have any
specific instances in front of me of fraud, and that seems very
odd to me.
As Mr. Stearns pointed out we have seen an increase from $5
billion to $12 billion in the use of Form 1358. It just seems
to me that Form 1358 must be so easy to use that everybody in
the VA wants to use it.
I mean is that why people are using it more? Is that why
the--it is just easier to use, require, less discipline, less
work? Is that what is happening?
Mr. Murray. The 1358 Form is used primarily--should be used
primarily for non-Federal Acquisition Regulation (FAR) type
procurement transactions, such as beneficiary travel, meal
tickets, and purchase care under title 38 that do require a
FAR-based contract.
Mr. Buyer. You just said should be. We are all getting
really annoyed here. Please be responsive to the gentleman's
question.
Mr. Murray. There are 23 approved uses for that form.
Mr. McNerney. Right.
Mr. Murray. They have been vetted. They should only be used
for those 23 approved uses.
Mr. McNerney. I mean it just seems that to me that Form
1358 ought to be eliminated and Form 2237 ought to be expanded
and used for everything, because look at the situation you are
in right now.
I mean if 2237 requires more discipline then that is what
people should be using. Do you have a way to respond to that?
Mr. Kearns. Yes, sir. I think I would respond that we
currently have 23 authorized uses for the 1358. Such things as
purchase care fee care, particularly in rural areas,
beneficiary travel, which Congress recently increased and we
are very grateful for, prosthetic supplies, pharmaceuticals.
These are all authorized items for the use of a 1358. We know
exactly what they are used for.
Mr. McNerney. So then if that is the case then why is there
such a ballooning from $5 billion to $12 billion?
Mr. Kearns. Because it went actually from $6.9 billion in
2007 to $11 billion in 2008, to $12 billion in 2009. We are on
track this year to be right at about that same level. The
number of transactions have actually decreased. The dollar
amount has increased.
We know specifically what it is being used for, each of
them. We can give you a detailed report. Like I said, there are
certain examples. There are 23 different categories that are
authorized.
Mr. McNerney. But I mean, if you know what they are all
being used for why is there such a disconnect between what the
auditors are saying?
Mr. Kearns. The auditors are telling you what is documented
in the IFCAP system, which is the feeder system. We can then
get the information out of the financial system. We know who
has been paid for this, we know what it is for. By the OMB
categories we categorize that and we can pull it out of the
financial system.
It is true what the GAO has said, that the documentation is
not 100 percent. We have a long way to go. We have made some
improvements, we still have a long way to go. A lot of it
requires manual oversight to comply, and we are training our
people, reinforcing that, but we do know what the spending is
for and we can report that.
The fact that the label is miscellaneous does not mean that
we don't know what we are purchasing, and we can report it with
transparency.
Mr. McNerney. Well, I mean, that is what I am getting at.
If that label is getting us into this problem and it is going
to--I mean it could end up in the media or whatever, why don't
we correct that by creating a form that is more transparent?
Mr. Kearns. I think that is what Mr. Murray was referring
to. And it is not just to change the name, it is to correctly
articulate what we are buying. In other words----
Mr. McNerney. Right, it needs to be more transparent.
Mr. Kearns [continuing]. Part of these purchases--and we
can show--are for fee-basis care. You cannot run those through
a contracting officer. We wouldn't be able to respond to the
veterans' needs. Part of them are pharmaceuticals, are drugs
and supplies for a big item. Part of them are beneficiary
travel where we have to pay each veteran when they come for
care. The beneficiary travel can't go through a contracting
officer.
Mr. McNerney. Now you have recently terminated the
Financial and Logistics Integrated Technology Enterprise, is
there a better system that is going to be in place that will
help track what is missing here?
Mr. Murray. What we are doing is making a number of changes
to our subsidiary systems. As the Deputy Assistant Secretary
for Finance, my office is responsible for internal control. We
do our year-end financials working with the auditors, and as
such we constantly work within the paradigm of systems and
processes we have to make these improvements to be responsive
to GAO, our auditors, Deloitte, now Clifton Gunderson, and the
OIG. We are constantly looking at things that could improve the
state of our financial stewardship of these assets given those
tools we have now.
What I am trying to make clear is that we have always had a
parallel track to make improvements, these are existing
structures and resources.
Mr. McNerney. Well, we are running out of time.
Mr. Buyer. Will the gentleman yield to me for a second?
Mr. McNerney. Yes.
Mr. Buyer. You mentioned in response to his question about
the 23 categories on miscellaneous obligations. How much was
spent outside of the 23 categories under miscellaneous
obligations?
Mr. Murray. Based on the fiscal year 2010 audit, the
Management Quality Assurance Service sampled 271 transactions
at 16 different stations. And I might add, that is a judgmental
sample where they looked for suspicious transactions. I think
it was one-half of 1 percent of the total revenues that did not
receive head of contracting authority approval.
Mr. Buyer. One-half of 1 percent outside of the 23
categories. Okay. How much money are we talking about?
Mr. Murray. I have to take that and go back and look.
[The VA subsequently provided the information in the
answers to Questions #1 and #2 in the Post-Hearing Questions
and Responses for the Record submitted by Congressman Buyer,
which appear on p. 55.]
Mr. Buyer. One-half of 1 percent. Is it all right for me to
assume that we are talking about one-half of 1 percent of $12
billion? This is like real money, okay?
Mr. Murray. I have to be clear here. They did not do what I
call a random sample. When the Management Quality Assurance
Service looks at these stations and pull samples where they are
looking for suspicious activity. Therefore, you can't actually
extrapolate the one half of 1 percent to the entire population.
Mr. Buyer. Okay.
Mr. Murray [continuing]. Overly high.
Mr. Buyer. Mr. McNerney, I want to thank you for your line
of questions, but I want to share with my colleagues, look what
we have witnessed here in response to the question so far.
You have VHA responding to the questions. You have the
Deputy Assistant Secretary of the Office of Acquisition has not
commented yet. And why would he not comment? Because he doesn't
have oversight over them.
Therein lies our great challenge, and therein lies what the
Administration has given us some proposals on the centralizing
so we empower you, sir, with greater authority over the health
side of the business, and they are not going to like that, and
I understand that. But I think the centralizing of that
oversight, Mr. Chairman, is going to be pretty important.
I want to thank Mr. McNerney for yielding to me.
Mr. McNerney. I yield back.
The Chairman. Mr. Roe.
Mr. Roe. I thank the Chairman. And once again, I appreciate
you taking a look at the amendment that we had. The more I have
heard today the more I realize that we need to do that.
I looked at the OIG when we were looking at the entire
budget of the VA $125 billion, we are talking about .01 percent
to return 38 times the amount spent on it, and I see now that
the FLITE Program is gone and we are using basically current
software and current procedures.
And let me just get down to the real world. I would get a
patient sent to me from the VA or for instance in Montana where
85 percent of the mental health is provided outside of a VA
system because it is too far to travel. It makes sense to do
that. What oversight do you have on those dollars, those fee
service dollars being spent? Can you tell us how many they are?
Because what that would do for the VA would be able to tell
you how many personnel, for instance, in a more urban area,
that you might need to hire where you are short.
Do you have that information?
Mr. Kearns. Yes, sir, we do.
Mr. Roe. And you tell us--in other words you can tell the
VA right now that with certainty that you need--maybe it is
psychological help or more psychologists or associate workers
or whatever?
Mr. Kearns. We can tell how much we are spending in your
example in Montana for mental health to what providers and how
many transactions, you know, how many visits, that type of
thing.
The evaluation of whether we would want to put staff in-
house to do would be an economic decision, that it may not be
cost effective to do it.
In other words, actually going to civilian providers may be
the most cost effective way to do it, and also the best for the
veterans.
Mr. Roe. No, I agree with that. In some areas in Montana
you have to travel 6 to 8 hours maybe by car or something or
train or whatever to get to a facility. I agree with that 100
percent.
One of the frustrations that I have had since I have been
here is that we in the private world, which I spent my entire
life until 2 years ago here, I don't know how hundreds of
millions of dollars was spent on this FLITE Program, and $10
billion I think spent on a medical record program with the
Department of Defense and the VA and they can't talk to each
other. We can't do that in the private world. You go out of
business. You just go broke and you are done.
And unfortunately here it seems like we spend millions of
dollars or billions of dollars and we don't know where the
billions of dollars go. And just the short time I have been
here I see this panel after panel. And I guess that is some of
the frustration that we have, that I have, is we can't make the
same errors and then look back a year from now and say that
well, we are doing the same thing over and nobody is
accountable for what happened. I guess that is just a bit of
frustration I have.
I won't take anymore time, Mr. Chairman, I yield back.
The Chairman. Thank you.
Mr. Boozman, do you have any questions?
Mr. Boozman. Thank you, Mr. Chairman.
I guess my question is a couple things. First of all, I
would like to know how the VA facilities in Arkansas are doing
in relation to the GAO report? If we could get that sent to us
at some time that would be really helpful.
Mr. Kearns. We will provide that for the record, sir.
Mr. Boozman. Now, my understanding is--so you have the 1358
Form and then you have these 23 categories that you can use it
for. And so is it correct in saying that you should
theoretically list those 23 categories with the dollar amounts
to each one?
Mr. Kearns. Yes, sir, we can provide that report.
[The VA subsequently provided the information in the
answers to Questions #3 in the Post-Hearing Questions and
Responses for the Record submitted by Congressman Buyer, which
appears on p. 56.]
Mr. Boozman. Okay. I guess, in the interest of
transparency, I guess I don't understand why you are not doing
that rather than lumping such a large figure together.
As we try and figure out what is going on as you all do
your planning, certainly purchase care is a huge deal, as we
try and make these decisions. The travel, we have significantly
increased that it is helpful to know.
The first thing I look at in a budget is month to month,
you know what has jumped out, what is out of line, and then
year to year. But if you don't have that information, and it
sounds like you do it, okay?
Mr. Kearns. We do have it, sir. And I think a summary sheet
was provided to the Committee staff. We have the detail that
backs that up, probably about a seven-page list for each year
that breaks it been line item.
Mr. Boozman. Right. And then our concern is the past that
is not accounted for.
Mr. Kearns. I understand, sir.
Mr. Boozman. You know, which is about you said one-half of
1 percent, and that is about how much? What does that translate
to?
Mr. Kearns. We would have to give you the dollar amount. I
don't know that it is----
Mr. Boozman. But you should know that.
Mr. Kearns. Yes, sir.
Mr. Boozman. And that is a concern that you can't tell us
that figure.
So again you do need to break it down, you do need to--like
I said, I can't imagine that you couldn't give us that figure,
because that is important. So that is kind of where we are at.
And then the other thing is, is that as you follow through,
what is your follow through mechanism in the sense that you
said, you identified these that you found you are 200 and some
odd whatevers that you investigated that were kind of, what
happens at that point?
Mr. Murray. What happens, sir, is at a facility where the
Management Quality Assurance Service does an audit and has
findings they produce a set of recommendations. The facility
has to concur with the recommendations and they invariably do.
They have 30 days to provide an action plan as to how they are
going to remediate the findings. If they don't we elevate it up
the chain.
We receive a report on how they are going to remediate the
problem at that facility. Then we follow up to make sure that
it has been remediated and request documentation to show
remediation.
Mr. Boozman. So have we ever had to fire anybody or
prosecute anybody in the course of this in the last few years?
Mr. Murray. Not that I am aware of, sir.
Mr. Boozman. Okay. And that is a problem also. Again, not
in the catch you type situation, but we really are talking
about a lot of money, and you do have to hold people
accountable. And certainly if there are things going on that
shouldn't be going on, but the very basic of that is knowing
how much money out there is unaccounted for. So again, it is a
real concern that you can't give us that figure.
So thank you, Mr. Chairman.
The Chairman. Thank you, Mr. Boozman. We share your
frustration.
By the way, if the half percent was based on $12 billion I
could give you that figure. Then Mr. Murray says we should not
extrapolate. I don't know why you do a sample if you can't
extrapolate. What is the point? You may as well do every one.
You tell me you took a sample, but I extrapolate from it.
Mr. Boozman. But Mr. Chairman, if you will let me
interrupt.
I guess what I want to know is, is that when you do those
23 categories and you have all of that figured out, it is easy
to know how many you just subtract. You don't have to
extrapolate at all.
The Chairman. But these guys are all at the Secretary and
Assistant Secretary level, and I guess they don't do that.
Mr. Buyer.
Mr. Buyer. You know, Dr. Boozman, I can imagine if you took
your CFO or a deputy CFO from Wal-Mart just down the street
from you and brought them and had them listen to this today.
You know, it is almost as if there has to be an off the
shelf--a private sector off the shelf accountability system. Is
there one that you could utilize within the VA, or is our
procurement such a mess that you couldn't do that? Jan?
Mr. Frye. I think we are talking about the financial
accountability system here.
Mr. Buyer. Yes.
Mr. Frye. And that is what this is. And I just want to make
sure that we are clear in that this is a financial
accountability system, whether it is a 2237 or a 1358,
miscellaneous obligation, that can be used to fund a FAR-based
contract. And at least half of this $12 billion in revenue is
used to fund FAR-based contracts. Those are contracts that are
put in place by warranted contracting officers, they just
happen to be funded with miscellaneous obligations.
Now, I think we could all argue the point that perhaps we
are shooting ourselves in the foot by funding these FAR-based
contracts with a miscellaneous obligation vice a 2237, but the
reason it was done is because of the financial system that is
currently in place.
The financial system at the transaction level was designed
around a 1358 some years ago. Again, FLITE was supposed to come
in and fix all that. So out of necessity, so to speak, they
used this antiquated system, this system that we call an aged
system, to fund these FAR-based contracts.
There are some issues that have recently come to light in
the way the contracts are funded by the use of the 1358's that
we have to look at, but you know, as long as it is a system
that has been blessed by the financial community, the
contracting community doesn't care how we finance the
contracts.
Mr. Buyer. All right, you are the policy guy, okay? I don't
care if this is the VA or this is the school board running the
local school, you don't have the one person identify,
authorize, and obligate. One person. I guess if I had owned my
own firm that is what I am going to do, right? I would do that.
But we don't do that with the taxpayer's money. We bring
transparency to it so people get to know how we make our
judgments and how we make decisions and were they the right
ones done. It is the ultimate of collusion. It is one person.
From a policy standpoint how do we allow that to happen?
I don't have a problem--seriously, I don't have a problem
with them if we say we have gone from $5 billion to $12 billion
under miscellaneous obligations. You can just throw that out,
no, no, that is not what my problem is. My problem is the lack
of transparency and the internal controls, and you don't have
the ability to identify. My gosh, you know, 25 percent here,
you don't even know who the vendor was. I mean from a policy
standpoint, Mr. Frye.
Mr. Frye. Well, I would agree with you, Mr. Buyer, that
when a document, a 1358 goes to a contracting officer and the
contracting officer obligates that document there are supposed
to be fields that are filled out on that 1358. And technically
our rules say that it should never even get to the contracting
officer if those fields aren't filled out. In some cases they
do, and those should be turned around. They shouldn't be used
to finance a contract.
But again, I want to emphasize, the majority of those cases
I believe are outside of the contractual arena, because as Mr.
Kearns pointed out, these 1358's are used to finance contracts,
FAR-based contracts, and they are also used to finance things
such as fee care for patients, travel, and those types of
things.
The Chairman. But that is the point that we are trying to
make. If you don't have all those filled out and if you don't
know where they are somebody could be using them for something
else, right? You keep saying they are all being used for the
right purpose, but we don't have any proof of that.
Mr. Frye. Well, again, Mr. Chairman, I am not saying they
are all being used for the right purpose. I think the GAO
report has clearly shown that there are some problems. I am
just trying to draw the distinction between those used for
contracts and those that aren't used to contracts.
The Chairman. We understand, and that is the point. You
must have accountability for those very kinds of transactions,
and it seems to be missing.
Mr. Frye. Agreed, sir.
Mr. Buyer. We recognize that Congress has sought to be
responsive to the American people's demands to provide medical
services to your wounded warriors and to do it as efficiently
and as quickly and as best we possibly can as a Nation, and
more money has been put into that pipeline to do that, and as
we stress the system to be responsive we have had an escalation
in the fee for service.
Now we recognize that the system is being responsive to the
public's demand, but you have to have the internal controls,
you have to do that. I mean Congress is going to continue to
put more money in, but we have to have these internal controls.
And so as we--that is why this Acquisition Reform Bill, and
the Secretary recognizes that, and gentlemen I have spoken with
you about this, I think it is timely, it is ripe and it is
timely to do this and empower you and to centralize the system.
Mr. Murray, of the 23 categories, would you be able to tell
us where the escalation came from?
Mr. Murray. We could break it out by facility and by
category.
Mr. Buyer. So what is it?
Mr. Murray. I would have to get back to you. We would have
to do the analysis.
[The VA subsequently provided the information in the
answers to Questions #1 and #2 in the Post-Hearing Questions
and Responses for the Record submitted by Congressman Filner,
which appear on p. 42.]
Mr. Buyer. Has anybody ever looked?
Mr. Kearns. Yes, sir. I don't have the specific figures
here, but the areas would be fee care, pharmaceuticals,
beneficiary travel, home oxygen, those types of things that
have increased in terms of dollar amounts from 2008 to 2009 to
half way through 2010 that we have the data for.
Mr. Buyer. Have you looked at that before?
Mr. Kearns. Yes. Yes, sir, we have.
Mr. Buyer. So do you remember--the fee for service, was
that--tell me what the biggie is?
Mr. Kearns. That is one of----
Mr. Buyer. The fee for service has to be.
Mr. Kearns. Fee is one of them, yes, sir.
Mr. Buyer. And the pharmaceutical.
Mr. Kearns. And beneficiary travel.
Mr. Buyer. And beneficiary travel.
Mr. Kearns. You know, where we have to----
Mr. Buyer. Yes.
Mr. Kearns [continuing]. You know, pay mileage.
Mr. Buyer. On to per diems.
Mr. Kearns. In other words, and it is not practical to run
those types of things through a procurement office. I mean, it
is not cost effective.
Mr. Buyer. And I don't have a problem with it.
Mr. Kearns. Yes.
Mr. Buyer. See what I am saying, I don't have a problem
with that.
Mr. Kearns. So we can----
Mr. Buyer. Just document it.
Mr. Kearns [continuing]. Actually give transparency and
report this. It is just that it is--the document that we use is
a 1358.
Now we would be probably smarter to call it beneficiary
travel, beneficiary travel obligations rather than a
miscellaneous obligation, because we know exactly what it is
for. The same thing with pharmaceuticals. We know these, it is
just that the document that is used is miscellaneous obligation
document.
As Mr. Frye said, it was something that was developed years
ago and has been part of our system the way it is developed.
Now certainly that can be changed, but as far as
transparency and reporting and what it is for we can provide
that information.
[The VA subsequently provided the information in the
answers to Questions #1 and #2 in the Post-Hearing Questions
and Responses for the Record submitted by Congressman Buyer,
which appear on p. 55.]
Mr. McNerney. Will the Ranking Member yield?
Mr. Buyer. Yes. Yes.
Mr. McNerney. Part of the problem that I perceive is that
there are several fields in this form that either can't be
filled out or inherently can't be filled out, or either that or
they should be required to fill out.
I mean can we ask you here today to require every form to
have all the fields filled out or are you going to be able to
tell me that there are some that we just can't fill out because
the situation is too specific to the case involved?
Mr. Kearns. No, sir, I would tell you we will attempt to
have them all filled out, but our system right now will process
a document without all those fields being filled out. What it
does, it then generates an after the fact report of this
exception. Locally we have to then go in and review that, and
the only way to fix it in the system is to cancel the order and
re-issue the order.
So one of our problems right now is the way our automated
systems are designed they won't reject the transaction if all
those fields aren't filled. That is the ideal that we would
like to have.
Mr. McNerney. So you can't right now, if you go back to the
office you can't say okay, anyone that fills out a form 1358,
we will reject your form if you don't fill out every field? You
can't do that today.
Mr. Kearns. Our system will not allow us. It will report to
us after the fact, after it is done. We have report generators
that will say you have submitted this document and all the
fields aren't filled, or fewer than four people--the separation
of duties didn't comply with----
Mr. McNerney. It seems like that ought to be a priority.
I yield back.
Mr. Buyer. You know, it is the Administration that is
asking for the contracting authority on the fee for service.
You asked us. So we are going to do that so you don't use this
form for it.
One of the things we don't realize is, you know, you have a
medical center--break this down, bubba-size it. I mean, I am a
bubba, okay? If you bubba-size it, you say all right, you have
that wounded warrior, you have a particular--sometimes I wish I
were a doctor--some medical procedure needs to be done and it
is highly technical and they are going to refer it out in the
community. You know, sometimes we don't have the internal to
say, okay let us look at what is the provider network, what is
the TRICARE provider, what is the--you know, the negotiated
price? Sometimes we move quickly, we don't even do that,
immediately fill out your form, and the particular doc just
down the road is going to do it, and he is charging what he
wants to charge, and we don't have anybody that then even looks
at the contract. You know, 50 percent of them getting looked
at.
Mr. Kearns? I mean, so I can understand why you are asking
us to say hey we are going to do this fee for service by
contract.
Mr. Kearns. No, the fee care, sir, is specifically
authorized.
Now normally the first priority is to make sure we have a
quality provider, then it is a cost effective. In other words,
cost isn't the first consideration, it is the quality of the
provider and the care and the access.
But we look at all of those things in authorizing care to
be provided in the civilian community.
Mr. Buyer. All right. Mr. Kearns, I created TRICARE for
Life, you don't have to explain that to me. When I created
these programs you create these networks. And I agree, you look
at quality. But by golly it is quality and its price, and you
just don't say we give you a blank check.
Mr. Kearns. Oh, absolutely, sir, no, I agree with you.
Mr. Buyer. Okay.
Mr. Kearns. I am saying it is not just price though.
Mr. Buyer. Right, I agree.
The Chairman. Thank you, Mr. Buyer, and Mr. McNerney for
being here. We also thank the panel.
I must say I hope you will report back to the Secretary
that we did not find the testimony to be very responsive. You
didn't respond to the anger that was up here, you didn't
respond to specific questions that our colleagues asked and you
didn't give us any real assurance that things are being taken
care of. You have a form that may change and you may change the
name of the categories.
This was not a good response to the issues, and we are
going to pursue them. If we have to have your bosses here to
get answers, we are going to do that.
I want you to report back to the Secretary that we did not
find your testimony responsive and that we are going to
continue to look at this.
This hearing is adjourned.
[Whereupon, at 11:28 a.m., the Committee was adjourned.]
A P P E N D I X
----------
Prepared Statement of Hon. Bob Filner, Chairman,
Committee on Veterans' Affairs
Good morning. The U.S. Department of Veterans Affairs is the second
largest agency in our system of government; and each year, they are
authorized billions of dollars to care for our Nation's veterans.
Miscellaneous obligations are used by the VA to obligate funds in
circumstances where the amount to be spent is uncertain. They are used
to reduce administrative workload and to facilitate payment for
contracted goods and services when quantities and delivery dates are
unknown.
In 2008, the Subcommittee on Oversight and Investigations held a
hearing to assess the Department's inadequate controls of these funds,
shedding light on material weaknesses in VA financial management
systems.
Today, we will examine what actions the VA has taken since 2008 to
ensure that these financial material weaknesses are corrected and that
improvements are being made in its internal financial control
reporting.
The Secretary's recent decision to cancel the Integrated Financial
Accounting System project effectively eliminates the Financial and
Logistics Integrated Technology Enterprise (FLITE) program, which was
intended to integrate and standardize the agency's financial and asset
management processes across all offices of the Department by 2014 at an
estimated cost of $570 million.
Though the FLITE program was not the ultimate end all, VA had
parallel efforts under way to fix the material weaknesses. We are here
today to make certain that the process is credible and ensure integrity
of the process.
In fiscal year 2009, the VA spent almost $12 billion on
miscellaneous obligations, up nearly $6 billion from reported fiscal
year 2007 levels.
The Government Accountability Office reviewed VA's financial
reporting system and cited that the Department has made some
improvements, but they still have not fully addressed the specific
control design flaws.
The GAO made four recommendations to the VA to develop and
implement policies and procedures intended to improve overall control,
including: improved oversight of miscellaneous obligations by
contracting officials; segregation of duties; improved supporting
documentation of miscellaneous obligations; and, oversight mechanisms
to ensure control policies and procedures are fully and effectively
implemented.
We will hear today that the VA is making significant strides in its
financial accounting employing policies and procedures to improve its
oversight of miscellaneous obligations and implement GAO's
recommendations. However, I am anxious to hear from the VA when they
plan to implement these policies.
Effective oversight and review by trained, qualified officials is a
key factor in identifying potential risk for fraud and waste.
It is obvious that without basic controls over these billions of
dollars in miscellaneous obligations, the VA is at a significant risk
of fraud, and effectively designed internal controls would help
mitigate these concerns.
As we ensure there is more accountability in miscellaneous
obligations, we do not want to infringe on VA's abilities to provide
quality care to veterans.
While the VA's mission is to care for those who have sacrificed so
much, we must also ensure proper use of taxpayer money, and financial
accountability.
Prepared Statement of Susan Ragland, Director, Financial Management and
Assurance, U.S. Government Accountability Office
DEPARTMENT OF VETERANS AFFAIRS: Long-standing Weaknesses in
Miscellaneous Obligation and Financial Reporting Controls
GAO Highlights
Why GAO Did This Study
In September 2008, GAO reported internal control weaknesses over
the Veteran Health Administration's (VHA) use of $6.9 billion in
miscellaneous obligations in fiscal year 2007. In November 2009, GAO
reported on deficiencies in corrective action plans to remediate
financial reporting control deficiencies. This testimony is based on
these previous reports that focused on (1) VHA miscellaneous obligation
control deficiencies and (2) Department of Veterans Affairs (VA)
financial reporting control deficiencies and VA plans to correct them.
For its review of VHA miscellaneous obligations, GAO evaluated VA's
policies and procedures and documentation, interviewed cognizant agency
officials, and conducted case studies at three VHA medical centers. For
its review of financial reporting control deficiencies, GAO evaluated
VA financial audit reports from fiscal years 2000 to 2008 and analyzed
related corrective action plans.
What GAO Recommends
In its September 2008 report, GAO made four recommendations to
improve VA's internal controls over miscellaneous obligations. In its
November 2009 report, GAO made three recommendations to improve VA
corrective action plans to remediate financial reporting control
deficiencies. VA generally concurred with these recommendations and has
since reported taking actions to address the recommendations.
What GAO Found
In September 2008, we reported that VHA recorded over $6.9 billion
of miscellaneous obligations for the procurement of mission-related
goods and services in fiscal year 2007. We also reported that VA
policies and procedures were not designed to provide adequate controls
over the authorization and use of miscellaneous obligations, placing VA
at significant risk of fraud, waste, and abuse. We made four
recommendations with respect to (1) oversight by contracting officials,
(2) segregation of duties, (3) supporting documentation for the
obligation of funds, and (4) oversight mechanisms. In January 2009, VA
issued new policies and procedures aimed at addressing the deficiencies
identified in GAO's September 2008 report.
In November of 2009, we reported that VA's independent public
auditor had identified two of VA's three fiscal year 2008 material
weaknesses--in financial management system functionality and IT
security controls--every year since fiscal year 2000 and the third--
financial management oversight--each year since fiscal year 2005. While
VA had corrective action plans in place that intended to result in
near-term remediation of its internal control deficiencies, many of
these plans did not contain the detail needed to provide VA officials
with assurance that the plans could be effectively implemented on
schedule. For example, 8 of 13 plans lacked key information about
milestones for steps to achieve the corrective action and how VA would
validate that the steps taken had actually corrected the deficiency.
While VA began to staff a new office responsible for, in part,
assisting VA and the three administrations in executing and monitoring
corrective action plans, we made three recommendations to improve
corrective action plan development and oversight. VA concurred with our
recommendations and took some steps to address them.
In fiscal year 2009, VA's own internal VA inspections and financial
statement audit determined that the internal control deficiencies
identified in our prior reports on miscellaneous obligations and
material weaknesses identified in prior financial audits continued to
exist. VA conducted 39 inspections, which identified problems with how
VHA facilities had implemented VA's new miscellaneous obligation
policies and procedures. Similarly, VA's independent auditor reported
that VA continued to have material weaknesses in financial management
system functionality, IT security controls, and financial management
oversight in fiscal year 2009. To the extent that the deficiencies we
identified continue, it will be critical that VA have an effective
``tone at the top'' and mechanisms to monitor corrective actions
related to deficient internal controls.
__________
Mr. Chairman and Members of the Committee:
I am pleased to be here today to discuss the findings from our
prior work that are relevant to the subject of this hearing on VA
internal controls. Specifically, I will highlight findings from our
reports on (1) Veterans Health Administration's (VHA) use of
miscellaneous obligations,\1\ and (2) the Department of Veterans
Affairs (VA) plans to correct financial reporting control deficiencies.
In September 2008, we reported on VHA's use of miscellaneous
obligations and identified related control deficiencies.\2\ Although
the VA developed new policies and procedures in response to our
recommendations, recent internal VA inspections indicate that the
deficiencies we identified have not yet been corrected. In November
2009, we reported that VA had long-standing financial reporting control
deficiencies.\3\ These deficiencies continue to be reported by VA's
independent public auditor.
---------------------------------------------------------------------------
\1\ An obligation is a definite commitment that creates a legal
liability of the government for the payment of goods and services
ordered or received, or a legal duty on the part of the United States
that could mature into a legal liability by virtue of actions on the
part of the other party beyond the control of the United States.
Payment may be made immediately or in the future.
\2\ GAO, Veterans Health Administration: Improvements Needed in
Design of Controls over Miscellaneous Obligations, GAO-08-976
(Washington, D.C., Sept. 11, 2008).
\3\ GAO, Department of Veterans Affairs: Improvements Needed in
Corrective Action Plans to Remediate Financial Reporting Material
Weaknesses, GAO-10-65 (Washington, D.C., Nov. 16, 2009).
---------------------------------------------------------------------------
My testimony today summarizes findings of these prior two
engagements. I will also provide an update regarding the information we
have obtained from VA concerning recent internal inspections on the use
of miscellaneous obligations and pertinent sections of VA's fiscal year
2009 financial audit report.
For our prior work regarding VHA's use of miscellaneous
obligations, we obtained and analyzed a copy of VHA's Integrated Funds
Distribution, Control Point Activity, Accounting and Procurement
(IFCAP) database of miscellaneous obligations.\4\ We also reviewed VA
policies and procedures, interviewed financial management and
procurement officials, and conducted case studies at three VHA medical
centers. For our review of VA corrective actions to remediate financial
reporting control deficiencies, we analyzed financial statement audit
reports from fiscal years 2000 to 2008, interviewed VA and Office of
Inspector General (OIG) officials and VA's independent auditor, and
reviewed VA documents and independent auditor work papers. We also
analyzed VA corrective action plans to remediate significant
deficiencies underlying two of the three financial reporting material
weaknesses. Appendixes to our prior reports provide additional details
on our scope and methodologies.
---------------------------------------------------------------------------
\4\ IFCAP is used to create miscellaneous obligations at VA and
serves as a feeder system for VA's Financial Management System, the
department's financial reporting system of record used to generate VA
financial statements and other reports.
---------------------------------------------------------------------------
We conducted the work for the report on VHA miscellaneous
obligations from November 2007 through July 2008, and the work for the
report on VHA corrective action plans to remediate financial reporting
control deficiencies from November 2008 to November 2009, in accordance
with generally accepted government auditing standards. Those standards
require that we plan and perform the audits to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives. We also summarize information VA
provided us on its actions to address our recommendations in these two
reports, as well as pertinent sections from VA's independent public
auditor's report on the VA fiscal year 2009 financial statements.
Because of the relatively short time between the request to testify and
the hearing date, we did not have sufficient time to validate VA's
information on the status of actions taken to address our prior
recommendations.
Background
VHA provides a broad range of primary and specialized health care,
as well as related medical and social support services through a
network of more than 1,200 medical facilities. In carrying out its
responsibilities, VHA uses ``miscellaneous obligations'' to obligate
(or administratively reserve) estimated funds against appropriations
for the procurement of a variety of goods and services when specific
quantities and time frames are uncertain.\5\ According to VA policy,\6\
miscellaneous obligations can be used to record estimated obligations
to facilitate the procurement of goods and services, such as fee-based
medical and nursing services and beneficiary travel.
---------------------------------------------------------------------------
\5\ A miscellaneous obligation can be used as a funds control
document to commit (reserve) funds that will be obligated under a
contract or other legal obligation at a later date. VA Office of
Finance Directive, VA Controller Policy MP-4, part V, chapter 3,
section A, paragraph 3A.01 states in pertinent part that ``it will be
noted that in many instances an estimated miscellaneous obligation (VA
Form 4-1358) is authorized for use to record estimated monthly
obligations to be incurred for activities which are to be specifically
authorized during the month by the issuance of individual orders,
authorization requests, etc. These documents will be identified by the
issuing officer with the pertinent estimated obligation and will be
posted by the accounting section to such estimated obligation.''
\6\ Department of Veterans Affairs, VA Financial Policies and
Procedures, Volume II, Chapter 6--Miscellaneous Obligations (January
2009).
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In fiscal year 2007, VHA recorded over $6.9 billion of
miscellaneous obligations for the procurement of mission-related goods
and services. According to VHA fiscal year 2007 data, almost $3.8
billion (55.1 percent) of VHA's miscellaneous obligations was for fee-
based medical services and another $1.4 billion (20.4 percent) was for
drugs and medicines. The remainder funded, among other things, state
homes for the care of disabled veterans, transportation of veterans to
and from medical centers for treatment, and logistical support and
facility maintenance for VHA medical centers nationwide.
Miscellaneous Obligation Control Deficiencies
In September 2008, we reported that VA policies and procedures were
not designed to provide adequate controls over the authorization and
use of miscellaneous obligations with respect to (1) oversight by
contracting officials, (2) segregation of duties, and (3) supporting
documentation for the obligation of funds. Collectively, these flaws
increased the risk of fraud, waste, and abuse. Our case studies at
three medical centers showed, for example, that VA did not have
procedures in place to document any review by contracting officials,
and none of the 42 obligations we reviewed had such documented
approval. Effective oversight and review by trained, qualified
officials is a key factor in helping to ensure that funds are used for
their intended purposes. Without control procedures to help ensure that
contracting personnel review and approve miscellaneous obligations
prior to their creation, VHA is at risk that procurements do not have
the necessary safeguards. In addition, our analysis of VA data
identified 145 miscellaneous obligations, amounting to over $30.2
million, that appeared to have been used in the procurement of such
items as passenger vehicles; furniture and fixtures; office equipment;
and medical, dental and scientific equipment. VA officials told us,
however, that the acquisition of such assets should be done by
contracting rather than through miscellaneous obligations.
Our 2008 report also cited inadequate segregation of duties.
Federal internal control standards provide that for an effectively
designed control system, key duties and responsibilities need to be
divided or segregated among different people to reduce the risk of
error or fraud.\7\ These controls should include separating the
responsibilities for authorizing transactions, processing and recording
them, reviewing the transactions, and accepting any acquired assets. In
30 of the 42 obligations reviewed, one official performed two or more
of the following functions: requesting, approving, or recording the
miscellaneous obligation of funds, or certifying delivery of goods and
services and approving payment. In two instances involving employee
grievance settlements, one official performed all four of these
functions. In 2007, the VA OIG noted a similar problem in its review of
alleged mismanagement of funds at the VA Boston Health care System.\8\
For example, according to OIG officials, they obtained documents
showing that a miscellaneous obligation was used to obligate $200,000.
This miscellaneous obligation was requested, approved, and obligated by
one fiscal official. The OIG concluded that Chief of the Purchasing and
Contracting Section and four other contracting officers executed
contract modifications outside the scope of original contracts and the
Chief of the Fiscal Service allowed the obligation of $5.4 million in
expired funds. In response to the OIG recommendations, VA officials
notified contracting officers that the practice of placing money on a
miscellaneous obligation for use in a subsequent fiscal year to fund
new work was a violation of appropriations law, and that money could no
longer be ``banked'' on a miscellaneous obligation absent a contract to
back it up. Similarly, an independent public accountant's July 2007
report found, among other things, that the segregation of duties for
VA's miscellaneous obligation process was inadequate.\9\ Without the
proper segregation of duties, risk of errors, improper transactions,
and fraud increases.
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\7\ GAO, Standards for Internal Control in the Federal Government,
(Washington, D.C.: November 1999).
\8\ Department of Veterans Affairs, Office of Inspector General,
Audit of Alleged Mismanagement of Government Funds at the VA Boston
Healthcare System, Report No 06-00931 (Washington, D.C.: May 31, 2007).
\9\ Grant Thornton, Department of Veterans Affairs, OMB Circular A-
123, Appendix A--Findings and Recommendations Report (Procurement
Management) (July 18, 2007).
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Our 2008 case studies also identified a lack of adequate supporting
documentation at the three medical centers we visited. Specifically, VA
policies and procedures were not sufficiently detailed to require the
type of information needed such as purpose, vendor, and contract number
that would provide crucial supporting documentation for the obligation.
In 8 of 42 instances, we could not determine the nature, timing, or the
extent of the goods or services being procured from the description in
the purpose field. As a result, we could not confirm that the
miscellaneous obligations were for bona fide needs or that the invoices
reflected a legitimate use of Federal funds.
Our report concluded that without basic controls in place over
billions of dollars in miscellaneous obligations, VA is at significant
risk of fraud, waste, and abuse. In the absence of effectively designed
key funds and acquisition controls, VA has limited assurance that its
use of miscellaneous obligations is kept to a minimum, for bona fide
needs, and in the correct amounts. We made four recommendations,
concerning review by contracting officials, segregation of duties,
supporting documentation, and oversight mechanisms. These
recommendations aimed at reducing the risks associated with the use of
miscellaneous obligations.
In response to our recommendations, in January of 2009, VA issued
Volume II, Chapter 6, of VA Financial Policies and Procedures--
Miscellaneous Obligations, which outlines detailed policies and
procedures aimed at addressing control deficiencies identified in our
September 2008 report. Key aspects of the policies and procedures VA
developed in response to our four recommendations included:
Review of miscellaneous obligations by contracting
officials--The request and approval of miscellaneous obligations are to
be reviewed by contracting officials, and the contracting reviews are
to be documented.\10\
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\10\ Review is required except for those miscellaneous obligations
used for previously approved purposes listed on an Exception List
attached to the new policies and procedures.
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Segregation of duties--No one official is to perform more
than one of the following key functions: requesting the miscellaneous
obligation; approving the miscellaneous obligation; recording the
obligation of funds; or certifying the delivery of goods and services
or approving payment.
Supporting documentation for miscellaneous obligations--
New procedures require providing the purpose, vendor, and contract
number fields before processing obligation transactions, including
specific references, the period of performance, and the vendor name and
address.\11\
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\11\ The vendor name and address must be provided, except in the
case of multiple vendors; and the contract number must be included on
the miscellaneous obligation document.
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Oversight mechanism to ensure control policies and
procedures are fully and effectively implemented--Each facility is now
responsible for performing independent quarterly oversight reviews of
the authorization and use of miscellaneous obligations. Further, the
results of the independent reviews are to be documented and
recommendations tracked by facility officials. The policies and
procedures also note that the Office of Financial Policy is to conduct
quarterly reviews of VA miscellaneous obligation usage to ensure
compliance with the new requirements.
Recent VA Inspections Identify Continuing Control Problems
As part of its fiscal year 2009 review activities, VA's Office of
Business Oversight (OBO) \12\ Management Quality Assurance Service
(MQAS) evaluated VA compliance with new VA policies and procedures
concerning the use of miscellaneous obligations--Financial Policies and
Procedures, Volume II, Chapter 6, Miscellaneous Obligations. According
to its executive summary report, the MQAS reviewed 476 miscellaneous
obligations at 39 different medical centers, health care systems, and
regional offices in fiscal year 2009. The MQAS found 379 instances of
noncompliance with the new policies and procedures. Examples include:
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\12\ The OBO, created in February 2004, consolidated VA review
organizations and functions that once existed across the department.
The OBO has a Director's Office, located in Washington, D.C., and three
supporting services located in Austin, Texas: (1) the Management
Quality Assurance Service (MQAS), (2) the Systems Quality Assurance
Service (SQAS), and (3) the Internal Controls Service (ICS). The MQAS
has oversight responsibility, under the purview of the Assistant
Secretary for Management, to ensure VA officials comply with laws,
policies, and directions from OMB, the Treasury, GAO, and the Congress.
MQAS is to perform quality assurance oversight for the financial,
capital asset management, contracting, logistics, and inventory
operations. The SQAS serves as the primary office for managing and
overseeing the independent verification and validation of internal
control areas for financial and interfacing automated information
systems within VA. The ICS is to plan and conduct departmentwide
reviews of internal controls over financial reporting and
departmentwide financial management system reviews. This includes
testing internal controls over financial reporting, which forms the
basis for VA's annual statement of assurance on the effectiveness of
internal controls.
Inadequate oversight of miscellaneous obligations by
contracting officials--Many miscellaneous obligations were not
submitted for the required approval by the Head of Contracting
Activity. Further, some miscellaneous obligation were used for invalid
purposes, including employee tuition, utilities, general post, lab
tests, and blood products.
Segregation of duties--Many miscellaneous obligations had
inadequate segregation of duties concerning the requesting, approving,
and recording of miscellaneous obligations, and the certifying receipt
of goods and services and approving payment. For example, the MQAS
identified 48 instances where two individuals performed all four of
these functions.
Supporting documentation for miscellaneous obligations--
Some miscellaneous obligations also lacked adequate supporting
documentation concerning the vendor name, performance period, and the
contract number.
These noncompliance issues were similar to those we identified in
our September 2008 report on VHA miscellaneous obligations.
Overall, MQAS found that there was a lack of timely dissemination
of the new miscellaneous obligation policy, and issued 34
recommendations to VA facility officials. Fiscal year 2010 facility-
level recommendations included the need to develop standard operating
procedures for implementing the policy, to provide training for new
accounting personnel, to require documentation establishing segregation
of duties, and to institute facility-level quarterly reviews. According
to the MQAS Associate Director, VHA facilities are in the process of
taking corrective actions to address the MQAS recommendations.
VA Has Had Long-standing Material Weaknesses in Financial Reporting
In November of 2009, we reported that VA had three long-outstanding
material weaknesses \13\ in internal control over financial reporting
identified during VA's annual financial audits.\14\
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\13\ A material weakness is a significant deficiency, or a
combination of significant deficiencies, that results in more than a
remote likelihood that a material misstatement of the financial
statements will not be prevented or detected by the entity's internal
control.
\14\ GAO, Department of Veterans Affairs: Improvements Needed in
Corrective Action Plans to Remediate Financial Reporting Material
Weaknesses, GAO-10-65 (Washington, D.C.: Nov. 16, 2009).
Financial management oversight--reported as a material
weaknesses since fiscal year 2005. This issue was also identified as a
significant deficiency \15\ in fiscal years 2000 through 2004. This
weakness stemmed from a variety of control deficiencies, including the
recording of financial data without sufficient review and monitoring, a
lack of sufficient human resources with the appropriate skills, and a
lack of capacity to effectively process a significant volume of
transactions.
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\15\ A significant deficiency is a control deficiency, or a
combination of control deficiencies, that adversely affects the
entity's ability to initiate, authorize, record, process, or report
financial data reliably in accordance with generally accepted
accounting principles such that there is more than a remote likelihood
that a misstatement of the entity's financial statements that is more
than inconsequential will not be prevented or detected by the entity's
internal control.
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Financial management system functionality--reported since
fiscal year 2000--is linked to VA's outdated legacy financial systems
affecting VA's ability to prepare, process, and analyze financial
information that is timely, reliable, and consistent. Legacy system
deficiencies necessitated significant manual processing of financial
data and a large number of adjustments to the balances in the system.
IT security controls--also reported since fiscal year
2000--resulted from the lack of effective implementation and
enforcement of an agencywide information security program. Security
weaknesses were identified in the areas of access control, segregation
of duties, change control, and service continuity.
We also found that while VA had corrective action plans in place
intended to result in near-term remediation of its significant
deficiencies, many corrective action plans did not contain the detail
needed to provide VA officials with assurance that the plans could be
effectively implemented on schedule. Eight of the 13 plans we reviewed
lacked key information regarding milestones for completion of specific
action steps and/or validation activities. Consequently, VA managers
could not readily identify and address slippage in remediation
activities, exposing VA to continued risk of errors in financial
information and reporting. VA recognized the need to better oversee and
coordinate agencywide oversight activities for financial reporting
material weaknesses, and began to staff a new office responsible for,
in part, assisting VA and the three administrations and staff offices
in executing and monitoring corrective actions plans. Our report
concluded that actions to provide a rigorous framework for the design
and oversight of corrective action plans will be essential to ensuring
the timely remediation of VA's internal control weaknesses, and that
continued support from senior VA officials and administration CFOs
would be critical to ensure that key corrective actions are developed
and implemented on schedule. We made three recommendations to help
improve corrective action plan development and oversight. VA concurred
with the recommendations and said that it took some actions to address
the recommendations, including developing a manual with guidance on
corrective action planning and monitoring, creating a corrective action
plan repository, and establishing a Senior Assessment Team of senior VA
officials as the coordinating body for corrective action planning,
monitoring, reporting, and validation of deficiencies identified during
financial audits.
Recent VA Financial Reporting Indicates Continuing Material Weaknesses
VA's independent auditor fiscal year 2009 financial audit report
included the three material weaknesses that have been reported as
deficiencies since 2000. In addition, it also included a new material
weakness concerning compensation, pension, and burial liabilities.\16\
Furthermore, VA's reporting indicated remediation timetables for the
previously reported material weaknesses appear to be slipping. In the
fiscal year 2009 Performance and Accountability Report, VA officials
noted that in fiscal year 2009 they had closed 10 of the underlying
significant deficiencies reported in fiscal year 2008, but that their
timetables had slipped for remediating the IT security controls and
financial management oversight material weaknesses to 2010 and 2012,
respectively.\17\ In addition, milestones for remediating the new
material weakness--compensation, pension, and burial liabilities--had
yet to be determined.
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\16\ Department of Veterans Affairs, Department of Veterans Affairs
Fiscal Year 2009 Performance and Accountability Report, (Washington,
D.C, Nov. 16, 2009).
\17\ In its fiscal year 2008 Performance and Accountability Report,
VA reported that it planned to remediate the IT security controls and
financial management oversight material weaknesses in 2009.
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According to the independent auditor, the causes for the fiscal
year 2009 material weaknesses related to
outdated systems,
challenges to implement security policies and procedures,
a lack of sufficient personnel with the appropriate
knowledge and skills,
a significant volume of transactions, and
decentralization.
These findings are consistent with those we identified in our 2009
report and are all long-standing issues at the VA. The auditor noted
that VA did not consistently monitor, identify, and detect control
deficiencies. The auditor recommended that VA assess the resource and
control challenges associated with operating in a highly decentralized
accounting function, and develop an immediate interim review and
monitoring plan to detect and resolve deficiencies.
In summary, while we have not independently validated the status of
VA's actions to address our 2008 and 2009 reports' findings concerning
VA's controls over miscellaneous obligations and financial reporting,
VA's recent inspections and financial audit report indicate that the
serious, long-standing deficiencies we identified are continuing.
Effective remediation will require well-designed plans and diligent and
focused oversight by senior VA officials. Further, the extent to which
such serious weaknesses continue raises questions concerning whether VA
management has established an appropriate ``tone at the top'' necessary
to ensure that these matters receive the full, sustained attention
needed to bring about their full and effective resolution. Until VA's
management fully addresses our previous recommendations, VA will
continue to be at risk of improper payments, waste, and mismanagement.
Mr. Chairman, this concludes my prepared statement. I would be
happy to respond to any questions you or other Members of the Committee
may have at this time.
GAO Contact and Staff Acknowledgments
For further information about this testimony, please contact Susan
Ragland, Director, Financial Management and Assurance at (202) 512-
9095, or [email protected]. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this testimony. Major contributors to this testimony included
Glenn Slocum, Assistant Director; Richard Cambosos; Debra Cottrell;
Daniel Egan; Patrick Frey; W. Stephen Lowrey; David Ramirez; Robert
Sharpe; and George Warnock.
Prepared Statement of Edward Murray, Deputy Assistant Secretary for
Finance, U.S. Department of Veterans Affairs
Mr. Chairman, Mr. Ranking Member, and Members of the Committee,
thank you for inviting me to appear before you today to discuss what VA
has done and plans to do to continue improving its oversight of
miscellaneous obligations. Today, I will discuss what we use currently
to obligate VA funds, the policies that apply to use of miscellaneous
obligations, and the ongoing work to improve accountability of the
miscellaneous obligations process. As the Committee knows, these issues
are cross-cutting, corporate issues that affect multiple VA
organizations, as reflected in the witnesses invited to appear today. I
am pleased to be accompanied today by Mr. Fred Downs, Chief Procurement
and Logistics Officer, and Mr. Paul Kearns, Chief Financial Officer,
both of the Veterans Health Administration (VHA); and Mr. Jan Frye,
Deputy Assistant Secretary for Acquisition and Logistics.
Overview of Documents Used to Obligate Funds
VA primarily uses two different document types to obligate funding
for goods and services: a VA Form 2237, a standard procurement
requisition document; and a VA Form 1358, commonly known as a
``miscellaneous obligation.'' However, the word ``miscellaneous'' can
be misleading. In most cases, we clearly know the source of the actions
using these obligation documents. They are usually for a specific
purpose and apply to a specific vendor. These are not arbitrary
obligations being created in the financial system; VA acts based on
validated requirements.
I will note, however, that the process to execute a Form 1358 is
generally considered less stringent than using Form 2237. The
procedures for using Form 1358 do not apply as rigorous and proactive
internal controls as strictly as those used with Form 2237. Thus, Form
1358 compliance must rely on data to track violations, reports based on
those data, and the willingness of managers to review them. Recent
policy changes have strengthened internal controls used with Form 1358.
Status of Corrective Actions
The Government Accountability Office's September 2008 report (GAO-
08-976) identified two key findings about Form 1358. They were
inadequate segregation of duties, and insufficient documentation of
approval by contracting officials. To address these findings VA has
strengthened policies and procedures, and provided new tools for
management and staff use.
VA has modified its Integrated Funds Distribution Control Point
Activity (IFCAP) system to identify whether a given purchasing
transaction uses Form 1358 or Form 2237. As of September 2009, these
data are now sent to VA's Financial Management System (FMS) to
distinguish between these two types of transactions. This new
capability identifies transactions originated on a Form 1358 and helps
VA monitor the use of this form.
To assist field activities with monitoring compliance with policy,
VA has developed two new IFCAP reports to help facilities accomplish
their oversight responsibilities:
A Segregation of Duties Violations Report is available
for management in order to ensure appropriate segregation of duties
between the approval functions involved in using a Form 1358, as
described below; and
An additional report identifies fields (vendor, contract
number, purpose) that have not been completed as required.
With respect to segregation of duties, in January 2009, VA's Chief
Financial Officer's Office of Finance reissued policy for use of
miscellaneous obligations,\1\ including a prohibition of any individual
performing more than one of the following key approval functions:
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\1\ VA Financial Policies and Procedures, Volume II, Chapter 6,
``Miscellaneous Obligations.''
Requesting the miscellaneous obligation.
Approving the miscellaneous obligation.
Recording the obligation of funds.
Certifying delivery of goods or services and approving
payment.
This policy also requires the originating office obtain contracting
approval for a miscellaneous obligation that is outside the narrow list
of approved uses for Form 1358, and VHA updated their guidance
accordingly. This policy clearly specifies that a miscellaneous
obligation shall not be used unless the Head of Contracting Activity
(HCA) has determined that a purchase order or contract is specifically
not required, or the obligation is for a specifically defined purpose
determined to be acceptable for this type of obligation. However,
because Form 1358 is not generated by a contracting official, the HCAs
have no knowledge when such a document is being used. Currently, they
must rely on the offices creating the document to determine if the Form
1358 is to be used for other than predetermined purposes and HCA
approval is required.
We have prohibited the use of miscellaneous obligations for other
uses, and we are certain the policies are clear.
Policy Adherence and Enforcement
Although we are certain VA's policies are clear, we must take the
needed steps to assure that compliance with the policies is applied
consistently throughout VA. In FY 2009, the Management Quality
Assurance Service (MQAS) reviewed 476 individual miscellaneous
obligations processed at 39 field stations and found 51 percent of the
actions did not comply with the segregation of duties requirement set
forth in VA policy.
In addition, because VA systems are aging, it is difficult to
modify them to automate and enforce internal controls on segregation of
duties requirements. VA has already completed the analysis and
identified the system requirements necessary to affect needed changes
and is aggressively pursuing the modification of IFCAP to eliminate
this shortfall.
VA has and will continue to address these through technological
changes as well as enforcement practices such as the Secretary of
Veterans' Affairs recent mandate, described further below.
System Changes
These changes include modifying IFCAP to enforce systematically the
segregation of duties, verifying that a system user has only one
distinct role in each key action required to process a miscellaneous
obligation. Changes will also require data elements such as Purpose,
Vendor, and Contract Number to be documented on all miscellaneous
obligations. The IFCAP system will also be modified to route any
miscellaneous obligations to the contracting office for determination
of proper use if other than those pre-approved.
We are also considering a programming change that would provide a
``drop down'' menu of the allowable exceptions for using a
miscellaneous obligation, as detailed in VA policies, requiring an
entry that would specifically identify the type of miscellaneous
obligation. This change is important as it would essentially remove the
``miscellaneous'' aspect of these obligations and provide for easier
reporting of obligations by category.
In August 2009, we implemented a change in our systems to clearly
flag miscellaneous obligations that are processed for later review or
tabulation. This important change allows us to target our review of
these transactions, determine total spend, and enhances oversight by
identifying miscellaneous obligation transactions in our core financial
system.
Until VA policies on segregation of duties and adequacy of
documentation can be fully enforced by computer programming changes, VA
has taken other measures to mitigate the risks involved with
miscellaneous obligations and to ensure that adequate oversight and
reviews are regularly performed.
Risk Mitigation and Oversight
VA has established two review programs to mitigate the risks
involved with miscellaneous obligations and to ensure adequate
oversight and reviews are regularly performed:
1. MQAS has expanded their site visit reviews to include a review
of miscellaneous obligations; and
2. VHA's Financial Quality Assurance Managers at each network
review a percentage of all VHA stations miscellaneous obligations for
segregation of duties and documentation of purpose, vendor, and
contract number.
Both of these activities will continue for the indefinite future.
Current Trends
Current FY 2010 Year To Date (YTD) results from MQAS reviews show
an overall trend of substantial improvement over the initial GAO
findings in FY 2008. For example:
In FY 2010 YTD, 4 percent of 1358s did not have the
purpose field completed compared to 19 percent in FY 2008.
In FY 2010 YTD, 13 percent of 1358s did not have the
vendor field completed compared to 48 percent in FY 2008.
In FY 2010 YTD, 10 percent of 1358s did not have the
contract field completed compared to 38 percent in FY 2008.
Segregation of Duties violations continue to decrease. In FY 2008
the percentage was 71 percent; in FY 2009 it dropped to 51 percent; and
in FY 2010 YTD, it has continued to decrease to 29 percent.
For FY 2010 YTD, miscellaneous obligations that require but were
not submitted for HCA review show a continued decrease. For FY 2010,
MQAS has reviewed 271 miscellaneous obligation actions. Of those, 257
were an authorized use of the Form 1358 instrument and did not require
HCA review. The remaining 14 were required to have such review, and of
these, 7 forms (50 percent) were not appropriately reviewed by
contracting. By comparison, in FY 2008 the percentage was 100 percent
not properly reviewed; in FY 2009 it dropped to 84 percent--so these FY
2010 YTD results demonstrate a continued improvement in compliance with
policy.
These results demonstrate that VA's efforts to date have resulted
in an overall improvement of the situation from the 2008 GAO review.
Additional Efforts
Recognizing that efforts to date were not improving the situation
quickly enough, VA is taking interim action to strengthen oversight of
the segregation of duties requirement. On June 29, 2010, the Secretary
of Veterans Affairs mandated that facility directors certify quarterly
that their facility meets the four levels for segregating duties
(described above) as defined by VA policy. For the quarter ending
September 30, 2010, and every quarter thereafter, each facility
director will be required to verify that the four functions have been
separated.
The Information Security Officer is also required to certify the
report. As a result of the Secretary's certification mandate, VA is
currently enhancing its miscellaneous obligations policies \2\ to
provide facilities with guidance for implementation, to ensure that the
quarterly certification requirements are met and reported timely. We
expect this policy will be completed in August, 2010. Concurrently,
VA's MQAS and VHA's Financial Quality Assurance Managers will continue
to review miscellaneous obligations to measure field facilities'
compliance with policy. The Secretary of Veterans Affairs also directed
that a long-term plan be developed by September 1, 2010, to provide a
longer-term IFCAP system solution, requiring the software changes
(discussed previously) necessary to enforce the segregation of duties
and other findings. The Office of Information and Technology will lead
this effort, collaborating closely with VHA, VA's Chief Financial
Officer, and the Office of Acquisition, Logistics, and Construction.
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\2\ VA Financial Policies and Procedures, ibid.
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Mr. Chairman and Members of the Committee, VA has made significant
policy changes to address the concerns you have raised about our use
and oversight of miscellaneous obligations. VA has tightened
requirements to enforce segregation of duties and to ensure proper
review of Form 1358. New reports and data are available to help
managers conduct the proper oversight, and the Secretary's mandate
requires them to exercise this oversight quarterly and certify the
results for every facility. VA will continue to pursue technological
solutions as well, but I am pleased to report that VA has made
significant improvements, as recent data show.
Thank you for the opportunity to share this report of VA's progress
in this area. This concludes my statement. I would be pleased to answer
any questions you may have.
MATERIAL SUBMITTED FOR THE RECORD
Committee on Veterans' Affairs
Washington, DC.
July 29, 2010
Gene L. Dodaro
Acting Comptroller General
U.S. Government Accountability Office
441 G Street, NW
Washington, DC 20548
Dear Gene:
In reference to our Full Committee hearing entitled ``Continued
Oversight of Inadequate Cost Controls at the U.S. Department of
Veterans Affairs'' on July 28, 2010, I would appreciate it if you could
answer the enclosed hearing questions by the close of business on
September 10, 2010.
In an effort to reduce printing costs, the Committee on Veterans'
Affairs, in cooperation with the Joint Committee on Printing, is
implementing some formatting changes for materials for all full
Committee and Subcommittee hearings. Therefore, it would be appreciated
if you could provide your answers consecutively and single-spaced. In
addition, please restate the question in its entirety before the
answer.
Due to the delay in receiving mail, please provide your response to
Debbie Smith by fax at 202-225-2034. If you have any questions, please
call 202-225-9756.
Sincerely,
BOB FILNER
Chairman
MH:ds
__________
United States Government Accountability Office
Washington, DC.
September 9, 2010
The Honorable Bob Filner
Chairman
House Committee on Veterans' Affairs
335 Cannon House Office Building
Washington, DC 20515
Dear Chairman Filner:
As requested in your letter of July 29, 2010, enclosed are
responses to follow-up questions from your committee's hearing,
``Continued Oversight of Inadequate Cost Controls at the U.S.
Department of Veterans Affairs'' held July 28, 2010. As noted in our
testimony before your committee, and in the enclosed responses, the
Department has not yet remediated its financial reporting and internal
control weaknesses. Until VA fully addresses our recommendations in
this area, it will not have the quality financial information managers
need on a day-to-day basis, and VA's use of miscellaneous obligations
will be at an increased risk of improper payments and mismanagement.
Thank you for your continued interest in these matters. We will
continue to follow up on VA's actions to implement our recommendations.
Please contact me at (202) 512-8486 or [email protected] if you have
questions or if I can be of further assistance.
Sincerely yours,
Susan Ragland
Director, Financial Management and Assurance
Enclosure
cc: Brian Mullins
__________
Question 1: Please explain why VA has a clean financial statement
yet they have four material weaknesses?
Response: In fiscal year 2009, VA received a clean opinion on its
financial statements, signifying that they were fairly presented in all
material respects. Although VA's financial statements were fairly
presented, VA still had serious problems in its ability to initiate,
authorize, record, process or report financial data reliably in
accordance with generally accepted accounting principles. Such problems
can at times necessitate near ``heroic'' efforts to get financial
statements to a ``clean'' condition. Furthermore, until these
weaknesses are corrected, VA officials will not have the quality
financial information they need on a day-to-day basis--the end goal of
the Chief Financial Officer's Act (CFO Act) of 1990. \1\
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\1\ Pub. L. No. 101-576, 104 Stat. 2838 (Nov. 15, 1990).
Question 2: In November 2009, GAO reported that VA had long-
standing financial reporting control deficiencies. These deficiencies
continue to be reported by VA's independent public auditor. Why do you
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think these deficiencies continue?
Response: VA's serious, long-standing material weaknesses in
financial reporting, that significantly increase the risk of
misstatements in financial information reported to Congress and used by
VA to manage its operations, are at times the result of a combination
of outdated systems and a lack of mechanisms in place to consistently
monitor, identify and detect control deficiencies. Furthermore, the
extent to which these serious weaknesses continue raises questions
concerning whether VA management has established an appropriate ``tone
at the top'' necessary to ensure that these matters receive the full,
sustained attention needed to bring about their full and effective
resolution. Remediation of these material weaknesses will require a
rigorous framework and a sustained commitment to the design and
oversight of corrective action plans, including continued support and
oversight from senior VA officials and administration CFOs. The VA
framework should (1) include a periodic analysis of audit
recommendations and corrective action to determine trends and system-
wide problems, (2) assure that performance appraisals of appropriate
officials reflect their effectiveness in resolving and implementing
audit recommendations, and (3) provide for an evaluation of VA's audit
follow-up system.
Question 3: In your testimony, you state that in the absence of
effectively designed key funds and acquisition controls, VA has limited
assurance that its use of miscellaneous obligations is kept to a
minimum, for bona fide needs, and in the correct amounts. Should this
be a concern for VA?
Response: Yes. According to VA policy, \2\ except for specifically
delineated purposes, miscellaneous obligations should not be used as an
obligation control document unless the Head of Contracting Activity has
determined that a purchase order or contract is not required. In fiscal
year 2007, VA recorded nearly $9.8 billion in miscellaneous obligations
(with $6.9 billion recorded by VHA). Also, VA policies and procedures
were not designed to provide adequate controls over the authorization
and use of miscellaneous obligations. In particular, we identified
deficiencies in oversight by contracting officials, segregation of
duties, and supporting documentation for the obligation of funds. Taken
together, these miscellaneous obligation control deficiencies increase
the risk of fraud, waste and abuse. In fiscal year 2009, according to
documents provided by VA to GAO, VA increased its use of miscellaneous
obligations to nearly $12.5 billion. Meanwhile, inspections by the VA
Office of Business Oversight Management Quality Assurance Service that
year showed that internal control deficiencies continued. Until VA's
management fully addresses our recommendations, VA use of miscellaneous
obligations will be at increased risk of improper payments, waste, and
mismanagement.
---------------------------------------------------------------------------
\2\ Department of Veterans Affairs, VA Financial Policies and
Procedures, Volume II, Chapter 6--Miscellaneous Obligations,
(Washington, D.C.: January 2009).
Question 3(a): What are the real world consequences that can
adversely impact VA if these effectively designed key fund and
---------------------------------------------------------------------------
acquisition controls remain absent?
Response: The problems with inadequate review by contracting
officials, segregation of duties, and documentation identified in our
2008 report and confirmed by the recent VA inspections can have real
world consequences. For example,
Without control procedures to help ensure that
contracting personnel review and approve miscellaneous obligations
prior to their creation, VHA will be unable to ensure that all
procurements are competitively priced and that VA gets the best value
for its money. For example, in one case study at the VA Pittsburgh
Medical Center, we found 12 miscellaneous obligations, totaling about
$673,000, used to pay for laboratory services provided by the
University of Pittsburgh Medical Center (UPMC), which should have been
procured through purchase orders backed by reviewed and competitively
awarded contracts. The Chief of Acquisition and Materiel Management for
the VA Pittsburgh Medical Center stated that she was not aware of the
UPMC laboratory testing service procurements and would review these
testing services to determine whether a contract should be established
for these procurements. Subsequent to our review, VA changed its
policies and procedures in January 2009 to require officials to procure
laboratory testing services through purchase orders backed by reviewed
and competitively awarded contracts.
Without adequate segregation of duties for key steps
associated with miscellaneous obligation transactions, VA is at risk of
error, fraud, and mismanagement. Segregation of duties helps ensure
that transactions are properly authorized and reviewed, and helps guard
against mismanagement. For example, there was an inadequate segregation
of duties with miscellaneous obligations in one case reported by the VA
OIG involving the mismanagement of funds at the Boston Health care
System from 2002 to 2006. \3\ The OIG concluded that VA officials had
used expired funds in violation of appropriations law, and that
contracting officials had executed contract modifications outside the
scope of original contracts. According to VA OIG officials,
documentation showed that a miscellaneous obligation for $200,000 at
the VA Boston Health care System was requested, approved, and obligated
by the same fiscal official. In our 2008 report, we identified 11
instances where the same official requested and approved a
miscellaneous obligation, and then certified receipt of goods and
services.
---------------------------------------------------------------------------
\3\ Department of Veterans Affairs, Office of Inspector General,
Audit of Alleged Mismanagement of Government Funds at the VA Boston
Health care System, Report No. 06-00931-139 (Washington, D.C.: May 31,
2007).
---------------------------------------------------------------------------
Another tenet of an effectively designed control system
is that all transactions need to be clearly documented and all
documentation and records should be properly managed and maintained.
Adequate documentation is essential to support an effective funds
control system. During our case studies, we found many instances where
VA did not have records supporting key elements of miscellaneous
obligation transactions--such as the purpose, vendor, and contract
number As a result, VA could not effectively demonstrate that these
miscellaneous obligations were for bona fide needs, that estimated
obligation amounts were properly calculated, that the authorized vendor
was paid, or whether VA received the appropriate type and quantity of
goods and services at the correct price.
Question 4: In 2009, the VA's Office of Business Oversight
Management Quality Assurance Service found that out of 476
miscellaneous obligations at 39 different medical centers, health care
systems, and regional offices there were 379 instances of noncompliance
with the new policies and procedures. These noncompliance issues were
similar to those GAO identified in your September 2008 report on VHA
miscellaneous obligations. Why did the Office of Business Oversight
report similar findings?
Response: The VA Office of Business Oversight Management Quality
Assurance Service (MQAS) 2009 report identified several causes for the
continuing noncompliance issues it identified concerning the use of
miscellaneous obligations that were similar to problems we identified
in our September 2008 report. First, the MQAS report identified a lack
of timely dissemination of the new miscellaneous obligation policy.
Consequently, the VA had little assurance that all VA's widespread
locations received notification of the new policies and procedures in
force concerning the use of miscellaneous obligations. The MQAS noted
that this cause had often been identified in other MQAS review areas,
indicating a potential systemic issue associated with the general
dissemination of policies throughout VHA. In addition, the MQAS report
disclosed that some VHA facilities had not yet developed standard
operating procedures for implementing the new miscellaneous obligation
policy, provided training for new accounting personnel, required
documentation establishing segregation of duties, and instituted
facility-level quarterly reviews.
Committee on Veterans' Affairs
Washington, DC.
July 29, 2010
Honorable Eric K. Shinseki
Secretary
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20420
Dear Mr. Secretary:
In reference to our Full Committee hearing entitled ``Continued
Oversight of Inadequate Cost Controls at the U.S. Department of
Veterans Affairs'' on July 28, 2010, I would appreciate it if you could
answer the enclosed hearing questions by the close of business on
September 10, 2010.
In an effort to reduce printing costs, the Committee on Veterans'
Affairs, in cooperation with the Joint Committee on Printing, is
implementing some formatting changes for materials for all full
Committee and Subcommittee hearings. Therefore, it would be appreciated
if you could provide your answers consecutively and single-spaced. In
addition, please restate the question in its entirety before the
answer.
Due to the delay in receiving mail, please provide your response to
Debbie Smith by fax to Debbie at 202-225-2034. If you have any
questions, please call 202-225-9756.
Sincerely,
BOB FILNER
Chairman
MH:ds
__________
Questions for the Record
The Honorable Bob Filner, Chairman, House Committee on Veterans'
Affairs, ``Continued Oversight of Inadequate Cost Controls at VA''
July 28, 2010
Question 1: Why has VA gone from $6.9 billion in recorded
miscellaneous obligations during fiscal year 2007 to around $12 billion
currently?
Response: The $6.9 billion of recorded miscellaneous obligations in
FY 2007 was the amount reported by the GAO in their report No. 08-976,
dated, September 2008, and was attributable to the 21 VISNs (No. 1 thru
23) but did not include amounts attributable to other VHA and VA
organizations. The $12 billion of recorded miscellaneous obligations in
FY 2009 was the amount attributable to the 21 VISNs plus the other VHA
and VA organizations. The attached spreadsheet report shows the details
of the recorded miscellaneous obligations by budget object code (BOC)
for FY 2007 compared to FY 2009. The first comparison shows the amounts
recorded by the 21 VISNs: $6.905 billion in FY 2007 compared to $8.480
billion in FY 2009. The second comparison shows amounts recorded by the
other VHA/VA organizations: $2.876 billion in FY 2007 compared to
$3.982 billion in FY 2009. The final comparison shows the total
recorded amounts: $9.782 billion in FY 2007 compared to $12.476 billion
in FY 2009.
Question 2: Regarding corrective actions planned, VA implemented
several policies to combat material weakness deficiency, yet
implementation of these policies continues to be a troubling issue at
the VA. For example, the VA's Management Quality Assurance Service
found that 51 percent of VA's actions did not comply with the
segregation of duties requirement set forth in VA policy. What
consequences do violators of VA policy face, if any?
Response: Enforcement of VA policy is a shared leadership
responsibility. Violations of VA policies within a medical center would
be dealt with at the local medical center level in collaboration with
their Human Resources Department (H.R.). Violations by medical center
directors would be dealt with at the Veterans Integrated Service
Network (VISN) level, and the Network Director is held accountable to
the Deputy Under Secretary for Health for Operations and Management.
H.R. refers to the Table of Disciplinary Offenses and Penalties when
advising supervisors, managers, and directors.
For the example cited, the segregation of duties within
miscellaneous obligations is audited by the Financial Quality Assurance
Managers and reported to Network and Facility Directors. This oversight
responsibility became part of the Network Director's Performance Plan
in 2010.
Question 3: The Secretary has recently decided to cancel the
Integrated Financial Accounting System (IFAS). This effectively
eliminates the Financial and Logistics Integrated Technology Enterprise
(FLITE) program. What impact does the cancellation of FLITE have on
ensuring the integrity of the VA's ability to fulfill the critical need
for a modernized and integrated financial and asset management process?
Response: VA will implement lower-cost, short-term improvements to
VA's current financial management system (FMS). This system has
resulted in a clean audit opinion on our financial statements for 11
years in a row. It only costs $15 million to operate. There is relative
low risk with maintaining the system for the foreseeable future. On the
other hand, the FLITE/IFAS solution would have cost an estimated $500
million and carried very high implementation risks. We will reevaluate
our financial system environment in another 2 to 3 years and then
decide whether to undertake a replacement of FMS.
Question 4: On June 29, 2010, the Secretary mandated that facility
directors certify quarterly that their facility meet the four levels
for segregating duties as defined by VA policy. Why is the Information
Security Officer also required to certify the report?
Response: The Information Security Officer (ISO) is required to
certify the report along with the facility director for two reasons. It
gives each security officer visibility into the state of compliance at
their assigned facility. The ISOs are generally more familiar with this
type of certification and can look for patterns or trends that need
correction. ISO certification is also appropriate because a key
function of the ISO is to ensure the integrity of information
technology systems, including system segregation of duties and access
controls. These individuals serve locally and provide oversight over an
assigned facility(ies); however, they report to the Department's IT
organization. This separate chain of command further enhances the
integrity of the certification.
Recorded Miscellaneous Obligations by Budget Object Code (BOC) for FY 2007 Compared to FY 2009
Attachment to Question #1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
VISNs 1 to 23 VISNs 1 to 23 VISNs 1 to 23 Other VHA/ VA Other VHA/ VA Other VHA/ VA Total Total Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
BUDGET OBJECT
CODE (BOC)
BOC DESCRIPTION FY 2007 FY 2009 Change FY 2007 FY 2009 Change FY 2007 FY 2009 Change------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Personal
Services &
Benefits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1101 Regular Pay $28,057 $17,789 ($10,268) $2,841,009 $2,841,009 $28,057 $2,858,798 $2,830,741
(Includes
merit pay)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1122 RETENTION $3,680 $3,680 $0 $0 $0 $3,680 $3,680
ALLOWANCE
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1128 Incentive $1,500 $1,500 $0 $1,500 $1,500
Awards, Cash
or Non-Cash
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1204 Office of $43,729,171 $60,682,464 $16,953,294 $1,751,204 $5,493,957 $3,742,753 $45,480,375 $66,176,421 $20,696,046
Workers
Compensation
Program
Payments
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1208 Subsistence $4,284 ($4,284) $0 $0 $4,284 ($4,284)
and
Temporary
Miscellaneou
s Moving
Expenses
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1215 FSA-Adm Fees- $55,030 $85,970 $30,940 $1,885 $1,981 $96 $56,915 $87,951 $31,036
Dep Care
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1217 Flexible $452,109 $1,090,943 $638,835 $14,285 $31,338 $17,053 $466,394 $1,122,281 $655,887
Spending
Account
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1218 Federal $13,125 $13,125 ($0) ($0) $0 $13,125 $13,125
Employees
Health
Benefits--VA
Share
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1221 STUDENT LOAN $27,087 $27,087 $0 $0 $0 $27,087 $27,087
REPAYMENT
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1283 Childcare $5,446,134 $3,636,533 ($1,809,601) $5,446,134 $3,636,533 ($1,809,601)
Subsidy
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1284 TRANSIT $372,200 $372,200 $0 $0 $0 $372,200 $372,200
BENEFIT
PRETAX
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1285 Direct $3,620,880 $7,067,169 $3,446,290 $2,544,153 $14,405,233 $11,861,080 $6,165,033 $21,472,402 $15,307,369
Subsidy
Transit
Benefit
Program
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1286 Liability $19,715 $16,978 ($2,737) $1,662 $14,207 $12,545 $21,377 $31,185 $9,808
Insurance
Reimbursemen
t Program
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1287 EDRP $6,959,080 $8,465,768 $1,506,687 $1 $1 $6,959,080 $8,465,768 $1,506,688
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1302 Unemployment $11,210,885 $11,210,885
Compensation
Payments
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$54,868,325 $77,843,174 $22,974,848 $9,759,323 $26,425,757 $16,666,434 $64,627,648 $115,479,816 $50,852,168
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Travel and
Transportati
on of
Persons
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2101 Permanent $6,307 $583 ($5,725) $0 $0 $6,307 $583 ($5,724)
Duty Travel
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2102 PCS House $52 $90 $38 $0 $0 $52 $90 $38
Hunting
Travel
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2103 Employee $360,868 $401,869 $41,001 $5,036 $80,000 $74,964 $365,904 $481,869 $115,965
Training or
Temporary
Duty Travel
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recorded Miscellaneous Obligations by Budget Object Code (BOC) for FY 2007 Compared to FY 2009--Continued
Attachment to Question #1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
VISNs 1 to 23 VISNs 1 to 23 VISNs 1 to 23 Other VHA/ VA Other VHA/ VA Other VHA/ VA Total Total Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
BUDGET OBJECT
CODE (BOC)
BOC DESCRIPTION FY 2007 FY 2009 Change FY 2007 FY 2009 Change FY 2007 FY 2009 Change------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2104 Employee $342,876 $326,400 ($16,476) $121,314 $377,755 $256,441 $464,190 $704,155 $239,965
Administrati
ve Travel
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2111 Employee $635,922 $506,765 ($129,157) $0 $0 $635,922 $506,765 ($129,157)
Medical
Travel
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2112 Inter- $37,723,748 $40,167,301 $2,443,552 $7,000 $0 ($7,000) $37,730,748 $40,167,301 $2,436,553
Facility
Travel
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2119 Beneficiary $158,624,532 $130,093,662 ($28,530,869) ($0) ($0) $158,624,532 $130,093,662 ($28,530,870)
Travel--Othe
r than
Mileage
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2120 Beneficiary $62,148,628 $285,823,505 $223,674,876 $341,061 $341,061 $62,148,628 $286,164,566 $224,015,938
Travel--Mile
age
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2121 Local $992,087 $835,314 ($156,773) $1,329 $8,715 $7,386 $993,416 $844,029 ($149,387)
Transportati
on of
Employees
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2128 Non-medical $29,354 $12,390 ($16,964) ($0) ($0) $29,354 $12,390 ($16,964)
Beneficiary
Travel
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2130 Rental of GSA $24,278,045 $30,942,261 $6,664,216 $1,352,847 $1,423,872 $71,025 $25,630,892 $32,366,133 $6,735,241
Passenger
Vehicles
from
Government
Motor Pools
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2140 Commercial $272,889 $100,148 ($172,741) $0 $0 $272,889 $100,148 ($172,741)
Transportati
on Charges
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2150 Reimbursable $331,093 $24,333 ($306,760) $16,097 $16,097 $331,093 $40,430 ($290,663)
Travel
Expense
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$285,746,401 $489,234,620 $203,488,219 $1,487,526 $2,247,501 $759,975 $287,233,927 $491,482,121 $204,248,194
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Transportatio
n of Things
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2210 Shipment of $64,363 $261 ($64,103) $253,646 $0 ($253,646) $318,009 $261 ($317,748)
Bodies
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2220 Other $1,769,284 $337,401 ($1,431,883) $2,990,662 ($337,401) ($3,328,063) $4,759,946 ($4,759,946)
Shipments
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2230 Shipment of $1,500 ($1,500) $0 $0 $1,500 ($1,500)
Household
Goods and
Personal
Effects
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2240 Parcel Post $280,411 $251,334 ($29,077) $1 $0 ($1) $280,412 $251,334 ($29,078)
Service
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2250 Rental of $12,864,641 $13,683,907 $819,266 $603,658 $818,641 $214,983 $13,468,299 $14,502,548 $1,034,249
Trucks from
Government
Motor Pools
(GSA)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2298 Service & $1,533,361 $1,533,361 $0 $1,533,361 $1,533,361
Distribution
Transportati
on
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2299 Transportatio $88,050 ($88,050) $600,000 $600,000 $88,050 $600,000 $511,950
n--Other
than Service
and
Distribution
Center
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$15,068,249 $14,272,902 ($795,348) $3,847,967 $2,614,602 ($1,233,365) $18,916,216 $16,887,504 ($2,028,712)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recorded Miscellaneous Obligations by Budget Object Code (BOC) for FY 2007 Compared to FY 2009--Continued
Attachment to Question #1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
VISNs 1 to 23 VISNs 1 to 23 VISNs 1 to 23 Other VHA/ VA Other VHA/ VA Other VHA/ VA Total Total Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
BUDGET OBJECT
CODE (BOC)
BOC DESCRIPTION FY 2007 FY 2009 Change FY 2007 FY 2009 Change FY 2007 FY 2009 Change------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Rent,
Communicatio
ns, and
Utilities
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2301 Telephone--Lo $3,448,185 $2,045,447 ($1,402,738) $1,646,190 $852,706 ($793,484) $5,094,375 $2,898,153 ($2,196,222)
ng Distance--
Commercial
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2302 Telephone--Lo $8,796,965 $6,814,773 ($1,982,191) $10,384,608 $1,079,500 ($9,305,108) $19,181,573 $7,894,273 ($11,287,300)
ng Distance--
GSA-Federal
Telecommunic
ations
Service
(FTS)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2303 Telephone--Re $38,799,405 $13,902,505 ($24,896,900) $4,380,015 $1,784,178 ($2,595,837) $43,179,420 $15,686,683 ($27,492,737)
curring
Costs--Comme
rcial
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2304 Telephone--Re $1,009,739 $1,044,952 $35,213 $876,092 $2,181,697 $1,305,605 $1,885,831 $3,226,649 $1,340,818
curring
Costs--GSA
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2305 Telephone--No $5,920,529 $742,912 ($5,177,618) $141,832 $7,792 ($134,040) $6,062,361 $750,704 ($5,311,657)
n-recurring
Costs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2307 Data $6,325,727 $2,769,279 ($3,556,449) $34,087,238 $42,487,970 $8,400,732 $40,412,965 $45,257,249 $4,844,284
Communicatio
ns Services
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2310 Wireless $4,167,828 $2,297,692 ($1,870,137) $538,312 $712,872 $174,560 $4,706,140 $3,010,564 ($1,695,576)
Services
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2312 Communication $1,403,450 $16,836 ($1,386,614) $263,631 $2,000 ($261,631) $1,667,081 $18,836 ($1,648,245)
s--Other
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2313 Integrated $42,092 ($42,092) $42,092 ($42,092)
Data
Communicatio
n Utility
(IDCU)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2320 Regular Mail $13,427,289 $3,073,912 ($10,353,377) $109,783,949 $147,564,140 $37,780,191 $123,211,238 $150,638,052 $27,426,814
Service
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2321 Express Mail $10,911,696 $1,961,922 ($8,949,774) $13,168,109 $14,947,523 $1,779,414 $24,079,805 $16,909,445 ($7,170,360)
Service
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2324 Software $30,000 $444,703 $414,703 $30,000 $444,703 $414,703
rental and
License Fees
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2330 Real Property $12,270,569 $1,093,770 ($11,176,799) $7,796,711 $13,340,645 $5,543,934 $20,067,280 $14,434,415 ($5,632,865)
Rental--Comm
ercial
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2331 Rental $2,668,335 $3,101,222 $432,887 $53,775,780 $86,115,718 $32,339,938 $56,444,115 $89,216,940 $32,772,825
Property
Rental--GSA
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2334 Rent, $294,420 $207,912 ($86,508) $291,077 $291,077 $294,420 $498,989 $204,569
Communicatio
ns, and
Utilities--M
arketing--Fr
anchise Fund
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2341 Equipment $22,899,204 $3,547,443 ($19,351,761) $64,588 $20,646 ($43,942) $22,963,792 $3,568,089 ($19,395,703)
Rentals
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2345 Telecommunica $16,403 ($16,403) $338 $0 ($338) $16,741 ($16,741)
tions
Equipment
Rental
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2350 Audio/Video $1,128 ($1,128) $0 $0 $1,128 ($1,128)
Media
Rentals
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2389 Purchased $1,615,275 $3,808,454 $2,193,179 $1,873 ($0) ($1,873) $1,617,148 $3,808,454 $2,191,306
Chilled
Water
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2390 Utility $31,652,712 $2,939,736 ($28,712,977) $103,751 $33,493 ($70,258) $31,756,463 $2,973,229 ($28,783,234)
Services
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recorded Miscellaneous Obligations by Budget Object Code (BOC) for FY 2007 Compared to FY 2009--Continued
Attachment to Question #1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
VISNs 1 to 23 VISNs 1 to 23 VISNs 1 to 23 Other VHA/ VA Other VHA/ VA Other VHA/ VA Total Total Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
BUDGET OBJECT
CODE (BOC)
BOC DESCRIPTION FY 2007 FY 2009 Change FY 2007 FY 2009 Change FY 2007 FY 2009 Change------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2391 Electricity-- $248,491,319 $255,722,609 $7,231,289 $2,435,769 $2,787,675 $351,906 $250,927,088 $258,510,284 $7,583,196
Buildings
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2392 Water $23,156,266 $25,439,358 $2,283,092 $1,938,566 $2,243,132 $304,566 $25,094,832 $27,682,490 $2,587,658
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2393 Purchased $27,269,812 $24,281,877 ($2,987,935) $1 $1 $27,269,812 $24,281,877 ($2,987,935)
Steam, Heat,
and Hot
Water
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2394 Natural Gas-- $145,440,716 $119,738,523 ($25,702,193) $317,847 $306,703 ($11,144) $145,758,563 $120,045,226 ($25,713,337)
Buildings
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2395 Sewer $17,747,038 $21,546,888 $3,799,851 $46,729 $56,416 $9,687 $17,793,767 $21,603,304 $3,809,537
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2396 Purchased $3,250 $3,421 $171 $0 $0 $3,250 $3,421 $171
Renewable
Electric
Energy--Buil
dings
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2399 Other $64,534 $64,534 ($0) ($0) $0 $64,534 $64,534
Purchased
Renewable
Energy--Buil
dings
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$627,737,260 $496,165,976 ($131,571,285) $241,824,020 $317,260,587 $75,436,567 $869,561,280 $813,426,563 ($56,134,717)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Printing and
Reproduction
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2423 Forms and $150 ($150) $0 $0 $150 ($150)
Form Letters
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2424 Other $668,744 $591,335 ($77,409) $30,381 $18,790 ($11,591) $699,125 $610,125 ($89,000)
Printing and
Reproduction
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$668,894 $591,335 ($77,559) $30,381 $18,790 ($11,591) $699,275 $610,125 ($89,150)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Other
Contractual
Services
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2507 Data $3,438,387 $388,849 ($3,049,538) $5,305,278 $11,076,572 $5,771,294 $8,743,665 $11,465,421 $2,721,756
Processing
Services and
Information
Technology
Services--Ot
her Than
Federal
Executive
Branch
Agency
Suppliers
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2510 Data $105,220 ($105,220) $20,436,795 $235,433,321 $214,996,526 $20,542,015 $235,433,321 $214,891,306
Processing
Services and
Information
Technology
Support
Services
(Federal
Executive
Branch
Agency
Supplier)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2511 Automated $234,128 $3,621 ($230,507) $49,274 $103,000 $53,726 $283,402 $106,621 ($176,781)
Data
Processing
Equipment
Time/Data
Processing
Service
(Commercial
Supplier)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2512 Other $30 $30 $486,697 $150,000 ($336,697) $486,697 $150,030 ($336,667)
Contractual
Services--Ma
rketing--Ent
erprise
Business
Center Fund
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recorded Miscellaneous Obligations by Budget Object Code (BOC) for FY 2007 Compared to FY 2009--Continued
Attachment to Question #1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
VISNs 1 to 23 VISNs 1 to 23 VISNs 1 to 23 Other VHA/ VA Other VHA/ VA Other VHA/ VA Total Total Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
BUDGET OBJECT
CODE (BOC)
BOC DESCRIPTION FY 2007 FY 2009 Change FY 2007 FY 2009 Change FY 2007 FY 2009 Change------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2513 ADP $870,916 $117,489 ($753,427) $1,489,307 $20,188,224 $18,698,917 $2,360,223 $20,305,713 $17,945,490
Operations
and
Maintenance
Support
Services
(Commercial
Supplier)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2515 Systems $10,795,280 ($10,795,280) $33,630,164 $41,299,511 $7,669,347 $44,425,444 $41,299,511 ($3,125,933)
Analysis and
Programming
(Commercial
Supplier)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2520 Repair of $1,817,334 $33,474 ($1,783,860) $21,184 $18,411 ($2,774) $1,838,518 $51,884 ($1,786,634)
Furniture
and
Equipment
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2521 Interest $687,232 $50,194 ($637,038) $4,728 $4,728 $687,232 $54,922 ($632,310)
Payments--Ba
ck Pay
Settlements
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2523 FEE BASIC $165,740 $127,489 ($38,250) ($0) ($0) $165,740 $127,489 ($38,251)
PURC CARD
PMT
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2528 Security $22,490 $32,143 $9,653 $10,764,830 $12,202,047 $1,437,217 $10,787,320 $12,234,190 $1,446,870
service
other than
2580
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2529 GOODS & $53,782 $1,192,575 $1,138,793 $3,298,045 $9,582,282 $6,284,237 $3,351,827 $10,774,857 $7,423,031
SERVICES--1V
A + FUND
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2532 Special $77,776 $1,112 ($76,664) $1,037,515 $1,852,484 $814,969 $1,115,291 $1,853,596 $738,305
services
provided by
GSA
services,
over and
above the
basic SLUC
rental
charges
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2535 Interior $174,363 ($174,363) $14,555 $0 ($14,555) $188,918 ($188,918)
Decorating
Services
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2536 Deactivated $0 $0 $0 $0 $0 $0
10/1/05
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2540 Laundry and $5,428,355 $1,691 ($5,426,663) $13,250 ($0) ($13,250) $5,441,605 $1,691 ($5,439,914)
Dry-cleaning
Services
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2542 Cleaning and $7,080,784 $6,452,275 ($628,509) $207,274 $91,191 ($116,083) $7,288,058 $6,543,466 ($744,592)
Janitorial
Services for
Buildings
and Other
Items
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2543 Recurring $3,599,487 $765,345 ($2,834,142) $252,715 $171,262 ($81,453) $3,852,202 $936,607 ($2,915,595)
Maintenance
and Repair
Services
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2544 ADP Equipment $1,492,298 $538,335 ($953,963) $969,965 $969,965 $1,492,298 $1,508,300 $16,002
and Computer
Maintenance
Contracts--C
ommercial
Supplier
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2548 Utility Plant $58,741 $185,920 $127,179 ($0) ($0) $58,741 $185,920 $127,179
Operations
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2549 Roads and $156,001 $178,570 $22,568 $359,865 $257,595 ($102,271) $515,866 $436,164 ($79,702)
Grounds
Maintenance
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2551 Prosthetic $9,176,798 $9,196,078 $19,280 $102 $15,646,750 $15,646,648 $9,176,900 $24,842,828 $15,665,928
Repair-
Contract
Services
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2552 Repair $100 $100 $0 $0 $0 $100 $100
Services to
Home
Dialysis
Equipment
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2553 Miscellaneous $194,626 $191,955 ($2,671) $0 $0 $194,626 $191,955 ($2,671)
Contractual
Services for
Indigent
Veterans
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recorded Miscellaneous Obligations by Budget Object Code (BOC) for FY 2007 Compared to FY 2009--Continued
Attachment to Question #1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
VISNs 1 to 23 VISNs 1 to 23 VISNs 1 to 23 Other VHA/ VA Other VHA/ VA Other VHA/ VA Total Total Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
BUDGET OBJECT
CODE (BOC)
BOC DESCRIPTION FY 2007 FY 2009 Change FY 2007 FY 2009 Change FY 2007 FY 2009 Change------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2560 Medical Care $1,087,173,771 $1,399,761,144 $312,587,373 $38,026,578 $47,908,136 $9,881,558 $1,125,200,349 $1,447,669,280 $322,468,931
Contracts
and
Agreements
with
Institutions
and
Organization
s
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2561 Fee Basis-- $26,661,723 $8,035,450 ($18,626,273) $2,030,000 $1,739,346 ($290,654) $28,691,723 $9,774,796 ($18,916,927)
Physician
Services (On-
Station
Only)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2562 Non-VA $754,590,259 $1,357,142,565 $602,552,307 $73,371,652 $73,371,652 $754,590,259 $1,430,514,217 $675,923,958
Medical and
Nursing
Service (Off-
Station
Only)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2563 Enhanced $8,491,593 ($8,491,593) $0 $0 $8,491,593 ($8,491,593)
Sharing--Nur
sing (38 U
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2564 Nursing $100,122 ($100,122) $0 $0 $100,122 ($100,122)
Services (On-
Station
only)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2566 FEE BASIS $320,722 ($320,722) $0 $0 $320,722 ($320,722)
OTHER THAN
PHYSICIAN
AND NURSING
SERVICES
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2567 ENHANCED $313,737 $28,713 ($285,024) ($0) ($0) $313,737 $28,713 ($285,024)
SHARING
OTHER HEALTH
CARE
SERVICES
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2569 Emergency $192,766,066 $302,356,227 $109,590,161 ($0) ($0) $192,766,066 $302,356,227 $109,590,161
Treatment of
Veterans
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2570 Non-VA Dental $74,555,913 $90,118,166 $15,562,253 ($0) ($0) $74,555,913 $90,118,166 $15,562,253
Services--Of
f-Station
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2571 Fee Dental $909,186 $712,423 ($196,763) $0 $0 $909,186 $712,423 ($196,763)
Service, On-
Station
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2572 Services $690,992 $458,323 ($232,669) $0 $0 $690,992 $458,323 ($232,669)
Purchased or
Sold by a
VHA Special
Clinical
Resource
Center
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2573 SERVICES $2,924 $27,484 $24,560 $15,143,749 $15,143,749 $2,924 $15,171,233 $15,168,309
PURCHASED OR
SOLD BY VHA
SPECIAL
ADMIN
RESOURCE CTR
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2574 Home Oxygen-- $10,914,954 $15,143,749 $4,228,795 ($15,143,749) ($15,143,749) $10,914,954 ($10,914,954)
Contractual
Agreement
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2575 Other $100,455,112 $136,176,396 $35,721,283 $0 $0 $100,455,112 $136,176,396 $35,721,284
Contract
Hospitalizat
ion
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2576 Consultants $861,151 $265,392 ($595,759) $14,799,193 $13,038,940 ($1,760,253) $15,660,344 $13,304,332 ($2,356,012)
and
Attendings
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2579 Scarce $121,075,482 $23,642,634 ($97,432,848) $442,821 $108,550 ($334,271) $121,518,303 $23,751,184 ($97,767,119)
Medical
Specialist
Contracts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2580 Non-Medical $254,609,738 $179,147,047 ($75,462,691) $228,301,758 $318,936,733 $90,634,975 $482,911,496 $498,083,780 $15,172,284
Contracts
and
Agreements
with
Institutions
and
Organization
s
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2581 Contracts and $44,177,304 $48,244,758 $4,067,454 $1,139,008 $495,682 ($643,326) $45,316,312 $48,740,440 $3,424,128
Agreements
with
Individuals
for Personal
Services
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2582 Incentive $6,422,235 $6,946,780 $524,544 $0 $0 $6,422,235 $6,946,780 $524,545
Therapy
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recorded Miscellaneous Obligations by Budget Object Code (BOC) for FY 2007 Compared to FY 2009--Continued
Attachment to Question #1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
VISNs 1 to 23 VISNs 1 to 23 VISNs 1 to 23 Other VHA/ VA Other VHA/ VA Other VHA/ VA Total Total Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
BUDGET OBJECT
CODE (BOC)
BOC DESCRIPTION FY 2007 FY 2009 Change FY 2007 FY 2009 Change FY 2007 FY 2009 Change------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2583 Tuition and $1,646,723 $990,382 ($656,341) $416,195 $545,599 $129,404 $2,062,918 $1,535,981 ($526,937)
Registration
within the
Government
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2584 Tuition and $13,523,939 $24,817,432 $11,293,493 $169,057 $445,425 $276,368 $13,692,996 $25,262,857 $11,569,861
Registration
outside the
Government
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2585 College Work- $308,198 $280,859 ($27,339) $1,071 $1,071 $308,198 $281,930 ($26,268)
Study
Program
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2586 Enhanced $50,967,154 $26,297,159 ($24,669,995) ($0) ($0) $50,967,154 $26,297,159 ($24,669,995)
Sharing--Phy
sicians in
VA
Facilities
(38 U
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2587 House Staff $391,306,664 $457,471,644 $66,164,980 $7,202 ($0) ($7,202) $391,313,866 $457,471,644 $66,157,778
Contracts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2589 Compensated $43,530,386 $60,011,087 $16,480,700 $564,099 $963,151 $399,052 $44,094,485 $60,974,238 $16,879,753
Work Therapy
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2590 VA/DoD $33,925,026 $49,429,837 $15,504,811 $157,163 $157,163 $33,925,026 $49,587,000 $15,661,974
Sharing
Agreement--3
8 U
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2591 Enhanced $575,321 $1,297,204 $721,883 ($0) ($0) $575,321 $1,297,204 $721,883
Sharing--Phy
sicians
Outside the
VA Facility
(38 U
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2592 Enhanced $4,847,953 $7,072,830 $2,224,877 $0 $0 $4,847,953 $7,072,830 $2,224,877
Sharing--Cli
nicians (Non-
physicians)
(38 U
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2593 IRS $2,014 $2,014 $0 $0 $0 $2,014 $2,014
COLLECTION
FEE
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2594 C&P MEDICAL $4,268,645 $4,268,645 ($0) ($0) $0 $4,268,645 $4,268,645
EXAMINATIONS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2595 Education and $17,868 $75,000 $57,132 $0 $0 $17,868 $75,000 $57,132
Training
Reporting
Allowances--
38 U
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2597 Burial Costs $279,226 $9,700 ($269,526) $0 $0 $279,226 $9,700 ($269,526)
for
Unclaimed
Bodies
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2598 Non-VA $568,529,740 $817,611,755 $249,082,015 $127,100,670 $130,531,175 $3,430,505 $695,630,410 $948,142,930 $252,512,520
Hospital and
Outpatient
Treatment
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$3,840,180,922 $5,037,300,044 $1,197,119,122 $490,363,431 $937,289,964 $446,926,533 $4,330,544,353 $5,974,590,008 $1,644,045,655
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Supplies and
Materials
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2610 Provisions $76,213,618 $86,335,451 $10,121,833 $55,048 $167 ($54,881) $76,268,666 $86,335,618 $10,066,952
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2620 Office $1,878,032 $86,032 ($1,792,000) $3,563 $685 ($2,878) $1,881,595 $86,717 ($1,794,878)
Supplies
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2623 Automated $1,200 ($1,200) $0 $0 $1,200 ($1,200)
Data
Processing
Recording
Media
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2625 Computing $19,327 $30,150 $10,823 $650 $144 ($506) $19,977 $30,294 $10,317
parts and
materials
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2631 Drugs/ $1,221,387,050 $1,325,120,414 $103,733,364 $2,048,950,544 $2,364,290,096 $315,339,552 $3,270,337,594 $3,689,410,510 $419,072,917
Medicines
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recorded Miscellaneous Obligations by Budget Object Code (BOC) for FY 2007 Compared to FY 2009--Continued
Attachment to Question #1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
VISNs 1 to 23 VISNs 1 to 23 VISNs 1 to 23 Other VHA/ VA Other VHA/ VA Other VHA/ VA Total Total Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
BUDGET OBJECT
CODE (BOC)
BOC DESCRIPTION FY 2007 FY 2009 Change FY 2007 FY 2009 Change FY 2007 FY 2009 Change------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2632 Other Medical $36,398,764 $27,788,064 ($8,610,700) $28,390,359 $37,331,642 $8,941,283 $64,789,123 $65,119,706 $330,583
and Dental
Supplies
(also
Expendable
Property)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2633 Chemical $6,570,519 $2,203,061 ($4,367,458) $0 $0 $6,570,519 $2,203,061 ($4,367,458)
Supplies
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2635 Blood $59,856,232 $10,957,457 ($48,898,775) $0 $0 $59,856,232 $10,957,457 ($48,898,775)
Products
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2636 Prescriptions $6,029,609 $4,955,296 ($1,074,313) $0 $0 $6,029,609 $4,955,296 ($1,074,313)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2645 Books, $635,566 $64,811 ($570,755) $10,650 $14,900 $4,250 $646,216 $79,711 ($566,505)
Periodicals,
and
Newspapers
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2647 Audio/video $25,392 $783 ($24,609) $95 ($0) ($95) $25,487 $783 ($24,704)
Media
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2650 Fuel Oil $4,398,742 $1,620,397 ($2,778,345) $47,696 $3,954 ($43,742) $4,446,438 $1,624,351 ($2,822,087)
(Heating Oil/
Diesel)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2651 COAL $50,850 $50,850 ($0) ($0) $0 $50,850 $50,850
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2652 Liquefied $7,924 $5,298 ($2,626) ($0) ($0) $7,924 $5,298 ($2,626)
Petroleum
Gas (LPG)/
Propane--Hea
ting and
Cooking
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2654 FUEL FOR $511,631 $518,169 $6,537 $15,100 $103,717 $88,616 $526,731 $621,885 $95,154
FLEET
VEHICLES
ONLY
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2655 Auto $138,262 $46,206 ($92,056) $12,547 $4,826 ($7,721) $150,809 $51,032 ($99,777)
Gasoline--No
n-Fleet
Vehicles &
other
Equipment
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2656 Liquefied $3,831 $42,000 $38,169 $0 $0 $3,831 $42,000 $38,169
Petroleum
Gas (LPG)/
Propane--Non-
Fleet
Vehicles &
Other
Equipment
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2657 Diesel/ $28,450 ($28,450) $9,500 $0 ($9,500) $37,950 ($37,950)
Distillate--
Non-Fleet
Vehicles &
Other
Equipment
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2660 Operating $14,157,669 $15,243,340 $1,085,670 $6,571,344 $6,188,207 ($383,137) $20,729,013 $21,431,547 $702,534
Supplies and
Materials
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2665 Linen Items $126,000 $438,020 $312,020 ($0) ($0) $126,000 $438,020 $312,020
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2666 Employee $9,757 $4,881 ($4,875) $6,943 $375 ($6,568) $16,700 $5,256 ($11,444)
Uniforms and
Protective
Clothing
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2670 Maintenance $341,630 $1,796 ($339,835) $33,563 $15 ($33,548) $375,193 $1,811 ($373,382)
Supplies and
Materials
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2674 Home Oxygen-- $266,562 $805,803 $539,241 $0 $0 $266,562 $805,803 $539,241
Prosthetic
Supplies/
Appliances
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2680 Supply Fund - $500 ($500) $0 $0 $500 ($500)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2692 Prosthetic $81,540,037 $111,545,205 $30,005,168 $342 $209,820,750 $209,820,408 $81,540,379 $321,365,955 $239,825,576
Supplies
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2693 Home Dialysis $54,356 $90,576 $36,220 $0 $0 $54,356 $90,576 $36,220
Equipment
and Supplies
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recorded Miscellaneous Obligations by Budget Object Code (BOC) for FY 2007 Compared to FY 2009--Continued
Attachment to Question #1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
VISNs 1 to 23 VISNs 1 to 23 VISNs 1 to 23 Other VHA/ VA Other VHA/ VA Other VHA/ VA Total Total Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
BUDGET OBJECT
CODE (BOC)
BOC DESCRIPTION FY 2007 FY 2009 Change FY 2007 FY 2009 Change FY 2007 FY 2009 Change------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2696 Supply Fund $1,750,000 $1,750,000
Inventory--H
eld for Sale
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$1,510,600,661 $1,587,954,060 $77,353,399 $2,084,107,944 $2,617,759,477 $533,651,533 $3,594,708,605 $4,207,463,537 $612,754,932
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Equipment
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3110 Transportatio $73,712 ($73,712) $0 $0 $73,712 ($73,712)
n Equipment,
Passenger
Vehicles--Ca
pitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3111 Transportatio $40,191 ($40,191) $0 $0 $40,191 ($40,191)
n Equipment,
Passenger
Vehicles--No
n-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3120 Furniture and $2,601,394 $2,601,394 $0 $2,601,394 $2,601,394
Fixtures--Ca
pitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3121 Office $4,062 $4,062 $0 $0 $0 $4,062 $4,062
Equipment--C
apitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3123 Automated $2,252,024 $5,880,450 $3,628,426 $2,252,024 $5,880,450 $3,628,426
Data
Processing
(ADP)
Software--Ca
pitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3124 Internal Use $332,493 ($332,493) $5,157,976 $30,358,909 $25,200,933 $5,490,469 $30,358,909 $24,868,440
Software--Ca
pitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3126 Furniture and $509,185 $3,553,131 $3,043,946 $9,022 $1,074,057 $1,065,035 $518,207 $4,627,188 $4,108,981
Fixtures--No
n-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3127 Office $755 ($755) $37,456 $332,686 $295,230 $38,211 $332,686 $294,475
Equipment--N
on-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3128 Office $89,997 ($89,997) $89,997 ($89,997)
Automation/
Word
Processing--
Non-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3129 Automatic $1,288,738 $105,846 ($1,182,891) $850,747 $1,430,866 $580,119 $2,139,485 $1,536,712 ($602,773)
Data
Processing
Equipment
(ADPE)--Non-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3130 Medical, $392,305 $20,250 ($372,055) $0 $0 $392,305 $20,250 ($372,055)
Dental, and
Scientific
Equipment--C
apitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3131 Medical, $700,073 $2,333,394 $1,633,321 $0 $0 $700,073 $2,333,394 $1,633,321
Dental, and
Scientific
Equipment--N
on-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3133 Telecommunica $296,754 $14,097 ($282,657) $5,105 $1,246,000 $1,240,895 $301,859 $1,260,097 $958,238
tion
Equipment--N
on-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3134 Automated $9,976 ($9,976) $75,339 $75,339 $9,976 $75,339 $65,363
Data
Processing
(ADP)
Software--No
n-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recorded Miscellaneous Obligations by Budget Object Code (BOC) for FY 2007 Compared to FY 2009--Continued
Attachment to Question #1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
VISNs 1 to 23 VISNs 1 to 23 VISNs 1 to 23 Other VHA/ VA Other VHA/ VA Other VHA/ VA Total Total Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
BUDGET OBJECT
CODE (BOC)
BOC DESCRIPTION FY 2007 FY 2009 Change FY 2007 FY 2009 Change FY 2007 FY 2009 Change------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3151 Utility and $1,221 ($1,221) $0 $0 $1,221 ($1,221)
Operating
Equipment--N
on-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3155 Hazardous $30,682 $790 ($29,892) $580 $580 $30,682 $1,370 ($29,312)
Waste Clean-
Up of
Personal
Property--Ca
pitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3161 Equipment $10,001 $35,607 $25,606 $83,055 $179,307 $96,252 $93,056 $214,914 $121,858
under
Capital
Lease
Purchase
Contracts--N
on-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$3,686,085 $6,067,176 $2,381,092 $8,485,382 $43,179,589 $34,694,207 $12,171,467 $49,246,765 $37,075,298
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Land and
Structures
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3216 Improvements $12,000 $12,000
to Land--Non-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3220 Buildings and $5,606,001 $17,884,920 $12,278,920 $4,500,000 ($0) ($4,500,000) $10,106,001 $17,884,920 $7,778,919
Facilities--
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3222 Land, $5,006,261 $5,590,133 $583,871 $0 $0 $5,006,261 $5,590,133 $583,872
Building,
and Other
Structures
Acquired
Under Lease
Purchase
Contracts--C
apitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3223 Buildings and $358,037 $1,372 ($356,665) $0 $0 $358,037 $1,372 ($356,665)
Facilities--
Non-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3224 Buildings $5,692 $14,556 $8,864 ($0) ($0) $5,692 $14,556 $8,864
Under
Capital
Lease--Non-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3226 Telecommunica $430,266 ($430,266) $0 $0 $430,266 ($430,266)
tion
Equipment--N
on-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3230 Leasehold $401,475 $401,475 $1,199,887 $1,199,887 $0 $1,601,362 $1,601,362
Improvements
-Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3231 Leasehold $82,575 ($82,575) $60,000 $1,202,970 $1,142,970 $142,575 $1,202,970 $1,060,395
Improvements
-Non-
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3255 Hazardous $2,000,000 ($2,000,000) $0 $0 $2,000,000 ($2,000,000)
Waste Clean-
Up of
Buildings
and Other
Structures--
Not
Capitalized
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
3310 Property $463 ($463) $0 $0 $463 ($463)
Acquisitions
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$13,489,295 $23,892,457 $10,403,162 $4,560,000 $2,402,856 ($2,157,144) $18,049,295 $26,307,313 $8,258,018
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Recorded Miscellaneous Obligations by Budget Object Code (BOC) for FY 2007 Compared to FY 2009--Continued
Attachment to Question #1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
VISNs 1 to 23 VISNs 1 to 23 VISNs 1 to 23 Other VHA/ VA Other VHA/ VA Other VHA/ VA Total Total Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
BUDGET OBJECT
CODE (BOC)
BOC DESCRIPTION FY 2007 FY 2009 Change FY 2007 FY 2009 Change FY 2007 FY 2009 Change------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Grants,
Subsidies,
and
Contribution
s
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4110 Grants, $541,571,009 $714,982,223 $173,411,213 $0 $0 $541,571,009 $714,982,223 $173,411,214
Subsidies,
and
Contribution
s to States
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4120 Grants--Homel $11,409,121 $30,556,301 $19,147,180 $28,117,161 $30,663,004 $2,545,843 $39,526,282 $61,219,305 $21,693,023
ess Veterans
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$552,980,131 $745,538,524 $192,558,393 $28,117,161 $30,663,004 $2,545,843 $581,097,292 $776,201,528 $195,104,236
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Insurance
Claims and
Indemnities
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4205 No Fear (EEO) $5,000 $5,000 $5,000
Act
Settlements
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4210 Pension $7,230 $7,230 $2,674,790 $2,175,104 ($499,686) $2,674,790 $2,182,334 ($492,456)
Annuities
and Ins
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4220 Federal Tort $719,764 $1,022,225 $302,461 $69,342 $2,560 ($66,782) $789,106 $1,024,785 $235,679
Claims
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4250 Reimbursement $135,077 $352,401 $217,324 $0 $0 $135,077 $352,401 $217,324
for Losses
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4260 Administrativ $655 $292 ($363) $0 $0 $655 $292 ($363)
e Expense--
Insurance
Programs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$855,496 $1,387,148 $531,652 $2,744,132 $2,177,664 ($566,468) $3,599,628 $3,564,812 ($34,816)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Interest and
Dividends
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
4310 Interest $4,678 $4,678 $376,103 $356,982 ($19,121) $376,103 $361,660 ($14,443)
Expense--Lea
se Purchase
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CASCA/GPF/
SUPPLY FUND
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
9999 Casca/GPF/ $81,078 $200 ($80,878) $0 $0 $81,078 $200 ($80,878)
Supply Fund
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total $6,905,962,798 $8,480,252,293 $1,574,289,495 $2,875,703,370 $3,982,396,774 $1,106,693,404 $9,781,666,168 $12,475,621,952 $2,693,955,784
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Committee on Veterans' Affairs
Washington, DC.
July 30, 2010
The Honorable Eric K. Shinseki
Secretary
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20420
Dear Secretary Shinseki,
In reference to our Committee hearing of July 28, 2010, I would
appreciate your response to the enclosed additional questions for the
record by close of business Wednesday, September 1, 2010.
It would be appreciated if you could provide your answers
consecutively on letter size paper, single spaced. Please restate the
question in its entirety before providing the answer.
Thank you for your cooperation in this matter.
Sincerely,
Steve Buyer
Ranking Republican Member
SB:dwc
Enclosure
__________
Questions for the Record
The Honorable Steve Buyer, Ranking Republican
Member, House Committee on Veterans' Affairs, ``Continued Oversight of
Inadequate Cost Controls at the U.S. Department of Veterans Affairs''
July 28, 2010
Question 1: Please provide to the Committee a complete listing of
the 23 categories Form 1358 should be used, as well as the amount spent
with these 23 categories for FY 2009. For those purchases made using
form 1358 that are not under the 23 approved categories, please provide
the Committee the amount and type of these purchases.
Response: The table below lists the 23 categories and the dollar
amount for each in fiscal year (FY) 2009. There were 9 of 23 categories
that had no costs. The remaining 14 of 23 categories accounted for
$11.2 billion (90 percent) of the total $12.5 billion in FY 2009. The
balance of $1.3 billion (10 percent) was not in one of the 23
authorized categories.
------------------------------------------------------------------------
Exception Description FY 2009 Total Percent of
--------------------------------------- Obligations Total
---------------------------------
Exceptions
------------------------------------------------------------------------
1 Nursing Homes/Adult $539,352,030 4.32%
Daycare
------------------------------------------------------------------------
2 Fee Basis, including $3,570,650,185 28.62%
Fee Dental,
Homemaker/Home
Health Aid, Non-VA
Hospitalization
------------------------------------------------------------------------
3 Standardized $104,855,181 0.84%
Obligations
------------------------------------------------------------------------
4 Limited Open Travel $0
Authority (LOTA)
under $10.00
------------------------------------------------------------------------
5 Research Studies $0
------------------------------------------------------------------------
6 Inter-Library Loan $0
Program
------------------------------------------------------------------------
7 Affiliation $457,471,644 3.67%
Agreement for
Interns/Residents
------------------------------------------------------------------------
8 Tort Claims/EEO $3,619,734 0.03%
settlements; OIG
Confidential
Services
------------------------------------------------------------------------
9 Meal Tickets $0
------------------------------------------------------------------------
10 Incentive Therapy/ $67,921,018 0.54%
Compensated Work
Therapy
------------------------------------------------------------------------
11 Beneficiary Travel $415,929,557 3.33%
------------------------------------------------------------------------
12 Home Improvement $4,932,949 0.04%
Structural
Alterations (HISA)
------------------------------------------------------------------------
13 Outer Burial $0
Receptacle
------------------------------------------------------------------------
14 VBA Lease Agreement $0
Overtime Charges
------------------------------------------------------------------------
15 Home Oxygen Bills $15,949,552 0.13%
------------------------------------------------------------------------
16 Prosthetics--New or $346,020,253 2.77%
Repaired Items
------------------------------------------------------------------------
17 Pharmacy and $3,775,746,128 30.26%
Subsistence Prime
Vendor
------------------------------------------------------------------------
18 Regulated Utilities $523,565,607 4.20%
------------------------------------------------------------------------
19 Tuition $0
Reimbursement to VA
Employees
------------------------------------------------------------------------
20 Miscellaneous Non- $1,247,407,534 10.00%
Procurement
Obligations
------------------------------------------------------------------------
21 CHAMPVA, Spina $96,433,697 0.77%
Bifida Health,
Children of Women
Vietnam Veterans,
Foreign Medical
Program, and other
Health
Administration
Center health care
programs
------------------------------------------------------------------------
22 Special Adaptive $0
Housing Inspections
------------------------------------------------------------------------
23 State Approving $0
Agency
------------------------------------------------------------------------
Total Exceptions in $11,169,855,071 89.53%
FY 2009
------------------------------------------------------------------------
Total Non-Exceptions $1,305,766,878 10.45%
in FY 2009
------------------------------------------------------------------------
Total in FY 2009 $12,475,621,950 100%
------------------------------------------------------------------------
Question 2: Please provide a breakdown in the dollar amounts used
for each of the 23 approved categories for miscellaneous obligations.
Response: See VA's response to question 1 for the dollar amounts.
Question 3: Please provide a status on Arkansas facilities on the
use of Form 1358 for miscellaneous obligations relative to the GAO
report.
Response: The table below provides the data for the two facilities
in Arkansas.
----------------------------------------------------------------------------------------------------------------
Exception Description FY 2009 FY 2009 Little FY 2009 Total Percent of Total
------------------------------------- Fayetteville Rock Obligations Arkansas ------------------
Obligations ------------------- Obligations
Exceptions ------------------- -----------------------------------------------------------------------------------------------------------------------------------
1 Nursing Homes/ $1,672,047 $3,242,910 $4,914,957 3.61%
Adult Daycare
----------------------------------------------------------------------------------------------------------------
2 Fee Basis, $28,187,329 $18,337,131 $46,524,460 34.19%
including Fee
Dental,
Homemaker/Home
Health Aid, Non-
VA
Hospitalization
----------------------------------------------------------------------------------------------------------------
3 Standardized $702,197 $1,763,532 $2,465,729 1.81%
Obligations
----------------------------------------------------------------------------------------------------------------
4 Limited Open $0 $0 $0
Travel Authority
(LOTA) under
$10.00
----------------------------------------------------------------------------------------------------------------
5 Research Studies $0 $0 $0
----------------------------------------------------------------------------------------------------------------
6 Inter-Library $0 $0 $0
Loan Program
----------------------------------------------------------------------------------------------------------------
7 Affiliation $29,274 $8,406,952 $8,436,226 6.20%
Agreement for
Interns/
Residents
----------------------------------------------------------------------------------------------------------------
8 Tort Claims/EEO $4,222 $5,334 $9,556 0.01%
settlements; OIG
Confidential
Services
----------------------------------------------------------------------------------------------------------------
9 Meal Tickets $0 $0 $0 0.00%
----------------------------------------------------------------------------------------------------------------
10 Incentive Therapy/ $330,820 $736,056 $1,066,876 0.78%
Compensated Work
Therapy
----------------------------------------------------------------------------------------------------------------
11 Beneficiary $3,325,889 $10,191,629 $13,517,518 9.93%
Travel
----------------------------------------------------------------------------------------------------------------
12 Home Improvement $44,414 $111,248 $155,662 0.11%
Structural
Alterations
(HISA)
----------------------------------------------------------------------------------------------------------------
13 Outer Burial $0 $0 $0
Receptacle
----------------------------------------------------------------------------------------------------------------
14 VBA Lease $0 $0 $0
Agreement
Overtime Charges
----------------------------------------------------------------------------------------------------------------
15 Home Oxygen Bills $126,000 $0 $126,000 0.09%
----------------------------------------------------------------------------------------------------------------
16 Prosthetics--New $518,551 $2,116,551 $2,635,102 1.94%
or Repaired
Items
----------------------------------------------------------------------------------------------------------------
17 Pharmacy and $8,113,401 $21,489,504 $29,602,905 21.75%
Subsistence
Prime Vendor
----------------------------------------------------------------------------------------------------------------
18 Regulated $463,348 $729,397 $1,192,413 0.88%
Utilities
----------------------------------------------------------------------------------------------------------------
19 Tuition $0 $0 $0
Reimbursement to
VA Employees
----------------------------------------------------------------------------------------------------------------
20 Miscellaneous Non- $2,642,964 $2,962,449 $5,605,413 4.12%
Procurement
Obligations
----------------------------------------------------------------------------------------------------------------
21 CHAMPVA, Spina $0 $0 $0 0.00%
Bifida Health,
Children of
Women Vietnam
Veterans,
Foreign Medical
Program, and
other Health
Administration
Center health
care programs
----------------------------------------------------------------------------------------------------------------
22 Special Adaptive $0 $0 $0
Housing
Inspections
----------------------------------------------------------------------------------------------------------------
23 State Approving $0 $0 $0
Agency
----------------------------------------------------------------------------------------------------------------
Total Exceptions $46,160,456 $70,092,693 $116,253,149 85.43%
in FY 2009
----------------------------------------------------------------------------------------------------------------
Total Non- $465,499 $19,359,928 $19,825,427 14.57%
Exceptions in FY
2009
----------------------------------------------------------------------------------------------------------------
Total in FY 2009 $46,625,955 $89,452,621 $136,078,576 100.00%
----------------------------------------------------------------------------------------------------------------
Question 4: The private sector utilizes various accounting and
financial systems to track their income and expenditures. Can the
department utilize similar commercial off the shelf (COTS) products,
and make a few modifications to build a readily usable program that
will assist them in getting a better idea of its expenditures. If the
answer is no, please provide the Committee with an explanation of the
differences between the government and private sector that would
prohibit the use of a COTS product.
Response: VA can use commercial off the shelf (COTS) products for
financial and accounting transactions and reporting. There are a number
of COTS products available which provide Federal Government financial
and accounting software. Vendors typically work with agencies to
configure or tailor the software to meet agency needs and satisfy
specific requirements. COTS products that are not designed for Federal
Government finance and accounting require much customization to
accommodate the budgeting process unique to Federal agencies.
Implementation of any COTS product, with VA's size and complexity, is
high risk, tends to cost more than it should, and takes many years to
deploy. Our current accounting system (as of FY 2010) provides us with
the total amount of 1358 spending data. VA's Logistics Data Warehouse
provides the breakout of 1358 spending data by category.
Question 5: It is apparent to the Committee that the Department
needs an integrated financial management and logistics accounting
system as mandated by OMB in 2001. Please provide the Committee with a
detailed plan for the replacement system of the FLITE program,
including a timeline for implementation, to include development
timelines.
Response: In general, we agree that VA would benefit from replacing
our current financial system with an integrated financial management
system. In making the determination of when such a replacement should
happen there are several key considerations. These considerations
include: how well the current system is functioning today and is
expected to function in the future; how much it costs to operate the
current system; how much it will cost to replace the current system;
how much risk there would be in implementing a new system; what other
financial management challenges we face; and the relative priority and
impact of other challenges versus the need to replace the current
financial system.
Earlier this year when we reevaluated all of our financial
management challenges, risks, and priorities, we considered all of
these questions and determined that now was not the best time for tVA
to replace the current financial system. Our current system has
resulted in a clean audit opinion on our financial statements for 11
years in a row. It only costs $15 million to operate. There is relative
low risk with maintaining the system for the foreseeable future. On the
other hand, the Financial and Logistics Integrated Technology
Enterprise (FLITE)/Integrated Financial Accounting System (IFAS)
solution would have cost an estimated $500 million and carried very
high implementation risks. We will reevaluate our financial system
environment in another 2-3 years and then decide whether to undertake a
replacement of VA's Financial Management System (FMS). At that time, if
a decision is made to replace FMS, VA will develop a detailed plan for
implementation.
__________
The Honorable Cliff Stearns, Deputy Ranking Republican Member
Question 1: Two years ago the VA had $6.9 billion in miscellaneous
obligations. Today there are $12 billion in miscellaneous obligations.
What is the appropriate use of the miscellaneous obligations
classification? Does the VA feel that $12 billion in miscellaneous
obligations is the appropriate use of this code? What does the VA
consider as an acceptable level of expenditure in the miscellaneous
obligations category?
Response: According to VA records, miscellaneous obligations
totaled $9.8 billion in FY 2007. The $6.9 billion in miscellaneous
obligations cited in the Government Accountability Office (GAO) report
for FY 2007 refers only to those miscellaneous obligations used by the
21 VISNs (No. 1 thru 23), but did not include amounts attributable to
other Veterans Health Administration (VHA) and VA organizations in FY
2007. The GAO report cited an additional $2.9 billion during this same
time frame applicable to miscellaneous obligations for drugs,
medicines, and other supplies, and for various fee-based medical,
dental, and other services. In FY 2008, the number of recorded
miscellaneous obligations was $11.3 billion, and in FY 2009, the number
was $12.4 billion. This represents an average growth rate of about 9
percent per year, which roughly corresponds to the annual increase in
the VA budget along the same time frame.
The usage of the miscellaneous obligation form is defined by VA
policy. VA may use Form 1358 as an obligation control document for any
of the 23 approved uses, or when the Head of Contracting Activity (HCA)
or contracting designee has determined that a contract is not required.
A copy of the Appendix to VA policy detailing these approved uses is
attached. In reviewing the transactions, the bulk of the items fall
under fee care and pharmacy. Therefore, while we agree that internal
controls must be strengthened and the type of use must be enumerated on
the Form, VA believes that the current level of expenditure is
appropriate. VA continues to examine the process for improvements.
Question 2: What steps is the VA taking to prevent the misuse of
miscellaneous obligations from being used in future financial
reporting? What steps is the VA taking to clarify current expenditures
listed as miscellaneous obligations? How much expenditure would be
classified as fraud or misuse within the miscellaneous obligations
category?
Response: VA has established clear policy on the use of
miscellaneous obligations. In January 2009, VA's Chief Financial
Officer reissued policy for use of miscellaneous obligations, including
a prohibition of any individual performing more than one of the
following key approval functions:
Requesting the miscellaneous obligation
Approving the miscellaneous obligation
Recording the obligation of funds
Certifying delivery of goods or services and approving
payment.
In addition, VA modified its Integrated Funds Distribution Control
Point Activity (IFCAP) system to identify whether a given purchasing
transaction uses Form 1358, Use of Estimated Miscellaneous Obligation
or Change in Obligation, or Form 2237, Request, Turn-In, and Receipt
for Property or Services. As of September 2009, these data are now sent
to VA's Financial Management System to distinguish between these two
types of transactions. This new capability identifies transactions
originated on a Form 1358 (commonly referred to as a miscellaneous
obligation) and helps VA monitor the use of this form. To assist field
activities with monitoring compliance with policy, VA developed two new
IFCAP reports to help facilities accomplish their oversight
responsibilities:
A Segregation of Duties Violations Report is available
for management to ensure appropriate segregation of duties between the
approval functions involved in using a Form 1358, and
An additional report, the Missing Fields Report,
identifies fields (vendor, contract number, purpose) that have not been
completed as required.
The VA Secretary recently approved an additional measure to improve
internal controls over the use of miscellaneous obligations. The new
measure includes requiring facility directors to certify quarterly that
their facility meets the four levels of segregation of duties as
defined by VA policy. In completing the certification, the facility
director must verify that he or she has reviewed the segregation of
duties violations report in the IFCAP system. In addition, the facility
Information Security Officer is required to certify the report. VA
policy on miscellaneous obligations has been updated to include the
quarterly certification requirements and related processes. During site
visits where miscellaneous obligations are reviewed, VA's Management
Quality Assurance Service (MQAS) will conduct an independent review of
the facility's certifications to ensure they accurately represent the
state of operations at that facility.
The Secretary has also directed that VA lay out a long-term plan to
implement automated information technology controls to prevent
segregation of duties issues and other issues surrounding the use of
miscellaneous obligations. These changes will include modifying IFCAP
to systematically enforce the segregation of duties, verifying that a
system user has only one distinct role in each key action required to
process a miscellaneous obligation. System changes will also force
required data elements such as purpose, vendor, and contract number to
be populated on all miscellaneous obligations. Lastly, the IFCAP system
will also be modified to route any miscellaneous obligation to the
contracting office for determination of proper use if it does not fall
within one of the 23 pre-approved exceptions.
VA is also considering a programming change that would provide a
drop-down menu of the allowable exceptions for using a miscellaneous
obligation, as detailed in VA policy, requiring an entry that would
specifically identify the type of miscellaneous obligation. This change
is important as it would essentially remove the ``miscellaneous''
aspect of these obligations and provide for easier reporting of
obligations by category.
Over the last two fiscal years (FY 2009 and FY 2010 year-to-date),
MQAS reviewed a total of 747 miscellaneous obligations totaling $141.5
million at 55 sites within VA and found no instances of fraud. During
that same time frame, MQAS found 25 of 747 instances (3.3 percent)
totaling $1.1 million of $141.5 million reviewed (0.8 percent) where
the site misused the Form 1358 for a purpose that is explicitly listed
in VA policy as an ``invalid use'' of a miscellaneous obligation.
It should also be noted that since the 2008 GAO study, VA's efforts
have significantly reduced practices inconsistent with VA policy. For
example, in FY 2008, 71 percent of transactions sampled were in
violation of the four-person Separation of Duties standard. In FY 2010,
this has decreased to 29 percent. The number of sampled transactions
with a blank vendor field has decreased from 48 percent in FY 2008, to
13 percent in FY 2010. The blank or incomplete data field problem is
now in single digit percentages. While the remaining challenges are
still large, and we are addressing them, the data shows significant
progress.
Question 3: What is VA's plan to establish proper cost control and
oversight? How is this plan different from 2 years ago from the last
GAO report? How long will it take to implement this plan?
Response: In response to the GAO report from 2007, VA modified its
IFCAP system to distinguish whether a transaction originated on a Form
1358 or Form 2237. As of September 2009, this data is now sent to VA's
FMS to distinguish between these two types of transactions. VA has also
developed two new IFCAP reports to help facilities accomplish their
oversight responsibilities. The Segregation of Duties Violations Report
is used to ensure appropriate segregation of duties for approval
functions involved in using a Form 1358 and an additional Missing
Fields Report identifies where the vendor, contract number, or purpose
data fields have not been entered.
Also, in response to the GAO report, MQAS expanded their site
reviews to include a review of miscellaneous obligations, and VHA's
Financial Quality Assurance Managers at each network review a
percentage of all VHA stations miscellaneous obligations for
segregation of duties and documentation of vendor, contract number and
purpose.
The VA response to GAO's report included a commitment from VA to
establish policies and procedures regarding the proper segregation of
duties, requiring proper documentation in IFCAP, and ensuring review by
contracting officials for certain miscellaneous obligations.
As assured in our response to the GAO report, VA implemented the
recommendations associated with establishing policies and procedures to
enhance internal controls over financial reporting. However, the
independent reviews conducted by MQAS indicated that policies and
procedures were not enough to ensure compliance with strong internal
controls. Recognizing the GAO recommendations did not improve the
situation quickly enough, VA took additional action, over and above the
recommendations made by GAO, to strengthen oversight of the segregation
of duties requirement. In January 2009, VA's Office of Finance reissued
policy for use of miscellaneous obligations reaffirming the prohibition
against one individual performing more than one key function in the
miscellaneous obligations process. The policy also prohibited the use
of miscellaneous obligations for uses other than 23 accepted uses
unless HCA approval is obtained.
VHA has also begun an aggressive communication campaign to ensure
field stations are aware of requirements for use of miscellaneous
obligations. VHA communicated the GAO findings, the continued MQAS
findings associated with field station non-compliance with policy, and
VA policy requirements during national VISN network director calls,
national fiscal officer calls, and in writing via national email
distribution groups for VHA facility and fiscal office leadership and
staff.
On June 29, 2010, the Secretary mandated that facility directors
certify quarterly that their facility meets the four levels for
segregating duties. For the quarter ending September 30, 2010, and
every quarter thereafter, each facility director is required to verify
that the four functions have been separated. The facility Information
Security Officer is also required to certify the report. As a result of
the Secretary's certification mandate, VA updated its miscellaneous
obligations policy to provide facilities with guidance on how to timely
and accurately implement the quarterly certification requirements.
``VA's Office of Information and Technology, in collaboration with
business stakeholders, has developed a plan to provide a longer-term
IFCAP system solution that would automate many of the controls to
enforce compliance within the system. The initial version of this plan
was delivered on 1 September 2010. Following the tenets of the Program
Management Accountability System (PMAS), this plan fully covered the
first phase of work and laid out preliminary steps for the second and
final phase. The plan will be updated again by 17 December 2010 to
fully cover the second and final phase.'' This solution will replace
the FLITE information technology solution originally included in our
response to the 2007 GAO report.
To enhance oversight, during FY 2011 site visits where
miscellaneous obligations are reviewed, MQAS will conduct an
independent review of each facility's certifications to ensure they
accurately represent the state of operations at that facility. MQAS is
also planning a special, in-depth review of the use of miscellaneous
obligations at one VISN and all of its associated medical facilities in
FY 2011. The in-depth review will clearly identify the root causes of
findings of non-compliance so that recommendations that correct the
underlying root causes can be made and addressed by the Department.
MQAS and VHA's Financial Quality Assurance Managers will also continue
their existing reviews of miscellaneous obligations to measure field
facilities' compliance with policy.
Since first receiving GAO's report 2 years ago, VA has made
significant policy changes to address the concerns raised about VA use
and oversight of miscellaneous obligations. VA has tightened
requirements to enforce segregation of duties and to ensure proper
review of Form 1358. New reports and data are available to help
managers conduct the proper oversight. VA also established an
independent review mechanism to measure compliance with policy on
miscellaneous obligations and made additional changes to policy, such
as the Secretary's mandate requiring quarterly facility certification.
VA will continue to pursue technological solutions to automate the
internal controls over miscellaneous obligations. These new efforts
have the highest management attention and are being tracked by the VA
Secretary and VA Chief Financial Officer.
Question 4: What is the penalty for a contracting officer when they
fail to follow proper procedures as detailed in VAAR and other
regulations? Does VA enforce these penalties? Should there be more
penalties? How many employees have lost their jobs for not complying
with regulations? How many employees have been transferred to non-
contracting positions for not complying with regulations? What are the
criteria that the VA uses to determine a contracting officer's employee
performance? Does the VA use contractors for its contracting? If so,
what steps are used to maintain proper oversight?
Response: Contracting officers who fail to comply with statute,
regulation, policy, and/or procedures subject themselves to corrective,
performance-based and/or disciplinary actions. Although some may
consider these actions punitive, performance-based and disciplinary
actions taken against government personnel, to include contracting
personnel, are designed to correct or improve future behavior and
performance. Labor-management agreement obligations require
performance-based and disciplinary actions to be progressive in nature.
Supervisory personnel and the HCS are charged with responsibility for
taking these actions with respect to contracting personnel assigned to
their respective organizations.
Prior to initiating formal performance-based or disciplinary
action, most supervisors provide verbal and/or written counseling to
employees. Performance-based actions include informal and formal
counseling; placing the employee on a formal performance improvement
plan, remedial training, coaching, and closer supervision to help the
employee improve. Formal disciplinary actions include letters of
admonishment and reprimand, and suspension from duty without pay. In
addition, the potential exists for further adverse actions which could
include suspensions of 14 days or greater, demotion in grade, or
removal from Federal service. VA's Office of Acquisition, Logistics,
and Construction (OALC) does not track disciplinary or performance-
based actions taken against contracting personnel across the enterprise
for failure to comply with statute, regulation, policy or procedures,
as these actions are effected through a localized supervisory
structure. OALC is unaware of any employees losing their jobs or being
reassigned to non-contracting positions for failures in this regard.
Government contractor personnel are used as contract specialists and
consultants on a small scale and their performance is closely
supervised and monitored by government personnel, also in a localized
manner.
Though both types of actions occur locally, through training and
Department-wide coordination via VA's Acquisition Reform Initiative,
Acquisition Academy, Senior Procurement Council activities, VA will
continue to foster enterprise management as necessary and develop the
acquisition workforce to ensure that fewer and fewer of these instances
occur.
Question 5: Does VA require all contracts to be signed off by a
head contracting authority? Are contracts that have not been approved
by all appropriate parties within the VA considered legal and valid?
Would VA support legislation that would require all contracts over
$100,000 must be approved by the contracting officer, the HCA and OGC
to be considered a legal offer?
Response: VA does not require contracts be signed off by heads of
contracting activities (HCAs). Warranted contracting officers, as the
government's legal representative in contractual matters, are the only
authorized authority to legally bind the government by contract. All
contracts executed by authorized contracting officers are considered
legally binding and valid. HCAs and legal counsel do not have authority
to enter into contracts on behalf of the government.
VA believes adequate authority currently exists to establish the
necessary policy and guidance on the execution of contracts over
$100,000, and no additional legislation is needed to further enhance
its acquisition program. VA Acquisition Regulation 801.695 delineates
VA's appointment of HCAs, whose overall responsibility includes the
management of the procurement program assigned to the activity. Office
of Acquisition and Logistics (OAL) Information Letter (IL) 001AL-09-02,
Integrated Oversight Process (IOP), establishes the various contract
review thresholds. Contracts become legally binding once signed by an
authorized contracting officer.
VA's contracting officers are warranted to sign contracts in
accordance with the Office of Procurement Policy Letter 05-01,
Developing and Managing the Acquisition Workforce, dated April 15,
2005. This policy has been codified in VA via OAL ILs 049-07-5,
Department of Veterans Affairs Acquisition Workforce Certification
Program, and 001AL-09-03, Updates to Federal Acquisition Certification
in Contracting (FAC-C) Program, which define the implementation process
for the Department and provides updates to the FAC-C training policy.