[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]

VA FINANCIAL MANAGEMENT

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HEARING

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

OF THE

COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTEENTH CONGRESS

FIRST SESSION

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WEDNESDAY, MAY 24, 2017

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Serial No. 115-15

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Printed for the use of the Committee on Veterans' Affairs

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Available via the World Wide Web: http://www.fdsys.gov

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COMMITTEE ON VETERANS' AFFAIRS

DAVID P. ROE, Tennessee, Chairman

GUS M. BILIRAKIS, Florida, Vice- TIM WALZ, Minnesota, Ranking
Chairman Member
MIKE COFFMAN, Colorado MARK TAKANO, California
BRAD R. WENSTRUP, Ohio JULIA BROWNLEY, California
AMATA COLEMAN RADEWAGEN, American ANN M. KUSTER, New Hampshire
Samoa BETO O'ROURKE, Texas
MIKE BOST, Illinois KATHLEEN RICE, New York
BRUCE POLIQUIN, Maine J. LUIS CORREA, California
NEAL DUNN, Florida KILILI SABLAN, Northern Mariana
JODEY ARRINGTON, Texas Islands
JOHN RUTHERFORD, Florida ELIZABETH ESTY, Connecticut
CLAY HIGGINS, Louisiana SCOTT PETERS, California
JACK BERGMAN, Michigan
JIM BANKS, Indiana
JENNIFFER GONZALEZ-COLON, Puerto
Rico
Jon Towers, Staff Director
Ray Kelley, Democratic Staff Director

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

JACK BERGMAN, Michigan, Chairman

MIKE BOST, Illinois ANN MCLANE KUSTER, New Hampshire,
BRUCE POLIQUIN, Maine Ranking Member
NEAL DUNN, Florida KATHLEEN RICE, New York
JODEY ARRINGTON, Texas SCOTT PETERS, California
JENNIFER GONZALEZ-COLON, Puerto KILILI SABLAN, Northern Mariana
Rico Islands

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
published in electronic form. The printed hearing record remains the
official version. Because electronic submissions are used to prepare
both printed and electronic versions of the hearing record, the process
of converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.

C O N T E N T S

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Wednesday, May 24, 2017

Page

VA Financial Management.......................................... 1

OPENING STATEMENTS

Honorable Jack Bergman, Chairman................................. 1
Honorable Ann Kuster, Ranking Member............................. 2

WITNESSES

Ms. Laurie Park, Deputy Assistant Secretary for Finance, Office
of Management, U.S. Department of Veterans Affairs............. 4
Prepared Statement........................................... 26

Accompanied by:

Mr. Mitchel Sturm, Acting Deputy Chief Financial Officer,
Veterans Benefits Administration, U.S. Department of
Veterans Affairs

Ms. Beryl Davis, Director, Financial Management and Assurance,
U.S. Government Accountability Office.......................... 6
Prepared Statement........................................... 29

Mr. Nick Dahl, Deputy Assistant, Inspector General for Audits and
Evaluations, Office of Inspector General, U.S. Department of
Veterans Affairs............................................... 8
Prepared Statement........................................... 41

Accompanied by:

Ms. Sue Schwendiman, Director, Financial Audit Division,
Office of Inspector General, U.S. Department of Veterans
Affairs

Ms. Julie Larsen, Team Leader, Pension Maintenance Center and
Debt Management, The American Legion........................... 9
Prepared Statement........................................... 45

MATERIALS SUBMITTED FOR THE RECORD

Attachment 1..................................................... 49
Attachment 2..................................................... 62
Attachment 3..................................................... 73
VA Response to HVAC.............................................. 78

VA FINANCIAL MANAGEMENT

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Wednesday, May 24, 2017

U.S. House of Representatives,
Committee on Veterans' Affairs,
Subcommittee on Disability Assistance
and Memorial Affairs,
Washington, D.C.
The Subcommittee met, pursuant to notice, at 2:00 p.m., in
Room 334, Cannon House Office Building, Hon. Jack Bergman
[Chairman of the Subcommittee] presiding.
Present: Representatives Bergman, Bost, Poliquin, Dunn,
Arrington, Kuster, and Peters.
Also present: Representative Roe.

OPENING STATEMENT OF JACK BERGMAN, CHAIRMAN

Mr. Bergman. Good afternoon. This hearing will come to
order. I want to welcome everyone to today's hearing.
Earlier today, we had the opportunity to hear from
Secretary Shulkin about the administration's budget priorities
for the Department of Veterans Affairs. Now, we will examine
how VA actually manages the money that taxpayers provide.
Many of the numbers involved are astoundingly large and the
audit speak can be confusing, but the core of the issue is very
simple. The VA chief financial officer must move the right
amount of money from Point A to Point B at the right time. The
CFO must have strong internal controls, effective employees,
and IT systems that work in order to accomplish that.
We will hear about VA's fiscal year 2016 financial report
and the officer of the Inspector General will present its audit
of those financial statements.
OIG and the Government Accountability Office will explain
their work on the troubling issue of improper payments. The
American Legion will also share its observations on VA's debt-
collection practices.
The department has a troubling number of weaknesses and
deficiencies in internal financial controls. First, persistent
IT security weaknesses are, unfortunately, well known to this
Committee. The financial IT systems are inadequate, obsolete,
and potentially only a few years away from complete failure;
however, the problems go well beyond IT. The CFO organization
is weak and hobbled by fragmentation. VA struggled to account
for its education, mortgage, compensation, and pension
liabilities.
For years, VA has had difficulties in obligating and de-
obligating funds, especially in the area of Community Care and
undelivered orders; in other words, VA has a hard time
estimating how much a purchase will cost, setting aside the
money when it will be needed, and then reclaiming the unspent
money to use for other purposes. Billions of dollars are often
tied up on the books, unavailable for the intended use. Last
year, VA had about $5.5 billion in improper payments.
An improper payment, as our fine witnesses will explain, is
one that should not have been made, is the wrong amount, went
to the wrong person, was made for items not received, or lacks
necessary documentation.
Not all improper payments are lost, but they represent a
significant amount of government waste. VA has never been able
to fully comply with the Improper Payments Elimination and
Recovery Act and the improper payments are forecast to continue
rising.
VA deserves credit for its transparency on improper
payments, but beyond transparency, I look forward to hearing a
credible plan to solve the problem.
Finally, sometimes, benefits are paid out incorrectly and
recouping those improper payments necessarily entails debt
collection. VA's debt management center in St. Paul, Minnesota,
does the work. In most instances, especially when the improper
payment is through no fault of the veteran, the debt management
center operates flexibly and constructively. VA policy is not
to charge interest on these debts; however, after a payment is
delinquent for 120or 180 days, the law requires VA to turn it
over to the Treasury for collection.
The Treasury operates much more aggressively and adds
interest and fees that can be substantial. This debt-
collection system must operate to the highest standard.
Administrative errors have grave consequences for veterans and
their beneficiaries.
In conclusion, Members of Congress and presidents of both
parties have demonstrated a commitment to funding the benefits
our veterans have earned. But no matter how many resources are
provided, if the dollars are mismanaged or wasted, VA will not
succeed in its mission.
And now, I will yield to my friend, colleague, Ranking
Member Kuster for her opening remarks.

OPENING STATEMENT OF ANN KUSTER, RANKING MEMBER

Ms. Kuster. Thank you, Mr. Chairman.
Good afternoon and welcome to the Oversight and
Investigations Committee. This afternoon's hearing is an
opportunity to discuss current issues facing VA financial
mismanagement or management.
VA's financial management system is of critical importance
to the VA, especially VA health care. The VA relies on these
systems to account for the procurement of needed medical and
surgical supplies, prosthetics, adaptive sports equipment,
which are critical to a veteran's quality of life, and VA's
extensive community-care programs that we have discussed so
frequently in our Committee.
Year after year, the VA fails to fully comply with the
Improper Payments Elimination and Recovery Act and year after
year, this Committee struggles to ensure that the VA has the
funds necessary to provide veterans with the benefits and care
that they have earned.
We know that in fiscal year 2015, $5.5 billion in improper
payments were made which went mostly to providing veterans care
in the community, but this is unacceptable and we need to get
this under control. I will have some questions today, however,
about the definition, so we all have a common understanding of
what that--how those funds were expended.
The issues facing the VA's financial management system are
complex and I appreciate the opportunity to gain insight from
the expert witnesses assembled today from the VA, the GAO, the
IG, and The American Legion.
As you are all aware, this morning, our Committee heard
from Secretary Shulkin about the VA's proposed budget. With
VA's financial management challenges, I am concerned that the
VA is unable to properly forecast its requirements, which
contributes to VA's many challenges that we discussed in our
hearing this morning.
Toward that end--toward the end of last year, the VA
announced its selection of the Department of Agriculture as its
Federal shared service provider. While I understand that
selection of an FSSP can allow a department to better focus on
its mission and replace its 50-year-old financial management
system, I would like more details on the costs and
implementation of this shared system and whether this will meet
VA's needs going forward.
VA's IT system is the backbone of the organization. All too
often, this Subcommittee discuss the lack of IT infrastructure
when we are discussing the agitating factors that led to a
particular crisis. The VA's partnership with the USDA seems to
be a move in the right direction, but the VA's financial IT
system is not the only cause, as the Chairman has mentioned,
for the VA's faulty finances.
As in many other departments, the VA's chief financial
officers operate under piecemeal protocols and cannot follow
recommendations intended to remedy complex and expensive
problems within the system.
I hope to learn more about these witnesses within the VA
from our witnesses. The GAO and IG have completed multiple
investigations into the VA's improper payments and financial
structure; however, the VA has not always agreed with the
recommendations made by the agencies and today I hope to hear
about why that is.
We have been asked to pass legislation that would allow VA
to enter into provider agreements and other contracts that do
not require compliance with certain parts of the Federal
acquisition regulations. Well, in some circumstances, this
appears to be the best solution. I also know from previous
hearings, that VA's failure to follow policies, its broken
promises, and lack of oversight still contribute to many of
VA's challenges and I am not convinced that simply passing such
a legislation will solve this problem.
I look forward to the discussion ahead of us this
afternoon, so we can get VA's financial management program on
track so that it can support the important VA mission to get
veterans the benefits, care, and support they so desperately
need and deserve.
So, thank you, Chairman Bergman. I yield back the balance
of my time.
Mr. Bergman. Thank you, Ranking Member Kuster.
I ask that all Members waive their opening remarks, as per
this Committee's custom.
With that, I invite the first and only panel to the witness
table. On the panel we have Ms. Laurie Park, Deputy Assistant
Secretary for Finance in the VA Office of Management; she is
accompanied by Mr. Mitchel Sturm, Acting Deputy Chief financial
officer for VBA.
We have Ms. Beryl Davis, Director of Financial Management
and Assurance for GAO.
We also have Mr. Nick Dahl, Deputy Assistant Inspector
General for Audits and Evaluations; he is accompanied by Ms.
Sue Schwendiman, Director of OIG's Financial Audit Division.
And we have Ms. Julie Larsen, Team Leader for Debt
Management and The Pension Maintenance center The American
Legion.
I ask the witnesses to please stand and raise your right
hand.
[Witnesses sworn.]
Mr. Bergman. And let the record reflect that all witnesses
have answered in the affirmative.
Ms. Park, you are now recognized for five minutes.

STATEMENT OF LAURIE PARK

Ms. Park. Good afternoon, Chairman Bergman, Ranking Member
Kuster, and Members of the Subcommittee. Thank you for the
opportunity to discuss the actions the Department of Veterans
Affairs is taking to improve financial management.
As the VA Deputy Assistant Secretary for Finance, I am
responsible for department-wide financial management
activities.
I am here today with my esteemed colleague, Mitch Sturm,
Acting Deputy Chief Financial Officer for the Veterans Benefits
Administration.
Over the last several years, through our improper-payment
reviews, insights from the Office of Inspector General reports
and detailed deep dives into root causes of audit findings, it
has become clear that the foundation of our financial
management practices is failing us. We have based our day-to-
day acquisition and financial management process on a fragile
network of systems that routinely require our workforce in the
field to rely upon manual double-entry processes, complex
workarounds, manual reconciliations, and procedures that cannot
keep pace with current financial management requirements, set
forth by the Office of Management and Budget and the Department
of the Treasury.
Efforts to remediate these complex issues within our
current foundation, coupled with a workforce that has not been
trained in best practices has limited our progress. VA must
focus on modernizing our financial management and acquisition
systems, strengthening our internal controls, reengineering
business processes, and investing in a trained workforce.
Recognizing these challenges, we have recruited talented
financial management professionals, seasoned project managers,
experienced data architects, and a strong leadership team to
lead initiatives that will improve financial management at VA.

Examples of this important work include:

In October of 2016, we kicked off VA's financial management
business transformation initiative. This agency top-priority,
brings acquisition, financial, information technology, supply-
chain, and frontline health care and benefit experts from
across the department in collaborative sessions to transform
the way that VA does business. This multi-year effort will
standardize, integrate, and streamline financial management and
acquisition processes within Department of Agriculture's shared
service solution.
My office is charged with the responsibility to spearhead a
new department-wide effort, the financial management training
initiative, providing education to financial management and
acquisition professionals across the department through a
centralized and standardized curriculum. An important aspect of
this initiative is the partnership between financial management
and acquisition professionals, which is needed to address many
of our complex challenges and support VA's financial management
business transformation.
In the last ten months, we have held both, virtual web-
based and in-person events where VA employees participated in a
total of 71 separate classes. Two more events, one virtual and
one in-person, are planned over the next nine months.
Over the past three years, VA has completed a deep-dive
review of over 75 programs to identify internal control
failures that result in improper payments. This led to a
significant increase of VA's reported improper payments.
Currently the legislative improper payment definition
includes any payment that experienced an error during the
acquisition or payment process, as well as those made to the
wrong person, the wrong amount, and where services were not
received. This results in many payments being reported as
improper, even though the government has not lost money.
Currently, we estimate about 90 percent of our $5.5 billion
in reported improper payments do not represent a loss to the
government and cannot be recovered; further, about 80 percent
are attributed to errors in the acquisition process,
specifically in our programs providing care in the community,
because a contract did not exist that followed Federal
acquisition regulations.
While we are committed to recovering identified losses, VA
can only collect payments that have been specifically
identified during an internal review process. VA cannot collect
on a projected amount of improper payments, even a loss,
because the payees or documentation supporting a collection
cannot be identified or created from projections.
Debt collection is also an essential part of strong
financial management where VA is making improvements. VA
balances Veteran debt collection with a strong sense of
compassion, as well as compliance with Federal debt-collection
statutes and policy. We have collaborated closely with Veterans
and veteran service organizations to understand the challenges
facing Veterans when a debt exists.
Our approach includes educating Veterans on strategies to
avoid debt, understanding the debt-collection process, and
leveraging options available when a debt is established. Even
with these many efforts, VA recognizes it has many challenges
to overcome, while at the same time, providing Veterans the
benefits and services that they have earned and deserve.
VA acknowledges its current challenges and audit findings
in financial management that reflect a need for improved
financial stewardship. We believe that the initiatives we are
working on will improve VA's financial management and better
serve our Veterans.
Thank you for the opportunity to appear before you today
and for your continued support of Veterans. I look forward to
your questions.

[The prepared statement of Laurie Park appears in the
Appendix]

Mr. Bergman. Okay. Thank you.
You have got to turn the microphone on first. It doesn't--
it is not voice-activated.
Thank you, Ms. Park.
Ms. Davis, you are recognized.

STATEMENT OF BERYL DAVIS

Ms. Davis. Chairman Bergman, Ranking Member Kuster, and
Members of the Subcommittee, I am pleased to be here today to
discuss the issue of improper payments at both the government-
wide level and at the Department of Veterans Affairs.
Improper payments remain a significant and pervasive
government-wide issue. For several years, GAO has reported that
the Federal government is unable to determine the full extent
to which improper payments occur and reasonably assure that
actions are taken to reduce them.
Since fiscal year 2003, when certain agencies began
reporting improper payments, as required by law, cumulative
government-wide improper payment estimates have totaled over
$1.2 trillion. For fiscal year 2016, agencies reported improper
payment estimates totaling over $144 billion, an increase of
more than $7 billion from the previous year's estimate. For the
same year, the Department of Veterans Affairs reported an
improper payment estimate that totaled 5.5 billion, an increase
of about 500 million from the prior year. The VA improper
payment error rate was 4.5 percent of related program outlays;
the VA Community Care Program, reporting $3.6 billion in
improper payments; and the Purchase Long-Term Services and
Support Program, reporting $1.2 billion in improper payments
accounted for about 87 percent of VA's estimated improper
payments for fiscal year 2016.
These two programs also had the two highest error rates
government-wide in that fiscal year with error rates of about
76 percent and 69 percent respectively.
VA has not developed improper payment estimates for all of
the programs and activities it has identified as susceptible to
significant improper payments. For fiscal year 2016, VA did not
report improper payment estimates for four such programs.
Because VA did not report estimates for these programs, its
overall improper payment estimate is understated and the agency
is hindered in its efforts to reduce improper payments in these
programs. Strong financial management practices, including
effective internal control, are important for Federal agencies
to better detect and prevent improper payments.
The VA faces significant financial management challenges.
In 2015, GAO designated VA health care as a high- risk area
because of concern about VA's ability to ensure its resources
are being used cost-effectively and efficiently and to improve
veterans' timely access to health care and to ensure the
quality and safety of that care.
In addition, in VA's fiscal year 2016 agency financial
report, the independent auditor cited material weaknesses and
significant deficiencies in the design or operation of internal
controls of our financial reporting. To reduce improper
payments, VA can use root-cause analysis to identify why
improper payments are occurring and to develop corrective
actions.
According to VA's fiscal year 2016 agency financial report,
the root cause for over three-quarters of VA's improper
payments was program design or structural issues. To reduce the
amount of improper payments in this area, VA stated that it
will make the procurement practices more compliant with Federal
acquisition regulation provisions.
In addition, to help reduce improper payments, VA can
complete its implementation of GAO's recommendations. VA pays
billions of dollars to millions of disabled veterans, thus,
accurate claims decisions help ensure that VA is paying
disability benefits only to those eligible for such benefits
and in the correct amounts; however, two GAO reports have found
problems with how VA processed its claims to reasonably assure
the accuracy of or eligibility for the disability benefits,
increasing the risk of the improper payments.
For example, in a November 2014 report, GAO found that VA
had, among other things, shortcomings in its quality review
practices that could reduce its ability to ensure accurate and
consistent processing of disability compensation claims
decisions. To date, VA has implemented six of the report's
eight recommendations and expects to implement the other two
this summer.
In conclusion, in light of VA's significant financial
management challenges, we continue to be concerned about VA's
ability to ensure its resources are being used cost-effectively
and efficiently. It is critical that VA take actions to reduce
improper payments, especially given that VA's payments amounts
are likely to increase in fiscal year 2017.
While VA has taken several actions to prevent improper
payments, further efforts are needed to help minimize the risk
of improper payments across its programs.
Chairman Bergman, Ranking Member Kuster, and Members of the
Subcommittee, this concludes my prepared remarks. I look
forward to answering any questions you may have.

[The prepared statement of Beryl Davis appears in the
Appendix]

Mr. Bergman. Thank you, Ms. Davis.
Mr. Dahl, you are now recognized for five minutes.

STATEMENT OF NICK DAHL

Mr. Dahl. Mr. Chairman, Ranking Member Kuster, and Members
of the Subcommittee, thank you for the opportunity to discuss
our work regarding VA's financial management.
I will focus on the results of the fiscal year 2016 audit
of VA's consolidated financial statements and our work related
to IPERA. As mentioned, I am joined by my colleague, Sue
Schwendiman.
Effective financial management is important because it
enables an agency to plan, direct, monitor, and control its
financial resources. The CFO Act requires the OIG to conduct an
audit of VA's financial statements. We contracted with the
independent public accounting firm, CliftonLarsonAllen, to
perform the audit.
Although VA has received an unmodified or clean opinion on
its consolidated financial statements from our contracted
auditors, VA has continuously faced challenges in achieving
that result. A clean opinion means that financial statements
are presented fairly in all material respects, in accordance
with accounting principles, generally accepted in the United
States. It does not, however, mean VA easily obtained that
opinion or that VA does not have internal control weaknesses.
The most recent audit of VA's financial statements
identified six material weaknesses and two significant
deficiencies, which was two more in total than the previous
year. A material weakness is a deficiency in internal controls,
such that there is a reasonable possibility a material
misstatement will not be prevented or detected and corrected in
a timely basis.
Three of these material weaknesses are repeated from the
prior year's audit, including information technology security
controls; Community Care obligations, reconciliations, and
accrued expenses; and, financial reporting.
Three others were new material weaknesses; first, education
benefits accrued liability. For this, CLA reported VA did not
use the appropriate method to account for veterans education
benefits and, therefore, did not report an estimated liability
for future benefit payments until fiscal year 2016.
Second, the control environment surrounding the
compensation, pension, and burial actuarial estimates. After
VA's chief actuary retired, CLA noted the lack of succession
planning to replace the actuary, who was responsible for
calculating VA's unfunded veterans compensation and burial
liability, which totaled over $2 trillion.
Third, the CFO organizational structure for VA and the
Veterans Health Administration, CLA elevated this from a
significant deficiency to a material weakness and reported VA's
decentralized and fragmented organizational structure for
financial management and reporting did not operate in a fully
integrated manner.
CLA also reported two significant deficiencies, which are
deficiencies in internal controls, less severe than material
weaknesses, yet important enough to merit attention by those
charged with governance. First, procurement, undelivered
orders, accrued expenses, and reconciliations: CLA reported
issues concerning reconciliation among various procurement
systems and VA's financial management system, VA's extensive
use of miscellaneous obligating documents, the lack of an
adequate process to validate estimated accrued expenses against
payment data, and procurement issues, such as untimely
liquidation of undelivered orders or the untimely recording of
contracts in FMS.
Second, VA's loan guarantee liability: CLA reported the
Veterans Benefits Administration needed to revise certain model
assumptions used for estimating future cash flows and
determining the cost of its loan guarantees for financial
reporting purposes, which led to a reduced reported liability.
Overall, CLA reported VA's legacy financial management
system no longer met increasingly stringent and demanding
financial management and reporting requirements. CLA made
recommendations to address identified issues.
Additionally, VA is currently working with the U.S.
Department of Agriculture as a shared services provider to
obtain financial services.
In fiscal year 2017, VA began efforts to standardize
business processes and identify changes required for this
systems modernization effort.
Last week, we issued our annual determination on VA's
compliance with IPERA. We reported VA did not comply with two
of OMB's six IPERA requirements, specifically, that VA did not
maintain a gross improper payment rate of less than 10 percent
for the VA Community Care Program and the Purchased Long Term
Services and Support Program, and also, VA did not meet
reduction targets for six VHA programs.
We made several recommendations to agency leadership to
take steps to reduce improper payment rates, achieve reduction
targets, and improve improper payment estimates.
In conclusion, VA's financial management and system
challenges are many and complex. VA plans to move to a shared
services provider to gain access to modern technology, but VA
will need strong organizational leadership and coordination or
cooperation to manage this significant change.
Mr. Chairman, this concludes my statement. We would be
happy to answer any questions you or other Members of the
Subcommittee may have.

[The prepared statement of Nick Dahl appears in the
Appendix]

Mr. Bergman. Thank you, Mr. Dahl.
Ms. Larsen, you are now recognized for five minutes.

STATEMENT OF JULIE LARSEN

Ms. Larsen. Chairman Bergman, Ranking Member Kuster, and
distinguished Members who proudly serve on the Subcommittee, on
behalf of Charles E. Schmidt, the national commander of the
largest veterans service organization in the United States,
representing more than two million members, it is my duty and
honor to present The American Legion's position on this
important issue regarding veteran debt and collection and
assist the Committee in understanding the Department of
Veterans Affairs debt-collection process, and highlight areas
of improvement, as well as provide insight as to how The
American Legion assists the veterans in these matters.
I am The American Legion subject matter expert on debt
collection within the VA and work at the VA's Regional Office
in St. Paul, Minnesota. There, I assist veterans who have
incurred debts.
Often, these debts are being collected from VA benefits or
other sources of income, such as tax refunds. Older debts are
referred for collection to the U.S. Treasury Department, which
will employ collection methods, such as garnishment of wages or
Social Security benefits.
Once a debt is owed to the VA, the case is referred to the
debt management center for collection. The DMC sends the
claimant a letter detailing the reason for the debt, along with
the amount due. It also provides information on repayment
options and requesting a waiver and rights of appeal.
If there is no response to the letter within 30 days and
the person is receiving VA benefits, the VA will recover the
full amount of debt from those benefits.
In cases where an individual is not receiving VA benefits,
demand letters will be sent and credit agencies are notified.
Eventually, these debts will be referred to the U.S. Treasury
Department for further collection action.
There are a number of ways that The American Legion tries
to assist claimants. For example, we help explain the process
to the claimant and inform them of their options. We will
request additional information from debt management center
staff to develop a repayment plan; additionally, we will
contact the Regional Office staff if the debt appears to be
erroneous.
I would like now to share a few case scenarios with you. A
case where the daughter of a veteran incurred a sixteen-
thousand-dollar overpayment, because she was incorrectly
receiving death and education benefits when she was not
entitled to receive both. She had applied for a waiver on time,
but because her request was misplaced, the waiver was never
processed. As a result, DMC garnished her entire-eight-
thousand-dollar tax refund in order to recover a portion of the
debt.
I later learned that the daughter had a delivery
confirmation from the U.S. Postal Service, verifying that the
waiver request had, indeed, been received by the VA.
Fortunately, in this case, the VA granted the waiver, due to
the financial hardship and the $8,000 was later refunded.
The next case concerns a homeless female veteran who
incurred a large debt after the VA removed her dependence from
her benefits retroactively to 2005. Due to her homelessness,
she was unable to receive the VA's letter advising her of the
debt. Because she was unaware of her options such as a
repayment plan, DMC began recovering all of the debt from her
compensation. This went on for about a year before we
intervened.
What made matters even worse for this female veteran, and
if being homeless wasn't hard enough, she also had to deal with
her vehicle being repossessed. Fortunately, we were successful
in getting two months of her benefits refunded and a small
withholding set up. I am pleased to report that her benefits
were restored completely and she received a retroactive
payment.
As you all well know, the VA system is complex and
difficult for many veterans to understand. In both the examples
that we have shared with you, the primary issue is how the VA
collected and processed that information; letters sent to
homeless veterans were returned and a debt was incurred.
Veterans who submitted requested information never made it to
the debt management center. These are areas we feel the VA can
improve upon.
Fortunately, The American Legion and other veteran service
organizations maintain staff in every Regional Office to aid
veterans and their dependents with claims and other VA issues,
such as debts. We specialize in identifying VA errors and
solving problems for veterans and their families. Thank you.

[The prepared statement of Julie Larsen appears in the
Appendix]

Mr. Bergman. Thank you, Ms. Larsen.
The written statements of those who have just provided oral
testimony will be entered into the hearing record.
We will now proceed with questioning. I will yield myself
the first five minutes. Ms. Park, I would like to start with
the headline here, ``Community Care and purchased long term
services and supports have the highest improper payments in the
Federal government''; about 3.5 billion and 1.2 billion of
overpayments, respectively.
I understand VA's position that most of this money is not
necessarily misspent, just designated as improper, because it
is not backed up by bona fide contracts. VA categorizes about
3.3 billion and 900 million that way.
Can you assure me and all of us that none of that money is
wasted?
Ms. Park. So, thank you for the question, sir.
So, in doing the test of those two programs, Community Care
and PLTSS, our testers do sample and they dig into the actual,
did we have the proper paperwork that supports those payments?
Did they get to the right place? The right amount? Were they
paid the Medicare rate?
So, yes, I can assure you that they were correct.
Mr. Bergman. So, yes or no, regardless, is it fair to say a
payment that lacks a bona fide contract could also be made in
the wrong amount or sent to the wrong place?
Ms. Park. So, when you talk about the huge number of
payments that we have, I think there is always opportunity for
something to go wrong; however, during our sampling, we found
that the payments were made to the right person for the right
amounts.
Mr. Bergman. Ms. Davis, putting aside this issue of
contracts or no contracts, there was still about $200 million
and $300 million of overpayment in the two programs
respectively. Can you tell us about what they are?
Ms. Davis. I cannot speak to what they are. I can state
that in addition to the structural issues that have been
referred to regarding the two programs, Community Care and
Purchase Long Term Services and Support, there are a number of
improper payments that are made in the compensation program and
those are due to administrative errors.
This is based on information that is provided by the agency
itself as to how it is categorizing its improper payments,
using the categories that are established by the Office of
Management and Budget.
Mr. Bergman. Thank you.
Mr. Dahl, OIG rejected the improper payment estimates VA
submitted for two programs: VHA Purchasing of Supplies and
Materials and the Post-9/11 G.I. Bill.
VA said the improper payments were 22 million and 3.9
million, respectively, and OIG said they were 78 million and
250 million, respectively; that is a huge difference.
Can you explain how OIG came up with its numbers?
Mr. Dahl. What we did was questioned the depth of the
testing that they did when they were verifying those payments,
and we found that, for example, with the Post-9/11 G.I. Bill,
that they weren't verifying the tuition charges against, in the
old days, it would be a course catalog; today it might be more
likely something posted on a Web site. But in our opinion, they
didn't independently validate that the tuition that they were
billed was proper. So that is why there was such a large delta
there.
Mr. Bergman. Ms. Park, would you like to comment on that?
Ms. Park. Sure. For the supplies and materials--so, the
supplies and materials issue actually ended up being that when
the IG actually sampled, they were looking for precise
schedule--fee schedules that actually matched the time in which
we were invoiced from someone--Care in the Community was--for a
supply--I'm sorry--for a supply.
So, what we found was, because of the disconnect between
our acquisition and our financial systems, we couldn't make
that link. We didn't have a report that we could actually
demonstrate to the IG that we had actually paid the right
amount for those supplies, so that was generally the issue. I
can defer to Mitch about the education.
Mr. Sturm. Thank you. Yeah, for education, we did go back
and look at 30 of the samples the IG pulled and they were
right; we were not verifying back to the old catalog, but all
30--all 30 of them were proper. But because we didn't have the
proper support, the IG determined them to be improper for this
review, is we are going to expand our testing for next year and
this year to include that look at those catalogs or online Web
sites.
Mr. Bergman. Thank you. I see my time has expired.
Ranking Member Kuster is recognized for five minutes.
Ms. Kuster. Thank you, Mr. Chair.
I want to follow up on this whole issue about the improper
payments, because I have a concern about expectations going
forward based on the White House budget presentation. The White
House has stated the budget will save the American people $150
billion in improper payment savings and we have discussed here
today that according to the 2016 agency financial report, the
VA issued over 5.5 billion in improper payments in fiscal year
2016; 5.3 billion of this is overpayments.
But Ms. Park, your testimony is that 90 percent of that
cannot be recovered. And would you please clarify for my
colleagues and for anyone watching this hearing, this whole
issue about the contracts in the Community Care programs,
because we have a serious disconnect if the White House is
assuming that these funds can be recovered and, in fact, we are
not going to go back--these services have been provided. We are
not going to go back out into the community--I hope not, in my
district--and take these monies back from rural hospitals that
barely get by.
So, could you explain the reality of this situation?
Ms. Park. Yeah, I am very happy to do that.
So, take the example for a Veteran that receives care in
the community where there is no Federal acquisition regulation
based contract exists; they are going to get care in the
community. What our sampling and testing has indicated is that
this payment was for the correct amount to the right person--we
verified the rate--but because the provider agreement was not
based on a FAR[NMF1] contract, it is improper.
According to the improper payment rate, we should be able
to go back to that provider and collect that payment. And that
is something that we don't want to do because we did receive a
service. The Veteran was helped, so we are not going to move
forward with those collections.[NMF2]
Ms. Kuster. Thank you very much, Ms. Park.
And I just want to say to Ms. Larsen, you broke my heart. I
cannot imagine that we--the U.S. Government, through the VA,
goes after a homeless woman because of some retroactive change
in her benefits that she knew nothing about and takes money out
of her paycheck and repossesses her car.
So, I certainly hope we don't go forward with going after
rural hospitals for services that have already been provided.
All right. So we are going to move toward this USDA
financial product--I am sorry, I don't have the correct term--
and the VA, how is this going to help with the payments of
veterans benefits, medical center operations, non-far based
contracts? I feel like we are going to be back here for another
hearing another day, so help us understand how this is going to
get better and is there anything that we could do to help with
legislation if these Community Care contracts are not going to
be far-based contracts, let's not put them under this improper
payment category; let's define it some other way.
Ms. Park. So, when we talk about moving to a Federal
financial system and how it is actually going to help us with
the issues that you have seen, so the way--VA is different than
what you look at for most big departments. They will have a
singular financial system where they do all of their accounting
activities, so I am talking about status of funds, funds
distribution, obligations, contract ordering, payments,
accounts receivable.
So, VA built things way differently and it started out a
program area, so they built programs like care in the
community, veteran benefit programs, the education programs;
they built systems to meet those needs and then they slapped
accounting on top of it. So, that causes all of these
disconnects. That is why we rely so heavily on these
reconciliations between systems out in the field.
So, what we are going to do with a new shared service
provider, just like any other Federal government agency, we are
going to put that finance stuff into one financial and
acquisition system that is already integrated, so we are not
going to have the fat fingering in between the systems and all
the reconciliations that occur.
So that will give us, not only visibility into our
financials, but it is also going to resolve a lot of our
issues. So--and so it will also make our programs more
efficient, I believe, as well.
Ms. Kuster. Yeah, I appreciate it. My time is up, but I do
think we are going to have to deal with this community contract
as an issue.
And I just want to say for myself, having worked for many,
many years with hospitals and hospital economics, the quote
that I have heard over and over is ``Hospital economics are
wear the rubber meets the blue sky.'' So, good luck with
keeping track of how these dollars are spent.
Thank you, I yield back.
Mr. Bergman. Thank you.
Mr. Poliquin, you are recognized for five minutes, sir.
Mr. Poliquin. Thank you, Mr. Chairman, very much.
Ms. Park, let me ask you a couple of questions. I want to
make sure I understand this. The VA contracts for goods and
services, whether it be providing health care for our heroes in
a community setting or to buy band aids or aspirin, correct?
Ms. Park. Yes, sir.
Mr. Poliquin. Okay. And anytime you use those or you don't
use those monies, you return them to the United States
Treasury, correct?
Ms. Park. In some cases. There are some authorities where
we are allowed to keep the money, but, generally, yeah.
Mr. Poliquin. Okay. Yeah, and in 2016, there was $4.2
billion of funds that were contracted for various purposes that
were unused by the VA; is that correct?
Ms. Park. I am not familiar with that number, sir.
Mr. Poliquin. Okay. Well, that is the number that I have
here, but there is a lot of money every year that goes back to
the U.S. Treasury. We appreciate it so the taxpayers don't have
to spend it because it wasn't used for whatever purposes it was
supposed to, right?
Do you tell this Committee how much money in each category
was unused so we don't have to appropriate the money to you
every year?
Ms. Park. So, through our financial reporting, that
information is available. I don't have it on hand right now.
Mr. Poliquin. Okay. So I want to make sure I understand
this. So, your budget is $185 billion this year; that is what
the president has asked for, okay. And six years ago, it was 50
percent less. So, it has it gone up 50 percent from 120 to
about $185 billion in six years. That is a lot of money and we
want to make sure it goes to our veterans, okay.
So, I want to make sure I understand this. So, when money
is appropriated to the VA, but not used, you send it back to
the Treasury, but you don't tell this Committee that it was
unused in a specific category, so we don't know if we
appropriate that amount of money to you or not; is that right?
Ms. Park. No, I don't agree with that statement at all.
Mr. Poliquin. All right.
Ms. Park. So, first of all, there are many different
appropriations that govern the way that we do business at VA.
And a lot of those appropriations are no-year accounts and that
money doesn't expire, so that is--so put that aside.
For money that is expired, we do report that through our
financial management--
Mr. Poliquin. Well, here is what I am trying to get at, Ms.
Park--
Ms. Park [continued]. --reporting.
Mr. Poliquin [continued]. --is there a way that you can
tell us beforehand, before the budgeting process or the
executive branch--but you are in the executive branch--the
White House, such that money is not appropriated to you that
you don't use, then you send it back to the U.S. Treasury, can
we avoid that step to make sure we don't lose any of that money
and to make sure that we are budgeting properly--
Ms. Park. That information is reported to the Department of
Treasury on a monthly basis.
Mr. Poliquin. Okay. But we appropriate it. Is it reported
to us?
Ms. Park. I assume you guys get the Treasury reports, but
we are happy to give you that information.
Mr. Poliquin. That would be great.
Ms. Park. Uh-huh.
Mr. Poliquin. Let's move on to something else.
Improper payments, I want to make sure I understand this.
Ms. Davis would probably be the person that I should ask. Did
you say--did I hear this correctly--that since 2003, which is
roughly 15 years, over one--I almost can't say this--one
trillion dollars of improper payments have been made throughout
the Federal government?
Ms. Davis. One point--over $1.2 trillion--
Mr. Poliquin. $1.2 trillion--
Ms. Davis [continued]. --have been estimated, yes.
Mr. Poliquin [continued]. --in this year alone.
2016, alone, last year, it was about $140 billion?
Ms. Davis. Yes, reported as estimate.
Mr. Poliquin. Okay. And we found out about that because of
audits that we are doing; is that correct?
Ms. Davis. It is some--it comes from the agency's financial
reports on an annual basis and we at GAO have accumulated those
statistics.
Mr. Poliquin. Okay. And at the VA, it was 5.5 billion,
right?
Ms. Davis. Correct.
Mr. Poliquin. Okay. I come from a state--in Maine and we
have an annual budget in the state of Maine, an annual budget
of about three and a half billion dollars. This is 5.5 billion
of improper payments. This is about 70 percent larger than our
entire state budget.
And then I see something right here, a request from you
folks, saying that you want to now, discontinue the use of
outside auditors when it deals with improper payments and do it
internally. Why in the Dickens would we trust you people to
audit yourself internally when you can't keep track of this
money? Why would we do that? Somebody answer the question; who
wants to take a shot at it?
Okay. So, for the record, nobody wants to defend the fact
that they are asking us to discontinue the use of--
Ms. Park. Sir, I don't know where that reference came from,
but it didn't come from the department.
Mr. Poliquin. Okay. Well, go ahead and tell us why you
think you can audit yourself better when you can't keep track
of $5.5 billion--
Ms. Park. I don't believe that came from the VA, sir.
Mr. Poliquin. Who did this come from?
Ms. Park. I am not familiar with it.
Mr. Poliquin. Okay. Let me ask you this, does anybody--
okay, fine; I have four seconds left--does anybody on this
panel think it is a good idea to let you audit yourself instead
of outside folks doing it?
Thank you, Mr. Chairman.
Mr. Bergman. Mr. Arrington, you are recognized for five
minutes, sir.
Mr. Arrington. Thank you, Mr. Chairman.
Sorry to come in late, and we have a few hearings today, so
today is a challenge to keep up, but this is incredibly
important and I just have a few questions--pretty broad
questions for you.
I guess, Ms. Park, are you the senior-most VA official here
today?
Ms. Park. Yes, I am, sir.
Mr. Arrington. Who is responsible for improper payments and
reducing improper payments, managing, having a game plan, if
you would, for reducing improper payments at the VA?
Ms. Park. Sure. So, we do have a structure of
accountability for improper payments. Our chief financial
officer, Ed Murray, is responsible to ensure that we have an
appropriate program to address improper payments.
In addition to that, for every high-risk program, we
designate a senior accountable official. So, for all of our
large programs with large improper payments, we do have a
senior accountable official, and they are responsible for
developing corrective actions and making sure that, you know,
each year they are making progress on those.
Mr. Arrington. Has anybody ever been fired for not managing
the improper payments down, as you described, is the job
description of those folks accountable?
Ms. Park. So, I would not be aware of that because those
programs are in those--within the agency. We would have to
refer that to the Office of Accountability.
Mr. Arrington. Okay. Could you--I am a new Member, but I
would like to get the answer to who has been and when was the
last time somebody was fired because they didn't perform in
oversight to manage improper payments down. The improper
payments actually went up and they didn't achieve whatever the
desired outcome, whatever the management goal, I would like to
know the answer to that question.
Ms. Park. So, if I may, I would like to say that part of
the work we have done is actually doing a deep dive to identify
the improper payments, so that was very purposeful so that we
knew what our baseline was for improvement.
So, in this case, I think that in some ways it is positive
that we are being very open and honest about this rate, sir.
Mr. Arrington. Yeah, I guess being open and honest is
positive, but a change in behavior and change in delivery and
performance is the goal. So, the VBA, VHA, NCA, I assume they
all have heads. I don't know if they are political in career,
but is there a political in career senior-most person at each
of those bureaus?
Ms. Park. Yes, sir, there are.
Mr. Arrington. Has any--when is the last time somebody in
those roles were fired because they didn't do their job to
manage their financial affairs, in this case, improper
payments?
Ms. Park. Again, sir, I am not aware of anything--
Mr. Arrington. Could you get me the answer for that?
Ms. Park [continued]. --but we can take that for the
record.
Mr. Arrington. So, rank order for me the most important
factor in not being able to manage improper payments better:
organizational structure, H.R. policies or policies that govern
how you manage people, IT systems--I will just start there;
rank order the most challenging aspect to the desired outcome
here, based on those three.
Ms. Park. I would say IT systems, sir.
Mr. Arrington. And I understand there is a legacy system,
financial management system that is in play to replace or to
upgrade, modernize; is that correct?
Ms. Park. It will replace several systems, yes.
Mr. Arrington. And how long will that take?
Ms. Park. So, we are looking at a five-year plan right
now--five-to eight-year plan.
Mr. Arrington. And how much money is that?
Ms. Park. So, the current--so we--this is our first year of
really diving into this project and our initial estimates with
our shared service provider are about 400 million, but we do
need to do a deep dive over the next 18 months where we are
really looking at--I talked a little bit earlier about is we
really need to pull this financial management information out
of all of these program systems and we really need to do a deep
dive into how much that is going to cost, so we will be
refining that in the next 18 months.
Mr. Arrington. Did you mention how much it cost, I am
sorry?
Ms. Park. Four hundred million, sir. We--in our initial
estimates, without the work that we are doing over the next 18
months.
Mr. Arrington. I appreciate your time and I yield back to
the Chairman.
Mr. Bergman. Thank you.
And it appears as though we have got time for a second
round and I would like to start the second round by yielding to
myself for five minutes.
Ms. Davis, your report notes that 20--the 24 biggest
agencies only reported preventing $680,000 worth of improper
payments in 2015 using the ``do not pay'' system. That under is
astoundingly low, considering the billions and billions of
dollars of improper payments that we are talking about.
Why are agencies not using the ``do not pay'' system
effectively?
Ms. Davis. Our audit at the ``do not pay'' system, which
was recently completed, determined that not all the databases
that the agency has access to are actually being used. Also,
the databases are--the two databases that are most frequently
used are the death master file and then what is commonly
referred to as the ``excluded parties list,'' which includes
contractors who cannot do business with the Federal government.
The process includes payment integration, which is a
process whereby Treasury's payments at the time of payment are
bumped up against certain databases and if there is an issue of
a potential improper payment, that payment is flagged and it
goes back to the agency for adjudication.
Now, there is a time lag there, so, for example, if it is
determined upon adjudication that there is an improper payment,
that can affect future payments or future flows of that
particular stream of improper payments; for example, a benefit
that goes on a recurring basis, you can stop future payments,
but you cannot stop the improper payment at the time that it
goes through the ``do not pay'' system. So, there are
limitations.
Mr. Bergman. Did I hear you say on the front-end that there
are more system capabilities than being utilized?
Ms. Davis. That is correct, yes.
Mr. Bergman. So, we got some folks who are using the
system, they are just kind of cherry-picking what they want?
Ms. Davis. Not exactly. There are issues with agreements in
order to obtain the six databases that are supposed to be
utilized and those agreements have not been finalized and those
databases have not been pulled in by Treasury in order to, you
know, utilize the payment streams that come from the various
agencies.
We have made recommendations, a number of recommendations,
to Treasury and OMB, including recommendations for OMB to look
at its guidance in how agencies are utilizing the system.
Mr. Bergman. So, two of six are being used?
Ms. Davis. Correct.
Mr. Bergman. Okay. Well, how long have the four--how long--
we have four other possible tools out there that are not being
used.
Ms. Davis. Yeah, right.
Mr. Bergman. How long has that been going on?
Ms. Davis. I cannot answer that. That is a question for the
agency to answer.
I want to be very clear that there are certain aspects of
some of those other day streams or databases that are being
utilized, but they are not fully integrated. They are not fully
utilized by the agencies. The only two that are being fully
utilized are the ones that I just mentioned.
Mr. Bergman. Okay. Well, then I guess it is fair to then--
Ms. Park, how is the VA, you know, using the ``do not pay''
system now and what are the plans to use more widely in the
future?
Ms. Park. Okay. So we have a really great partnership with
Treasury. My team and that finance service center in Austin
works directly with Treasury; they meet monthly[NMF3] with
them. One of the things that we found with do not pay is that
you really have to look at it for--you can't run all of your
payments through it at once. You really have to look at it from
a program-by-program perspective, so that takes time.
And that is what we are doing with Treasury right now, is
we are going through each one of our programs with them. We are
tailoring the ``do not pay'' tool and we are using it to not
only improve the way Treasury does business, but the way that
we do business.
Mr. Bergman. Okay. And one final, and more of a comment
with a follow-up: Ms. Park, I would be remiss if I did not
raise an important and related issue. On the 14th of April, I
requested purchase card transactions data from the DC VA
Medical Center. So far, nothing has been provided.
An environment with no inventory controls is the sort of
environment where government credit cards could be misused. Can
you estimate for me or tell me when the data listed in my
letter will be provided.
Ms. Park. Sir, I was not aware of that request, but I will
go back and I will get that to you in the next day or two. I
can get that pretty quickly.
Mr. Bergman. Great. Thank you very much.
I yield back. Ranking Member Kuster is recognized for five
minutes.
Ms. Kuster. Thank you very much, Mr. Chair.
I think we still have some misunderstanding, at least from
Members of this Committee and perhaps from the public at large,
about these--the impact of our provider agreements on this
dramatically inflated improper payment, that people are getting
the impression that there is improper payments that could be
recouped and you walked us through that. But would it be
helpful--I understand that there is legislation that we have
considered with regard to provider payments that could maybe
take them out from underneath the far so that we need to get to
the reality, if there are questions that have been asked, if
there are improper payments the way that any layperson would
understand that--too much money being paid or paid to the wrong
person--vendor, but we are going to expend a tremendous amount
of time and energy here on something that is not ever going to
be recouped and if we don't correct this going forward, we are
just going to pass this on to future generations.
I just want to get to the bottom of this at this hearing,
because otherwise, we are sending the wrong impression.
Ms. Park. So, I don't feel that there is an easy answer;
that is always the case here, isn't it?
Ms. Kuster. Well, I am just trying to say this whole
testimony--with all due respect to my colleague about your--and
by the way, this language, it has nothing to do with you; it
showed up in the budget. It sounds like maybe it didn't even
come through the VA--so that is another question; there is a
mystery as to why it came to us--we have language in the budget
asking that there not be an annual outside audit, asking that
the audit be done internally and we would like to get to the
bottom of the mystery behind this, but if you don't know about
it, you are not going to be the person who can help us.
But, I am just guessing that somebody has decided that
calling these payments to our community providers--this is
Community Care in our communities, rural hospitals, providing
services to veterans, getting paid, and that has been
characterized as improper because of a Federal regulation that
is typically in place when you have a different contracting
system.
Ms. Park. Right. So, I think would be good to read the
Improper Payment Act and see if it is really effective, right,
and especially the definition of the improper payment rate. The
problem is when you start talking about let's move away from
far-based contracts, you do put the veteran at risk, because
the far-based contracts do protect them in a lot of instances.
So, that is where, from my perspective, it gets a little
dicey.
Ms. Kuster. But I think--look, I can't speak for the
secretary and I can't speak for this administration, I just
think it is duplicitous for them to pretend that we are going
to recoup millions, billions of dollars--my colleague is
talking about trillions of dollars--we are not getting that
back, but hopefully, you can take it back to the secretary that
colleagues on both sides of the aisle want improvement in the
process of community-based care contracts that do not lead to
this level of misunderstanding in an O & I hearing about
trillions of dollars that may be recouped. That is all.
Ms. Park. Yes, and we are working with OMB, too, on that
definition. They are looking at revising some of their
guidance, too, and we hope that will have some impact on this.
Ms. Kuster. Great. Thank you very much.
Thank you for your service to our country and our veterans.
I yield back.
Mr. Bergman. Thank you.
Mr. Poliquin, you are recognized for five minutes, sir.
Mr. Poliquin. Thank you, Mr. Chairman, very much.
Just for the record, my colleagues on the Committee and for
you folks right here, this is Page 333 of the medical programs
and information technology volume of the VA budget request 2018
congressional submission, Page 333 where somebody at the VA
requests, since you hired more people at the VA to do this, you
are able to better audit yourselves than have outside folks
audit yourselves. And I would strongly disagree and will object
to any effort to go forward in that regard.
Let me ask you folks, you have an agency that you help run
or are connected with that has 360--365,000 employees. You have
a budget of about $185 billion per year and we are here to hear
about the problems in seeing how the money is spent, where it
is going, who is keeping track of it to make sure that we get
every dollar we can to provide clinical services to our
veterans and at the same time, the taxpayers.
So, I will start with you, Mr. Sturm. You are there; I am
not. What is the biggest problem you see at the VA when it
comes to financial management?
Mr. Sturm. I would say it is my legacy systems and not
being fully integrated between my business-line systems and
into the modern--
Mr. Poliquin. Okay. So, we know we have addressed that this
morning in another hearing is that the information technology,
the IT systems, you have several of them that have come up
through the years, and so now the VA is in the computer
software business, and I know you are about to replace that
with one system that is integrated across all platforms; is
that what you mean?
Mr. Sturm. Yes, sir.
Mr. Poliquin. Okay. Ms. Park, what is the biggest problem
you see in making sure that we keep track of all this money so
we know where it is gone--going and to make sure that we help
our veterans the maximum amount?
Ms. Park. Again, sir, it is our IT systems.
Mr. Poliquin. Okay. Ms. Davis?
Ms. Davis. I am not in a position to address that question.
Mr. Poliquin. Okay. Ms. Davis, when you look at the
financial management at the VA, you look, if I am not mistaken,
at different financial problems across different agencies, not
just the VA; is that right?
Ms. Davis. Correct.
Mr. Poliquin. How is the VA doing, relative to the--how
many different agencies do you look at?
Ms. Davis. Oh, we look at numerous agencies--
Mr. Poliquin. How many, 10, 15, 20?
Ms. Davis. Oh, many more than that.
Mr. Poliquin. Okay. Thirty, 40?
Ms. Davis. If you are talking GAO-wide, we can look at any
agency; we have the ability to do that.
Mr. Poliquin. Okay. So, I am not going to get an answer
here. I am just going to say--I will pick a number--30: how are
we doing at the VA, relative to the other 29?
Ms. Davis. Are you referring to improper payments or--
Mr. Poliquin. Yes, let's start with improper payments.
Ms. Davis. Okay.
Mr. Poliquin. The $5.5 billion of improper payments that
were transacted last year.
Ms. Davis. Okay. The agency that has the largest amount of
improper payments is HHS and that is because it includes
Medicare, the three Medicare programs--
Mr. Poliquin. So, how is the VA doing, relative to the
other 29 agencies?
Ms. Davis. Well, if you want to look at the rate, we can
refer to the rate, as I mentioned in my oral statement, that
the rate for those two programs are 76 and 69 percent and
that--those are the highest rates government-wise.
The next highest rate is 24 percent and that is the earned
income tax credit.
Mr. Poliquin. Okay. So, if I understood this correctly, the
VA is doing a poor job, relative to the other people you are
looking at?
Ms. Davis. I would not make that statement; I would only
give you the facts that I have.
Mr. Poliquin. Well, the facts lead us somewhere, right? You
have the responsibility of looking at multiple agencies; I am
just trying to figure out how the VA is doing.
Ms. Davis. Yeah, well, and the numbers there, the total
number for this past fiscal year was 144 billion government-
wide, and you know, a large portion of that or not a large
portion, but certainly a significant portion, is the 5.5
billion.
Mr. Poliquin. At the VA?
Ms. Davis. Correct.
Mr. Poliquin. Ms. Larsen--thank you, Ms. Davis--Ms. Larsen,
what is the biggest problem you see at the VA when it comes to
financial management and keeping track of all this money?
Ms. Larsen. Sir, a lot of it is just that people don't take
care of what they need to do when something is sent out to them
and that creates their own issues. So--and they ignore letters
that are sent out to them and then they all of a sudden, the
veteran calls and says, what happened, how come I didn't get my
check?
Mr. Poliquin. Uh-huh.
Ms. Larsen. And I am like, well, sir, you didn't respond to
what the VA wanted you to do or debt management or whatever.
Mr. Poliquin. Uh-huh.
Ms. Larsen. And a lot of it is on their own accord, but yet
I am there--
Mr. Poliquin. So, it is the veteran's fault?
Ms. Larsen. Oh, in some respects it is.
Mr. Poliquin. Uh-huh.
Ms. Larsen. And that is when they get kind of--they call me
and go, what can you do for me, can you get me my money back?
And I say I will try.
Mr. Poliquin. Uh-huh. Do you think, given all of that, that
it is a good idea to have the inside people at the VA audit
themselves, which has been requested at Page 333 of this
document?
Ms. Larsen. I am really not one that would be able to
answer that.
Mr. Poliquin. Mr. Dahl, do you have an opinion--if I may,
Mr. Chair--of what the biggest thing we need to fix when it
comes to financial management at the VA?
Mr. Dahl. I would just like to point out that we are the
independent auditors.
Mr. Poliquin. Good. I should have started with you.
Mr. Dahl. Not to get into too much detail--but we report on
the financial statements year after year. This year we did have
the six material weaknesses and the two significant
deficiencies.
Mr. Poliquin. And do you do individual audits for other
agencies, not just the VA?
Mr. Dahl. No, we are the Office of Inspector General. Our
purview is any VA program.
Mr. Poliquin. Does any other agency you know in the Federal
government ask to audit themselves?
Mr. Dahl. I hesitate to answer that because I am not
exactly clear on what--
Mr. Poliquin. Do you think it is a good idea that any
agency audits itself?
Mr. Dahl. Excuse me?
Mr. Poliquin. Do you think that it is a good idea that any
agency requests to audit themselves?
Mr. Dahl. It may be a useful tool for them, but I would
think that there would still need to be someone like the
Inspector General or maybe a contract auditor to also come in
behind that.
Mr. Poliquin. Thank you, Mr. Chairman, for the additional
time. Thank you, sir.
Mr. Bergman. Thank you.
Mr. Arrington, you are recognized for five minutes.
Mr. Arrington. Thank you, Mr. Chair.
Mr. Dahl, you report to the secretary, correct?
Mr. Dahl. No, I report to the Inspector General, who is
independent of the Secretary.
Mr. Arrington. Who manages his budget and who manages him?
Mr. Dahl. We have oversight committees like this. The IG
manages our office's budget.
Mr. Arrington. That is kind of how I felt when I was
working at the--in the Federal government, I never knew who the
OIG was accountable to, but I think they serve an appropriate
role, and so I am going to ask you some of the same questions I
asked Ms. Park.
What are your--what do you see as the challenge--and maybe
I am reiterating a question and point that my colleague made
about organizational structure. I saw that you made mention of
the convoluted system and the lack of authority with CFOs.
So maybe start there, but just give me a comprehensive view
of the breakdown and potentially even the dysfunction to
managing for the desired outcome of reducing improper payments.
Mr. Dahl. The organizational structure, from our
perspective, is a concern. We don't know what the solution is,
but we do believe that there needs to be more integration and
cooperation within the department in that you have a CFO in the
Office of Management, but then within VHA, VBA, NCA, they all
have their own CFO structures and VHA takes it even further
with further levels of reporting.
It probably is fair to say it makes it difficult for the
CFO to pull together all that he or she needs to prepare
financial statements every year. The folks from the department
have mentioned the systems. The systems are certainly a
challenge, but the systems are just a tool to get where they
need to be. VA has had challenges with implementing financial
systems before.
I remain guardedly optimistic that this solution will be
more successful than the last attempt.
Mr. Arrington. Was the last attempt to implement an IT
system a fail?
Mr. Dahl. Well, there have been a couple of high-profile
systems, Core FLS and FLITE, where they have been mainly
developed in- house and they have not been successful and that
is why we still have FMS a quarter century after it started.
Mr. Arrington. Yeah, it seems like we had a hearing on IT--
I think it was one of the first hearings we had--and it just
seemed like this there was an agency-wide issue with getting
the systems in place. They would start and stop things. They
would spend millions of dollars on a project. They would try to
do it in-house, instead of going, you know, off the shelf or
custom, and it was just the most convoluted thing I have ever
heard.
There was no real architecture, enterprise-wide
architecture, no sensible, well-managed IT system across the
agency, it seemed to me. Is that fair to say--
Mr. Dahl. Well, there are a lot of different users in the
department with a lot of different needs and I think that
challenges a department, making sure that they can define and
meet all those needs.
Mr. Arrington. Is there a CIO?
Mr. Dahl. There is. Well, there is currently--I believe he
is an acting CIO--but there is that position.
Mr. Arrington. Okay. Who is accountable for the--
ultimately--for improper payments, the management of improper
payments or the poor management or even good management,
ultimately?
Mr. Dahl. Overall, I would say that the Assistant Secretary
for Management bears the highest level of responsibility.
Mr. Arrington. And what is the senior most career person
that is responsible for?
Mr. Dahl. I believe he is a career employee.
Mr. Arrington. The assistant secretary?
Mr. Dahl. For management, yeah. He is acting right now.
Mr. Arrington. But if he weren't acting, would it be a
political appointee?
Mr. Dahl. I believe so.
Mr. Arrington. So, who is the career, senior most person
responsible; is it decentralized? Is it centralized? Who is
accountable?
Mr. Dahl. I think that I would have to have the department
answer that question.
Mr. Arrington. Yeah, I am not sure who is accountable. That
has been my problem, quite frankly, Mr. Chairman, in just about
every issue I have sat on this dais and listened issue after
issue; that becomes my recurring theme, accountability. I am
never clear about it and the results speak for themselves.
So, anyway, thank you for your time. I yield back to the
Chairman.
Mr. Bergman. Our thanks to all the witnesses. You are now
excused.
Today, we have had the opportunity to hear from an
impressive panel of financial and audit experts. I hope
everyone watching will carry with them a focus on managing the
money after the budget is agreed upon.
Partisan and interest group battles over spending get much
of the attention. Internal controls are deficient is not a very
good headline, but the nuts and bolts of financial management
have a huge impact.
This Subcommittee will continue to monitor VA's progress in
resolving the internal control weaknesses and deficiencies and
eliminating the improper payments. Modernizing the financial IT
systems is a major part of the effort, so the Subcommittee is
giving that special scrutiny.
But obsolete IT is not the whole story and organizational
and procedural problems cannot be ignored. VA's financial
challenges are hardly unique, but they are substantial and I
would like to be able to hold the department up as an example
of sound financial management.
I ask unanimous consent that all Members have five
legislative days to revise and extend their remarks and include
extraneous material.
Without objection, so ordered.
I would like, once again, to thank all of our witnesses and
the audience members for joining in today's conversation. With
that, this hearing is adjourned.

[Whereupon, at 3:25 p.m., the Subcommittee was adjourned.]

A P P E N D I X

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Prepared Statement of Laurie Park
Introduction

Good afternoon, Chairman Bergman, Ranking Member Kuster, and
Members of the Subcommittee. Thank you for the opportunity to discuss
the actions the Department of Veterans Affairs (VA) is taking to
improve financial management. As the VA Deputy Assistant Secretary for
Finance, I am responsible to the Acting Chief Financial Officer (CFO)
for Department-wide financial management activities.
Over the last several years, through our improper payment reviews,
insights from the Office of Inspector General (OIG) reports, and
detailed deep dives into root causes of audit findings, it has become
clear that the foundation of our financial management practices is
failing us. We have based our day-to-day acquisition and financial
management processes on a fragile network of systems that routinely
require our workforce in the field to rely on manual double entry
processes, complex work-arounds, manual reconciliations, and processes
that cannot keep pace with current financial management best practices
set forth by guidance from the Office of Management and Budget (OMB)
and the Department of the Treasury. Efforts to remediate these complex
issues within our current foundation, coupled with a workforce that has
not been trained in best practices, has limited our success. VA must
focus on modernizing our financial management and acquisition systems,
strengthen our internal controls, adopt best practices, and invest in a
trained workforce.

Reforming VA at the Root Cause: Financial Management Business
Transformation

Recognizing these challenges, with support from Secretary Shulkin,
Interim Deputy Secretary Blackburn, and my boss, Ed Murray, the Acting
CFO, we have recruited talented financial management professionals,
seasoned project managers, experienced data architects, and a strong
leadership team to lead initiatives to modernize our systems, adopt
best practices, and train our workforce. Our Financial Management
Business Transformation (FMBT) initiative is ongoing now and with
continued management support and openness to change will take a focused
effort over the next 5-8 years to be successful. We are committed to
addressing audit findings in our current environment as much as
possible, but because many of the findings are a result of our aged
systems, our main focus will be on the transformation.
We have made progress on ensuring FMBT is well managed and headed
for success. During fiscal year (FY) 2016, following guidance from OMB
to migrate to a Federal Shared Service Provider, VA explored two
Federal shared service providers as directed by the Unified Shared
Service Management Office and conducted in-depth evaluation sessions. I
utilized subject matter experts from across the agency to determine
which provider was the best fit for VA. After a detailed and thorough
process, VA selected the United States Department of Agriculture
(USDA). In collaboration with USDA, we are in the engagement phase of
the effort, performing business process engineering, developing
conversion strategies, and evaluating technical data interface
alternatives. It is imperative that the FMBT initiative take the
necessary steps to ensure that VA is fully prepared to replace our
legacy systems with an integrated, modern system and reap the
functional and technical benefits.

Independent Auditor's Report on VA's Financial Statements

OIG, utilizing an independent auditor, issued VA's 18th consecutive
unmodified (``clean'') audit opinion in FY 2016 reporting six material
weaknesses:

1.Office of Information Technology (OIT) security controls - The
material weakness in OIT Information Technology security controls is a
long-standing issue and the Chief Information Officer has taken
aggressive action to remediate these findings. In 2018, OIT fully
expects to remedy this finding.

2.Veterans Benefits Administration's (VBA) education benefits
accrued liability - This new finding relates to the inaccurate
interpretations of accounting standards for post-employment benefits.
In addition, several education programs were not included in the FY
2016 estimates. Currently VBA is building valid models that meet
actuarial standards for all required education programs. Difficulties
in hiring certified actuaries and initiating necessary experience
studies will most likely delay resolution of this finding until FY
2018.

3.VBA control environment surrounding the compensation, pension,
and burial actuarial estimates - This new finding resulted from the
unexpected retirement of VA's Chief Actuary. The lack of a qualified
actuary managing and taking full responsibility for VA's compensation,
pension, and burial actuarial model resulted in a lack of segregation
of duties and outdated assumptions used in the model. Difficulties in
hiring certified actuaries and initiating necessary updates to critical
assumptions will most likely delay resolution of this finding until FY
2018.

4.Veterans Health Administration (VHA) Community Care obligations,
reconciliations, and accrued expenses - This long-standing issue is
directly related to the lack of modern integrated financial and
acquisition systems. While efforts have been made to strengthen manual
workarounds and improve reconciliations, these processes are short-term
solutions and are not sustainable for the long-term. Until the new FMBT
system is implemented, the burden to resolve these findings relies on
the workforce rather than a modern system. Many of the issues
identified here also contributed to the improper payment rates and
findings in the Improper Payments Elimination & Recovery Act (IPERA)
review for Community Care. This finding will remain until we move to a
new system.

5.Financial reporting - This long-standing issue is a result of our
antiquated financial system. Due to our legacy financial system's
limited functionality, VA has to exercise complex analysis and
inefficient work-arounds to fully meet Treasury and OMB reporting
requirements. This finding will remain until we move to a new system.

6.CFO organizational structure for VA and VHA - VA's CFO community
has worked to improve their communication and cooperation through a
series of joint initiatives. The FY 2017 audit is ongoing, and we
expect to receive OIG's feedback on our efforts.

Many of the findings are due to long-standing problems inherent in
the legacy financial management system. VA will continue to work to
address audit findings that will improve our position in the short-
term. We will not see the large-scale improvements needed to remediate
VA's financial management challenges and audit findings until the
legacy Financial Management System is replaced.

Commitment to Training VA's Workforce

In the spring of 2016, I instituted the Financial Management
Training Initiative (FMTI). The overall objective of FMTI is to educate
financial management professionals across the Department in order to
help remediate current audit findings and avoid repeat or new findings
during the annual financial statement audit. My FMTI strategy is to
centralize and standardize a financial management training curriculum
throughout the Department. The initiative will reinforce accurate daily
financial transactional processes; increase employee levels of
knowledge, skill, and proficiency; remediate audit findings and
deficiencies with targeted sessions related to findings and
recommendations; and support change management for the FMBT effort-our
new financial management system. In pursuit of this goal, my office
held a virtual, 3-day, web-based event in August 2016 and an in-person,
3-day event in Nashville, Tennessee, in January 2017. In total, 1,560
VA employees participated in a total of 71 separate classes. Many of
the classes were focused directly on remediating audit findings,
including: capitalization of assets; reconciliations; undelivered
orders; interagency agreements and intragovernmental reconciliation;
accounting for community care; essentials of Federal appropriations and
fiscal law; the Anti-Deficiency Act; major, minor, and non-recurring
maintenance accounting; future of VA Form 1358; helping VA fight fraud;
improper payments; and internal controls. There are two more events
planned over the next 9 months-another virtual event in August 2017 and
another in-person event in late January 2018.

Commitment to Accurate Reporting, Remediating, and Ensuring
Accountability for VA Resources

Whereas modernizing VA's financial management system is a
desperately needed, multi-year effort that will truly transform VA's
ability to address root causes of audit findings, VA is also leading
initiatives in areas that can affect change now.
Over the past three years, VA has worked to increase senior
leadership collaboration and awareness of improper payment challenges.
We also established a new oversight office, the Improper Payments
Remediation and Oversight Office (IPRO), focused on driving
identification and remediation of improper payments. We recruited staff
with expertise in IPERA compliance, internal control assessment,
systemic issue identification, and corrective action development. This
office will also lead Secretary Shulkin's new ``Seek to Prevent Fraud,
Waste, and Abuse (STOP)'' effort. Recent accomplishments include:

Ensuring consistent application of the definition of
improper payments across the Department in the area of acquisitions. VA
issued acquisition guidance mandating testing procedures and providing
instructions on what constitutes a proper payment. This guidance is
iterative and is updated to address complex acquisition issues
identified during testing;
Revision of IPERA policy to clearly define roles and
responsibilities, in addition to processes and procedures; and
Review of improper payment risk assessments, testing
plans, and corrective action plans for each program to ensure a
consistent enterprise-wide approach and compliance with policy.

Although these efforts have not yet resulted in an overall
reduction of improper payments, VA did report a decrease in improper
payments in more than half of the 14 programs reporting in FY 2016. VA
cannot fully address systemic issues without accurate identification of
errors and root causes and acknowledges that this means its reported
improper payment rate will continue to rise until such time as efforts
underway in program's such as VA's Community Care begin to garner
results.
In FY 2017, VA is leading efforts to analyze improper payments to
determine the percentage that are accurate, but must still be reported
as improper due to failure to comply with policy versus those that
represent a true loss to the Government. This will aid leadership in
targeting resources to areas that will result in cost-benefits to VA.
Further, as part of VA's STOP fraud, waste, and abuse initiative, VA
will establish the baseline of existing fraud, waste, and abuse
activities, to include identifying savings; determine areas most at
risk of fraud, waste, and abuse; explore partnership opportunities with
the private sector and other federal agencies to maximize efficiencies;
and leverage the Financial Services Center Data Analytics capabilities
to improve VA's fraud, waste, and abuse prevention efforts. These
capabilities are enabled by a robust, enterprise-level analytics
technology platform leveraging commercial-off-the-shelf and advanced
open source programming/analytic tools; a team of data scientists,
statisticians, data engineers, and data/program analysts; and an
extended organizational ecosystem that includes internal and external
partners in fraud, waste, and abuse analytics and management.
Organizations included in the analytic ecosystem include the top ranked
McCombs School of Business, University of Texas; Centers for Medicare
and Medicaid Services; Interagency Fraud and Risk Data Mining
Workgroup; VA's Office of Compliance and Business Integrity; VA's
Office of Internal Controls; IPRO; and others. This important
initiative will reap great rewards for VA.
Debt collection is also an essential part of strong financial
management where VA is making improvements. VA balances Veteran debt
collection with a strong sense of compassion, as well as compliance
with Federal debt collection statutes and policy. VA works with
Veterans to resolve their debt through extended payment plans, benefit
offset, waivers, dispute resolution, and even refunds, if Veterans are
found to be in hardship. Federal statutes also require VA to send non-
tax debt to Treasury for collection. In December 2016, VA began
transferring delinquent debt for non-service connected medical care co-
payments to the Treasury Cross Servicing program for collection. As of
April 30, over 800 thousand delinquent debts totaling about $71 million
were referred for recovery. Veterans receive at least three debt
notices before Treasury takes offsets from tax refunds and/or Federal
salaries.
The Department's comprehensive efforts to improve financial
management will assist in improving activities to identify fraud,
waste, and abuse, reducing improper payments, and strengthening VA's
financial statements. However, VA cannot emphasize enough how important
the FMBT effort is to strengthen VA's overall financial management
position. This includes VA's ability to meet Federal regulations and
mandates and remediate VA's material weaknesses for the financial
statements.

Path Forward

Even with these efforts, VA recognizes it has many challenges to
overcome, while at the same time providing Veterans the benefits and
services they have earned and deserve. VA acknowledges its current
challenges and audit findings in financial management that reflect a
need for improved financial stewardship. We believe that the
initiatives we are working on will improve VA's financial management
and better serve our Veterans.
Thank you for the opportunity to appear before you today and for
your continued support of Veterans. I look forward to your questions.

Prepared Statement of Beryl H. Davis

VETERANS AFFAIRS
Improper Payment Estimates and Ongoing Efforts for Reduction

Chairman Bergman, Ranking Member Kuster, and Members of the
Subcommittee:

As the steward of taxpayer dollars, the federal government is
accountable for how it spends hundreds of billions of taxpayer dollars
annually. However, improper payments remain a significant and pervasive
government-wide issue. For several years, we have reported improper
payments as a material weakness \1\ in our audit reports on the
consolidated financial statements of the U.S. government because the
federal government is unable to determine the full extent to which
improper payments occur and reasonably assure that actions are taken to
reduce them. \2\ In addition, agency auditors continued to report
internal control deficiencies over financial reporting in their 2016
financial statement audit reports, such as financial system limitations
and information system control weaknesses. Such deficiencies could
significantly increase the risk that improper payments may occur and
not be detected promptly.
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\1\ A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of the
entity's financial statements will not be prevented, or detected and
corrected, on a timely basis. A significant deficiency is a deficiency,
or a combination of deficiencies, in internal control that is less
severe than a material weakness, yet important enough to merit
attention by those charged with governance. A deficiency in internal
control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their
assigned functions, to prevent, or detect and correct, misstatements on
a timely basis.
\2\ GAO, Financial Audit: Fiscal Years 2016 and 2015 Consolidated
Financial Statements of the U.S. Government, GAO 17 283R (Washington,
D.C.: Jan. 12, 2017).
---------------------------------------------------------------------------
Under the Improper Payments Information Act of 2002 (IPIA), as
amended, an improper payment is defined as any payment that should not
have been made or that was made in an incorrect amount (including
overpayments and underpayments) under statutory, contractual,
administrative, or other legally applicable requirements. Among other
things, an improper payment includes payment to an ineligible
recipient, payment for an ineligible good or service, and any duplicate
payment. In addition, Office of Management and Budget (OMB) guidance
instructs agencies to report as improper payments any payments for
which insufficient or no documentation was found. Reducing improper
payments is critical to safeguarding federal funds and could help
achieve cost savings and improve the government's fiscal position.
Strong financial management practices, including effective internal
controls, are important for federal agencies to better detect and
prevent improper payments. The Department of Veterans Affairs (VA)
faces significant financial management challenges. In 2015, we
designated VA health care as a high-risk area because of our concern
about VA's ability to ensure that its resources are being used cost-
effectively and efficiently to improve veterans' timely access to
health care, and to ensure the quality and safety of that care. \3\
Further, improving and modernizing federal disability programs has been
on GAO's high-risk list since 2003, in part because of challenges that
VA has faced in providing accurate, timely, and consistent decisions
related to disability compensation. \4\ In addition, in VA's fiscal
year 2016 agency financial report, the independent auditor reported
material weaknesses and significant deficiencies in internal control
over financial reporting. Finally, the VA Office of Inspector General
(OIG) has reported that VA has been noncompliant with the criteria
listed in Section 3 of the Improper Payments Elimination and Recovery
Act of 2010 (IPERA) since fiscal year 2011, the first year that the OIG
reported on the agency's compliance under that provision. \5\
---------------------------------------------------------------------------
\3\ GAO, High Risk Series: Progress on Many High-Risk Areas, While
Substantial Efforts Needed on Others, GAO 17 317 (Washington, D.C.:
Feb. 15, 2017).
\4\ GAO 17 317.
\5\ IPERA, Pub. L. No. 111-204, 124 Stat. 2224 (July 22, 2010),
established a requirement for entity inspectors general to report
annually on entities' compliance with specific criteria. The six
criteria are that the entity has (1) published an annual financial
statement and accompanying materials in the form and content required
by the Office of Management and Budget for the most recent fiscal year
and posted that report on the entity website; (2) conducted a risk
assessment for each specific program or activity that conforms with
IPIA, as amended; (3) published estimates of improper payments for all
programs and activities identified as susceptible to significant
improper payments under the entity's risk assessment; (4) published
corrective action plans for programs and activities identified as
susceptible to significant improper payments; (5) published and met
annual reduction targets for all programs and activities identified as
susceptible to significant improper payments; and (6) reported a gross
improper payment rate of less than 10 percent for each program and
activity for which an improper payment estimate was obtained and
published. For purposes of this report, program encompasses both
programs and activities.
---------------------------------------------------------------------------
Today, my statement will discuss improper payments on both the
government-wide level and at VA. It will also discuss certain actions
that VA has taken and other actions that VA can take to reduce improper
payments. My statement is primarily based on VA's financial reports, VA
OIG reports, and our recent improper payments related work at VA. \6\
The products cited throughout this statement include details on the
scope and methodology used to conduct that work. The work upon which
this statement is based was conducted in accordance with all sections
of GAO's Quality Assurance Framework that are relevant to our
objectives. The framework requires that we plan and perform the
engagement to obtain sufficient and appropriate evidence to meet our
stated objectives and to discuss any limitations in our work. We
believe that the information and data obtained, and the analysis
conducted, provide a reasonable basis for any findings and conclusions
in this product.
---------------------------------------------------------------------------
\6\ GAO, Veterans' Disability Benefits: Improvements Could Further
Enhance Quality Assurance Efforts, GAO 15 50 (Washington, D.C.: Nov.
19, 2014) and GAO, Veterans' Disability Benefits: VA Can Better Ensure
Unemployability Decisions Are Well Supported, GAO 15 464 (Washington,
D.C.: June 2, 2015).

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Background

VA's mission is to promote the health, welfare, and dignity of all
veterans in recognition of their service to the nation by ensuring that
they receive medical care, benefits, social support, and lasting
memorials. It is the second largest federal department and, in addition
to its central office located in Washington, D.C., has field offices
throughout the United States, as well as the U.S. territories and the
Philippines.
The department has three major components that are primarily
responsible for carrying out its mission:

the Veterans Benefits Administration (VBA), which
provides a variety of benefits to veterans and their families,
including disability compensation, educational opportunities,
assistance with home ownership, and life insurance;
the Veterans Health Administration (VHA), which provides
health care services, including primary care and specialized care, and
performs research and development to serve veterans' needs; and
the National Cemetery Administration (NCA), which
provides burial and memorial benefits to veterans and their families.

Collectively, the three components rely on approximately 340,000
employees to provide services and benefits. These employees work in 167
VA medical centers, approximately 800 community-based outpatient
clinics, 300 veterans centers, 56 regional offices, and 131 national
and 90 state or tribal cemeteries.
For fiscal year 2016, VA reported about $176 billion in net
outlays, an increase of about $16 billion from the prior fiscal year.
\7\ VBA and VHA account for about $102 billion (about 58 percent) and
$72 billion (about 41 percent) of VA's reported net outlays,
respectively. The remaining net outlays were for NCA and VA's
administrative costs. The fiscal year 2017 appropriations act that
covered VA provided approximately $177 billion to the agency, about a
$14 billion increase from the prior fiscal year. \8\
---------------------------------------------------------------------------
\7\ The amount of money paid out by the government is known as
outlays. Because of the timing of agency payments, appropriations may
not correspond to outlays in a given fiscal year. Net outlays are
disbursements net of offsetting collections.
\8\ Military Construction, Veterans Affairs, and Related Agencies
Appropriations Act, 2017, Pub. L. No. 114-223, div A, 130 Stat. 857
(Sept. 29, 2016). Appropriations provide budget authority to federal
agencies to make financial commitments (``obligations'') and make
payments from the Department of the Treasury for specified purposes in
specified amounts. Some payments for obligations are made soon after
being incurred (for example, employees' salaries) and some are made
over several years (for example, payments to contractors for major
construction projects).

Improper Payments Remain a Significant and Pervasive Government-Wide
---------------------------------------------------------------------------
Issue

As we recently reported, improper payments remain a significant and
pervasive government-wide issue. \9\ Since fiscal year 2003-when
certain agencies began reporting improper payments as required by IPIA-
cumulative reported improper payment estimates have totaled over $1.2
trillion, as shown in figure 1. \10\
---------------------------------------------------------------------------
\9\ GAO, The Nation's Fiscal Health: Action is Needed to Address
the Federal Government's Fiscal Future, GAO 17 579T (Washington, D.C.:
May 3, 2017).
\10\ IPIA-as amended by IPERA-requires executive branch agencies to
(1) review all programs and activities, (2) identify those that may be
susceptible to significant improper payments, (3) estimate the annual
amount of improper payments for those programs and activities, (4)
implement actions to reduce improper payments and set reduction
targets, and (5) report on the results of addressing the foregoing
requirements. ``Significant improper payments'' are defined as gross
annual improper payments in a program exceeding (1) both 1.5 percent of
program outlays and $10 million of all program or activity payments
during the fiscal year reported or (2) $100 million (regardless of the
percentage of outlays).

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

For fiscal year 2016, agencies reported improper payment estimates
totaling $144.3 billion, an increase of over $7 billion from the prior
year's estimate of $136.7 billion. \11\ The reported estimated
government-wide improper payment error rate was 5.1 percent of related
program outlays. \12\ As shown in figures 2 and 3, the government-wide
reported improper payment estimates-both dollar estimates and error
rates-have increased over the past 3 years, largely because of
increases in Medicaid's reported improper payment estimates.
---------------------------------------------------------------------------
\11\ These amounts do not include the Department of Defense's
Defense Finance and Accounting Service Commercial Pay program because
of concerns about the reliability of the program's estimate.
\12\ Reported error rates reflect the estimated improper payments
as a percentage of total program outlays.

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

For fiscal year 2016, overpayments accounted for approximately 93
percent of the government-wide reported improper payment estimate,
according to www.paymentaccuracy.gov, with underpayments accounting for
the remaining 7 percent.
Although primarily concentrated in three areas (Medicare, Medicaid,
and the Earned Income Tax Credit), the government-wide reported
improper payment estimates for fiscal year 2016 were attributable to
112 programs spread among 22 agencies. (See fig. 4.)

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

We found that not all agencies had developed improper payment
estimates for all of the programs they identified as susceptible to
significant improper payments. Eight agencies did not report improper
payment estimates for 18 risk-susceptible programs. (See table 1.)

[[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

As we have previously reported, the federal government faces
multiple challenges that hinder its efforts to determine the full
extent of and reduce improper payments. \13\ These challenges include
potentially inaccurate risk assessments, agencies that do not report
improper payment estimates for risk-susceptible programs or report
unreliable or understated estimates, and noncompliance issues.
---------------------------------------------------------------------------
\13\ GAO 17 579T.

Changes in VA's Evaluation Procedures Caused Significant Increases in
---------------------------------------------------------------------------
Reported Improper Payment Estimates since Fiscal Year 2013

For fiscal year 2016, VA's reported improper payment estimate
totaled $5.5 billion, an increase of about $500 million from the prior
year. The reported VA improper payment error rate was 4.5 percent of
related program outlays for fiscal year 2016, a slight increase from
the 4.4 percent reported error rate for fiscal year 2015. As shown in
table 2, VA's Community Care and Purchased Long-Term Services and
Support programs accounted for the majority of VA's estimated improper
payments. \14\ Specifically, for fiscal year 2016, VA's reported
improper payment estimate for VA's Community Care was approximately
$3.6 billion (about 65 percent of VA's total reported improper payments
estimate) and for VA's Purchased Long-Term Services and Support was
approximately $1.2 billion (about 22 percent of VA's total reported
improper payments estimate).
---------------------------------------------------------------------------
\14\ Community Care is a program through which VA authorizes
veteran care at community care facilities when the needed services are
not available through VA, or when a veteran is unable to travel to a VA
facility. Purchased Long-Term Services and Support strives to advance
quality care for aging and chronically ill veterans by providing policy
direction for the development, coordination, and integration of
geriatrics and long-term care clinical programs.

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

As shown in figures 5 and 6, VA's reported improper payment
estimates have increased over the past 3 years, and the reported
---------------------------------------------------------------------------
improper payment error rates have increased over the past 2 years.

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

The significant increase in VA's reported improper payment
estimates and error rates primarily occurred, according to the VA OIG,
because VA changed its sample evaluation procedures in fiscal year
2015, which resulted in more improper payments being identified. In
response to a finding by the VA OIG, \15\ VA began classifying every
payment as improper when it made a payment that did not follow all
applicable Federal Acquisition Regulation (FAR) and Veterans Affairs
Acquisition Regulation (VAAR) provisions. The OIG reported that when
those purchases do not follow applicable legal requirements, such as
having FAR-compliant contracts in place, the resulting payments are
improper because they ``should not have been made or were made in an
incorrect amount under statutory, contractual, administrative, or other
legally applicable requirements, according to the definition of
improper payments set forth in OMB Circular A-123, Appendix C.'' As a
result of the change in its sample evaluation procedures, VA reported
significant increases in estimated improper payments for both its
Community Care and Purchased Long-Term Services and Support programs.
---------------------------------------------------------------------------
\15\ Department of Veterans Affairs Office of Inspector General, FY
2014 Review of VA's Compliance With the Improper Payments Elimination
and Recovery Act, 14-03380-356 (Washington, D.C.: May 14, 2015).
---------------------------------------------------------------------------
As shown in table 3, VA's Community Care and Purchased Long-Term
Services and Support programs' reported improper payment error rates
are the two highest reported error rates government-wide for fiscal
year 2016. Specifically, VA's Community Care and Purchased Long-Term
Services and Support programs had reported improper payment error rates
of about 75.9 percent and 69.2 percent, respectively. The reported
improper payment error rates for these two programs were each over 45
percentage points higher than the reported improper payment error rate
for the next highest federal program-the Department of the Treasury's
Earned Income Tax Credit program.

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

In its fiscal year 2016 agency financial report, VA did not report
improper payment estimates for four programs it identified as
susceptible to significant improper payments. These four programs were

Communications, Utilities, and Other Rent;
Medical Care Contracts and Agreements;
Prosthetics; and
VA Community Care Choice payments made from the Veterans
Choice Fund.

Because VA did not report improper payment estimates for these
risk-susceptible programs, VA's improper payment estimate is
understated and the agency is hindered in its efforts to reduce
improper payments in these programs. In its fiscal year 2016 agency
financial report, VA stated that it will report improper payment
estimates for these programs in its fiscal year 2017 agency financial
report.

Ongoing Efforts for Reducing Improper Payments at VA

According to OMB guidance, to reduce improper payments, VA can use
root cause analysis to identify why improper payments are occurring and
develop effective corrective actions to address those causes. In
addition, our two prior reports identified problems with how VA
processed its claims to reasonably assure the accuracy of or
eligibility for the disability benefits, increasing the risk of
improper payments. VA can implement our recommendations from these two
reports to better ensure the accuracy of or eligibility for disability
benefits.

Root Cause Analysis

Root cause analysis is key to understanding why improper payments
occur and to developing and implementing corrective actions to prevent
them. In 2014, OMB established new guidance to assist agencies in
better identifying the root causes of improper payments and assessing
their relevant internal controls. \16\ Agencies across the federal
government began reporting improper payments using these more detailed
root cause categories for the first time in their fiscal year 2015
financial reports. Figure 7 shows the root causes of VA's estimated
improper payments for fiscal year 2016, as reported by VA.
---------------------------------------------------------------------------
\16\ Office of Management and Budget, Appendix C to Circular No. A-
123, Requirements for Effective Estimation and Remediation of Improper
Payments, OMB Memorandum M-15-02 (Washington, D.C.: 2014).

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

According to VA's fiscal year 2016 agency financial report, the
root cause for over three-fourths of VA's reported fiscal year 2016
improper payment estimates was program design or structural issues. As
noted above, most of the improper payments occurred in VA's Community
Care and Purchased Long-Term Services and Support programs. In the
fiscal year 2016 agency financial report, VA provided details on how it
plans to correct some program design issues by making its procurement
practices compliant with relevant laws and regulations. The agency
stated that it has made certain changes, such as issuing of new
policies that can reduce the amount of improper payments in this area.
For example, in VA's fiscal year 2016 agency financial report, VA
stated that it issued guidance in May 2015 to appropriately purchase
care, such as hospital care or medical services, in the community
through the use of VAAR-compliant contracts. VA stated that the
implementation of this guidance is ongoing with full impact and
compliance anticipated during fiscal year 2017.
According to VA's fiscal year 2016 agency financial report, the
second largest root cause for VA's reported improper payments was
administrative or process errors made by the federal agency. VA
reported that most of these errors occurred in its Compensation
program. These errors, such as failure to reduce benefits
appropriately, affected the payment amounts that veterans and
beneficiaries received. To address this root cause, VA stated in its
fiscal year 2016 agency financial report that it is updating procedural
guidance to reflect such things as changes in legislation and policy.
In addition, VA stated that it will train employees on specific
subjects related to errors found during improper payment testing and
quality reviews.

VA Has Implemented Steps to Improve the Accuracy of and Eligibility
Determinations for its Disability Benefits

Accurate claim decisions help ensure that VA is paying disability
benefits only to those eligible for such benefits and in the correct
amounts. Thus, it is critical that VA follows its claims processes
accurately and consistently. However, we previously reported problems
with how VA processed its claims to reasonably assure the accuracy of
or eligibility for the disability benefits, increasing the risk of
improper payments.
In November 2014, we reported that while VA pays billions of
dollars to millions of disabled veterans, there were problems with VA's
ability to ensure that claims were processed accurately and
consistently by its regional offices. \17\ VA measures the accuracy of
disability compensation claim decisions mainly through its Systematic
Technical Accuracy Review (STAR). Specifically, for each of the
regional offices, completed claims are randomly sampled each month and
the data are used to produce estimates of the accuracy of all completed
claims.
---------------------------------------------------------------------------
\17\ GAO 15 50.
---------------------------------------------------------------------------
In our November 2014 report, we reported that VA had not always
followed generally accepted statistical practices when calculating
accuracy rates through STAR reviews, resulting in imprecise performance
information. We also identified shortcomings in quality review
practices that could reduce their effectiveness. We made eight
recommendations to VA to review the multiple sources of policy guidance
available to claims processors and evaluate the effectiveness of
quality assurance activities, among other things. In response to the
draft report, VA agreed with each of our recommendations and identified
steps it planned to take to implement them.
To date, VA has implemented six of the report's eight
recommendations. For example, VA has revised its sampling methodology
and has made its guidance more accessible. VA has initiated action on
the remaining two recommendations related to quality review of the
claims processes. VA reported that it is in the process of making
systems modifications to its electronic claims processing system that
will allow VA to identify deficiencies during the claims process. In
addition, VA is developing a new quality assurance database that will
capture data from all types of quality reviews at various stages of the
claims process. VA stated that this new database will support increased
data analysis capabilities and allow the agency to evaluate the
effectiveness of quality assurance activities through improved and
vigorous error rate trend analysis. VA stated that it anticipates
deploying the systems modifications and the new quality assurance
database by July 2017.
In June 2015, \18\ we reported that VA's procedures did not ensure
that Total Disability Individual Unemployability (TDIU) benefit
decisions were well-supported. \19\ To begin receiving and remain
eligible for TDIU benefits, veterans must meet the income eligibility
requirements. VA first determines a claimant's income by requesting
information on the last 5 years of employment on the claim form and
subsequently requires beneficiaries to annually attest to any income
changes. VA uses the information provided by claimants to request
additional information from employers and, when possible, verifies the
claimant's reported income, especially for the year prior to applying
for the benefit. In order to receive verification, VA sends a form to
the employers identified on the veteran's benefit claim and asks them
to provide the amount of income earned by the veteran. However, VA
officials indicated that employers provided the requested information
only about 50 percent of the time.
---------------------------------------------------------------------------
\18\ GAO 15 464.
\19\ VA generally provides TDIU benefits to disabled veterans of
any age who are unable to maintain employment with earnings above the
federal poverty guidelines because of service-connected disabilities.
---------------------------------------------------------------------------
In our 2015 report, we reported that VA previously conducted audits
of beneficiaries' reported income by obtaining income verification
matches from Internal Revenue Service (IRS) earnings data through an
agreement with the Social Security Administration (SSA), but was no
longer doing so despite the standing agreement. In 2012, VA suspended
income verification matches in order to develop a new system that would
allow for more frequent, electronic information sharing. VA officials
told us that they planned to roll out a new electronic data system that
would allow for compatibility with SSA data sources in fiscal year
2015. They noted that they planned to use this system to conduct more
frequent and focused income verifications to help ensure beneficiaries'
continued entitlement. VA officials also anticipated being able to use
the system to conduct income verifications for initial TDIU applicants.
However, at the time of our 2015 report, VA could not provide us with a
plan or timeline for implementing this verification system. In the 2015
report, we recommended that VA verify the self-reported income provided
by veterans (1) applying for TDIU benefits and (2) undergoing the
annual eligibility review process by comparing such information against
IRS earnings data, which VA currently has access to for this purpose.
To date, VA is developing processes to use IRS earnings data from
SSA in verifying income eligibility requirements. According to VA, in
February 2016, it launched a national workload distribution tool within
its management system to improve its overall production capacity and
assist with reaching claims processing goals that will be used in
implementing our recommendation. To determine if new beneficiaries are
eligible for TDIU benefits, VA stated that it is expanding the data-
sharing agreement with SSA to develop an upfront verification process.
Specifically, when VA receives a TDIU claim, it will electronically
request the reported IRS income information from SSA and receive a
response within 16 days. In addition, according to VA, it is also
planning to begin a process for checking incomes of veterans to
determine whether they remain eligible for TDIU benefits. Specifically,
VA has reinstituted the data match agreement with SSA that was set to
expire in December 2016 to allow VA to compare reported income earnings
of TDIU beneficiaries to earnings actually received. According to VA,
it also has drafted a new guidance manual for the annual eligibility
review process. VA stated that it planned to fully implement the
upfront and annual eligibility verification processes by the summer of
2017.
In conclusion, in light of VA's significant financial management
challenges, we continue to be concerned about VA's ability to
reasonably assure its resources are being used cost-effectively and
efficiently. Because VA's payment amounts are likely to increase with
the increase in appropriations for fiscal year 2017, it is critical
that VA takes actions to reduce the risks of improper payments. While
VA has taken several actions to help prevent improper payments, further
efforts are needed to help minimize the risks of improper payments
across its programs.
Chairman Bergman, Ranking Member Kuster, and Members of the
Subcommittee, this completes my prepared statement. I would be pleased
to respond to any questions that you may have at this time.

GAO Contacts and Staff Acknowledgements

If you or your staff have any question about this testimony, please
contact Beryl H. Davis, Director, Financial Management and Assurance,
at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this statement. GAO staff who made key contributions to this
testimony are Matthew Valenta (Assistant Director), Daniel Flavin
(Analyst in Charge), Marcia Carlsen, Francine Delvecchio, Robert
Hildebrandt, Melissa Jaynes, Jason Kelly, and Jason Kirwan.

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Prepared Statement of Nicholas Dahl
Mr. Chairman, Ranking Member Kuster, and Members of the
Subcommittee, thank you for the opportunity to discuss the Office of
Inspector General's (OIG) work regarding VA's financial management. Our
statement today focuses on the results of the fiscal year (FY) 2016
Audit of VA's Consolidated Financial Statements, and our work related
to the Improper Payments and Recovery Act (IPERA). I am accompanied by
Ms. Sue Schwendiman, Director, OIG's Financial Audits Division.

BACKGROUND

Effective financial management is important because it enables VA
to plan, direct, monitor, and control its financial resources. It
supports the safeguarding of VA's assets and the timely payment of its
obligations. Good financial information helps users identify links
between resources and results, and to understand and improve value for
appropriated funds. It can also be used to manage risk effectively and
support decisions through financial analysis.
The Chief Financial Officers Act of 1990 (Public Law 101-576), as
amended, requires the OIG to conduct an audit of VA's consolidated
financial statements. Since 2000, we have contracted with an
independent public accounting firm to conduct the audit; and since
2010, we have contracted with CliftonLarsonAllen LLP (CLA). This work
helps ensure accountability for public resources.
VA's consolidated financial statements are published in VA's annual
Agency Financial Report, and these statements summarize VA's financial
results, financial condition, and the status of budgetary resources.
Although VA has received an unmodified or ``clean'' opinion, on its
consolidated financial statements from our contracted auditors, VA has
continuously faced challenges in achieving those results. A clean
opinion means the financial statements are presented fairly, in all
material respects, in accordance with accounting principles generally
accepted in the United Statement of America. It does not, however, mean
VA can easily obtain that opinion or that VA does not have internal
control weaknesses.
The contract auditor has regularly identified and reported on
material weaknesses and significant deficiencies. A material weakness
is a deficiency, or a combination of deficiencies, in internal controls
such that there is a reasonable possibility that a material
misstatement of VA's financial statements will not be prevented, or
detected and corrected, on a timely basis. A significant deficiency is
a deficiency, or combination of deficiencies, in internal controls that
is less severe than a material weakness, yet important enough to merit
attention by those charged with governance.

FISCAL YEAR 2016 FINANCIAL STATEMENT AUDIT RESULTS

The audit of VA's FY 2016 consolidated financial statements
identified six material weaknesses and two significant deficiencies-two
more in total than the prior year. As described above, these material
weaknesses make it more difficult for management to ensure the accuracy
of VA's financial statements and also more difficult to audit the
statements.

The material weaknesses are:

Information technology security controls - This is a
repeat finding that our contract auditors have reported since FY 2000.
Weaknesses existed in configuration management, such as untimely
patching to mitigate security vulnerabilities; access controls,
including inconsistent enforcement of password standards; security
management; and contingency planning. Without good information
technology security controls, VA's financial information may not be
safe in terms of confidentiality, integrity, and availability.
Community care obligations, reconciliations, and accrued
expenses - This is a repeat finding from the FY 2015 audit. CLA
identified numerous examples of obligations for Community Care Programs
that were overstated compared to actual payments. As a result, VA
management performed its own analysis and recorded journal entries of
approximately $1.9 billion to reduce overstated Choice Program
obligations and $2.6 billion to reduce other overstated Community Care
Program obligations in VA's general ledger on September 30, 2016. The
overestimation of obligations also resulted in a large overstatement of
accrued expenses, which management also reduced through journal
entries.

CLA identified several causes of these overstatements, but overall,
significant system limitations hindered effective and efficient
operations and controls. CLA also reported that methods to estimate the
cost of care were inconsistent at medical centers and the Office of
Community Care's procedures for its monitoring activities were not
adequate. For most of FY 2016, the Office of Community Care had not
performed a nationwide consolidated reconciliation of obligations and
disbursements between VA's Financial Management System (FMS) and the
system used to authorize and process individual non-VA care claims.

Financial reporting - This is a repeat finding from the
FY 2015 audit. VA's financial management and general ledger system is
FMS. Since its implementation in 1992, Federal financial reporting
requirements have become more complicated and the level of financial
information needed by management and oversight bodies has become
increasingly complex. Due to FMS' limited functionality to meet current
financial reporting needs, VA utilizes another system to create
financial statements for external reporting. However, this process
requires significant manual intervention and workarounds to ensure
accurate financial reporting. CLA reported that VA recorded a large
number of adjustments (called journal vouchers) to its accounts in
order to prepare VA's financial statements. Also, significant abnormal
account balances (that is, an account balance that shows a debit
balance when it should be a credit balance or vice versa) were not
researched and cleared timely. These weaknesses increase the risk of
material errors in financial reporting. Although VA has made
improvements in areas such as the reduced use of journal vouchers, many
issues have existed for years and require extensive efforts to
implement solutions to resolve them.
Education benefits accrued liability - This is a new
finding identified during the FY 2016 audit. CLA reported VA did not
use the appropriate method to account for veterans' education benefits.
VA manages several education benefit programs with total disbursements
of approximately $14.5 billion in FY 2016, with the Post 9/11 G.I. Bill
Program being the largest. Prior to FY 2016, management did not view
education benefit payments as post-employment benefits. As a result, VA
did not report an estimated liability for future benefit payments as
required by accounting standards. In FY 2016, VA reported this
liability in the amount of approximately $60 billion for the first time
on its balance sheet.
Control environment surrounding the compensation,
pension, and burial actuarial estimates - This is a new finding
identified during the FY 2016 audit. It resulted from the lack of
succession planning for the chief actuary who was responsible for the
calculation of VA's unfunded veterans' compensation and burial
liability amount. This amount was reported on VA's balance sheet as of
September 30, 2016, as approximately $2.5 trillion. The chief actuary
left VA in July 2016, and VA did not have a successor actuary with the
appropriate qualifications and experience to take full responsibility
to manage the actuarial model assumptions and review the related
calculations. Management subsequently obtained the services of a
credentialed actuary on detail from another department. VA also noted
its model's assumption for the rate of new compensation cases was
outdated and adjusted its balance sheet by $277 billion. CLA reported
VA needed to review the reasonableness of its key model assumptions,
which would include comparing relevant actuarial information from the
Department of Defense.
CFO organizational structure for VA and VHA - This was
elevated from a significant deficiency in FY 2015 to a material
weakness in FY 2016. CLA reported VA has a decentralized and fragmented
organizational structure for financial management and reporting that
did not operate in a fully integrated manner. The VA CFO establishes
financial policy and produces VA's consolidated financial statements.
Business components, such as the Veterans Health Administration (VHA),
the Veterans Benefits Administration (VBA), and the National Cemetery
Administration, have their own CFOs, who oversee financial management
operations and follow the chain of command within those organizations.
VHA's financial management structure was further fragmented, with three
different CFO organizational structures within the Administration. CLA
observed instances where procedures the VA CFO depended on were not
completed by VA components or communication issues existed.

CLA concluded the decentralization of financial management
functions among the VA component entities without organizational
reporting and accountability back to the VA CFO decreased the VA CFO's
ability to affect financial management at the component level and
across the VA enterprise, and also presented a risk to VA's planned
conversion to a shared service provider in order to modernize its
financial systems.
CLA also reported two significant deficiencies. As stated above, a
significant deficiency is a deficiency or combination of deficiencies
in internal controls that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance

Procurement, Undelivered Orders, Accrued Expenses, and
Reconciliations - Regarding this significant deficiency, CLA reported:

Centralized, complete, and consolidated reconciliations
among various procurement subsidiary systems and FMS were not
performed.
VA used miscellaneous obligating documents, also called
``1358s'', extensively, but lacked sufficient controls, such as
monitoring to ensure obligations and accrued expenses were not
overstated.
VA did not have an adequate process to validate estimated
accrued expenses against actual payment data.
Pervasive and long standing procurement related issues,
including instances of untimely liquidation of undelivered orders,
untimely recording of contracts and modifications in FMS, recording of
obligations prior to contract execution, over-obligation of funds, and
obligations recorded months or years after receiving goods or services.

Loan Guaranty Liability - VBA uses complex models to
estimate future cash flows and determine the cost of its loan
guarantees on a present value basis for budgetary and financial
reporting purposes. CLA reported structural deficiencies in model
design have impacted VA's ability to forecast future program cash flows
following the housing crisis. VBA's models have consistently shown
significant differences between model forecasts and actual program
performance. Based on the auditor's discussions with management
regarding this issue, VBA revised certain model assumptions, thus
reducing the Loan Guaranty Liability as of September 30, 2016, by $830
million.

Additionally, CLA noted that VA reported two violations of the
Antideficiency Act \1\ in August 2016 and was in the process of
reporting four other violations at the time of their audit report.
---------------------------------------------------------------------------
\1\ 31 CFR Sec. 1341(a) and 1517(a)
---------------------------------------------------------------------------
Overall, CLA reported VA's financial management systems do not
substantially comply with the requirements of the Federal Financial
Management Improvement Act of 1996. \2\ VA's complex, disjointed, and
legacy financial management system architecture continued to
deteriorate and no longer met increasingly stringent and demanding
financial management and reporting requirements mandated by the U.S.
Department of the Treasury and the Office of Management and Budget
(OMB). VA continued to be challenged in its efforts to apply consistent
and proactive enforcement of established policies and procedures
throughout its geographically dispersed portfolio of legacy
applications and systems.
---------------------------------------------------------------------------
\2\ Public Law-104-208, Sec. 803(a), Federal Financial Management
Improvement Act of 1996
---------------------------------------------------------------------------
FMS' limitations required VA to use another system to produce
financial statements. However, VA still had to re-enter or re-perform
numerous manual journal vouchers, reconciliations, and analyses for
each reporting period to produce VA's financial statements and trial
balances for submission to the U.S. Department of the Treasury. During
FY 2016, FMS was not centrally and completely reconciled with key
subsidiary systems such as the Electronic Contract Management System;
Integrated Funds Distribution Control Point Activity, Accounting and
Procurement System; and the Fee Basis Claims System.
VA is currently working with the U.S. Department of Agriculture to
obtain financial services, which is consistent with OMB guidance to
obtain financial services from a shared service provider. \3\ The VA
Office of Finance, within the Office of Management, is leading the
Financial Management Business Transformation program along with the
Office of Acquisition and Logistics and the Office of Information and
Technology. In FY 2017, VA began efforts to standardize business
processes and identify potential levels of change required for the
transformation.
---------------------------------------------------------------------------
\3\ OMB Memorandum 13-08, Improving Financial Management Through
Shared Services
---------------------------------------------------------------------------
In the FY 2016 audit report, \4\ CLA made recommendations for VA to
address the identified material weaknesses and significant
deficiencies. Those recommendations ranged from specific, targeted
actions to broader improvements in policies, processes, and systems.
---------------------------------------------------------------------------
\4\ Audit of VA's Financial Statements for Fiscal Years 2016 and
2015 (Report No. 16-01484-82, November 15, 2016)

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THE IMPROPER PAYMENTS ELIMINATION AND RECOVERY ACT

We recently issued our annual determination on VA's compliance with
the Improper Payments Elimination and Recovery Act (IPERA) \5\ finding
VA did not comply with two of the six requirements in OMB's guidance
for compliance with IPERA \6\. Specifically, VA did not:
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\5\ Review of VA's Compliance With the Improper Payments
Elimination and Recovery Act for FY 2016 (Report No. 16-04416-231, May
15, 2017)
\6\ OMB Circular A-123, Appendix C, Part II-A(1), Responsibilities
of Agency Inspectors General.

Maintain a gross improper payment rate of less than 10
percent for two programs -the VA Community Care Program and the
Purchased Long Term Services and Support (PLTSS) Program-reported in
the Agency Financial Report.
Meet reduction targets for six programs reported in the
Agency Financial Report.

VA met the other four IPERA requirements:

Published the FY 2016 Agency Financial Report on VA's
website
Performed risk assessments
Published improper payments estimates for programs
identified as susceptible to significant improper payments
Provided information on corrective action plans.

Although VA published improper payment estimates as required, we
determined estimates for the Supplies and Materials Program and the
Post-9/11 G.I. Bill Program were not reliable because of weaknesses in
sample evaluation procedures. Overall, VA reported improper payment
estimates totaling approximately $5.5 billion in VA's Agency Financial
Report for FY 2016, compared with $5 billion for FY 2015.

Areas of Non-Compliance

The two programs that exceeded the 10 percent improper payment rate
threshold were the VA Community Care Program and the PLTSS Program.
Improper payment rates for these programs were high at approximately 76
percent and 69 percent, respectively. This is a repeat of last year's
determination of noncompliance, but the rates were lower last year at
approximately 55 percent and 59 percent, respectively. VA reported the
improper payment rate for the VA Community Care Program was high
because VHA purchased a significant amount of medical care from non-VA
providers using individual authorizations. The individual
authorizations were not compliant with the Federal Acquisition
Regulation (FAR). The high PLTSS improper payment rate was also due to
the lack of FAR-compliant contracts. VA must generally follow the FAR
when other legal authorities are not available for the procurement of
goods and services. According to OMB's definition of improper payments,
``an improper payment is any payment that should not have been made or
that was made in an incorrect amount under statutory, contractual,
administrative, or other legally applicable requirements.'' Therefore,
when purchases do not follow applicable legal requirements, such as
having contracts in place that comply with the FAR, the resulting
payments are improper. As such, VA counted payments for non-FAR
compliant medical care purchases as improper.
VA also did not meet its annual reduction targets for six programs.
VA provided the following explanations for missing the reduction
targets in these programs:

VA Community Care Program - The improper payment rate
increased due to the inclusion of individual authorizations under
$2,500 in the improper payment estimate.
PLTSS - The higher improper payment rate was due to
contracting errors and the inclusion of individual authorizations under
$2,500 in the improper payment estimate.
Beneficiary Travel - Other priorities, such as access to
care and timely payment processing, have taken precedence over meeting
the reduction target.
Civilian Health and Medical Program of the Department of
Veterans Affairs - System improvements are needed to address identified
system issues and expand automated business rules that would reduce the
number of human entries and decisions.
State Home Per Diem Grants - VHA identified an increase
in improper payments associated with missing or incomplete
documentation for domiciliary residents, due in part to a change in
sampling stratification.
Supplies and Materials Program--Our review identified
additional improper payments, primarily due to insufficient supporting
documentation that increased the improper payment rate above the target
rate.

We also noted the VA Community Care Program and PLTSS Program did
not achieve the expected level of precision for their improper payment
estimates because of larger than expected variances in sample results.
Despite not meeting expectations, VHA did design its sampling
methodology appropriately.
We made several recommendations to Agency leadership in VHA, VBA,
the Office of Management, and the Office of Acquisition, Logistics, and
Construction, to take steps to reduce improper payment rates, achieve
reduction targets, and improve improper payment estimates. VA
management agreed with our recommendations and provided plans for
corrective action. We will follow-up on their implementation during the
FY 2017 IPERA review.

CONCLUSION

VA's financial management and system challenges are many and
complex. VA plans to move from FMS to a shared services provider to
gain access to modern technology. Initial operational capacity is
scheduled for FY 2020. VA will need strong organizational leadership
and cooperation to manage this significant change. VA also faces
challenges in reducing improper payments related to the procurement of
medical care through contracts that are not compliant with the Federal
Acquisition Regulation. As we review these areas annually, we will
monitor VA's actions to address its financial management and systems
challenges and its compliance with IPERA.
Mr. Chairman, this concludes my statement. We would be happy to
answer any questions you or other Members of the Committee may have.

Prepared Statement of Julie L. Larsen
Chairman Bergman, Ranking Member Kuster, and distinguished members
who proudly serve on this subcommittee; On behalf of Charles E.
Schmidt, the National Commander of the largest Veteran Service
Organization in the United States of America representing more than 2.2
million members; we thank you for the opportunity to comment on this
important issue regarding veteran debt collection. It is my duty and
honor to represent The American Legion and assist this Committee in
understanding the Department of Veterans Affairs (VA) debt collection
process and touch on areas of improvement, as well as provide insight
on how The American Legion assists in these matters.
The American Legion has worked extensively on matters concerning VA
debt management and recognizing the importance of these issues has had
a dedicated representative at the Debt Management Center (DMC) in Saint
Paul, MN since 1978 specifically to support and assist veterans who
fall into debt with VA. With nearly 40 years of service our
representative has been instrumental in assisting thousands of veterans
avoid financial hardships by; filing waivers, negotiating offsets of
current VA benefits, establishing reasonable monthly payment plans to
avoid financial burdens, and has assisted in ending erroneous
collection actions; and has correct or helped to reclaim improper
collections.
The VA categorizes debt into six different areas;

Benefit debt, (including benefits for veterans and
burial, and first and third party debts for medical care and hospital
services),
VA program debt (including capital grants, and emergency
and humanitarian care debt),
Vendor debt,
Employee debt (including payroll, travel, agent cashier,
property),
Intra-governmental debt, and
Freedom of Information Act debt. \1\
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\1\ https://drive.google.com/file/d/0B70--mGYT1tJETzZGWUZKYzdGXzg/
view
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Benefit debt is the most common type of debt affecting veterans,
which is why The American Legion's primary focus in our debt collection
management office is assisting veterans affected by overpayments of
benefits, and addressing how to best mitigate or repay the funds owed.
Of the millions of dollars in benefits awarded to veterans by the VA
every year, thousands of veterans are paid incorrect amounts. When
these incorrect payments are more than the amount due to a veteran,
debt is incurred and collection actions will ultimately be triggered. A
VA benefit debt can be generated through a number of actions, like;
change in income or net worth, dependent status, receipt of retired
pay, school attendance, failure to obtain the release of home loan
liability, hospitalization, treatment co-payments, overpayments to
schools while using the G.I. Bill, and double payments of drill pay and
VA benefits pay to members of the Reserves and National Guard.

VA Debt Collection Process within the VHA

According to VA, in 2014, 88% of all debts owed were related to the
Veteran Health Administration (VHA), whereas only 8% of all debts owed
originated at the Veteran Benefits Administration (VBA). \2\ Once a
debt has been created at the regional office of jurisdiction, VA is
required to send notice in writing to the subject of the alleged debt.
This notice must include the exact amount of the debt, the reason for
the debt, and the individuals' rights and remedies in connection with
the debt. Additionally, it must inform the debtor that collection may
be made through offset of current or future benefits and that interest
and administrative costs may be assessed. Once the debt is generated,
it is referred to the Debt Management Center (DMC) for collection
actions.
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\2\ https://drive.google.com/file/d/0B70--mGYT1tJETzZGWUZKYzdGXzg/
view
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Within 30 days the DMC sends a collection due process letter
advising the debtor of the debt amount and provides a notice of their
rights and obligations. If the debtor is actively drawing benefits, the
letter will indicate that failure to respond will result in a full
benefit offset beginning with the first pay period 60 days after the
date of the notification letter. If the debtor is not actively drawing
benefits a second letter is mailed 30 days later as a reminder to take
action. The letter advises that if the debt is not satisfied, or an
agreeable repayment plan is not established within 60 days, the account
will be reported to Credit Collection Agencies as delinquent. The
letter will further state that the Treasury Department may refer the
account to private collecting agencies and the account may be subject
to garnishment of non-federal wages under the Treasury's Administrative
Wage Garnishment Program. If no action is taken, third and fourth
letters are mailed 30 days apart. If no action is taken 60 days after
the third letter, the account is referred to the Treasury Department
for active collection.
In our experience, the VA makes every attempt to keep these debts
``in-house'' and tries to notify the veteran in numerous ways.
According to the Code of Federal Regulations (C.F.R.) 1.911 (d), VA is
required to send a notice of debt that must include the exact amount of
the debt, the reason for the debt, the individual's rights and remedies
in connection with the debt, and inform the debtor that collection may
be made through offset of current or future benefits and that interest
and administrative costs may be added.
Sometimes, notification letters are sent to wrong addresses due to
updated information not being provided to the VA debt collection team.
Failure to update the system with the correct and current contact
information can lead to a veteran who owes a debt not being properly
informed of their rights. The American Legion calls upon VA to
continually update their contact database to ensure the most up-to-date
information for a veteran is available so the VA may contact the
veteran for a multitude of reasons, including debt collection.
Additionally, a veteran may request copies of the debt and
coinciding information from the original office of jurisdiction where
the overpayment was created. If the veterans feels necessary, they may
file an appeal with VA. If the veteran chooses to file an appeal, then
they will need to notify the VA in writing before the 30-day deadline
if they are requesting a hearing to contest the debt. The debtor's
right to inspect the record is also included in the original debt
notification letter.
Many of the issues associated with a veteran incurring a VA based
debt is caused by the lack of an integrated records system within the
VA. The American Legion recommends the VA implement an integrated
system that all VA branches can access for the most up-to-date
information regarding a veteran's most recent contact information.
Through American Legion Resolution No. 44, we support the VA in
creating and implementing an updated and modernized integrated system.
\3\
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\3\ The American Legion Resolution No. 44 (2016): Department of
Veterans Affairs Rural Healthcare Program
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Furthermore, The American Legion believes that overpayments to
veterans who receive benefit pay and drill pay during their Reserve,
National Guard drill or Active Duty period can be easily remedied if
the VA and Department of Defense (DOD)compare drill records once a
month, and not once year or however often they currently do it. When a
soldier is activated for their Reserve or National Guard training, or
even Active Duty, they are not eligible to receive VA disability
payments. The soldier has the option of either receiving either drill
or VA disability, and they typically choose the higher of the two. If
VA does not stop the payment, then an overpayment is created. It has
been our experience that DOD and VA only compare this information every
year, or sometimes every few years, sending servicemembers into debt
that accumulates over many years. Errors like this are preventable and
put unnecessary stress on our nation's heroes. We support any
legislation that aims to address this issue using Resolution No. 228:
Timely Processing of Overpayments for Reserve Components and/or Active
Duty Pay, which states that The American Legion supports ``plac[ing]
greater emphasis on processing of these overpayments for the
performance of Reserved Component and/or Active Duty pay so not to have
multiple years processed at the same time''. \4\
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\4\ American Legion Resolution No. 228 (2016): Timely Processing of
Overpayments for Reserve Components and/or Active Duty Pay

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VA Debt Collection Process within the VBA

When a veteran is attending an institution of higher learning VA
pays the institution the amount owed for the veteran to attend the
school. Sometimes, because of improper reporting, the school is
overpaid, and other times the veteran may change his or her course
schedule which often results in an overpayment of benefits to the
school. Many veterans are unaware their schedule adjustment triggers an
overpayment because there is little or no guidance provided to enrolled
veterans on VA's policy.
In a study conducted by the Government Accountability Office (GAO),
GAO noted that education institutions make frequent errors when
reporting enrollment information to VBA and that not all schools send
their certifying officials to attend the various training opportunities
offered by VBA, contributing to additional improper education claims
being filed on behalf of the veteran. \5\
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\5\ https://www.gao.gov/products/GAO-16-42
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The American Legion recommends that educational institutions
authorized to accept GI Bill payments review GAO's report and ensure
that they comply with all findings in an effort to avoid future
overpayments.

VA Partnership with the Treasury

In most cases, delinquent accounts over 120 days are referred to
the Treasury Department for collection. Once a debt is referred to the
Treasury Department the debtor is subjected to the Treasury's
collection tools, interest, and any administrative fees and veteran
service organizations are no longer empowered to assist. The American
Legion strongly recommends that veterans who receive debt notification
letters from DMC immediately contact an advocate like The American
Legion for assistance to prevent the debt from spiraling out of
control. It has been the experience of The American Legion that the VA
DMC office is much easier and sensitive to the veterans particular
circumstances and needs than the Treasury department, which is why
veterans need to act quickly to avoid garnishment actions and negative
credit reporting.
Finally, the DMC does not charge interest or fees when collecting
on compensation and pension debt, a policy that The American Legion
strongly. While the DMC does not charge interest on compensation and
pension debt, they do assess interest on Home Loan Guaranty, Chapter 34
and Chapter 35 education debts where the rate of interest is 4% for
these types of debt.

Conclusion

Debt collection within the VA and Treasury Departments are
complicated and nuanced. The American Legion sees room for improvement,
and we have highlighted some of those suggestions in this testimony.
Overall The American Legion believes that VA does an adequate job in
protecting veterans from added exposure when they are identified as
having been overpaid and want to ensure that veterans are aware of
their rights, resources, and consequences should they neglect to
address these issues right away.
And finally, The American Legion calls on DoD and VA to integrate
their systems seamlessly so that the responsibility does not fall to
the veteran to make notifications to either VA or DoD that should be
the responsibility of the departments and the Administration as
highlighted in GAO report 16-42.
As always, The American Legion thanks this committee for the
opportunity to elucidate the position of the over 2.2 million veteran
members of this organization. For additional information regarding this
testimony, please contact Mr. Derek Fronabarger, Deputy Director of The
American Legion Legislative Division at dfronabarger@legion.org or
(202) 861-2700.

Statements For The Record

Attachment 1

Department of Veterans Affairs (VA) Financial Management Training
Initiative (FMTI)Financial Management Leadership Training (FMLT) Course
Offerings
------------------------------------------------------------------------
Course Title Course Description Date (Method)
------------------------------------------------------------------------
A New Paradigm for Internal This course August 2016 (via
Controls - Entity Level provides a Webinar)
Internal Control Assessment demonstration of
(ELICA) Tool Processes/ the integration
Statement of Assurance (SOA). of internal
controls into all
aspects of
management;
explanation of
the necessity of
internal controls
for mission
completion; walk-
through of ELICA
Tool along with a
demonstration of
effectiveness of
the internal
controls system..
------------------------------------------------------------------------
Avoiding Travel Pitfalls: Travel This course will August 2016 (via
with Data Analytics Tool. help attendees Webinar)
gain an
understanding of
the Concur.Gov
"How To" when
certifying,
reviewing or
approving travel
documents; gain a
basic
understanding of
the Federal
Travel
Regulations (FTR)
and Department of
Veterans Affairs
(VA) Policy
requirements when
certifying,
reviewing or
approving travel
documents..
------------------------------------------------------------------------
Capitalization - Know Your This course August 2016 (via
Assets. explains policies Webinar)
related to
Capitalization of
Construction
Projects and Real
Property;
explains the VA
Capitalization
process related
to Construction
and Real
Property;
expresses when
timely
capitalization of
Construction
Projects and Real
Property should
occur; identifies
supporting
documentation
required for
capitalization of
Construction
Projects and Real
Property;
identifies useful
reports and
potential general
ledger issues..
------------------------------------------------------------------------
Financial Management Business The course will August 2016 (via
Transformation (FMBT). increase Webinar)
awareness of the
Department's
decision to
migrate to a
Federal Shared
Service Provider
(FSSP) offering
of an integrated
financial
management and
acquisition
system solution;
provide an
overview and
current status of
the FMBT program..
------------------------------------------------------------------------
Financial Management Vision..... The course August 2016 (via
provides an Webinar)
opportunity for
the Acting Deputy
CFO to share her
vision and major
goals for the VA
financial
management
community. From
encouraging
attendees to
assist in
maintaining our
clean audit
opinion by
reducing the
number of
Material Weakness
and Significant
Deficiencies to
pressing forward
with
modernization of
our Financial
Management System
through our FMBT
initiative, this
served as the
opening to
virtual training
event..
------------------------------------------------------------------------
Fiscal Law Basics - This course serves August 2016 (via
Appropriation Law. as an Webinar)
introduction to
fiscal law basics-
where federal
money comes from,
what it can be
used for, when
you can spend it,
and when you
can't. In
addition
attendees will
understand how
federal funding
moves, gets used,
and budget
planning tools.
The course also
covers the Anti-
Deficiency Act-
how to avoid
obligating
appropriations
you do not have
and avoiding jail
and a career-
ending fiscal
disaster; how
agencies do
business between
themselves;
explanation of
the Economy Act
as the basis for
intra and
interagency
transactions; and
securing services
and supplies
without going to
the private
sector..
------------------------------------------------------------------------
Hey! Got Debt?: Debt Collection. This course helps August 2016 (via
attendees develop Webinar)
greater
understanding of
Federal laws and
VA policies and
procedures
related to Debt
Collection;
increase
awareness and the
impact Debt
Collection has on
Veterans,
schools, tax
payers, and other
stakeholders;
ensure compliance
throughout VA
with Debt
Collection
statutes..
------------------------------------------------------------------------
Interagency Agreements (IAA) and This course August 2016 (via
the General Post Fund: Lawful discusses the Webinar)
Agreements. General Post Fund-
the softer side
of funding aid
for patients,
members, and
residents in VA
medical
facilities; along
with where
philanthropy and
government come
together..
------------------------------------------------------------------------
Purchase Cards - Avoiding Common This course August 2016 (via
Purchase Card Errors. provides a clear Webinar)
understanding of
what constitutes
a split purchase
transaction; the
consequences of
intentionally
splitting a
transaction in
order to
circumvent the
micro-purchase
limit; and
alternate
procurement
options in order
to prevent a
split
transaction..
------------------------------------------------------------------------
The Joys of Balancing: This course August 2016 (via
Reconciliations. provides Webinar)
information to
promote the
Veteran
Integrated
Service Network
(VISN)/Medical
Center staff
compliance with
reconciliation
policies and
procedures; focus
station resources
and attention on
critical
reconciliations;
provide better
oversight and
guidance to
station staff on
key
reconciliation
tools and
techniques..
------------------------------------------------------------------------
Undelivered Orders (UDO) and This course August 2016 (via
Accruals - UDOs not UFOs. promotes Webinar)
compliance with
Federal and VA
policies related
to obligations
and accruals;
record an
obligation in FMS
with the proper
accrual flag; and
perform timely
reviews of open
undelivered
orders..
------------------------------------------------------------------------
Understanding Interagency This course August 2016 (via
Agreements (IAA) and highlights the Webinar)
Intragovernmental successful
Reconciliation. process for an
IAA to help with
proper
reconciliation
within and
between federal
agencies; comply
with applicable
VA and Treasury
policy relating
to IAAs; and
identify the
types of
agreements and
when to use each
form..
------------------------------------------------------------------------
2017 Audit Site Visit This course will January 2017 (In-
Preparation. provide an Person)
understanding of
the audit cycle;
associated roles
and
responsibilities;
how to be
prepared and
effective during
the site audit;
how to work with
the auditors to
address audit
exceptions and
findings; proper
preparation for
the audit site
visit, collecting
and providing
source and
evidentiary
documents to the
auditors,
answering
auditors'
questions, and
ask questions for
clarification..
------------------------------------------------------------------------
A Day in the Life of a Fiscal This course January 2017 (In-
Officer. provides insight Person)
into the daily
work of the Chief
Fiscal Officer at
a VA medical
center, and
provides best
practices along
with helpful
hints in the
areas of the
financial
statement audit,
allocation of
resources,
travel, payroll,
budget, and care
in the community..
------------------------------------------------------------------------
Accounting for Community Care... This course January 2017 (In-
provides an Person)
overview of
standard process
within the
Medical Center,
VISN and all of
the Veterans
Health
Administration
(VHA), including
mandatory uses
for estimates,
obligations and
reconciliations
of purchased
care. In addition
the course
provided tips on
how to avoid year
end adjusting
entries; develop
a greater
understanding of
Federal and VA
policies over
obligations in
order to prevent
overstating
obligations;
provide tools and
options to reduce
rework and make
the new financial
management system
transition
easier; prior
year obligations
clean-up and an
overview of when
you can use prior
year funds..
------------------------------------------------------------------------
Anti-deficiency act (ADA) This course offers January 2017 (In-
violations, Major, Minor and an increased Person)
NRM Accounting. understanding of
ADA, Major,
Minor, and NRM
construction
programs; root
causes of ADA
violations; and
oversight
techniques to
detect and
prevent ADA
violations on
Minor and NRM
projects..
------------------------------------------------------------------------
Appropriations Law Basics....... The course January 2017 (In-
provides an Person)
understanding of
the basic
principles of how
federal funds are
used; the Anti-
Deficiency Act
and why you want
to avoid it;
understanding
enough about
fiscal law to
know if there is
a problem, or at
least, what
questions to ask;
how to comply
with funding
requirements;
know how to
partner with the
Office of General
Counsel (OGC)..
------------------------------------------------------------------------
Budget Execution - Getting More The course January 2017 (In-
Bang for Your Buck. provides an Person)
understanding of
how to improve
the accuracy and
management of
reported
obligations, the
impact of
improperly
managed funds,
and the ways to
improve the
accuracy of
reported
information..
------------------------------------------------------------------------
Budget Process.................. The course January 2017 (In-
provides an Person)
increased
understanding of
the Federal and
Department's
budget processes;
unique aspects of
the FY 2018
budget cycle;
anticipated FY
2019-2020 budget
process and
timeline; and
where to obtain
information on
the budget status
for the
Department..
------------------------------------------------------------------------
Business Process Reengineering The course January 2017 (In-
(BPR) - Your World is Changing. provides an Person)
overview, vision
and goals of
Business Process
Reengineering
(BPR) and the
importance of
this endeavor to
the successful
implementation of
a federal shared
service provider
solution at the
Department of
Veterans Affairs..
------------------------------------------------------------------------
Business Processing The course January 2017 (In-
Reengineering: BPR 101 What to provides a Person)
Expect. detailed look at
business process
reengineering and
the necessities
of business
process
standardization
efforts for the
success of the
FMBT program..
------------------------------------------------------------------------
Corrective Action Plan (CAP) The course January 2017 (In-
Development and Execution. provides an Person)
overview of the
Office of
Financial Process
Improvement and
Audit Readiness
(FPIAR) fiscal
year (FY) 17 CAP
oversight
approach;
understand the
relationship
between the CAP
cycle and audit
timeline;
introduce the
enhanced CAP
template; define
the key elements
of a deficiency;
discuss how to
identify the root
causes of the
FY16 audit
material
weaknesses (MW)
and significant
deficiencies..
------------------------------------------------------------------------
Cash Reconciliations: Suspense The course January 2017 (In-
and Deposit Funds. provides an Person)
understanding of
audit findings
relating to
reconciliations
and timely
clearing of
suspense accounts
(clearing and
deposit funds)
and how to take
appropriate
action to
remediate..
------------------------------------------------------------------------
Centralized Receivables Service The course January 2017 (In-
(CRS). educates business Person)
partners on how
the Debt
Management Center
(DMC) can ease
the burden of the
debt collection
process by using
Treasury's CRS
tool..
------------------------------------------------------------------------
Chief Financial Officer (CFO) The course January 2017 (In-
Dotted Line of Accountability. provides an Person)
overview of VA's
actions to
address the FY
2016 financial
statement audit
finding
concerning the
CFO
Organizational
Structure with
financial leaders
from the
Administrations
and Staff Offices
detailing how VA
is building a
collaborative
work environment
to resolve
emerging
challenges.
------------------------------------------------------------------------
Debt Collection - From Treasury The course January 2017 (In-
Offset Program (TOP) to the provides an Person)
Treasury Report on Receivables overview of the
(TROR). debt collection
process from
establishment to
collection and
clarifies the
Agency's legal
responsibility.
------------------------------------------------------------------------
Enterprise Risk Management...... The course January 2017 (In-
provides an Person)
orientation on
establishing and
achieving goals,
seizing
opportunities to
improve
operations,
providing
reliable
reporting, and
maintaining
compliance with
laws and
regulations..
------------------------------------------------------------------------
Financial Management Vision: This course January 2017 (In-
Status Update. provides an Person)
update regarding
expectations to
achieve VA's
vision for
financial
management,
including best
practices in
preparing
facilities to
support
activities
related to the
financial
statement audit
and FMBT..
------------------------------------------------------------------------
Financial Policy - Making it The course January 2017 (In-
Work for You!. provides an Person)
overview of the
hierarchy of
laws, regulations
and policies; a
walkthrough of
the financial
policy process &
web layout; an
update on recent
policy changes;
and potential
policy changes
derived during
FMBT..
------------------------------------------------------------------------
Financial Services Center (FSC): This course shares January 2017 (In-
Strategy Drivers in Delivery of the Financial Person)
Services. Service Center's
(FSC) core
services and
explores
additional
opportunities to
leverage their
shared service
platform..
------------------------------------------------------------------------
Financial Statement Audit Review This course January 2017 (In-
provides a high Person)
level review of
the FY2016
material
weaknesses and
significant
deficiencies and
highlights major
challenges to
maintain a clean
audit opinion..
------------------------------------------------------------------------
Financial Management Business This course January 2017 (In-
Transformation: Change provides an Person)
Management. overview of
impacts that
changes have on
daily activities
in people's work
assignment and
discusses the
organizational
change management
(OCM) approach
and best
practices as they
are applicable to
the participant's
organizations as
we begin FMBT..
------------------------------------------------------------------------
Financial Management Business This course January 2017 (In-
Transformation Overview: provided an Person)
Setting Expectations. opportunity for
the financial
management
leadership from
both VA and the
United States
Department of
Agriculture
(USDA) to discuss
the selection of
the Momentum
solution
utilizing the
shared service
model. This
question and
answer platform
offers attendees
the chance to
gain insight on
the new financial
management system
and how it will
be implemented at
VA..
------------------------------------------------------------------------
Funding Follies: Cautionary The course January 2017 (In-
Tales. provides an Person)
understanding of
the color of
money, bonafide
needs rule, Anti-
Deficiency Act,
Purpose Statute
and how to avoid
embarrassing
fiscal mistakes
of the past..
------------------------------------------------------------------------
Future of VA Form 1358.......... This interactive January 2017 (In-
session serves as Person)
an opportunity to
gather
information on
how and why VA
offices use 1358s
and discusses
potential changes
to the 1358
process as the
result of the
financial
management system
modernization..
------------------------------------------------------------------------
Great Responsibility: Certifying This course January 2017 (In-
Invoices Correctly. demonstrates Person)
responsibilities
and potential
legal
ramifications for
Invoice Review
and Certification
as promulgated by
Treasury
Financial Policy
and VA Financial
Policy Volume
VIII - Chapter 1A
and the relevant
capabilities of
the FSC Invoice
Payment
Processing System
(IPPS)..
------------------------------------------------------------------------
Help VA Fight Fraud............. This course January 2017 (In-
highlights the Person)
definition of
fraud, waste and
abuse; introduces
the Data
Analytics and
Fraud Act of
2015; discusses
fraud cases
within the VA;
and explains how
you can help
fight fraud,
waste and abuse..
------------------------------------------------------------------------
How to Avoid A-123 Appendix A This course January 2017 (In-
Findings at the Facility. provides a brief Person)
history of Office
of Management and
Budget (OMB)
Circular A-123
and how employees
can use its
principals to
strengthen
financial
reporting within
the Department..
------------------------------------------------------------------------
Improper Payments - Do This, Not This course January 2017 (In-
That. provides an Person)
overview of
legislation and
the circular
covering improper
payments, all
reporting
requirements,
VA's Improper
Payments and
Elimination and
Recovery Act
(IPERA) Program,
the importance of
corrective
actions, and
examples of
actions that
result in
Improper
Payments..
------------------------------------------------------------------------
Internal Control Overview: What The course January 2017 (In-
Are You Responsible For?. provides and Person)
overview of
internal
controls;
internal control
requirements
under relevant
laws and
regulations; how
internal controls
ensure
organizations
meet their
objectives; how
internal controls
are an integral
part of every
aspect of
management
through
explaining
necessity of
carrying out the
agency mission at
all levels and in
all operations..
------------------------------------------------------------------------
Information Technology (IT) /Non- This course January 2017 (In-
IT Policy. highlights the Person)
revision of VA
Directive 6008-
Acquisition and
Management of VA
Information
Technology
Resources along
with the recent
significant steps
towards
implementing
improved internal
controls across
VA for making
proper funding
decisions for all
IT related
acquisitions..
------------------------------------------------------------------------
Meet the Chief Financial This course January 2017 (In-
Officers. illustrates the Person)
changing role of
the CFO function
in the face of
various
challenges as we
move the
Department
forward in
improving
financial
management..
------------------------------------------------------------------------
Moving Forward - VA Agreements The course January 2017 (In-
and You. provides an Person)
understanding of
accounting
elements within
Interagency
Agreements
(IAAs); new
requirements for
processing IAAs
within VA,
including
requirements for
Intra-agency and
IAAs and use of
the Agreement
Repository; and
how IAAs affect
the federal
financial audit..
------------------------------------------------------------------------
Navigating the National The course January 2017 (In-
Acquisition Center (NAC), provides an Person)
Strategic Acquisition Center overview of the
(SAC) & Technology Acquisition acquisition
Center (TAC). organization and
processes,
highlighting key
enterprise
vehicles
available at the
NAC, SAC & TAC,
and how to gain
access to them..
------------------------------------------------------------------------
Preparing for Your VA Time and The course January 2017 (In-
Attendance System (VATAS) provides and Person)
Deployment. understanding of
the VATAS
deployment model
and strategies
along with
lessons learned
and keys to a
successful
deployment..
------------------------------------------------------------------------
Preparing Now for the Future of This course January 2017 (In-
Financial Management. outlines the Person)
importance of the
Financial
Management
Training
Initiative in
support of the
Department's goal
to: reduce
material
weaknesses and
significant
deficiencies;
modernize our
Financial
Management
System; and
incorporate a
dotted line of
accountability
for financial
officers across
VA..
------------------------------------------------------------------------
Preventing Late Capitalization.. This course January 2017 (In-
provides an Person)
overview of VA's
capitalization
policy and the
need for timely
capitalization,
including a
discussion of
widespread
capitalization
issues identified
in prior
Financial
Statement Audits..
------------------------------------------------------------------------
Procurement/Purchase Card This course January 2017 (In-
Violations. highlights the Person)
importance of
internal controls
in the purchase
card program, as
well as the
common pitfalls
to avoid; and
provides the
auditors
perspective
related to recent
reviews by the
Office of
Internal
Controls..
------------------------------------------------------------------------
Project Management Best This course January 2017 (In-
Practices: How FMBT Will Be Run. provides an Person)
overview of the
program and
project
management; FMBT
Program
Objectives; how
best practices
will be leveraged
for FMBT..
------------------------------------------------------------------------
Reconciliation and Data Cleanup. This course January 2017 (In-
discusses the Person)
data cleanup and
migration
framework as part
of our move to
the new financial
management system
solution;
outlines best
practices on data
cleanup and
migration
approaches;
identifies
specific but
preliminary
options that
organizations may
want to consider;
discusses
preliminary
timelines and
requirements..
------------------------------------------------------------------------
Role of the Inspector General... This course January 2017 (In-
informs the Person)
attendees about
the role of the
Inspector General
and the various
activities of
Office of the
Inspector
General..
------------------------------------------------------------------------
Shared Services - Adopting the This course January 2017 (In-
Common Solution. provides an Person)
overview of why
the government is
utilizing shared
services;
potential
challenges for
FMBT, and a high
level vision for
how to achieve
our objectives..
------------------------------------------------------------------------
Solutions to Navigating Public This course January 2017 (In-
Law 111-163. promotes intra- Person)
agency
understanding to
better leverage
knowledge,
insight and skill
across the
agency;
understanding the
challenges
associated with
Public Law 111-
163, the progress
made to date, and
the agency's
solution to
becoming
compliant..
------------------------------------------------------------------------
The Power of Data Analytics in This course January 2017 (In-
VA Charge Card Programs. provides a high- Person)
level overview of
data analytics
and how to use
its power to
improve program
performance,
including a
demonstration of
the FSC's Travel/
Purchase Card
Dashboards and
the VATAS
scorecard..
------------------------------------------------------------------------
The Power of Programming and This course January 2017 (In-
Cost Analysis. provides an Person)
introduction to
the Programming,
Analysis and
Evaluation (PA&E)
organization and
its
responsibilities.
PA&E is new to
the Office of
Management and
has the lead for
one of VHA's GAO
High Risk list
items, related to
the proper
allocation of
resources and
accurate cost
analysis, for
both VHA and
Department level
improvements..
------------------------------------------------------------------------
Undelivered Orders (UDOs) and This course January 2017 (In-
Accruals - The Lookback provides an Person)
Analysis. understanding of
how to maintain
valid general
ledger balances
for UDOs and
accruals with
proper supporting
documentation..
------------------------------------------------------------------------
Understanding the Payroll This course January 2017 (In-
Process and Resources. provides an Person)
understanding of
the inter-
dependencies of
the various
systems involved
to produce a
payroll check, as
well as the
avenues and point
of contacts to
resolve payroll
issues..
------------------------------------------------------------------------
Anti-Deficiency Act (ADA), This course August 2017 (via
Major, Minor and Non-Recurring provides Webinar)
Maintenance (NRM) Accounting. information to
assist with the
decrease of Anti-
Deficiency Act
(ADA) violations
involving VA
construction
programs; educate
VA financial
managers on ADA
and ways to
detect and
prevent
violations on
Minor and Non-
Recurring
Maintenance (NRM)
projects..
------------------------------------------------------------------------
Appropriations Law.............. This course August 2017 (via
provides an Webinar)
overview of basic
fiscal law for
federal
employees..
------------------------------------------------------------------------
Capitalization.................. This course August 2017 (via
provides a policy Webinar)
overview and best
practices to
resolve
widespread issues
with capitalizing
fixed assets late
along with
educating VA on
the timely
capitalization of
assets to
remediate audit
findings..
------------------------------------------------------------------------
Cash Reconciliations............ This course August 2017 (via
details the FSC's Webinar)
application for
matching Treasury
and General
Ledger
Transactions;
Treasury
Reconciliation
matching and re-
classification;
effective use of
Treasury
Reconciliation
Website; and tips
for reconciling
specific
transactions..
------------------------------------------------------------------------
Commitment Accounting........... This course August 2017 (via
answers the Webinar)
question, what is
commitment
accounting? In
addition it
highlights VA's
current financial
environment; how
commitment
accounting will
improve funds
management; and
commitment
accounting in the
shared services
environment..
------------------------------------------------------------------------
Interagency Agreements (IAAs) This course will August 2017 (via
and Intragovernmental provide Webinar)
Reconciliation. information
regarding recent
audit issues;
types of IAAs;
real-world
examples of
reimbursable
activity;
important
accounting
elements required
within an IAA;
new requirements
for processing
IAAs within VA;
accounting
treatment for
IAAs within the
Financial
Management System
(FMS)..
------------------------------------------------------------------------
Internal Control Review (ICR) This course August 2017 (via
Fundamentals. details major Webinar)
financial
statement
assertions which
all transactions
and accounts at
VA must satisfy
for users of the
financial
statements;
including
controls, the
purpose,
objective and
attributes of a
control,
designing a
control and how
to design a
control..
------------------------------------------------------------------------
Improper Payments............... This course August 2017 (via
provides an Webinar)
understanding
VA's Improper
payments, causes,
and impact..
------------------------------------------------------------------------
Reconciling the Fee Basis Claims This course August 2017 (via
System (FBCS) to FMS. provides an Webinar)
overview of
Public Law 112-
194 compliance;
basic internal
controls; the
importance of
timely
reconciliation;
new account
applications; and
reducing
unnecessary
accounts..
------------------------------------------------------------------------
Travel Update................... This course August 2017 (via
highlights how to Webinar)
avoid pitfalls
when on official
travel..
------------------------------------------------------------------------
Undelivered Orders (UDO) and This course August 2017 (via
Accruals. provides an Webinar)
overview of
Public Law 112-
194 compliance;
basic internal
controls; the
importance of
timely
reconciliation;
new account
applications; and
reducing
unnecessary
accounts..
------------------------------------------------------------------------
Travel Update................... This course August 2017 (via
highlights how to Webinar)
avoid pitfalls
when on official
travel..
------------------------------------------------------------------------
Undelivered Orders (UDO) and This course August 2017 (via
Accruals. provides Webinar)
information on
how an obligation
originates,
accruals
recorded, and
close out; how
obligations and
accruals are
recorded and
monitored at VA
(automated and
manual
processes);
accounting
guidelines for
recognizing
accruals
(automated and
manual
processes);
undelivered
orders and how we
should monitor
the information
to be fiscally
responsible with
our funds..
------------------------------------------------------------------------
VA Form 1358.................... This course August 2017 (via
highlights the Webinar)
importance of
reducing the use
of Form 1358
(miscellaneous
obligations) for
legal compliance;
strategy for
reducing the use
of miscellaneous
obligations pre
and post-Momentum
implementation..
------------------------------------------------------------------------
VA Time and Attendance System This course August 2017 (via
(VATAS) Update. provides a VATAS Webinar)
progress update,
deployment
status; system
enhancements and
development;
VATAS and payroll
processes; time
and attendance
metrics;
compliance
metrics; and
VATAS helpdesk
support..
------------------------------------------------------------------------
Accounting Classification This course August 2017 (via
Structure (ACS). provides an Webinar)
overview of the
ACS; key
definitions and
concepts of the
ACS in Momentum;
how the ACS
relates to the
budget, general
ledger and
spending
transactions; and
how current
functionality in
FMS translates
into Momentum
capabilities..
------------------------------------------------------------------------
Data Cleanup.................... The course August 2017 (via
addresses data Webinar)
cleanse
activities and
the necessity of
their occurrence
after a data
quality
assessment is
performed. This
training will
cover the data
cleansing
framework,
process to
cleanse data and
the roles and
responsibilities
of the
administrations,
FSC and Veterans
Affairs Central
Office (VACO).
This will be
accomplished by
provided a use
cases to provide
practical
examples for
attendees..
------------------------------------------------------------------------
Financial Business Process This course August 2017 (via
Reengineering. provides an Webinar)
overview of
business process
reengineering
principals,
concepts, and
application for
the VA Financial
Management
Business
Transformation
(FMBT) to a
Federal Shared
Service Provider
as well as an
update of
activities that
have occurred to
date..
------------------------------------------------------------------------
Office of Information and This course August 2017 (via
Technology (OI&T) Update. details the role Webinar)
of OI&T in the
FMBT program, the
relationship with
USDA, and the
challenges to be
overcome in the
future..
------------------------------------------------------------------------

Attachment 2
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

Attachment 3

----------------------------------------------------------------------------------------------------------------
Other Discussion
on
Performance Accountability
Program SAO Title Office Measure Provided by the
Program Office/
SAO
----------------------------------------------------------------------------------------------------------------
Beneficiary Travel............ Tammy Assistant VHA 2016 Non- Each individual
Czarnecki. Deputy Under Operations Compliant reporting
Secretary and Program Program Office
for Health Management (program did Director and
for (10NC). not meet corresponding
Administrati reduction subordinates
ve target): SAO is are also held
Operations. accountable for accountable to
ensuring the Senior
execution of Executive
corrective performance
action plans. plan
The SAO's expectations.
FY2017 Unique program
performance corrective
plan includes a action plans
measure to meet are tracked and
the measurable monitored for
milestones with routine
90 percent reporting. In
success based November 2015,
on date and Member Services
action. Step added a
down Compliance and
performance Internal
measures is set Controls
as 80 percent Program Office
and 70 percent.. to assist in
creating
additional
internal
controls for
its programs
inclusive of
Beneficiary
Travel. This
increases
accountability
and Senior
Executive
knowledge and
understanding
of the
complexity
related to
Beneficiary
Travel payments
and the IPERA
process. The
additional
oversight also
allows for new
insight into
the root causes
of improper
payments most
notably
identifying how
VA is
streamlining
business
practices to
align payment
processing to
abide with laws
while
vigilantly
upholding core
values. VA's
evaluation of
the Veteran
experience from
transportation
request to
reimbursement
has fostered
key
collaborative
efforts and
initiatives
leading to long-
term solutions.
----------------------------------------------------------------------------------------------------------------
CHAMPVA....................... Gene Executive VHA Office of 2016 Non- OCC has the
Migliaccio. Director of Community Compliant primary
Delivery Care (10D1B). Program responsibility
Operations. (program did for the
not meet processing of
reduction CHAMPVA claims
target): SAO is and works to
accountable for address and
ensuring correct
execution of improper
corrective payments. When
action plans. errors are
The SAO's identified, OCC
FY2017 supervisors
performance work to
plan includes a identify trends
measure to meet and provide
the measurable education to
milestones with the voucher
90 percent examiners
success based regarding the
on date and issue both
action. Step individually
down and as a group.
performance The Director of
measures is set Claims
as 80 percent Adjudication
and 70 percent.. and
Reimbursement's
performance
plan includes
goals for
financial
stewardship and
the
identification
and
implementation
of corrective
actions to
address
improper
payments.
----------------------------------------------------------------------------------------------------------------
VA Communnity Care (part of Gene Executive VHA Office of 2016 High- OCC has the
Non-VA Medical Care (NVC) fee Migliaccio. Director of Community Priority primary
program in 2013, separated in Delivery Care (10D1B). Program/Non- responsibility
2014). Operations. Compliant for the
Program (did processing of
not meet CHAMPVA claims
reduction and works to
target and address and
error rate is > correct
10%): SAO is improper
accountable for payments. When
ensuring errors are
execution of identified, OCC
corrective supervisors
action plans. work to
The SAO's identify trends
FY2017 and provide
performance education to
plan includes a the voucher
measure to meet examiners
the measurable regarding the
milestones with issue both
90 percent individually
success based and as a group.
on date and The Director of
action. Step Claims
down Adjudication
performance and
measures is set Reimbursement's
as 80 percent performance
and 70 percent.. plan includes
goals for
financial
stewardship and
the
identification
and
implementation
of corrective
actions to
address
improper
payments.
----------------------------------------------------------------------------------------------------------------
PLTSS (part of NVC fee program Richard Allman GEC Chief VHA 2016 High-
in 2013, separated in 2014). Consultant. Geriatrics Priority
and Extended Program/Non-
Care (10P). Compliant (did
not meet
reduction
target and
error rate is >
10%): SAO is
accountable for
ensuring
execution of
corrective
action plans.
The SAO's
FY2017
performance
plan includes a
measure to meet
the measurable
milestones with
90 percent
success based
on date and
action. Step
down
performance
measures is set
as 80 percent
and 70 percent..
----------------------------------------------------------------------------------------------------------------
State Home Per Diem........... Gene Executive VHA Office of 2016 Non- The State Home
Migliaccio. Director of Community Compliant Per Diem
Delivery Care (10D1B). Program Program Office
Operations. (program did has the primary
not meet responsibility
reduction for overseeing
target): SAO is the processing
accountable for claims and
ensuring works directly
execution of with the
corrective facility when
action plans. improper
The SAO's payments are
FY2017 identified, as
performance well as broadly
plan includes a across the
measure to meet program through
the measurable monthly
milestones with training
90 percent events. The
success based Director of
on date and Claims
action. Step Adjudication
down and
performance Reimbursement's
measures is set performance
as 80 percent plan includes
and 70 percent.. goals for
financial
stewardship and
the
identification
and
implementation
of corrective
actions to
address
improper
payments.
----------------------------------------------------------------------------------------------------------------
Supplies and Materials........ Tammy Assistant VHA 2016 Non-
Czarnecki. Deputy Under Operations Compliant
Secretary and Program
for Health Management (program did
for (10NC). not meet
Administrati reduction
ve target): SAO is
Operations. accountable for
ensuring
execution of
corrective
action plans.
The SAO's
FY2017
performance
plan includes a
measure to meet
the measurable
milestones with
90 percent
success based
on date and
action. Step
down
performance
measures are
set as 80
percent and 70
percent..
----------------------------------------------------------------------------------------------------------------
Prosthetics................... Penny National VHA 2016 Newly New programs
Nechanicky. Program Rehabilitati Identified High- determined to
Director for on and Risk Program. be susceptible
Prosthetic & Prosthetic Projected to improper
Sensory Aids Services improper payments as a
Service. (10P4R). payments, result of the
corrective FY 2016 risk
action plans, assessments
and will design and
accountability implement
measures will appropriate
be reported in statistical
agencies 2017 sampling and
Annual estimation
Financial methods to
Report.. produce
statistically
valid improper
payment
estimates the
fiscal year
following (FY
2017) the
fiscal year in
which the risk
assessment was
conducted in
accordance with
OMB Circular A-
123 Appendix C.
----------------------------------------------------------------------------------------------------------------
Medical Care Contracts and Tammy Assistant VHA 2017 Newly New programs
Agreements. Czarnecki. Deputy Under Operations Identified High- determined to
Secretary and Risk Program. be susceptible
for Health Management Projected to improper
for (10NC). improper payments as a
Administrati payments, result of the
ve corrective FY 2016 risk
Operations. action plans, assessments
and will design and
accountability implement
measures will appropriate
be reported in statistical
agencies 2017 sampling and
Annual estimation
Financial methods to
Report.. produce
statistically
valid improper
payment
estimates the
fiscal year
following (FY
2017) the
fiscal year in
which the risk
assessment was
conducted in
accordance with
OMB Circular A-
123 Appendix C.
----------------------------------------------------------------------------------------------------------------
Communications, Utilities, and Tammy Assistant VHA 2018 Newly New programs
Other Rents. Czarnecki. Deputy Under Operations Identified High- determined to
Secretary and Risk Program. be susceptible
for Health Management Projected to improper
for (10NC). improper payments as a
Administrati payments, result of the
ve corrective FY 2016 risk
Operations. action plans, assessments
and will design and
accountability implement
measures will appropriate
be reported in statistical
agencies 2017 sampling and
Annual estimation
Financial methods to
Report.. produce
statistically
valid improper
payment
estimates the
fiscal year
following (FY
2017) the
fiscal year in
which the risk
assessment was
conducted in
accordance with
OMB Circular A-
123 Appendix C.
----------------------------------------------------------------------------------------------------------------
Compensation.................. Danny Devine.. Deputy Compensation 2016 Compliant, The Compensation
Director of Service. but High- Service (CS)
Policy and Priority Senior
Procedures. Program - From Accountable
the SAO's Official (SAO)
performance is responsible
measure: for all
Critical completed CS
Element 5; IPERIA
Performance activities to
Requirement 5: include:
"Oversee the - approval of
development of IPERIA test
policy guidance sampling plans,
and - IPERIA testing
promulgation of and review of
regulations all improper
that improve payments for
VA's the given
compensation annual fiscal
benefits year (FY),
programs. - annual
Conduct corrective
systematic action plan
reviews of creation and
current execution,
policies and - implementation
procedures to and monitoring
identify of CS
changes that supplemental
may improve measures as a
program high priority
integrity or program, and
facilitate - reports of CS'
efficient progress to the
delivery of periodic
benefits. Take Governing Board
action to meetings held
implement all by the Office
necessary of Management.
changes.". The CS SAO is
further
responsible
for:
- determining,
and meeting
reduction
targets in an
annual testing
FY,
- monitoring
recapture and
recovery
activities that
are performed
and,
- identifying
high dollar
overpayments.
The SAO reports
annually on the
CS program
assessment of
risk, as a high
priority
program. He/she
maintains all
fiscal activity
with annual FY
testing to
include
monitoring for
any fraud
activities
involving CS
payments.
----------------------------------------------------------------------------------------------------------------
Pension....................... Cheryl Rawls.. Director..... Pension & Ensures Service None
Fiduciary. develops and
maintains
efficient
systems of
internal and
external
program
integrity
controls..
- Manages the
Service
responsibilitie
s under the
Improper
Payment
Elimination and
Recovery Act
and other
internal
auditing
practices
established by
law..
- Ensures
recommendations
for business
requirements
for IT systems
are IPERA
compliant and
certifies that
system designs
meet program
needs..
- Makes certain
that
transactions
performed are
in accordance
to established
policies,
regulations and
procedures..
- Discuss and
coordinates
program
integrity
issues with the
VA Office of
Inspector
General and
Government
Accountability
Office..
- Develops and
certifies that
Service
corrective
measures are
implemented as
part of the
operations
function..
- Conducts on-
site visits,
national
reviews and
meets with
management/
leadership to
address
hindrances and
provides
constructive
feedback with
regards to
goals of
significant
impact on
Service
outcomes..
- Ensures
organizational
standards
related to
quality,
customer
service and
timeliness are
met..
----------------------------------------------------------------------------------------------------------------
VR&E.......................... Jack Kammerer. Director..... Vocational Performance "The SAO
Rehabilitati evaluation oversees the
on & criteria such reduction of
Employment. as a improper
performance payments for
agreement on the Chapter 31
the success of program.
the elimination Responsibilitie
of improper s include but
payments has are not limited
not been to
implemented. - coordinating
While VR&E and monitoring
Service can improper
implement payment testing
policy changes - reviewing
to assist with improper
eliminating payment results
improper - reporting
payments, the improper
business line payments
does not have results to
direct appropriate
authority over stakeholders
the field - identifying
offices who potential areas
make the of fraud and
individual risk for
payments.. improper
payments,
- developing and
implementing
corrective
action plans to
reduce improper
payments, and
- addressing
inquiries from
IPRO and ORM
----------------------------------------------------------------------------------------------------------------
Education - Chapter 33........ Robert Worley. Director..... Education The Senior The SAO current
Education - Chapter 1606...... Services. Accountable performance
Education - Chapter 1607...... Official (SAO)- standards
Robert M. includes a
Worley II, performance
Director, evaluation
Education criteria that
Service requires the
currently does individual to
not have a assess and
performance adjust to
evaluation changing
criteria for situations,
improper implementing
payment innovative
metrics. solutions to
However, the make
SAO is organizational
responsible for improvements,
overseeing ranging from
improper incremental
payments. improvements to
Oversight major shifts in
includes direction or
quality reviews approach, as
conducted by appropriate.
Education Balances change
Service to and continuity;
include continually
quarterly strives to
reviews, improve service
special and program
projects, and performance;
Improper creates a work
Payment environment
Elimination and that encourages
Recover Act creative
audits. In thinking,
addition, the collaboration,
SAO is held and
accountable by transparency;
being directly and maintains
responsible for program focus,
passing IPERA even under
audits each adversity.
fiscal year and
ensuring
Corrective
Action Plans
are developed
and
implemented.
Overpayments
are audited and
referred back
to the Regional
Processing
Offices for
corrections and
potential
collections
where
appropriate..
----------------------------------------------------------------------------------------------------------------
Disaster Relief - Hurricane George Associate 003C4........ Ensure improper
Sandy. Szwarcman. Executive payments are
Director. improved by
exceeding the
reduction
target
estimated in
2016.
----------------------------------------------------------------------------------------------------------------
Payments to Federal Employees- Carin Otero, Associate HR&A/OHRM.... The "Payments to By establishing
Payroll. Acting. Deputy Federal continued
Assistant Employees - collaborative
Secretary, Payroll" SAO efforts between
HR Policy left VA in May HR&A and the
and Planning. 2017. While Office of
Carin Otero is Finance,
acting in this communication
role to ensure plans can be
that ongoing developed that
corrective facilitates
action better sharing
activities of information
continue, a with station HR
performance and payroll
metric will be offices as it
added to the relates to
new SAO's audit findings,
performance corrective
plan once HRA action plans,
has recruited and strategies
and filled the to reduce
position.. improper
payments.
----------------------------------------------------------------------------------------------------------------

VA Responses to HVAC
1. Please provide a copy of the financial management training
initiative curriculum that Ms. Park referenced in her testimony.
This should include, at a minimum, course titles, a summary of each
course's content, whether the course is taught in person or through
the internet, and information about how frequently and to whom the
courses are taught.

VA Response: The Financial Management Training Initiative (FMTI) offers
two mandatory Financial Management Leadership Training (FMLT)
events annually to VA's financial community. The Office of
Management hosted an online training event in August 2016 and an in
person one in January 2017. Currently, there is an online session
planned for August 2017, and an in person event scheduled for
January or February 2018.Select sessions will offer Continuing
Professional Education (CPE) credits. The complete course offerings
for all sessions are seen in attachment 1.

2. Please provide the most recent monthly unexpended funds report that
VA submitted to the Treasury. The Subcommittee's intent is to
evaluate whether the content of this report meets the
Subcommittee's needs and then decide whether the report should be
provided on an ongoing basis.

VA Response: Please see April 2017 Unexpended Funds Report (Attachment
2.)

3. Please identify the accountable officials, to include at a minimum
their names and offices, for each program designed as high risk for
improper payments. Please explain how they are accountable, for
example being assigned performance evaluation criteria that include
improper payment metrics. Please also identify the formal
responsibilities for overseeing improper payments detection,
elimination, and recovery of the VBA, VHA, and NCA chief financial
officers and any chief financial officers for major subdivisions of
the three administrations.

VA Response: The accountable officials and detailed information
regarding their accountability and performance evaluation criteria
for each program designated as a high risk for improper payments
are included in Attachment 3.

Department of Veterans Affairs Financial Policy "Volume VII Financial
Reporting - Erroneous and Improper Volume VII - Chapter 9 Payment
Reporting under OMB Circular A - 123 Appendix C," January 2017,
assigns roles and responsibilities, and requires the establishment
of an accountability mechanism with appropriate incentives and
consequences tied to the success of the senior officials who lead
efforts to achieve improper payment compliance. The complete policy
can be found at: https://www.va.gov/finance/docs/VA-
FinancialPolicyVolumeVIIChapter09.pdf

Specific policy excerpts to address formal responsibilities for CFOs
and other accountable officials include:

0904 ROLES AND RESPONSIBILITIES
(pgs. 6-7 of 84) Administration and Staff Office CFOs are responsible
for accurate testing, projections and reporting and must coordinate
activities with OM through the IPRO Office. The Administration and
Staff Office CFOs are responsible for oversight of the Senior
Accountable Officials (SAOs) in their Administrations and Staff
Offices to ensure that corrective action plans are created and
monitored and that recapture and recovery activities are performed
- all in accordance with VA policy. Administration and Staff Office
CFOs in collaboration with SAOs are also responsible for providing
oversight of progress made to implement supplemental measures and
preparation of the request for relief from reporting high-risk
programs. Administration and Staff Office CFOs in collaboration
with SAOs are responsible for coordinating all data analytics
activities with FSC and IPRO regarding the Fraud Reduction and Data
Analytics Act of 2015 (herein after referred to as Fraud Act) as
well as identifying any fraud risk within their respective
programs. Administration and Staff Office CFOs will ensure that
test plans include attributes designed to identify potential fraud
and ensure any risks identified during testing are properly
addressed by the SAO in the program CAPs.

(pg. 7 of 84) Senior Accountable Officials (SAOs) are responsible for
remediating improper payments and overseeing payment recapture
audits, development and implementation of CAPs, and development of
supplemental measures when the program or activity is deemed high-
priority as well as quality of testing reviews. Additionally, SAOs
are responsible for focusing on identifying and eliminating the
highest improper payments, reducing improper payments, and
coordinating Federal, State, and local government action in
identifying and eliminating improper payments. SAOs are also
responsible for notifying and coordinating with the IPRO Office and
their Administration or Staff Office CFO on any reviews or audits
that are associated with improper payments. SAOs, in conjunction
with responsible Administration or Staff Office CFOs, are
responsible for preparing the request for relief from reporting
high-risk programs. SAOs, in collaboration with Administration and
Staff Office CFOs, are responsible for coordinating all data
analytics activities with FSC and IPRO regarding the Fraud Act,
identifying any fraud risk within their respective programs,
testing for potential fraud, and ensuring CAPs address any
identified fraud risk.

090609 Improper Payment Reporting B. ii. For Noncompliant Programs (pg.
21 of 84) - The designation of a SAO, a member of the SES, who
shall be accountable for the progress of the program coming into
compliance. As such, the SAO must have the span of control
necessary to affect change in the program or activity determined to
be noncompliant; and the establishment of an accountability
mechanism, such as a performance agreement, with appropriate
incentives and consequences tied to the success of the SAO in
leading efforts to achieve compliance for the program or activity.
VA interprets this requirement to mean a performance measure that
provides transparency into whether the measure was met and when
incentives/consequences are enforced.

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