Audit of

VA Medical Center Use of Intergovernmental

Personnel Act Assignments

Report No. 7R8-A19-044

Date: February 27, 1997

Office of Inspector General

Washington DC 20420

VHA needs additional

policy guidance to help ensure the

appropriate use of IPA assignments.
Memorandum to the Under Secretary for Health (10)

Audit of VA Medical Center Use of Intergovernmental

Personnel Act Assignments

1. The Office of Inspector General performed an audit to evaluate VA medical center (VAMC)

use of Intergovernmental Personnel Act assignments (IPAs). This audit was conducted as part

of our ongoing review of affiliation issues. The purpose of IPAs is to facilitate

Federal-State-local cooperation through the temporary assignment of skilled personnel. Within

VA, the Veterans Health Administration (VHA) has made the most extensive use of IPAs,

primarily for assigning medical school employees to work on research projects. In recent years

VAMCs have increased their use of IPAs. Using the best available information, we estimate that

in Fiscal Year 1996 VAMCs had more than 1,000 IPAs with total costs of at least $34.7 million.

2. We initiated our audit by reviewing the use of IPAs at one VAMC which was the largest

known user of IPAs nationwide. We found that the VAMC’s use of IPAs for supporting

research activities met Federal policy requirements. All of these IPAs were for temporary

assignments to work on VA-approved research projects, and the VAMC’s Research Service had

adequate controls to ensure that IPA assignees worked the required time and that IPA payments

were correct. However, IPAs were inappropriately used to obtain clinical services and for

administrative and support positions. The VAMC’s use of IPAs to procure medical specialist

services did not meet Federal policy requirements and did not provide the procurement integrity

and pricing protections built into VHA’s contracting and sharing policies and procedures. As a

result, the VAMC paid more for clinical services obtained through IPAs than it would have paid

using properly negotiated and administered contracts or sharing agreements. In addition, the

VAMC inappropriately used IPAs as a means of filling administrative and support positions

during a personnel ceiling reduction and hiring freeze.

3. To confirm that the use of IPAs to obtain clinical services was a national issue and not

isolated to one VAMC, we performed further reviews of IPA documents obtained from two

other VAMCs that were also large users of IPAs. These two VAMCs had also used IPAs to

inappropriately obtain clinical services.

4. In response to our initial findings, VHA top management agreed that we had identified a

national issue and that no further detailed audit work was necessary. In view of VHA top

management’s agreement to take corrective action, we ended the planned audit. VHA top

management took action to remind VAMCs of the importance of complying with IPA

regulations. VHA management also required the VAMCs reviewed to discontinue their use of
ii

clinical IPAs and expressed agreement with our view that VAMCs needed more detailed policy

guidance on the use of IPAs. We recommended that this guidance be developed to help prevent

misinterpretation of the intent of the IPA authority and the purpose of IPA assignments. We

suggested that the new guidance should largely restrict the use of IPAs to their traditional

purpose of supporting VA research activities. Most importantly, the new guidance should

specify that IPA agreements may not be used to procure clinical services that would normally be

obtained through staff appointments, scarce medical specialist (SMS) contracts, sharing

agreements, or other recognized methods of obtaining these services.

5. The Under Secretary for Health concurred with the audit recommendation and provided an

acceptable implementation plan. We consider all audit issues resolved and we will follow up on

the completion of planned corrective actions.

[Signed]

MICHAEL G. SULLIVAN

Assistant Inspector General

for Auditing
Table of Contents

Page

 Memorandum to the Under Secretary for Health (10)............................................ i

Results and Recommendation.......................................................................................... 1

Additional Policy Guidance Could Ensure the Appropriate

Use of IPA Assignments................................................................................................ 1

Conclusion..................................................................................................................... 6

Recommendation ........................................................................................................... 7

Appendices

1. Background ........................................................................................................... 8

2. Objectives, Scope, and Methodology ..................................................................... 12

3. Details of Audit...................................................................................................... 14

4. Monetary Benefits in Accordance with IG Act Amendments.................................. 25

5. Under Secretary for Health Comments................................................................... 26

6. Final Report Distribution........................................................................................ 28
1

Results and Recommendation

Additional Policy Guidance Could Ensure the Appropriate

Use of IPA Assignments

In recent years VA medical centers (VAMCs) have increased their use of Intergovernmental

Personnel Act assignments (IPAs). Some VAMCs have used IPAs for purposes not intended by

the Act. Our review at one VAMC found that IPAs used to support research activities met

policy requirements and were properly administered. However, IPAs used to obtain clinical

services did not meet requirements, and the VAMC did not have adequate controls to prevent

overpayments on these IPAs. In addition, the VAMC inappropriately used IPAs as a means of

circumventing personnel ceiling limitations in the hiring of administrative and support staff.

VHA top management has taken action to remind VAMCs about IPA regulations and has

agreed that additional policy guidance is needed to ensure the appropriate use of IPAs.

VAMCs Have Increased Their Use of IPAs

Purpose of IPA Assignments. The Intergovernmental Personnel Act of 1970 authorized the

temporary assignment of personnel between the Federal Government and State or local

governments, institutions of higher learning, and other eligible institutions. Such assignments

are commonly called “intergovernmental mobility assignments,” “IPA assignments,” or simply

“IPAs.” The intended purpose of IPAs is to facilitate Federal-State-local cooperation through

the temporary assignment of skilled personnel. Within VA, VHA has made the most extensive

use of IPAs, primarily for assigning medical school employees to work on VA research projects.

The Federal Personnel Manual (FPM) specifies four objectives for IPAs: (1) strengthening the

management capabilities of Federal agencies and participating non-Federal institutions; (2)

assisting the transfer and use of new technology and approaches to solving governmental

problems; (3) serving as a means of involving non-Federal officials in developing and

implementing Federal programs; and (4) providing developmental experience to enhance the job

performance of IPA assignees.1

Increase in VAMC Use of IPAs. Because there is no requirement to maintain centralized data

on IPAs, the precise number of IPAs used by VAMCs is unknown. However, it appears that the

number has increased significantly in recent years. Based on the best available information, the

number of IPAs increased from 33 in Fiscal Year (FY) 1984, to 200 by FY 1988, to more than

1,000 in FY 1996. The only available record of currently active IPAs is an informal VHA list

which showed that as of February 1996, 57 VAMCs reported having a total of 1,010 IPAs with

 

1

 In December 1993, in response to a National Performance Review recommendation, the Office of Personnel

Management decided to “sunset” FPM Chapter 334, which covered IPAs. However, the governing IPA laws and

regulations are still in effect, and the FPM is still the best available guidance on the use of IPAs.
2

a total cost of $34.7 million. However, VHA officials recognized that this list was not accurate,

and our audit confirmed that many active IPAs were not recorded on the list.

Because of the increase in the use of IPAs, we were concerned that some VAMCs might not

understand IPA requirements and might be inappropriately using IPAs to obtain specialized

medical services, to avoid physician timekeeping requirements, or to circumvent staff ceiling

limitations. We discussed these concerns with the Under Secretary for Health, and he agreed

that we should perform an audit to determine if VHA needed better policy guidance on IPAs.

Some VAMCs Have Misinterpreted the Intent of the IPA Program

We selected a VAMC that was the largest known user of IPAs. After completing this review,

we discussed the results with VHA top management. They concluded that our findings

demonstrated the need for better guidance nationwide on IPAs and indicated that VHA would

take action on this issue.

As of January 1, 1996, the VAMC we reviewed had a total of 77 IPAs to obtain the services of

employees of non-Federal institutions.2 The total annual cost of these IPAs was about $5.13

million. The 77 IPAs fell into three categories: 21 for research activities; 40 for clinical

services; and 16 for administrative and support positions. Most of the research and clinical IPA

assignees were employees of the affiliated medical school. The administrative and support IPA

agreements were with the VAMC’s non-profit Research Corporation and with an associated

hospital. Under all the agreements the VAMC made monthly payments to the participating

institutions as reimbursement for the IPA employees’ salaries and benefits.

We reviewed a judgment sample of 40 of the 77 IPAs (12 research, 18 clinical, and 10

administrative and support). The total cost of the 40 IPAs in our sample was $2.81 million, or

54.8 percent of the $5.13 million cost of all 77 IPAs. Our review covered the 4-month period

January 1, 1996, through April 30, 1996. We focused on two questions: (1) Did the VAMC

use IPAs as intended by Federal Regulations and VA policy? and (2) Did the VAMC have

controls to ensure that IPAs were properly administered and that payments were correct?

Research IPAs Were Appropriately Used. We found that the VAMC appropriately used

IPAs to support research activities. All of the IPA assignees were skilled, career employees,

such as research scientists and laboratory technicians. All of the IPAs were used for temporary

assignments to work on VA-approved research projects, and the VAMC’s Research Service had

adequate controls to ensure that IPA employees worked the required time and that IPA

payments were correct.

 

2

 In addition to the 77 IPAs to obtain services, the VAMC had 3 IPAs to provide services. Under these IPAs the

VAMC assigned dental technicians to work at a laboratory operated by an affiliated University.
3

IPAs Were Inappropriately Used to Obtain Specialized Medical Services. The VAMC

used IPAs to procure medical specialist services that would normally be obtained by either hiring

the required specialist, contracting for the services, or establishing sharing agreements. This

practice did not provide the procurement integrity and pricing protections built into VHA’s

contracting and sharing policies and procedures. The VAMC had not established adequate

internal controls to ensure that services required under IPA agreements were received, that IPA

payments were correct, and that potential conflicts of interest were avoided. As a result, VA’s

interests and resources were not adequately protected, and the VAMC paid more for clinical

services obtained through IPAs than it would have paid using properly negotiated and

administered scarce medical specialist (SMS) contracts or other recognized methods of

procuring clinical services.

In addition to not meeting VA procurement policies, the VAMC’s use of clinical IPAs did not

meet IPA policy requirements. There were two reasons for this. First, the clinical IPAs did not

meet any of the four objectives cited by the FPM guidance (see page 1). Second, the VAMC’s

use of clinical IPAs did not meet the spirit of the FPM requirement that IPA assignments be

temporary. The VAMC used IPAs as a long-term method of obtaining services. This can be

illustrated by the neurosurgery IPAs, which the VAMC had used for 8 years, since 1988.

The Cost of Clinical IPAs Was Excessive. For 2 of the 18 clinical IPAs reviewed the VAMC

received the services specified in the agreements, and payments were correct. For the remaining

16 IPAs, the VAMC overpaid the medical school. These excessive payments fell into two

categories:

• Services Not Received. On 16 IPAs there were excessive payments made for services not

received. Under these IPAs, the VAMC paid a total of $629,149 during the 4-month review

period and should have received a total of 6,612 hours of service. The VAMC actually

received 4,524 hours (68.4 percent of the required time). The amount the VAMC should

have paid was $445,814. Therefore, the payment for services not received was $183,335, or

29.1 percent of the total amount paid.

• Payment For Substitutes. On eight IPAs excessive payments occurred because the VAMC

paid based on the IPA assignee’s salary when a lower paid substitute actually provided the

services. The excessive payment attributable to the use of substitutes was $7,504, or 1.2

percent of the total paid. (All eight of these IPAs also had excessive payments for services

not received.)

The total amount of excessive payment for the 4-month period was $190,838, or 30.3 percent of

the total payment of $629,149. If the 4-month payment were to continue for the entire year,

then the estimated excessive payment would be about $572,000. If the average excessive

payment rate found for all 18 clinical IPAs reviewed were to hold true for all 40 of the VAMC’s

clinical IPAs, then the annual excessive payment could be as much as $1.3 million.
4

The example of the neurosurgery IPA illustrates how overpayments occurred:

The IPA agreement required the neurosurgeon to provide 2 days of service per week.

During the 4-month review period this equated to 35 days. The VAMC paid the

school $40,000 for the 35 days. However, our review of workload documents and

discussions with the neurosurgeon and six substitutes found that they had actually

provided only about 13.25 days of service. Based on the 13.25 days provided, the

payment should have been $15,140. The overpayment attributable to services not

received was $24,860, or 62.1 percent of the $40,000.

The use of substitutes also resulted in an overpayment. During the 4-month period,

the substitutes provided 8.5 days of service. The VAMC paid about $17,379 for the

8.5 days (based on the IPA neurosurgeon’s medical school compensation). However,

for the six substitutes the school incurred costs of about $10,377 for the 8.5 days, so

the overpayment attributable to the use of substitutes was $7,002.

Using Contracts Would Prevent Excessive Payments. The excessive IPA payments could

have been avoided if the VAMC had used properly negotiated and administered SMS contracts

to obtain clinical services. The following three contracting requirements were particularly

relevant to the VAMC’s use of IPAs:

• Workload Analysis. SMS contracting policy requires that VAMCs analyze current and

projected workloads to determine the types and levels of services needed under SMS

contracts. The VAMC had not determined the levels of services needed under IPAs. The

lack of a workload analysis caused needed service levels to be overestimated and, in turn,

contributed to excessive payments -- that is, services were not received simply because they

were not needed.

• Cost or Pricing (C/P) Data. The payments that resulted from the use of substitutes could

have been avoided if the VAMC had obtained C/P data from the school, as is required by

SMS contracting policy. C/P data would show the costs that the school would incur in

providing the services. With this information, the contracting officer could have established

reasonable contract prices and could have adjusted contract payments based on the school’s

costs for the physicians who actually worked during any particular time period.

• Performance Monitoring. SMS contracting policy requires that the VAMC have reliable

procedures for ensuring that services are provided in accordance with the contract. The

VAMC did not have such procedures for the IPAs. This can be illustrated by the

neurosurgery IPA. Neither the neurosurgeon nor the substitutes prepared timesheets.

Instead, the Surgical Service timekeeper reviewed the surgical and attending logs. If the

logs showed any time on a given day, then the timekeeper gave credit for a full day of

service and recorded this on the IPA attendance report. This attendance report was not used

for any management purpose. The VAMC paid the school’s bill even if the report showed

that the required levels of service had not been received.
5

Sharing Agreements May Be an Alternative to SMS Contracts. The VAMC could also

have used sharing agreements to obtain some specialized services. Properly negotiated and

administered sharing agreements provide internal control protections similar to those of SMS

contracts. However, sharing agreements offer more pricing flexibility because prices can be

based on Medicare rates instead of C/P data.

As a general rule, sharing agreements are most appropriate for obtaining low-demand services

that can best be purchased on a per-procedure basis, with Medicare reimbursement rates used as

benchmarks for setting procedure prices. At the VAMC reviewed, neurosurgical services are an

example of the type of low-demand services that could be procured through sharing agreements:

During the 4-month review period, the IPA neurosurgeon and the six substitutes

performed or supervised 18 surgical procedures. The Medicare reimbursement for the

18 procedures would have been $23,240, or $16,760 less than the $40,000 the VAMC

paid under the IPA.

Use of Contracts or Sharing Agreements Would Help Avoid Conflicts of Interest. In

recent years VA has placed special emphasis on the importance of VAMC employees who are

also employees of affiliated medical schools avoiding conflicts of interest in business

relationships with the schools. In our opinion, the VAMC’s use of IPAs for procuring clinical

services presented the appearance of possible conflicts of interest and increased the risk that

actual conflicts could occur. The reason for this is that the IPAs were, in effect, contracts with

the medical school, and VAMC employees who would logically be involved in the IPA

decision-making process received remuneration from the school.

Our review found no evidence of actual violations of conflict of interest rules. However, given

the absence of controls to prevent conflicts of interest, there was a risk that these employees

could become involved in IPA decisions such as determining how many IPAs a clinical service

would use or who would be placed on IPAs. If the VAMC had used SMS contracts or sharing

agreements, there would have been less conflict of interest risk because contracting requirements

help ensure an “arms length” relationship between the VAMC and the school.

The VAMC Inappropriately Used IPAs to Avoid Personnel Ceiling Reductions. The

VAMC inappropriately used IPAs as a mechanism for filling administrative and support

positions during a personnel ceiling reduction. To accomplish this, the VAMC used the VA

Research Corporation as the non-Federal employer when, in fact, the IPA assignees did not

work for the corporation.

The FPM guidance states that IPA assignments arranged “to circumvent personnel ceilings are

contrary to the spirit and intent” of the IPA program (FPM 334, 1-2b). In FY 1993 VHA

reduced the VAMC’s personnel ceiling and imposed a hiring freeze. During the freeze the

VAMC used a total of 45 IPAs for administrative and support services.
6

In establishing these IPAs, the VAMC inappropriately used the VA Research Corporation as the

IPA assignees’ employer. Under this process the VAMC recruited the employee, arranged for

the corporation to act as the non-Federal “employer,” and then used an IPA to assign the

employee from the corporation to the VAMC. This practice did not meet IPA requirements

because the employees never actually worked for the corporation. The FPM guidance requires

that an IPA assignee must have been a permanent career employee with the non-Federal

employer for at least 90 days before the IPA. As a result of the audit, research corporation

management has discontinued the practice of using the corporation as an “employer” of

administrative and support IPA assignees.

Other VAMCs Have Used IPAs to Obtain Clinical Services. To determine if IPA problems

existed in other VHA facilities, we performed reviews of IPA documents obtained from two

other VAMCs that were also large users of IPAs. We found that these two VAMCs had also

used IPAs to inappropriately obtain clinical services. One VAMC had 15 IPAs for various

surgical specialties, and the other VAMC had 9 IPAs for specialties such as nuclear medicine,

psychiatry, and surgery.

After we briefed VHA top management on the results of our initial review, VHA initiated

immediate action to address the issues identified by our audit. In view of VHA top

management’s agreement to take corrective action, we ended the audit.

Conclusion -- VAMCs Need Additional Guidance on IPAs

The Under Secretary of Health sent all facilities a memorandum reminding them of the purpose

of IPA assignments and emphasizing the importance of compliance with IPA regulations. VHA

management also required the VAMC we reviewed onsite to discontinue its use of clinical IPAs.

(Because the primary responsibility for the accuracy of IPA payments rested with the VAMC,

we did not think it reasonable to recommend pursuing recovery of excessive payments from the

school.)

In addition, VHA top management expressed agreement with our view that more detailed policy

guidance on the use of IPAs was needed. We believe that this guidance is necessary because

some VAMC managers have misinterpreted the intent of the IPA authority and the purpose of

IPA assignments. VHA officials have told us that they are concerned that the misuse of IPAs

might endanger their continued use to support VA research. The recommended additional

guidance will help ensure that this does not occur.

In our opinion, the new guidance should largely restrict the use of IPAs to their traditional

purpose of supporting VA research activities. The guidance should require that VAMCs have

procedures to ensure that salary rates shown on IPA agreements are accurate, that duty and time

requirements are specified, that payments for IPA services are correct, that conflicts of interest

are avoided, and that timekeeping records are accurate and available for audit or other review.

Although the use of IPAs for administrative and support positions is not a widespread practice,

the policy should state that IPAs should not be used for such positions. Most importantly, the
7

new guidance should specify that IPA agreements may not be used to procure clinical services

that would normally be obtained through staff appointments, SMS contracts, sharing

agreements, or other recognized methods of obtaining these services.

For More Information

• The purpose of IPA assignments, procedures for establishing and administering IPA

agreements, and other background information are discussed in Appendix 1, pages 8-11.

• The audit objectives, scope, and methodology are discussed in Appendix 2, pages 12-13.

• The results of our onsite VAMC audit are discussed in detail in Appendix 3, pages 14-24.

Recommendation 1

We recommend that the Under Secretary for Health issue detailed guidance on the use of IPA

assignments, with emphasis on the issues identified by this audit.

The associated monetary benefits for Recommendation 1 are shown in Appendix 4, page 25.

Under Secretary for Health Comments

The Under Secretary for Health concurred with our findings and recommendation and did not

disagree with our estimated monetary benefit.

Implementation Plan

The Under Secretary agreed to revise VHA policy as recommended in this report.

Representatives from VHA’s Management and Support Office and Chief Network Office have

been working with the Office of the Deputy Assistant Secretary for Human Resources

Management and the Office of the General Counsel to revise IPA guidance. The revised

guidance will specifically cite the concerns raised by the audit. VHA plans to issue the revised

guidance in April 1997. (See Appendix 5, pages 26-27, for the full text of the Under Secretary’s

comments and implementation plan.)

Office of Inspector General Comments

The Under Secretary accepted our audit findings, concurred with our recommendation, and

provided an acceptable implementation plan. We consider all audit issues resolved and we will

follow up on the completion of planned corrective actions.
Appendix 1

8

Background

Legislative Authority for IPA Assignments

In 1970 Congress passed the Intergovernmental Personnel Act (Public Law 91-648). The Act

authorized grants, technical assistance, and training programs aimed at improving

Federal-State-local government cooperation by strengthening the personnel capabilities of State

and local governments. Title IV of the Act authorized the temporary assignment of personnel

between the Federal Government and State or local governments, institutions of higher learning,

Indian tribal governments, or other eligible institutions.

Purpose of IPA Assignments

The intended purpose of IPA assignments is to facilitate Federal-State-local cooperation through

the temporary assignment of skilled personnel. Federal agencies may use IPAs either to assign

agency employees to work at participating institutions or to have employees of participating

institutions work at Federal agencies. IPA assignments should be made for sound public

purposes and should be of mutual benefit to the Federal agency and to the participating

non-Federal agency. The Federal Personnel Manual specifies four appropriate objectives for

IPA assignments:

1. Strengthening the management capabilities of Federal agencies and non-Federal participating

institutions.

2. Assisting the transfer and use of new technology and approaches to solving governmental

problems.

3. Serving as a means of involving non-Federal officials in developing and implementing

Federal programs.

4. Providing program and developmental experience which will enhance the IPA assignee’s job

performance. (FPM 334, 1-2)

Requirements for IPA Agreements

IPA assignments are required to be formalized with written IPA agreements. In VA, these

agreements are typically made using the Office of Personnel Management (OPM) Optional Form

69, “Assignment Agreement: Title IV of the Intergovernmental Personnel Act of 1970.” The

rules for IPA assignments and agreements are set forth in Title 5 United States Code, Section

3371-3376; Title 5, Code of Federal Regulations, Part 334; and the FPM, Chapter 334.
Appendix 1

9

The most important rules and criteria for IPA assignments and agreements are:

• Each agreement may cover only one specific employee.

• Assignments should normally be for no more than 2 years. However, the Federal agency

head may extend the assignment to a maximum of 4 years.

• Before taking an IPA assignment to a Federal agency, the assignee must have worked for the

participating non-Federal institution for at least 90 days in a career position.

• Agreements must record the responsibilities of all the agreeing parties -- the Federal agency,

the participating institution, and the assignee.

VA Policy on the Use of IPAs

VA policy on the use of IPAs is set forth in VA Manual MP-5, Part I, Chapter 334 and states

that VA will follow the guidance provided in the FPM, Chapter 334. The VA policy emphasizes

the requirements for temporary assignments of VA employees to non-Federal institutions.

However, in VA most IPA agreements are used for assigning medical school employees to

VAMCs. VA policy does not provide any specific guidance on this use of IPAs and only states

that assignments from non-Federal institutions will be made in accordance with the FPM

guidance (VA Manual MP-5, Part I, 334.3b).

Program Data on VAMC Use of IPAs

As of October 1996, neither VHA nor the Office of the Assistant Secretary for Human

Resources and Administration maintained reliable data on the number of active IPAs or on the

cost of those IPAs. No element of either organization had been specifically charged with

collecting this information. In addition, IPA data was not captured in any of VHA’s accounting

or workload measurement systems, such as the Financial Management System or the Resource

Planning and Management system.

In our view, this absence of data was understandable -- IPA data was not a significant issue

because VAMCs had historically used very few IPAs. Traditionally, the use of IPAs had been

limited to the purpose of obtaining the services of affiliated medical school employees who had

the specialized skills needed to provide temporary support for specific VA medical research

projects. Employees typically hired through IPAs included scientists, laboratory technicians,

research assistants, and technical writers. In our opinion, the use of IPAs for research activities

was appropriate because assignments were short-term, mutually beneficial to the agreeing

parties, and served the sound public purpose of furthering VA research.

Increase in Use of IPAs. Before Fiscal Year (FY) 1994 Federal agencies were required to

report data on their usage of IPAs to OPM. This requirement was discontinued in FY 1994.

(The last required report covered FY 1993.) It appears that in about FYs 1993-1994 VAMCs

began increasing their use of IPAs and some VAMCs began using IPAs to hire non-research
Appendix 1

10

staff, such as clinical and administrative personnel. The current VHA top management was not

aware of this increased usage of IPAs.

The precise number of IPAs used by VAMCs is unknown. However, it is certain that the

number has increased significantly in recent years:

• In a FY 1989 report on the Government-wide use of IPAs, the General Accounting Office

(GAO) reported that in FY 1984 VA had 33 IPAs and that the number had increased to 200

by FY 1988.3

• In its FY 1993 report to OPM on IPA usage, VA reported a total of 460 IPAs.

• VHA’s Office of the Associate Chief Medical Director for Research and Development

(R&D) maintained an informal list of active IPAs. This list showed that as of February

1996, 57 VAMCs reported having a total of 1,010 IPAs with a total cost of $34.7 million.

R&D List Not Accurate. Although the R&D list represented VHA’s most up-to-date

information on IPA’s, VHA officials knew that the list was not accurate or complete. R&D

began keeping the list several years ago in a effort to account for IPAs used to support research

activities.

While we recognized that VHA knew the R&D list was inaccurate, we considered it important

to compare the list to more accurate data in order to get a better sense of how much VAMC

usage of IPAs had increased in recent years. To make this comparison we obtained data from

three VAMCs shown to be large users of IPAs according to the R&D list. The list showed that

the three VAMCs had 141 IPAs, but we found that the VAMCs actually had 194 IPAs (37.6

percent more):

VAMC Records R&D List Difference

VAMC Number Cost Number Cost Number Cost

A 77 $5,135,839 66 $3,018,717 11 $2,117,122

B 63 1,945,491 45 1,361,186 18 584,305

C 54 1,964,701 30 861,356 24 1,103,345

Total 194 $9,046,031 141 $5,241,259 53 $3,804,772

 

Sources: R&D list of IPAs and the selected VAMC IPA documents.

With 194 IPAs, the three VAMCs had almost as many as the 200 IPAs reported for the entire

VA in 1988. In our opinion, this data strongly indicates that VAMCs have significantly

increased their use of IPAs.

 

3

 June 1989 GAO report entitled Intergovernmental Personnel Act of 1970: Intergovernmental Purpose No

Longer Emphasized, page 32.
Appendix 1

11

Reason for Audit

During work on an audit of affiliation issues, we noted that some VAMCs had apparently used

IPAs to hire physicians and other clinical staff whose services would normally have been

obtained either through part-time appointments, SMS contracts, or sharing agreements. In

addition, as discussed above, VAMCs had significantly increased their use of IPAs in recent

years. We were concerned that some VAMCs might view IPAs as a means of circumventing:

(1) SMS contracting rules; (2) physician timekeeping requirements; (3) physician salary

limitations; and (4) VHA staffing restrictions, such as hiring freezes and staff ceiling limitations.

We discussed these concerns with the Under Secretary for Health, and he agreed that we should

perform an audit to determine if VHA needed better policy guidance on IPAs.
Appendix 2

12

Objectives, Scope, and Methodology

Objectives

The purpose of the audit was to evaluate the use of IPA assignments by VAMCs. Specific audit

objectives were to determine if:

• VAMCs used IPAs in accordance with the authorizing legislation and VA policy.

• VHA needed to strengthen policy guidance on the use of IPAs.

Scope and Methodology

To meet the audit objectives we audited selected IPAs at a VAMC. We chose this VAMC

because VHA records indicated that this VAMC had the largest number of IPAs, the highest

IPA costs, and the largest number of physicians on IPAs. Our review focused on two questions:

(1) Did the VAMC use IPAs as intended by IPA regulations and VA policy? (2) Did the VAMC

have adequate controls to ensure that IPAs were properly administered and that payments were

accurate?

To address these questions we selected a judgment sample of 40 of the VAMC’s 77 IPA

assignments and we reviewed various records pertaining to the assignments. These records

included clinic schedules, research activity reports, surgical logs, timesheets, payroll records,

duty schedules, and billing and payment documents. We reviewed records pertaining to the

university’s compensation of IPA employees. We also conducted interviews with VAMC

management, IPA employees, their VAMC supervisors, university officials, and VA Research

Corporation officials. Our review covered the 4-month period January 1, 1996, through April

30, 1996. We used this period because it was recent and because some records were available

for this period that may not have been available for other periods.

We had originally planned to review all the IPA assignments at the VAMC and to perform

similar reviews at several other VAMCs. However, after reviewing the judgment sample of the

VAMC’s IPAs we briefed VHA top management. They concluded that our findings were

sufficient to demonstrate the need for better guidance on IPAs and indicated that VHA would

take action on this issue.

Based on this commitment, we did not perform any additional onsite reviews. However, to

confirm that IPA problems were not isolated to one VAMC, we performed limited reviews of

IPA documents obtained from two other VAMCs. Our reviews of these documents and our

discussions with officials of the two VAMCs indicated problems similar to those identified

during our onsite review.
Appendix 2

13

Our onsite audit of the VAMC included evaluations of IPA internal controls and compliance

with applicable laws and regulations. We performed the audit in accordance with generally

accepted government auditing standards.
Appendix 3

14

Details of Audit

The VAMC Needed to Discontinue the Use of IPAs for Procuring

Clinical Services and Hiring Administrative Staff

Purpose of Review of VAMC IPAs

As discussed on page 12, before we began our onsite review of IPAs, VHA top management

had agreed that the OIG needed to review VAMC use of IPAs. Because of this, the major

purpose of our onsite audit of the VAMC was to identify issues and concerns that VHA needed

to address.

VAMC IPA Data

As of January 1, 1996, the VAMC had 77 IPAs to obtain services at a total cost of about $5.13

million. The 77 IPAs fell into three categories:

• 21 for research projects (cost = $594,000)

• 40 for clinical services (cost = $3.99 million)

• 16 for administrative and support positions (cost = $550,000)

Audit Approach for Evaluating IPAs

We reviewed a judgment sample of 40 of the VAMC’s 77 IPAs to obtain services. The major

objectives of our review were to determine if the VAMC (1) had used IPAs as intended by

Federal regulations and VA policy and (2) had established adequate controls to ensure that IPAs

were properly administered and that payments were accurate. Our sample of 40 IPAs consisted

of 12 research IPAs (cost = $374,000); 18 clinical IPAs (cost = $2.06 million); and 10

administrative and support IPAs (cost = $378,000). The total cost of the IPAs in our sample

was $2.81 million, or 54.8 percent of the $5.13 million cost of all 77 IPAs. (As discussed on

page 13, we had originally planned to review all of the VAMC’s IPAs. However, based on our

discussions with the Deputy Under Secretary for Health we determined that this was not

necessary.)

We based our evaluation of IPAs on the following four principles:

• IPAs should be used for the temporary assignment of skilled personnel.

• IPAs should address one or more of the four objectives cited by the FPM (see page 8).
Appendix 3

15

• IPAs used to obtain scarce medical specialist services or other services should provide the

same protections and controls that VA has established for SMS contracts, sharing

agreements, and other means of obtaining services. Specifically, the VAMC’s IPA

procedures should ensure that prices paid for services are reasonable, that services required

by IPA agreements are received, that conflicts of interest are avoided, and that other

procurement integrity requirements are met.

• Time and attendance requirements should be the same for IPA employees as for all other VA

staff and contract employees. The VAMC should specify tours of duty and should maintain

accurate and complete timekeeping records for IPA employees.

Research IPAs

Our review found that the VAMC’s use of IPAs to support research activities was appropriate.

Most of the research IPA agreements were with employees of the affiliated medical school

although there were a few agreements with employees of another eligible education institution.

All of these IPA assignees were skilled, career employees such as research scientists and

laboratory technicians. All of the IPAs were temporary assignments to work on VA-approved

research projects. These IPAs met the program objectives of assisting in solving VA research

problems and, in some instances, of enhancing the assignee’s job performance. The VAMC’s

Research Service had adequate controls to ensure that IPA employees worked the required time

and that IPA payments were correct.

Clinical IPAs

The VAMC inappropriately used clinical IPAs to procure scarce medical specialist services that

would normally be obtained by either hiring the required specialist, contracting for the services,

or establishing sharing agreements.

No Authority to Use IPAs Instead of SMS Contracts or Sharing Agreements. We reviewed

18 clinical IPAs (10 surgeons, 6 anesthesiologists, and 2 perfusionists). VAMC management

acknowledged that these IPAs had been used instead of SMS contracts to obtain the services of

medical specialists. None of these 18 IPAs met policy requirements or represented an

appropriate use of the IPA authority. In our opinion, nothing in the IPA regulations, FPM

policy guidance, Federal Acquisition Regulations, or VA Acquisition Regulations suggests or

authorizes the use of IPAs to obtain services that would normally be procured through contracts

or sharing agreements.

Furthermore, VHA top management does not support the use of IPAs to obtain medical

specialist services. As a result of our audit, on August 15, 1996, the Under Secretary for Health

issued a memorandum instructing all VAMCs to review all IPAs. This memorandum states:

“IPA assignments should not be used as a substitute for scarce medical specialist contracts.”
Appendix 3

16

IPA Objectives Not Met. In addition to not meeting VA procurement policies, the VAMC’s

use of IPAs in lieu of SMS contracts did not meet IPA policy requirements. There were two

reasons for this. First, the use of clinical IPAs did not meet any of the four objectives cited by

the FPM guidance. Specifically, these IPAs did not: (1) strengthen VA’s management

capability; (2) assist in the transfer and use of new technologies and approaches to solving

governmental problems; (3) involve State officials in developing and implementing Federal

policies and programs; or (4) provide experience that enhanced the IPA employees’ performance

in their regular jobs. At the VAMC, the IPA clinicians provided the same types of services they

did in their private practices or in their work at other hospitals involved in the medical school

affiliation. There was nothing unique about the services provided to the VAMC. As further

evidence of this, it should be noted that several of the IPA clinicians had previously worked for

the VAMC as part-time or contract employees before they were placed on IPAs.

IPAs Not Temporary. The second reason the clinical IPAs did not meet policy requirements is

that they were, in fact, not temporary. VAMC management viewed IPAs as a long-term, if not

permanent, method of procuring services. Although the VAMC would change the names of

clinicians on IPA agreements to meet the requirement that the agreements normally not exceed 2

years, the clinicians were always selected from the cadre of medical school employees. Even

though agreements with the individuals named in the IPA were temporary, the underlying

arrangement was long-term.

Since FY 1988 the VAMC has had an informal agreement with the medical school to use IPAs

to obtain some clinical services. As recently as May 1996, management informed the school that

they intended to continue the arrangement (May 24, 1996, letter from the VAMC Director to

the Chairman of the affiliated medical school’s Department of Surgery). In addition, in a

September 1996 letter to VHA management the VAMC Director indicated that the VAMC

would continue the arrangement (September 16, 1996, letter from the VAMC Director to the

Under Secretary for Health).

The long-term nature of IPA arrangements can be illustrated by the IPA for neurosurgical

services. The VAMC awarded its first neurosurgery IPA in 1988 and has used IPAs to obtain

neurosurgical services ever since.

IPA Services Not Received. To determine if the VAMC had received the services paid for

under the 18 clinical IPAs reviewed, we examined pertinent workload and timekeeping records

for the 4-month period January-April 1996. We discussed work activities with all 18 employees

named on the IPAs and, as appropriate, with other university employees who substituted for

those named on IPAs. We gave IPA and substitute employees credit for any work time that was

shown on VAMC records or that the employees told us they spent on VA duties or VA-related

activities (even if these were not documented).

One problem we encountered was that 10 of the 18 IPAs did not specify a work time or level of

service requirement for the IPA employee. In these cases, we estimated the employee’s time

requirement based on the proportion of the university compensation costs that the VAMC’s IPA

payment represented. For example, if the medical school incurred compensation costs that

totaled $100,000 for a specific physician during the 4-month review period and if the VAMC
Appendix 3

17

paid the medical school $50,000 under the IPA agreement, then the VAMC should have

received 50 percent of the physician’s time based on a 40-hour work week (that is, the VAMC

should have received 20 hours of service).

For 2 of the 18 clinical IPAs the VAMC received the level of services specified in the

agreements, and payments for these services were correct. For the remaining 16 IPAs, the

VAMC made overpayments. These overpayments fell into two categories: (1) payments for

services not received, and (2) payments for the IPA employee when a lower paid substitute

actually provided the services.

Payments Made for Services Not Received. For 16 of the 18 IPAs there were payments made

for services not received. Under the 16 IPAs the VAMC paid a total of $629,149 during the

4-month review period and should have received a total of 6,612 hours of service. The VAMC

actually received 4,524 hours (68.4 percent of the required time). The amount the VAMC

should have paid was $445,814. Therefore, the amount of payments made for services not

received was $183,334 (29.1 percent of the total amount paid).

During the audit VAMC management disagreed with our conclusions about services received,

stating that they believed that they had received the appropriate levels of services under the

IPAs.

We believe that our conclusions are correct. It should be recognized that the IPAs we reviewed

covered employees who provided surgical and anesthesia services. As required by VA policy,

most of their clinical time was recorded in operating room logs, anesthesia logs, and other

required records. In addition, we gave the IPA employees and their substitutes credit for any

time they stated they spent on VA-related activities, such as pre- and post-operation time, VA

committee meetings, and other meetings and conferences where they represented VA interests

or discussed VA patients.

Overpayment for Substitutes. In addition to the overpayments made for services not received,

the VAMC also overpaid because the medical school substituted lower paid employees for those

named in the IPA agreements. This occurred on 8 of the 16 IPAs with overpayments. (All eight

of these IPAs also had overpayments for services not received.) The amount of overpayment

attributable to the use of substitutes was $7,504 (1.2 percent of the total paid).

Estimated Annual Amount of Overpayments. For the 18 clinical IPAs reviewed, the total

amount of overpayments for the 4-month period was $190,838, or 30.3 percent of the total

payment of $629,149. ($183,334 for services not received + $7,504 for lower paid substitutes =

$190,838). If the 4-month overpayment were to continue for the entire year, then the estimated

overpayment would be $572,000. If the average overpayment rate found for all 18 clinical IPAs

reviewed were to hold true for all 40 of the VAMC’s clinical IPAs, then the annual amount of

overpayment could be as much as $1.3 million ($190,838 overpayment for 4-month period ÷ 18

clinical IPAs reviewed = $10,600 average overpayment × 40 total clinical IPAs = $424,000 × 3

(4-month periods) = $1,272,000).
Appendix 3

18

Use of SMS Contracts or Sharing Agreements Would Provide More

Equitable Payments

As discussed above, there were two components to the excessive IPA payments: (1) the VAMC

paid for services not received (or time not worked), and (2) the VAMC paid for substitutes

whose university compensation was less than that of the IPA employees. Both of these

problems would have been avoided if the VAMC had followed SMS contracting requirements

pertaining to analyzing workloads to determine the services needed, basing contract

reimbursement rates on cost or pricing data, and monitoring contractor performance (VA

Manual M-1, Part I, 34.02 and 34.04). The relationship between these requirements and the

VAMC’s IPA practices is discussed below. (As discussed on page 5, sharing agreements have

essentially the same internal control requirements as SMS contracts, except that Medicare rates

may be used instead of C/P data to set procedure prices.)

Workload Analysis Requirement. VHA policy on SMS contracting requires that VAMCs

analyze current and projected workloads to determine the types and levels of services needed

under SMS contracts. VAMC staff acknowledged that they had not performed workload

analyses to determine the levels of services needed under IPAs. This lack of workload analysis

caused IPA service levels to be overestimated and this, in turn, contributed to IPA excessive

payments -- that is, services were not received simply because they were not needed. The IPA

agreements either stated or implied specific levels of service and specific payment obligations.

The VAMC’s actual workloads were usually less than the estimated levels of services.

However, payments were based on the estimated levels, not on the actual services received. If

workload analyses had been done, estimated service needs would have been more accurate and

excessive payments could have been avoided or significantly reduced.

Cost or Pricing Data Requirement. Part of the excessive IPA payments occurred because the

VAMC paid for substitutes who received less university compensation than the IPA employee.

This problem could have been avoided if the VAMC had obtained C/P data from the school, as

is required by SMS contracting policy. (The university readily provided this data to us for use in

reviewing IPA payments.) C/P data shows the costs that the school will incur in providing the

services (plus any profit the school proposed to make on the contract). Typically, almost all the

school’s costs would be for the compensation (salary and benefits) of the clinicians working

under the contract. With this information, the contracting officer could have established

reasonable contract prices and could have adjusted contract payments based on the school’s

costs for the physicians who actually worked during any particular time period. The following

examples illustrate how the use of C/P data could have prevented excessive payments (also see

the example on page 4):

• Perfusionist IPA. The VAMC had an IPA to obtain perfusionist services at a cost of

$90,000 per year, or $30,000 for the 4-month review period. For this IPA, we identified

two types of payments that could have been avoided if the VAMC had used C/P data. The

first problem was that the $90,000 cost shown on the IPA agreement was overstated.

University records showed that during the review period the school incurred costs of

$27,905 for the perfusionist’s salary and benefits. This would equate to an estimated annual
Appendix 3

19

cost of $83,715, or $6,285 less than the $90,000 shown on the agreement. If the VAMC

staff had obtained C/P data, they would have known that the $90,000 cost was too high and

could have avoided a $2,095 excessive payment for the 4-month period and a possible

$6,285 excessive payment for the entire year.

The second problem pertained to the use of substitutes. During the review period, four

substitutes worked under the IPA, providing 376 hours of service. The medical school

compensation for the four substitutes ranged from $30.59 to $37.39 per hour. For the 376

hours the school incurred costs of $12,891. As stated above the university compensation

costs for the perfusionist was $27,905. This equates to a rate of about $41.52 per hour.

Based on the differences in the hourly compensation rates, we estimate that use of C/P data

could have prevented an additional excessive payment of $2,721.

For this IPA, the total 4-month excessive payment resulting from C/P data errors was

$4,816 ($2,095 for overstated salary + $2,721 for use of substitutes = $4,816). It should be

noted that in addition to the excessive payments resulting from not using C/P data, there was

an excessive payment of $4,816 because the VAMC paid for services not received. During

the review period the VAMC paid for 672 hours of service and received 556 hours, a

difference of 116 hours ($41.52 per hour rate × 116 hours = $4,816). The total excessive

payment on this IPA was $9,632 ($4,816 + $4,816 = $9,632).

• Ophthalmology IPA. The VAMC had an IPA agreement to obtain the services of an

ophthalmologist at a cost of $31,250 per year, or $10,417 for the 4-month review period.

During the period the VAMC received 37.5 hours of services under this IPA. The

ophthalmologist named on the IPA agreement provided 21.1 hours of service, and a

substitute ophthalmologist provided 16.4 hours. The medical school paid the IPA

ophthalmologist an hourly rate of $152.76 (based on a 40-hour week), so the cost of the

16.4 hours would have been about $2,505. Our review of UTSMC compensation records

found that for the substitute the school incurred costs of about $1,579 for the 16.4 hours. In

this case, the use of C/P data would have prevented an excessive payment of about $926.

Performance Monitoring Requirement. VHA policy on SMS contracts requires that the

VAMC have reliable procedures for ensuring that services are provided in accordance with the

contract. Contract monitoring and record keeping procedures must be sufficient to ensure

accurate payments and to allow audit verification that services were provided. The VAMC’s

practice of using IPAs instead of SMS contracts did not have these safeguards. We identified

the following deficiencies in monitoring performance under IPA agreements:

• As mentioned above, the IPA agreements did not consistently specify the level of service

expected from the IPA employee. Of the 18 IPAs reviewed, only 8 specified the work time

required. The other 10 IPAs did not show any service requirement.

• The VAMC did not have a written policy on monitoring performance under IPAs, and no

employee was assigned responsibility for monitoring performance. (Under SMS contracting

policy this responsibility is typically assigned to the Contracting Officer’s Technical

Representative.)
Appendix 3

20

• The VAMC did not require accurate time and attendance records for the clinical IPA

employees. Surgical Service did maintain a local report called the “IPA Attendance in Days”

report. However, this report was highly inaccurate, there was no standard method for

gathering information used to complete the report, and the report was not used for any

management purpose.

Each month the medical school sent the VAMC a bill for the IPA employees’ services. The

monthly billed amount was based on the total cost of the IPA divided by the months of duration

shown on the agreement. (For example, if the total cost shown on the IPA agreement was

$120,000 and the duration of the agreement was 12 months, then each monthly bill would be for

$10,000.) The VAMC paid the monthly bills without question. Even if the IPA attendance

report showed that the employee had not provided the days of service required by the IPA

agreement, the bill was paid in full.

The following examples illustrate how the absence of performance monitoring contributed to

excessive payments (also see the example on page 4):

• Plastic Surgeon IPA. The plastic surgeon’s IPA agreement did not show a specific time

requirement. However, because the VAMC paid the university an amount equal to about 33

percent of the school’s compensation costs for this physician, he should have devoted 33

percent of his time to VA duties. Based on a 40-hour workweek this 33 percent equated to

about 223 hours, or about 28 days of service during the 4-month review period. The

Surgical Service IPA attendance report showed that the plastic surgeon and one substitute

provided 22 days of service during the period. The timekeeper told us that entries for the

plastic surgeon were based on timecards that he submitted and on supplemental information

the timekeeper obtained from surgical and attending logs.

Our review of VAMC records showed that the plastic surgeon actually provided only about

5.25 days (42 hours) of service during the 4-month period. There was no evidence that a

substitute had provided any services, and neither VAMC staff nor the plastic surgeon could

identify the substitute. The 5.25 days of service actually provided was 16.75 days less than

the IPA attendance report showed and 22.75 days less than the time requirement implied by

the IPA agreement. The medical school billed the VAMC for 28 days of service. The

VAMC paid the entire amount, even though the VAMC had information indicating that all

28 days were not provided. Based on our review, we concluded that the excessive payment

attributable to services not received was $22,010.

• Anesthesiology IPA. The IPA agreement required the anesthesiologist to provide 50

percent of his time to the VAMC. During the 4-month review period this requirement

equated to 42 days of service. The Surgical Service IPA attendance report showed that the

anesthesiologist provided 39 days of service during the period. The Surgical Service

timekeeper prepared the IPA attendance report by reviewing timecards and appropriate

surgical and attending logs. If the timesheets or logs showed any time on a given day, then

the timekeeper gave credit for a full day of service and recorded this on the IPA attendance

report. Our review of anesthesiology workload documents and discussions with the

anesthesiologist found that he had actually provided 28.24 days of service during the period.
Appendix 3

21

This was 10.76 days less than the time shown on the IPA attendance report and 13.76 days

less than the time commitment specified on the IPA agreement. The medical school billed

the VAMC $27,665 for the 42 days of service. The VAMC paid this amount even though

its records indicated that only 39 days of service had been provided. Based on our review,

we concluded that the excessive payment attributable to services not received was $9,064,

or 32.8 percent of the amount paid.

Avoiding Conflicts of Interest. VA has placed special emphasis on the importance of VAMC

employees who are also employees of affiliated medical schools avoiding conflicts of interest in

business relationships with affiliated schools (VHA Directive 10-93-119 dated September 22,

1993). In our opinion, the VAMC’s use of IPAs as a mechanism of procuring scarce medical

specialist services presented the appearance of possible conflicts of interest and increased the

risk that actual conflicts could occur.

Federal law and VA policy prohibit VA employees who are also employed by a contractor from

“participating personally and substantially on behalf of the Government through decision,

approval, disapproval, recommendation, rendering of advice, certifying for payment or otherwise

in that contract. No VA employee who is an employee, officer, director, or trustee of an

affiliated university, or who has a financial interest in the contract, may lawfully participate in a

VA contract or any other Government contract with the university.” (VA Manual M-1, Part I,

34.01f; also 18 U.S. Code 208 and 41 U.S. Code 423)

As used by the VAMC, IPAs were, in effect, contracts. VAMC management acknowledged that

they used IPAs as a mechanism for obtaining the same types of services that would normally be

procured through SMS contracts. In addition, the contractual nature of the IPA arrangements

was demonstrated by the facts that: (1) IPA agreements were formal agreements in which the

VAMC agreed to pay the medical school for the services of its employees; (2) the VAMC used a

series of IPAs over long periods of time to obtain services; and (3) the VAMC allowed the use

of substitutes, indicating that there was never any expectation that services would be provided

exclusively by the individual named on the IPA agreement, so the agreement could not

reasonably be viewed as a “personnel action” (as opposed to a contract).

As our report shows, the school benefited from the use of IPAs because it received more in VA

payments than it incurred in costs for providing services. Even if this benefit had not occurred,

the use of IPAs would still be a business relationship between the VAMC and the school, and

therefore there would be a need for controls to ensure the avoidance of conflicts of interest.

Our review found no evidence of actual violations of conflict of interest rules. However, in our

opinion there was a risk that such conflicts could occur. The reason for this is that a number of

VAMC employees who would logically be involved in the IPA decision-making process received

remuneration from the medical school. These employees included the Chief of Staff and the

clinical service and section chiefs. They told us that they were not involved in the IPA

decision-making process. However, given the absence of controls to prevent conflicts of

interest, there was a risk that these employees could become involved in IPA decisions such as

determining how many IPAs a clinical service would use or who would be placed on IPA

agreements.
Appendix 3

22

If the VAMC had followed SMS contracting or sharing agreement procedures, there would have

been less risk of conflicts of interest or of the appearance of such conflicts. The reason for this

is that SMS contracting policy includes requirements that help ensure an “arms length”

contracting relationship between the VAMC and the medical school. These requirements

include:

• Assigning the contracting officer primary authority and responsibility for overseeing the

SMS contracting process (VA Manual MP-1, Part I, 34.02c).

• Prohibiting VA employees who receive any remuneration or benefit from the affiliated

school from participating personally and substantially in the contracting process (VA Manual

MP-1, Part I, 34.01f).

• Requiring that any VA employee who holds an academic title, even those who are not paid

by the affiliated school, receive written authorization from the Regional Counsel to

participate in the contracting process -- to include preparing statements of work to be

performed under the contract (VA Manual MP-1, Part I, 34.01f).

• Requiring the VAMC Director and Chief of Staff to personally certify that the contracting

officer conducted or controlled all contract negotiations and that there were no discussions

between VA officials and the service provider at which the contracting officer was not

present (VA Manual MP-1, Part I, Appendix 34A).

VAMC Management Position on Use of IPAs in Lieu of SMS Contracts. During the audit

VAMC management told us that they used IPAs primarily because they were less costly than

SMS contracts. Management believed that IPAs were less costly because they allowed the

VAMC to avoid a “clinical overhead rate” that the State required the university to charge on all

contracts. The school originally set the overhead rate at 10.18 percent but later agreed to

reduce the rate to 8.70 percent. Management’s position was that the school was doing the

VAMC a favor by using IPAs as a mechanism to avoid collection of the indirect overhead rate,

with the school’s logic being that the State requirement covered contracts but not IPA

agreements.

Our review found, however, that the university would not necessarily charge the overhead rate

on SMS contracts with the VAMC. The pertinent State legislation directs agencies to recover

indirect costs where these “reimbursement are an allowable part of the charges to the program.”

(emphasis added) However, under VA policy indirect overhead is not an allowable cost:

“Unallowable costs include items such as general department or university overhead and other

indirect costs.” (VA Manual M-1, Part I, 34.02f)

When we discussed this issue with the university’s Director of Contracts Management, he said

that he was not aware that VHA policy did not allow payment of indirect overhead rates. After

we provided him a copy of the VA policy, he told us that the university would not charge the

overhead rate on contracts with the VAMC. Given this, the VAMC agreed with us that the use

of clinical IPAs should be discontinued (October 28, 1996, letter from VAMC Director to the

OIG).
Appendix 3

23

The VAMC Used Clinical and Support IPAs to Circumvent Personnel Ceiling

Limitations

We reviewed 10 of the VAMC’s 16 IPAs for administrative and support employees. The 10

IPAs covered positions such as chaplain’s assistant, laboratory technician, administrative

assistant, and fiscal clerk. Our review of these IPAs identified three issues that should be

addressed by future VHA policy on the use of IPAs:

• The VAMC used IPAs to circumvent staff ceilings.

• The administrative and support IPAs did not meet FPM requirements.

• The VAMC used the VA Research Corporation as the non-Federal participating employer

when, in fact, the IPA employees did not really work for the corporation.

IPAs Used to Circumvent the Staff Ceiling. The FPM guidance states that IPA assignments

should not be used to circumvent personnel ceilings (FPM 334, 1-2b). In February 1993 the

President directed Federal agencies to reduce the number of employees by at least 4 percent by

September 1995 (Executive Order No. 12839). As part of VA’s action to implement this order,

VHA reduced the authorized personnel ceilings of some VAMCs and imposed a hiring freeze.

During this hiring freeze (FY 1994-1995), the VAMC used IPAs as a mechanism for obtaining

administrative and support staff. A total of 45 such staff were hired using IPAs. In a March

1996 memorandum to the OIG, the VAMC Director stated that the increased use of IPAs was

“primarily the result of the VA Central Office mandate to reduce FTEE.”

When the hiring freeze was lifted, the VAMC reduced its use of IPAs for administrative and

support staff. In addition, VAMC management has stated that they have changed VAMC policy

so that “IPAs will not be used to circumvent FTEE ceilings.” (September 16, 1996,

memorandum from the VAMC Director to the Under Secretary for Health)

IPA Objectives Not Met. None of the administrative IPAs met the four objectives cited by the

FPM guidance -- that is, these IPAs did not strengthen management capabilities, assist in solving

governmental problems, involve State or local officials in implementing Federal policies or

programs, or provide developmental opportunities for the assignees. All of the IPA employees

in question were doing routine administrative and support work.
Appendix 3

24

Research Corporation Used to Hire IPA Employees. The VAMC used the VA Research

Corporation as a mechanism for using IPA agreements to hire employees. Under this process

the VAMC recruited the employee, arranged for the research corporation to act as the

non-federal “employer,” and then established an IPA agreement assigning the employee from the

corporation to the VAMC. This process did not meet IPA requirements because the employees

never actually worked for the research corporation. The FPM guidance requires that an IPA

assignee must have been a permanent career employee with the participating non-federal

employer for at least 90 days prior to the IPA assignment (FPM 334, 1-3d).

Research Corporation management has acknowledged that it was not appropriate to use the

corporation as a mechanism for hiring VAMC employees, and they have discontinued the

practice. In addition, in July 1996 the National Association of Veterans Research and Education

Foundations (NAVREF), the VA research corporation professional organization, issued a

newsletter reminding their membership of the proper use of and restrictions on the use of IPAs.

(NAVREF Up-To-Date, “Nonprofit Research Corporations/VA IPAs -- Do It Right,” July 3,

1996)
Appendix 4

25

Monetary Benefits

In Accordance With IG Act Amendments

Report Title: Audit of VA Medical Center Use of Intergovernmental Personnel Act

Assignments

Project Number: 6R8-176

Recommendation

 Number 

Category/Explanation

 of Benefits 

Better Use

 of Funds

Questioned

 Costs 

1 Better use of funds by issuing

guidance that restricts the use of

IPAs to their traditional purpose

and specifies that IPAs may not be

used to procure clinical services

that are normally obtained

through other recognized

methods.

$1.3 million

 

Note: The monetary benefit pertains to the VAMC covered by our detailed review of IPAs.
Appendix 5

26

Under Secretary for Health Comments

Department of

Veterans Affairs Memorandum

Date: February 4, 1997

From: Under Secretary for Health (10/105E)

Subj: OIG Draft Report, Audit of VA Medical Center Use of Intergovernmental

Personnel Act Assignments, Project No. 6R8-176

To: Assistant Inspector General for Auditing (52)

1. We have reviewed this draft report and concur with its findings and recommendation. We

appreciate your early alert to us on your initial findings and we are pleased with your

recognition of our actions taken in response to your alert. We find this type of cooperative

approach to problem solving to be very effective and beneficial to both of our organizations.

2. In response to the recommendation, Veterans Health Administration (VHA) representatives

from the Management and Administrative Support Office (163) and the Chief Network Office

(10NC) have been working with representatives from the Deputy Assistant Secretary for Human

Resources Management (05) and General Counsel (02) to revise the guidance as recommended

in the report. An Under Secretary for Health directive on the revised guidance is being prepared

for VHA by the Deputy Assistant Secretary’s staff. We anticipate that it will be issued to VA

facilities in April 1997.

3. Thank you for the opportunity to review the draft report. If you have any questions, please

contact Mr. Paul C. Gibert, Jr., Director, Reports Review and Analysis Service (105E), Office of

Policy, Planning and Performance, at 273.8355.

[Signed by Thomas L. Garthwaite, M.D., for:]

Kenneth W. Kizer, M.D., M.P.H.

Attachment

VA Form 2105

Mar 1989
Appendix 5

27

Under Secretary for Health Comments (Continued)

Action Plan in Response to OIG/GAO/MI Audits/Program Evaluations/Reviews

Name of Report: Audit of VA Medical Center Use of Intergovernmental Personnel Act Assignments

Project No.: 6R8-176

Date of Report: Draft report, dated December 5, 1996

______________________________________________________________________________

Recommendations/ Status Completion

Actions Date

______________________________________________________________________________

We recommend that the Under Secretary for Health issue detailed guidance on the use of IPA

assignments, with emphasis on the issues identified by this audit.

Concur

Guidance is currently being developed by the Deputy Assistant Secretary (DAS) for Human Resources

Management (05) in cooperation with VHA and General Counsel representatives. An Under Secretary

for Health directive is being prepared by the DAS for Human Resources Management staff for the Under

Secretary for Health on this revised guidance. The directive will specifically cite the concerns raised by

the OIG in the audit.

In process 4/30/97
Appendix 6

28

Final Report Distribution

VA Distribution

Secretary (00)

Under Secretary for Health (105E)

Assistant Secretary for Management (004)

Assistant Secretary for Human Resources and Administration (006)

Assistant Secretary for Policy and Planning (008)

General Counsel (02)

Deputy Assistant Secretary for Human Resources Management (05)

Deputy Assistant Secretary for Congressional Affairs (60)

Deputy Assistant Secretary for Public Affairs (80)

Deputy Assistant Secretary for Acquisition and Materiel Management (90)

Director, Office of Management Controls (004B)

Veterans Integrated Service Network Directors (10N1-10N22)

Director, VA Medical Center Dallas, Texas (549/00)

Director, VA Medical Center Nashville, Tennessee (626/00)

Director, VA Connecticut Healthcare System (689/00)

Non-VA Distribution

Office of Management and Budget

U. S. General Accounting Office

Congressional Committees:

Chairman, Committee on Governmental Affairs, United States Senate

Ranking Member, Committee on Governmental Affairs, United States Senate

Chairman, Committee on Veterans’ Affairs, United States Senate

Ranking Member, Committee on Veterans’ Affairs, United States Senate

Chairman, Subcommittee on VA, HUD, and Independent Agencies, Committee on

Appropriations, United States Senate

Ranking Member, Subcommittee on VA, HUD, and Independent Agencies, Committee on

Appropriations, United States Senate

Chairman, Committee on Government Reform and Oversight, House of Representatives

Ranking Member, Committee on Government Reform and Oversight, House of

Representatives

Chairman, Committee on Veterans’ Affairs, House of Representatives

Ranking Member, Committee on Veterans’ Affairs, House of Representatives

Chairman, Subcommittee on VA, HUD, and Independent Agencies, Committee on

Appropriations, House of Representatives

Ranking Member, Subcommittee on VA, HUD, and Independent Agencies, Committee on

Appropriations, House of Representatives