Land-Use Agreements: Improved Data Reliability and Monitoring Needed for Department of Veterans Affairs
Published: 2015-02-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: VA manages one of the nation's largest federal property portfolios. To manage these properties, VA uses land-use authorities that allow VA to enter into various types of agreements for the use of its property in exchange for revenues or in-kind considerations. GAO was asked to examine VA's use of land-use agreements.
This report addresses the extent to which VA (1) maintains reliable data on land-use agreements and the revenue they generate, (2) monitors the billing and collection processes at selected VA medical centers, and (3) monitors land-use agreements at selected VA medical centers. GAO analyzed data from VA's database on its land-use agreements for fiscal year 2012, reviewed agency documentation, and interviewed VA officials. GAO also visited three medical centers to review the monitoring of land-use agreements and the collection and billing of the associated revenues. GAO selected medical centers with the largest number of agreements or highest amount of estimated revenue. The site visit results cannot be generalized to all VA facilities.
section_title: What GAO Found
paragraphs: According to the Department of Veterans Affairs' (VA) Capital Asset Inventory system—the system VA utilizes to record land-use agreements and revenues—VA had hundreds of land-use agreements with tens of millions of dollars in estimated revenues for fiscal year 2012, but GAO's review raised questions about the reliability of those data. For example, one land-use agreement was recorded 37 times, once for each building listed in the agreement, 13 agreements terminated before fiscal year 2012 had not been removed from the system, and more than $240,000 in revenue from one medical center had not been recorded. VA relies on local medical center staff to enter data timely and accurately, but lacks a mechanism for independently verifying the data. Implementing such a mechanism and working with medical centers to make corrections as needed would better position VA to reliably account for its land-use agreements and the associated revenues they generate.
GAO found weaknesses in the billing and collection processes for land-use agreements at three selected VA medical centers due primarily to ineffective monitoring. For example, VA incorrectly billed its sharing partners for 14 of 34 agreements at the three centers, which resulted in VA not billing $300,000 of the nearly $5.3 million owed. In addition, at the New York center, VA had not billed a sharing partner for several years' rent that totaled over $1 million. VA began collections after discovering the error; over $200,000 was outstanding as of April 2014. VA stated that it did not perform systematic reviews of the billing and collection practices at the three centers and had not established mechanisms to do so. VA officials at the New York and North Chicago centers stated that information is also not timely shared on the status of agreements with offices that perform billing due to lack of collaboration. Until VA addresses these issues, VA lacks assurance that it is collecting the revenues owed by its sharing partners.
VA did not effectively monitor many of its land-use agreements at two of the centers. GAO found problems with unenforced agreement terms, expired agreements, and instances where land-use agreements did not exist. Examples include the following:
In West Los Angeles, VA waived the revenues in an agreement with a nonprofit organization—$250,000 in fiscal year 2012 alone—due to financial hardship. However, VA policy does not allow revenues to be waived.
In New York, one sharing partner—a local School of Medicine—with seven expired agreements remained on the property and occupied the premises without written authorization during fiscal year 2012.
The City of Los Angeles has used 12 acres of VA land for recreational use since the 1980s without a signed agreement or payments to VA. An official said that VA cannot negotiate agreements due to an ongoing lawsuit brought on behalf of homeless veterans about its land-use agreement authority.
VA does not perform systematic reviews and has not established mechanisms to do so, thus hindering its ability to effectively monitor its agreements and use of its properties.
section_title: What GAO Recommends
paragraphs: GAO is making six recommendations to VA including recommendations to improve the quality of its data, foster collaboration between key offices, and enhance monitoring. VA concurred with the recommendations.

section_title: Letter
paragraphs: I am pleased to come before the subcommittee to discuss the findings of  our August 2014 report on the Department of Veterans Affairs’ (VA) use  of land-use agreements. With over 7,400 buildings situated on more than  35,000 acres of land, VA continues to rank among the largest federal  landholding organizations, and also operates one of the largest health  care–related real-estate portfolios in the nation. To manage these  properties, VA relies on land-use authorities that allow VA to enter into  various types of agreements for the use of its property. For example, VA  has authority to enter into sharing agreements with entities to use VA  space on behalf of veterans or nonveterans in exchange for payment or  services. Other authorities include enhanced-use leases, outleases,  licenses, and permits. VA receives revenue, in-kind considerations, or  both, from entities that use VA’s space. In-kind considerations can be  used to offset the costs of maintaining its property through cost avoidance  or savings, or to enhance the availability of the services it offers to  veterans or its employees. Examples of the benefits derived from leasing  its property can include providing additional care options to homeless  veterans, making parking available for veterans seeking treatment, or  providing child-care services for VA employees and others. VA  agreements may also offer benefits to the community as a whole, such as  recreational facilities and credit unions.
For all federal agencies, including VA, we have identified the  management of federal real property as a high-risk area and have  included it on GAO’s High-Risk List since 2003. In February 2013, we  reported that federal departments and agencies have given high-level  attention to this issue and have made progress in real-property  management. However, the underlying challenges remain, such as the  absence of consistent, accurate, and useful data to support decision  making.
My remarks today highlight the key findings of our August 2014 report on  VA land-use agreements. Specifically, like the report, this testimony  discusses the extent to which VA (1) maintains reliable data on land-use  agreements and the revenue they generate, (2) monitors the billing and  collection processes at selected VA medical centers, and (3) monitors  land-use agreements at selected VA medical centers.
For the report, we analyzed data from VA’s database on its land-use  agreements for fiscal year 2012, which were the most-recent data  available at the time we initiated our review. We took steps to assess the  reliability of the data in the Capital Asset Inventory (CAI) by interviewing  agency officials knowledgeable about the data, reviewing systems  documentation, analyzing the data to assess accuracy and completeness,  and taking steps to corroborate certain data from CAI to land-use  agreements and other source documents at three selected sites: New  York City, New York; North Chicago, Illinois; and West Los Angeles,  California. We determined that while the CAI data were reliable enough to  select our three sites for review, as discussed later, the data were not  sufficiently reliable for the purposes of reporting the total number of  agreements held by VA and the revenue those agreements generated in  fiscal year 2012 for this audit. We also reviewed agency documentation  and interviewed VA officials. In addition, we visited the three selected  medical centers to review the monitoring of land-use agreements and the  collection and billing of the associated revenues. We selected medical  centers with the largest number of agreements or those with high  amounts of estimated revenue. The site-visit results cannot be  generalized to all VA facilities. Further details on our scope and  methodology are included in the August 2014 report. Our work for that  report was conducted in accordance with generally accepted government  auditing standards.
In summary, we found that VA did not maintain reliable data on the total  number of land-use agreements and the revenue they generate. Further,  our work found weaknesses in the billing and collection processes for  land-use agreements at three selected VA medical centers due primarily  to ineffective monitoring. Finally, we found that VA did not effectively  monitor many of its land-use agreements at its medical centers in West  Los Angeles and New York. These problems included unenforced  agreement terms, expired agreements, and instances where land-use  agreements did not exist where they should. At these sites, VA did not  perform systematic reviews and has not established mechanisms to do  so, thus hindering its ability to effectively monitor its agreements and use  of its properties. After reviewing our draft report, VA concurred with all six  of our recommendations and indicated planned actions to address them.
subsections: section_title: VA Does Not Maintain Reliable Data on the Number of Land-Use Agreements and Their Associated Revenues
paragraphs: In August 2014, we reported that, on the basis of our review of land-use  agreement data for fiscal year 2012, VA does not maintain reliable data  on the total number of land-use agreements and VA did not accurately  estimate the revenues those agreements generate. According to the land- use agreement data provided to us from VA’s Capital Asset Inventory  (CAI) system—the system VA utilizes to record land-use agreements— VA reported that it had over 400 land-use agreements generating over  $24.8 million in estimated revenues for fiscal year 2012. However, when  one of VA’s administrations—the Veterans Health Administration (VHA)— initiated steps to verify the accuracy and validity of the data it originally  provided to us, it made several corrections to the data that raised  questions about their accuracy, validity, and completeness.
Examples of these corrections include the following: at one medical center, one land-use agreement was recorded 37  times, once for each building listed in the agreement; and
VHA also noted that 13 agreements included in the system should  have been removed because those agreements were terminated prior  to fiscal year 2012.
At the three VA medical centers we reviewed, we also found examples of  errors in the land-use agreement data. Examples of these errors include  the following:
VHA did not include 17 land-use agreements for the medical centers  in New York and North Chicago, collectively.
VHA incorrectly estimated the revenues it expected to collect for the  medical center in West Los Angeles. VHA revised its estimated  revenues from all land-use agreements in fiscal year 2012 from about  $700,000 to over $810,000. However, our review of VA’s land-use  agreements at this medical center indicated that the amount that  should have been reflected in the system was approximately $1.5  million.
VA policy requires that CAI be updated quarterly until an agreement ends.  VA’s approach on maintaining the data in CAI relies heavily on data being  entered timely and accurately by a staff person in the local medical  center; however, we found that VA did not have a mechanism to ensure  that the data in CAI are updated quarterly as required and that the data  are accurate, valid, and complete. By implementing a mechanism that will  allow it to assess whether medical centers have timely entered the  appropriate land-use agreement data into CAI, and working with the  medical centers to correct the data, as needed, VA would be better  positioned to reliably account for land-use agreements and the associated  revenues that they generate.
section_title: Additional Monitoring at Three VA Medical Centers Could Improve the Billing and Revenue- Collection Process for Land-Use Agreements
paragraphs: In our August 2014 report, we also found weaknesses in the billing and  collection processes for land-use agreements at three selected VA  medical centers due primarily to ineffective monitoring.
Inadequate billing: We found inadequate billing practices at all three  medical centers we visited. Specifically, we found that VA had billed  partners in 20 of 34 revenue-generating land-use agreements for the  correct amount; however, the partners in the remaining 14  agreements were not billed for the correct amount. On the basis of  our analysis of the agreements, we found that VA underbilled by  almost $300,000 of the approximately $5.3 million that was due under  the agreements, a difference of about 5.6 percent. For most of these  errors, we found that VA did not adjust the revenues it collected for  inflation. We also found that the West Los Angeles medical center  inappropriately coded the billing so that the proceeds of its sharing  agreements, which totaled over $500,000, were sent to its facilities  account rather than the medical-care appropriations account that  benefits veterans, as required. VA officials stated that the department  did not perform systematic reviews of the billings and collections  practices at the three medical centers, which we discuss in more  detail later. A mechanism for ensuring transactions are promptly and  accurately recorded could help VA collect revenues that its sharing  partners owe.
Opportunities for improved collaboration: At New York and North  Chicago, we found that VA could improve collaboration among key  internal staff, which could enhance the collections of proceeds for its  land-use agreements. For example, at the New York site, the VA  fiscal office created spreadsheets to improve the revenue collection  for more than 20 agreements. However, because the contracting  office failed to inform the fiscal office of the new agreements, the fiscal  office did not have all of the renewed contracts or amended  agreements that could clearly show the rent due. According to a VA  fiscal official at the New York office, repeated requests were made to  the contracting office for these documents; however, the contracting  office did not respond to these requests by the time of our visit in  January 2014. By taking additional steps to foster a collaborative  environment, VHA could improve its billing and collection practices.
No segregation of duties: On the basis of a walkthrough of the billing  and collections process we conducted during our field visits, and an  interview with a West Los Angeles VA official, we found that West Los  Angeles did not properly segregate duties. Specifically, the office  responsible for monitoring agreements also bills the invoices, receives  collections, and submits the collections to the agent cashier for  deposit. Because of the lack of appropriate segregation of duties at  West Los Angeles, the revenue-collection process has increased  vulnerability to potential fraud and abuse. This assignment of roles  and responsibilities for one office is not typical of the sites we  examined. At the other medical centers we visited, these same  activities were separated amongst a few offices, as outlined in VA’s  guidance on deposits.
VA headquarters officials informed us that program officials located at VA  headquarters do not perform any systematic review to evaluate the  medical centers’ processes related to billing and collections at the local  level. VA officials further informed us that VHA headquarters also lacks  critical data—the actual land-use agreements—that would allow it to  routinely monitor billing and collection efforts for land-use agreements  across the department. One VA headquarters official told us that the  agency is considering the merits of dispatching small teams of staff from  program offices located at VA’s headquarters to assist the local offices  with activities such as billing and collections. However, as of May 2014,  VA had not implemented this proposed action or any other mechanism for  monitoring the billing and collections activity at the three medical centers.  Until VA performs systematic reviews, VA will lack assurance that the  three selected medical centers are taking all required actions to bill and  collect revenues generated from land-use agreements.
section_title: VA Did Not Effectively Monitor Many of Its Land-Use Agreements at New York and West Los Angeles Medical Centers
paragraphs: In our August 2014 report, we found that VA did not effectively monitor  many of its land-use agreements at the New York and West Los Angeles  medical centers. We found problems with unenforced agreement terms,  expired agreements, and instances where land-use agreements did not  exist. Examples include the following:  In West Los Angeles, VA waived the revenues in an agreement with a  nonprofit organization—$250,000 in fiscal year 2012 alone—due to  financial hardship. However, VA policy does not allow revenues to be  waived.  In New York, one sharing partner—a local school of medicine—with  seven expired agreements remained on the property and occupied  the premises without written authorization during fiscal year 2012. Our  review of VA’s policy on sharing agreements showed that VA did not  have any specific guidance on how to manage agreements before  they expired, including the renewal process.  In New York, we observed more antennas on the roof of a VA facility  than the New York medical center had recorded in CAI. After we  brought this observation to their attention, New York VA officials  researched the owners of these antennas and could not find written  agreements or records of payments received for seven antennas.  According to New York VA officials, now that they are aware of the  antennas, they will either establish agreements with the tenants or  disconnect the antennas.
The City of Los Angeles has used 12 acres of VA land for recreational  use since the 1980s without a signed agreement or payments to VA.  An official said that VA cannot negotiate agreements in this case due  to an ongoing lawsuit brought on behalf of homeless veterans about  its land-use agreement authority.
We found that VA had not established mechanisms to monitor the various  agreements at the West Los Angeles and New York medical centers. VA  officials stated that they had not performed systematic reviews of these  agreements and had not established mechanisms to enable them to do  so. Without a mechanism for accessing land-use agreements to perform  needed monitoring activities, VA lacks reasonable assurance that the  partners are meeting the agreed-upon terms, agreements are renewed as  appropriate, and agreements are documented in writing, as required. This  is particularly important if sharing partners are using VA land for purposes  that may increase risk to VA’s liability (e.g., an emergency situation that  might occur at the park and fields in the city of Los Angeles). Finally, with  lapsed agreements, VA not only forgoes revenue, but it also misses  opportunities to provide additional services to veterans in need of  assistance and to enhance its operations.
section_title: Implementation of Recommendations Could Enhance the Quality of Data That VA Collects, Enhance VA’s Monitoring of Revenue and Agreements, and Improve VA’s Accountability
paragraphs: Our August 2014 report made six recommendations to the Secretary of  Veterans Affairs to improve the quality of the data collected on specific  land-use agreements (i.e., sharing, outleases, licenses, and permits),  enhance the monitoring of its revenue process and monitoring of  agreements, and improve the accountability of VA in this area.  Specifically, we recommended that VA develop a mechanism to independently verify the accuracy, validity,  and completeness of VHA data for land-use agreements in CAI; develop mechanisms to monitor the billing and collection of revenues  for land-use agreements to help ensure that transactions are promptly  and accurately recorded at the three medical centers; develop mechanisms to foster collaboration between key offices to  improve billing and collections practices at the New York and North  Chicago medical centers; develop mechanisms to access and monitor the status of land-use  agreements to help ensure that agreement terms are enforced,  agreements are renewed as appropriate, and all agreements are  documented in writing as required, at the New York and West Los  Angeles selected medical centers; develop a plan for the West Lost Angeles medical center that  identifies the steps to be taken, timelines, and responsibilities in  implementing segregation of duties over the billing and collections  process; and develop guidance on managing expiring agreements at the three  medical centers.
After reviewing our draft report, VA concurred with all six of our  recommendations. VA’s comments are provided in full in our August 2014  report.
In November 2014, VA provided us an update on the actions it is taking to  respond to these recommendations in our August 2014 report. These  actions include (1) drafting CAI changes to improve data integrity and to  notify staff of expiring or expired agreements, (2) updating guidance and  standard operating procedures for managing land-use agreements and  training staff on the new guidance, and (3) transitioning oversight and  operations of the West Los Angeles land-use agreement program to the  regional level.  If implemented effectively, these actions should improve  the quality of the data collected on specific land-use agreements,  enhance the monitoring of VA’s revenue process and agreements, and  improve accountability for these agreements.
Chairman Coffman, Ranking Member Kuster, and members of the  subcommittee, this concludes my prepared remarks. I look forward to  answering any questions that you may have at this time.
For further information on this testimony, please contact Stephen Lord at  (202) 512-6722 or lords@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this testimony  include Matthew Valenta, Assistant Director; Carla Craddock; Marcus  Corbin; Colin Fallon; Olivia Lopez; and Shana Wallace.
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