Land-Use Agreements: Department of Veterans Affairs Needs to Improve Data Reliability and Monitoring
Released: 2014-09-17T00:00:00


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: With over 7,400 buildings situated on over 35,000 acres of land, the  Department of Veterans Affairs (VA) continues to rank amongst the  largest federal land-holding organizations, and also operates one of the  largest health care–related real estate portfolios in the nation. Since the  1990s, VA’s portfolio has been shaped by changes to its organizational  mission—transitioning from predominately hospital-based care to  outpatient-based services for veterans and their families. As a result of  this organizational transformation and other factors, millions of square  feet of VA’s property at its medical facilities and centers in the past was  underutilized or vacant.with this portfolio, Congress provided VA with several legal authorities  that enable the department to enter into agreements with public or private  entities for the use of its underutilized or vacant property in exchange for  cash or some other benefit. For instance, VA has authority to enter into a  particular type of lease, called an enhanced-use lease (EUL), which  allows the agency to enter into long-term agreements with public and  private entities for the use of VA property, resulting in cash or in-kind  consideration for VA. Additionally, VA has authority to enter into sharing  agreements with entities to provide the use of VA space for the benefit of   To effectively manage the challenges associated  veterans or nonveterans in exchange for payment or services. Other  authorities include outleases, licenses, and permits.

In exchange for use of the space, VA receives revenue, or in-kind  considerations, or both. The 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, and 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. However, while VA’s underutilized and vacant  space can be leased for the benefit of veterans or the public at large,  VA’s policy is to prioritize making agreements that in no way result in a  diminution of services for veterans and also focus on providing supportive  housing or service centers for homeless veterans.

For all federal agencies, including VA, we have identified the  management of real federal 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. Specifically,  the government continues to lack consistent, accurate, and useful data to  support decision making. Likewise, the VA Office of Inspector General  (IG) reported in February and September 2012 that VA could improve its  monitoring and oversight of EUL agreements. Specifically, the IG found  that the EUL agreements were not always effectively monitored in a way  that served the best interests of veterans and the department.  Additionally, the IG found that VA could not fully determine the  effectiveness of leased space due to inaccurate reporting on benefits, and  that decision making by local VA staff sometimes lacked transparency.  These findings, while specific to the EUL program, raise concerns related  to potential deficiencies in the management of other land-use agreements  such as sharing agreements, outleases, licenses, and permits.

You asked us to review information on what is known about VA’s use of  certain land-use authorities, the agreements executed under those  authorities, and their outcomes. 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 revenue-collections processes  at selected VA medical centers, and (3) monitors the land-use  agreements at selected VA medical centers.

To determine the extent to which VA maintains reliable data on its land- use agreements and the revenue generated from those agreements, we  analyzed land-use agreement data contained in VA’s Capital Asset  Inventory (CAI) for fiscal year 2012, the most recent data available at the  time we initiated our review.data in 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. These sites were selected because they  had among the largest number of agreements or highest amount of  estimated revenue maintained in CAI. Our testing of the existence and   We took steps to assess the reliability of the  completeness of VA land-use agreement records determined that VA  records were neither accurate nor complete, as discussed later in this  report. As such, we determined that while the CAI data were reliable  enough to select our three sites for review, 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.

Over the course of this engagement, we visited the three selected sites to  corroborate some of the data maintained in CAI and to accomplish other  audit objectives. During these site visits, our overall approach included  interviewing local medical center officials such as medical facilities’  directors, contracting officials, and fiscal officials. With our interviews, we  made inquiries on VA’s processes and controls related to the billing and  collection of its revenues, and tested billing and collections on fiscal year  2012 land-use agreements provided to us by the medical centers. Finally,  we toured the facilities and recorded our observations about the space  relative to the terms as documented in the agreements.

To determine the extent to which VA monitors the billing and collection  processes at selected VA medical centers, we examined VA policies and  procedures as they relate to billing and collections of land-use  agreements, interviewed VA officials responsible for billing and collecting  revenues from land-use agreements at the three selected sites (New York  City, New York; North Chicago, Illinois; and West Los Angeles, California)  and reviewed all billing and collection documents associated with the  land-use agreements at those sites. Because the VA IG performed recent  work on EULs, our work for this objective was limited to other land-use  agreements types (i.e., sharing agreements, outleases, licenses, and  permits). In addition, for one of those sites, West Los Angeles, the VA IG  is conducting an investigation in which the IG seized all records related to  land-use agreements. As such, our audit was limited to only copies of  those records that VA officials had separately maintained. We made  inquiries to the investigation, but VA OIG staff declined to discuss the  nature or scope of the investigation. We assessed VA’s efforts, including  VA policies and procedures, using federal internal control standards.did not perform a systematic review of VA’s internal controls outside of   We  the three selected sites, and therefore the findings for this objective  cannot be generalized to other VA medical centers.

To determine the extent to which VA monitors the management of its  land-use agreements, we examined VA policies and procedures and  interviewed VA officials responsible for monitoring land-use agreements.  We also reviewed the land-use agreements and conducted observations  about the monitoring of the property associated with all land-use  agreements at the three selected sites. As noted above, our work at West  Los Angeles was limited by a current investigation being performed by the  VA IG, who seized all records related to land-use agreements. We  assessed VA’s controls using federal internal control standards. We did  not perform a systematic review of VA’s internal controls outside of the  three selected sites and therefore the findings for this objective cannot be  generalized to other VA medical centers.

We conducted this performance audit from May 2013 to August 2014 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.
subsections: section_title: Background
subsections: section_title: Federal Role
paragraphs: VA’s three operational administrations—the Veterans Health  Administration (VHA), the Veterans Benefits Administration (VBA), and  the National Cemetery Administration (NCA)—each manage their own  separate regional network of facilities to provide program services to  veterans and their families. These services include a diverse array of  educational, disability, survivor, and health benefits.

VHA holds the nation’s largest integrated health care system consisting  of, among other things, medical centers and community-based outpatient  clinics that are decentralized across 21 Veterans Integrated Service  Networks. In addition to its primary program mission area of providing  health care to veterans, VHA—specifically—is also responsible for  managing the majority of the department’s underutilized and excess  property and land-use agreements at the local level. It should be noted  that the management of underutilized and vacant spaces can be costly.  Decision making on how to use these properties may involve competing  considerations such as budgetary constraints, legal limitations, and  stakeholder input.

section_title: Types of Land-use Agreements and Their Benefits
paragraphs: VA utilizes various leasing authorities as a means of avoiding or  decreasing its costs by maximizing available resources through the joint  use of facility space. VA may use these authorities to enter into  agreements that include outleases, licenses, permits, sharing  agreements, and EUL agreements with public or private entities to use  land and buildings for revenue or in-kind consideration. See table 1 below  for the various types of authorities available to VA, a brief description of  the authority, and how proceeds may be used if revenue is generated.

Depending upon the terms specified and the type of agreement,  agreements may generate revenue, in-kind considerations (such as cost  savings or avoidance, or enhanced services), or both for the benefit of  veterans, VA’s operations, or the community at large. When veterans  benefit directly from these agreements, they may enjoy access to an  expanded range of services that would otherwise not be available on VA  medical center campuses because in some cases VA is not authorized to  provide such services itself. VA benefits from land-use agreements by  offsetting or avoiding altogether the costs associated with operating and  maintaining underutilized or vacant properties. Finally, local communities  may also benefit from agreements through the provision of services such  as credit unions, daycare, or the placement of rooftop antennas to  strengthen cell-phone reception.

section_title: Land-use Agreement Data and Monitoring
paragraphs: Details about land-use agreements, including estimated revenue and  indications of in-kind considerations, are to be recorded in VA’s CAI  system by administration, network, or medical facility personnel who are  responsible for those agreements. According to VA, it uses this system to  evaluate property management by its administrations, regional networks,  and medical centers. The inventory data from this system are to form the  basis for decision making used in VA’s strategic capital-investment  planning processes. CAI data are also reported to external stakeholders,  including Congress and GAO.

To be entered into CAI, each land-use agreement must have its own  revenue source and accounting codes. VA headquarters staff process  requests and register the land-use agreements with these codes. Once  assigned, the codes are to be entered into the CAI database. VA medical  centers in VA’s 21 service networks are then responsible for updating the  land-use agreement information into CAI immediately after they are  notified that the codes have been entered as well as updating CAI at the  time of execution of the land-use agreement. VA medical centers are also  required to immediately update the CAI database for any subsequent  changes in the land-use agreements. Each year, VA headquarters staff  initiate a call for the VA medical centers to review existing data in CAI,  including land-use agreements; update any needed changes to CAI; and  certify the data are complete and accurate at that point in time.

Enhanced use leases (EUL) are centrally managed at headquarters by  the Office of Asset Enterprise Management (OAEM). OAEM is  responsible for administering and managing the EUL program, with  support from local facility staff from VA’s administrations. This monitoring  includes tracking lease requirements and identifying benefits and  expenses for EUL projects, once leases are executed. VA is also  responsible for producing an annual consideration report to Congress for  EULs that includes information on revenue, cost avoidance, cost savings,  enhanced services, and expenses paid by VA.

Unlike the central management of revenues and agreements associated  with EULs, VA generally uses a decentralized approach in the monitoring  of sharing agreements, outleases, licenses, and permits. The scope of  projects can be diverse, ranging from space for medical research, day  care, and rooftop telecommunications equipment, to 1-day special events  for community causes. Regardless of the type of project, roles and  responsibilities may vary by medical facility when overseeing land-use  agreements. The monitoring of agreements, including ensuring the space  is properly maintained or occupied, may involve offices responsible for  asset management or contracting, for instance. According to VA officials,  the medical centers are allowed considerable discretion in their  management of these agreements.

section_title: VA Does Not Maintain Reliable Data on the Number of Land-use Agreements and Their Associated Revenues
paragraphs: Based on 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.provided to us from VA’s CAI system, VA reported that it had over 400  land-use agreements with over $24.8 million in estimated revenues for  fiscal year 2012. However, in the course of our testing the reliability of the  data, one of VA’s administrations—VHA—initiated steps to verify the  accuracy and validity of the data it originally provided to us. During this  verification process, VHA made several corrections to the data that raised  questions about their accuracy, validity, and completeness. Examples of  these corrections include the following:   According to the land-use agreement data

VHA reported multiple entries for a single land-use agreement.

Specifically, VHA had 37 separate land-use entries for the same  agreement entered in CAI—one for each building listed in the  agreement—that were, in fact, for only one agreement at VA’s facility  in Perry Point, Maryland.

VHA also noted in its revisions that there were 13 agreements that  had been terminated prior to fiscal year 2012 that should have been  removed from the system.

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 initially reported that it had 9 non-EUL land-use agreements that  generated about $3.2 million in revenues at its North Chicago medical  center in fiscal year 2012. In its revisions, VHA stated that its North  Chicago medical center maintained 7 land-use agreements that  generated no revenue, instead of 9 agreements that generated  revenues. However, on the basis of our independent review of  revenue receipts, we found that 5 agreements generated more than  $240,000 in revenue in fiscal year 2012.

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 generated was approximately $1.5 million.

Guidance in this area states that reliable data can be characterized as  being accurate, valid, and complete.reasonably complete and accurate, can be used for their intended  purposes, and have not been subject to inappropriate alteration.  Additionally, data in systems should also be consistent—a subset of  accuracy—and valid. Consistency can be impaired when data are entered  at multiple sites and there is an inconsistent interpretation of what data  should be entered. Finally, data that are valid actually represent what is   Reliable data means that data are  being measured. Thus, despite the corrections made by VHA, we cannot  conclude that the revised number of land-use agreements held by VA or  the amount of revenue these agreements generated in fiscal year 2012  are sufficiently reliable.

VA policy requires that CAI be updated quarterly until the agreement  ends. VA’s approach on maintaining the data in CAI relies heavily on data  being entered timely (quarterly) and accurately by a staff person in the  local medical center. VA OAEM makes annual requests to medical  centers to update the data in CAI, which also calls for the medical centers  staff to verify the data. VA officials stated that a number of deficiencies  remained after an annual update of the data in CAI. According to VA  officials, the errors may be a result of manual data entry or medical  centers not adhering to the guidance for updating CAI on a quarterly  basis. Our review found that VA does not currently have a mechanism to  ensure that the data in CAI are updated quarterly as required and that the  data are accurate, valid, and complete. Federal internal control standards  state that relevant, reliable, and timely information is to be available for  external reporting purposes and management decision making.  Additionally, these standards also state that management should put in  place control mechanisms and activities to enable it to enforce its  directives and achieve results, such as providing relevant, reliable, and  timely information.

VA officials recognize the importance of maintaining quality data.  According to VA’s guidance on CAI, the maintenance of high-quality data  is critical to the organization’s credibility and is an indication of VA’s  commitment to responsible capital asset portfolio management.  Additionally, VA contends that high-quality data are needed to be  responsive to policymakers and others. Officials at the VA headquarters  reported that they undertake a few activities throughout the year to  improve their data, such as the annual update. For example, an official  told us that staff at headquarters had recently deployed a training session  in 2014 that focused on updating data in CAI. According to a VA official,  six sessions have been provided through June 2014. While these  activities are positive steps, they do not provide the assurance needed  that the data maintained in CAI are reliable. 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
subsections: section_title: Weaknesses Noted in Various Aspects of the Revenue Collection Process at the Selected Medical Centers
paragraphs: At the three medical centers we visited, we found weaknesses with the  billing and collection processes that impair VA’s ability to effectively and  timely collect land-use agreement revenues from its sharing partners.  Specifically, we found inadequate billing practices at all three medical  centers we visited, as well as opportunities for improved collaboration at  two of the three medical centers, and duties that were not properly  segregated at one medical center. Because we did not perform a  systematic review of VA’s internal controls outside of the three selected  sites, our findings in this section cannot be generalized to other VA  medical centers.
subsections: section_title: Inadequate Billing Practices
paragraphs: At the three sites that we visited, 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   Based on our analysis of the agreements, we found  the correct amount.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. According to the department’s guidance on sharing  agreements, VA must incorporate an annual inflation adjustment to  multiple-year agreements to ensure that its maintenance and operating  costs—such as future utility costs—continue to be recouped, or  exceeded. However, for some of these incorrectly billed agreements, the  sharing partners paid the correct amount of rent as specified in the  agreement even though the bill stated an incorrect amount. In addition,  we 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. According to the West  Los Angeles chief fiscal officer, these proceeds were mainly used to fund  maintenance salaries. However, according to VA policy, proceeds from  sharing agreements are required to be deposited in the medical care  appropriations account that benefits veterans.

According to the policy for sharing agreements, each agreement must  include the amount of rent for the space, when the rent is expected to be  paid, and the number of payments to be made over a specified period by  the sharing partners. In the absence of a bill from VA, the sharing partner  still is required to make payments as stipulated under the agreement.  However, at all three sites that we visited, we found problems with the  billing of rent for the land-use agreements:

At the New York City location, VA officials were not aware that a  sharing partner—an academic department with the local university— renewed its agreement to remain at the VA in 2008. As a result and  according to a VA New York fiscal official, VA did not bill the sharing  partner for several years’ rent that totaled over $1 million. After it  discovered this error, VA began to take collection action on the unpaid  rent in 2012, but over $200,000 in delinquent rent remained  outstanding as of April 2014.

At the West Los Angeles location, officials did not send periodic  invoices to sharing partners as required by policy or under its  agreements. As a result, two of its sharing partners did not always  submit timely payments. And in a third case, VA has not fully collected  on the total amount of past due rent from a sharing partner that it did  not bill as expected. Specifically, in August 2011, VA stopped billing a  hospitality corporation that operated a laundry facility on the campus.  Since that time, the sharing partner has not made any payments as  required under the terms of its agreement. The partner vacated the  space in December 2013, and owes hundreds of thousands of dollars  to VA. A contracting officer in Long Beach, who is responsible for the  management of the land-use agreements in West Los Angeles, stated  during a February 2014 meeting with GAO that he advised the West  Los Angeles location to evict the sharing partner for occupying VA  space beyond its agreement term because they were “trespassing”  and lacked authorization to remain in the space. The contracting  official also stated that VA should bill the sharing partner for the rent  due and, if necessary, seek guidance to initiate available collection  actions. A West Los Angeles VA official acknowledged that eviction  was one of the options that could be pursued; however, the medical  center continued to allow the sharing partner to remain in the space  so that the agreement could be terminated “amicably.” During our visit  in December 2013, that same West Los Angeles official also stated  that VA would continue to negotiate with the sharing partner on the  final payment to be received; and those negotiations would take into  account the value of certain inventory items and parts that the partner  left in the space. This official later reported to GAO that, as of May  2014, VA would bill the sharing partner for the full amount of past due  rent without offsetting the value of the property remaining in the  space. We asked for a copy of the letter that would be sent to the  sharing partner, but as of June 2014 VA had not provided it.

The medical center at West Los Angeles also did not bill a federal  government agency sharing space at the Sepulveda Ambulatory Care  Center during fiscal year 2012. Instead, the medical center submitted  the bill for about $480,000 to the federal agency on October 1, 2012,  the day after the end of fiscal year 2012. As a result, the sharing  partner did not make any monthly rental payments during fiscal year  2012. The sharing partner subsequently made the full rental payment  in November 2012.

At the North Chicago medical center, VA officials did not bill one of its  sharing partners for about $3,000 for the month of August 2012.  Officials were not aware that they had not billed for this agreement  until we brought the matter to their attention in January 2014.  According to a VA official, the North Chicago medical center  submitted a bill to the sharing partner in June 2014.

VA officials acknowledged 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. Federal internal control  standards state that management is to ensure that transactions are  promptly recorded to maintain their relevance and value to management  in controlling operations and making decisions. This applies to the entire  process or life cycle of a transaction or event from its initiation and  authorization through its final classification in summary records. In  addition, the standards call for agencies to design control activities to help  ensure that all transactions are completely and accurately recorded.  These standards and OMB guidance also state that management should  put in place control mechanisms and activities to enable it to enforce its  directives and achieve results. Because VA lacks a mechanism that  ensures its transactions are promptly and accurately recorded, VA is not  consistently collecting revenues that the sharing partners owe to VA at  these three medical centers.

section_title: Opportunities for Improved Collaboration
paragraphs: At two of the three sites we visited, we found that VA could improve  collaboration amongst key staff that could enhance the collections of  proceeds for its land-use agreements. Examples include the following:

At the New York site, VA finance staff created spreadsheets to  improve the collection of its revenues for more than 20 agreements.  However, the fiscal office did not have all of the renewed contracts or  amended agreements that could clearly show the rent due since the  contracting office failed to inform the fiscal office of the new  agreements. 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. According to the  New York Harbor Healthcare System director and the fiscal officials at  New York, collection activities suffered because the contracting office  was not responsive.

At the North Chicago medical center, the finance staff identified  differences between what they billed from the sharing partners and  what they collected for some agreements. As a result, a North  Chicago medical center finance staff official stated that the center’s  staff had to undertake extra, time-consuming measures—including  speaking to the sharing partners themselves—to resolve these  differences. At that time, the finance staff discovered that VA was not  billing for the increase in rent for inflation. North Chicago did not have  a mechanism to communicate the specific terms (such as inflation  adjustments) and did not have access to the land-use agreements  across offices, according to another North Chicago finance official.  Such sharing of information would have helped to expedite the  explanation of these differences.

Collaboration can be broadly defined as any joint activity that is intended  to produce more public value than could be produced when organizations  act alone. Best practices state that agencies can enhance and sustain  collaborative efforts by engaging in several practices that are necessary  for a collaborative working relationship. These practices include defining and articulating a common outcome; agreeing on roles and responsibilities; and establishing compatible policies, procedures, and other means to  operate across agency boundaries.

By taking additional steps to foster a collaborative environment, VHA  could improve its billing and collection practices. For example, rather than  contacting sharing partners to confirm the accuracy of its billing, fiscal  staff in the North Chicago VA could work with the office that holds the  agreements, the contracting office, to confirm the accuracy of its billing  and to correct errors.

section_title: Segregation of Duties
paragraphs: Based on 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 utilize proper  segregation of duties. Specifically, the office responsible for monitoring  agreements also bills the invoices, receives collections, and submits the  collections to the agent cashier for deposit. 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. Federal internal control standards state that for an effectively  designed control system, key duties and responsibilities need to be  divided or segregated among different people to reduce the risk of error  or fraud. These controls should include separating the responsibilities  for authorizing transactions, processing and recording them, reviewing  them, and accepting any acquired assets. Without proper segregation of  duties, risk of errors, improper transactions, and fraud increases.  According to West Los Angeles officials, the medical center is considering  steps to correct the segregation of duties issue by assigning certain  duties to the fiscal office. However, the West Los Angeles site did not  provide any details on the steps it would take or the timeline it would  follow to implement these actions. Federal internal control standards  emphasize the need for federal agencies to establish plans to help ensure  goals and objectives can be met. 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.

section_title: Opportunities for Improved Monitoring of Billing and Collections at Selected Medical Centers
paragraphs: 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. Federal internal control standards require that  departments and agencies assess program quality and performance over  time and work to address any identified deficiencies. Further,  management must continually assess and evaluate these controls to  assure that the activities being used are sufficient and effective. In  response to our findings, 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.  Federal internal control standards also state that management should put  in place control mechanisms and activities to enable it to enforce its  directives and achieve results. 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, as expected.

section_title: VA Did Not Effectively Monitor Many of Its Land-use Agreements at Two of the Three Selected Medical Centers
paragraphs: VA did not effectively monitor the status of the land-use agreements at  the medical center level for two selected sites that we visited. As a result,  we identified problems associated with many of the land-use agreements  including unenforced agreement terms, expired agreements with partners  remaining in VA space, and organizations occupying VA space without a  written agreement. Because we did not perform a systematic review of  VA’s internal controls outside of the three selected sites, our findings in  this section cannot be generalized to other VA medical centers.
subsections: section_title: Several Agreements Lacked Proper Enforcement of Terms
paragraphs: During our site visit to West Los Angeles, we noted several sharing  agreements that lacked proper enforcement. These agreements included  the following:

Authorization and Reporting Terms for Parking Services Agreement  Not Enforced. VA did not enforce two key modification terms of a  West Los Angeles sharing agreement. One modification for this  agreement allowed for the receipt of in-kind considerations—such as  road repaving and the installation of speed bumps—in lieu of revenue,  as originally agreed. This agreement modification stipulates that the  sharing partner will provide services (such as paving) as determined  necessary by the contracting official. However, the medical center’s  current contracting officer—an official located in the Long Beach  office—stated that he had not approved any services under the  agreement since his appointment in June 2012. Another provision in  the modification requires the sharing partner to provide an annual  reconciliation to the contracting officer. According to a West Los  Angeles VA official that was previously responsible for monitoring the  agreement, this report reconciles the costs of the in-kind services  provided to VA to the revenues generated through the agreement  each year. This official could not provide us with either documentation  or information regarding any services that were provided during fiscal  year 2012, including the value of such services. According to the  current contracting officer in Long Beach, neither the sharing partner  nor officials at West Los Angeles medical center have provided the  reconciliation reports for 2012. We also requested the 2012  reconciliation report from VA West Los Angeles officials, but they  could not provide us with a copy.

Original Payment Terms with Nonprofit Organization Not Enforced. A  West Los Angeles VA agreement with a nonprofit organization to  provide space and services for homeless veterans included a rental  provision that, if enforced, would have collected over $250,000 in  revenue in 2012. However, according to a West Los Angeles VA  official, no revenue was collected that fiscal year because the rental  provision was waived. According to this same official, the waiver for  the rental provision may have occurred in the late 2000s due to the  nonprofit experiencing financial hardship.of the VA solicitation for award, demonstrating financial viability was  one of the criteria considered in evaluating this partner. Further, VA  policy requires the monitoring of sharing agreements and does not  have a provision that allows for the waiving of such revenues.  According to the contracting officer at the Long Beach VA office, VA  has given this nonprofit organization an unfair advantage over other  organizations that provide similar services by lowering its operating  costs.

However, from our review

Agreement Terms with Golf Course Manager Not Enforced. During  our site visit to West Los Angeles, we observed the installation of an  irrigation system to upgrade a nine-hole golf course (shown in fig. 1)  located at the medical center. As part of this agreement, the partner  managing the golf course is required to obtain prior approval from the  VA contracting officer before making any improvements to VA’s  property. The Long Beach contracting officer told us that, he was  unaware of the improvements to the golf course and had not  authorized them, in contrast to what was stipulated in the agreement.

Improper Subleasing of VA Space. VA guidance does not allow  sharing partners to sublease the space obtained through sharing  agreements. However, we found that a nonprofit organization—a  botanic garden—subleased its space to two other organizations,  including an exotic bird sanctuary and a food pantry. The Long Beach  VA contracting officer told us that he was not aware of this sublease  prior to our audit.
subsections: section_title: Expired Agreements
paragraphs: We found expired agreements at two of the three VA medical centers we  reviewed where the sharing partners were still occupying the space. At  the West Los Angeles medical center, a university athletics department, a  laundry-services company, and a soccer club occupied VA space after  their agreements had expired. According to a West Los Angeles VA  official, VA did not renegotiate an extension for these agreements  because of an ongoing lawsuit. The university athletics department and  soccer club continued to pay rent although they generally did not fully  comply with the schedule of payment terms outlined in the expired  agreement. However, as previously discussed, the laundry-services  company had not made any payments to VA since 2011 but remained in  the building until it vacated the space in December 2013. According to  the current contracting officer, he advised West Los Angeles to remove  the laundry-services company from the premises, but medical center  officials did not act on this advice. West Los Angeles VA officials told us  that they discussed sending month-to-month tenancy letters to sharing  partners that authorized them to operate on the VA property in the  absence of an agreement. However, according to the contracting official  at Long Beach, the letters were not sent to the partners because the  lawsuit prohibited such actions.

At the New York medical center, seven agreements expired and were not  renewed timely. Because of the lack of monitoring, 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  did not have any specific guidance on how to manage agreements before  they expired including the renewal process. Federal internal control  standards state that the policies and procedures are needed to enforce  management directives such as the process for managing expiring  agreements. Without such guidance, VA may find it difficult to adequately manage  agreements scheduled to expire at any time or determine what specific  actions should be taken when an agreement has expired.

They help ensure that actions are taken to address risks.

section_title: Lack of Written Agreements
paragraphs: GAO/AIMD-00-21.3.1. the New York medical center had recorded in CAI. After we brought  this 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. VA did not have written  agreements associated with these 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.

Dog Park and Baseball Fields. The City of Los Angeles has utilized a  12-acre field—Barrington Park—on VA property for recreational use  (e.g., dog park and baseball fields) without a written agreement. The  city has posted signs about local ordinances at the site, which purport  to show the space is under the city’s jurisdiction. VA is forgoing  potential revenue for use of this facility by not having a written  agreement in place. In the absence of a written agreement, it is also  unclear what party should respond to any emergency situation that  may occur at the park and fields. The lack of an agreement in this  instance could potentially increase VA’s risk of liability.

VA officials stated there could be a number of reasons that these spaces  lacked agreements such as agreements could have been disposed of or  misplaced. VA officials acknowledged that agreements are not centrally  managed or stored and that CAI does not include all terms of the  agreements that are needed for monitoring activity. However, VA’s  guidance calls for written sharing agreements with all non-VA partners.  Further, federal internal control standards state that all transactions and  other significant events need to be clearly documented, and the  documentation should be readily available for examination and the  documentation should be properly managed and maintained.

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 acknowledged that they had not performed systematic reviews of  these agreements and had not established mechanisms to enable them  to do so. Federal internal control standards also state that management  should put in place control mechanisms and activities to enable it to  enforce its directives and achieve results. Federal internal control  standards require that departments and agencies assess program quality  and performance over time and work to address any identified  deficiencies. Further, management must continually assess and evaluate  these controls to assure that the activities being used are effective.  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. 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: Conclusions
paragraphs: For the past decade, we have reported that the management of federal  property is at risk for fraud, waste, and abuse. As one of the U.S.  government’s largest property holders, many of the issues we identified  across the federal government can be found in VA’s management of its  underutilized and vacant property. VA’s system for managing its  numerous land-use agreements, including its system for recording  associated revenues and benefits, is in need of corrective action.  Because we found that the VHA data maintained in CAI are unreliable,  these data cannot be used to accurately and reliably manage the bulk of  VA’s land-use agreements as intended. Developing a mechanism to  assess the accuracy, validity, and completeness of land-use agreement  data in CAI would better position VHA to reliably account for the current  land-use agreements and the associated revenues that they generate.

VA has opportunities to enhance the effectiveness of its land-use  agreements processes at the three selected medical centers. As noted in  our report, deficiencies in its monitoring of the billing and collection of  revenues have impaired VA in the timely collection of all revenues due  from its sharing partners and the proper recording of the revenues to its  medical-care appropriations account at one of the medical centers. In  addition, VA did not have mechanisms in place at two medical centers to  ensure that different individuals charged with the responsibility of  executing and managing agreements and collecting revenues worked  together in a collaborative manner. Further, VA lacked adequate  processes that enabled it to readily access land-use agreements and  perform monitoring of the execution of its land-use agreements at two of  the three selected sites, which resulted in land-use agreement terms not  being properly documented in writing or being enforced by VA and the  failure to execute renewals when the agreements have expired. The  ineffective monitoring of land-use agreements at the VA medical centers  is further exacerbated by the lack of any detailed guidance by VA on how  to manage the expiration of land-use agreements. Finally, the lack of  appropriately segregated duties at its West Los Angeles medical center is  also problematic and needs to be immediately addressed; however,  officials at that medical center have not developed a plan for doing so.  This lapse of a key internal control increases the likelihood that revenues  from land-use agreements may be vulnerable to potential fraud and  abuse. Until VA effectively addresses these weaknesses, it will likely  continue to miss opportunities to maximize revenues that can be used to  offset VA operational costs—thereby placing a higher burden on  taxpayers—or provide additional services to veterans in need of  assistance.

section_title: Recommendations for Executive Action
paragraphs: In order 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 the VA in this area, we recommend that the  Secretary of Veterans Affairs take the following six actions: 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; foster collaboration between key offices to improve billing and  collections practices at the New York and North Chicago medical  centers; and 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.

section_title: Agency Comments
paragraphs: We provided the Departments of Veterans Affairs with a draft of this  report for its review and comment. In its written comments, reprinted in  appendix II, the Department concurred with our recommendations and  provided technical comments that we incorporated, as appropriate.

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 appropriate  congressional committees and the Secretary of Veterans Affairs. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.

If you have any questions concerning this report, please contact me 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 report. Key contributors to this report are listed in appendix III.

section_title: Appendix I: Court Decision on Sharing Agreements at the West Los Angeles Medical Center
paragraphs: On August 29, 2013, a federal judge found that certain sharing  agreements in the West Los Angeles medical center were unauthorized  under the land-use authority under which they were executed. This  authority states that the Secretary of Veterans Affairs may enter into  agreements to share health care resources with health care providers in  support of the Department of Veterans Affairs’ (VA) mission. As a result,  the federal judge voided several sharing agreements with entities other  than health care providers; thus, the district court case called into  question whether VA can enter into sharing agreements with entities  other than health care providers. The case is under appeal at the United  States Court of Appeals for the Ninth Circuit.

If this opinion stands, this ruling may affect other sharing agreements VA  holds with nonmedical providers nationwide. Our review of VA’s land-use  agreements at West Los Angeles, North Chicago, and New York found  just over 40 percent of VA’s sharing agreements were with nonmedical  providers, such as telecommunication companies that lease space for  rooftop antennas, and collectively generate hundreds of thousands of  dollars in revenue each year.

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 contact named above, Matthew Valenta (Assistant  Director), Erika Axelson, Carla Craddock, Debra Draper, Olivia Lopez,  Elke Kolodinski, Edward Laughlin, Barbara Lewis, Paul Kinney, Jeffrey  McDermott, Maria McMullen, Linda Miller, Lorelei St. James, April  VanCleef, Shana Wallace, and William Woods made key contributions to  this report.


Question-summary annotations: questions: question: How have land-use agreements specifically been a place of concern within the GAO's findings?
answer: 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.
child_questions: question: What is particularly troubling about the VA's shared partners at the New York Center?
answer: In addition, at the New York center, VA had not billed a sharing partner for several years' rent that totaled over $1 million.

question: How did the VA attempt to rectify this error?
answer: VA began collections after discovering the error; over $200,000 was outstanding as of April 2014.

question: Why is there cause for continued concerned regarding the billing and collection processes at these centers?
answer: 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. Until VA addresses these issues, VA lacks assurance that it is collecting the revenues owed by its sharing partners.

question: What information did VA officials at the New York and Chicago centers share to shed more light on this case?
answer: 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.

questions: question: What three things does this report address?
answer: 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.

question: How did the GAO gather information for this report?
answer: 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.

question: How did GAO select the medical centers they did?
answer: GAO selected medical centers with the largest number of agreements or highest amount of estimated revenue.
child_questions: question: What is a limitation to these site visits?
answer: The site visit results cannot be generalized to all VA facilities.