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[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

 
                 REFORMING VA'S FLAWED FIDUCIARY SYSTEM

=======================================================================

                                HEARING

                               before the

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 of the

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                       THURSDAY, FEBRUARY 9, 2012

                               __________

                           Serial No. 112-42

                               __________

       Printed for the use of the Committee on Veterans' Affairs

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                     COMMITTEE ON VETERANS' AFFAIRS

                     JEFF MILLER, Florida, Chairman

CLIFF STEARNS, Florida               BOB FILNER, California, Ranking
DOUG LAMBORN, Colorado               CORRINE BROWN, Florida
GUS M. BILIRAKIS, Florida            SILVESTRE REYES, Texas
DAVID P. ROE, Tennessee              MICHAEL H. MICHAUD, Maine
MARLIN A. STUTZMAN, Indiana          LINDA T. SANCHEZ, California
BILL FLORES, Texas                   BRUCE L. BRALEY, Iowa
BILL JOHNSON, Ohio                   JERRY McNERNEY, California
JEFF DENHAM, California              JOE DONNELLY, Indiana
JON RUNYAN, New Jersey               TIMOTHY J. WALZ, Minnesota
DAN BENISHEK, Michigan               JOHN BARROW, Georgia
ANN MARIE BUERKLE, New York          RUSS CARNAHAN, Missouri
TIM HUELSKAMP, Kansas
MARK E. AMODEI, Nevada
ROBERT L. TURNER, New York

            Helen W. Tolar, Staff Director and Chief Counsel

                                 ______

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                      BILL JOHNSON, Ohio, Chairman

CLIFF STEARNS, Florida               JOE DONNELLY, Indiana, Ranking
DOUG LAMBORN, Colorado               JERRY McNERNEY, California
DAVID P. ROE, Tennessee              JOHN BARROW, Georgia
DAN BENISHEK, Michigan               BOB FILNER, California
BILL FLORES, Texas

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.

                            C O N T E N T S

                               __________

                            February 9, 2012

                                                                   Page

Reforming VA's Flawed Fiduciary System...........................     1

                           OPENING STATEMENTS

Chairman Bill Johnson............................................     1
    Prepared Statement of Chairman Johnson.......................    43
Hon. Joe Donnelly, Ranking Democratic Member.....................     2
    Prepared Statement of J. Donnelly............................    44
Hon. Jon Runyan..................................................     4
    Prepared Statement of J. Runyan..............................    44
Hon. Jerry McNerney, Prepared Statement only.....................    45

                               WITNESSES

Dave McLenachen, Director of Pension and Fiduciary Service, U.S. 
  Department of Veterans Affairs.................................     5
    Prepared Statement of Mr. McLenachen.........................    46
    Accompanied by:

      Diana Rubens, Deputy Under Secretary for Field Operations, 
          U.S. Department of Veterans Affairs
Doug Rosinski, Attorney, Law Office of Douglas J. Rosinski, Esq..    23
    Prepared Statement of D. Rosinski, Esq.......................    48
    Executive Statement of D. Rosinski, Esq......................    52
Katrina Eagle, Attorney, Law office of Katrina J. Eagle, Esq.....    24
    Prepared Statement of K. Eagle, Esq..........................    52
    Executive Statement of K. Eagle, Esq.........................    54
Pam Estes, Veteran Fiduciary.....................................    25
    Prepared Statement of P. Estes...............................    55
Rick Weidman, Executive Director for Policy & Government Affairs, 
  Vietnam Veterans of America....................................    28
    Prepared Statement of R. Weidman.............................    56

                       STATEMENTS FOR THE RECORD

Lori Perkio, Assistant Director, Veterans Affairs and 
  Rehabilitation Commission, The American Legion.................    58
Wounded Warrior Project..........................................    60

                        QUESTIONS FOR THE RECORD

Question & Response From: Hon. Bill Johnson, Chairman. 
  Subcommittee on Oversight and Investigations - To: U.S. 
  Department of Veterans Affair..................................    62
Additional Question & Response From: Hon. Bill Johnson, Chairman. 
  Subcommittee on Oversight and Investigations - To: U.S. 
  Department of Veterans Affair..................................    87
Letter & Questions From: Hon. Joe Donnelly, Subcommittee on 
  Oversight and Investigations - To: Mr. David R. McLenachen, 
  Director, Pension and Fiduciary Service, Veterans Benefits 
  Administration, Department of Veterans Affairs.................    88
Response From: Mr. David R. McLenachen, Director, Pension and 
  Fiduciary Service, Veterans Benefits Administration, Department 
  of Veterans Affairs - To: Hon. Joe Donnelly, Subcommittee on 
  Oversight and Investigations...................................    90

                 REFORMING VA'S FLAWED FIDUCIARY SYSTEM

                              ----------                              

                       THURSDAY, FEBRUARY 9, 2012

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
              Subcommittee on Oversight and Investigations,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to notice, at 10:03 a.m., in 
Room 334, Cannon House Office Building, Hon. Bill Johnson, 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Johnson, Roe, Flores, Donnelly, 
McNerney, Barrow, Runyan.

           OPENING STATEMENT OF CHAIRMAN BILL JOHNSON

    Mr. Johnson. The hearing will come to order. I want to 
thank everyone for coming to today's hearing on the VA's 
Fiduciary Program. I will say from the outset, we already know 
that we're going to be interrupted. I apologize for that. We've 
been told that here within the next five to fifteen minutes 
votes will be called. At that point, we'll take a brief recess 
and go take care of that matter, and then reconvene.
    I would like to ask unanimous consent of the Subcommittee 
and of the Subcommittee that Chairman Runyan of the Disability 
Assistance and Memorial Affairs' Subcommittee be allowed to 
join us today in our meeting.
    Hearing no objection, so ordered.
    The Subcommittee's Ranking Member, Congressman McNerney--is 
also Member of this Subcommittee, and we welcome him in both 
capacities today.
    We're here today to have a frank and honest discussion 
about the problems festering in the VA's fiduciary program. The 
VA's approximately 95,000 appointed fiduciaries manage over $3 
billion in payments made to more than 100,000 of our Nation's 
veterans and their dependents.
    In the last several years, the VA has created and 
implemented its fiduciary hub program. This program aims to 
streamline the system, and improve processing in fiduciary 
accountings, but I fear that these recent changes have only 
addressed a fraction of the problem.
    This Subcommittee's investigation in the VA's Fiduciary 
Program revealed that fiduciaries who are doing the right thing 
are all too often finding it difficult to navigate the maze 
that makes up the fiduciary program. While numerous honorable 
fiduciaries serve our veterans, many bad actors exist in the 
system.
    We found an instance where the VA arbitrarily removed a 
veteran's wife from her duties as his fiduciary, after what the 
VA characterized as ten years of excellent service. She was 
replaced by a paid fiduciary. VA policy is that they prefer 
family members and friends to serve as fiduciaries. It is 
obvious to me that this policy is just lip service and that 
needs to change.
    Our investigation also uncovered that the fiduciary program 
has been plagued by failures in oversight and unwillingness to 
listen to the veteran. Last week in a hearing before the Full 
Committee, VA Deputy Secretary Scott Gould stated that the 
wrong way became the way we've always done it.
    This mindset seems to have permeated the VA's fiduciary 
program. This past December, a VA fiduciary and a VA field 
examiner were convicted in Tennessee for embezzling almost 
$900,000 from ten veterans' accounts which they oversaw. These 
felons used some of the stolen funds to pay their own cable and 
utility bills. Holding its fiduciaries accountable through 
proper oversight is just one way the VA can take modest steps 
to improve the system.
    One of the VA's core values is responsible stewardship of 
the human and financial resources entrusted to it. The VA needs 
to work more efficiently and effectively to properly serve 
those veterans who have fiduciaries. I have seen evidence of 
veterans, their friends, and family repeatedly notifying the VA 
of fiduciary misfeasance. And time after time their appeals 
have been ignored. This needs to stop.
    Identifying and correcting situations like these is 
certainly not rocket science. The VA has testified in the past 
that they are working through the backlog of fiduciary claims. 
To successfully manage the fiduciary program, the VA must focus 
not only on those waiting to be assigned a fiduciary, but also 
on those veterans in the program already.
    In our first panel, Mr. Dave McLenachen, Director of the 
VA's Pension and Fiduciary Service and Ms. Diana Rubens, 
Associate Deputy Under Secretary for Field Operations at the VA 
will share their thoughts on the state of the fiduciary 
program.
    As we will hear from our second panel, the VA is aware of 
the problems facing those in the fiduciary system. As much as 
the VA focuses on the positive steps they are taking in the 
fiduciary program, we are all aware of the other problems they 
refuse to address. This hearing provides a positive step 
forward in addressing and resolving these issues.
    I appreciate everyone's attendance at this hearing, and I 
now yield to Ranking Member Donnelly for his opening statement.

    [The prepared statement of Bill Johnson appears in the 
Appendix]

            OPENING STATEMENT OF HON. JOE DONNELLY, 
                   RANKING DEMOCRATIC MEMBER

    Mr. Donnelly. Thank you, Mr. Chairman, and thank you for 
holding this important hearing. This hearing provides us with 
an opportunity to learn of the many changes the VA has taken to 
improve this program, since the Subcommittee on Disability and 
Memorial Assistance held a hearing last Congress on the VA 
Fiduciary Program.
    The VA assures us that it is taking solid steps to fix the 
problems and weaknesses in the fiduciary program. Other 
witnesses will suggest that many problems remain. I want to be 
assured that the VA is improving the program, and has a solid 
road map to follow as we move forward.
    The VA Fiduciary Program in place since 1926 is one of the 
most sensitive programs run by the VA, and one most in need of 
effective management and oversight. Not only must the needs of 
beneficiaries come first, but their assets must be protected 
from fraud and waste.
    The VA currently oversees approximately 95,000 fiduciaries 
managing the financial affairs of more than 121,000 
beneficiaries. In fiscal year 2011, the VA reports that the 
Veterans Benefits Administration made payments for compensation 
and pension benefits of approximately 53.5 billion, while 
fiduciaries managed approximately 171 million in VA benefits.
    Since the 2010 hearing, VBA acknowledging that central 
office oversight of its fiduciary program like priority, 
announced in November 2011 that they would consolidate 
fiduciary operations from 56 regional offices into six hubs in 
six regional offices. The VA informs us the process will 
convert to a paperless processing environment. These changes 
should hopefully increase the program's efficiency and 
accountability.
    The VA also informs us that it is making progress in coming 
to grips with the many problems it faces with its fiduciary 
beneficiary system. One of the major flaws exposed in 2010.
    I am interested to see where we are in this process, and 
hope to get a detailed timeline, as to when the VA expects to 
bring forward a new electronic case management system. I hope 
the VA and our witnesses can provide insight into the current 
staffing levels of the VA Fiduciary Program, and whether we 
might need additional personnel.
    I also would like to explore the effectiveness of current 
training efforts in ways this could be improved. I'm interested 
to hear that VA believes it has fully addressed the 
recommendations made by the VA, OIG and GAO. I hope we'll have 
an in-depth discussion of where we have been and where we need 
to go.
    The fiduciary program faces many challenges and many 
problems in improving oversight. We must ensure that while we 
provide beneficiaries and their families with a meaningful say 
in the fiduciary process, we must make sure that the needs and 
interests of our veterans come first. I am pleased the VA is 
taking steps to improve the fiduciary program, but this 
Subcommittee wants to make sure these steps represent real 
progress in fixing these real problems.
    Mr. Chairman, thank you for bringing this hearing, and I 
yield back.

    [The prepared statement of Joe Donnelly appears in the 
Appendix]

    Mr. Johnson. I thank the gentleman for yielding back. I've 
just been notified that votes have been called. So I think at 
this point, so we can keep continuity to the hearing and stay 
on focus, we're going to go ahead and recess at this point, and 
we will come back. I suspect it'll take probably 15 to 20 
minutes or so, if I've got my information correct.
    So the meeting--the hearing will be adjourned for now. 
We'll reconvene in about 15, 20 minutes.

    [Recess]

    Mr. Johnson. This hearing will come to order. I thank those 
in attendance for indulging us as we took care of our duties to 
vote. I now recognize Chairman Runyan of the Disability 
Assistance and Memorial Affairs Subcommittee for an opening 
statement.

              OPENING STATEMENT OF HON. JON RUNYAN

    Mr. Runyan. Thank you, Chairman Johnson, and thank you for 
the opportunity to participate in the hearing today. As 
Chairman of the Subcommittee on Disability Assistance and 
Memorials Affairs, I'm greatly concerned about the current 
state of the VA's Fiduciary Program. I look forward to working 
with this Subcommittee on oversight investigation in an effort 
to serve our Nation's disabled veterans.
    Improving the VA's Fiduciary Program is essential because 
it serves a very vulnerable segment of the veterans' 
population, who are no longer able to take care of themselves. 
There are approximately 95,000 fiduciaries in the VA system, 
overseeing accounts of approximately 120,000 veterans. The 
total value of these accounts is in excess of $3.3 billion.
    While this overall amount is clearly significant, every 
individual dollar counts to the veteran who has earned 
disability investment through his or her service in sacrifice 
to our country.
    Mismanagement and little oversight have no place in the 
administration of these benefits, especially dealing with those 
that are least able to manage their own affairs. We are here 
today to hold our VA accountable for its inability to properly 
serve the veterans who are in most need of the VA's assistance. 
When the VA fails to provide this assistance, many veterans 
experience extreme financial hardship.
    Currently there is evidence that some in the VA system with 
responsibility for helping our veterans are embezzling funds, 
being nonresponsive to veterans' needs, and being over 
compensated for their duties performed. And this is simply 
unacceptable.
    The issue in the VA Fiduciary system are further 
complicated by a backlog of initial appointments. Although the 
VA has stated that this backlog is due to the rigorous vetting 
process, there also has been evidence that the VA's 
noncompliance with its own regulations in ensuring that it 
appoints responsible trustworthy individuals to assess veterans 
in this way.
    The majority of VA regulations concerning these 
appointments date from 1975 and I would highly encourage the VA 
to update these regulations immediately. It is my hope that as 
a result of today's hearing, the process of fixing VA's flawed 
fiduciary system can begin. I want to commend the Chairman, 
Chairman Johnson for holding today's hearing. And again, as 
Chairman of the Disability and Assistance--Disability 
Assistance and Memorials Affairs Committee, I look forward to 
working with you in truly serving our American heroes, and 
thank you, and I yield back.

    [The prepared statement of Jon Runyan appears in the 
Appendix]

    Mr. Johnson. I thank the gentleman for yielding back. We'll 
now, without any objection, we'll make Ranking Member 
McNerney's statement a part of the record.

    [The prepared statement of Jerry McNerney appears in the 
Appendix]

    Mr. Johnson. I now invite the first panel to the witness 
table. On this panel, we will hear from Dave McLenachen, the 
VA's Director of the Pension and Fiduciary Service. He is 
accompanied by Ms. Diana Rubens, the VA's Deputy Under 
Secretary for Field Operations.
    Mr. McLenachen, your complete written statement will be 
made a part of the hearing record, and you are now recognized 
for five minutes.

STATEMENT OF DAVE MCLENACHEN, DIRECTOR OF PENSION AND FIDUCIARY 
 SERVICE, U.S. DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY 
DIANA RUBENS, DEPUTY UNDER SECRETARY FOR FIELD OPERATIONS, U.S. 
                DEPARTMENT OF VETERANS AFFAIRS.

              OPENING STATEMENT OF DAVE MCLENACHEN

    Mr. McLenachen. Mr. Chairman, Members of the Subcommittee, 
thank you for the opportunity to review the Department of 
Veterans Affairs Fiduciary Program. I'm accompanied by Ms. 
Diana Rubens, Deputy Under Secretary for Field Operations.
    First, I am pleased to report the VA has strengthened its 
central office oversight of the program, dramatically improved 
the timeliness of its fiduciary appointments, aligned its 
staffing with the needs of beneficiaries, and significantly 
reduced misuse of benefits.
    The Fiduciary Program appoints and oversees fiduciaries for 
veterans and other beneficiaries because of injury, disease, or 
the infirmities of age are unable to manage their financial 
affairs.
    The VA currently oversees approximately 95,000 fiduciaries, 
who provide services to more than 121,000 beneficiaries. In 
April 2011, VA established a new office to more directly 
control this program. The new pension and fiduciary service 
focuses on the unique needs of these beneficiaries, of whom 
more than 50 percent are in VA's needs-based pension program.
    The separate service also allows us to strengthen oversight 
of VA appointed fiduciaries, with dedicated staff responsible 
for policy, procedures, quality and training. Prior to the 
establishment of the pension and fiduciary service, VA worked 
to implement program improvements. These efforts included 
revising the site visit protocol for field activities, 
providing on-site training, deploying special assistance teams, 
strengthening policies and procedures, and enhancing service, 
delivery and protections.
    In addition, VA has been responsive to GAO and Inspector 
General audits of the program. The findings from these audits 
confirm the VA has improved the fiduciary program. 
Recommendations from GAO included conducting additional reviews 
of appointed fiduciaries and evaluating VA's fiduciary hub 
pilot project.
    Recommendations from OIG included additional financial 
reporting requirements for fiduciaries, development of the 
fiduciary personnel staffing model, and development of Web 
sites for fiduciaries. All recommended action items were 
completed and closed.
    To improve operational efficiencies, VA consolidated 14 of 
its fiduciary activities at the western area fiduciary hub in 
Salt Lake City, Utah. Under this hub concept, fiduciary 
managers deployed their field examination resources, according 
to the location of beneficiaries within the hub, and without 
regard to state borders or regional office jurisdiction, while 
centralizing all other fiduciary functions at the hub.
    The consolidation improved timeliness of initial fiduciary 
appointments by 36 percent, and improved quality by 13 percent. 
It reduced the number of miles traveled per field examination 
by 6 percent, and the average days to complete initial 
fiduciary appointments by 26 days.
    We are planning the deployment of the fiduciary hub concept 
in five other regions nationwide. In preparation for this 
deployment, we conducted an in-depth staffing analysis of our 
fiduciary activities, mapping the physical location of our 
beneficiaries, and field examiners, to develop a model for the 
national consolidation plan.
    The VA will hire 58 additional field examiners and employ 
them nationwide based upon this model. The VA continues to 
develop procedures to enhance its efforts, to prevent and 
identify the misuse of beneficiary funds. We now require 
fiduciaries to submit detailed financial records with annual 
accountings. This allows us to verify reported expenditures 
during the accounting process, and better identify potential 
misuse of funds.
    Additionally, under procedures implemented in 2010, our 
central office staff reviews each misuse determination to 
ensure accuracy and timeliness of follow-up actions. As a 
result of these new requirements, the rate of misuse decreased 
to less than one-tenth of one percent in 2011.
    VA continues to conduct outreach regarding the fiduciary 
program. We participate in forums hosted by various agencies, 
such as the National Guardianship Association, the National 
Association of Elder Law Attorneys, the National College of 
Probate Judges, and the American Association of Retired 
Persons.
    Outreach efforts include providing education on VA's 
program, participate in conference discussions, and recruiting 
qualified fiduciaries. We also organized and led a multi-agency 
round table with other government agencies to discuss and 
identify government-wide fiduciary best practices. We 
established collaborative relationships and developed methods 
to better serve common beneficiaries.
    In 2011, the VA further improved its fiduciary training 
programs for employees and external stakeholders. We conducted 
centralized training for 115 new legal instrument examiners who 
review accountings, and maintain follow-up communications with 
beneficiaries. We also conducted ongoing monthly conference 
calls with field personnel to ensure consistent dissemination 
of policy information.
    Finally, we deployed our first ever Web site for 
fiduciaries and beneficiaries, which provides tools, 
references, related links, and information on fiduciary 
responsibilities.
    Despite VA's successful implementation of these 
improvements, challenges do remain. VA continues to work to 
improve its electronic case management system, the fiduciary 
beneficiary system, as it poses significant limitations.
    Thus far, VA has developed a business requirements document 
for the new system, established a work group to investigate how 
it should integrate with other VA systems.
    Mr. Johnson. Sorry, Mr. McLenachen, your time has expired. 
So the remainder of your testimony will be entered into the 
record.
    Mr. McLenachen. Thank you, Mr. Chairman.

    [The prepared statement of Dave McLenachen appears in the 
Appendix]

    Mr. Johnson. Let's go into questioning. What are the 
criteria for choosing a fiduciary?
    Mr. McLenachen. Mr. Chairman, the criteria for selecting a 
fiduciary is controlled by law. Congress required us when 
looking to see who should be a fiduciary to check a number of 
things; criminal history, credit, and with general willingness 
to act as a fiduciary for a beneficiary.
    VA's policy, Mr. Chairman, is to always try to select the 
least restrictive and most effective method of payment for a 
beneficiary. To do that, the first thing that we do is we look 
at who does the beneficiary want us to appoint. That's our 
first step.
    If we can qualify that person, we will appoint that person. 
If that person cannot be qualified, we'll look to the person 
who has the care and custody of the beneficiary. That may be a 
family member that lives with the beneficiary and provides 
care, it may be a guardian, that's who we'll look to next.
    The next step is any other family member or person 
interested in performing these functions for a beneficiary. 
Only as a last resort, Mr. Chairman, will we look to a paid 
fiduciary or a court-appointed fiduciary. That is because we're 
looking for the least restrictive method. And I can assure you, 
Mr. Chairman, that that is our policy and that's how we carried 
it out.
    Just so there's no misunderstanding, currently only about 
eight percent of the roughly 120,000 beneficiaries pay a 
commission for fiduciary services.
    Mr. Johnson. Okay. The CFR states that a commission is only 
given to a beneficiary when it is necessary to obtain his or 
her services. Further it states that commission should only be 
used if the veteran's best interests would be served by the 
appointment of a qualified professional, or a qualified person. 
What does qualified mean to the VA?
    Mr. McLenachen. To us, Mr. Chairman, qualified as I've 
described means that it's a person that has the interest of the 
beneficiary in mind, is willing to perform the service, and 
meets the qualifications that have been prescribed by Congress 
for us to implement. That is what the regulations are referring 
to.
    So if it's an individual who has a criminal history or that 
has bad credit history, or for some other reason cannot be 
bonded, that individual will not be appointed as a fiduciary, 
but that just----
    Mr. Johnson. Are there any educational or other 
qualifications required for--to be classified as a qualified 
person?
    Mr. McLenachen. Not at this time, sir. However, one of the 
first things that I did when I took this job of approximately 
five months ago, was to initiate a complete review of our 
current regulations, which Congressman Runyan mentioned during 
his statement. I think there's a real need to update those 
regulations. We've reviewed all of those regulations and are 
currently revising them. That is one issue that I would like to 
address in our regulations is whether there should be such 
requirements for fiduciaries.
    Mr. Johnson. Would it surprise you to know that we have 
sworn testimony that a VA fiduciary stated that she had 
approximately one semester of community college education, 
while she is the appointed fiduciary for 43 veterans, as a 
single mother, working full-time? Is that--would that be the 
VA's acceptable criteria for a qualified person?
    Mr. McLenachen. Sir, I can tell you that with our current 
regulations, there is nothing to prohibit that fiduciary from 
serving in that role.
    Mr. Johnson. In your opinion, would that be a qualified 
fiduciary? If you're a veteran, a disabled veteran, would you 
want--is that who you would want to put in charge of your daily 
care?
    Mr. McLenachen. It may be, sir, if that's the wishes of the 
veteran to have that particular fiduciary----
    Mr. Johnson. No. This wasn't the wishes of the veteran. I'm 
talking about the VA appointing someone who's a qualified 
person, so the veteran has gone to the VA saying, I need a 
fiduciary.
    So you go to the VA, and you request a fiduciary, would 
that be your idea of a qualified person?
    Mr. McLenachen. Sir, I would like to strengthen the 
requirements to be a fiduciary. So, in that instance, I think 
that there should be some more stringent requirements.
    Mr. Johnson. Okay. How many fiduciaries have the background 
checks or certifications waived?
    Mr. McLenachen. Sir, we just recently issued new guidance 
that affirms our responsibility to check the background.
    Mr. Johnson. Does the VA waive fiduciary background checks 
and certifications?
    Mr. McLenachen. It's not my knowledge that we do. The 
guidance out there now is to check background in every 
fiduciary appointment.
    Mr. Johnson. I hope you're going to stay around for all the 
testimony today then.
    Mr. McLenachen. Yes, sir.
    Mr. Johnson. What's the maximum percentage of a veteran's 
benefit a fiduciary is allowed to keep as a fee for their 
services?
    Mr. McLenachen. I'm glad you asked that question, Mr. 
Chairman, because I think there's a lot of confusion about the 
payment of commissions. The maximum amount by law is four 
percent. That's of the annual benefits paid to a beneficiary. 
And again that's the maximum. We always try to pay--to find a 
fiduciary who will take less than four percent, but that's four 
percent of the annual benefits that's paid to a beneficiary. 
And again, only eight percent of the more than 120,000 
beneficiaries pay such a commission.
    Mr. Johnson. Okay. Would it surprise you to know that we 
have examples of VA fiduciaries taking five percent of all the 
veteran's income, as well as others taking five percent of VA 
disability compensation? And what do you do when you find 
situations where a fiduciary is taking more? First of all, what 
kind of auditing process do you have to ensure that you know, 
that your department knows what fiduciaries are taking, and 
what do you do when you find someone who's taking more than 
they should?
    Mr. McLenachen. Well, sir, the--we do have very stringent 
requirements that--for detecting that type of abuse. 
Approximately 30,000 or more than 30,000 accountings are done 
every year, to include fiduciaries who receive a commission. 
They're required to submit an annual accounting report, and in 
addition to that, submit detailed financial records to show all 
the transactions going in and out of the beneficiary's account. 
To include the commissions.
    I'd be very surprised to learn that a fiduciary was in a VA 
appointment case taking more than four percent. What may be 
happening is the information you have pertains to a court-
appointed fiduciary. In that situation, we recognize often a 
court-appointed fiduciary and the state courts often authorize 
more than the four percent that is authorized by Federal law. 
For that reason, court-appointed fiduciaries are a very last 
option as far as selecting a fiduciary for a beneficiary.
    Mr. Johnson. Okay. I'm going to yield now to our Ranking 
Member for his questions. We'll go to Mr. Barrow, since the 
Ranking Member is not here.
    Mr. Barrow. I'd like to pass at this time, Mr. Chairman. 
I'll ask the question later if I may.
    Mr. Johnson. Absolutely. The gentleman yields back. I'll go 
to Dr. Roe.
    Mr. Roe. Thank you, Mr. Chairman. Obviously there are 
situations where veterans are taken advantage of. We certainly 
understand that, and--but we shouldn't be by the fiduciaries.
    In Tennessee, there was an example of $900,000 being 
siphoned off from ten veterans' accounts, and what sort of 
oversight is there of the fiduciary by VA to prevent this 
incredibly egregious occurrence?
    Mr. McLenachen. Congressman, thank you for asking that 
question because I would like to be able to promise you that 
there would be no misuse of any benefits at all, and that we 
could completely eradicate that problem. Unfortunately, that is 
always going to be a very difficult task. Nonetheless, we have 
a very, I believe, good story about the oversight that we're 
currently doing to prevent misuse of funds.
    In addition to the accountings that I mentioned, which are 
done on an annual basis, Congress has also authorized us to do 
on-site reviews of fiduciaries that handle 20 or more 
beneficiaries. In those cases, we actually go to the 
fiduciary's site where they conduct their business, and 
investigate the work that they've been doing for the 
beneficiaries that they manage.
    In addition to that, sir, every single beneficiary in this 
program receives a follow-up field examination. Now, it depends 
on the circumstances of the beneficiary's case, it may be an 
annual follow-up field examination, or it may be periodically 
such as every four years in a case where there's a small amount 
of benefits paid.
    But between those three--with those three measures that we 
take, annual accountings, on-site reviews, and follow-up field 
examinations, which every single beneficiary gets, we believe 
we're doing a pretty good job now of detecting misuse of 
benefits.
    Mr. Roe. Does a VA fiduciary have the right to act 
independently of the VA? Or do they act independently of VA?
    Mr. McLenachen. Sir, are you asking about the fiduciaries?
    Mr. Roe. I'm asking if a fiduciary does something, they 
have to go back to the VA, does the VA look at that?
    Mr. McLenachen. Sir, actually, this is something that I 
have a little bit of concern about, and I really want to 
address in the regulations that we're working on. I think one 
area that we can really improve this program is more clearly 
defining the responsibilities of the fiduciary and the rights 
of beneficiaries.
    I'm admitting to you today that that's an area that we need 
to address. VA is not the fiduciary. We appoint a fiduciary to 
act for the beneficiary.
    Mr. Roe. Independently?
    Mr. McLenachen. Independently within the guidelines 
provided by the law, VA regulations and guidance issued by the 
VA.
    Mr. Roe. But they're not acting independently?
    Mr. McLenachen. No, sir. We still do VA oversight.
    Mr. Roe. That would not be my definition of independent.
    Mr. McLenachen. There is no----
    Mr. Roe. With all these disclaimers.
    Mr. McLenachen. There's no fiduciary that acts independent 
of VA oversight, sir.
    Mr. Roe. Okay. What legal basis for VA--what is the legal 
basis for VA to ignore valid power of attorney appointing a 
specific individual of the veteran's choice as attorney-in-
fact, fiduciary, or guardian of a veteran's finances?
    Mr. McLenachen. Let me clarify, sir, that we do not ignore 
individuals that have power of attorney. In fact, if that's the 
person that the beneficiary wants to have appointed, that's the 
first person that we would look to to appoint.
    Mr. Roe. But isn't that a--haven't you just laid out a 
catch 22, because if this person isn't competent to do their 
own finances, then you would assume they wouldn't be competent 
to appoint who they want as fiduciary, that's why the VA does 
it. That's kind of a catch 22, isn't it?
    Mr. McLenachen. No, sir. These individuals are unable to 
manage their financial affairs. They're not unable or----
    Mr. Roe. Who determines that?
    Mr. McLenachen. Excuse me?
    Mr. Roe. By the way? Who determines they're incompetent? I 
know the voters determine we're all incompetent, but who 
determines that the veteran is incompetent----
    Mr. Johnson. Will the gentleman yield?
    Mr. Roe. I'll yield.
    Mr. Johnson. Are you speaking for everybody?
    Mr. Roe. I'm speaking for everybody.
    Mr. Johnson. Okay. I wanted to make sure you were including 
all of us.
    Mr. Roe. I'm including everybody. But who makes that 
determination?
    Mr. McLenachen. Sir, actually I'm going to refer you to Ms. 
Rubens. It's actually her individuals out in the field that 
have jurisdiction over making those decisions before they're 
forwarded to the fiduciary activity.
    Ms. Rubens. Thanks, Dave. Hopefully I can answer this 
fully. Actually, the rating specialist at the regional office, 
when they're reviewing the medical records, whether it's an 
exam or some other indication from medical providers, determine 
that there perhaps is a reason to believe that the veteran may 
be incompetent. At that point, if in fact, there's some 
uncertainty or some conflicting opinions, we will request an 
opinion to investigate the competence, based on the opinion of 
the medical provider as to whether or not they're competent to 
manage their own funds for VA purposes.
    Once that's done, we'll provide that veteran due process, a 
notice that that proposal to determine that he or she is 
incompetent, allowing the veteran to come back in, provide 
contradictory or clarifying evidence. And at that point, we 
will make a determination based on that medical evidence that 
the veteran may be incompetent to handle his or her funds, and 
begin the process of identifying a fiduciary.
    Mr. Roe. Okay. I'll yield back. I'll have some other 
questions later.
    Mr. Johnson. We will--we'll have multiple rounds of 
questions, I'm sure. I'll go to Mr. Flores now.
    Mr. Flores. Thank you, Mr. Chairman, Director McLenachen 
and Deputy Rubens, thank you for joining us today.
    It appears that you've done some internal studies on your 
fiduciary processes, and you've also reviewed, you know, 
thousands of cases of fiduciary work. Under Title 38 CFR 1369 
it stipulates that the number of beneficiaries for whom an 
individual fiduciary may act, will be limited to the number of 
fiduciary that any--excuse me, the number the fiduciary may 
reasonably be expected to properly serve.
    What do your studies tell you based on those--that in your 
reviews is a reasonable number of persons that a fiduciary can 
act for?
    Mr. McLenachen. Let me first say that, just to give you an 
idea of the scope of work that fiduciaries currently have. 
You've heard that there's 95,000 fiduciaries that we provide 
oversight of. 90,000 of those fiduciaries serve one 
beneficiary. So that's a one-on-one relationship.
    Of the remaining 5,000, 4,000 of them serve five or fewer 
beneficiaries. That leaves us 1,000 fiduciaries who actually 
serve six or more veterans who need fiduciary services. Of 
those, roughly half are corporate fiduciaries, and the other 
half are individuals.
    Now, keep in mind, that for these 1,000 fiduciaries, we're 
not talking about a single individual who tries to provide 
services to a hundred or 200 beneficiaries on their own. 
Rather, these are people that are actually in the business of 
doing--of providing fiduciary services. So they have full 
staffs.
    It may be an accountant that has a full staff of 
individuals to work on the project. And again, these are the 
individuals that we go out and we do on-site reviews of, and we 
get annual accountings regarding their practices.
    The number of individuals that a particular fiduciary can 
handle, is controlled by what we see as far as the capabilities 
of the fiduciary and their performance. If they're performing 
below the level that we think is appropriate, we will remove 
them as fiduciaries for certain beneficiaries, and get them 
down to the level that we think they can do an adequate job.
    Mr. Flores. Okay. Well, I was a little concerned because 
I'd heard the comments by Chairman Johnson about 43 
beneficiaries under one fiduciary, and 20 from Dr. Roe, and so 
you're saying we've got a small number of issues. Let me 
rephrase this, are you telling me we've got a small number of 
incidents where we have fiduciaries that have too many 
beneficiaries, or are you going to limit it to a handful or?
    Mr. McLenachen. Sir, we've got a small number of 
fiduciaries that handle multiple beneficiaries, a very small 
number.
    Mr. Flores. I got that part.
    Mr. McLenachen. As far as how many a particular fiduciary 
can handle, again there's no set number in our regulations. 
There's the criteria that you noted in the regulations which we 
interpret to mean, they've got to perform adequately to handle 
the number that they have, and have the capability to do it. 
And if they don't, we'll remove them as a fiduciary.
    Mr. Flores. Okay. Thank you. I yield back.
    Mr. Johnson. I thank the gentleman for yielding back. I'll 
go to Mr. Runyan.
    Mr. Runyan. Thank you, Mr. Chairman, and thank both of you 
for being here and your testimony, but my--I think my first 
question is probably going to go to Ms. Rubens.
    In the American Legions' written testimony, they've--it 
cites that the Western Hub Fiduciary Program delayed for a 
follow-up has went from 120 days to 151 days on average. Are--
is this accurate and are you addressing that issue?
    Ms. Rubens. Thank you. I would tell you that I don't have 
the exact number for how long it's taking. I can tell you that 
as I look at the trend of how quickly we're doing those follow-
up or fiduciary beneficiary exams, that that has continued to 
improve through the end of last fiscal year and into November.
    We have looked at and are working with Mr. McLenachen, as 
we identify where do we need to put some additional field 
examiners out, and we're in the process now of taking our 
number of field examiners from 350 and adding another 58. Not 
to a specific geographic location where we're located, but in 
fact, we have also worked to identify where are our 
beneficiaries are located, so that we can ensure our ease of 
access to reach them. We are working diligently to improve each 
and every outreach and field exam that we do, whether it's an 
initial appointment or a follow-up exam.
    Mr. Runyan. I mean, because obviously creating the hub was 
supposed to increase efficiency, and with their testimony, it's 
going the wrong direction. And it's unacceptable personally.
    Ms. Rubens. And I would tell you that as we are looking at 
the numbers, is that the FEs are at a standard of 120 days, and 
right now, we're at 116. If we've got some issues in the west, 
obviously we'll take a look at that and make sure that we're 
addressing it.
    I think as we add those 58 field examiners, the goal is, 
based on where the need is greatest and where we are seeing 
those beneficiaries residing, to ensure that we're going to 
have good access to them.
    Mr. Runyan. Now, kind of addressing--actually what I said 
in my opening statement, a lot of the--the majority of the 
regulations concerning fiduciaries haven't been updated since 
1975. You've talked a lot about how these--and how you need to 
do it, and how you're promising to do it. I mean, we need to 
get this done, because you also say, we have training that we 
have to do. Well, what standards are we training to? I mean, 
it's really hard to hold people accountable for things that we 
have outdated procedures and rules to deal with. Can you tell 
me where you're at in the process, how close you are to being--
having a solid thing to update your manual?
    Mr. McLenachen. Yes, sir. When I said that we were working 
on the regulations, I did not imply--mean to imply that we're 
not currently working on them, or we're going to do it in the 
future. We are actually drafting regulations right now.
    So we took a--we brought people together, our staff for a 
week, to essentially disassemble the current regulations. I 
couldn't agree with you more that our regulations are out of 
date and need to be updated immediately. I came from the Office 
of General Counsel, where I reviewed regulations for the 
department, I know how to do this, and that's what we're 
working to get done.
    As far as timing, I can tell you that the rule-making 
process is not easy. It's slow, just because of the law that's 
required, that we're required to follow when we're doing 
regulations. So these regulations will be complete within the 
next year to a year and a half, and that's only because of the 
lengthy process that's required by law.
    Now, I will say that I've discussed our regulations with 
Secretary Shinseki, and he assured me that these were among the 
highest priorities in the department, and he was going to back 
us on getting them done as quick as possible. And I intend to 
take him up on that.
    Mr. Runyan. How long going into that, I know the GAO report 
of 2010 said you needed to revise them. How long--did we not 
address that issue before we got to where you're at now?
    Mr. McLenachen. Well, sir, I can't really comment on what 
happened before I got to this position. I can tell you that 
when I first got to this position, I did an assessment on my 
own, to see what I thought we needed to do, what the highest 
priority was, and if you talk to any Member of my staff, I'm 
sure they would tell you that that was the very thing that I 
identified.
    Why it took so long to get to this point, I cannot answer 
that question for you. I can just assure you that we're working 
on it.
    Mr. Runyan. I'll wait for the next round of questions and I 
yield back.
    Mr. Johnson. Thank the gentleman for yielding back. We'll 
return now to Ranking Member McNerney for his questions.
    Mr. McNerney. Good morning. Thank you for testifying this 
morning. Before I get into sort of the pre-prepared questions, 
what I'd like to know is what's your--Ms. Rubens, what's your 
opinion of the overall--well, what's the typical fiduciary? Are 
they well meaning and well intended and well prepared, or just 
sort of--what I want to avoid is painting a picture of all the 
fiduciaries as being bad, because I think most of them are out 
there doing the best they can with lack of training, and I just 
want to make sure they get credit before we go into this sort 
of investigatory phase.
    Mr. Rubens. Mr. McNerney, I couldn't agree more. I would 
tell you that as Mr. McLenachen mentioned, 90,000 of our 
fiduciaries are out there with responsibility for one 
beneficiary. And I would go beyond that to say that even for 
folks that are taking care of more than one veteran, largely 
you are absolutely right. They are doing a terrific job and a 
great service for the servicemembers and survivors who have 
come to the point where they're incompetent to handle their 
funds. And they're doing a terrific job for the most part of 
ensuring that those benefits that they're receiving are meant 
to take care of and are, in fact, taking care of our veterans 
and beneficiaries, absolutely.
    Mr. McNerney. Thank you for that statement. In your 
testimony, you mentioned that an analysis of the pilot hub 
improved initial fiduciary appointments by 36 percent and 
qualified by 13 percent. How does the VA measure timeliness, 
and can you elaborate on how the VA quantified quality to claim 
a 13 percent improvement?
    Ms. Rubens. Absolutely. We have targets established for how 
long will it take us to do our initial appointments, to have 
fiduciaries established. We have timeliness requirements for 
how long will it take us to do follow-up visits with those 
fiduciaries. The quality standard is established, and a review 
is by the National Systematic Technical Advisory Review Staff, 
and I believe, Dave, your folks are also in Nashville. And they 
will do a review of a statistically valid sample of the work 
being completed, and in this case, by the western area hub, and 
the staff has identified an improvement in that quality of 13 
percent.
    Mr. McNerney. So what this tells me is that the effort then 
is to continue to improve the quality especially from these 
sort of home fiduciary people that are caring for relatives or 
people that they know personally?
    Ms. Rubens. I would tell you, sir, that it's across the 
board, that no matter where that fiduciary comes from, it's 
important to us to ensure that they're doing a good job of 
administering the veteran or beneficiary funds.
    Mr. McNerney. And this 13 percent is your way to quantify 
that improvement?
    Ms. Rubens. Yes, sir.
    Mr. McNerney. Okay. Are there outside like the OIG or any 
other group that's collaborated or validated that improvement?
    Mr. McLenachen. Not that I'm aware of, sir. However, I want 
to clarify that in addition to, I believe you're asking about 
the quality of fiduciary services----
    Mr. McNerney. Right.
    Mr. McLenachen. --the quality measure that we're referring 
to is the quality of our own staff in doing the functions that 
Diana's more than 600 people out in the field doing this work, 
it's their quality that is increasing as a result of the hub 
consolidation concept. So that's part of the quality measure 
that we're talking about.
    Mr. McNerney. Okay. Well, I know that we had--in DAMA, we 
had a hearing last year on this, and I would like to see next 
year when we have a hearing, that we have another 13 percent 
improvement. So that's our challenge is to keep improving this 
and make sure that--whenever you have a system like this, 
there's going to be temptation for some people, some bad 
players, to rip the system off. We want to make sure that we 
have the tools in place to keep that from happening, and when 
it does happen, to prosecute.
    Thank you. I yield back.
    Mr. Johnson. I thank the gentleman for yielding back, and 
we'll go into a second round of questioning, and I would like 
to echo what my colleague Mr. McNerney said. This hearing today 
is in no way a negative reflection on those fiduciaries that 
are doing an outstanding job, and that's certainly not the 
intent.
    Our responsibility here on the Subcommittee for Oversight 
and Investigation is, of course, to make sure that all of our 
veterans, every single one of them, is getting the benefits and 
the care that they have earned, and therefore, as we dig down 
into this, we have questions to weed out, as he said, those bad 
actors.
    With that being said, I want to go back and kind of spin 
off of what Congressman Runyan was asking. You were talking 
about if I recall, that you monitor these fiduciaries and 
monitor their performance. What kind of metrics do you use to 
determine how your fiduciary program is working? I think if I 
heard your testimony right, Ms. Rubens, you did not know how 
long it's taking to get these claims through.
    So what are your metrics, how are you reviewing them, and 
what do you do with the information when you get them, and 
that's for both of you?
    Mr. McLenachen. Well, sir, first of all, as far as metrics 
regarding fiduciary performance, which I think was the first 
part of your question, those metrics are set up during the 
field examination that we do in the selection process. The 
field examiner actually meets with the beneficiary, meets with 
the prospective fiduciary, discovers what the needs are of the 
beneficiary, and in discussing that situation of that 
beneficiary, we come up with a basic picture of what this 
particular person needs. And that is actually discussed and 
given to the fiduciary at that point, so that there's an 
agreement about what this particular person actually needs.
    When I talked about performance, that's what we're talking 
about. Is this fiduciary ensuring that the needs of this 
particular beneficiary are being met.
    Mr. Johnson. Let me qualify my question. We talked about at 
least one instance that we know of, of a person who is managing 
43 veterans, a single mother working full-time with nothing 
more than a, one semester of community college background. 
How--what kind of metrics do you have that would tell you that 
you've got that kind of situation out there?
    Mr. McLenachen. As far as telling us that that particular 
individual has full-time employment, separate from the 
fiduciary activities she's doing, I'm not aware of any metrics 
that would identify that for us at this time, that that may----
    Mr. Johnson. Do you have any operational metrics that come 
to you that you review on the fiduciary program, as a part of 
your operational review?
    Mr. McLenachen. We do have those metrics that----
    Mr. Johnson. What are they?
    Mr. McLenachen. --we gather at the central office regarding 
the performance of our fiduciary activities out there, and that 
information----
    Mr. Johnson. Can you provide us with a copy of what those 
metrics are?
    Mr. McLenachen. Yes, sir.
    Mr. Johnson. Yeah, I'd like to see that. When was the last 
time that a fiduciary was removed? I mean, assuming that you're 
monitoring these operational metrics, and you're monitoring the 
performance of the fiduciaries, when was the last time a 
fiduciary was removed because of lack of performance?
    Mr. McLenachen. Well, sir, I don't have that exact 
information with me today.
    Mr. Johnson. Can you provide that to me as well?
    Mr. McLenachen. I can, sir.
    Mr. Johnson. What I'd like to see is, I know you said you 
came to the job five months ago?
    Mr. McLenachen. Five months ago, yes, sir.
    Mr. Johnson. I'd like to see if you could provide that for 
the last three years.
    Mr. McLenachen. Okay.
    Mr. Johnson. I'd like to see how many fiduciaries have been 
removed as a result of performance related issues and the dates 
that that occurred.
    Mr. McLenachen. Yes, sir, we'll provide you that.
    Mr. Johnson. Okay. Has VA upgraded or replaced the 
fiduciary benefit system in order to provide an electronic 
interface for external entities that includes inputting and 
processing of income and expense related transactions?
    Mr. McLenachen. Mr. Chairman, it has not been replaced yet. 
However, I'm--I can report that a decision has been made to 
replace it. We have a business requirements document that 
states exactly what the new system is going to look like. It's 
been planned. And we have a weekly work group that is looking 
at how we are going to integrate this new system.
    As you know, we're also developing other systems in the VA 
as we're continuing----
    Mr. Johnson. Well, I'm well aware of that.
    Mr. McLenachen. Yes.
    Mr. Johnson. Information technology and business systems 
applications are another very important area that we're 
interested in.
    Mr. McLenachen. This--the fiduciary beneficiary system 
provides us kind of a unique challenge because as you may know, 
it's a stove pipe system that exists outside of VBA's corporate 
database. And so the challenge we have is as we're developing 
these other new systems, we need to make this external system 
integrate into those systems. We need to remove the data from 
the Legacy system, and plug it into the new system that's being 
developed.
    Mr. Johnson. Okay.
    Mr. McLenachen. And we're currently working on that.
    Mr. Johnson. According to your testimony, VA's outreach 
efforts are for qualified fiduciaries, and yet you also stated 
that fiduciary personnel should be trained to a centralized 
environment, using a standard curriculum.
    So if fiduciaries are already qualified, what would VA be 
schooling them on?
    Mr. McLenachen. Yes, sir. Actually the reference to 
training being centralized is for VA's fiduciary personnel, not 
for the fiduciaries themselves. So what I was suggesting in my 
testimony was, we can do a lot better job of training our own 
personnel to make sure that we're providing state of the art 
customer service for these vulnerable beneficiaries, that's 
what I was referring to.
    Mr. Johnson. Okay. In your written testimony, you mentioned 
round tables that VA, the Social Security Administration, OPM 
and DFAS have participated in. Why is there such a disparity 
between the Social Security Administration's fiduciary program 
and VA's?
    Mr. McLenachen. Well, I think there's two factors there. 
One is there is a different body of law that pertains to each, 
they have their own unique criteria and are substantially 
different. But in addition to that, the social security system 
is enormous compared to the fiduciary system that VA runs. 
Although I believe that we're the second biggest such program 
in the government, nonetheless, the Social Security 
Administration's payee program is much, much larger than VA's 
which poses its own problems.
    Mr. Johnson. Okay. How is the VA--how are you strengthening 
the oversight of the fiduciary program? Who oversees the field 
examiners? I think that's in your area, Ms. Rubens. And how 
much oversight occurs, and I'm going back to that operational 
metric review? How does that process work?
    Ms. Rubens. Yes, sir. I would tell you that we are 
strengthening the program, and I think that it's in two arenas. 
One, as you've heard Mr. McLenachen talk about, the standing up 
of the pension and fiduciary service in November, will provide 
us a number of things for the folks in the field that are 
implementing the guidance and the regulations. It's that more 
consistent oversight from headquarters, in terms of devising 
guidance. It's also, as he talks about the Federal beneficiary 
system, helping us build new tools. It's identifying things. 
For instance, in the Salt Lake City Hub, they identified 
mapping programs to help them be more efficient in how they go 
out and make our visits to our fiduciaries.
    And I would tell you that I think the hub program in 
itself, reorganizing the infrastructure, sir, in the field, 
will make a tremendous difference in two ways. One, is that we 
now will look to consolidate our legal instruments' examiners, 
who are actually doing the accountings and reviewing the 
information provided by the fiduciaries. We're ensuring there's 
a more consistent review. But also frankly, sir, while they 
were distributed among the regional offices, the number of 
legal instruments' examiners at one legal office might be one, 
two, or three, or in a large office, you might get up to six or 
ten, which meant you could find yourself with, I'll say, a 
shortage of personnel if somebody were to get a promotion, 
leave the job, retire, what have you.
    By consolidating into the hubs, we are going to aggregate 
that accounting review expertise. We are also then going to 
ensure that the oversight for our field examiners takes 
advantage of the fact that they are provided direction and 
oversight from fewer responsible supervisors. This also take 
advantage of the fact that jurisdictional lines that may have 
been an issue when they were out there by regional office are 
no longer an issue. So we can ensure the most effective and 
most efficient means to get out and do those field exams.
    Our timeframes for doing an initial appointment are set at 
hitting those at 45 days. That's a record that we monitor. 
We're currently at about 51, which is not where we want to be. 
With 58 additional field examiners, we expect that we're going 
to make a tremendous difference there.
    For the review of exams by the field examiner, we have a 
target of 120 days and are at 116 days. We think that we've got 
some room; we can continue to improve, but we're hitting our 
target. And there is a time frame for making sure that we're 
getting the accounting work in, looking to ensure that those 
accountings are coming in for our review.
    We agree that while most of our fiduciaries are doing a 
terrific job, it's still our responsibility to look for those 
anomalies and to look for those bad actors that you referred 
to.
    Mr. Johnson. Okay. All right. Back to Mr. McLenachen. 
You've been in your job for five months, and I certainly sense, 
you know, a desire and motivation to make this program 
effective, and I appreciate that.
    In your testimony, you said that the VA has initiated a 
complete review and revision of all regulations and procedure 
manuals pertaining to fiduciary matters. When was this review 
initiated?
    Mr. McLenachen. Sir, I started in this position in August, 
and I believe it was the beginning of September where I first 
started discussing with my Assistant Director, Gary Chesterton, 
that we initiate that process. I've had people working on that 
full-time since that--since early September.
    Mr. Johnson. Okay. Are you aware that in early 2010, the VA 
stated that a new fiduciary policy was to be published in 
September of 2010, and that to date, no specific policy has--
that has not happened, and the policy is still, as far as we 
know, is still dated 2005, and a revision has not been 
released. Are you aware of that?
    Mr. McLenachen. Mr. Chairman, based on that information, I 
cannot answer the question. If you could narrow it down to a 
specific policy, I might be able to provide you an answer.
    Mr. Johnson. Yeah, I would certainly like to see that, 
because September of 2010 has long come and gone. I concur with 
Congressman Runyan's assessment, this is not rocket science. 
Why it's taking so long to get these policies and regulations 
reviewed and put in place, is a little bit concerning to me.
    Mr. McLenachen. Mr. Chairman, being in this position for 
five months, I haven't yet had an opportunity to sit down and 
meet with your staff, and I'm available to do that at any time 
if you would like to arrange that.
    Mr. Johnson. Okay. All right. Thank you. At this time, I 
yield to Ranking Member McNerney, if he has any follow-up 
questions.
    Mr. McNerney. Thank you, Mr. Chairman. Yeah, you asked one 
of my questions, so I'm a little blank here. But I'd like to 
follow-up with a remark that you made earlier, Ms. Rubens, that 
the--and I just want to clarify it. You said that the quality 
is measured by the staff performance, not by the actual 
benefits disbursement. Could you clarify that a little bit?
    Ms. Rubens. Absolutely. The quality review that's done by 
our headquarters quality review staff in Nashville is really to 
look at how we in the field are carrying out our 
responsibilities from a review of the accountings, ensure that 
we get our field exams done, whether they're initial or follow-
up. They ensure that as we conduct those field exams, we are 
following the prescribed guidance.
    Those two things are really meant to help us ensure that if 
there is a concern, a problem with how the fiduciaries 
disbursing the funds, that that's brought to light. If we're 
identifying those things, we are pursuing that and ensuring 
that if, in fact, that fiduciary is misusing the money, that 
appropriate action is taken.
    As the STAR review staff, the quality reviewers, and 
headquarters review our work, it's to ensure that we are 
meeting our requirements to identify those kinds of situations.
    Mr. McNerney. So it sounds like you believe and feel that 
it's not only a measure of the quality of your staff's 
performance, but also of how the benefits are being disbursed?
    Ms. Rubens. It is our effort to ensure that the 
disbursement of those funds is being made in accordance with 
the guidance that we've got, yes, sir.
    Mr. McNerney. Okay. In your testimony, you state that the--
you've reviewed the pilot's program strengths and weaknesses. 
Do you have an assessment of the weaknesses? You've talked 
about the strengths, but you haven't discussed the weaknesses.
    Ms. Rubens. I would tell you that as we look at the pilot 
opportunities to ensure that we've got enough field examiners 
out there to meet the needs. Ensuring that we've got good 
supervision in the right places and doing oversight with those 
field examiners as well as the accountants, these are things on 
which we continue to work with Mr. McLenachen.
    As the P&F service has stood up, I think it's been one of 
the best things that we've done for our incompetent veterans to 
ensure we've got the right guidance and the right oversight. 
Dave and I have worked very closely together to make sure that 
we're meeting those needs.
    Mr. McNerney. Okay. I'm going to yield back, Mr. Chairman.
    Mr. Johnson. I thank the gentleman for yielding back.
    Dr. Roe.
    Mr. Roe. Just a couple of--thanks, Mr. Chairman, for 
yielding. Just a couple of questions.
    What sort of a contract does a fiduciary sign with the VA, 
when you're accepted as a fiduciary, and that's your job?
    Mr. McLenachen. Well, sir, there is no contract that's 
signed. There is a document that we call a fiduciary agreement, 
which is really just a informing the fiduciary of their 
responsibilities, the specific needs of this particular 
beneficiary. So that document does exist, and it is signed by 
the fiduciary and provided to us.
    It's essentially a way for us to inform the fiduciary of 
what this particular needs--what the particular needs of this 
particular beneficiary are. But this goes back to the point 
that I was mentioning an area that we really need to strengthen 
is the role of the fiduciary in this program, and something I 
intend to work on.
    And that is, that the fiduciary holds an obligation to the 
beneficiary. That is where the fiduciary relationship is, and 
that's the one thing that we really--one of the things that we 
really need to strengthen and clarify.
    Mr. Roe. I'm glad to hear you say that, because if--do they 
sign this document, does it obligate them to check with VA 
before they release these funds, or to be looked at by VA 
before they can be released?
    Mr. McLenachen. The current policy, sir, is that if an 
expenditure is going to exceed a thousand dollars, an unusual, 
a nonrecurring expenditure of that amount is going to be made, 
per current policy is that there does have to be a check with 
the fiduciary activity, that's correct.
    Mr. Roe. So in Tennessee, where this $900,000 was 
embezzled, that didn't happen obviously, unless they took it 
out of, a buck at a time?
    Mr. McLenachen. Unfortunately, sir, I cannot comment about 
that specific case, the facts of that case, and I cannot tell 
you whether there was a lack of oversight or not. It may have 
been discovered----
    Mr. Roe. Well, it obviously was if $900,000 got embezzled.
    Mr. McLenachen. Yeah. Eventually it was discovered, and 
there's--thankfully Congress has a law in place that we've 
implemented that allows us to reissue benefits in those cases, 
and of course, those matters are referred to the Inspector 
General for prosecution.
    Mr. Roe. I guess just one last question, Mr. Chairman, 
briefly, and this one bothers me a little bit, because what 
legal basis is there for VA, the Veterans Administration, to 
ignore a state court order of guardianship? If a state court, a 
judge in a court of Tennessee says, you can be--this is a legal 
guardianship, how can the VA just ignore that, and they have?
    Mr. McLenachen. Well, sir, we have a body of Federal law 
that requires us and authorizes us to run this program. That 
law is supreme. And we have developed policy that we believe 
best suits the needs of these veterans, with the exception----
    Mr. Roe. So that--back up right there just a second. So 
what you're saying is, and I'm not directing this at you, but 
I'm directing it globally.
    Mr. McLenachen. Sure.
    Mr. Roe. That sounds pretty arrogant to me, to think that a 
judge in a hometown that knows my folks better than anybody up 
at Webber Wood, is now being told that no, you can't be a 
guardian. This is a judge that may know the family, they may 
know the circumstances in Surgoinsville, Tennessee, a lot 
better than anybody at the VA would ever know it.
    Mr. McLenachen. Mr. Congressman, let me clarify my 
statement just a little bit. If that guardian, which has been 
appointed by the Court, is the individual that this beneficiary 
wants appointed, then yes, we're going to seek to appoint that 
person if that's who they want. If it's not who they want, and 
there's an exorbitant fee being charged by that guardianship 
created in the state court, we are going to determine whether 
that's in the best interests of that beneficiary.
    I don't know whether you're aware of this, but the fees 
often exceed by far the four percent authorized by Congress for 
this fiduciary program. In many cases, and for that reason, we 
only appoint approximately eight percent--eight percent of our 
fiduciaries are court appointed guardians.
    So we've determined that in most cases, it is not in the 
best interests of a beneficiary to have a state appointed 
fiduciary. Now, that does not mean that we're not recognizing 
state appointed guardians who are family members, or the person 
that the beneficiary wants.
    Mr. Roe. So you're telling me now on the record, that the 
VA, and I don't know this has or hadn't happened, has had a 
veteran who said, yeah, this is fine with me, this will be 
fine, the VA hadn't overruled that?
    Mr. McLenachen. I'm sorry, sir. Could you restate the 
question?
    Mr. Roe. Yeah. We've had the state court, the judge, the 
local judge has said, this will be--this is a guardianship and 
this person is the guardian. And the veteran says that, yeah, 
this is okay with me, the VA's never counteracted that?
    Mr. McLenachen. That is not my testimony. We often 
appoint--in eight percent of our fiduciary cases we appoint----
    Mr. Roe. Now, back up. That's what you said. You said if 
the veteran wanted it, and the state court said it was okay, 
then it was okay. I think that's what you said.
    Mr. McLenachen. Yes. If the person that the beneficiary 
wants as their fiduciary is a state appointed guardian, that is 
the first person that we're going to look at to qualify.
    Mr. Roe. Okay. And you've never--and the VA's never gone 
and said, no, that's not adequate?
    Mr. McLenachen. I do not have that information with me, no.
    Mr. Roe. I'll yield back.
    Mr. Johnson. Thank you. I think we'd like to see that if 
you could look into that and tell us whether or not that has 
occurred. Mr. Flores.
    Mr. Flores. Thank you, Mr. Chairman. A couple of questions. 
As you're going through this regulatory rewrite and overhaul 
process, a couple of questions on the statutory side. Are there 
any limitations under current statutes that are preventing you 
from being able to write all the regulations that you need, or 
to overhaul the regulations in a manner to make this work 
better?
    Mr. McLenachen. Congressman, at this time, I do not believe 
that we need additional authority. I think our authority is 
sufficient to allow us to write the regulations that we need.
    Mr. Flores. Okay. So I think that answered my second 
question, too. And that is, do you--is there any legislative 
fix that you need in order to be able to complete this 
regulatory rewrite?
    Mr. McLenachen. One of the things that we have been 
recently asked is whether we have legislative proposals to 
develop within the department, and we intend to take a look at 
the statutes, to see if we can make some recommendations for 
you that we think might improve the program.
    Mr. Flores. Okay. Well, that would be good, if you can get 
those to us as soon as you get to that point, that would be 
helpful.
    Mr. McLenachen. We will.
    Mr. Flores. I mean, we'd like to work together on this----
    Mr. McLenachen. Yes.
    Mr. Flores. --so that we take--do what our charge is, and 
that's to take care of our Nation's vets. Thank you. I yield 
back.
    Mr. Johnson. Mr. Runyan?
    Mr. Runyan. Thank you, Chairman. And continuing on the 
theme of rewriting some of these regs. Our Uniform Probate Code 
which serves as a standardized and modernized all areas of 
probate law was not widely adopted until after the VA had 
adopted its current regulations. And Uniform Probate Code was 
recently updated in `06. Will the VA take up the Probate Code, 
Article 5, Part 5, which concerns durable power of attorney 
into consideration in updating your regulations?
    Mr. McLenachen. Yes, sir. In reviewing our regulations, we 
looked at a number of different sources of modifications that 
we could make, including those, the Social Security 
Administration regulations, and any other regulations existing 
that we could find that might be helpful to us for informing us 
about a better way to do what we're charged with doing. So, 
yes, we have looked at those.
    Mr. Runyan. And are there any guidelines for fiduciaries or 
field managers to follow when it comes to emergency requests?
    Mr. McLenachen. Yes. We have procedures in place for 
appointing temporary fiduciaries. Just last night, we got a 
call regarding a specific case regarding a terminal veteran 
where those exact procedures needed to be invoked. So we do 
have those procedures in place.
    Mr. Runyan. It's working?
    Mr. McLenachen. Yes, sir, it is.
    Mr. Runyan. And are you also looking to update any of them 
to make sure you can work any bugs out of it?
    Mr. McLenachen. Those will be included in the regulations 
that we're working on, yes.
    Mr. Runyan. Thank you. Chairman, I yield back.
    Mr. Johnson. I thank the gentleman for yielding back. I 
have no further questions. Any other Members have questions?
    Well, our thanks to the panel, and you are now excused.
    Our second panel we will hear from today consists of Doug 
Rosinski and Katrina Eagle, Veterans Law Attorneys, Pam Estes, 
who serves as the fiduciary for her son, Jason, an OEF, OIF 
veteran, and Rick Weidman, Executive Director for Policy and 
Government Affairs at Veterans of America.
    Mr. Rosinski, Ms. Eagle, Ms. Estes, and Mr. Weidman, your 
complete written statements will be made part of the hearing 
record. Mr. Rosinski, you are now recognized for five minutes.

STATEMENTS OF DOUG ROSINSKI, ESQUIRE; LAW OFFICE OF DOUGLAS J. 
  ROSINSKI, ESQUIRE; KATRINA EAGLE, ESQUIRE; THE VETERANS LAW 
OFFICE OF MICHAEL WILDHABER, LLP; PAM ESTES, VETERAN FIDUCIARY; 
   RICK WEIDMAN, EXECUTIVE DIRECTOR FOR POLICY & GOVERNMENT 
             AFFAIRS, VIETNAM VETERANS OF AMERICA.

                   STATEMENT BY DOUG ROSINSKI

    Mr. Rosinski. Thank you, Mr. Chairman, Mr. Ranking Member, 
and Members of the Subcommittee.
    I want to also join your statements. This is not about the 
vast majority of fiduciaries who are struggling to do the best 
for their veterans. This is about primarily the veteran--the 
Department of Veterans Affairs' individuals. This is not about 
VA money, this is about the veterans' money. Every dollar we're 
talking about today has already been awarded and provided to 
the veteran. VA is spending the veteran's money at a rate--for 
the veterans that I represent, at approximately $600 an hour to 
write a single check a month. They get $108 and change at four 
percent for a hundred percent benefit, that's $108 to write one 
check a month.
    These metrics that you've been talking about are 
misleading. They are metrics about policies and procedures. We 
are talking about people who live day-to-day, dollar-to-dollar, 
who have to beg the VA fiduciary because of the policies to buy 
new underwear for a Korean War veteran.
    They're about policies and procedures that require and 
instruct these fiduciaries to not contact the veteran, to not 
answer a veteran, to not respond to their counsel.
    So when you measure how many meetings they have, how long 
it takes to meet with a veteran, how many days it takes to cash 
a check has nothing to do with what goes on in the field day-
to-day.
    What my clients want to know is why, when they are living 
at home, or under supervised care, their veteran suddenly has 
to have a VA fiduciary at all. My veterans have had decades of 
family members giving them care, and handling their benefits 
without VA interruption.
    Suddenly VA appoints a perfect stranger, perfectly unknown 
to the veteran, who has never contacted the veteran, who will 
not ever contact the veteran, and is paid money from the 
veteran's account to withhold the money from the veteran, to 
place it in bank accounts that they will not disclose to the 
veteran, and that they will not even disclose under FOIA. They 
will redact the veteran's own information about his own money 
from the files they give up.
    My clients want to know why that if there is a need for a 
VA appointed fiduciary, it has to be this stranger. They want 
to know why this stranger is told to take all of the veteran's 
finances, all of his bank accounts, and ask questions about his 
CDs and his--whether he owns a boat, and what his wife's salary 
is, and where is that salary put, and then go into the banks 
and take all of it and not tell them where it is.
    They want to know why VA not only will not correct that, 
when I've had personal discussions with Members or people 
sitting in this hearing today, and then they will not fix that 
problem. They want to know why VA defends those practices at 
every turn in every court in every discussion.
    This is not about numbers and procedures and policies. My 
clients don't care about policies and procedures. They want to 
know why they have $100,000 in the bank and they cannot afford 
the medicine that the VA doctors prescribed last month.
    They want to know why the power company is in the front 
yard, when they have $50,000 in the bank, and it takes an 
emergency motion to the Veterans Court before these people will 
call a power company and tell them they'll pay $178.
    That's what my clients would like to hear today. And I did 
not hear any of that by the prior panel.
    I thank you for the time, and yield back the rest of my 
time.

    [The prepared statement of Douglas J. Rosinski appears in 
the Appendix]

    Mr. Johnson. Thank you, Mr. Rosinski. Ms. Eagle, you are 
now recognized for five minutes.

                 STATEMENT OF KATRINA J. EAGLE

    Ms. Eagle. Mr. Chairman, Members of the Subcommittee, thank 
you very much for having me this morning.
    I want to use my five minutes to address some of the 
fundamental misunderstandings. First of all, let me be very 
clear. A finding of incompetency by the VA applies only to 
their managing of their VA money. There is no catch 22. They 
can enter contracts. That finding of incompetency applies only 
to their being able to manage their VA money.
    So with respect to having durable powers of attorney and 
being able to enter into those, they are perfectly fine. The VA 
has no finding with incompetency. It does not reach that far.
    The second basic fundamental misunderstanding, is the law 
that applies to the fiduciary program. That law states very 
clearly that the Secretary may find, when it is in the 
veteran's best interest, may appoint a fiduciary. And before 
they appoint a fiduciary, that law makes it very clear that the 
money can still go directly to the veteran.
    It can go supervised direct pay. VA's own forms list the 
veteran as receiving his own money even after being found 
incompetent. The fiduciary is the last person. So that with 
respect to the VA form direct payment of the beneficiary, that 
was not the intent of Congress when they created the fiduciary 
program. And, in fact, even since the Freeman decision, made 
challenges to the fiduciary appointments available to veterans.
    Just in December 6th, 2011, the VA's most recent VA FAS 
letter emphasizes another basic misunderstanding. That letter 
makes very clear one sentence sums it all up. The purpose of 
the VA Fiduciary Program is to protect the benefits paid to the 
beneficiaries. No. I submit to you the purpose of the program 
is to protect the veteran. It is his money, not the VA's. The 
VA treats it as if it is theirs.
    Another basic misunderstanding is how this process actually 
works. Ms. Ruben's identified very clearly, when a veteran is 
proposed to be found incompetent, there are due process systems 
in place. That veteran can appeal. While that appeal process 
with respect to the finding of incompetency is ongoing, nothing 
happens. The moment incompetency attaches to the veteran, 
however, everything else changes. A fiduciary is appointed, the 
same day his direct deposit VA money is stopped and changed and 
diverted to another account with which the veteran has no 
knowledge, did not approve, and is now getting four percent of 
that money taken out and paid to someone else he does not know, 
has not met.
    That same money that is the veteran's, is then used, 
without his permission, without his authority, for a surety 
bond. The veteran gets to pay for his own money to be protected 
from him. Before the veteran is asked or even let allowed to 
try and use his own money, even though found incompetent.
    We have in this country, you are innocent until proven 
guilty, but in the VA system, once you are found incompetent, 
you can't even be trusted or given a chance to use your own 
money. They assume you can't, and put somebody else, be it a 
spouse, a family member, or a paid fiduciary before the veteran 
himself is given an opportunity to show that he can still do 
it, even with being found incompetent.
    The last thing that I would like you to make sure you 
understand is that the strict control of the money, while we 
discuss policies are being changed, while we discuss 
regulations are being reviewed and changed, every day a veteran 
has a need, daily lives, life goes on, and they have needs to 
access of their money.
    If they call their fiduciary and in the best of 
circumstances, weeks go by while they fax in this request to 
the fiduciary hub in Salt Lake City or anywhere else, and they 
have to wait weeks to get approval, if they get approval for an 
air conditioner, for underwear, for heart medication, they have 
to wait.
    While they wait, what do they do? They use credit cards, 
they get fees charged to them because they have to find other 
means to pay for things that they need today. The system is not 
working.
    I appreciate your time. I appreciate sincerely on behalf of 
veterans that I work with, you're looking into this entire 
program. Thank you.

    [The prepared statement of Katrina J. Eagle appears in the 
Appendix]

    Mr. Johnson. I thank you for your comments, Ms. Estes, you 
are now recognized for five minutes.

                     STATEMENT OF PAM ESTES

    Ms. Estes. Chairman Johnson, Ranking Member Donnelly, and 
Members of the Subcommittee, thank you for inviting me to 
testify at the VA's Fiduciary Program and for holding this 
hearing.
    My name is Pam Estes. My life and my family's life changed 
overnight in December of 2005 when my son sustained multiple 
severe injuries, including severe traumatic brain injury, 
multiple leg fractures, a lower leg amputation, and second and 
third degree burns to over 60 percent of his body, as a result 
of an IED blast in Iraq.
    At the time of his injury, Jason was only 19 years old. 
Since then, my husband, Mike, and I have been caregivers for 
Jason. I was appointed to serve as a fiduciary in 2007 as he 
was not able to manage his financial affairs. As both a 
fiduciary for my son and as a caregiver, I have extensive 
experience in working with the Department of Veterans Affairs. 
In fact, I served for two years as a Member of a VA Advisory 
Committee, on OEF, OIF veterans and families established by 
former Secretary of Veterans Affairs, Jim Nicholson.
    As a result, I have a good understanding of the department 
and its programs. But my experience of dealing with the 
Veterans Benefits Administration as it relates to Jason's VA 
compensation contrasts sharply with the experience of working 
with the Veterans Health Administration as it relates to my 
son's care and to the administration of the VA Caregiver 
Assistance Program established by Congress.
    One of the very positive experience with the VHA, 
particularly in coordinating effectively with its case managers 
surrounding Jason's care, my experience as a fiduciary and me 
not even understanding VBA's requirements, has been disturbing.
    I certainly understand that VBA has an important 
responsibility as it relates to safeguarding the benefits of 
veterans who are unable to manage their own affairs. While this 
fiduciary program unquestionably has an important mission, my 
own experience and that of other caregivers of wounded 
warriors, leave me to question how effectively the program is 
managed.
    Among the frustrations I've encountered in serving as a 
fiduciary has been the lack of information as to precisely what 
VBA needed and expected, and the mixed signals it sent. Despite 
a lack of guidance, I maintain detailed documentation of 
expenditures for Jason, consistent with my background in 
accounting. But I was stunned in 2008, when despite the lack of 
detailed VBA instructions, I received a letter from the VA 
regional office in Baltimore, which cited my failure to submit 
your timely accounting is outstanding, constituting a breach of 
your fiduciary duty, and threatened to remove me as fiduciary.
    I find it extremely offensive to be painted as 
irresponsible when we've been working so hard to do what's best 
for Jason, including saving much of his money for the future, 
when we're not there to care for him.
    Following up on that letter, I ultimately met with a VA 
field auditor in September of 2008, and explained that I'd 
never received instructions about requirements for annual 
accounting or applicable forms. I was relieved that the 
official accepted my detailed documentation, and advised me 
that no further action was needed.
    Yet, less than a year later, I received another letter from 
the VA regional office officials stating that I was delinquent, 
and this time, directing me to submit a VA form within 14 days, 
an accounting of all expenditures for Jason going back to 2007. 
This letter again threatened that I risked being removed as 
fiduciary. The VARO official's letter also responded to an 
earlier letter of mine explaining that I had never received 
instructions on how to file an annual accounting to VBA, and 
stated that in an ideal world, each year the computer would 
print you a letter, and we would send you the letter and blank 
forms prior to your accounting date. It's supposed to work that 
way, but in real life, it doesn't.
    VBA's fourteen-day reporting or else directive prompted us 
to contact the Wounded Warrior Project who brought this 
situation to the attention of the VBA central office officials 
and requested a meeting. My husband and I subsequently met with 
these officials who were deeply apologetic. The meeting was 
instrumental in resolving the immediate problem, and we assumed 
accordingly that we would encounter no future difficulties, but 
we were mistaken.
    For the 2011 accounting period, I received a message from 
the supervisory official in Baltimore indicating that I was 
subject to a field audit this year. After back and forth 
messages, the visit had still not been scheduled, and still 
hasn't been. Fearing another delinquency, I submitted my annual 
accounting on December 5th of 2011, and further sought to 
clarify VA policy regarding certain charges to be entered on 
that form.
    In a follow-up letter--in a follow-up to the letter, I 
called and left messages, but received no response. On January 
9th, however, I was shocked to receive a letter stating that I 
was delinquent again in submitting the required accounting, and 
threatening to remove me as Jason's fiduciary if I did not 
comply within 30 days. Today's 30 days, so I'm sure I'll get 
another letter.
    From the perspective of a mother of a very severely wounded 
warrior, VBA communications like this suggesting that with the 
stroke of a pen, I could be deemed unqualified and lose the 
right to manage my son's finances are terribly stressful. 
Despite my being a loving caregiver, the program operates in a 
manner that leaves me feeling as though something threatening 
is always hanging over my head.
    Given that that's been my experience, imagine what this 
process might be like for a young spouse, without my background 
and recordkeeping, let alone my years working in accounting.
    I understand the need for methodical recordkeeping and 
reporting and the interest of documenting appropriate financial 
management of Jason's compensation, but I do not understand an 
agency that is so quick to threaten, so unresponsive to 
questions, so much of a black hole. Nor do I understand why VBA 
cannot better align its reporting requirements with a much less 
detailed and less burdensome level, a reporting used by the 
Social Security Administration.
    Some two and a half years ago, my husband, Mike, attended a 
caregiver summit here in Washington sponsored by Wounded 
Warriors. One of the most common and deeply felt concerns 
expressed by the caregiver participants was with the VA 
Fiduciary Program. Which many participants described in some 
details as confusing, demeaning, highly intrusive, and often 
unreasonable, and disallowing expenditures. The then Director 
of VA's Compensation and Pension Service attended the session 
of the conference, and on hearing a presentation of these 
problems, promised fiduciary program reforms. But it's not 
apparent to me that such reforms have taken place, or if any 
steps were taken, that they really have taken hold.
    On behalf of the many other caregivers who as fiduciaries 
for their loved ones, have had experiences like mine, I hope 
this morning's hearing can help achieve such changes.

    [The prepared statement of Pam Estes appears in the 
Appendix]

    Mr. Johnson. Thank you, Ms. Estes. Mr. Weidman, you are now 
recognized for five minutes.

                   STATEMENT OF RICK WEIDMAN

    Mr. Weidman. Mr. Chairman, thank you for allowing us to 
present our views here today. And thank you moreover for having 
this hearing.
    Going back to at least 2006, it seems like the only time we 
make progress and fits and starts, is when there's a hearing 
coming up. So I guess we should have more hearings, maybe we'd 
keep that progress going. But hopefully, this time it's going 
to take.
    The first thing about this program is that there's big 
bucks involved, and any time there are big bucks involved, you 
better make sure that you have all of your safeguards in place. 
And that's the first thing, point I want to make.
    The second point is, it's not a financial program. It is an 
extension of a clinical program, and that's a fundamental 
misunderstanding of this program. If this individual, and the 
former age, 60 years ago, many of these veterans would be in a 
long-term care facility, but they don't exist anymore at VA. 
And therefore, they're living independently.
    So at nowhere in this, has anybody talked about, is this 
person eating correctly, do they have access to proper 
nutrition, do they--is their shelter warm, do they have warm 
clothes for the winter time, do they have an air conditioner, 
et cetera. It's all an extension, if you will. What we should 
be concerned with is a medical model and hopefully people 
getting better.
    The third point I wanted to make is, this is a drastic step 
to take to infantialize, if you will, a person who had taken 
that step forward, pledging life and limb in defense of the 
Constitution, and therefore has been lessened by virtue of that 
service. And it should be rare.
    There are a lot of things today that in terms of doing 
financial literacy classes at each medical center or CBOC or 
somewhere available in the community, putting the individual's 
bills on--that are recurrent on automatic pay for him or her, 
and many things short of taking away their money to make 
decisions at least on anything, and giving it to a stranger, as 
you've heard here before.
    There should be, and in our view, never a case where 
there's a percentage of retroactive benefits that are paid to 
the individual, and a fiduciary takes a percentage. This 
happens though. There are two recent cases that we know of. One 
that where Katrina is an attorney, and another with our folks 
in New Jersey. Where there was a large settlement, and hundreds 
of thousands of dollars, and without the knowledge of the 
veteran, he was--a fiduciary was appointed, and a huge chunk of 
this was given to a person the veteran had never met. This 
doesn't make any sense.
    They should be recompensed for services rendered. And the 
best model is to think about what you all have done here in 
this Committee in passing caregiver legislation. Which makes a 
great deal of sense. Where there are a certification, and it's 
based on care provided that is an extension of the medical 
system.
    Yes, you need to pay the bills on time, but a lot of that 
can be taken care of by computerization and automation of the 
accounts today. And our real concern should be the welfare of 
this individual, number one. And number two, if you have to 
take that drastic step now, what is being done to help that 
person get better and get away from, get out of the fiduciary 
program, and return to full autonomy. And nobody talks about 
that. There aren't any clear procedures for getting out of the 
fiduciary program once you're stuck in. And this becomes a 
catch 22, almost like a hundred years ago, that if you got 
stuck in the state hospital, you couldn't get out, you couldn't 
get out.
    It was assumed that anything you said that you were nuts, 
and therefore, you were stuck in all of your basic rights under 
the Constitution of the United States would be taken away. 
Well, these are folks who put their lives on the line in 
defense of the Constitution. And if they want their full rights 
restored in terms of autonomy, then there should be a clear way 
to exit the program.
    And there is apparently now a move to rethink things, and I 
was glad to hear the first panel talk about that. I must tell 
you that they have not contacted anybody in the veteran's 
service organizations. They haven't contacted Committee staff, 
they haven't contacted Committee Members, and exactly who are 
they going to talk to, to rectify some of the problems that we 
have identified that they seem to be blissfully unaware of.
    My guess is that those discussions on the new regulations 
don't include any interface with people on the Veteran's Health 
Administration side, and they need to.
    Mr. Chairman, I thank you for--once again for this 
opportunity to appear, and I'd be glad to answer any questions, 
sir.

    [The prepared statement of Rick Weidman appears in the 
Appendix]

    Mr. Johnson. I thank you all for your statements. Let's go 
directly into questioning. Mr. Rosinski, in your experience, 
what is the significance of VA's Form 21-4703 when it comes to 
fiduciary authority?
    Mr. Rosinski. Mr. Chairman, that's one of the roots of the 
problem here. You talked about it briefly in the previous 
panel. But essentially, that is a contract. That is the--those 
are the rules for this fiduciary, and I always put quotes 
around fiduciary when it's and/or qualified as a VA appointed 
fiduciary.
    One of the key points here is this is not a fiduciary. 
These people are agents of VA, and this form establishes that. 
There's various versions of this form in the files of 
fiduciaries, but it explicitly requires that this VA appointed 
fiduciary only do what VA authorizes. And----
    Mr. Johnson. Okay. So that's basically the contract between 
the VA and the fiduciary?
    Mr. Rosinski. Yes, sir. And it is----
    Mr. Johnson. And their responsibility for the veteran.
    Mr. Rosinski. And it is--and if you read it, they have no 
responsibility for the veteran. They only do what the VA says.
    Mr. Johnson. Yeah, we're going to get into that. I 
apologize for cutting you off, but for the sake of time, we're 
going to try to keep our answers short, so we can get through 
all of these questions, because there are some very, very 
important ones here. So please don't be offended if I move us 
along.
    Ms. Eagle, if VA is paying a fiduciary a percentage of a 
veteran's compensation, only to allow VA to have the final say, 
then why pay a fiduciary in the first place?
    Ms. Eagle. I have many veterans and clients who ask that 
very same question. I don't understand it myself. I find it 
ironic that I have several cases where the veteran is paid 
also, excuse me, his social security benefits, and he has no 
fiduciary managing his social security benefits, but the VA 
finds fit that he must be appointed a fiduciary for his VA 
benefits, which also then gets sucked into including his social 
security benefits.
    Moreover, as Mr. Weidman was saying, with respect to 
veterans who try to get out of the program, I've seen many 
instances of retribution, so to speak, in that when the veteran 
applies to get out of the fiduciary program, he is then found 
perfectly fine with his medical condition, the underlying 
medical condition be it physical or often times a psychiatric 
condition, and therefore he is reduced. And that is encouraging 
the veteran to say nothing, go along, and not question or cause 
problems.
    Mr. Johnson. And I want to read this paragraph for 
everyone's attention out of that form we're discussing. It 
says, approval for VA use of--``Approval for use of VA funds,'' 
and this is the 21-4703 that we're discussing. ``VA must 
approve any use of a beneficiary's VA funds. You,'' and I'm 
presuming that's the fiduciary, ``agree to use these funds only 
as specifically authorized by VA. You agree to request VA 
approval for all spending of these funds, unless VA has 
previously authorized the expenditures. Any questions regarding 
authorized expenditures should be addressed to the fiduciary 
activity at the address and phone number on the front side of 
this form.''
    Ms. Eagle, in your opinion, should VA remove this paragraph 
in question on VA Form 21-4703?
    Ms. Eagle. Yes.
    Mr. Johnson. Okay. Thank you. Ms. Estes, you mentioned that 
you submitted the annual report to VA but have heard nothing 
since. When is your last day to be informed of the status of 
this issue? You said today, correct?
    Ms. Estes. They told me I had 30 days, so I'm assuming--I 
took 30 days from the postmark on the envelope, that would be 
today.
    Mr. Johnson. Okay. What results, good or bad, have you 
experienced in the fiduciary program? Now, that's a big 
question, but ----
    Ms. Estes. When there is contact, it's fine. I mean, when 
they come out and I talk to them, we go over the expenditures 
and stuff, I don't have a problem there. It's like a black 
hole. I don't get any return calls when I call and leave 
messages. I was afraid to send the accounting because they 
require originals of everything, original bank statements and 
stuff like that, and you're not handing it, you're mailing it, 
so I suspected something like that might happen, so we sent it 
certified and everything. And even--and then I followed up with 
a phone call saying I did this, I know I was supposed to have 
an audit, but nobody came out, so I'm submitting it, and so 
then we got the letter that said, I hadn't submitted it at all.
    Mr. Johnson. So basically it's miscommunication, lack of 
communication, lack of follow-up----
    Ms. Estes. There would be no communication, right.
    Mr. Johnson. --no communication?
    Ms. Estes. Right. There's no communication.
    Mr. Johnson. Okay. Ms. Eagle, on the first panel, we 
discussed VA waivers for fiduciaries. And if I recall the 
testimony, they were not aware of waivers being granted for 
certification or fiduciary qualifications. Do you have any 
experience with VA fiduciary requirements being waived?
    Ms. Eagle. I do. What I find and what Mr. McLenachen was 
talking about is that a fiduciary for the first time will be 
reviewed, background checks perhaps performed. What I see 
happen in all of the cases I have reviewed, and assisting the 
veteran is that if that fiduciary has been at all ever in the 
VA system as a fiduciary previously, the background check is 
waived, criminal background checks are waived, et cetera, et 
cetera. So once he's in, it's good to go.
    Mr. Johnson. Okay. Mr. Rosinski, is the issue of a person 
with a criminal background being allowed to serve as a VA 
fiduciary an isolated incident in your view?
    Mr. Rosinski. Mr. Chairman, there's no way to tell. As Ms. 
Eagle just said, they waive all of the background checks I've 
ever seen. And also, my experience is, all they ask is, they're 
asked to check a box, have you ever been convicted and served 
more than one year for a felony, yes, no. So I'll leave it to 
you whether a convicted felon is going to answer that yes, no. 
That is, as far as I know, the background check. I have never 
seen anything else, and that is what is waived on top of it.
    Mr. Johnson. Mr. Rosinski, in your experience and clients 
you've represented, what is your background of some of the VA 
fiduciaries? Have you seen incidents where fiduciaries have 
been removed?
    Mr. Rosinski. The only fiduciary that I know was removed, 
was a daughter who was taking care of her 81-year old father, 
and was a registered nurse, and had been taking care of her 
father full-time for two decades, had retired from being a 
nurse to do that. She took her father to an Alzheimer's clinic 
because he has advancing Alzheimer's, and VA turned around and 
fired her as fiduciary, and has registered a complaint for 
misuse of those funds because they were not preauthorized.
    I've also--that's my example of firing. The issue of 
qualifications, I had the privilege of deposing two actual 
fiduciaries in the State of Texas. One was a cabinet salesman, 
who in 2009, got his first fiduciary appointment. In 2011, 
November 2011 when I had deposed him, had 53. He had never 
heard of a fiduciary until someone suggested that this would be 
a good job to have, since he had had a heart attack.
    The other fiduciary there is the full-time working single 
mother, who incidentally said her father had been a VA 
fiduciary, and that's how she found out about the program.
    Mr. Johnson. Okay. Ms. Eagle, given the three to five 
percent fee paid to a fiduciary for administering a veteran's 
account, what purpose would a fiduciary have for hoarding a 
veteran's money?
    Ms. Eagle. I think that the purpose of hoarding has nothing 
to do with how much they're being authorized from the veteran's 
money on a monthly basis. The reason they would be hoarding, 
and there's two different kinds of fiduciaries that I have 
dealt with. The hoarding is encouraged by the VA Fiduciary 
Program leadership, because they are to save as much money as 
possible, in case of future emergencies.
    Keep in mind that these are monthly recurring benefits. So 
needing to save $100,000 when the veteran's going to get paid 
$3,000 every month until and unless he passes, there's no need 
to save that much money.
    Second of all, lots of these fiduciaries are banks. It is 
in their best interest to keep as much money in their accounts 
as possible. So those are two possible reasons I see for 
hoarding other than you have people who have not had background 
checks performed, who may not have the veteran's best interests 
at heart.
    Mr. Johnson. Okay, thank you. With that, I yield to the 
Ranking Member for his questions.
    Mr. McNerney. Thank you. You know what I want to say is 
wow, what a difference in point of view between this panel and 
the prior panel. In the prior panel, seemed like well-
intentioned people with a set of regulations that they need to 
follow, and from your point-of-view, the fall-out of what that 
looks like from the veteran's--from the beneficiary's point-of-
view, very, very different, striking.
    The three to five percent of what a fiduciary--does that 
apply to all fiduciaries, or is it just the so-called the 
professional, what I'm calling professional fiduciaries? And 
does that come out of the veteran's benefit or is that some 
other fund that produces that three to five percent?
    Mr. Rosinski. Congressman, if I may. Yes, by law, by 
Federal statute, they can pay up to four percent to any 
fiduciary that's quote/unquote a paid Federal fiduciary. It 
generally applies to these strangers who are doing it strictly 
for the money. The VA determines this in some kind of black 
box. I've seen two percent, three percent, and four percent for 
successive beneficiaries or fiduciaries assigned----
    Mr. McNerney. So the VA decides this----
    Mr. Rosinski. The VA decides it, and it is clearly 
everything we've talked about today is paid from the veteran's 
money. Nothing here is paid by VA money.
    Mr. McNerney. Well, that's a problem.
    Mr. Rosinski. And why I also believe it's why the priority 
is not as it should be.
    Mr. McNerney. But there's no different set of regulations 
for a professional fiduciary as there are for family member 
fiduciaries?
    Mr. Rosinski. No, sir. It is one set of statutes and one 
set of regulations. Again, what I believe is, they are well 
intentioned, they've just flipped the program on its head. 
They're protecting the money versus protecting the veteran.
    Mr. McNerney. So how much does authority does a fiduciary 
have in disbursing money?
    Mr. Rosinski. Absolutely none. It is--you cannot serve two 
masters. The issue of fiduciary in any definition is you owe 
the highest duty to the beneficiary. These people, as the 
Chairman read, have no authority to do anything, and indeed in 
testimony, they said they will not do anything. One of them 
said they would let the veteran go homeless, they would let the 
veteran get sick if the VA hadn't approved the medicine, 
because the VA would take all their cases away. That's in----
    Mr. McNerney. So that's another problem?
    Mr. Rosinski. Oh, yes, sir, that is the----
    Mr. McNerney. I mean, you don't want the fiduciaries to 
have all Draconian control over the money because then that 
makes the veteran dependent on the fiduciary, but you want to 
have a fiduciary with some amount of responsibility, so that 
they can make decisions in the benefit of the veteran.
    Mr. Rosinski. Congressman, all 50 states, and I believe all 
the territories have codes of fiduciary duties. All the 
fiduciaries that I have personally sued, that are VA 
fiduciaries, and the VA's position is, we don't have to follow 
those codes. That is why they're allowed to call them 
fiduciaries, and yet, the VA bureaucrat, if I can use that 
term, which could be four or five different people at any one 
time, whoever answers the phone for the fiduciary is making the 
day-to-day decisions. And if that fiduciary doesn't do what 
that guys says, he loses up to $108 a month per fiduciary. That 
is--you cannot fulfill that----
    Mr. McNerney. So are there another set of fiduciary rules 
out there besides the VA that would be----
    Mr. Rosinski. There's the model probate code. Every state 
has case law and statutory law about what a fiduciary is 
supposed to do for a beneficiary----
    Mr. McNerney. Right.
    Mr. Rosinski. --regardless of appointment. The VA supremacy 
argument was explicitly rejected in Texas. Because there isn't. 
It was not the intent of Congress to push away all fiduciary 
duties and the whole probate code of all 50 states in 5502.
    Mr. McNerney. So, Mr. Rosinski, if there was one or two 
basic things you'd like to change, what would they be, in order 
to--I mean, is this something that can be done incrementally, 
or is this something that just needs to be erase the slate and 
start over?
    Mr. Rosinski. As I've said, I have not been able to get an 
official answer to any of these questions, or the questions I 
posed in my written testimony. They refuse to answer. I would 
like to know.
    The best answer I've gotten was when I got the fiduciary 
manager from the Waco office on the phone one time, and the 
bottom line was, he said, look, this is the way I've always 
done it, and this is the way I'm going to do it until somebody 
says I don't have to do it this way anymore. And as I've said, 
I've had conversations with people in this room, all the way up 
the chain, and they know about these cases, they know about 
that conversation, and they haven't told him to do it any 
different.
    Mr. McNerney. Mr. Weidman, comment? Do you have a comment 
on what would the basic approach you'd like to take to 
reforming this process?
    Mr. Weidman. It would several fold, Congressman. The first 
and foremost is folks to my right and distinguished colleagues 
here are correct, it should be a veteran's centric process. 
They're spending millions of dollars in VHA to try and shift 
the medical model to become veteran centric as opposed to 
institutionally centric, and that should be extended.
    Any of the fiduciary program should come--be an extension, 
if you will, of the case manager for the medical condition, 
one. And additionally, I think we're way too quick in putting 
people into the fiduciary program, to strip them of the 
control, most basic control of their own life. And there are 
many ways that we can assist the veteran to pay the bills on 
time, to make sure they have shelter, clothing, et cetera, and 
get to the doctor.
    Having a bank, banks are not known for their great bedside 
manner, and if anybody here has a bank that has a great bedside 
manner, I'd like to talk to them, to that bank. And it's--so 
it's not protecting the vet, and that was Congress' intent from 
the outset.
    Mr. McNerney. All right.
    Mr. Weidman. And so if they involve the veteran service 
organizations, if they involve the community at large, 
particularly the families of the more recently separated 
veterans who have been--have a medical condition that may even 
necessitate a fiduciary, somebody else controlling their money, 
that's what should happen. It should be open, it should be 
transparent. Nothing about this program is in conformance with 
the Executive Order issued in 2009 on transparency and 
accountability, and it needs to be.
    Ms. Eagle. Congressman, if I may, add with what Mr. Weidman 
was saying.
    Mr. McNerney. Do you wish to----
    Mr. Rosinski. Absolutely, go ahead.
    Ms. Eagle. Thank you. First of all, it is Draconian. The 
veteran is completely dependent upon reaching that fiduciary, 
getting him on the phone, and getting permission for the money.
    Second of all, any money that is in an account that a 
fiduciary is the custodian of, none of that bank account 
information is ever, ever shared with the veteran. The 
fiduciary is required to submit bank statements and bank 
account information on an annual basis only back to the VA. All 
nine of the cases that I am working on right now, my clients 
have no idea how much money to the penny is in their own 
accounts, of their VA money. It is completely Draconian.
    Second of all, with respect to these changes in the 
fiduciary hubs, I have two cases within the last two weeks, my 
clients who I have represented for a year, have gotten letters 
saying, we need to have updated information from you, you have 
no representative that we know of, and if you don't inform us 
in 30 days of where you are, we are going to stop payments to 
you. I didn't get a copy of that letter, and these people who 
are saying we're making changes, the changes on the ground in 
the local level are not productive, and are not efficient or 
effective. My clients are scared that they're going to lose all 
of their money, and I can't even assist them because their 
system doesn't have me on their books after a year of 
representing them.
    Mr. Johnson. Thank you. Dr. Roe.
    Mr. Roe. I thank the Chairman for yielding, and I want to 
thank this panel for advocating for veterans. I thank you for 
that.
    And to you specifically, Ms. Estes, I worked as a veteran 
of the Medical Battalion, 2nd Infantry Division, as a 
congressman and as a father, I want to apologize to you 
personally for what you have had to go through, and I want to 
thank you for the service of your son. And I sincerely mean 
that. If we didn't have people like you and your son, we 
wouldn't have a free country. And we shouldn't treat you like 
this.
    Ms. Estes. Thank you.
    Mr. Roe. And I'm embarrassed to be sitting here listening 
to this personally. It is embarrassing to me as I said as a 
father, as a veteran, and just a citizen of the country. We 
don't need to be treating our wounded warriors and heroes this 
way. We ought to be advocating for you, and thank you for 
taking care of your son, who gave--almost gave his life in 
service of this country, and has horrendous injuries that are 
going to have to be taken care of, and as you said, you are 
like a lot of people, like a parent thinks, what happens to my 
children after I'm gone.
    Ms. Estes. Right.
    Mr. Roe. And you're trying to prepare for that now, and 
it's not being made any easier.
    Ms. Estes. No.
    Mr. Roe. So I just wanted to say that----
    Ms. Estes. Yes.
    Mr. Roe. --to you here before I had to leave. And to the 
panel, and I guess, Ms. Eagle, back to you or any of you who 
want to, if a veteran gets a--you know, it takes a long time 
sometimes to have these determinations. If a veteran were to 
get a lump sum of money, 1, 2, $300,000, and is deemed 
incompetent, does--and gets a fiduciary, does the fiduciary get 
four percent of that, or just whatever transaction? So if they 
got a $200,000 or $300,000 and they got a--they would get 8 to 
$12,000?
    Ms. Eagle. I do not have any cases--I have heard accounts 
where that has happened. None of the cases I have brought to 
the Congress--to the Subcommittee's attention include a 
percentage of retro benefits going back to the fiduciary.
    Mr. Roe. I would hope that would never happen.
    Ms. Eagle. But let me be clear, I have several cases where 
the retro benefit has been awarded, and then subverted to an 
account that the veteran cannot, cannot access at all.
    Mr. Roe. And then----
    Ms. Eagle. So he cannot access that money.
    Mr. Roe. And then what you said a minute ago, you also said 
that then they didn't know what happened to the money, that 
after--I mean, even after you took my money and spent it some 
way, I don't even know what then happened to it; is that 
correct?
    Ms. Eagle. That is absolutely correct.
    Mr. Rosinski. Mr. Congressman?
    Mr. Roe. Yes, sir?
    Mr. Rosinski. I have a case where we actually did take the 
fiduciary to state court to, you know, under probate code and 
say what's going on. The day the judge said he was going to 
rule on that, and we had the hearing, the VA sent them a 
letter, and they moved the money to a new fiduciary without 
informing us or the Court, and it took us three weeks to find 
out even who had the money. And then that person cut off the 
benefits to the person who was trying to find out about it. And 
now after many, many months, the only way I know where it is, 
is that the general counsel in that office has started to tell 
us things, and he's been very--the only person I can say has 
done his moral duty, if not, regulatory duty, and we now know 
that that money is in VA hands again, and that that veteran has 
passed. So now, that money will never get to him, and we have 
to follow the hoops to get it to his estate.
    Mr. Roe. Well, the fiduciary at my house is my wife, and I 
think she does a little better than four percent, but at least 
I know what's going on with the money. And, you know, I think 
it's fair, only fair to--for a veteran and their family to know 
what's happening to their money. I mean, it's not like in Ms. 
Estes' case with her son, everything--we can't--I can't do 
enough for him. I can't-- this government can never do enough 
for him, because his life in defense of this country was 
forever changed.
    So I'm sitting here and telling you now, we need--whatever 
we're hearing today, for her, it needs to stop yesterday. And 
we need to be working for her, not against her. And I'm beyond 
frustrated when I heard her testimony. I read it last night, 
but I'm glad to hear it again.
    Ms. Eagle, again do you or anyone, in your written 
testimony, you discuss a case involving Mr. Boatman's wife. 
Would you just elaborate on that just a moment?
    Ms. Eagle. I would be happy to. That case is troubling on 
so many different levels. I have documents from that veteran's 
file. The wife was the spouse payee for ten years. There are 
years, ten years worth of reports by field examiner, VA field 
examiners that she's doing an excellent job.
    Suddenly in July 2011, a new field examiner arrives at the 
house, looks at some accountings, says this is all wrong, and 
on the same day, the fiduciary agreement, claimed not to be a 
contract by VA people here today, was signed with a VA 
appointed fiduciary. The money direct deposited VA--I'm sorry, 
direct deposited veteran's money was stopped, ordered stopped 
all on this same day, July 11, 2011, and then the veteran 
wasn't even informed of any of this until ten days later.
    He retained me. I have brought this specific case to people 
in this room's attention, and nothing has been done except for 
last week, he is now no longer part of the fiduciary program, 
only because he was found competent, but the money has not been 
returned. The four percent to the VA appointed fiduciary has 
not been returned, and for the record, it was taken in the 
constitutional sense, nor have I been provided an investigative 
report of why this happened in the first place, and what has 
been done.
    And finally, the VA's fiduciary supervisor who I have had 
direct conversations with, approved all of these actions that 
I've described, and he's now been promoted to one of the hubs.
    Mr. Roe. So what we've done is we just took his money away 
from this veteran, am I--I mean, just took it.
    Ms. Eagle. Yes, you did.
    Mr. Roe. And got spent, and he has no way to get it back?
    Ms. Eagle. He has no way to get it back, and he as yet to 
get it back, and here we are.
    Mr. Rosinski. And if I may add, Congressman.
    Mr. Roe. Yes.
    Mr. Rosinski. He appealed his finding of incompetency, and 
he prevailed on that. So they never should have taken it at 
all. They didn't even let the process run. They were so eager 
to help this guy, they didn't even let the process run, they 
took his money far----
    Ms. Eagle. And he appealed the event that led to all of 
this. He sent letters in. This person arrived in my house, my 
wife was in tears, we don't understand what's going on, we've 
submitted accountings all along like we were told to do, that 
VA regional office didn't get it, I don't know why, but we sent 
it in. Everything that is supposed to happen, did happen all 
the wrong way.
    Mr. Roe. And I thank the panel and I yield back.
    Mr. Johnson. I thank the gentleman for yielding back. Mr. 
Flores.
    Mr. Flores. Thank you, Mr. Chairman. I also want to thank 
the panel for attending today. This has been a very helpful 
discussion. Ms. Estes, thank you for your service to your son, 
and also for your son's service to our country.
    I'm going to try to get through three questions quickly. 
First of all, would it be helpful, do you think, if this 
Subcommittee sent a letter to the VA and asked them to directly 
seek VSO feedback? Do you think that would be helpful? Mr. 
Weidman, you more or less brought this up.
    Mr. Weidman. You're talking about what is the clear 
procedure for getting out of the program?
    Mr. Flores. No, no. Would it be helpful--you said that the 
VA had not sought VSO feedback in this process.
    Mr. Weidman. That's correct, sir.
    Mr. Flores. Would it be helpful for us to write a letter to 
direct them that--to seek that help?
    Mr. Weidman. You know, that's--well, yes, sir, it would, 
but it's the kind of thing one would think that that's the 
first thing you do. And----
    Mr. Flores. Well, I went down----
    Mr. Weidman. If all parties concerned get their 
perspective, do information gathering, and then write the 
thing, instead of publishing, you know, interim rules or 
proposed rules and----
    Mr. Flores. I'm going to cut you off.
    Mr. Weidman. --we----
    Mr. Flores. I've got to go, but thanks for the feedback. 
Mr. Chairman, I'd ask that we send that letter, if that's 
appropriate.
    The next question is, and this is more of a philosophical 
question. Do we have a problem with--and this is for anybody 
who wants to answer it, do we have a problem with the 
regulations and the process and the rules, or do we have a 
problem with the culture of the bureaucracy?
    Mr. Rosinski. The latter.
    Mr. Flores. Ms. Eagle?
    Ms. Eagle. Absolutely the latter.
    Mr. Flores. Ms. Estes?
    Ms. Estes. Yes, the bureaucracy.
    Mr. Flores. Okay. Mr. Weidman?
    Mr. Weidman. It's a corporate culture, but it's also the 
wrong paradigm. It should be a medical paradigm, sir.
    Mr. Flores. Okay. Well, see it's one thing to write rules 
and regulations, but you could take all the rules and 
regulation process and stick it in a bad culture, and you're 
still going to have a bad outcome. And so, we're going to have 
to work with the VA somehow to try to figure out how do we fix 
the culture. Because I was sitting here listening to your 
testimony thinking, we could write a thousand pages and not fix 
this.
    Ms. Eagle. Congressman, to follow-up on what you're saying, 
and I apologize, but again, we're talking about people. And at 
the very local level what happens when the veteran is found 
incompetent, and a fiduciary is appointed, that letter simply 
says, we have appointed this person, XYZ because it's in your 
best interests. They don't explain why the veteran himself 
doesn't get an opportunity to be his own best fiduciary. They 
don't explain why a spouse doesn't qualify. They don't explain 
why anyone else that they've asked to be appointed does not 
qualify. They simply say this person is in your best interests 
now appointed.
    Mr. Flores. Okay. Thank you. And the last question is, and 
this is a repeat of the first question I asked the first panel, 
and that is, based on you all's experience, do you--is there 
any statutory fix that's required, is there any legislative fix 
that would be helpful to address this issue?
    Mr. Rosinski. I am working on the state level to pass a 
law, which I think would help, is that simply, that VA 
appointed fiduciaries must follow the laws in the state in 
which they practice their fiduciary duties. And that's all 
that's necessary. All the states have hundreds of years of law, 
and that does not interfere, or should not interfere with the 
VA, which as a high level just says, go do it in the best 
interests. And I've asked that specific question to VA 
officials and in each court case, what are the conflicts with 
that. They have identified none, and no one has been able to 
identify it.
    Mr. Flores. Okay. If you would pass that along to us, I 
think we can make some determinations as to whether or not we 
can be helpful with that. Ms. Eagle, you looked like you wanted 
to say something in response to the question.
    Ms. Eagle. I only think that it should--it troubles me and 
I get the sense that it should trouble all of you, that when I 
first was retained in several of these cases with veterans who 
have durable powers of attorney appointed court square good to 
go, and we bring these and I was thinking, okay, maybe the VA 
doesn't realize, and we've brought that to their attention. 
Nothing changes. They don't honor it, they don't explain why 
they won't honor it, except for, they don't have to, our laws 
trump, anything else--our laws are supreme.
    Mr. Flores. Okay.
    Ms. Eagle. That's not the way it's supposed to work.
    Mr. Flores. Okay. Mr. Weidman, Ms. Estes, any additional 
feedback there?
    Mr. Weidman. It's--I agree with the proposal that Mr. 
Rosinski talked about, but I do think that in a Committee 
report to any such law change that talking about making it 
veteran centric and coordination with VHA clinicians, which 
currently isn't there. There's not even a consciousness that 
it's important, sir.
    Mr. Flores. Okay. Again, we would appreciate your feedback. 
As soon as you can get us that, we'll see if we can help with 
the legislative fix. Thank you, Mr. Chairman, I yield back.
    Mr. Johnson. Thank the gentleman for yielding back. Mr. 
Runyan.
    Mr. Runyan. Thank you, Mr. Chairman, and thank all of you 
for opening, I hope, many people's eyes to this situation. And, 
Mr. Chairman, you know, being on this Committee as the Full 
Committee level, I think most of us remember when we address 
this fiduciary problem with constitutional rights to the Second 
Amendment, it wasn't but several months ago, we had to deal 
with this in this exact Committee. Now, we're talking about 
financial instances, but that right there is a constitutional 
right that had been taken away from many of them that we 
addressed right here in this hearing room.
    Mr. Rosinski, going back to my last question to the first 
panel, in your experience dealing with fiduciaries or field 
examiners when it comes to emergency requests, do you have any 
background on them?
    Mr. Rosinski. Well, I think the answer ducked the question. 
There is a process for a temporary fiduciary, but that again 
could take months. I mean, they were talking about in the 
interim. If a veteran needed heart medicine, you've got to send 
an e-mail, call somebody, try to get a hold of a fiduciary 
who's been instructed not to interact with you, and it took us 
two months to get that. I don't know a bigger emergency than 
that, maybe he's bleeding or something.
    But there is no--the problem is it's this chain. The 
fiduciary does not have the authority of any other fiduciary.
    Mr. Runyan. Ms. Eagle?
    Ms. Eagle. I echo what Mr. Rosinski was saying. I have 
cases where a veteran had to go out of town to attend a family 
funeral. Family funerals don't wait, and he couldn't get a hold 
of the fiduciary, and when he did, the fiduciary then had to 
get approval from VA in order to approve the money that he 
needed to take a road trip to northern Texas for a family 
funeral.
    I have air conditioners that couldn't get approved even 
with the help of the prior fiduciary program manager, Tom 
Murphy. I have cases, heart medicine in Texas. The daughter has 
spent her own savings and has gone into debt, to fund, and we 
had to go to veteran's court and get them to move and release 
$1,800 to reimburse her for the months of heart medication 
because the fiduciary would not pay it, because he did not have 
VA approval.
    Mr. Runyan. And, Ms. Eagle, why do you think advises 
veterans to spend all of their other sources income prior to 
the VA funds?
    Ms. Eagle. Because the VA sees it as their money, and they 
want their money saved, not spent, not used, until everything 
else is spent.
    Mr. Rosinski. And a shorter answer to that is if that they 
spent all the VA money, then the fiduciaries wouldn't have 
anything to do.
    Mr. Runyan. Point taken. And, Ms. Eagle, thus far, how is 
the VA responding to the Freeman decision?
    Ms. Eagle. At the local level, I have--if I had a quarter 
for every time I've heard, huh, I haven't heard about the 
Freeman case, we could all go have lunch right now.
    Word at the leadership level is not making it to the local 
level. Real changes are not happening. Time and again I hear, 
this is how I've always done it, this is how I'm going to keep 
on doing it, politicians come and go, I do it my way, until I 
am forced to do it a different way.
    Mr. Runyan. And with that, Chairman, I think obviously the 
other day, we had a breakfast with the Secretary, and I think 
he has a lot of that same concern, where it's not getting down 
to the people that are taking care of our veterans, and I think 
that's a huge part of this bureaucracy that we're having to 
tackle here. So with that, I yield back.
    Mr. Johnson. I thank the gentleman for yielding back, and I 
certainly concur with that. And so we're going to talk about 
that here for just a minute.
    Ms. Eagle, the Freeman case, that's the one where the 
veteran's money was taken, and now he can't get it back. Is 
that the one we're referring to that you were talking about 
just a few minutes ago?
    Ms. Eagle. That is one of the cases where the veteran's 
money has been taken and he can't get it back. The Freeman case 
is the case that the veteran's court took up on petition, where 
the sister had applied to be the fiduciary, and the VA, the old 
days was, fiduciary matters are at the sole discretion of the 
Secretary, thank you very much, have a good day.
    She challenged that at the veteran's court, the veteran's 
court found that like all issues with regards to the provisions 
of benefits, the fiduciary program affects the veteran's money, 
and therefore, it should be appealable.
    Mr. Johnson. Which case is it, the one that we were talking 
about earlier where the veteran was--his money was taken, he 
was now found competent, but his money is locked away?
    Ms. Eagle. That is Mr. Boatman----
    Mr. Johnson. Boatman, okay.
    Ms. Eagle. --out of the Waco regional office.
    Mr. Johnson. Well, I thank my colleagues for all the 
questions. I thank the panel for being here, and you are now 
excused.
    I think it's safe to say that shocking is an understatement 
for what we have heard here today. I--in my experience as a 
military commander, where you see problems like this it's the 
iceberg effect. What we find out, the ones that we know about, 
it would probably shock us to know what we don't know about, 
and that's what concerns me.
    I--there have been numerous hearings over the years about 
this issue, and I am tired, and am weary of hearing apologies, 
and broken promises. I want it fixed. And I can assure you that 
the O&I Investigation Subcommittee is not going to lay this 
down. I am--I have reason to believe that there is concern from 
some of these representatives of these veterans on panel two, 
that there could be retribution. I can assure you that the O&I 
Investigation Subcommittee is going to be monitoring this 
situation closely. And it will not take lightly any form of 
retribution or roadblock to getting these veterans what they 
deserve.
    In fact, again as an operational commander, I can tell you 
that the people in my--under my command, paid a lot of 
attention to the things that I was concerned about. So, Mr. 
McLenachen, I'm going to give you an opportunity. I want to 
know from you one week from today in a letter signed by you, 
what you're going to do to address the Boatman case, and the 
Estes case. That's going to help you get involved at the 
tactical level of what's happening to these veterans.
    In 45 days, I want a report informing me and my staff that 
no fiduciary is receiving a larger commission that is 
authorized by law, and from the funds so authorized. By close 
of business today, VA should provide me and my staff the status 
on the updated fiduciary policy. If it is complete, provide the 
revised policy.
    By March 9th, I want the VA's thoughts on removing the 
paragraph that we have that's in question on the Form 21-4703. 
On that same day, I want the VA's opinion in writing, on how 
they can incorporate aspects from other Federal fiduciary 
programs, including the Social Security Administration's 
program to make VA's fiduciary program better.
    And I know you're writing, but we'll provide you these 
deliverables. On that same day, March 9th, I want to see those 
metrics that we talked about. I want to know what operational 
metrics are reviewed by the director, and by the operational 
team that will address these problems, and highlight them in a 
manner that resolution can be found.
    Again, there are thousands of fiduciaries that are doing a 
great job. This is not a condemnation on those that are. But I 
submit to everyone in this room, when we have even one of our 
Nation's heroes, who have sacrificed life and limb to protect 
the freedoms that we enjoy as Americans, that's one too many. 
And if the system doesn't address a hundred percent of them, 
then it doesn't do a good enough job.
    I look forward to working with Chairman Runyan, I'm sorry 
he had to leave, and the Disability Assistance and Memorial 
Affairs Subcommittee on approving VA's Fiduciary Program. I 
thank my colleague, Mr. McNerney for being here today.
    With that, 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.
    I want to thank all Members and witnesses for their 
participation in today's hearings and business meeting. This 
hearing is now adjourned.

    [The prepared statement of Lori Perkio appears in the 
Appendix]

    [The prepared statement of Wounded Warrior Project appears 
in the Appendix]

    [Whereupon, at 12:45 p.m. the Subcommittee was adjourned.]

                            A P P E N D I X

                              ----------                              

           Prepared Statement of Hon. Bill Johnson, Chairman

    Good morning. This hearing will come to order.
    I want to welcome everyone to today's hearing on the VA's Fiduciary 
Program.
    I would like to ask unanimous consent of the Subcommittee that 
Chairman Runyan of the Disability Assistance and Memorial Affairs 
Subcommittee be allowed to join us today in our meeting.
    Hearing no objection, so ordered.
    His Subcommittee's Ranking Member, Congressman McNerney, is also a 
Member of this Subcommittee, and we welcome him in both capacities 
today.
    We are here today to have a frank and honest discussion about the 
problems festering in the VA's Fiduciary Program. The VA's 
approximately 95,000 appointed fiduciaries manage over three billion 
dollars in payments made to more than 100,000 of our Nation's veterans 
and their dependents.
    In the last several years, the VA has created and implemented its 
fiduciary hub program. This program aims to streamline the system and 
improve processing in fiduciary accountings, but I fear that these 
recent changes have only addressed a fraction of the problem.
    This Subcommittee's investigation into the VA's Fiduciary Program 
revealed that fiduciaries who are doing the right thing are all too 
often finding it difficult to navigate the maze that makes up the 
Fiduciary Program. While numerous honorable fiduciaries serve our 
veterans, many bad actors exist in the system.
    We found an instance where the VA arbitrarily removed a veteran's 
wife from her duties as his fiduciary after what the VA characterized 
as ten years of excellent service. She was replaced by a paid 
fiduciary. VA policy is that they prefer family members and friends to 
serve as fiduciaries. It is obvious to me that this policy is just lip 
service and that needs to change.
    Our investigation also uncovered that the Fiduciary Program has 
been plagued by failures in oversight and unwillingness to listen to 
the veteran.
    Last week, in a hearing before the Full Committee, VA Deputy 
Secretary Scott Gould stated that ``the wrong way became the way we've 
always done it.'' This mindset seems to have permeated the VA's 
Fiduciary Program.
    This past December, a VA fiduciary and a VA Field Examiner were 
convicted in Tennessee for embezzling almost $900,000 from ten 
veterans' accounts which they oversaw. These felons used some of the 
stolen funds to pay their own cable and utility bills. Holding its 
fiduciaries accountable through proper oversight is just one way the VA 
can take modest steps to improve the system.
    One of the VA's core values is responsible stewardship of the human 
and financial resources entrusted to it. The VA needs to work more 
efficiently and effectively to properly serve those veterans who have 
fiduciaries.
    I have seen evidence of veterans, their friends and family 
repeatedly notifying the VA of fiduciary misfeasance. And time after 
time, their appeals have been ignored. This needs to stop. Identifying 
and correcting situations like these is certainly not rocket science.
    The VA has testified in the past that they are working through the 
backlog of fiduciary claims. To successfully manage the Fiduciary 
Program, the VA must focus not only on those waiting to be assigned a 
fiduciary, but also on those veterans in the program already.
    In our first panel, Mr. Dave McLenachen, Director of the VA's 
Pension and Fiduciary Service, and Miss (or Ms. If unsure) Diana 
Rubens, Associate Deputy Undersecretary for Field Operations at the VA 
will share their thoughts on the state of the Fiduciary Program.
    As we will hear from our second panel, the VA is aware of the 
problems facing those in the fiduciary system. As much as the VA 
focuses on the positive steps they are taking in the Fiduciary Program, 
we are all aware of the other problems they refuse to address. This 
hearing provides a positive step forward in addressing and resolving 
these issues.
    I appreciate everyone's attendance at this hearing, and I now yield 
to Ranking Member Donnelly for an opening statement.

                                 
               Prepared Statement of Hon. Joe Donnelly, 
                       Ranking Democratic Member

    This hearing provides us with an opportunity to learn of the many 
changes the VA has taken to improve this program since the Subcommittee 
on Disability and Memorial Assistance held a hearing last Congress on 
the VA Fiduciary Program. The VA assures us that it is taking solid 
steps to fix the problems and weaknesses in the Fiduciary Program; 
other witnesses will suggest that many problems remain. I want to be 
assured that the VA is improving the program and has a solid roadmap to 
follow as we move forward.
    The VA Fiduciary Program, in place since 1926, is one of the most 
sensitive programs run by the VA, and one most in need of effective 
management and oversight. Not only must the needs of beneficiaries come 
first, but their assets must be protected from fraud and waste.
    The VA currently oversees approximately 95,000 fiduciaries managing 
the financial affairs of more than 121,000 beneficiaries. In Fiscal 
Year 2011, the VA reports that the Veterans Benefits Administration 
made payments for compensation and pension benefits of approximately 
$53.5 billion, while fiduciaries managed approximately $171 million in 
VA benefits.
    Since the 2010 hearing, VBA, acknowledging that Central Office 
oversight of its Fiduciary program lacked priority, announced in 
November, 2011, that they would consolidate Fiduciary operations from 
56 Regional Office into six hubs in six Regional Offices. The VA 
informs us that the process will convert to a ``paperless processing 
environment.'' These changes should hopefully increase the program's 
efficiency and accountability.
    The VA also informs us that it is making progress in coming to 
grips with the many problems it faces with its Fiduciary Beneficiary 
System, one of the major flaws exposed during the 2010 hearing. I am 
interested to see where we are in this process, and hope to get a 
detailed timeline as to when the VA expects to bring forward a new 
electronic case management system.
    I hope the VA, and our witnesses, can provide insight into the 
current staffing levels of the VA fiduciary Program, and whether we 
might need additional personnel. I also would like to explore the 
effectiveness of current training efforts and ways that this could be 
improved.
    I am interested to hear that VA believes that it has fully 
addressed the recommendations made by the VA OIG and GAO. I hope we 
will have an in-depth discussion of where we have been and where we 
need to go.
    The Fiduciary Program faces many challenges, and many problems in 
improving oversight. We must ensure that while we provide beneficiaries 
and their families with a meaningful say in the fiduciary process, we 
must make sure that the needs and interests of veterans come first.
    I am pleased that the VA has taken steps to improve the Fiduciary 
Program, but I know this Subcommittee wants to make sure that these 
steps represent real progress in fixing these real problems.

                                 
                 Prepared Statement of Hon. Jon Runyan

    Good morning. Thank you, Chairman Johnson, for the opportunity to 
participate in today's hearing.
    As the Chairman for the Subcommittee on Disability Assistance and 
Memorial Affairs, I am greatly concerned by the current state of VA's 
fiduciary program. I look forward to working with the Subcommittee on 
Oversight and Investigation in an effort to best serve our Nation's 
disabled Veterans.
    Improving VA's fiduciary program is essential, because it serves a 
very vulnerable segment of the Veteran population - Veterans who are no 
longer able to take care of themselves.
    There are approximately 95,000 fiduciaries in the VA system, 
overseeing the accounts of approximately 120,000 Veterans. The total 
value of these accounts is in excess of $3.3 billion. While this amount 
in the aggregate is clearly significant to the VA and the American tax 
payers, and for that reason alone would be deserving of the VA's 
highest level stewardship and oversight; so too is every individual 
dollar of the utmost importance to the Veteran who has earned 
disability benefits through his or her service and sacrifice to our 
country. Mismanagement and negligent oversight therefore have no place 
in the administration of these benefits, especially when dealing with 
those least able to manage their own affairs.
    We are here today to hold VA accountable for its inability to 
properly serve these Veterans who are most in need of VA's assistance. 
When VA fails to provide this assistance, many Veterans experience 
extreme financial hardship.
    Currently, there is evidence of fiduciaries in the VA system 
embezzling funds; being non-responsive to Veterans' needs; and being 
over-compensated for the duties performed. This is simply unacceptable.
    The issues in the VA fiduciary system are further complicated by a 
backlog of initial fiduciary appointments. Although VA has stated that 
this backlog is due to its rigorous vetting process, there has also 
been evidence of VA's non-compliance with its own regulations in 
ensuring that it appoints responsible, trustworthy fiduciaries.
    It is my hope that as a result of today's hearing, the process of 
fixing VA's flawed fiduciary system can begin. I would like to note 
that the majority of VA's regulations concerning fiduciary appointments 
are from 1975, and I would highly encourage VA to update these 
regulations of their own volition in an effort to provide better 
guidance throughout the fiduciary appointment process.
    In closing, I again want to commend Chairman Johnson for calling 
today's hearing to focus on this specific situation dealing with 
fiduciaries and look forward to working with him as the Disability 
Assistance and Memorial Affairs Subcommittee continues its ongoing 
oversight of the broader fiduciary program.
    Thank you.

                                 
               Prepared Statement of Hon. Jerry McNerney

    Thank you Mr. Chairman.
    Today's hearing is intended to examine VA's Fiduciary program and 
assess how the VA can strengthen management controls and accountability 
to protect some of our most vulnerable citizens.
    Since 1926 when Congress passed the World War Veterans Act, the VA 
has been providing oversight of its benefits paid to those 
beneficiaries who were incapable of handling their own affairs due to 
injury, disease, or infirmities of age. Today, according to VA, the VA 
Fiduciary Program manages approximately $171 million in VA benefits for 
more than 121,000 beneficiaries.
    In April 2010, the DAMA Subcommittee conducted an oversight hearing 
examining the VA Fiduciary Program based on then-recent reports from 
VA's Office of Inspector General and the GAO. These reports pointed to 
a number of deficiencies in VA's management controls and oversight, 
including insufficient staffing, training, and workload management. 
Additionally, both the VAOIG and GAO expressed serious concerns with 
the inadequacy of the Fiduciary Beneficiary System, VA's electronic 
fiduciary case management and tracking program.
    As indicated in these reports, in the absence of adequate oversight 
and accountability, some fiduciaries have misused millions of dollars 
belonging to our veterans and their dependents.
    In fact, from October 1998 to March 2010, the VA OIG's Office of 
Investigations reported that it conducted 315 fiduciary fraud 
investigations, resulting in 132 arrests and monetary recoveries of 
$7.4 million in restitution, fines, penalties, and administrative 
judgments.
    It should be noted that these abuses are hardly representative of 
all fiduciaries--they are the exception not the rule. In fact, on the 
other end of the spectrum, we heard during that hearing from VSOs and 
family members that caregivers and other relatives who serve as 
fiduciaries receive no training or support from VA. In fact, the 
witnesses seemed to indicate that in many instances, professional 
fiduciaries are not always subjected to as much VBA oversight as family 
member and caregiver fiduciaries. That even worse, during the audits by 
VA staff, these caregiver fiduciaries are treated with suspicion and 
mistrust. For example, the Wounded Warrior Project testified that VBA 
required a mother who served as a fiduciary for her mentally disabled 
veteran son to reimburse funds spent on toilet paper for the home.
    I think this is a scenario of being pennywise and dollar foolish--
of VA watching the pennies, while the dollars flow out of the window. 
We must insist that VA strike a better balance while protecting our 
vulnerable beneficiaries.
    Finally, I understand that since the DAMA 2010 hearing, VA has made 
a number of internal management and structural changes within its 
Fiduciary Program. I look forward to hearing of your progress. I also 
want to know in particular what VA's plans are in light of the recent 
Freeman v. Shinseki decision. I look forward to the insight that all of 
our witnesses may provide today and thank them for being here.
    Mr. Chairman, our most vulnerable VA beneficiaries deserve a 21st 
Century system that reflects the service and sacrifice they gave to our 
Nation, VA must do better.
    With that Mr. Chairman, I yield back.

                                 
               Prepared Statement of David R. McLenachen

    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to review the Department of Veterans Affairs (VA) fiduciary 
program. I am accompanied by Ms. Diana Rubens, Deputy Under Secretary 
for Field Operations.
    The fiduciary program appoints and oversees fiduciaries for 
Veterans and other beneficiaries who, because of injury, disease, or 
the infirmities of age, are unable to manage their financial affairs. 
VA currently oversees approximately 95,000 fiduciaries who provide 
services to more than 121,000 beneficiaries with cumulative VA estates 
exceeding $3.3 billion.
    Secretary Shinseki has consistently noted the need for heightened 
awareness with regard to many of the Department's most vulnerable 
beneficiaries, who rely on the services of VA-appointed fiduciaries to 
properly manage their VA benefits. Last year, he authorized a 
reorganization within the Veterans Benefits Administration (VBA) to 
establish a new office to more directly control and implement the 
Department's fiduciary program. In April 2011, VBA established the 
Pension and Fiduciary Service, led by a VA Senior Executive, to focus 
on the unique needs of these beneficiaries, more than 50 percent of 
whom are in VA's needs-based pension program, and to strengthen 
oversight of VA-appointed fiduciaries. This reorganization has allowed 
VBA to increase the staff responsible for fiduciary policy and 
procedures, and to establish a separate staff responsible for all 
aspects of fiduciary quality, training, and site visits.

Oversight and Audits
    Even prior to the establishment of the Pension and Fiduciary 
Service, VA was working hard to implement fiduciary program 
improvements, and continues to do so. These efforts included revising 
the site survey protocol to ensure proper oversight of field fiduciary 
activities, providing on-site training to fiduciary activities, 
deploying special assistance teams to fiduciary activities, and 
clarifying and strengthening policies and procedures to enhance service 
delivery and protection of beneficiaries.
    In addition to these internal initiatives, VA has recently had the 
opportunity to participate in several audits of the fiduciary program 
conducted by the Government Accountability Office (GAO) and the VA 
Office of Inspector General (OIG). The findings from these audits 
confirmed that VA is making improvements in its fiduciary program. GAO 
recommended that VA conduct additional periodic reviews of fiduciaries; 
and analyze the results of its fiduciary hub pilot project. OIG 
recommended that VA: require fiduciaries to report additional 
information regarding their expenditures; include fiduciary information 
in VBA's Annual Benefits Report; develop a staffing model for its 
fiduciary personnel; develop an internet site for fiduciaries, take 
measures to better protect retroactive benefits paid and enhance its 
procedures for providing oversight of fiduciaries to prevent the misuse 
of benefits. Both organizations recommended that VA conduct an 
operational analysis of its electronic data management system for the 
fiduciary program and develop standardized training for its fiduciary 
personnel. VA took these recommendations very seriously and worked hard 
to fully address each of the recommendations with detailed action 
plans. Every recommendation made was acted upon and all have been 
closed.

Fiduciary Hub Consolidation
    To improve operational efficiencies, VA consolidated the management 
of fiduciary activities at 14 of its regional offices into a paperless 
processing environment at the Western Area Fiduciary Hub in Salt Lake 
City, Utah. Under this hub concept, fiduciary managers deploy their 
field examination resources according to the location of beneficiaries 
within the hub and without regard to state borders or VA regional 
office jurisdiction, while centralizing all other fiduciary functions 
at the hub site. An analysis of the pilot's strengths, weaknesses, and 
lessons learned found that the reorganization improved the timeliness 
of initial fiduciary appointments by 36 percent and quality by 13 
percent. It also found that field examiners traveled fewer miles per 
field examination, a 6 percent improvement, and reduced the average 
days to complete an initial appointment by 26 days. Based upon these 
significant improvements, VA is planning the deployment of the 
fiduciary hub concept nationwide at five additional sites.
    In connection with the consolidation, VA conducted an in-depth 
staffing analysis of its fiduciary activities. This analysis examined 
the location of our beneficiaries and field examiners to develop a 
staffing model for full hub consolidation. Under the resulting model, 
VA will hire 58 additional field examiners nationwide and deploy them 
based upon the needs of the current beneficiary population to further 
improve efficiency and client services.

Training
    In 2011, VA further improved its internal training programs and 
delivery of fiduciary-related information to external stakeholders. 
First, VA developed and piloted centralized training for the program's 
Legal Instrument Examiners (LIEs), who review fiduciary accountings, 
investigate misuse of benefits, and maintain follow-up communications 
with beneficiaries. Under the pilot, VA trained more than 100 new LIEs 
to full production standards, following which they were deployed to 
their assigned fiduciary activities in the field. VA plans to expand 
the delivery of mandatory, centralized training for its fiduciary 
personnel as part of its continuing efforts to improve client services. 
Second, VA implemented a training program consisting of monthly 
telephone calls with key fiduciary personnel to ensure consistent, 
nationwide dissemination of information regarding policies, procedures, 
and best practices. Third, VA deployed its first-ever internet site 
specifically for fiduciaries and beneficiaries in the fiduciary 
program. This innovative internet site provides valuable information 
regarding fiduciary duties and responsibilities, and other useful tools 
such as references and related links.

Prevention of Misuse of Funds
    VA has implemented procedures to enhance its prevention and 
identification of misuse of beneficiary funds. Effective September 1, 
2009, fiduciaries must submit more specific financial documents, 
including bank records, with their annual accountings. Collection of 
this additional information during the accounting process allows VA to 
verify reported expenditures and identify potential misuse of funds for 
further investigation. This requirement also serves as a fraud 
deterrent for fiduciaries. Additionally, under procedures implemented 
in April 2010, VA Central Office Fiduciary Staff personnel review the 
records regarding every misuse determination to ensure that VA has 
identified and properly responded to potential misuse of benefits by 
fiduciaries. VA's efforts to prevent fiduciary misuse of beneficiary 
funds have been successful. These efforts resulted in a misuse rate of 
less than one-tenth of one-percent in fiscal year 2011.

Fiduciary Program Outreach
    VA continues to conduct extensive outreach regarding its fiduciary 
program. Over the past three years, VA has participated in meetings 
hosted by the National Guardianship Association, the National 
Association of Elder Law Attorneys, the National College of Probate 
Judges, and the American Association of Retired Persons. These outreach 
efforts include educational presentations on VA's program, 
participating in conference discussions, and recruitment of qualified 
fiduciaries for VA beneficiaries at industry practice group meetings. 
In January 2011, VA organized and led a multi-agency roundtable that 
included representatives from VA, the Social Security Administration, 
the Office of Personnel Management, and the Defense Finance and 
Accounting Service. The purpose of these roundtable discussions was to 
identify Government-wide best practices, establish collaborative 
relationships, and develop methods to better serve beneficiaries.

Challenges
    Despite VA's successful implementation of these improvements, 
challenges remain. VA is working to improve its electronic case 
management system, the Fiduciary Beneficiary System, as it poses 
significant limitations. VA created a comprehensive business 
requirements document and has a workgroup tasked to design and deploy a 
new case management system that will improve efficiency and fiduciary 
oversight capabilities.
    In April 2011, the U.S. Court of Appeals for Veterans Claims issued 
an opinion in Freeman v. Shinseki, in which it concluded that a 
beneficiary may appeal VA's appointment of a fiduciary to the Board of 
Veterans' Appeals and the court under current law. This decision may 
significantly impact VA's fiduciary program workload, which conducts 
more than 30,000 initial fiduciary appointments annually.
    VA has initiated a complete review and revision of all regulations 
and procedure manuals pertaining to fiduciary matters. Among other 
things, the revised regulations will address appointment procedures and 
appeals, beneficiary rights, fiduciary qualifications, and fiduciary 
responsibilities. Upon completion of the regulation rewrite, VA will 
revise its manual guidance consistent with the new regulations.
    Another challenge is the increasing backlog of initial appointment 
and follow-up visit field examinations. In part, this backlog is 
attributable to the almost 10 percent increase in VA's fiduciary 
program population from 2010 to 2011. VA hopes to implement the 
efficiencies employed by the Western Area Fiduciary Hub nationwide to 
continue the successes shown in timeliness and quality.
    Consistency is key to improved client service. In addition to the 
training provided to new legal instruments examiners in 2011, all 
fiduciary personnel should be trained in a centralized environment 
using a standardized curriculum. VA is designing a curriculum for the 
fiduciary program and needs to explore methods for efficient delivery 
to its field personnel.
Conclusion
    In conclusion, I want to affirm VA's commitment to serve and 
protect our most vulnerable population of Veterans and other 
beneficiaries. VA has significantly improved the fiduciary program to 
ensure that America's Veterans and their survivors receive the benefits 
and services they have earned. The interest in our program expressed by 
GAO, OIG, and this committee reflects the importance of this effort. VA 
is committed to taking all steps necessary to ensure we fulfill our 
obligation to protect the beneficiaries in this program.
    Mr. Chairman, this concludes my prepared remarks. I would be happy 
to address any questions or comments regarding my testimony here today.

                                 
            Prepared Statement of Douglas J. Rosinski, Esq.

    Mr. Chairman, Ranking Member, and Distinguished Members of the 
Subcommittee:
    Thank you for the opportunity to represent the views of veterans 
and their families who have had their lives upended by the so-called VA 
``fiduciary'' program. The indignities that our most vulnerable 
veterans suffer under this flawed, if not failed, program is a national 
disgrace. Yet, VA officials allow the same harm to occur over and over 
again while opposing every effort by veterans to even learn who has 
their money. VA has erected innumerable barriers for veterans seeking 
benefits earned defending this country. But, with the stroke of a pen, 
VA can take back every dollar paid in the past and every dollar to be 
paid in the future. It happens every day. I sincerely believe that you 
will not find an area more worthy of your attention and fundamental 
reform than this out-of-control VA program.
    I am an attorney based in Columbia, South Carolina, and have been 
practicing veterans law for over a decade. I have had the honor and 
pleasure of representing dozens of veterans of conflicts from World War 
II to the present and those affected by the infamous ``lost laptop'' in 
2006. The views expressed in this statement are based on my personal 
knowledge of the VA ``fiduciary'' program's abuses in cases from 
California, Indiana, Maine, Tennessee, and several in Texas.
    Members of Congress and all citizens should understand how the VA 
``fiduciary'' program really operates, not just how VA officials claim 
it works.
    Today, elderly veterans will do without prescribed medicine, have 
the power to their homes threatened to be turned off, and be evicted, 
despite having thousands of dollars in the bank because a VA-appointed 
``fiduciary'' would not provide those veterans with a single dollar 
more than VA approved for payment months or years ago.
    Today, VA will ignore the expressed wishes of a veteran and the 
pleadings of his or her spouse, children, and caregivers and appoint a 
``fiduciary'' to control the veteran's finances, a ``fiduciary'' who 
has never met or spoken with the veteran or any family member.
    Today, VA will demand physical access to an elderly veteran, the 
veteran's home, and the entire family's financial information.
    Today, VA will ignore a valid Power of Attorney and disregard a 
State Court Order of Guardianship to assert authority over a veteran's 
finances.
    Today, VA will determine that a wife of more than 60 years with her 
full mental faculties is not qualified to make financial decisions for 
her veteran husband.
    Today, VA will stop the direct deposit of the monthly benefits that 
a veteran relies upon for daily living expenses and authorize a person 
who has never spoken with, much less met, the veteran to seize all of 
the veteran's bank accounts.
    Today, VA will decide a veteran's financial needs for the next 
three years based on a single hour-long interrogation by a VA ``field 
examiner'' who possesses no discernable expertise in finance, social 
work, mental health, or any other discipline reasonably viewed as 
pertaining to such a task.
    Today, a VA-appointed ``fiduciary'' will sign a contract with VA 
that requires him or her to do only what VA tells him or her to do with 
a veteran's money.
    Today, VA will instruct that ``fiduciary'' to avoid meeting or even 
speaking with ``their'' veteran and to refuse to provide the veteran or 
family with any information about the veteran's money.
    Today, VA will withhold a 90 year old veteran's benefits payments 
because his family refused to let VA invade his home or rifle through 
his family's financial information.
    Sadly, every one of the outrages described above has occurred in 
one or more of the cases in which I am involved - some more than once. 
Indeed, VA-appointed ``fiduciaries'' have - under oath - confirmed that 
these examples are in many ways typical of how the VA ``fiduciary'' 
program operates.
    Mr. Chairman, VA's acts would be outrageous if they involved VA 
money. But, worse still they involve veterans' money that VA has 
already paid. Let me be very clear, the VA fiduciary program runs on 
veterans' money - well over $3 billion of it. VA takes a veteran's 
money and gives it to a stranger who does not know and does not want to 
know the veteran. VA takes the veteran's money and pays that stranger a 
fee that can be over $100 each month, many times for writing a single 
check of an unvarying amount. VA takes the veteran's money and pays 
$1,000 or more for surety bonds to protect against the VA-appointed 
``fiduciary'' steals the veteran's money. VA takes the veteran's money 
and pays legal and other fees to enable the stranger to assert control 
over other aspects of the veteran's life, including speaking for the 
veteran in VA benefits claims and appeals.
    Ironically, VA regulations require strict due process protections 
for a veteran facing a proposal to merely reduce his or her monthly 
benefit payments. These protections include the right to a hearing, to 
present evidence, and to appeal the decision. Importantly, VA cannot 
implement a reduction in payments until the appeal process is complete. 
Yet, VA asserts that it can take every penny ever paid to a veteran and 
all future benefits payments by simply announcing the appointment of a 
``fiduciary.''
    Until April 2011, VA did not even recognize a right to appeal a 
fiduciary appointment. Now, despite vigorous VA opposition, the 
Veterans Court has held that VA must allow a veteran to appeal a 
fiduciary appointment. But VA can still take and hold a veterans entire 
life savings while the VA ``hamster wheel'' churns on the appeal for 
years. The Subcommittee should note that since the April 2011 Freeman 
decision, only a single Statement of the Case (the first step in an 
appeal) has been issued in any of the fiduciary cases of which I have 
knowledge. With an appeal cycle to the Board of Veterans' Appeals and 
the Veterans Court now taking 5 to 8 years, VA can take an elderly 
veteran's money with practical impunity.
    Reform of the so-called VA ``fiduciary'' program will be difficult. 
The program has run unchecked so long that is not recognizable as the 
aid to our most vulnerable veterans intended by Congress. Indeed, my 
personal conclusion is that defense of the program by VA officials is 
now a reflex action unmoored to any concern for fairness or 
effectiveness, as illustrated by the following observations.
    First, the highest levels of VA management and legal counsel are 
personally aware of the facts in the cases in which I am involved, but 
they have uniformly refused to take any action in any case. I know this 
because I have participated in email exchanges and conference calls 
with senior VA officials where these and other clear examples of 
program overreaching. The officials either subsequently did not 
respond, terminated the exchange, or explicitly stated that they would 
not take any action.
    Further casting doubt on VA's interest in reforming the fiduciary 
program is that VA has vigorously opposed - and continues to vigorously 
oppose - every legal action to assert a veteran's basic rights in the 
face of VA fiduciary program abuses. VA has fought every petition for 
relief to the Veterans Court, every federal district court lawsuit, and 
every state court action seeking review of VA fiduciary program abuses 
of which I am aware.
    In a Texas state court action which may go to trial next week, VA 
even went so far as to attempt to intervene in a state case in which it 
was not a party and tried to remove the case to federal court the day 
before an expected adverse ruling. The federal district court remanded 
the case characterizing VA's arguments as ``unsupported'' and 
``absurd.'' However, the several month delay caused by VA's baseless 
interference did mean that the veteran would not have his day in court: 
he died three weeks ago. His cause is being taken up by the son that VA 
accused in an internal email of trying to steal his father's money.
    Just two weeks ago in a case brought in Indiana state court, the 
defendant VA-appointed fiduciary (a bank) similarly removed that case 
to federal district court. The affidavit of defense counsel stated that 
the grounds for removal were ``discovered'' by the him ``through 
discussions with the Indianapolis regional counsel for the Department 
of Veterans Affairs.'' Only the VA General Counsel can explain why VA 
attorneys are helping delay an elderly veteran's lawsuit by providing a 
legal strategy adverse to a veteran and for which VA was scolded by a 
federal judge less than a year earlier.
    These are not the only times that VA has played fast and loose in 
court actions involving challenges to its authority to take a veteran's 
money under the guise of appointing a ``fiduciary.'' As detailed in the 
filings in Freeman v. Shinseki, 24 Vet. App. 404 (2011), VA will argue 
whatever legal position is required to have a veteran's case thrown out 
of a particular court. In federal district court, VA argues that only 
the Veterans Court has jurisdiction. In the Veterans Court, VA argues 
that the Veterans Court does not have jurisdiction. And, as described 
above, in state court VA argues that only federal district court can 
hear a fiduciary challenge.
    Indeed, in the Texas veteran's case discussed above, VA was caught 
unabashedly arguing in district court that the Veterans Court had 
exclusive jurisdiction and, at the same time and against the same 
veteran, arguing in the Veterans Court that the Veterans Court did not 
have jurisdiction. When the Veterans Court was alerted to the 
situation, VA filed an amended argument in the district court removing 
the conflicting position, which was described as an ``error.'' Again, 
only the VA General Counsel can explain a VA legal position that is 
based on protecting the fiduciary program from veterans asserting their 
rights.
    Whatever else is true, Congress did not establish the VA fiduciary 
program to operate the way it does today. Indeed, Congress could not 
have done so because not even Congress can authorize a federal agency 
to take a citizen's money without providing for a constitutional 
minimum of due process. A VA employee authorizing a stranger to 
surreptitiously seize a veteran's bank accounts and benefit payments is 
not legal process of any kind, it is an unconstitutional taking.
    To the extent that VA asserts that it has legal bases for its 
fiduciary program actions, it refuses to provide them. Co-counsel and I 
have repeatedly asked for the legal bases for VA actions in each and 
every one of our fiduciary cases. Each and every time the response has 
been silence. The only basis that I can discern from the entirety of my 
interactions with VA on this issue is that VA ``has always done it this 
way.'' Perhaps VA will be more responsive to the Subcommittee regarding 
the following issues:

      What is the legal basis for VA to ignore a valid Power of 
Attorney appointing a specific individual of the veteran's choice as 
attorney-in-fact, fiduciary, or guardian of a veteran's finances?
      What is the legal basis for VA to ignore a state court 
Order of Guardianship and to appoint a guardian in direct conflict with 
such an Order?
      What is the basis for directing financial institutions to 
provide a veteran's financial accounts under the guise of a 
``fiduciary'' relationship, when the purported ``fiduciary'' owes a 
contractual duty to VA and nothing to the veteran-beneficiary?
      What is the legal basis for denying a veteran-beneficiary 
access to basic information regarding the VA-appointed ``fiduciary'' 
and periodic information regarding the amount and location of the funds 
held in trust?
      Why is there not an actual and direct conflict of 
interest between a VA-appointed ``fiduciary'' with a contractual duty 
to do only what VA authorizes or face financial repercussions and the 
``highest duty of loyalty'' a true fiduciary owes to a beneficiary?
      What conflicts, if any exist, between the duties and 
obligations of a VA-appointed ``fiduciary'' and the common law and 
state law fiduciary duties of loyalty, transparency, fair dealing, 
accounting, and similar duties of non-VA fiduciaries controlling 
beneficiary funds?
      What is the legal basis for the position that Congress 
intended that statutes governing the VA fiduciary program preempt state 
law or otherwise shield VA-appointed ``fiduciaries'' from compliance 
with state laws governing similarly empowered fiduciaries in the same 
state?

    Mr. Chairman, every person to whom I have spoken who knows 
Secretary Shinseki, including a contemporary who was awarded the Medal 
of Honor during service in Vietnam, has told me that the Secretary is 
one of the most honorable and conscientious leaders ever to serve our 
country. Yet his agency, his command, not only tolerates this flawed 
fiduciary program, but attacks veterans who try to escape the program's 
clutches. I can only conclude that for whatever reason, the VA 
officials with whom I have interacted have not told the Secretary what 
is happening on his watch.
    After this hearing, the Secretary will no longer be in the dark. 
If, as his officials claim, the above examples are merely ``isolated'' 
cases, it should be a straightforward matter to correct the abuses in 
these few cases without significant effort or delay. I look forward to 
the Secretary's immediate and personal leadership in correcting this 
national disgrace.

Recommendations
    Finally, I offer a few suggestions for actions that the Secretary 
can immediately implement that will go a long way to repairing the 
damage done by the failed fiduciary program.
    First, the Secretary can and should immediately order that VA take 
no action to seize a veteran's finances or authorize a VA-appointed 
fiduciary to do so until any appeal of the decision to appoint a 
fiduciary is fully adjudicated and becomes final.
    Second, the Secretary can and should immediately order that appeals 
of fiduciary matters be conducted under the same due process procedures 
as a reduction or severance of benefits, which provide for notice, an 
opportunity to present evidence and to be heard, and allow an appeal to 
the Veterans Court.
    Third, the Secretary can and should order that every VA-appointed 
fiduciary recognize and comply with the duties of persons exercising 
similar fiduciary powers in the state in which they are located. As a 
minimum, the Secretary should order VA-appointed fiduciaries to provide 
fundamental financial information to beneficiaries on a routine basis 
and when reasonably requested and to provide complete explanations for 
the denial of any request for funds from the beneficiary.
    Fourth, the Secretary can and should order revision of the 
documents used to appoint VA fiduciaries to make clear that fiduciaries 
have the independent authority - and the primary duty - to act in the 
best interest of the veteran, whether or not VA ``approves'' in 
advance.
    Fifth, the Secretary can and should order that VA officials 
specifically state in writing the ``reasons and bases'' for appointment 
decisions and including how appointment of a VA fiduciary generally, 
and the selected fiduciary in particular, is in the best interests of 
veteran-beneficiary and provide that statement to the veteran-
beneficiary and his or her legal representative.
    I know of no reason why any of these actions require anything more 
than the Secretary's mandate for these changes become the ``way VA does 
it'' while grander goals and policy changes grind their way through the 
agency.
    Thank you again for this opportunity to speak on behalf of our 
country's most vulnerable veterans and their families. I look forward 
to your questions and, hopefully, substantive changes in this failed 
program.

Curriculum Vitae
    Douglas J. Rosinski earned a B.S., with distinction, in Physics & 
Astronomy from the University of Rochester in 1981 and a J.D., cum 
laude, from the University of South Carolina School of Law in 1997. He 
is admitted to practice law in the District of Columbia, Georgia, and 
South Carolina, numerous federal district and appellate courts, the 
United States Court of Appeals for Veterans Claims, and the United 
States Supreme Court. Mr. Rosinski is also accredited to represent 
veterans before the Department of Veterans Affairs.
    Since 1997, Mr. Rosinski has concentrated his practice in 
administrative law and regulatory compliance. In 2000, he began 
litigating cases on behalf of veterans and their families before the 
Department of Veterans Affairs regional offices, the Board of Veterans' 
Appeals, the United States Court of Appeals for Veterans Claims, 
federal district court, the United States Court of Appeals for the 
Federal Circuit Court, and the United States Supreme Court. In 2006, 
Mr. Rosinski was co-lead counsel in a class action on behalf of 
veterans that obtained the largest reported settlement in a case for 
Privacy Act violations. Mr. Rosinski currently practices veterans law 
with his own firm in Columbia, South Carolina.
    In addition to his veteran's practice, Mr. Rosinski has represented 
clients in licensing and enforcement actions before the Nuclear 
Regulatory Commission and Department of Energy on issues regarding 
federal regulations on the design, licensing, operation, and 
maintenance of a broad range of nuclear facilities.
    Mr. Rosinski is a veteran of the United States Navy where he was a 
qualified submariner and nuclear engineering officer.

Disclosure Statement
    Mr. Rosinski is appearing before the Subcommittee as a private 
citizen and has not received any federal grant or contract relevant to 
the subject matter of his testimony.

Executive Summary
    It is a national disgrace that our most vulnerable veterans and 
their families suffer repeated indignities because of the flawed VA 
``fiduciary'' program, under which VA impoverishes these veterans while 
claiming to protect their benefits. Despite professing concern, VA 
officials allow the same harms to occur over and over again while 
vigorously opposing every effort to learn who has taken the veteran's 
money, how much of the veteran's money has been taken, and where the 
veteran's money is held. The program has run without effective 
oversight for so long that is not recognizable as the aid to our most 
vulnerable veterans intended by Congress.
    Reform of the flawed VA ``fiduciary'' program will be difficult for 
several reasons. First, the highest levels of VA management and legal 
counsel are personally aware of the facts in many cases of program 
overreaching, but they have refused to take any action in any case. 
Further, VA has long opposed - and continues to oppose - every attempt 
to assert a veteran's rights in the face of VA fiduciary program 
abuses. Finally, VA has repeatedly refused to provide any legal basis 
for ignoring state laws governing fiduciary conduct and denying 
veterans other fundamental rights.
    Whatever else is true, Congress did not establish the VA fiduciary 
program to operate the way it does today. Indeed, Congress could not 
have done so because not even Congress can authorize a federal agency 
to take a citizen's money without providing a constitutional minimum of 
due process. Yet, the VA ``fiduciary'' program does this every day. A 
VA employee authorizing a stranger to surreptitiously seize a veteran's 
bank accounts and benefits payments is not legal process, it is an 
unconstitutional taking.
    There are at least five administrative actions that Secretary 
Shinseki can order today that would immediately require the VA 
fiduciary program to provide a modicum of due process, consider a 
veteran's basic rights, and be accountable for its actions.

                                 
                 Prepared Statement of Katrina J. Eagle

    MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE:
    Thank you for the opportunity to share my experiences and insight 
into the Fiduciary Program of the Department of Veterans Affairs (VA). 
I am a veterans law attorney in private practice; my clients are 
veterans and their family members whose claims for benefits and 
compensation have been denied by VA. I currently represent or am 
counsel to nine different veteran-beneficiaries who are challenging 
various aspects of the VA fiduciary process.
    The watershed moment for purposes of this Congressional hearing was 
April 26, 2011, the day the U.S. Court of Appeals for Veterans Claims 
(``Veterans Court'') held that the appointment of a VA fiduciary is 
appealable to the Board of Veterans' Appeals and to the Veterans Court 
thereafter. See Freeman v. Shinseki (24 Vet. App. 404). The Veterans 
Court's holding was premised upon the basic legal tenet that any aspect 
of the VA's ``provision of benefits'' is subject to judicial review. 
See 38 U.S.C. Sec. Sec.  511(a), 5502. No longer are veterans' 
fiduciary-related questions and disagreements discarded with a terse VA 
letter asserting that such issues are ``within the sole discretion of 
the Secretary.''
    But, until the Veterans Court allowed fiduciary issues to be 
challenged, the VA Fiduciary Program operated with completely 
unfettered authority, in ``splendid isolation.'' The result of this 
decades-long unaccountability is now coming to light as veteran-
beneficiaries and their family members report their problems and demand 
answers.
    Of course, VA leadership will tout the issuance of two VA fast 
letters and the re-organization of fiduciary personnel into six VA 
Fiduciary Hubs as proof that they are fixing the system and improving 
the program. Meanwhile, veterans continue to be unable to talk directly 
to their VA-appointed fiduciary, to receive additional funds on an 
emergent or timely basis, and unable to obtain basic account 
information regarding their VA funds. In short, despite claiming that 
veteran-beneficiaries' best interests are central to VA's efforts, the 
reality is quite the opposite. And veterans are suffering as a result.
    For example, according to VA Pension and Fiduciary Service 
leadership, current VA policy is that any time a veteran is determined 
to be incompetent to manage his VA benefits, a fiduciary must be 
appointed. Always. This VA policy, however, directly conflicts with VA 
law, which states unambiguously that a fiduciary is not required in 
every case. In fact, the relevant VA statute lists the veteran-
beneficiary as the first choice--among several--to whom VA can pay the 
veteran's monthly benefits. The last choice is a VA-appointed paid 
fiduciary. According to 38 U.S.C. section 5502, ``Where it appears to 
the Secretary that the interest of the beneficiary would be served 
thereby, payment of benefits under any law administered by the 
Secretary may be made directly to the beneficiary or to a relative or 
some other fiduciary for the use and benefit of the beneficiary.'' May. 
Not must.
    The VA then compounds its erroneous interpretation of VA law by 
appointing a paid fiduciary and re-routing the veteran's VA monthly 
payments to an undisclosed bank account to which only the fiduciary has 
access and control--all without the veteran's consent, approval, or 
even knowledge (under the guise that he or she is incompetent). Yes, 
thanks to Freeman, the veteran can now challenge the appointment by 
filing a Notice of Disagreement. But, while the appeal is pending and 
until the issue is resolved, a stranger--known only to VA--has complete 
control of the veteran's monthly benefits. Further, according to VA's 
own statistics, it takes the Board of Veterans' Appeals an average of 
886 days to process an appeal. Thus, even under the best possible 
outcome, for at least 2.5 years, a veteran has absolutely no access to 
his or her own VA funds - and many more years if the appeal has to go 
to the Veterans Court or the Federal Circuit.
    Sadly--but not surprisingly--VA has not tried to proactively 
resolve any of the veterans' fiduciary-related complaints and concerns 
I have personally brought to their attention since April 2011. No one 
at the local VA Regional Office level, nor anyone at VA headquarters. 
Indeed, only one case has been settled satisfactorily, and that was 
primarily due to adverse media attention. Sadder still is that in all 
nine of these cases, VA fiduciary management has defended its staff and 
the VA-appointed fiduciary (who is paid a monthly commission from the 
veteran's VA funds), regardless of the merits of the veterans' 
complaints.
    In fact, the adult daughter of an elderly, World War II veteran in 
Texas has been explicitly rejected as a possible fiduciary for her 
father because she dared to make legitimate complaints - still 
unanswered by VA--regarding her father's VA-appointed paid fiduciary's 
accountings. Indeed, internal VA memos show that VA itself had concerns 
with the same fiduciary during the same period. The fiduciary remains 
in place; the daughter was disqualified from handling her father's 
finances.
    VA officials will assert that the role of VA-appointed fiduciaries 
is to manage the veteran's VA funds, a seemingly simple and straight-
forward duty. VA leadership will also claim that these paid fiduciaries 
act independently from the VA. But the reality is that the fiduciary is 
required to sign a contract that explicitly states that he or she will 
never release any funds to the veteran without VA's pre-approval. VA-
appointed individuals are ``fiduciaries'' in name only - they are 
actually micro-managed agents of VA. As a result, fiduciaries have 
refused to release my clients' own funds to them for heart-ailment 
medication, travel expenses for a family funeral, mid-summer air 
conditioner repairs--and then only did so under threat of court 
intervention.
    Veterans are suffering as a result of other VA Fiduciary Program 
policies as well. Typically, as part of appointing a fiduciary, a VA 
Field Examiner visits the veteran's home and demands to see all bills, 
expenditures, sources of income and revenue--including income from 
Social Security disability, military retirement, and spousal income. A 
monthly budget is then created and strictly enforced. Curiously, VA 
field examiners instruct veterans to expend all other sources of income 
before VA funds. VA-appointed fiduciaries are then directed to ``save'' 
large percentages of the monthly VA benefits - supposedly for 
emergencies - but which are rarely approved by VA management for any 
use. As a result, beneficiaries are left to scrape by on barebones VA-
determined ``budgets'' while accumulating tens of thousands of dollars 
in untouchable bank accounts. Families are often forced to provide 
monetary assistance to these veterans, depleting their savings while VA 
benefits are unused. VA has yet to explain why a 90-year-old veteran 
needs to ``save'' 20% or 30% of his monthly payments for ``future 
needs'' when he cannot afford prescribed medicines and already has over 
$100,000.00 in his name.
    The manner in which VA fiduciary personnel treat family members who 
volunteer to be the veteran's fiduciary is abhorrent and disturbing 
too. Adult children of World War II veterans have been depicted as 
trying to ``free ride'' off of their father's VA benefits, as are 
spouses of Vietnam-era veterans. For example:

      After ten years of ``excellent'' account reports, a VA 
Field Examiner in Texas made a personal home visit and summarily 
removed the spouse-payee of one of my clients because of supposed 
accounting discrepancies. That very same day, he appointed a paid 
fiduciary and stopped the veteran's direct-deposited monthly VA funds. 
The Waco Regional Office then waited another ten days before sending 
the veteran a letter informing him of their actions.
      In Indiana, a World War II veteran's adult daughter, who 
serves as his caregiver, Court-appointed Guardian, and Power-of-
Attorney, was removed for incorrect account reports and accused of 
mismanaging the veteran's funds because she used them to take him to a 
world-renowned dementia-treatment center in Arizona. VA then appointed 
a bank to oversee his VA funds, which routinely pays his monthly bills 
late or not at all, creating additional late fees and threats of 
utility shut-offs.
      In Maine, VA awarded a World War II veteran service-
connected benefits in January 2011, but determined he was incompetent 
to manage his VA funds. His daughter, already his Court-appointed 
Durable Financial Power-of-Attorney, volunteered to act as his 
fiduciary. But once she learned that VA representatives required 
documentation of all of her father's financial affairs to establish a 
monthly budget, she refused the home visit and requested an explanation 
for why her father must be appointed a fiduciary in the first place. VA 
responded by appointing a total stranger to open an undisclosed bank 
account and oversee the veteran's VA funds. The veteran has yet to 
enjoy any of his awarded VA benefits.

    My first-hand experience with these fiduciary cases makes clear 
that reforms in the VA Fiduciary Program are desperately needed. One 
simple suggestion is for paid fiduciaries to provide monthly bank 
statements to their veteran-beneficiary. Even incompetent veterans have 
every right to know basic account information regarding their money. 
Monthly bank statements would also allow veterans or family members to 
voice timely concerns, and thereby possibly prevent years-long fraud 
from being committed, as recently discovered by VA, IRS, and DOJ 
investigators in Texas.
    Another suggestion is for VA fiduciary personnel, from top 
management to local Regional Office staff, to reform their mindset 
regarding the approximately 112,000 veteran-beneficiaries in their 
program. Incompetency is not synonymous with idiocy. Yet, all too often 
these veterans and their family members are totally ignored or treated 
with sub-standard professional etiquette. VA must also stop viewing the 
veteran's VA funds as if it still the agency's, stop hoarding it under 
the guise of ``saving'' it for emergencies, and allow paid fiduciaries 
the independence to make decisions that are truly in the veteran's best 
interests.
    On behalf of the veterans who have suffered as a result of VA's 
flawed and ill-managed Fiduciary Program, I applaud this Subcommittee 
for its investigation and call for reforms. While many other issues 
deserve your attention, please remain diligent in your demands for 
substantive and timely changes in this program. Especially in these 
financially difficult times, these veterans deserve more information 
about and better access to their well-earned VA benefits.

Executive Summary
    Congress created the Department of Veterans Affairs' (VA) Fiduciary 
Program to provide assistance to veterans who are deemed incompetent to 
manage their own VA monthly benefits. The individual providing the 
assistance is oftentimes a VA-appointed fiduciary who is paid a 
commission fee from the veteran's VA funds. In theory, the fiduciary is 
an independent third party who serves the veteran and ensures his day-
to-day financial needs are met. In reality, the fiduciary is 
contractually obligated to obtain approval from VA Fiduciary personnel 
for every expenditure not previously budgeted.
    Veterans are suffering because of VA's strict control over 
fiduciaries. Requests for money needed for veterans' basic needs are 
being ignored or denied, forcing veterans and their families to endure 
severe financial hardship. Despite the recent change in law that now 
allows challenges to the fiduciary appointment process, VA management 
continues to ignore veterans' basic due process rights and state court-
appointed Durable Powers of Attorney. Contrary to the veterans' best 
interests, abuses by fiduciary personnel and VA-appointed fiduciaries 
are rampant.
    Reforms are needed so that fiduciaries actually serve their 
veteran-beneficiaries and comply with all fiduciary-related duties. In 
addition, with effective reforms, veterans will be provided basic 
account information regarding his own VA funds. Finally, with this 
Committee's diligent oversight, VA's Fiduciary Program personnel will 
explain how and why it chooses a particular paid fiduciary over the 
veteran himself, a relative, or another individual designated by the 
veteran.

                                 
                    Prepared Statement of Pam Estes

    Chairman Johnson, Ranking Member Donnelly, and Members of the 
Subcommittee:
    Thank you for inviting me to testify on VA's Fiduciary Program, and 
for holding this hearing.
    My name is Pam Estes. My life and my family's life changed 
overnight in December 2005 when my son Jason sustained multiple severe 
injuries--including severe traumatic brain injury, multiple leg 
fractures, a lower leg amputation, and second and third degree burns 
over 60% of his body--as a result of an IED blast in Iraq. At the time 
of his injury Jason was only 19 years old. Since then, my husband Mike 
and I have been caregivers for Jason. I was appointed to serve as a 
fiduciary in 2007 as he was not able to manage his financial affairs.
    As both a fiduciary for my son and a caregiver, I have had 
extensive experience in working with the Department of Veterans 
Affairs. In fact, I served for two years as a Member of a VA Advisory 
Committee on OEF/OIF Veterans and Families established by former 
Secretary of Veterans Affairs Jim Nicholson. As a result, I have a good 
understanding of the Department and its programs. But my experience of 
dealing with the Veterans Benefits Administration (VBA), as it relates 
to Jason's VA compensation, contrasts sharply with the experience of 
working with the Veterans Health Administration (VHA), as it relates to 
my son's care and to the administration of the VA Caregiver-assistance 
Program established by Congress in Public Law 111-163. While I have had 
very positive experiences with VHA, particularly in coordinating 
effectively with its case-managers surrounding Jason's care, my 
experiences as a fiduciary in meeting - and even understanding--VBA's 
requirements have been disturbing.
    I certainly understand that VBA has an important responsibility as 
it relates to safeguarding the benefits of veterans who are unable to 
manage their own affairs. While its Fiduciary Program unquestionably 
has an important mission, my own experience and that of other 
caregivers of wounded warriors lead me to question how effectively the 
program is managed.
    Among the frustrations I have encountered in serving as a fiduciary 
has been the lack of information as to precisely what VBA needed and 
expected, and the ``mixed signals'' it has sent. Despite a lack of 
guidance, I maintained detailed documentation of expenditures for 
Jason, consistent with my background in accounting. But I was stunned 
in 2008 when, despite the lack of detailed VBA instructions, I received 
a letter from the VA Regional Office in Baltimore which cited my 
``failure to submit your timely accounting'' as ``constituting a breach 
of your fiduciary duty,'' and threatened to remove me as a fiduciary. I 
found it extremely offensive to be painted as irresponsible when we'd 
been working so hard to do what's best for Jason, including saving much 
of his money for the future when we're not here to care for him. 
Following up on that letter, I ultimately met with a VA field auditor 
in September 2008 and explained that I had never received instructions 
about requirements for annual reporting, or applicable forms; I was 
relieved that that official accepted my detailed documentation and 
advised me that no further action was needed. Yet less than a year 
later I received another letter from a VA Regional Office official 
stating that I was delinquent, and this time directing me to submit on 
a VA form within 14 days an accounting of all expenditures for Jason 
going back to 2007. This letter again threatened that I risked being 
removed as a fiduciary. The VARO official's letter also responded to an 
earlier letter of mine explaining that I had never received 
instructions on HOW to file annual accountings to VBA, and stated:

    ``In an ideal world, each year the computer would print you a 
letter and we would send you the letter and blank forms prior to your 
accounting date. It is supposed to work that way, but in real life 
doesn't always.''

    VBA's ``14-day reporting/or-else'' directive prompted us to contact 
Wounded Warrior Project, which brought our situation to the attention 
of VBA Central Office officials and requested a meeting. My husband and 
I subsequently met with these officials, who were deeply apologetic. 
The meeting was instrumental in resolving the immediate problem, and we 
assumed, accordingly, that we would encounter no future difficulties. 
We were mistaken!
    For the 2011 accounting period, I received a message from a 
supervisory official at the Baltimore VARO indicating that I was 
subject to a field audit this year. After back and forth messages, the 
visit had still not been scheduled. Fearing another delinquency, I 
submitted my annual accounting on December 5, 2011, and further sought 
to clarify VA policy regarding certain charges to be entered on that 
accounting form. In follow-up to the letter, I called and left 
messages, but received no response. On January 9th, however, I was 
shocked to receive a letter stating that I was delinquent in submitting 
the required accounting and threatening to remove me as Jason's 
fiduciary if I did not comply within 30 days.
    From the perspective of a mother of a very severely wounded 
warrior, VBA communications like this - suggesting that with the stroke 
of a pen I could be deemed ``unqualified'' and lose the right to manage 
my son's finances--are terribly stressful. Despite my being a loving 
caregiver, this program operates in a manner that leaves me feeling as 
though something threatening is always hanging over my head. Given that 
that's been my experience, imagine what this process might be like for 
a young spouse without any background in recordkeeping let alone many 
years working in accounting! I understand the need for methodical 
recordkeeping and reporting in the interest of documenting appropriate 
financial management of Jason's compensation. But I do not understand 
an agency that is so quick to threaten, so unresponsive to questions, 
so much of a ``black hole.'' Nor do I understand why VBA cannot better 
align its reporting requirements with the much less detailed and less 
burdensome level of reporting used by the Social Security 
Administration.
    Some two and a half years ago, my husband Mike attended a Caregiver 
Summit here in Washington sponsored by Wounded Warrior Project. One of 
the most common and deeply felt concerns expressed by the caregiver-
participants was with the VA Fiduciary Program, which many participants 
described in some detail as confusing, demeaning, highly intrusive and 
often unreasonable in disallowing expenditures. The then-Director of 
VA's Compensation and Pension Service attended a session of the 
conference and, on hearing a presentation on these problems, promised 
Fiduciary Program reforms. It is not apparent to me that such reforms 
have taken place, or, if any steps were taken, that they have really 
taken hold.
    On behalf of the many other caregivers who, as fiduciaries for 
their loved ones, have had experiences like mine, I hope this morning's 
hearing can help achieve such changes.

                                 
                   Prepared Statement of Rick Weidman

    Mr. Chairman, thank you for the opportunity to present views here 
today. I appear on behalf of Vietnam Veterans of America (VVA), where I 
serve on the National staff as Executive Director for Policy & 
Government Affairs.
    Thank you for the opportunity to appear here today to share our 
concerns and thoughts regarding concerns as to how the Veterans 
Benefits Administration (VBA) is managing the Fiduciary program. Even 
more importantly, thank you for holding this hearing, which has spurred 
VBA to actually take remedial steps they pledged to take six years ago 
and two years ago. This program is designed to protect some of our most 
vulnerable veterans. Unfortunately it appears that the program as 
currently operated falls far short of accomplishing that goal.
    Perhaps it would be useful to note that it is our belief that VBA 
is often too quick to place veterans into the fiduciary program. A more 
extensive use of automatic bill payments on recurrent bills, and 
classes in simple financial literacy could eliminate the need for many 
veterans to be placed in this program. There are now computer 
applications at the U.S. Department of Veterans Affairs (VA) for 
everything from ``e-Benefits'' to ``MyHealth-e-Vet'' to PTSD advisor 
that veterans can download from VA. The point is that there are 
practical steps that can be taken to assist the veteran to live 
independently short of placing more veterans into the fiduciary 
program.
    There also needs to be more objective criteria for taking the 
rather dramatic step of ``infantilizing'' veterans by putting them into 
the fiduciary program. There must be clear standard ways for veterans 
to get out of this program once placed into it.
    The preference in choosing a fiduciary for a veteran for whom this 
is the only alternative should be someone who can be bonded, who has 
close personal relationship with the veteran, and who lives in the same 
general geographic area as the veteran, knows the validity of 
businesses in that area, and can automate as many of the veterans 
standard recurrent expenses as possible.
    Much of the basis of our comments today are based on the Inspector 
General's (IG) Report 09-1999-120, dated March 31, 2010, and on the 
General Accountability Office Report GAO-10-241, dated February of 
2010, as well as anecdotal evidence gleaned from our local leaders and 
service representatives around the nation. There has also been verbal 
briefings from staff at the Veterans Benefits Administration (VBA) that 
indicate they know they have a problem, and that they have reassigned 
as many as 80 staff from adjudication to work on doing quality 
assurance for the fiduciary program.
    As we have noted before this committee in the past, there is no 
clear indication, to our knowledge, of a coherent plan for getting a 
handle on the parameters of this problem. VA simply does not know who 
is responsible for each veteran involved. Many of these veterans have 
major impairments because of schizophrenia or other condition that 
means that they are unable to properly care for themselves to the point 
that someone else needs to take charge of their financial affairs for 
their protection and well being. Seen from this perspective, they are 
the protectors of these veterans. Yet VA apparently does not know 
exactly who is responsible for each and every veteran, and only 
recently has started to move to at least systematically investigate 
what is actually occurring at each station. In the recent past it was 
clear to all that they were not doing even a reasonable minimal job of 
monitoring to ensure that each and every veteran is properly cared for 
in regard to their safety and general well being.
    The first step is getting a handle on who is the fiduciary for each 
and every veteran involved in the program. We gather that the apparent 
allocation of additional staff is intended to accomplish this 
assessment. What about just hiring a certain number of FTEs in VA or 
Treasury to be fiduciaries, and not take more than a nominal fee from 
the veteran's check such as $8 (the amount of one VHA co-pay)? This 
would stretch the veterans' resources much further than usual.
    In any case, what should be expressly forbidden is paying 
fiduciaries a lump sum taken from retroactive disability payments, as 
is the case today.
    It would appear that there are still not clear guidelines on who 
should be a fiduciary, i.e., meaningful minimum standards and 
determination of eligibility for same. It is clear that such standards 
and certification are needed, hopefully without creating a needlessly 
bureaucratic mass of red tape. It also appears that there is a need for 
training and quality assurance mechanisms that would be appropriate for 
all staff assigned to do fiduciary work, but particularly the new 
staff. In any there should never be a case of one person (often an 
attorney) serving as fiduciary for dozens of veterans (or even more) 
where the veteran is seen not as a human being to be cared for, but 
rather seen as a profit center.
    What is perhaps most distressing about the IG reports referenced 
above was the lack of follow through. There was no implementation of 
many of the recommendations in the IG Report from 2006 as pledged by 
the Veterans Benefits Administration (VBA) in their Agency response to 
that 2006 report. Some (but not all) of those recommendations from both 
2006 and from 2010 are just being implemented now as a run-up to this 
hearing. This has been a major problem at the VA and at the VA IG 
historically, in that there has been a failure by the IG to follow 
through to ensure that the pledged corrective action has been taken. As 
importantly, when the officials in the part of the agency under review 
pledge to take action, they should be held to this pledge.
    Because the majority of the more than 100,000 veterans who have 
fiduciary agents are in poor mental and/or physiological health, there 
should be regular communication between Veterans Health Administration 
(VHA) personnel and whoever is acting as fiduciary agent/guardian. 
Unless we missed it, monitoring of health condition does not even 
appear to be on the radar screen as one of the key factors in any 
evaluation of this program. Is the living situation for the veteran 
appropriate or not, given his/her disabilities? Is he/she getting to 
regular appointments at VHA? Does the veteran have adequate shelter, 
adequate nutrition, assistance to ensure proper hygiene and clothing 
appropriate to the season, access to needed transportation, and overall 
well being of the veteran? These are literally life and death questions 
to which the answer is often not known by those who should be on top of 
tracking those in need of a fiduciary.
    The aggregate amount of monthly income is very significant for the 
veterans in this program. The size of the aggregate estate of these 
veterans combined is at least several billion dollars. Any time there 
is that kind of money there had better be strong accountability 
mechanisms to ensure that it is being used for the intended purpose(S).
    To not have clear guidelines and consistent monitoring only invites 
misuse and misappropriation of these funds. There appears to be so 
little in the way of effective tracking and oversight of this program 
that VA does not have any idea if the funds are being used correctly. 
This is akin to shipping $10 Billion in cash into the war zone in Iraq 
and then acting surprised that they could only account for less than a 
third of the money. It is just not a prudent or wise thing to do.
    VVA hears anecdotal stories about attorneys or others who are 
acting as agents/guardians for many veterans whom they have never met 
except over the telephone. It seems pretty clear to us that there is no 
relationship to speak of in positive way between the veteran and the 
fiduciary. As noted above, it appears they see a ``profit center'' and 
not a human being who served their country well who is now in dire 
need. It seems pretty clear to us that these people are getting more 
than the 4% of funds being handled in the name of the veteran. In fact 
the record keeping at the VBA does not appear to even be to the level 
where this can even be monitored or detected. Looked at from both a 
fiscal point of view as well as a human point of view, this must 
change.
    In short, there must be a cap placed on the number of veterans a 
fiduciary may represent, and much closer monitoring of where the money 
is going. Additionally, VV suggests an overall cap on total fees going 
to each fiduciary, and that fees should not be based on percentage of a 
veteran's benefits but rather on work done.
    There is still a need for VBA to make a significant effort to put 
such a system in place as quickly as possible. To not move boldly and 
quickly would be irresponsible, and leave many of our most vulnerable 
veterans subject to abuse and theft of resources that is rightfully 
theirs.
    While it may not be practical to just ``start over' it is clear 
that dramatic change is called for in this area. There is finally at 
least some progress toward straightening out the C&P system because VA 
has admitted that they have a problem, and is now recognizing that the 
VBA must treat the Veterans Service Organizations (VSO) as well as 
state and local partners as true equal partners in this process of 
reform. We suggest that the same holds true for the fiduciary program 
at VA.
    The welfare of the individual veterans who are least able to fend 
for him/her self should be enough to drive immediate reform. Added to 
that primary responsibility is the need to properly account for 
taxpayer dollars, and the VA and Congressional responsibility to ensure 
those funds are being used correctly for the welfare of the intended 
recipients.
    Thank you for this opportunity to present our views here today. I 
will be happy to answer any questions.

                                 
                       STATEMENTS FOR THE RECORD
                              LORI PERKIO

    Mr. Chairman and Members of the Subcommittee:
    Thank you for the opportunity to provide The American Legion's 
views on the Department of Veterans Affairs (VA) Fiduciary Program. We 
testified on April 22, 2010 on this same program and while there have 
been some improvements; more still needs to be done.
    VA oversees appointment and management of fiduciaries who act on 
the behalf of veterans/surviving spouse or dependent children referred 
to as ``beneficiaries'' who are deemed mentally incompetent and unable 
to manage their finances. Upon notification of incompetency, a VA Field 
Examiner will investigate the beneficiary's social, economic and 
industrial impairment then recommends appointment of a fiduciary. The 
VA Fiduciary is responsible for managing VA monetary benefits ensuring 
the beneficiary's just debts are paid. Other responsibilities include 
utilizing funds for daily needs such as food, clothing housing, medical 
expenses, and personal items of the beneficiary and his /her recognized 
dependents. The veteran should be able to live a lifestyle as any other 
person who is not within the Fiduciary program. The appointed Fiduciary 
is allowed to charge a fee of up to 4% of the VA benefits paid to the 
beneficiary. If the beneficiary is married, the spouse may receive 
payments on the beneficiary's behalf. Selection of a Fiduciary involves 
analysis of current credit report, disclosure of criminal background 
and consideration of the opinion of character witness(es).
    In 2008, the Veterans Benefits Administration, which oversees VA's 
Fiduciary Program, established a Western Hub Fiduciary Hub pilot 
program in Salt Lake City, UT. Prior to the consolidation, VA Regional 
Offices (RO) were performing poorly in the average number of days to 
appoint a fiduciary and also with the average number of days for follow 
up visits. At the time of our testimony in 2010, the Western Hub 
Fiduciary average for initial days to appoint fiduciaries was 45 days 
and that number decreased to 38 days in FY 2011. However, the average 
number of days for follow up visits in 2010 was 120 days but in FY 2011 
that number increased to 151 days.
    After the Western Hub Fiduciary model became operational in 2010, 
VA began consolidation of other regions across the United States in 
Fiscal Year 2012. Those Hubs and locations include: Indianapolis, 
Milwaukee, WI; Louisville, KY; Lincoln, NE and Columbia, SC. VA is 
adding an additional 58 Field Examiners to their current number of 310. 
Unfortunately, these 58 additional personnel are being pulled from 
other areas of the Veterans Benefits Administration (VBA) such as 
Compensation (currently experiencing backlog). A total of 368 Field 
Examiners will be responsible for approximately 123,000 beneficiaries. 
Equally disturbing is that new Field Examiners training consists of two 
weeks formal training, an additional two weeks field training and then 
they are assigned a mentor for 60 days with 100 percent review for the 
following 90 days. Field Examiners do not work within the Regional 
Office or at the Hub but from-their homes. Moreover, Field Examiners 
are not required to provide contact information to beneficiaries. The 
assigned location of the Field Examiner is determined by population 
density of beneficiaries. This however, does not take into account the 
travel time in less populated states with larger geographical areas.
Previous Recommendations:
    The following recommendations were presented at the time of our 
last testimony and here is an update on their progress:

    1. The American Legion recommended an additional Full Time Employee 
(FTE) be funded and authorized within each RO and PMC solely dedicated 
to Fiduciary Program management and oversight.
    Currently: VBA does not feel this is necessary with the 
implementation of an 800 number currently being tested which will be 
solely dedicated to Fiduciary issues. This 800 number will direct the 
caller to the Fiduciary Hub within the callers region or allow the 
caller to request assistance from another Hub outside the calling area. 
Until it becomes fully operational, callers are directed to call 1-800-
827-1000. VBA changed their claims assistance toll free number (827-
1000) from RO access and consolidated them into areas. Unfortunately, 
this has become an exercise in futility as the call centers are so busy 
the caller is asked to leave a number to be called back which more 
often than not does not happen. The American Legion continues to urge 
Congress to ensure VBA hires a Fiduciary Program Coordinator to work 
within each Regional Office to improve coordination between Fiduciary 
Hubs, ROs and Field Examiners.

    2. The American Legion recommended Congress appropriate funding to 
VBA's Information Technology (IT) budget to set up an IT software 
package within all of the RO's Fiduciary Program Units, PMCs, and Salt 
Lake City Fiduciary Hub to enhance communications between each of these 
offices.
    Currently: The VBA Fiduciary program is in the progress of creating 
Fiduciary Screens within the current Veterans Benefits Management 
System for tracking status of Fiduciary claims. The software program is 
currently being written with a projected completion date of 
approximately two years. A target date for implementation of the 
program is not available at this time.

    3. The American Legion recommends that part of the software package 
include reminders or alerts throughout the process to ensure that no 
paperwork is lost or falls through the cracks. This recommendation and 
current status is addressed above.

    4. The American Legion recommends that appointed Fiduciaries must 
be co-located within the at least a 300 mile radius of the beneficiary.
Veteran Personal Stories:
    The importance of solving the issues associated with VA's Fiduciary 
programs can best be illustrated with the personal stories of some 
affected veterans. All too often, by simply looking at numbers, program 
projections and reports, we forget the human face of this problem. 
Because of the nature of the competency challenges involved for 
veterans requiring a Fiduciary, these are among our nation's most 
vulnerable veterans.
    In August of 2011, the Western Area Fiduciary Hub was notified that 
a veteran was rated incompetent and a field examination for a fiduciary 
was required. The son of this veteran, already the court appointed 
Power of Attorney for this veteran, requested to be appointed fiduciary 
for this veteran, but this family request was not granted.
    By late September, a Field Examiner completed an examination, and 
appointed an outside fiduciary for the veteran. However, two months 
later, in November, the veteran's local Regional Office released to the 
fiduciary in question a check for $385,966. As there had been no 
previous notification of any back payment, the fiduciary contacted VA 
for information about how to process this overlarge payment, and was 
informed she would need to obtain a surety bond to protect the funds 
and that the Field Examiner would have to contact her to complete a new 
budget for the veteran.
    This situation is still being investigated, including the 
possibility that the veteran's son, who had initially sought to be 
appointed fiduciary as the veteran's Power of Attorney, may well wind 
up being finally designated as such. However, months have gone by and 
the veteran is unable to gain access to money that is rightfully his.
    In another matter, a veteran applied for Pension benefits in 2009. 
In 2010, with a diagnosis of ischemic cardiomyopathy from private 
medical records, the veteran's claim was upgraded to a straight 
benefits claim under the presumptions inherent for Agent Orange related 
illness. Further medical evidence established, over the course of 2010, 
multiple related conditions dating back as far as 2007, as well as the 
need for specially adaptive housing amongst other concerns.
    In a VA letter dated March 23, 2011 the entire estimated back pay 
was found to be $163,256 the entirety of which was withheld. Fully 
seven months later, in late October, the veteran received a decision 
letter stating:

    ``Review of your claims file shows the rating decision of March 22, 
2011, proposed a finding of incompetency. It was noted in that decision 
there was a Delegation of Rights and responsibilities signed by you and 
your physician that you are not able of understanding your rights due 
to dementia due to Parkinson's disease, dated August 25, 2010. You were 
sent a VA letter dated March 23, 2011, informing you of our right to 
submit any evidence, information, or statement that will present your 
side of the case. To date, no response has been received from you. 
Since there is a definitive finding if incompetency by a physician in 
this case and you are not shown to be able to manage personal affairs 
to include disbursement of funds, we have determined you are 
incompetent for purposes of managing VA payments.''

    Ultimately, the veteran passed away awaiting appointment of his 
sister as fiduciary. During the entire process, his sister had been 
providing for his nursing care and doing so out of her own pocket.
    These two examples provide insight into cases where close family 
members are already providing close care to these veterans, in some 
cases with court appointed POA authority, yet these veterans still must 
wait months and even years to receive hundreds of thousands of dollars 
in benefits. These benefits belong to these veterans, yet they can 
derive no use from them as they are held back beyond yards of red tape 
and miles of obstacles and delays. We cannot keep veterans from 
benefits belonging to them, and sadly these cases are not unique. 
American Legion service officers come across stories like these on a 
regular basis and have been all to eager to share these stories in the 
hopes that some good will come towards reforming this system.

Conclusions:
    It is worth reiterating that these are among our most vulnerable 
veterans. As the nation's veterans experience mental health trauma or 
diseases, they or their family members should not have to worry about 
receiving their earned benefits. While The American Legion recognizes 
VA's attempts to improve the situation, clearly there is still much 
work to be done. The Fiduciary Hubs may have shown some improvement in 
reduced timelines for a portion of the process, the phone banks for 
these centers still lack direct access for veterans' service officers, 
and the remote nature of these facilities adds an additional layer of 
remove from these increasingly vulnerable veterans. Furthermore the 
improvements to manpower for this task cannot come at the expense of 
manpower in the regular claims processing, as all are aware of the 
backlog struggles in that arena. The American Legion, through our 
network of service officers, is working hard to gain justice for these 
veterans as these difficult scenarios present themselves, but clearly 
this problem will not be solved overnight.

                                 
                        WOUNDED WARRIOR PROJECT

    Chairman Johnson, Ranking Member Donnelly, and Members of the 
Subcommittee:
    Wounded Warrior Project (WWP) applauds your holding this hearing, 
and appreciates the opportunity to submit this statement for the 
record. Through our long work with severely-wounded veterans and their 
family caregivers, many of whom are fiduciaries, WWP brings a unique 
understanding to the operation, and shortcomings, of VA's Fiduciary 
Program.
    We commend to your attention the testimony of Pam Estes, a 
dedicated mother and caregiver of her wounded warrior son, Jason, who 
has for years also served as a fiduciary to manage his VA compensation. 
The frustration evident in Mrs. Estes' statement mirrors that of many 
family caregivers who struggle to do the best for their wounded loved 
ones. While these caregiver-fiduciaries generally understand VA's 
oversight responsibility to the beneficiary - they often are left to 
feel as though they are suspect, and subject to a rigid, intrusive, and 
sometimes even unreasonable process that ignores abundant evidence of 
their dedication to their loved one.
    Pam Estes' experience is anything but unique. But it is a telling 
comment on the management of this program, its requirements have been 
problematic for an individual with a background in accounting!
    The experience of other caregivers is instructive. Asked to 
describe their experience with the fiduciary program, one caregiver-
fiduciary responded:

    ``They don't really help with management [of assets] but audit 
every two years every penny I spend for my son's care. [There are] not 
many guidelines and auditors question expenses when they know nothing 
about the care needed, [such as asking,] why am I buying him movies and 
music when he has a brain injury . . . .really?''

    A New Mexico caregiver questions the intense level of detail VA 
requires, noting that she is also a fiduciary for her son's SSDI 
benefits, but that in contrast to VA:

    ``Social Security accounting paperwork is simple. They have two 
categories: 1. Food and housing, and 2. Clothing, education, medical 
and dental, recreation or personal items. No bank statement or bank 
signatures are needed. If this were the case with the VA, [reporting] 
would not be an issue.''

    Another draws a similar contrast, commenting:

    ``Each year I am required by the Social Security Administration to 
file a formal fiduciary accountability report. [Unlike VA's 
requirements,] it is user-friendly, quick and inclusive of necessary 
pertinent information.

    VA's demanding requirements are not only difficult, fiduciaries 
report that they are on their own:

    ``When the paperwork arrived at the end of the year, there were no 
instructions or assistance to do it. I had to figure out how to do 
everything on my own. I asked for software that I could use to make it 
easier to do the accounting but I was told there was none. I had to 
create an excel spreadsheet to enter in the amounts in the categories 
that were requested, and sometimes it takes me up to 2 weeks to 
complete all the data entry.''

    Caregivers express frustration over the fact that, despite being 
closely and frequently monitored under the Veterans Health 
Administration's Caregiver-Assistance Program, they are closely 
scrutinized again by the Veterans Benefits Administration:

    ``We are required to purchase, annually, a Surety Bond that costs 
roughly $500 to $600 to `protect the funds of the service member 
against the fiduciary'. I find this appalling. We are financially 
responsible, debt-free, tax-paying ADULTS nearly 55 years old. We have 
managed to pull our son out of all debt and have secured funds for his 
future and meet/exceed his daily needs responsibly. When I'm forced to 
`line item' Walmart receipts this is TOO far! I have to `ask 
permission' to pay property taxes and home owner insurances that run 
over $ 1,000.00. I have to ask a stranger permission prior to making a 
purchase, and submit reasoning as to why it's needed. [Under the 
Caregiver-Assistance Program] there is a VA representative that 
physically comes inside our home every 90 days that walks into every 
room (including my private bedroom and bath), checks every closet and 
cupboard, and refrigerator to `inspect' the level of care our service 
member receives, and yet additionally we are probed yearly by a 
forensic accounting that seemingly investigates for `murderous' 
infractions.''

    Others echo the sense of insecurity Pam Estes cited in her 
statement, aggravated when VA auditors are insensitive or threatening. 
As one reported:

    ``[The auditor] went on to say that . . . it's `the government's 
money' and since he is representing the government that he could tell 
me what to spend the money on and that our electric bill was too high 
and that during the summer in Florida that I shouldn't run the A/C on 
at night!''

    Understandably, VBA must be ``on guard'' in managing a fiduciary 
program. But it does not seem to take account of the unique 
circumstances of family members who have devoted themselves to the 
full-time care of severely wounded warriors, and who also serve as 
their fiduciaries. Parents and spouses of wounded warriors have made 
great sacrifices - often giving up careers and depleting savings--to 
care for their loved ones. Many have been appointed fiduciaries. Their 
love and dedication to their wounded spouses and children does not 
change in any way by virtue of taking on new responsibilities as a 
fiduciary.
    As we understand it, VA policy recognizes that all fiduciary cases 
do not require the same degree of attention and supervision, and that 
field examiners should consider the unique circumstances of each case. 
But there appears to be wide variability in how or even whether 
examiners' exercise that judgment in their work with family members who 
are not only fiduciaries for severely wounded veterans, but also their 
full-time caregivers.
    It is tragic that parents and spouses who over time have surely 
proven their dedication to their loved one, and have taken on the 
responsibility to serve as fiduciaries, should have to deal with a 
system that still appears to be marked by rigidity, intrusiveness, 
demanding of unnecessarily detailed reporting, and unreasonableness 
when it conducts oversight of those caregivers in their role as the 
veteran's fiduciary.
    VA Fiduciary Program policy should provide that a devoted family 
member who furnishes daily care for a severely wounded veteran should 
not be treated as an object of VA suspicion - either in terms of rigid 
management of their budgeting or intrusive home visits--simply because 
the individual serves as the veteran's fiduciary. These families should 
be treated with dignity. VBA should substantially revise its policy and 
practice to reflect far greater balance and understanding as it relates 
to caregiver-fiduciaries who have demonstrated that they do not pose 
significant risk and have earned VA's trust.
    VA officials have acknowledged a need for more training for the 
fiduciary program staff. It should also better inform family members of 
their responsibilities in agreeing to serve as fiduciaries. VBA 
officials led us to believe that they were committed to remedying the 
kinds of problems caregiver-fiduciaries have experienced. But WWP is 
not aware of substantial remedial measures having been instituted, let 
alone of sensible steps whereby VBA could learn from VHA's caregiver-
monitoring that a family-caregiver who is also a fiduciary for the 
veteran is reliable and caring.
    In short, a devoted family member who provides consistent, high-
quality daily care for a severely wounded veteran has surely earned 
VA's trust and should not be treated as an object of VA suspicion 
simply because the individual serves as the veteran's fiduciary. 
Families who have already earned VA's trust should not be subjected to 
rigid budgeting, unnecessarily detailed accounting, ongoing intrusive 
scrutiny, or threatening warnings without substantial cause. Finally, 
VA should work to achieve more uniform standards and greater 
consistency in its application of fiduciary oversight policy.

                                 
                        QUESTIONS FOR THE RECORD

    Question & Response From: Hon. Bill Johnson, Chairman. Subcommittee 
on Oversight and Investigations - To: U.S. Department of Veterans 
Affair
    Question 1: When was the last time a fiduciary was removed from 
his/her duties?
    Response: As of February 27, 2012, the last date on which a VA-
appointed fiduciary was removed from his or her duties due to 
inadequate performance was February 24, 2012.
    Question 2: How many fiduciaries were removed as a result of 
performance related issues? Please provide the dates of removal, 
covering the last three years.
    Response: The number of fiduciaries removed based upon inadequate 
performance by fiscal year (FY) is as follows:

        FY 2009 = 611
        FY 2010 = 629
        FY 2011 = 551
        FY 2012 = 202 (through February 28)
        Total 1,993
    VA removes fiduciaries when they misuse a beneficiary's funds or do 
not perform adequately, such as an inability or unwillingness to 
account. Upon identification of unresolved performance issues, VA acts 
promptly to remove fiduciaries. Less than one percent of all 
fiduciaries are removed for inadequate performance each year. The 
attached spreadsheet (Attachment A) lists the dates of each removal.

                                              Attachement A--Fiduciaries Removed (post hearing question #2)
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                                                                 FY 2010  DATE OF REMOVAL       FY 2011  DATE OF REMOVAL      FY 2012 (through 2/28/12)
                   FY 2009  DATE OF REMOVAL                                                                                       DATE OF REMOVAL
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10/2/2008                                                                       10/1/2009                      10/1/2010                      10/3/2011
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10/2/2008..................................................                     10/2/2009                      10/1/2010                      10/3/2011
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10/2/2008..................................................                     10/2/2009                      10/3/2010                      10/5/2011
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10/3/2008..................................................                     10/5/2009                      10/4/2010                      10/5/2011
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10/3/2008..................................................                     10/6/2009                      10/4/2010                      10/6/2011
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10/6/2008..................................................                     10/6/2009                      10/5/2010                      10/6/2011
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10/6/2008..................................................                     10/6/2009                      10/5/2010                      10/7/2011
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10/6/2008..................................................                     10/6/2009                      10/6/2010                     10/11/2011
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10/6/2008..................................................                     10/6/2009                      10/6/2010                     10/11/2011
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10/6/2008..................................................                     10/6/2009                      10/6/2010                     10/12/2011
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10/7/2008..................................................                     10/6/2009                      10/6/2010                     10/12/2011
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10/9/2008..................................................                     10/6/2009                      10/7/2010                     10/12/2011
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10/9/2008..................................................                     10/7/2009                      10/7/2010                     10/12/2011
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10/9/2008..................................................                     10/7/2009                      10/7/2010                     10/12/2011
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10/9/2008..................................................                     10/7/2009                      10/7/2010                     10/13/2011
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10/9/2008..................................................                     10/8/2009                      10/7/2010                     10/14/2011
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10/10/2008.................................................                     10/8/2009                      10/7/2010                     10/17/2011
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10/14/2008.................................................                     10/8/2009                      10/8/2010                     10/17/2011
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10/14/2008.................................................                     10/8/2009                      10/8/2010                     10/17/2011
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10/15/2008.................................................                     10/8/2009                     10/12/2010                     10/17/2011
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10/15/2008.................................................                     10/9/2009                     10/12/2010                     10/18/2011
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10/16/2008.................................................                     10/9/2009                     10/13/2010                     10/18/2011
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10/16/2008.................................................                     10/9/2009                     10/13/2010                     10/18/2011
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10/16/2008.................................................                    10/13/2009                     10/14/2010                     10/18/2011
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10/17/2008.................................................                    10/13/2009                     10/15/2010                     10/18/2011
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10/17/2008.................................................                    10/13/2009                     10/15/2010                     10/18/2011
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10/17/2008.................................................                    10/14/2009                     10/15/2010                     10/19/2011
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10/17/2008.................................................                    10/14/2009                     10/15/2010                     10/19/2011
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10/17/2008.................................................                    10/15/2009                     10/19/2010                     10/20/2011
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10/17/2008.................................................                    10/15/2009                     10/19/2010                     10/21/2011
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10/20/2008.................................................                    10/15/2009                     10/19/2010                     10/21/2011
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10/20/2008.................................................                    10/16/2009                     10/22/2010                     10/24/2011
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10/20/2008.................................................                    10/16/2009                     10/22/2010                     10/25/2011
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10/20/2008.................................................                    10/20/2009                     10/25/2010                     10/25/2011
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10/20/2008.................................................                    10/20/2009                     10/25/2010                     10/25/2011
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10/20/2008.................................................                    10/21/2009                     10/25/2010                     10/25/2011
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10/20/2008.................................................                    10/22/2009                     10/26/2010                     10/26/2011
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10/20/2008.................................................                    10/22/2009                     10/26/2010                     10/26/2011
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10/20/2008.................................................                    10/22/2009                     10/27/2010                     10/26/2011
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10/20/2008.................................................                    10/22/2009                     10/27/2010                     10/27/2011
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10/20/2008.................................................                    10/22/2009                     10/28/2010                     10/28/2011
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10/21/2008.................................................                    10/22/2009                     10/28/2010                     10/28/2011
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10/21/2008.................................................                    10/23/2009                     10/28/2010                     10/28/2011
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10/21/2008.................................................                    10/23/2009                     10/28/2010                     10/28/2011
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10/22/2008.................................................                    10/23/2009                     10/28/2010                     10/28/2011
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10/22/2008.................................................                    10/23/2009                     10/28/2010                     10/29/2011
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10/23/2008.................................................                    10/23/2009                     10/28/2010                     10/31/2011
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10/24/2008.................................................                    10/26/2009                     10/28/2010                     10/31/2011
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10/24/2008.................................................                    10/27/2009                     10/28/2010                     10/31/2011
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10/24/2008.................................................                    10/28/2009                     10/29/2010                     10/31/2011
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10/24/2008.................................................                    10/28/2009                     10/29/2010                     10/31/2011
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10/27/2008.................................................                    10/29/2009                     10/29/2010                      11/1/2011
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10/27/2008.................................................                    10/29/2009                     10/29/2010                      11/1/2011
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10/28/2008.................................................                    10/29/2009                     10/29/2010                      11/1/2011
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10/28/2008.................................................                    10/29/2009                     10/29/2010                      11/2/2011
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10/29/2008.................................................                    10/29/2009                     10/29/2010                      11/3/2011
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10/29/2008.................................................                    10/30/2009                      11/2/2010                      11/3/2011
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10/29/2008.................................................                    10/30/2009                      11/3/2010                      11/7/2011
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10/31/2008.................................................                    10/30/2009                      11/4/2010                      11/7/2011
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10/31/2008.................................................                     11/2/2009                      11/5/2010                      11/7/2011
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10/31/2008.................................................                     11/2/2009                      11/5/2010                      11/8/2011
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10/31/2008.................................................                     11/3/2009                      11/8/2010                      11/8/2011
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10/31/2008.................................................                     11/4/2009                      11/8/2010                      11/8/2011
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10/31/2008.................................................                     11/4/2009                      11/8/2010                      11/8/2011
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11/3/2008..................................................                     11/4/2009                      11/8/2010                      11/9/2011
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11/3/2008..................................................                     11/4/2009                      11/9/2010                     11/10/2011
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11/4/2008..................................................                     11/5/2009                     11/10/2010                     11/14/2011
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11/5/2008..................................................                     11/5/2009                     11/10/2010                     11/14/2011
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11/5/2008..................................................                     11/5/2009                     11/12/2010                     11/16/2011
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11/5/2008..................................................                     11/5/2009                     11/12/2010                     11/16/2011
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11/6/2008..................................................                     11/5/2009                     11/12/2010                     11/16/2011
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11/6/2008..................................................                     11/6/2009                     11/12/2010                     11/17/2011
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11/6/2008..................................................                     11/6/2009                     11/15/2010                     11/17/2011
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11/6/2008..................................................                     11/6/2009                     11/15/2010                     11/18/2011
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11/7/2008..................................................                     11/6/2009                     11/15/2010                     11/18/2011
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11/7/2008..................................................                     11/9/2009                     11/15/2010                     11/18/2011
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11/10/2008.................................................                     11/9/2009                     11/16/2010                     11/18/2011
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11/10/2008.................................................                     11/9/2009                     11/17/2010                     11/21/2011
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11/11/2008.................................................                     11/9/2009                     11/17/2010                     11/21/2011
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11/12/2008.................................................                     11/9/2009                     11/17/2010                     11/22/2011
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11/13/2008.................................................                     11/9/2009                     11/18/2010                     11/23/2011
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11/14/2008.................................................                     11/9/2009                     11/18/2010                     11/25/2011
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11/14/2008.................................................                    11/10/2009                     11/19/2010                     11/25/2011
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11/14/2008.................................................                    11/10/2009                     11/19/2010                     11/26/2011
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11/19/2008.................................................                    11/10/2009                     11/19/2010                     11/28/2011
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11/19/2008.................................................                    11/10/2009                     11/19/2010                     11/28/2011
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11/20/2008.................................................                    11/12/2009                     11/19/2010                     11/28/2011
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11/21/2008.................................................                    11/12/2009                     11/19/2010                     11/28/2011
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11/24/2008.................................................                    11/12/2009                     11/22/2010                     11/29/2011
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11/25/2008.................................................                    11/12/2009                     11/22/2010                     11/29/2011
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11/25/2008.................................................                    11/13/2009                     11/22/2010                     11/29/2011
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11/26/2008.................................................                    11/16/2009                     11/23/2010                     11/29/2011
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11/26/2008.................................................                    11/16/2009                     11/23/2010                     11/30/2011
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11/26/2008.................................................                    11/16/2009                     11/23/2010                     11/30/2011
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11/26/2008.................................................                    11/17/2009                     11/23/2010                     11/30/2011
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11/28/2008.................................................                    11/18/2009                     11/23/2010                     11/30/2011
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12/2/2008..................................................                    11/18/2009                     11/26/2010                     11/30/2011
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12/4/2008..................................................                    11/18/2009                     11/26/2010                     11/30/2011
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12/5/2008..................................................                    11/19/2009                     11/29/2010                      12/1/2011
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12/5/2008..................................................                    11/20/2009                     11/29/2010                      12/1/2011
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12/8/2008..................................................                    11/20/2009                     11/30/2010                      12/1/2011
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12/8/2008..................................................                    11/20/2009                     11/30/2010                      12/5/2011
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12/8/2008..................................................                    11/20/2009                     11/30/2010                      12/5/2011
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12/8/2008..................................................                    11/23/2009                     11/30/2010                      12/5/2011
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12/8/2008..................................................                    11/23/2009                     11/30/2010                      12/6/2011
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12/8/2008..................................................                    11/24/2009                      12/2/2010                      12/6/2011
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12/9/2008..................................................                    11/24/2009                      12/2/2010                      12/7/2011
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12/9/2008..................................................                    11/24/2009                      12/2/2010                      12/7/2011
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12/9/2008..................................................                    11/25/2009                      12/3/2010                      12/7/2011
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12/9/2008..................................................                    11/25/2009                      12/3/2010                      12/8/2011
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12/9/2008..................................................                    11/25/2009                      12/3/2010                      12/9/2011
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12/9/2008..................................................                    11/27/2009                      12/4/2010                      12/9/2011
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12/9/2008..................................................                    11/27/2009                      12/6/2010                      12/9/2011
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12/9/2008..................................................                    11/28/2009                      12/6/2010                     12/12/2011
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12/10/2008.................................................                    11/30/2009                      12/7/2010                     12/12/2011
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12/10/2008.................................................                    11/30/2009                      12/7/2010                     12/14/2011
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12/10/2008.................................................                    11/30/2009                      12/8/2010                     12/14/2011
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12/11/2008.................................................                     12/1/2009                      12/9/2010                     12/14/2011
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12/11/2008.................................................                     12/2/2009                      12/9/2010                     12/15/2011
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12/11/2008.................................................                     12/2/2009                     12/15/2010                     12/17/2011
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12/11/2008.................................................                     12/2/2009                     12/15/2010                     12/19/2011
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12/12/2008.................................................                     12/2/2009                     12/16/2010                     12/19/2011
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12/15/2008.................................................                     12/3/2009                     12/16/2010                     12/20/2011
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12/15/2008.................................................                     12/3/2009                     12/16/2010                     12/21/2011
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12/16/2008.................................................                     12/3/2009                     12/17/2010                     12/22/2011
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12/16/2008.................................................                     12/7/2009                     12/17/2010                     12/22/2011
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12/17/2008.................................................                     12/7/2009                     12/20/2010                     12/22/2011
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12/17/2008.................................................                     12/8/2009                     12/20/2010                     12/23/2011
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12/17/2008.................................................                     12/9/2009                     12/20/2010                     12/23/2011
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12/17/2008.................................................                     12/9/2009                     12/20/2010                     12/27/2011
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12/17/2008.................................................                    12/10/2009                     12/20/2010                     12/27/2011
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12/17/2008.................................................                    12/10/2009                     12/20/2010                     12/28/2011
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12/17/2008.................................................                    12/10/2009                     12/20/2010                     12/29/2011
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12/17/2008.................................................                    12/11/2009                     12/21/2010                     12/29/2011
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12/18/2008.................................................                    12/14/2009                     12/21/2010                       1/4/2012
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12/18/2008.................................................                    12/14/2009                     12/22/2010                       1/5/2012
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12/18/2008.................................................                    12/15/2009                     12/22/2010                       1/6/2012
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12/18/2008.................................................                    12/15/2009                     12/22/2010                       1/9/2012
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12/19/2008.................................................                    12/15/2009                     12/22/2010                      1/10/2012
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12/22/2008.................................................                    12/16/2009                     12/22/2010                      1/12/2012
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12/23/2008.................................................                    12/17/2009                     12/22/2010                      1/12/2012
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12/23/2008.................................................                    12/17/2009                     12/23/2010                      1/13/2012
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12/23/2008.................................................                    12/17/2009                     12/23/2010                      1/17/2012
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12/23/2008.................................................                    12/18/2009                     12/23/2010                      1/17/2012
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12/23/2008.................................................                    12/18/2009                     12/23/2010                      1/18/2012
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12/23/2008.................................................                    12/21/2009                     12/23/2010                      1/19/2012
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12/23/2008.................................................                    12/21/2009                     12/24/2010                      1/19/2012
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12/24/2008.................................................                    12/22/2009                     12/28/2010                      1/20/2012
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12/24/2008.................................................                    12/22/2009                     12/30/2010                      1/21/2012
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12/24/2008.................................................                    12/22/2009                     12/30/2010                      1/21/2012
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12/24/2008.................................................                    12/22/2009                     12/30/2010                      1/21/2012
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12/29/2008.................................................                    12/22/2009                     12/30/2010                      1/23/2012
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12/30/2008.................................................                    12/22/2009                     12/30/2010                      1/24/2012
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12/30/2008.................................................                    12/23/2009                       1/3/2011                      1/24/2012
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12/30/2008.................................................                    12/28/2009                       1/3/2011                      1/24/2012
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12/31/2008.................................................                    12/28/2009                       1/5/2011                      1/25/2012
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1/5/2009...................................................                    12/28/2009                       1/5/2011                      1/26/2012
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1/5/2009...................................................                    12/28/2009                       1/5/2011                      1/26/2012
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1/6/2009...................................................                    12/28/2009                       1/5/2011                      1/26/2012
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1/7/2009...................................................                    12/28/2009                       1/6/2011                      1/26/2012
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1/7/2009...................................................                    12/29/2009                       1/6/2011                      1/27/2012
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1/8/2009...................................................                    12/30/2009                       1/6/2011                      1/27/2012
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1/8/2009...................................................                    12/31/2009                       1/6/2011                      1/30/2012
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1/9/2009...................................................                    12/31/2009                       1/7/2011                      1/30/2012
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1/9/2009...................................................                    12/31/2009                       1/7/2011                      1/30/2012
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1/9/2009...................................................                    12/31/2009                       1/7/2011                      1/30/2012
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1/12/2009..................................................                      1/7/2010                       1/7/2011                      1/30/2012
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1/12/2009..................................................                      1/7/2010                       1/8/2011                      1/30/2012
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1/12/2009..................................................                      1/8/2010                       1/8/2011                      1/30/2012
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1/13/2009..................................................                      1/8/2010                      1/10/2011                      1/31/2012
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1/13/2009..................................................                     1/11/2010                      1/10/2011                      1/31/2012
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1/13/2009..................................................                     1/12/2010                      1/11/2011                      1/31/2012
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1/15/2009..................................................                     1/12/2010                      1/12/2011                      1/31/2012
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1/16/2009..................................................                     1/12/2010                      1/12/2011                       2/2/2012
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1/20/2009..................................................                     1/13/2010                      1/12/2011                       2/2/2012
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1/20/2009..................................................                     1/14/2010                      1/13/2011                       2/3/2012
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1/20/2009..................................................                     1/14/2010                      1/13/2011                       2/3/2012
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1/21/2009..................................................                     1/14/2010                      1/13/2011                       2/6/2012
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1/21/2009..................................................                     1/15/2010                      1/13/2011                       2/6/2012
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1/21/2009..................................................                     1/19/2010                      1/13/2011                       2/7/2012
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1/22/2009..................................................                     1/19/2010                      1/14/2011                       2/7/2012
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1/22/2009..................................................                     1/19/2010                      1/14/2011                       2/8/2012
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1/23/2009..................................................                     1/19/2010                      1/14/2011                       2/9/2012
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1/26/2009..................................................                     1/20/2010                      1/14/2011                      2/10/2012
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1/26/2009..................................................                     1/20/2010                      1/15/2011                      2/10/2012
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1/26/2009..................................................                     1/21/2010                      1/15/2011                      2/13/2012
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1/27/2009..................................................                     1/21/2010                      1/15/2011                      2/13/2012
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1/27/2009..................................................                     1/21/2010                      1/15/2011                      2/15/2012
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1/27/2009..................................................                     1/22/2010                      1/18/2011                      2/16/2012
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1/28/2009..................................................                     1/22/2010                      1/18/2011                      2/16/2012
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1/28/2009..................................................                     1/22/2010                      1/18/2011                      2/16/2012
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1/29/2009..................................................                     1/22/2010                      1/19/2011                      2/17/2012
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1/29/2009..................................................                     1/22/2010                      1/19/2011                      2/17/2012
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1/30/2009..................................................                     1/22/2010                      1/20/2011                      2/24/2012
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1/30/2009..................................................                     1/25/2010                      1/20/2011                      2/24/2012
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1/30/2009..................................................                     1/25/2010                      1/20/2011                      2/24/2012
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1/30/2009..................................................                     1/26/2010                      1/21/2011                      2/27/2012
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1/30/2009..................................................                     1/26/2010                      1/24/2011                      2/27/2012
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2/3/2009...................................................                     1/26/2010                      1/25/2011                      2/27/2012
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2/4/2009...................................................                     1/26/2010                      1/25/2011                      2/28/2012
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2/4/2009...................................................                     1/26/2010                      1/26/2011                      2/28/2012
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2/4/2009...................................................                     1/27/2010                      1/27/2011
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2/5/2009...................................................                     1/28/2010                      1/27/2011
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2/6/2009...................................................                     1/28/2010                      1/28/2011
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2/6/2009...................................................                     1/29/2010                      1/28/2011
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2/6/2009...................................................                     1/29/2010                      1/28/2011
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2/9/2009...................................................                     1/29/2010                      1/28/2011
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2/10/2009..................................................                     1/29/2010                      1/31/2011
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2/12/2009..................................................                     1/30/2010                       2/3/2011
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2/12/2009..................................................                      2/1/2010                       2/3/2011
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2/12/2009..................................................                      2/2/2010                       2/3/2011
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2/12/2009..................................................                      2/3/2010                       2/4/2011
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2/13/2009..................................................                      2/3/2010                       2/4/2011
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2/13/2009..................................................                      2/4/2010                       2/7/2011
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2/16/2009..................................................                      2/4/2010                       2/7/2011
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2/17/2009..................................................                      2/4/2010                       2/7/2011
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2/17/2009..................................................                      2/4/2010                       2/7/2011
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2/17/2009..................................................                      2/4/2010                       2/7/2011
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2/18/2009..................................................                      2/5/2010                       2/8/2011
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2/18/2009..................................................                      2/5/2010                       2/8/2011
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2/19/2009..................................................                      2/5/2010                       2/9/2011
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2/19/2009..................................................                      2/8/2010                      2/10/2011
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2/19/2009..................................................                      2/8/2010                      2/10/2011
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2/19/2009..................................................                      2/8/2010                      2/10/2011
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2/19/2009..................................................                      2/9/2010                      2/10/2011
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2/19/2009..................................................                      2/9/2010                      2/10/2011
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2/20/2009..................................................                      2/9/2010                      2/10/2011
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2/20/2009..................................................                     2/10/2010                      2/11/2011
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2/20/2009..................................................                     2/11/2010                      2/11/2011
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2/20/2009..................................................                     2/16/2010                      2/14/2011
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2/20/2009..................................................                     2/16/2010                      2/16/2011
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2/20/2009..................................................                     2/16/2010                      2/17/2011
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2/20/2009..................................................                     2/17/2010                      2/18/2011
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2/20/2009..................................................                     2/17/2010                      2/18/2011
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2/20/2009..................................................                     2/17/2010                      2/23/2011
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2/23/2009..................................................                     2/17/2010                      2/23/2011
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2/24/2009..................................................                     2/18/2010                      2/24/2011
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2/24/2009..................................................                     2/18/2010                      2/24/2011
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2/24/2009..................................................                     2/19/2010                      2/24/2011
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2/24/2009..................................................                     2/22/2010                      2/24/2011
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2/24/2009..................................................                     2/22/2010                      2/24/2011
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2/24/2009..................................................                     2/22/2010                      2/24/2011
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2/25/2009..................................................                     2/22/2010                      2/25/2011
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2/25/2009..................................................                     2/22/2010                      2/25/2011
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2/26/2009..................................................                     2/22/2010                      2/28/2011
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2/27/2009..................................................                     2/22/2010                      2/28/2011
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2/27/2009..................................................                     2/24/2010                      2/28/2011
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2/27/2009..................................................                     2/24/2010                      2/28/2011
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3/2/2009...................................................                     2/24/2010                       3/2/2011
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3/2/2009...................................................                     2/24/2010                       3/2/2011
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3/3/2009...................................................                     2/25/2010                       3/4/2011
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3/3/2009...................................................                     2/25/2010                       3/4/2011
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3/4/2009...................................................                     2/25/2010                       3/7/2011
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3/4/2009...................................................                     2/26/2010                       3/7/2011
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3/5/2009...................................................                     2/26/2010                       3/7/2011
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3/5/2009...................................................                     2/26/2010                       3/7/2011
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3/5/2009...................................................                     2/27/2010                       3/7/2011
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3/6/2009...................................................                     2/28/2010                       3/7/2011
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3/7/2009...................................................                      3/1/2010                       3/7/2011
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3/9/2009...................................................                      3/3/2010                       3/7/2011
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3/9/2009...................................................                      3/3/2010                       3/8/2011
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3/9/2009...................................................                      3/3/2010                       3/9/2011
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3/12/2009..................................................                      3/5/2010                      3/10/2011
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3/12/2009..................................................                      3/5/2010                      3/11/2011
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3/13/2009..................................................                      3/5/2010                      3/11/2011
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3/16/2009..................................................                      3/5/2010                      3/11/2011
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3/16/2009..................................................                      3/5/2010                      3/11/2011
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3/17/2009..................................................                      3/5/2010                      3/11/2011
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3/17/2009..................................................                      3/5/2010                      3/14/2011
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3/18/2009..................................................                      3/8/2010                      3/14/2011
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3/19/2009..................................................                      3/8/2010                      3/14/2011
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3/20/2009..................................................                     3/11/2010                      3/14/2011
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3/23/2009..................................................                     3/11/2010                      3/14/2011
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3/23/2009..................................................                     3/11/2010                      3/14/2011
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3/24/2009..................................................                     3/11/2010                      3/14/2011
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3/24/2009..................................................                     3/12/2010                      3/15/2011
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3/26/2009..................................................                     3/12/2010                      3/15/2011
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3/26/2009..................................................                     3/12/2010                      3/15/2011
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3/26/2009..................................................                     3/15/2010                      3/15/2011
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3/26/2009..................................................                     3/15/2010                      3/16/2011
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3/27/2009..................................................                     3/16/2010                      3/16/2011
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3/30/2009..................................................                     3/17/2010                      3/16/2011
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    Question 3: Has VA ever overruled a Veteran who wanted his/her 
state-appointed guardian appointed as his/her fiduciary and appointed 
someone else?
    a. If so, please provide all occurrences over the last five years.
    Response: VA records do not contain information on the appointment 
of Federal fiduciaries for beneficiaries who also have state court-
appointed guardians. However, VA's policy is to select the most 
effective and least restrictive method of payment. The least 
restrictive method of payment refers to the selection of a third-party 
payee, such as a relative or close friend who can serve without the 
supervision of a court. Since a court-appointed guardian is the most 
restrictive method of payment and often requires the beneficiary to 
incur fees that exceed by far the four percent maximum established by 
Congress for Federal fiduciaries, VA does not always recognize the 
court-appointed guardian. When a beneficiary requests his or her court-
appointed guardian as fiduciary, VA will still attempt to qualify that 
individual because this is the individual the Veteran desires. There 
are cases in which VA cannot qualify the court-appointed guardian, such 
as cases where the guardian was previously removed as Federal fiduciary 
for misusing benefits.
    Question 4: What is the clinical process for determining 
incompetency?
    Response: For purposes of VA's fiduciary appointments, a 
beneficiary is determined to be ``incompetent'' when a healthcare 
professional has opined that the beneficiary cannot manage his or her 
financial affairs, specifically his or her VA benefits. VA's 
administrative process by which it determines incompetency is 
predicated on a clinician's medical judgment. VA adjudicators will not 
make an incompetency determination without medical evidence indicating 
that the beneficiary cannot manage his or her financial affairs.
    Upon receipt of medical evidence indicating an inability to manage 
financial affairs, VA will propose an incompetency rating and provide 
notice to the beneficiary regarding his or her due process rights. The 
beneficiary has 60 days to dispute the proposal and provide information 
or evidence indicating that the proposal is incorrect.
    At the conclusion of the 60-day period, or upon waiver of that 
period, VA will consider any information or evidence submitted by the 
beneficiary and prepare a final rating on the issue of incompetency. VA 
will issue any final rating of incompetency with notice regarding the 
beneficiary's right of appeal to the Board of Veterans' Appeals. The 
rating is then referred to the VA fiduciary hub with jurisdiction to 
initiate the fiduciary appointment process. A field examiner will 
personally interview the beneficiary, his or her family members, and 
other parties of interest to determine the person or entity best suited 
to serve as fiduciary for the beneficiary. The field examiner will 
recommend a fiduciary selection to fiduciary program management for 
approval.
    Question 5: What are the challenges of bringing VA-appointed 
fiduciaries into accordance with the law of the state in which the 
fiduciary is practicing?
    a. Does VA plan to incorporate this practice into its fiduciary 
program?
    Response: VA interprets current Federal law to mean that Congress 
chose to legislate in this area because it recognized the need for 
enactment of a consistent national standard for all VA beneficiaries 
who cannot manage their benefits, regardless of the state in which the 
beneficiary or fiduciary resides. Absent such a standard, which 
preempts state law, beneficiaries might receive different services, 
incur different fees, and have different rights and obligations, based 
only upon the beneficiary's or fiduciary's state of residence. VA 
generally does not support the disparate treatment of beneficiaries. 
Further, it would be very difficult for VA to conduct the oversight 
required by current law under a system requiring the application of 
various standards of conduct for fiduciaries.
    VA does not intend to require the application of state law in its 
fiduciary program. However, consistent with Congressional intent, VA is 
working to revise its regulations to ensure a national standard is in 
place for the fiduciaries who serve Veterans and other beneficiaries. 
This project includes a review of other Federal agencies' regulations, 
as well as the provisions of the Uniformed Veterans Guardianship Act, 
the Uniform Probate Code, and the standards of conduct issued by 
professional organizations and industry practice groups. VA intends to 
propose the incorporation of some of these provisions in its revised 
regulations, as a means to ensure consistent fiduciary services 
nationwide.
    Question 6: Has VA put out a decision assessment for Freeman vs. 
Shinseki?
    a. If so, please provide a copy of the assessment and the date it 
was issued.
    b. If not, please explain why a decision assessment has not been 
distributed.
    Response: A decision assessment document (DAD) regarding a court's 
opinion is for informational purposes only. It does not establish VA 
policy or provide procedural guidance for field personnel. VA did not 
issue a DAD regarding Freeman v. Shinseki. Instead, the Pension and 
Fiduciary Service issued Fast Letter 11-37, Procedures and Required 
Documentation for Fiduciary Selection Decisions, Notices of 
Disagreement Received Regarding Fiduciary Selection, and Fiduciary 
Notice of Disagreement Tracking Requirements, regarding Freeman. This 
Fast Letter was issued on December 6, 2011, and provides detailed 
instructions on VA's interpretation of the decision, notification 
procedures, and appeal processing procedures. A copy is included as 
Attachment B.
Attachment B

                     DEPARTMENT OF VETERANS AFFAIRS
                    Veterans Benefits Administration
                         Washington, D.C. 20420

December 6, 2011

    Director (00/21PF)                    In Reply Refer To: 21PF
    All VA Regional Offices          Fast Letter: 11-37

    SUBJ: Procedures and Required Documentation for Fiduciary Selection 
Decisions, Notices of Disagreement Received Regarding Fiduciary 
Selection, and Fiduciary Notice of Disagreement Tracking Requirements
Purpose
    This fast letter provides correspondence to be used when notifying 
a Veteran or other beneficiary (beneficiary) of Department of Veterans 
Affairs' (VA) selection of a fiduciary to manage his or her VA funds. 
It also includes letters to be used in the event a beneficiary files a 
Notice of Disagreement (NOD) regarding a fiduciary selection.
Background
    The purpose of the VA Fiduciary Program is to protect the benefits 
paid to beneficiaries who are unable to manage their financial affairs. 
This protection most often includes the appointment or recognition of a 
fiduciary to manage the beneficiary's VA estate. On April 26, 2011, the 
Court of Appeals for Veterans Claims (CAVC) decided Freeman v. 
Shinseki, holding that VA's selection of a fiduciary is subject to 
appeal by the beneficiary to the Board of Veterans' Appeals and 
thereafter to the CAVC.
Procedures for Notifying a Beneficiary of Fiduciary Selection
    Effective April 26, 2011, beneficiaries and their representatives, 
if any, must be notified in writing of our selection of a fiduciary to 
manage the beneficiary's VA benefits. This requirement pertains to all 
beneficiaries who are rated incompetent, including those paid by 
Supervised Direct Pay. The Fiduciary Activity making the selection is 
responsible for providing this notification within five working days of 
the selection. Notifications must be provided for all initial 
selections and successor selections made on or after April 26, 2011. 
All notification letters for selections made on or after April 26, 
2011, but prior to the date of this fast letter must be mailed within 
60 days of the date of this fast letter.
    To facilitate compliance with the CAVC's decision, the letter 
attached as Enclosure A must be used in every instance of selection of 
a fiduciary. The letter must be amended to include the information 
specific to each case as noted in red text. No other alterations may be 
made.
    Every beneficiary and his or her representative, if any, must be 
sent the fiduciary's contact information and a copy of the fund usage 
agreement. These are required elements of the letter.
Procedures for Notification Upon Receipt of a Notice of Disagreement
    Consistent with current practice, only the beneficiary has standing 
to appeal our selection of a fiduciary. However, certain persons or 
entities other than the beneficiary may file a NOD on the beneficiary's 
behalf. Persons granted legal authority to act on a beneficiary's 
behalf, such as a court-appointed guardian, conservator, committee, or 
trustee, may appeal the selection of a fiduciary on the beneficiary's 
behalf. Also, if a beneficiary chooses to appeal the selection of a 
fiduciary, an accredited service organization representative, agent, or 
attorney representing the beneficiary as indicated by VA Form 21-22, 
Appointment of Veterans Service Organization as Claimant's 
Representative, or VA Form 21-22a, Appointment of Individual as 
Claimant's Representative, may appeal the selection of a fiduciary on 
the beneficiary's behalf.
    Receipt and control of NODs pertaining to the selection of a 
fiduciary will be the responsibility of the Regional Office of 
Jurisdiction (ROJ) where the Fiduciary Activity has selected the 
fiduciary. The Veterans Service Center Manager or Hub Manager at the 
ROJ will modify and use one of two sample letters (Enclosure B or 
Enclosure C) attached to this fast letter to provide notification to 
the beneficiary of receipt and/or acceptance of the NOD.
    The three categories of acceptable NODs submitted by the 
beneficiary or legal representative that warrant sending one of the 
enclosed letters are:

    1. Selections made prior to April 26, 2011
    --Process as any other NOD if received within one year of the date 
of selection. (Use Enclosure B.)
    2. Selections made on or after April 26, 2011
    --Process as any other NOD if received within one year of the date 
of the notification letter. (Use Enclosure B.)
    3. Selections for which notification was provided more than one 
year prior to receipt of NOD
    --Send acknowledgement letter and hold awaiting further guidance. 
(Use

    Enclosure C.)
    For NODs in categories one and two, the attached letter, Enclosure 
B, must be used to notify the beneficiary of our receipt of the NOD. 
Those NODs received which fall into category three will require sending 
the letter labeled Enclosure C. Guidance regarding preparation of a 
statement of the case will be provided under separate cover.
    NODs received from an individual or entity other than the 
beneficiary or his or her accredited or court appointed representative 
will not be accepted. In such cases, the person or entity submitting 
the correspondence will be provided the letter labeled Enclosure D. 
This letter acknowledges receipt, but states VA is not able to accept 
the document as an NOD as it was not submitted by the beneficiary or 
his or her legal representative.
Procedures for Tracking Receipt of a Notice of Disagreement
    Stations are required to compile a list of all NODs received 
regarding fiduciary cases on the enclosed NOD Tracker, Enclosure E. 
There is no current requirement to provide this listing on a recurring 
basis; however, the information must be made available upon request of 
Pension and Fiduciary Service and will be reviewed during site surveys.
Manual Changes
    Pension and Fiduciary Service will update M21-1MR as needed 
consistent with this fast letter.
Questions
    Questions regarding this letter may be submitted to VAVBAWAS/CO/
F&FE.

                                  /S/

                                  David R. McLenachen
                                  Director
                                  Pension and Fiduciary Service

    Enclosures

    Question 7: In its submitted testimony, VA refers to the April 2011 
Freeman vs. Shinseki opinion as something that ``may significantly 
impact VA's fiduciary program workload.'' Please inform the Committee 
at what date VA will know whether there will be an impact and what the 
impact will be.
    Response: The impact of the Freeman decision is difficult to 
predict. VA mailed more than 23,000 letters to VA beneficiaries 
advising them of their appellate rights regarding the selection of a 
fiduciary. Beneficiaries have one year from the date of the letter to 
submit a Notice of Disagreement regarding a fiduciary appointment. 
Historically, approximately five percent of VA's benefit decisions are 
appealed. If this holds true for appeals in the fiduciary program, VA 
could receive as many as 1,200 appeals as a result of the initial 
notifications. Applying the same logic, VA could receive approximately 
1,500 appeals annually in response to the approximately 30,000 new 
appointments made annually.
    While VA will need time to see the impact Freeman has on the 
fiduciary program, VA's appointment procedures might significantly 
reduce the number of appeals received as a result of Freeman. As stated 
above, VA considers the beneficiary's preference first and generally 
appoints family members, care takers, or legal guardians. VA 
anticipates that most beneficiaries will be satisfied with their 
fiduciaries. Also, as described above, these beneficiaries have already 
had one opportunity to appeal VA's decision regarding their inability 
to manage their VA benefits. This prior right of appeal might further 
mitigate the risk of large numbers of appeals.
    Question 8: In its submitted testimony, VA cited a ``misuse rate of 
less than one-tenth of one percent in fiscal year 2011'' of benefits by 
fiduciaries. Please list all the metrics used to calculate this rate, 
in addition to how misuse was discovered, including whether it was 
reported or discovered by VA.
    Response: VA measured the misuse rate using the number of misuse 
cases as compared the number of beneficiaries in the fiduciary program. 
The data used for FY 2011 is:

        Number beneficiaries in the fiduciary program = 122,271
        Number of misuse cases = 113
        Misuse rate = 0.09 percent

    There are several ways VA is alerted to potential misuse of VA 
funds by a fiduciary. The most common methods include annual 
accountings, field examinations, and beneficiary and third party 
reports. Auditing of annual accountings can reveal irregularities in 
expenditures, which VA will investigate for potential misuse. 
Additionally, failure to provide adequate accountings has also alerted 
VA of potential misuse. Field examinations provide information of 
inappropriate expenditures or other potential misuse through personal 
contact with the beneficiary and fiduciary. Additionally, a report from 
the beneficiary or third party has also prompted VA to investigate 
allegations of misuse.
    Question 9: What are VA's own proposals for reforming the fiduciary 
system? Please provide a detailed response including any potential 
statutory reforms and a timeline for completing and implementing the 
reforms.
    Response: VA has several initiatives underway to improve service to 
beneficiaries in the fiduciary program. In 2011, VA began transforming 
the culture of the fiduciary program to reflect a more beneficiary-
centric service approach. This cultural transformation began with a 
revised mission statement that focuses on this approach. This cultural 
transformation was communicated through training conferences, monthly 
teleconferences, and policy changes to ensure the focus of the 
fiduciary program is meeting the beneficiary's needs and wants. Under 
this change in culture, fiduciaries will have the responsibility and 
authority to determine the expenditures that are in the best interests 
of the beneficiary.
    As noted in the testimony, VA will revise its fiduciary 
regulations. Among other things, these regulations will prescribe 
beneficiary rights, fiduciary responsibilities, bars to service, 
limitations on commissions, grounds for removal, investigation 
procedures, and fiduciary qualifications. VA interprets its regulations 
and establishes procedures for its field personnel in its Adjudication 
Procedures Manual. VA will update the fiduciary portion of the manual 
consistent with the revised regulations.
    VA is currently evaluating the replacement of the Fiduciary-
Beneficiary System (FBS), which is the information technology system 
used by VA's fiduciary personnel. Replacement of FBS will improve the 
timeliness of VA's field fiduciary functions, better utilize resources, 
and protect beneficiaries through enhanced national oversight 
capabilities. Improved caseload management will enhance the efficiency 
of field examiners and allow managers to better assess workload trends.
    VA is consolidating its fiduciary activities to six regional hubs. 
This consolidation will allow VA the flexibility to address workload 
issues without the current constraint of state borders and VA regional 
office jurisdictions. It will also facilitate consistency in operations 
and decision-making, which will improve the quality of services 
provided to beneficiaries and the oversight of fiduciaries. The 
consolidation will be complete on March 26, 2012.
    VA developed and piloted centralized training for new legal 
instruments examiners (LIEs) in 2011. VA will continue to refine the 
centralized training for both LIEs and field examiners, and plans to 
fully deploy the concept in 2013. Training for fiduciaries, including 
an online training module and enhanced website, is also a reform 
initiative. Funding for this initiative is included in the FY 2013 
budget request.
    VA is also considering several policy changes that will enhance its 
fiduciary program. Policy changes under consideration include 
clarifying the limitation on fiduciary commissions, enhancing the 
communication between the fiduciary and beneficiary by requiring 
sharing of the approved annual accounting, and establishing case 
managers to address the unique needs of our very seriously injured 
Veterans in the fiduciary program.

                                 

    Additional Question & Response From: Hon. Bill Johnson, Chairman. 
Subcommittee on Oversight and Investigations - To: U.S. Department of 
Veterans Affair
    Question 1: Please notify us if VA uses metrics to monitor the 
Fiduciary Program. If VA does not use metrics, please provide an 
explanation as to why. If VA does use metrics, please provide all of 
the metrics that Mr. McLenachen reviews, including numbers, scores, and 
any other measure VA uses to monitor the effectiveness and efficiency 
of the Fiduciary Program. Additionally, please provide what VA 
considers a good score using the STAR protocol.
    Response: VA has several metrics for the performance of the 
fiduciary program. The following table lists current goals and results 
effective February 29, 2012. It also compares national performance with 
the performance of the Western Area Fiduciary Hub to illustrate the 
improvements made based upon consolidation of VA's fiduciary 
activities.

                                       National Fiduciary Program Metrics
----------------------------------------------------------------------------------------------------------------
                                                             Goal              National        Western Area Hub
----------------------------------------------------------------------------------------------------------------
Fiduciary STAR Accuracy                                             92%                 89%                 88%
----------------------------------------------------------------------------------------------------------------
Follow-up field exams pending 

    Letter & Questions From: Hon. Joe Donnelly, Subcommittee on 
Oversight and Investigations - To: Mr. David R. McLenachen, Director, 
Pension and Fiduciary Service, Veterans Benefits Administration, 
Department of Veterans Affairs

                           February 15, 2012
    Mr. David R. McLenachen
    Director, Pension and Fiduciary Service
    Veterans Benefits Administration
    Department of Veterans Affairs
    810 Vermont Ave, NW
    Washington, DC 20420

    Dear Mr. McLenachen:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to our House Committee on 
Veterans' Affairs Subcommittee on Oversight and Investigations hearing 
on Reforming VA's Flawed Fiduciary System on February 9, 2012. Please 
answer the enclosed hearing questions by no later than March 30, 2012.

    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for material for all full 
committee and subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively on letter size paper, 
single-spaced. In addition, please restate the question in its entirety 
before the answer.

    Due to the delay in receiving mail, please provide your response to 
Ms. Orfa Torres at [email protected], and fax at (202) 
225-2034. If you have any questions, please call (202) 225-9756.

                                  Sincerely,

                                  Joe Donnelly
                                  Ranking Member

    DMT/ot

Questions
    1. During the hearing you stated that fiduciaries are required to 
undergo a background investigation. Can you provide the Subcommittee 
with a detailed explanation of what a background investigation entails, 
including what records are sought and reviewed and what personal 
interviews, if any, are undertaken?

    a. What type of fiduciary (for example, paid fiduciary, court-
appointed fiduciary, VA appointed fiduciary) would require a background 
investigation?

    b. Has the VA ever waived a background investigation to first-time 
fiduciaries?

    i. If so, is there a consistent policy on waivers?
    ii. Does the VA waive background investigations to recurring 
fiduciaries?
    iii. Under what circumstances would the VA allow a background 
investigation to be waived?

    2. Please provide the Subcommittee with detailed information on how 
the Hub Pilot Program will be managed.

    a. How will fiduciary manager track field examiners while they 
travel?
    b. Is there a budget set aside to cover the cost of travel for 
field examiners?
    c. When would a field examiner be required to travel?
    d. How often would a field examiner travel?
    e. In your written testimony you mentioned the VA conducted an 
analysis of the Hub program to determine the programs' weaknesses and 
strengths. Please provide us a list of the weaknesses and strengths you 
found.

    3. Your testimony stated that you had begun a ``complete review and 
revision of all regulations and procedure manuals pertaining to 
fiduciary matters.'' During the hearing you estimated that this process 
would take one to one-and-a-half years to complete.

    a. Please provide the Subcommittee with your best estimate as to 
the date you plan to publish regulations for notice and comment?
    b. Please provide the Subcommittee with a detailed timeline listing 
the subjects of your review and estimated timeline for completion of 
each item.

    4. Regarding the Fiduciary Beneficiary System (FBS):

    a. Please provide the Subcommittee with a detailed timeline 
regarding replacement of this system.
    b. Will the replacement system be integrated with the Veterans 
Benefits Management System (VBMS)?
    c. Is VA assigning or requiring a unique identifier for all 
fiduciaries? If not, does the VA plan to do so?

    5. Regarding VA form 21-4703:

    a. If the VA approval of expenditures language is removed from the 
Fiduciary Agreement, what safeguards would be in place to protect 
beneficiaries? What safeguards would the VA recommend?
    b. If the agency relationship between the VA and the fiduciary was 
removed, would current law protect the interests of the beneficiary? If 
current law is felt by the VA to be inadequate, what statutory 
provisions would the VA recommend to protect beneficiaries?

                                 

    Response From: Mr. David R. McLenachen, Director, Pension and 
Fiduciary Service, Veterans Benefits Administration, Department of 
Veterans Affairs - To: Hon. Joe Donnelly, Subcommittee on Oversight and 
Investigations
    Question 1: During the hearing you stated that fiduciaries are 
required to undergo a background investigation. Can you provide the 
Subcommittee with a detailed explanation of what a background 
investigation entails, including what records are sought and reviewed 
and what personal interview, if any, are undertaken?
    Response: Section 5507 of title 38, United States Code, requires VA 
to appoint fiduciaries based upon a fitness investigation, to include 
face-to-face interviews, credit report reviews, and a criminal history 
check; a determination regarding the interests of the beneficiary; and 
the ability to obtain a bond. The process is thorough and is outlined 
below.
    All proposed fiduciaries are contacted in person to assess their 
willingness to serve, interest in the beneficiary, and qualifications. 
Qualifications include an analysis of a current credit report, review 
of an instant criminal background investigation, and consideration of 
opinion of at least one character witness.
    VA maintains contracts with reporting services to obtain the 
required background information. With this information, VA's field 
examiners are able to assess a proposed fiduciary's prior criminal 
activities, bankruptcy and foreclosure information, addresses, 
relationships, and personal assets. The assessment includes 
consideration of the nature of an offense, the length of time since an 
offense occurred, evidence that the proposed fiduciary has been 
rehabilitated, and all information contained in the credit report. A 
recommendation regarding the proposed fiduciary is not made until all 
of the available evidence is weighed and the individual is determined 
to be acceptable for service.

    a. What type of fiduciary (for example, paid fiduciary, court-
appointed fiduciary, VA appointed fiduciary) would require a background 
investigation?

    Response: Background investigations, consisting of obtaining and 
reviewing a credit report, and conducting an instant criminal 
background check, are generally required for all individuals who wish 
to serve as a VA beneficiary's fiduciary.
    For credit reports, the exceptions are: (1) the parent of a minor 
beneficiary, (2) the spouse of a Veteran, (3) a court-appointed 
fiduciary, (4) an individual appointed to manage an estate where the 
annual amount of benefits will not exceed $4,338, which reflects 
statutory requirement and is adjusted annually and (5) an individual 
currently serving satisfactorily as a VA fiduciary.
    For instant criminal background checks, the exceptions are: (1) 
cases in which VA makes an immediate benefit payment to the parent of a 
minor beneficiary, and (2) financial institutions or companies that 
provide fiduciary services.

    b. Has the VA ever waived a background investigation to first-time 
fiduciaries?

    Response: Yes, but only as outlined in the above exceptions.

    i. If so, is there a consistent policy on waivers?

    Response: The policy regarding waivers is established by 38 U.S.C. 
Sec.  5507(c), 38 C.F.R. 3.850, and VBA's Adjudication Procedures 
Manual, the guidance VA provides to its field personnel to interpret 
its regulations and establish procedures.

    ii. Does the VA waive background investigations to recurring 
fiduciaries?

    Response: Credit reports are waived for fiduciaries currently 
serving satisfactorily. Instant criminal background checks are 
performed on all proposed fiduciaries who are individuals regardless of 
the number of beneficiaries served. Background checks are not performed 
on companies that provide fiduciary services.

    iii. Under what circumstances would the VA allow a background 
investigation to be waived?

    Response: As noted above, the exceptions for instant criminal 
background checks are: (1) cases in which VA makes an immediate benefit 
payment to the parent of a minor beneficiary, and (2) financial 
institutions or companies that provide fiduciary services.
    Question 2: Please provide the Subcommittee with detailed 
information on how the Hub Pilot Program will be managed.

    a. How will the Fiduciary Manager track field examiners while they 
travel?

    Response: In 2009, VBA initiated a pilot project, which 
consolidated 14 of its fiduciary activities into the Western Area 
Fiduciary Hub, operating in a nearly paperless environment. 
Consolidation had a significant positive impact on the timeliness and 
quality of fiduciary appointments. Based upon the pilot results, VBA 
deployed the Hub concept nationwide at five new Hubs located at the 
Columbia, Indianapolis, Lincoln, Louisville, and Milwaukee Regional 
Offices. VBA's fiduciary activities will be fully consolidated in 2012.
    Fiduciary Hub Management works with field examiners to schedule 
field examination visits according to the most urgent needs and to 
maximize the efficiency of their travel. The Western Area Fiduciary Hub 
(WAH) has been using MapPoint software with good success to help 
identify ways to recognize the priorities, cluster work, and take the 
most efficient routes when traveling. The new Hubs are incorporating 
best practices from WAH. Hub Management also checks mileage monthly to 
ensure the amount of travel is consistent with the number of field 
examinations completed and the amount of travel needed to complete 
those field examinations.

    b. Is there a budget set aside to cover the cost of travel for 
field examiners?

    Response: For fiscal year 2012, a budget has been established for 
the Fiduciary Hubs to cover the expenses of not only travel for field 
examiners, but also centralized training for new Hub employees, 
supervisory oversight travel to each state managed within a Hub, and 
GSA car leases.

    c. When would a field examiner be required to travel?

    Response: Please see the response to question 2d below.

    d. How often would a field examiner travel?

    Response: Field examiners travel daily to visit beneficiaries and 
fiduciaries. Most travel is accomplished during a normal work tour with 
use of a GSA car. Additional travel money is spent when a field 
examiner must travel for an extended time. Overnight trips are needed 
periodically when multiple cases are located in remote areas where it 
is not feasible to travel both ways and accomplish needed work during a 
normal eight-hour shift. To minimize travel costs, VBA is hiring 
additional field examiners placed strategically throughout the country 
where field examiner coverage is sparse (i.e. rural areas). This will 
facilitate more efficient service and less travel for field examiners.

    e. In your written testimony you mentioned the VA conducted an 
analysis of the Hub program to determine the programs' weaknesses and 
strengths. Please provide us a list of the weaknesses and strengths you 
found.

    Response: The WAH pilot in Salt Lake City, Utah, afforded VA the 
opportunity to identify best practices as well as identify challenges 
and weaknesses. One of the largest challenges discovered by WAH during 
consolidation was the implementation of paperless processing. Ensuring 
that all documentation pertaining to a Veteran's fiduciary activity was 
scanned into VBA's online depository (Virtual VA) posed a challenge 
based in both consistency of operations and the volume of paper. 
Scanning units have been established at all of the Hubs to scan 
incoming mail, and a contractor is being utilized to scan all 
historical documentation into the Virtual VA system. VBA has also 
developed standard operating procedures for paperless processing in an 
effort to gain consistency of services. Working in the paperless 
environment has allowed the WAH to manage work more efficiently, 
transfer workload among employees with more ease, and increase 
timeliness in processing.

    Additional lessons learned during the pilot include:

      Ensuring out-based fiduciary employees have adequate and 
appropriate IT equipment,
      Establishing a toll-free number exclusive to the Hubs to 
provide specialized customer service to fiduciaries,
      Developing a refresher training curriculum to maintain 
and improve the level of performance of all Hub personnel,
      Utilizing Regional Counsels for new employee and 
refresher training on the various state laws and processes for Hub 
employees, and
      Utilizing a mapping system for workload with distance, 
clustering, and routing data for efficient assignment of field 
examinations.

    Question 3: Your testimony stated that you had begun a ``complete 
review and revision of all regulations and procedure manuals pertaining 
to fiduciary matters.'' During the hearing you estimated that this 
process would take one to one-and-a-half years to complete.

    a. Please provide the Subcommittee with your best estimate as to 
the date you plan to publish regulations for notice and comment?

    Response: We are currently drafting the notice of proposed 
rulemaking and hope to have it under review within the Department 
within 60 days. Additional steps required include an internal review 
process and Office of Management and Budget review.
    In the interim, Pension and Fiduciary Service will implement 
program improvements that do not require rulemaking using VBA's ``fast 
letter'' process, under which the agency provides mandatory policy 
guidance to its field personnel. For example, on March 16, 2012, the 
Service issued Fast Letter 12-09 regarding procedures for providing 
copies of fiduciaries' annual accountings to beneficiaries. These 
procedures add transparency for beneficiaries and enhance VA's ability 
to detect misuse of benefits. On March 16, the Service also issued Fast 
Letter 12-10, which clarified VA's interpretation of current law and 
procedures for appointing paid fiduciaries.

    b. Please provide the Subcommittee with a detailed timeline listing 
the subjects of your review and estimated timeline for completion of 
each item.

    Response: We foresee the complete review and revision of all 
regulations and procedure manuals pertaining to fiduciary matters in 
approximately 18 months. We will propose a complete revision of 38 
C.F.R. part 13 consistent with current VA policy and procedures. Among 
other things, we will address:

      Beneficiary rights;
      Bars to serving as a fiduciary;
      Qualification of fiduciaries;
      Responsibilities of fiduciaries;
      Fiduciary commissions;
      Removal of fiduciaries;
      Preference in selection of fiduciaries;
      Field examinations;
      Periodic onsite reviews;
      Personal funds of patients; and
      Misuse, reissuance, and recoupment of benefits.

    After the proposed rule has been published for notice and comment, 
we will revise the Adjudication Procedures Manual to ensure its 
consistency.
    Question 4: Regarding the Fiduciary Beneficiary System (FBS)

    a. Please provide the Subcommittee with a detailed timeline 
regarding replacement of this system.

    Response: Pension and Fiduciary Service is working with the Office 
of Enterprise Development (OED) in the Office of Information and 
Technology to replace the current FBS system. The new system will 
include rules-based functionality, communicate with other VA systems, 
and facilitate the processing of accountings and field examination 
reports. OED has outlined the following three steps necessary to update 
the current system:

    1. Clean-up the data contained in FBS so that it is compatible with 
VBA's corporate database, which contains all beneficiary records;
    2. Migrate FBS data to the corporate database and modify FBS to 
allow users to view information in the corporate database; and
    3. Build a new user-friendly, rules-based, front-end system, which 
will provide all of the functionality required to properly administer 
the fiduciary program.

    We are currently in step 1, and anticipate completion in the Fall 
of 2012. At that time, we will be able to provide a better estimate for 
the complete replacement of FBS.

    b. Will the replacement system be integrated with the Veterans 
Benefit Management System (VBMS)?

    Response: Yes, initial integration will be with the corporate 
database but the plan for the future is complete integration with VBA's 
systems.

    c. Is VA assigning or requiring a unique identifier for all 
fiduciaries? If not, does the VA plan to do so?

    Response: Yes, VA requires all businesses acting as fiduciaries to 
provide their tax-identification number. VA requires all individuals 
who are fiduciaries to provide their Social Security number. VA will 
not appoint the business or individual without this information.
    Question 5: Regarding VA Form 21-4703:

    a. If the VA approval of expenditures language is removed from the 
Fiduciary Agreement, what safeguards would be in place to protect 
beneficiaries? What safeguards would the VA recommend?

    Response: If the approval of expenditures language is removed from 
the Fiduciary Agreement, there are adequate safeguards in place to 
protect beneficiaries. These safeguards include, but are not limited 
to: annual accountings, surety bonds, withdrawal agreements, follow-up 
field examinations, misuse investigations, and onsite reviews. VA will 
also continue to collect beneficiaries' income and expense information 
during field examinations for purposes of oversight and to provide to 
fiduciaries for their use in determining the beneficiary's needs.

    b. If the agency relationship between the VA and the fiduciary was 
removed, would current law protect the interests of the beneficiary? If 
current law is felt by the VA to be inadequate, what statutory 
provisions would the VA recommend to protect beneficiaries?

    Response: VA interprets this question as being related to the prior 
question regarding VA's role in the fiduciary program. In our view, 
current law, as interpreted and implemented by VA, provides adequate 
protection for beneficiaries. It is current VA policy that VA appointed 
fiduciaries have a fiduciary relationship with the beneficiary and an 
obligation to determine which expenditures are in the beneficiary's 
best interest. It is VA's obligation to properly appoint fiduciaries 
and conduct oversight of fiduciaries to ensure that they are properly 
managing beneficiary funds and meeting the needs of the beneficiaries 
they serve. As noted above, this oversight includes follow-up field 
examinations, annual accountings, surety bonds, withdrawal agreements, 
misuse investigations, and onsite reviews. VA will continue to evaluate 
current law to determine whether legislative proposals might facilitate 
program improvements.

                                  
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