Department of Veterans Affairs 

Office of Inspector General 

Audit of 

Veterans Benefits Administration’s 

Control of Veterans’ Claims Folders 

Report No. 09-01193-228 September 28, 2009

VA Office of Inspector General 

Washington, DC 20420 
To report suspected wrongdoing in VA programs and operations 

Call: 1 800 488-8244 between 8:30 a.m. and 4:00 p.m. Eastern Time 

Monday through Friday excluding Federal Holidays 

e-mail: vaoighotline@va.gov
 Audit of VBA’s Control of Veterans’ Claims Folders 

Contents 

Page 

Executive Summary ........................................................................................................ i 

Introduction...................................................................................................................... 1

Purpose............................................................................................................................. 1

Background...................................................................................................................... 1

Results and Conclusions ............................................................................................. 2

VBA’s Claims Folder Control Process Ineffective ......................................................... 2

Appendixes..................................................................................................................... 12

A. Scope and Methodology ........................................................................................... 12

B. Universe and Sample Review of Claims Folders ..................................................... 14 

C. Under Secretary for Benefits Comments .................................................................. 17

D. OIG Contact and Staff Acknowledgments ............................................................... 21 

E. Report Distribution.................................................................................................... 22

VA Office of Inspector General 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Executive Summary 

Results in Brief 

The Office of Inspector General (OIG) conducted this audit to evaluate the Veterans 

Benefits Administration’s (VBA) control of veterans’ claims folders. The objective for 

the audit was to determine if VBA had adequate procedures in place to effectively locate 

veterans’ claims folders. 

VBA’s control of veterans’ claims folders, which contain personally identifiable 

information, was not effective because VBA managers did not track the number of lost or 

rebuilt folders, consistently enforce Control of Veterans Records System (COVERS) 

policies, and establish effective search procedures for missing claims folders. Misplaced 

claims folders can cause unnecessary claim processing delays and increases the 

likelihood that folders will be lost. Lost claims folders place additional burdens on the 

veterans and reduce the time regional office personnel have to spend processing claims. 

Background 

COVERS is VBA’s system for tracking the location of paper claims folders within and 

between offices. COVERS shows where a folder should be located within a particular 

organization or operating element, or with a specific individual in the organization. The 

more specific the designation, the more useful COVERS will be in locating a folder. 

VBA employees update the COVERS database location by accessing COVERS and 

updating the system’s “receive” function. This can be done by scanning the folder 

barcode with an electronic barcode reader, or by manually typing in the folder number. 

Claims folders contain sensitive and personally identifiable information including social 

security numbers, birth dates, military records, and medical information. Loss of a 

claims folder could potentially impair a veteran’s ability to obtain accurate and timely 

benefits. 

COVERS Inaccurate 

As of February 20, 2009, VBA had assigned about 4.2 million claims folders to regional 

offices for benefit claims processing and safeguarding. We projected the claims folders 

for an estimated 437,000 (10 percent) veterans were not at the location shown in 

COVERS: 

• Claims folders for approximately 296,000 (7 percent) veterans were at locations 

different from that shown in COVERS (misplaced). Of the 296,000 misplaced claims 

folders, we projected about 55 percent were found in other locations inside the 

regional office, and the remaining 45 percent were found at the VA Records 

Management Center (RMC). Regional office personnel could not completely explain 

why folders were located at the RMC rather than at the regional office location shown 

in COVERS. 

VA Office of Inspector General i 
 Audit of VBA’s Control of Veterans’ Claims Folders 

• Claims folders for approximately 141,000 (3 percent) veterans were lost. Our sample 

results showed most of the 141,000 lost claims folders were for veterans with denied 

claims or for deceased veterans with no current payments. Regardless of the lost 

claims folders’ status, regional office personnel agreed with us that VBA was 

responsible for maintaining accountability over these folders to ensure veterans’ 

personally identifiable information was protected. VBA officials agreed that some of 

these folders were lost but also stated that many may never have existed. However, 

we found folders that met the same criteria VBA used to conclude a folder may not 

have existed. Additionally, all of the lost folders had records in COVERS and the 

Beneficiary Identification and Records Locator System (BIRLS) indicating the folders 

existed and at one time had been at a Federal Records Center, the RMC, or a regional 

office. 

Lost Claims Folders Not Tracked or Monitored 

VBA personnel were not required and did not consistently track and monitor the number 

of lost claims folders. In addition to the lost claims folders we identified, regional office 

personnel rebuilt approximately 49,000 (1 percent) of the 4.2 million claims folders 

assigned to regional offices. Approximately 6,000 of the 49,000 rebuilt claims folders 

were rebuilt from September 2007 through May 2009. A rebuilt folder represents a 

folder where a veteran with previous claims history submits a new claim, but regional 

office personnel cannot find the folder and declare the folder lost. Only 2 of the 

12 regional offices we visited tracked the number of rebuilt claims folders. 

COVERS Policies Not Enforced 

While VBA criteria mandates the use of COVERS, regional office managers did not 

consistently enforce existing COVERS policies due to minimal procedures for 

monitoring compliance. VBA requires regional office personnel to: 

• Receive, or scan, the claims folder in COVERS immediately to confirm receipt. Our 

surprise inspections of employees’ desks and office common areas found that 

128 (7 percent) of 1,731 randomly selected claims folders were not shown in the 

correct location. Common areas are areas within the regional office where claims 

folders that need to be worked or returned to the main folder storage area are stored 

on shelves or tables. Regional office personnel generally have unrestricted access to 

move claims folders in and out of these common areas. 

• Periodically reconfirm the location of claims folders that are located outside the 

regional offices’ main folder storage area. VBA’s national policies conflicted 

regarding how often staff needed to reconfirm the location of folders–either every 

7 days or every 30 days. From our sample, approximately 467,000 claims folders 

were located outside the regional offices’ main folder storage area. Of these 

467,000 claims folders, regional office personnel had not reconfirmed the location of 

approximately 202,000 (43 percent) claims folders within the last 7 days. Further, of 

VA Office of Inspector General ii 
 Audit of VBA’s Control of Veterans’ Claims Folders 

those 202,000, regional office personnel had not reconfirmed the location of an 

estimated 45,000 (10 percent of the 467,000) folders within the last 30 days. 

• Conduct annual sequence checks of the regional offices’ main folder storage areas to 

ensure folders are filed in sequential numerical order. Sequence checking provides 

regional offices the opportunity to confirm COVERS locations and identify misfiled 

claims folders before they are needed for claims processing. Of the 12 regional 

offices reviewed, 11 stated they conducted annual sequence checks. However, their 

processes did not always update COVERS. The review of 2,881 sample claims 

folders located during our physical search showed that 16 misplaced claims folders 

were found misfiled in the main folder storage areas, and about 36 percent of folders 

found in our sample had not been confirmed since January 1, 2008. At the regional 

office that did not complete annual sequence checks, staff stated they had not 

conducted a sequence check for at least 5 years. 

Claims Folders Search Process Ineffective 

VBA’s process for locating lost claims folders was not effective. Regional office 

personnel use COVERS to search for claims folders. However, the COVERS search 

report was not reliable because regional office personnel did not update the search report 

to keep it accurate. Additionally, COVERS does not differentiate between a potentially 

lost claims folder and a claims folder that regional office personnel flagged because 

action needed to be taken on the claim. At four of the first five regional offices we 

visited, managers stated they were not able to give us a list of potentially lost claims 

folders. 

Further, no standards specified how long regional office personnel should search for a 

claims folder before declaring it lost and rebuilding it. Using the COVERS search report, 

we attempted to determine if any folders were lost by matching a list of claims folders on 

search to active claims listed on the Veterans Service Network Operations Report. Based 

on our matches, we found that for most claims folders a search was no longer necessary 

because the claims folder had been previously located, but regional office personnel 

failed to remove the search request. However, we identified eight veterans’ benefits 

claims where the claims folder appeared to be lost. These claims from 6 of the 

12 regional offices had processing delays ranging from 105 to 270 days. 

Conclusion 

Controls need to be strengthened to better track, locate, and provide accountability over 

veterans’ claims folders. Effective control of veterans’ records is imperative for reducing 

the time regional office personnel spend searching for, and rebuilding lost folders. This 

time can be better spent improving services to veterans and to improve claims processing 

timeliness along with increasing regional office productivity. Without an effective 

method to track lost and rebuilt claims folders, and ensure policies are enforced, VBA 

VA Office of Inspector General iii 
 Audit of VBA’s Control of Veterans’ Claims Folders 

leadership cannot adequately monitor performance or rely on the information they have 

available in COVERS to improve control and accountability of veterans’ claims folders. 

Recommendations 

1. We recommended the Under Secretary for Benefits require regional office 

directors to establish unique COVERS locations for all areas to include office 

common areas and claims folders designated for relocation and retirement. 

2. We recommended the Under Secretary for Benefits establish a mechanism to 

identify and track the number of claims folders regional office personnel rebuild. 

3. We recommended the Under Secretary for Benefits establish a mechanism to 

ensure regional office personnel update COVERS when they transfer and receive 

claims folders. 

4. We recommended the Under Secretary for Benefits clarify national policy for 

regional office personnel to reconfirm the location of the claims folders outside the 

main folder storage areas every 7 days. 

5. We recommended the Under Secretary for Benefits establish a mechanism to 

ensure regional office personnel meet the requirement to reconfirm the location of 

claims folders outside the main folder storage areas every 7 days and take 

corrective actions to meet the requirement where improvement is needed. 

6. We recommended the Under Secretary for Benefits establish a mechanism to 

ensure regional office personnel conduct annual sequence checks that update 

COVERS. 

7. We recommended the Under Secretary for Benefits establish requirements for 

regional office directors to maintain the COVERS folder search report using 

standard codes for claim related mail requiring action and monitor to ensure the 

search report is accurate. 

8. We recommended the Under Secretary for Benefits require regional office 

personnel to initiate rebuilding missing claims folders with a pending claim no 

more than 60 days from the date VBA personnel are notified of the claim. 

9. We recommended the Under Secretary for Benefits establish a mechanism to 

ensure regional office personnel enforce the maximum 60 day search established 

in recommendation 8 and take corrective actions to meet the standard where 

improvement is needed. 

Under Secretary for Benefit Comments 

The Under Secretary for Benefits agreed with our findings and recommendations. The 

Under Secretary’s planned actions for the nine recommendations were acceptable and we 

VA Office of Inspector General iv 
 Audit of VBA’s Control of Veterans’ Claims Folders 

VA Office of Inspector General v 

will follow up on their implementation. See Appendix C for the full text of the Under 

Secretary’s comments. 

 (original signed by:) 

BELINDA J. FINN 

Assistant Inspector General 

for Auditing 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Introduction 

Purpose 

The Office of Inspector General (OIG) conducted this audit to determine if the Veterans 

Benefits Administration (VBA) had adequate procedures in place to locate veterans’ 

claims folders effectively. 

Background 

Control of Veterans Records System (COVERS) is VBA’s system for tracking the 

location of paper claims folders. COVERS shows where a folder is located within a 

particular organizational or operating element or with a specific individual in the 

organization. VBA employees update the COVERS database location by accessing 

COVERS and updating the system’s “receive” function. This may be done by scanning 

the folder barcode with an electronic barcode reader, or by manually typing in the folder 

number. The COVERS User Guide requires that staff update COVERS each time a 

claims folder is received at a new location. However, VBA had conflicting policies 

addressing how often the regional office should reconfirm the location of the folders 

located outside the main folder storage area: 

• VBA Manual M21-4, dated May 20, 2008, requires regional office personnel to 

reconfirm the folders at least monthly. 

• VBA Manual M21-1MR, dated November 15, 2004, and still in effect, requires 

regional office personnel to reconfirm folders every 7 days. 

In addition, VBA Manual M23-1, dated March 7, 1994, requires checking the main folder 

storage areas annually to make sure folders are filed in numerical sequential order. 

Upon receipt of an initial claim from a veteran, a VBA employee establishes a paper 

claims folder and an electronic record of the veteran in COVERS. A label including the 

veteran’s name, claim number or social security number, and COVERS barcode is 

generated and placed on the folder. Claims folders contain critical documents necessary 

to support the veteran’s military and medical history, which is the evidence used to grant 

benefits and, in many cases, could be the only original or certified copy of the document. 

This includes documents such as military discharge (DD Form 214), medical records 

showing the origin and cause of a disability, death certificates, and marriage certificates. 

Claims folders contain sensitive or personally identifiable information including social 

security numbers, birth dates, military records, and medical information. Loss of a 

claims folder could potentially impair a veteran’s ability to obtain accurate and timely 

benefits. 

VA Office of Inspector General 1 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Results and Conclusions 

VBA’s Claims Folder Control Process Ineffective 

VBA’s control of veterans’ claims folders, which contain personally identifiable 

information, was not effective. VBA managers did not track lost and rebuilt folders, 

consistently enforce COVERS policies, or establish effective search procedures for 

missing claims folders. Misplaced claims folders can cause unnecessary claim 

processing delays and increases the likelihood that folders will be lost. Lost claims 

folders place additional burdens on the veterans and reduce the time regional office 

personnel have to spend processing claims. 

1. COVERS Inaccurate–Claims Folders Misplaced and Lost 

As of February 20, 2009, VBA had about 4.2 million claims folders assigned to regional 

offices for benefit claims processing and safeguarding. From a statistical review of 

claims folders, we projected an estimated 437,000 (10 percent) of the 4.2 million claims 

folders were not at the location shown in COVERS. This consisted of approximately 

7 percent that regional office personnel eventually found at a location different than 

shown in COVERS (misplaced), and about 3 percent that were still missing at the 

completion of our audit (lost). 

Table 1. Location of Veterans’ Claims Folders Incorrect in COVERS 

Category 

Claims 

Folders Percent 

Misplaced Folders 296,000 7 

Lost Folders 141,000 3 

Total Not at COVERS Location 437,000 10 

Claims Folders Found At Different Locations Than Shown in COVERS

We projected that claims folders for approximately 296,000 (7 percent) veterans were 

misplaced. About 55 percent of the folders from this projection were found in other 

locations inside the regional office. For example, a claims folder that COVERS showed 

to be in the rating section was actually located in the regional office’s main folder storage 

area. 

The remaining 45 percent of the misplaced folders were found at the VA Records 

Management Center (RMC). VBA relocates inactive folders for living veterans to the 

RMC. However, claims folders that are designated for relocation are not updated until 

the RMC has acknowledged receipt of the folder in COVERS. During the time regional 

offices are relocating claims folders, and until such time as RMC staff update COVERS, 

these folders show in COVERS that they are located in the regional office’s main folder 

storage area, which is not the correct location for the claims folders. To ensure that 

VA Office of Inspector General 2 
 Audit of VBA’s Control of Veterans’ Claims Folders 

COVERS shows the correct location of claims folders, VBA should establish unique 

COVERS locations for folders waiting to be relocated. 

Claims Folders Not Located

We projected that claims folders for an estimated 141,000 (3 percent) veterans were lost. 

A review of payment histories for the 99 lost claims folders from the sample found that 

98 were not receiving current payments and 1 was receiving the appropriate monthly 

pension payment. For these lost claims folders, VBA officials stated most were for 

veterans with denied claims or for deceased veterans with no current payments. 

Regardless of the status (denied claims or deceased veterans) of lost claims folders, VBA 

personnel were responsible for maintaining accountability over these folders. VBA 

officials agreed that some of these folders were lost but also stated that the remaining 

folders may never have existed. However, we found folders that met the same criteria 

VBA used to conclude a folder may not have existed. Additionally, the disputed lost 

folders had records in COVERS and the Beneficiary Identification and Records Locator 

System (BIRLS) indicating the folders existed and at one time had been at a Federal 

Records Center, the RMC, or a regional office. 

2. VBA Did Not Track and Monitor Lost Veterans’ Claims Folders 

VBA personnel were not required and did not consistently track and monitor the number 

of lost claims folders. In addition to the lost claims folders we identified, regional office 

personnel rebuilt approximately 49,000 (1 percent) of the 4.2 million claims folders 

assigned to regional offices. Approximately 6,000 of the 49,000 rebuilt claims folders 

were rebuilt from September 2007 through May 2009. A rebuilt folder represents a 

situation where regional office personnel cannot find the folder when a veteran with 

previous claims history submits a new claim. 

Staff at only 2 of 12 regional offices tracked the number of rebuilt claims folders. For 

example, one regional office required staff to request approval from the service center 

manager when a folder was lost and needed to be rebuilt. Without knowledge of the 

number of claims folders lost and rebuilt, VBA officials cannot effectively manage 

resources to improve veterans’ benefits and services. 

3. COVERS Policies Not Enforced 

While VBA criteria mandates the use of COVERS, regional office managers did not 

consistently enforce existing COVERS policies due to minimal procedures for 

monitoring compliance. VBA Manual M21-4 requires regional office personnel to use 

COVERS for tracking the movement of all claims folders. The regional office assigns a 

COVERS name to each individual and office common area located in the regional office. 

Common areas are areas within the regional office where claims folders that need to be 

worked or returned to the main folder storage area are stored on shelves or tables. The 

more specific the designation, the more useful COVERS is in locating a folder. The 

COVERS User Guide requires that each individual update COVERS when they receive a 

claims folder to ensure locations in COVERS are up to date at all times–this includes 

VA Office of Inspector General 3 
 Audit of VBA’s Control of Veterans’ Claims Folders 

receiving folders located in office common areas used for temporarily storing folders. 

While criteria conflicts, M21-4 requires regional office personnel to reconfirm the 

location of the claims folder at least monthly, and sooner if numerous claims folders are 

on search or spot checks identify noncompliance. 

Regional Office Personnel Did Not Update COVERS 

Regional office personnel did not always receive, or scan the claims folders to confirm 

receipt. The COVERS User Guide states that all staff will update COVERS to show the 

folder’s new location each time they receive a claims folder. This relatively simple and 

quick process requires the individual to access the COVERS system and click the receive 

button in the COVERS window. Regional office personnel use an electronic barcode 

reader to scan the barcode, but if necessary, they could manually type in the claims folder 

number. COVERS is then updated to show the folder’s new location. 

Our surprise inspections of 1,731 randomly selected claims folders from employees’ 

desks and office common areas found that 128 (7 percent) of the claims folders were 

misplaced. Regional office personnel told us they: 

• Were unaware that the claims folder was on their desk and that most likely the folder 

was placed on their desk when they were not there. 

• Received new folders at the close of business and believed it to be too disruptive to 

stop and receive a folder every time one was received. However, folders frequently 

move multiple times in a day and if the folder was requested for review by a veteran, 

a service organization, or Congressional inquiry an extensive search would then be 

required since the last location in COVERS would have been at least a day old. 

Regional office managers need to establish a mechanism to ensure regional office 

personnel update COVERS when they transfer and receive claims folders. One potential 

option discussed with VBA officials was to require regional office personnel to COVER 

folders to new locations, and monitor COVERS to determine when regional office 

personnel did not receive the folders in COVERS within a specific number of business 

days. 

Further, office common areas at one location did not have a unique COVERS location so 

multiple common areas in the office showed the same location. While attempting to 

locate some claims folders, we had to search multiple locations in the regional office that 

had the same location name in COVERS to find a claims folder. Searching multiple 

locations is time consuming and creates inefficiencies reducing time available for claims 

processing. Regional office managers need to ensure each COVERS location within the 

regional office is unique. 

VA Office of Inspector General 4 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Regional Office Personnel Did Not Periodically Reconfirm Claims Folders

Regional office personnel did not always reconfirm claims folders periodically as 

required by VBA policy. In addition, VBA’s existing policies conflicted on how often 

staff needed to reconfirm folders. M21-4 stated that regional office management should 

ensure that all folders (outside the regional office’s main folder storage area) are 

reconfirmed at their current location at least monthly. On the other hand, M21-1MR, 

which is still in effect, requires regional office personnel to reconfirm folders every 

7 days. 

VBA Central Office personnel stated that folders should be reconfirmed every 7 days. 

Further, 11 of the 12 regional offices had local policies that required staff to reconfirm 

claims folders outside the main folder storage area every 7 days. All 11 offices 

designated a specific day of the week as their update COVERS day, where all employees 

were required to reconfirm every folder in their physical custody. Personnel at one 

regional office told us they reconfirmed folders twice a month, which met the 

requirement for criteria described in M21-4. However, this did not meet the requirement 

described in M21-1MR and was inconsistent with the local policies for the other 

11 regional offices. 

We projected that approximately 467,000 claims folders were located outside the regional 

offices’ main folder storage areas. Of these 467,000 claims folders, regional office 

personnel had not reconfirmed the location of approximately 202,000 (43 percent) claims 

folders within the last 7 days. Further, of these 202,000, regional office personnel had 

not reconfirmed an estimated 45,000 (10 percent of the 467,000) folders within the last 

30 days.

Regional office personnel said that periodic reconfirmations were not done because: 

• Staff was unclear about what day to reconfirm claims folders. 

• Claims folders at an office common area were rarely reconfirmed. 

• Claims folders were not reconfirmed for absent staff. 

Regional office managers need to establish a mechanism to ensure regional office 

personnel reconfirm folders at least every 7 days. One potential option we discussed with 

VBA officials was to implement a management report that will globally identify claims 

folders at the regional office that were outside the main folder storage area and have not 

been received for more than 7 days. 

Annual Sequence Checks Not Complete

The review of 2,881 sample claims folders located during our physical search showed 

that 16 claims folders were misfiled in the main folder storage areas, and about 

36 percent of folders found in our sample had not been confirmed since January 1, 2008. 

VBA Manual M23-1 requires staff to confirm annually that claims folders located in the 

main folder storage area are in sequential numerical order. Of 12 regional offices, 

11 stated they conducted annual sequence checks. At the regional office that did not 

VA Office of Inspector General 5 
 Audit of VBA’s Control of Veterans’ Claims Folders 

complete annual sequence checks, staff stated they had not conducted a sequence check 

for at least 5 years. 

While staff at 11 regional offices stated they completed annual sequence checks, their 

processes did not always update COVERS. VBA officials informed us about two modes 

in which regional office personnel could perform sequence checks via COVERS. When 

regional office personnel perform the sequence check, and the computer is connected to 

the regional office’s data network, the first option simultaneously reconfirms (updates the 

date and location) the claims folder in COVERS at the time it is scanned. If regional 

office personnel perform the sequence check with the computer not connected to the 

network, the second option provides a log file that can be uploaded to update COVERS. 

Sequence checking is necessary to organize and control veterans’ records in the storage 

areas. For example, in our report Audit of VA Regional Office Rating Claims Processing 

Exceeding 365 Days (Report No. 08-03156-227, September 23, 2009) we reported a case 

where a veteran’s claim for benefits was significantly delayed because the claims folder 

was misplaced. The misplaced claims folder was found during an annual sequence check 

at a regional office 22 months after the claim was filed. Without the sequence check, this 

original folder could have remained lost indefinitely and eventually would have required 

regional office personnel to rebuild the folder. Regional office managers need to 

establish a schedule so that regional office main folder storage areas are sequence 

checked and claims folders are reconfirmed at least annually. 

4. Claims Folders Search Process Ineffective 

VBA’s process for locating lost claims folders was not effective. VBA uses COVERS to 

search for claims folders needed for filing new mail (“M” search request) or for other 

reasons such as a Veterans Service Organization had requested the folder (“O” search 

request). However, COVERS did not identify a folder as lost. VBA needs to ensure lost 

folders are identified and implement standards for initiating the rebuilding process. 

Search Procedures

If regional office personnel have exhausted all initial search efforts and still cannot find a 

claims folder necessary to complete an action, they would generally place the claims 

folder on either “M” or “O” search. However, regional office personnel stated that the 

search function was not reliable because regional office personnel did not update the 

search report to keep it accurate. Further, COVERS information does not differentiate 

between a potentially lost claims folder and a claims folder that has been flagged because 

it requires action. Regional offices were using the “M” and “O” search codes 

inconsistently. For example, one regional office associated mail immediately with the 

claims folder, and only used the COVERS “O” search for potentially lost folders when 

regional office personnel needed the folder for claims processing. Other regional offices 

used the COVERS “M” search for most incoming mail without trying to associate the 

mail with the folder—claim related or not. Some regional offices used the COVERS 

VA Office of Inspector General 6 
 Audit of VBA’s Control of Veterans’ Claims Folders 

“M” search for missing claims folders, while other regional offices only used the 

COVERS “O” search to locate missing claims folders. 

At four of the first five regional offices we visited, we asked managers to provide us a list 

of lost folders for which they were currently searching. They were unable to provide us a 

list of lost folders because COVERS did not track that information, but referred us to the 

COVERS search report, which they stated was usually not accurate. VBA should ensure 

regional office directors maintain the COVERS folder search report using standard codes 

for claim related mail requiring action and monitor to ensure the search report is accurate. 

An accurate search report would help minimize delays in identifying folders that are 

actually lost and initiating the rebuilding process. 

Declaring Folders Lost and Rebuilding the Folder

Regional office personnel did not rebuild lost claims folders unless a claim was pending. 

When folders could not be located, staff placed the folder on the search report, requested 

a physical check for the folder in the main folder storage area, and sent a request to the 

regional offices where they believed the folder might be located. If the claims folder was 

not located, regional office personnel then requested the RMC to conduct a missing 

folder search. If the claims folder was not at the RMC, regional office personnel 

prepared a rebuilt claims folder to include development for any evidence or documents 

required for reconstruction, and marked the cover of the claims folder with the words 

Rebuilt Folder. 

VBA lacks standards specifying how long regional office personnel should search for a 

claims folder before declaring it lost and rebuilding it. A review of claims folders on 

search prior to January 1, 2009, and active claims listed on the Veterans Service Network 

Operations Report found that for most claims folders a search was no longer necessary 

because the claims folders had been previously located but regional office personnel had 

failed to remove the search request. However, we identified eight claims folders that 

were lost with related veteran benefit claims pending. These claims from 

6 of the 12 regional offices had processing delays ranging from 105 to 270 days. 

• A claim for increase in benefits was received from a veteran and opened on 

June 18, 2008. Additional medical information that could materially affect the rating, 

was date stamped September 18, 2008. The folder was put on search on 

December 2, 2008. Regional office personnel agreed the claim should have been 

rated when the medical exam results were received on or about September 18, 2008. 

The folder was rebuilt and benefits were granted on May 5, 2009—a delay of 

229 days. 

• A claim for increase in benefits was received from a veteran and established on 

December 1, 2008, and the folder was put on mail search on December 2, 2008. On 

March 17, 2009, in response to our inquiry, regional office personnel initiated a 

request to obtain service history information to continue processing the claim. The 

lack of timely action on the initial mail search delayed processing the claim from 

VA Office of Inspector General 7 
 Audit of VBA’s Control of Veterans’ Claims Folders 

December 2, 2008, to March 17, 2009—a delay of at least 105 days from the time the 

claim was received until the first action was taken. On April 9, 2009, the folder was 

found misfiled in the regional office’s offsite storage area. 

The time regional office personnel spend searching for and rebuilding lost folders can be 

better spent processing claims for veterans. When regional office personnel locate 

folders on search, they should remove the search request. Additionally, folders that 

regional office personnel cannot find should be identified as lost, and the staff should 

begin rebuilding the claims folder within 60 days from the date VBA personnel are 

notified of the claim. 

Conclusion 

Controls need to be strengthened to better track and locate claims folders and improve 

claims processing timeliness because current procedures were inadequate. VBA 

personnel properly controlled 90 percent of the claims folders, but additional 

improvements were needed to better track claims folders throughout the benefit claims 

rating process. Better control of veterans’ claims folders will improve service to 

veterans, help reduce claims processing times and lost documentation, and improve 

regional office productivity. 

Recommendations 

1. We recommended the Under Secretary for Benefits require regional office 

directors to establish unique COVERS locations for all areas to include office 

common areas and claims folders designated for relocation and retirement. 

Under Secretary for Benefits Comments

The Under Secretary agreed and stated VBA will revise the COVERS User Guide 

to direct stations to establish unique COVERS locations for all common areas and 

for those folders designated for relocation and retirement. 

2. We recommended the Under Secretary for Benefits establish a mechanism to 

identify and track the number of claims folders regional office personnel rebuild. 

Under Secretary for Benefits Comments

The Under Secretary agreed and stated VBA will create a report in the COVERS 

application to identify and track the number of folders rebuilt by VA regional 

offices that will show the number of days it takes to initiate the rebuilding process. 

3. We recommended the Under Secretary for Benefits establish a mechanism to 

ensure regional office personnel update COVERS when they transfer and receive 

claims folders. 

VA Office of Inspector General 8 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Under Secretary for Benefits Comments

The Under Secretary agreed and stated that the Office of Field Operations will 

send a formal letter to all regional offices reinforcing the requirement that all 

personnel update COVERS when they transfer and receive claims folders. 

Compliance will be monitored by the Area Office during their regional office site 

visits. 

4. We recommended the Under Secretary for Benefits clarify national policy for 

regional office personnel to reconfirm the location of the claims folders outside the 

main folder storage areas every 7 days. 

Under Secretary for Benefits Comments

The Under Secretary agreed and stated VBA will update M21-4, Chapter 2, 

requiring regional office personnel to reconfirm the location of claims folders 

outside the main storage area every 7 days. 

5. We recommended the Under Secretary for Benefits establish a mechanism to 

ensure regional office personnel meet the requirement to reconfirm the location of 

claims folders outside the main folder storage areas every 7 days and take 

corrective actions to meet the requirement where improvement is needed. 

Under Secretary for Benefits Comments

The Under Secretary agreed and stated VBA will create a report in the COVERS 

application that will show those claims files scanned out of the main file banks and 

not reconfirmed in the COVERS application within 7 days. Compliance will be 

monitored by the Area Office and Compensation and Pension Service during their 

regional office site visits. 

6. We recommended the Under Secretary for Benefits establish a mechanism to 

ensure regional office personnel conduct annual sequence checks that update 

COVERS. 

Under Secretary for Benefits Comments

The Under Secretary agreed and stated that Office of Field Operations will send a 

formal letter to all regional offices reinforcing the requirement for annual 

COVERS sequence checks that update COVERS simultaneously. The Area 

Office and Compensation and Pension Service will incorporate a review of the 

sequence check schedule during their regional office site visits. 

7. We recommended the Under Secretary for Benefits establish requirements for 

regional office directors to maintain the COVERS folder search report using 

standard codes for claim related mail requiring action and monitor to ensure the 

search report is accurate. 

VA Office of Inspector General 9 
 Audit of VBA’s Control of Veterans’ Claims Folders 

VA Office of Inspector General 10 

Under Secretary for Benefits Comments

The Under Secretary agreed and stated VBA will update the COVERS User Guide 

to clarify the appropriate use of the “M” and “O” codes when initiating search 

efforts on missing or lost files. 

8. We recommended the Under Secretary for Benefits require regional office 

personnel to initiate rebuilding missing claims folders with a pending claim no 

more than 60 days from the date VBA personnel are notified of the claim. 

Under Secretary for Benefits Comments

The Under Secretary agreed and stated VBA will update M21-1 MR, Chapter III, 

requiring regional office personnel to initiate rebuilding missing claims folders 

with a pending claim no more than 60 days from the date VBA personnel are 

notified of the claim. The manual update is scheduled for February 2010. 

9. We recommended the Under Secretary for Benefits establish a mechanism to 

ensure regional office personnel enforce the maximum 60 day search established 

in recommendation 8 and take corrective actions to meet the standard where 

improvement is needed. 

Under Secretary for Benefits Comments

The Under Secretary agreed and stated VBA will create a report in the COVERS 

application to show the number of days it takes a regional office to rebuild a 

claims folder. VBA will also add a review of the time it takes to rebuild a claims 

folder, from date of notification of claim to date of folder rebuild, in the 

Compensation and Pension Service site visits to regional offices upon 

implementation of the new rebuilt folder report. 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Appendix A 

Scope and Methodology 

We conducted our audit from March to August 2009. Our review of national and local 

policies included discussions with VBA Central Office personnel on procedures in place 

to locate claims folders and track their movements. We conducted a physical inspection 

and review of 3,000 claims folders at 12 statistically selected regional offices to 

determine if VBA had adequate procedures in place to effectively locate veterans’ claims 

folders. We selected the 3,000 claims folders based on a statistical sample of the claims 

folders COVERS showed were currently located at the 12 regional offices. We 

performed the following test procedures: 

• Determined if the location of claims folders shown in COVERS matched the 

claims folders’ current physical locations. 

Identified the potential effect for the misplaced and lost claims folders and 

researched the history of these folders in COVERS, Modern Award ProcessingDevelopment, and BIRLS. 

• Identified claims folders from our sample located outside the regional offices’ 

main folder storage areas to determine if regional office personnel reconfirmed 

folders within seven days, per VBA Manual M21-1MR. 

• Interviewed regional office and VA medical center administrative personnel with 

compensation and pension examination responsibilities to determine if they 

followed established procedures to adequately locate and track claims folders. 

In addition to the statistical review of claims folders, we performed the following 

tests at the 12 regional offices selected for onsite review: 

• Surprise inspections of 1,731 randomly selected claims folders located at 

employees’ desks or office common areas to determine if the location shown in 

COVERS matched the folders’ current physical locations. 

• Examination of selected folders placed on search to determine if staff removed 

folders from the list after receiving the claims folders. 

• Matched a list of folders searched prior to January 1, 2009, to active claims listed 

on the Veterans Service Network Operations Report to determine any potential 

delays in processing the claims due to folders not being readily available. 

Randomly selected matches from these lists to determine if claims processing 

delays occurred because the claims folders could not be located when needed. 

Also, to determine the number of rebuilt claims folders, we used data obtained from 

BIRLS, which is a VBA managed legacy database system that contains records of all 

beneficiaries and includes the claims folder rebuilt indicator. We obtained the number of 

rebuilt claims folders in BIRLS as of September 18, 2007, and May 5, 2009, which 

showed 118,080 and 124,136 rebuilt claims folders, respectively. Therefore, for the 20-

VA Office of Inspector General 11 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Appendix A 

VA Office of Inspector General 12 

month period ended May 5, 2009, the national number of rebuilt claims folders increased 

by 6,056. 

Our assessment of COVERS’ computer processed data was a primary objective of this 

audit. We determined location data of claims folders identified in COVERS was 

inaccurate. We also assessed the reliability of the veterans’ name and claim number in 

the claims folder’s documentation, and found it to be sufficiently reliable, and when 

viewed in context with the available evidence, we believe the conclusions and 

recommendations in this report fairly reflect the accuracy and reliability of COVERS’ 

computer processed data. 

We conducted this performance audit in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit 

objectives.
 Audit of VBA’s Control of Veterans’ Claims Folders 

Appendix B 

Universe and Sample Review of Claims Folders 

Universe

The sampling universe consisted of 4,204,541 claims folders under the jurisdiction of 

57 regional offices as of February 20, 2009. For the purpose of our review, Cheyenne, 

WY was sampled as a separate regional office and we did not include Manila, which had 

36,282 claims folders. 

Sample Design

We used a two stage sample design. The first stage of the sample selection stratified 

regional offices by region (East, Central, South, and West). Three regional offices were 

selected from each stratum using probability proportional to the number of claims folders 

in each regional office. The second stage of the sample design employed simple random 

sampling to select claims folders within each selected regional office. For each of the 

12 regional offices, we selected 250 claims folders for a total of 3,000 claims folders. 

This design minimized variations in the size of the sampling weights between sample 

units and therefore reduced any negative impact on precision due to unequal weights. 

Sample Methodology

To evaluate COVERS accuracy, we determined if claims folders were at the physical 

locations recorded in COVERS by performing a physical search for each claims folder 

using the claims folder number and the recorded COVERS location. For the physical 

search: 

• Auditors were accompanied by a staff member of each regional office. 

• The location where the folder was found was compared to the location recorded in 

COVERS. 

• If folders were not found during our initial search, then regional office personnel 

searched for the folders. 

• We verified possession of the folders by receiving a fax of the front cover for each 

volume of each sampled claims folder for folders outside the regional office. 

• Folders found at locations other than the recorded COVERS location were determined 

to be misplaced. 

After all search efforts were exhausted at the regional office and all folders had not been 

found, we made requests to the RMC and Federal Records Centers to locate the missing 

claims folders. Folders not found by the regional office, RMC, or Federal Records 

Centers were identified as lost. 

Sample Projections

VA Office of Inspector General 13 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Appendix B 

We projected 437,541 (10 percent) of 4,204,541 claims folders were not at the recorded 

COVERS location. This consisted of an estimated 296,354 misplaced claims folders and 

141,187 lost claims folders. 

Table 2. Projection of Misplaced and Lost Claims Folders 

Category 

Number of 

Claims 

Folders 

Margin of 

Error 

Number 

 +/- 

Percent of 

Active 

Folders 

Margin of 

Error 

Percent 

+/- 

Misplaced 296,354 34,823 7 0.83 

Lost 141,187 23,802 3 0.57 

Total: 437,541 42,231 10 1.01 

Of the 141,187 lost claims folders, we projected 137,065 (with a margin of error of 

23,856) were lost claims folders that had not been rebuilt. 

In addition, we projected 466,830 claims folders were located outside of the main folder 

storage area. This consisted of an estimated 201,622 claims folders that were not 

reconfirmed within 7 days. Of the 201,622 folders, 45,180 were not reconfirmed within 

30 days. 

Table 3. Projection of Claims Folders Outside the Main Folder Storage Area 

Not Confirmed Timely 

No. of 

Claims 

Folders 

Margin 

of Error 

Number 

+/- 

Folders 

Outside 

Main 

Storage 

Area 

Margin 

of Error 

Percent 

+/- 

Sample 

Size 

Not Confirmed within 7 

days 201,622 27,694 43% 5 140 

Not Confirmed within 30 

days 45,180 12,319 10% 2 31 

Total Folders Outside 

Main Folder Storage 

Area 

466,830 37,989 - - 330 

VA Office of Inspector General 14 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Appendix B 

VA Office of Inspector General 15 

Sample Results

We selected 250 claims folders for a total of 3,000 claims folders for each of the 

12 regional offices. For 20 sampled claims folders, it was determined that physical 

claims folders did not exist for the sampled claims numbers. These sampled claims 

folders were not included in sample results or projections. 

Of the 2,980 claims folders reviewed, we found a total of 2,670 claims folders at the 

recorded COVERS location, 211 claims folders that were misplaced, and 99 claims 

folders that were lost. 

Table 4. OIG Sample of Claims Folders 

Location 

Folders 

Reviewed 

Accurate 

Locations 

Misplaced 

Folders 

Lost 

Folders 

Total 

Inaccurate 

Locations 

Atlanta 245 212 21 12 33 

Boston 250 239 4 7 11 

Houston 248 224 15 9 24 

Indianapolis 248 174 68 6 74 

Little Rock 250 227 16 7 23 

Nashville 249 239 7 3 10 

New York 247 202 20 25 45 

Reno 250 228 19 3 22 

San Diego 250 227 17 6 23 

Seattle 246 230 10 6 16 

St. Louis 247 227 8 12 20 

WinstonSalem 250 241 6 3 9 

Total: 2,980 2,670 211 99 310 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Appendix C 

Under Secretary for Benefits Comments 

Department of 

Veterans Affairs Memorandum

Date: September 11, 2009 

From: Under Secretary for Benefits 

Subj: OIG Draft Report - Audit of Veterans Benefits Administration's Control of 

Veterans’ Claims Folders – WebCIMS 437886

To: Assistant Inspector General for Audit (52) 

1. Attached are VBA’s comments to OIG’s Draft Report: Audit of Veterans Benefits 

Administration’s Control of Veterans’ Claims Folders. 

2. Questions may be referred to Nancy Holly, Program Analyst, at 461-9199. 

(original signed by:) 

P. W. Dunne 

Attachment

VA Office of Inspector General 16 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Appendix C 

VBA COMMENTS TO OIG DRAFT REPORT 

Audit of Veterans Benefits Administration’s 

Control of Veterans’ Claim Folders 

Recommendation 1: We recommended the Under Secretary for Benefits require regional 

office directors to establish unique COVERS locations for all areas to include office 

common areas and claims folders designated for relocation and retirement. 

VBA Response: Concur. VBA will revise the COVERS User Guide to direct stations to 

establish unique COVERS locations for all common areas and for those folders 

designated for relocation and retirement. These unique locations will be required for 

use nationwide to establish consistency across regional offices. 

Target Completion Date: December 1, 2009 

Recommendation 2: We recommended the Under Secretary for Benefits establish a 

mechanism to identify and track the number of claims folders regional office personnel rebuild. 

VBA Response: VBA will create a report in the COVERS application to identify and 

track the number of folders rebuilt by VA regional offices. This report will also show the 

number of days it takes a Regional Office to initiate the process of rebuilding a claims 

folder. 

Target Completion Date: August 1, 2010 

Recommendation 3: We recommended the Under Secretary for Benefits establish a 

mechanism to ensure regional office personnel update COVERS when they transfer 

and receive claims folders. 

VBA Response: Concur. Current VBA policy in M21-1MR, Chapter III, requires all VA 

regional offices to use COVERS for tracking files. In addition, VBA also reviews 

COVERS compliance in the Compensation and Pension (C&P) site visits to regional 

offices. The Office of Field Operations (OFO) will send a formal letter to all regional 

offices reinforcing the requirement that all personnel update COVERS when they 

transfer and receive claims folders. This letter will also emphasize station 

management’s duty to ensure all regional office employees are following established 

policy and procedures. Compliance will be monitored by the Area Office during their 

regional office site visits. 

1Target Completion Date: December 1, 2009 

VA Office of Inspector General 17 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Appendix C 

Recommendation 4: We recommended the Under Secretary for Benefits clarify national 

policy for regional office personnel to reconfirm the location of the claims folders outside 

the main folder storage areas every 7 days. 

VBA Response: Concur. VBA will update M21-4, Chapter 2, requiring regional office 

personnel to reconfirm the location of claims folders outside the main storage area 

every 7 days. VBA will also provide notification to the regional offices of the M21-4 

update during the next Veterans Service Center Manager call scheduled for 

September 17, 2009. 

Target Completion Date: December 1, 2009 

Recommendation 5: We recommended the Under Secretary for Benefits establish a 

mechanism to ensure regional office personnel meet the requirement to reconfirm the 

location of claims folders outside the main folder storage areas every 7 days and take 

corrective actions to meet the requirement where improvement is needed. 

VBA Response: Concur. VBA will create a report in the COVERS application that will 

show those claims files scanned out of the main file banks and not reconfirmed in the 

COVERS application within 7 days. Compliance will be monitored by the Area Office 

and C&P Service during their site visits to the regional office. 

Target Completion Date: August 1, 2010 

Recommendation 6: We recommended the Under Secretary for Benefits establish a 

mechanism to ensure regional office personnel conduct annual sequence checks that 

update COVERS. 

VBA Response: Concur. Current VBA policy in M21-1MR, Chapter III, requires 

regional office management to establish a schedule to ensure that each regional office 

conducts a full file bank sequence check at least once per year. The Office of Field 

Operations (OFO) will send a formal letter to all regional offices reinforcing the 

requirement for annual COVERS sequence checks that update COVERS 

simultaneously. The Area Office and C&P Service will incorporate a review of the 

sequence check schedule during their regional office site visits. 

Target Completion Date: December 1, 2009 

Recommendation 7: We recommended the Under Secretary for Benefits establish 

requirements for regional office directors to maintain the COVERS folder search report 

using standard codes for claim related mail requiring action and monitor to ensure the 

search report is accurate. 

VA Office of Inspector General 18 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Appendix C 

VA Office of Inspector General 19 

VBA Response: Concur. VBA will update the COVERS User Guide to clarify the 

appropriate use of the “M” and “O” codes to when initiating search efforts on missing or 

lost files. This guide will incorporate the requirement for station management to ensure 

the accuracy of the search report on a regular recurring basis. In addition, mandatory 

employee training will be conducted for all appropriate regional office personnel. 

Target Completion Date: January 1, 2010 

Recommendation 8: We recommended the Under Secretary for Benefits require regional 

office personnel to initiate rebuilding missing claims folders with a pending claim no 

more than 60 days from the date VBA personnel are notified of the claim. 

VBA Response: Concur. VBA will update M21-1 MR, Chapter III, requiring regional 

office personnel to initiate rebuilding missing claims folders with a pending claim no 

 more than 60 days from the date VBA personnel are notified of the claim. The manual 

update is scheduled for February 2010. VBA will also provide notification to the regional 

offices of this new time limit for initiation of rebuilding claims folders during the next 

Veterans Service Center Manager call scheduled for September 17, 2009 

Target Completion Date: March 1, 2010 

Recommendation 9: We recommended the Under Secretary for Benefits establish a 

mechanism to ensure regional office personnel meet the maximum 60 day search time 

standard and take corrective actions to meet the standard where improvement is 

needed. 

VBA Response: Concur. VBA will create a report in the COVERS application to show 

the number of days it takes a regional office to rebuild a claims folder. VBA will also 

add a review of the time it takes to rebuild a claims folder, from date of notification of 

claim to date of folder rebuild, in the Compensation and Pension (C&P) site visits to 

regional offices upon implementation of the new rebuilt folder report. 

Target Completion Date: March 1, 2010 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Appendix D 

OIG Contact and Staff Acknowledgments 

OIG Contact Larry Reinkemeyer , (816) 997-6940 

Acknowledgments Joey Foley 

Robin Frazier 

Lee Giesbrecht 

Timothy V. Halpin 

Carol Hickman 

Patricia Hudon 

Brad Lewis 

Russ Lewis 

Jim McCarthy 

Henry Mendala 

Deanna Moczygemba 

Daniel Morris 

Ken Myers 

Tom Phillips 

Carla Reid 

Lynn Scheffner 

Jason Schuenemann 

Brenda Uptain 

Oscar Williams 

VA Office of Inspector General 20 
 Audit of VBA’s Control of Veterans’ Claims Folders 

Appendix E 

Report Distribution 

VA Distribution

Office of the Secretary 

Veterans Health Administration 

Veterans Benefits Administration 

National Cemetery Administration 

Assistant Secretaries 

Office of General Counsel 

Non-VA Distribution

House Committee on Veterans’ Affairs 

House Appropriations Subcommittee on Military Construction, Veterans Affairs, and 

Related Agencies 

House Committee on Oversight and Government Reform 

Senate Committee on Veterans’ Affairs 

Senate Appropriations Subcommittee on Military Construction, Veterans Affairs, and 

Related Agencies 

Senate Committee on Homeland Security and Governmental Affairs 

National Veterans Service Organizations 

Government Accountability Office 

Office of Management and Budget 

This report will be available in the near future on the OIG’s Web site at 

http://www.va.gov/oig/publications/reports-list.asp. This report will remain on the OIG 

Web site for at least 2 fiscal years after it is issued. 

VA Office of Inspector General 21