U.S. GOVERNMENT PUBLISHING OFFICE

29–683 WASHINGTON : 2018

VA FINANCIAL MANAGEMENT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON VETERANS’ AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

WEDNESDAY, MAY 24, 2017 

Serial No. 115–15 

Printed for the use of the Committee on Veterans’ Affairs 

( 

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

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(II) 

COMMITTEE ON VETERANS’ AFFAIRS 

DAVID P. ROE, Tennessee, Chairman 

GUS M. BILIRAKIS, Florida, Vice-Chairman 

MIKE COFFMAN, Colorado 

BRAD R. WENSTRUP, Ohio 

AMATA COLEMAN RADEWAGEN, American 

Samoa 

MIKE BOST, Illinois 

BRUCE POLIQUIN, Maine 

NEAL DUNN, Florida 

JODEY ARRINGTON, Texas 

JOHN RUTHERFORD, Florida 

CLAY HIGGINS, Louisiana 

JACK BERGMAN, Michigan 

JIM BANKS, Indiana 

JENNIFFER GONZALEZ-COLON, Puerto 

Rico 

TIM WALZ, Minnesota, Ranking Member 

MARK TAKANO, California 

JULIA BROWNLEY, California 

ANN M. KUSTER, New Hampshire 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

J. LUIS CORREA, California 

KILILI SABLAN, Northern Mariana Islands 

ELIZABETH ESTY, Connecticut 

SCOTT PETERS, California 

JON TOWERS, Staff Director 

RAY KELLEY, Democratic Staff Director 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

JACK BERGMAN, Michigan, Chairman 

MIKE BOST, Illinois 

BRUCE POLIQUIN, Maine 

NEAL DUNN, Florida 

JODEY ARRINGTON, Texas 

JENNIFER GONZALEZ-COLON, Puerto Rico 

ANN MCLANE KUSTER, New Hampshire, 

Ranking Member 

KATHLEEN RICE, New York 

SCOTT PETERS, California 

KILILI SABLAN, Northern Mariana Islands 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Veterans’ Affairs are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 

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(III) 

C O N T E N T S 

Wednesday, May 24, 2017 

Page 

VA Financial Management ..................................................................................... 1 

OPENING STATEMENTS 

Honorable Jack Bergman, Chairman ..................................................................... 1 

Honorable Ann Kuster, Ranking Member ............................................................. 2 

WITNESSES 

Ms. Laurie Park, Deputy Assistant Secretary for Finance, Office of Management, U.S. Department of Veterans Affairs ....................................................... 4 

Prepared Statement ......................................................................................... 26 

Accompanied by: 

Mr. Mitchel Sturm, Acting Deputy Chief Financial Officer, Veterans Benefits Administration, U.S. Department of Veterans Affairs 

Ms. Beryl Davis, Director, Financial Management and Assurance, U.S. Government Accountability Office ............................................................................. 6 

Prepared Statement ......................................................................................... 29 

Mr. Nick Dahl, Deputy Assistant, Inspector General for Audits and Evaluations, Office of Inspector General, U.S. Department of Veterans Affairs ........ 8 

Prepared Statement ......................................................................................... 41 

Accompanied by: 

Ms. Sue Schwendiman, Director, Financial Audit Division, Office of Inspector General, U.S. Department of Veterans Affairs 

Ms. Julie Larsen, Team Leader, Pension Maintenance Center and Debt Management, The American Legion .......................................................................... 9 

Prepared Statement ......................................................................................... 45 

MATERIALS SUBMITTED FOR THE RECORD 

Attachment 1 ............................................................................................................ 49 

Attachment 2 ............................................................................................................ 62 

Attachment 3 ............................................................................................................ 73 

VA Response to HVAC ............................................................................................ 78 

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(1) 

VA FINANCIAL MANAGEMENT 

Wednesday, May 24, 2017 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON VETERANS’ AFFAIRS, SUBCOMMITTEE ON DISABILITY ASSISTANCE

AND MEMORIAL AFFAIRS, 

Washington, D.C. 

The Subcommittee met, pursuant to notice, at 2:00 p.m., in Room 

334, Cannon House Office Building, Hon. Jack Bergman [Chairman 

of the Subcommittee] presiding. 

Present: Representatives Bergman, Bost, Poliquin, Dunn, 

Arrington, Kuster, and Peters. 

Also present: Representative Roe. 

OPENING STATEMENT OF JACK BERGMAN, CHAIRMAN 

Mr. BERGMAN. Good afternoon. This hearing will come to order. 

I want to welcome everyone to today’s hearing. 

Earlier today, we had the opportunity to hear from Secretary 

Shulkin about the administration’s budget priorities for the Department of Veterans Affairs. Now, we will examine how VA actually manages the money that taxpayers provide. 

Many of the numbers involved are astoundingly large and the 

audit speak can be confusing, but the core of the issue is very simple. The VA chief financial officer must move the right amount of 

money from Point A to Point B at the right time. The CFO must 

have strong internal controls, effective employees, and IT systems 

that work in order to accomplish that. 

We will hear about VA’s fiscal year 2016 financial report and the 

officer of the Inspector General will present its audit of those financial statements. 

OIG and the Government Accountability Office will explain their 

work on the troubling issue of improper payments. The American 

Legion will also share its observations on VA’s debt-collection practices. 

The department has a troubling number of weaknesses and deficiencies in internal financial controls. First, persistent IT security 

weaknesses are, unfortunately, well known to this Committee. The 

financial IT systems are inadequate, obsolete, and potentially only 

a few years away from complete failure; however, the problems go 

well beyond IT. The CFO organization is weak and hobbled by fragmentation. VA struggled to account for its education, mortgage, 

compensation, and pension liabilities. 

For years, VA has had difficulties in obligating and de-obligating 

funds, especially in the area of Community Care and undelivered 

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orders; in other words, VA has a hard time estimating how much 

a purchase will cost, setting aside the money when it will be needed, and then reclaiming the unspent money to use for other purposes. Billions of dollars are often tied up on the books, unavailable 

for the intended use. Last year, VA had about $5.5 billion in improper payments. 

An improper payment, as our fine witnesses will explain, is one 

that should not have been made, is the wrong amount, went to the 

wrong person, was made for items not received, or lacks necessary 

documentation. 

Not all improper payments are lost, but they represent a significant amount of government waste. VA has never been able to fully 

comply with the Improper Payments Elimination and Recovery Act 

and the improper payments are forecast to continue rising. 

VA deserves credit for its transparency on improper payments, 

but beyond transparency, I look forward to hearing a credible plan 

to solve the problem. 

Finally, sometimes, benefits are paid out incorrectly and recouping those improper payments necessarily entails debt collection. 

VA’s debt management center in St. Paul, Minnesota, does the 

work. In most instances, especially when the improper payment is 

through no fault of the veteran, the debt management center operates flexibly and constructively. VA policy is not to charge interest 

on these debts; however, after a payment is delinquent for 120or 

180 days, the law requires VA to turn it over to the Treasury for 

collection. 

The Treasury operates much more aggressively and adds interest 

and fees that can be substantial. This debt- collection system must 

operate to the highest standard. Administrative errors have grave 

consequences for veterans and their beneficiaries. 

In conclusion, Members of Congress and presidents of both parties have demonstrated a commitment to funding the benefits our 

veterans have earned. But no matter how many resources are provided, if the dollars are mismanaged or wasted, VA will not succeed 

in its mission. 

And now, I will yield to my friend, colleague, Ranking Member 

Kuster for her opening remarks. 

OPENING STATEMENT OF ANN KUSTER, RANKING MEMBER 

Ms. KUSTER. Thank you, Mr. Chairman. 

Good afternoon and welcome to the Oversight and Investigations 

Committee. This afternoon’s hearing is an opportunity to discuss 

current issues facing VA financial mismanagement or management. 

VA’s financial management system is of critical importance to 

the VA, especially VA health care. The VA relies on these systems 

to account for the procurement of needed medical and surgical supplies, prosthetics, adaptive sports equipment, which are critical to 

a veteran’s quality of life, and VA’s extensive community-care programs that we have discussed so frequently in our Committee. 

Year after year, the VA fails to fully comply with the Improper 

Payments Elimination and Recovery Act and year after year, this 

Committee struggles to ensure that the VA has the funds necessary 

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to provide veterans with the benefits and care that they have 

earned. 

We know that in fiscal year 2015, $5.5 billion in improper payments were made which went mostly to providing veterans care in 

the community, but this is unacceptable and we need to get this 

under control. I will have some questions today, however, about the 

definition, so we all have a common understanding of what that— 

how those funds were expended. 

The issues facing the VA’s financial management system are 

complex and I appreciate the opportunity to gain insight from the 

expert witnesses assembled today from the VA, the GAO, the IG, 

and The American Legion. 

As you are all aware, this morning, our Committee heard from 

Secretary Shulkin about the VA’s proposed budget. With VA’s financial management challenges, I am concerned that the VA is unable to properly forecast its requirements, which contributes to 

VA’s many challenges that we discussed in our hearing this morning. 

Toward that end—toward the end of last year, the VA announced 

its selection of the Department of Agriculture as its Federal shared 

service provider. While I understand that selection of an FSSP can 

allow a department to better focus on its mission and replace its 

50-year-old financial management system, I would like more details on the costs and implementation of this shared system and 

whether this will meet VA’s needs going forward. 

VA’s IT system is the backbone of the organization. All too often, 

this Subcommittee discuss the lack of IT infrastructure when we 

are discussing the agitating factors that led to a particular crisis. 

The VA’s partnership with the USDA seems to be a move in the 

right direction, but the VA’s financial IT system is not the only 

cause, as the Chairman has mentioned, for the VA’s faulty finances. 

As in many other departments, the VA’s chief financial officers 

operate under piecemeal protocols and cannot follow recommendations intended to remedy complex and expensive problems within 

the system. 

I hope to learn more about these witnesses within the VA from 

our witnesses. The GAO and IG have completed multiple investigations into the VA’s improper payments and financial structure; 

however, the VA has not always agreed with the recommendations 

made by the agencies and today I hope to hear about why that is. 

We have been asked to pass legislation that would allow VA to 

enter into provider agreements and other contracts that do not require compliance with certain parts of the Federal acquisition regulations. Well, in some circumstances, this appears to be the best solution. I also know from previous hearings, that VA’s failure to follow policies, its broken promises, and lack of oversight still contribute to many of VA’s challenges and I am not convinced that 

simply passing such a legislation will solve this problem. 

I look forward to the discussion ahead of us this afternoon, so we 

can get VA’s financial management program on track so that it can 

support the important VA mission to get veterans the benefits, 

care, and support they so desperately need and deserve. 

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So, thank you, Chairman Bergman. I yield back the balance of 

my time. 

Mr. BERGMAN. Thank you, Ranking Member Kuster. 

I ask that all Members waive their opening remarks, as per this 

Committee’s custom. 

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

On the panel we have Ms. Laurie Park, Deputy Assistant Secretary 

for Finance in the VA Office of Management; she is accompanied 

by Mr. Mitchel Sturm, Acting Deputy Chief financial officer for 

VBA. 

We have Ms. Beryl Davis, Director of Financial Management and 

Assurance for GAO. 

We also have Mr. Nick Dahl, Deputy Assistant Inspector General 

for Audits and Evaluations; he is accompanied by Ms. Sue 

Schwendiman, Director of OIG’s Financial Audit Division. 

And we have Ms. Julie Larsen, Team Leader for Debt Management and The Pension Maintenance center The American Legion. 

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

[Witnesses sworn.] 

Mr. BERGMAN. And let the record reflect that all witnesses have 

answered in the affirmative. 

Ms. Park, you are now recognized for five minutes. 

STATEMENT OF LAURIE PARK 

Ms. PARK. Good afternoon, Chairman Bergman, Ranking Member Kuster, and Members of the Subcommittee. Thank you for the 

opportunity to discuss the actions the Department of Veterans Affairs is taking to improve financial management. 

As the VA Deputy Assistant Secretary for Finance, I am responsible for department-wide financial management activities. 

I am here today with my esteemed colleague, Mitch Sturm, Acting Deputy Chief Financial Officer for the Veterans Benefits Administration. 

Over the last several years, through our improper-payment reviews, insights from the Office of Inspector General reports and detailed deep dives into root causes of audit findings, it has become 

clear that the foundation of our financial management practices is 

failing us. We have based our day-to-day acquisition and financial 

management process on a fragile network of systems that routinely 

require our workforce in the field to rely upon manual double-entry 

processes, complex workarounds, manual reconciliations, and procedures that cannot keep pace with current financial management requirements, set forth by the Office of Management and Budget and 

the Department of the Treasury. 

Efforts to remediate these complex issues within our current 

foundation, coupled with a workforce that has not been trained in 

best practices has limited our progress. VA must focus on modernizing our financial management and acquisition systems, strengthening our internal controls, reengineering business processes, and 

investing in a trained workforce. 

Recognizing these challenges, we have recruited talented financial management professionals, seasoned project managers, experienced data architects, and a strong leadership team to lead initiatives that will improve financial management at VA. 

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Examples of this important work include: 

In October of 2016, we kicked off VA’s financial management 

business transformation initiative. This agency top-priority, brings 

acquisition, financial, information technology, supply-chain, and 

frontline health care and benefit experts from across the department in collaborative sessions to transform the way that VA does 

business. This multi-year effort will standardize, integrate, and 

streamline financial management and acquisition processes within 

Department of Agriculture’s shared service solution. 

My office is charged with the responsibility to spearhead a new 

department-wide effort, the financial management training initiative, providing education to financial management and acquisition 

professionals across the department through a centralized and 

standardized curriculum. An important aspect of this initiative is 

the partnership between financial management and acquisition 

professionals, which is needed to address many of our complex 

challenges and support VA’s financial management business transformation. 

In the last ten months, we have held both, virtual web- based 

and in-person events where VA employees participated in a total 

of 71 separate classes. Two more events, one virtual and one inperson, are planned over the next nine months. 

Over the past three years, VA has completed a deep-dive review 

of over 75 programs to identify internal control failures that result 

in improper payments. This led to a significant increase of VA’s reported improper payments. 

Currently the legislative improper payment definition includes 

any payment that experienced an error during the acquisition or 

payment process, as well as those made to the wrong person, the 

wrong amount, and where services were not received. This results 

in many payments being reported as improper, even though the 

government has not lost money. Currently, we estimate about 90 percent of our $5.5 billion in reported improper payments do not represent a loss to the government and cannot be recovered; further, about 80 percent are attributed to errors in the acquisition process, specifically in our programs providing care in the community, because a contract did not 

exist that followed Federal acquisition regulations. 

While we are committed to recovering identified losses, VA can 

only collect payments that have been specifically identified during 

an internal review process. VA cannot collect on a projected 

amount of improper payments, even a loss, because the payees or 

documentation supporting a collection cannot be identified or created from projections. 

Debt collection is also an essential part of strong financial management where VA is making improvements. VA balances Veteran 

debt collection with a strong sense of compassion, as well as compliance with Federal debt-collection statutes and policy. We have 

collaborated closely with Veterans and veteran service organizations to understand the challenges facing Veterans when a debt exists. 

Our approach includes educating Veterans on strategies to avoid 

debt, understanding the debt-collection process, and leveraging options available when a debt is established. Even with these many 

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efforts, VA recognizes it has many challenges to overcome, while at 

the same time, providing Veterans the benefits and services that 

they have earned and deserve. 

VA acknowledges its current challenges and audit findings in financial management that reflect a need for improved financial 

stewardship. We believe that the initiatives we are working on will 

improve VA’s financial management and better serve our Veterans. 

Thank you for the opportunity to appear before you today and for 

your continued support of Veterans. I look forward to your questions. 

[THE PREPARED STATEMENT OF LAURIE PARK APPEARS IN THE APPENDIX]

Mr. BERGMAN. Okay. Thank you. 

You have got to turn the microphone on first. It doesn’t—it is not 

voice-activated. 

Thank you, Ms. Park. 

Ms. Davis, you are recognized. 

STATEMENT OF BERYL DAVIS 

Ms. DAVIS. Chairman Bergman, Ranking Member Kuster, and 

Members of the Subcommittee, I am pleased to be here today to 

discuss the issue of improper payments at both the governmentwide level and at the Department of Veterans Affairs. 

Improper payments remain a significant and pervasive government-wide issue. For several years, GAO has reported that the 

Federal government is unable to determine the full extent to which 

improper payments occur and reasonably assure that actions are 

taken to reduce them. 

Since fiscal year 2003, when certain agencies began reporting improper payments, as required by law, cumulative government-wide 

improper payment estimates have totaled over $1.2 trillion. For fiscal year 2016, agencies reported improper payment estimates totaling over $144 billion, an increase of more than $7 billion from the 

previous year’s estimate. For the same year, the Department of 

Veterans Affairs reported an improper payment estimate that totaled 5.5 billion, an increase of about 500 million from the prior 

year. The VA improper payment error rate was 4.5 percent of related program outlays; the VA Community Care Program, reporting $3.6 billion in improper payments; and the Purchase LongTerm Services and Support Program, reporting $1.2 billion in improper payments accounted for about 87 percent of VA’s estimated 

improper payments for fiscal year 2016. 

These two programs also had the two highest error rates government-wide in that fiscal year with error rates of about 76 percent 

and 69 percent respectively. 

VA has not developed improper payment estimates for all of the 

programs and activities it has identified as susceptible to significant improper payments. For fiscal year 2016, VA did not report 

improper payment estimates for four such programs. Because VA 

did not report estimates for these programs, its overall improper 

payment estimate is understated and the agency is hindered in its 

efforts to reduce improper payments in these programs. Strong financial management practices, including effective internal control, 

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are important for Federal agencies to better detect and prevent improper payments. 

The VA faces significant financial management challenges. In 

2015, GAO designated VA health care as a high- risk area because 

of concern about VA’s ability to ensure its resources are being used 

cost-effectively and efficiently and to improve veterans’ timely access to health care and to ensure the quality and safety of that 

care. 

In addition, in VA’s fiscal year 2016 agency financial report, the 

independent auditor cited material weaknesses and significant deficiencies in the design or operation of internal controls of our financial reporting. To reduce improper payments, VA can use rootcause analysis to identify why improper payments are occurring 

and to develop corrective actions. 

According to VA’s fiscal year 2016 agency financial report, the 

root cause for over three-quarters of VA’s improper payments was 

program design or structural issues. To reduce the amount of improper payments in this area, VA stated that it will make the procurement practices more compliant with Federal acquisition regulation provisions. 

In addition, to help reduce improper payments, VA can complete 

its implementation of GAO’s recommendations. VA pays billions of 

dollars to millions of disabled veterans, thus, accurate claims decisions help ensure that VA is paying disability benefits only to those 

eligible for such benefits and in the correct amounts; however, two 

GAO reports have found problems with how VA processed its 

claims to reasonably assure the accuracy of or eligibility for the disability benefits, increasing the risk of the improper payments. 

For example, in a November 2014 report, GAO found that VA 

had, among other things, shortcomings in its quality review practices that could reduce its ability to ensure accurate and consistent 

processing of disability compensation claims decisions. To date, VA 

has implemented six of the report’s eight recommendations and expects to implement the other two this summer. 

In conclusion, in light of VA’s significant financial management 

challenges, we continue to be concerned about VA’s ability to ensure its resources are being used cost-effectively and efficiently. It 

is critical that VA take actions to reduce improper payments, especially given that VA’s payments amounts are likely to increase in 

fiscal year 2017. 

While VA has taken several actions to prevent improper payments, further efforts are needed to help minimize the risk of improper payments across its programs. 

Chairman Bergman, Ranking Member Kuster, and Members of 

the Subcommittee, this concludes my prepared remarks. I look forward to answering any questions you may have. 

[THE PREPARED STATEMENT OF BERYL DAVIS APPEARS IN THE APPENDIX]

Mr. BERGMAN. Thank you, Ms. Davis. 

Mr. Dahl, you are now recognized for five minutes. 

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STATEMENT OF NICK DAHL 

Mr. DAHL. Mr. Chairman, Ranking Member Kuster, and Members of the Subcommittee, thank you for the opportunity to discuss 

our work regarding VA’s financial management. 

I will focus on the results of the fiscal year 2016 audit of VA’s 

consolidated financial statements and our work related to IPERA. 

As mentioned, I am joined by my colleague, Sue Schwendiman. 

Effective financial management is important because it enables 

an agency to plan, direct, monitor, and control its financial resources. The CFO Act requires the OIG to conduct an audit of VA’s 

financial statements. We contracted with the independent public 

accounting firm, CliftonLarsonAllen, to perform the audit. 

Although VA has received an unmodified or clean opinion on its 

consolidated financial statements from our contracted auditors, VA 

has continuously faced challenges in achieving that result. A clean 

opinion means that financial statements are presented fairly in all 

material respects, in accordance with accounting principles, generally accepted in the United States. It does not, however, mean 

VA easily obtained that opinion or that VA does not have internal 

control weaknesses. 

The most recent audit of VA’s financial statements identified six 

material weaknesses and two significant deficiencies, which was 

two more in total than the previous year. A material weakness is 

a deficiency in internal controls, such that there is a reasonable 

possibility a material misstatement will not be prevented or detected and corrected in a timely basis. 

Three of these material weaknesses are repeated from the prior 

year’s audit, including information technology security controls; 

Community Care obligations, reconciliations, and accrued expenses; 

and, financial reporting. 

Three others were new material weaknesses; first, education benefits accrued liability. For this, CLA reported VA did not use the 

appropriate method to account for veterans education benefits and, 

therefore, did not report an estimated liability for future benefit 

payments until fiscal year 2016. 

Second, the control environment surrounding the compensation, 

pension, and burial actuarial estimates. After VA’s chief actuary retired, CLA noted the lack of succession planning to replace the actuary, who was responsible for calculating VA’s unfunded veterans 

compensation and burial liability, which totaled over $2 trillion. 

Third, the CFO organizational structure for VA and the Veterans 

Health Administration, CLA elevated this from a significant deficiency to a material weakness and reported VA’s decentralized and 

fragmented organizational structure for financial management and 

reporting did not operate in a fully integrated manner. 

CLA also reported two significant deficiencies, which are deficiencies in internal controls, less severe than material weaknesses, 

yet important enough to merit attention by those charged with governance. First, procurement, undelivered orders, accrued expenses, 

and reconciliations: CLA reported issues concerning reconciliation 

among various procurement systems and VA’s financial management system, VA’s extensive use of miscellaneous obligating documents, the lack of an adequate process to validate estimated accrued expenses against payment data, and procurement issues, 

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such as untimely liquidation of undelivered orders or the untimely 

recording of contracts in FMS. 

Second, VA’s loan guarantee liability: CLA reported the Veterans 

Benefits Administration needed to revise certain model assumptions used for estimating future cash flows and determining the 

cost of its loan guarantees for financial reporting purposes, which 

led to a reduced reported liability. 

Overall, CLA reported VA’s legacy financial management system 

no longer met increasingly stringent and demanding financial management and reporting requirements. CLA made recommendations 

to address identified issues. 

Additionally, VA is currently working with the U.S. Department 

of Agriculture as a shared services provider to obtain financial 

services. 

In fiscal year 2017, VA began efforts to standardize business 

processes and identify changes required for this systems modernization effort. 

Last week, we issued our annual determination on VA’s compliance with IPERA. We reported VA did not comply with two of 

OMB’s six IPERA requirements, specifically, that VA did not maintain a gross improper payment rate of less than 10 percent for the 

VA Community Care Program and the Purchased Long Term Services and Support Program, and also, VA did not meet reduction targets for six VHA programs. 

We made several recommendations to agency leadership to take 

steps to reduce improper payment rates, achieve reduction targets, 

and improve improper payment estimates. 

In conclusion, VA’s financial management and system challenges 

are many and complex. VA plans to move to a shared services provider to gain access to modern technology, but VA will need strong 

organizational leadership and coordination or cooperation to manage this significant change. 

Mr. Chairman, this concludes my statement. We would be happy 

to answer any questions you or other Members of the Subcommittee may have. 

[THE PREPARED STATEMENT OF NICK DAHL APPEARS IN THE APPENDIX]

Mr. BERGMAN. Thank you, Mr. Dahl. 

Ms. Larsen, you are now recognized for five minutes. 

STATEMENT OF JULIE LARSEN 

Ms. LARSEN. Chairman Bergman, Ranking Member Kuster, and 

distinguished Members who proudly serve on the Subcommittee, on 

behalf of Charles E. Schmidt, the national commander of the largest veterans service organization in the United States, representing 

more than two million members, it is my duty and honor to present 

The American Legion’s position on this important issue regarding 

veteran debt and collection and assist the Committee in understanding the Department of Veterans Affairs debt-collection process, and highlight areas of improvement, as well as provide insight 

as to how The American Legion assists the veterans in these matters. 

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I am The American Legion subject matter expert on debt collection within the VA and work at the VA’s Regional Office in St. 

Paul, Minnesota. There, I assist veterans who have incurred debts. 

Often, these debts are being collected from VA benefits or other 

sources of income, such as tax refunds. Older debts are referred for 

collection to the U.S. Treasury Department, which will employ collection methods, such as garnishment of wages or Social Security 

benefits. 

Once a debt is owed to the VA, the case is referred to the debt 

management center for collection. The DMC sends the claimant a 

letter detailing the reason for the debt, along with the amount due. 

It also provides information on repayment options and requesting 

a waiver and rights of appeal. 

If there is no response to the letter within 30 days and the person is receiving VA benefits, the VA will recover the full amount 

of debt from those benefits. 

In cases where an individual is not receiving VA benefits, demand letters will be sent and credit agencies are notified. Eventually, these debts will be referred to the U.S. Treasury Department 

for further collection action. 

There are a number of ways that The American Legion tries to 

assist claimants. For example, we help explain the process to the 

claimant and inform them of their options. We will request additional information from debt management center staff to develop a 

repayment plan; additionally, we will contact the Regional Office 

staff if the debt appears to be erroneous. 

I would like now to share a few case scenarios with you. A case 

where the daughter of a veteran incurred a sixteen-thousand-dollar 

overpayment, because she was incorrectly receiving death and education benefits when she was not entitled to receive both. She had 

applied for a waiver on time, but because her request was misplaced, the waiver was never processed. As a result, DMC garnished her entire-eight-thousand-dollar tax refund in order to recover a portion of the debt. 

I later learned that the daughter had a delivery confirmation 

from the U.S. Postal Service, verifying that the waiver request had, 

indeed, been received by the VA. Fortunately, in this case, the VA 

granted the waiver, due to the financial hardship and the $8,000 

was later refunded. 

The next case concerns a homeless female veteran who incurred 

a large debt after the VA removed her dependence from her benefits retroactively to 2005. Due to her homelessness, she was unable 

to receive the VA’s letter advising her of the debt. Because she was 

unaware of her options such as a repayment plan, DMC began recovering all of the debt from her compensation. This went on for 

about a year before we intervened. 

What made matters even worse for this female veteran, and if 

being homeless wasn’t hard enough, she also had to deal with her 

vehicle being repossessed. Fortunately, we were successful in getting two months of her benefits refunded and a small withholding 

set up. I am pleased to report that her benefits were restored completely and she received a retroactive payment. 

As you all well know, the VA system is complex and difficult for 

many veterans to understand. In both the examples that we have 

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shared with you, the primary issue is how the VA collected and 

processed that information; letters sent to homeless veterans were 

returned and a debt was incurred. Veterans who submitted requested information never made it to the debt management center. 

These are areas we feel the VA can improve upon. 

Fortunately, The American Legion and other veteran service organizations maintain staff in every Regional Office to aid veterans 

and their dependents with claims and other VA issues, such as 

debts. We specialize in identifying VA errors and solving problems 

for veterans and their families. Thank you. 

[THE PREPARED STATEMENT OF JULIE LARSEN APPEARS IN THE APPENDIX]

Mr. BERGMAN. Thank you, Ms. Larsen. 

The written statements of those who have just provided oral testimony will be entered into the hearing record. 

We will now proceed with questioning. I will yield myself the 

first five minutes. Ms. Park, I would like to start with the headline 

here, ‘‘Community Care and purchased long term services and supports have the highest improper payments in the Federal government’’; about 3.5 billion and 1.2 billion of overpayments, respectively. 

I understand VA’s position that most of this money is not necessarily misspent, just designated as improper, because it is not 

backed up by bona fide contracts. VA categorizes about 3.3 billion 

and 900 million that way. 

Can you assure me and all of us that none of that money is wasted? 

Ms. PARK. So, thank you for the question, sir. 

So, in doing the test of those two programs, Community Care 

and PLTSS, our testers do sample and they dig into the actual, did 

we have the proper paperwork that supports those payments? Did 

they get to the right place? The right amount? Were they paid the 

Medicare rate? 

So, yes, I can assure you that they were correct. 

Mr. BERGMAN. So, yes or no, regardless, is it fair to say a payment that lacks a bona fide contract could also be made in the 

wrong amount or sent to the wrong place? 

Ms. PARK. So, when you talk about the huge number of payments 

that we have, I think there is always opportunity for something to 

go wrong; however, during our sampling, we found that the payments were made to the right person for the right amounts. 

Mr. BERGMAN. Ms. Davis, putting aside this issue of contracts or 

no contracts, there was still about $200 million and $300 million 

of overpayment in the two programs respectively. Can you tell us 

about what they are? 

Ms. DAVIS. I cannot speak to what they are. I can state that in 

addition to the structural issues that have been referred to regarding the two programs, Community Care and Purchase Long Term 

Services and Support, there are a number of improper payments 

that are made in the compensation program and those are due to 

administrative errors. 

This is based on information that is provided by the agency itself 

as to how it is categorizing its improper payments, using the catLeonard.horne on VACREP0180 with DISTILLER

12 

egories that are established by the Office of Management and 

Budget. 

Mr. BERGMAN. Thank you. 

Mr. Dahl, OIG rejected the improper payment estimates VA submitted for two programs: VHA Purchasing of Supplies and Materials and the Post-9/11 G.I. Bill. 

VA said the improper payments were 22 million and 3.9 million, 

respectively, and OIG said they were 78 million and 250 million, 

respectively; that is a huge difference. 

Can you explain how OIG came up with its numbers? 

Mr. DAHL. What we did was questioned the depth of the testing 

that they did when they were verifying those payments, and we 

found that, for example, with the Post-9/11 G.I. Bill, that they 

weren’t verifying the tuition charges against, in the old days, it 

would be a course catalog; today it might be more likely something 

posted on a Web site. But in our opinion, they didn’t independently 

validate that the tuition that they were billed was proper. So that 

is why there was such a large delta there. 

Mr. BERGMAN. Ms. Park, would you like to comment on that? 

Ms. PARK. Sure. For the supplies and materials—so, the supplies 

and materials issue actually ended up being that when the IG actually sampled, they were looking for precise schedule—fee schedules 

that actually matched the time in which we were invoiced from 

someone—Care in the Community was—for a supply—I’m sorry— 

for a supply. 

So, what we found was, because of the disconnect between our 

acquisition and our financial systems, we couldn’t make that link. 

We didn’t have a report that we could actually demonstrate to the 

IG that we had actually paid the right amount for those supplies, 

so that was generally the issue. I can defer to Mitch about the education. 

Mr. STURM. Thank you. Yeah, for education, we did go back and 

look at 30 of the samples the IG pulled and they were right; we 

were not verifying back to the old catalog, but all 30—all 30 of 

them were proper. But because we didn’t have the proper support, 

the IG determined them to be improper for this review, is we are 

going to expand our testing for next year and this year to include 

that look at those catalogs or online Web sites. 

Mr. BERGMAN. Thank you. I see my time has expired. 

Ranking Member Kuster is recognized for five minutes. 

Ms. KUSTER. Thank you, Mr. Chair. 

I want to follow up on this whole issue about the improper payments, because I have a concern about expectations going forward 

based on the White House budget presentation. The White House 

has stated the budget will save the American people $150 billion 

in improper payment savings and we have discussed here today 

that according to the 2016 agency financial report, the VA issued 

over 5.5 billion in improper payments in fiscal year 2016; 5.3 billion of this is overpayments. 

But Ms. Park, your testimony is that 90 percent of that cannot 

be recovered. And would you please clarify for my colleagues and 

for anyone watching this hearing, this whole issue about the contracts in the Community Care programs, because we have a serious 

disconnect if the White House is assuming that these funds can be 

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13 

recovered and, in fact, we are not going to go back—these services 

have been provided. We are not going to go back out into the community—I hope not, in my district—and take these monies back 

from rural hospitals that barely get by. 

So, could you explain the reality of this situation? 

Ms. PARK. Yeah, I am very happy to do that. 

So, take the example for a Veteran that receives care in the community where there is no Federal acquisition regulation based contract exists; they are going to get care in the community. What our 

sampling and testing has indicated is that this payment was for 

the correct amount to the right person—we verified the rate—but 

because the provider agreement was not based on a FAR[NMF1] 

contract, it is improper. 

According to the improper payment rate, we should be able to go 

back to that provider and collect that payment. And that is something that we don’t want to do because we did receive a service. 

The Veteran was helped, so we are not going to move forward with 

those collections.[NMF2] 

Ms. KUSTER. Thank you very much, Ms. Park. 

And I just want to say to Ms. Larsen, you broke my heart. I cannot imagine that we—the U.S. Government, through the VA, goes 

after a homeless woman because of some retroactive change in her 

benefits that she knew nothing about and takes money out of her 

paycheck and repossesses her car. 

So, I certainly hope we don’t go forward with going after rural 

hospitals for services that have already been provided. 

All right. So we are going to move toward this USDA financial 

product—I am sorry, I don’t have the correct term—and the VA, 

how is this going to help with the payments of veterans benefits, 

medical center operations, non-far based contracts? I feel like we 

are going to be back here for another hearing another day, so help 

us understand how this is going to get better and is there anything 

that we could do to help with legislation if these Community Care 

contracts are not going to be far-based contracts, let’s not put them 

under this improper payment category; let’s define it some other 

way. 

Ms. PARK. So, when we talk about moving to a Federal financial 

system and how it is actually going to help us with the issues that 

you have seen, so the way—VA is different than what you look at 

for most big departments. They will have a singular financial system where they do all of their accounting activities, so I am talking 

about status of funds, funds distribution, obligations, contract ordering, payments, accounts receivable. 

So, VA built things way differently and it started out a program 

area, so they built programs like care in the community, veteran 

benefit programs, the education programs; they built systems to 

meet those needs and then they slapped accounting on top of it. So, 

that causes all of these disconnects. That is why we rely so heavily 

on these reconciliations between systems out in the field. 

So, what we are going to do with a new shared service provider, 

just like any other Federal government agency, we are going to put 

that finance stuff into one financial and acquisition system that is 

already integrated, so we are not going to have the fat fingering 

in between the systems and all the reconciliations that occur. 

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14 

So that will give us, not only visibility into our financials, but it 

is also going to resolve a lot of our issues. So—and so it will also 

make our programs more efficient, I believe, as well. 

Ms. KUSTER. Yeah, I appreciate it. My time is up, but I do think 

we are going to have to deal with this community contract as an 

issue. 

And I just want to say for myself, having worked for many, many 

years with hospitals and hospital economics, the quote that I have 

heard over and over is ‘‘Hospital economics are wear the rubber 

meets the blue sky.’’ So, good luck with keeping track of how these 

dollars are spent. 

Thank you, I yield back. 

Mr. BERGMAN. Thank you. 

Mr. Poliquin, you are recognized for five minutes, sir. 

Mr. POLIQUIN. Thank you, Mr. Chairman, very much. 

Ms. Park, let me ask you a couple of questions. I want to make 

sure I understand this. The VA contracts for goods and services, 

whether it be providing health care for our heroes in a community 

setting or to buy band aids or aspirin, correct? 

Ms. PARK. Yes, sir. 

Mr. POLIQUIN. Okay. And anytime you use those or you don’t use 

those monies, you return them to the United States Treasury, correct? 

Ms. PARK. In some cases. There are some authorities where we 

are allowed to keep the money, but, generally, yeah. 

Mr. POLIQUIN. Okay. Yeah, and in 2016, there was $4.2 billion 

of funds that were contracted for various purposes that were unused by the VA; is that correct? 

Ms. PARK. I am not familiar with that number, sir. 

Mr. POLIQUIN. Okay. Well, that is the number that I have here, 

but there is a lot of money every year that goes back to the U.S. 

Treasury. We appreciate it so the taxpayers don’t have to spend it 

because it wasn’t used for whatever purposes it was supposed to, 

right? 

Do you tell this Committee how much money in each category 

was unused so we don’t have to appropriate the money to you every 

year? 

Ms. PARK. So, through our financial reporting, that information 

is available. I don’t have it on hand right now. 

Mr. POLIQUIN. Okay. So I want to make sure I understand this. 

So, your budget is $185 billion this year; that is what the president 

has asked for, okay. And six years ago, it was 50 percent less. So, 

it has it gone up 50 percent from 120 to about $185 billion in six 

years. That is a lot of money and we want to make sure it goes 

to our veterans, okay. 

So, I want to make sure I understand this. So, when money is 

appropriated to the VA, but not used, you send it back to the 

Treasury, but you don’t tell this Committee that it was unused in 

a specific category, so we don’t know if we appropriate that amount 

of money to you or not; is that right? 

Ms. PARK. No, I don’t agree with that statement at all. 

Mr. POLIQUIN. All right. 

Ms. PARK. So, first of all, there are many different appropriations 

that govern the way that we do business at VA. And a lot of those 

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15 

appropriations are no-year accounts and that money doesn’t expire, 

so that is—so put that aside. 

For money that is expired, we do report that through our financial management— 

Mr. POLIQUIN. Well, here is what I am trying to get at, Ms. 

Park— 

Ms. PARK [continued]. —reporting. 

Mr. POLIQUIN [continued]. —is there a way that you can tell us 

beforehand, before the budgeting process or the executive branch— 

but you are in the executive branch—the White House, such that 

money is not appropriated to you that you don’t use, then you send 

it back to the U.S. Treasury, can we avoid that step to make sure 

we don’t lose any of that money and to make sure that we are 

budgeting properly— 

Ms. PARK. That information is reported to the Department of 

Treasury on a monthly basis. 

Mr. POLIQUIN. Okay. But we appropriate it. Is it reported to us? 

Ms. PARK. I assume you guys get the Treasury reports, but we 

are happy to give you that information. 

Mr. POLIQUIN. That would be great. 

Ms. PARK. Uh-huh. 

Mr. POLIQUIN. Let’s move on to something else. 

Improper payments, I want to make sure I understand this. Ms. 

Davis would probably be the person that I should ask. Did you 

say—did I hear this correctly—that since 2003, which is roughly 15 

years, over one—I almost can’t say this—one trillion dollars of improper payments have been made throughout the Federal government? 

Ms. DAVIS. One point—over $1.2 trillion— 

Mr. POLIQUIN. $1.2 trillion— 

Ms. DAVIS [continued]. —have been estimated, yes. 

Mr. POLIQUIN [continued]. —in this year alone. 

2016, alone, last year, it was about $140 billion? 

Ms. DAVIS. Yes, reported as estimate. 

Mr. POLIQUIN. Okay. And we found out about that because of audits that we are doing; is that correct? 

Ms. DAVIS. It is some—it comes from the agency’s financial reports on an annual basis and we at GAO have accumulated those 

statistics. 

Mr. POLIQUIN. Okay. And at the VA, it was 5.5 billion, right? 

Ms. DAVIS. Correct. 

Mr. POLIQUIN. Okay. I come from a state—in Maine and we have 

an annual budget in the state of Maine, an annual budget of about 

three and a half billion dollars. This is 5.5 billion of improper payments. This is about 70 percent larger than our entire state budget. 

And then I see something right here, a request from you folks, 

saying that you want to now, discontinue the use of outside auditors when it deals with improper payments and do it internally. 

Why in the Dickens would we trust you people to audit yourself internally when you can’t keep track of this money? Why would we 

do that? Somebody answer the question; who wants to take a shot 

at it? 

Okay. So, for the record, nobody wants to defend the fact that 

they are asking us to discontinue the use of— 

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16 

Ms. PARK. Sir, I don’t know where that reference came from, but 

it didn’t come from the department. 

Mr. POLIQUIN. Okay. Well, go ahead and tell us why you think 

you can audit yourself better when you can’t keep track of $5.5 billion— 

Ms. PARK. I don’t believe that came from the VA, sir. 

Mr. POLIQUIN. Who did this come from? 

Ms. PARK. I am not familiar with it. 

Mr. POLIQUIN. Okay. Let me ask you this, does anybody—okay, 

fine; I have four seconds left—does anybody on this panel think it 

is a good idea to let you audit yourself instead of outside folks 

doing it? 

Thank you, Mr. Chairman. 

Mr. BERGMAN. Mr. Arrington, you are recognized for five minutes, sir. 

Mr. ARRINGTON. Thank you, Mr. Chairman. 

Sorry to come in late, and we have a few hearings today, so 

today is a challenge to keep up, but this is incredibly important 

and I just have a few questions—pretty broad questions for you. 

I guess, Ms. Park, are you the senior-most VA official here today? 

Ms. PARK. Yes, I am, sir. 

Mr. ARRINGTON. Who is responsible for improper payments and 

reducing improper payments, managing, having a game plan, if you 

would, for reducing improper payments at the VA? 

Ms. PARK. Sure. So, we do have a structure of accountability for 

improper payments. Our chief financial officer, Ed Murray, is responsible to ensure that we have an appropriate program to address improper payments. 

In addition to that, for every high-risk program, we designate a 

senior accountable official. So, for all of our large programs with 

large improper payments, we do have a senior accountable official, 

and they are responsible for developing corrective actions and making sure that, you know, each year they are making progress on 

those. 

Mr. ARRINGTON. Has anybody ever been fired for not managing 

the improper payments down, as you described, is the job description of those folks accountable? 

Ms. PARK. So, I would not be aware of that because those programs are in those—within the agency. We would have to refer 

that to the Office of Accountability. 

Mr. ARRINGTON. Okay. Could you—I am a new Member, but I 

would like to get the answer to who has been and when was the 

last time somebody was fired because they didn’t perform in oversight to manage improper payments down. The improper payments 

actually went up and they didn’t achieve whatever the desired outcome, whatever the management goal, I would like to know the answer to that question. 

Ms. PARK. So, if I may, I would like to say that part of the work 

we have done is actually doing a deep dive to identify the improper 

payments, so that was very purposeful so that we knew what our 

baseline was for improvement. 

So, in this case, I think that in some ways it is positive that we 

are being very open and honest about this rate, sir. 

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Mr. ARRINGTON. Yeah, I guess being open and honest is positive, 

but a change in behavior and change in delivery and performance 

is the goal. So, the VBA, VHA, NCA, I assume they all have heads. 

I don’t know if they are political in career, but is there a political 

in career senior-most person at each of those bureaus? 

Ms. PARK. Yes, sir, there are. 

Mr. ARRINGTON. Has any—when is the last time somebody in 

those roles were fired because they didn’t do their job to manage 

their financial affairs, in this case, improper payments? 

Ms. PARK. Again, sir, I am not aware of anything— 

Mr. ARRINGTON. Could you get me the answer for that? 

Ms. PARK [continued]. —but we can take that for the record. 

Mr. ARRINGTON. So, rank order for me the most important factor 

in not being able to manage improper payments better: organizational structure, H.R. policies or policies that govern how you manage people, IT systems—I will just start there; rank order the most 

challenging aspect to the desired outcome here, based on those 

three. 

Ms. PARK. I would say IT systems, sir. 

Mr. ARRINGTON. And I understand there is a legacy system, financial management system that is in play to replace or to upgrade, modernize; is that correct? 

Ms. PARK. It will replace several systems, yes. 

Mr. ARRINGTON. And how long will that take? 

Ms. PARK. So, we are looking at a five-year plan right now—fiveto eight-year plan. 

Mr. ARRINGTON. And how much money is that? 

Ms. PARK. So, the current—so we—this is our first year of really 

diving into this project and our initial estimates with our shared 

service provider are about 400 million, but we do need to do a deep 

dive over the next 18 months where we are really looking at—I 

talked a little bit earlier about is we really need to pull this financial management information out of all of these program systems 

and we really need to do a deep dive into how much that is going 

to cost, so we will be refining that in the next 18 months. 

Mr. ARRINGTON. Did you mention how much it cost, I am sorry? 

Ms. PARK. Four hundred million, sir. We—in our initial estimates, without the work that we are doing over the next 18 

months. 

Mr. ARRINGTON. I appreciate your time and I yield back to the 

Chairman. 

Mr. BERGMAN. Thank you. 

And it appears as though we have got time for a second round 

and I would like to start the second round by yielding to myself for 

five minutes. 

Ms. Davis, your report notes that 20—the 24 biggest agencies 

only reported preventing $680,000 worth of improper payments in 

2015 using the ‘‘do not pay’’ system. That under is astoundingly 

low, considering the billions and billions of dollars of improper payments that we are talking about. 

Why are agencies not using the ‘‘do not pay’’ system effectively? 

Ms. DAVIS. Our audit at the ‘‘do not pay’’ system, which was recently completed, determined that not all the databases that the 

agency has access to are actually being used. Also, the databases 

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18 

are—the two databases that are most frequently used are the 

death master file and then what is commonly referred to as the 

‘‘excluded parties list,’’ which includes contractors who cannot do 

business with the Federal government. 

The process includes payment integration, which is a process 

whereby Treasury’s payments at the time of payment are bumped 

up against certain databases and if there is an issue of a potential 

improper payment, that payment is flagged and it goes back to the 

agency for adjudication. 

Now, there is a time lag there, so, for example, if it is determined 

upon adjudication that there is an improper payment, that can affect future payments or future flows of that particular stream of 

improper payments; for example, a benefit that goes on a recurring 

basis, you can stop future payments, but you cannot stop the improper payment at the time that it goes through the ‘‘do not pay’’ 

system. So, there are limitations. 

Mr. BERGMAN. Did I hear you say on the front-end that there are 

more system capabilities than being utilized? 

Ms. DAVIS. That is correct, yes. 

Mr. BERGMAN. So, we got some folks who are using the system, 

they are just kind of cherry-picking what they want? 

Ms. DAVIS. Not exactly. There are issues with agreements in 

order to obtain the six databases that are supposed to be utilized 

and those agreements have not been finalized and those databases 

have not been pulled in by Treasury in order to, you know, utilize 

the payment streams that come from the various agencies. 

We have made recommendations, a number of recommendations, 

to Treasury and OMB, including recommendations for OMB to look 

at its guidance in how agencies are utilizing the system. 

Mr. BERGMAN. So, two of six are being used? 

Ms. DAVIS. Correct. 

Mr. BERGMAN. Okay. Well, how long have the four—how long— 

we have four other possible tools out there that are not being used. 

Ms. DAVIS. Yeah, right. 

Mr. BERGMAN. How long has that been going on? 

Ms. DAVIS. I cannot answer that. That is a question for the agency to answer. 

I want to be very clear that there are certain aspects of some of 

those other day streams or databases that are being utilized, but 

they are not fully integrated. They are not fully utilized by the 

agencies. The only two that are being fully utilized are the ones 

that I just mentioned. 

Mr. BERGMAN. Okay. Well, then I guess it is fair to then—Ms. 

Park, how is the VA, you know, using the ‘‘do not pay’’ system now 

and what are the plans to use more widely in the future? 

Ms. PARK. Okay. So we have a really great partnership with 

Treasury. My team and that finance service center in Austin works 

directly with Treasury; they meet monthly[NMF3] with them. One 

of the things that we found with do not pay is that you really have 

to look at it for—you can’t run all of your payments through it at 

once. You really have to look at it from a program-by-program perspective, so that takes time. 

And that is what we are doing with Treasury right now, is we 

are going through each one of our programs with them. We are taiLeonard.horne on VACREP0180 with DISTILLER

19 

loring the ‘‘do not pay’’ tool and we are using it to not only improve 

the way Treasury does business, but the way that we do business. 

Mr. BERGMAN. Okay. And one final, and more of a comment with 

a follow-up: Ms. Park, I would be remiss if I did not raise an important and related issue. On the 14th of April, I requested purchase 

card transactions data from the DC VA Medical Center. So far, 

nothing has been provided. 

An environment with no inventory controls is the sort of environment where government credit cards could be misused. Can you estimate for me or tell me when the data listed in my letter will be 

provided. 

Ms. PARK. Sir, I was not aware of that request, but I will go back 

and I will get that to you in the next day or two. I can get that 

pretty quickly. 

Mr. BERGMAN. Great. Thank you very much. 

I yield back. Ranking Member Kuster is recognized for five minutes. 

Ms. KUSTER. Thank you very much, Mr. Chair. 

I think we still have some misunderstanding, at least from Members of this Committee and perhaps from the public at large, about 

these—the impact of our provider agreements on this dramatically 

inflated improper payment, that people are getting the impression 

that there is improper payments that could be recouped and you 

walked us through that. But would it be helpful—I understand 

that there is legislation that we have considered with regard to 

provider payments that could maybe take them out from underneath the far so that we need to get to the reality, if there are 

questions that have been asked, if there are improper payments 

the way that any layperson would understand that—too much 

money being paid or paid to the wrong person—vendor, but we are 

going to expend a tremendous amount of time and energy here on 

something that is not ever going to be recouped and if we don’t correct this going forward, we are just going to pass this on to future 

generations. 

I just want to get to the bottom of this at this hearing, because 

otherwise, we are sending the wrong impression. 

Ms. PARK. So, I don’t feel that there is an easy answer; that is 

always the case here, isn’t it? 

Ms. KUSTER. Well, I am just trying to say this whole testimony— 

with all due respect to my colleague about your—and by the way, 

this language, it has nothing to do with you; it showed up in the 

budget. It sounds like maybe it didn’t even come through the VA— 

so that is another question; there is a mystery as to why it came 

to us—we have language in the budget asking that there not be an 

annual outside audit, asking that the audit be done internally and 

we would like to get to the bottom of the mystery behind this, but 

if you don’t know about it, you are not going to be the person who 

can help us. 

But, I am just guessing that somebody has decided that calling 

these payments to our community providers—this is Community 

Care in our communities, rural hospitals, providing services to veterans, getting paid, and that has been characterized as improper 

because of a Federal regulation that is typically in place when you 

have a different contracting system. 

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20 

Ms. PARK. Right. So, I think would be good to read the Improper 

Payment Act and see if it is really effective, right, and especially 

the definition of the improper payment rate. The problem is when 

you start talking about let’s move away from far-based contracts, 

you do put the veteran at risk, because the far-based contracts do 

protect them in a lot of instances. 

So, that is where, from my perspective, it gets a little dicey. 

Ms. KUSTER. But I think—look, I can’t speak for the secretary 

and I can’t speak for this administration, I just think it is 

duplicitous for them to pretend that we are going to recoup millions, billions of dollars—my colleague is talking about trillions of 

dollars—we are not getting that back, but hopefully, you can take 

it back to the secretary that colleagues on both sides of the aisle 

want improvement in the process of community-based care contracts that do not lead to this level of misunderstanding in an O 

& I hearing about trillions of dollars that may be recouped. That 

is all. 

Ms. PARK. Yes, and we are working with OMB, too, on that definition. They are looking at revising some of their guidance, too, and 

we hope that will have some impact on this. 

Ms. KUSTER. Great. Thank you very much. 

Thank you for your service to our country and our veterans. 

I yield back. 

Mr. BERGMAN. Thank you. 

Mr. Poliquin, you are recognized for five minutes, sir. 

Mr. POLIQUIN. Thank you, Mr. Chairman, very much. 

Just for the record, my colleagues on the Committee and for you 

folks right here, this is Page 333 of the medical programs and information technology volume of the VA budget request 2018 congressional submission, Page 333 where somebody at the VA requests, since you hired more people at the VA to do this, you are 

able to better audit yourselves than have outside folks audit yourselves. And I would strongly disagree and will object to any effort 

to go forward in that regard. 

Let me ask you folks, you have an agency that you help run or 

are connected with that has 360—365,000 employees. You have a 

budget of about $185 billion per year and we are here to hear about 

the problems in seeing how the money is spent, where it is going, 

who is keeping track of it to make sure that we get every dollar 

we can to provide clinical services to our veterans and at the same 

time, the taxpayers. 

So, I will start with you, Mr. Sturm. You are there; I am not. 

What is the biggest problem you see at the VA when it comes to 

financial management? 

Mr. STURM. I would say it is my legacy systems and not being 

fully integrated between my business-line systems and into the 

modern— 

Mr. POLIQUIN. Okay. So, we know we have addressed that this 

morning in another hearing is that the information technology, the 

IT systems, you have several of them that have come up through 

the years, and so now the VA is in the computer software business, 

and I know you are about to replace that with one system that is 

integrated across all platforms; is that what you mean? 

Mr. STURM. Yes, sir. 

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21 

Mr. POLIQUIN. Okay. Ms. Park, what is the biggest problem you 

see in making sure that we keep track of all this money so we 

know where it is gone—going and to make sure that we help our 

veterans the maximum amount? 

Ms. PARK. Again, sir, it is our IT systems. 

Mr. POLIQUIN. Okay. Ms. Davis? 

Ms. DAVIS. I am not in a position to address that question. 

Mr. POLIQUIN. Okay. Ms. Davis, when you look at the financial 

management at the VA, you look, if I am not mistaken, at different 

financial problems across different agencies, not just the VA; is 

that right? 

Ms. DAVIS. Correct. 

Mr. POLIQUIN. How is the VA doing, relative to the—how many 

different agencies do you look at? 

Ms. DAVIS. Oh, we look at numerous agencies— 

Mr. POLIQUIN. How many, 10, 15, 20? 

Ms. DAVIS. Oh, many more than that. 

Mr. POLIQUIN. Okay. Thirty, 40? 

Ms. DAVIS. If you are talking GAO-wide, we can look at any 

agency; we have the ability to do that. 

Mr. POLIQUIN. Okay. So, I am not going to get an answer here. 

I am just going to say—I will pick a number—30: how are we doing 

at the VA, relative to the other 29? 

Ms. DAVIS. Are you referring to improper payments or— 

Mr. POLIQUIN. Yes, let’s start with improper payments. 

Ms. DAVIS. Okay. 

Mr. POLIQUIN. The $5.5 billion of improper payments that were 

transacted last year. 

Ms. DAVIS. Okay. The agency that has the largest amount of improper payments is HHS and that is because it includes Medicare, 

the three Medicare programs— 

Mr. POLIQUIN. So, how is the VA doing, relative to the other 29 

agencies? 

Ms. DAVIS. Well, if you want to look at the rate, we can refer to 

the rate, as I mentioned in my oral statement, that the rate for 

those two programs are 76 and 69 percent and that—those are the 

highest rates government-wise. 

The next highest rate is 24 percent and that is the earned income tax credit. 

Mr. POLIQUIN. Okay. So, if I understood this correctly, the VA is 

doing a poor job, relative to the other people you are looking at? 

Ms. DAVIS. I would not make that statement; I would only give 

you the facts that I have. 

Mr. POLIQUIN. Well, the facts lead us somewhere, right? You 

have the responsibility of looking at multiple agencies; I am just 

trying to figure out how the VA is doing. 

Ms. DAVIS. Yeah, well, and the numbers there, the total number 

for this past fiscal year was 144 billion government-wide, and you 

know, a large portion of that or not a large portion, but certainly 

a significant portion, is the 5.5 billion. 

Mr. POLIQUIN. At the VA? 

Ms. DAVIS. Correct. 

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Mr. POLIQUIN. Ms. Larsen—thank you, Ms. Davis—Ms. Larsen, 

what is the biggest problem you see at the VA when it comes to 

financial management and keeping track of all this money? 

Ms. LARSEN. Sir, a lot of it is just that people don’t take care of 

what they need to do when something is sent out to them and that 

creates their own issues. So—and they ignore letters that are sent 

out to them and then they all of a sudden, the veteran calls and 

says, what happened, how come I didn’t get my check? 

Mr. POLIQUIN. Uh-huh. 

Ms. LARSEN. And I am like, well, sir, you didn’t respond to what 

the VA wanted you to do or debt management or whatever. 

Mr. POLIQUIN. Uh-huh. 

Ms. LARSEN. And a lot of it is on their own accord, but yet I am 

there— 

Mr. POLIQUIN. So, it is the veteran’s fault? 

Ms. LARSEN. Oh, in some respects it is. 

Mr. POLIQUIN. Uh-huh. 

Ms. LARSEN. And that is when they get kind of—they call me and 

go, what can you do for me, can you get me my money back? And 

I say I will try. 

Mr. POLIQUIN. Uh-huh. Do you think, given all of that, that it is 

a good idea to have the inside people at the VA audit themselves, 

which has been requested at Page 333 of this document? 

Ms. LARSEN. I am really not one that would be able to answer 

that. 

Mr. POLIQUIN. Mr. Dahl, do you have an opinion—if I may, Mr. 

Chair—of what the biggest thing we need to fix when it comes to 

financial management at the VA? 

Mr. DAHL. I would just like to point out that we are the independent auditors. 

Mr. POLIQUIN. Good. I should have started with you. 

Mr. DAHL. Not to get into too much detail—but we report on the 

financial statements year after year. This year we did have the six 

material weaknesses and the two significant deficiencies. 

Mr. POLIQUIN. And do you do individual audits for other agencies, not just the VA? 

Mr. DAHL. No, we are the Office of Inspector General. Our purview is any VA program. 

Mr. POLIQUIN. Does any other agency you know in the Federal 

government ask to audit themselves? 

Mr. DAHL. I hesitate to answer that because I am not exactly 

clear on what— 

Mr. POLIQUIN. Do you think it is a good idea that any agency audits itself? 

Mr. DAHL. Excuse me? 

Mr. POLIQUIN. Do you think that it is a good idea that any agency requests to audit themselves? 

Mr. DAHL. It may be a useful tool for them, but I would think 

that there would still need to be someone like the Inspector General or maybe a contract auditor to also come in behind that. 

Mr. POLIQUIN. Thank you, Mr. Chairman, for the additional time. 

Thank you, sir. 

Mr. BERGMAN. Thank you. 

Mr. Arrington, you are recognized for five minutes. 

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Mr. ARRINGTON. Thank you, Mr. Chair. 

Mr. Dahl, you report to the secretary, correct? 

Mr. DAHL. No, I report to the Inspector General, who is independent of the Secretary. 

Mr. ARRINGTON. Who manages his budget and who manages 

him? 

Mr. DAHL. We have oversight committees like this. The IG manages our office’s budget. 

Mr. ARRINGTON. That is kind of how I felt when I was working 

at the—in the Federal government, I never knew who the OIG was 

accountable to, but I think they serve an appropriate role, and so 

I am going to ask you some of the same questions I asked Ms. 

Park. 

What are your—what do you see as the challenge—and maybe I 

am reiterating a question and point that my colleague made about 

organizational structure. I saw that you made mention of the convoluted system and the lack of authority with CFOs. 

So maybe start there, but just give me a comprehensive view of 

the breakdown and potentially even the dysfunction to managing 

for the desired outcome of reducing improper payments. 

Mr. DAHL. The organizational structure, from our perspective, is 

a concern. We don’t know what the solution is, but we do believe 

that there needs to be more integration and cooperation within the 

department in that you have a CFO in the Office of Management, 

but then within VHA, VBA, NCA, they all have their own CFO 

structures and VHA takes it even further with further levels of reporting. 

It probably is fair to say it makes it difficult for the CFO to pull 

together all that he or she needs to prepare financial statements 

every year. The folks from the department have mentioned the systems. The systems are certainly a challenge, but the systems are 

just a tool to get where they need to be. VA has had challenges 

with implementing financial systems before. 

I remain guardedly optimistic that this solution will be more successful than the last attempt. 

Mr. ARRINGTON. Was the last attempt to implement an IT system 

a fail? 

Mr. DAHL. Well, there have been a couple of high-profile systems, 

Core FLS and FLITE, where they have been mainly developed inhouse and they have not been successful and that is why we still 

have FMS a quarter century after it started. 

Mr. ARRINGTON. Yeah, it seems like we had a hearing on IT— 

I think it was one of the first hearings we had—and it just seemed 

like this there was an agency-wide issue with getting the systems 

in place. They would start and stop things. They would spend millions of dollars on a project. They would try to do it in-house, instead of going, you know, off the shelf or custom, and it was just 

the most convoluted thing I have ever heard. 

There was no real architecture, enterprise-wide architecture, no 

sensible, well-managed IT system across the agency, it seemed to 

me. Is that fair to say— 

Mr. DAHL. Well, there are a lot of different users in the department with a lot of different needs and I think that challenges a deLeonard.horne on VACREP0180 with DISTILLER

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partment, making sure that they can define and meet all those 

needs. 

Mr. ARRINGTON. Is there a CIO? 

Mr. DAHL. There is. Well, there is currently—I believe he is an 

acting CIO—but there is that position. 

Mr. ARRINGTON. Okay. Who is accountable for the—ultimately— 

for improper payments, the management of improper payments or 

the poor management or even good management, ultimately? 

Mr. DAHL. Overall, I would say that the Assistant Secretary for 

Management bears the highest level of responsibility. 

Mr. ARRINGTON. And what is the senior most career person that 

is responsible for? 

Mr. DAHL. I believe he is a career employee. 

Mr. ARRINGTON. The assistant secretary? 

Mr. DAHL. For management, yeah. He is acting right now. 

Mr. ARRINGTON. But if he weren’t acting, would it be a political 

appointee? 

Mr. DAHL. I believe so. 

Mr. ARRINGTON. So, who is the career, senior most person responsible; is it decentralized? Is it centralized? Who is accountable? 

Mr. DAHL. I think that I would have to have the department answer that question. 

Mr. ARRINGTON. Yeah, I am not sure who is accountable. That 

has been my problem, quite frankly, Mr. Chairman, in just about 

every issue I have sat on this dais and listened issue after issue; 

that becomes my recurring theme, accountability. I am never clear 

about it and the results speak for themselves. 

So, anyway, thank you for your time. I yield back to the Chairman. 

Mr. BERGMAN. Our thanks to all the witnesses. You are now excused. 

Today, we have had the opportunity to hear from an impressive 

panel of financial and audit experts. I hope everyone watching will 

carry with them a focus on managing the money after the budget 

is agreed upon. 

Partisan and interest group battles over spending get much of 

the attention. Internal controls are deficient is not a very good 

headline, but the nuts and bolts of financial management have a 

huge impact. 

This Subcommittee will continue to monitor VA’s progress in resolving the internal control weaknesses and deficiencies and eliminating the improper payments. Modernizing the financial IT systems is a major part of the effort, so the Subcommittee is giving 

that special scrutiny. 

But obsolete IT is not the whole story and organizational and 

procedural problems cannot be ignored. VA’s financial challenges 

are hardly unique, but they are substantial and I would like to be 

able to hold the department up as an example of sound financial 

management. 

I ask unanimous consent that all Members have five legislative 

days to revise and extend their remarks and include extraneous 

material. 

Without objection, so ordered. 

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I would like, once again, to thank all of our witnesses and the 

audience members for joining in today’s conversation. With that, 

this hearing is adjourned. 

[Whereupon, at 3:25 p.m., the Subcommittee was adjourned.] 

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(26) 

A P P E N D I X 

Prepared Statement of Laurie Park 

Introduction 

Good afternoon, Chairman Bergman, Ranking Member Kuster, and Members of 

the Subcommittee. Thank you for the opportunity to discuss the actions the Department of Veterans Affairs (VA) is taking to improve financial management. As the 

VA Deputy Assistant Secretary for Finance, I am responsible to the Acting Chief 

Financial Officer (CFO) for Department-wide financial management activities. 

Over the last several years, through our improper payment reviews, insights from 

the Office of Inspector General (OIG) reports, and detailed deep dives into root 

causes of audit findings, it has become clear that the foundation of our financial 

management practices is failing us. We have based our day-to-day acquisition and 

financial management processes on a fragile network of systems that routinely require our workforce in the field to rely on manual double entry processes, complex 

work-arounds, manual reconciliations, and processes that cannot keep pace with 

current financial management best practices set forth by guidance from the Office 

of Management and Budget (OMB) and the Department of the Treasury. Efforts to 

remediate these complex issues within our current foundation, coupled with a workforce that has not been trained in best practices, has limited our success. VA must 

focus on modernizing our financial management and acquisition systems, strengthen 

our internal controls, adopt best practices, and invest in a trained workforce. 

Reforming VA at the Root Cause: Financial Management Business Transformation 

Recognizing these challenges, with support from Secretary Shulkin, Interim Deputy Secretary Blackburn, and my boss, Ed Murray, the Acting CFO, we have recruited talented financial management professionals, seasoned project managers, experienced data architects, and a strong leadership team to lead initiatives to modernize our systems, adopt best practices, and train our workforce. Our Financial 

Management Business Transformation (FMBT) initiative is ongoing now and with 

continued management support and openness to change will take a focused effort 

over the next 5–8 years to be successful. We are committed to addressing audit findings in our current environment as much as possible, but because many of the findings are a result of our aged systems, our main focus will be on the transformation. 

We have made progress on ensuring FMBT is well managed and headed for success. During fiscal year (FY) 2016, following guidance from OMB to migrate to a 

Federal Shared Service Provider, VA explored two Federal shared service providers 

as directed by the Unified Shared Service Management Office and conducted indepth evaluation sessions. I utilized subject matter experts from across the agency 

to determine which provider was the best fit for VA. After a detailed and thorough 

process, VA selected the United States Department of Agriculture (USDA). In collaboration with USDA, we are in the engagement phase of the effort, performing 

business process engineering, developing conversion strategies, and evaluating technical data interface alternatives. It is imperative that the FMBT initiative take the 

necessary steps to ensure that VA is fully prepared to replace our legacy systems 

with an integrated, modern system and reap the functional and technical benefits. 

Independent Auditor’s Report on VA’s Financial Statements 

OIG, utilizing an independent auditor, issued VA’s 18th consecutive unmodified 

(‘‘clean’’) audit opinion in FY 2016 reporting six material weaknesses: 

1.Office of Information Technology (OIT) security controls - The material weakness in OIT Information Technology security controls is a long-standing issue and 

the Chief Information Officer has taken aggressive action to remediate these findings. In 2018, OIT fully expects to remedy this finding. 

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2.Veterans Benefits Administration’s (VBA) education benefits accrued liability - 

This new finding relates to the inaccurate interpretations of accounting standards 

for post-employment benefits. In addition, several education programs were not included in the FY 2016 estimates. Currently VBA is building valid models that meet 

actuarial standards for all required education programs. Difficulties in hiring certified actuaries and initiating necessary experience studies will most likely delay 

resolution of this finding until FY 2018. 

3.VBA control environment surrounding the compensation, pension, and burial actuarial estimates - This new finding resulted from the unexpected retirement of 

VA’s Chief Actuary. The lack of a qualified actuary managing and taking full responsibility for VA’s compensation, pension, and burial actuarial model resulted in 

a lack of segregation of duties and outdated assumptions used in the model. Difficulties in hiring certified actuaries and initiating necessary updates to critical assumptions will most likely delay resolution of this finding until FY 2018. 

4.Veterans Health Administration (VHA) Community Care obligations, reconciliations, and accrued expenses - This long-standing issue is directly related to the 

lack of modern integrated financial and acquisition systems. While efforts have been 

made to strengthen manual workarounds and improve reconciliations, these processes are short-term solutions and are not sustainable for the long-term. Until the 

new FMBT system is implemented, the burden to resolve these findings relies on 

the workforce rather than a modern system. Many of the issues identified here also 

contributed to the improper payment rates and findings in the Improper Payments 

Elimination & Recovery Act (IPERA) review for Community Care. This finding will 

remain until we move to a new system. 

5.Financial reporting - This long-standing issue is a result of our antiquated financial system. Due to our legacy financial system’s limited functionality, VA has 

to exercise complex analysis and inefficient work-arounds to fully meet Treasury 

and OMB reporting requirements. This finding will remain until we move to a new 

system. 

6.CFO organizational structure for VA and VHA - VA’s CFO community has 

worked to improve their communication and cooperation through a series of joint 

initiatives. The FY 2017 audit is ongoing, and we expect to receive OIG’s feedback 

on our efforts. 

Many of the findings are due to long-standing problems inherent in the legacy financial management system. VA will continue to work to address audit findings 

that will improve our position in the short-term. We will not see the large-scale improvements needed to remediate VA’s financial management challenges and audit 

findings until the legacy Financial Management System is replaced. 

Commitment to Training VA’s Workforce 

In the spring of 2016, I instituted the Financial Management Training Initiative 

(FMTI). The overall objective of FMTI is to educate financial management professionals across the Department in order to help remediate current audit findings and 

avoid repeat or new findings during the annual financial statement audit. My FMTI 

strategy is to centralize and standardize a financial management training curriculum throughout the Department. The initiative will reinforce accurate daily financial transactional processes; increase employee levels of knowledge, skill, and 

proficiency; remediate audit findings and deficiencies with targeted sessions related 

to findings and recommendations; and support change management for the FMBT 

effort-our new financial management system. In pursuit of this goal, my office held 

a virtual, 3-day, web-based event in August 2016 and an in-person, 3-day event in 

Nashville, Tennessee, in January 2017. In total, 1,560 VA employees participated 

in a total of 71 separate classes. Many of the classes were focused directly on remediating audit findings, including: capitalization of assets; reconciliations; undelivered orders; interagency agreements and intragovernmental reconciliation; accounting for community care; essentials of Federal appropriations and fiscal law; the 

Anti-Deficiency Act; major, minor, and non-recurring maintenance accounting; future of VA Form 1358; helping VA fight fraud; improper payments; and internal 

controls. There are two more events planned over the next 9 months-another virtual 

event in August 2017 and another in-person event in late January 2018. 

Commitment to Accurate Reporting, Remediating, and Ensuring Accountability for VA Resources 

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Whereas modernizing VA’s financial management system is a desperately needed, 

multi-year effort that will truly transform VA’s ability to address root causes of 

audit findings, VA is also leading initiatives in areas that can affect change now. 

Over the past three years, VA has worked to increase senior leadership collaboration and awareness of improper payment challenges. We also established a new 

oversight office, the Improper Payments Remediation and Oversight Office (IPRO), 

focused on driving identification and remediation of improper payments. We recruited staff with expertise in IPERA compliance, internal control assessment, systemic issue identification, and corrective action development. This office will also 

lead Secretary Shulkin’s new ‘‘Seek to Prevent Fraud, Waste, and Abuse (STOP)’’ 

effort. Recent accomplishments include: 

• Ensuring consistent application of the definition of improper payments across 

the Department in the area of acquisitions. VA issued acquisition guidance 

mandating testing procedures and providing instructions on what constitutes a 

proper payment. This guidance is iterative and is updated to address complex 

acquisition issues identified during testing; 

• Revision of IPERA policy to clearly define roles and responsibilities, in addition 

to processes and procedures; and 

• Review of improper payment risk assessments, testing plans, and corrective action plans for each program to ensure a consistent enterprise-wide approach 

and compliance with policy. 

Although these efforts have not yet resulted in an overall reduction of improper 

payments, VA did report a decrease in improper payments in more than half of the 

14 programs reporting in FY 2016. VA cannot fully address systemic issues without 

accurate identification of errors and root causes and acknowledges that this means 

its reported improper payment rate will continue to rise until such time as efforts 

underway in program’s such as VA’s Community Care begin to garner results. 

In FY 2017, VA is leading efforts to analyze improper payments to determine the 

percentage that are accurate, but must still be reported as improper due to failure 

to comply with policy versus those that represent a true loss to the Government. 

This will aid leadership in targeting resources to areas that will result in cost-benefits to VA. Further, as part of VA’s STOP fraud, waste, and abuse initiative, VA 

will establish the baseline of existing fraud, waste, and abuse activities, to include 

identifying savings; determine areas most at risk of fraud, waste, and abuse; explore 

partnership opportunities with the private sector and other federal agencies to 

maximize efficiencies; and leverage the Financial Services Center Data Analytics capabilities to improve VA’s fraud, waste, and abuse prevention efforts. These capabilities are enabled by a robust, enterprise-level analytics technology platform 

leveraging commercial-off-the-shelf and advanced open source programming/analytic 

tools; a team of data scientists, statisticians, data engineers, and data/program analysts; and an extended organizational ecosystem that includes internal and external 

partners in fraud, waste, and abuse analytics and management. Organizations included in the analytic ecosystem include the top ranked McCombs School of Business, University of Texas; Centers for Medicare and Medicaid Services; Interagency 

Fraud and Risk Data Mining Workgroup; VA’s Office of Compliance and Business 

Integrity; VA’s Office of Internal Controls; IPRO; and others. This important initiative will reap great rewards for VA. 

Debt collection is also an essential part of strong financial management where VA 

is making improvements. VA balances Veteran debt collection with a strong sense 

of compassion, as well as compliance with Federal debt collection statutes and policy. VA works with Veterans to resolve their debt through extended payment plans, 

benefit offset, waivers, dispute resolution, and even refunds, if Veterans are found 

to be in hardship. Federal statutes also require VA to send non-tax debt to Treasury 

for collection. In December 2016, VA began transferring delinquent debt for nonservice connected medical care co-payments to the Treasury Cross Servicing program for collection. As of April 30, over 800 thousand delinquent debts totaling 

about $71 million were referred for recovery. Veterans receive at least three debt 

notices before Treasury takes offsets from tax refunds and/or Federal salaries. 

The Department’s comprehensive efforts to improve financial management will assist in improving activities to identify fraud, waste, and abuse, reducing improper 

payments, and strengthening VA’s financial statements. However, VA cannot emphasize enough how important the FMBT effort is to strengthen VA’s overall financial management position. This includes VA’s ability to meet Federal regulations 

and mandates and remediate VA’s material weaknesses for the financial statements. 

Path Forward 

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1 A material weakness is a deficiency, or a combination of deficiencies, in internal control over 

financial reporting such that there is a reasonable possibility that a material misstatement of 

the entity’s financial statements will not be prevented, or detected and corrected, on a timely 

basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control 

that is less severe than a material weakness, yet important enough to merit attention by those 

charged with governance. A deficiency in internal control exists when the design or operation 

of a control does not allow management or employees, in the normal course of performing their 

assigned functions, to prevent, or detect and correct, misstatements on a timely basis. 2GAO, Financial Audit: Fiscal Years 2016 and 2015 Consolidated Financial Statements of the 

U.S. Government, GAO 17 283R (Washington, D.C.: Jan. 12, 2017). 3GAO, High Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others, GAO 17 317 (Washington, D.C.: Feb. 15, 2017). 4GAO 17 317. 

Even with these efforts, VA recognizes it has many challenges to overcome, while 

at the same time providing Veterans the benefits and services they have earned and 

deserve. VA acknowledges its current challenges and audit findings in financial 

management that reflect a need for improved financial stewardship. We believe that 

the initiatives we are working on will improve VA’s financial management and better serve our Veterans. 

Thank you for the opportunity to appear before you today and for your continued 

support of Veterans. I look forward to your questions. 

f 

Prepared Statement of Beryl H. Davis 

VETERANS AFFAIRS 

IMPROPER PAYMENT ESTIMATES AND ONGOING EFFORTS FOR REDUCTION

Chairman Bergman, Ranking Member Kuster, and Members of the Subcommittee: 

As the steward of taxpayer dollars, the federal government is accountable for how 

it spends hundreds of billions of taxpayer dollars annually. However, improper payments remain a significant and pervasive government-wide issue. For several years, 

we have reported improper payments as a material weakness 1 in our audit reports 

on the consolidated financial statements of the U.S. government because the federal 

government is unable to determine the full extent to which improper payments 

occur and reasonably assure that actions are taken to reduce them. 2 In addition, 

agency auditors continued to report internal control deficiencies over financial reporting in their 2016 financial statement audit reports, such as financial system 

limitations and information system control weaknesses. Such deficiencies could significantly increase the risk that improper payments may occur and not be detected 

promptly. 

Under the Improper Payments Information Act of 2002 (IPIA), as amended, an 

improper payment is defined as any payment that should not have been made or 

that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements. Among other things, an improper payment includes payment to an ineligible recipient, payment for an ineligible good or service, and any duplicate payment. In addition, Office of Management and Budget (OMB) guidance instructs 

agencies to report as improper payments any payments for which insufficient or no 

documentation was found. Reducing improper payments is critical to safeguarding 

federal funds and could help achieve cost savings and improve the government’s fiscal position. 

Strong financial management practices, including effective internal controls, are 

important for federal agencies to better detect and prevent improper payments. The 

Department of Veterans Affairs (VA) faces significant financial management challenges. In 2015, we designated VA health care as a high-risk area because of our 

concern about VA’s ability to ensure that its resources are being used cost-effectively 

and efficiently to improve veterans’ timely access to health care, and to ensure the 

quality and safety of that care. 3 Further, improving and modernizing federal disability programs has been on GAO’s high-risk list since 2003, in part because of 

challenges that VA has faced in providing accurate, timely, and consistent decisions 

related to disability compensation. 4 In addition, in VA’s fiscal year 2016 agency financial report, the independent auditor reported material weaknesses and significant deficiencies in internal control over financial reporting. Finally, the VA Office 

of Inspector General (OIG) has reported that VA has been noncompliant with the 

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5 IPERA, Pub. L. No. 111–204, 124 Stat. 2224 (July 22, 2010), established a requirement for 

entity inspectors general to report annually on entities’ compliance with specific criteria. The 

six criteria are that the entity has (1) published an annual financial statement and accompanying materials in the form and content required by the Office of Management and Budget 

for the most recent fiscal year and posted that report on the entity website; (2) conducted a risk 

assessment for each specific program or activity that conforms with IPIA, as amended; (3) published estimates of improper payments for all programs and activities identified as susceptible 

to significant improper payments under the entity’s risk assessment; (4) published corrective action plans for programs and activities identified as susceptible to significant improper payments; 

(5) published and met annual reduction targets for all programs and activities identified as susceptible to significant improper payments; and (6) reported a gross improper payment rate of 

less than 10 percent for each program and activity for which an improper payment estimate 

was obtained and published. For purposes of this report, program encompasses both programs 

and activities. 6GAO, Veterans’ Disability Benefits: Improvements Could Further Enhance Quality Assurance Efforts, GAO 15 50 (Washington, D.C.: Nov. 19, 2014) and GAO, Veterans’ Disability Benefits: VA Can Better Ensure Unemployability Decisions Are Well Supported, GAO 15 464 (Washington, D.C.: June 2, 2015). 7The amount of money paid out by the government is known as outlays. Because of the timing 

of agency payments, appropriations may not correspond to outlays in a given fiscal year. Net 

outlays are disbursements net of offsetting collections. 8Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, Pub. 

L. No. 114–223, div A, 130 Stat. 857 (Sept. 29, 2016). Appropriations provide budget authority 

criteria listed in Section 3 of the Improper Payments Elimination and Recovery Act 

of 2010 (IPERA) since fiscal year 2011, the first year that the OIG reported on the 

agency’s compliance under that provision. 5

Today, my statement will discuss improper payments on both the governmentwide level and at VA. It will also discuss certain actions that VA has taken and 

other actions that VA can take to reduce improper payments. My statement is primarily based on VA’s financial reports, VA OIG reports, and our recent improper 

payments related work at VA. 6 The products cited throughout this statement include details on the scope and methodology used to conduct that work. The work 

upon which this statement is based was conducted in accordance with all sections 

of GAO’s Quality Assurance Framework that are relevant to our objectives. The 

framework requires that we plan and perform the engagement to obtain sufficient 

and appropriate evidence to meet our stated objectives and to discuss any limitations in our work. We believe that the information and data obtained, and the analysis conducted, provide a reasonable basis for any findings and conclusions in this 

product. 

BACKGROUND

VA’s mission is to promote the health, welfare, and dignity of all veterans in recognition of their service to the nation by ensuring that they receive medical care, 

benefits, social support, and lasting memorials. It is the second largest federal department and, in addition to its central office located in Washington, D.C., has field 

offices throughout the United States, as well as the U.S. territories and the Philippines. 

The department has three major components that are primarily responsible for 

carrying out its mission: 

• the Veterans Benefits Administration (VBA), which provides a variety of benefits to veterans and their families, including disability compensation, educational opportunities, assistance with home ownership, and life insurance; 

• the Veterans Health Administration (VHA), which provides health care services, 

including primary care and specialized care, and performs research and development to serve veterans’ needs; and 

• the National Cemetery Administration (NCA), which provides burial and memorial benefits to veterans and their families. 

Collectively, the three components rely on approximately 340,000 employees to 

provide services and benefits. These employees work in 167 VA medical centers, approximately 800 community-based outpatient clinics, 300 veterans centers, 56 regional offices, and 131 national and 90 state or tribal cemeteries. 

For fiscal year 2016, VA reported about $176 billion in net outlays, an increase 

of about $16 billion from the prior fiscal year. 7 VBA and VHA account for about 

$102 billion (about 58 percent) and $72 billion (about 41 percent) of VA’s reported 

net outlays, respectively. The remaining net outlays were for NCA and VA’s administrative costs. The fiscal year 2017 appropriations act that covered VA provided approximately $177 billion to the agency, about a $14 billion increase from the prior 

fiscal year. 8

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to federal agencies to make financial commitments (‘‘obligations’’) and make payments from the 

Department of the Treasury for specified purposes in specified amounts. Some payments for obligations are made soon after being incurred (for example, employees’ salaries) and some are 

made over several years (for example, payments to contractors for major construction projects). 9GAO, The Nation’s Fiscal Health: Action is Needed to Address the Federal Government’s Fiscal Future, GAO 17 579T (Washington, D.C.: May 3, 2017). 10 IPIA-as amended by IPERA-requires executive branch agencies to (1) review all programs 

and activities, (2) identify those that may be susceptible to significant improper payments, (3) 

estimate the annual amount of improper payments for those programs and activities, (4) implement actions to reduce improper payments and set reduction targets, and (5) report on the results of addressing the foregoing requirements. ‘‘Significant improper payments’’ are defined as 

gross annual improper payments in a program exceeding (1) both 1.5 percent of program outlays 

and $10 million of all program or activity payments during the fiscal year reported or (2) $100 

million (regardless of the percentage of outlays). 11These amounts do not include the Department of Defense’s Defense Finance and Accounting 

Service Commercial Pay program because of concerns about the reliability of the program’s estimate. 

Improper Payments Remain a Significant and Pervasive Government-Wide 

Issue 

As we recently reported, improper payments remain a significant and pervasive 

government-wide issue. 9 Since fiscal year 2003-when certain agencies began reporting improper payments as required by IPIA-cumulative reported improper payment 

estimates have totaled over $1.2 trillion, as shown in figure 1. 10

For fiscal year 2016, agencies reported improper payment estimates totaling 

$144.3 billion, an increase of over $7 billion from the prior year’s estimate of $136.7 

billion. 11 The reported estimated government-wide improper payment error rate 

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12 Reported error rates reflect the estimated improper payments as a percentage of total program outlays. 

was 5.1 percent of related program outlays. 12 As shown in figures 2 and 3, the government-wide reported improper payment estimates-both dollar estimates and error 

rates-have increased over the past 3 years, largely because of increases in Medicaid’s reported improper payment estimates. 

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For fiscal year 2016, overpayments accounted for approximately 93 percent of the 

government-wide reported improper payment estimate, according to 

www.paymentaccuracy.gov, with underpayments accounting for the remaining 7 

percent. 

Although primarily concentrated in three areas (Medicare, Medicaid, and the 

Earned Income Tax Credit), the government-wide reported improper payment estimates for fiscal year 2016 were attributable to 112 programs spread among 22 agencies. (See fig. 4.) 

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We found that not all agencies had developed improper payment estimates for all 

of the programs they identified as susceptible to significant improper payments. 

Eight agencies did not report improper payment estimates for 18 risk-susceptible 

programs. (See table 1.) 

As we have previously reported, the federal government faces multiple challenges 

that hinder its efforts to determine the full extent of and reduce improper payLeonard.horne on VACREP0180 with DISTILLER


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13GAO 17 579T. 14 Community Care is a program through which VA authorizes veteran care at community 

care facilities when the needed services are not available through VA, or when a veteran is unable to travel to a VA facility. Purchased Long-Term Services and Support strives to advance 

quality care for aging and chronically ill veterans by providing policy direction for the development, coordination, and integration of geriatrics and long-term care clinical programs. 

ments. 13 These challenges include potentially inaccurate risk assessments, agencies 

that do not report improper payment estimates for risk-susceptible programs or report unreliable or understated estimates, and noncompliance issues. 

Changes in VA’s Evaluation Procedures Caused Significant Increases in Reported Improper Payment Estimates since Fiscal Year 2013 

For fiscal year 2016, VA’s reported improper payment estimate totaled $5.5 billion, an increase of about $500 million from the prior year. The reported VA improper payment error rate was 4.5 percent of related program outlays for fiscal year 

2016, a slight increase from the 4.4 percent reported error rate for fiscal year 2015. 

As shown in table 2, VA’s Community Care and Purchased Long-Term Services and 

Support programs accounted for the majority of VA’s estimated improper payments. 14 Specifically, for fiscal year 2016, VA’s reported improper payment estimate 

for VA’s Community Care was approximately $3.6 billion (about 65 percent of VA’s 

total reported improper payments estimate) and for VA’s Purchased Long-Term 

Services and Support was approximately $1.2 billion (about 22 percent of VA’s total 

reported improper payments estimate). 

As shown in figures 5 and 6, VA’s reported improper payment estimates have increased over the past 3 years, and the reported improper payment error rates have 

increased over the past 2 years. 

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The significant increase in VA’s reported improper payment estimates and error 

rates primarily occurred, according to the VA OIG, because VA changed its sample 

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Figure 5: Department of Veterans Affairs' Reported Improper Payment Estimates for 

Fiscal Years 2013 through 2016 

Dollars in billions 

4 

2013 

Fiscal year 

2014 2015 

Underpayments 

Overpayments 

$5.5 

2016 

Source: Department of Veterans Affairs Agency Financial Report for fiscal years 2014 through 2016 1 GA0-17~633T 

Note: Figures may not add up to totals due to rounding 

Figure 6: Department of Veterans Affairs' Reported Improper Payment Error Rates 

for Fiscal Years 2013 through 2016 

Percentage 

5 

4 

0 

1.5% 

2013 

Fiscal year 

4.5% 

1.5% 

2014 2015 2016 

Source. Department of Veterans Affairs Agency Finenr::iat Report fotfiscal years 20t4 through 2C15 1 GA0-17-633T 
37 

15Department of Veterans Affairs Office of Inspector General, FY 2014 Review of VA’s Compliance With the Improper Payments Elimination and Recovery Act, 14–03380–356 (Washington, D.C.: May 14, 2015). 

evaluation procedures in fiscal year 2015, which resulted in more improper payments being identified. In response to a finding by the VA OIG, 15 VA began 

classifying every payment as improper when it made a payment that did not follow 

all applicable Federal Acquisition Regulation (FAR) and Veterans Affairs Acquisition Regulation (VAAR) provisions. The OIG reported that when those purchases do 

not follow applicable legal requirements, such as having FAR-compliant contracts in 

place, the resulting payments are improper because they ‘‘should not have been 

made or were made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements, according to the definition of improper payments set forth in OMB Circular A–123, Appendix C.’’ As a result of the 

change in its sample evaluation procedures, VA reported significant increases in estimated improper payments for both its Community Care and Purchased Long-Term 

Services and Support programs. 

As shown in table 3, VA’s Community Care and Purchased Long-Term Services 

and Support programs’ reported improper payment error rates are the two highest 

reported error rates government-wide for fiscal year 2016. Specifically, VA’s Community Care and Purchased Long-Term Services and Support programs had reported improper payment error rates of about 75.9 percent and 69.2 percent, respectively. The reported improper payment error rates for these two programs were each 

over 45 percentage points higher than the reported improper payment error rate for 

the next highest federal program-the Department of the Treasury’s Earned Income 

Tax Credit program. 

In its fiscal year 2016 agency financial report, VA did not report improper payment estimates for four programs it identified as susceptible to significant improper 

payments. These four programs were 

• Communications, Utilities, and Other Rent; 

• Medical Care Contracts and Agreements; 

• Prosthetics; and 

• VA Community Care Choice payments made from the Veterans Choice Fund. 

Because VA did not report improper payment estimates for these risk-susceptible 

programs, VA’s improper payment estimate is understated and the agency is hindered in its efforts to reduce improper payments in these programs. In its fiscal year 

2016 agency financial report, VA stated that it will report improper payment estimates for these programs in its fiscal year 2017 agency financial report. 

Ongoing Efforts for Reducing Improper Payments at VA 

According to OMB guidance, to reduce improper payments, VA can use root cause 

analysis to identify why improper payments are occurring and develop effective corrective actions to address those causes. In addition, our two prior reports identified 

problems with how VA processed its claims to reasonably assure the accuracy of or 

eligibility for the disability benefits, increasing the risk of improper payments. VA 

can implement our recommendations from these two reports to better ensure the accuracy of or eligibility for disability benefits. 

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16Office of Management and Budget, Appendix C to Circular No. A–123, Requirements for Effective Estimation and Remediation of Improper Payments, OMB Memorandum M–15–02 

(Washington, D.C.: 2014). 

Root Cause Analysis 

Root cause analysis is key to understanding why improper payments occur and 

to developing and implementing corrective actions to prevent them. In 2014, OMB 

established new guidance to assist agencies in better identifying the root causes of 

improper payments and assessing their relevant internal controls. 16 Agencies across 

the federal government began reporting improper payments using these more detailed root cause categories for the first time in their fiscal year 2015 financial reports. Figure 7 shows the root causes of VA’s estimated improper payments for fiscal 

year 2016, as reported by VA. 

According to VA’s fiscal year 2016 agency financial report, the root cause for over 

three-fourths of VA’s reported fiscal year 2016 improper payment estimates was program design or structural issues. As noted above, most of the improper payments 

occurred in VA’s Community Care and Purchased Long-Term Services and Support 

programs. In the fiscal year 2016 agency financial report, VA provided details on 

how it plans to correct some program design issues by making its procurement practices compliant with relevant laws and regulations. The agency stated that it has 

made certain changes, such as issuing of new policies that can reduce the amount 

of improper payments in this area. For example, in VA’s fiscal year 2016 agency financial report, VA stated that it issued guidance in May 2015 to appropriately purchase care, such as hospital care or medical services, in the community through the 

use of VAAR-compliant contracts. VA stated that the implementation of this guidance is ongoing with full impact and compliance anticipated during fiscal year 2017. 

According to VA’s fiscal year 2016 agency financial report, the second largest root 

cause for VA’s reported improper payments was administrative or process errors 

made by the federal agency. VA reported that most of these errors occurred in its 

Compensation program. These errors, such as failure to reduce benefits appropriately, affected the payment amounts that veterans and beneficiaries received. To 

address this root cause, VA stated in its fiscal year 2016 agency financial report 

that it is updating procedural guidance to reflect such things as changes in legislation and policy. In addition, VA stated that it will train employees on specific subjects related to errors found during improper payment testing and quality reviews. 

VA Has Implemented Steps to Improve the Accuracy of and Eligibility Determinations for its Disability Benefits 

Accurate claim decisions help ensure that VA is paying disability benefits only to 

those eligible for such benefits and in the correct amounts. Thus, it is critical that 

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17GAO 15 50. 18GAO 15 464. 19 VA generally provides TDIU benefits to disabled veterans of any age who are unable to 

maintain employment with earnings above the federal poverty guidelines because of service-connected disabilities. 

VA follows its claims processes accurately and consistently. However, we previously 

reported problems with how VA processed its claims to reasonably assure the accuracy of or eligibility for the disability benefits, increasing the risk of improper payments. 

In November 2014, we reported that while VA pays billions of dollars to millions 

of disabled veterans, there were problems with VA’s ability to ensure that claims 

were processed accurately and consistently by its regional offices. 17 VA measures 

the accuracy of disability compensation claim decisions mainly through its Systematic Technical Accuracy Review (STAR). Specifically, for each of the regional offices, 

completed claims are randomly sampled each month and the data are used to 

produce estimates of the accuracy of all completed claims. 

In our November 2014 report, we reported that VA had not always followed generally accepted statistical practices when calculating accuracy rates through STAR 

reviews, resulting in imprecise performance information. We also identified shortcomings in quality review practices that could reduce their effectiveness. We made 

eight recommendations to VA to review the multiple sources of policy guidance 

available to claims processors and evaluate the effectiveness of quality assurance activities, among other things. In response to the draft report, VA agreed with each 

of our recommendations and identified steps it planned to take to implement them. 

To date, VA has implemented six of the report’s eight recommendations. For example, VA has revised its sampling methodology and has made its guidance more 

accessible. VA has initiated action on the remaining two recommendations related 

to quality review of the claims processes. VA reported that it is in the process of 

making systems modifications to its electronic claims processing system that will 

allow VA to identify deficiencies during the claims process. In addition, VA is developing a new quality assurance database that will capture data from all types of 

quality reviews at various stages of the claims process. VA stated that this new 

database will support increased data analysis capabilities and allow the agency to 

evaluate the effectiveness of quality assurance activities through improved and vigorous error rate trend analysis. VA stated that it anticipates deploying the systems 

modifications and the new quality assurance database by July 2017. 

In June 2015, 18 we reported that VA’s procedures did not ensure that Total Disability Individual Unemployability (TDIU) benefit decisions were well-supported. 19

To begin receiving and remain eligible for TDIU benefits, veterans must meet the 

income eligibility requirements. VA first determines a claimant’s income by requesting information on the last 5 years of employment on the claim form and subsequently requires beneficiaries to annually attest to any income changes. VA uses the 

information provided by claimants to request additional information from employers 

and, when possible, verifies the claimant’s reported income, especially for the year 

prior to applying for the benefit. In order to receive verification, VA sends a form 

to the employers identified on the veteran’s benefit claim and asks them to provide 

the amount of income earned by the veteran. However, VA officials indicated that 

employers provided the requested information only about 50 percent of the time. 

In our 2015 report, we reported that VA previously conducted audits of beneficiaries’ reported income by obtaining income verification matches from Internal 

Revenue Service (IRS) earnings data through an agreement with the Social Security 

Administration (SSA), but was no longer doing so despite the standing agreement. 

In 2012, VA suspended income verification matches in order to develop a new system that would allow for more frequent, electronic information sharing. VA officials 

told us that they planned to roll out a new electronic data system that would allow 

for compatibility with SSA data sources in fiscal year 2015. They noted that they 

planned to use this system to conduct more frequent and focused income 

verifications to help ensure beneficiaries’ continued entitlement. VA officials also anticipated being able to use the system to conduct income verifications for initial 

TDIU applicants. However, at the time of our 2015 report, VA could not provide us 

with a plan or timeline for implementing this verification system. In the 2015 report, we recommended that VA verify the self-reported income provided by veterans 

(1) applying for TDIU benefits and (2) undergoing the annual eligibility review process by comparing such information against IRS earnings data, which VA currently 

has access to for this purpose. 

To date, VA is developing processes to use IRS earnings data from SSA in 

verifying income eligibility requirements. According to VA, in February 2016, it 

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40 

launched a national workload distribution tool within its management system to improve its overall production capacity and assist with reaching claims processing 

goals that will be used in implementing our recommendation. To determine if new 

beneficiaries are eligible for TDIU benefits, VA stated that it is expanding the datasharing agreement with SSA to develop an upfront verification process. Specifically, 

when VA receives a TDIU claim, it will electronically request the reported IRS income information from SSA and receive a response within 16 days. In addition, according to VA, it is also planning to begin a process for checking incomes of veterans 

to determine whether they remain eligible for TDIU benefits. Specifically, VA has 

reinstituted the data match agreement with SSA that was set to expire in December 

2016 to allow VA to compare reported income earnings of TDIU beneficiaries to 

earnings actually received. According to VA, it also has drafted a new guidance 

manual for the annual eligibility review process. VA stated that it planned to fully 

implement the upfront and annual eligibility verification processes by the summer 

of 2017. 

In conclusion, in light of VA’s significant financial management challenges, we 

continue to be concerned about VA’s ability to reasonably assure its resources are 

being used cost-effectively and efficiently. Because VA’s payment amounts are likely 

to increase with the increase in appropriations for fiscal year 2017, it is critical that 

VA takes actions to reduce the risks of improper payments. While VA has taken several actions to help prevent improper payments, further efforts are needed to help 

minimize the risks of improper payments across its programs. 

Chairman Bergman, Ranking Member Kuster, and Members of the Subcommittee, 

this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. 

GAO Contacts and Staff Acknowledgements 

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key contributions to this testimony are Matthew Valenta (Assistant Director), Daniel Flavin (Analyst in Charge), Marcia Carlsen, Francine Delvecchio, Robert 

Hildebrandt, Melissa Jaynes, Jason Kelly, and Jason Kirwan. 

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f 

Prepared Statement of Nicholas Dahl 

Mr. Chairman, Ranking Member Kuster, and Members of the Subcommittee, 

thank you for the opportunity to discuss the Office of Inspector General’s (OIG) 

work regarding VA’s financial management. Our statement today focuses on the results of the fiscal year (FY) 2016 Audit of VA’s Consolidated Financial Statements, 

and our work related to the Improper Payments and Recovery Act (IPERA). I am 

accompanied by Ms. Sue Schwendiman, Director, OIG’s Financial Audits Division. 

BACKGROUND 

Effective financial management is important because it enables VA to plan, direct, 

monitor, and control its financial resources. It supports the safeguarding of VA’s assets and the timely payment of its obligations. Good financial information helps 

users identify links between resources and results, and to understand and improve 

value for appropriated funds. It can also be used to manage risk effectively and support decisions through financial analysis. 

The Chief Financial Officers Act of 1990 (Public Law 101–576), as amended, requires the OIG to conduct an audit of VA’s consolidated financial statements. Since 

2000, we have contracted with an independent public accounting firm to conduct the 

audit; and since 2010, we have contracted with CliftonLarsonAllen LLP (CLA). This 

work helps ensure accountability for public resources. 

VA’s consolidated financial statements are published in VA’s annual Agency Financial Report, and these statements summarize VA’s financial results, financial 

condition, and the status of budgetary resources. Although VA has received an unmodified or ‘‘clean’’ opinion, on its consolidated financial statements from our contracted auditors, VA has continuously faced challenges in achieving those results. 

A clean opinion means the financial statements are presented fairly, in all material 

respects, in accordance with accounting principles generally accepted in the United 

Statement of America. It does not, however, mean VA can easily obtain that opinion 

or that VA does not have internal control weaknesses. 

The contract auditor has regularly identified and reported on material weaknesses 

and significant deficiencies. A material weakness is a deficiency, or a combination 

of deficiencies, in internal controls such that there is a reasonable possibility that 

a material misstatement of VA’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or 

combination of deficiencies, in internal controls that is less severe than a material 

weakness, yet important enough to merit attention by those charged with governance. 

FISCAL YEAR 2016 FINANCIAL STATEMENT AUDIT RESULTS 

The audit of VA’s FY 2016 consolidated financial statements identified six material weaknesses and two significant deficiencies-two more in total than the prior 

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42 

year. As described above, these material weaknesses make it more difficult for management to ensure the accuracy of VA’s financial statements and also more difficult 

to audit the statements. 

The material weaknesses are: 

• Information technology security controls - This is a repeat finding that our contract auditors have reported since FY 2000. Weaknesses existed in configuration 

management, such as untimely patching to mitigate security vulnerabilities; access controls, including inconsistent enforcement of password standards; security management; and contingency planning. Without good information technology security controls, VA’s financial information may not be safe in terms of 

confidentiality, integrity, and availability. • Community care obligations, reconciliations, and accrued expenses - This is a 

repeat finding from the FY 2015 audit. CLA identified numerous examples of 

obligations for Community Care Programs that were overstated compared to actual payments. As a result, VA management performed its own analysis and recorded journal entries of approximately $1.9 billion to reduce overstated Choice 

Program obligations and $2.6 billion to reduce other overstated Community 

Care Program obligations in VA’s general ledger on September 30, 2016. The 

overestimation of obligations also resulted in a large overstatement of accrued 

expenses, which management also reduced through journal entries. 

CLA identified several causes of these overstatements, but overall, significant system limitations hindered effective and efficient operations and controls. CLA also reported that methods to estimate the cost of care were inconsistent at medical centers and the Office of Community Care’s procedures for its monitoring activities 

were not adequate. For most of FY 2016, the Office of Community Care had not performed a nationwide consolidated reconciliation of obligations and disbursements between VA’s Financial Management System (FMS) and the system used to authorize 

and process individual non-VA care claims. 

• Financial reporting - This is a repeat finding from the FY 2015 audit. VA’s financial management and general ledger system is FMS. Since its implementation in 1992, Federal financial reporting requirements have become more complicated and the level of financial information needed by management and oversight bodies has become increasingly complex. Due to FMS’ limited functionality 

to meet current financial reporting needs, VA utilizes another system to create 

financial statements for external reporting. However, this process requires significant manual intervention and workarounds to ensure accurate financial reporting. CLA reported that VA recorded a large number of adjustments (called 

journal vouchers) to its accounts in order to prepare VA’s financial statements. 

Also, significant abnormal account balances (that is, an account balance that 

shows a debit balance when it should be a credit balance or vice versa) were 

not researched and cleared timely. These weaknesses increase the risk of material errors in financial reporting. Although VA has made improvements in areas 

such as the reduced use of journal vouchers, many issues have existed for years 

and require extensive efforts to implement solutions to resolve them. 

• Education benefits accrued liability - This is a new finding identified during the 

FY 2016 audit. CLA reported VA did not use the appropriate method to account 

for veterans’ education benefits. VA manages several education benefit programs with total disbursements of approximately $14.5 billion in FY 2016, with 

the Post 9/11 G.I. Bill Program being the largest. Prior to FY 2016, management did not view education benefit payments as post-employment benefits. As 

a result, VA did not report an estimated liability for future benefit payments 

as required by accounting standards. In FY 2016, VA reported this liability in 

the amount of approximately $60 billion for the first time on its balance sheet. 

• Control environment surrounding the compensation, pension, and burial actuarial estimates - This is a new finding identified during the FY 2016 audit. It 

resulted from the lack of succession planning for the chief actuary who was responsible for the calculation of VA’s unfunded veterans’ compensation and burial liability amount. This amount was reported on VA’s balance sheet as of September 30, 2016, as approximately $2.5 trillion. The chief actuary left VA in 

July 2016, and VA did not have a successor actuary with the appropriate qualifications and experience to take full responsibility to manage the actuarial 

model assumptions and review the related calculations. Management subsequently obtained the services of a credentialed actuary on detail from another 

department. VA also noted its model’s assumption for the rate of new compensation cases was outdated and adjusted its balance sheet by $277 billion. 

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1 31 CFR §1341(a) and 1517(a) 

2Public Law-104–208, §803(a), Federal Financial Management Improvement Act of 1996 

tions, which would include comparing relevant actuarial information from the 

Department of Defense. • CFO organizational structure for VA and VHA - This was elevated from a significant deficiency in FY 2015 to a material weakness in FY 2016. CLA reported 

VA has a decentralized and fragmented organizational structure for financial 

management and reporting that did not operate in a fully integrated manner. 

The VA CFO establishes financial policy and produces VA’s consolidated financial statements. Business components, such as the Veterans Health Administration (VHA), the Veterans Benefits Administration (VBA), and the National 

Cemetery Administration, have their own CFOs, who oversee financial management operations and follow the chain of command within those organizations. 

VHA’s financial management structure was further fragmented, with three different CFO organizational structures within the Administration. CLA observed 

instances where procedures the VA CFO depended on were not completed by 

VA components or communication issues existed. 

CLA concluded the decentralization of financial management functions among the 

VA component entities without organizational reporting and accountability back to 

the VA CFO decreased the VA CFO’s ability to affect financial management at the 

component level and across the VA enterprise, and also presented a risk to VA’s 

planned conversion to a shared service provider in order to modernize its financial 

systems. 

CLA also reported two significant deficiencies. As stated above, a significant deficiency is a deficiency or combination of deficiencies in internal controls that is less 

severe than a material weakness, yet important enough to merit attention by those 

charged with governance 

• Procurement, Undelivered Orders, Accrued Expenses, and Reconciliations - Regarding this significant deficiency, CLA reported: 

• Centralized, complete, and consolidated reconciliations among various procurement subsidiary systems and FMS were not performed. 

• VA used miscellaneous obligating documents, also called ‘‘1358s’’, extensively, 

but lacked sufficient controls, such as monitoring to ensure obligations and accrued expenses were not overstated. 

• VA did not have an adequate process to validate estimated accrued expenses 

against actual payment data. 

• Pervasive and long standing procurement related issues, including instances of 

untimely liquidation of undelivered orders, untimely recording of contracts and 

modifications in FMS, recording of obligations prior to contract execution, overobligation of funds, and obligations recorded months or years after receiving 

goods or services. 

• Loan Guaranty Liability - VBA uses complex models to estimate future cash 

flows and determine the cost of its loan guarantees on a present value basis 

for budgetary and financial reporting purposes. CLA reported structural deficiencies in model design have impacted VA’s ability to forecast future program 

cash flows following the housing crisis. VBA’s models have consistently shown 

significant differences between model forecasts and actual program performance. Based on the auditor’s discussions with management regarding this issue, 

VBA revised certain model assumptions, thus reducing the Loan Guaranty Liability as of September 30, 2016, by $830 million. 

Additionally, CLA noted that VA reported two violations of the Antideficiency 

Act 1 in August 2016 and was in the process of reporting four other violations at 

the time of their audit report. 

Overall, CLA reported VA’s financial management systems do not substantially 

comply with the requirements of the Federal Financial Management Improvement 

Act of 1996. 2 VA’s complex, disjointed, and legacy financial management system architecture continued to deteriorate and no longer met increasingly stringent and demanding financial management and reporting requirements mandated by the U.S. 

Department of the Treasury and the Office of Management and Budget (OMB). VA 

continued to be challenged in its efforts to apply consistent and proactive enforcement of established policies and procedures throughout its geographically dispersed 

portfolio of legacy applications and systems. 

FMS’ limitations required VA to use another system to produce financial statements. However, VA still had to re-enter or re-perform numerous manual journal 

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44 

3OMB Memorandum 13–08, Improving Financial Management Through Shared Services 

4 Audit of VA’s Financial Statements for Fiscal Years 2016 and 2015 (Report No. 16–01484– 

82, November 15, 2016) 5 Review of VA’s Compliance With the Improper Payments Elimination and Recovery Act for 

FY 2016 (Report No. 16–04416–231, May 15, 2017) 6OMB Circular A–123, Appendix C, Part II–A(1), Responsibilities of Agency Inspectors General. 

vouchers, reconciliations, and analyses for each reporting period to produce VA’s financial statements and trial balances for submission to the U.S. Department of the 

Treasury. During FY 2016, FMS was not centrally and completely reconciled with 

key subsidiary systems such as the Electronic Contract Management System; Integrated Funds Distribution Control Point Activity, Accounting and Procurement System; and the Fee Basis Claims System. 

VA is currently working with the U.S. Department of Agriculture to obtain financial services, which is consistent with OMB guidance to obtain financial services 

from a shared service provider. 3 The VA Office of Finance, within the Office of Management, is leading the Financial Management Business Transformation program 

along with the Office of Acquisition and Logistics and the Office of Information and 

Technology. In FY 2017, VA began efforts to standardize business processes and 

identify potential levels of change required for the transformation. 

In the FY 2016 audit report, 4 CLA made recommendations for VA to address the 

identified material weaknesses and significant deficiencies. Those recommendations 

ranged from specific, targeted actions to broader improvements in policies, processes, and systems. 

THE IMPROPER PAYMENTS ELIMINATION AND RECOVERY ACT 

We recently issued our annual determination on VA’s compliance with the Improper Payments Elimination and Recovery Act (IPERA) 5 finding VA did not comply with two of the six requirements in OMB’s guidance for compliance with 

IPERA 6. Specifically, VA did not: 

• Maintain a gross improper payment rate of less than 10 percent for two programs -the VA Community Care Program and the Purchased Long Term Services and Support (PLTSS) Program-reported in the Agency Financial Report. 

• Meet reduction targets for six programs reported in the Agency Financial Report. 

VA met the other four IPERA requirements: 

• Published the FY 2016 Agency Financial Report on VA’s website 

• Performed risk assessments 

• Published improper payments estimates for programs identified as susceptible 

to significant improper payments 

• Provided information on corrective action plans. 

Although VA published improper payment estimates as required, we determined 

estimates for the Supplies and Materials Program and the Post-9/11 G.I. Bill Program were not reliable because of weaknesses in sample evaluation procedures. 

Overall, VA reported improper payment estimates totaling approximately $5.5 billion in VA’s Agency Financial Report for FY 2016, compared with $5 billion for FY 

2015. 

Areas of Non-Compliance 

The two programs that exceeded the 10 percent improper payment rate threshold 

were the VA Community Care Program and the PLTSS Program. Improper payment 

rates for these programs were high at approximately 76 percent and 69 percent, respectively. This is a repeat of last year’s determination of noncompliance, but the 

rates were lower last year at approximately 55 percent and 59 percent, respectively. 

VA reported the improper payment rate for the VA Community Care Program was 

high because VHA purchased a significant amount of medical care from non-VA providers using individual authorizations. The individual authorizations were not compliant with the Federal Acquisition Regulation (FAR). The high PLTSS improper 

payment rate was also due to the lack of FAR-compliant contracts. VA must generally follow the FAR when other legal authorities are not available for the procurement of goods and services. According to OMB’s definition of improper payments, 

‘‘an improper payment is any payment that should not have been made or that was 

made in an incorrect amount under statutory, contractual, administrative, or other 

legally applicable requirements.’’ Therefore, when purchases do not follow applicable 

legal requirements, such as having contracts in place that comply with the FAR, the 

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resulting payments are improper. As such, VA counted payments for non-FAR compliant medical care purchases as improper. 

VA also did not meet its annual reduction targets for six programs. VA provided 

the following explanations for missing the reduction targets in these programs: 

• VA Community Care Program - The improper payment rate increased due to 

the inclusion of individual authorizations under $2,500 in the improper payment estimate. 

• PLTSS - The higher improper payment rate was due to contracting errors and 

the inclusion of individual authorizations under $2,500 in the improper payment estimate. 

• Beneficiary Travel - Other priorities, such as access to care and timely payment 

processing, have taken precedence over meeting the reduction target. 

• Civilian Health and Medical Program of the Department of Veterans Affairs - 

System improvements are needed to address identified system issues and expand automated business rules that would reduce the number of human entries 

and decisions. 

• State Home Per Diem Grants - VHA identified an increase in improper payments associated with missing or incomplete documentation for domiciliary residents, due in part to a change in sampling stratification. 

• Supplies and Materials Program—Our review identified additional improper 

payments, primarily due to insufficient supporting documentation that increased the improper payment rate above the target rate. 

We also noted the VA Community Care Program and PLTSS Program did not 

achieve the expected level of precision for their improper payment estimates because 

of larger than expected variances in sample results. Despite not meeting expectations, VHA did design its sampling methodology appropriately. 

We made several recommendations to Agency leadership in VHA, VBA, the Office 

of Management, and the Office of Acquisition, Logistics, and Construction, to take 

steps to reduce improper payment rates, achieve reduction targets, and improve improper payment estimates. VA management agreed with our recommendations and 

provided plans for corrective action. We will follow-up on their implementation during the FY 2017 IPERA review. 

CONCLUSION 

VA’s financial management and system challenges are many and complex. VA 

plans to move from FMS to a shared services provider to gain access to modern 

technology. Initial operational capacity is scheduled for FY 2020. VA will need 

strong organizational leadership and cooperation to manage this significant change. 

VA also faces challenges in reducing improper payments related to the procurement 

of medical care through contracts that are not compliant with the Federal Acquisition Regulation. As we review these areas annually, we will monitor VA’s actions 

to address its financial management and systems challenges and its compliance 

with IPERA. 

Mr. Chairman, this concludes my statement. We would be happy to answer any 

questions you or other Members of the Committee may have. 

f 

Prepared Statement of Julie L. Larsen 

Chairman Bergman, Ranking Member Kuster, and distinguished members who 

proudly serve on this subcommittee; On behalf of Charles E. Schmidt, the National 

Commander of the largest Veteran Service Organization in the United States of 

America representing more than 2.2 million members; we thank you for the opportunity to comment on this important issue regarding veteran debt collection. It is 

my duty and honor to represent The American Legion and assist this Committee 

in understanding the Department of Veterans Affairs (VA) debt collection process 

and touch on areas of improvement, as well as provide insight on how The American 

Legion assists in these matters. 

The American Legion has worked extensively on matters concerning VA debt 

management and recognizing the importance of these issues has had a dedicated 

representative at the Debt Management Center (DMC) in Saint Paul, MN since 

1978 specifically to support and assist veterans who fall into debt with VA. With 

nearly 40 years of service our representative has been instrumental in assisting 

thousands of veterans avoid financial hardships by; filing waivers, negotiating offsets of current VA benefits, establishing reasonable monthly payment plans to avoid 

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1https://drive.google.com/file/d/0B70—mGYT1tJETzZGWUZKYzdGXzg/view 

2https://drive.google.com/file/d/0B70—mGYT1tJETzZGWUZKYzdGXzg/view 

financial burdens, and has assisted in ending erroneous collection actions; and has 

correct or helped to reclaim improper collections. 

The VA categorizes debt into six different areas; 

• Benefit debt, (including benefits for veterans and burial, and first and third 

party debts for medical care and hospital services), 

• VA program debt (including capital grants, and emergency and humanitarian 

care debt), 

• Vendor debt, 

• Employee debt (including payroll, travel, agent cashier, property), 

• Intra-governmental debt, and 

• Freedom of Information Act debt. 1

Benefit debt is the most common type of debt affecting veterans, which is why 

The American Legion’s primary focus in our debt collection management office is assisting veterans affected by overpayments of benefits, and addressing how to best 

mitigate or repay the funds owed. Of the millions of dollars in benefits awarded to 

veterans by the VA every year, thousands of veterans are paid incorrect amounts. 

When these incorrect payments are more than the amount due to a veteran, debt 

is incurred and collection actions will ultimately be triggered. A VA benefit debt can 

be generated through a number of actions, like; change in income or net worth, dependent status, receipt of retired pay, school attendance, failure to obtain the release of home loan liability, hospitalization, treatment co-payments, overpayments 

to schools while using the G.I. Bill, and double payments of drill pay and VA benefits pay to members of the Reserves and National Guard. 

VA Debt Collection Process within the VHA 

According to VA, in 2014, 88% of all debts owed were related to the Veteran 

Health Administration (VHA), whereas only 8% of all debts owed originated at the 

Veteran Benefits Administration (VBA). 2 Once a debt has been created at the regional office of jurisdiction, VA is required to send notice in writing to the subject 

of the alleged debt. This notice must include the exact amount of the debt, the reason for the debt, and the individuals’ rights and remedies in connection with the 

debt. Additionally, it must inform the debtor that collection may be made through 

offset of current or future benefits and that interest and administrative costs may 

be assessed. Once the debt is generated, it is referred to the Debt Management Center (DMC) for collection actions. 

Within 30 days the DMC sends a collection due process letter advising the debtor 

of the debt amount and provides a notice of their rights and obligations. If the debtor is actively drawing benefits, the letter will indicate that failure to respond will 

result in a full benefit offset beginning with the first pay period 60 days after the 

date of the notification letter. If the debtor is not actively drawing benefits a second 

letter is mailed 30 days later as a reminder to take action. The letter advises that 

if the debt is not satisfied, or an agreeable repayment plan is not established within 

60 days, the account will be reported to Credit Collection Agencies as delinquent. 

The letter will further state that the Treasury Department may refer the account 

to private collecting agencies and the account may be subject to garnishment of nonfederal wages under the Treasury’s Administrative Wage Garnishment Program. If 

no action is taken, third and fourth letters are mailed 30 days apart. If no action 

is taken 60 days after the third letter, the account is referred to the Treasury Department for active collection. 

In our experience, the VA makes every attempt to keep these debts ‘‘in-house’’ and 

tries to notify the veteran in numerous ways. According to the Code of Federal Regulations (C.F.R.) 1.911 (d), VA is required to send a notice of debt that must include 

the exact amount of the debt, the reason for the debt, the individual’s rights and 

remedies in connection with the debt, and inform the debtor that collection may be 

made through offset of current or future benefits and that interest and administrative costs may be added. 

Sometimes, notification letters are sent to wrong addresses due to updated information not being provided to the VA debt collection team. Failure to update the system with the correct and current contact information can lead to a veteran who 

owes a debt not being properly informed of their rights. The American Legion calls 

upon VA to continually update their contact database to ensure the most up-to-date 

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3The American Legion Resolution No. 44 (2016): Department of Veterans Affairs Rural 

Healthcare Program 4 American Legion Resolution No. 228 (2016): Timely Processing of Overpayments for Reserve 

Components and/or Active Duty Pay 5https://www.gao.gov/products/GAO–16–42 

information for a veteran is available so the VA may contact the veteran for a multitude of reasons, including debt collection. 

Additionally, a veteran may request copies of the debt and coinciding information 

from the original office of jurisdiction where the overpayment was created. If the 

veterans feels necessary, they may file an appeal with VA. If the veteran chooses 

to file an appeal, then they will need to notify the VA in writing before the 30-day 

deadline if they are requesting a hearing to contest the debt. The debtor’s right to 

inspect the record is also included in the original debt notification letter. 

Many of the issues associated with a veteran incurring a VA based debt is caused 

by the lack of an integrated records system within the VA. The American Legion 

recommends the VA implement an integrated system that all VA branches can access for the most up-to-date information regarding a veteran’s most recent contact 

information. Through American Legion Resolution No. 44, we support the VA in creating and implementing an updated and modernized integrated system. 3

Furthermore, The American Legion believes that overpayments to veterans who 

receive benefit pay and drill pay during their Reserve, National Guard drill or Active Duty period can be easily remedied if the VA and Department of Defense 

(DOD)compare drill records once a month, and not once year or however often they 

currently do it. When a soldier is activated for their Reserve or National Guard 

training, or even Active Duty, they are not eligible to receive VA disability payments. The soldier has the option of either receiving either drill or VA disability, 

and they typically choose the higher of the two. If VA does not stop the payment, 

then an overpayment is created. It has been our experience that DOD and VA only 

compare this information every year, or sometimes every few years, sending 

servicemembers into debt that accumulates over many years. Errors like this are 

preventable and put unnecessary stress on our nation’s heroes. We support any legislation that aims to address this issue using Resolution No. 228: Timely Processing 

of Overpayments for Reserve Components and/or Active Duty Pay, which states that 

The American Legion supports ‘‘plac[ing] greater emphasis on processing of these 

overpayments for the performance of Reserved Component and/or Active Duty pay 

so not to have multiple years processed at the same time’’. 4

VA Debt Collection Process within the VBA 

When a veteran is attending an institution of higher learning VA pays the institution the amount owed for the veteran to attend the school. Sometimes, because of 

improper reporting, the school is overpaid, and other times the veteran may change 

his or her course schedule which often results in an overpayment of benefits to the 

school. Many veterans are unaware their schedule adjustment triggers an overpayment because there is little or no guidance provided to enrolled veterans on VA’s 

policy. 

In a study conducted by the Government Accountability Office (GAO), GAO noted 

that education institutions make frequent errors when reporting enrollment information to VBA and that not all schools send their certifying officials to attend the 

various training opportunities offered by VBA, contributing to additional improper 

education claims being filed on behalf of the veteran. 5

The American Legion recommends that educational institutions authorized to accept GI Bill payments review GAO’s report and ensure that they comply with all 

findings in an effort to avoid future overpayments. 

VA Partnership with the Treasury 

In most cases, delinquent accounts over 120 days are referred to the Treasury Department for collection. Once a debt is referred to the Treasury Department the 

debtor is subjected to the Treasury’s collection tools, interest, and any administrative fees and veteran service organizations are no longer empowered to assist. The 

American Legion strongly recommends that veterans who receive debt notification 

letters from DMC immediately contact an advocate like The American Legion for 

assistance to prevent the debt from spiraling out of control. It has been the experience of The American Legion that the VA DMC office is much easier and sensitive 

to the veterans particular circumstances and needs than the Treasury department, 

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which is why veterans need to act quickly to avoid garnishment actions and negative credit reporting. 

Finally, the DMC does not charge interest or fees when collecting on compensation and pension debt, a policy that The American Legion strongly. While the DMC 

does not charge interest on compensation and pension debt, they do assess interest 

on Home Loan Guaranty, Chapter 34 and Chapter 35 education debts where the 

rate of interest is 4% for these types of debt. 

Conclusion 

Debt collection within the VA and Treasury Departments are complicated and 

nuanced. The American Legion sees room for improvement, and we have highlighted 

some of those suggestions in this testimony. Overall The American Legion believes 

that VA does an adequate job in protecting veterans from added exposure when they 

are identified as having been overpaid and want to ensure that veterans are aware 

of their rights, resources, and consequences should they neglect to address these 

issues right away. 

And finally, The American Legion calls on DoD and VA to integrate their systems 

seamlessly so that the responsibility does not fall to the veteran to make notifications to either VA or DoD that should be the responsibility of the departments and 

the Administration as highlighted in GAO report 16–42. 

As always, The American Legion thanks this committee for the opportunity to elucidate the position of the over 2.2 million veteran members of this organization. For 

additional information regarding this testimony, please contact Mr. Derek 

Fronabarger, Deputy Director of The American Legion Legislative Division at 

dfronabarger@legion.org or (202) 861–2700. 

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49 

Statements For The Record 

Attachment 1 

Department of Veterans Affairs (VA) Financial Management Training Initiative (FMTI)Financial 

Management Leadership Training (FMLT) Course Offerings 

Course Title Course Description Date (Method) 

A New Paradigm for Internal Controls 

- Entity Level Internal Control Assessment (ELICA) Tool Processes/ 

Statement of Assurance (SOA).

This course provides a demonstration 

of the integration of internal controls into all aspects of management; explanation of the necessity 

of internal controls for mission 

completion; walk-through of ELICA 

Tool along with a demonstration of 

effectiveness of the internal controls system..

August 2016 (via Webinar) 

Avoiding Travel Pitfalls: Travel with 

Data Analytics Tool.

This course will help attendees gain 

an understanding of the Concur.Gov 

′′How To′′ when certifying, reviewing 

or approving travel documents; 

gain a basic understanding of the 

Federal Travel Regulations (FTR) 

and Department of Veterans Affairs 

(VA) Policy requirements when certifying, reviewing or approving travel documents..

August 2016 (via Webinar) 

Capitalization - Know Your Assets ....... This course explains policies related to 

Capitalization of Construction 

Projects and Real Property; explains 

the VA Capitalization process related to Construction and Real 

Property; expresses when timely 

capitalization of Construction 

Projects and Real Property should 

occur; identifies supporting documentation required for capitalization of Construction Projects and 

Real Property; identifies useful reports and potential general ledger 

issues..

August 2016 (via Webinar) 

Financial Management Business 

Transformation (FMBT).

The course will increase awareness of 

the Department’s decision to migrate to a Federal Shared Service 

Provider (FSSP) offering of an integrated financial management and 

acquisition system solution; provide 

an overview and current status of 

the FMBT program..

August 2016 (via Webinar) 

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Department of Veterans Affairs (VA) Financial Management Training Initiative (FMTI)Financial 

Management Leadership Training (FMLT) Course Offerings—Continued 

Course Title Course Description Date (Method) 

Financial Management Vision .............. The course provides an opportunity for 

the Acting Deputy CFO to share her 

vision and major goals for the VA 

financial management community. 

From encouraging attendees to assist in maintaining our clean audit 

opinion by reducing the number of 

Material Weakness and Significant 

Deficiencies to pressing forward 

with modernization of our Financial 

Management System through our 

FMBT initiative, this served as the 

opening to virtual training event..

August 2016 (via Webinar) 

Fiscal Law Basics - Appropriation Law This course serves as an introduction 

to fiscal law basics-where federal 

money comes from, what it can be 

used for, when you can spend it, 

and when you can’t. In addition 

attendees will understand how federal funding moves, gets used, and 

budget planning tools. The course 

also covers the Anti-Deficiency Acthow to avoid obligating appropriations you do not have and avoiding 

jail and a career-ending fiscal disaster; how agencies do business 

between themselves; explanation of 

the Economy Act as the basis for 

intra and interagency transactions; 

and securing services and supplies 

without going to the private sector..

August 2016 (via Webinar) 

Hey! Got Debt?: Debt Collection ........... This course helps attendees develop 

greater understanding of Federal 

laws and VA policies and procedures related to Debt Collection; increase awareness and the impact 

Debt Collection has on Veterans, 

schools, tax payers, and other 

stakeholders; ensure compliance 

throughout VA with Debt Collection 

statutes..

August 2016 (via Webinar) 

Interagency Agreements (IAA) and the 

General Post Fund: Lawful Agreements.

This course discusses the General 

Post Fund-the softer side of funding aid for patients, members, and 

residents in VA medical facilities; 

along with where philanthropy and 

government come together..

August 2016 (via Webinar) 

Purchase Cards - Avoiding Common 

Purchase Card Errors.

This course provides a clear understanding of what constitutes a split 

purchase transaction; the consequences of intentionally splitting 

a transaction in order to circumvent the micro-purchase limit; 

and alternate procurement options 

in order to prevent a split transaction..

August 2016 (via Webinar) 

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Department of Veterans Affairs (VA) Financial Management Training Initiative (FMTI)Financial 

Management Leadership Training (FMLT) Course Offerings—Continued 

Course Title Course Description Date (Method) 

The Joys of Balancing: Reconciliations This course provides information to 

promote the Veteran Integrated 

Service Network (VISN)/Medical 

Center staff compliance with reconciliation policies and procedures; 

focus station resources and attention on critical reconciliations; provide better oversight and guidance 

to station staff on key reconciliation tools and techniques..

August 2016 (via Webinar) 

Undelivered Orders (UDO) and Accruals 

- UDOs not UFOs.

This course promotes compliance with 

Federal and VA policies related to 

obligations and accruals; record an 

obligation in FMS with the proper 

accrual flag; and perform timely reviews of open undelivered orders..

August 2016 (via Webinar) 

Understanding Interagency Agreements 

(IAA) and Intragovernmental Reconciliation.

This course highlights the successful 

process for an IAA to help with 

proper reconciliation within and between federal agencies; comply 

with applicable VA and Treasury 

policy relating to IAAs; and identify 

the types of agreements and when 

to use each form..

August 2016 (via Webinar) 

2017 Audit Site Visit Preparation ........ This course will provide an understanding of the audit cycle; associated roles and responsibilities; how 

to be prepared and effective during 

the site audit; how to work with the 

auditors to address audit exceptions and findings; proper preparation for the audit site visit, collecting and providing source and 

evidentiary documents to the auditors, answering auditors’ questions, 

and ask questions for clarification..

January 2017 (In-Person) 

A Day in the Life of a Fiscal Officer ... This course provides insight into the 

daily work of the Chief Fiscal Officer at a VA medical center, and 

provides best practices along with 

helpful hints in the areas of the financial statement audit, allocation 

of resources, travel, payroll, budget, 

and care in the community..

January 2017 (In-Person) 

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Department of Veterans Affairs (VA) Financial Management Training Initiative (FMTI)Financial 

Management Leadership Training (FMLT) Course Offerings—Continued 

Course Title Course Description Date (Method) 

Accounting for Community Care .......... This course provides an overview of 

standard process within the Medical Center, VISN and all of the 

Veterans Health Administration 

(VHA), including mandatory uses for 

estimates, obligations and reconciliations of purchased care. In 

addition the course provided tips 

on how to avoid year end adjusting 

entries; develop a greater understanding of Federal and VA policies 

over obligations in order to prevent 

overstating obligations; provide 

tools and options to reduce rework 

and make the new financial management system transition easier; 

prior year obligations clean-up and 

an overview of when you can use 

prior year funds..

January 2017 (In-Person) 

Anti-deficiency act (ADA) violations, 

Major, Minor and NRM Accounting.

This course offers an increased understanding of ADA, Major, Minor, and 

NRM construction programs; root 

causes of ADA violations; and oversight techniques to detect and prevent ADA violations on Minor and 

NRM projects..

January 2017 (In-Person) 

Appropriations Law Basics ................... The course provides an understanding 

of the basic principles of how federal funds are used; the Anti-Deficiency Act and why you want to 

avoid it; understanding enough 

about fiscal law to know if there is 

a problem, or at least, what questions to ask; how to comply with 

funding requirements; know how to 

partner with the Office of General 

Counsel (OGC)..

January 2017 (In-Person) 

Budget Execution - Getting More Bang 

for Your Buck.

The course provides an understanding 

of how to improve the accuracy and 

management of reported obligations, the impact of improperly 

managed funds, and the ways to 

improve the accuracy of reported 

information..

January 2017 (In-Person) 

Budget Process ..................................... The course provides an increased understanding of the Federal and Department’s budget processes; 

unique aspects of the FY 2018 

budget cycle; anticipated FY 2019- 

2020 budget process and timeline; 

and where to obtain information on 

the budget status for the Department..

January 2017 (In-Person) 

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Department of Veterans Affairs (VA) Financial Management Training Initiative (FMTI)Financial 

Management Leadership Training (FMLT) Course Offerings—Continued 

Course Title Course Description Date (Method) 

Business Process Reengineering (BPR) 

- Your World is Changing.

The course provides an overview, vision and goals of Business Process 

Reengineering (BPR) and the importance of this endeavor to the 

successful implementation of a 

federal shared service provider solution at the Department of Veterans Affairs..

January 2017 (In-Person) 

Business Processing Reengineering: 

BPR 101 What to Expect.

The course provides a detailed look at 

business process reengineering and 

the necessities of business process 

standardization efforts for the success of the FMBT program..

January 2017 (In-Person) 

Corrective Action Plan (CAP) Development and Execution.The course provides an overview of 

the Office of Financial Process Improvement and Audit Readiness 

(FPIAR) fiscal year (FY) 17 CAP 

oversight approach; understand the 

relationship between the CAP cycle 

and audit timeline; introduce the 

enhanced CAP template; define the 

key elements of a deficiency; discuss how to identify the root 

causes of the FY16 audit material 

weaknesses (MW) and significant 

deficiencies..

January 2017 (In-Person) 

Cash Reconciliations: Suspense and 

Deposit Funds.

The course provides an understanding 

of audit findings relating to reconciliations and timely clearing of 

suspense accounts (clearing and 

deposit funds) and how to take appropriate action to remediate..

January 2017 (In-Person) 

Centralized Receivables Service (CRS) The course educates business partners 

on how the Debt Management Center (DMC) can ease the burden of 

the debt collection process by using 

Treasury’s CRS tool..

January 2017 (In-Person) 

Chief Financial Officer (CFO) Dotted 

Line of Accountability.

The course provides an overview of 

VA’s actions to address the FY 

2016 financial statement audit 

finding concerning the CFO Organizational Structure with financial 

leaders from the Administrations 

and Staff Offices detailing how VA 

is building a collaborative work environment to resolve emerging challenges.

January 2017 (In-Person) 

Debt Collection - From Treasury Offset 

Program (TOP) to the Treasury Report on Receivables (TROR).

The course provides an overview of 

the debt collection process from establishment to collection and clarifies the Agency’s legal responsibility.

January 2017 (In-Person) 

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Department of Veterans Affairs (VA) Financial Management Training Initiative (FMTI)Financial 

Management Leadership Training (FMLT) Course Offerings—Continued 

Course Title Course Description Date (Method) 

Enterprise Risk Management ............... The course provides an orientation on 

establishing and achieving goals, 

seizing opportunities to improve operations, providing reliable reporting, and maintaining compliance 

with laws and regulations..

January 2017 (In-Person) 

Financial Management Vision: Status 

Update.

This course provides an update regarding expectations to achieve 

VA’s vision for financial management, including best practices in 

preparing facilities to support activities related to the financial 

statement audit and FMBT..

January 2017 (In-Person) 

Financial Policy - Making it Work for 

You!.

The course provides an overview of 

the hierarchy of laws, regulations 

and policies; a walkthrough of the 

financial policy process & web layout; an update on recent policy 

changes; and potential policy 

changes derived during FMBT..

January 2017 (In-Person) 

Financial Services Center (FSC): Strategy Drivers in Delivery of Services.This course shares the Financial Service Center’s (FSC) core services and 

explores additional opportunities to 

leverage their shared service platform..

January 2017 (In-Person) 

Financial Statement Audit Review ....... This course provides a high level review of the FY2016 material weaknesses and significant deficiencies 

and highlights major challenges to 

maintain a clean audit opinion..

January 2017 (In-Person) 

Financial Management Business 

Transformation: Change Management.

This course provides an overview of 

impacts that changes have on daily 

activities in people’s work assignment and discusses the organizational change management (OCM) 

approach and best practices as 

they are applicable to the participant’s organizations as we begin 

FMBT..

January 2017 (In-Person) 

Financial Management Business 

Transformation Overview: Setting 

Expectations.

This course provided an opportunity 

for the financial management leadership from both VA and the United 

States Department of Agriculture 

(USDA) to discuss the selection of 

the Momentum solution utilizing the 

shared service model. This question 

and answer platform offers 

attendees the chance to gain insight on the new financial management system and how it will be implemented at VA..

January 2017 (In-Person) 

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Department of Veterans Affairs (VA) Financial Management Training Initiative (FMTI)Financial 

Management Leadership Training (FMLT) Course Offerings—Continued 

Course Title Course Description Date (Method) 

Funding Follies: Cautionary Tales ........ The course provides an understanding 

of the color of money, bonafide 

needs rule, Anti-Deficiency Act, Purpose Statute and how to avoid embarrassing fiscal mistakes of the 

past..

January 2017 (In-Person) 

Future of VA Form 1358 ....................... This interactive session serves as an 

opportunity to gather information 

on how and why VA offices use 

1358s and discusses potential 

changes to the 1358 process as 

the result of the financial management system modernization..

January 2017 (In-Person) 

Great Responsibility: Certifying Invoices Correctly.This course demonstrates responsibilities and potential legal ramifications for Invoice Review and Certification as promulgated by Treasury 

Financial Policy and VA Financial 

Policy Volume VIII - Chapter 1A and 

the relevant capabilities of the FSC 

Invoice Payment Processing System 

(IPPS)..

January 2017 (In-Person) 

Help VA Fight Fraud ............................. This course highlights the definition of 

fraud, waste and abuse; introduces 

the Data Analytics and Fraud Act of 

2015; discusses fraud cases within 

the VA; and explains how you can 

help fight fraud, waste and abuse..

January 2017 (In-Person) 

How to Avoid A-123 Appendix A Findings at the Facility.This course provides a brief history of 

Office of Management and Budget 

(OMB) Circular A-123 and how employees can use its principals to 

strengthen financial reporting within the Department..

January 2017 (In-Person) 

Improper Payments - Do This, Not That This course provides an overview of 

legislation and the circular covering 

improper payments, all reporting 

requirements, VA’s Improper Payments and Elimination and Recovery Act (IPERA) Program, the importance of corrective actions, and examples of actions that result in 

Improper Payments..

January 2017 (In-Person) 

Internal Control Overview: What Are 

You Responsible For?.

The course provides and overview of 

internal controls; internal control 

requirements under relevant laws 

and regulations; how internal controls ensure organizations meet 

their objectives; how internal controls are an integral part of every 

aspect of management through explaining necessity of carrying out 

the agency mission at all levels 

and in all operations..

January 2017 (In-Person) 

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Department of Veterans Affairs (VA) Financial Management Training Initiative (FMTI)Financial 

Management Leadership Training (FMLT) Course Offerings—Continued 

Course Title Course Description Date (Method) 

Information Technology (IT) /Non-IT 

Policy.

This course highlights the revision of 

VA Directive 6008-Acquisition and 

Management of VA Information 

Technology Resources along with 

the recent significant steps towards 

implementing improved internal 

controls across VA for making proper funding decisions for all IT related acquisitions..

January 2017 (In-Person) 

Meet the Chief Financial Officers ........ This course illustrates the changing 

role of the CFO function in the face 

of various challenges as we move 

the Department forward in improving financial management..

January 2017 (In-Person) 

Moving Forward - VA Agreements and 

You.

The course provides an understanding 

of accounting elements within 

Interagency Agreements (IAAs); new 

requirements for processing IAAs 

within VA, including requirements 

for Intra-agency and IAAs and use 

of the Agreement Repository; and 

how IAAs affect the federal financial audit..

January 2017 (In-Person) 

Navigating the National Acquisition 

Center (NAC), Strategic Acquisition 

Center (SAC) & Technology Acquisition Center (TAC).

The course provides an overview of 

the acquisition organization and 

processes, highlighting key enterprise vehicles available at the NAC, 

SAC & TAC, and how to gain access to them..

January 2017 (In-Person) 

Preparing for Your VA Time and Attendance System (VATAS) Deployment.The course provides and understanding of the VATAS deployment 

model and strategies along with 

lessons learned and keys to a successful deployment..

January 2017 (In-Person) 

Preparing Now for the Future of Financial Management.This course outlines the importance of 

the Financial Management Training 

Initiative in support of the Department’s goal to: reduce material 

weaknesses and significant deficiencies; modernize our Financial 

Management System; and incorporate a dotted line of accountability for financial officers across 

VA..

January 2017 (In-Person) 

Preventing Late Capitalization ............. This course provides an overview of 

VA’s capitalization policy and the 

need for timely capitalization, including a discussion of widespread 

capitalization issues identified in 

prior Financial Statement Audits..

January 2017 (In-Person) 

Leonard.horne on VACREP0180 with DISTILLER

57 

Department of Veterans Affairs (VA) Financial Management Training Initiative (FMTI)Financial 

Management Leadership Training (FMLT) Course Offerings—Continued 

Course Title Course Description Date (Method) 

Procurement/Purchase Card Violations This course highlights the importance 

of internal controls in the purchase 

card program, as well as the common pitfalls to avoid; and provides 

the auditors perspective related to 

recent reviews by the Office of Internal Controls..

January 2017 (In-Person) 

Project Management Best Practices: 

How FMBT Will Be Run.

This course provides an overview of 

the program and project management; FMBT Program Objectives; 

how best practices will be leveraged for FMBT..

January 2017 (In-Person) 

Reconciliation and Data Cleanup ........ This course discusses the data cleanup and migration framework as 

part of our move to the new financial management system solution; 

outlines best practices on data 

cleanup and migration approaches; 

identifies specific but preliminary 

options that organizations may 

want to consider; discusses preliminary timelines and requirements..

January 2017 (In-Person) 

Role of the Inspector General .............. This course informs the attendees 

about the role of the Inspector General and the various activities of 

Office of the Inspector General..

January 2017 (In-Person) 

Shared Services - Adopting the Common Solution.This course provides an overview of 

why the government is utilizing 

shared services; potential challenges for FMBT, and a high level 

vision for how to achieve our objectives..

January 2017 (In-Person) 

Solutions to Navigating Public Law 

111-163.

This course promotes intra-agency understanding to better leverage 

knowledge, insight and skill across 

the agency; understanding the 

challenges associated with Public 

Law 111-163, the progress made to 

date, and the agency’s solution to 

becoming compliant..

January 2017 (In-Person) 

The Power of Data Analytics in VA 

Charge Card Programs.

This course provides a high-level overview of data analytics and how to 

use its power to improve program 

performance, including a demonstration of the FSC’s Travel/Purchase Card Dashboards and the 

VATAS scorecard..

January 2017 (In-Person) 

Leonard.horne on VACREP0180 with DISTILLER

58 

Department of Veterans Affairs (VA) Financial Management Training Initiative (FMTI)Financial 

Management Leadership Training (FMLT) Course Offerings—Continued 

Course Title Course Description Date (Method) 

The Power of Programming and Cost 

Analysis.

This course provides an introduction 

to the Programming, Analysis and 

Evaluation (PA&E) organization and 

its responsibilities. PA&E is new to 

the Office of Management and has 

the lead for one of VHA’s GAO High 

Risk list items, related to the proper allocation of resources and accurate cost analysis, for both VHA 

and Department level improvements..

January 2017 (In-Person) 

Undelivered Orders (UDOs) and Accruals - The Lookback Analysis.This course provides an understanding 

of how to maintain valid general 

ledger balances for UDOs and accruals with proper supporting documentation..

January 2017 (In-Person) 

Understanding the Payroll Process and 

Resources.

This course provides an understanding 

of the inter-dependencies of the 

various systems involved to produce 

a payroll check, as well as the avenues and point of contacts to resolve payroll issues..

January 2017 (In-Person) 

Anti-Deficiency Act (ADA), Major, Minor 

and Non-Recurring Maintenance 

(NRM) Accounting.

This course provides information to 

assist with the decrease of AntiDeficiency Act (ADA) violations involving VA construction programs; 

educate VA financial managers on 

ADA and ways to detect and prevent violations on Minor and NonRecurring Maintenance (NRM) 

projects..

August 2017 (via Webinar) 

Appropriations Law ............................... This course provides an overview of 

basic fiscal law for federal employees..

August 2017 (via Webinar) 

Capitalization ........................................ This course provides a policy overview 

and best practices to resolve widespread issues with capitalizing 

fixed assets late along with educating VA on the timely capitalization of assets to remediate audit 

findings..

August 2017 (via Webinar) 

Cash Reconciliations ............................ This course details the FSC’s application for matching Treasury and 

General Ledger Transactions; Treasury Reconciliation matching and reclassification; effective use of 

Treasury Reconciliation Website; 

and tips for reconciling specific 

transactions..

August 2017 (via Webinar) 

Leonard.horne on VACREP0180 with DISTILLER

59 

Department of Veterans Affairs (VA) Financial Management Training Initiative (FMTI)Financial 

Management Leadership Training (FMLT) Course Offerings—Continued 

Course Title Course Description Date (Method) 

Commitment Accounting ...................... This course answers the question, 

what is commitment accounting? In 

addition it highlights VA’s current 

financial environment; how commitment accounting will improve funds 

management; and commitment accounting in the shared services environment..

August 2017 (via Webinar) 

Interagency Agreements (IAAs) and 

Intragovernmental Reconciliation.

This course will provide information 

regarding recent audit issues; types 

of IAAs; real-world examples of reimbursable activity; important accounting elements required within 

an IAA; new requirements for processing IAAs within VA; accounting 

treatment for IAAs within the Financial Management System (FMS)..

August 2017 (via Webinar) 

Internal Control Review (ICR) Fundamentals.This course details major financial 

statement assertions which all 

transactions and accounts at VA 

must satisfy for users of the financial statements; including controls, 

the purpose, objective and attributes of a control, designing a 

control and how to design a control..

August 2017 (via Webinar) 

Improper Payments ............................... This course provides an understanding 

VA’s Improper payments, causes, 

and impact..

August 2017 (via Webinar) 

Reconciling the Fee Basis Claims System (FBCS) to FMS.This course provides an overview of 

Public Law 112-194 compliance; 

basic internal controls; the importance of timely reconciliation; new 

account applications; and reducing 

unnecessary accounts..

August 2017 (via Webinar) 

Travel Update ....................................... This course highlights how to avoid 

pitfalls when on official travel..

August 2017 (via Webinar) 

Undelivered Orders (UDO) and Accruals This course provides an overview of 

Public Law 112-194 compliance; 

basic internal controls; the importance of timely reconciliation; new 

account applications; and reducing 

unnecessary accounts..

August 2017 (via Webinar) 

Travel Update ....................................... This course highlights how to avoid 

pitfalls when on official travel..

August 2017 (via Webinar) 

Leonard.horne on VACREP0180 with DISTILLER

60 

Department of Veterans Affairs (VA) Financial Management Training Initiative (FMTI)Financial 

Management Leadership Training (FMLT) Course Offerings—Continued 

Course Title Course Description Date (Method) 

Undelivered Orders (UDO) and Accruals This course provides information on 

how an obligation originates, accruals recorded, and close out; how 

obligations and accruals are recorded and monitored at VA (automated and manual processes); accounting guidelines for recognizing 

accruals (automated and manual 

processes); undelivered orders and 

how we should monitor the information to be fiscally responsible 

with our funds..

August 2017 (via Webinar) 

VA Form 1358 ....................................... This course highlights the importance 

of reducing the use of Form 1358 

(miscellaneous obligations) for 

legal compliance; strategy for reducing the use of miscellaneous 

obligations pre and post-Momentum 

implementation..

August 2017 (via Webinar) 

VA Time and Attendance System 

(VATAS) Update.

This course provides a VATAS progress 

update, deployment status; system 

enhancements and development; 

VATAS and payroll processes; time 

and attendance metrics; compliance metrics; and VATAS helpdesk 

support..

August 2017 (via Webinar) 

Accounting Classification Structure 

(ACS).

This course provides an overview of 

the ACS; key definitions and concepts of the ACS in Momentum; 

how the ACS relates to the budget, 

general ledger and spending transactions; and how current 

functionality in FMS translates into 

Momentum capabilities..

August 2017 (via Webinar) 

Data Cleanup ........................................ The course addresses data cleanse 

activities and the necessity of their 

occurrence after a data quality assessment is performed. This training will cover the data cleansing 

framework, process to cleanse data 

and the roles and responsibilities 

of the administrations, FSC and 

Veterans Affairs Central Office 

(VACO). This will be accomplished 

by provided a use cases to provide 

practical examples for attendees..

August 2017 (via Webinar) 

Financial Business Process Reengineering.This course provides an overview of 

business process reengineering 

principals, concepts, and application for the VA Financial Management Business Transformation 

(FMBT) to a Federal Shared Service 

Provider as well as an update of 

activities that have occurred to 

date..

August 2017 (via Webinar) 

Leonard.horne on VACREP0180 with DISTILLER

61 

Department of Veterans Affairs (VA) Financial Management Training Initiative (FMTI)Financial 

Management Leadership Training (FMLT) Course Offerings—Continued 

Course Title Course Description Date (Method) 

Office of Information and Technology 

(OI&T) Update.

This course details the role of OI&T in 

the FMBT program, the relationship 

with USDA, and the challenges to 

be overcome in the future..

August 2017 (via Webinar) 

Leonard.horne on VACREP0180 with DISTILLER

f 

62 

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73 

Attachment 3 

Program SAO Title Office Performance Measure 

Other Discussion on Accountability Provided by 

the Program Office/SAO 

Beneficiary 

Travel.

Tammy 

Czarnecki.

Assistant Deputy 

Under Secretary for 

Health for 

Administrative Operations.

VHA Operations 

and Management (10NC).

2016 Non-Compliant Program 

(program did not meet reduction target): SAO is accountable for ensuring execution of corrective action 

plans. The SAO’s FY2017 

performance plan includes a 

measure to meet the measurable milestones with 90 

percent success based on 

date and action. Step down 

performance measures is set 

as 80 percent and 70 percent..

Each individual reporting Program Office Director and 

corresponding subordinates 

are also held accountable to 

the Senior Executive performance plan expectations. 

Unique program corrective 

action plans are tracked 

and monitored for routine 

reporting. In November 

2015, Member Services 

added a Compliance and Internal Controls Program Office to assist in creating 

additional internal controls 

for its programs inclusive of 

Beneficiary Travel. This increases accountability and 

Senior Executive knowledge 

and understanding of the 

complexity related to Beneficiary Travel payments and 

the IPERA process. The additional oversight also allows for new insight into the 

root causes of improper payments most notably identifying how VA is streamlining 

business practices to align 

payment processing to abide 

with laws while vigilantly 

upholding core values. VA’s 

evaluation of the Veteran 

experience from transportation request to reimbursement has fostered key collaborative efforts and initiatives leading to long-term 

solutions. 

CHAMPVA ...... Gene Migliaccio Executive Director of Delivery 

Operations.

VHA Office of 

Community 

Care (10D1B).

2016 Non-Compliant Program 

(program did not meet reduction target): SAO is accountable for ensuring execution of corrective action 

plans. The SAO’s FY2017 

performance plan includes a 

measure to meet the measurable milestones with 90 

percent success based on 

date and action. Step down 

performance measures is set 

as 80 percent and 70 percent..

OCC has the primary responsibility for the processing of 

CHAMPVA claims and works 

to address and correct improper payments. When errors are identified, OCC supervisors work to identify 

trends and provide education to the voucher examiners regarding the issue 

both individually and as a 

group. The Director of 

Claims Adjudication and Reimbursement’s performance 

plan includes goals for financial stewardship and the 

identification and implementation of corrective actions 

to address improper payments. 

Leonard.horne on VACREP0180 with DISTILLER

74 

Program SAO Title Office Performance Measure 

Other Discussion on Accountability Provided by 

the Program Office/SAO 

VA 

Communnity Care 

(part of 

Non-VA 

Medical 

Care (NVC) 

fee program in 

2013, separated in 

2014).

Gene Migliaccio Executive Director of Delivery 

Operations.

VHA Office of 

Community 

Care (10D1B).

2016 High-Priority Program/ 

Non-Compliant Program (did 

not meet reduction target 

and error rate is > 10%): 

SAO is accountable for ensuring execution of corrective action plans. The SAO’s 

FY2017 performance plan 

includes a measure to meet 

the measurable milestones 

with 90 percent success 

based on date and action. 

Step down performance 

measures is set as 80 percent and 70 percent..

OCC has the primary responsibility for the processing of 

CHAMPVA claims and works 

to address and correct improper payments. When errors are identified, OCC supervisors work to identify 

trends and provide education to the voucher examiners regarding the issue 

both individually and as a 

group. The Director of 

Claims Adjudication and Reimbursement’s performance 

plan includes goals for financial stewardship and the 

identification and implementation of corrective actions 

to address improper payments. 

PLTSS (part 

of NVC fee 

program in 

2013, separated in 

2014).

Richard Allman GEC Chief Consultant.VHA Geriatrics 

and Extended 

Care (10P).

2016 High-Priority Program/ 

Non-Compliant (did not 

meet reduction target and 

error rate is > 10%): SAO is 

accountable for ensuring 

execution of corrective action plans. The SAO’s 

FY2017 performance plan 

includes a measure to meet 

the measurable milestones 

with 90 percent success 

based on date and action. 

Step down performance 

measures is set as 80 percent and 70 percent..

State Home 

Per Diem.

Gene Migliaccio Executive Director of Delivery 

Operations.

VHA Office of 

Community 

Care (10D1B).

2016 Non-Compliant Program 

(program did not meet reduction target): SAO is accountable for ensuring execution of corrective action 

plans. The SAO’s FY2017 

performance plan includes a 

measure to meet the measurable milestones with 90 

percent success based on 

date and action. Step down 

performance measures is set 

as 80 percent and 70 percent..

The State Home Per Diem Program Office has the primary 

responsibility for overseeing 

the processing claims and 

works directly with the facility when improper payments 

are identified, as well as 

broadly across the program 

through monthly training 

events. The Director of 

Claims Adjudication and Reimbursement’s performance 

plan includes goals for financial stewardship and the 

identification and implementation of corrective actions 

to address improper payments. 

Leonard.horne on VACREP0180 with DISTILLER

75 

Program SAO Title Office Performance Measure 

Other Discussion on Accountability Provided by 

the Program Office/SAO 

Supplies and 

Materials.

Tammy 

Czarnecki.

Assistant Deputy 

Under Secretary for 

Health for 

Administrative Operations.

VHA Operations 

and Management (10NC).

2016 Non-Compliant Program 

(program did not meet reduction target): SAO is accountable for ensuring execution of corrective action 

plans. The SAO’s FY2017 

performance plan includes a 

measure to meet the measurable milestones with 90 

percent success based on 

date and action. Step down 

performance measures are 

set as 80 percent and 70 

percent..

Prosthetics .... Penny 

Nechanicky.

National Program Director 

for Prosthetic 

& Sensory 

Aids Service.

VHA Rehabilitation and 

Prosthetic 

Services 

(10P4R).

2016 Newly Identified HighRisk Program. Projected improper payments, corrective 

action plans, and accountability measures will be reported in agencies 2017 Annual Financial Report..

New programs determined to 

be susceptible to improper 

payments as a result of the 

FY 2016 risk assessments 

will design and implement 

appropriate statistical sampling and estimation methods to produce statistically 

valid improper payment estimates the fiscal year following (FY 2017) the fiscal 

year in which the risk assessment was conducted in 

accordance with OMB Circular A-123 Appendix C. 

Medical Care 

Contracts 

and Agreements.

Tammy 

Czarnecki.

Assistant Deputy 

Under Secretary for 

Health for 

Administrative Operations.

VHA Operations 

and Management (10NC).

2017 Newly Identified HighRisk Program. Projected improper payments, corrective 

action plans, and accountability measures will be reported in agencies 2017 Annual Financial Report..

New programs determined to 

be susceptible to improper 

payments as a result of the 

FY 2016 risk assessments 

will design and implement 

appropriate statistical sampling and estimation methods to produce statistically 

valid improper payment estimates the fiscal year following (FY 2017) the fiscal 

year in which the risk assessment was conducted in 

accordance with OMB Circular A-123 Appendix C. 

Communications, Utilities, and 

Other 

Rents.

Tammy 

Czarnecki.

Assistant Deputy 

Under Secretary for 

Health for 

Administrative Operations.

VHA Operations 

and Management (10NC).

2018 Newly Identified HighRisk Program. Projected improper payments, corrective 

action plans, and accountability measures will be reported in agencies 2017 Annual Financial Report..

New programs determined to 

be susceptible to improper 

payments as a result of the 

FY 2016 risk assessments 

will design and implement 

appropriate statistical sampling and estimation methods to produce statistically 

valid improper payment estimates the fiscal year following (FY 2017) the fiscal 

year in which the risk assessment was conducted in 

accordance with OMB Circular A-123 Appendix C. 

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Program SAO Title Office Performance Measure 

Other Discussion on Accountability Provided by 

the Program Office/SAO 

Compensation Danny Devine .... Deputy Director 

of Policy and 

Procedures.

Compensation 

Service.

2016 Compliant, but High-Priority Program - From the 

SAO’s performance measure: 

Critical Element 5; Performance Requirement 5: 

′′Oversee the development of 

policy guidance and promulgation of regulations that 

improve VA’s compensation 

benefits programs. Conduct 

systematic reviews of current policies and procedures 

to identify changes that may 

improve program integrity or 

facilitate efficient delivery of 

benefits. Take action to implement all necessary 

changes.′′.

The Compensation Service (CS) 

Senior Accountable Official 

(SAO) is responsible for all 

completed CS IPERIA activities to include: 

- approval of IPERIA test sampling plans, 

- IPERIA testing and review of 

all improper payments for 

the given annual fiscal year 

(FY), 

- annual corrective action plan 

creation and execution, 

- implementation and monitoring of CS supplemental 

measures as a high priority 

program, and 

- reports of CS’ progress to the 

periodic Governing Board 

meetings held by the Office 

of Management. 

The CS SAO is further responsible for: 

- determining, and meeting reduction targets in an annual 

testing FY, 

- monitoring recapture and recovery activities that are 

performed and, 

- identifying high dollar overpayments. 

The SAO reports annually on 

the CS program assessment 

of risk, as a high priority 

program. He/she maintains 

all fiscal activity with annual FY testing to include 

monitoring for any fraud activities involving CS payments. 

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Program SAO Title Office Performance Measure 

Other Discussion on Accountability Provided by 

the Program Office/SAO 

Pension ......... Cheryl Rawls ..... Director ............. Pension & Fiduciary.Ensures Service develops and 

maintains efficient systems 

of internal and external program integrity controls..

- Manages the Service responsibilities under the Improper 

Payment Elimination and 

Recovery Act and other internal auditing practices established by law..

- Ensures recommendations for 

business requirements for IT 

systems are IPERA compliant and certifies that system designs meet program 

needs..

- Makes certain that transactions performed are in accordance to established 

policies, regulations and 

procedures..

- Discuss and coordinates program integrity issues with 

the VA Office of Inspector 

General and Government Accountability Office..

- Develops and certifies that 

Service corrective measures 

are implemented as part of 

the operations function..

- Conducts on-site visits, national reviews and meets 

with management/leadership 

to address hindrances and 

provides constructive feedback with regards to goals 

of significant impact on 

Service outcomes..

- Ensures organizational standards related to quality, customer service and timeliness 

are met..

None 

VR&E ............ Jack Kammerer Director ............. Vocational Rehabilitation & 

Employment.

Performance evaluation criteria 

such as a performance 

agreement on the success of 

the elimination of improper 

payments has not been implemented. While VR&E 

Service can implement policy changes to assist with 

eliminating improper payments, the business line 

does not have direct authority over the field offices who 

make the individual payments..

′′The SAO oversees the reduction of improper payments 

for the Chapter 31 program. 

Responsibilities include but 

are not limited to 

- coordinating and monitoring 

improper payment testing 

- reviewing improper payment 

results 

- reporting improper payments 

results to appropriate stakeholders 

- identifying potential areas of 

fraud and risk for improper 

payments, 

- developing and implementing 

corrective action plans to 

reduce improper payments, 

and 

- addressing inquiries from 

IPRO and ORM 

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Program SAO Title Office Performance Measure 

Other Discussion on Accountability Provided by 

the Program Office/SAO 

Education - 

Chapter 33.

Education - 

Chapter 

1606.

Education - 

Chapter 

1607.

Robert Worley .... Director ............. Education Services.The Senior Accountable Official 

(SAO)- Robert M. Worley II, 

Director, Education Service 

currently does not have a 

performance evaluation criteria for improper payment 

metrics. However, the SAO is 

responsible for overseeing 

improper payments. Oversight includes quality reviews conducted by Education Service to include 

quarterly reviews, special 

projects, and Improper Payment Elimination and Recover Act audits. In addition, the SAO is held accountable by being directly 

responsible for passing 

IPERA audits each fiscal 

year and ensuring Corrective 

Action Plans are developed 

and implemented. Overpayments are audited and referred back to the Regional 

Processing Offices for corrections and potential collections where appropriate..

The SAO current performance 

standards includes a performance evaluation criteria 

that requires the individual 

to assess and adjust to 

changing situations, implementing innovative solutions 

to make organizational improvements, ranging from 

incremental improvements to 

major shifts in direction or 

approach, as appropriate. 

Balances change and continuity; continually strives to 

improve service and program performance; creates a 

work environment that encourages creative thinking, 

collaboration, and transparency; and maintains program focus, even under adversity. 

Disaster Relief - Hurricane 

Sandy.

George 

Szwarcman.

Associate Executive Director.003C4 ............... Ensure improper payments are 

improved by exceeding the 

reduction target estimated 

in 2016.

Payments to 

Federal 

EmployeesPayroll.

Carin Otero, Acting.Associate Deputy 

Assistant 

Secretary, HR 

Policy and 

Planning.

HR&A/OHRM ...... The ′′Payments to Federal Employees - Payroll′′ SAO left 

VA in May 2017. While Carin 

Otero is acting in this role 

to ensure that ongoing corrective action activities continue, a performance metric 

will be added to the new 

SAO’s performance plan 

once HRA has recruited and 

filled the position..

By establishing continued collaborative efforts between 

HR&A and the Office of Finance, communication plans 

can be developed that facilitates better sharing of 

information with station HR 

and payroll offices as it relates to audit findings, corrective action plans, and 

strategies to reduce imf 

proper payments. 

VA Responses to HVAC 

1. Please provide a copy of the financial management training initiative 

curriculum that Ms. Park referenced in her testimony. This should include, at a minimum, course titles, a summary of each course’s content, 

whether the course is taught in person or through the internet, and information about how frequently and to whom the courses are taught. 

VA Response: The Financial Management Training Initiative (FMTI) offers two 

mandatory Financial Management Leadership Training (FMLT) events annually 

to VA’s financial community. The Office of Management hosted an online training 

event in August 2016 and an in person one in January 2017. Currently, there is 

an online session planned for August 2017, and an in person event scheduled for 

January or February 2018.Select sessions will offer Continuing Professional Education (CPE) credits. The complete course offerings for all sessions are seen in attachment 1. 

2. Please provide the most recent monthly unexpended funds report that 

VA submitted to the Treasury. The Subcommittee’s intent is to evaluate 

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whether the content of this report meets the Subcommittee’s needs and 

then decide whether the report should be provided on an ongoing basis. 

VA Response: Please see April 2017 Unexpended Funds Report (Attachment 2.) 

3. Please identify the accountable officials, to include at a minimum their 

names and offices, for each program designed as high risk for improper 

payments. Please explain how they are accountable, for example being 

assigned performance evaluation criteria that include improper payment 

metrics. Please also identify the formal responsibilities for overseeing improper payments detection, elimination, and recovery of the VBA, VHA, 

and NCA chief financial officers and any chief financial officers for major 

subdivisions of the three administrations. 

VA Response: The accountable officials and detailed information regarding their 

accountability and performance evaluation criteria for each program designated as 

a high risk for improper payments are included in Attachment 3. 

Department of Veterans Affairs Financial Policy ′′Volume VII Financial Reporting 

- Erroneous and Improper Volume VII - Chapter 9 Payment Reporting under 

OMB Circular A - 123 Appendix C,′′ January 2017, assigns roles and responsibilities, and requires the establishment of an accountability mechanism with appropriate incentives and consequences tied to the success of the senior officials who 

lead efforts to achieve improper payment compliance. The complete policy can be 

found at: https://www.va.gov/finance/docs/VAFinancialPolicyVolumeVIIChapter09.pdf 

Specific policy excerpts to address formal responsibilities for CFOs and other accountable officials include: 

0904 ROLES AND RESPONSIBILITIES 

(pgs. 6-7 of 84) Administration and Staff Office CFOs are responsible for accurate 

testing, projections and reporting and must coordinate activities with OM through 

the IPRO Office. The Administration and Staff Office CFOs are responsible for 

oversight of the Senior Accountable Officials (SAOs) in their Administrations and 

Staff Offices to ensure that corrective action plans are created and monitored and 

that recapture and recovery activities are performed - all in accordance with VA 

policy. Administration and Staff Office CFOs in collaboration with SAOs are also 

responsible for providing oversight of progress made to implement supplemental 

measures and preparation of the request for relief from reporting high-risk programs. Administration and Staff Office CFOs in collaboration with SAOs are responsible for coordinating all data analytics activities with FSC and IPRO regarding the Fraud Reduction and Data Analytics Act of 2015 (herein after referred to 

as Fraud Act) as well as identifying any fraud risk within their respective programs. Administration and Staff Office CFOs will ensure that test plans include 

attributes designed to identify potential fraud and ensure any risks identified during testing are properly addressed by the SAO in the program CAPs. 

(pg. 7 of 84) Senior Accountable Officials (SAOs) are responsible for remediating improper payments and overseeing payment recapture audits, development and implementation of CAPs, and development of supplemental measures when the program or activity is deemed high-priority as well as quality of testing reviews. Additionally, SAOs are responsible for focusing on identifying and eliminating the 

highest improper payments, reducing improper payments, and coordinating Federal, State, and local government action in identifying and eliminating improper 

payments. SAOs are also responsible for notifying and coordinating with the IPRO 

Office and their Administration or Staff Office CFO on any reviews or audits that 

are associated with improper payments. SAOs, in conjunction with responsible 

Administration or Staff Office CFOs, are responsible for preparing the request for 

relief from reporting high-risk programs. SAOs, in collaboration with Administration and Staff Office CFOs, are responsible for coordinating all data analytics activities with FSC and IPRO regarding the Fraud Act, identifying any fraud risk 

within their respective programs, testing for potential fraud, and ensuring CAPs 

address any identified fraud risk. 

090609 Improper Payment Reporting B. ii. For Noncompliant Programs (pg. 21 of 

84) - The designation of a SAO, a member of the SES, who shall be accountable 

for the progress of the program coming into compliance. As such, the SAO must 

have the span of control necessary to affect change in the program or activity determined to be noncompliant; and the establishment of an accountability mechanism, such as a performance agreement, with appropriate incentives and consequences tied to the success of the SAO in leading efforts to achieve compliance 

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for the program or activity. VA interprets this requirement to mean a performance measure that provides transparency into whether the measure was met and 

when incentives/consequences are enforced. 

Æ 

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