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

Letter

Background

Federal Role

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.

Types of Land-use Agreements and Their Benefits

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.

Land-use Agreement Data and Monitoring

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.

VA Does Not Maintain Reliable Data on the Number of Land-use Agreements and Their Associated Revenues

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.

Additional Monitoring at Three VA Medical Centers Could Improve the Billing and Revenue- Collection Process for Land-use Agreements

Weaknesses Noted in Various Aspects of the Revenue Collection Process at the Selected Medical Centers

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.

Inadequate Billing Practices

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.

Opportunities for Improved Collaboration

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.

Segregation of Duties

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.

Opportunities for Improved Monitoring of Billing and Collections at Selected Medical Centers

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.

VA Did Not Effectively Monitor Many of Its Land-use Agreements at Two of the Three Selected Medical Centers

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.

Several Agreements Lacked Proper Enforcement of Terms

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.

Expired Agreements

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.

Lack of Written Agreements

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.

Conclusions

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.

Recommendations for Executive Action

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.

Agency Comments

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.

Appendix I: Court Decision on Sharing Agreements at the West Los Angeles Medical Center

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.

Appendix II: Comments from the Department of Veterans Affairs

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

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.