VA's Fiduciary Program: Improved Compliance and Policies Could Better Safeguard Veterans' Benefits
Published: 2010-02-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Many individuals receiving monthly compensation and pension benefits from the Department of Veterans Affairs (VA) have mental impairments that prevent them from managing their finances. VA's Fiduciary Program selects and oversees third parties, called fiduciaries, to help manage and protect beneficiaries' funds. GAO examined (1) how effective program policies and procedures are in monitoring fiduciaries and safeguarding beneficiary assets, and (2) challenges VA faces in improving program performance and oversight. GAO reviewed program policies, analyzed a nationally representative random sample of case files, interviewed Central Office managers and staff, and conducted three site visits to Fiduciary Program offices which accounted for 25 percent of program beneficiaries. During these visits GAO interviewed regional office managers and staff and conducted 32 file reviews.
section_title: What GAO Found
paragraphs: VA's Fiduciary Program has policies in place that are intended to ensure that qualified fiduciaries are selected and regularly monitored; however, insufficient staff compliance with some policies and weaknesses in others hinder VA's ability to safeguard veterans' benefits. For example, VA was late in conducting required follow-up visits to monitor fiduciaries or provided insufficient documentation to show whether these visits were conducted in about 18 percent of the cases GAO reviewed. In addition, while GAO estimated that nearly 40 percent of fiduciaries who were required to submit financial reports to demonstrate how beneficiary funds are managed turned their reports in late, VA did not always take actions to obtain them on time or provide documentation that an attempt had been made, as required by VA policy. GAO also found that files did not always contain documentation that a bond was secured when required to safeguard beneficiary estates or that the requirement was waived. Fiduciary Program managers and staff said that they did not always comply with VA policies due, in part, to a lack of time, resources, and staff. In addition, VA's policies for conducting on-site reviews of professional fiduciaries who manage funds for multiple beneficiaries do not ensure these fiduciaries are effectively identified and monitored. For example, VA's policy may not ensure that all fiduciaries who need to be reviewed are identified because the agency's policy allows the use of the fiduciary's name--which may be entered inconsistently--to match them to beneficiaries rather than requiring a unique identifier, such as a Social Security number. Moreover, VA does not have a nationwide quality review process to ensure that these reviews are conducted properly and consistently. GAO identified two key challenges that hinder VA's ability to improve Fiduciary Program performance and oversight. First, managers and staff in the three regional offices visited said VA's electronic fiduciary case management system does not provide sufficient information and is cumbersome to use. For example, the system limits staff's ability to track multiple actions on a case or enter all needed information. Also, the system does not generate comprehensive management reports that would facilitate effective oversight. In addition, managers and staff indicated that available training may not be sufficient to ensure they have the necessary expertise to carry out program responsibilities. Moreover, many managers and staff had less than 2 years of program experience, and the lack of sufficient training may have contributed to inconsistent compliance with some program policies. VA is developing standardized training that it expects to implement some time in fiscal year 2010. VA is also piloting a consolidated Fiduciary Program unit covering 14 western units, in part, to address program challenges. While the pilot is intended to improve program performance and oversight, managers and staff noted that difficulties, such as not having resources in place and up-to-date case files, impeded effective implementation. VA has not yet evaluated the impact and effectiveness of this model.

section_title: Letter
paragraphs: Each year, the Department of Veterans Affairs (VA) pays billions of dollars  in compensation and pension benefits to disabled veterans and their  dependents. For those beneficiaries who are unable to manage their own  affairs due to mental impairments, VA appoints a third party to help  manage and protect the beneficiary’s funds. This third party, called a  fiduciary, can be a spouse or other family member, or an entity such as a  law firm, hospital, or nursing home. Fiduciaries are selected and  monitored through VA’s Fiduciary Program. In fiscal year 2008, this  program oversaw fiduciaries for more than 103,000 beneficiaries, and  these individuals managed nearly 4 percent of the $38.6 billion in  compensation and pension benefits VA paid out in that year. Moreover, the  average annual benefit amount for beneficiaries in this program was  approximately $14,400 in fiscal year 2008, which is about $4,200 more per  year than the average for all VA compensation and pension beneficiaries.  VA’s oversight of beneficiary funds is especially important because the  financial management of a person’s funds is entrusted to a third party,  thus, there is a risk that these funds could be used inappropriately.
Over the years, both Congress and VA’s Office of Inspector General (OIG)  have expressed concern that VA is not fully safeguarding beneficiaries’  assets in the Fiduciary Program. Areas of concern included delays in  conducting visits to select fiduciaries and insufficient monitoring of VA  fund usage by fiduciaries on behalf of beneficiaries. As a result, the  Veterans’ Benefits Improvement Act of 2004 increased the degree to which  VA is held accountable to its beneficiaries by requiring it to reissue any  benefit amount that is misused by a fiduciary due to VA’s negligence. The  act also increased VA’s fiduciary oversight authority and responsibilities.  For example, the act requires VA to conduct periodic on-site reviews of  professional fiduciaries who oversee more than 20 beneficiaries with total  combined benefits exceeding $50,000. You asked us to examine current  policies and procedures the VA Fiduciary Program uses to select and  monitor fiduciaries, as well as their effectiveness in safeguarding benefits  and estates of beneficiaries. Specifically, we examined: (1) how effective  VA policies and procedures are in monitoring fiduciaries and safeguarding  beneficiary assets and (2) challenges VA faces in improving program  performance and oversight.
To address the first objective, we reviewed the Fiduciary Program’s  policies and procedures manuals and applicable federal laws and  regulations. In addition, we collected and analyzed case-level data from a  nationwide stratified random sample of 205 beneficiary case files. We  selected these files using data as of March 31, 2009, from VA’s electronic  case information and workload management system, which we found to  be sufficiently reliable for the purpose of sampling cases for review. Our  selection methodology allowed us to generalize some of the data we  obtained from our case file review to nearly all adult beneficiaries within  the Fiduciary Program. All percentage estimates in this report have a  margin of error of plus or minus 10 percentage points or less, unless  otherwise noted. We also used the same electronic case management  system data to assess how reliably fiduciaries managing multiple  beneficiaries could be identified. To obtain information on both objectives,  we interviewed appropriate managers at VA’s Central Office and  conducted site visits to 3 of 43 Fiduciary Program units located in VA  regional offices—St. Petersburg, Florida; Cleveland, Ohio; and Salt Lake  City, Utah—where we interviewed managers and staff about program  policies and procedures, as well as VA’s internal controls for meeting the  program’s mission and goals and ensuring its integrity. During these site  visits and in Washington, D.C., we also spoke with veterans service  organization representatives regarding their experiences working with  beneficiaries under the Fiduciary Program. In addition, during our site  visits we conducted 32 file reviews based on a judgmental sample of cases  where either VA suspected that fiduciaries were inappropriately using  beneficiary funds or fiduciaries were seriously late in submitting one or  more annual financial reports that documented how beneficiary funds  were spent. We also collected and reviewed 12 VA on-site reviews of the  performance of professional fiduciaries. We chose these reviews based on  professional fiduciaries identified in our 32 site visit file reviews. We  selected the sites we visited based on differences in geographic location,  size of the Fiduciary Program unit, and number of cases with misuse  allegations. We specifically selected the Salt Lake City regional office  because it is the site of a pilot project to merge 14 western Fiduciary  Program units into one hub office.
We conducted this performance audit from December 2008 to February  2010, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. Further details on our  objectives, scope, and methodology can be found in appendix I.
subsections: section_title: Background
paragraphs: Many individuals receiving monthly compensation and pension benefits  from the VA have mental impairments that can prevent them from  managing their finances. These conditions may result from injury,  disease, or infirmities of age. In 1935, Congress created an early version of the VA Fiduciary Program to select and oversee responsible third parties,  called fiduciaries, who help manage and protect beneficiaries’ funds. In  fiscal year 2008, fiduciaries managed approximately $1.5 billion in VA  benefits for more than 103,000 beneficiaries.
The VA Fiduciary Program matches beneficiaries who are unable to  manage their financial affairs with a fiduciary, giving preference to  spouses. If VA is unable to locate a qualified spouse who is willing to serve  in this capacity, an individual or other entity, such as a lawyer or nursing  home, will be appointed. Fiduciaries who are appointed by VA who are not  dependents or close family members can collect a fee for their services  (up to 4 percent of a beneficiary’s annual benefit amount) and can oversee  multiple beneficiaries. Whether a fiduciary is a family member or a  professional, the responsibilities are generally the same and may include  receiving the beneficiary’s VA benefits, paying the beneficiary’s expenses,  maintaining the beneficiary’s budget, and generally seeing to the financial  well-being—and, in some cases, the physical well-being—of the  beneficiary. Finally, if a court has already determined that a beneficiary is  unable to handle his or her own affairs and has appointed its own  fiduciary, VA must assess the performance of the fiduciary and determine  if he or she is suitable for the position given the needs and welfare of the  beneficiary. If VA decides to use the court-appointed fiduciary, the agency  generally defers to certain rules set by the court, such as those pertaining  to the fee amount that the fiduciary can charge the beneficiary for his or  her services.
VA has established a number of policies to guide the selection of qualified  fiduciaries and ensure regular monitoring of them. The procedures for  carrying out these policies include the following:    Visits to beneficiaries and fiduciaries. VA policy requires staff to  conduct initial visits to assess the competence and welfare of the  beneficiary, determine whether a fiduciary is required and, if so, select and  appoint the most appropriate type of fiduciary. These evaluations typically  include a general background check of the potential fiduciary, which could  include contacting character witnesses and reviewing a recent credit  report. VA staff, in conjunction with potential fiduciaries, may develop a  spending plan for the beneficiary’s funds. Once the fiduciary is selected,  staff conduct periodic subsequent visits to reevaluate the beneficiary’s  condition and to determine if funds have been properly used and  protected. The first routine follow-up visit generally takes place 1 year   after a fiduciary is selected, and subsequent visits typically take place  every 1 to 3 years thereafter. Unscheduled visits may also be conducted  under certain circumstances.
Annual reviews of financial reports. VA policy generally requires staff to  obtain yearly financial reports and bank statements from some fiduciaries  to determine how beneficiary funds were used. Reports are generally due  on the anniversary of a fiduciary’s appointment or as otherwise required in  the case of court-appointed fiduciaries. When fiduciaries do not submit  their financial reports on time, staff are required to follow-up with them to  obtain these reports and to document these contacts in the beneficiaries’  files. For example, if a report is not received within 90 days of the  deadline, VA staff can follow-up with fiduciaries by letter, telephone, or  face-to-face contact and may describe the possible repercussions of failing  to supply the report, which could include legal action or referral to the  OIG.
Confirmation of surety bond acquisition. When it is necessary to protect  the interests of the beneficiary, VA generally requires staff to obtain a  surety bond from fiduciaries overseeing estates with a value of $20,000 or  more that is attributable to VA funds. A bond ensures that the beneficiary’s  estate will be reimbursed in the event of fiduciary mismanagement or  abuse of beneficiary funds. Generally, the bond amount should be  adequate to cover the value of the beneficiary’s accumulated estate  derived from VA funds plus 1 year of VA benefits. Fiduciary Program staff  are required to obtain documentation showing that the fiduciary has an  adequate bond. VA is required to assess the need for a bond and the bond  amount each time it reviews the fiduciary’s yearly financial report.
Periodic on-site reviews of professional fiduciaries. In addition to visits,  VA staff are required to conduct on-site reviews of professional fiduciaries  who oversee more than 20 beneficiaries with combined benefits of at least  $50,000 once every 3 years. Unscheduled reviews may also be conducted  as needed. During the on-site reviews, staff are to examine the financial  records of multiple beneficiaries concurrently and examine any  questionable expenses. VA developed this policy in 2005 as a result of new  requirements included in the Veterans’ Benefits Improvement Act of 2004.
Fiduciary Program policies and procedures are developed by Fiduciary  Program Central Office staff under the Office of Policy and Program  Management within the Veterans Benefits Administration. Individual  Fiduciary Program units are generally colocated in VA regional offices that  also oversee other Veterans Benefits Administration programs. One major  exception to this is the Western Area Fiduciary Hub, where Fiduciary  Program units and files from 14 western VA regional offices were merged  into a single unit colocated in the VA regional office in Salt Lake City,  Utah, beginning in January 2008.
Each regional office is held accountable for meeting performance  measures established by VA, including workload timeliness and accuracy  measures. For example, performance measures for Fiduciary Program  units include the timeliness of visits and the accuracy of beneficiary case  file documentation, as measured through VA’s internal quality review  processes. VA tracks Fiduciary Program performance measures for  timeliness by generating reports based on case-level data recorded in its  electronic case management system, known as the Fiduciary Beneficiary  System (FBS). Because FBS only maintains this case-level data for about  30 days, we could not validate the accuracy of the performance reports  and, therefore, could not use them in our study.
VA’s OIG has reported on the inappropriate use of beneficiary funds by  fiduciaries over the years, and Congress, GAO, and VA’s OIG have cited a  number of concerns with VA’s efforts to safeguard beneficiaries’ assets. In  2006, VA’s OIG noted concerns regarding overdue visits, which may  increase the risk of inappropriate use of beneficiary funds. In addition,  the report cited concerns with VA’s efforts to follow up with fiduciaries  and obtain late financial reports. The report further noted concerns  regarding missing or undocumented bond information, as well as the  adequacy of the amount of coverage required under the bond. In 2004,  GAO cited concerns about the lack of systematic coordination between  VA, the courts, and other federal agencies in regards to overseeing third  parties who manage the funds of others.
section_title: Inconsistent Compliance with Some Policies and Weaknesses in Others Hinder VA’s Ability to Monitor Fiduciaries and Safeguard Benefits
subsections: section_title: Program Staff Do Not Always Comply with Policies for Conducting Visits and Obtaining Timely Financial Reports and Bonds
paragraphs: Although VA has established Fiduciary Program policies intended to  ensure that qualified fiduciaries are selected and regularly monitored, staff  did not always take required actions within established time frames or  document in the case files that required actions were taken. Such actions  included conducting initial and follow-up visits to beneficiaries and  fiduciaries, following up with fiduciaries to obtain late financial reports,  and ensuring that fiduciaries managing large beneficiary estates purchased  bonds.
subsections: section_title: Initial Visits
paragraphs: VA policy states that initial visits to appoint fiduciaries are to be  conducted within 45 days of a request for a fiduciary, and VA’s  performance goal is to conduct at least 90 percent of these visits on time.  Conducting initial visits on time is important because fiduciaries cannot  begin receiving and handling VA benefits until these visits are completed,  and beneficiaries may depend on VA funds for basic living expenses.
We sampled and reviewed 67 case files in which initial visits were  supposed to be conducted between July 1, 2006, and June 9, 2009, and  found that 37 visits were conducted within the 45-day time frame, and 10  were from 3 to 39 days late. For one case, the file lacked documentation  that an initial visit was made at all. Managers and staff in some offices we  visited said compliance with the timeliness policy for initial visits was  improving, but was still a concern. They attributed some compliance  issues to a continued lack of staff and resources.
section_title: Follow-up Visits
paragraphs: According to VA managers, it is VA’s policy that follow-up visits to  fiduciaries are to be conducted within 120 days of the scheduled date, and  the on-time goal for these visits is also 90 percent. Timely follow-up visits  are important to determine the continued suitability of the fiduciary and to  protect beneficiaries from potential misuse of their funds.
Our sample estimated that approximately 61,000 adult beneficiaries were  supposed to have had at least one follow-up visit between July 1, 2006, and  June 9, 2009. We estimated that 76 percent of these visits occurred within  the 120-day time frame, and approximately 12 percent were 1 to 216 days  late. About 6 percent of cases lacked documentation to indicate that a  scheduled follow-up visit occurred at all and, in the most extreme case,  there was no documentation that a follow-up visit had been conducted  although it was overdue by 16 months as of June 9, 2009. Finally, an  additional estimated 6 percent lacked documentation as to when the visits  were conducted. Similar to initial visits, program managers and staff  noted that compliance with the 120-day time frame for follow-up visits can  be challenging due in part to a lack of staff and time. Program managers  said that conducting visits in a timely manner may be especially  challenging in regional offices with only one or two Fiduciary Program  staff who may also have responsibilities outside of the Fiduciary Program.  In addition, managers and staff noted that conducting timely visits can be  challenging in areas where staff must drive long distances to see  beneficiaries and fiduciaries.
section_title: Annual Financial Reports
paragraphs: VA policy generally requires that some fiduciaries submit annual financial  reports documenting how they managed beneficiaries’ funds. Based on our  nationwide sample, we estimate that fiduciaries for about 33,000  beneficiaries were required to submit such reports for the time period we  reviewed. Table 1 shows that, for more than one-half of these files,  fiduciaries either submitted their financial reports late or it was not  possible to determine if or when they were submitted. Late financial  reports were submitted between 1 and 140 days late.
VA policy requires staff to contact fiduciaries when their financial reports  are 35 to 65 days late and again when they are 90 days late. At that time,  they may inform the fiduciary of the possible repercussions of a failure to  comply, which may include legal actions, a referral to the OIG, or other  actions. After 120 days, the financial reports are considered “seriously  delinquent,” and appropriate action is to be taken. Staff in one regional  office we visited acknowledged that follow-up contact is important  because without it, precedent can be set for fiduciaries to continually turn  in late financial reports. Moreover, failure to take action to secure timely  financial reports may result in a finding of negligence, which will require  VA to reissue any misused benefits.
Our nationwide sample and site visit file reviews showed that follow-up  contact was frequently not done or not documented by program staff. Of  the 30 case files in our sample where financial reports were submitted  more than 65 days late, 19 case files either lacked documentation of any  follow-up actions or showed that such actions were not taken within VA  established time frames. This included two cases where the files did not  contain any documentation of follow-up actions, and the most recent  financial reports were submitted nearly 5 months late. Moreover, we found  additional instances of inadequate staff follow-up on seriously delinquent  financial reports during our site visit file reviews. We reviewed 20 such  cases, and table 2 shows that, for the most recent financial reports  submitted in these cases, staff were generally either late in conducting  such follow-up actions or did not document the file to show if such actions  were taken. The 14 late actions in table 2 were between 3 days and about  11 months late, with 8 actions being more than 4 months late.
In one case, a fiduciary’s financial report was submitted more than 2 years  later than the original due date, and only after VA initiated action to  suspend payment. However, VA’s policy notes that this action can be taken  when a fiduciary is more than 90 days late submitting a financial report. In  another case, a financial report due in June 2006 was not submitted until  nearly 2 years later. The file did not indicate that any follow-up actions had  occurred, although the case is now being investigated for possible misuse  of funds. Staff in all regional offices we visited said that they sometimes  did not take follow-up actions or failed to document actions they did take,  in part, because they lacked the time or believed that some actions did not  warrant documentation.
section_title: Bonds
paragraphs: According to VA managers, VA policy generally requires staff to consider  requiring fiduciaries who oversee estates with a value of $20,000 or more  in VA funds to purchase a bond to protect beneficiaries’ estates. Our  nationwide sample showed that program staff sometimes failed to obtain  proof that a fiduciary purchased a bond, when required, or did not  adequately document in the beneficiary case files that the bond  requirement was waived. Of the 52 case files in our sample for which  fiduciaries were required to purchase a bond, 8 case files lacked adequate  documentation to indicate whether a bond was purchased or that the bond  requirement was waived because the fiduciary met conditions for an  exception. Some of the 8 cases involved substantial benefit amounts. For  example, 2 cases in our sample, which contained no documentation that  bonds were purchased, had VA estate values of approximately $82,000 and  $62,000—leaving these beneficiaries and VA vulnerable to a substantial  loss if funds were misused. Some staff in regional offices we visited said  that they were often uncertain about what types of bonds are required for  certain types of fiduciaries, and this was confirmed by our site visit file  reviews. For example, in one case, a Fiduciary Program staff member was  told by a fiduciary who was an attorney that an individual bond was  unnecessary because the fiduciary had a “blanket” bond that covered all  VA responsibilities. Although this staff member documented in the case  file that he was unsure if this was correct, he took the fiduciary’s word  that an additional bond was not required. However, we were told by  managers and staff that a blanket bond was most likely not acceptable in  this case, and the staff person should have required the fiduciary to obtain  an individual bond.
section_title: VA’s Policy for Periodic On-site Reviews Does Not Ensure Effective Monitoring of Professional Fiduciaries
paragraphs: In 2005, VA developed a new policy requiring Fiduciary Program staff to  conduct periodic on-site reviews of professional fiduciaries as required  by the Veterans’ Benefits Improvement Act of 2004. These financial  reviews examine records kept by fiduciaries who manage funds for  multiple beneficiaries. Cumulatively, such benefits can be a substantial  amount of money and the reviews can help detect discrepancies among  beneficiary accounts, which may not be detected by examining annual  financial reports for a single beneficiary. Though managers and staff in  regional offices we visited and in the Central Office said that on-site  reviews are useful when conducted properly, we found two associated  policy weaknesses: (1) not all fiduciaries who need these reviews can be  reliably identified and (2) VA lacks a nationwide quality review process to  ensure that these on-site reviews are conducted properly and consistently.
Not all fiduciaries who need reviews can be reliably identified. While VA  is required to conduct periodic on-site reviews for professional fiduciaries  who oversee more than 20 beneficiaries with combined benefits totaling  $50,000 or more, we found that VA cannot reliably identify all those who  meet this criteria. Each Fiduciary Program unit generates a list of  fiduciaries meeting this criteria by using VA’s electronic case management  system to link or match a fiduciary to all of their beneficiaries. However,  this computer match is based on a fiduciary’s name, rather than a unique  identifier, such as the fiduciary’s Social Security number or tax  identification number. Central Office managers and staff, as well as  managers in two regional offices we visited, acknowledged that these  matches may not reliably identify all the beneficiaries managed by a  fiduciary because fiduciary names can be entered inconsistently into the  system. For example, if a fiduciary’s name is entered using different  spellings or abbreviations, such as JOHN SMITH versus JON H. SMITH, it  may not show up in the system as the same fiduciary across multiple  beneficiary case files. While VA’s case management system includes a field  for unique fiduciary identifiers, VA policy does not require this  information. Central Office staff acknowledged that requiring a unique  identifier would decrease VA’s chances of making mistakes in identifying  fiduciaries with multiple beneficiaries who require reviews.
VA lacks a nationwide quality review process to ensure that periodic on- site reviews are conducted properly and consistently. While VA has  nationwide quality review processes to ensure that actions—such as  conducting visits and obtaining financial reports and bonds—are carried  out in accordance with VA policies, Central Office managers  acknowledged that VA lacks a similar process for on-site reviews. Having  such a process is not only a key internal control, but it is also important  for ensuring that the on-site reviews are conducted properly and  consistently across all Fiduciary Program units nationwide. While local  managers are required to examine the on-site review files and reports after  completion, our examination of 12 files from the three regional offices we  visited suggests that requiring only a local review may be insufficient. Four  of the files we examined lacked key case selection information, preventing  managers from determining whether cases were selected according to VA  policy. This policy states that cases associated with beneficiary complaints  or those with a history of late or questionable financial reports should  receive priority consideration for review. In addition, although VA policy  requires that at least 25 percent of a fiduciary’s beneficiary case files (or  up to 25 case files) be examined during the on-site reviews, we found that  this threshold was not met in four reports. While Central Office staff track  whether on-site reviews are completed, and noted that they have  considered implementing a national quality review process to ensure that  they are conducted properly, such a process has not yet been developed.
section_title: System Limitations and Insufficient Training Hamper Program Performance and Oversight; However, VA Is Taking Steps That May Help
paragraphs: We identified two key challenges that limit VA’s ability to improve  Fiduciary Program performance and oversight. First, VA’s electronic  fiduciary case management system does not provide sufficient information  to managers and staff about their cases, and it is cumbersome to use.  Second, some managers and staff may not have received sufficient training  to ensure that they have the necessary expertise to effectively monitor  individual fiduciaries and oversee the program. VA is taking steps to build  expertise about the case management system and the program itself by  developing additional standardized training and piloting a consolidated  Fiduciary Program unit covering 14 western VA regional offices.
subsections: section_title: VA’s Fiduciary Case Management System Provides Insufficient Information and Is Cumbersome to Use
paragraphs: VA’s electronic fiduciary case management system, FBS, does not provide  sufficient data to effectively manage the Fiduciary Program. FBS provides  some useful information on individual case files, pending workloads, and  program performance; however, many managers and staff characterized it  as an antiquated system that is cumbersome to use. Several system  limitations hamper the agency’s ability to maintain accurate and timely  data and provide management with quality information about the  program—typical internal control standards by which government  agencies are expected to operate. Managers and staff cited several  system weaknesses, including: (1) data field limitations and (2) difficulties  generating useful management information.
Data field limitations: The accuracy and completeness of the information  that FBS provides is limited because the system’s data fields are  configured to track a fixed number of pending activities and because some  of the data fields are too restrictive. As a result, fiduciaries may be  ineffectively monitored. For example, a required visit might not be  scheduled due to restrictive data fields that prohibit tracking crucial dates  or omit important information about the performance of a fiduciary.
Staff and managers in the three regional offices we visited said they often  need to track more upcoming actions than FBS permits. For example, staff  noted that FBS accepts only one due date for upcoming financial reports,  even though multiple financial reports may be due simultaneously if one or  more is late. In such cases, the due date for the most recent over-due  report overrides the older due date, even if the older financial report has  not yet been submitted. In one case we reviewed, Fiduciary Program staff  had to follow up on two financial reports from a professional fiduciary  that were due in 2006 and 2007, while simultaneously tracking an  upcoming financial report due in 2008. To compensate for this FBS  limitation, staff in one regional office we visited and staff in Central Office  said that such actions are tracked manually outside of the system. Some  staff, for example, keep personal notes as reminders of pending actions  while others input data into spreadsheets.
Fiduciary Program staff also told us that the usefulness of FBS is limited  because not enough information is captured about cases due to restrictive  data fields. For example, staff sometimes use a “remarks” data field to  enter notes that help managers and staff understand certain events and  oversee a case, but said they may need to omit some information because  of limitations on the number of characters for that field. In addition, one  Central Office official we spoke with said that some FBS data fields can be  too general to adequately convey important case information. For  example, one entry option in FBS to denote why a fiduciary has been  removed from a case is “resignation”. However, fiduciaries can resign for a  variety of reasons, such as because of changes in personal circumstances  or because program staff encouraged the fiduciary to resign due to poor  money management practices. Another entry option—unfit—also does not  adequately convey the reasons for removal. For example, fiduciaries may  become unfit due to a serious illness or may be deemed unfit because they  were not adhering to the VA approved spending plan. The Central Office  official we spoke with also provided further evidence that the entry  options for removal are too general, stating that the option “other” was  one that staff frequently chose, due to lack of more precise options.
Difficulties with FBS-generated management reports: Managers at the  three regional offices we visited told us that they do not always find the  FBS management reports easy to generate or helpful in overseeing the  program. For example, one manager told us that monitoring staff  performance was difficult because the system does not generate a single  report that shows all upcoming work that staff need to conduct over a  certain period of time. Instead, several reports need to be generated and  cross-referenced, which can be cumbersome. In addition, FBS does not  store historical information beyond 30 days that would allow managers to  examine past issues with fiduciaries or staff performance. For example,  managers in two regional offices said that in order to look at historical  information on seriously delinquent financial reports, they would have to  manually examine monthly paper printouts generated in prior months by  FBS. Managers explained that finding these printouts in their archives is  time-consuming and, because they are not required to keep printouts  beyond 2 years, information beyond that time may not be available. A 2007  internal VA report also stated that FBS requires extensive knowledge to  use, which inhibits effective oversight and management at all levels of the  program. The report recommended that VA begin long-term planning to  replace FBS with a more user-friendly workload tool that is comparable to  other operational management systems within VA.
Although there is acknowledgement among Fiduciary Program  management that FBS is outdated, VA has no formal plan or time line to  replace it. Managers and staff at the Central Office said that VA has not yet  submitted a request to VA’s Office of Information Technology to update  FBS. One Central Office official told us that although VA intends to make  such a request in the future, it has not done so yet because of the need to  focus on other aspects of the program. This official also mentioned that  the Central Office will offer nationwide FBS training to managers in fiscal  year 2010 to increase both managers’ knowledge about the system and  their willingness to use it.
section_title: VA Provides Some Training for Fiduciary Managers and Staff, but Additional Standardized Training Is Needed
paragraphs: Managers and staff in all three regional offices we visited said the  Fiduciary Program is complex and requires a great deal of specialized  knowledge to effectively monitor fiduciaries and provide program  oversight. Although the Fiduciary Program has a policy manual to guide  staff in carrying out their responsibilities, managers and staff said there  are many nuances and exceptions that take time to master, particularly  since each fiduciary and beneficiary situation may be different. In addition  to these program complexities, managers in all of the regional offices we  visited said that high staff turnover has contributed to a large number of  inexperienced managers and staff in their Fiduciary Program units who  need training. For example, in two of the three regional offices we  visited, only about one-third of staff (15 out of 47) had more than 2 years  of experience in the program. In addition, we were told that many  managers at the regional offices we visited had been in their position for  less than 2 years and had little or no Fiduciary Program experience.  Managers noted that limited training for these managers and staff may  have contributed to various program problems, including failures to  properly monitor fiduciaries or document certain actions in beneficiary  case files. Our case file review showed that about 15 percent of the files in  our nationwide sample lacked sufficient documentation of at least one  required action between July 1, 2006, and June 9, 2009, making it  impossible to know whether staff acted as required but failed to document  it, or failed to complete the action.
VA has provided some training to ensure that Fiduciary Program managers  and staff are proficient in carrying out their responsibilities, and some  regional offices have developed their own training. VA provides a  standardized computer-based training program for new staff who conduct  visits to beneficiaries and fiduciaries and for those needing a refresher.  Central Office managers and staff also said that they hold monthly  teleconferences and conduct periodic visits to individual Fiduciary  Program units to discuss selected topics. In addition, managers and staff in  all three regional offices we visited said that they conduct their own  weekly or biweekly training sessions on selected topics, such as how to  determine whether bonds are required, and what kinds of situations  constitute misuse. However, they noted that individual training occurs  primarily on the job, and the effectiveness and consistency of such  training depends on the expertise of staff conducting the training.
Given the complexity of the program and the level of staff experience at  many Fiduciary Program units, managers and staff in the three regional  offices we visited said that additional standardized training is needed.  Central Office managers acknowledged that such training would be  beneficial and noted that they are in the process of developing two  standardized training programs. Central Office management said that they  expect to implement these training programs some time in fiscal year 2010.
section_title: VA Consolidated Western Fiduciary Program Units to Improve Performance and Oversight but Has Not Yet Evaluated the Outcomes of This Effort
paragraphs: Beginning January 2008 through September 2008, VA consolidated  Fiduciary Program unit managers, staff, and files from 14 western VA  regional offices into a single location in Salt Lake City, Utah—referred to  as the Western Area Fiduciary Hub—to improve program performance and  oversight. VA officials expect the hub to achieve these improvements  through increased staff expertise, more consistent training, better  leveraging of staff resources, and increased program efficiencies. For  example, the hub created specific management positions for the Fiduciary  Program and divided some staff into teams to focus on specific actions  and responsibilities in an effort to build program expertise, including  expertise with FBS. In addition, the hub provides opportunities to train  more staff at once, which could help to further build staff expertise and  potentially increase the consistency of training. The hub eliminated  jurisdictional boundaries that prevented staff from conducting visits that  were geographically close, but outside of their assigned jurisdiction or  area of responsibility, which VA expects will help balance workloads  among staff and reduce travel time. Additionally, the hub moved its paper- based beneficiary case file system to an electronic file system, called  Virtual VA, by scanning in paper documents in an attempt to more  efficiently transfer information between the hub and staff conducting  visits in other offices.
While some VA managers and staff in the hub believe consolidation can  help improve Fiduciary Program performance, they described some  challenges that have impeded effective implementation of the pilot project.  The hub’s managers explained that there had been multiple changes in  management and, until January 2009, they did not consider the hub to be  fully functional, which was approximately 1 year after it opened. Managers  and staff also told us that the hub was implemented before appropriate  planning and resources were in place. For example, new standard  operating procedures specific to the hub, as well as new phone systems,  were put in place over 15 months after the initial rollout. During our visit,  managers and staff agreed that all of the necessary equipment to conduct  visits, such as computers, printers, and navigational systems, were still not  fully in place. Hub managers and staff also said there were unforeseen  difficulties with Virtual VA, such as inconsistent access and system  crashes multiple times a day. In addition, managers and staff noted that  documents were sometimes scanned into the wrong electronic beneficiary  case file, and a backlog of incoming documents to be scanned meant they  could not be certain that case files in Virtual VA were up to date. Managers  also said that the beneficiary case files they received from some regional  offices had not been properly maintained, which slowed the hub’s ability  to meet performance goals and time frames. In some cases, for example,  staff had not taken required actions to address seriously delinquent  financial reporting and that potential misuse of funds had gone  unidentified for significant periods of time. As a result, hub staff spent a  large portion of time updating old cases and performing necessary follow- up actions, in addition to completing incoming work. Managers and staff  noted that they have gained valuable insight and knowledge in  implementing the hub that could help inform future office consolidations.
Because the hub is still undergoing multiple changes and has not yet been  evaluated, it is unclear whether consolidation of Fiduciary Program units  has improved program performance and oversight. Central Office staff told  us that the agency has been focusing on getting the hub fully operational  as opposed to evaluating its performance. However, a VA official from the  Office of Field Operations said that the agency may conduct an evaluation  of the hub in early 2010, but has not yet developed a specific time frame or  a plan to conduct such a study.
section_title: Conclusions
paragraphs: The Fiduciary Program provides a valuable service in ensuring that  billions of dollars in benefits to one of VA’s most vulnerable populations— those who are unable to manage their own financial affairs due to mental  impairments—are safeguarded.
Past reports show that this program can be susceptible to misuse of funds,  so it is important that VA take actions to minimize risks to its  beneficiaries. Since 2005, VA has made several efforts to better monitor  fiduciaries and oversee the program, such as adding on-site reviews to  help ensure that professional fiduciaries are appropriately managing  beneficiaries’ funds as required in the Veterans’ Benefits Improvement Act  of 2004 and consolidating western Fiduciary Program units to improve  performance. However, VA continues to face challenges safeguarding  Fiduciary Program benefits because staff inconsistently comply with  program policies, some policies are weak or unclear and, as program  managers and staff stated, the program lacks adequate resources and  tools.
Insufficient compliance with VA policies for monitoring fiduciaries,  including lack of timely follow-up on late financial reports, presents the  opportunity for funds to be used inappropriately and could preclude VA’s  prompt detection of such use. In addition, failure to ensure that fiduciaries  purchase bonds when necessary can leave beneficiaries’ estates unsecured  and VA liable for replacing misused funds. Further, in the absence of  stronger policies and procedures for on-site reviews of professional  fiduciaries, staff may lack key information to determine if fiduciaries who  serve multiple beneficiaries are performing satisfactorily and in the best  interest of the beneficiaries. Although improving compliance and policies  in these areas may take additional resources, such an investment will  likely lead to improved staff and program performance. Additionally,  without investing in a case management system that provides sufficient  information and can be more efficiently navigated, managers and staff may  not readily have all the information they need to effectively monitor  fiduciaries and oversee the program. Also, in the absence of sufficient  standardized training, managers and staff may not have the expertise  needed to effectively carry out program responsibilities. Finally, although  VA’s Western Area Fiduciary Hub has the potential to enhance program  expertise and consistency, improve the delivery of training, and help VA  better leverage staff resources, it has not yet been evaluated. Without a  formal evaluation of hub outcomes, VA will not be able to determine its  impact and whether this effort can address long-standing problems in the  program.
section_title: Recommendations for Executive Action
paragraphs: To ensure that maximum efforts are made to safeguard beneficiary assets,  we recommend that the Secretary of Veterans Affairs take the following  four actions:    Ensure that policies regarding file documentation, follow-up with  fiduciaries for late financial reports, and bond acquisition are understood  and carried out by staff. This might be accomplished by increasing  standardized training for staff, clarifying certain policies, and improving  management review and oversight.
Improve the policies for periodic on-site reviews of professional  fiduciaries by taking additional actions such as:   Requiring a unique identifier for all fiduciaries to better determine  which professional fiduciaries meet the criteria to have on-site  reviews.
Implementing a nationwide systematic quality review process to  examine completed on-site review reports.
Evaluate alternative approaches to effectively and efficiently meet the  electronic case management system needs of Fiduciary Program managers  and staff. This could include developing or acquiring a replacement system  or enhancing the existing system.
Move forward with developing a plan to systematically evaluate the extent  to which the hub pilot project is addressing identified program  weaknesses. This could include documenting lessons learned during  implementation.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to VA for review and comment. VA  generally agreed with our conclusions and concurred with our  recommendations. Its written comments are reproduced in appendix II.
VA agreed with our recommendation that it ensure that policies regarding  file documentation, follow-up with fiduciaries for late financial reports,  and bond acquisition are understood and carried out by staff and cited  actions it is taking to do so. VA’s actions include preparing additional  interim guidance and standardized training that, among other things, will  address file documentation and appropriate follow-up. The standardized  training, which will be provided to all fiduciary managers and staff  nationwide who are directly involved in administering the Fiduciary  Program, is scheduled to begin in March 2010. VA is also planning a  Fiduciary Managers Training Conference in 2010 to provide in-depth  training on a variety of fiduciary topics. In addition, VA expects to publish  a revised policy manual by September 30, 2010, that will clarify existing  guidance, establish new policies, and enhance oversight.
VA also agreed with our recommendation that it improve its policies and  procedures for conducting on-site reviews of professional fiduciaries. The  agency stated that its revised policy will require staff to obtain Social  Security numbers or tax identification numbers for organizations and  businesses that serve as fiduciaries, in addition to its current practice of  requiring this information on individual fiduciaries. The agency plans to  issue interim guidance and standardized training on this new requirement  in March 2010. Also effective March 31, 2010, VA will begin requiring that  all completed on-site reviews of professional fiduciaries be submitted to  its Central Office for review and analysis. The Central Office’s assessment  of on-site reviews is an important first step in ensuring that these reviews  are conducted consistently across all offices and in accordance with  program policy.
VA also agreed with our recommendation to evaluate alternative  approaches to effectively and efficiently meet the electronic case  management system needs of the Fiduciary Program. VA has established a  work group that will evaluate the current FBS and submit its findings and  recommendations in June 2010 for either enhancing or replacing the  system.
Finally, VA agreed with our recommendation to move forward with  developing and implementing a plan to systematically evaluate the extent  to which the Western Area Fiduciary Hub is addressing identified program  weaknesses. VA intends to complete such an evaluation by September 30,  2010. We encourage VA to take steps to ensure that the evaluation’s design  and criteria yield valid information that will help the agency decide  whether the consolidation of the western Fiduciary Program units has  effectively addressed identified program weaknesses.
VA noted a concern in its comments regarding GAO’s extrapolation of case  data across the Fiduciary Program population. Specifically, VA  commented that a stratified random sample of 205 cases is not large  enough to provide precise predictions about the 106,000 adults in the  Fiduciary Program. However, we determined our estimates regarding the  overall population based on this sample with a precision of plus or minus  10 percentage points. We believe that this was sufficient for the purposes  of our report and that our sample size was large enough to achieve this  precision. In addition, all margins of error have been disclosed in the  report, including footnotes for those estimates of subpopulations with  margins of error larger than plus or minus 10 percentage points.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Veterans  Affairs and others who are interested. The report also will be available at  no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-7215 or bertonid@gao.gov. Contact points for our  Office of Congressional Relations and Public Affairs may be found on the  last page of this report. Staff members making key contributions to this  report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The objectives of our report on the Department of Veterans Affairs (VA)  Fiduciary Program were to examine (1) how effective program policies  and procedures are in monitoring fiduciaries and safeguarding beneficiary  assets and (2) challenges VA faces in improving program performance and  oversight.
subsections: section_title: Effectiveness of Program Policies and Procedures
paragraphs: To address the first objective, we reviewed existing information on the  Fiduciary Program. We then collected and analyzed data from a stratified  random sample of 205 beneficiary case files. We also assessed the  reliability of VA’s Fiduciary Beneficiary System (FBS) because it was the  source for our sample selection. We found the data to be reliable for the  purpose of providing a sampling frame.
To address both the first objective and obtain necessary background  information on the program, we reviewed available information on the  Fiduciary Program, such as the Fiduciary Program’s policies and  procedures manuals and internal program documents. These included the  FBS user’s guide to learn how VA tracks and measures Fiduciary Program  performance, such as the timeliness of visits. We also reviewed relevant  federal laws and regulations. In addition, we examined VA Office of  Inspector General (OIG) reports and congressional hearings about the  Fiduciary Program to understand previously identified weaknesses in  safeguarding beneficiary assets.
We also collected and analyzed case-level data from a stratified random  sample of 205 beneficiary case files to generate performance estimates for  processes that Fiduciary Program staff use to monitor fiduciaries, such as  the timeliness in obtaining financial reports or conducting visits. Our  sample was from a population of over 106,000 adult beneficiaries and was  stratified based on estate values that were $20,000 and under, and over  $20,000. The data was also stratified based on the beneficiary’s status as a  supervised direct payment (SDP) beneficiary. Ultimately, our analysis did  not focus on the SDP strata because we found that these cases  represented such a small portion of all Fiduciary Program activity. After  excluding these SDP cases, our sample allowed us to generalize to a  population of over 103,000 adult beneficiaries and to some subpopulations.  This population included all adult beneficiaries, other than those who VA  planned to monitor with a method other than visits and those who had  negative estate values, as of March 31, 2009. All estimates in this report  have a margin of error of plus or minus 10 percentage points or less, at the  95 percent confidence level, unless otherwise noted. We developed a data  collection instrument to record information from the case files. Activities  documented in the beneficiary case files after July 1, 2006, provided the  basis for our analysis of recent case activities. We chose to focus our  analysis on these recent case activities because, by this date, VA had  implemented recommendations from the agency’s June 2006 OIG report  on the Fiduciary Program. The end date for our sample file review was  June 9, 2009. One limitation of the file review was that a limited number  of cases did not contain the relevant information we needed to complete  our review. One reason was that VA provided us with photocopies of the  case files, and some of the date stamps VA used to assess the timeliness of  staff activities may not have been legible on the copies. In other instances,the original documents may never have been stamped with the date that  the actions began or were completed. For some categories (such as follow- up visits), we used the date that the appropriate document was signed  to  approximate a missing date stamp in a particular case. We did this when  the average difference for all cases in that category which included both  the date signed and the date stamped was no more than 7 days. For initial  and follow-up visits, we substituted the date signed for the date stamped,  respectively, in 10 and 25 cases. For categories where such a difference  exceeded this average (such as the request for an initial visit), or if we  could not otherwise substitute the missing date stamp to calculate  timeliness, we simply classified cases as having missing date stamps.  Additionally, if there was an indication in the file that a visit was  scheduled but there was no documentation that the visit occurred, or if a  financial report or bond was due, but there was no indication that it was  submitted, we classified the activity as having no documentation.
Further, we conducted several tests to assess the reliability of FBS as the  source for our sample selection and for other case file information  because prior VA OIG findings and some of our interviews raised  questions about some FBS data. First, we reviewed existing  documentation about FBS and prior VA OIG reports that discussed FBS,  and we interviewed knowledgeable staff about how FBS data was  collected, stored, and used. Second, we conducted electronic testings of  FBS data reliability, such as checking for missing data elements. Third, we  traced selected information to the source documents in the case files.  Specifically, we compared the estate values in FBS with the documented  estate values in the case files for 10 randomly selected cases and found  them to be accurate enough for our purposes. Overall, we found FBS to be  sufficiently reliable for the purposes of sampling cases for review. We also  used FBS data to assess how reliably fiduciaries managing multiple  beneficiaries could be identified.
section_title: Program Effectiveness and Challenges
paragraphs: To obtain information for both objectives, we interviewed managers and  staff at VA’s Central Office. We also conducted site visits to three  Fiduciary Program units in VA regional offices to assess how Fiduciary  Program units oversee fiduciary cases. Finally, we spoke with  representatives from veterans service organizations and other Fiduciary  Program units.
During our interviews with Fiduciary Program managers and staff at VA’s  Central Office and regional offices, we asked about program policies and  procedures and internal control standards used to ensure effective  program performance and safeguard cash benefits. We also asked about  program performance goals and standards, and how the Fiduciary  Program interacts with other VA offices and programs. Among others, we  spoke with the Chief Fiduciary and his staff, officials from the Office of  Enterprise Development, Compensation and Pensions, and staff familiar  with FBS.
Of the 43 Fiduciary Program Units in VA regional offices, we conducted  site visits to three—St. Petersburg, Florida; Cleveland, Ohio; and Salt Lake  City, Utah—during which we interviewed staff and managers, reviewed  case files, and examined on-site reviews of professional fiduciaries. We  considered several factors in selecting the Fiduciary Program units to visit.  First, we wanted to maximize the number of beneficiary cases being  handled at the offices we visited. Taken together, these three sites  oversaw more than 25 percent of all Fiduciary Program beneficiaries in  fiscal year 2008. Second, to obtain geographical variation, we chose units  in three of the four regions. Third, we selected the Salt Lake City regional  office because it is the site of a pilot project that consolidated 14 western  regional offices into one hub. Our purpose in conducting these site visits  was to gather information about how individual units handled fiduciary  cases, including the extent to which staff complied with policies and  procedures, and managers and staff understood them and found them  useful. To do so, we interviewed program managers and staff and also  reviewed a total of 32 site visit files for which there were allegations of  misuse or for which financial reports were more than 120 days overdue.  We selected these files based on a judgmental sample of files stored at the  three VA regional offices we visited. We also collected and reviewed 12 on- site reviews of professional fiduciaries who managed funds for more than  20 beneficiaries with total combined benefits of at least $50,000. We  chose these fiduciaries from our 32 site visit file reviews.
Finally, to gain further perspective on the program, we interviewed  representatives from 10 veterans service organizations during our site  visits and in Washington, D.C., and spoke to managers and staff at  Fiduciary Program units in Oakland, California, and Baltimore, Maryland.
We conducted this performance audit from December 2008 to February  2010, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Department of Veterans Affairs
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Shelia Drake, Assistant  Director; Nancy Cosentino; Laura Henry; Wiktor Niewiadomski; Nhi  Nguyen; and Nyree Ryder Tee made significant contributions to this  report. Roger Thomas provided legal assistance; Jim Ashley, Melinda  Cordero, and Walter Vance provided assistance with design methodology  and data analysis; and Kathleen Van Gelder assisted in report  development.