[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                    VA REVOLVING FUNDS: ARE VETERANS
                          BEING SHORTCHANGED?

=======================================================================

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON OVERSIGHT AND 
                             INVESTIGATIONS

                                 OF THE

                     COMMITTEE ON VETERANS' AFFAIRS

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                      WEDNESDAY, JANUARY 17, 2024

                               __________

                           Serial No. 118-46

                               __________

       Printed for the use of the Committee on Veterans' Affairs
       
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 

                    Available via http://govinfo.gov
                    
                               __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
54-926                  WASHINGTON : 2025                  
          
-----------------------------------------------------------------------------------                     
                     COMMITTEE ON VETERANS' AFFAIRS

                     MIKE BOST, Illinois, Chairman

AUMUA AMATA COLEMAN RADEWAGEN,       MARK TAKANO, California, Ranking 
    American Samoa, Vice-Chairwoman      Member
JACK BERGMAN, Michigan               JULIA BROWNLEY, California
NANCY MACE, South Carolina           MIKE LEVIN, California
MATTHEW M. ROSENDALE, SR., Montana   CHRIS PAPPAS, New Hampshire
MARIANNETTE MILLER-MEEKS, Iowa       FRANK J. MRVAN, Indiana
GREGORY F. MURPHY, North Carolina    SHEILA CHERFILUS-MCCORMICK, 
C. SCOTT FRANKLIN, Florida               Florida
DERRICK VAN ORDEN, Wisconsin         CHRISTOPHER R. DELUZIO, 
MORGAN LUTTRELL, Texas                   Pennsylvania
JUAN CISCOMANI, Arizona              MORGAN MCGARVEY, Kentucky
ELIJAH CRANE, Arizona                DELIA C. RAMIREZ, Illinois
KEITH SELF, Texas                    GREG LANDSMAN, Ohio
JENNIFER A. KIGGANS, Virginia        NIKKI BUDZINSKI, Illinois

                       Jon Clark, Staff Director
                  Matt Reel, Democratic Staff Director
                  

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

               JENNIFER A. KIGGANS, Virginia, Chairwoman

AUMUA AMATA COLEMAN RADEWAGEN,       FRANK J. MRVAN, Indiana, Ranking 
    American Samoa                       Member
JACK BERGMAN, Michigan               CHRIS PAPPAS, New Hampshire
MATTHEW M. ROSENDALE, SR., Montana   SHEILA CHERFILUS-MCCORMICK, 
                                         Florida

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

                              ----------                              

                      WEDNESDAY, JANUARY 17, 2024

                                                                   Page

                           OPENING STATEMENTS

The Honorable Jennifer A. Kiggans, Chairwoman....................     1
The Honorable Frank J. Mrvan, Ranking Member.....................     2

                               WITNESSES

Ms. Teresa Riffel, Deputy Assistant Secretary for Financial 
  Management Business Transformation, Financial Management 
  Business Transformation Service, U.S. Department of Veterans 
  Affairs........................................................     4

        Accompanied by:

    Mr. Leroy Larkins, Executive Director, Office of Revolving 
        Funds, Office of Management, U.S. Department of Veterans 
        Affairs

    Mr. Phillip Christy, Deputy Executive Director, Office of 
        Acquisition, Logistics, and Construction, U.S. Department 
        of Veterans Affairs

Ms. Julie Matta, Deputy General Counsel, U.S. Government 
  Accountability Office..........................................     5

                                APPENDIX
                    Prepared Statements Of Witnesses

Ms. Teresa Riffel Prepared Statement.............................    21
Ms. Julie Matta Prepared Statement...............................    24

 
          VA REVOLVING FUNDS: ARE VETERANS BEING SHORTCHANGED?

                              ----------                              


                      WEDNESDAY, JANUARY 17, 2024

             U.S. House of Representatives,
      Subcommittee on Oversight and Investigations,
                            Committee on Veterans' Affairs,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:50 p.m., in 
room 360, Cannon House Office Building, Hon. Jen Kiggans 
[chairwoman of the subcommittee] presiding.
    Present: Representatives Kiggans, Rosendale, Mrvan, and 
Pappas.

      OPENING STATEMENT OF JENNIFER A. KIGGANS, CHAIRWOMAN

    Ms. Kiggans. Good afternoon. The subcommittee will come to 
order.
    Thank you all for being here today for this oversight 
hearing on revolving funds of the Department of Veteran 
Affairs. A revolving fund is essentially a business run by a 
Federal agency under authority granted by Congress. The 
revolving fund contains enterprises that provide services and 
collect fees. Instead of the typical model where Congress 
provides appropriations to pay Federal employees to perform 
tasks, the revolving fund is supposed to be self-supporting. A 
fund can recoup its costs and even make a profit, which goes 
into its reserves. That is supposed to be competitive and 
economical, but in practice it tends to be less transparent.
    VA has two large revolving funds, the Franchise Fund and 
the Supply Fund, and many other smaller funds. The enterprises 
in the Franchise Fund provide accounting, payments, debt 
collection, human resources, IT, law enforcement training, and 
other services. The enterprises in the Supply Fund are 
distribution centers and contracting offices that sell products 
like hearing aids, medical equipment, and burial flags, and put 
in place contracts other offices can order against.
    The revolving funds are big business for VA, and they seem 
to be steadily expanding. Each fund took in revenue of about 
$1.8 billion last year, but they do not disclose key 
information. VA publishes the Franchise Fund's annual report, 
but the Supply Fund's financial statements are not public. 
These documents do not include basic facts like how much 
individual enterprises made or lost, or how much a fund drew 
from its reserves. The committee discovered the Supply Fund ran 
a $37 million loss last year, but the financial statements 
characterized it as a profit. I hope you can see why I am 
concerned. This is not transparency.
    It has also been a struggle to get information on VA's 
agreement with the Department of Homeland Security or U.S. 
Immigration and Customs Enforcement (ICE) to process payments 
to local healthcare providers who treat detained illegal 
immigrants. After several months of Chairman Bost asking 
questions, VA did provide the agreement last week. Now that we 
have been able to read it, several things have become clear.
    The VA has been processing the medical claims for illegal 
immigrants for ICE since 2002. ICE pays VA for the healthcare 
claims, as well as fees to cover VA's administrative costs and 
a profit. The agreement actually covers a half-dozen different 
services related to processing the claims. VA collected at 
least $124 million from ICE in 2023 through their agreement, 
and the VA officials who run the Franchise Fund consider these 
profits very important.
    These revolving funds have been steadily adding and 
expanding business lines over the years, growing their revenues 
and their payrolls. There is clearly an incentive to grow the 
funds, but they do not always turn a profit. We discovered that 
several enterprises within the Franchise Fund have suffered 
losses in recent years and the Supply Fund as a whole took a 
loss last year. The Canteen Fund had to be bailed out for $140 
million during the pandemic. Congress would not know any of 
that if not for this hearing.
    Revolving funds may be an effective way to provide 
services, but they also seem to be a blind spot. Like any other 
business, they can be mismanaged or suffer downturns. We always 
need to know how they are performing. We need to ensure that VA 
is not creating new enterprises for the sake of empire 
building, but signing these agreements carefully. I appreciate 
our witnesses joining us today to answer these important 
questions.
    With that, I now recognize Ranking Member Mrvan for his 
opening comments.

      OPENING STATEMENT OF FRANK J. MRVAN, RANKING MEMBER

    Mr. Mrvan. Thank you, Chair Kiggans. I appreciate the 
opportunity to learn more about VA revolving funds today.
    Revolving funds are not unique to VA. They are used across 
Federal agencies. Congress authorized revolving funds to help 
the government run more efficiently. I want to go ahead and 
answer the question this committee hearing title--this hearing 
title poses: Are veterans being shortchanged by VA revolving 
funds?
    From my read of the testimony and other materials my staff 
compiled ahead of this hearing, no, veterans are not being 
shortchanged. In fact, veterans are benefiting from the VA 
revolving funds program. As we will hear today, the use of the 
VA revolving funds results in government efficiencies and cost 
savings that allow VA to focus on what it does best, care for 
veterans. VA is able to reinvest the profits from its revolving 
funds directly into technology advances, benefiting VA and the 
veterans it serves.
    VA revolving funds are subject to significant oversight. 
The Revolving Funds Board of Directors provides strategic 
leadership and ensures accountability and transparency for this 
program. Annual independent audits are performed on the funds 
and VA has received 16 consecutive clean audits for Supply Fund 
and 26 for Franchise Fund.
    The Antideficiency Act (ADA) also mandates that the fund 
does not incur costs or make payments that exceed the amounts 
available in the funds. These guardrails help ensure the 
revolving funds operate in the way Congress intended. I was 
impressed to hear about the wide range of goods and services 
the revolving fund provides through the Supply and Franchise 
Funds, all while being fiscally responsible.
    VA's enterprise centers, operated through the Franchise 
Fund, provided administrative services in the areas of IT, 
financial management, personal security, and law enforcement 
and human resources. These programs boost productivity and 
minimize cost. This is a prime example of good governance.
    I want to address recent claims made in the media in regard 
to VA's revolving funds. VA and the Department of Homeland 
Security have had a fee-for-service partnership authorized 
through the VA Franchise Fund for nearly two decades, 
specifically between ICE Health Services Corps (IHSC) and VA's 
Financial Service Center. Since 2002, IHSC and Financial 
Services Center (FSC) have operated independently with 
appropriate congressional oversight under multiple Republican 
and Democratic administrations alike.
    VA has repeatedly informed the public and Congress that it 
does not provide or fund healthcare services for ICE detainees. 
ICE is solely responsible for determining a patient's 
eligibility for care, helping them access care in private 
sector, and transmitting bills for processing to FSC. In this 
relationship, VA is solely responsible for administrative tasks 
which are reimbursed by IHSC.
    The argument that this takes away key manpower from 
processing veterans claims is blatantly false and intended to 
incite outrage against VA and migrant communities. In fact, if 
the VA were to end this partnership and work, it would likely 
result in enormous cost and administrative burden to the 
Federal Government as they would have to contract with a 
private company to process these bills. The only way veterans 
could be shortchanged here is if my colleagues push to remove 
this successful and efficient revenue building program at VA.
    Instead of politicizing the facts of a successful VA 
operation, we should focus on the real positive outcomes of VA 
revolving funds. I hope my colleagues across the aisle also 
look at this hearing as an opportunity to learn more about a 
program in government that is working well.
    With that, I yield back.
    Ms. Kiggans. Thank you, Ranking Member Mrvan.
    We will now turn to witness testimony. Testifying before us 
today on our first panel, we have Ms. Terry Riffel, deputy 
assistant secretary for Financial Management Business 
Transformation at the Department of Veteran affairs. She is 
accompanied by Mr. Leroy Larkins, executive director of the VA 
Office of Revolving Funds; Mr. Phillip Christy, the deputy 
executive director of the VA Office of Acquisition, Logistics, 
and Construction. Finally, we have Ms. Julie Matta, deputy 
general counsel at the Government Accountability Office (GAO).
    Thank you and welcome. Will the witnesses please stand and 
raise your right hand?
    [Witnesses sworn.]
    Ms. Kiggans. Thank you. You may be seated. Let the record 
reflect that the witnesses answered in the affirmative.
    Ms. Riffel, you are now recognized for 5 minutes to provide 
your testimony.

                   STATEMENT OF TERESA RIFFEL

    Ms. Riffel. Good afternoon, Chairwoman Kiggans, Ranking 
Member Mrvan, and members of the subcommittee. Thank you for 
the opportunity to testify today on the Department of Veterans 
Affairs VA revolving funds and how these funds support VA's 
mission to care for veterans, their families, caregivers, and 
survivors. I am accompanied by Leroy Larkins, executive 
director for revolving funds, and Philip Christy, deputy 
executive director for acquisitions, logistics, and 
construction.
    The VA revolving funds, consisting of the Supply Fund and 
Franchise Fund, provide high-quality, cost-effective support 
services by streamlining processes, optimizing the value of 
common administrative services to VA administrations and staff 
offices, as well as other government agencies (OGA). Shared 
service offerings allow VA revolving fund customers to focus on 
performing their mission-critical functions of providing high-
quality care, benefits, and services to veterans and eligible 
family members.
    Better support to VA employees for common administrative 
services means better service for veterans, their families, 
caregivers, and survivors. VA is proud to serve as a Federal 
shared service provider.
    I would like to highlight a few examples where the Supply 
Fund and Franchise Fund have successfully improved services to 
VA, enhancing support to our veterans. The Financial Services 
Center, the FSC, has consolidated 78 field payroll offices to 
the FSC. As a result, Veterans Health Administration (VHA) and 
Veterans Benefits Administration (VBA) can redirect resources 
to focus on their core mission of caring for veterans and 
family members.
    Additionally, the FSC reduced the backlog of veteran 
noncommunity care network medical claims by 99 percent and 
achieved a 92 percent auto-adjudication rate for dialysis 
medical claims with an average of 1.6 processing days. These 
efforts resulted in significant improvement in VA provider 
relations, directly supporting veterans' ability to receive 
medical care.
    The Supply Fund Board organizations, which provide 
strategic contracting, have delivered over 3 billion in cost 
avoidance since 2020 due to robust category management 
principles and board-approved business plans.
    Oversight for the VA revolving funds is conducted through 
the Revolving Fund Board of Directors, which functions as the 
principal governance body overseeing the Supply Fund and 
Franchise Fund's strategic priorities, goals, and objectives. 
It also provides strategic leadership for the Supply and 
Franchise Funds' operations, execution, and management of 
overall risk and challenges. The Revolving Fund Board of 
Directors is co-chaired by the deputy chief financial officer 
and deputy chief acquisition officer of the Department, with 
board members consisting of six other senior leaders from VA 
administrations and staff offices whose participation on the 
Revolving Fund Board of Directors ensures revolving fund 
resources strategically serve VA's mission.
    To emphasize transparency and accountability for a $2.2 
billion budget, each Franchise Fund Enterprise Center and 
Supply Fund Acquisition Center is required to complete a 2-year 
business plan on an annual basis. The Revolving Fund Board of 
Directors reviews and approves each business plan, which 
details specific revenue and expense projections, full-time 
equivalent staffing levels, and contract support requirements 
prior to funds execution. Information from the approved 
business plans is utilized to develop budget summary data and 
is included in part 5 of the VA president's budget submission.
    VA revolving fund financial statements are audited by a 
private sector public accounting firm annually to provide an 
independent assessment of each revolving fund's financial 
stewardship. As a result of sound financial management business 
practices, the Franchise Fund received 26 and Supply Fund 16 
consecutive unmodified clean opinions.
    In closing, the VA revolving funds provide shared services 
to meet customer service demands effectively and efficiently, 
providing significant benefit to VA administrations and staff 
offices as well as other government agencies. As the Government 
Accountability Office noted in a recent report, GAO 23-104624, 
on a similar function in another agency, given the fiscal 
pressures facing the Federal Government, consolidating and 
sharing services, such as payroll or information technology 
services, within and among agencies is one way agencies can 
operate more efficiently. Shared services may also allow 
agencies to benefit from economies of scale and take advantage 
of specialized expertise. VA's revolving funds adhere to this 
principle and are consistent with GAO's recommendation.
    Madam Chairwoman and other members of the subcommittee, 
thank you again for the opportunity to discuss VA's revolving 
funds. This concludes my opening statement, and my colleagues 
and I are happy to respond to any questions you may have.

    [The Prepared Statement Of Teresa Riffel Appears In The 
Appendix]

    Ms. Kiggans. Thank you, Ms. Riffel.
    Ms. Matta, you are now recognized for 5 minutes to provide 
your testimony.

                    STATEMENT OF JULIE MATTA

    Ms. Matta. Chairwoman Kiggans, Ranking Member Mrvan, and 
members of the committee, thank you for the opportunity to 
discuss some of the key features of revolving funds, including 
how they are established, revolving fund types, and the 
applicability of key appropriations law principles. I am 
pleased to be able to share some of GAO's expertise in 
appropriations law on this topic.
    I would like to begin with the fundamental nature of a 
revolving fund as a form of appropriation. As the name 
suggests, a revolving fund is intended to finance a cycle of 
operations. To accomplish that purpose, revolving funds collect 
and retain receipts that are then used to finance the fund's 
operations. Thus, revolving funds are exceptions to the 
miscellaneous receipts statute. This law requires an agency to 
deposit any funds it receives outside of congressional 
appropriations into the appropriate general fund of the U.S. 
Treasury, unless the agency is otherwise authorized to retain 
and use the funds. Revolving funds provide such an 
authorization.
    The structure of a revolving fund is similar to that of a 
business. One of the advantages of this structure is that the 
fund may become self-sustaining through its cycle of 
operations. If that happens, the activities supported by the 
revolving fund may no longer need annual appropriations from 
Congress. This gives the agency more flexibility, but it may 
also reduce the routine congressional visibility into the 
fund's operations that the annual appropriations cycle 
provides.
    The flexibility provided by a revolving fund is not 
unlimited. Importantly, the amounts in a revolving fund are 
appropriated, including both the initial infusion of working 
capital and the operating receipts generated by the fund 
itself. This has two significant consequences for the revolving 
fund.
    First, revolving funds can only be created by Congress 
because only Congress can make an appropriation. Agencies have 
no authority to administratively create a revolving fund. 
Instead, an agency may only operate such a fund where Congress 
has provided specific statutory authority. That statutory 
authority will specify the receipts that may be deposited into 
the fund and the purposes for which those receipts may be used.
    Second, the rules that guide the use of appropriations 
apply to revolving funds as well. We often think about 
appropriations law as having three fundamental characteristics: 
purpose, time, and amount. The purpose statute provides that 
appropriations can only be used for the purposes for which they 
were made. Revolving funds, then, may only be used for the 
purposes specified in the legislation authorizing the fund.
    With respect to time, revolving funds have a special 
characteristic. One of the defining features of a revolving 
fund is that the receipts earned by the fund are available 
without fiscal year limitation. This means that the receipts 
can be used to purchase goods and services that the fund needs 
at any time. By contrast, most annual appropriations are 
available only for those goods and services an agency needs 
during a fixed period of time.
    Finally, with respect to amount, perhaps the most important 
fiscal statute is the Antideficiency Act. This law prohibits 
agencies from spending more than is appropriated to them and 
from spending amounts before they receive them. As a result, a 
revolving fund may not spend more than the amount contained in 
the fund, and receipts cannot be spent until they are 
collected.
    Revolving funds are also subject to other legal 
requirements that apply to appropriated amounts. For example, 
obligations made against any appropriation must be recorded. An 
obligation is a legal requirement to make a payment, and the 
recording statute requires agencies to document their 
obligations, keeping track of how much has already been spent. 
Importantly, only those obligations that meet certain statutory 
criteria can be recorded. These requirements ensure that the 
obligations incurred by a revolving fund are proper and within 
the fund's means.
    Revolving funds strike a balance between agency flexibility 
and congressional control of the public purse. They provide a 
way to finance cyclical agency operations that may become self-
sustaining while remaining subject to the restrictions that 
apply to all appropriated funds.
    Chairwoman Kiggans, Ranking Member Mrvan, and members of 
the committee, this completes my prepared statement. I am 
pleased to respond to any questions that you may have. Thank 
you.

    [The Prepared Statement Of Julie Matta Appears In The 
Appendix]

    Ms. Kiggans. Thank you very much.
    We will now move to questions, and I yield myself 5 
minutes.
    Ms. Matta, what benefit do revolving funds produce? Is the 
purpose to provide services in the most economical way possible 
or to turn a profit for the agency?
    Ms. Matta. GAO's longstanding case law, looking at 
revolving funds as a form of appropriation, talks about a 
couple flexibilities with revolving funds, primarily that they 
are no longer part of the annual appropriation cycle. They are 
a form of permanent appropriation, and typically, the amounts 
in the revolving fund are no year. They are provided to the 
agency without fiscal year limitations. That provides the 
agency a certain amount of flexibility. It is a loosening of 
the congressional purse strings, if you would.
    We would, if GAO were looking at a particular revolving 
fund, look at the exact language of the statute. Revolving 
funds can differ and may give an agency more or less 
flexibility to retain a balance. Some revolving funds specify 
an amount that must be returned to the Treasury. GAO would look 
at the language of the statute because each revolving fund 
requires a specific authorization.
    Ms. Kiggans. Thank you.
    Ms. Riffel, you explained in a briefing to staff that the 
profits generated by the Franchise Fund are very important to 
the VA. Where do the profits go and what would be the 
consequences of losing them?
    Ms. Riffel. Yes, so they are very important. They go into 
retained earnings. In those retained earnings, we have 
operational reserves as well as capital reserves.
    Operational reserves are there in case we were to lose a 
customer and we have to all of a sudden bear additional costs 
with no income, we would have that to fall back on. The capital 
reserve is also used to provide for technology enhancements or 
improvements. A customer may come to us with a new requirement. 
We would leverage our reserves to support quick delivery of 
that customer's requirements.
    That is part, really, of the whole idea behind shared 
services, that an agency and/or a customer internal to VA may 
have a specific business need. They are not able to meet that 
business need. They can come to us. If it is a common 
administrative service that we offer, we would certainly do 
what we need to, to on demand meet that customer's need. Those 
reserves are critical for us to be able to do that.
    If we were to lose this customer, or lose a customer in 
general, anytime a business loses a customer, then you 
obviously have less profit, less reserves, and you have to 
determine what you are going to do with the individuals that 
were performing that duty that is no longer there, which also 
becomes a burden to, in this case, a franchise organization.
    Ms. Kiggans. Thank you.
    Ms. Matta, what happens when there is a shortfall in a 
revolving fund?
    Ms. Matta. The Antideficiency Act prohibits agencies from 
incurring expenses in excess of the amount in a fund. An agency 
is legally prohibited from incurring additional expenses if 
they do not have amounts to cover it.
    Ms. Kiggans. Thank you.
    Mr. Larkins, how many times in the last 3 years has one of 
the funds or one of their enterprises produced a loss? How did 
you make up that shortfall?
    Mr. Larkins. Thank you for the question.
    For the Supply Fund we have seen that in 2 years of the 
last 5 years, it was in 2020 and then 2023. We have seen that 
also in the Franchise Fund. We have only one instance, and that 
was back in 2022, for our law enforcement training center. Each 
time we are able to utilize the reserves to compensate for 
those particular losses.
    Ms. Kiggans. Thank you.
    Mr. Larkins, how much money is in the fund's reserve, and 
how much has been drawn down over the last 3 years?
    Mr. Larkins. Okay. Thank you for that.
    In the Franchise Fund, we have a total reserve of, I want 
to say, $678 million, which consists of operating reserves of 
$521 million and $157 million in capital reserves. For the 
Supply Fund, we have a total of $424 million in the reserve.
    Ms. Kiggans. Thank you.
    Ms. Matta, the VA publishes the Franchise Fund financial 
statements, but the Supply Fund financial statements are not 
made public. Neither of them contain much information about the 
funds reserves or the profits or losses of enterprises within 
the funds. Does this lack of transparency present any risks?
    Ms. Matta. The Antideficiency Act and the recording statute 
both require agencies to keep track of receipts and the 
expenses on any form of appropriation, including a revolving 
fund. The VA should be able to provide this committee with 
those statements at the level of detail that you require for 
your oversight at any time.
    Ms. Kiggans. Thank you.
    My time has expired. I will now yield 5 minutes to Ranking 
Member Mrvan.
    Mr. Mrvan. Ms. Riffel, I want to give you the opportunity 
to set the record straight on the relationship between the VA 
and the Department of Homeland Security. Please share the facts 
that you think are relevant to dispel any of the misinformation 
in the media relating to this issue.
    Ms. Riffel. I really appreciate the opportunity to respond 
to that question. I think there is been a lot of 
mischaracterization in the media around the Financial Services 
Center's relationship with Immigration and Customs Enforcement, 
particularly Health Services Corps. I want to make it really 
clear that there is no VA funds nor VA healthcare professionals 
that provide any services to those individuals that are in the 
custody of ICE. We have been doing this for over 20 years, and 
the relationship is solely to process medical claims. IHSC pre-
funds or advance funds the VA or the Financial Services Center 
for that work. That is really how simple it is.
    Mr. Mrvan. Okay. From a cost savings and economies of scale 
perspective, why does it make sense for the VA to process these 
bills?
    Ms. Riffel. Yes. It is because the skill to process 
healthcare claims is actually fairly unique. The Financial 
Services Center does this service for Veterans Health 
Administration and also for this other government agency, IHSC.
    I think part of the efficiency is that through economies of 
scale, we are able to actually spread the overhead that is 
necessary to be able to perform this service. It benefits VA 
because IHSC is actually absorbing some of that overhead in 
that product line overall, that medical claims processing 
product line.
    I think it is a good example of shared services across 
government where you have more than one agency that is 
benefiting from a shared service offering that, in this case, 
the Financial Services Center, as part of VA, is able to 
deliver.
    Mr. Mrvan. Okay, thank you.
    Mr. Larkins, thank you for sharing the information about 
the VA revolving funds. This is certainly an interesting 
program and clearly a benefit to the VA, the Federal 
Government, and taxpayers. How have revolving funds been 
instrumental in enhancing operational efficiencies within 
government programs? What specific examples can you provide 
that highlight the benefits of utilizing revolving funds and 
promoting fiscal responsibility and sustainability resource 
management?
    Mr. Larkins. No, thank you for the opportunity to speak 
about the value of shared services, specifically the VA 
revolving funds.
    When I think about the work that we do across the eight 
enterprise centers within the Franchise Fund, one item actually 
sticks out to me from the Internal Control Servicing Center, 
who provides reviews of state and Tribal government-operated 
veteran cemeteries. What we want to do is make sure that they 
are maintaining the standards that National Cemetery 
Administration (NCA) has been known for. They got a 97 score 
related to the American Customer Satisfaction Index. We want to 
make sure that we take that off their plate so they can 
concentrate on serving the VA cemeteries. At the same time, we 
want to make sure that these state cemeteries are up to 
standard. We do this.
    I think that this is something that is personal to me 
because my father, who is a U.S. Army Vietnam veteran, actually 
has preselected a state cemetery for his final burial place for 
him and my mother. For me, I want to make sure that they are 
getting the standards that they are up to.
    We talk about the duality of shared services, the 
efficiencies that are there, but we are actually taking care of 
the veteran as well.
    When we think about on the Supply Fund side of the house, 
one of the programs that sticks out to me is the Warriors to 
Workforce Program that is conducted from the VA Acquisitions 
Academy. The 7-month program actually trains service-disabled 
veterans and actually trains them to be contract specialists. 
Literally, we are using our resources to train veterans to 
improve their lives. Actually, this is a shared service 
training resource where we have trained 264 interns across the 
Federal Government, 44 actually are from other government 
agencies.
    Mr. Mrvan. Quickly, we have got about 30 seconds. You had 
mentioned that there is $678 million in that fund. Can you tell 
me, is that--those programs that you mentioned, that fund is 
utilized for that?
    Mr. Larkins. Yes, sir.
    Mr. Mrvan. Okay. Thank you very much.
    Mr. Larkins. Thank you.
    Mr. Mrvan. With that, I yield back. I am sorry.
    Ms. Kiggans. Thank you, Mr. Mrvan.
    The chair now recognizes Mr. Rosendale for 5 minutes.
    Mr. Rosendale. Thank you very much, Madam Chair. Appreciate 
it.
    The U.S. Department of Veterans affairs has two major 
revolving funds, the Franchise Fund and the Supply Fund, that 
provide services to VA offices and other agencies on a fee-for-
service basis. Both do not receive annual appropriations from 
Congress and instead operate like a business.
    While I am glad these revolving funds do not add to our 
over $34 trillion debt, the funding mechanism has largely 
prevented Congress from providing proper oversight. The lack of 
oversight has led to confusion about how the funds are used, 
and I am hopeful that this hearing today can clear that up.
    Ms. Riffel, several processing functions have been improved 
by turning them over to FSC, as you talked about. Do not 
disagree with that. I do have some questions about some of 
those other practices that you all have taken on, whether it 
was by choice or not.
    The U.S. Immigration and Customs Enforcement allocated $75 
million in fiscal year 2021 and $124 million in fiscal year 
2023 for illegal immigrants in ICE detention to receive 
healthcare services on the taxpayer's dime. This 65 percent 
increase is the direct result of Biden's refusal to secure the 
southern border.
    Ms. Riffel, where do the dollars come from to pay the 
healthcare providers who treat the ICE detainees?
    Ms. Riffel. Thanks for that question.
    As I stated earlier, Immigration and Customs Enforcement, 
IHSC pre-funds for both the Full-time Equivalency (FTE) that 
are dedicated for that particular claims processing service, as 
well as for the disbursements to reimburse those providers that 
are doing that care.
    Mr. Rosendale. This is coming directly from ICE's budget 
then?
    Ms. Riffel. That is correct.
    Mr. Rosendale. Okay. Ms. Riffel, who are the healthcare 
providers who treat the illegal immigrants detained by ICE?
    Ms. Riffel. Yes. I would actually--so ICE has 
responsibility for that coordination of care for anybody in 
their custody. VA does not get involved with that. We are 
simply processing claims on behalf of IHSC. We are not involved 
whatsoever in where or how those individuals in custody are 
receiving care.
    Mr. Rosendale. I understand that the care is provided by 
non-VA providers.
    Ms. Riffel. That is correct.
    Mr. Rosendale. Okay. Is it possible that the same 
healthcare providers who are part of the VA's community care 
network could also be the same providers who treat the illegal 
immigrants that are detained by ICE?
    Ms. Riffel. There is no analysis to indicate one way or the 
other on that. That is not part of any of the agreement that we 
have with IHSC in terms of asking for any of that information.
    Mr. Rosendale. You are not privy to any of that 
information?
    Ms. Riffel. We do not analyze----
    Mr. Rosendale. I did not ask if you analyze it. You are 
privy to it. You have access to the information that shows the 
healthcare providers that they are utilizing because you are 
processing their collections and payments.
    Ms. Riffel. We are processing payments to providers, yes.
    Mr. Rosendale. Okay. Then you know who the providers are 
that they are using.
    Ms. Riffel. Yes.
    Mr. Rosendale. Okay. Again, the same healthcare providers 
who are part of the VA's community care network could also be 
the same providers who treat the illegal immigrants detained by 
ICE?
    Ms. Riffel. Again, we have not done that analysis to 
confirm----
    Mr. Rosendale. I did not ask you if you did the analysis. I 
said, could they be the same care providers?
    Ms. Riffel. We would have to confirm that. I do not want to 
say yes or no.
    Mr. Rosendale. Is it possible? Is it possible?
    Ms. Riffel. I would like to take that for the record and 
answer it accurately.
    Mr. Rosendale. You do not know if it is possible? If 
healthcare is being delivered in the same communities that we 
have, a veterans community, and you have access to the very--
because of the fact you have to pay them, you cannot say 
whether that would even be possible?
    Ms. Riffel. I would rather actually answer the question 
accurately.----
    Mr. Rosendale. I mean, you are not looking good to the 
American people right now, okay, the way you are trying to 
evade this. It is a pretty simple question.
    Ms. Riffel. Well, I appreciate your question. We have not 
completed that analysis.
    Mr. Rosendale. You just will not answer. Okay. Okay.
    This arrangement could result in illegal immigrants 
receiving treatment before veterans do. Quite frankly, to this 
committee, that is completely unacceptable.
    Do you think it is fair?
    Ms. Riffel. I am not aware of that.
    Mr. Rosendale. Do you think it is fair if that is taking 
place, if we have illegal immigrants that are utilizing the 
same community care providers that our veterans are supposed to 
be utilizing, and it is keeping our veterans from receiving 
their care, do you think that that is fair?
    Ms. Riffel. That is an assertion.
    Mr. Rosendale. Wow. Okay. What can you show me that proves 
they are not the same networks and that illegal immigrants are 
not being prioritized over veterans? Can you provide me that 
information?
    Ms. Riffel. We can take that for the record if that is 
something that you would like to see.
    Mr. Rosendale. I would like to see that. I would absolutely 
like to see that.
    Madam Chair, I see I am 12 seconds over. I would yield 
back.
    Ms. Kiggans. Thank you, Mr. Rosendale.
    The chair now recognizes Mr. Pappas for 5 minutes.
    Mr. Pappas. Thanks very much, Madam Chair. I appreciate, 
members of the panel, for your comments here this morning.
    I think it is critically important that, you know, the way 
that you have reinforced the argument about VA being laser-
focused on its mission to deliver care and benefits to the 
veterans of this country, and we appreciate that. I think at a 
time where we are seeing a historic expansion of care and 
benefits through the The Sergeant First Class Heath Robinson 
Honoring our Promise to Address Comprehensive Toxics (PACT) 
Act, more than 5 million American veterans have been screened 
for toxic exposure, for instance. Veterans should have no 
question about the ability of VA to be there for them. I think 
any sort of political narrative that is ginned up to try to sow 
doubt among veterans is dangerous and is counterproductive to 
the work that is ongoing at VA.
    I did appreciate the way that you highlighted the benefits 
of these programs. I learned a few things today. I did hear, 
Ms. Riffel, you talking about the Financial Services Center and 
the way that it has played a role in terms of paying claims 
through the Community Care Program. It is something that I have 
heard a lot about over the years in my district.
    A lot of providers that are out there, a few years ago in 
particular, were dealing with a huge backlog of legacy claims. 
I am wondering if you could talk a little bit more about how 
you have worked with the provider community to make sure, 
ultimately, that the bill is paid and that these folks continue 
to be there to be able to provide care to our veterans.
    Ms. Riffel. Yes, so thanks for that.
    We have had a relationship with Veterans Health 
Administration for quite some time in terms of supporting their 
claims processing, particularly around the Camp Lejune Family 
Member Program as well as the dialysis--contracted dialysis 
claims and then the Community Care non-network claims. We are 
not associated with the contract that they have right now, but 
the other ones. I would tell you that we were instrumental in 
helping them with their initial backlog that they had several 
years back that resulted in some concerns from the private 
sector community. We feel really honored to partner with them 
and to be able to really help those relations that they needed 
to ensure that veterans are getting the care they need to in 
the community.
    We continue to this day to have that relationship with VHA 
and certainly would stand by to support any additional claims 
that they need us to do for them. Ninety-five percent of our 
medical claims processing that we do is in support of VHA. Only 
really 5 percent is OGA. Again, our big focus is for Veterans 
Health Administration.
    Mr. Pappas. Well, we thank you for that. I have seen the 
benefit on the ground in my district in terms of the 
relationship between providers and VA and the way that they 
work for veterans.
    I want to highlight another program and the way that it 
supports VA's work, and that is around VA's police force. I 
understand that the revolving funds program led to the creation 
of the Law Enforcement Training Center (LETC). It provides 
special training for police officers working in healthcare 
environments, which is a pretty specific environment, including 
law enforcement personnel working at VA healthcare facilities.
    I am wondering maybe, Mr. Larkins, if you want to take this 
one, can you share how LETC trains VA police officers and 
fosters a safe environment for veterans seeking care at VA?
    Mr. Larkins. No, thank you for this opportunity.
    It is some great work that is being done at the law 
enforcement training center. Specifically, they have a mandate 
to train our VA police officers, a very specialized training. 
We want to make sure that if a veteran's in crisis, an emergent 
situation happens, that we maintain respect for the veteran's 
rights and the things that they have earned over time. You 
know, things happen, but we want to make sure that we are able 
to de-escalate the situation quickly. Right? Get voluntary 
adherence to what the police officer is asking.
    They have been carrying out this mission now since, I want 
to say, 2007, and they have been doing a great job for that--
you know, for this timeframe.
    Mr. Pappas. Well, thank you all for helping us to 
understand the bigger picture in terms of these revolving 
funds. We look forward to receiving more information, staying 
up to date, so that we can do our oversight work.
    With that, I yield back my time.
    Ms. Kiggans. Thank you, Mr. Pappas.
    We will now proceed to round 2 of questions, and I will 
yield 5 minutes to myself.
    Ms. Riffel, the VA has described the ICE agreement as 
processing healthcare claims. However, based on the documents 
you provided last week, there is a lot more to it. Can you walk 
me through the full scope of these services?
    Ms. Riffel. Yes, I would be happy to. There is some 
ancillary services that happen when you process medical claims. 
Like some mailroom stuff and some of the help desk activities 
in terms of answering inquiries and whatnot, we did not call 
those out directly initially, but they are called out in the 
agreement with ICE.
    The other main service that is provided is purchase card 
services. You would see that on there as well.
    Other than that, the other ancillary are really secondary 
to supporting the medical claims processing product line, which 
is the main product line that we have with them.
    Ms. Kiggans. Then, additionally, Ms. Riffel, according to 
the VA spokesman, not more than 10 VA staff perform this work 
for ICE. Is this just counting the VA Federal employees or does 
that number also include contractors?
    Ms. Riffel. No, Federal employees. Those are FTE.
    Ms. Kiggans. Okay, let us see. Also, did these positions 
exist in the VA prior to the ICE agreement, or were they 
created to work on the agreement?
    Ms. Riffel. That is been, you know, 20-plus years ago. I 
think over the years, initially, when we first started, we had 
some contractors involved, but as we have gotten very 
specialized skill in that area, now we have switched over to 
FTE so that we can actually maintain some continuity and 
standards in that particular product line.
    Ms. Kiggans. Okay. Then, let us see, in 2021, the 
administration reassigned most of the Community Care claims 
processing from the FSC to the newly created Integrated 
Veterans Care Office. As the FSC processes more and more 
medical claims for ICE and fewer and fewer veteran Community 
Care claims, how is this ICE agreement benefiting veterans or 
the community care program? Ms. Riffel.
    Ms. Riffel. Again, I want to just reiterate that 95 percent 
of our claims processing is for Veterans Health Administration. 
Only 5 percent is represented by OGA.
    I think it really is shared services in general. Right? You 
have that opportunity to create efficiencies, economies of 
scale, by spreading your overhead amongst more than one 
customer. It benefits VA, as well as us maintaining the skill 
that we need to, to be able to perform that for any other 
agency, really, that might come to us and request that service.
    Ms. Kiggans. One last question. Committee staff asked the 
VA this question prior to the hearing, but we did not receive 
an answer. Do you know how many revolving funds there are in 
the VA at all levels?
    Ms. Riffel. Yes, I will actually defer that to Mr. Larkins 
here.
    Mr. Larkins. Yes, we have more than a dozen VA revolving 
funds that are there, and we are working on now trying to 
compile the information, and we will get it to you soon.
    Ms. Kiggans. That would be great. Thank you.
    I will yield to Mr. Mrvan for 5 minutes.
    Mr. Mrvan. Thank you, Chairwoman.
    Ms. Matta, are there best practices used in other Federal 
agencies the VA could adopt to increase transparency for the 
revolving funds to address some of the concerns we hear today?
    Ms. Matta. Ranking Member Mrvan, I can provide an answer 
for the record for you on that. Our experts back at GAO who do 
engagements looking at the operations of specific funds can 
work with your staff and give you some of that information.
    Mr. Mrvan. Mr. Larkins, I was pleased to hear about the 
clean audit history of the VA Franchise Fund. Can you please 
describe how audits and general oversight of the fund is 
conducted?
    Mr. Larkins. No--oh, I am sorry.
    Mr. Mrvan. What are the guardrails to ensure the fund 
remains fiscally responsible?
    Mr. Larkins. No, thank you for that.
    We, each year, we have a public accounting firm come in to 
do an assessment of our financial statements, and they actually 
produce an audit report on our behalf, and they go through an 
exhaustive list of controls over a period of about 6 months, 
and they come to an opinion. Just as mentioned before, we have 
26 consecutive clean opinions for the Franchise Funds, 16 for 
the Supply Fund.
    In addition to that, we actually have other internal 
controls within VA to make sure that, again, we are not going 
to exhaust the revolving fund. One of the things that my 
colleague has helped stand up is the Integrated Financial and 
Acquisition Management Transformation (IFAM) system. There are 
controls within that system that are going to prevent us from, 
you know, overspending what is actually in the reserve.
    There is many controls set up. There is actually monthly 
monitoring of budget execution to make sure that the plan that 
is been laid out, these 2-year business plans that we talked 
about before, are actually being executed properly.
    There is many controls in place to make sure that we stay 
fiscally sound.
    Mr. Mrvan. Thank you. With that, I yield back.
    Ms. KigganS. Thank you, Mr. Mrvan.
    The chair now recognizes Mr. Rosendale for 5 minutes.
    Mr. Rosendale. Thank you very much, Madam Chair.
    Mr. Larkins, as a former Montana insurance commissioner, I 
do understand the need and the purpose for having reserves 
available to you. I just did some quick math, and the 
organization, your organization has 2,500 employees, roughly. 
If we just average that you have $100,000 a year salary across 
the board. I am sure some make more, some make less. That is 
about $250 million a year of obligation, of true obligation 
that you have.
    Let us throw some benefits in there, some bonus payments, 
whatever goes on, and round it up to $300 million. If you have 
$300 million of true obligation and you are sitting on a 
balance of your reserves is at 1.64 billion--wait a second, 1.2 
billion, excuse me, 1.2 billion in accumulated reserves, that 
is four times the amount that is truly, totally obligated.
    The balance of your $164 billion that I am showing, $164 
billion is your cost going out, $100.8 billion revenue coming 
in. Okay? This is your in and out numbers. That is truly an 
exercise of the books that you are handling for other people. 
If there is a change in that, there is going to be an equal 
change in the obligation that goes out.
    Your true obligation is about 250-to $300 million a year. 
Why I am asking is that at $1.2 billion of accumulated 
reserves, you are talking about 4 years' worth of time. You 
would certainly be able to modify your business plan, your 
business model in a year's time, if there was that dramatic of 
a change. I just do not understand why this organization has a 
requirement for such a high reserve amount.
    I am not sure who is best equipped to answer this question. 
This question is for whoever may be able to take it up. I want 
to ask you about another revolving fund. It is the Pershing 
Hall in Paris.
    Pershing Hall was purchased and organized by a group of 
World War I veterans and American Legion members as a memorial 
and gathering place. Since then, it has been turned over to the 
VA. It has become dilapidated and renovated several times, and 
most recently leased to a hotel and then to a shoe store. 
Today, VA collects the rent and is allowed to spend a portion 
of it on receptions.
    According to the Legion members in Paris, it no longer 
serves any public purpose and its collection of historical 
artifacts has been scattered. Are you aware of the situation? 
Anybody? Do you think this revolving fund has mutated into a 
pure moneymaker and forgotten its original purpose?
    Mr. Larkins. Well, first off, I just want to, for the 
record, we can provide you some expenses that make up why we 
need the reserve that is been there. Typically, for our 
Franchise Fund, sir, we keep 1 to 3 months of operating reserve 
on task. Again, there is some other expenses there, like you 
said, outside of salaries. We are happy to provide, and take 
that for the record.
    For the Supply Fund, there is about 6 months of operating 
reserves. Again, this is information that we can provide to you 
so that you can get a clearer picture.
    Now, in relation to Pershing Hall, that is not something 
that is under our purview today, but we are happy to take this 
for the record so that we can address your concerns. You know, 
my main oversight is for the Franchise Fund and the Supply 
Fund, sir.
    Mr. Rosendale. Wonderful. Will you commit with us today 
then, Mr. Larkins, that you will get that information and set 
something up with committee on Pershing Hall so we can find out 
exactly what is going on with that property?
    Mr. Larkins. We will take that for the record. Yes, sir.
    Mr. Rosendale. Okay. Going back to the reserve funds, 
again, the reserve funds, I truly understand when there is a 
need for an obligation, but there is not going to be an 
obligation. If you have a 4-month operating cost, okay, there 
is not going to be that large of a true obligation because you 
either have a customer that is having you service their 
account, so you have revenue in and revenue going out. If that 
customer goes away, you are certainly not going to have the 
obligation for that bill to be paid because that customer is no 
longer going to be creating that obligation, so you will not 
have that revenue.
    The true obligation and reserves that are necessary for the 
organization is the salary for the employees and to have 4 
years of salary requirement in reserve, that is far too much 
money.
    I yield back.
    Mr. Larkins. If I can address that just real quickly. We 
will, you know, again, we will get you this information. There 
are more expenses out there than just salary. We actually have 
buildings, you know, that we are renting, and there is other 
overhead that we can definitely be able to explain to you 
further. Thank you.
    Ms. Kiggans. Thank you, Mr. Rosendale.
    I just have a few more questions, so I will yield a few 
minutes to myself.
    Mr. Larkins, why does the VA publish the annual report for 
the Franchise Fund, but not for the Supply Fund?
    Mr. Larkins. No, thank you for that question.
    This is actually one of the questions that I asked when I 
first took this job in 2019. The Franchise Fund is more of an 
enterprise business entity, meaning we are actively selling 
services to not only VA, but to other government agencies. 
Okay.
    The Supply Fund is strictly more so with services to VA. 
Right? Therefore, we do not necessarily put together a public 
facing document that is, you know, put out there for everyone 
to view, but we have access. We have this information, and 
anyone who desires it, we can give them access to that 
information.
    Ms. Kiggans. Thank you for that and also for Mr. Larkins. 
If the committee had not held this hearing, then how would we 
have found out about the Supply Fund loss?
    Mr. Larkins. That is a good question. We do put this 
information out there in the audit reports. I think this is a 
classic thing of, again, like, if you ask, we give you the 
information, but you are right, there is probably other areas 
where we could provide information on a regular basis if it is 
required.
    Ms. Kiggans. Ms. Matta, can you provide an example in which 
a revolving fund violated the Antideficiency Act?
    Ms. Matta. Yes. The Antideficiency Act requires agencies to 
have a system of funds control. In fiscal year 2023, the 
Department of Housing and Urban Development reported to us that 
they had counted the value of reimbursable agreements that they 
were anticipating getting and had obligated against those 
anticipated receipts before they received them. That violated 
the Antideficiency Act's prohibition against obligations before 
you receive the amounts. That violation is in GAO's compilation 
of ADA reports that we published in December.
    Ms. Kiggans. Great. Thank you.
    Then, Ms. Riffel, when was the last time that a VA 
revolving fund violated the Antideficiency Act?
    Ms. Riffel. Yes, I actually am not aware. I will defer to 
Mr. Larkins and see if he is aware.
    Mr. Larkins. From my aware, we have not had an 
Antideficiency Act within the VA revolving funds.
    Ms. Kiggans. Mr. Mrvan, you do not have any other 
questions?
    Great. I think that is all we have for today, so thank you 
all for being here today and for answering all of our 
questions.
    I ask unanimous consent that all members shall have 5 
legislative days in which to revise and extend their remarks, 
and include any extraneous material. Hearing no objection, so 
ordered.
    This hearing is now adjourned.
    [Whereupon, at 3:42 p.m., the subcommittee was adjourned.]
    
=======================================================================

                         A  P  P  E  N  D  I  X

=======================================================================

                    Prepared Statements of Witnesses

                              ----------                              


                  Prepared Statement of Teresa Riffel

    Good afternoon, Chairwoman Kiggans, Ranking Member Mrvan, and 
Members of the Subcommittee. Thank you for the opportunity to testify 
today on the Department of Veterans Affairs' (VA) Revolving Funds and 
how these funds support VA's mission to care for Veterans, their 
families, caregivers, and survivors. I am accompanied by Leroy Larkins, 
Executive Director for Revolving Funds and Phillip Christy, Deputy 
Executive Director for Acquisition, Logistics, and Construction.
    VA Revolving Funds, consisting of the Supply Fund and Franchise 
Fund, provide high-quality, cost-effective support services by 
streamlining processes and optimizing the value of common 
administrative services to VA's Administrations and Staff Offices and 
other government agencies. Shared service offerings allow VA Revolving 
Funds customers to focus on performing their mission-critical functions 
of providing high-quality care, benefits, and services to Veterans and 
eligible family members. Better support to VA employees for common 
administrative services means better services for Veterans, their 
families, caregivers, and survivors. VA is proud to serve as a Federal 
shared service provider.

VA Revolving Funds History

    VA's Supply Fund is authorized by 38 U.S.C. Sec.  8121. In July 
1953, President Dwight D. Eisenhower signed legislation authorizing a 
revolving supply fund to maintain and operate a supply system for VA, 
including procurement of goods and services, equipment, personal 
services, and the repair and reclamation of used, spent, or excess 
personal property. The Supply Fund is authorized to provide services on 
a reimbursable basis to VA and the Department of Defense. Additionally, 
the Supply Fund uses authorities under the Economy Act and Government 
Employees Training Act with other government agencies.
    VA's Franchise Fund was established under the authority of the 
Government Management Reform Act of 1994 (P.L. 103-356), and the VA and 
Housing and Urban Development and Independent Agencies Appropriations 
Act of 1997. VA was selected by the Office of Management and Budget 
(OMB) in 1996 as one of six Executive branch agencies to establish a 
franchise fund pilot program. VA's Franchise Fund began providing 
common administrative support services to VA and other government 
agencies in 1997. In 2006, the Military Quality of Life and Veterans 
Affairs Appropriations Act, P.L. 109-114, made VA's Franchise Fund 
permanent.

Operations and Management of VA Revolving Funds

VA Supply Fund

    The Supply Fund is a self-sustaining, revolving fund that supports 
the operation of a supply system at VA. As such, no Congressional 
appropriation is required. Revenue is realized from fees on 
acquisitions of goods and services from both VA and other government 
agency customers as approved by VA's Revolving Fund Board of Directors.
    The Supply Fund comprises the Office of Acquisition and Logistics 
and the Office of Procurement, Acquisition, and Logistics, which are 
organizational elements within the Office of Acquisition, Logistics, 
and Construction. The Supply Fund is also the funding source for the 
Office of Small and Disadvantaged Business Utilization.
    The Supply Fund provides a broad spectrum of acquisition services, 
category management oversight, and logistics support operations to VA 
customers and other government agencies (6 percent of total revenue in 
fiscal year (FY) 2023). Service offerings include awarding and 
administering cost-effective multiple award and national contracts to 
meet the health care-related information technology (IT), supply, and 
equipment needed to operate the largest integrated health care system 
in the Nation.

VA Franchise Fund

    The Franchise Fund is a self-sustaining revolving fund providing 
common administrative services which are funded on a fee-for-service 
basis rather than through appropriations. This means organizations, 
internal to VA and external agencies, provide reimbursement to the fund 
for services received. As such, no Congressional appropriation is 
required.
    The Franchise Fund is comprised of an administrative office and 
eight self-supporting enterprise centers. VA's enterprise centers 
provide administrative services in the areas of IT, financial 
management, personnel security and law enforcement, and human 
resources. The complete list of the Franchise Fund enterprise centers 
includes Information Technology Infrastructure Operations, Debt 
Management Center, Financial Services Center, Internal Controls Support 
Center, Law Enforcement Training Center, Personnel Security 
Adjudication Center, Human Capital Services Center, and the Center for 
Enterprise Human Resources Information Services. Each focuses on 
adopting efficient, standardized business processes resulting in high 
customer satisfaction. VA's enterprise centers are accountable to the 
Revolving Funds Board of Directors and adhere to guidance on quality, 
cost, and customer service.
    The Franchise Fund enterprise centers also support the OMB Cross-
Agency Priority Goal of Sharing Quality Services, ``The Government 
strives to identify opportunities to improve stewardship of taxpayer 
dollars, to create high performing, centralized capabilities for 
mission-support functions and to make more resources available for 
agency mission-specific work.''
    The Franchise Fund enables VA to leverage commercial solutions and 
innovative practices to provide high-quality cost-effective solutions 
to VA and other government agencies. The enterprise centers are 
required to recover all their expenses through revenue collection, 
i.e., their operations are totally dependent upon revenues realized 
from internal and external customers' purchases of services. In 
addition, they also market their services as appropriate to other 
government agencies (15 percent of total revenue in FY 2023), including 
the Department of Homeland Security, Department of Health and Human 
Services, and Department of the Air Force. Providing services to other 
government agencies spreads the Franchise Fund's fixed costs over a 
larger unit base, which leads to lower costs for all customers, 
including customers internal to VA. This economy of scale leads to more 
effective use of taxpayer dollars.

VA Revolving Funds Oversight and Best Practices

    Oversight for VA's Revolving Funds is conducted through the 
Revolving Funds Board of Directors which functions as the principal 
governance body overseeing the Supply Fund and Franchise Fund's 
strategic priorities, goals, and objectives. It also provides strategic 
leadership for the Supply and Franchise Funds' operations, execution, 
and management of overall risks and challenges. The Revolving Funds 
Board of Directors is co-chaired by the Deputy Chief Financial Officer 
and Deputy Chief Acquisition Officer of the Department with board 
members consisting of six other VA senior leaders from the Veterans 
Health Administration, Veterans Benefits Administration, National 
Cemetery Administration, Office of Human Resources and Administration/
Operations, Security, and Preparedness, and Office of Information and 
Technology. VA's Administrations and Staff Offices' participation on 
the Revolving Funds Board of Directors ensures Revolving Funds 
resources strategically serve VA's mission.
    To emphasize transparency and accountability for a $2.2 billion 
budget, each Franchise Fund Enterprise Center and Supply Fund 
Acquisition Center is required to complete a 2-year Business Plan on an 
annual basis. The Revolving Funds Board of Directors reviews and 
approves each Business Plan which details specific revenue and expense 
projections, full-time equivalent staffing levels, and contract support 
requirements prior to funds execution. Information from the approved 
Business Plans is used to develop Budget Summary data and is included 
in Part 5 of the VA President's Budget Submission.
    The Revolving Funds Board of Directors also ensures that each 
entity complies with their respective Business Plan through monthly 
budget execution reviews. Explanations are provided for variances above 
or below 10 percent from estimates and briefed to the Revolving Funds 
Board of Directors during quarterly meetings. In addition, the 
enterprise and acquisition centers establish key performance indicators 
each year. These key performance indicators help the Revolving Funds 
Board of Directors gauge progress toward achieving customer service 
goals and progress is briefed during quarterly meetings.
    Finally, VA Revolving Funds financial statements are audited by a 
private sector public accounting firm each year to provide an 
independent assessment of each Revolving Fund's financial stewardship. 
As a result of sound financial management business practices, the 
Franchise Fund received 26 and the Supply Fund received 16 consecutive 
unmodified ``clean'' opinions.
    In closing, VA's Revolving Funds provide shared services to meet 
customer service demands effectively and efficiently, providing 
significant benefit to VA's Administrations and Staff Offices, as well 
as other government agencies. As the Government Accountability Office 
(GAO) noted in a recent report, ``Commerce Working Capital Fund: Policy 
and Performance Measure Enhancements Could Help Strengthen Management'' 
(GAO-23-104624), on a similar function in another agency, ``Given the 
fiscal pressures facing the federal government, consolidating and 
sharing services--such as payroll or information technology services--
within and among agencies is one-way agencies can operate more 
efficiently. Shared services may also allow agencies to benefit from 
economies of scale and take advantage of specialized expertise.'' VA's 
Revolving Funds adhere to this principle and are consistent with GAO's 
recommendation.
    Madam Chairwoman and Members of the Subcommittee, thank you again 
for the opportunity to discuss VA's Revolving Funds. This concludes my 
testimony. My colleagues and I are happy to respond to any questions 
you may have.

                   Prepared Statement of Julie Matta
                   
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                 [all]