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98–637 2016

WASTE, FRAUD, AND ABUSE IN VA’S PURCHASE 

CARD PROGRAM 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON VETERANS’ AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

THURSDAY, MAY 14, 2015 

Serial No. 114–20 

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 

GUS M. BILIRAKIS, Florida, Vice-Chairman 

DAVID P. ROE, Tennessee 

DAN BENISHEK, Michigan 

TIM HUELSKAMP, Kansas 

MIKE COFFMAN, Colorado 

BRAD R. WENSTRUP, Ohio 

JACKIE WALORSKI, Indiana 

RALPH ABRAHAM, Louisiana 

LEE ZELDIN, New York 

RYAN COSTELLO, Pennsylvania 

AMATA COLEMAN RADEWAGEN, American 

Samoa 

MIKE BOST, Illinois 

CORRINE BROWN, Florida, Ranking 

Minority Member 

MARK TAKANO, California 

JULIA BROWNLEY, California 

DINA TITUS, Nevada 

RAUL RUIZ, California 

ANN M. KUSTER, New Hampshire 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

TIMOTHY J. WALZ, Minnesota 

JERRY MCNERNEY, California 

JON TOWERS, Staff Director 

DON PHILLIPS, Democratic Staff Director 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATION 

MIKE COFFMAN, Colorado, Chairman 

DOUG LAMBORN, Colorado 

DAVID P. ROE, Tennessee 

DAN BENISHEK, Michigan 

TIM HUELSKAMP, Kansas 

JACKIE WALORSKI, Indiana 

ANN M. KUSTER, New Hampshire, Ranking 

Member 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

TIMOTHY J. WALZ, Minnesota 

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. 


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C O N T E N T S 

Thursday, May 14, 2015 

Page 

Waste, Fraud, and Abuse in VA’s Purchase Card Program ................................. 1 

OPENING STATEMENTS 

Mike Coffman, Chairman ........................................................................................ 1 

Prepared Statement ......................................................................................... 34 

Hon. Beto O’Rourke ................................................................................................. 2 

Ann Kuster, Ranking Member 

Prepared Statement ......................................................................................... 35 

WITNESSES 

Mr. Edward J. Murray, Acting Assistant Secretary for Management and 

Interim Chief Financial Officer, Office of Management, Department of Veterans Affairs ......................................................................................................... 4 

Prepared Statement ......................................................................................... 35 

Accompanied by: 

Mr. Jan Frye, Deputy Assistant Secretary and Senior Procurement Executive, 

Office of Acquisition and Logistics, Department of Veteran Affairs ................ 7 

Prepared Statement ................................................................................................. 46 

Mr. Gregory Giddens, Principal Executive Director, Office of Acquisition, Logistics and Construction, Department of Veterans Affairs 

Mr. Norbert Doyle, Chief Procurement & Logistics Officer, Veterans 

Health Administration, Department of Veterans Affairs 

Ms. Linda A. Halliday, Assistant Inspector General for Audits and Evaluations, Office of Inspector General, Department of Veterans Affairs ................ 5 

Prepared Statement ......................................................................................... 39 

Accompanied by: 

Mr. Quentin G. Aucoin, Deputy Assistant Inspector General for Investigations (Field Operations), Office of Inspector General, Department of Veterans Affairs 

Mr. Murray Leigh, Director, Financial Integrity Division, Office of 

Audits and Evaluations, Office of Inspector General, Department 

of Veterans Affairs 

Mr. Kent Wrathall, Director, Atlanta Office of Audits and Evaluations, Office of Inspector General, Department of Veterans Affairs 

STATEMENT FOR THE RECORD 

Letter & Questions From: Chairman Mike Coffman, To: VA .............................. 83 

Questions From: Chairman Mike Coffman and Responses From: VA ................ 84 

Questions From: Subcommittee and Response From: VA .................................... 86 

Department of Veterans Affairs, Attachment for Purchase Card Hearing ......... 93 

Department of Veterans Affairs, Credit Card System .......................................... 94 

Letter & Questions, From: Richard Griffin To: VA .............................................. 95 

Memorandum from Jan R. Frye ............................................................................. 98 

Department of Veterans Affairs Government Purchase Card ............................. 99 


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WASTE, FRAUD, AND ABUSE IN VA’S 

PURCHASE CARD PROGRAM 

Thursday, May 14, 2015 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON VETERANS’ AFFAIRS, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATION, Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:31 a.m., in 

Room 334, Cannon House Office Building, Hon. Mike Coffman 

[chairman of the subcommittee] presiding. 

Present: Representatives Coffman, Miller, Lamborn, Roe, 

Benishek, Huelskamp, Walorski, Kuster, O’Rourke, Rice, and Walz. 

OPENING STATEMENT OF CHAIRMAN MIKE COFFMAN 

Mr. COFFMAN. Good morning. This hearing will come to order. I 

want to welcome everybody to this hearing, ‘‘Waste, Fraud, and 

Abuse of the VA’s Purchase Card Program,’’ the deficiencies of VA’s 

implementation and oversight of its government Purchase Card 

Program. 

The use of government purchase cards is intended to streamline 

payment procedures and improve cash management practices at 

the Department. However, the program has had a history of weak 

internal controls and serious violations of procurement laws, including the Competition in Contracting Act and the Federal Acquisition Regulation. 

Due to inadequate oversight of the Purchase Card Program, especially at the Veterans Health Administration, we have learned 

that VA may have committed as much as $5 billion a year in improper and unauthorized procurement expenditures for at least the 

last 5 years. This is truly a staggering amount. 

Given the high number of transactions, 6.2 million in fiscal year 

2014, and the aggregate billions at risk, it is crucial that VA implement effective oversight controls to ensure its uses of taxpayer resources are efficiently used for veterans. Even after multiple reports from the OIG, the GAO, VA continues to leave its program 

vulnerable to massive waste, fraud, and abuse. 

In this regard, for fiscal year 2015, the VA OIG has identified the 

following seven risk areas: number one, exceeding authorized purchase limits individually or in aggregate; number two, an excessive 

number of purchase cardholders with inadequate justification; 

number three, an unmanageable span of control, the ratio of cardholders to approving officials is very high; number four, inadequate 

financial controls prohibiting duplicative or split payments; number 

five, inadequate reporting of financial information; number six, inVerDate Aug 31 2005 13:57 Jul 21, 2016 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 Y:\98-637.TXT PAT

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sufficient oversight of year-end spending; and number seven, inadequate review of purchases by reviewing officials. 

Violations of procurement laws are not mere technicalities. It is 

not just a matter of paying a little more for needed supplies and 

services, as some apologists for VA have asserted. Among other 

things, purchase card abuse invites cronyism and the directing of 

business to favored vendors, including those who may employ 

former VA officials. 

Moreover, buying of biologics and medical supplies without contracts imperils patient safety. Without contracts, FDA certifications 

are not a legal requirement, nor are the Buy America Act or Trade 

Agreement Act provisions applicable. If veterans are later harmed 

by these products, VA would have little recourse without contracts 

with the vendor. 

Recognizing the importance of compliance with procurement laws 

in Purchase Card Programs, Congress has passed the Government 

Charge Card Abuse Prevention Act of 2012, requiring periodic audits, reports, and risk assessments. It also requires that agencies 

hold employees who violate purchase card guidelines or make erroneous, improper, or illegal purchases accountable through adverse 

personnel actions, including dismissal. Under existing law, agencies may also hold such employees personally liable. 

However, rather than following the law and holding its employees accountable, VA has often sought to institutionally ratify unauthorized commitments, sometimes in wholesale, for years of illegal 

purchases. 

I am sure many of you know that The Washington Post published an article this morning involving these very issues, citing to 

a 35-page letter sent to Secretary McDonald months ago—months 

ago—detailing these problems. We distributed that letter to every 

member of this subcommittee and would like to get an answer from 

VA as to what it plans to do to fix the litany of problems explained 

within it. 

In conclusion, VA needs to explain to the subcommittee, to taxpayers, and to veterans its continuing and longstanding mismanagement of the Purchase Card Program. Each time VA makes 

illegal purchases taxpayers are forced to foot the bill, resources to 

care for veterans are squandered, and the veteran, as well as the 

government assumes all the risk. 

I look forward to the discussion we will have here today on this 

important issue. 

With that, I now yield to the Ranking Member, Mr. O’Rourke, for 

any opening remarks he may have. 

[THE PREPARED STATEMENT OF CHAIRMAN MR. MIKE COFFMAN

APPEARS IN THE APPENDIX] 

OPENING STATEMENT OF HON. BETO O’ROURKE 

Mr. O’ROURKE. Thank you, Mr. Chairman. And thank you for 

holding this hearing. I look forward to the testimony from our 

panel and to their answers from our questions. 

I’ll waive any opening remarks, but I’ll ask that Ranking Member Kuster’s full written opening remarks be submitted for the 

record. 

Mr. COFFMAN. Thank you, Mr. O’Rourke. 


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Ask all members waive their opening remarks as per this committee’s custom. 

With that, I invite the first and only panel to the witness table. 

On the panel from VA, we have Mr. Edward Murray, Acting Assistant Secretary for Management and Interim Chief Financial Officer 

of the Office of Management; Mr. Greg Giddens, Principal Executive Director of the Office of Acquisitions, Logistics and Construction. 

Is Mr. Giddens here? Okay. I think you ought to be at the panel. 

Okay. That’s fine. 

Okay. Mr. Jan Frye. Okay. VA Senior Procurement Executive 

and Deputy Assistant Secretary for the Office of Acquisition and 

Logistics. And Mr. Norbert Doyle, Chief Procurement and Logistics 

Officer of the Veterans Health Administration. 

From the Office of Inspector General we have Ms. Linda 

Halliday, Assistant Inspector General for Audits and Evaluations. 

She is accompanied by Mr. Quentin Aucoin, Deputy Assistant Inspector General for Investigations, Mr. Kent Wrathall, Director of 

the Atlanta Office of Audits and Evaluations, and Mr. Murray 

Leigh, Director of the Office of Audits and Evaluations, Financial 

Integrity Division, of the Office of Inspector General. 

I’d ask the witnesses to please stand and raise your hand. 

[Witnesses sworn.] 

Mr. COFFMAN. Please be seated. 

Prior to hearing from our witnesses, I would like to note the considerable effort VA exerted to substitute witnesses in place of those 

who I requested for this hearing. I requested that Mr. Frye, who 

serves as VA’s senior procurement executive, attend as the lead 

witness for VA since it is his role and has been for about 8 years 

to act as VA’s chief contracting officer. For some unexplainable reason VA pushed back, stating that it would not send Mr. Frye and 

instead would send Mr. Giddens, who just passed his fifth week in 

the position of Executive Director of VA’s Acquisition Office, which 

admittedly makes him Mr. Frye’s superior. 

What strikes me as strange is that VA decided that it would be 

better to send an individual who has been at the helm of VA’s Contracting Office for just over a month to discuss matters that have 

been affecting VA for years. I specifically asked for Mr. Frye to attend because he can speak with firsthand experience on the specifics of VA’s acquisitions, whereas Mr. Giddens can only do so by 

what he has been told about them. 

When this committee makes specific requests for witnesses to attend it is because it knows those witnesses can speak to the issues 

in question. We are not asking VA to attempt to substitute its judgment for that of the committee in what can only be seen as yet another attempt to avoid responding in a fully open, candid, and accurate manner to our questions. In other words, we do not want a 

person who has just joined a particular office to come and, when 

asked a question, take it for the record since they have only been 

there for a short time. 

Unfortunately, this has become a continuing VA tactic, but appears to be a means to avoid answering questions publicly when 

the answer might reflect poorly on VA. All that does is stifle the 


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conversation, which defeats the entire purpose of having a hearing. 

Perhaps that is the point. 

Ultimately, VA relented and agreed to send Mr. Frye and Mr. 

Giddens, which is why we have had to seat some witnesses behind 

those who sit at the table. 

With that, Mr. Murray, you are now recognized for 5 minutes. 

STATEMENT OF MR. EDWARD J. MURRAY, ACTING ASSISTANT 

SECRETARY FOR MANAGEMENT AND INTERIM CHIEF FINANCIAL OFFICER, OFFICE OF MANAGEMENT, DEPARTMENT OF 

VETERANS AFFAIRS, ACCOMPANIED BY MR. GREGORY 

GIDDENS, PRINCIPAL EXECUTIVE DIRECTOR, OFFICE OF ACQUISITIONS, LOGISTICS AND CONSTRUCTION, DEPARTMENT 

OF VETERANS AFFAIRS, MR. JAN FRYE, DEPUTY ASSISTANT 

SECRETARY AND SENIOR PROCUREMENT EXECUTIVE, OFFICE OF ACQUISITION AND LOGISTICS, DEPARTMENT OF 

VETERANS AFFAIRS, AND MR. NORBERT DOYLE, CHIEF PROCUREMENT & LOGISTICS OFFICER, VETERANS HEALTH ADMINISTRATION, DEPARTMENT OF VETERANS AFFAIRS 

STATEMENT OF EDWARD J. MURRAY 

Mr. MURRAY. Good morning, Chairman Coffman, Ranking Member Kuster, and members of this subcommittee. Thank you for the 

opportunity to participate in this hearing and to discuss the Department of Veterans Affairs’ implementation and oversight of our 

Purchase Card Program. I’m accompanied today by Mr. Greg 

Giddens, Principal Executive Director, Office of Acquisitions, Logistics and Construction; Mr. Jan Frye, Deputy Assistant Secretary 

for Acquisitions and Logistics; and Mr. Norbert Doyle, Chief Procurement Logistics Officer for the Veterans Health Administration. 

I, with the senior leadership at this table and across the VA, am 

committed to ensuring VA’s Purchase Card Program is run efficiently and effectively. VA relies on the program to buy supplies 

and services in direct support to our veterans. For instance, purchase cards are used to buy prosthetics and sensory aids to promote veteran health and quality of life. 

As with many large programs, we have experienced challenges, 

as noted in the recent report by the Office of Inspector General. We 

value the recommendations provided by the inspector general and 

have implemented needed improvements to strengthen our controls 

over VA’s Purchase Card Program. 

We now close the account or have reduced the card spending limits due to inactivity, invalid training certificates, and lack of valid 

warrants, or when employees separate. In December 2012, our Financial Services Center became the single point of control in VA 

for setting single purchase limits for cardholders. Using these controls and others, we have not identified any unwarranted cardholders with single purchase limits above the micro-purchase limit 

since January 2013. 

Within VA, VHA has the largest number of purchase cardholders, generating a little over 98 percent of the purchase card 

transactions in fiscal year 2014. VHA purchase cardholders spend 

about $3.7 billion annually on approximately 6 million transactions. As the inspector general noted in their 2013 report, use of 


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the purchase card is a way for VHA to increase purchasing efficiency and cost-effectiveness. VHA’s Office of Procurement and Logistics provides additional oversight for VHA’s Purchase Card Program. 

In May 2014, the inspector general issued a report on the review 

of alleged unauthorized commitments regarding purchase card 

transactions in fiscal year 2012. The IG substantiated allegations 

that cardholders made unauthorized commitments and that VA 

had not performed ratification actions on identified unauthorized 

commitments. In total, OIG made nine recommendations to VA, all 

of which were closed by October 2015—I mean, I’m sorry, April 

2015. 

VA has made significant strides in recent years in its Purchase 

Card Program, and we recognize the need to continue to expand 

and improve our oversight internal controls. The Charge Card Act 

has supported our improved program, and we continue to develop 

and refine training for all government Purchase Card Program participants. 

Mr. Chairman, this concludes my opening statement. My colleagues and I are prepared to answer any questions you or other 

members of the committee may have. 

[THE PREPARED STATEMENT OF MR. EDWARD J. MURRAY APPEARS

IN THE APPENDIX] 

Mr. COFFMAN. Thank you, Mr. Murray. 

Ms. Halliday, you are now recognized for 5 minutes. 

STATEMENT OF MS. LINDA A. HALLIDAY, ASSISTANT INSPECTOR GENERAL FOR AUDITS AND EVALUATIONS, OFFICE OF 

INSPECTOR GENERAL, DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY MR. QUENTIN G. AUCOIN, DEPUTY 

ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS 

(FIELD OPERATIONS), OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF VETERANS AFFAIRS, MR. MURRAY LEIGH, DIRECTOR, FINANCIAL INTEGRITY DIVISION, OFFICE OF AUDITS AND EVALUATIONS, OFFICE OF INSPECTOR GENERAL, 

DEPARTMENT OF VETERANS AFFAIRS, AND MR. KENT 

WRATHALL, DIRECTOR, ATLANTA OFFICE OF AUDITS AND 

EVALUATIONS, OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF VETERANS AFFAIRS 

STATEMENT OF LINDA A. HALLIDAY 

Ms. HALLIDAY. Chairman Coffman and members of the subcommittee, thank you for the opportunity to provide testimony concerning the OIG’s work related to VA’s Purchase Card Program. 

VA’s program enables authorized employees to make purchases 

on behalf of the Federal Government to support VA’s mission. 

From fiscal year 2011 to 2014, the value of VA’s purchase card 

transactions increased by just over 100 percent, from $1.8 billion 

to $3.7 billion. 

Considering the high value and the volume of the purchase card 

transactions, ensuring compliance with policies and controls over 

the use of purchase cards is critical to providing and protecting taxpayers’ funds in an efficient and effective manner. 


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The Government Charge Card Abuse Prevention Act of 2012 requires agencies to establish and maintain safeguards and internal 

controls over purchase cards. OIGs must conduct periodic risk assessments of agency purchase cards to analyze the risks of illegal, 

improper, or erroneous payments. Based on our risk assessments, 

we conduct and plan audits and reviews that can continue to address high risk areas, inefficiencies, and help limit the financial 

risks to VA. 

Overall, we consider VA’s Purchase Card Program at medium 

risk of fraud. However, our recent risk assessments identified significant control weaknesses that did not detect or prevent transactions involving unauthorized commitments, improper payments, 

split purchases, and purchases that lacked appropriate supporting 

documentation. We identified seven high-risk weaknesses in the 

controls. I won’t restate those since your opening statement did. 

On May 2014, our report titled ‘‘Review of Alleged Unauthorized 

Commitments Within VA’’ substantiated allegations that purchase 

cardholders made unauthorized commitments and violated the law 

by not performing proper ratification actions on these unauthorized 

commitments. An unauthorized commitment circumvents Federal 

competition requirements and increases the risks of paying excessive prices and misuses taxpayer funds. Ratification is an act of approving an unauthorized commitment by an official who has the 

authority to do so. 

Our review of these alleged unauthorized commitments estimated that during fiscal year 2012 and 2013, VA made about 

15,600 potential unauthorized commitments. We projected a value 

of $85.6 million, which was a conservative range, that required 

ratification actions. In one instance, we identified one cardholder 

that made 18 unauthorized commitments totaling approximately 

$4.6 million. 

These commitments occurred over a 10-month period without 

being detected. VA could have prevented and reduced the number 

of unauthorized commitments with stronger controls and early detection by ensuring regular oversight. 

VA used a practice of institutionally ratifying bundled unauthorized commitments in the past. This practice, in our view, does not 

hold individuals accountable for this serious offense and it does not 

ensure that reasonable prices were obtained. 

Given these types of purchase card risks and noncompliance with 

purchasing requirements, we are examining compliance with purchase card requirements in VA conference management activities 

for fiscal year 2015. Additionally, in response to information obtained during the course of a criminal investigation involving purchase card abuses at a VA New Jersey Health Care System, we 

have initiated a follow-on review to determine whether the practice 

of continuing to split purchasing is pervasive throughout that 

healthcare system. Our data mining, risk assessments, audits, and 

reviews are complemented with the work performed by the Office 

of Investigations, who performs criminal investigations involving 

purchase card fraud. 

Misuse of purchase cards throughout VA is unacceptable. It has 

existed for years and it contributes to the erosion of public trust 

that taxpayer dollars are being spent wisely and effectively. 


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We have reported since 1995 inadequate VA controls that allowed cardholders to make thousands of unauthorized purchase 

commitments. VA must significantly strengthen its Purchase Card 

Program to prevent future misuse of taxpayer dollars. 

Mr. Chairman, this concludes my statement, and we’d be pleased 

to answer any questions. 

[THE PREPARED STATEMENT OF MS. HALLIDAY APPEARS IN THE AP- PENDIX] 

Mr. COFFMAN. Thank you, Ms. Halliday, for your testimony. 

Mr. Frye, at my invitation to VA to testify I originally asked for 

you to provide an opening statement, so I now invite you to the 

table and will recognize you for 5 minutes to do so. 

STATEMENT OF JAN FRYE 

Mr. FRYE. Chairman Coffman, Ranking Member Kuster, and 

members of the subcommittee, thank you for inviting me to testify 

before you this morning. 

Today I find myself in a position I never envisioned myself to be 

in: I’m testifying as a whistleblower. 

Before I go further, I want to assure you I do not enjoy being a 

whistleblower. I am not a disgruntled VA senior executive. I am 

definitely not seeking attention or celebrity. I’m here before you because I’ve been unsuccessful in my persistent attempts to bring 

massive violations of Federal acquisition and fiscal laws and regulations to a halt in VA. 

Each of us engaged in Federal acquisition and fiscal processes 

have an overriding responsibility to taxpayers. Those of us in leadership positions must always lead in a manner so as to maintain 

the public trust while upholding the integrity of the Federal acquisition and financial systems. 

Over the past 5 years, some senior VA acquisition and finance 

officials have woefully violated the public trust while Federal procurement and financial laws were debased. Their overt actions and 

dereliction of duties combined have resulted in billions of taxpayer 

dollars being spent without regard to Federal laws and regulations, 

making a mockery of Federal statutes. 

I’m not aware of a single senior acquisition leader being held accountable for wrongdoing or dereliction in the nearly 10 years I’ve 

been in my present VA position. 

While intentional violations of Federal acquisition and fiscal laws 

add to VA’s now infamous corrosive culture, recently cited by the 

White House, these unlawful acts may potentially result in serious 

harm or death to America’s veterans. When VA procures pharmaceuticals or medical devices without terms and conditions afforded 

via written contracts, the government forfeits all legal protections 

afforded by contract law. Efficacy and safety mandates are nonexistent. Without contracts, Food and Drug Administration certifications are not a legal requirement, nor Trade Agreement Act or 

Made in America provisions. 

Unfortunately, the government has little recourse if veterans are 

harmed by products or services obtained without protection of contract terms and conditions. 

In addition, doors are flung wide open for fraud, waste, and 

abuse when contracts are not executed. For example, by law, prices 


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paid for goods or services subject to contracts can only be determined to be fair and reasonable by duly appointed contracting offices. I can state without reservation that VA has and continues to 

waste millions of dollars by paying excessive prices for goods and 

services due to breaches of Federal procurement laws. 

Further, traceability and auditability of public funds spent without regard for established laws and regulations are difficult, if not 

impossible to realize. Contract award data is required statutorily to 

be recorded in the Federal Procurement Data System, which is accessible by the general public. When contracts are not executed, the 

taxpayers are not afforded access to data describing these expenditures. 

Also, VA’s small business goal accomplishments have been and 

continue to be overstated. Illegal procurements without contracts 

are not included in calculations to determine federally mandated 

small business goals. Thus, we’ve duped the veteran-owned business community we’re required by law to advocate for. 

The overarching questions are these: How is it possible the VA 

procurement and finance systems have been allowed to operate 

where potentially billions of dollars in goods and services are acquired without contracts as required by Federal law? Why are VA 

senior procurement and finance officials not actively enforcing acquisition and fiscal laws? 

You just heard Mr. Murray provide the VA’s official statement in 

response to your request for this hearing. There are no false affirmations in our statement that I’m aware of. However, senior leaders before you today know the Department is not telling the whole 

story. 

We hope you won’t ask us any questions that will force us to tell 

you about the important pieces we premeditatedly left out. If you 

happen to ask us about what we failed to tell you, we hope we can 

answer your question in such a way as to quickly extinguish followon questions. In short, obfuscation is our game. 

I will no longer be you a party to these VA games. The vaunted 

Veterans Affairs ICARE values, with integrity being first, make an 

attractive lapel pin, but little else if we don’t live these values 

daily. We continue to flout integrity, the most basic and necessary 

foundational footing, the very core of our being. 

In the recent past, because VA senior leaders would not conduct 

themselves appropriately, I was forced to request assistance from 

congressional Members. For instance, Representative Donnelly, 

now Senator Donnelly, assisted me in halting the ubiquitous violations of Federal law in the procurement of VA pharmaceuticals in 

2012 through hearings he mustered. Former Representative Buyer 

assisted me twice in arresting massive violations in the use of miscellaneous obligations in 2008 and again in 2010 through hearings. 

In 2013, I attempted to report massive illegal acts to the House 

Oversight and Government Reform Committee, including matters 

involving illegal purchase card use. I was thwarted in my efforts 

when that committee’s senior counsel and a VA senior acquisition 

executive, who are friends, conspired to keep my letter from Chairman Issa. 

Approximately 7 weeks ago, I disclosed illegal matters in a 35- 

page report to Secretary McDonald, which included recommendaVerDate Aug 31 2005 13:57 Jul 21, 2016 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 Y:\98-637.TXT PAT

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tions going forward. My labors have not yet been acknowledged. I 

took to heart the Secretary’s invitation for whistleblowers to step 

forward. I believed the Secretary was sincere when entreating all 

VA employees to abide by the words found in the West Point Cadet 

Prayer: ‘‘Make us to choose the harder right instead of the easier 

wrong.’’ 

However, I hope we can resolve to also live up to the remainder 

of the sentence in which those words are contained, and let me 

read that entire sentence for you: ‘‘Make us to choose the harder 

right instead of the easier wrong and never to be content with a 

half-truth when the whole can be won.’’ 

Mr. Chairman, this concludes my testimony, and I’m prepared to 

answer questions you or other members of the subcommittee may 

have. 

[THE PREPARED STATEMENT OF MR. JAN FRYE APPEARS IN THE AP- PENDIX] 

Mr. COFFMAN. Thank you, Mr. Frye, for your remarks. 

Unless there is any member objection, the written statements of 

those who have just provided oral testimony will be entered into 

the hearing record. Hearing none, so ordered. And we will now proceed to questioning. 

Mr. Murray, according to VA emails, in late 2012, Mr. Frye clearly informed you and others that stopping the illegal use of purchase cards does not adversely impact veterans’ care. In fact, stopping the practice would actually better protect veterans and the 

government by putting contracts in place and providing the protections offered under the law. 

So why are the issues identified in 2012 by Mr. Frye still not 

fixed? 

Mr. MURRAY. If I recall that email, and some of this is just going 

to be recollection, because it was a while ago, and I think this occurred after a meeting that we had as well, a Senior Assessment 

Team meeting, but the issue there was we agreed to establish a 

work group, both the Health Administration participants as well as 

the Office of Acquisitions and Logistics, to look into these matters. 

And that work group did meet, and the Office of Business Oversight did try to pursue those important issues. 

Mr. COFFMAN. Well, Mr. Murray, obviously there’s documentation that this practice has gone on for years and has been reported 

to the OIG repeatedly, so it doesn’t seem as if you’re in a hurry to 

fix it. 

Mr. Frye, why are the issues you outlined in 2012 still not fixed? 

Mr. FRYE. Well, first of all, let me make sure the committee 

knows what hasn’t been fixed. As you know, the IG report identified over 2,000 persons where cards were issued, and these persons 

did not have the authority to use the card above $3,000. That’s one 

issue. 

But the second issue the IG didn’t choose to look in, because they 

had limited their scope, was whether there were contracts in place. 

That’s the other element that is absolutely essential when cards 

are used above $3,000. 

Cards used above $3,000 are not a procurement methodology, 

they’re a payment methodology. It goes without saying, to pay on 

a contract, you must have a contract. That is the issue in question 


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here. That’s the issue that some of my colleagues have not been 

willing to talk too much about. And that’s primarily where we have 

very, very much abused the system. 

The reason these have not been fixed is because of poor leadership. There simply is not the leadership, the leadership’s will to get 

them fixed. We know what’s wrong. 

The VA has a very complex supply chain system, but we have, 

I think, a relatively easy procurement system. What we buy are 

commercial off-the-shelf products, for the most part. We aren’t 

sending people to the moon, we’re not sending rovers to Mars, we’re 

not prosecuting a war in Southwest Asia. We’re buying commercial 

off-the-shelf products and services, and so it’s an easy procurement 

mission. But for some reason we’ve decided, and we’ve been following this model for a long time, that it’s just too hard for us to 

put contracts in place in accordance with the law. 

So I would say leadership is the lacking ingredient. 

Mr. COFFMAN. And, Mr. Murray, on January 8, 2013, Glenn 

Haggstrom informed the Deputy Secretary and VA Chief of Staff 

of, quote, ‘‘significant problems in how purchasing was being done,’’ 

unquote, basically outlining that contracts weren’t being created 

and purchase cards were being misused. 

On January 9, 2013, Mr. Frye published rules for proper prosthetics procurement in VHA, but VHA is still circumventing the 

rules, regulations, and law. Why? And I want to remind, you are 

under oath. 

Mr. MURRAY. I’m not aware of any circumvention that VHA is involved in. I will tell you that we have stringent controls over our 

card program and we’ve made them more stringent since 2012. We 

ensure that everybody that purchases under the card for authorities greater than the micro-purchase threshold do have a valid contracting warrant. 

But as Mr. Frye will tell you, possessing a valid contracting warrant requires a high degree of training and a high degree of responsibility. So I think that it would be something that would be in the 

procurement space in terms of whether those contracts are valid or 

not. 

Mr. COFFMAN. Okay. Well, Mr. Murray, I have a copy of the 

email right here in front of me, and it says—again, from Mr. 

Haggstrom to Mr. Gould—prosthetics on purchase cards have significant problems in how purchasing was being done by non-1102 

prosthetic folks holding a warrant. Essentially, there were no contracts in place. 

Mr. Frye, why are the laws and regulations being broken by 

VHA procurement? 

Mr. FRYE. In the particular case that you bring up, at the end 

of that year, at the end of 2012, I discovered by chance that there 

was an organization, VISN 3 in VHA, that had obligated over $50 

million in procurement buys without contracts. That led me and 

my staff to believe that the problem might be a lot larger. 

As we began to look into it, we discovered wholesale abuse. What 

we discovered was that VHA had warranted contracting officers, 

over 1,100 of them, but these contracting officers were not putting 

contracts in place, they were simply using their warrant as their 

justification to call vendors, order, no matter what the amount, and 


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pay for those particular purchases with the government purchase 

card. Of course, that is illegal. A contract must be in place before 

the purchases are made. 

What we accomplished immediately, after some pushback from 

the senior leadership of VA, is we put a temporary provision in 

place that allowed VHA personnel, non-1102s, because they were 

very, very short of qualified people, that the non-1102s were allowed to place contracts in place up to $25,000, but they had to be 

supervised by a qualified 1102 contracting officer. From $25,000 up 

to the simplified acquisition threshold of $150,000, Mr. Doyle required 1102 contracting officers to put those contracts on file. 

So we had to come up with a system to try and mitigate the damage that had been in place. And these weren’t events that just 

emerged. These were events that had taken place for probably 

many years and probably billions of dollars spent without benefit 

of contracts. 

I remember the first instance that I heard, I was in the Washington hospital, and one of the senior prosthetics personnel stated 

that they had ordered a $143 prosthesis and paid for it with a government purchase card. And I then asked: So you had a contract? 

He said no. That was the first indication of this malfeasance. 

Mr. COFFMAN. Thank you, Mr. Frye. 

Mr. O’ROURKE. you are now recognized. 

Mr. O’ROURKE. Thank you. Thank you, Mr. Chair. 

In the little time that I have, I’m going to try to see if we can 

shed some light on how bad this problem was and perhaps still is, 

who has been held accountable that was responsible for these problems, whether or not the necessary fixes are in place, and then, if 

we have time, what concerns we have going forward. 

So to get to how bad this was and perhaps still is, Mr. Frye, you 

said that these lack of safeguards and controls in the practices at 

the VA when it came to the purchase card could have led to serious 

harm or death. Do we have any specific examples of that being the 

case? 

Mr. FRYE. I don’t know of any examples, but certainly without 

the safeguards that are included in contracts, you’re open only to 

the largesse of the suppliers. For instance, that $142,000 prosthetic 

that I just mentioned, if that prosthesis broke the day after we 

bought it, we’ve got to rely on the contractor to make good, because 

we have no contractual provisions to force him to make good. 

Mr. O’ROURKE. I understand and I share your concern about 

that. 

But beyond speculation, Ms. Halliday, do we have with any evidence that this practice has caused serious harm or death? 

Ms. HALLIDAY. I don’t have absolute evidence that it has caused 

harm or death. I think what we always see is the practice is justified because of lack of planning, and it’s just the easy course. And 

it seems that to try to get compliance VA-wide, enterprise-wide to 

ensure that everyone is taking the proper precautions just doesn’t 

occur. 

Mr. O’ROURKE. Okay. 

And for Mr. Murray, can you tell us about what you’ve done to 

hold those responsible accountable? I think that has been a recurVerDate Aug 31 2005 13:57 Jul 21, 2016 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 Y:\98-637.TXT PAT

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ring necessary theme on this committee. More than resources, I 

think the VA needs accountability. So could you address that? 

Mr. MURRAY. Yes, sir. Thank you for the question. 

So upon the Charge Card Act of 2012 being implemented, we 

worked with our partners in Human Resources to come up with a 

table of offenses for misuse of either the travel, the purchase, or 

the fleet card. First offense is, in that table of penalties, is admonishment all the way to removal. 

Mr. O’ROURKE. And has anybody been admonished or removed? 

Mr. MURRAY. We have reported in the three semi-annual reports, 

two removals, two dismissals. 

Mr. O’ROURKE. Two removals related to this problem? 

Mr. MURRAY. To misuse of a card. 

Mr. O’ROURKE. Great. And then if I heard you correctly, Mr. 

Murray, you said that all of the outstanding OIG concerns were addressed and closed as of April 2015. Did I hear you correctly? 

Mr. MURRAY. From the unauthorized commitment report that 

they issued in 2014, we closed all those recommendations working 

with the Office of Acquisitions and Logistics. 

Mr. O’ROURKE. Okay. 

And, Ms. Halliday, would you care to comment on that? Does 

OIG have any outstanding concerns, and do you agree with Mr. 

Murray’s conclusion on that? 

Ms. HALLIDAY. Mr. Murray’s team fixed the controls to our satisfaction. That’s why we closed those recommendations. However, 

you have to have compliance with those controls or you still have 

serious problems. This is the area I think VA really struggles with. 

Mr. O’ROURKE. And would you care to comment on Mr. Frye’s 

statement about how narrow your focus was in addressing some of 

the issues that he has unsuccessfully, it seems, tried to bring to the 

attention of senior VA leadership and whether that warrants expanding OIG’s investigation of the Purchase Card Program? 

Ms. HALLIDAY. When we decided to take a look at the purchase 

cards, we scoped out specific objectives. The issue that Mr. Frye is 

talking about is putting contracts in place, and I have other teams 

that look at contracts. 

The reason we narrowed our focus at the time was VA was moving forward to put an integrated operating procedure in place to 

build quality into its contracts. It had put a QA program and these, 

I think if I get it right, the head contracting officials would be monitoring the contracts. We thought at some point as that started to 

take hold we would see some improvement in this. We had tested 

those controls and they worked when they were used. Unfortunately VA, in our other work that we did, we found that they just 

circumvented the controls or ignored them. 

Mr. O’ROURKE. And then just briefly, Mr. Frye, going forward, 

can you comment on any change you’ve seen in leadership related 

to these control issues, accountability, and ensuring that we’re 

safeguarding taxpayer dollars under this new administration, 

under Secretary McDonald, compared to Secretary Shinseki? 

Mr. FRYE. Let me just relate that several months ago I was 

asked to visit three VA healthcare centers. The last one we visited 

remarked that they had just discontinued this illegal practice in 

October of 2014. They were supposed to have discontinued this illeVerDate Aug 31 2005 13:57 Jul 21, 2016 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 Y:\98-637.TXT PAT

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gal practice in January of 2013. That’s as far as we’ve dug into it, 

but I can assure you that if we were to do an investigation, a full 

investigation, we would find that many of these issues still exist. 

I provided to this subcommittee a document that shows the po- tential for $1.2 billion spent without contracts paid for with the 

government purchase cards for fiscal year 2013 and half of fiscal 

year 2014. That information was obtained by us. We hired a supplier to come in and help us out. No investigation has been made 

into these potential unauthorized commitments. So I would say 

based on that, they said they stopped, but they continued. 

Mr. O’ROURKE. Thank you. 

Thank you, Mr. Chairman. 

Mr. COFFMAN. Dr. Roe, you’re now recognized for 5 minutes. 

Dr. ROE. Thank you, Mr. Chairman. 

I think, first of all, Ms. Halliday, if I could get your address. 

You’re here so much, I want to send you a Christmas card. Okay? 

You seem to be here so much in front of our committee. 

Ms. HALLIDAY. I would appreciate that. 

Dr. ROE. Anyway, one of the things that has been brought up is 

trust. And we look at the Veterans Choice Card, yesterday we held 

a hearing, problems. We look at VA hospital construction. We look 

at now this purchase card. This reminds me of a story you’re going 

to see about every year in the local newspaper of the secretary at 

the church that has the credit card and overspends and finally gets 

caught sometimes. That’s what this reminds me of. 

And you’ve got 2,000 cards out there without supervision. Most 

of these employees are honest people. I certainly understand that. 

They are. They’re not going to do anything wrong. But without 

oversight, it just opens itself up for abuse, I think. And I think 

that’s what we’re hearing, that this has occurred. And we don’t 

know how deep it is because we haven’t delved into it as deeply as 

we probably should. 

Let me tell you what happens in the private world of Medicare. 

As a physician, if I go out and pull some of the stuff that happened 

here, I end up in a Federal pen. There are huge penalties against 

what we’ve done and what has happened here without contracts. 

If you do that in the private world under a government contract 

with Medicare, you’re in deep trouble in the private world. 

I have heard maybe two people lost their positions from this. And 

that continues to be a problem with the VA, is no one is held accountable when these egregious events occur. And it’s just business 

as usual. 

And, look, I get it. It’s a whole lot easier to take your credit card 

and just purchase something than it is to go out and get a contract. 

That’s a lot simpler to do and you circumvent a lot of issues and 

problems, but it’s not the way the business needs to be done. 

And I’ll get to a question. 

Mr. Frye, Colonel, thank you for your service. In any of the reviews you’ve conducted, have you found examples of unauthorized 

purchase cards used in retail businesses like Amazon or PayPal or 

things like that? 

Mr. FRYE. As a matter of fact, when this subject first emerged 

in October of 2013 we did hear that there were some charges made 

in the VA central office for PayPal, Amazon.com, and, as I recall, 


VACREP0180 with DISTILLER
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some steakhouses, and there seems to have been one other, which 

I can’t remember. I don’t know whether those were adjudicated, 

but the head of the contracting activity at that time in the VA central office informed myself and Mr. Haggstrom of these issues. 

Dr. ROE. And, Ms. Halliday, did the OIG find any inappropriate 

purchases to retailers? 

Ms. HALLIDAY. In our annual risk assessments we consistently 

identify transactions we think are high risk or suspicious. We had 

teams go out and look at some purchases where we identified in 

Las Vegas where there was rooms at casinos, there was alcohol 

purchased, things like that. And as they drilled down, and this is 

very resource intensive, we found a preponderance of transactions 

that were made for veterans. Happened that the liquor store, the 

shuttle bus was right near the hospital, they were filling up gas 

there. The casinos, the veterans placed in those rooms at night had 

gone through chemotherapy and they were too sick to drive home. 

So it’s very hard to find where you find absolute fraud and the 

intent for personal gain. And that’s why I think so many of these 

ratifications are occurring, because the VA has gotten the benefit. 

There are costs associated with that, excessive prices, things like 

that. 

When we find an issue that we absolutely think is fraud, we 

hand it over to the Office of Criminal Investigations, and Quentin’s 

group would take that, and that is also very resource intensive. 

I’d like to ask him to talk to an issue up in East Orange that 

I think you might. 

Mr. AUCOIN. We conducted an investigation in East Orange. We 

had a senior supervisory engineer that had brought in a contractor 

of his choosing. And there are two parts to this. Part of this was 

a service-disabled veteran-owned business fraud, but also there 

was a huge element of purchase card fraud. There were a lot of 

transactions set up to be below the thresholds for additional scrutiny, and they processed so many that we had about $3.4 million 

of purchase card fraud at this facility. 

That case is now pending sentencing. There has been a conviction. And the splitting of purchase cards was one of the ways they 

used to conceal this. And upon conviction, we brought in our audit 

group, and they’re doing some follow-up work to see if they’ve 

cleaned up their act, but also this is something that we can certainly look at, at other facilities. 

Dr. ROE. So the more you continued to drill down, the more you 

found, is what I’m hearing. 

Mr. AUCOIN. Yes. Absolutely. 

Dr. ROE. I don’t think we started the buzzer. I’ve had more than 

adequate time. And I just want to finish by what Colonel Frye said. 

What happened to duty, honor, and country? Yield back. 

Mr. COFFMAN. Ranking Member Kuster, you are now recognized. 

Ms. KUSTER. Thank you very much, Mr. Chair. And I apologize. 

I was at a markup in the Ag Committee. 

So thank you all for being with us. And Mr. Frye certainly 

shared my shock reading The Washington Post this morning with 

my colleagues on both sides of the aisle. I am concerned, though, 

about allegations, and maybe it was misquotes, but it’s a pretty severe allegation to say that people might have died for this, and I 


VACREP0180 with DISTILLER
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think if we don’t have examples of that, it would be best not to sort 

of catastrophize. But I do understand that this is a serious problem. 

So I want to drill down a bit, if I could, and either for Ms. 

Halliday or for Mr. Frye, if you have further information on this. 

I want to drill down on the thousands of pharmaceutical purchases 

and prosthetic purchases without contract files to document the 

purchases, whether they were included in this figure of 15,600 unauthorized commitments in the IG report. If you know the answer 

to that, that would be helpful. 

I’m trying to narrow the universe as to what is the most typical 

transaction and how this committee, subcommittee, can narrow in 

on changes to improve procedures going forward. So if you could, 

pharmaceutical purchases and prosthetics. 

Mr. FRYE. Let me start with pharmaceuticals. I don’t know that 

we have any issues in pharmaceuticals right now. We have issues 

that were reported to this bigger committee, the entire committee 

back in 2012. 

Back in 2011, in December of 2011, to be exact, the Secretary 

wrote a letter to Congressman Donnelly and said that our illegal 

activities had ended. Between December 2011 and August of 2012, 

the VHA self-reported 9,700 illegal transactions in the purchase of 

pharmaceuticals. Those transactions were never reported to Congress that I know of, they were swept under the rug. 

And, frankly, when a report was submitted by Mr. Haggstrom 

and others, and some of the people at the table were signatories 

on that report, they simply omitted those figures on a document 

that was presented to the Secretary to tell him about the health 

of the Department of Veterans Affairs. I consider it an absolute lie. 

It should never have taken place. I was not a signatory on the document, for obvious reasons. 

Now let me go to prosthetics. Prosthetics, as I stated earlier, we 

found in 2013, at the same time, and I may have my years confused here because I don’t have notes in front of me, but at the 

same time we found that we had 2,000 purchase cards that had 

been provided to personnel who didn’t have authority to use the 

purchase cards over the $3,000, we at the same time discovered 

that prosthetics personnel were buying prosthetics without contracts. They were simply making phone calls to their suppliers and 

buying prosthetics and then liquidating that obligation with a government purchase card. 

In a normal situation where you have a contract and you buy 

something, that something is verified by the receiver, usually a 

contracting officer representative or somebody in the hospital, they 

check the block and say, we got it. That receipt then goes to the 

finance center. The finance center takes a look at that receipt 

that’s now payable and they confirm that there is a legal obligation 

for that product. 

If there is not a legal obligation, in other words, if they don’t 

have a contract number, they get ahold of the person that was responsible and tell them: We’ve got a problem here. We’ve got an 

unauthorized commitment. A ratification has to take place. 

By using the cards, the purchasers simply ignore that process. 

They’re able to liquidate that unauthorized commitment, no pain, 


VACREP0180 with DISTILLER
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no stain, nobody ever knows. The only people who would know are 

the people that run the Purchase Card Program or the people that 

run the contracting program in the organization where those infractions are taking place. And that’s what’s happened in—— 

Ms. KUSTER. Is there—— 

Mr. FRYE. Go ahead. 

Ms. KUSTER. I want to understand. Is there any record of the 

prosthetic? Because, I mean, we had a hearing recently about trying to keep track of an identification. So for recalls and the like, 

you’re telling me there’s no paperwork, there’s no file, there’s no 

record of this purchase other than perhaps the monthly card statement? 

Mr. FRYE. There was undoubtedly some record of the purchase, 

because they paid for that purchase with a purchase card, but 

there is supposed to be a contract. Federal law requires contracts 

be put in place for all requirements above $3,000. They must have 

a contract in place. Something as simple as determining a fair and 

reasonable price can only be made by a contracting officer, no one 

else, by law. 

Ms. KUSTER. My time is up. Thank you. 

Mr. COFFMAN. Mr. Huelskamp, you’re now recognized. 

Dr. HUELSKAMP. Thank you, Mr. Chairman. I appreciate you 

calling this hearing on a very important topic. A headline in one of the newspapers was $6 billion in illegal 

spending. Mr. Frye, I can’t find that figure. What’s your range 

guesstimate? $6 billion that I see, $6 billion to $10 billion. Which 

are you suggesting? 

Mr. FRYE. Well, first of all, I never intended that document to 

be sent to the press. I intended for the Secretary, when I sent it 

to him 7 weeks ago, my intent was to do what he asked us to do, 

which was to give him information that he might be able to act 

upon. Those ranges are there because we know we spend $5 billion a 

year in fee basis care, and that’s where you walk—a veteran like 

myself walks into a VA hospital, for instance—— 

Dr. HUELSKAMP. I want to follow up on the Secretary issue, but $6 billion, is that the bottom line? Is it $6 billion to $10 billion, is 

that where that figure comes from? 

Mr. FRYE. Without a proper investigation, we’ll never know. 

Dr. HUELSKAMP. No, I understand. 

Mr. FRYE. But I’m confident that it’s at least $5 billion. 

Dr. HUELSKAMP. Okay, I appreciate that. 

My second question would be, you sent that letter to Secretary 

McDonald. What was the response from his office? 

Mr. FRYE. I have not received a response from his office. 

Dr. HUELSKAMP. Allegations of up to $6 billion in illegal spending, and you have had no response from the Secretary’s office? 

Mr. FRYE. I have not had any response from the Secretary’s office. I know that he received it, because his assistant assured me 

that both he and Deputy Secretary Gibson had received hard copies. 

Dr. HUELSKAMP. I appreciate that. 

And, Mr. Chairman, I don’t know who was called in as a witness, 

but I think that’s devastating, that these type of allegations and no 


VACREP0180 with DISTILLER
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response. Perhaps Mr. Murray is here to respond to that. But I 

want to ask Mr. Murray about another issue. 

In Mr. Frye’s letter to the Secretary, when did you read that letter? 

Mr. MURRAY. I have not seen that letter. 

Dr. HUELSKAMP. You’re here to discuss this this morning. When 

were you aware of the letter? 

Mr. MURRAY. I just found out about this letter this morning. 

Dr. HUELSKAMP. How did you find out about it? 

Mr. MURRAY. Through discussions with people here. 

Dr. HUELSKAMP. I guess I’m dumbfounded. You’re here to speak 

for the VA about allegations of $6 billion in illegal spending and 

you’ve never seen the allegations? 

Let me ask you about a meeting July 11, 2014. According to Mr. 

Frye, you were at a meeting discussing many of these issues. Do 

you recall this meeting? Were you actually present there? 

Mr. MURRAY. If this was a Senior Assessment Team meeting, I 

was. 

Dr. HUELSKAMP. Okay. Did you keep notes of this meeting? 

Mr. MURRAY. I do. 

Dr. HUELSKAMP. Will you provide those notes to the committee? 

Mr. MURRAY. I absolutely will. 

Dr. HUELSKAMP. Okay. 

Mr. MURRAY. Along with our request to Mr. Frye to provide the 

information he alleged he had from the—— 

Dr. HUELSKAMP. Actually, sir, I make the requests, not you. 

Mr. MURRAY. Okay. 

Dr. HUELSKAMP. But I would like to see those notes. Mr. Frye alleges that it was proposed by top-level officials that violations of 

the law would continue. Tell me what you heard at that particular 

meeting and were you aware of Mr. Frye’s concerns. 

Mr. MURRAY. So Mr. Frye raised his concerns with the CFOs at 

the senior assessment team meeting. The particular item that was 

being—being reviewed at the time he raised those concerns was the 

medical necessity documentation that a physician or clinician 

would provide to authorize care. It was not a contracting issue, but 

he raised the issue of contracting to wit we—we said let’s get a 

team together, let’s review these allegations, let’s see the data that 

you have on this particular issue, the—— 

Dr. HUELSKAMP. Did he say he thought the VHA was violating 

the law at this meeting? 

Mr. MURRAY. I’m sure he did. 

Dr. HUELSKAMP. Well, I don’t know. You were there, I was not, 

Mr. Frye was there. Did he say that? 

Mr. MURRAY. Yes, I believe he probably—yes, I would say he did. 

Dr. HUELSKAMP. Okay. Well, we’ll find that in the notes where 

you referenced it. Did you do anything with that information? Now 

you’re in a position to do something with it, I guess, for 5 weeks 

now. 

Mr. MURRAY. We did. We—so based on that meeting, we put together a work group to—to review these allegations. They were serious allegations. The work group did meet with VHA. Jan Frye did 

not attend, so the idea was to get to the bottom, to get the data 


VACREP0180 with DISTILLER
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that apparently would either substantiate or refute these allegations. 

Dr. HUELSKAMP. I hope you can provide that to the committee. 

Last question would be, I guess, for you, Mr. Murray, I’m about out 

of time for the first round. How many active purchase cards are 

available to VA employees? 

Mr. MURRAY. I believe the number is about 25,000. 

Dr. HUELSKAMP. 25,000 cards. How many employees are authorized to use 25,000 cards? Is that the same number or is it—— 

Mr. MURRAY. No, no, fewer employees have cards. So total cards 

is 25,500, roughly. 

Dr. HUELSKAMP. I would like documentation of that. 

Mr. MURRAY. Sure. 

Dr. HUELSKAMP. How many employees are using—— 

Mr. MURRAY. I have 23,000 cardholders. 

Ms. RICE. How many? 

Mr. MURRAY. 23,500 cardholders—25,515. I mean, the number is 

ballpark, but cards. 

Dr. HUELSKAMP. And are you able to indicate how many dollars 

of annual purchases are on these 25,000 active cards? 

Mr. MURRAY. $3.74 billion is spent, of which 98 percent is the 

health administration. 

Dr. HUELSKAMP. Okay. Who is the card—the company that 

issues those cards, who’s the vendor for that? 

Mr. MURRAY. That’s U.S. Bank. 

Dr. HUELSKAMP. U.S. Bank. All right. I yield back to my next 

round of questions, Mr. Chairman. 

Mr. COFFMAN. Thank you, Mr. Huelskamp. 

Ms. RICE. you are now recognized. 

Ms. RICE. Thank you, Mr. Chairman. 

Mr. Frye, I want to start with you. So these cards that are 

issued, whoever is issued those cards is able to make a purchase 

up to $3,000 just without any record kept; is that correct? 

Mr. FRYE. The purchases made up to $3,000 are called—are 

called ‘‘micro purchases.’’ There are records kept. The purchase 

cardholder must keep records, and then the purchase cardholder 

has someone who provides oversight to that cardholder, and normally these approving officials, or authorizing officials, have a 

number of cardholders under them, so records are kept. 

Ms. RICE. Okay. So anything over 3,000—— 

Mr. FRYE. I’m sorry? 

Ms. RICE. Anything over—any purchase over $3,000 requires a 

contract? 

Mr. FRYE. That’s correct. Every purchase over $3,000 requires a 

contract. The card can be used above $3,000 to pay for those products that are bought under a contract, but it is not a contractual 

instrument. A contractual instrument must be in place, by law, 

above $3,000. 

Ms. RICE. And who enters into that contract? The cardholder? 

Mr. FRYE. No, cardholders, unless they’re also—— 

Ms. RICE. There has to be an existing contract within VA. 

Mr. FRYE. There has to be a contracting officer above—— 

Ms. RICE. Got it. 

Mr. FRYE [continuing]. $3,000. 


VACREP0180 with DISTILLER
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Ms. RICE. Okay. So the one think I’d—I just want to ask you 

very quickly. The—in New York, obviously I’m from New York, so 

I was a little surprised at this, there was recorded $50 million in 

prosthetic purchases in increments of $24,999, which is $1 under 

the charging limit on each card. Is that—and maybe I should direct 

this question to you, actually, Ms. Halliday, is that a red flag? 

Ms. HALLIDAY. It’s definitely a red flag. We look at the splitting 

of orders. This is part of the problem in one of the high-risk areas 

that I identified that we focus on the transactions and try and take 

a closer look. 

Ms. RICE. So did you take a closer look at this instance of all 

the—— 

Ms. HALLIDAY. No, I was unaware of the example that Mr. Frye 

put out there. 

Ms. RICE. Would you be able to go—I mean, upon a request of 

this committee. 

Ms. HALLIDAY. Obviously we could look at that, and we would 

want to do that. I’ve stood up an entire new financial integrity 

team to put more oversight under these purchase cards because the 

value of the purchase cards is just skyrocketing, and I never saw 

that the controls were getting strong enough to make sure that the 

program was run effectively. 

Ms. RICE. Well, to me, that’s a major red flag, and I appreciate 

your willingness to go back and look at that. You made a statement 

before the controls were fixed, but the VA—by the VA, but that 

compliance is still something that the VA struggles with. In your 

opinion, why? 

Ms. HALLIDAY. Holding people accountable to make sure that 

they really execute their job. I think, in many cases, purchases 

made using the purchase cards, they always say, well, they needed 

to get immediate services to the veteran in the medical center. And 

then when you look at the type of purchase, you’re like, really, 

that’s just not the case. 

It’s lack of planning, but by using a purchase card is a quicker 

method to get the goods and services into the medical center. 

Ms. RICE. That’s if you’re using it to purchase goods and services. 

Ms. HALLIDAY. Correct. 

Ms. RICE. Okay. So—— 

Ms. HALLIDAY. You know, we—we struggle with when there is 

fraud, a lot of times the documentation is just not there, or the 

audit trail to really look at it because it’s been destroyed. 

Ms. RICE. So let me ask you—oh, that’s the another thing that 

I want you to look into because when they were asked for the 

records regarding the prosthetic purchases in New York, they were 

told that all the records were destroyed by Superstorm Sandy—— 

Mr. COFFMAN. Is that right? 

Ms. RICE [continuing]. And they have not been—right? And they 

have not been able to document that to—I mean, we don’t know 

that that’s true. So maybe you could also inquire into that as part 

of looking into that. 

So I’m just going to ask you two questions to see if you can give 

a specific number. In the past 2 years, how many instances of 

fraud, waste, and abuse with purchase card use were found by you? 


VACREP0180 with DISTILLER
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Ms. HALLIDAY. I can’t get that number. I have to submit it for 

the record. 

Ms. RICE. Okay. So that, and what was the percentage of fraud, 

waste, and abuse found out of the total number of purchase card 

transactions during this time period as well? That would be great 

if you could look into that as well and get that number to us. 

So, Mr. Murray, I just have one question for you, and this is just 

an observation that I have made, and it’s very disturbing. I understand that you were sent here and I understand that you have a 

role to play, but I have—I don’t think I have ever seen a member 

of the VA come before this committee in the relatively short time 

that I have been here. I’ve been here for about 5 seconds, right, but 

I haven’t seen one member of the VA come and talk about whistleblowers and how they’re treated, a lack of retaliators being held accountable, this allegations of waste, fraud, and abuse with all this 

money, and show any level of outrage. Can you explain that to me? 

Mr. MURRAY. I am outraged. If the allegations are correct, I am 

very outraged, and we take our program responsibilities very seriously. We closed the IG recommendations in a year. I meet with 

Ms. Halliday and her team quarterly. 

Ms. RICE. So your response to her saying that while you have— 

controls were fixed by the VA and yet she still sees a difficulty in 

compliance by the VA, what is your response to that, and maybe 

you can—do you have a reason for the lack of compliance? 

Mr. MURRAY. When we meet with the IG on a quarterly basis, 

we take everything seriously. We look at these compliance issues, 

but a lot of what we see is personal responsibility at a local level. 

For instance, let me explain. So a cardholder doesn’t make a purchase by themselves. They have to get their supervisor or approving official to approve it. That approving official needs to reconcile 

those transactions with U.S. Bank and certify they’ve reconciled 

them at the end of every month. 

We review those reconciliations and follow up with the field for 

those self-approving officials that have not been executing their fiduciary responsibilities. So, you know, we put in place at the departmental level every detective control and strong policy on people’s responsibilities. For instance, the cardholder is supposed to 

keep records of all the receipts. The approving official is supposed 

to ensure that that—those items were, in fact, receipted for, received for, and that they were good goods. 

So there is a hierarchy of—of strong policy requirements to have 

a card. In fact, you have to take training to get a card, not just on 

the card itself but on authorized commitments. 

Ms. RICE. No, I understand that, but clearly those systems are 

not working. Just Mr. Chairman, with your indulgence. I’m 1 of 10 

kids. If my parents gave all of us a credit card, none of us would 

have gotten a college education, and that’s 10 people. You’re talking about 25,000—35,000—25,500 credit cards. I think that has to 

be looked at as well. That number is just enormous. 

Thank you, Mr. Chairman. 

Mr. COFFMAN. Thank you, Miss Rice. 

Ms. Walorski, you are now recognized. 

Ms. WALORSKI. Thank you, Mr. Chairman. 


VACREP0180 with DISTILLER
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Mr. Murray, I just have to ask. You know, I guess to echo many 

of the things that have just been said here, we have—I’ve been 

on—this is my third year on this committee, and the questions I 

get asked at home after people watch these hearings on C-SPAN, 

Americans are listening, Americans hear this, Americans are at the 

table, and the expectation for transparency and accountability has 

never been higher in this country, and it’s been a year since we’ve 

had a transfer of Secretaries, but the requirements of the American 

people are enough’s enough. 

And what I get asked when I go home is this question: How do 

you guys individually not have a gut check on doing right for the 

sake of right? So Mr. Frye identifies this, he comes and he talks 

about it, and you are aware of it. You stand under a subpoena in 

front of a committee that has heard these same stories in just 

about every area of the VA for 3 years and longer. Mr. Frye talked 

about having issues longer than I’ve been here, and doesn’t—didn’t 

you have a gut check when these allegations came up that even 

though the VA has been operating illegally for all these years, that 

when it’s on your watch, that something in your gut says, ‘‘You 

know what, we have to stop this, this is wrong, it’s illegal activity,’’ 

did that ever dawn on you that this is illegal activity? 

Mr. MURRAY. We have strong—we have a group of—the office of 

business oversight that actually goes out and checks these things. 

Ms. WALORSKI. That’s not the question, and the question isn’t 

about the work group. Mr. Murray, do you now think that what 

was going on in the place that you worked was wrong and that 

some day, with all the oversight going on with the VA, you’re going 

to sit here under oath with a couple of hours’ notice and you’re 

going to say what to the American people? Do you think what happened is wrong? 

Mr. MURRAY. So, you know, we’ve spoken to our office of general 

counsel. I’ve spoken to contracting officials in the health administration. There are different views. 

Ms. WALORSKI. What’s your view, Mr. Murray? You’re employed, 

you’re under oath to stand here and represent the entire Veterans 

Administration. You are sitting here telling us what? This is okay? 

You were compliant with it? It’s wrong, you knew it, you agree 

with Mr. Frye? What’s your gut say about it? 

Mr. MURRAY. My gut is that the—a lot of different parts of the 

organization have looked at this issue and that there are—are different views on this issue. 

Ms. WALORSKI. Mr. Murray, I’m asking you. 

Mr. MURRAY. And it is a complicated issue. 

Mrs. WALORSKI. With all due respect, you’re representing the VA 

today. I have, you know, three-quarters of a million people that pay 

me to do a job, and the job is to ask you, because America’s up to 

here, right, with many areas. You are sitting here today, and you’re 

saying what? Do you believe this is right or wrong? Are these allegations right or wrong? What does your gut say? It sounds like 

you’re taking the Fifth. 

Mr. MURRAY. So—so—but my—so what I do know is that 99 percent of these purchases above $3,000 are prosthetics and sensory 

aid purchases, and there is ambiguity in those type of purchases, 

what the controlling legal authority, I thing is what they call it, 


VACREP0180 with DISTILLER
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Norb, is. And under the Choice Act, for instance, and I think 

there’s legislation up here now to provide the VA some flexibility 

on how we—how we procure, at least care in the community in this 

case. And so the whole—the whole issue to me is there is no—there 

are differences in opinion from very, very senior people on. 

Ms. WALORSKI. Sir, I understand that. Were you afraid of losing 

your job if you identified this? Were you afraid of your job security 

of raising flags? 

Mr. MURRAY. I am trying to give you the—I’m giving you the answer that—there are different people at this table, you would get 

a different—— 

Ms. WALORSKI. But I’m not asking the other people at the table, 

sir. We have an inspector general who has been reliable. We have 

a whistleblower who I thank again for every whistleblower that 

comes in here. We are trying to get to the bottom of this to help 

put the pieces together because we want the VA to work. 

So my question is, is this right or wrong? What does your gut 

say? I’m going to take that as you’re taking the Fifth, and I guess, 

you know—Mr. Frye, I want to again thank you for the multiyear 

commitment you’ve made to this, and our district, obviously, is very 

active. I mean, the second district now as well, and we are very active because of the amount of veterans and families we have. But 

I think that when America sees this kind of response, you know, 

again it begs the question from you, has this department that Mr. 

Murray been involved in, have they done enough to correct this 

issue? Do you see the remedial steps they’ve taken as being 

enough? 

Mr. FRYE. Absolutely not. I brought these issues up time and 

time and time again. Those of us who bring these issues up are 

scorned, shut aside. For the last 4 years I have—I have been 

shelved because I—because I went to Senator Donnelly—— 

Ms. WALORSKI. Yes. 

Mr. FRYE [continuing]. Then Representative Donnelly and reported the wrongdoing in the VA. I guarantee you that those who— 

those of us who want to do right are shoved to the side. And that 

is what’s happened over at the last 4 years. But I’ve been—I’ve got 

record after record where I’ve addressed these issues in emails. 

There are people that have heard me say this below VA about 

these issues in meeting after meeting after meeting, and people 

simply don’t want to hear it. 

Ms. WALORSKI. I appreciate it. I yield back my time, Mr. Chairman. 

Mr. COFFMAN. Chairman Miller. 

Mr. MILLER. Mr. Coffman, I would yield my time to Mr. Walz 

first, and then I—— 

Mr. WALZ. I will pass to you, Jeff. Thank you. 

Mr. MILLER. I hope VA is embarrassed, ashamed at the way they 

treat the people that try to bring problems forward. I’m tired of 

hearing the same thing over and over and over again from the VA. 

Nothing is changing. Regardless of what leadership is telling this 

committee, nothing is changing. 

I talked with the Secretary, and he says, you know, this committee needs to quit looking in the past. We need to look at where 

VA is going. I don’t trust where they’re going. I don’t think you 


VACREP0180 with DISTILLER
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know where you’re supposed to go. The whole idea is to serve those 

who have served this Nation, not to build a bureaucracy that 

serves itself. 

I came into this hearing because I had been monitoring on my 

television in the office, and I couldn’t believe the lack of specificity 

that we were hearing, how poorly people have been treated. The 

Office of Inspector General has a job to do, and sometimes we get 

crosswise with them, but that’s okay. But on this instance they are 

dead on the mark. And to let this continue on and on and on and 

not be furious about it defies anybody’s rational thinking. And I 

hope the Secretary hears back from you that this committee is not 

going to take any more steps of faith with the VA. 

Our patience is gone. The American public’s patience is gone, and 

the veterans of this country are not being served appropriately. So 

Mr. Chairman, thank you and to your ranking member for holding 

this hearing, and I’m sure that there will be more than just this. 

I am speechless, absolutely speechless. I yield back. 

Mr. COFFMAN. Thank you, Chairman Miller. Dr. Benishek, you 

are now recognized. 

Dr. BENISHEK. Thank you, Mr. Chairman. Well, I, too, am truly 

amazed by the testimony that we’ve heard here today, and I think 

it brings to mind, frankly, for me, a piece of legislation that I have 

been trying to get forward here, and that is to—when the Office of 

Inspector General identifies a problem with the VA, it seems like 

there is nobody in charge of solving the problem. 

So I’m trying to have a piece of legislation that makes—identifies 

an employee who is supposed to deal with the IG report, identifies 

them by name, and then makes them comply to the IG report within 30 days or that person gets disciplined. I mean, I think that’s 

a reasonable thing, because right now, we have Ms. Halliday talking about stuff, we have Mr. Frye, but nobody seems to be the person in charge of fixing it. That’s—I see as a common theme whenever this stuff comes up here in this committee. 

Ms. Halliday, do you think that’s a reasonable idea that—I mean, 

a lot of times the VA will agree with your findings and never act 

on it. Do you ever see that happen? 

Ms. HALLIDAY. Absolutely. First, when we give them recommendations, we believe that they’re telling us in good faith what 

their corrective actions plans are, and what their implementation 

schedule is. The reason we do follow-up is to find out if the actions 

have been effective. So we see that all the time. 

Dr. BENISHEK. You know, the—— 

Ms. HALLIDAY. As far as—— 

Dr. BENISHEK. Yes, go ahead. 

Ms. HALLIDAY. As holding someone accountable, I would want to 

tie it to the senior official or the program official responsible, not 

just a person in administration. 

Dr. BENISHEK. Yes, well, I want to see some somebody’s name, 

because otherwise they all say, well, nobody ever took care of this, 

and it wasn’t me who was responsible for it. And this is in response 

to IG reports that have gone over 30 years as far as physician recruitment that you’ve made recommendations like eight times in 

the last 30 years. The VA has agreed with you, but they never implemented the changes that you recommended over 30 years, and 


VACREP0180 with DISTILLER
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this is just another example of nobody being responsible for doing 

anything to fix this problem. 

And Mr. Frye, I must congratulate you on your efforts. I’m very 

disappointed in Mr. Murray’s testimony here today, but just as— 

I agree with the chairman, this is just outrageous and another example of what’s going on here, and my disappointment for the administration here is exceedingly high at this point. I yield back. 

Mr. COFFMAN. Thank you, Dr. Benishek. 

And Chairman Miller, you had mentioned another hearing on the 

topic of procurement, and this subcommittee will hold another 

hearing on the 1st of June. 

Let me just say, Mr. Murray, I think you’re one of the reasons 

why Secretary McDonald is failing. Simply because of the fact that 

he’s unwilling, when he came aboard, to remove what I would consider the deadwood that is not leading this agency, and you’re absolutely doing nothing to make a difference on this issue, and I—I’m 

very disappointed in your testimony today and in your conduct in 

this committee. Okay. 

Mr. Frye, can you speak to the potential that one person might 

be buying, paying, and receiving goods in VA and what pitfalls that 

creates? 

Mr. FRYE. Absolutely. We need a separation of duties. If, for instance, a person is issued a card and if that person buys a product 

with that card, and then pays for the card at the same time, there’s 

a chance for waste, fraud, and abuse. 

So, for instance, if we have a contracting officer who also has au- thority to pay above the $3,000 threshold, and they write a contract 

and products, let say, are delivered, let’s say for the sake of argument they’re televisions and they have those televisions delivered 

to their house and they’re also able to pay for those televisions, 

perhaps no one would ever catch that problem. So we must have 

a separation of duties. 

Mr. COFFMAN. Mr. Murray, in your testimony you indicated that 

VA employees made 6.1 million transactions in fiscal year 2014. 

Does U.S. Bank card charge a transaction fee? 

Mr. MURRAY. They do, but we receive rebates for every charge 

that VA makes. 

Mr. COFFMAN. So is there a net cost to the taxpayer? 

Mr. MURRAY. There is not. In fact, we got $75 million in rebates 

back to the appropriation from which those costs came from last 

year in fiscal year 2014. 

Mr. COFFMAN. So it’s a real benefit to U.S. Bank Corp then? 

Mr. MURRAY. Excuse me, sir? 

Mr. COFFMAN. So it’s—you see it as a benefit to the VA? 

Mr. MURRAY. Sir, the card program was established primarily for 

small items below the micro purchase of $3,000 threshold. 

Mr. COFFMAN. We know that’s not happening. We know that 

they are breaking the purchases up and doing things that were in 

violation of current law. We know that; is that correct? 

Mr. MURRAY. We have examples of it. 

Mr. COFFMAN. We know that. Mr. Murray, in 2012, VA confirmed 

that employees were using purchase cards even though they did 

not have the legal authority to obligate the government or to use 

the cards. 


VACREP0180 with DISTILLER
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Given the risk to VA, as the OIG can attest, why is VA allowing 

this practice to continue, and why is no one being held accountable 

for breaking regulations in the law? 

Mr. MURRAY. So VA, we took strong measures upon learning of 

this, so in 2013, the only way an individual, a cardholder can hold 

a card is if they have a contracting warrant. And we now check the 

warrant before the individual gets the card to make sure they have 

the warrant before they get the card with the—a threshold above 

$3,000, and we also check on a periodic basis to ensure that they 

haven’t left the agency, they haven’t left their position, their warrant hasn’t changed, so we put a strong control there in that only 

warranted officials, contracting officials, can purchase above the 

micro purchase threshold. 

Mr. COFFMAN. Mr. Murray, we have evidence that there are people that do not have the authority that you have stated that they 

have that are still using those credit cards. Are you aware of that? 

Mr. MURRAY. I am not. 

Mr. COFFMAN. Do you go out of your way to become unaware? 

Mr. MURRAY. No, sir. We do these checks on a weekly basis. We 

rely on the Office of Acquisitions to provide us accurate and complete warrant information. My staff very diligently check the cardholder or thresholds against those warrants, so no—and the minute 

we determine that someone no longer has a warrant, we reduce the 

card to a dollar and then close it if they can’t produce it. 

Mr. COFFMAN. Mr. Frye. 

Mr. FRYE. Yes. Let me respond to that. It is important, it’s absolutely essential that whomever has a card with authority above 

$3,000 has a warrant, but that’s only one of two elements. The 

other element is, is there a contract in place? The card is issued 

for a single purpose, above $3,000, and that’s to pay the bills, so 

to speak, for products that are purchased through this contract. 

So I applaud the improvement in making sure that people have 

warrants, but what we’ve got to do is make sure the contracts are 

put in place as well, and that is the piece that has not been looked 

at effectively. We certainly found that beginning in December of 

2012 and on into 2013 when we put the procedure in place so that 

prosthetics personnel would hopefully quit—even though they had 

warrants, they were buying, and buying millions of dollars’ worth 

of products without contracts. And hopefully we put that to bed 

now. But again, as I said, I was in a hospital just several months 

ago, and in that hospital they claimed they had just stopped that 

illegal practice in October of 2014. 

Mr. COFFMAN. Mr. O’Rourke, you are now recognized. 

Mr. O’ROURKE. Thank you, Mr. Chairman. 

Ms. Halliday, do we have any idea of how these failures compare 

to those that we might find in other Federal departments or agencies? In the backup that I read for this hearing, there were instances within the Department of Homeland Security and the Department of Defense where you had abuse or lack of safeguards in 

purchase cards. Can you shed some light on that? 

Ms. HALLIDAY. I think that there’s several Federal agencies 

struggling with these same issues. To the extent that they hold 

their purchase cardholders accountable and their approving officials, you’re going to have differences. I saw that GSA ranked their 


VACREP0180 with DISTILLER
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program medium risk the same as I’ve ranked this, and I want to 

clarify something on that for you. 

I clarified it medium risk because at 2 percent of the total value 

of the purchases, I’d have to find some $72 million worth of fraud, 

and I hadn’t found that. My unauthorized commitment report was 

over 2 years, 85, so half of that. 

I do think that our problems are pervasive enough that this 

needs attention. The way to get to that attention is to make sure 

we hold the approving officials responsible. They’re down at the 

lowest level looking at these cards, looking at the justification, the 

need, the appropriateness of the buying, and I don’t see that as 

happening. 

Mr. O’ROURKE. Yes. So perhaps relative to other Federal departments, this is a similar problem, and you know, despite, I think, 

some very valid concerns raised by Mr. Frye, we don’t have any 

proof yet of specific instances where someone has died or been injured because of this practice. You gave us an anecdote that helped 

show us that at least so far, this money wasn’t used for poker chips 

and booze. You know, maybe there are instances forthcoming that 

we should know about, but it’s deeply troubling nonetheless. 

But what makes it absolutely unacceptable is that this just follows in a litany of unaccountability at the VA, and it’s the $1.1 billion overrun in Aurora, it’s the Choice program yesterday that we 

heard about which was budgeted to be spent, the entire $10 billion 

within the next 6 months, and we’ve only spent $500 million. 

So it really raises profound concerns about control and accountability at the VA, and whether we use your number of $85 million 

in the last 2 years that were unauthorized or we use The Washington Post $6 billion number, the fact that only two people have 

been disciplined in any significant way, they both lost their jobs to 

this, makes me uncomfortable with where the VA is going. 

And I appreciate Mr. Murray’s answers to our questions. But 

really we need the Secretary to respond to this. 

And I 100 percent agree with him that we need to be need to be 

focused on the future and getting this right for the veteran going 

forward. But unless we’re sure that these concerns have been addressed—and I’m not, following all of these instances and the hearing today—it’s hard to have that faith. 

And when the VA asks us to expedite the purchasing program 

going forward it makes it hard for us to do that. When the VA says 

let’s shift a billion dollars over from this account to the other, this 

lack of control and accountability gives me some pause in authorizing that. 

So I really appreciate, Mr. Frye, your work on this, Ms. Halliday, 

what you’ve shed light on, and also hopefully your commitment to 

further investigate some of the issues that have been brought up 

by different members of the committee. I think we’re all interested 

in those answers. 

And I think this committee certainly wants to be a constructive 

partner with the VA. I want to find a way that we get these things 

addressed. Because in El Paso and almost every other congressional district we are still seeing wait times 1 year later after Phoenix that have not improved at all, despite the billions of additional 


VACREP0180 with DISTILLER
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dollars that have been authorized and the hundreds of millions of 

dollars that have been obligated. 

So we really need some significant, bold, dramatic change. It has 

to be in accountability control. 

Ms. Halliday, you mentioned this erosion in the public’s confidence in the VA. I mean, this is one more cut against that. And 

I’m really worried about this. 

And so look forward to hearing from the Secretary on how we 

can be his partner in getting this fixed, but we need to see a demonstration on the part of the VA that they take this seriously. So 

I appreciate everyone’s work on this. 

And I yield back, Mr. Chair. 

Mr. COFFMAN. Thank you, Mr. O’Rourke. 

And after this committee meeting, we’ll be distributing some reports whereby the Veterans Administration did purchase drugs and 

tissue on the open market and found it to be contaminated. 

Dr. Huelskamp, you are now recognized. 

Dr. HUELSKAMP. Thank you, Mr. Chairman. 

And after 8 weeks since the memo was sent that they indicated 

that there was a mockery of spending rules, I guess I’m still 

stunned that Mr. Murray was unaware of the memo till this morning. 

But, Mr. Doyle, you’ve been here and haven’t had the great opportunity to answer many questions. When were you aware of the 

memo from Mr. Frye? 

Mr. DOYLE. This morning. 

Dr. HUELSKAMP. This morning. 

Mr. DOYLE. I read it in the news clips, yes, sir. 

Dr. HUELSKAMP. And your position at the VA is what again? 

Mr. DOYLE. I am the Chief Procurement and Logistics Officer for 

VHA. 

Dr. HUELSKAMP. Don’t you think you should have seen this 

memo that had allegations of $6 billion in improper spending, most 

of it directly beneath your purview? Don’t you think you should 

have heard about this before today? 

Mr. DOYLE. It was shocking, the memo, even the existence of it, 

I guess, but I imagine I’ve heard issues that were brought up in 

the memo before. 

Dr. HUELSKAMP. Do you have authority over VHA contracting officers assigned to procure prosthetics? 

Mr. DOYLE. Yes, I do. 

Dr. HUELSKAMP. In the memo, Mr. Frye alleges that you claim 

to have no such authority. So is that incorrect in the memo? 

Mr. DOYLE. Well, a little bit of history, sir. It’s really a split. 

Three years ago we came before some subcommittees, I believe this 

one, on what we called the prosthetics transfer at the time. For 

whatever reason, in VA, years ago, people who were not contracting 

officers had contracting officer warrants. We started that process to 

take the warrants back from all the people in pharmacy, logistics, 

sterile processing, and prosthetics. 

That was a deliberate process, and we were very deliberate about 

it because we did not want to hurt veterans at the end of this process. It’s a quality of life issue for an individual veteran. We wanted 

to make sure we did not impact that. 


VACREP0180 with DISTILLER
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We finished that process in October 2013. Since that point, every 

procurement above $3,000 in prosthetics is bought by a warranted 

contracting officer. Now, I say that, that’s only, although that’s still 

close to 100,000 actions per year, that’s still only 3 percent of the 

overall prosthetic actions. Less than $3,000 are bought by the procurement folks who work under the purview of the medical center 

directors. 

Dr. HUELSKAMP. Now, I’ve got concerns about under $3,000. I 

have concerns about over. One thing I’m not clear, I understand 

the $3,000 threshold, but what is the cap per card? What is the 

maximum that can be charged to each card? 

Mr. DOYLE. It varies. It depends on what limits that are asked 

for and approved for that individual. There’s a $3,000 cap for an 

individual procurement usually. It doesn’t even have to be up to 

$3,000. But then there are, I think, monthly, monthly limits on 

how much can be procured in total for that individual. 

Dr. HUELSKAMP. What’s the maximum allowed on any card? 

Maybe Mr. Murray has that answer. 

Mr. DOYLE. Well, if it’s a contracting officer who has the card, 

it’s the limit of that contracting officer’s warrant. If it’s below—— 

Dr. HUELSKAMP. What is that limit? 

Mr. DOYLE. Well, it can vary by the contracting officer. 

Dr. HUELSKAMP. What’s the highest limit? 

Mr. DOYLE. Well, the highest is, for contracting officers, an unlimited warrant. 

Dr. HUELSKAMP. Unlimited, there is no—— 

Mr. DOYLE. Unlimited, yes, sir. 

Dr. HUELSKAMP. Okay. I had seen some figures somewhere about 

$150,000, but it’s unlimited. 

Mr. DOYLE. Well, subcontracting officers have a warrant that’s 

limited to $150,000, some might be a million. It varies depending 

on the—— 

Dr. HUELSKAMP. On the—and maybe Mr. Murray—we have 

25,500 cards. Is that active? 

Mr. MURRAY. That’s correct. 

Dr. HUELSKAMP. And do you know the cumulative limit of those 

cards? 

Mr. MURRAY. I’d have to get back with you with that number. 

Dr. HUELSKAMP. Okay. And that number, that limit, if there is 

a limit, is that a monthly limit or is that a cap for a year or—— 

Mr. MURRAY. There’s both single purchase limits, which means 

per transaction, as well as monthly totals that are allowed. 

Dr. HUELSKAMP. And the variance in totals, that was for the 

monthly or the single purchase, single transaction? 

Mr. DOYLE. Well, in the normal course of events an individual 

will have a card that authorizes them up to $3,000. If an approving 

official decides that person does not need that $3,000, that cap can 

be set at some lower dollar value. 

Dr. HUELSKAMP. Well, I’m worried about the $150,000 or the unlimited, which is no cap whatsoever, which seems to be a problem 

area. 

And let me ask Ms. Halliday a question on split purchasing. Do 

you have any evidence that VA employees engage in split purVerDate Aug 31 2005 13:57 Jul 21, 2016 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 Y:\98-637.TXT PAT

VACREP0180 with DISTILLER
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chasing transactions on their cards to steer contracts to favored 

vendors? 

Ms. HALLIDAY. If they’re splitting purchase orders and they’re 

trying to stay below the threshold based on their authority, that to 

me isn’t to steer to somebody. They’re just making those purchases. 

Now, do they have a favorite vendor like the chairman said? Possibly. They are circumventing Federal competition requirements. 

Dr. HUELSKAMP. And, Mr. Doyle, are you aware of that occurring, and what have you done to stop that? 

Mr. DOYLE. Unfortunately, split requirements do happen. I don’t 

know if they go to their favorite contractor to benefit. The vast majority of unauthorized commitments, I’m convinced, because I cite 

the ratification actions in VHA, are for a bona fide need for that 

facility. 

Dr. HUELSKAMP. It’s not a bona fide need. It’s being engaged in 

favoritism in the purchase. We’re not saying the needs aren’t. 

That’s another question. But it’s splitting purchase so you can 

avoid that cap, that threshold. Is that occurring, and what have 

you done to stop it? 

Mr. DOYLE. I don’t have a specific knowledge of it occurring. It 

may be someone gets steered to the IG. 

Dr. HUELSKAMP. Could be in the memo. Could be in dozens of 

memos you’ve never seen. But I presume, since this has occurred, 

you’ve sent an email or contacted the Secretary’s office to ask him 

why he didn’t see the memo. Have you tried to contact him? 

Mr. DOYLE. I would not contact the Secretary’s office directly. I 

would go through my chain of command in VHA. 

Dr. HUELSKAMP. Yes, well, you better hurry. 

And I yield back, Mr. Chairman. 

Mr. COFFMAN. Thank you. 

Ms. RICE. you are now recognized. 

Ms. RICE. Thank you, Mr. Chairman. 

So, Ms. Halliday, I’d just like to go back, and I don’t know if this 

has been touched on since I just had to run out. But during the 

course of your investigation did you see any, either during it or 

post issuing it, did you see any significant level of accountability 

for people who were engaging in fraudulent, wasteful spending 

with these cards by the VA? 

Ms. HALLIDAY. I think I did cover it. No—— 

Ms. RICE. You didn’t see any. 

Ms. HALLIDAY [continuing]. Would be the answer. 

Ms. RICE. Okay. 

Ms. HALLIDAY. I do think when we identify an issue that goes to 

criminal investigations there are very specific actions that have to 

take place, criminal prosecutions, restitution, penalties, those type 

of things. I think our investigative group takes care of that to the 

extent that they know it’s happening. 

Ms. RICE. Now, is there anything that you think we could work 

with the issuing bank on? You know, if you are traveling abroad 

and you use your credit card abroad and it seems like it might be 

a fraudulent activity, they’ll deny a charge to make sure that it’s 

you. 

And is there any way that you think—I mean, is that one of the 

recommendations that you made? Do you think that would be helpVerDate Aug 31 2005 13:57 Jul 21, 2016 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 Y:\98-637.TXT PAT

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ful? I mean, I’m just trying to figure out, if you’re not going to close 

the universe of people who are given these cards and the ability to 

purchase money, purchase products that cost the amount of money 

that we’re talking about. 

Ms. HALLIDAY. Yes, I think the Office of Management has started 

to reduce the purchasing limits on the cards with inactive cards 

and not being able to demonstrate a need for the card. I would say, 

from an IG perspective, we do significant data mining and look for 

all those outliers and anomalies, and we do research as many of 

them as we can. Normally I pick financial risk or a pattern to see 

if there is a problem with fraud and then work with investigations. 

Ms. RICE. Okay. 

Mr. Murray, is there—I think it was Mr. Huelskamp that asked 

this question, I think, about the number of people who are held accountable. You gave us two, I guess it was a reprimand. What were 

the two things that could be done? 

Mr. MURRAY. Removals. They were removals. We reported two 

removals. 

Ms. RICE. I’m sorry? 

Mr. MURRAY. Two removals. Dismissals, removals. 

Ms. RICE. Okay. So from 2010, 2011 to—— 

Mr. MURRAY. It was three semi-annual reporting periods, so had 

to be about 18-month period. 

Ms. RICE. In an 18-month period there were two people who were 

what? 

Mr. MURRAY. Removed from service, dismissed. 

Ms. RICE. Removed. Anyone reprimanded? 

Mr. MURRAY. I don’t have that information in front of me. I’m 

sorry. 

Ms. RICE. The people who were removed, are you seeking to get 

restitution from them? 

Mr. MURRAY. I’d have to get back to you with that. 

Ms. RICE. Okay. So, Mr. Murray, the question I have is, if there 

is going to be real systemic reform at the VA, which everyone 

agrees that we need in a bunch of different areas, not just in the 

construction area but the actual procurement area, the actual getting medical care to people, the wait times, all of those things, 

would you agree with me that there has to be a significant shift 

in the culture at the VA? 

Mr. MURRAY. Absolutely would agree with you, and I absolutely 

agree that Secretary McDonald is trying to shift the culture. And 

I believe that I am working with him, and me and my staff are 

doing our very utmost to try to move the culture to be more accountable and transparent. 

Ms. RICE. And I do not doubt that at all, and I think that Secretary McDonald has that as his main goal as well. But my observation is that if you take any one of these cardholders who are 

abusing this system and taking money away from service to veterans, and they see their higher-ups coming into this room and testifying in the way that they do, that is not going to do anything 

to dissuade people from breaking the rules because they know that 

their higher-ups are going to sit at that table right there and 

they’re going to defend the practice and never want to admit that 

they did anything wrong. 


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So they can act with complete impunity, it seems to me. So if 

there is going to be a shift in the culture, it has to come from the 

top, and the people underneath you have to know that when you 

come here and you’re asked questions like this, you’re going to say: 

You’re right, this is horrible, and we are going to get to the bottom 

of it, and we are going to hold people accountable. It’s just a 

thought. 

Mr. MURRAY. Yes, ma’am. 

Ms. RICE. Thank you. 

Thank you, Mr. Chairman. 

Mr. COFFMAN. Mr. Walz. 

Mr. WALZ. Well, thank you, Mr. Chairman. Thank you and the 

ranking member for continuing to do what is asked and tasked and 

required of us in our oversight. 

And I passed on my time earlier. Mainly the frustration that you 

heard out of the chairman and many of our members is where I’m 

at, and I want to get solutions other than just venting my frustrations, which I think is probably fairly important, though. 

And again, Ms. Halliday, welcome, and I echo the sentiments of 

my colleagues. You’ve been here many times and been very helpful. 

I used to have a saying when I’d be here that I’m the VA’s 

staunchest supporter and their harshest critic. I’m reevaluating 

that over the years because the first part is not having much stick 

with me. 

You’ve heard it from folks. Miss Rice was articulating this too. 

There’s not much granular detail here. There will be. It’ll come one 

way or another, and we’ll find out about it and get more on it. But 

I hope everyone was listening. I think the ranking member made 

a very important and clear point about this and it was echoed by 

many other members. There’s some advice. You all knew what was 

going to get asked here. Hire somebody to tell you what’s going to 

come here. Because, yes, part of this is the optics, is what’s happening here. 

And then what breaks my heart is, is the VA is damaged for a 

generation. And what kills me is the veterans’ lack of trust. That’s 

the one I hear all the time. And this makes them really—puts our 

veterans in a really tough spot because they have ownership for the 

VA, and it breaks their heart to see these stories in the news because many of them will come to me and say: You know, I’m getting really good care at my VA. 

It happens all time. We know that. But these things are happening. And it tests their faith, it makes them not be advocates 

that we need them to be for this. And to be very honest with you, 

if there were a fix and they could run into the private sector and 

get the specialized care, that would be one thing, but we know 

that’s not there. We know that’s what the VA is there for in many 

cases. And if it’s not fulfilling that, it’s not happening. 

So this isn’t added on. All of you know. We are so damn—I mean, 

it’s just a cliche. The bureaucracy is so siloed up that you come 

today and can’t realize this is going to play on years’ worth. This 

has to do with Phoenix. This has to do with the other issues. And 

then to try and take us into a kind of arcane balancing act on accounting, that wasn’t the main purpose. The main purpose is to get 

the answers, and you heard people saying this. And I’m not expectVerDate Aug 31 2005 13:57 Jul 21, 2016 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 Y:\98-637.TXT PAT

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ing you to violate someone’s due process or throw them under the 

bus, but this is repeating itself over and over and over again. 

And let’s be clear, when the VA comes from now on, you do not 

get the benefit of the doubt. So when you go back and talk to your 

colleagues, you’re not getting the benefit of the doubt when you 

come here. And the frustration these members are feeling is because they are hearing it from their constituents. 

I have talked about this for 9 years. I talked about culture 

change. That’s my job. I’m a cultural geographer. I don’t for a second believe there is an attempt, especially on the levels below, to 

make that true change. 

You have no time. This is not a multiyear process. It has to start 

today. And the damage is getting deeper, it’s getting much more 

difficult to repair, and you’re testing the patience beyond anything 

I have witnessed since I’ve been here. 

So my two cents on this is, is that this Kabuki dance is not going 

to play itself anymore. Be very clear. Someone will fix this for you. 

Someone will fix it for you, and the way our system is, that’s our 

responsibility by the American people. 

So thank you, Chairman. I applaud both of your efforts on your 

doggedness on this. And be very clear, while we may have differences politically, this is an issue that has unified us in a way 

that I have not witnessed. And so I would say that bodes well for 

us to at least figure out how to get this right. 

I yield back. 

Mr. COFFMAN. Thank you, Mr. Walz. 

Mr. Lamborn, you are now recognized. 

Mr. LAMBORN. Thank you, Mr. Chairman. Thank you for having 

this hearing. I’ll just jump right in. 

Mr. Murray, does the VA collect rebates for its use of the purchase cards? If so, how much? And also, to what account is this deposited? 

Mr. MURRAY. Thank you for that question. VA collected $75.5 

million in rebates in fiscal year 2014, and that money is returned 

to the accounts that did the original purchase, which is primarily 

the healthcare accounts. 

Mr. LAMBORN. Okay. Thank you. And also, a VA employee in VISN 3 committed $54 million in 

purchase card authorization without contracts and violated the law 

by using split purchasing to pay for the purchases. How could such 

a large aggregation of unauthorized expenditures occur without detection? 

Mr. MURRAY. There are a number of people use a number of 

cards with a number of approving officials and put change vendors, 

change amounts, put time between the purchases. There can be 

some sophistication in people trying to avoid the appearance of a 

split purchase, and sometimes it’s not always clear that a purchase 

is a split purchase. 

Mr. LAMBORN. Mr. Frye, would you care to comment on that 

question as well? 

Mr. FRYE. Yes. Actually this was a classic case of an employee 

in VISN 3 trying to deceive the public. These amounts that were 

being hand jammed into the Federal Procurement Data System, as 

I recall, were from 2010 and 2011, and these dollars were being 


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jammed into the Federal Procurement Data System, I think, in a 

way to make it look like this VISN had increased its small business 

efforts. Don’t know for sure because there was no—again, nothing 

is ever—nothing seems to ever be investigated to the fullest extent. 

But as you know, it took us nearly 11 months to answer the 

questions. We received a request from Mr. Johnson. It took us so 

long to reply that Mr. Johnson retired, and that response went to 

Mr. Coffman. The response that I received in my office for me to 

chomp on was just ridiculous. It was full of obfuscation, falsehoods. 

And I absolutely blew a gasket. I threw it in the trash, and I rewrote it. And then it was signed by my boss, then Mr. Haggstrom, 

and further signed by the Secretary, and it came to Mr. Coffman. 

It was deplorable to me that we got responses out of VHA that 

made absolutely no sense whatsoever. But that’s why it took 11 

months to gin up the answer. The first answer we got was that the 

hurricane ruined the files. Complete falsehood. There were no files. 

There were no contract files. No contracts were put in place. Prosthetics personnel simply made—it appears the prosthetics personnel simply made purchases without the benefit of contracts and 

paid for those using the cards. 

The individual that was caught hand jamming those into FPDS 

didn’t actually make the purchases. They were just trying to 

thank—or take credit, we believe, for small business, and they 

were putting purchases in from previous years. 

So it’s probably a lot more complex than I’ve depicted here, but 

no formal investigation was ever done. That’s $55 million, or nearly 

$55 million, that can’t be accounted for that the taxpayer never 

saw it. And worse, maybe that should have been set aside for a veteran-owned service-disabled or veteran-owned small businesses. It 

wasn’t. 

Mr. LAMBORN. Thank you. I appreciate that. 

Mr. Chairman, I yield back. 

Mr. COFFMAN. All right. Thanks to the witnesses today. Are 

there any more comments? Questions? 

Prior to excusing you, Mr. Murray, I would like to get your guarantee and assurances that Mr. Frye, who has testified as a whistleblower today, will not be subjected to any retaliation by VA for 

doing so. Will you make that guarantee to me? 

Mr. MURRAY. I will. 

Mr. COFFMAN. Very well. 

You are now excused. Thank you for your testimony. 

Today we have had a chance to hear about problems that exist 

within the Department of the Veterans Affairs with regard to oversight of its Government Purchase Card Program. Based on the testimony provided and questions asked today, it appears that VA is 

failing to adequately monitor the use of its purchase cards and 

those who hold them, which is resulting in the waste of billions of 

taxpayer dollars and should be used to serve our veterans. 

As such, this hearing was necessary to accomplish a number of 

items, to, number one, identify the continuing widespread problems 

with VA with regard to the use of Government Purchase Cards; 

two, to allow VA to provide answers as to why these problems will 

exist and have been allowed to continue for so long; and three, asVerDate Aug 31 2005 13:57 Jul 21, 2016 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 Y:\98-637.TXT PAT

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sess next steps that must be taken by the Department in order to 

stem the continued waste out of taxpayer dollars. 

I ask unanimous consent that all members have 5 legislative 

days to revise and extend their remarks and include extraneous 

materials. Without objection, so ordered. 

Mr. COFFMAN. I would like to once again thank all of the witnesses and audience members for joining in today’s conversations. 

With that, this meeting is adjourned. 

[Whereupon, at 12:25 p.m., the subcommittee was adjourned.] 

f 

APPENDIX 

PREPARED STATEMENT OF CHAIRMAN MIKE COFFMAN, CHAIRMAN

Oversight and Investigations Remarks 

‘‘Waste, Fraud, and Abuse in VA’s Purchase Card Program’’ 

May 14, 2015 

Good morning. This hearing will come to order. 

I want to welcome everyone to today’s hearing titled, ‘‘Waste, Fraud, and Abuse 

in VA’s Purchase Card Program.’’ This hearing will examine the deficiencies in VA’s 

implementation and oversight of its government Purchase Card Program. 

The use of Government Purchase Cards is intended to streamline payment procedures and improve cash management practices at the Department. However, the 

program has had a history of weak internal controls resulting in serious violations 

of procurement laws, including the Competition in Contracting Act and the Federal 

Acquisition Regulation. Due to inadequate oversight of the Purchase Card Program, 

especially at the Veterans Health Administration, we have learned that VA may 

have committed as much as $5 billion a year in improper and unauthorized procurement expenditures for at least the last five years. This is a truly staggering amount. Given the high number of transactions—$6.2 

million in FY 2014—and the aggregate billions at risk, it is crucial that VA implement effective oversight controls to ensure it uses taxpayer resources efficiently for 

veterans. Even after multiple reports from the OI–G and GA–O, VA continues to 

leave its program vulnerable to massive waste, fraud, and abuse. In this regard, for 

fiscal year 2015, VA OI–G has identified the following seven high risk areas: 

1) Exceeding authorized purchase limits individually or aggregately; 

2) An excessive number of purchase cardholders with inadequate justification; 

3) An unmanageable span of control (ratio of cardholders to approving officials is 

high); 

4) Inadequate financial controls prohibiting duplicative or split payments; 

5) Inadequate recording or reporting of financial information; 

6) Insufficient oversight of year-end spending; and 

7) Inadequate review of purchases by reviewing officials. 

Violations of procurement laws are not mere technicalities. It is not just a matter 

of paying a little more for needed supplies and services as some apologists for VA 

have asserted. Among other things, purchase card abuse invites cronyism and the 

directing of business to favored vendors, including those who may employee former 

VA officials. Moreover, buying biologics and medical supplies without contracts imperils patient safety. Without contracts, F–D–A certifications are not a legal requirement nor are the Buy American Act or Trade Agreement Act provisions. If veterans 

are later harmed by these products, VA would have little recourse without contracts 

with the vendor. 

Recognizing the importance of compliance with procurement laws in Purchase 

Card Programs, Congress passed the Government Charge Card Abuse Prevention 

Act of 2012 requiring periodic audits, reports, and risk assessments. It also requires 

that agencies hold employees who violate purchase card guidelines or make erroneous, improper, or illegal purchases accountable through adverse personnel actions, 

including dismissal. Under existing law, agencies may also hold such employees personally liable. However, rather than following the law and holding its employees accountable, VA has often sought to institutionally ratify unauthorized commitments, 

sometimes in wholesale, for years of illegal purchases. 

I am sure many of you now know that the Washington Post published an article 

this morning involving these very issues, citing to a 35-page letter sent to Secretary 

McDonald months ago detailing these problems. We distributed that letter to every 


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member of this Subcommittee and would like to get answers from VA as to what 

it plans to do to fix the litany of problems explained within it. 

In conclusion, VA needs to explain to this Subcommittee, to taxpayers, and to veterans, its continuing and longstanding mismanagement of the Purchase Card Program. Each time VA makes illegal purchases, taxpayers are forced to foot the bill, 

resources to care for veterans are squandered, and the Veteran as well as the government assumes all the risk. 

I look forward to the discussion we will have here today on this important issue. 

With that, I now yield to Ranking Member Kuster for any opening remarks she may 

have. 

f 

PREPARED STATEMENT OF RANKING MEMBER ANN M. KUSTER

• Thank you Mr. Chairman. • Purchase cards simplify the often-cumbersome practice of procurement. The use 

of purchase cards by Federal agencies, including the VA, is estimated to save these 

agencies $1.7 billion per year. But their very ease of use sometimes invites abuse. 

• Recent reports have detailed abuses in the Departments of Defense and Homeland 

Security. The work of the VA Inspector General has highlighted areas of abuse and 

concern with the VA’s use of purchase cards. It is my hope today that we can discuss the benefits of this program, as well as the problems, and that we can work 

together to find solutions that strengthen the VA’s internal controls and oversight 

to ensure that VA has more resources to spend on our veterans, and that these resources are used for proper purposes. 

• The recent VA Inspector General findings, while not as shocking as the DoD and 

DHS scandals, are still troubling. I am concerned about the VA’s lax oversight over 

purchase cards, and the lack of accountability for purchase card holders. While purchase cards are necessary to VA operations, we must thoroughly examine the policies and processes in place to prevent further misuse and hold VA employees accountable for violations of federal acquisition law and regulations. 

• The data is concerning: from 2012 to 2013, 15,600 purchase card transactions val- ued at $85.6 million may have been unauthorized purchases. Although the vast majority of these purchases were for legitimate purposes—not fraud, waste, and 

abuse—acquisition law was still violated and employees were not held accountable. 

Many of these card holders allegedly exceeded their authorized purchase limit. In 

other instances, card holders split purchases—which is the practice of improperly 

dividing what should have been a single purchase into separate purchases to avoid 

micro-purchase thresholds and Federal Acquisition Regulation (FAR) competition requirements. Additionally, due to the large volume of unauthorized purchases, VA 

failed to follow proper procedures to ratify each of these unauthorized purchases, 

which meant that VA employees were not held accountable for circumventing the 

law. 

• One of the areas I would like us to focus on this morning is whether VA has an 

adequate number of Approving Officials to ensure that purchases are scrutinized before they are made, and not just looked at afterwards. Does VA have the resources 

to provide adequate oversight, and the focus on this program that I believe they 

need. Are cardholders provided a suitable level of training in order for them to avoid 

making improper or unauthorized purchases? 

• Another area I would like to explore is whether technology may provide us with 

an additional layer of oversight and scrutiny. The use of financial algorithms similar 

to those used by credit card companies to detect fraud can also be used to detect 

improper use. 

• I look forward to hearing the testimony from our witnesses, and working with 

each of you to strengthen oversight of VA procurement. 

• Thank you Chairman Coffman, and I yield back the balance of my time. 

f 

PREPARED STATEMENT OF MR. EDWARD MURRAY

Good morning, Chairman Coffman, Ranking Member Kuster, and Members of the 

Subcommittee. Thank you for the opportunity to discuss the Department of Veterans Affairs’ (VA) implementation and oversight of our Government Purchase Card 

Program. I am accompanied today by Mr. Gregory Giddens, Principal Executive Director, Office of Acquisitions, Logistics and Construction (OALC), Mr. Jan Frye, 

Deputy Assistant Secretary for the Office of Acquisition and Logistics and Mr. NorVerDate Aug 31 2005 13:57 Jul 21, 2016 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6621 Y:\98-637.TXT PAT

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bert Doyle, Chief Procurement and Logistics Officer for the Veterans Health Administration (VHA). 

VA has a robust Government Purchase Card Program with 25,515 card accounts 

generating $3.7 billion worth of purchases in 6.1 million transactions as of the end 

of Fiscal Year (FY) 2014. We rely on this program to aide in the expeditious acquisition of supplies and services in support of our Veterans. For example, purchase 

cards are used for acquisition of prosthetics and sensory aids that promote health, 

independence and quality of life for Veterans. As with many large programs, we 

have experienced challenges in implementing the Government Purchase Card Program as noted in recent reports by VA’s Office of the Inspector General (OIG). We 

value the recommendations provided by OIG and have implemented needed improvements to strengthen controls over VA’s Purchase Card Program. 

Background 

Implementation, including oversight and internal controls, of VA’s Purchase Card 

Program is a collaborative effort across the Department. Key Department-level participants include OALC, VHA, and the Office of Management (OM). In implementing our program we are acutely aware of the need to effectively manage taxpayer resources; as such, we maximize use of the Government Purchase Card Program to reduce administrative overhead costs while earning rebates. 

OALC is responsible for the acquisition policy for the Department. In this role, 

OALC manages the delegation from the Secretary for the micro-purchase authority 

(less than $3,000). OALC further delegated the micro-purchase authority, which is 

specific to the Governmentwide commercial Purchase Card Program, to OM. OALC 

maintains responsibility for procurement policy of the program above the micro-purchase threshold, while OM is responsible for providing policy up to the micro-purchase threshold. 

OM establishes purchase card policies and procedures defining roles and responsibilities, ensuring separation of duties, and overseeing the management of VA’s 

Purchase Card Program. OM also ensures that VA purchase card policies are in 

compliance with Appendix B of the Office of Management and Budget (OMB) Circular A–123, ‘‘Improving the Management of Government Charge Card Programs,’’ 

and with the Government Charge Card Abuse Prevention Act of 2012. 

In October 2011, VA took a significant step toward strengthening internal controls 

by consolidating the Purchase Card Program under the Financial Services Center 

(FSC). This action enabled centralized oversight, management, and consolidation of 

the Purchase Card Program, thus reducing the number of purchase card accounts 

VA-wide by 31 percent from approximately 37,000 in FY2011 to 25,515 by the end 

of FY2014. 

VA is committed to continuous monitoring and improvement of its Government 

Purchase Card Program and has implemented a number of processes and internal 

controls to minimize and eliminate fraud, waste, and abuse. For example, we close 

or reduce card spending limits due to inactivity, invalid training certificates, lack 

of valid warrants, or for separated employees. Controls have been implemented with 

the U.S. Bank to limit the use of the government purchase card for specific types 

of merchants. We also have mandated the use of the U.S. Bank on-line portal for 

reconciliations of purchase card transactions and monitor the completion of reconciliations on a monthly basis. Training is required prior to the issuance of a card, 

with refresher training required every two years. In addition, controls have been implemented to ensure active government purchase card holders are compliant with 

these training requirements. As noted, with centralized control within FSC, we are 

able to monitor purchase card activity across VA on a daily, weekly and monthly 

basis. Using these controls, we have not identified any cardholders with single purchase limits above the micro-purchase threshold who were not warranted since January 2013. 

OM also conducts two types of oversight reviews of the Purchase Card Program 

at the transactional level—data mining and statistical sampling. The data mining 

process involves collecting, filtering, and analyzing approximately 1.5 million transactions each Fiscal Quarter to seek patterns or relationships in the data and identify areas of potential non-compliance with policy requirements. The statistical sampling seeks to select and evaluate a representative sample of transactions from the 

same population to review for compliance with policy. OM issues quarterly memoranda to responsible officials to notify them of potential unauthorized commitments 

such as split purchases and transactions that exceeded micro-purchase limits that 

may require ratification. Beginning in 2015, if no response is received from the initial responsible official, OM elevates the potential unauthorized commitments to officials in the cardholder’s chain of command—with 30 day intervals between each 

elevation. In calendar year 2014, we issued nine elevation memos for 95 ratifications 


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pending completion at the time of the OIG review. We also continue to aggressively 

elevate unresolved ratifications identified during quarterly reviews, and have issued 

eight additional elevation memos to date in 2015 for 49 open ratifications. 

Within VA, VHA has the largest number of government purchase cardholders, 

generating a little over 98 percent of purchase card transactions in the Department 

in FY2014. VHA purchase cardholders spend about $3.7 billion annually on approximately 6 million transactions. VHA has approximately 11,000 cardholders and 6,000 

approving officials (AOs); typically the AO is a supervisor within the cardholder’s 

chain of command. VHA’s Procurement and Logistics Office provides additional 

oversight over VHA’s Purchase Card Program. 

Government Charge Card Abuse Prevention Act of 2012 

On October 5, 2012, the President signed into law the Government Charge Card 

Abuse Prevention Act of 2012 (Charge Card Act), Public Law 112–194, which reinforced Administration and Congressional efforts to prevent waste, fraud, and abuse 

of Governmentwide charge card programs. In September 2013, OMB issued guidance to Departments and Agencies on implementation of the Charge Card Act. In 

December 2013, VA’s Financial Policy was updated to comply with the Charge Card 

Act and OMB guidance. 

A chief purpose of the Charge Card Act was to deter employee misuse of government cards, by implementing penalties for charge card violations. Additionally, VA 

revised Human Resources policy to outline penalties, adverse personnel actions, or 

other appropriate disciplinary actions for misuse of the purchase card. 

Corrective Actions To Address OIG Findings 

In the report ‘‘Administrative Investigation of VA’s FY2011 Human Resources 

Conferences in Orlando, FL’’, issued September 2012, OIG found that at least one 

VA employee held at least 3 purchase cards with single purchase limits above the 

micro-purchase threshold and had inappropriately made purchases above the micropurchase threshold. OIG recommended that VA complete a special review of purchase card transactions in support of VA Learning University conferences. OM took 

this weakness in internal controls very seriously and opted to expand this review 

VA-wide across the entire Purchase Card Program. 

During its review, OM identified a total of 2,022 unwarranted purchase card accounts with single purchase limits over the micro-purchase threshold. OM initiated 

a reconciliation and corrective action process, which resulted in the systematic reduction of single purchase limits as prescribed in the cardholder’s valid warrant. 

That process was completed by January 2013. 

Concurrent to the review, in December 2012, the FSC became the single centralized point of control in VA for setting the single purchase limit for a cardholder. 

All requests to raise or lower the single purchase limit on a purchase card account 

must be submitted to the FSC. Requests to raise the single purchase limit over the 

micro-purchase threshold are reviewed to verify that the cardholder possesses a 

valid warrant on the most recent OALC warrant report. In addition, as of December 

2013, U.S. Bank routes the request for the issuance of new Government Purchase 

Cards to FSC for review and approval or rejection. FSC then works to ensure full 

compliance with policy and validates training and warrants during the review process. 

In May 2014, OIG issued a report on the ‘‘Review of Alleged Unauthorized Commitments’’, which reviewed purchase card transactions from FY2012, substantiated 

allegations that cardholders had made unauthorized commitments, and that VA had 

not performed ratification actions on identified unauthorized commitments. In total, 

OIG made nine recommendations to VA, all of which were closed by April 2015. 

In its report, OIG also projected 15,600 potential unauthorized commitments, valued at approximately $85.6 million in FY2012 and FY2013. OIG recommended OM 

review FY2012 and FY2013 purchase card transactions exceeding $3,000 to identify 

unauthorized commitments made by cardholders who did not have appropriate warrant authority. In 2014, OM conducted the review of 57,577 high risk transactions 

valued at $586.5 million. OM determined that roughly 29 percent, 16,686 transactions, valued at $221.2 million were potentially unauthorized commitments and 

needed research and validation from Heads of Contracting Activity (HCA) before a 

final ratification determination could be made. The result of the initial review of the 

16,686 transactions by HCAs identified 4 percent or 680 unauthorized commitments 

totaling $10.7 million. VA continues to review these transactions for appropriate action. 

Path Forward 

VA has made tremendous strides in recent years in its Purchase Card Program, 

however, we recognize the need to continue to expand and improve our oversight 


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and internal controls. The Charge Card Act has supported our improved program 

and we continue to develop and refine training for all Government Purchase Card 

Program participants; to develop and continuously monitor data analytics to identify 

trends of misuse and abuse and elevate for appropriate remediation; and to seek 

ways to develop a cross-functional mechanism of continuous improvements. 

Mr. Chairman, this concludes my testimony. My colleagues and I are prepared to 

answer any questions you, or other Members of the Committee, may have. 


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PREPARED STATEMENT OF JAN R. FRYE

Chairman Coffman, Ranking Member Kuster, and Members of the Subcommittee. 

Thank you for inviting me to testify before you this morning. Today I find myself 

in a position I never envisioned myself to be in. I am testifying as a whistle blower. 

Before I go further, I want to assure you I do not enjoy being a whistle blower. 

I am not a disgruntled VA Senior Executive. I am definitely not seeking attention 

or celebrity. I am here before you, because I have been unsuccessful in my persistent attempts to bring massive violations of Federal acquisition and fiscal laws 

and regulations to a halt in VA. 

Each of us engaged in Federal acquisition and fiscal processes have an overriding 

responsibility to taxpayers. Those of us in leadership positions must always lead in 

a manner so as to maintain the public trust, while upholding the integrity of the 

Federal acquisition and financial systems. 

Over the past five years, some senior VA acquisition and finance officials have 

willfully violated the public trust while Federal procurement and financial laws 

were debased. Their overt actions and dereliction of duties combined have resulted 

in billions of taxpayer dollars being spent without regard to Federal laws and regulations, making a mockery of Federal Statutes. I am not aware of a single senior 

acquisition leader being held accountable for wrongdoing or dereliction in the nearly 

10 years I’ve been in my present VA position. 

While intentional violations of Federal acquisition and fiscal laws add to the VA’s 

now infamous ‘‘corrosive culture’’ recently cited by the White House, these unlawful 

acts may potentially result in serious harm or death to America’s veterans. When 

VA procures pharmaceuticals or medical devices without terms & conditions afforded via written contracts, the government forfeits all legal protections afforded 

by contract law. Efficacy and safety mandates are nonexistent. 

Without contracts, Food and Drug Administration certifications are not a legal requirement, nor are Trade Agreement Act or Made-in-America provisions. Unfortunately, the government has little recourse if veterans are harmed by products or 

services obtained without protection of contract terms & conditions. 

In addition doors are flung wide-open for fraud, waste and abuse when contracts 

are not executed. For example, by law, prices paid for goods or services subject to 

contracts can only be determined to be fair-and-reasonable by duly appointed contracting officers. I can state without reservation that VA has and continues to waste 

millions of dollars by paying excessive prices for goods and services due to breaches 

of Federal procurement laws. 

Further, traceability and auditability of public funds spent without regard for established laws and regulations are difficult if not impossible to realize. Contract 

award data is required statutorily to be recorded in the Federal Procurement Data 

System (FPDS), which is accessible by the general public. When contracts are not 

executed, taxpayers are not afforded access to data describing these expenditures. 

Also, VA small-business goal accomplishments have been and continue to be overstated. Illegal procurements without contracts are not included in calculations to determine Federally mandated small-business goals. Thus we’ve duped the veteranowned business community we are required by law to advocate for. 

The overarching questions are these: How is it possible the VA procurement and 

finance systems have been allowed to operate where potentially billions of dollars 

in goods and services are acquired without contracts as required by Federal law? 

Why are VA senior procurement and finance officials not actively enforcing acquisition and fiscal laws? 

You have just heard Mr. Murray provide the VA’s official statement in response 

to your request for this hearing. There are no false affirmations in our statement 

that I am aware of. However, senior leaders before you today know the Department 

is not telling the whole story. We hope you won’t ask us any questions that will 

force us to tell you about the important pieces we’ve premeditatedly left out. If you 

happen to ask us about what we’ve failed to tell you, we hope we can answer your 

questions in such a way as to quickly extinguish potential follow-on questions. In 

short, obfuscation is our game. 

I will no longer be a party to these VA games. The vaunted Veterans Affairs 

ICARE values, with Integrity being first, make an attractive lapel pin, but little else 

if we don’t live these values daily. We continue to flout Integrity, the most basic 

and necessary foundational footing, the very core of our being. 

In the recent past, because VA senior leaders would not conduct themselves appropriately, I was forced to request assistance from Congressional members. For instance, Rep. Donnelly, now Senator Donnelly, assisted me in halting ubiquitous violations of Federal law in the procurement of VA pharmaceuticals in 2012, through 

hearings he mustered. Former Rep. Buyer assisted me twice in arresting massive 


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violations in the use miscellaneous obligations, in 2008 and again in 2010, through 

hearings. 

In 2013 I attempted to report massive, illegal acts to the House Oversight and 

Government Reform Committee, including matters involving illegal purchase card 

use. I was thwarted in my efforts when that Committee’s Senior Counsel and a VA 

Senior Acquisition Executive, who are friends, conspired to keep my letter from 

Chairman Issa. 

Approximately seven weeks ago, I disclosed illegal matters in a 35-page report to 

Secretary McDonald, which included recommendations going forward. My labors 

have not yet been acknowledged. I took to heart the Secretary’s invitation for ‘‘whistle blowers’’ to step forward. I believed the Secretary was sincere when entreating 

all VA employees to abide by words found in the West Point Cadet Prayer ‘‘Make 

us to choose the harder right instead of the easier wrong.’’ However, I hope we can 

also live up to the remainder of the sentence in which those words are contained, 

which reads ‘‘and never to be content with a half-truth when the whole can be won.’’ 

Mr. Chairman, this concludes my testimony. I am prepared to answer questions 

you or other members of the Subcommittee may have. 


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