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[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]

 INVESTIGATING HOW VA IMPROPERLY PAID MILLIONS TO INCARCERATED VETERANS

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

                                HEARING

                               before the

       SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL AFFAIRS

                                 of the

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

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                      TUESDAY, SEPTEMBER 27, 2016

                               __________

                           Serial No. 114-82

                               __________

       Printed for the use of the Committee on Veterans' Affairs

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                     COMMITTEE ON VETERANS' AFFAIRS

                     JEFF MILLER, Florida, Chairman

DOUG LAMBORN, Colorado               CORRINE BROWN, Florida, Ranking 
GUS M. BILIRAKIS, Florida, Vice-         Minority Member
    Chairman                         MARK TAKANO, California
DAVID P. ROE, Tennessee              JULIA BROWNLEY, California
DAN BENISHEK, Michigan               DINA TITUS, Nevada
TIM HUELSKAMP, Kansas                RAUL RUIZ, California
MIKE COFFMAN, Colorado               ANN M. KUSTER, New Hampshire
BRAD R. WENSTRUP, Ohio               BETO O'ROURKE, Texas
JACKIE WALORSKI, Indiana             KATHLEEN RICE, New York
RALPH ABRAHAM, Louisiana             TIMOTHY J. WALZ, Minnesota
LEE ZELDIN, New York                 JERRY McNERNEY, California
RYAN COSTELLO, Pennsylvania
AMATA COLEMAN RADEWAGEN, American 
    Samoa
MIKE BOST, Illinois
                       Jon Towers, Staff Director
                Don Phillips, Democratic Staff Director

       SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL AFFAIRS

                   RALPH ABRAHAM, Louisiana, Chairman

DOUG LAMBORN, Colorado               DINA TITUS, Nevada, Ranking Member
LEE ZELDIN, New York                 JULIA BROWNLEY, California
RYAN COSTELLO, Pennsylvania          RAUL RUIZ, California
MIKE BOST, Illinois

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

                              ----------                              

                      Tuesday, September 27, 2016

                                                                   Page

Investigating How VA Improperly Paid Millions To Incarcerated 
  Veterans.......................................................     1

                           OPENING STATEMENTS

Honorable Ralph Abraham, Chairman................................     1
Honorable Dina Titus, Ranking Member.............................     2

                               WITNESSES

The Honorable Michael J. Missal, Inspector General, Office of 
  Inspector General, U. S. Department of Veterans Affairs........     3
    Prepared Statement...........................................    22

        Accompanied by:

    Mr. Nick Dahl, Director, Bedford Office of Audits and 
        Evaluations, Office of Inspector General, U. S. 
        Department of Veterans Affairs

Ms. Beth Murphy, Director, Compensation Service, Veterans 
  Benefits Administration, U. S. Department of Veterans Affairs..     5
    Prepared Statement...........................................    25

        Accompanied by:

    Mr. Willie Clark, Acting Deputy Under Secretary for Field 
        Operations, Veterans Benefits Administration, U. S. 
        Department of Veterans Affairs

    Mr. David R. McLenachen, Director, Appeals Management Center, 
        Veterans Benefits Administration, U. S. Department of 
        Veterans Affairs
 
 INVESTIGATING HOW VA IMPROPERLY PAID MILLIONS TO INCARCERATED VETERANS

                              ----------                              

                      Tuesday, September 27, 2016

             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 10:33 a.m., in 
Room 334, Cannon House Office Building, Hon. Ralph Abraham 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Abraham, Lamborn, Zeldin, 
Costello, Bost, Titus, Brownley, Ruiz.

          OPENING STATEMENT OF RALPH ABRAHAM, CHAIRMAN

    Mr. Abraham. The Subcommittee on Disability Assistance and 
Memorial Affairs will now come to order. And I want to thank 
the witnesses for being here today. I think I met all of you.
    According to a June 28, 2016 IG report, the VA has failed 
to process incarceration adjustments in a timely manner. To 
date, VA's error has resulted in more than $100 million of 
overpayments. What is worse, if VA does not address this issue 
soon, the IG estimates that the VA will issue more than $200 
million in overpayments between fiscal year 2016, and fiscal 
year 2020. And this is simply not acceptable.
    By law, if a beneficiary is incarcerated for more than 60 
days, VA is usually required to reduce compensation and pension 
benefits to no more than the ten percent disability rate. The 
IG recently discovered that the VA has not processed the 
incarceration adjustments in a timely manner since 2008. The 
veterans who receive these overpayments have committed crimes, 
but the overpayments are not their fault. VA's testimony blames 
the veteran for not notifying VA of his or her incarceration. I 
have a copy of an attachment to a VA decision letter, and I 
know that there is one buried sentence stating that 
incarceration affects their rights to payments. At the very end 
of the document is a blanket request that veterans contact VA 
if there is a change in any condition affecting their right to 
payments. However, the information sheet does not clearly 
explain how the veteran is supposed to notify the VA, nor is 
there any warning that a debt may be created. Besides, does VA 
really expect a veteran to remember to contact VA from prison, 
what may be many years after receiving the decision letter so 
VA can reduce their compensation payment? I would venture to 
say that these veterans have more urgent matters on their 
minds.
    Moreover, even if the veteran did notify the VA of his or 
her incarceration, based on the IG report, there is no evidence 
that the VA would have promptly processed the adjustment.
    Regardless, nothing excuses the VA for failing to do its 
job. I am particularly concerned about the families of these 
veterans. On the other hand, although I am sympathetic to these 
families if a veteran is unable to repay the debt, American 
taxpayers will be on the hook.
    According to the IG report, this failure is not limited to 
one or two ROs, it is system wide. That means that the decision 
not to make the adjustment a priority was made at a higher 
level, probably by someone at the central office. And I also 
hope that we will receive these answers in a timely manner, 
unlike the VA's failure to respond to the questions from the 
record that the Subcommittee submitted on July 25, 2016 
following the hearing, ``TBI Claims: VA's Failure to Provide 
Adequate Examinations.''
    I am also frustrated that despite repeated requests, it was 
only last night that the VA finally responded to questions 
submitted by my staff on the subject of the present hearing, 
questions submitted over a month and a half ago. VA cannot 
continue to avoid answering questions to escape scrutiny.
    Ms. Murphy, I expect that we will receive VA's responses to 
our questions on the overpayments by no later than the end of 
this week. With that, I call on our distinguished Ranking 
Member Ms. Titus for her opening statements.

        OPENING STATEMENT OF DINA TITUS, RANKING MEMBER

    Ms. Titus. Well thank you very much, Mr. Chairman. Like 
you, I am concerned about the improper payments that are 
outlined in the GAO report, and I look forward to hearing from 
the VA about what can be done to eliminate the problem. I hope 
you all, our witnesses today, will make recommendations as to 
how we can help and assist in this effort. I would remind the 
Committee, however, that it was Congress that in its infinite 
wisdom that passed that law and wrote it that required the 
veteran to call from prison and let the VA know they were 
having a change in status.
    Today's hearing is focused on just one small part of the 
many responsibilities of the VBA. We realize that, and I think 
it is important that we take a look at the whole picture. Over 
the past four years, the VBA has made significant progress in 
reducing the workload for the backlog. This is something that 
we asked you to do, and you have done it. Unfortunately, over 
the same time work has piled up in other areas. You squeezed 
the balloon, the air has moved to another part.
    In July, 2013 there were more than 883,000 disability and 
compensation claims waiting for a decision by the VA. By July 
of 2015, the claims inventory had been reduced to 375,000. This 
is a reduction of half a million claims in just two years. That 
is commendable. In terms of the backlog claims, the claims that 
have been pending for more than 125 days, you also made 
significant improvement. In March of 2013, there were 611,000 
claims that were considered to be backlogged. Veterans were 
waiting for years for their initial decisions on those claims. 
But now thanks to your hard work, veterans are waiting only 130 
days for a decision on their initial claim, and 115 days if 
they utilize the fully developed claim process which this 
Committee helped to establish.
    In clearing out the backlog, however, we asked you to make 
some tough decisions, and the results of that have been 
unfortunate in some areas. While the benefits backlog was a top 
priority, other work was put on the back burner, and that is 
one of the things that we are addressing today. Our 
Subcommittee was promised that once the claims and pension 
backlog was reduced, resources would be moved around and 
utilized to work on other priorities within the VBA. I am 
interested in hearing from you all, how the VBA is going to 
maintain that benchmark or those benchmarks that we set for 
timeliness of benefits claims while also addressing the non-
rating backlog and the backlog of appeals, which we have talked 
about over and over again.
    Incarcerated veterans' claims equate to 1.19 percent of the 
total non-rating workload of the VBA. These claims represent 
less than 25,000 claimants nationwide, or half a percent of the 
total pending rating and non-rating workload. Our Subcommittee, 
however, should not forget to look at the larger issues as 
well. There are currently 213,000 non-rating claims waiting an 
average of 350 days for a decision. There are nearly half a 
million veterans waiting more than three years on average for 
their decision on an appeal. In sum, total that is nearly 
three-fourths of a million claimants waiting extensive periods 
of time for something from the VA, so we need to be focusing 
our attention now on all of those backlogs, including these for 
incarcerated veteran problems.
    So Mr. Chairman, I look forward to working with you on this 
issue and others along these same lines that come before our 
Subcommittee, and I yield back.
    Mr. Abraham. Thank you, Ms. Titus. And I know Chairman 
Miller is coming this way. He has been detained, but he does 
plan to join us. So I do ask unanimous consent that when he 
does arrive he be allowed to sit at the dais and make opening 
statements and to ask questions. Does anyone else have an 
opening statement that they would like to make? Okay. Hearing 
no objection, so ordered.
    Now I would like to welcome today's witnesses. We are 
honored to have the Inspector General Michael Missal with us. 
Congratulations on your confirmation as the VA Inspector 
General. I am looking forward to working with you. And 
Inspector General Missal is accompanied with Mr. Nick Dahl, the 
Director of the Bedford Office of Audits and Evaluations. We 
also welcome the VA's witnesses. Ms. Beth Murphy is the 
Director of Compensation Service. She is accompanied by Mr. 
Willie Clark, Acting Deputy Under Secretary for Field 
Operations, and Mr. David McLenachen, Director of the Appeals 
Management Center. Mr. McLenachen is here today to answer 
questions related to his previous position as Deputy Under 
Secretary for Disability Assistance. I want to remind the 
witnesses that your complete written statements will be entered 
into the hearing record. Inspector General, you are recognized 
now for five minutes to present the testimony of the VA 
Inspector General.

                 STATEMENT OF MICHAEL J. MISSAL

    Mr. Missal. Thank you. Mr. Chairman and Members of the 
Subcommittee, thank you for the opportunity to discuss the 
OIG's June, 2016 report, ``Veterans Benefits Administration 
Audit of Compensation and Pension Benefit Payments to 
Incarcerated Veterans.'' This morning, as you noted, I am 
accompanied by Mr. Nick Dahl, Director of OIG's Audits and 
Evaluations Division in Bedford, Massachusetts.
    On May 2, 2016, I was sworn in as the Inspector General. 
Since that time, I have immersed myself to better understand 
the people, work, and priorities of our office. My integration 
has gone very well. I am impressed with the OIG staff, many of 
whom are veterans. Our office has a strong commitment and focus 
on bringing about positive changes in the integrity, 
efficiency, and effectiveness of VA programs and operations. I 
have submitted my written statement for the record so I will 
summarize.
    Federal law requires VBA to reduce compensation and pension 
benefit payments for veterans incarcerated for more than 60 
days in a Federal, state, or local penal institution. Our audit 
objective was to determine whether VBA was adjusting C&P 
benefits payments for incarcerated veterans. We found that VA 
regional office and pension management center staff did not 
consistently take action to adjust C&P benefits for 
incarcerated veterans.
    For those in Federal facilities ranging from May 2008 
through June 2015, VBA did not adjust veterans' C&P benefits as 
required in an estimated 53 percent of the cases. This resulted 
in improper payments totaling approximately $59.9 million. 
Without improvements, we estimate that VBA could make improper 
benefit payments totaling about $41.8 million for Federal 
incarceration cases from fiscal year 2016 through fiscal year 
2020.
    VA regional office and pension management center staff also 
did not take consistent and timely action to adjust C&P 
benefits for veterans incarcerated in state and local penal 
institutions. Based on incarceration notifications received 
from March 2013 to August 2014, the most current data available 
at the time of our audit, VBA did not effectively adjust 
veterans' C&P benefits in an estimated 18 percent of cases. 
This resulted in significant delays and improper payments 
totaling approximately $44.2 million. Without improvements, we 
estimate that VBA could make additional improper benefit 
payments totaling about $162 million for state and local 
incarceration cases from fiscal year 2016 through fiscal year 
2020. In total, we estimated potential improper benefit 
payments of about $307.9 million.
    In general, VBA did not place priority on processing these 
adjustments because VBA did not consider these non-rating 
claims to be part of the disability claims backlog. Both VBA 
central office staff from Compensation Service and the Office 
of Field Operations, as well as VA regional office service 
center managers and staff consistently reported that 
incarceration adjustments were not a high priority. Accordingly 
we recommended the Acting Under Secretary for Benefits increase 
the priority of VBA's incarceration adjustment workload.
    We made six recommendation to the then Acting Under 
Secretary for Benefits. These recommendations included 
increasing the priority of Federal, state, and local 
incarceration workload by making timely benefit adjustments 
when appropriate; reviewing Bureau of Prisons data on Federal 
incarcerations and issuing bills of collection to recover 
improper benefit payments; and monitoring the terms of its 
computer matching agreements and take timely action to extend 
the agreements when appropriate.
    The Acting Under Secretary for Benefits concurred with our 
recommendations. Management's planned actions were responsive 
and we will follow-up as required.
    In summary, VBA needs to prioritize its workload, make 
improvements to ensure sound financial stewardship over 
benefits earned through entitlements, and take timely actions 
that reduce improper benefit payments.
    Mr. Chairman, this concludes my statement. Mr. Dahl and I 
would be happy to answer any questions you or Members of the 
Subcommittee may have. I would like to add that this is my 
first House hearing as the Inspector General and I look forward 
to continuing the OIG tradition of providing the Committee with 
independent oversight reports on VA programs and operations. 
Thank you.

    [The prepared statement of Michael J. Missal appears in the 
Appendix]

    Mr. Abraham. Thank you, Mr. Missal. Ms. Murphy, you are 
recognized to give the department's testimony now for five 
minutes.

                    STATEMENT OF BETH MURPHY

    Ms. Murphy. Thank you. Good morning, Chairman Abraham, 
Ranking Member Titus, and Members of the Committee. As you 
mentioned earlier I am joined today by Mr. Clark and Mr. 
McLenachen. We appreciate the opportunity to respond to the 
concerns raised by the Committee regarding benefits paid to 
incarcerated veterans.
    Today I will address the recent IG audit of C&P payments, 
compensation and pension payments to incarcerated veterans. I 
will highlight VA's response to the IG recommendations and 
describe the actions taken by the department.
    Federal law requires VA to reduce compensation payments and 
terminate pension payments to individuals incarcerated for a 
period in excess of 60 days for conviction of a felony. 
Veterans receiving compensation or pension payments are 
responsible for notifying VA of their incarceration and the 
date of release. This important reminder is sent to veterans 
when they receive an award of benefits or an increase in 
benefits, and because VA does not always receive this 
notification from veterans we have established data matching 
agreements with the Federal Bureau of Prisons and Social 
Security as backup mechanisms.
    IG in its report in June, 2016 found VBA offices did not 
take timely and consistent actions to adjust payments made to 
incarcerated veterans in Federal institutions between May, 2008 
and June, 2015, and state and local institutions between March, 
2013 and August, 2014. As a result IG made recommendations to 
the department which included prioritizing incarceration 
adjustment workload, recouping overpayments, and renewing VA's 
formal agreement with Bureau of Prisons.
    In accordance with IG's recommendation VA has renews our 
data matching agreements and we are seeking to expand the type 
of electronic data we receive. This will enhance efficiency of 
the process and support future automation of incarceration 
adjustments.
    The VA's agrees with IG's recommendation to increase the 
priority of processing of incarceration adjustments. VBA has 
issued guidance to all regional offices to ensure these claims 
are appropriately prioritized. Claims are being processed based 
on the date of incarceration, focusing on working the oldest 
dates first.
    VA also agrees with the recommendations to initiate more 
timely development of the work product after receiving 
notification of incarceration from the veteran or from the 
Bureau of Prisons or Social Security, and to make more timely 
adjustments after the due process notification has been issued.
    VA agrees with the IG recommendation to initiate procedures 
to recover improper payments where necessary after due process 
has been afforded. As a result, VBA will continue to 
retroactively adjust awards of veterans who are currently 
incarcerated, as well as those who were previously but no 
longer incarcerated. Veterans who become indebted as a result 
of incarceration are notified they have a right to request a 
waive of the overpayment, offer a compromise, or establish a 
repayment plan to help ease the financial burden once released. 
Repayment options can include partial withholdings from future 
benefit payments. Veterans are provided with information on how 
to contact the debt management center in VA for assistance in 
resolving their debts.
    VA acknowledges the importance of timely processing of the 
non-rating workload on behalf of veterans, their families, and 
taxpayers. This includes the timely processing of award 
adjustments to incarcerated veterans. As VBA completed record-
breaking numbers of disability rating claims in recent years 
and eliminated almost 90 percent of the rating backlog one 
result is an associated increase in the volume of non-rating 
claims.
    In fiscal year 2015 VBA completed more non-rating claims 
than ever before. We will continue to prioritize these 
incarceration adjustments and balance resources accordingly to 
address non-rating inventory of claims. We will continue to 
renew and improve the data matching agreements with Federal 
Bureau of Prisons and Social Security so that all necessary 
data is included in their transmission of data to VA. And 
finally as part of VBA's continued transformational efforts we 
will improve our electronic systems to streamline the 
processing of incarceration adjustments.
    Mr. Chairman, this concludes my statement. We would be 
pleased to respond to the questions that you or the Members may 
have.

    [The prepared statement of Beth Murphy appears in the 
Appendix]

    Mr. Abraham. Thank you, Ms. Murphy. I will start the 
questioning. You made a comment in your opening statement there 
about you wanted to expand the electronic data and that leads 
into a question I want to ask. In April of 2015 VBA reentered 
into a computer matching agreement with the Bureau of Prisons, 
over seven years after the previous was allowed to lapse. 
However, according to the IG's report even after this agreement 
was signed VBA was still not working the backlog of 
incarceration adjustments ten months after the data was 
provided. So I guess my question is why were these adjustments 
not made in a timely manner?
    Ms. Murphy. Mr. Chairman, I would say that there were a 
number of factors at play, and I can start down the list. There 
are complications with the source of information and the data 
feeds that we get in particular.
    Mr. Abraham. Who inputs that data into the system? The 
Bureau of Prisons? The VA? I mean, how do they match up?
    Ms. Murphy. So it is my understanding that we provide 
information to Bureau of Prisons, they bump it against their 
lists, and then they provide us information back. A key piece 
of this, is the information we get, does not include the date 
of incarceration. So unless that is provided by, verified by 
the veteran or we get that making phone calls or doing 
development--
    Mr. Abraham. That is not on the Bureau of Prisons' match, 
with the day they got into the prison? I mean, that would seem 
like an important date.
    Ms. Murphy. The date of conviction is not included and the 
date of incarceration is not included. These are pieces of 
information that we have to follow-up on in a manual manner, 
making phone calls, sending letters. If we send a letter we 
have to give 30 days for the institution to respond. So there 
are manual processes, time lags involved in getting this 
information if it is not provided to us.
    Mr. Abraham. Okay. That is, you know, good enough for now.
    Mr. Abraham. We will come back. Inspector General Missal, 
this is a question for you, sir. Based on the VA's testimony, 
do you believe that there is an appropriate level of engagement 
to determine who was responsible for allowing the data sharing 
agreement with the Bureau of Prisons to lapse for seven years?
    Mr. Missal. We believe that this is now an issue that they 
are focused on. It did not appear to be an issue during our 
review. Holding a hearing like this certainly raises that issue 
again. One of our recommendations was to make sure that they 
are focused on that. We follow-up on all our recommendations.
    Mr. Abraham. And you guys are focused on it now, I am 
assuming, Ms. Murphy?
    Ms. Murphy. We are focused, sir. Yes, sir.
    Mr. Abraham. All right. I will take that as a yes. And I am 
going to come back to you, Ms. Murphy--
    Ms. Murphy. Yes.
    Mr. Abraham [continued]. --for the next question. Now I 
understand that you are new to your role as the Director of the 
Compensation Service whose responsibility was to ensure that 
the data sharing agreement with the Bureau of Prisons was in 
place. So who is responsible now? I mean, who is the go to 
person that makes sure this is happening?
    Ms. Murphy. So there are lots of different pieces of this. 
There is an IT piece of this to make sure that the information 
is provided securely.
    Mr. Abraham. All right. So who, all right, so give me that 
name.
    Ms. Murphy. I do not have a particular name. On the IT side 
there are folks that work with us on that. But as far as going 
forward I have got my eye on that ball and making sure from the 
Compensation Service aspect that we will make sure that 
matching agreement remains viable going forward.
    Mr. Abraham. Well if you could give me, I would appreciate 
it if you could give me that name of that IT person. But who, 
who is ultimately responsible for this? I mean, whose doorstep 
does it land at, at the end of the day?
    Ms. Murphy. I would say now going forward I will be 
watching this. It is my responsibility. I work with other 
partners. We work with a bigger universe, including IT, working 
with the Bureau of Prisons and Social Security, all the right 
parties working together to make sure we have that data feed.
    Mr. Abraham. And again I, you know, I am, you know me, I am 
pretty stickler about accountability. Who was it, whose 
responsibility was it at the time it lapsed?
    Ms. Murphy. Sir, I would say, and I am not being evasive, I 
have asked. I have looked into this. There were a lot of 
factors at play. And if I could comment on that a little bit? 
This was over a long time period.
    Mr. Abraham. Mr. McLenachen, do you know that answer, to 
who was overall responsible for this lapse period here?
    Mr. McLenachen. I cannot provide you a name either, but I 
can tell you that this is administered at the service level, 
the Compensation Service level. But if you look back the 
history is pretty long regarding this issue. Congress first 
enacted this law in 1980. The data that we get from the Bureau 
of Prisons and from Social Security is not really clean data 
that we can use, like we have in other non-rating 
circumstances, to automate how we do this. Until we get the 
data to that point, just because of the nature of the law, we 
are always going to have a certain period of time where we are 
having to go back and adjust these--
    Mr. Abraham. But my point is, and hopefully you understand, 
somebody has got to own this. Somebody has to be accountable 
for this seven-year lapse. I mean, it is just not responsible 
government. It is not responsible business. It is not 
responsible for our taxpayers. And it is not responsible for 
the veterans' families.
    Mr. McLenachen. So, during the period that I was Deputy 
Under Secretary for Disability Assistance, one of the programs 
I administered was the compensation program. To that extent I 
am accountable because this has not happened. It is 
administered at the service level. Nonetheless, it was under my 
control during about the 2014 to July of 2016 period.
    Mr. Abraham. Well I thank you for that.
    Mr. McLenachen. So I will tell you that I was accountable 
during that time.
    Mr. Abraham. I appreciate that. I am out of time. Ms. 
Titus?
    Ms. Titus. Thank you, Mr. Chairman. I would just ask Mr. 
Missal about his perspective of the bigger picture. I know this 
is a problem and we need to focus on it. But let us work on the 
whole non-rating workload. Could you remind us of the last time 
that the IG's office took a look at that whole workload? And 
would you say, I think I know but I want to hear it from you, 
would you say it is fair that you all did not focus your 
auditing efforts on the non-rating workload because you were 
focused on the rating workload for all the more recent years?
    Mr. Missal. We are looking at all of the benefit payment 
programs that they have on a fairly regular basis. Part of the 
audit group that I have is divided into benefit inspection 
teams that look at it, so we are looking at both rating and 
non-rating claim processes as well. And this is not something 
that we thought was unusual given the focus on the rating 
claims.
    Ms. Titus. Well what, can you tell us what the state of 
that is now, what you are looking at with these different 
teams?
    Mr. Missal. We have a number of different programs that we 
are looking at now. We have put out various reports over time 
and we have a number of projects in the work stream.
    Ms. Titus. Well I have information here that looks like 
you, the last time you looked at the non-rating workload and 
issued a report it was February, 2008. Now apparently a lot can 
happen in almost ten years, or eight years. So I would not say 
that is kind of keeping up with the problem.
    Mr. Missal. We do look at it. I have been in the job now 
almost five months--
    Ms. Titus. And I understand that is not fair to blame you 
for something in 2008.
    Mr. Missal [continued]. and with respect to our benefits 
team, in fact, we had recent discussions on that in terms of 
going forward, what we are looking at. And we actually expanded 
our benefits inspection team. We now have three separate teams 
that are going to be working so we are going to be expanding 
our look at the benefit programs.
    Ms. Titus. I think that would be helpful so we do not get 
so far behind the curve. That makes it more difficult to make 
improvements when you do find problems and things like this 
come out.
    Mr. Missal. We agree.
    Ms. Titus. Thank you. All right I would like to kind of 
shift over to Ms. Murphy. Just to go back to some of the 
details of how this process works, some context to how the non-
rating claims related to the prisoners' process versus the 
other people's claims, how we could change the law to make it 
better. Do you not really think it is silly that you are 
relying on a prisoner to call you up and say, hey, I got 
arrested, cut off my benefits? I mean, give us a little help 
here so it is not just a hearing about accountability, we can 
actually do something.
    Ms. Murphy. Ranking Member Titus, thank you. And thank you 
for your comments earlier for the context that this 
incarcerated veteran population of non-rating claims are just 
over one percent of all of our non-rating claims that we are 
working with. So it is a small subset, but all of our claims 
are important and we are not trying to put anything off. We 
have been focused on the rating claims, as you mentioned. But 
the more rating claims we do, potentially the more folks are 
entitled to benefits, and then non-rating claims flow from 
that.
    During this time period where we were giving prioritization 
to backlog, we have designated non-rating and appeals folks. 
And during their daylight hours we said you have to continue to 
do rating and appeals work. So we did not take them off of that 
work during their regular hours. So there was continued work 
and focus on non-rating and appeals.
    As far as non-rating work in the last few years, we have 
really been looking at automation to help us standardize and 
make this go smoother and faster. Getting the essential data 
elements we need from Bureau of Prisons will help that. Support 
for our IT systems will help that. So that we have either 
claims that we do not have to touch, or that we do not have to 
touch, with data support and evaluation support tools. So I 
think automation is a piece, getting the right feed, and 
support tools are a big part of this.
    Ms. Titus. Should we not have somebody here from the prison 
side of things to talk about what they need to do to help you 
with this to do it better?
    Ms. Murphy. Well we are working with them now just to make 
sure that we can get as much information as possible, also with 
Social Security. I would say that they are good partners. We 
just have to really get down into the weeds of what we need to 
have to stop chasing this in a manual way.
    Ms. Titus. Do you need additional resources from us? Have 
you asked for any additional resources?
    Ms. Murphy. Yes, ma'am. In the fiscal year 2017 budget 
request that is still pending there is about 300 more FTE for 
non-rating that has been asked for. We also appreciate the 
support from Congress in the past. We have added some non-
rating FTE, full time employees, in the past couple of years. 
And that is helping. We are bringing down the dependency 
claims. We have made great strides in that, drill pay 
adjustments as well, so they are some of the very large buckets 
that put money into veterans' hands that we are working through 
and have made great strides.
    Ms. Titus. Thank you. Mr. Chairman?
    Mr. Abraham. Mr. Lamborn, you are recognized for five 
minutes.
    Mr. Lamborn. Thank you. I am going to build on the 
questions that have already been asked by the Chairman and 
Ranking Member. You said you are asking for 300 more FTEs. Is 
that just for this problem? Or is it a wider range of issues 
that that 300 people would be working on if you received them?
    Ms. Murphy. That would be for the whole category of non-
rating claims that we complete. And this incarcerated veteran 
piece of that is about one percent of that total. So there are 
other adjustments in the non-rating bucket.
    Mr. Lamborn. Okay, that helps put it in perspective.
    Ms. Murphy. Yes.
    Mr. Lamborn. Because that would otherwise eat up the entire 
recovery. So it sounds like you know what you want to do but 
you have not started doing it, is that a fair assessment? I 
mean, you have not talked to SSA. You have not talked to BOP. 
Or you have talked to them but no one has sat down and hammered 
out a final agreement?
    Ms. Murphy. We have the agreement back in place. It is 
running. It has been in place since June. We have been getting 
the data information from Bureau of Prisons. We continue to get 
it from Social Security Administration. So that flow of 
information is coming. We have been working these.
    Another thing I want to point out is that during all of 
this time period, we were working these. We did get information 
from the veterans. Many do call us. We do get information from 
other sources. So when we identified these in working a claim, 
if we know that someone is in prison, we make that adjustment.
    Mr. Lamborn. No, and I am glad that it is done on a case by 
case basis.
    Ms. Murphy. Yes.
    Mr. Lamborn. But it obviously has to be automated and you 
have to have the accurate social security numbers and you have 
to know the dates of incarceration. Is there anything else out 
there? Or just those two bits of information?
    Ms. Murphy. That primarily is the information we would 
need. I think Mr. McLenachen may have more to add to that.
    Mr. McLenachen. Congressman, part of the problem is the 
nature of incarceration. It is a lot different than other 
things that we can automate, because you have the whole 
recidivism issue, we have early release, we have pre-trial 
confinement. It is just the nature of incarceration that makes 
this one of the harder things to do, and one of the more 
complex things to do. And for that reason the data that would 
allow us to automate is just not there yet. So it is not just 
getting the data elements, the additional data elements, it is 
the nature of incarceration that makes it very difficult to 
automate.
    Mr. Lamborn. Does it go back to the date of incarceration? 
Or is it 60 days forward?
    Mr. McLenachen. It is the 61st day of incarceration after a 
conviction for a felony or a misdemeanor, depending on whether 
it is compensation or pension.
    Mr. Lamborn. Okay. And I understand that there are a lot of 
wrinkles here. Halfway houses--
    Mr. McLenachen. Exactly.
    Mr. Lamborn [continued]. --all those things.
    Mr. McLenachen. We do not reduce for certain circumstances, 
like a halfway house. We do take those types of things into 
consideration. And again, you have to assume that the Bureau of 
Prisons, or a state or local penal institution, has accurate 
data about when somebody is released after an incarceration, or 
when the transition occurs from pre-trial confinement to actual 
incarceration for a conviction, and that is part of the 
problem. And then we have, individual veterans who go in and 
out of the system many times during a certain period of time.
    Mr. Lamborn. This is complicated. Paragraph five on this 
handout says the amount not payable may be apportioned to a 
spouse, dependent children, or parents. What does that mean?
    Mr. McLenachen. That means that if a veteran is 
incarcerated and they have a family that they are providing 
support for, the benefits can be apportioned by VA to the 
spouse so that while the veteran is incarcerated the spouse can 
continue to receive the veteran's benefits for support.
    Mr. Lamborn. So if someone is married they would get that 
consideration?
    Mr. McLenachen. Yes, they have to apply--
    Mr. Lamborn. Or if they are single, they will not?
    Mr. McLenachen [continued]. They have to apply for it. If 
there is a veteran who has the responsibility to support family 
members--
    Mr. Lamborn. Is it routine to grant that?
    Mr. McLenachen [continued]. It depends on the 
circumstances. They have to provide information about their 
ability to support themselves while their spouse is 
incarcerated: those type of situations. But in general, if the 
spouse can establish that they need the support of the 
compensation benefits, for example, then we would grant the 
apportionment.
    Mr. Lamborn. And in terms of recouping debts, is that ever 
done? Or is that basically blown off?
    Mr. McLenachen. That is done. I believe Ms. Murphy has some 
information on how often we do that.
    Ms. Murphy. So there is a process and we look at various 
standards of equity and good conscience. The fault of the 
veteran, whether they should have told us that they had gone 
into prison, undue hardship, things like that are taken into a 
case by case account. The latest information I was able to get 
roughly overall with our overpayments and requests for waivers, 
it is a little over half of them are granted. But again, it is 
on a case by case basis and it depends on the facts and 
circumstances.
    Mr. Lamborn. Well I wish you would start doing this. I 
mean, it is complicated and it is going to take a lot more work 
and it needs to get to the automated stage and it is not there 
yet. The IG's report is very helpful but we just have not 
really followed through quite yet like we need to. Mr. 
Chairman, I yield back.
    Mr. Abraham. Thank you. Ms. Brownley, five minutes, please.
    Ms. Brownley. Thank you, Mr. Chairman. Ms. Murphy you had, 
in your testimony you said we are focused on this issue now, 
and I think, you know, my question is, you know, do you have 
any sort of checks and balances, you know, to know about 
problems that exist in the overall organization before the OIG 
has to investigate it and surface those issues? So you know, in 
the ideal world I would much prefer that you would be coming to 
us and saying, I have got this problem, I need your help in 
solving the problem, as opposed to the OIG having to raise the 
problem and then say, well now it is a priority. So could you 
comment on that?
    Ms. Murphy. Absolutely, Congresswoman. So we have a lot 
more data analysis and data available to us than ever before. 
The more we get into our electronic systems the better we are 
doing at tracking all the different types of actions that we 
have and being able to automate some of that. So we are able to 
move some of the folks from rating to non-rating, and balance 
out that work load. But as far as internal controls and checks 
and balances, our new national work queue is something that we 
are doing a better job of that as we move forward--
    Ms. Brownley. Were you aware of the problem before the OIG 
raised it?
    Ms. Murphy. So we have been aware of the fact that this is 
happening. But I think the fact that these were coming in and 
we were working them as we learned of them from other sources, 
or from the veteran themself, was part of the situation. So we 
knew we were working some and that there were, again, different 
pieces of the organization that were involved with getting the 
data, making sure the data matches were happening, making sure 
the flow was coming through IT in a secure, private manner. And 
there was some clunkiness in those pieces.
    Ms. Brownley. So understood. And I want to say that I think 
that, you know, your folks with VBA are working hard. Our 
office, my local office in my district, we are in touch with 
them all the time. I just hope that you understand the point 
that I am trying to make is that, you know, I would feel better 
if you were raising the issue versus the OIG having to raise 
the issues. And I know in many respects you are partners. But 
it would still, you know, I would feel better that we are 
recognizing the problem and trying to address it ahead of the 
OIG.
    So now that we have prioritized this as an issue, you know, 
if you could comment a little bit on what will be your process. 
You talked about, you know, future payments and being deducted 
from those future payments I think you said could be the 
solution. But what specifically, you know, is the process and 
have you decided on a process and is there, you know, a formula 
that is not one size fits all, or is it a formula depending on, 
you know, the particular set of circumstances, etcetera?
    Ms. Murphy. So very quickly a couple of points. In the old 
days and until just recently under this matching agreements, 
these work items adjustments that may need to be made on these 
incarcerated veterans was a paper process. Since we have gone 
into more of an electronic environment we were able to have 
that feed starting August 1st. So now that these are going out 
in an electronic work item to the regional offices. So we are 
not working with a paper process. So that is one thing. Number 
two, we have been able--
    Ms. Brownley. Well does the electronic process have a 
formula, of how to treat this? Or I am not sure how that 
answer--
    Ms. Murphy. Not so much a formula but there is less of a 
lag as to when we know that we have this work to do. And also 
as we get all of our work into the national work queue, that 
will help to balance the work and decide instead of 56 
different regional offices deciding what is the next right case 
to work, the system helps us determine that in a global sense.
    Ms. Brownley. Yes, I think I am just trying to drive at 
sort of, you know, specifically, you know, once you have the 
claim and now you are going to act on it more quickly, then how 
are you going to treat it? You know? And what is the formula? 
How much are you going to take out of that future check and 
really trying to understand the specifics of it. So in terms 
of, you mentioned that veterans, that some veterans do actually 
give notice, and not looking into the future but looking into 
the past, when those veterans did give notice were they 
addressed in terms of, you know, the deductions that they 
should be receiving? Or were they also sort of put on the back 
burner like the other claims?
    Ms. Murphy. We were working non-rating claims, as I said, 
all along. And incarcerated veterans were part of that. So just 
for a reference, the last couple of fiscal years we completed 
11,500 of these in fiscal year 2015, and completed so far this 
year almost 15,000 so far. And we have about 13,000 pending 
overall, Federal, state and local. So this is a body of work 
that has been moving. But again, the non-rating work was not 
prioritized at the same level as the rating workload was.
    You asked about the process. Again, very high level. We 
make the review of the incarcerated veteran. We look to see 
what their circumstances are. We send them notification to say 
we see that you are in a penal institution. After 60 days of 
being there we propose to reduce your benefit according to the 
law. The veteran has 60 days for due process to respond, tell 
us anything that might be relevant, including, hey, maybe you 
have the wrong person. After that 60 days is over we make the 
adjustment and send the final notification to the veteran with 
notification that they should contact our debt management 
center in St. Paul, which is our agent to collect those debts. 
They can contact St. Paul and request a waiver of this, a 
partial or a full waiver of this monies due. Then we engage on 
our Committee on waivers, look at the facts and circumstances 
and decide based on the standards of equity and good conscience 
if we are going to waive a portion of these overpayments in 
total or in part. And our debt management center finally also 
can set up a repayment plan that is a little more forgiving, 
stretches the payments out a little bit so it is not such a 
hardship on the veteran.
    Ms. Brownley. Thank you. I yield back.
    Mr. Abraham. Thank you. Mr. Costello?
    Mr. Costello. Let me commend my colleagues for their 
questions. There are still so many questions that were not 
asked that I do not know where to start. So let me speak with a 
couple of, Mr. Clark, first for you, towards the IG report VBA 
has planned to improve the process for incarceration 
adjustments had not been implemented as of June 14, 2016. Has 
the VA implemented the plan as of this date? And if so when? 
And if not, why?
    Mr. Clark. Mr. Costello, thank you for that question. And 
yes, we have. Starting on May 11th of this year we actually 
started processing those claims and with the expectation that 
we will complete them by the end of this calendar year, 
December 31st.
    Mr. Costello. So it was implemented as of May, so prior to 
June 14th, actually?
    Mr. Clark. That is correct.
    Mr. Costello. Okay. Mr. Missal, do you think the VBA's 
proposed plan to improve processing of incarceration 
adjustments will be effective? If so, why? If not, why not?
    Mr. Missal. As part of our work we made six recommendations 
which we felt best addressed the situation. As part of our 
process we monitor their progress toward meeting those 
recommendations and we do not release them from their 
obligation until they do so. So we will be doing that on a 
regular basis and our goal is to make sure it is an effective 
program based on the recommendations we made.
    Mr. Costello. Can we reconcile, and honestly if it is a 
week or two off it really does not matter I think in the grand 
scheme of things. But Mr. Clark is saying May 11th 
implementation occurred. Your IG report says as of June 14th 
implementation had not yet occurred. Can somebody try and 
reconcile that? I do not want to spend too much time on this. 
But because if it has now been implemented, whether it was 
implemented May 28th or June 15th or June 20th, at least it is 
now implemented.
    Mr. Missal. Yes--
    Mr. Costello. Do you know whether it has been implemented 
now?
    Mr. Missal [continued]. Yes, I would like to defer to Mr. 
Dahl, who is closer to this audit.
    Mr. Dahl. When we checked in June just before we were ready 
to issue our report the response we got was that they were not 
working the claims yet. Maybe they had gotten the word out in 
May, but we were told in June that they had not started yet.
    Mr. Costello. Okay, Mr. Clark?
    Mr. Clark. Yes, sir. We issued guidance on May 11th, and 
with the expectation to be completed by the end of December. So 
I can go back and check the actual day that the first person 
started. But we issued guidance--
    Mr. Costello. Okay.
    Mr. Clark [continued]. --on May 11, 2016.
    Mr. Costello. It would be nice for you to provide something 
in writing for the IG to basically sign off on that or say yes, 
we are on the same page now. Next question, and this really is 
something that bothers me, and it is not just exclusive to this 
proceeding today but writ large our oversight capacity here at 
the VA. It is my understanding that VA Committee staff has been 
told that the individual who failed to maintain the computer 
matching agreement has since retired, is that correct?
    Ms. Murphy. Congressman, as I mentioned earlier there are a 
lot of folks that are involved in this and over a long period 
of time. So I cannot--
    Mr. Costello. You do not know offhand? Sure, I am not going 
to, if you do not know offhand, you do not know offhand.
    Ms. Murphy. I do not know.
    Mr. Costello. Okay. It is my understanding that the person 
who failed to maintain the CMA has retired and therefore there 
was no disciplinary action taken against that individual. Could 
you confirm whether that is accurate or not for me by follow-
up?
    Here is something else that frustrates me. Staff has also 
been advised that we do not even know who that individual's 
supervisor is. And here is my, and that is also a source of 
frustration because, I mean, everybody has a supervisor, right, 
unless you are at the top. Why that is bothersome to me is when 
we are talking about using better technology in order to get to 
the bottom line to hold people accountable, and yet a computer 
matching agreement is intended to do that. And so if the 
computer matching agreement is intended to make things 
interoperable and you have an individual who is tasked with 
maintaining it does not do their job, I mean, the whole point 
of technology is if it is not working another set of eyes will 
be able to identify that rather quickly and so then you will be 
able to solve the problem. And that is a big source of concern 
for me. So I would appreciate any follow-up on that point.
    My final point, another question, is this. I understand 
that someone gets incarcerated, and the question I have for 
you, Mr. McLenachen, if you can answer at some point here is 
you said the nature of incarceration makes it difficult. I used 
to be a county commissioner and a lawyer. I sort of understand 
what you are saying with that. But I would ask you to embellish 
on that a little bit. But the question I have is the due 
process which has to occur in order for the 60-day notice, has 
to occur for you to stop the payment, must the due process go 
out before the stop payment--can the stop payment precede the 
due process notice? Or must the due process notice happen and 
only from that date forward stop payment can occur? And the 
reason why that is very important is if you are sitting on a 
pile of, you know, you are saying you are going to prioritize 
more of them. But if you are sitting on a pile of them until 
that due process goes out, payments are going to continue. And 
that is a real problem. Because until you send out the due 
process all these potentially improper payments are going to 
continue. Can somebody shed some light on that? And then I am 
over my time.
    Mr. McLenachen. You are absolutely correct. To answer your 
question about due process, yes, as a general rule we have to 
give due process before we take adverse action on a benefit 
payment.
    Mr. Costello. But can the, but the payment, can you, you 
cannot claw back a payment from a date that precedes the due 
process notice, correct? I would not think--
    Mr. McLenachen. No, that is not correct. We can--
    Mr. Costello. You can?
    Mr. McLenachen. We can retroactively recover--
    Mr. Costello. Okay. Very good.
    Mr. McLenachen [continued]. --overpaid.
    Mr. Costello. All right. So the actual date on which the 
due process notice goes out is not quite as significant because 
you can, you can--
    Mr. McLenachen. We can always go back, the same thing when 
we are generally paying benefits. Basically, there is 
retroactive action in everything we do. And I want to share 
with the Committee that a big focus for VA is our compliance 
with the Improper Payments Elimination and Recovery Act. That 
is discussed at the highest level in the department, it is 
tracked very carefully. This is among the types of improper 
payments that we have to report on in VA in every one of our 
benefit programs. So it is a big issue for us and that is why 
this program integrity oversight is very important. But 
basically we have improper payments in every part of our 
business and the idea is we have got to shrink the amount of 
time that it takes to make these adjustments to; we will always 
have improper payments but we need to make them smaller--
    Mr. Costello. Right.
    Mr. McLenachen [continued]. --rather than larger.
    Mr. Costello. Yeah. The question I failed to ask, since no 
one has shut me up, is I see the number, you know, 3,000, 
1,800, a couple of different numbers. How many actually were 
done timely and properly so that we understand, you know, how 
many, we see how many were improperly paid, right? How much, 
how often did the system actually work? I do not have that 
information in front of me. Because to your point, improper 
payments are going to happen in a system that large. We get it. 
The question is, how often is it happening?
    Mr. McLenachen. So it depends on the definition--
    Mr. Costello. I will yield back now that I am three minutes 
over.
    Mr. McLenachen [continued]. --the definition we are going 
to use for timely. There is no such standard. We are not doing 
them as fast as we should now, that is the bottom line. There 
is no standard. But just because of the fact that we need to 
get notice of the incarceration, provide 60 days of due 
process, and go through the steps that Ms. Murphy described, we 
are always going to have an improper payment that we have to 
retroactively go back and collect. But we need to do them 
quicker to shrink that.
    Mr. Abraham. Okay. Thank you, Mr. Costello. Just for the 
record I will follow-up a little bit with what Mr. Costello 
asked. We would also like, the Committee, the date that the VA 
started processing the backlog, okay? We are going to, we have 
a little time so we are going to have another round of 
questions right quick. And I will start them. This is going to 
be for you, Inspector General Missal. In 2015, the Major 
Management Challenge Report, your office had identified 
overpayments and improper payments as one of VA's management 
challenges. Do you agree that $100 million of improper payments 
to incarcerated beneficiaries was the result of poor 
management?
    Mr. Missal. Yes. I think our report outlines the various 
areas where we thought this was not managed in a proper way, 
and we thought this was a significant improper payment.
    Mr. Abraham. Okay. Thank you. And this next question is to 
you, too. The IG report addressed issues related to the VA's 
failure to reduce benefit payments when the veteran begins 
their incarceration sentence. Do you know if the VA is 
similarly failing to adjust veterans' payments back to their 
pre-incarceration level upon release?
    Ms. Murphy. So as we mentioned earlier--
    Mr. Abraham. That was to Mr. Missal.
    Ms. Murphy. Oh, I am sorry.
    Mr. Missal. I am sorry. Could you repeat that?
    Mr. Abraham. I can. The IG report addressed issues relating 
to the VA's failure to reduce benefit payments when the veteran 
begins their incarceration sentence. Do you know if the VA is 
similarly failing to adjust veterans' payments back to their 
pre-incarceration level on release?
    Mr. Missal. That was not part of our audit scope so we did 
not look at that. However, I would say that given the problems 
not only with having an agreement in place but even when an 
agreement was in place the information still was not being 
transferred because they did not have the necessary hookup, you 
would assume that they would have similar problems on the other 
side after the veteran was released from prison.
    Mr. Abraham. Ms. Murphy, do you have a comment on that? Go 
ahead.
    Ms. Murphy. I would agree generally. I would also mention 
that the similar situation that the veteran is required to 
notify us when they get out of prison. And for financial 
reasons they tend to be more compliant with notifying us when 
they get out of prison.
    Mr. Abraham. Okay. And I would like to know just for the 
record how many days on average it takes for the VA to restore 
the full amount of benefit payments to veterans once their debt 
to society is paid and they are released from prison.
    Mr. McLenachen, one last question for you. You used to be 
the Deputy Under Secretary for Disability Assistance, so I 
would like your perspective on these overpayments.
    Mr. McLenachen. Mr. Chairman, I recall back in about 
January of this year, I did an interview with I believe it was 
NPR. And that was basically the question that they asked was, 
"are we doing a good enough job on these?" And my response to 
that was, "no, we are not. We need to do them faster. In 
particular, there was a veteran who was actually released from 
incarceration, was still getting the full amount of benefits, 
and had a debt, of I believe about $38,000 upon release that he 
had to contend with. And those were the facts that were 
presented. Basically the same situation we are talking about 
here today. My response was, "we are not doing a good enough 
job on these."
    Mr. Abraham. Okay. And I think it is safe to say that the 
situation with, you know, these improper payments arose because 
the VA dropped the ball. And let me go back to you, in your 
opinion balancing fairness to the veterans with good 
stewardship, do you think the VA should waive repayment? Or 
should the department try to recoup the money?
    Mr. McLenachen. We have a legal obligation to recoup the 
money. Congress has created an equitable relief for veterans, 
not the equitable relief under Section 503, but under Section 
5302. Congress has created an equitable consideration and that 
is what Ms. Murphy was talking about when she mentioned the 
debt management center and the Committee on waivers process 
provides equitable relief based on the hardship they may have.
    Mr. Abraham. Okay. Thank you. Ms. Titus?
    Ms. Titus. Thank you. We have kind of danced all around the 
issue of veterans as prisoners. Perhaps we should be talking 
about are there any patterns of what kinds of crimes are 
committed by veterans? Are there mental health problems of 
veterans who end up in prison? Do VA medical centers have 
outreach to prisons to deal with veterans while they are there? 
Those seem to be some major issues that we want to probably 
look at in the future, maybe not today. But let us put that on 
the radar. Do you want to address it?
    Ms. Murphy. Congresswoman Titus, if I could mention it, 
there is a Healthcare for Reentry veterans program that is 
administered through VHA. They do some outreach to folks while 
they are in prison to help prepare them to get out, and with a 
particular focus to try to avoid homelessness. There are some 
mental health resources that are pointed out, resources in the 
community. So there is engagement with these veterans to try to 
make their reentry into society a positive one.
    Ms. Titus. Is that a standard program? Or does it vary from 
hospital to hospital, place to place? I wonder if there is one, 
for example, with the new hospital in Las Vegas?
    Ms. Murphy. Being a VHA entity, I do not know a lot about 
it. But I do know that it is a standardized program that is in 
VHA.
    Ms. Titus. Well I will have to look into that. Another 
question I wanted to ask you is that we did a lot of work on 
that national work queue, to set that up to broker out the 
rating claims. And I know that worked in Reno. It helped and 
you brokered out a lot of those claims. It helped bring down 
the backlog, bring down the wait time. And that has become 
pretty standard nationally. I would like to hear more about 
that work queue, actually. But my question today is are the 
non-rating claims in any kind of work queue? Should they be? Is 
that something we should address? Because from regional office 
to regional office there is a great deal of difference. For 
example, in Nevada they wait 475 days on average. The national 
average is 343. In Las Angeles it is 435. In San Diego it is 
316. Is there something we need to look at making this more 
equal across the regional offices?
    Mr. Clark. Ranking Member Titus, you are right. And we have 
plans to place non-rating workload into our national work queue 
and that is starting next year, second or third quarter of next 
year we are hopeful to have that in. Technology is the key. We 
understand that automation, you know, obviating the need to go 
out and query the veteran about getting information. That is 
the long way of taking care of work. It requires more manual 
labor on our part. And any time you get the human factor 
involved in doing that it sometimes increases errors. So 
national work queue, which as you stated, if you recall I 
worked with you there in Nevada. We brought down the backlog.
    Ms. Titus. We did.
    Mr. Clark. And the national work queue is going to do that 
for our non-rating portion of our work just like it did for our 
rating work.
    Ms. Titus. Well, good. I am glad to hear that. Because it 
was very helpful for the other claims. And so I think it might 
be helpful for these as well. Not just the prisoners, but all 
of those non-rating ones. And I would ask the Chairman if maybe 
we could have a hearing to kind of look at how that worked and 
get some of those statistics and how you are going to 
incorporate the new claims in there. Thank you very much. And 
thank you for helping us with Reno. We really appreciate it.
    Mr. Costello. All right. Ms. Murphy, this goes back in time 
a little bit. I understand you were not in your current 
position at that time, but I suspect this is a question that 
you may have anticipated. Eighty-three months went by where the 
needed data was not yet obtained and when you finally, when the 
department finally received the data in May, 2015 OIG 
nevertheless found that it took, or that even five months after 
obtaining the data the VBA still had not used it. Is that your 
understanding?
    Ms. Murphy. There were different renewals of the data 
matching agreements and the farther back in history we go the 
less I can speak to that. More recently we just renewed that 
most recent one with Bureau of Prisons in June and that is 
going forward for a 12-month period. We will watch that 
carefully to make sure it continues to be renewed.
    As far as getting the information, once there is a matching 
agreement in place that is also another piece of the puzzle and 
that requires a secure connection to make sure that we are 
getting that information with the appropriate security and data 
integrity and privacy attached to that. So there were some 
challenges with getting the feed over on the IT side of things. 
So there were a couple of different pieces that had to come 
together successfully to get that information to our claims 
processors.
    Mr. Costello. Do you have something to add, Mr. Clark?
    Mr. Clark. Yes, Congressman Costello. I just want to 
bookmark the fact that we have placed a great deal of emphasis 
on non-rating, the total. These incarcerated veterans claims 
represent only one percent of all of the aggregate total of 
non-rating work that we do. We have an agency priority goal for 
dependency claims. We have lowered that inventory. We started 
last year at 227,000. We are at about 117,000 of those now 
pending, well ahead of schedule and getting to our goal of 
100,000 by the end of next fiscal year.
    Mr. Costello. Fair point. I am going to ask the IG to weigh 
in. But something for everybody to consider, and I understand 
we are talking about one percent, you mentioned one percent. 
This cohort is one percent. But we do have to extrapolate that 
and ask ourselves the following question. That one percent over 
a seven- or eight-year period resulted in over $100 million in 
improper payments being made. So if we were to take that one 
percent and multiply it times 100, that is a very scary number. 
So this one percent in a certain respect is a cohort that 
requires VA to improve considerably how we, the integrity of 
your systems, for lack of a better term. The IG, I was going to 
ask you to weigh in on the same question.
    Mr. Missal. Yes. As our report identified, we did not find 
in our audit that they moved as quickly as they could have once 
they had the information. We did make the recommendations, they 
concurred with them, they made obligations to fulfill them 
going forward, and we are going to continue to monitor their 
progress and not release them from their obligation until we 
are satisfied they have done so.
    Ms. Murphy. And Congressman, if I could add also?
    Mr. Costello. Sure.
    Ms. Murphy. The IG talks about estimates and 
extrapolations. If I could talk about the reality of what we 
have looked at in our review so far.
    Mr. Costello. Mm-hmm.
    Ms. Murphy. 2008 to 2015 was the timeframe, and there were 
3,600 in that timeframe that we are reviewing. So granted, a 
long period of time. But of those 3,600 we are about halfway 
through that review. As Mr. Clark mentioned, they are due to 
have that done by the end of this calendar year. Of the half, 
roughly half we have looked so far, about a third of them do 
not need an adjustment and there are a number of reasons for 
that. It could be that they were some of the folks that already 
came in and told us they were in prison and we have done the 
adjustment. It could be that in the interim they applied for an 
increase in benefits and were granted that so there was an 
offset in what we would have had to recoup. It could be that we 
had the wrong data information, it was the wrong veteran--
    Mr. Costello. Right.
    Ms. Murphy [continued]. --from Bureau of Prisons. There are 
only about nine percent so far of those that we have reviewed 
that we have to go and make some sort of adjustment or 
recoupment. So when we are talking about extrapolations and 
estimates that is different from what we are seeing in the 
actual reviews and the actual data.
    Mr. Costello. I appreciate your follow-up. Does the IG have 
a follow-up?
    Mr. Missal. Well I would say that we did an audit using a 
statistical random sampling. We feel confident in our numbers 
to the degree of comfort stated in the report. So we believe 
the number is significant.
    Mr. Costello. Stepping back, this question is more 
elementary than a lot of what has happened. And you know, 
layperson, it is very difficult to understand someone becomes 
incarcerated, they are a veteran, we obviously cannot totally 
rely on them to notify, right? I just, it is very difficult for 
me to understand why, whether it is the lag time, the confusing 
nature of the incarceration process, which I do understand a 
little bit about what you are saying there, Mr. McLenachen. But 
there is always somebody at every prison who you could send the 
notification to. Like you have a point of contact at every 
single prison in this country, correct?
    Ms. Murphy. Generally, I would say that is true. Folks 
change, their personnel changes. We make calls to these 
institutions. Sometimes they do not get back to us. If that is 
the case we need to send a letter to the institution. We have a 
30-day response time that we provide for that. So it is not an 
artful process.
    Mr. Costello. And it may never be an artful process. We 
just want to make sure it is a more efficient process.
    Ms. Murphy. Absolutely.
    Mr. Costello. Okay. Thank you. I yield back.
    Mr. Abraham. All right. Thank you. Well, ladies and 
gentlemen, thanks for being here again on behalf of the 
Subcommittee. Unfortunately even after what we have learned 
today, and I have learned a lot, I remain very concerned that 
the VA is not yet appropriately prioritizing its workload and 
properly safeguarding taxpayer funds. Both veterans and 
taxpayers have the right to expect that the VA will ensure that 
veterans receive the benefits they are entitled to, and respond 
fairly when the department's errors disadvantage veterans. The 
Subcommittee will certainly continue to monitor this issue 
closely. Furthermore as I said in my opening statement I expect 
the VA to properly respond to the Subcommittee's requests for 
information. I look forward to the VA's answers by the end of 
this week.
    Again, thanks for being here. The complete written 
statement of today's witnesses will be entered into the hearing 
record. I ask unanimous consent that all Members have five 
legislative days to revise and extend their remarks and include 
extraneous material. Hearing no objection, so ordered. I thank 
the members and witnesses for being here today. This hearing is 
now adjourned.

    [Whereupon, at 11:40 a.m., the Subcommittee was adjourned.]

                            A P P E N D I X

                              ----------                              

                Prepared Statement of Michael J. Missal
    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to discuss the Office of Inspector General's (OIG) June 
2016 report, Veterans Benefits Administration: Audit of Compensation 
and Pension Benefit Payments to Incarcerated Veterans. I am accompanied 
by Mr. Nick Dahl, Director, OIG's Audits and Evaluations Division in 
Bedford, Massachusetts.

BACKGROUND

    Delivering timely and accurate benefits and services to the 
millions of veterans who served in our Nation's Armed Forces is central 
to VA's mission. The Veterans Benefits Administration (VBA) is 
responsible for administering a range of veterans benefits programs, 
including compensation, pension, education, home loan guaranty, 
vocational rehabilitation and employment, and life insurance. These 
programs are estimated to pay out over $92 billion in claims to 
veterans and their beneficiaries in fiscal year (FY) 2016 and comprise 
approximately half of VA's total budget.
    Federal law requires VBA to reduce compensation and pension (C&P) 
benefits for veterans incarcerated in Federal, state, or local penal 
institutions longer than 60 days. \1\ Effective the 61st day of 
incarceration, VBA must reduce compensation benefits for veterans 
convicted of a felony. For veterans whose service-connected disability 
rating is 20 percent or higher, VBA reduces compensation benefits to 
the 10 percent disability rate. For veterans whose service-connected 
disability rating is 10 percent, VBA reduces compensation benefit 
payments by one-half. In addition, effective on the 61st day of 
incarceration, VBA must discontinue pension benefits for veterans 
convicted of a felony or misdemeanor. Once the veteran is released from 
the penal institution, VBA can restore full C&P benefits.
---------------------------------------------------------------------------
    \1\ Relevant Federal laws are Title 38 United States Code (USC) 
Section 3113, Title 38 USC Section 5313, and Title 38 USC Section 1505.
---------------------------------------------------------------------------
    VA Regional Office (VARO) and Pension Management Center (PMC) 
employees are responsible for making incarceration adjustments. VBA 
classifies incarceration adjustments as non-rating claims. Generally, 
these claims require development, review, and administrative decision 
or award action. Non-rating claims are different from disability rating 
claims because staff can process non-rating claims without a rating 
decision. VBA's disability claims backlog includes claims that require 
a rating decision that have been pending for more than 125 days. Since 
non-rating claims-including incarceration adjustments-do not require a 
rating decision to complete, they are not considered part of the 
disability claims backlog.
    Within VBA, Compensation Service is responsible for developing 
policy requirements, disseminating procedures for the administration of 
compensation benefit programs, and establishing and maintaining 
computer-matching agreements between VBA and other Government agencies. 
The Office of Field Operations oversees operations and establishes 
workload priorities at the VAROs across the Nation that process 
disability claims and provide services to veterans. Pension and 
Fiduciary Service has jurisdiction and responsibility over the three 
PMCs, which are located in Philadelphia, Pennsylvania; Milwaukee, 
Wisconsin; and St. Paul, Minnesota.
    Computer Matching Agreements
    VBA has a computer matching agreement with the Federal Bureau of 
Prisons (BOP) under which VBA receives information on Federal prisoners 
whose VA benefits may be subject to reduction or termination. 
Similarly, VBA has an information exchange agreement with the U.S. 
Social Security Administration (SSA) under which VBA receives 
information on state and local prisoners whose VA benefits may be 
subject to reduction or termination. The purpose of these agreements is 
to identify veterans and beneficiaries who are in receipt of VBA 
benefits, including C&P benefits, and who are incarcerated for a period 
exceeding 60 days due to a felony or misdemeanor conviction.
    Improper Payments
    As we reported in our annual review of VA's compliance with the 
Improper Payments Elimination and Recovery Act, VA estimates that for 
FY 2015, improper payments for VBA's Compensation program rose by $648 
million to $1.3 billion. \2\ This increase was primarily due to 
improvements in VA's estimates of improper payments. While we applaud 
the more extensive testing VA is performing to help identify improper 
payments, the large amount of improper payments are still a concern for 
how VBA manages its financial stewardship. We continue to identity 
overpayments and to report improper payments as one of VA's Management 
Challenges. \3\ Moreover, in November 2015, the Office of Management 
and Budget designated Compensation programs as high-priority since the 
program estimated improper payments in excess of OMB's threshold of 
$750 million.
---------------------------------------------------------------------------
    \2\ Review of VA's Compliance With the Improper Payments 
Elimination and Recovery Act for FY 2015, May 12, 2016 and VA's 
Performance and Accountability Report, November 16, 2015.
    \3\ Office of Inspector General 2015 Major Management Challenges, 
November 16, 2015.
---------------------------------------------------------------------------
    Improper payments include payments made in the incorrect amount 
(payments not reduced timely) and payments made to ineligible 
recipients (payments not terminated timely). Some forms of improper 
payments include payments to incarcerated veterans; not reducing 
temporary 100 percent disability ratings; and any reductions in 
benefits where the veteran or beneficiary is not entitled, such as 
payments to ineligible children of veterans and continued payments to 
veterans for spouses when they are no longer married. \4\ During our 
Benefits Inspection reviews, we have reported that VBA's focus on 
reducing the disability claims backlog leaves little time for staff to 
process reductions in benefits. We made recommendations to VARO 
Directors to implement a plan to prioritize actions related to benefits 
reductions to minimize improper payments to veterans.
---------------------------------------------------------------------------
    \4\ Follow-up Audit of VBA's 100 Percent Disability Evaluations, 
June 6, 2014. Audit of VBA's 100 Percent Disability Evaluations, 
January 24, 2011.
---------------------------------------------------------------------------
    INCARCERATION ADJUSTMENT ISSUES

    In June 2016, the OIG issued a report on the Audit of Compensation 
and Pension Benefit Payments to Incarcerated Veterans. This audit 
examined whether VBA was adjusting C&P benefit payments for veterans 
incarcerated in Federal, state, and local penal institutions in a 
timely manner and as required by Federal law. We reported that VBA 
needed to improve its processing of incarceration adjustments. We 
identified program weaknesses and determined that VBA did not 
consistently take action to adjust C&P benefits for incarcerated 
veterans as required by Federal law. VBA's ineffective actions in 
processing incarceration adjustments resulted in significant improper 
benefit payments totaling more than $100 million. If conditions remain 
the same and improvements are not made, we project that VBA could make 
additional inaccurate payments (improper payments) of more than $200 
million over a 5-year period from FY 2016 through FY 2020.
    Federal Incarceration Adjustments
    VBA needs to improve its processing of Federal incarceration 
adjustments. Based on BOP incarceration data from May 2008 through June 
2015, we reviewed a random statistical sample of 132 veterans who had 
received C&P benefits prior to their incarcerations in Federal prisons. 
This included past incarcerations, as well as incarcerations that were 
current at the time of our audit. Based on our statistical sample 
review, we projected that VBA did not adjust veterans' C&P benefits, as 
required, for about 1,300 of 2,500 cases (53 percent), which resulted 
in improper payments totaling nearly $60 million.
    Prior to July 2008, VBA had a computer matching agreement with BOP 
to receive data on individuals admitted to Federal penal institutions. 
In July 2008, the agreement with BOP expired. We determined that VBA 
did not receive data from BOP on Federal incarcerations from July 2008 
through May 2015 (a total of 83 months). After the computer matching 
agreement with BOP expired in July 2008, a new agreement did not go 
into effect until October 2010. However, prior to the effective date of 
the new agreement, VA's Office of Information and Technology revised VA 
policy to require that sensitive data be encrypted when transferred. In 
order to comply with this requirement, VBA needed to set up a secure 
connection with BOP. Even though a computer matching agreement was in 
place, VBA reported that it did not receive data from BOP because VBA 
did not fully implement a secure connection to receive electronic data 
until July 2012.
    Once VBA fully implemented the secure connection, BOP did not 
transfer Federal incarceration data because VBA had allowed the 
computer matching agreement to expire in April 2012. VBA could have 
extended the agreement for 1 year if VBA and BOP certified in writing 
that the matching program complied with the original agreement and 
would continue without change. However, VBA did not complete this 
action within 3 months prior to the end of the agreement, as required. 
Therefore, the agreement was not in place to manage the data exchange 
needed.
    In April 2015, VBA finalized a new agreement with BOP to receive 
Federal incarceration data. In May 2015, BOP transferred 83 backup 
files to VBA with almost 7 years of data on veterans incarcerated in 
Federal penal institutions from May 2008 through March 2015. Once BOP 
provided the backup files to VBA, it agreed to provide monthly data 
files to VBA on Federal incarcerations. However, in December 2015, VBA 
Central Office staff told us that VBA had not yet used the 83 backup 
files or monthly data from BOP to make appropriate benefits adjustments 
for incarcerated veterans. We found that VBA did not process Federal 
incarceration adjustments primarily because they did not place priority 
on incarceration adjustments, as they do not consider these non-rating 
claims part of the disability claims backlog.
    State and Local Incarceration Adjustments
    VBA also needs to improve its processing of state and local 
incarceration adjustments. Based on SSA incarceration data from March 
2013 through June 2015, we reviewed a random statistical sample of 331 
state and local incarceration notifications for veterans who had 
received C&P benefits. Based on this statistical sample review, we 
projected that VARO and PMC staff did not effectively adjust veterans' 
C&P benefits for about 3,800 of 21,600 cases (18 percent), which 
resulted in estimated improper payments totaling nearly $45 million. 
For instances where VBA made C&P benefit adjustments, it took an 
average of about 300 days to process those adjustments.
    When VBA receives an incarceration notification from SSA, staff are 
required to take prompt development action to determine whether the 
veteran's benefits need to be adjusted. We identified issues and delays 
with VBA employees initiating development action after receiving 
incarceration notifications from SSA. We estimated that VARO and PMC 
staff had failed to initiate development action for about 53 percent of 
state and local incarceration cases from March 2013 through June 2015. 
While staff had initiated development action for about 47 percent of 
the cases, it took an average of about 76 days from receipt of the 
incarceration notifications to initiate action.
    Once VBA staff complete development action, a determination is made 
whether a veteran's C&P benefits should be adjusted. For cases in which 
an adjustment is needed, VBA staff send a due process notification to 
the veteran and allows them 60 days to provide additional evidence 
showing that his or her benefits should not be adjusted. After 60 days, 
if VBA has not received additional evidence from the veteran, staff 
should adjust the veteran's benefits as proposed-retroactively dating 
back to the veteran's 61st day of incarceration.
    We identified delays in VARO and PMC staff making final 
incarceration adjustments after providing due process notification to 
veterans. We projected statistically that VBA staff made final 
incarceration adjustments in about 3,000 cases after sending due 
process notifications to the veterans. For these claims, it took staff 
an average of about 110 days to make final benefit adjustments from the 
date of due process notification. Since VBA should make final benefit 
adjustments after the 60-day due process period expires, we concluded 
that significant delays existed. We found that VBA did not process 
state and local incarceration adjustments timely primarily because they 
did not place priority on incarceration adjustments, as they do not 
consider these non-rating claims part of the disability claims backlog.
    We made six recommendations to the then Acting Under Secretary for 
Benefits. These recommendations include:

      Increase the priority of Federal, state, and local 
incarceration workload by making timely benefit adjustments when 
appropriate.
      Review BOP data on Federal incarcerations and issue bills 
of collection to recover improper benefit payments.
      Monitor the terms of its computer matching agreements and 
take timely action to extend the agreements when appropriate.

    The then Acting Under Secretary concurred with all of our 
recommendations and agreed that VBA's current process for award 
adjustments due to incarceration needed to be improved. The Acting 
Under Secretary provided action plans that were responsive to our 
recommendations. We will monitor VBA's progress and follow up until all 
proposed actions are completed.
    CONCLUSION
    The OIG determined that because it was not a priority, VBA did not 
take consistent and timely action to make incarceration adjustments 
when appropriate. Incarceration adjustments are non-rating claims work 
and VBA has focused on eliminating the disability claims backlog as it 
relates to claims that require a rating decision. VBA needs to 
prioritize this workload, make improvements to ensure sound financial 
stewardship over benefits earned through entitlements, and take timely 
actions that reduce improper benefit payments.
    Mr. Chairman, this concludes my statement. Mr. Dahl and I would be 
happy to answer any questions you or members of the Subcommittee may 
have.

                                 
                   Prepared Statement of Beth Murphy
    Good afternoon, Chairman Abraham, Ranking Member Titus, and Members 
of the Committee. VBA appreciates the opportunity to respond to 
concerns raised by the Committee regarding disability compensation and 
pension (C&P) benefits paid to incarcerated Veterans. Joining me today 
is Willie Clark, Acting Deputy Under Secretary for Field Operations and 
Dave McLenachen, Director for the Appeals Management Center.
    The VA Office of Inspector General (OIG) conducted an audit of C&P 
payments made to Veterans incarcerated in Federal institutions between 
May 2008 and June 2015, and Veterans incarcerated in state and local 
institutions between March 2013 and August 2014, to determine whether 
VBA offices were adjusting C&P payments to incarcerated Veterans in a 
timely manner.
    VA reviewed these findings and agreed that the current process for 
award adjustments due to incarceration needs to be improved. This 
statement will address OIG's six recommendations, focusing on the 
Department's responses to those recommendations to improve the program. 
In short, VBA accepted OIG's six recommendations, which included 
prioritizing incarceration adjustment workload, recouping overpayments 
made between May 2008 and June 2015, and renewing the Federal Bureau of 
Prisons (FBOP) agreement.
    OIG's findings estimate that approximately $59.9 million was 
improperly paid to Veterans incarcerated in Federal institutions and 
approximately $44.2 million was improperly paid to Veterans 
incarcerated in state and local institutions during the two time 
periods noted above. Additionally, OIG estimates that if incarceration 
adjustment issues continue through Fiscal Year (FY) 2020, it could cost 
VA an additional $203.8 million.

Current Procedures

    Federal law requires VA to reduce disability compensation payments 
(38 United States Code (U.S.C.) Sec.  5313) to individuals incarcerated 
for a period in excess of 60 days for conviction of a felony and 
discontinue pension payments (38 U.S.C. Sec.  1505) to individuals 
imprisoned for more than 60 days as a result of conviction of a felony 
or misdemeanor. VA is required to reduce compensation benefits of 
incarcerated Veterans rated 20 percent or higher to the 10 percent 
disability compensation rate (currently $133.17). Incarcerated Veterans 
rated at 10 percent service-connection are reduced to one-half 
(currently $66.58) of their compensation. Once a Veteran is released 
from prison, VBA can restore C&P payments upon notice of his or her 
release.
    Veterans receiving C&P payments are responsible for notifying VA of 
incarceration and dates of release. VBA offices include this important 
reminder in the notification letter to the Veteran when he or she 
receives an award of compensation or pension benefits or an increase in 
benefits. Upon notification of the incarceration, VA is responsible for 
verifying the incarceration and conviction date; providing the 
beneficiary with notice of proposed adjustment prior to compensation or 
pension benefits being reduced or terminated (i.e., 60-day due process 
period); and providing proper notice after reducing or terminating the 
award.
    Because Veterans do not always notify VA of their incarceration, VA 
has established data matching agreements with FBOP and the Social 
Security Administration (SSA). Through these agreements, VBA conducts 
an electronic data match of all disability C&P benefit recipients to 
identify Veterans confined in penal institutions at the Federal, state, 
or local levels.
    After verifying a Veteran's incarceration, VA will reduce his or 
her service-connected disability compensation payments on the 61st day 
of incarceration following a felony conviction. Veterans in receipt of 
VA pension will have benefit payments terminated effective the 61st day 
after imprisonment in a Federal, state, or local penal institution for 
conviction of a felony or misdemeanor.
    Veterans should notify VA immediately upon release from prison. VA 
may reinstate compensation payments based upon the severity of the 
service-connected disabilities at that time. The level of severity 
assigned after release is generally the same as when the Veteran was 
incarcerated. Payments are not reduced for recipients participating in 
work release programs, residing in halfway houses (also known as 
``residential re-entry centers''), or under community control. 
According to law, VA may resume payments effective the date of release 
only if VA receives notice within 1 year of release.

Addressing OIG Recommendations

Monitoring Computer Matching Agreements

    The OIG report recommended that VBA monitor the terms of the 
current agreement with FBOP and take timely action to extend the 
agreement, if appropriate. VBA agrees and has pursued action to expand 
the type of electronic data currently received from FBOP. This is 
critical because the current data feed from FBOP does not include the 
beneficiary's date of conviction, which is required for claim 
processors to make the necessary adjustments. This requires additional, 
time-consuming research to determine the date of conviction (e.g., 
contacting the beneficiary or prison in writing and/or by phone and 
waiting for response). VBA is working with FBOP to determine the 
changes needed to improve the efficiency of payment adjustments and 
also support future automation of the process. VBA will continue to 
work with FBOP, and SSA, to obtain the needed data and identify 
additional ways to streamline the process.

Increasing Priority of Processing of Incarceration Adjustments

    For the 7th year in a row, VBA completed over a million disability 
compensation claims. Even as VBA focused on its priority goal to 
eliminate the disability rating claims inventory for Veterans who have 
waited the longest, VBA remained focused on non-rating claims, 
including incarceration adjustments. As VBA completed record-breaking 
numbers of disability rating claims in recent years, one result is an 
associated increase in the volume of non-rating claims and appeals. In 
FY 2015, VBA completed a record 3.1 million non-rating claims, a 15-
percent increase over FY 2014.
    OIG recommended that VA increase priority of processing 
incarceration adjustments. VBA agrees with this recommendation and has 
issued guidance to all regional offices to ensure prioritization of 
these claims. This includes retroactively adjusting awards of Veterans 
who are currently incarcerated, as well as those who were previously, 
but are no longer, incarcerated. OIG recommended that VA take action on 
both of these categories of adjustments. OIG also estimated that VA did 
not effectively adjust accounts for approximately 3,800 Veterans 
incarcerated in state and local institutions and for approximately 
1,300 Veterans incarcerated in Federal penal institutions. VBA 
conducted its own review of Veterans incarcerated in Federal penal 
institutions and identified 3,615 cases which required review and 
possible adjustment. VBA has already completed action on 46 percent of 
the 3,615 FBOP cases identified since May 5, 2016. In addition, VBA has 
directed offices to process claims based on the date of incarceration 
by working the oldest dates first. VBA will continue to balance 
available resources to maintain a focus on processing incarceration 
adjustments.
    VBA's actions to prioritize incarceration adjustments, as noted 
above, also address OIG's other recommendations to initiate more timely 
development of the work product after receiving notification of 
incarceration from SSA, and to make more timely adjustments after the 
proper due process notification has been issued. VA Headquarters will 
continue to monitor the progress of these adjustments.

Debt Management Center

Steps VA is taking to recoup such improper payments
    The Debt Management Center (DMC) is an organization within the 
Office of Management/Office of Finance that provides collection 
services to VA organizations. Currently, its primary customer is VBA. 
DMC's role in recouping improper VBA payments is limited to collecting 
debts that have resulted from those improper payments. DMC is not 
involved in mitigating and identifying improper payments and 
establishing associated debts. DMC performs debt collection activities 
once the debts have been established by VBA. DMC collects all debts in 
accordance with VA regulations and policies (38 Code of Federal 
Regulations (C.F.R.)), the Debt Collection Improvement Acts of 1982 and 
1996, and the Digital Accountability and Transparency Act of 2014 (DATA 
Act).

DMC Operations, Guidelines, and Procedures

    DMC follows VA procedures and Federal debt collection laws, 
regulations, and policies to collect debts. In general, the VBA station 
of jurisdiction establishes the debt and electronically transfers the 
debt to DMC's Centralized Accounts Receivable System. DMC performs 
standard debt collection activities, such as sending notification 
letters of indebtedness; notifying debtors of their rights and 
obligations; establishing repayment agreements; and referring accounts 
to credit bureaus, the Department of the Treasury, and Credit Alert 
System. DMC also utilizes VA's authority to internally offset monthly 
benefit payments to satisfy the debt.
    Veterans who become indebted as a result of incarceration are 
notified that they have the right to request a waiver of the 
overpayment, offer a compromise, or establish a repayment plan to help 
ease the financial burden, once released. Repayment options include 
partial withholdings from future benefit payments. Veterans are 
provided with information on how to contact DMC for assistance in 
resolving their debts. VBA agreed with the OIG recommendation to 
initiate recoupment procedures to recover improper payments, where 
necessary, after the provision of due process notifications.

Committee on Waivers and Compromises (COWC)

Operations, Guidelines, and Procedures

    Currently, DMC functions as a liaison between indebted 
beneficiaries and VBA's COWC. DMC receives all requests for waivers of 
debts and repayment offers prior to them being sent to VBA's COWC for 
waiver decisions. DMC reviews the waiver package to determine if the 
request was received timely (within 180 days of the date of the initial 
notification of indebtedness) and complete. For those received beyond 
180 days, DMC notifies the debtor the waiver is denied for untimeliness 
and provides available options including establishing a repayment 
agreement, filing a notice of disagreement, or making a compromise 
offer. When DMC identifies an incomplete waiver request package, it 
makes one attempt to obtain the missing information. After 30 days, if 
DMC does not receive the information, then DMC forwards the waiver 
request package to VBA's COWC for consideration to avoid delay. In 
addition, if DMC determines that the waiver request was received within 
30 days, debt collection activities are suspended until VBA's COWC has 
rendered its decision and notified DMC. Upon VBA's notification of its 
decision, DMC takes the necessary steps based on the status of the 
debt.
    VA believes the existing waiver process prescribed by law (38 
U.S.C. Sec.  5302) is the appropriate remedy for beneficiaries who have 
pending claims adjustments due to their incarceration and may be 
financially unable to repay their debt. In that regard, each waiver 
decision considers whether recovery of the debt would be ``against 
equity and good conscience.'' This includes considering the 
circumstances surrounding the creation of the debt, to include VA's own 
actions or inactions, along with the current financial impact to the 
debtor and other factors.
    Waivers are considered on a case-by-case basis. A blanket waiver of 
overpayment would erode the integrity of C&P programs by enabling VA 
beneficiaries to accrue personal wealth through receipt of Federal 
benefits without regard to their financial situation while the 
Government pays for all costs associated with their incarceration. 
Furthermore, equitable relief is not an option for these individuals. 
Equitable relief is a unique legal remedy that authorizes the Secretary 
to provide relief either (1) when benefits ``have not been provided'' 
because of an administrative error, or (2) when a beneficiary ``has 
suffered loss as a consequence of reliance upon a determination by [VA] 
of eligibility or entitlement to benefits, without knowledge that it 
was erroneously made.'' 38 U.S.C. Sec.  503.
    In the case of C&P payments made to incarcerated VA beneficiaries, 
the first equitable relief circumstance is not satisfied because C&P 
payments were made to the incarcerated beneficiaries. In other words, 
there is no benefit that ``ha[s] not been provided.''
    The second circumstance is also not satisfied in cases in which the 
creation of an overpayment was the result of the beneficiary's 
inaction. Moreover, VA does not believe that the creation of an 
overpayment or debt due to delay in benefit adjustments would itself 
constitute a ``loss'' incurred in reliance on VA error for purposes of 
equitable relief.
    VA acknowledges that its delay in adjusting Veterans' payments in a 
timely manner based on information received through data matching may 
have resulted in larger overpayments. However, VA does not believe that 
the creation of an overpayment or debt due to delay in benefit 
adjustments would itself constitute a ``loss'' incurred in reliance on 
VA error for purposes of equitable relief. A ``loss'' incurred in 
reliance on a VA decision ordinarily occurs if the individual took 
actions to his or her detriment based on the erroneous decision.

Reintegration

    Upon release from incarceration, VA is prepared to assist Veterans 
to reintegrate. The VA Health Care for Re-entry Veterans (HCRV) Program 
is designed to help incarcerated Veterans successfully reintegrate back 
into the community after their release. A critical part of HCRV is 
providing information to Veterans while they are incarcerated, so they 
can plan for re-entry. A primary goal of the HCRV program is to prevent 
Veterans from becoming homeless once they are re-integrated back into 
the community and the program has regional and state HCRV Specialists 
who are VA points of contact for incarcerated Veterans and their family 
members.

Conclusion

    VBA acknowledges the importance of executing the non-rating 
workload on behalf of Veterans, their families, and taxpayers. This 
includes timely processing of C&P payments and award adjustments to 
incarcerated Veterans and improving the computer matching programs with 
FBOP and SSA. VA does not take lightly the issues prompted by untimely 
processing of such work. Our approach will be to ensure the priority of 
such claims is recognized, and the claims are worked appropriately. VA 
also will continue to develop and improve electronic systems to enhance 
these abilities.
    Mr. Chairman, this concludes my statement. We would be pleased to 
respond to questions you or other Members may have.

                                 [all]
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