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98–643 2016

EXPLORING VBA’S FIDUCIARY PROGRAM 

HEARING 

BEFORE THE

SUBCOMMITTEE ON DISABILITY 

ASSISTANCE AND MEMORIAL AFFAIRS 

OF THE

COMMITTEE ON VETERANS’ AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

THURSDAY, JUNE 11, 2015 

Serial No. 114–26 

Printed for the use of the Committee on Veterans’ Affairs 

( 

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


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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 DISABILITY ASSISTANCE AND MEMORIAL 

AFFAIRS 

RALPH ABRAHAM, Louisiana, Chairman 

DOUG LAMBORN, Colorado 

LEE ZELDIN, New York 

RYAN COSTELLO, Pennsylvania 

MIKE BOST, Illinois 

DINA TITUS, Nevada, Ranking Member 

JULIA BROWNLEY, California 

RAUL RUIZ, California 

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, June 11, 2015 

Page 

Exploring VBA’s Fiduciary Program ...................................................................... 1 

OPENING STATEMENTS 

Ralph Abraham, Chairman ..................................................................................... 1 

Dina Titus, Ranking Member ................................................................................. 3 

WITNESSES 

Mr. David R. McLenachen, Acting Deputy Under Secretary for Disability 

Assistance Director, Pension and Fiduciary Service, VBA, U.S. Department 

of Veterans Affairs ............................................................................................... 5 

Prepared Statement ......................................................................................... 24 

Accompanied by: 

Mr. Michael R. Stephens, Director, Indianapolis Regional Office, Veterans Benefits Administration, U.S. Department of Veterans Affairs 

And 

Marcia Hempy, Acting Deputy Director, Pension and Fiduciary Service and Manager, Columbia Fiduciary Hub, Veterans Benefits 

Administration, U.S. Department of Veterans Affairs 

Mr. Gary Abe, Deputy Assistant Inspector General for Audits and Evaluations, Office of Inspector General, U.S. Department of Veterans Affairs ........ 5 

Prepared Statement ......................................................................................... 30 

Accompanied by: 

Quentin Aucoin, Assistant Inspector General for Investigations, Office of Inspector General, U.S. Department of Veterans Affairs 

And 

Timothy Crowe, Director, St. Petersburg Office of Audits and Evaluations, Office of Inspector General, U.S. Department of Veterans 

Affairs 

Mr. Zachary Hearn, Deputy Director for Claims, Veterans Affairs and Rehabilitation Division, The American Legion .......................................................... 15 

Prepared Statement ......................................................................................... 38 

Mr. Sam J. Albritton, III, Executive Vice President, Regions Bank ................... 15 

Prepared Statement ......................................................................................... 43 

Mr. Douglas J. Rosinski, Attorney, Veterans Justice Group, LLC 15 

Prepared Statement ......................................................................................... 51 

FOR THE RECORD 

Deliverable ............................................................................................................... 65 


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EXPLORING VBA’S FIDUCIARY PROGRAM 

Thursday, June 11, 2015 

HOUSE OF REPRESENTATIVES, COMMITTEE ON VETERANS’ AFFAIRS, SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL

AFFAIRS, Washington, D.C. 

The subcommittee met, pursuant to notice, at 3:09 p.m., in Room 

334, Cannon House Office Building, Hon. Ralph Abraham [chairman of the subcommittee] presiding. 

Present: Representatives Abraham, Lamborn, Costello, Bost, 

Titus, and Brownley. 

Also Present: Representative Johnson. 

OPENING STATEMENT OF CHAIRMAN RALPH ABRAHAM 

Mr. ABRAHAM. Good afternoon, everyone. Thank you for your patience. 

This oversight hearing of the subcommittee on Disability Assistance and Memorial Affairs will now come to order. The purpose of 

this hearing is to explore VBA’s fiduciary program, which is intended to protect veterans, who, due to their injury, disease, or 

other infirmity, are unable to manage their own financial affairs. 

According to the VA, in 2014, this program covered more than 172,800 beneficiaries who received approximately $2.9 billion in VA 

benefit payments. 

The fiduciary program is supposed to help protect our Nation’s 

most vulnerable veterans, and it is absolutely essential that this 

subcommittee has the most up-to-date information about whether 

the changes to the program over the last few years have been effective. 

Today’s hearings will review the criteria VA uses to determine 

whether a veteran needs help managing his or her finances and 

how VA determines who should be appointed as fiduciary. 

We will also look at VA’s oversight of fiduciaries, including use 

of the field exam, which helps assess the veteran’s general welfare, 

and evaluate how well the fiduciary is managing the veteran’s finances. 

Inevitably, this hearing will focus on oversight of the fiduciaries 

and how to protect veterans from fraud. But I want to acknowledge 

at the onset that the vast majority of fiduciaries are doing the right 

thing and serving the veterans to the best of their ability. In most 

cases, the fiduciary is a loving family member who is naturally 

committed to ensuring the veteran’s health and welfare. 


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There are also many businesses that as a way to show their appreciation to our veterans develop significant resources to provide 

this service for veterans and their families. 

However, serious concerns have been raised about the VBA’s 

oversight of fiduciaries. On June 1st, 2015, the Office of Inspector 

General issued a report substantiating allegations that VBA has 

not conducted field examinations in a timely manner in 42 percent 

of cases in 2013. Let me repeat that. The VBA did not conduct 42 

percent of field examinations in a timely manner. 

VBA is supposed to conduct field examinations in order to assess 

the welfare of the beneficiary and evaluate the overall performance 

of the fiduciary. 

According to the OIG, the delay in conducting field examination placed $360.7 million in benefit payments and $487.6 million in estate value at increased risk. 

According to the VA figures, fiduciaries have misused almost $19.3 million of veterans benefits in a little more than 3 years, 

money that was intended to ensure the care and comfort of some 

of the Nation’s most valuable heroes. 

Although taxpayers re-issued $5.6 million to replace some of 

these lost benefits, the veterans involved may have lost as much 

as $14 million. 

Another problem previously highlighted by the OIG in 2014 reports that 89 percent of the merit reviews, which are investigations 

into allegations of misuse of funds, were not completed by the 

EAFH within VBA’s performance standard of 14 days after receipt 

of an allegation. This is unacceptable. 

I look forward to hearing VA’s plan to implement the OIG’s recommendation as well as other initiatives to improve the oversight 

of fiduciaries. The welfare of veterans served by the fiduciary program should be one of VA’s top priorities. 

This hearing will also address whether there are any negative, 

unintended consequences for the veteran after the VA determines 

that a beneficiary is incompetent. 

While the fiduciary program is essential to protect the welfare of 

veterans who are unable to manage their own financial affairs, it 

is also crucial that the VA ensure that our Nation’s heroes are not 

deprived of the constitutional rights they have fought so hard to 

defend. 

Before we begin, I have to say that I am extremely frustrated 

that the VA’s eastern area hub manager is not here to answer 

questions, despite the fact that my staff specifically requested the 

individual’s presence in light of the findings of the 2014 OIG report. 

VA has not indicated that there were any scheduling conflicts 

that would have prevented the eastern area hub manager to appear, so I am forced to question whether this absence is because 

VA did not want this particular hub manager to answer questions 

related to the problems uncovered by the OIG. 

This appears to be another example of VA’s failure to follow 

through on Secretary McDonald’s promise of improving VA’s transparency and accountability. Our Nation’s veterans deserve better 

than the status quo. Although I am pleased that Ms. Marcia 

Hempy, the Columbia Area Hub manager, is here to answer some 


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of these questions, I note that she is only here because I directed 

that subcommittee staff insist that a regional hub manager be 

present to answer questions about this vital problem in this program, and that Ms. Hempy is currently working from the VA central office here in Washington. Going forward, I hope VA will more 

fully cooperate with the subcommittee’s requests and help us to 

conduct effective oversight so that we can work together to provide 

veterans with the service they deserve. 

I am looking forward to hearing from our witnesses. With that, 

I would like unanimous consent that our colleague, Representative 

Johnson of Ohio, be allowed to participate in today’s hearing. Representative Johnson has been working on fiduciary issues for a long 

time and recently introduced H.R. 2605, the Veterans Fiduciary 

Reform Act of 2015. 

Hearing no objections, so ordered. 

I now call on distinguished Ranking Member Ms. Titus for her 

opening statement. 

OPENING STATEMENT OF RANKING MEMBER DINA TITUS 

Ms. TITUS. Thank you, Mr. Chairman, and thank you for holding 

this hearing on the VBA’s fiduciary program. It is very important 

that we look at this program, because it was designed to protect 

some of our most vulnerable veterans. 

I would like to welcome Mr. Abe from the VA Office of Inspector 

General, and also Undersecretary McLenachen and thank them 

and their team for the diligent work that they are doing on this 

subject. 

I am like you, though, I share some of your concerns. After reviewing today’s testimony and the figures that have been shared 

with us by our witnesses, I fear that the fiduciary program may be 

much under-resourced and in need of critical changes. Part of the 

problem appears to be that the VA failed to anticipate the need for 

more field examiners and other employees when they submitted 

their 2015 budget request. Instead, much like with the appeals 

process, which we are also trying to address, they have allowed the 

problem to fester and grow before asking for additional resources. 

A basic and important responsibility of the fiduciary program is 

to conduct field examinations. That is how qualified veterans gain 

access to the program and how the integrity of the work that the 

fiduciaries are doing is maintained. So if the VBA fails to complete 

timely examinations and to review and investigate misuse allegations, then the well-being of the beneficiaries is put at risk. 

Yet, according to the IG, as you stated, 42 percent of field examinations are not being completed in a timely fashion. And even more 

concerning is the fact that the VA hasn’t completed 89 percent of 

its misuse allegations in a timely manner, leaving some veterans 

in challenging, perhaps even dangerous, situations for about a half 

a year on average. 

To this point, I was also surprised to learn that VA field examiners are expected to visit only one veteran a day. Surely, we can 

visit more than one veteran a day. And I would welcome your suggestions on what we can do to better utilize the resources that we 

have to be more efficient in the meantime. 


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I am also curious about how those in the hub offices, now that 

it is been reorganized, track and oversee those in the field, those 

field examiner positions, because they can be as far away as from 

St. Louis to Honolulu. If you look at the western regional hub, you 

can see that is pretty long distances, and I wonder what kind of 

leadership and scrutiny is occurring in those field offices to try to 

bring these numbers down. 

So in short, I am afraid the program is drastically underresourced and not scrutinized by leadership. So it is clearly time 

that we had a complete review of the fiduciary program’s effectiveness. These are some of our most vulnerable veterans, and we have 

to do all we can to ensure their financial and physical well-being. 

So, Mr. Chairman, I look forward to working with you in the bipartisan spirit of this committee to address some of these questions 

and improve the program. And I would yield back. 

Mr. ABRAHAM. Thank you, Ms. Titus. I ask that all members 

waive their opening as per this committee’s custom. 

I would like to welcome our first panel. Thank you for coming 

today, and thank you, again, for your patience. 

David McLenachen, the Director of Pension and Fiduciary Service and Acting Deputy Under Secretary for Disability Assistance of 

the Veterans Benefits Administration. He is accompanied by Mr. 

Michael Stephens, the Director of the Indianapolis office; and Ms. 

Marcia Hempy, the Manager of the Columbia Fiduciary Hub and 

Acting Deputy Director of Pension and Fiduciary Service. 

Mr. Gary Abe, the Deputy Assistant Inspector General for Audits 

and Evaluations. He is accompanied by Mr. Aucoin, Assistant Inspector General for Investigations, and Mr. Timothy Crowe, the Director of the St. Petersburg’s Office of Audits and Evaluations. 

And after we conclude panel 1, we will seat a second panel consisting of Mr. Zachary Hearn, the Deputy Director for Claims, Veterans Affairs and Rehabilitation Division of the American Legion; 

Mr. Samuel J. Albritton, the Executive Vice President of Regions 

Bank, and Mr. Douglas Rosinski, a founding member and attorney 

with the Veterans Justice Group, LLC. 

I want to remind the witnesses that your complete written statements will be entered into the hearing record, and because of the 

time constraints, the panel has agreed to waive their opening statement. We can go straight to questions. We have all your opening 

statements in our books, and I have actually read them. 


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STATEMENTS OF DAVID R. MCLENACHEN, ACTING DEPUTY 

UNDER SECRETARY FOR DISABILITY ASSISTANCE, DIRECTOR, PENSION AND FIDUCIARY SERVICE, VETERANS BENEFITS ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY MR. MICHAEL R. STEPHENS, DIRECTOR, INDIANAPOLIS REGIONAL OFFICE, VETERANS BENEFITS ADMINISTRATION, U.S. DEPARTMENT OF VETERANS 

AFFAIRS, AND MARCIA HEMPY, ACTING DEPUTY DIRECTOR, 

PENSION AND FIDUCIARY SERVICE AND MANAGER, COLUMBIA FIDUCIARY HUB, VETERANS BENEFITS ADMINISTRATION U.S. DEPARTMENT OF VETERANS AFFAIRS; GARY ABE, 

DEPUTY ASSISTANT INSPECTOR GENERAL FOR AUDITS AND 

EVALUATIONS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY 

QUENTIN AUCOIN, ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF VETERANS AFFAIRS, AND TIMOTHY CROWE 

DIRECTOR, ST. PETERSBURG OFFICE OF AUDITS AND EVALUATIONS OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF VETERANS AFFAIRS 

Mr. ABRAHAM. So I will begin the questioning. 

Mr. McLenachen, VA testified in 2012 that the misuse rate for 

beneficiary funds was less than one-tenth of 1 percent at the time. 

And I have a few follow-up questions. Is that rate still accurate? 

Mr. MCLENACHEN. That is still correct. 

Mr. ABRAHAM. Okay. And how did the VBA calculate that figure? 

Mr. MCLENACHEN. It is based on the number of beneficiaries and 

the number of misuse cases. 

Mr. ABRAHAM. Okay. All right. Can you be a little more specific 

on that, sir, please? 

Mr. MCLENACHEN. Sure. The process that we go through is we 

can have misuse allegation, and within 14 days, we look at that allegation to see whether it merits further investigation. 

If it is determined that it does, we will investigate that misuse 

allegation, and the investigation has to be completed within a period of time, the entire process. 

Mr. ABRAHAM. You think those calculations are good calculations? You think there is any misalignment of the numbers? 

Mr. MCLENACHEN. In the prehearing information that we provided, you will see that those numbers grow from over the last few 

years. The reason for that is, after we did the hub consolidation in 

March 2012, it allowed us to get better control of this work. And 

so we have been involved in a cleanup—essentially, a cleanup effort 

over the last few years. And that is why when you look at that 

data, you will see over the last 3 years, those numbers have grown. 

And we have done a better job of detecting misuse. 

Mr. ABRAHAM. So VBA still stands by those figures at this point 

so to speak? 

Mr. MCLENACHEN. Yes. And those numbers are based on when 

we make a determination that there has been misuse in a case, 

that number is based on the number of beneficiaries in the program. 

Mr. ABRAHAM. Now, is VBA’s suggestion that it can effectively 

measure all misuse of the beneficiary funds that has taken place, 


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and is that rate of misuse almost negligible? Is that what you are 

saying? 

Mr. MCLENACHEN. It is a very low number. And if you are asking 

is there misuse out there that we are not detecting, I hope there 

is not. But for me to guarantee that, I cannot guarantee that. The 

important role of the fiduciary program is to detect misuse. And as 

you saw in the inspector general’s testimony, there is a number of 

criminal cases that they have prosecuted, and the majority of those 

have been detected by our program and referred to the inspector 

general’s office. So it is a very important role for the fiduciary program. 

And if you look at the data that we have provided prior to the 

hearing, you will see that the allegation numbers have gone up. We 

are doing a much better job now of getting allegations of misuse 

and acting upon them. We did a couple of different things. We centralized allegations of misuse in our phone centers, so our phone 

centers are tracking that information as it comes in, referring it to 

the fiduciary hubs. 

Mr. ABRAHAM. Mr. Abe, would you agree with those figures? Do 

you think they are accurate? 

Mr. ABE. Well, I would like to turn that over to Mr. Crowe, because he has actually reviewed that statistic, and he can explain 

how we view it. 

Mr. CROWE. It does represent the dollar amount of misuse that 

VBA has determined that occurred, I presume, divided by the total 

States they are managing. Would that be correct? 

Given the magnitude of the number of beneficiaries out there 

and the kind of money you are talking about, we would tend to 

think that there is misuse going on out there that has not been detected. 

Mr. ABRAHAM. Mr. McLenachen, as of 2013, the VBA procedure 

required the VBA to initiate debt collection procedures for all fiduciaries who misused funds. What specific controls have you implemented to ensure debt collection procedures are conducted effectively? 

Mr. MCLENACHEN. That is one of the significant changes that we 

made in the program recently in the misuse area. 

Prior to that we were, admittedly, not doing a good job of establishing debts when the fiduciaries misused benefits. We initiated 

new procedures. We did training in the area of debt—establishing 

debts. In 2014, we deployed a new IT system, which has built into 

it the entire misuse protocol for managing the misuse work. The 

protocol is what we go through to make a misuse determination. 

Mr. ABRAHAM. Before I run out of time, what are those procedures, per se? Could you give me a couple of examples? 

Mr. MCLENACHEN. Well, we have a pretty significant and detailed procedure that our finance activities, local offices and the fiduciary hubs are supposed to follow. If I have time, sir, I could 

maybe ask Ms. Hempy, she could probably give you a better idea 

of what she does in her hub under those new procedures. 

Mr. ABRAHAM. Well, I am out of time. But if you will just give 

me a copy of those procedures later, I would appreciate that. 

Mr. MCLENACHEN. I would be happy to. 

Mr. ABRAHAM. Ms. Titus. 


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Ms. TITUS. Thank you, Mr. Chairman. 

Mr. Secretary, do you have some figures that are broken down 

within the regions that you can tell me how this process is working 

in Nevada? 

Mr. MCLENACHEN. I do. We, nationally—and I am going to distinguish the national number for you, and I am specifically referring to our initial appointments, initial appointment field exams, 

which is a very point in the process, because that is when we start 

payment of benefits to a fiduciary. 

Nationally, we have driven that number down, thanks to the 

hard work in our hubs, down to about an average of 33 days for 

those initial appointment field examinations. 

However, in Nevada, the State of Nevada, we are at about 68 

days. So we have a lot of work to do in Nevada to get it down to 

the point—the standard for those is 45 days. So we are above 

standard in the State of Nevada. You might ask why that is. There 

are only three field examiners in Nevada right now. We lost one 

recently. However, to address that concern, the hub has already adjusted to get some assistance, for southern Nevada from Utah. One 

of the good points of the consolidation is that we are able to move 

our resources across State lines, which we were not able to do before. 

In addition to that, they are hiring another field examiner. So 

they will be up to 5 field examiners with one in Reno, two in Vegas, 

and then an additional person that they are hiring, and a person 

in Utah. So hopefully that will help address that situation. 

I just want to point out, one of the resource management hard 

issues in the fiduciary program is it depends on the nature of the 

area where we are doing the field examinations. In a rural area, 

can be a challenging resource area, compare an urban—denselypopulated urban issue, less travel, beneficiaries are closer together, 

it is a different resource issue. So Nevada, we have a lot of rural 

areas to cover. 

Ms. TITUS. Do you have any patterns for the people who need 

these services; older, younger, men, women? Anything that stands 

out? 

Mr. MCLENACHEN. We are actually putting that data together 

right now, and we would be happy to provide it to the committee 

after the hearing once we get that completed. That is not data that 

we routinely track in the program, but we are working on pulling 

that data and putting the report together. 

Ms. TITUS. I think that would be interesting. I appreciate that. 

And I would just ask you, Ms. Hempy, if you could address the 

comment I made earlier about how you oversee your field examiners when you are located in Salt Lake City they are in Hawaii 

or Nevada, wherever. I realize your district isn’t that large, but the 

one in the west is. 

Do you have proper oversight? Do you go out and visit in the 

field occasionally yourself? Do you follow up on their cases? How 

do you do that? 

Ms. HEMPY. Thank you for that question. Currently, we touch 

base with our field examiners daily to make sure that their needs 

are met and we know their schedule. We have weekly meetings 

with the entire group to discuss policy and procedures and any 


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changes in the program that we need to implement, or any problems that they may be having out in the field that we could address as a leadership team. 

We also have an open communication line that they can call the 

leadership or email the leadership at any time if they need assistance. We do make periodic visits out into the field and do supervisory visits and ride-alongs with each of our field examiners to ensure that they are properly doing their job and holding them accountable for those things. And I personally do go out and do spot 

checks of those types of supervisory visits and ride-alongs. 

Ms. TITUS. So do you think that seeing only one or maybe slightly over one a day is an efficient use of time? Is there something 

we can do to increase those numbers? Is it a function of geography? 

Would you address that issue? 

Ms. HEMPY. Yes, ma’am. Currently, we are working with a 

standard, and we hold our employees accountable for that standard. What we do is we encourage our employees to work above that 

standard, and many of them do. And we address those that are not 

working to that standard. 

Ms. TITUS. How do you address them? 

Ms. HEMPY. We would evaluate their performance, and we put 

them on a performance improvement plan, and try to make them 

successful, address what needs they have, whether it be training 

or more oversight. And if they are not successful in that plan, then 

we take action to either remove that employee or find a more suitable job for them. 

Ms. TITUS. I would ask the Secretary, do you think you have the 

resources you need to put in place the recommendations made by 

the inspector general? President’s fiscal year 2016 budget we requested 85 additional FTE. I think that is critical to us making 

progress on the IG’s recommendations. We are taking them very 

seriously. 

Ms. TITUS. Thank you. Mr. Chairman. 

Mr. ABRAHAM. Mr. Lamborn. 

Mr. LAMBORN. Thank you, Mr. Chairman. Thank you for having 

this hearing. 

Mr. McLenachen. 

Mr. MCLENACHEN. Yes, sir. 

Mr. LAMBORN. Okay. If—as you told the chairman, one-tenth of 

1 percent of cases have problems. That is one out of a thousand. 

Do you stand by that number? 

Mr. MCLENACHEN. Based on the data that I have available to 

me, yes. 

Mr. LAMBORN. Okay. Now, there was a disturbing Houston news 

expose in June of 2012, which alleged that the VA had appointed 

gambling addicts, psychiatric cases, and convicted criminals as fiduciaries. Has that problem been cleaned up? Was that accurate to 

start with? And are any current fiduciaries in one of those categories? 

Mr. MCLENACHEN. Based on what I know, that was not accurate. 

Let me explain. 

In 2004, Congress amended the law to require us to do a specific 

investigation to qualify a fiduciary. We follow that law. It requires 

us to do a criminal background check, a credit check, and do a comVerDate Aug 31 2005 11:58 Sep 07, 2016 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 Y:\98-643.TXT PAT

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plete investigation to determine whether appointing a specific individual is in the best interest of a particular beneficiary. 

Regarding, for example, criminal convictions, we can still appoint 

somebody under that law if they have a criminal conviction, if we 

think it is in the best interest of that beneficiary to appoint that 

person. But as a general rule, that is not our policy. And we clarified those policies in the proposed rules that we published and that 

we hope to finalize soon. 

It is not my belief that this is the case; however, this program 

has been around for a long time, and it is possible that there is a 

fiduciary out there that was appointed before Congress changed the 

law. 

Mr. LAMBORN. Okay. Thank you. 

Now, Mr.—is it Abe? 

Mr. ABE. Abe. 

Mr. LAMBORN. Aucoin. 

Mr. AUCOIN. Yes, sir. 

Mr. LAMBORN. And Mr. Crowe, do any of you have reason to 

doubt the one out of 1,000 number that the Deputy Secretary 

thought was the current situation of bad cases? 

Mr. ABE. Well, I think the assumption is misleading in a sense 

that they are basing their that rate on the misuse that they have 

identified. So they are assuming that they have identified all the 

misuse, which is probably not the case. And so the number is higher and I think that they would agree. 

Mr. LAMBORN. Then how can they do a better job of identifying 

those additional problems? Do any of the three of you have suggestions for the VA on how to do a better job of rooting those out? 

Mr. McLenachen asked for additional FTE, but is that all there 

is to it, or are the processes in some way lacking? 

Mr. AUCOIN. No, sir that is not all there is to it. When I looked 

at our statistics on our referreds of allegations of fraud, they either 

come from VBA or come from some outside source I looked at the 

data starting in fiscal year 2010 to present date, there is an over 

91 percent increase in those allegations of fiduciary fraud that have 

come to us for investigation. 

The referrals that we converted to full investigations during the 

same time frame have gone up 48 percent. The numbers are increasing. Whether it is a good scrubbing, as has been mentioned, 

or we are just getting more fraud brought to our attention, I can’t 

say. 

But what I can say is when we look at these things, there are 

certain weaknesses that seem to occur time and time again in the 

fraud cases. The accountings are being falsified a number of times. 

The funds that are supposed to be certified as being on deposit in 

the banks are not accurate. There are times where the certificates 

are presented to the bank, by the fiduciary the bank stamps it and 

say, yes, this is, in fact what is on deposit, but it is then given back 

to the fiduciary. The fiduciary takes it and then brings it in with 

their accounting. But while they have that form in their possession, 

they alter the form and add additional funds that they have stolen, 

and they add it to the form to pretend that the funds are still on 

deposit. And that showed up time and time and time again in our 

fraud cases. 


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Mr. LAMBORN. Then how can we do a better job of making sure 

that doesn’t continue to happen? 

Mr. AUCOIN. I think getting the field exams done in a timely 

fashion, spending more time on-site with the actual fiduciaries 

would do that. You have got to look at the documentation and 

make sure that it adds up. 

The bank statements that are turned in to VA in today’s time 

frame, a bank statement that looks official because it looks like it 

came from the bank, can be altered by the fiduciary and turned in 

as if it is the official bank statement. 

We also found that with multiple fiduciaries—multiple beneficiaries under one fiduciary, if the money is taken out of one account and the accountings are turned in on an annual basis, which 

is when the fiduciary took that beneficiary on, you have multiple 

accounts, you can shift money from one account to another. So if 

I go to look at that one account and if everything looks fine, that 

is because the money was shifted from another account to hide 

fraud. We found that scheme more than once. 

Mr. LAMBORN. Thank you all for the work that you are doing in 

trying to protect our veterans. 

Mr. ABRAHAM. Mr. Costello. 

Mr. COSTELLO. The hub model and whether it is been successful, 

and if it is not been entirely successful, what reforms need to be 

made in order to button up some of the management criticisms 

that were made in the June 1st, 2015, OIG report? Can you comment on that? 

Mr. MCLENACHEN. Yes. I am glad to have the opportunity to address that, because I know there have been some concerns about 

our consolidation in the hub model. I will tell you it is very, very 

successful in our view because of the things that you are hearing 

about today, which is doing a better job of having control of the 

work that we have. We went from 56 offices that had a fiduciary 

activity to 6, not counting the Manila regional office, that now we 

have a complete and, I guess, transparent view of what the workload is in this program. And that is why you see those allegations 

going up, because we are doing a better job of tracking those and 

making sure that there is no misuse to the best of our ability. And 

I don’t dispute that there might be some other misuse out there. 

However, the hub model has really been a significant change for 

us and it has improved the program. And if I could, I would like 

to let—one of the best, probably, examples is in the Indianapolis 

hub. Mr. Stephens experienced that prehub and posthub, and he 

can tell you what impact it has had on the program in his area. 

Mr. COSTELLO. Okay. Yes. 

Mr. STEPHENS. Good afternoon. Thank you for the opportunity to 

respond. 

I have worked as a director or in leadership in regional offices, 

both preconsolidation and postconsolidation of fiduciary operations. 

I can tell you that, my experience, when it was decentralized, is 

that it was very difficult to show the proper amount of oversight 

to that operation. It was a very small part of what 56 different regional offices do. Once we consolidated, we were able to—we are 

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proved consistency in operations through consistent training and 

consistent management through our region. 

The amount of progress we have been able to make, I will give 

you an example. We have improved—or reduced, rather, the number and the amount of over 45-day-old initial exams, which is our 

standard for timeliness. Over 45-day initial appointments we have 

reduced by 98 percent since their peak. We have reduced the number of follow-up, old follow-up field exams, by 38 percent in Indianapolis. You would see similar results across the other hubs. 

Mr. COSTELLO. So the OIG report 2013 relative to the timeliness 

standards, you are saying that in the past 2 years with the hub, 

you have seen marked improvement on the percentages related to 

timeliness? 

Mr. STEPHENS. Absolutely. Like I said, 98 percent reduction in 

the number of old initial appointments. 

Mr. COSTELLO. And, Mr. McLenachen—I apologize if I butchered 

that. 

Mr. MCLENACHEN. Sure. 

Mr. COSTELLO. The definition of success, or when I ask has it 

been successful, you had indicated that the ability to identify the 

absconding of funds, or the misuse of funds has gone up. So, in 

other words, you are able to identify more misappropriation for 

lack of a better term? 

Mr. MCLENACHEN. We are doing a much better job of that now. 

And that is due to a number of factors. The consolidation is one 

piece, but we have a new IT system. We have done—we have misuse training that we deployed. And so, really, it is a matter of having control of the work, and doing a better job of identifying that 

type of conduct. There is a number of ways we do that. It is 

through accounting, and follow-up field examinations. We do onsite reviews of fiduciaries that handle multiple beneficiaries. I 

think my message is that the oversight is much better today than 

it was a few years ago. 

Mr. COSTELLO. Another question. The proposed regulatory 

changes, can you share with me your observations. Are you welcoming them? What constructive comments do you have to make 

them better? It seems to me, most particularly, that the intent is 

to make sure that the fiduciary appointment process, as well as the 

training of fiduciaries, will weed out some of the bad actors before 

they have the ability to misappropriate. 

Mr. MCLENACHEN. Yes. The regulations that we proposed address that aspect of the program to include bars to appointment. 

So we have a section that we proposed that would bar somebody 

from acting as a fiduciary for a variety of reasons, a long list of reasons. 

The regulations are a critical component of the transformation of 

this program. And we have a number of things that we need to get 

in place before we go final, such as training, procedures manual, 

guidance to the field, our IT system, which we put out last year. 

We are about at the point where we have all that stuff together 

where we can go final with those regulations. And it will kind of 

be the end piece of transforming the program. That doesn’t mean 

the work’s done, though. 


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Mr. ABRAHAM. Thank you. Mr. Johnson. 

Mr. JOHNSON. Well, thank you, Mr. Chairman. And thanks to the 

committee for allowing me to participate. 

And thank the panel for being here today. 

Mr. McLenachen, as you may recall, I chaired the Oversight Investigation Subcommittee in the 112th Congress, and we conducted 

an investigation and oversight hearing that revealed shocking behavior on the part of some of the VA’s fiduciaries at that time and 

some gross misfeasance on the part of the VA in addressing the 

issues; things from egregious examples of appointing fiduciaries 

embezzling their veteran beneficiaries funds to examples of the VA 

arbitrarily removing a veteran’s wife and replacing her with a paid 

fiduciary, unknown to the family without provocation. 

It was clear then that the VBA’s fiduciary program was in dire 

need of reform. And I have to tell you, you know, it sounds like 

there might be an echo in the room, because here we are 3 years 

later, and we are still talking about some of the same issues. 

And that is concerning to me, Mr. Chairman, that after 3 years, 

that we are still dealing with some of the basics. 

Mr. Stephens, I acknowledge you. You say there have been some 

improvement. And I am not going to say that there hasn’t been 

some improvement in some areas, but these are very, very serious 

problems for our Nation’s heroes that need to be taken care of. 

So let me ask just a few very specific questions. 

Mr. McLenachen, how quickly is a fiduciary, who has been found 

to have misused a beneficiary’s funds, removed from their role as 

a fiduciary? 

Mr. MCLENACHEN. Our policy is once a misuse determination has 

been made, they will be removed and they will not be appointed 

to any another—— 

Mr. JOHNSON. How quickly? The question was, how quickly is a 

fiduciary that has been found to have misused a beneficiary’s funds 

removed? Is it the same day? Same week? A month later? What is 

it? 

Mr. MCLENACHEN. Immediately upon an allegation of misuse 

that is substantiated, they are removed and a successor fiduciary 

is appointed. 

Mr. JOHNSON. Okay. Great. 

Can you tell me in the last 12 months how many fiduciaries have 

been removed? 

Mr. MCLENACHEN. I do not have that data with me, but I can 

certainly provide that to you. 

Mr. JOHNSON. Please. I would like to see that. 

If a fiduciary is handling—let’s say a fiduciary is identified to 

have misused funds and they are removed from that—their role as 

a fiduciary, if they are handling more than one beneficiary, is he 

or she removed from their role in all cases or just one? 

Mr. MCLENACHEN. Our policy is that they would be removed 

from all cases. 

Mr. JOHNSON. Great. I love that. 

Are there any criminal pursuits, charges, against fiduciaries that 

do this kind of thing? 

Mr. MCLENACHEN. I will defer to the inspector general for that, 

but what we do and our procedures are that when we make a misVerDate Aug 31 2005 11:58 Sep 07, 2016 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 Y:\98-643.TXT PAT

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use determination, we refer those matters to the IG for evaluation. 

So that is the next step in the process. 

Mr. JOHNSON. Mr. Abe, one of you, are there criminal charges 

and pursuits of criminal investigations against these folks? 

Mr. AUCOIN. Absolutely. If misuse referral is sent over to the Office of Inspector General, we will look at it, and we will investigate 

it. 

Mr. JOHNSON. Okay. 

Mr. AUCOIN. The VBA is certainly briefed on our findings, and 

in some cases, the fiduciaries may have a surety bond and we have 

assisted the Department to go after and get some of the funds 

back. Not every fiduciary has a surety bond, but especially in one 

of the examples that we listed, we worked hand in hand with regional counsel once the case was done to recoup the money, and get 

it back to the Department. 

Mr. JOHNSON. That leads me to the next question, and you answered a little bit of it there. If they have a security bond, then 

you are able to get some of the money back? 

Mr. AUCOIN. Yes, sir. 

Mr. JOHNSON. But what, in a broader scope, Mr. McLenachen, is 

done for that veteran who has had his or her funds abused or misused, what is done to help them recover that? 

Mr. MCLENACHEN. So there is a number of things, a number of 

tools. The biggest issue is that in 2004, Congress changed the law 

to allow us to re-issue benefits. So in the cases where we have been 

authorized to re-issue benefits, that is the first thing that we will 

do. 

Mr. JOHNSON. And one final question, and then you can respond 

to all of it, if they will give us the time, how is the veteran taken 

care of during that time that the investigation is going on? Let’s 

say there is a fiduciary that has been accused and you are doing 

the investigation, what happens in that interim time while that investigation—— 

Mr. MCLENACHEN. So we remove the fiduciary that misused— 

has been alleged to have misused the benefits—and appoint a successor fiduciary. The goal is to try to do that quickly enough that 

there is no interruption of benefits. So the monthly benefits will 

continue to flow. The fiduciary that has been removed has to transfer funds to the successor fiduciary, so it should be a seamless process for the beneficiary. That is the way the program is supposed 

to run. 

Mr. JOHNSON. Okay. Well, I certainly sense a desire to fix these 

problems. I really do. It is the slow moving wheels of a massive bureaucracy that I know you are dealing with that makes it awfully 

frustrating for me as a veteran and someone who is concerned, as 

I know you are, about our Nation’s heroes. 

Mr. MCLENACHEN. I assure we have made a lot of changes since 

you and I last spoke in this setting. 

Mr. JOHNSON. Well, this one was a much better conversation, I 

think. Thank you. 

Mr. ABRAHAM. Thank you, Mr. Johnson. 

Ms. Brownley. 

Ms. BROWNLEY. Thank you, Mr. Chairman and Ranking Member. 

And I apologize to all of you for being late. 


VACREP0180 with DISTILLER
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But Mr. McLenachen, I wanted to—in your testimony you talked 

a little bit about current law in the VA and their, sort of, inability 

to re-issue benefits to veterans in cases of fiduciary misuse when 

the fiduciary in question manages benefits for nine—I think nine 

or fewer veterans. 

Mr. MCLENACHEN. Yes. 

Ms. BROWNLEY. So veterans are out, if they have a family matter—member, excuse me, that has misused the funds, the veteran 

just loses his or her benefits, correct? That is current law? 

Mr. MCLENACHEN. So that was another—Representative Johnson 

brought up the point of what can we do. And we have a legislative 

proposal that was in the President’s budget to address this concern. 

There is essentially an inequity within the law for re-issuance of 

benefits. A fiduciary that is handling 10 or more beneficiaries, or 

that is a corporate entity, we can re-issue benefits automatically. 

If it is a beneficiary, though, that has a fiduciary that handles nine 

or less, the only way that we can recoup their benefits and make 

them whole is, one, if VA was neglect. If the VA was neglect, and 

I make that determination, we can re-issue benefits. 

Otherwise, we are talking about collecting on a surety bond, restitution from a criminal case, our options are very limited. And I 

see no reason at all why we should treat two beneficiaries that are 

situated exactly the same way as far as their disability differently 

just because there is an arbitrary cutoff between nine and 10 individuals that are handled. So I would appreciate any support we 

could get for that particular legislative proposal. 

Ms. BROWNLEY. Well, thank you for that. And I really do thank 

the administration for the proposal in the budget. And I have discussed with my staff and the staff here and plan to introduce legislation, as you suggested, that will ensure that every veteran who 

is the victim—— 

Mr. MCLENACHEN. Thank you. 

Ms. BROWNLEY [continuing]. Would receive the benefits that they 

have earned and deserve. And certainly, would love the help and 

support from the committee and all the committee members to join 

me in that legislation. 

It seems, though, it is your judgment, then, if the VA has—is 

negligent, then the veteran has recourse. But if the VA is not doing 

its appropriate oversight and making sure that the fiduciaries are 

fulfilling their duties and doing so appropriately, isn’t that— 

wouldn’t that fall into the category of the VA being negligent? 

Mr. MCLENACHEN. Those decisions are centralized in my office, 

and I assure you that I use the most liberal possible negligent 

standards I can possibly use—— 

Ms. BROWNLEY. I am sure you do. 

Mr. MCLENACHEN [continuing]. To make sure that we re-issue 

whatever benefits we can. That is the guidance in my office, and 

that is what we do. 

Because in those cases, there may not be that many opportunities for recouping the benefits. And so, just so you all know, in our 

program, about 90 percent of the beneficiary fiduciary relationships 

are one-on-one relationships with a family member or a caregiver 

or friend that volunteers their services. Most of those people are 


VACREP0180 with DISTILLER
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not covered by re-issuance of benefits, because we are not going to 

be negligent in every case, thankfully. 

Ms. BROWNLEY. So in terms of the number of the cases that you 

review, can you give us a sense of how many are—— 

Mr. MCLENACHEN. We provided—— 

Ms. BROWNLEY [continuing]. Successful. 

Mr. MCLENACHEN. We provided some information in some prehearing data. As far as negligence determinations, if you can refer 

to that in fiscal year 2013—and this is where we really started trying to clean up this work as I mentioned—having a million dollars 

we re-issued due to negligence. And, by the way, negligence—for 

example, by statute, if we do not act on a misuse allegation within 

60 days, it is negligence. But also, the statute contains a general 

negligence provision, which we apply, like I say, very liberally to 

try to re-issue as much as we can. Fiscal year 2014, we re-issued approximately $3 million in bene- fits, and so far this fiscal year, $1.4 million in benefits due to negligence. 

Ms. BROWNLEY. Very good. 

My time is done, but I look forward to working with you to come 

up with an appropriate solution. 

And I yield back. 

Mr. ABRAHAM. All right, ladies and gentlemen, thank you, again, 

for your testimony on behalf of the subcommittee. Thank you for 

your time. We certainly realize that time is a rare commodity in 

this part of the world, so thank you, again. 

You are now excused. And we will pause for just a minute to seat 

the second panel. 

[THE PREPARED STATEMENTS OF MR. MCLENACHEN AND MR. ABE

APPEAR IN THE APPENDIX] 

Mr. ABRAHAM. Thank you for coming again. We have got a vote 

coming up in just a bit, so in the interest of time, we are going to 

forgo the spoken testimony. We have the written testimony, and I 

have actually read it. So we are going to go straight to questions. 

STATEMENTS OF ZACHARY HEARN, DEPUTY DIRECTOR FOR 

CLAIMS, VETERANS AFFAIRS AND REHABILITATION DIVISION, THE AMERICAN LEGION; SAM J. ALBRITTON, III, EXECUTIVE VICE PRESIDENT, REGIONS BANK; AND DOUGLAS J. 

ROSINSKI, ATTORNEY, VETERANS JUSTICE GROUP, LLC 

Mr. ABRAHAM. Mr. Hearn, I am going to start with you, sir. In 

your written testimony you described a situation in which the VA 

denied a veteran’s request that his wife serve as a fiduciary because VA says his spouse was unable to properly take care of the 

veteran. Instead, the VA appointed an unknown individual to serve 

as fiduciary at a cost of up to 4 percent of the veteran’s benefit. 

Do you think the VA handled that case appropriately? 

Mr. HEARN. Thank you, Chairman. 

That situation came out of—our experience has been that these 

issues have been centralized with certain fiduciary hubs. This 

dealt, in particular, with the Lincoln fiduciary hub. 

In this situation, speaking with the service officer, it was kind 

of silly. The veteran’s wife just paid the bills. My wife pays the 

bills. I mean, so it was just a question. The way it was asked was 


VACREP0180 with DISTILLER
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that the—who handles the financial responsibilities of the household, and the veteran and the veteran’s wife just answered honestly; well, she does. 

So things were a little bit misconstrued there. In that situation, 

obviously, we don’t believe that the VA handled that properly. 

Mr. ABRAHAM. Okay. And I will stay with you for this next one. 

In your written testimony you also note that delays in appointing 

fiduciaries can create serious challenges for veterans and their 

families. Expound on that a little bit for me. 

Mr. HEARN. Okay. And we have a seasoned service officer, and 

he was explaining the situation where it was a World War II veteran that was in a nursing home. Alzheimer’s requires a fiduciary. 

Thankfully, the veteran’s nursing home recognized the situation, 

and they weren’t going to kick the veteran out of the nursing home 

and lose that care. But there have been situations where there has 

been a significant concern. 

Now, the problem with this is, that the veterans can’t get involved—or the veteran’s family can’t get involved in commingling 

of funds, and at that point, the family members, do they inherit an 

additional responsibility that they are biting off more than they 

can chew? That, really, this should be falling upon—that deal with 

the retroactive payment. And so that is where that problem lies. 

And, actually, that deals with—that situation dealt more with 

the Salt Lake City fiduciary hub. 

Mr. ABRAHAM. All right, sir. What would you tell the VA do to 

improve those situations? 

Mr. HEARN. One of the most common things we have heard, and 

I know Mr. Stephens is here from Indianapolis. And we heard 

glowing remarks of that fiduciary hub from service officers from 

that region of the country. 

Other regions of the country, just like the regional officers, you 

have good ones and you have bad ones. One of the biggest concerns 

that the American Legion has had is that through the decentralization of programs, theoretically, it would work. Specialization of 

skills tends to increase efficiency. However, that hasn’t proven to 

be the case in a lot of places such as Lincoln, such as Salt Lake 

City. And so what we would like to have is our service officers do 

not have access to those adjudicators, so those people out in the 

field, at the level that they had in the past, and we would like for 

them to return those responsibilities back to the local regional offices. 

Mr. ABRAHAM. Mr. Albritton, in your written testimony you note 

that the VA does not currently have clearly defined standards to 

guide regional hub manager’s decisions with respect to determining 

how many beneficiaries a single trust entity is able to serve. What 

factors do you think the VA should consider when determining how 

many beneficiaries a single trust entity should manage? 

Mr. ALBRITTON. Well, thank you, Mr. Chairman. It is a pleasure 

to be here today. 

First off, I just want to point out that Regions Bank has been in 

this business for 25 years serving veterans. We have never had any 

case of misuse. We enjoy this business serving our veterans, and 

it is a core policy of our organization. 

Mr. ABRAHAM. We appreciate it. 


VACREP0180 with DISTILLER
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Mr. ALBRITTON. We feel that there should be a designation made 

between professional third-party fiduciary that has standards with 

internal controls that has been in this business that has bonding 

to cover any instances of any misuse, and there should be a distinction in terms of appointing those types of fiduciaries versus fiduciaries that maybe provide services for smaller amount of beneficiaries. 

I believe the OIG report pointed out there were several instances 

in which there were 2 to 50 beneficiaries under a provider, and unfortunately, in those type of situations, there were situations in 

which illness, someone went on vacation, bills weren’t paid, and the 

process broke down. So there, we would suggest that there is some 

standards set to govern a professional-type fiduciary, and that type 

of orientation would be beneficial for the VA. 

Mr. ABRAHAM. Okay. Thank you. 

Ms. Titus. 

Ms. TITUS. Thank you. I want to ask you, Mr. Hearn, what is 

your general impression of the hub reorganization system. Do you 

think there is enough oversight? Do you think that having a centralized office and a large area to cover is working out for this program? 

Mr. HEARN. Thank you, Ranking Member. 

This was something that I specifically addressed with service officers as they came back to me, because this is how important it 

is. These service officers, it is hard for us to advocate for policy unless we listen and listen intently. 

And for the overwhelming majority of them, especially the ones 

living in the western part of the country, those living in the southwest part of the country, that are dealing with a handful of fiduciary hubs, they are saying it is not working, they are not noticing 

any sort of measurable uptick. And the quality of service as far as 

the relationship dealing with the adjudicators is down. And so 

while you may have picked up a day or two here or a day or two 

there, everybody that I have spoken to, especially in those parts of 

the country, are asking for it to be returned back to the regional 

office. 

Ms. TITUS. Is there any difference in terms of the veterans that 

you serve that you have noticed in different ages, different circumstances of the impressions that they have of this program? 

Mr. HEARN. Was that to me? 

Ms. TITUS. Yes. 

Mr. HEARN. Sorry. I can check on that for you and get back to 

you, for the record. That wasn’t an issue that was brought up, but 

I will certainly ask that on your behalf. 

Ms. TITUS. Thank you. 

Mr. HEARN. You are welcome. 

Ms. TITUS. Mr. Albritton, I just—I think we heard earlier that 

90 percent of the veterans who need this service have a family 

member or close friend. That would leave 10 percent to either be 

assigned to a bank or a lawyer or some kind of official professional 

fiduciary. 

I just wondered, how do you generate revenue from—this is part 

of your business? Is there a service charge? How much does that 

cut into the benefit that the veteran receives? What kind of servVerDate Aug 31 2005 11:58 Sep 07, 2016 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 Y:\98-643.TXT PAT

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ices do they get that a person doesn’t get by having their wife take 

care of the books? Would you just kind of describe what you do? 

Mr. ALBRITTON. Certainly. Thank you. 

There is the 10 percent that is available for third-party professional beneficiary, and the standard fee is 4 percent that is paid 

to that third-party professional fiduciary. 

In our instance, our unit is based in Kingsport, Tennessee. The 

employees that man this unit have, on average, 16 years of experience working with veterans. They have developed a personal relationship with the veterans that they serve. A lot of different examples of where they built homes for our veterans and bought furniture, arranged that furniture, set them up completely, or assisted 

them in escaping a situation where family members were using the 

funds intended for the veteran for their own sake. 

So we assist hands-on and have personalized service with those 

veterans. But for that 4 percent, we are looking at—we are looking 

at—we have internal audits that we perform. We look at investment reviews. We have the monthly account administration reviews of the accounts, and then we have dedicated phone lines that 

the veterans can call into 24-hour response. And so any or—or all 

of those accounting and other procedures that would be necessary 

to show that there is huge amount of accountability that we are 

able to provide for that 4 percent. 

In addition to that, we have investment officers, trust officers, 

real estate professionals, others that can probate accounts, if there 

is no one there to probate the estate. So for that 4 percent, there 

are a lot of services that are performed for the veteran, and they 

seem to be very appreciative of that. 

Ms. TITUS. I would imagine. I know there are caps on a certain 

number that you can serve. And I think that is to keep it more personal and more closely supervised. Do you have any comment on 

those caps? 

Mr. ALBRITTON. I do. I am not aware that there is any formalized 

cap. It is interesting, since 2012, we have been frozen out of any 

new accounts. In 2012, we had 530 accounts, veterans that we 

worked with. We are down now to 298. We were not told officially 

any sort of limitation that was in place. We were not pointed to 

any written policy that was in place, and yet we have been frozen 

out for 2 years. Our standard right now is one associate in our VA 

beneficiary hub per 100 veterans. And I think if you look at that 

and you compare it to the number of field officers that the VA has 

assigned, which I believe is one in 350, 375, there is a lot of personalized service. In fact, our team goes out and visits with the veterans, they visit with the field service officers. 

So there is a lot of one-on-one interaction. But as far as I understand, there is no written policy for a limitation, although it has 

been quoted to us and we have been frozen out of any new accounts. And we would like to build this business and serve our veterans more. 

Ms. TITUS. Thank you, Mr. Chairman. 

Mr. ABRAHAM. Thank you, Ms. Titus. Mr. Costello. 

Mr. COSTELLO. Thank you, Mr. Chairman. Mr. Rosinski, I have 

two questions for you. In your written testimony, you describe 

cases in which the VA inappropriately sought to appoint a fiduciary 


VACREP0180 with DISTILLER
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for veterans who were able to manage their own affairs without 

VA’s help. Can you elaborate on the standards you think the VA 

should adopt to ensure that the due process rights of veterans are 

protected and that the VA’s decision to appoint a fiduciary is proper? 

Mr. ROSINSKI. Yes, sir. First of all, I have seen actual cases that 

I have represented people where they have said something about 

their wife signing the checks or handling their finances, which 

were placed in the VA fiduciary program, one being a man who suffered from ALS, who really wanted to try explain, but was cut off 

that he could not write and that it caused him great pain to write 

his name, so he had his wife sign the checks. And it took us over 

a year to get him out of the program. 

Other cases where lives have been completely overlooked. A 61- 

year marriage, the spouse was not even considered, and was given 

to a third-party, which was a bank, which was not as qualified as 

this gentleman’s bank. And that case has been in Veterans court, 

has been in local court, has been in State court, has been in Federal court. But the issue is the standards, yes. The standards are 

the State standards for appointing a person of these capacities. I 

think we are all missing that the statute that Congress passed 

here is solely limited to the ability to handle their finances. It has 

nothing to do with the legal definition of incompetency. And what 

is happening more and more is that if you are adjudicated a high 

mental health rating, PTSD being the largest one, you are automatically considered incompetent unless you can prove otherwise. 

And that is coming from many parts of the country through the 

legal clinic people that I speak with. And it is at an increasing rate. 

And the second thing is because of those standards, the field examiners are wandering far outside the boundaries of that and demanding, again, my clients and sworn testimony, they are wandering outside of that into personal finances of the family’s, using 

up their time, using up the field examiner’s time on areas they 

should not be in. 

Mr. COSTELLO. So to clarify, since we are talking about due process rights, it seems like you are getting into burden of proof here, 

and you are saying with PTSD, the burden of proof sort of automatically shifts for a VA beneficiary to have to prove they are competent and not—— 

Mr. ROSINSKI. Absolutely. All it takes to get into the fiduciary 

program, or be proposed into the program is a check box, yes or no, 

on a VA medical form, usually DBQ for a mental health condition. 

There are some that come through that are just checked ‘‘yes,’’ no 

explanation. The proposal comes out. If it says ‘‘check,’’ wife handles the funds, they are into the program and then the burden 

shifts to them to find someone who can convince the VA that they 

have had sufficient tests or mental health tests or whatever, which 

varies from office to office, how to get out. 

Mr. COSTELLO. I want to get to my next question, but it appears 

to me that you are saying that we are painting with too broad of 

a brush. 

Mr. ROSINSKI. Absolutely. 

Mr. COSTELLO. So what kind of standards do you incorporate in 

order to sort of make that a little bit more precise? 


VACREP0180 with DISTILLER
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Mr. ROSINSKI. If VA would define the standards, instead of just 

a check box by some VA health care manager, one, we could reduce 

the number that get into the proposal stage, that need field examinations, that get into the program and get the problems caused, 

even if it is 1 percent or 10 percent. The broad brush brings in a 

lot of people that don’t need to be in the program, don’t need to 

take up the resources of VA. 

Mr. COSTELLO. You also indicated you think it is important for 

VA to conduct criminal background and credit checks when assigning new beneficiaries to known fiduciaries. Is that a good use of VA 

resources for fiduciaries that have already been approved by VA? 

And maybe even an added question, why do you think that we 

should be doing that? 

Mr. ROSINSKI. I think it would be a wonderful requirement, because right now the law is the requirement that when a fiduciary 

is appointed, they are supposed to do a credit check and a criminal 

background check. Every single case of which I am aware, and I 

admit I only see very few, they have waived both of those for fiduciaries who already have one case. So the people, most of the people that are being caught have multiple cases. They have never 

gone back and done a credit check to see if the guy suddenly has 

bought a million dollar boat, or opened up any other bank accounts. 

To me, that is exactly what is required every time you give them 

another case. 

Mr. COSTELLO. I can see it on the credit check, because obviously, 

if there has been a lot of consumer activity incommensurate to the 

type of salary that one might be drawing. But how about the criminal check? 

Mr. ROSINSKI. That one would be my second choice. But also, as 

we found out, and I was asked information on those previous media 

reports, that is how they found those people. Some had criminal activity after they were appointed their first or second or third case. 

And I think it is very relevant that if they know they are going to 

do checks maybe every fifth one, I don’t know, to go back and see 

if someone who has got in the gate has turned on their beneficiaries. 

Mr. COSTELLO. I appreciate your work and your testimony here 

today. 

Mr. ABRAHAM. Ms. Brownley. 

Ms. BROWNLEY. Thank you, Mr. Chairman. Mr. Hearn, I just 

wanted to ask you if—I talked a little bit in the first panel about 

trying to put forward some legislation that would ensure veterans 

who are misguided by their fiduciary, that they would indeed—we 

figure out a way in which to make sure that they are in receipt of 

their benefits that they earned and deserved. I am sure you have 

a process by which you go through, but just wanted to get an idea 

from you if that is something that you feel like the American Legion could support? 

Mr. HEARN. Yes, Congresswoman. Thank you. The American Legion would be happy to work with you and your office on this. This 

is a program, when I was preparing the testimony, it becomes increasingly clear—I mean, it smacks you in the face that these are 

some of the most vulnerable veterans in our Nation. And we need 

to ensure that we put these protections in place because we don’t 


VACREP0180 with DISTILLER
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want there to be a situation where it just spirals out of control. So 

we would be more than thrilled to work with you on trying to get 

something together. 

Ms. BROWNLEY. Thank you for that. And, you know, I was also 

just sort of curious, I mean, clearly, we have aging population with 

our veterans. And with that aging population it is going to be more 

Alzheimer’s, other kinds of things where this seems at least we are 

going to go through, I would imagine, a bubble where we are going 

to have the growth there. And certainly the numbers that were 

given by the OIG, if you just look at the fiscal year 2015 quarter 

one, it looks as though there is a trajectory here that is trend-lined 

as, you know, could take a real leap, because in other full years, 

they have already had at least almost the amount of requests in 

just the first quarter, of allegations, I should say, than—they have 

more than they did in all of fiscal year 2012. 

So it seems as though that trajectory is definitely going in a direction where it is clear that we need to set up some better procedures to make sure that it doesn’t happen, but if it does happen, 

that we treat our veterans and take care of our veterans appropriately. So thank you for that. And I would look forward to working with you. You know, from your vantage point, if there are some 

particular stories that you have or particular members who have 

struggled with this, if you could share any of that, I would certainly appreciate it. 

Mr. HEARN. This is one of those programs where it is imperative 

to have a strong relationship with VA. That if a veteran is being 

injured by his or her fiduciary, it is kind of difficult for the veteran 

to oftentimes get in contact with the Veterans Service Officer. So 

we don’t hear about it usually firsthand. We have heard anecdotal 

stories. But as far as—we are almost solely relying upon IG or VA 

to do the investigation. Unfortunately, a lot of times we don’t hear 

about it until it is later, just because of the reporting structure and 

everything along those lines. The veterans don’t really have necessarily the ability to pick up the phone and call, because if they 

have a fiduciary, they generally don’t have access to the funds. 

That is the whole purpose of the program. 

But getting back to the point of the age, back in 2010 the average male veteran was 64.9 years old. I think in 1967 was the biggest year of the draft during the Vietnam War. You can do the 

math and figure out where we are the baby boomers, the Vietnam 

War was no longer your father’s war, it was your grandfather’s 

war. And it is something that we definitely need to get hold of before it spirals out of control. 

Ms. BROWNLEY. Thank you, sir, and I yield back. 

Mr. ABRAHAM. Mr. Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman. Mr. Rosinski, in your 

experience, have background checks been waived, and have felons 

been able to serve or appointed to serve as fiduciaries? And if so, 

can you explain? 

Mr. ROSINSKI. I am not aware of a felon in any of my clients’ 

cases. I believe, though, that if you look at the people who are in 

jail, they have multiple dozens, a hundred in some cases, I believe, 

veterans under their charge, and they stole from most, if not all of 

them, over a period of years. And that is what has stimulated the 


VACREP0180 with DISTILLER
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thought to me—and that they were waived. I know that some of 

those were waived. I don’t know if every single one was. But everything when I have seen they have waived it because they are inside 

the door already, inside the program. They are trusted. So the 

harm is even worse when someone you trusted turns around not 

to have that trust. And here we are trying to verify that trust. 

Mr. JOHNSON. What do you think about the periodic—what if the 

VA were to do periodic background checks, especially on situations 

like you just described where you have hundreds of veterans in a 

particular fiduciary pool? Maybe you think we should have a policy 

that requires periodically that they go through a background investigation just to make sure they are still clean? 

Mr. ROSINSKI. Yes, sir, I do. And a credit check and a background check is push a button on a computer, as far as I know, and 

make a request. And the costs are very, very trivial. And certainly 

a lot easier to do that from a service that provides that type of information than have a field examiner run around a community to 

see if somebody knows something bad about a person. 

Mr. JOHNSON. Right. Okay. For the entire panel, I know it is the 

VA’s current policy to appoint fiduciaries by first considering the 

individual entity, whether it is a family member or whoever, that 

the beneficiary requests. In your experience, and I will give each 

of you a chance to answer, in your experience is this policy widely 

practiced? 

Mr. ALBRITTON. If they are appointing an individual, is it widely 

practiced that they are appointing an individual first and foremost? 

Yes, I believe that policy is widely practiced. I think from our 

standpoint, when you do work down the process and get to where 

you need a third-party professional fiduciary, you need to be careful about who you appoint, because you could have the same misuse even with that fiduciary as you would possibly an individual 

misusing funds. 

And that is one of the many reasons we believe that a consolidated fiduciary program like what we have seen with HUD in section 8 housing vouchers for a statewide contract, putting together 

a 2- to 3-year contract so that not only the agency knows that the 

entity will be there to provide those services, but also the entity 

that is providing those services has a clear roadmap to know how 

much they need to staff up, and are committed to that. And so 

there is that relationship. 

But to directly answer your question, yes, I do believe they are, 

from my perspective, going through that process effectively. 

Mr. ROSINSKI. Congressman, in my experience, and maybe it is 

because of the nature of my cases I have seen, that is not the case. 

And actually, I would submit also the first choice by statute is the 

veteran himself. Even if they have been found to, quote-unquote, 

‘‘be incompetent,’’ the first choice is still the veteran himself unless 

there is some reason that that would not be to his benefit. That is 

completely missed. And indeed, my mantra that I have here for the 

opening statement was, first, do no harm. Most of these veterans 

that have anybody in their life have successfully navigated—usually they are 70 or 80 or 90 now—a long time without any about 

VA benefits, or with minimal VA benefits, and they have managed 

their money and they are not in debt. And they are scraping along. 


VACREP0180 with DISTILLER
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But VA completely overlooks that and goes down the list. And 

like I said, my experience has been has overlooked spouses or has 

specifically excluded spouses or sisters or brothers that have had 

20, 30 years of dealing with this veteran through all stages. 

And also we are going to see another bubble, because as I said 

before, it is the TBI people who are now getting sucked into this 

program. And there is a lot of that coming up where they are being 

found incompetent because they have some residuals of TBI. And 

in that case again, they are not looking at how those people have 

negotiated their finances while suffering from whatever condition 

they have, and have jumped right into fiduciaries much less qualified than the bank that we have described here. And that is 

compounding the problem. 

Mr. JOHNSON. Right. Sir. 

Mr. HEARN. Thank you, Congressman. From what we have seen, 

if you want to paint with a broad brush, VA is taking the necessary 

efforts to make sure that the family members are being given an 

opportunity. The times that we have noticed that fiduciaries have 

been appointed that fall outside of that realm, you have family 

members that may not qualify for one reason or the other. And so 

we understand that that is there as a protection for the veteran. 

And we want to make sure that that continues. The biggest problem that we have noticed is, there is confusion that goes on when 

that examination is occurring between, perhaps, an elderly couple 

that really aren’t understanding where the examiner is going with 

the questions, as was given by the chairman’s question about the 

veteran’s wife paid the bills, so the veteran was financially irresponsible, I guess. So with a broad brush, yes, VA is meeting its 

requirements. 

[THE PREPARED STATEMENTS OF MR. HEARN, MR. ALBRITTON, AND

MR. ROSINSKI APPEAR IN THE APPENDIX] 

Mr. JOHNSON. Okay. Mr. Chairman, I yield back. 

Mr. ABRAHAM. Thank you, Mr. Johnson. Again, on behalf of this 

subcommittee, we thank you so much for being here. Thank you for 

your patience. The testimony here today has raised serious concerns about how VBA is managing the fiduciary program and serving our most vulnerable veterans. I look forward to working 

through these issues with the Department, my colleagues on the 

committee, and the stakeholders who took time to present those 

concerns today, and those who work to assist veterans who need 

help managing their financial affairs. Again, thanks to everyone for 

being here. And as initially noted, the complete written statements 

of today’s witnesses will be entered into the hearing record. I ask 

unanimous consent that all members have 5 legislative days to revise and extend their remarks and include extraneous material. 

Hearing no objection, so ordered. I thank the members and the witnesses for their attendance and participation. This hearing is now 

adjourned. 

[Whereupon, at 4:27 p.m., the subcommittee was adjourned.] 


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APPENDIX 

STATEMENT OF DAVID R. MCLENACHEN 

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity 

to discuss the Department of Veterans Affairs (VA) fiduciary program. I am accompanied by Mr. Michael Stephens, Director, Indianapolis Regional Office, who oversees the activities of VA’s Eastern Area Fiduciary Hub. 

In the fiduciary program, VA appoints and oversees fiduciaries for Veterans and 

other beneficiaries who, because of injury, disease, or the infirmities of advanced 

age, are unable to manage their VA benefits. In 2014, VA protected more than 

172,800 Veterans and their survivors, who were in receipt of VA benefits, which is 

a 41 percent increase in the number of beneficiaries overseen from 2011. Approximately 138,900 fiduciaries provided services to these beneficiaries who received annual VA benefit payments of almost $2.9 billion. The number of beneficiaries in the 

program will continue to grow as VA decides more benefit claims and the beneficiary population ages. 

VA is working hard to implement fiduciary program improvements to enhance 

service delivery and protection of beneficiaries. These efforts include implementing 

operational efficiencies, clarifying and strengthening policies and procedures, modernizing information technology systems, and providing training to fiduciary program staff and fiduciaries. VA appreciates the Committee’s oversight and interest 

in improving the fiduciary program, and welcomes the opportunity to highlight recent program enhancements, as set out in detail below. 

Organizational Changes 

VA has consistently noted the need for heightened awareness regarding the Department’s most vulnerable beneficiaries, who rely on the services of VA-appointed 

fiduciaries to properly manage their VA benefits. Recognizing the need for program 

reforms and additional oversight, VA reorganized to create its Pension and Fiduciary (P&F) Service in 2011. P&F Service focuses on the unique needs of these beneficiaries, more than 50 percent of whom are also in VA’s needs-based pension program, and on strengthening oversight of VA-appointed fiduciaries. This reorganization has allowed VA to increase the staff responsible for fiduciary program policies 

and procedures, quality, training, and site visits. 

In March 2012, VA consolidated the management of its fiduciary activities at six 

fiduciary hubs nationwide. VA moved all fiduciary workload from individual VA Regional Offices (ROs) to the hubs to improve controls and consistency in processing 

the work. These hubs are located at the Salt Lake City, Lincoln, Milwaukee, Indianapolis, Louisville, and Columbia VA ROs. Under this hub concept, fiduciary hub 

managers deploy their field examination resources according to the location of beneficiaries within the hub and without regard to state borders or VA regional office 

jurisdiction, while centralizing all other fiduciary functions at the hub site. 

In August 2014, VA established claims processing teams in each of the fiduciary 

hubs to improve the internal procedures for delivering benefits to individuals who 

require the assistance of a fiduciary. These teams produce beneficiaries’ final ratings 

of incompetency, initiate monthly benefit payments to fiduciaries on behalf of beneficiaries, and release beneficiaries’ retroactive benefits to their fiduciaries. The new 

process eliminates the hand offs between VA’s Pension Management Centers and 

Veterans Service Centers and the fiduciary hubs and ensures more timely release 

of benefits to fiduciaries. 

Strengthening Oversight Through Policy and Procedures 

In January 2014, VA published proposed fiduciary regulations that would prescribe new rules for all aspects of the fiduciary program’s administration. This is 

the first major update of fiduciary regulations since 1975. VA rewrote the proposed 

regulations in easier to understand language and proposed policy changes that 

would modernize VA’s oversight of beneficiaries and fiduciaries. The proposed regulations would also incorporate statutory changes and court decisions that have had 

an impact on the program over the past decade. Among other things, the new regulations would prescribe beneficiary rights and fiduciary responsibilities, and define 

VA’s oversight role in ensuring that fiduciaries properly manage VA benefits for the 

beneficiaries they serve. We anticipate publishing the final regulations in 2015. 

Effective in October 2014, VA changed its policies and procedures to allow the fiduciary hubs to expand the use of streamlined oversight for certain less vulnerable 

beneficiaries. In some cases, the beneficiary’s well-being is assessed by other means, 

including by the beneficiary’s spouse, through programs approved by the Veterans 

Health Administration, or by the licensed health care facility where the beneficiary 

resides. For example, a beneficiary in a Medicaid-eligible nursing home is in a proVerDate Aug 31 2005 11:58 Sep 07, 2016 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6621 Y:\98-643.TXT PAT

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tected environment monitored by a government agency and does not require duplicative oversight by VA. This new policy provides more frequent oversight through 

other means such as telephone calls or correspondence in order to provide less intrusive oversight of these beneficiaries, when appropriate. It also allows VA to shift resources to improving its oversight of its most severely disabled beneficiaries. 

Strengthening Oversight Through Technology 

In May 2014, VA deployed a new information technology system for the fiduciary 

program, called the Beneficiary Fiduciary Field System (BFFS). Use of the previous 

antiquated system was discontinued and all useful data was migrated to BFFS. VA 

designed the system to improve workload management, to deploy streamlined processing tools, and to enhance beneficiary and fiduciary oversight. In addition, BFFS 

provides real time reporting capabilities; robust and meaningful data capture to 

identify trends and conduct analysis; custom workflows designed to automatically 

and effectively assign fiduciary work; and audit tracking to improve user monitoring 

and data integrity. BFFS also provides improved oversight of fiduciaries and affords 

more effective safeguards against misuse of benefits through improved fiduciary 

misuse reporting and monitoring. 

In January 2015, VA deployed its electronic Knowledge Management (KM) system 

to all fiduciary program staff. KM replaced the fiduciary intranet site and is the official source for all fiduciary guidance, including the Fiduciary Program Manual, regulations, statutes, and other program guidance. This innovative tool, which an individual employee can tailor to his or her personal needs and can collect employee 

feedback for Pension and Fiduciary Service’s consideration, is the single source of 

all fiduciary reference material in an easily searchable format. 

In 2012, VA established phone units in the hubs to respond to direct inquiries 

from beneficiaries and fiduciaries and ensure consistent service delivery. The fiduciary hubs have a toll-free number dedicated to answering fiduciary program inquiries. VA is in the process of modernizing the current telephone system to improve 

call routing and reporting capabilities and allow for the recording of telephone calls 

for quality monitoring. 

Strengthening Oversight Through People 

VA has improved its internal training programs and delivery of fiduciary-related 

information to external stakeholders. First, VA designed a National Training Curriculum to promote standardized practices for its field fiduciary program personnel. 

Since 2013, VA has provided an 80-hour training course to 217 fiduciary field examiners who had less than 12-months of experience. In 2014, VA deployed an online 

self-study training course for more experienced field examiners and will train over 

160 journey-level field examiners using this course in 2015. In addition, VA developed a web-based misuse training course designed for the specific roles of fiduciary 

field personnel. The misuse training is mandatory for all fiduciary staff and provides 

the knowledge and tools necessary to properly address misuse allegations, conduct 

investigations, and finalize misuse determinations. In addition to these centralized 

training efforts, onsite training is provided to field fiduciary program personnel on 

hub-specific topics, such as misuse procedures, BFFS tools and reports, and error 

trends discovered during quality reviews or site visits. 

Second, the Veterans Benefits Administration (VBA) has developed a standardized 

computer-based training module for fiduciaries that VA hosts on its internet site. 

VA also published A Guide for VA Fiduciaries, which is a reference booklet for fiduciaries that helps them understand their responsibilities and perform their duties. 

The guide book is available in hard copy and electronically on the VA fiduciary program internet site at http://www.benefits.va.gov/fiduciary/index.asp. As an additional tool for fiduciaries, VA is developing an on-line accounting assistant to aid 

fiduciaries in completing their accounting forms. All of these products aim to educate fiduciaries on beneficiary rights, fiduciary responsibilities, management of 

funds, and accounting and audit procedures. 

Currently, VBA is conducting a Work Measurement Study (WMS) of all fiduciary 

work tasks. This study is under contract and should be completed in June 2015. The 

fiduciary program has experienced tremendous growth and significant revisions to 

policies and procedures, and the WMS is capturing work performance in this new 

fiduciary program environment. With the information provided through the WMS, 

VA will be able to more accurately define and quantify the time involved in completing fiduciary program work and will be able to refine fiduciary program resource 

requirements. 

Fiduciary Appointment and Oversight 

Under current policy, VA appoints fiduciaries by first considering the individual 

or entity that the beneficiary requests. If the beneficiary does not state a preference, 


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VA considers the beneficiary’s family members, friends, and other acquaintances 

who are willing to serve without charging a fee. Absent such an appointment, VA 

will appoint an individual or entity that will provide fiduciary services for a fee. 

VA’s policy is to select the least restrictive and most effective method of payment 

for a beneficiary. Currently, about 80 percent of the beneficiaries in the program 

have a one-to-one relationship with their fiduciary and approximately 90 percent of 

fiduciaries perform their duties without cost to the beneficiary. 

As required by 38 United States Code (U.S.C.) § 5507, VA conducts an investigation prior to appointing a person as a fiduciary for a beneficiary. As part of that 

investigation, VA has a face-to-face meeting with the proposed fiduciary and obtains 

a copy of a credit report regarding the proposed fiduciary. VA also checks the proposed fiduciary’s criminal history, determines whether appointment of the proposed 

fiduciary would be in the interest of the beneficiary, and requires the proposed fiduciary to obtain a surety bond if necessary. Fiduciaries must enter into an agreement 

with VA regarding their responsibilities, such as meeting the beneficiary’s needs, 

maintaining a separate financial institution account for the beneficiary, accounting 

for funds under management, and protecting any reserved funds. VA ensures that 

an individual or entity that serves as a fiduciary meets each of these qualification 

requirements. 

It is VA’s obligation to oversee the fiduciaries it appoints to manage VA benefits 

for beneficiaries. VA conducts this oversight through visits with the beneficiary and 

fiduciary, by auditing the fiduciary’s annual accounting and supporting financial 

documentation, by conducting on-site reviews, by verifying surety bonds, and by investigating misuse allegations. 

VA confirms that the fiduciary is fulfilling his or her obligation to determine and 

meet the needs of the beneficiary through periodic, follow up field examinations. 

During the follow up field examination, VA interviews the beneficiary and fiduciary, 

and either recommends continuing the appointment or replacing the fiduciary. VA 

may perform these follow up field examinations through face-to-face contact, or a 

telephone call or letter. VA schedules the first follow up field examination one year 

after the initial appointment field examination and then schedules subsequent follow up on one- to three-year intervals based on the beneficiary’s situation. In addition, VA conducts an unscheduled field exam when it identifies a problem in the 

beneficiary-fiduciary relationship, receives a public report of concern, or the fiduciary fails to respond or inappropriately responds to a VA telephone or correspondence inquiry. 

Under 38 U.S.C. § 5509(a), Congress authorized VA to require fiduciaries to file 

reports or accountings regarding the management of funds by the fiduciary. Currently, VA requires annual accountings when: the fiduciary is also the beneficiary’s 

court-appointed guardian; VA has authorized a fee; or, the funds under management 

by the fiduciary for the beneficiary exceed $10,000. VA requires fiduciaries to provide detailed financial documents, including bank records, with their annual accountings. Collection of this additional information allows VA to verify reported expenditures and identify potential misuse of funds for further investigation. This requirement also serves as a misuse deterrent for fiduciaries. To ensure transparency 

for beneficiaries, VA changed its accounting procedures to include instructing fiduciaries to provide a copy of any VA-approved accounting to the beneficiary. VA audits approximately 35,000 accountings each year. 

Congress also authorized VA to conduct on-site reviews of fiduciaries who handle 

20 or more beneficiaries. In these cases, VA visits the fiduciary’s place of business 

and inspects the fiduciary’s activities on behalf of VA beneficiaries. There are currently 264 fiduciaries that meet the statutory requirements for on-site reviews. VA 

schedules these reviews once every three years; however, VA may conduct an unscheduled on-site review as part of a misuse investigation, in response to a complaint, or upon failure of the fiduciary to submit a timely accounting or appropriately respond to VA contact. 

Management and Oversight of Fiduciary Hub Managers 

Each fiduciary hub manager reports to and has his or her performance evaluated 

by the Director of the VA Regional Office where the hub is located. Fiduciary hub 

managers are responsible for meeting fiduciary program performance measures, to 

include the timely completion of initial appointment field examinations, follow up 

field examinations, fiduciary accountings, and the misuse protocol, to include investigating misuse allegations and making misuse determinations. In addition, VA conducts recurring quality reviews of fiduciary field work to measure the accuracy of 

the work and identify error trends. VA analyzes these trends to identify training 

gaps, clarify policies and procedures, and modify the information technology requirements for the fiduciary program. 


VACREP0180 with DISTILLER
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In December 2014, VA revised its site survey protocol to ensure that Pension and 

Fiduciary Service’s site visit teams conduct comprehensive inspections of fiduciary 

hub compliance with program policies and procedures. During a site visit, the assigned team reviews the hub’s organizational structure, workload management 

plans, and performance data to determine whether the hub is appropriately using 

its resources. Prior to the visit and while on-site, the site visit team reviews processing operations and station controls for data integrity, quality and training. During this fiscal year, VA has conducted site visits at two fiduciary hubs. 

Fiduciary Misuse of VA Funds 

VA has implemented several procedures to enhance its prevention and identification of misuse of beneficiary funds. First, as noted above, VA requires fiduciaries 

to submit detailed financial documents, including bank records, with their annual 

accountings. This policy allows VA to detect inappropriate movement of funds for 

the purpose of concealing misuse. VA also centralized allegations of misuse within 

its National Call Centers, developed mandatory misuse training for all fiduciary personnel, and modified its new information technology system to add internal controls 

for the misuse work process and reporting of misuse data and protocol timeliness. 

VA is also developing procedures for expanding the quality assurance program for 

fiduciary work to include the tasks associated with investigating fiduciary misuse 

of beneficiary funds. 

After fiduciary hub consolidation in 2012, VA began an effort to identify and complete all pending misuse matters, including final misuse determinations, debt establishment, and benefit reissuance. Although misuse of benefits is rare in the fiduciary program, approximately one-tenth of one percent of beneficiaries are the victims of fiduciary misuse. VA recognizes that fiduciary misuse of benefits can cause 

financial hardship for beneficiaries. 

VA is aggressively pursuing recoupment of VA benefits in all cases of misuse, particularly in cases where VA is not authorized to reissue benefits. In November 2013, 

VA implemented formal procedures for creating a debt against a fiduciary who misused VA benefits, for initiating debt collection activities, and for referring debts to 

the U.S. Department of the Treasury for offset against other Federal payments, including Federal tax return refunds. If a bond was in place when a fiduciary misused 

a beneficiary’s benefits, the fiduciary hub manager will attempt to recoup benefits 

from the surety company. 

Under 38 U.S.C. § 6107, VA must reissue benefits to victims of fiduciary misuse 

when the fiduciary is not an individual, or when the fiduciary is an individual who 

manages benefits for 10 or more beneficiaries. In all other cases of fiduciary misuse, 

VA’s authority to reissue benefits is limited to cases in which VA was negligent in 

its appointment or oversight of the fiduciary. This law leaves many beneficiaries unprotected because VA-appointed fiduciaries are generally family members, friends, 

or care providers who have a one-to-one relationship with the beneficiary they serve. 

It is also arbitrary because VA must treat two beneficiaries, who have the same disability and the same inability to manage their financial affairs differently depending 

upon the fiduciary that it appoints. 

Under current law, if one beneficiary has an individual fiduciary who manages 

benefits for nine other beneficiaries, that beneficiary has the added protection of 

VA’s reissuance of benefits upon a VA finding of fiduciary misuse. If the other beneficiary has a fiduciary who manages benefits for eight other beneficiaries, that beneficiary has the added protection of reissuance of benefits only if VA determines that 

it was negligent. Absent negligence in these cases, the Government’s ability to make 

the beneficiary whole is limited to court-ordered restitution in a criminal or civil action or recovery under a surety bond that the fiduciary purchased. To address this 

problem, VA submitted a legislative proposal during the 2016 budget process that 

would authorize VA to automatically reissue misused benefits in all cases of fiduciary misuse. 

CHALLENGES

Despite VA’s successful implementation of many program enhancements over the 

past few years, challenges remain. As noted previously, the VA’s fiduciary program 

is experiencing extraordinary growth. The program’s current staffing levels are inadequate to further strengthen oversight of beneficiaries, resulting in an increasing 

workload of initial appointment and follow up field examinations. In 2014, fiduciary 

program personnel conducted almost 85,000 field examinations, however, almost 

42,000 field examinations remained pending at the end of the fiscal year. From 2011 

to 2014, the field employee allocation increased 22 percent (703 to 855 employees); 

however, staffing has not kept pace with program growth. VA completed 19 percent 

more field examinations in 2014 than in 2012, but the number of field examinations 

received increased by 32 percent during the same period. Even though fiduciary 


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hubs are completing more work through increased staffing and improved efficiency, 

the inventory of pending field examinations continues to grow. 

VA implemented a fiduciary program workload management plan at four fiduciary 

hubs to improve the timeliness of initial appointment field examinations. The national average days pending for an initial appointment field examination decreased 

to 33 days in April 2015, down from 142 days in October 2012. VA’s emphasis on 

average days pending prioritizes the oldest pending initial appointment field examination. As a result, VA improved the number of initial appointments pending less 

than 45 days from 34 percent in September 2012, to 83 percent in April 2015. While 

VA successfully reduced the length of time a beneficiary must wait for the appointment of a fiduciary, the average days pending for follow up field examinations increased to 244 days in April 2015, up from 199 days in October 2012. If VBA’s FY 

2016 budget request isn’t provided, beneficiary protection will be compromised by 

increased intervals between visits. 

VA is grateful for funding in 2015 to hire 50 fiduciary employees and has requested funding in the 2016 budget process to hire another 85 fiduciary employees. 

Conclusion 

In conclusion, I want to affirm VA’s commitment to serve and protect our most 

vulnerable population of Veterans and other beneficiaries. VA has significantly improved the fiduciary program to ensure that these beneficiaries receive the benefits 

and services they have earned. The interest in our program expressed by this Committee reflects the importance of this effort. I assure you that VA is committed to 

taking all steps necessary to ensure we fulfill our obligation to protect the beneficiaries in this program. 

Mr. Chairman, this concludes my prepared remarks. I would be happy to address 

any questions or comments regarding my testimony today. 

f 

STATEMENT OF GARY K. ABE 

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity 

to discuss the work of the Office of Inspector General (OIG) related to the Department of Veterans Affairs (VA) Fiduciary Program and how the Veterans Benefits 

Administration (VBA) can better protect veterans, who, because of injury, disease, 

or the infirmities of age, are in need of assistance managing their financial affairs. 

I am accompanied today by Mr. Quentin Aucoin, Assistant Inspector General for Investigations, and Mr. Timothy Crowe, Director, OIG Bay Pines Audit Operations Division. 


VACREP0180 with DISTILLER
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Background 

VBA can determine a veteran or other beneficiary is unable to manage his or her 

financial affairs based on receipt of medical documentation or if a court of competent 

jurisdiction has already made this determination. VA will then appoint a fiduciary, 

either an individual or entity, and with the authority contained in Section 5502(a)(1) 

of Title 38, United States Code, Payments to and Supervision of Fiduciaries, will 

disburse VA benefits on behalf of the beneficiary for the use and benefit of the beneficiary. 

Fiduciaries appointed by VBA may be the spouse of a veteran; the chief officer 

of an institution in which a veteran is receiving care; a legal custodian who is the 

person or entity caring for the beneficiary and his or her estate; or another responsible person. Payments may also be made to a state court-appointed fiduciary, to 

a fiduciary whose duties and authority are established by Federal statute, or by 

means of supervised direct payment to an adult beneficiary. In all cases, VBA maintains oversight responsibility to ensure that the VA-derived income and estates of 

incompetent beneficiaries are used solely for the care, support, welfare, and needs 

of those beneficiaries. The Fiduciary Program reported overseeing more than 

147,000 beneficiaries who received approximately $2.6 billion in VA benefit payments in fiscal year (FY) 2013, which represents the most recent program data reported by VBA. In response to a recent OIG report, VBA stated that the program 

supervised almost 173,000 beneficiaries in FY 2014. 

Since our 2010 report, Audit of the Fiduciary Program’s Effectiveness in Addressing Potential Misuse of Beneficiary Funds (March 31, 2010), VBA has made significant changes to the structure of the Fiduciary Program. In April 2011, VBA established the Pension and Fiduciary Service, in part, to strengthen oversight of VA-appointed fiduciaries. In March 2012, VBA completed consolidation of Fiduciary Program operations from 56 VA Regional Offices (VAROs) to 6 Fiduciary Hubs and the 

Fiduciary Activity at the VARO in Manila, Philippines. VA’s FY 2014 Budget Submission stated the consolidation was intended to improve operational efficiencies. 

The Hubs are located in Indianapolis, Indiana; Louisville, Kentucky; Lincoln, Nebraska; Columbia, South Carolina; Salt Lake City, Utah; and Milwaukee, Wisconsin. 

OIG Oversight of the Fiduciary Program 

The OIG has an aggressive and comprehensive program in place to provide oversight of VBA’s Fiduciary Program through a combination of audits, recurring inspections of VARO operations, review of allegations received by the OIG Hotline, and 

criminal investigations. OIG audit and evaluation reports, Hotline reviews, and inspection reports conducted by our Benefits Inspection Division since FY 2009 have 

consistently identified the vulnerability of VA-derived beneficiary estates to fraud, 

as well as opportunities for VBA to provide more consistent and effective oversight 

of the Fiduciary Program. 

Investigative Work 

The OIG Office of Investigations through its criminal investigation activities, aggressively combats fiduciary fraud by pursing prosecution and court-ordered restitution against those individuals diverting funds intended for VA beneficiaries and 

highlights Fiduciary Program vulnerabilities that are exploited by unscrupulous individuals at the expense of VA beneficiaries. From April 1, 2010, to March 31, 2015, 

the OIG conducted 216 investigations involving fiduciary fraud and arrested 94 fiduciaries and/or associates. For example: 

• In Houston, Texas, an attorney and his wife, who served as his legal assistant, were sentenced to 46 months’ incarceration, 3 years’ supervised release, 

and ordered to pay restitution of $2,352,107 to VA and $282,112 to the Internal 

Revenue Service. The OIG investigation revealed that the attorney, who served 

as a court-appointed guardian and Federal fiduciary for 54 veterans, and his 

wife conspired to steal $2,352,107 from veterans’ fiduciary bank accounts and 

failed to report the stolen income on their Federal tax returns. Prior to becoming a guardian for veteran clients, the attorney was employed by the VA’s Regional Counsel in Houston, Texas. His duties were consistent with duties now 

performed by VBA Field Examiners. After a reorganization of VA legal services, 

he was assigned to the Fiduciary Section of VARO Houston. He retired from his 

position and opened a private law practice. 

• In Memphis, Tennessee, a former VBA Field Examiner and a former courtappointed fiduciary were sentenced to 3 and 2 years in prison, respectively. 

They were also ordered to pay $889,626.87 in restitution to VA. An OIG and 

FBI investigation revealed that from 1999 until October 2008, both individuals 

conspired to alter annual accountings to conceal the theft of $889,626.87 from 

13 veterans. The investigation also revealed that the former Field Examiner 


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suggested to the fiduciary that they take money from the guardianship accounts. 

• In Tuskegee, Alabama, an administrative assistant for an attorney appointed 

as a fiduciary for several VA beneficiaries was sentenced to imprisonment for 

33 months followed by 60 months of supervised probation. She was ordered to 

make restitution in the amount of $681,965. The OIG investigation revealed 

that the administrative assistant devised a scheme to embezzle $681,965 from 

25 beneficiary accounts. 

• In Lexington, Kentucky, an attorney serving as a VA fiduciary for a VA beneficiary was sentenced to 41 months’ imprisonment, 36 months’ supervised release, ordered to pay $460,679 in restitution to VA, as well as $176,246 restitution to the Social Security Administration. The investigation revealed that the 

fiduciary embezzled VA and Social Security benefits from a veteran. Following 

the conviction in this case, in April 2013, the OIG issued a management implication notice to the former VBA Deputy Undersecretary for Field Operations, 

detailing Fiduciary Program weaknesses exploited by this defendant. 

• In Newfields, New Hampshire, the daughter of an incompetent veteran serving as the fiduciary was sentenced to 366 days’ incarceration, followed by 24 

months’ supervised release. Prior to sentencing the defendant paid full restitution to VA in the amount of $251,534. The OIG investigation revealed that the 

daughter admitted to taking her father’s VA benefits and falsifying the annual 

accountings and supporting bank records to conceal her illegal activities from 

VA. 

• In Pearl, Mississippi, a former local prosecutor was sentenced to 120 months 

of incarceration followed by 60 months of supervised probation. The sentence 

also included a restitution order of $198,669. The OIG investigation revealed 

that while serving as the appointed fiduciary for five veterans, the fiduciary embezzled funds from accounts under his care as legal custodian. 

• In Mansfield, Massachusetts, an attorney who was the VA-appointed fiduciary for his disabled veteran brother-in-law was sentenced to 6 months’ home 

confinement, 5 years of supervised probation, and ordered to pay restitution to 

VA in the amount of $137,493. The OIG investigation revealed that the fiduciary embezzled the VA funds from his disabled brother-in-law while serving as 

a VA-appointed fiduciary. 

• In Manchester, New Hampshire, the daughter who was the VA-appointed fiduciary of a disabled veteran was sentenced to 18 months’ imprisonment and 

24 months’ supervised probation. She was also ordered to pay restitution of 

$221,905 to VA and $22,768 to the Social Security Administration. The investigation revealed that the fiduciary depleted her father’s savings and continued 

diverting VA benefit payments for her own personal use. 

• In Greenville, Mississippi, a former VA-appointed fiduciary was sentenced to 

5 years’ supervised probation and ordered to pay VA restitution of $30,240 after 

pleading guilty to embezzlement. An OIG investigation revealed that the fiduciary failed to notify VA that a widow beneficiary had died. The fiduciary subsequently received and negotiated VA benefit checks issued after the beneficiary’s 

death and used the funds for personal expenses. 

Audit Work 

The OIG last testified about the Fiduciary Program in April 2010 shortly after 

releasing our audit report, Audit of the Fiduciary Program’s Effectiveness in Addressing Potential Misuse of Beneficiary Funds. In that report, we concluded the Fiduciary Program was inconsistent in taking timely actions to ensure VA-derived 

funds and estates of beneficiaries determined to be unable to manage their financial 

affairs were used solely for the care, support, welfare, and needs of those beneficiaries or adequately protected from diversion or misuse. Specifically, the Fiduciary 

Program was not consistently: 

• Taking effective action to obtain the fiduciary’s written accounting of his/her 

management of a beneficiary’s income and estate which had become seriously 

delinquent 

• Verifying questionable beneficiary expenditures reported by fiduciaries 

• Replacing fiduciaries when appropriate 

• Reviewing and investigating allegations of misuse of beneficiary funds by fiduciaries 

We concluded that this occurred because the Fiduciary Program lacked the elements of an effective management infrastructure to guide the program. Specifically, 

we determined that the program’s case management system had severe functional 

and data limitations that negatively affected management’s ability to support program operations. The program also lacked a staffing and workload model to guide 


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resource allocation decisions and other elements necessary to effectively monitor the 

program. In response to our report, the then Acting Under Secretary for Benefits 

indicated that VBA would undertake a series of measures in response to our report’s 

findings. 

VBA took steps to address our concerns to improve Fiduciary Program operations. 

For example, in 2014, VBA replaced the program’s inadequate case management 

system, implemented policy requiring receipts for some unbudgeted and budgeted 

expenses meeting specified thresholds, now includes misuse allegations processing 

data in the Fiduciary Program section of VBA’s Annual Benefits Report, developed 

a program staffing model for the Fiduciary Hubs, and launched a web-based portal 

providing resources to assist fiduciaries. However, work the OIG conducted recently 

concerning some of the Fiduciary Program’s most important functions indicates that 

VBA still faces challenges in meeting its mission of protecting some of VA’s most 

vulnerable constituencies. 

Review of Alleged Mismanagement at VBA’s Eastern Area Fiduciary Hub 

In May 2013, the OIG Hotline received allegations of mismanagement at the Eastern Area Fiduciary Hub (EAFH) located in Indianapolis, Indiana. This Hub is responsible for all beneficiaries in VBA’s Eastern Area, which spans 14 states and encompasses fiduciary activities of 16 VA Regional Offices. We substantiated the three 

allegations in our report, Review of Alleged Mismanagement at VBA’s Eastern Area 

Fiduciary Hub (May 28, 2014), which concerned processing allegations of misuse of 

beneficiary funds, processing in-coming correspondence, and completing field examinations timely. 

Hub staff did not timely complete various steps required by VBA policy after receipt of allegations of misuse of beneficiary funds. We analyzed 214 merit reviews 

and 23 investigations to determine compliance with VBA timeliness standards and 

policies. Additionally, in those cases where VBA determined that misuse of beneficiary funds had occurred, we followed up with EAFH and Pension and Fiduciary 

Service to determine whether misused funds had been repaid by the fiduciary and 

reissued to the beneficiary. We found the following: 

• The Hub did not timely review and investigate misuse of beneficiary fund allegations. Of the 214 merit reviews of allegations of fiduciary misuse of funds 

initiated by the Hub, 190 (89 percent) were not completed within 14 days of receipt, as required by program policy. It took Hub staff an average of 162 days 

to review the 190 allegations for merit, which includes 87 reviews that were not 

completed as of July 2013, the time we completed onsite field work at the Hub. 

We also found the Hub EAFH had not processed and completed 17 of 23 fiduciary misuse of funds investigations (74 percent) within 45 days of the completed merit review, as required. The average time to complete the 17 investigations was 174 days, which included 5 investigations that were not completed as 

of July 2013. 

• We also determined the Hub made 12 determinations concluding fiduciaries 

misused approximately $944,000 of beneficiary funds. However, required actions 

in response to identifying misuse of funds, such as replacing the fiduciary or 

requesting repayment from former fiduciaries, were not completed or completed 

timely by EAFH. For example, it took the Hub an average of 98 days from the 

date the misuse allegation was received to replace 5 of the 12 fiduciaries, ranging from 72–175 days. For the remaining seven determinations, three fiduciaries were replaced timely, three beneficiaries passed away prior to the Hub 

receiving the allegation, and one was an allegation against a previously replaced fiduciary. 

• Internal reviews by Pension and Fiduciary Service staff to determine if VBA 

was negligent in its oversight of the fiduciaries in instances where misuse of 

funds occurred were not consistently conducted as required. 

We also substantiated the allegation that the Hub had a large backlog of pending 

field examinations by identifying more than 11,000 (69 percent) of 16,000 pending 

field examinations that exceeded VBA timeliness standards. Field examinations, 

which consist of in-person visits by program staff, are a critical tool for VBA to assess the competency and welfare of beneficiaries who are unable to manage their 

financial affairs. Initial Appointment (IA) field examinations assess the competency 

and welfare of the beneficiary and, if needed, the appointment of a fiduciary to receive VA benefits. Subsequent to an IA field examination, program staff conduct Fiduciary-Beneficiary 

Fiduciary-Beneficiary field examinations to periodically reassess the welfare of the 

beneficiary and the continued suitability of the fiduciary. As a result of a large backlog of field examinations not being completed timely by VBA, the general health and 

well-being of beneficiaries are placed at increased and unnecessary risk. 


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We also identified more than 3,200 pieces of mail that had yet to be processed 

and exceeded EAFH’s timeliness standards, some of which were time-critical. VBA 

policy requires Fiduciary Program staff to review all correspondence in conjunction 

with the fiduciary folder and provide a response, if necessary, generally within 10 

workdays of receipt. The Hub had a local goal of processing incoming mail within 

5 days of receipt. Delays in processing the 3,200 pieces of mail ranged from 11 to 

486 workdays, with an average delay of 30 workdays. Mail not processed timely included allegations of misuse of beneficiary funds, competency restoration requests, 

and retroactive payment requests. By not effectively managing incoming mail, those 

receiving VA benefits may be affected. 

In response to our report, VBA stated that the conditions we identified concerning 

processing allegations of misuse, field examination backlogs, and unprocessed incoming correspondence occurred primarily due to an increased workload and insufficient staff when consolidation of VA regional office Fiduciary Program operations 

into the EAFH were completed. 


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Audit of the Fiduciary Program’s Management of Field Examinations 

Following the results of our work at the Indianapolis Fiduciary Hub, we conducted work nationwide concerning the Fiduciary Program’s field examination function. We issued our final report, Audit of the Fiduciary Program’s Management of 

Field Examinations on June 1, 2015. Our work was conducted at four of the remaining five Fiduciary Hubs: Columbia, South Carolina; Salt Lake City, Utah; Louisville, 

Kentucky; and Lincoln, Nebraska. 

We concluded that VBA faces a large and growing backlog of field examinations. 

Specifically, we determined VBA did not meet timeliness standards for about 45,500 

(42 percent) of approximately 109,000 pending and completed field examinations 

during calendar year (CY) 2013, of which 18,100 (40 percent) were still pending and 

not completed as of December 31, 2014. We followed-up by examining reported program performance for the first 9 months of CY 2014 and determined that field examinations not completed and already exceeding timeliness standards increased approximately 15 percent from about 19,000 in January 2014 to approximately 21,900 

in September 2014. 

This occurred because Field Examiner staffing did not keep pace with the growth 

in the beneficiary population, VBA did not staff the Hubs according to their staffing 

plan developed in conjunction with Fiduciary Program consolidation to the six Hubs, 

and did not use all relevant performance measures for the field examination function. The 2011 VBA staffing plan set a target of 1 Field Examiner for every 325 

beneficiaries. However, our analysis of VBA staffing reports for the period of January 2013 through December 2013 showed the Fiduciary Program had an average of 

1 Field Examiner for every 363 beneficiaries. The situation did not improve during 

the first 9 months of 2014. As of September 30, 2014, VBA employed 1 Field Examiner for every 386 beneficiaries supervised under the Fiduciary Program. While 

Field Examiner staffing has generally increased, the Fiduciary Program did not 

meet its staffing goal for Field Examiners in part due to the substantial growth in 

the beneficiary population. Specifically, although the beneficiary population increased by 10 percent from January 2013 through December 2013, the number of 

field examiners increased only 2 percent during this same period. 

As a result, untimely field examinations placed approximately $360.7 million in 

benefit payments and $487.6 million in estate values at increased risk. In addition, 

we determined that VBA did not schedule required field examinations for a projected 1,800 beneficiaries in CY 2013. Lapses in field examination scheduling occurred because of inadequate management oversight to ensure required field examinations were scheduled. As a result, we project the Fiduciary Program did not 

schedule field examinations for about 1,800 beneficiaries, placing beneficiaries’ wellbeing and approximately $36.1 million in benefit payments at increased risk in CY 

2013. 

We recommended the Under Secretary for Benefits implement a plan to meet 

timeliness standards, expand program performance measures, improve controls to 

identify unscheduled field examinations and enhance case management system 

functionality. The Under Secretary concurred with our recommendations and provided acceptable plans to complete all corrective actions. 

Audit of the Fiduciary Program’s Processing of Misuse Allegations 

We recently provided VBA with a draft report on the extent to which VBA protects the VA-derived income and estates of beneficiaries who are unable to manage 

their financial affairs when misuse of beneficiary funds is alleged. This work was 

a direct result of our work at the Hub located at Indianapolis, Indiana, and our follow-up work in the management of field examinations. 

Section 6106(b) of Title 38, United States Code, Misuse of Benefits by Fiduciaries, 

defines misuse as any case where a fiduciary receives payment under the laws administered by the VA Secretary, for the use and benefit of a beneficiary and uses 

any part of the payment for other than for the use and benefit of a beneficiary or 

the beneficiary’s dependents. VBA is made aware of allegations or indications of 

misuse of funds by fiduciaries through multiple sources, such as the beneficiaries 

themselves, third parties, or VBA employees while performing duties. Once misuse 

is alleged or indicators of misuse exist, program policy requires staff take specific 

actions to review, investigate, and determine misuse within specified timeliness 

standards. 

If VBA does not timely complete misuse actions, beneficiary funds are at increased risk of misuse. We projected VBA did not timely complete required misuse 

actions to ensure the protection of 758 beneficiaries’ Vader estates valued at about 

$45.2 million. VBA also did not restore approximately $2.1 million of misused funds 

to beneficiaries. Additionally, unless VBA improves the timeliness of actions in response to allegations and indications of misuse, we project VBA may not adequately 


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1 CFR Title 38, Chapter 1, Part 3, Subpart A, Section 3.353. 

2The American Legion Testimony: ‘‘VA Fiduciary Program’’: February 9, 2012. 

3http://www.usmedicine.com/agencies/department-of-veterans-affairs/senator-pushes-for-expedited-reform-of-controversial-va-fiduciary-program/. 

protect annual benefit payments to beneficiaries valued at approximately $16 million, or $80 million during Cyst 2014 through 2018. 

Conclusion 

Despite some of the significant changes to structure, oversight and operation of 

the Fiduciary Program since our 2010 audit, significant challenges remain. The 

OIG’s most recent work demonstrates that conditions that put beneficiaries and 

their VA-derived estates at unnecessary risk persist. Past and recent cases have uncovered unscrupulous fiduciaries who have misappropriated tens of thousands to 

even millions of dollars from the accounts of unsuspecting VA beneficiaries under 

the supervision of the Fiduciary Program. This type of theft can only be stopped by 

aggressive and consistent oversight by the Fiduciary Program. 

As the veteran population ages, more VA beneficiaries will likely require the appointment of a fiduciary to assist them in managing the monetary benefits provided 

by VA. In order to meet these challenges, VBA needs to revisit its staffing model 

and resource allocation decisions for the Fiduciary Program, as well as the programs’ work processes and tools. Without more effective controls, including more 

consistently and timely completion of some of the Program’s most important functions, unacceptable risks to the general well-being and VA benefits of some of VA’s 

most vulnerable beneficiaries will remain. 

Mr. Chairman, this concludes my statement and we would be happy to answer 

any questions that you or Members of the Committee may have. 

STATEMENT OF ZACHARY HEARN 

Chairman Abraham, Ranking Member Titus, and distinguished members of the 

subcommittee, on behalf of National Commander, Michael Helm, and the more than 

2 million members of The American Legion, we thank you for the opportunity to 

testify regarding The American Legion’s positions on the Department of Veterans 

Affairs Fiduciary programs. 

An unfortunate aspect of military service is that some service members and veterans develop mental health illnesses, and in some cases physical injuries that can 

diminish their capacity to manage financial affairs on a day to day basis. Whether 

a veteran suffers from posttraumatic stress disorder (PTSD) or develops depression 

secondarily to a previously service connected conditions, the nature of these disorders can impact multiple areas of their, and their family’s daily life. 

With severe conditions such as TBI or PTSD, veterans can struggle, either temporarily or over a long term, to perform certain tasks associated with their personal 

finances, and sometimes suffer diminished mental health capacity as well. Due to 

this diminished capacity, veterans may be deemed incompetent in accordance with 

the Code Federal Regulations (C.F.R.), which defines mental incompetency as one 

who because of injury or disease lacks the mental capacity to contract or to manage 

their own affairs to include disbursement of funds without limitation.1 If a veteran 

is deemed incompetent to handle his/her financial affairs, the Department of Veterans Affairs (VA) appoints a fiduciary. A fiduciary is an individual or entity that 

has been appointed to receive funds on behalf of a beneficiary for the use and benefit of the beneficiary and their dependents. The appointed fiduciary is allowed to 

charge a fee up to four percent of the VA benefits that are paid to the beneficiary. 

If the beneficiary is married the spouse may receive payments on behalf of the veteran. A selection of a fiduciary involves an analysis of current credit reports, disclosure of criminal background, and consideration of the opinion of character witnesses.2

VA’s fiduciary program is designed to benefit the veteran and their family. The 

American Legion recognizes that veterans who are suffering from mentally debilitating injuries may need the assistance of fiduciaries to manage their VA benefits 

as well as their personal finances. Unfortunately, the program can lead to appointed 

fiduciaries who may take advantage of veterans and their benefits. 

In recent years, allegations of fraud within the fiduciary program have been reported. After conducting an investigation in June 2012, the Hearst News Service 

discovered the program had ‘‘gambling addicts, psychiatric cases, and convicted 

criminals who were among the thieves who have been handed control of disabled 

veterans’ finances’’.3 Reports of these allegations do little to breed confidence in a 

program designed to protect some of our nation’s most vulnerable veterans. 


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4 Resolution No. 120: Discontinue Department of Veterans Affairs Regional Pension Maintenance Centers – AUG 2003. 

Beginning in May 2014, VA switched from the Fiduciary-Beneficiary System 

(FBS) to the new Beneficiary and Fiduciary Field System (BFFS) which is a new 

computer-based processing system that enables fiduciary employees to work more 

effectively and efficiently. The new system maintains larger quantities of data, 

tracks fiduciary information, retains information on previous fiduciaries and is a 

substantially more robust and powerful tracking system. 

Recommendations for Improvement: 

A chief concern of The American Legion is the location of the fiduciary branches. 

These locations are often separate from the VA regional office (VARO). For instance, 

the fiduciary location for the Muskogee, Oklahoma VARO is located in Lincoln, Nebraska. For the Denver VARO, its fiduciary hub is in Salt Lake City, Utah. Similar 

to other VA administrative processes, there is a backlog in adjudicating competency. 

This backlog proves frustrating to veterans as they complete their portion of the 

process, submit the medical evidence to rebut the incompetency claims, and then it 

languishes awaiting adjudication. 

The centralization of these processes is not unique to the fiduciary program, and 

The American Legion has expressed concerns about the impact of centralization of 

Veterans Benefits Administration VBA) programs dating back to 2003 with opposition to the consolidation of pension operations into Regional Pension Maintenance 

Centers.4 While VBA has continued to justify the centralized locations as a way to 

reduce the backlog of benefits processes, backlogs in adjudication continue even at 

the central locations, and communication between service officer advocates and VBA 

employees that could resolve common sense problems and expedite service is severely hampered. The centralization of programs has not provided the benefit intended, and therefore The American Legion believes more programs should be 

brought back into VAROs where direct communication can help facilitate an environment where obstacles are more rapidly overcome. 

The American Legion has over 2,500 accredited representatives located throughout the country who represented more than 716,000 veterans in 2014 alone, and 

continues to advise and advocate for veterans across the United States. While providing advocacy to veterans, The American Legion is able to gather feedback regarding the implementation and effectiveness of VA programs. 

According to our research: 

• The program has had problems that have needed to be addressed from its 

onset, our Service Offers reported an experience where a veteran was labeled 

incompetent because he indicated that he does not pay his bills; however, after 

further review, it was determined that in the division of household responsibilities, the veteran’s spouse held that responsibility. 

• Another incident included a veteran who indicated that he wanted his wife 

to serve as his fiduciary, and VA denied the request stating that she was unable 

to properly take care of the veteran. To find a veteran incompetent, VA needs 

a medical examination to support the finding; in the case of this veteran’s wife, 

no medical examination was afforded, and a VA field examiner awarded the fiduciary to an individual unknown to the veteran or his wife which cost the veteran up to four percent of his benefits annually. 

• Once an individual is determined to be incompetent a letter is sent to the vet 

proposing incompetency. This letter allows 60 days for due process which delays 

the awarding of the back pay amounts due the veteran. Unfortunately, because 

of the immediate financial needs of these vulnerable veterans, some representatives are waiving the due process to get the fiduciary appointment moving but 

these letters of waiver are frequently ignored, and the 60 day window remains. 

This delays approving the appointed representative and consequently, the back 

pay. 

• In a number of cases, this money is needed to pay owed amounts to nursing 

homes and private caregivers. Delaying this decision to award the back pay is 

placing undue hardship on facilities and families and, if continued, will lead to 

situations where nursing facilities or care facilities do not want to take on veteran patients if they require fiduciaries because of the VA filing delays. There 

often can be a delay of up to six months to get awarded amounts. 

• In a conversation with the Salt Lake City fiduciary hub last week, one representative heard that the assigning of the fiduciary is almost four months in 

duration. If we add four months to the claim adjudication, which can take four 

to six months at a minimum, we are now looking at least 10 months to get 

needed money to families. Nursing homes are attempting to have families pay 


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5http://www.benefits.va.gov/fiduciary/. 

6http://www.benefits.va.gov/fiduciary/beneficiary.asp. 

7 Resolution No. 92: Second Amendment-AUG 2014. 

for the care of their loved ones up front and this can cause a co-mingling of 

funds and can leave the family responsible for any owed money. The American 

Legion does not recommend that a family pay anything for the care up front, 

as this can become a potential legal issue for the family. 

• The service officers of The American Legion have also seen a number of 

claims that are not being expedited as they should be, based on the age of the 

veteran. When a veteran is above a certain age or has qualifying severe medical 

conditions, or is suffering unique and imminent financial hardships, the veteran 

is eligible to have their claim processed under an expedited procedure. However, 

American Legion service officers routinely remind VA that the client is entitled 

to this expedited treatment because it doesn’t happen automatically. With VA’s 

advanced digital and electronic capabilities and the electronic claims process almost fully implemented, the age factor should be identified by an automated 

process, but in addition, there should be better procedures built into the process 

to identify these factors and help the veteran. 

Many of these concerns could be overcome with more direct contact between advocates such as service officers and the VBA employees who process the claims, the 

centralization process inhibits this communication and leads to a disjointed process 

that ultimately does not serve the veterans or their families. 

Beyond the implementation of the program throughout the nation, The American 

Legion has concerns regarding how being determined incompetent affects the veteran. According to VA’s definition, veterans are defined as incompetent ‘‘due to injury, disease, or due to age, are unable to manage their financial affairs’’.5 Unfortunately, being deemed incompetent to manage financial affairs can have further consequences, as veterans deemed unable to manage finances are required to relinquish 

their weapons and are prohibited from purchasing weapons.6 Utilizing this logic, 

any American that files bankruptcy due to financial mismanagement should be subjected to the same recourse from the federal government. The fact that veterans are 

the only group in the United States subject to this scrutiny and can have their constitutional rights infringed without a more detailed and considered due process, is 

unfair and unjust. 

The American Legion is a strong supporter of the Second Amendment; by resolution adopted at our National Convention in August 2014, we urge ‘‘our nation’s lawmakers to recognize, as part of their oaths of office, that the Second Amendment 

guarantees law-abiding citizens the right to keep and bear the arms of their choice, 

as do the millions of American veterans who have fought, and continue to fight, to 

preserve those rights, hereby advise the Congress of the United States and the Executive Department to cease and desist any and all efforts to restrict these rights 

by any legislation or order.’’ 7

If veterans are made to fear that by asking for needed help they may see their 

rights taken away, it may prevent those who need help from seeking it, and place 

the veteran in a bad position. Reform of this policy that automatically places veterans requiring a fiduciary on a list to remove their Second Amendment rights is 

critical to ensuring veterans who have need of the fiduciary program need not fear 

seeking the help they require to properly manage their financial and family affairs. 

Conclusion 

The American Legion recognizes the importance of a successful fiduciary program. 

With an aging veteran population and veterans returning after serving years in 

combat where the signature wounds of TBI and PTSD can impact cognitive functioning, it is necessary to have a robust and effective fiduciary program. The American Legion believes, based on our research gathered from the experiences of thousands of service officers in the field, that the system can be improved by returning 

the fiduciary programs to direct contact in the VAROs, and by reforming the automatic reporting mechanism that can needlessly strip veterans of their constitutional 

right to bear arms for seeking help with financial matters. 

As always, The American Legion thanks this subcommittee for the opportunity to 

explain the position of the over 2 million veteran members of our organization. For 

additional information regarding this testimony, please contact Mr. Warren J. Goldstein at The American Legion’s Legislative Division at (202) 861–2700 or 

wgoldstein@legion.org. 


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