[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]





                    EXAMINING THE U.S. DEPARTMENT OF
                  VETERANS AFFAIRS FIDUCIARY PROGRAM:
                  HOW CAN VA BETTER PROTECT VULNERABLE
                      VETERANS AND THEIR FAMILIES?

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

                                HEARING

                               before the

       SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL AFFAIRS

                                 of the

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

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 22, 2010

                               __________

                           Serial No. 111-72

                               __________

       Printed for the use of the Committee on Veterans' Affairs








                                  ______

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                     COMMITTEE ON VETERANS' AFFAIRS

                    BOB FILNER, California, Chairman

CORRINE BROWN, Florida               STEVE BUYER, Indiana, Ranking
VIC SNYDER, Arkansas                 CLIFF STEARNS, Florida
MICHAEL H. MICHAUD, Maine            JERRY MORAN, Kansas
STEPHANIE HERSETH SANDLIN, South     HENRY E. BROWN, Jr., South 
Dakota                               Carolina
HARRY E. MITCHELL, Arizona           JEFF MILLER, Florida
JOHN J. HALL, New York               JOHN BOOZMAN, Arkansas
DEBORAH L. HALVORSON, Illinois       BRIAN P. BILBRAY, California
THOMAS S.P. PERRIELLO, Virginia      DOUG LAMBORN, Colorado
HARRY TEAGUE, New Mexico             GUS M. BILIRAKIS, Florida
CIRO D. RODRIGUEZ, Texas             VERN BUCHANAN, Florida
JOE DONNELLY, Indiana                DAVID P. ROE, Tennessee
JERRY McNERNEY, California
ZACHARY T. SPACE, Ohio
TIMOTHY J. WALZ, Minnesota
JOHN H. ADLER, New Jersey
ANN KIRKPATRICK, Arizona
GLENN C. NYE, Virginia

                   Malcom A. Shorter, Staff Director

       SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL AFFAIRS

                    JOHN J. HALL, New York, Chairman

DEBORAH L. HALVORSON, Illinois       DOUG LAMBORN, Colorado, Ranking
JOE DONNELLY, Indiana                JEFF MILLER, Florida
CIRO D. RODRIGUEZ, Texas             BRIAN P. BILBRAY, California
ANN KIRKPATRICK, Arizona


Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Veterans' Affairs are also 
published in electronic form. The printed hearing record remains the 
official version. Because electronic submissions are used to prepare 
both printed and electronic versions of the hearing record, the process 
of converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.








                            C O N T E N T S

                               __________

                             April 22, 2010

                                                                   Page
Examining the U.S. Department of Veterans Affairs Fiduciary 
  Program: How Can VA Better Protect Vulnerable Veterans and 
  Their Families?................................................     1

                           OPENING STATEMENTS

Chairman John J. Hall............................................     1
    Prepared statement of Chairman Hall..........................    42
The Honorable Doug Lamborn, Ranking Republican Member............     3
    Prepared statement of Congressman Lamborn....................    43

                               WITNESSES

U.S. Department of Veterans Affairs:

  Belinda J. Finn, Assistant Inspector General for Audits and 
    Evaluations, Office of Inspector General.....................     4
      Prepared statement of Ms. Finn.............................    43
  Bradley G. Mayes, Director, Compensation and Pension Service, 
    Veterans Benefits Administration.............................    31
      Prepared statement of Mr. Mayes............................    68
U.S. Government Accountability Office, Daniel Bertoni, Director, 
  Education, Workforce, and Income Security......................     6
    Prepared statement of Mr. Bertoni............................    48

                                 ______

American Federation of Government Employees, AFL-CIO, and AFGE 
  National Veterans Affairs Council, Katherine R. Pflanz, Field 
  Examiner, Winston-Salem Veterans Affairs Regional Office.......    22
    Prepared statement of Ms. Pflanz.............................    64
American Legion, Jacob B. Gadd, Assistant Director for Program 
  Management, Veterans Affairs and Rehabilitation Commission.....    18
    Prepared statement of Mr. Gadd...............................    59
Gold Star Wives of America, Inc., Vivianne Cisneros Wersel, 
  Au.D., Chair, Government Relations Committee...................    20
    Prepared statement of Dr. Wersel.............................    62
Vietnam Veterans of America, Richard F. Weidman, Executive 
  Director for Policy and Government Affairs.....................    15
    Prepared statement of Mr. Weidman............................    56
Wounded Warrior Project, Sarah Wade, Coordinator, Family Issues 
  and Traumatic Brain Injury.....................................    16
    Prepared statement of Ms. Wade...............................    57

                   MATERIAL SUBMITTED FOR THE RECORD

Post-Hearing Follow-up Letter and Response:

    Hon. John J. Hall, Chairman, Subcommittee on Disability 
      Assistance and Memorial Affairs, Committee on Veterans' 
      Affairs, to Hon. Eric K. Shinseki, Secretary, U.S. 
      Department of Veterans Affairs, letter and attachment, 
      dated May 13, 2010, and response letter, dated July 23, 
      2010.......................................................    70

 
                    EXAMINING THE U.S. DEPARTMENT OF
                  VETERANS AFFAIRS FIDUCIARY PROGRAM:
                  HOW CAN VA BETTER PROTECT VULNERABLE
                      VETERANS AND THEIR FAMILIES?

                              ----------                              


                        THURSDAY, APRIL 22, 2010

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
                      Subcommittee on Disability Assistance
                                      and Memorial Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:05 p.m., in 
Room 334, Cannon House Office Building, Hon. John J. Hall 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Hall, Donnelly, Kirkpatrick, and 
Lamborn.

               OPENING STATEMENT OF CHAIRMAN HALL

    Mr. Hall. Good afternoon and welcome to the House Committee 
on Veterans' Affairs, Subcommittee on Disability Assistance and 
Memorial Affairs, hearing on Examining the U.S. Department of 
Veterans Affairs (VA) Fiduciary Program, How Can VA Better 
Protect Vulnerable Veterans and Their Families?
    Please rise for the Pledge of Allegiance.
    [Pledge of Allegiance.]
    Thank you. My apologies for being late. I was on the phone 
trying to straighten out a problem for an individual in Darrell 
Issa's district. A friend of mine called across country to 
help, and fortunately, Congressman Issa has staff who are 
capably taking care of the issue at this moment.
    We are here today just a day after we passed another 
comprehensive veterans' health bill that supports veterans' 
caregivers and enhances the veterans' physical and mental well-
being of America's veterans.
    I was happy to support Chairman Filner in winning unanimous 
passage of this bipartisan legislation, S. 1963, the 
``Caregivers and Veterans Omnibus Health Services Act of 
2009.'' This bill incorporates the recommendations of nearly 20 
Members of Congress, Democrats and Republicans alike.
    Provisions in S. 1963 will provide training, education and 
counseling for caregivers of veterans of any era. In addition, 
the bill allows VA to recruit and retain nurses, home health 
aides and specialty care providers. It will help VA to better 
diagnose and treat those who suffer from the invisible wounds 
of war, the stigma associated with them, and many other factors 
that make effective treatment difficult.
    Specifically, the bill expands authority to fund services 
to treat wounded warriors suffering from post-traumatic stress 
disorder (PTSD), traumatic brain injury (TBI), and other 
combat-related disorders which lead to homelessness and in some 
cases, suicide and criminal acts in some unfortunate instances 
by veterans who are suffering from these disorders.
    Our hearing today is entitled, ``Examining the VA Fiduciary 
Program: How Can VA Better Protect Vulnerable Veterans and 
Their Families?'' This hearing is intended to examine VA's 
Fiduciary Program and assess how Congress and VA can work 
together to better protect veterans and dependents who are in 
need of fiduciary services.
    Since 1926 when Congress passed the World War Veterans Act, 
VA has been providing oversight of its benefits paid to those 
beneficiaries who are incapable of handling their own affairs 
due to injury, disease, or infirmities of age.
    Today, the Fiduciary Program that VA runs with authority 
contained in 38 U.S.C. 5502 is administered by VA regional 
offices (ROs) and their respective offices of regional counsel 
which interface directly with VA beneficiaries and State courts 
on guardianship and commitment matters.
    On average, impaired beneficiaries received approximately 
$14,400 in fiscal year 2008, about $4,200 more per year than 
the average for all VA compensation and pension beneficiaries. 
In fiscal year 2008, fiduciaries managed approximately $1.5 
billion in VA benefits for more than 103,000 beneficiaries. 
Thus far, for fiscal year 2010, VA reports $396 million in 
benefits have been paid to more than 102,000 beneficiaries with 
a cumulative estate value of $3.1 billion.
    Recently, both the VA's Office of Inspector General (OIG) 
and the U.S. Government Accountability Office (GAO) issued 
reports on VA's Fiduciary Program. These reports underscored 
the benefits of the program, and there are many; but it also 
pointed to insufficient staffing, training, and other resources 
that hampered effective oversight of the Fiduciary Program.
    In the absence of adequate oversight and accountability, 
some fiduciaries have misused millions of dollars belonging to 
our veterans and their dependents.
    Let me take a moment to highlight some of the concerns 
about the Fiduciary Program that were raised by the OIG and GAO 
reports. From October 1998 to March 2010, the VA OIG's Office 
of Investigations reports that it conducted 315 fiduciary fraud 
investigations resulting in 132 arrests and monetary recoveries 
of $7.2 million in restitution, fines, penalties and 
administrative judgments. One of these cases involved the 
submission of false financial reports by a fiduciary who 
attempted to conceal her embezzlement of nearly $1 million from 
33 disabled veterans whose accounts she managed. The funds 
embezzled by the fiduciary were reportedly used to support her 
gambling habit.
    It should be noted that these problems are not 
representative of all fiduciaries. The vast majority are doing 
an honorable and honest job of taking care of our veterans, who 
cannot handle their own affairs, many of whom are family 
members. However, the program is susceptible to abuse as a 
result of deficiencies noted by both OIG and GAO reports. 
Specifically, they found that first, the Veterans Benefits 
Administration (VBA) was not taking effective action to obtain 
seriously delinquent accountings. Second, VBA was not 
consistently verifying questionable expenses reported by 
fiduciaries. And, third, VBA was not adequately following up 
and reporting on allegations of misuse of beneficiary funds and 
estates.
    The VA OIG pointed out that VBA has also not been diligent 
in replacing problematic fiduciaries. In one case, a fiduciary 
was seriously delinquent in submitting multiple reports ranging 
from 134 days to 215 days late. In addition, during that 
period, VBA received numerous complaints concerning that 
particular fiduciary's performance. However, the VBA took no 
action to replace this particular fiduciary.
    On the other end of the spectrum, we will hear from 
veterans service organizations (VSOs) who complain that family 
members who serve as fiduciaries are neither supported 
financially nor through training by VBA to discharge their 
duties. Moreover, the VSOs suggest that while some professional 
fiduciaries are not subjected to enough oversight by the VBA, 
family member fiduciaries often feel they are viewed with 
suspicion and mistrust by the VBA, despite the sacrifices they 
make to care for relatives who are incapacitated veterans and/
or beneficiaries.
    For example, the Wounded Warrior Project reports that VBA 
required a mother who served as a fiduciary for her mentally 
disabled veteran son to reimburse funds spent on toilet paper 
for their home.
    This hearing provides a forum to explore concerns across 
the spectrum regarding the Fiduciary Program, and I look 
forward to the testimony of our witnesses and insightful 
comments or questions from my colleagues on the Subcommittee.
    I would now like to recognize Ranking Member Lamborn for 
his opening statement.
    [The prepared statement of Chairman Hall appears on p. 42.]

             OPENING STATEMENT OF HON. DOUG LAMBORN

    Mr. Lamborn. Thank you, Mr. Chairman, and welcome everyone 
to this hearing on the Department of Veterans Affairs Fiduciary 
Program. The Fiduciary Program provides oversight of VA 
benefits to beneficiaries who are incapable of managing their 
funds as a result of injury or disease. When the VA or a court 
determines that a veteran is incompetent to handle his or her 
finances, the Fiduciary Program establishes an appropriate 
benefits payment method, appoints a fiduciary to oversee his or 
her finances, and provides continued oversight services. 
Through periodic personal visits to the beneficiary's 
residence, VA field examiners monitor the welfare and needs of 
the veteran.
    My Subcommittee colleagues and I want to ensure that VA's 
Fiduciary Program is taking every measure and has the support 
necessary to fully safeguard beneficiaries' assets. During the 
108th Congress, Congress passed legislation that President Bush 
signed into law on December 10, 2004 (P.L. 108-454). The law 
included provisions to make improvements to increase fiduciary 
accountability and strengthen protections for the beneficiary. 
This included more thorough investigation of fiduciaries prior 
to them being appointed, and required VA to reissue benefits 
that were misused in cases where negligence was found.
    Today the Subcommittee would like to hear about the 
effectiveness of these provisions and whether further 
Congressional action is needed to ensure that our most 
vulnerable veterans are afforded the highest level of 
protection possible. I look forward to hearing from our 
witnesses today, and I want to thank you all for your 
participation.
    Unfortunately, I have to leave soon for the airport, but 
you will all be in good hands with our Chairman.
    [The prepared statement of Congressman Lamborn appears on 
p. 43.]
    Mr. Hall. Thank you, Mr. Lamborn.
    Votes are done. The good news is we will not be interrupted 
by votes as we sometimes are. Unfortunately, the Ranking Member 
and other Subcommittee Members may need to leave early.
    There are no other opening statements, so we will move 
right along to our first panel. I would like to welcome Belinda 
J. Finn, Assistant Inspector General For Audits and 
Evaluations, Office of Inspector General, U.S. Department of 
Veterans Affairs, and Daniel Bertoni, Director, Education 
Workforce and Income Security with the Government 
Accountability Office. They are accompanied by Timothy Crowe, 
also with the VA Office of Inspector General. Welcome and thank 
you for being here today and for the work you do.
    Ms. Finn, and all of the witnesses, your statements, 
written statements are entered into the record. I would like to 
ask you to present a 5-minute version if you can. You are now 
recognized, Ms. Finn.

STATEMENTS OF BELINDA J. FINN, ASSISTANT INSPECTOR GENERAL FOR 
   AUDITS AND EVALUATIONS, OFFICE OF INSPECTOR GENERAL, U.S. 
 DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY TIMOTHY CROWE, 
DIRECTOR, AUDIT OPERATIONS DIVISION, ST. PETERSBURG, FL, OFFICE 
OF INSPECTOR GENERAL, U.S. DEPARTMENT OF VETERANS AFFAIRS; AND 
  DANIEL BERTONI, DIRECTOR, EDUCATION, WORKFORCE, AND INCOME 
        SECURITY, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

                  STATEMENT OF BELINDA J. FINN

    Ms. Finn. Thank you, Chairman Hall and Members of the 
Subcommittee. Thank you for the opportunity to talk today about 
how the Department of Veterans Affairs can better protect 
vulnerable veterans and their families.
    With me today is Mr. Tim Crowe, Director of the Audit 
Operations Division in Bay Pines, Florida.
    VA annually provides benefits totaling more than $40 
billion to over 3 million veterans and dependents. When a VA 
beneficiary cannot handle their own finances because of injury, 
disease or the infirmities of age, VBA or the courts appoint a 
fiduciary to receive monies and make necessary payments for the 
beneficiary's living expenses. VBA reports that fiduciaries 
managed the finances of over 100,000 beneficiaries with 
cumulative estate values of over $3 billion and those 
beneficiaries receive annual benefit payments of around $700 
million.
    VBA employees at regional offices are responsible for 
overseeing the fiduciaries to ensure that the VA-derived income 
and estates are used solely for the care, support, welfare, and 
other needs of VA beneficiaries.
    From the OIG's perspective as an oversight agency, we know 
firsthand that a dishonest fiduciary can misuse funds and how 
they might hide that misuse. We recently completed a review of 
the Fiduciary Program's effectiveness in addressing potential 
misuse. We concluded that VBA lacks the elements of an 
effective management infrastructure to support the program. A 
previous audit in 2006 had identified some of the same 
weaknesses.
    VBA's case management system, the Fiduciary Beneficiary 
System, or FBS, has functional and data limitations that 
severely limit its usefulness as a tool to support program 
operations. For example, FBS stores only 2 months' worth of 
data at any time and does not interface with other critical VBA 
systems. Further, the system cannot receive financial 
information electronically, and this means that program 
personnel must deal with manual reports and statements from 
fiduciaries and financial institutions. Late last year, 
however, VBA did start work to compare the current capabilities 
of the FBS system with their program needs.
    VBA also needs a staffing and workload model to guide 
resource allocations across the program. For example, we found 
that the number of beneficiaries managed by individual VBA 
staff ranged from under 200 to over 1,500.
    Finally, VBA needs to consistently assess the quality of 
operations at regional offices, provide more guidance to 
fiduciaries, and analyze the findings from program evaluations.
    The program management issues lead to oversight lapses that 
can affect the safety of beneficiary funds. We found that VBA 
is not always taking effective action to obtain delinquent 
reports that detail beneficiary assets, income, and expenses. 
It also does not always verify the questionable expenditures 
that are reported by fiduciaries.
    Veterans and dependents that need the services of a 
fiduciary depend on VA to oversee their financial well-being. 
We believe that the Fiduciary Program can better monitor the 
performance of fiduciaries with improved systems, staffing, and 
information on program operations. As an OIG, we will continue 
to work with VBA to improve the oversight of fiduciaries and 
ensure that vulnerable veterans and their families are 
protected.
    Mr. Chairman, thank you for the opportunity to be here 
today and discuss these important issues. Mr. Crowe and I will 
be happy to answer any questions that you or the other 
Subcommittee Members may have.
    [The prepared statement of Ms. Finn appears on p. 43.]
    Mr. Hall. Thank you, Ms. Finn.
    Mr. Bertoni.

                  STATEMENT OF DANIEL BERTONI

    Mr. Bertoni. Mr. Chairman, Members of the Subcommittee, 
good afternoon. I am pleased to discuss the Department of 
Veterans Affairs Fiduciary Program and how it can be improved 
to better serve veterans and their families.
    As you know, VA appoints fiduciaries to protect the funds 
of veterans who are unable to manage their own affairs. The 
fiduciary may be a spouse, other family member, or a private 
party that provide such services for a fee. Last year, 
fiduciaries served more than 100,000 beneficiaries and managed 
over 4 percent of all benefits paid by VA.
    For years GAO, VA's inspector general and others have 
expressed concern that the program is not fully safeguarding 
beneficiary assets. You asked us to discuss areas of continuing 
vulnerability and possible ways the program can be improved. My 
statement draws on a recent report assessing VA's policies for 
safeguarding beneficiary assets, as well as challenges to 
program oversight and performance.
    In summary, we found that VA did not always take required 
actions or sufficiently document the records to protect 
beneficiaries. First, our analysis of case file data showed 
that VA did not always conduct initial visits within required 
time frames to assess a fiduciary's suitability to manage VA 
benefits.
    Beyond their value as a key screening tool, timely initial 
visits are important because individuals often cannot begin 
receiving benefits until they are completed. Moreover, in 18 
percent of the cases we reviewed, the VA was also late in 
completing required follow-up visits to monitor beneficiaries 
and fiduciaries, or lacked sufficient documentation for us to 
determine whether any action occurred at all. Similarly, while 
we estimated that about 39 percent of fiduciaries were late in 
submitting financial reports, program staff did not 
consistently follow-up to obtain required information or failed 
to document their actions. Many cases involved reports that 
were more than 120 days late and considered seriously 
delinquent under program rules. In the most egregious case, we 
found a fiduciary submitted financial reports almost 2 years 
late and only after VA initiated action to suspend payment.
    We also identified weaknesses and staff confusion around 
VA's processes for ensuring that fiduciaries who oversee high-
dollar-value estates are properly bonded. Of the cases we 
reviewed that required a bond, 13 percent lacked documentation 
that one was purchased or that the requirement was 
appropriately waived. Some cases have estate values approaching 
$100,000 leaving beneficiaries exposed to substantial loss if 
funds were misused. We have recommended that VA take additional 
steps to ensure that staff better understand and execute 
program policies for file documentation, initial and follow-up 
visits, and bond acquisition. The agency concurred with our 
recommendations and is moving to revise key policies and 
enhance its oversight role.
    In addition to program compliance issues, we identified 
weaknesses in VA's ability to monitor professional fiduciaries 
who manage substantial funds for multiple beneficiaries. 
Although VA is required to conduct on-site financial reviews of 
these fiduciaries, the agency did not use a unique identifier 
such as a Social Security number (SSN) or taxpayer 
identification number to identify and match them to all 
beneficiaries they may serve. Thus, the VA cannot be ensured 
that all required reviews are being conducted and beneficiary 
funds appropriately spent. However, per our recommendation, the 
VA recently noted that it plans to require staff to begin 
obtaining SSN or tax ID numbers for all professional 
fiduciaries.
    Finally, our report identified limitations in VA's 
electronic fiduciary case management system and the training 
provided to fiduciary staff as two key challenges to improving 
program performance going forward. Specifically, we found that 
restricted data fields in the current system prohibit staff 
from systematically recording important case management 
information such as when multiple financial reports are due or 
tracking historical information on prior performance problems 
with fiduciaries. In so many other areas, this system falls 
short in terms of helping staff monitor their very complex 
workloads.
    In regard to training management and staff in the offices 
we visited, we observed that available training was 
insufficient to ensure that they had the necessary expertise to 
carry out their responsibilities.
    In two of the three locations we visited, most fiduciary 
staff and managers had less than 2 years of programmatic 
experience. Managers at these locations told us that staff 
inexperience and limited training has likely contributed to the 
problems we identified, including failure to properly monitor 
fiduciaries or document certain actions in beneficiary case 
files.
    We have issued recommendations in both of these areas, and 
VA is moving to address them.
    Mr. Chairman, this concludes my statement. I am happy to 
answer any questions that you or other Members of the 
Subcommittee may have. Thank you very much.
    [The prepared statement of Mr. Bertoni appears on p. 48.]
    Mr. Hall. Thank you, Mr. Bertoni.
    I will have one question of both of you, and then I will 
ask Mrs. Kirkpatrick if she would like to go first, and then 
Mr. Lamborn because they may have travel plans sooner than 
mine. Mr. Mayes' prepared testimony on our third panel states 
that the GAO and OIG reports ``confirm the validity of the VA's 
current efforts.''
    Do you believe that VA is complying with the OIG and GAO's 
recommendations?
    Ms. Finn. Our current effort found problems with how the 
Department had implemented our recommendations from 2006. 
Several of our recommendations were similar to what we had 
issued in 2006, and the Department's efforts had not quite 
fixed the problem.
    For the current audit, though, of course they certainly 
took action during our audit on issues that we brought up. They 
have concurred with all of our recommendations, and the actions 
we see seem to indicate that they are moving forward on those 
recommendations.
    Mr. Bertoni. In the case of our report that we just issued 
at the end of February, and what we have is essentially 
concurrence with our recommendations and a litany of things 
that they have either planned or are underway.
    In some areas, I believe they have already taken action. I 
believe they are now requiring that professional fiduciaries 
are tracked via their Social Security number or tax 
identification number. I think that is very important.
    If you have a fiduciary who is perhaps less than honest and 
wants to game the system, under the old way they could list 
their name as John Smith. In another case, John Q. Smith and 
Johnny Smith. In that kind of situation they could have 
multiple beneficiaries and you wouldn't know it. With a unique 
identifier like a Social Security number or tax number, you 
will be able to tie them all together and follow a financial 
trail.
    In other areas in the on-site reviews, we were concerned 
that there was no national quality assurance process. My 
understanding is that there is one now in place, or at least 
beginning.
    In several areas it looks like they have already begun to 
initiate action per our recommendations. In others, what they 
plan to do sounds like sound practice.
    Mr. Hall. Thank you. I am sure when Mr. Mayes speaks, he 
will elaborate.
    Current efforts to move in the direction your reports have 
suggested is progress, and we like progress. We are not 
expecting perfection, but we are after progress here.
    Mrs. Kirkpatrick.
    Mrs. Kirkpatrick. Thank you, Mr. Chairman, for letting me 
go first. I do have to leave for a flight.
    I am very concerned about this program. Before I was 
elected to office, I did a lot of guardianships and 
conservatorships in my law practice, and then served for a 
period as a judge pro tem just reviewing guardianship and 
conservatorship accountings. As a judge, we have the power of 
the court to crack down and apply fairly swift sanctions. But I 
will tell you just the mere nature that you are combining 
resources that aren't really having to be accounted for to me 
just raises a huge red flag. So I have a couple of questions 
for both of you.
    Ms. Finn, first of all, is there training for the 
fiduciaries? Are there specific rules and regulations within 
the VA as to what the money can be spent for and are the 
fiduciaries trained?
    Ms. Finn. Mr. Crowe will answer that.
    Mr. Crowe. I would characterize the training that is given 
when they are appointed as being limited to a listing of their 
responsibilities. One of the things we brought up in our report 
was that a Web portal that lists responsibilities, training 
aids, frequently asked questions and answers, might be helpful 
in this regard.
    Mrs. Kirkpatrick. That concerns me. I hope to see some 
improvement in the training.
    My personal experience in the area led me to believe that a 
lot of people don't understand the nature of a fiduciary 
relationship. They think that money is their money and they can 
spend it any way they wish, and there really has to be tight 
control on that.
    Mr. Bertoni, I wanted to ask you, are there limitations on 
fiduciary fees? I want to tell you, there is a high-profile 
case in Arizona right now where a million dollars went to the 
fiduciaries and their attorneys leaving the ward almost 
bankrupt. Can you tell me, are there limitations on what the 
fiduciaries can charge themselves?
    Mr. Bertoni. Yes. Generally the fee is 4 percent of the 
annual benefit amount. There are exceptions to that, as well as 
exceptions when it is related to the courts. The courts often 
mandate higher fees. I believe VA is required to comply with 
the court's dictates. So yes, they can go higher, and 
oftentimes it is due to a court-ordered fee.
    Mrs. Kirkpatrick. I noticed in some of the statements that 
were submitted that it appears in the Department of Veterans 
Affairs, someone can be appointed a fiduciary. In my county, we 
have public fiduciaries. That is one person with a staff, but 
that person can be appointed the fiduciary. Do we have 
something similar in the VA system?
    Ms. Finn. The VA appoints the fiduciary and many, many 
times it is a family member, in a lot of cases, not necessarily 
a professional fiduciary.
    Mrs. Kirkpatrick. Are there professional fiduciaries within 
the VA who can serve in that capacity if the person doesn't 
have a family member who can serve?
    Ms. Finn. They are not employed by the VA. They register 
with VA but are not part of VA.
    Mrs. Kirkpatrick. My last question is I am very concerned 
about the lack of timely reporting and accounting and lack of 
documentation to support that. What kind of sanctions are there 
in the system if someone delays in reporting?
    Mr. Bertoni. In the financial area?
    Mrs. Kirkpatrick. Any kind of sanction. For instance, I 
would oftentimes remove a fiduciary who wasn't compliant. I 
always took a pretty strict approach because they are really 
dealing with someone else's money. So is there a process for 
removing them or fining them or some kind of sanction?
    Mr. Bertoni. Sure. In terms of the annual financial 
reports, I believe it is sort of a sequential process. If 
someone is late in filing, in the first 35 to 65 days, the VBA 
is required to reach out and remind them in various ways to 
submit reports. Once that gets up to be 90-plus days, then the 
VBA is required to reach out again and can in fact suspend 
benefits at that point. After 120 days, it becomes what is 
known ``seriously delinquent'' and then again the VBA can take 
more rigorous actions, which could be suspending the benefits 
and pursuing the funds.
    Mrs. Kirkpatrick. I hope we can do some more work on this. 
I do appreciate you appearing here today. The Chairman and I 
talked about wanting to do some additional oversight. I have a 
concern about the sanction of removing benefits hurts the 
veteran who needs the care. But we can keep talking.
    Mr. Chairman, thank you very much.
    Mr. Hall. Thank you, Congresswoman Kirkpatrick. I hate to 
say it because it sounds like a joke, but we may have stumbled 
upon a fiduciary backlog.
    Mr. Lamborn.
    Mr. Lamborn. Thank you, Mr. Chairman. I have a couple of 
questions to build on the questions that Representative 
Kirkpatrick already asked.
    As she noted, there is a State process. In Colorado, it is 
through the probate courts and the judge will grant someone's 
application normally, sometimes appoint a guardian ad litem. 
Does the VA just accept what the State courts, whoever has been 
appointed by the State courts, or is there a parallel process? 
Just so I understand better.
    Ms. Finn. I can't give you a specific answer on that right 
now mainly because our report didn't focus on the appointment 
process. At this point in time, we focused more on the misuse 
of funds.
    Mr. Bertoni. We have done some work in guardianship in the 
court systems. Generally I believe they defer to the court in 
terms of the arrangement that was made, the fee collection 
agreement, and the entity that is going to be the guardian and/
or the fiduciary.
    I believe their controls allow them to screen at a later 
point to determine whether that person still meets the bar in 
terms of being suitable for being a fiduciary. But I would 
defer the specifics to VA on that.
    Mr. Lamborn. If I am not here to ask questions of the VA 
panelists, I will possibly use the option of submitting 
questions in writing.
    Along that line, and I know you may not know the answer to 
this, if there is a contest as happens occasionally with heirs 
or other interested parties, does the VA ever take sides and 
determine between contesting applicants? Do you ever get into 
disputes over who is the guardian?
    Mr. Bertoni. We have not done that level of work to answer 
that question.
    Ms. Finn. I think that is a VA question.
    Mr. Lamborn. So that is not so much GAO matter of review. 
Okay, then I have some other technical questions. I will defer 
them to the VA. Thank you for being here and for the 
information you provided.
    I yield back.
    Mr. Hall. Thank you, Mr. Lamborn.
    Ms. Finn, your OIG report indicates that the program is 
plagued by VBA's inability to detect the misuse of incompetent 
beneficiary estates, insufficient staff follow-up on 
questionable or incomplete data in fiduciary annual accounting 
statements, and the failure of VBA to require documentation 
from fiduciaries to support expenses that are claimed. These 
challenges were identified in your 2006 audit, and in your 
2010, which audit show that these weaknesses still exist. What 
steps does the OIG plan to take to ensure that VA resolves 
these issues to protect the beneficiaries who are unable to 
protect themselves?
    Ms. Finn. We have a multifaceted approach right now. We are 
currently conducting a new audit where we are looking at the 
large, retroactive payments that are made to beneficiaries 
through a fiduciary. We are concentrating on those large 
payments over $10,000.
    We also work with our Office of Investigations on 
investigations as they take on fiduciary fraud. We are doing 
some work in our benefit inspections as we go into each 
regional office and we look at the Fiduciary Program across the 
board, not just misuse but we look at issues related to 
appointments and accountings and anything that comes to our 
attention in those regional offices.
    Finally, we will continue to follow-up on our 
recommendations and conduct future work in the program to look 
at other aspects that we may not have been able to address at 
this point. It is a pretty large program and we focused really 
on one aspect for this period of time.
    Mr. Hall. Thank you. From a statistical sample of Fiduciary 
Program reports, the OIG anticipates that legal instruments 
examiners may not have adequately verified approximately $2.9 
million in expenditures for 551 of 1,906 accountings. That is 
29 percent of the accountings completed between April 1, 2009, 
and May 22, 2009. Based on this 29 percent error rate, how many 
of the Nation's 104,000 incompetent beneficiaries do you 
predict or estimate are at risk of fiduciary misuse?
    Ms. Finn. Our statistical sample was somewhat constrained 
by the fact that the system included only 2 month's worth of 
data on accountings that were due and that is what we pulled 
our sample from. So we didn't have a whole year's worth of 
accountings, we just had 2 months of data. In the absence of 
data, we cannot do an estimate of possible impact to the 
program.
    Mr. Hall. Thank you. That would be welcomed.
    OIG contends in the 2010 report that VBA was not taking 
effective action to obtain the delinquent financial accountings 
from fiduciaries. Your report was based upon visits to a number 
of regional offices. What in your observation distinguishes a 
regional office that is properly overseeing a Fiduciary Program 
from one that is having problems?
    Mr. Crowe. I think the lack of a strong national management 
oversight infrastructure of the program, which meant that there 
were great performance variances from regional office to 
regional office. The effectiveness of the program largely fell 
to the abilities of local staff and management. We saw great 
differences.
    Mr. Hall. That is good for us to know since having 
consistency, training, and standards that everyone is expected 
to meet and taught to meet, are goals I am sure we would all 
support.
    The OIG's recent report notes that from fiscal year 2005 
through 2008, VBA has failed to include statistical information 
pertaining to misuse of funds by fiduciaries in the annual 
benefits report to Congress as required by title 38 U.S. Code 
section 5510. We know that the failure to provide this report 
to Congress impairs our ability to effectively provide 
oversight of the Fiduciary Program. How has this reporting 
failure in your opinion harmed veterans and other 
beneficiaries? And if so, what can we do to address this issue?
    Mr. Crowe. I think investigating allegations of misuse go 
to the heart of the mission of this program. I think we were 
surprised to find that their policies were not being followed 
largely because it appears that their performance in this area 
was not being measured by performance standards or any other 
measurements. And certainly some staff, I wouldn't characterize 
everybody, but some staff talked about this as being a lower 
priority, and we considered it to be a very high priority. And 
some of the misuse actions that they had taken in investigating 
these allegations were either untimely or not documented. 
Therefore, if they weren't reported in their system, what was 
being reported to Congress would be understated by definition.
    When you get allegations of misuse from a beneficiary, from 
a family member or from a friend, I think these are very 
important leads that something is going wrong and a great way 
for them to find out. We were trying to emphasize to the VBA 
the importance of making sure that this becomes a higher 
priority among their staff.
    Mr. Hall. Mr. Bertoni, in the GAO report to the 
Subcommittee, you observed that the Fiduciary Program is 
hindered by its electronic fiduciary case management system or 
FBS which some VA staff have called antiquated and cumbersome. 
I understand that this system prevents VBA from identifying all 
fiduciaries in the program since it may not be able to connect 
a Social Security number with a name, or it may have the same 
person's name entered in different ways and perhaps the VA 
cannot tell the difference or identify the sameness of John 
Hall, John J. Hall, John Joseph Hall, et cetera. Are there 
better systems that could be used by VA that are being used by 
other agencies that you oversee that could replace FBS and what 
recommendations do you have regarding the FBS system?
    Mr. Bertoni. I can't speak to specific systems, but I can 
speak to other Federal benefit programs, and to my knowledge, 
as I said, I have disability portfolios that entail the U.S. 
Department of Defense (DoD), VA, and the Social Security 
Administration (SSA), 20 other agencies, and within those 20 
agencies, 200 Federal programs, and it is a rarity not to 
capture the full Social Security number as the control number.
    In this situation, you can have a fiduciary in California 
who runs a afoul of the rules and regulations and pulls up 
stakes and ends up in Oregon and changes his name slightly and 
you would never know that. If you had a unique identifier, you 
could catch that kind of activity. That is just one example.
    I don't know what the system is. I do know that they are 
not capturing it now. I don't think it is a matter of 
capability. I think we were told that they could capture the 
Social Security number under the existing system. But I would 
say that FBS is problematic.
    In our case, you asked why the Legal Instruments Examiners 
(LIEs) were missing so many of their accountings. Well, if the 
system only holds the most recent account due, then the four 
prior that the fiduciary didn't submit drop off the radar 
screen. When we went out into the field, we found field 
examiners who had sticky notes on the wall to sort of remind 
them that this particular fiduciary was late in four 
accountings. The system wasn't doing that. These folks were 
working in their own paper system outside the electronic 
system.
    So as far as the apparent lack of attention on the LIE's 
part, I think much of that can be attributed to, number one, 
the system is not helping them. Second, the ratio of wards to 
staff. What I heard just a moment ago in terms of how many 
folks that these LIEs and field examiners are managing, that is 
alarming. At some point folks and tasks are going to fall 
through the cracks. If you look at the consolidated hub, I 
think the ratio is 800 wards per LIE and 400 wards per field 
examiner. I don't know if that is appropriate, but at least 
they know what they want to achieve.
    Mr. Hall. Thank you for that information. Regarding the 
site visits that GAO conducted to three of the 43 program 
units, St. Petersburg, Cleveland and Salt Lake City, which is 
the location of the western hub, I understand that the western 
hub is a new initiative and your examination did not yield 
conclusive findings, but you predicted this consolidation 
effort has promised to standardize training procedures and 
implementation. How long do you think it will take before the 
western hub shows those results?
    Mr. Bertoni. GAO, in general, is on record for much of the 
consolidation of workloads and activities that are happening at 
VA. They are consolidating a lot of workloads across a lot of 
different activities, and conceptually that makes sense to us. 
When you can pull together that many States and that many field 
examiners, give them consistent training, give them an 
opportunity to specialize in what they do instead of being the 
generalist, jack of all trades, I think there are real 
opportunities to increase timeliness and accuracy and 
consistency of the workload.
    Our concern is that we heard some noise out there in terms 
of how the hub came about, perhaps it was rolled out when there 
weren't enough support systems in place. How some of the cases 
that came in were not what I would say appropriately worked and 
they had to be reworked to make sure that the accountings were 
up to date. So I think there were some speed bumps in terms of 
implementation. We have asked that they do an evaluation to see 
lessons learned and what they could do different going forward. 
I believe that is underway or will be soon.
    As far as when it will be up to maximum productivity, I 
don't know. But I am starting to see some data that they are 
starting to exceed national targets in terms of submissions of 
the reviews of the financial accountings.
    Mr. Hall. Thank you. I have a couple of more questions for 
you and then we will give you some more in writing next week. I 
am going to try to get to our other panels here while we are 
all still awake and on solid food. But in your estimation, Ms. 
Finn or Mr. Bertoni, what misuse of beneficiary funds occurs 
more, that by fiduciaries who are related to beneficiaries or 
by professional, nonfamilial fiduciaries?
    Ms. Finn. It is hard to say what we don't know, but I can 
tell you that our Office of Investigations has told me that 
more than half of their investigations are related to a family 
member. I find that very sad to speak of, especially on Bring 
Your Child to Work Day, but that is the case.
    Mr. Hall. Well, we are talking about a lot of money and 
human beings here, so I guess we shouldn't be surprised that 
the temptation certainly exists.
    Mr. Bertoni. We couldn't answer that specifically either. 
We haven't done that work. But I do believe that when you have 
this level to date of management inattention, that that invites 
and can open the door to misuse.
    If you have structured oversight of the program, strong 
program integrity tools in place, I think that clamps down the 
temptation for abuse.
    I did get a call this week from a citizen, I get these 
quite frequently, who was having trouble contacting VA in terms 
of getting a fiduciary. I tried to work through various 
scenarios for that person, and I kept going back to: Do you 
have a family member that could take this on? And that person 
had family members but did not feel that they could trust their 
funds with a family member. But that is all I know.
    Mr. Hall. Just a couple of more things. We have some 
reports from family members who are acting as fiduciaries who 
have been barred from using VA funds for living expenses. One 
question is have you an opinion about that and also do you 
think that VA should consider paying familial fiduciaries?
    Ms. Finn. I would hesitate to voice an opinion on that. I 
guess if I were in that situation, I would hope my child would 
do that without a salary. But I can see where the occasion 
could arise where it is a large undertaking to take care of 
someone who needs that level of attention.
    Mr. Bertoni. Again, I don't have any work to bear any of 
this out, but I would say expenses should be associated with 
the care and well-being of the beneficiary. There are other 
programs, aide and attendants that can be sort of rolled into 
the equation to meet the supplementary needs of the 
beneficiary. But I have no opinion on whether living expenses 
should be part of it.
    Mr. Hall. My last question is do you have an opinion as to 
whether we should put a cap on the number of beneficiaries that 
one fiduciary may handle or whose affairs they may handle?
    Ms. Finn. It would seem to me to be a prudent undertaking 
to do because a professional fiduciary who is managing the 
funds of many beneficiaries has the greatest ability to move 
funds between fiduciaries and the most funds that are at risk. 
Certainly that is where we really need the controls to ensure 
that all of the funds for the many beneficiaries that may be 
under a fiduciary's management are well accounted for. I don't 
have a specific number that I would recommend, however.
    Mr. Bertoni. Is your question should we place a cap on the 
number of beneficiaries that professional fiduciaries can 
serve?
    Mr. Hall. Right.
    Mr. Bertoni. I would say, just as the point I made a few 
moments ago regarding the ratio of LIE to wards and field 
examiners to wards, I think at a certain point it becomes very 
difficult to manage the finances of folks when you have many, 
many beneficiaries to worry about. I don't know what that is, 
but I think at some point you have to look at does this person 
have the capacity or entity have the capacity to serve the 
needs of the beneficiaries.
    Mr. Hall. Thank you, sir. I would assume it would possibly 
vary depending on the degree of disability and impairment of 
the veteran beneficiary, but there is probably a limit to what 
any one person can do competently, even assuming total 
honestly.
    Mr. Bertoni. And it also depends on the capacity of the 
professional fiduciary. There are probably organizations and 
entities out there that have support staff in place that can 
sort of help with that. You really need to look at it on a 
case-by-case basis as to which entities might be able to handle 
more.
    Mr. Hall. Thank you very much, Mr. Bertoni, Ms. Finn, and 
Mr. Crowe. Your testimony has been very helpful. We will submit 
some more questions to you most likely. We thank you. You are 
excused, and now we welcome the second panel.
    Our witnesses are Richard Weidman, Executive Director for 
Policy and Government Affairs, Vietnam Veterans of America 
(VVA); Sarah Wade, Coordinator, Family Issues and Traumatic 
Brain Injury, Wounded Warrior Project (WWP); Jacob Gadd, 
Assistant Director for Program Management of the American 
Legion; Vivianne Cisneros Wersel, Gold Star Wives of America; 
and Katherine Pflanz, Field Examiner from the Winston-Salem VA 
Regional Office and American Federal of Government Employees 
(AFGE) representative. Welcome. Thank you for your patience. 
Again, it is good to see those of you who we have seen many 
times before. Your written statements are in the record. You 
are recognized for 5 minutes each, and then we will have some 
questions.
    We will start with Mr. Weidman.

STATEMENTS OF RICHARD F. WEIDMAN, EXECUTIVE DIRECTOR FOR POLICY 
  AND GOVERNMENT AFFAIRS, VIETNAM VETERANS OF AMERICA; SARAH 
 WADE, COORDINATOR, FAMILY ISSUES AND TRAUMATIC BRAIN INJURY, 
WOUNDED WARRIOR PROJECT; JACOB B. GADD, ASSISTANT DIRECTOR FOR 
    PROGRAM MANAGEMENT, VETERANS AFFAIRS AND REHABILITATION 
 COMMISSION, AMERICAN LEGION; VIVIANNE CISNEROS WERSEL, AU.D., 
   CHAIR, GOVERNMENT RELATIONS COMMITTEE, GOLD STAR WIVES OF 
    AMERICA, INC.; AND KATHERINE R. PFLANZ, FIELD EXAMINER, 
 WINSTON-SALEM VETERANS AFFAIRS REGIONAL OFFICE, ON BEHALF OF 
AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO, AND AFGE 
               NATIONAL VETERANS AFFAIRS COUNCIL

                STATEMENT OF RICHARD F. WEIDMAN

    Mr. Weidman. Mr. Chairman, thank you for the opportunity 
for Vietnam Veterans of America to present some thoughts about 
the fiduciary reports that you all are considering today, one 
by the OIG and one by GAO and looking at the overall problem.
    One thing is clear from both anecdotal experience that we 
have as an organization both directly and through our local 
leadership around the company as well as our service 
representatives in that things in this program have been not 
good for a very long period of time, mostly because it hasn't 
been paid attention to.
    So first and foremost, after reading both of these reports, 
there is not a good solid program. The axiom that is always 
useful to remember is that a unit does well is that which a 
commander checks well. And because this thing is not set up 
well, you can't even check well what is happening with each and 
every veteran.
    My second concern has to do with standards for the 
fiduciaries as well as training, and this is something that 
needs to be done.
    Three, we are very troubled that most of the 2006 
recommendations were not followed and implemented or at least a 
number of them were not.
    And the next observation that we have really has to do with 
care. Both of these reports focused on the fiduciary and the 
financial obligation that VA has to make sure that taxpayer 
dollars go to the intended recipient for his or her benefit and 
don't end up elsewhere. And that is an important function. But 
equally important is that these are folks in pretty rough 
shape, these 103,000 folks. They need medical care on an 
ongoing basis. They need lots of things on an ongoing basis, 
not the least of which is to make sure that they eat right.
    We, frankly, are not all that concerned where it is a 
spouse, which is true in a number of cases. We are concerned 
with those who have many, or perhaps even hundreds, in their 
caseload because that element of making sure that people get 
the medical care that they need when they need it, we believe, 
is a key part of this program. And of course, we have the 
exposure of billions of dollars potentially.
    It is almost akin when you don't have a system to check and 
follow-up to the genius idea of sending $10 billion in cash 
into the war zone into Iraq and then being surprised that more 
than 70 percent of it couldn't be accounted for. It is almost 
that foolhardy that you don't have checks and balances in this 
system that really make a great deal of sense. But it is easily 
done and we would urge Mr. Mayes and his folks that produce 
information technology (IT) that can give you that capability 
and start constructing a parallel system virtually immediately.
    We believe that some of the progress that has been made 
recently on the compensation and pension (C&P) system and a 
change in attitude on the part of VBA leadership towards those 
of us who are partners with them, and major stakeholders, is 
something that means that we can move towards solving the C&P 
problems within the next year and a half or 2 years. We need 
the same sort of attention and the same collegiality, if you 
will, and the same openness of attitude toward new solutions 
and working with stakeholders at the State, national as well as 
at the local level in order to solve the problems of the 
fiduciaries.
    With that, I will conclude my statement. I look forward to 
any questions you may have, sir.
    [The prepared statement of Mr. Weidman appears on p. 56.]
    Mr. Hall. Thank you, Mr. Weidman. Ms. Wade.

                    STATEMENT OF SARAH WADE

    Ms. Wade. Chairman Hall, Ranking Member Lamborn and Members 
of the Subcommittee, thank you for inviting Wounded Warrior 
Project to testify on VA's Fiduciary Program. Through our work 
with severely wounded veterans and their family caregivers, 
many of whom are fiduciaries, Wounded Warrior Project has a 
unique perspective on this program. As a caregiver myself of a 
severely wounded veteran of both Operation Enduring Freedom 
(OEF) and Operation Iraqi Freedom (OIF) who sustained a severe 
traumatic brain injury, and as someone who has worked with many 
caregivers of severely wounded warriors, I believe I can 
provide helpful insight.
    WWP appreciates the critical mission and vital work 
performed by the VA's Fiduciary Program, but we are gravely 
concerned that in managing the program, VA fails to take 
account of the unique circumstances of family members who are 
devoting themselves to the full-time care of severely wounded 
warriors and who also serve as their fiduciaries. Many have 
given up careers and depleted their own savings to care for 
these wounded warriors. Family members who have made these 
kinds of sacrifices hardly pose a risk of misusing the 
veterans' benefits.
    WWP recognizes the need for the VA Fiduciary Program and 
for appropriate oversight, and we appreciate the Government 
Accountability Office's helpful report on the need to 
strengthen the program and improve compliance with fiduciary 
policies. Importantly, those policies recognize that all 
fiduciary cases do not require the same degree of attention and 
supervision and that field examiners should consider the unique 
circumstances of each individual case. Unfortunately, we see 
wide variability in how the judgment is exercised.
    The many caregivers of wounded warriors, who are my friends 
and with whom I have worked over the years, have put their own 
lives on hold to be caregivers. Typically they have chosen to 
give up or independently suspend their own career plans and 
made other financial sacrifices. I can assure you of one thing 
regarding those who have been appointed fiduciaries: their 
dedication to their wounded spouses or children did not change 
by virtue of taking on responsibilities of a fiduciary, yet 
VBA's fiduciary oversight seldom recognizes the sacrifice of 
those who are also caregivers. Too often these family members 
encounter a VBA oversight system marked by rigidity, 
intrusiveness and unreasonable decision-making.
    Let me illustrate by way of a few examples. A VBA field 
examiner imposing a summer vacation expenditure limit for a 
profoundly wounded warrior, his wife and two children; a mother 
caregiver having to explain to a VBA examiner why she allowed 
her wounded warrior son to spend ``too much money'' on 
Christmas gifts; the spouse caregiver of a traumatically brain 
injured veteran having to get permission from their VBA field 
officer to purchase a couch for their home.
    As Chairman Hall mentioned in opening remarks, a devoted 
mother caregiver was required to pay back money for toilet 
paper purchased for the home. A family being questioned about 
expenditures for gasoline that was used in transportation of 
the wounded veteran; several instances of mothers who are full-
time caregivers being required to pay rent to the wounded 
veteran rather than residing in their home for ``free.'' A 
field examiner denying a mother caregiver's request to place 
the now-wheelchair bound veteran's 8-year-old high mileage 
truck that she uses to transport him in a rural, snowy area; a 
mother caregiver having to relinquish her role as a fiduciary 
because she had had to declare bankruptcy after leaving the 
workforce to care for her wounded warrior son.
    Let me assure you from personal knowledge that these 
families do not deserve to be treated this way. Not every case 
is mishandled, but these aren't isolated problems. Moreover, 
caregivers experience stark variability in VA's oversight 
across the country. The impression frankly is of a program 
marked by arbitrary and capricious decision-making. It should 
be recognized that family caregivers typically reside with the 
veteran and may no longer have their own income. We see no 
reason to preclude such families from applying part of their 
loved's one benefits to help maintain a household that they 
share. VA Fiduciary Program policies should make that 
abundantly clear.
    But even more fundamentally, a devoted family member who 
provides daily care for a severely wounded veteran should not 
be treated as the object of suspicion, either in terms of rigid 
management of the budget or intrusive home visits simply 
because the individual serves as the veteran's fiduciaries. We 
believe these families are owed a presumption of honesty and 
should be treated with dignity.
    Over the past year, WWP has discussed these concerns with 
VBA officials and offered to work with them, even arranging for 
them to meet a family caregiver fiduciary to appreciate better 
this family's experience, but we have yet to see any change in 
policy or practice. Clearly both are needed.
    In addition, VA must provide more training. Its own staff 
needs training, but VA should also better clarify to family 
members their responsibilities when they agree to serve as a 
fiduciary.
    Finally, it is noteworthy that caregivers of wounded 
warriors are well known to VA. Each has worked closely with a 
Federal Recovery Coordinator and/or other case manages in 
connection with the veteran's care. In the isolated instance in 
which there is some indication of a problem concerning a 
caregiver, case workers in the Veterans Health Administration 
become aware of it. From the caregiver's perspective, VA is a 
single entity and they have every reason to believe VA knows 
they are reliable and have integrity, so imagine how confusing 
it is for a caregiver who has worked closely and developed 
relationships of trust with other VA staff to encounter VBA 
personnel whose fiduciary requirements convey fundamental 
mistrust. It doesn't seem too much to expect that VBA and other 
arms of the Department work more closely to share information 
relating to caregiver fiduciaries rather than requiring these 
dedicated individuals to prove themselves yet again.
    Mr. Chairman, we look forward to working with the 
Subcommittee to address these concerns regarding the VA's 
Fiduciary Program.
    This concludes our testimony. I would be pleased to address 
any questions you may have.
    [The prepared statement of Ms. Wade appears on p. 57.]
    Mr. Hall. Thank you very much.
    Mr. Gadd.

                   STATEMENT OF JACOB B. GADD

    Mr. Gadd. Mr. Chairman and Members of the Subcommittee, 
thank you for the opportunity to provide the American Legion's 
views on the Department of Veterans Affairs' Fiduciary Program.
    Without effective oversight, coordination, and management, 
our Nation's veterans with mental health illnesses or diseases 
will continue to experience delays and financial hardships in 
accessing their earned benefits.
    Title 38, Code of Federal Regulations, section 13, provides 
the guidance for VA to manage the Fiduciary Program. VA is 
charged with the point of fiduciary to manage and handle the 
veterans compensation and pension benefits if a veteran is 
deemed mentally incompetent.
    A recent OIG report found that Veterans Benefits 
Administration lacks elements of an effective management 
infrastructure to monitor program performance, utilize staff, 
and oversee fiduciary activities. Furthermore, the Government 
Accountability Office recommended VA strengthen the Fiduciary 
Program monitoring policies, improve staff compliance, and 
consolidate the 14 western Fiduciary Program units.
    While VA is, indeed, moving forward with the fiduciary hub 
in Salt Lake City and taking actions to rectify the problems as 
noted by OIG and GAO in their reports and through testimony 
today, the American Legion still continues to have several 
concerns. These concerns include the difficulty and delay in 
processing the appointed fiduciary, the VA's centralization 
model, and then, three, feedback from American Legion State 
service officers and the Pension Management Center (PMC) staff.
    First, in researching the number of forms, accompanying 
delay in processing, and the stress that it places on veterans 
and their beneficiaries, that is monumental. In fact, as noted 
in my written testimony, there are 21 different VA forms 
required to appoint a fiduciary.
    Second, the American Legion has been concerned about VA's 
centralization policies and that VSOs are not being included in 
these processes. The American Legion continues to urge VA to 
provide internal access phone numbers for accredited VSO 
representatives. VA commented on this recommendation, stating 
that, ``Providing direct internal telephone access would 
require the redirection of resources currently dedicated to 
disability claims processing.'' This is the same communication 
problem that VA and VSOs are experiencing with the Fiduciary 
Program.
    At the Pension Management Centers, the American Legion has 
three national staff in Minneapolis, Philadelphia, and 
Milwaukee that have all shared the same concern, and that is 
improving the coordination between the regional offices, the 
pension centers, and the fiduciary hubs.
    For example, a service officer files for benefits for a 
veteran in August of 2009. The rating decision is then 
completed in February 2010, proposing incompetency. In March, 
the letter is sent to the veteran in regards to this 
incompetency and the veteran waives the due process, which 
enables VA to act on the claim prior to waiting the 65 days. 
The award letter then goes back to the veteran, the first 
payment, in May, but those retroactive benefits are withheld 
until the guardianship unit can make their visit.
    So, after all this process is complete, the Pension 
Management Center then sends VA the form to the hub back in 
Salt Lake City. The hub then would notify the guardianship 
unit. And, once the field exam was completed, it was sent back 
to the Pension Management Center.
    So, as you can tell from all of this explanation, it is a 
very cumbersome and lengthy process, and the coordination 
between these offices can definitely be improved.
    In addition, our service officer in one of the Pension 
Management Centers helped schedule a fiduciary field exam 
because the veteran had been waiting for 4 years to access his 
benefits. And that field exam agent went out to his home on a 
Sunday for that particular exam. And I just want to note that 
this is unconscionable, that a veteran's claim can be delayed 
for this period of time, and that our Nation's veterans and 
their beneficiaries deserve better.
    And the American Legion's focus with our testimony was on 
the front end of this process and how we need to improve, as we 
heard today, on the centralization, working with the IT 
component. And, in that regard, the American Legion has several 
recommendations:
    First, that a full-time employee be funded and authorized 
within each RO and PMC. Second, that Congress authorize and 
fund VBA's IT budget to develop that integrated IT software 
package that we have heard today.
    Third, the Legion recommends that Congress ensure VSO 
representatives are given an internal access phone number so we 
can improve the communication between VSO and VA. Fourth, that 
Congress direct VA to create a national fiduciary toll-free 
number for their family members and the general public so that 
they can get that information for that fiduciary.
    Fifth, that Congress direct VA to allow fiduciaries to sign 
the paperwork in advance so that a temporary fiduciary can be 
appointed, and it might shorten that delay that they are 
currently experiencing. And, lastly, that VA establish a VA 
voluntary service pilot program which may be able to train 
volunteers on how to become VA fiduciary volunteers.
    So, Mr. Chairman and Members of the Subcommittee, the 
American Legion sincerely appreciates the opportunity to submit 
testimony today. Thank you.
    [The prepared statement of Mr. Gadd appears on p. 59.]
    Mr. Hall. Thank you, Mr. Gadd.
    Dr. Wersel.

          STATEMENT OF VIVIANNE CISNEROS WERSEL, AU.D.

    Dr. Wersel. Mr. Chairman and Members of the Subcommittee, I 
am pleased to be here today and to testify on behalf of Gold 
Star Wives.
    My name is Vivianne Wersel, Chair of the Government 
Relations Committee. I am the widow of Lieutenant Colonel Rich 
Wersel, Jr., United States Marine Corps, who died suddenly on 
February 4, 2005, a week after returning from his second tour 
of duty in Iraq.
    We begin by thanking this Subcommittee and our Government 
for providing essential services necessary to help us through 
our loss and grief. Many services are being done well and in a 
caring and helpful way. We must stress the importance of 
staying vigilant so no one grieving the loss of a loved one 
will endure any indignities or forfeit benefits due to the lack 
of knowledge. Therefore, we need consistent and relevant 
assistance at the time of death and for some period of time 
thereafter.
    Gold Star Wives was unaware of the VA Fiduciary Program 
until requested to testify at this hearing. Even one of our 
most seasoned Government relations members, Mrs. Edith Smith, 
stated she was unaware of the Fiduciary Program. And this, in 
itself, posed a concern about the lack of information for 
eligible beneficiaries. ``Fiduciaries'' is not a word in our 
vocabulary; yet, it should be.
    We are concerned with the lack of publicity about the 
program and the information available to eligible 
beneficiaries. There is no mention of the Fiduciary Program in 
the VA Handbook for Veterans, Dependents, and Survivors. We 
need prior knowledge in order to obtain specific information on 
the VA Web site.
    Furthermore, this subject has neither been discussed in 
prior testimonies that included Gold Star Wives, nor has it 
been a topic of discussion with the VA/DoD Survivor Forum 
quarterly meetings. Lack of information and participation does 
not promote optimal care for surviving families.
    In preparation for this hearing, we discovered some Gold 
Star Wives were their spouses' fiduciary before their military 
spouses died. Some required an annual bonding fee as the 
designated fiduciaries. Why do spouses have to pay significant 
fees to be bonded?
    In 2002, Petty Officer Second Class Anthony Palmer 
collapsed while playing basketball. He was kept alive via 
medical devices. When the respirator was removed, he 
unexpectedly continued living; however, he was totally 
incapacitated. He was then medically retired, but when he died 
2 years later, his VA disability compensation suddenly stopped. 
His wife and two children were suddenly left without support. 
What role did the VA Fiduciary Program play for his family?
    When the Servicemembers' Group Life Insurance (SGLI) was 
assigned by name to Mrs. Palmer's two small children, she had 
to pay several thousand dollars for civilian court 
guardianship. Why is this required when she is the biological 
parent of two small children? She is one of the many young 
widows with children who are experiencing this problem. Why is 
the Fiduciary Program not used for SGLI, which is administered 
by the VA?
    Mrs. Dora Aja married her college sweetheart in 1953. His 
heart attack in 1976 eventually left him totally incapacitated. 
She had to be bonded to be a fiduciary, at the cost of $250 
annually. When she relocated to be closer to her family, she 
had to receive permission from the VA and Defense Finance and 
Accounting Service to purchase a home. In addition, she must 
submit, yearly, a spreadsheet of all her expenses.
    Are spouses provided with the tools they need to monitor 
the administration required of them annually? Mrs. Aja stated, 
``I have cared for him and loved him for over 50 years, and the 
Government treats me like a juvenile. It is a good thing that 
my husband is not aware of what is happening because he would 
be angry.'' She is neither a widow nor a veteran, nor is she 
treated as the dedicated military spouse that she is, even 
though she is soon to be a Gold Star Wife.
    On another note, there are approximately 35,000 surviving 
spouses and adults who are incapacitated and have fiduciaries. 
Who takes the lead when the surviving spouse becomes 
incapacitated? If the surviving spouse was not a fiduciary for 
the veteran spouse, they may not know anything about the 
program and, by extension, neither would their children.
    Our main concerns with this program is the lack of 
publicity and available information for our surviving spouses. 
It is imperative that pertinent information about the Fiduciary 
Program be made available to eligible beneficiaries to provide 
meaningful support for present and future surviving spouses.
    Please refer to our questions and concerns in our written 
testimony. We thank you all for all your past support and look 
forward to working with you to help improve this program. I 
will be happy to answer any questions you may have, and I thank 
you very much.
    [The prepared statement of Dr. Wersel appears on p. 62.]
    Mr. Hall. Thank you very much, Doctor.
    Ms. Pflanz.

                STATEMENT OF KATHERINE R. PFLANZ

    Ms. Pflanz. Chairman Hall and Members of the Subcommittee, 
thank you for the opportunity to testify on behalf of AFGE and 
the National Council in order to share the perspective of the 
field examiner and other employees of the fiduciary unit.
    The fiduciary unit may be a very small part of the VA, but 
it involves tremendous responsibilities. We are the unseen 
workers who are tasked with ensuring that VA benefits are 
protected. Field examiners are in the field 100 percent of the 
time. I, for example, live 220 miles from my regional office 
and over 100 miles from any other field examiners. We count on 
the legal instrument examiners for assistance and guidance. 
They are our eyes and ears for the protection of beneficiaries 
but also for our personal safety.
    Field examiners meet the fiduciary, who has been rated 
incompetent by VA or adjudicated incompetent by the court, face 
to face. We often live in the same community. We see them in 
the grocery stores. We meet their families, sit in their homes, 
and are provided a unique insight into their lives. We see them 
at their best, worst, on and off medications, mad at the VA, 
happy to have a visitor, and usually armed with many questions. 
We are tasked with gathering personal information, from 
finances to incontinence.
    Field examiners are investigators, social workers, 
auditors, medical personnel, financial advisers, information 
resource specialists for local, State, and Federal benefits. We 
work under very demanding production standards while striving 
for high quality.
    With a growing number of beneficiaries needing the service 
and oversight of the fiduciary activity, lack of experience, 
training, and guidance makes this task difficult to accomplish.
    When I was a VSR, veterans service representative, I got 
formal training by subject-matter experts as instructors. This 
training gave me the opportunity to ask questions, meet 
coworkers from other regional offices, work on mock cases, 
learn to conduct interviews, and work in live cases.
    In the fiduciary unit, formal training is not available. 
The only hands-on training provided is by observing other field 
examiners for a short time. Although useful, it does not 
provide enough exposure to the wide variety of cases and 
situations. We really need a comparable challenge course for 
the field examiners.
    Frontline supervisors, known as coaches, also need more 
training. Supervisors throughout the regional office rotate 
between stations or teams, but the fiduciary station requires a 
very different skill and knowledge other than these different 
teams. Too often, supervisors who do gain experience in the 
fiduciary unit are rotated.
    We also really need more field examiners. The workload 
keeps increasing, and we cannot meet timeliness, and our 
quality also suffers.
    We also need better tools to do our job. Often, we have to 
share cars, which hurts timeliness. The report generator, which 
is what we use to write our report, is only for one of the many 
types of reports that we have to prepare. The current 
production expectations are unrealistic.
    The standards make an assumption that every case is alike, 
even though it varies so much from case to case on how long it 
takes to gather the data required to properly assess the 
beneficiary's need, protect funds, assess possible benefits, 
and answer any questions the family may have. We are sometimes 
forced to choose to either not make our production goal or make 
errors or secretly work longer hours and risk facing the 
consequences.
    Giving the frontline employees a voice in the design and 
testing of fiduciary tools would both save time and improve 
quality. Me and my colleagues who work in the hub pilot in the 
West are also very frustrated because they had no say in the 
design of the pilot project. This model does not work, and AFGE 
and VA Council urge you to discontinue it. The pilot deprives 
veterans of the personal touch they need. It is depriving 
employees out on the road, who are trying to protect the 
veterans, from full support they need to do their jobs.
    The Salt Lake City hub covers 13 States with 13 different 
sets of State laws. There are a lot of morale problems. Field 
examiners are not getting the backup they need. I have been 
told that the San Diego hub also has big problems. Again, we 
urge you to listen to the fiduciary unit employees who do the 
job on the front lines.
    I want to close by saying: A bad day as a field examiner 
still beats a good day in the office any day. I feel this 
position is the most rewarding, emotionally and physically 
challenging, humbling, and enlightening position in the VA.
    Thank you.
    [The prepared statement of Ms. Pflanz appears on p. 64.]
    Mr. Hall. Thank you very much for your testimony, Ms. 
Pflanz.
    And thank you all. I am sorry I had to leave the room for a 
minute there, but I do have written statements from everyone.
    I wanted to start with Ms. Wade and ask you: In your 
testimony, you suggest that VBA staff does not recognize the 
unique circumstances of family members who are fiduciaries and 
who have devoted themselves to the care, sometimes full-time 
care, of severely wounded veterans, nor does it provide the 
support needed for these caregivers.
    What specific steps would you recommend that VBA take to 
better recognize the sacrifices of family members who oversee 
the financial affairs of our veteran beneficiaries?
    Ms. Wade. I think, first, it is important to distinguish 
between what kind of family members we are discussing here. I 
know in your previous question you asked about the number of 
family members that were investigated. And we are not talking 
about just any family member that suddenly came out of the 
woodwork after this veteran started receiving their benefits 
from the VA. The people I am talking about are ones that 
oftentimes handled that individual's money through multiple 
deployments when they were still on active duty and that is who 
they entrusted with their money. A lot of these people were 
asked to be the power of attorney of that servicemember before 
they were injured.
    Also, these are family members that have likely been at the 
bedside since day one of that veterans injury and done this at 
their own financial sacrifice. I know, in my own situation, 
when my husband was injured, I quit school and left my job to 
do it. I think these are people that have sorted themselves 
out, have proven themselves. Many are also court-appointed 
guardians, fiduciaries recognized by Social Security or just a 
power of attorney.
    But I think what we are talking about here is trusting 
these people by virtue of the fact that they have already 
proven themselves. And sometimes what that means is that--for 
instance, in the example I used of several moms that live with 
their veteran and take care of them, I don't think they are 
living there for free; I think they are earning their living. I 
don't think that it is that uncommon for family members to 
house another family member in a time of need. I know my own 
family has done it under numerous circumstances.
    So I think recognizing that these funds that are being used 
to take care of the household are for the veteran's well-being, 
that it allows that person to be there to care for them, it 
allows that veteran to stay out of institutional care and to 
have quality of life.
    I also think that it is very intrusive to have a complete 
stranger who is a Government employee decide how that person's 
budget gets spent when they didn't know that person before they 
were injured. I think a good example would be one of the ones I 
stated, of a family--a wife and her husband and two children, 
who were given a spending limit for what they could use for a 
vacation.
    I think it is important to include that I went on an 
alternative ski trip with that very family this winter, and the 
mother-in-law had to come, too, because there was no way the 
mom could take care of both her husband and the two children. 
And, heaven forbid she had gotten injured skiing or something, 
someone would have to take her place. So we are talking about 
quite a few people traveling.
    But my husband loved to travel before he was injured. And I 
think that how someone spends their money and chooses their 
financial priorities are oftentimes based on quality of life. 
We have made some financial adjustments in our lives. We went 
from a three-bedroom house to a two-bedroom house. We have one 
car. We sold the car that I dearly loved before he was injured 
to get something less expensive with better gas mileage that 
would require less expensive maintenance. We don't eat out as 
much. But we do still have a special account, actually, that we 
contribute to monthly to pay for recreation and trips.
    So I think that some leniency needs to be afforded to these 
families. But, also, I really think that if these family 
members are able to pay the bills and they are not putting this 
veteran into debt, then I think how they spend their money for 
fun and quality of life shouldn't be a stranger's business.
    Mr. Hall. Thank you, Ms. Wade.
    I would just like to say--and I am sure the rest of the 
Subcommittee and full Committee Members would concur--that we 
thank you and admire you and the other caregivers, fiduciaries 
or not, who take care of their husbands or wives or sons or 
daughters who have been injured serving this country and made a 
sacrifice that affects the entire family so gravely and 
seriously and requires the changes and the sacrifices that you 
described.
    Ms. Wade. We appreciate your support of the bill yesterday, 
sir.
    Mr. Hall. I thank you for coming here and giving us such 
moving examples of what I would assume are isolated and 
misguided actions that can be corrected. I don't believe that 
the VA staff are intentionally trying to make life harder for 
you, when it is already difficult.
    The job of this Subcommittee and that of the Congress in 
general is to perform oversight. And we are going to do that 
with this program, to try to improve it in ways that you and 
others are suggesting.
    Mr. Gadd, in your statement you indicate that the process 
for approving a fiduciary is long and tedious. Could you 
suggest some ways that that process could be improved, please?
    Mr. Gadd. Sure. And thank you, Mr. Chairman.
    The American Legion's primary concern was the delay in 
processing the fiduciaries. We indicate in our written 
testimony several different reasons why, whether it be the 
number of forms or the lack of communication between the RO, 
the Pension Management Center, and the guardianship unit that 
are actually scheduling these visits.
    And some of the ways that we suggested improving this was a 
comprehensive approach, such as training, IT software package, 
and having there be alerts or reminders to make sure that that 
process keeps continuing, and just more communication with the 
veterans service organizations. We walk together with the VA to 
try to help veterans and their beneficiaries.
    And so, again, we just focus, really, on the delay and on 
the front end. And we felt that if we addressed those problems 
and the length in time that these veterans and their 
beneficiaries are having to wait, that the program could be 
improved.
    And we also indicated, that a VA volunteer program--VA has 
the Department of Veterans Affairs Voluntary Service Program--
that they could train and do a better job of standardizing the 
training for this program.
    Mr. Hall. Mr. Gadd, you suggest that there is a disconnect 
between the public and the Fiduciary Program. If a public 
contact number was provided and widely publicized, do you think 
this would help to alleviate some of the commonly asked 
questions that both veterans and their families need answered?
    Mr. Gadd. Yes, sir, the American Legion feels that way. 
Part of our testimony today was a recommendation to have a 1-
800 national call number for this. As many of the panelists 
today have indicated, the public doesn't know enough about this 
program. Some may have questions on what the program actually 
does or how to get in touch with someone if you have a 
question. So that 1-800 number, maybe if it was run out of the 
Salt Lake City hub, will go a long way in improving that 
communication.
    Mr. Hall. Mr. Gadd, in your testimony you mentioned that 
one or more full-time employees should be dedicated exclusively 
to this program in each designated regional office. How many 
full-time employees do you think would be necessary to fully 
staff the Fiduciary Program in each RO?
    Mr. Gadd. Well, the American Legion would contend that we 
would need one additional full-time equivalent (FTE) in each 
regional office to improve the Fiduciary Program. But, as we 
have heard from the panelists today and from OIG and GAO, we 
might also need an additional FTE looking at the compliance 
side, to manage and make sure that those funds are being 
allocated and used to the intention that they were supposed to 
be.
    So a number of 200 comes to mind with the regional offices, 
and then the hub out in Salt Lake City.
    Mr. Hall. Thank you.
    Mr. Weidman, thank you again for coming before this 
Subcommittee. I was wondering what your organization's 
experience has been in interfacing with the Fiduciary Program 
field examiners or legal instrument examiners. Do these VBA 
staffers demonstrate the level of professionalism and diligence 
that you believe is necessary for adequate oversight of the 
program?
    Mr. Weidman. When I talked earlier about complaints from 
the field, almost every one of them has to do with the 
multiples, if you will, those who have many. And it is usually 
an attorney in a firm that is ostensibly a law firm but is much 
more like law firms that are really bill collectors, if you 
will.
    So that has been our major concern. And trying to get 
something done about those, we have not been particularly 
successful anywhere. The majority of those have been in the 
western States, as I think of it now. But also, here in this 
area, we have had problems also.
    And the question is, lack of a clear chain of command and 
who does what. You can always call the OIG if you know to call 
the OIG. The lack of information, which was talked about very 
eloquently by the Gold Star Wives here today. People don't know 
about the Fiduciary Program, but they don't know about any VA 
program. VA's outreach is something that this Committee has 
again and again and again discussed. The VA lacks public 
education and public outreach to let veterans and their 
families know what they have earned by virtue of military 
service. And the Fiduciary Program is just another example of 
that.
    Mr. Hall. Would you suggest that greater training for 
fiduciaries would help to curb the cases of misuse of funds 
that we have heard about today?
    Mr. Weidman. Well, it is partly that, and it is also the 
selection of the fiduciaries themselves.
    I mentioned earlier that we are not particularly concerned, 
because we had never had complaints, that I can recall, about a 
spouse misusing the moneys and not taking care of the vet. And 
all of our complaints have been about the multiples.
    But there clearly has to be some kind of differentiation 
between the spouse where the marriage was intact prior to the 
individual becoming disabled and those multiples. You shouldn't 
be treating them the same.
    I would say, when people asked about a living allowance 
separate and above the 4 percent, hopefully a lot of that will 
be taken care of with the caregivers bill, which passed the 
House yesterday--and I think almost unanimously on the part of 
the veterans organizations, will, knock on wood, pass the 
Senate easily--and that and a much better coordination with the 
VA chain when it comes to making sure people get their care.
    Mr. Hall. Thank you, Mr. Weidman. And may your words go 
straight to the Senate's ears. We have 290 bills that we have 
passed in the House waiting for Senate action. This one might 
jump to the head of the line and hopefully pass before Memorial 
Day.
    Dr. Wersel, in your testimony, you note the lack of 
information published by the VA about the Fiduciary Program and 
the fact that your organization was unfamiliar with the Program 
due in part that the omission of any mention of it in the VA 
Handbook for Veterans, Dependents, and Survivors.
    How are spouses caring for VA beneficiaries harmed by this 
scarcity of information? How much of an impact is that having 
on the families, that they don't know about the Fiduciary 
Program?
    Dr. Wersel. When you don't have the information--and we are 
looking at the--say, for instance, I am the surviving spouse. I 
have funds coming in to my account automatically. In the event 
something should happen to me catastrophically, am I prepared 
to know what will happen? I have children that are young, and 
one is over 18. It is just protecting--being able--that the 
funds are going to be protected to care for my family still.
    My children are not--I still have to have them go through 
college. If I was alive and if I was not incapacitated, as a 
mother I still would be providing a lot of support for my 
children. I would hate the fact that my children, who would be 
my fiduciary, would have to be limited in what they could spend 
and what they could not spend. On the other hand, 
accountability is important.
    But, still, I think the lack of knowledge to any program is 
compromising to our optimal well-being, just knowing, in the 
event something should catastrophically happen to us.
    Mr. Hall. Dr. Wersel, you also note that one spouse was 
required to seek permission from the VBA to purchase a home to 
be closer to family, that she was also required to be bonded.
    Dr. Wersel. Yes. She is in California. And they were living 
in northern California, and her family was in southern 
California. And it was really challenging for her to be up at 
the VA where he was, or at the care facility where he was, and 
she wanted to be closer to family. And when she said, okay, to 
get to California, they had to approve. She had to ask for 
permission to move to San Diego.
    I don't know if it is the State requirement that is asking 
her to be bonded, but we were told that she is required to pay 
$250 a year to be bonded. Because, at the time, it was decided 
that she did not have the correct criteria to not be bonded. 
But she does pay $250 a year to be bonded as fiduciary of her 
husband. And part of the insult is that, you know, they went 
through college together; she has been with him all these 
years, and now she is being monitored carefully.
    Mr. Hall. I understand that and I sympathize with it. I 
think all of us do. And I think most Americans would feel that 
this is, on the face of it, illogical, onerous and insulting, 
particularly for a family member who goes back many years and 
went to school with a veteran who is now incapacitated, like 
cases that Ms. Wade mentioned, had a power of attorney, was 
handling the finances while the spouse was serving overseas 
before the injury occurred and so on.
    But the question is, do you recommend any level of scrutiny 
and accountability that would be acceptable to family members 
to prevent misuse of funds.
    Dr. Wersel. At what level.
    Mr. Hall. Yes, the question is, what level?
    Dr. Wersel. At what level. I think Ms. Wade said it well. 
It is the fact that someone who has a vested relationship with 
that servicemember or with that survivor is that spouse, 
someone who has cared for that person unconditionally, that 
should not be scrutinized in that level. That is where we have 
issues with the wife who is still caring for the person who 
said, ``Here is your power of attorney, and I am naming you as 
the person in my power of attorney.'' The servicemember chose, 
and legally chose, to have this person care for them in the 
event that there was a traumatic event or a catastrophic event. 
So that was chosen.
    To have the Government come in and say, we want to monitor 
where you live, how you live, how you spend--and in our 
relationship, very much like her husband, we did a vacation 
every year, every single year. Now, unfortunately, my husband 
is not alive, but I would be insulted if someone wanted to know 
why we chose the vacation we chose this year. And it is 
something we tried to keep the tradition going. If it was 
something we did in the past, you continue. It never should be 
questioned. It is that close family member that has invested 
the time with that servicemember.
    So if you are thinking about levels, I think that the next 
of kin should probably not be scrutinized as much as someone 
who doesn't have that connection or perhaps wasn't named 
legally before there was a death--I mean, a catastrophic event 
that left them incapacitated.
    Am I getting there?
    Mr. Hall. Oh, you are, yes.
    Dr. Wersel. Okay. Good.
    Mr. Hall. I appreciate your suggestion. And I want to thank 
you also.
    Dr. Wersel. There is one thing that we talked about, that 
first question, and I think I didn't touch upon it correctly. 
You know, in the event of one of our children, if they became 
incapacitated and there were special needs, can you all come in 
and say, we don't want the mother to be the fiduciary? Can VA 
pick and choose who they will choose to be the--do we have any 
control of that?
    Mr. Hall. I am sure Mr. Mayes can answer that in the next 
panel when the time comes.
    Dr. Wersel. Okay. That is a concern.
    And those are the questions we have. The main concern is, 
when you are a surviving spouse or a survivor, sometimes what 
you don't know is okay, but then when you discover there are 
programs out there, you want to be prepared, you want your 
ducks in a row. We need to know what would happen in the event 
of a catastrophic event that would happen to me tomorrow.
    Mr. Weidman. Mr. Chairman, may I just offer one comment?
    Mr. Hall. Yes, Mr. Weidman.
    Mr. Weidman. That comment is, one size clearly does not fit 
all. And Brad Mayes and his competent pension staff are bound 
to act according to the law as interpreted by the General 
Counsel. This is the place in statute--and I would encourage 
and suggest that we encourage the administration to work with 
this Committee to fashion language so that they have the 
latitude to treat situations differently--to a distant nephew, 
who the individual was not close to who may end up being the 
guardian of an elderly vet, is not the same as a spouse of 50 
years. And right now the law doesn't provide for Brad's people 
being able to use their discretion to what makes sense. And 
that is why it would be my suggestion that you look at, how do 
you still have accountability yet have the latitude not to 
insult the people who have become fiduciary who have that kind 
of relationship?
    Mr. Hall. Right. Thank you, Mr. Weidman. Or a parent would 
probably fall in the same category of closeness to the 
individual, in my opinion. But we will follow up with our next 
panel with that.
    Ms. Pflanz, in your testimony you stated that field 
examiners often lack adequate training. What training would you 
recommend? And how often should field examiners receive updated 
training or refresher training to ensure that they remain 
current with all Federal Fiduciary Program policy and 
procedures?
    Ms. Pflanz. I think that field examiners, before they go 
out, should get the same kind of training as the veterans 
service representatives do in the challenge program that they 
have. And I also think that they should--as field examiners, we 
should be retrained every 2 years, you know, enhance our 
training. We deal with so many different levels, different 
regulations, State laws, Federal laws, and things change. So I 
think every 2 years would keep us at the best we can be to 
provide a service to those who need us the most.
    Mr. Hall. That is similar to lawyers doing continuing legal 
education or other professions where there have to be yearly or 
biyearly updates and education.
    And in your statement, also, you recommend getting rid of 
the western fiduciary hub, contending that it has adversely 
affected training, case management, and tracking. Could you 
give us any more details on the problems of the hub in your 
opinion, and indicate any specific examples of how a case was 
mishandled by staff in the western hub or how the case could 
have been better handled if it was located in another office?
    Ms. Pflanz. Personally, I am a field examiner out of the 
Winston-Salem office, and we have--you know, ours are in-house. 
But I know that my coworkers in-field are having a hard time 
getting service from a different regional office. It is totally 
in a different State. They don't know the local in-State 
benefits that we, as field examiners, are required to also 
speak about.
    And we have a timeliness issue, which affects our 
production, on being able to get it to a totally different 
State, our reports, so that if any actions need to be done, you 
know, it can be done in a timely manner. We count on the mail 
system, and it is just not working.
    With better training and then more tools, be automated, and 
vehicles--our regional offices, we are there. Our frontline 
supervisors are in the State. With better training, we would be 
able to provide a much better service, you know. Just as this 
lady had said, you know, to get the word out there. We also 
talk about State benefits, local benefits. And one hub handling 
13 different States with 13 different rules or different 
benefits is cumbersome.
    Mr. Hall. I understand that and appreciate that comment.
    You also have mentioned that you would like Congress to 
improve the lines of communication between the VA Fiduciary 
Program and other Federal agencies, and you note in your 
testimony a joint program between VBA and Social Security 
Administration.
    Could you elaborate on this program? And what are the pros 
and cons of establishing similar joint programs between VBA and 
other Federal and State agencies?
    Ms. Pflanz. As a field examiner, when I go out, there is--
and we see misuse. It is not always just on the VA benefits. 
Normally, that person also has control of our beneficiary's 
Social Security, military retirement, personal retirement. As 
field examiners, we can only take so much action. There is no 
follow-up. We don't send our reports to Social Security, you 
know, saying, ``Hey, there is a problem.'' Social Security, if 
they have somebody that is rated, you know, as incompetent or a 
fiduciary that is not doing what they are supposed to do, there 
is no feedback, no warning to me on the road, you know, out 
there working. You know, it is trial and error on both parts of 
a system that could work.
    Mr. Hall. So interagency communication would help both?
    Ms. Pflanz. Tremendously for everybody, especially our 
beneficiaries.
    Mr. Hall. From the AFGE point of view, I gather you would 
like to see a total revamp of the program that would allow 
field examiners to have more input, better training, better 
equipment, cell phones, et cetera, improved policies and 
procedures.
    Which is the most urgent of these changes? Or how would you 
have prioritized them? And what other changes might you 
recommend based on what you have heard today?
    Ms. Pflanz. Our senior field examiners, they have been on 
the road, they have dealt with several situations, and they 
should be the voice to writing policies and procedures. That 
would be my number-one thing, would be to get them, who have 
the experience to change because they have been there, they 
have gone through it. And they have met people who don't 
understand the programs. And they are more experienced than I 
on how to make it work, what we can do to make us more 
productive.
    We need tools. We need--like, they were talking about with 
the report generator, it is a great start, but it only provides 
one report that I as a field examiner am required to write. Our 
FBS program only gives our coaches a very limited scope or 
reports because it is for only 60 days. That also needs to be 
addressed. We need vehicles. We are where the rubber meets the 
road.
    Mr. Hall. Well, I want to thank you, Ms. Pflanz, Dr. 
Wersel, Mr. Gadd, Ms. Wade, Mr. Weidman. Thank you all for your 
testimony. Thank you for the perspective and the dedication and 
insight that you have brought us today, and for your patience. 
As usual, these hearings can take a long time, and we want to 
thank you.
    We may have some follow-up questions for you in writing, 
which we will send to you. But, for now, I just want to say 
thanks, and you are now excused. And have a great rest of your 
day. We will try to do our best to solve some of these 
problems.
    We will ask panel three to join us: Gary Chesterton, Chief 
of VBA's Fiduciary Program staff; Bradley G. Mayes, Director of 
Compensation and Pension Service for the Veterans Benefits 
Administration, U.S. Department of Veterans Affairs; with Diana 
Rubens, Associate Under Secretary for Field Operations of VBA, 
U.S. Department of Veterans Affairs.
    Mr. Mayes, the floor is yours, sir.

  STATEMENTS OF BRADLEY G. MAYES, DIRECTOR, COMPENSATION AND 
    PENSION SERVICE, VETERANS BENEFITS ADMINISTRATION, U.S. 
DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY DIANA M. RUBENS, 
ASSOCIATE DEPUTY UNDER SECRETARY FOR FIELD OPERATIONS, VETERANS 
 BENEFITS ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS; 
 AND GARY CHESTERTON, CHIEF, FIDUCIARY STAFF, COMPENSATION AND 
    PENSION SERVICE, VETERANS BENEFITS ADMINISTRATION, U.S. 
                 DEPARTMENT OF VETERANS AFFAIRS

    Mr. Mayes. Thank you, Mr. Chairman. I am pleased to appear 
before you today to speak of the initiatives under way to 
enhance the Department of Veterans Affairs' Fiduciary Program.
    I am accompanied by Ms. Diana Rubens, as you mentioned, 
Associate Deputy Under Secretary for Field Operations, and Mr. 
Gary Chesterton, Chief Fiduciary Staff for Compensation and 
Pension Service. I don't know if I could handle two of him, but 
he is doing a lot of great stuff for us.
    The Fiduciary Program oversees VA benefits paid to those 
veterans and beneficiaries who, because of injury, disease, or 
the infirmities of age, are unable to manage their financial 
affairs. VA currently supervises more than 108,000 VA 
beneficiaries, with cumulative estates exceeding $3 billion. 
These veterans and their widows and children are among our most 
vulnerable clients.
    First, let me say that VA takes very seriously the 
recommendations made by the Government Accountability Office 
and VA's Office of Inspector General and is working to 
implement recommendations made in their recent reports as well 
as other important measures that we believe will further 
strengthen our program.
    I would like to briefly highlight some of the strides VA 
has made within the last 18 months which are contributing to 
improved service delivery and oversight of benefits to this 
group of veterans and beneficiaries.
    In September 2008, a new Chief of the Fiduciary Staff, 
Gary, who is sitting to my left, was recruited to spearhead our 
reform efforts in this program. Shortly thereafter, we selected 
a new Assistant Director for Veterans Services, who has overall 
responsibility in this program area. And these individuals 
bring many years of technical and management experience to bear 
on our efforts to strengthen the program and the service 
delivery for these veterans and beneficiaries.
    In addition to these leadership changes, we have doubled 
the size of the staff responsible for fiduciary policies and 
procedures and we have reassigned quality assurance case 
reviews to our national quality assurance staff, located in 
Nashville, Tennessee.
    We are taking steps to clarify existing procedural 
guidance. The operations manual for fiduciary activities is 
undergoing a complete revision. Several policy changes are 
already in place to increase protections, to include changes in 
bonding requirements and documentation requirements for certain 
categories of both budgeted and unbudgeted expenses. And this 
guidance was contained in Compensation and Pension Service Fast 
Letters that have been issued to the field within the last 
year.
    VA has deployed several measures to improve oversight of 
investigations into allegations of misuse of beneficiary funds. 
In cases where a misuse allegation has occurred, policy is now 
in place that requires regional office fiduciary activities to 
provide VA's Central Office all documentation pertaining to the 
investigation of these allegations.
    To improve operational efficiencies, VA consolidated the 
management of 14 fiduciary activities within the western area 
under the fiduciary hub pilot program located at the regional 
office in Salt Lake City, Utah. Analysis of the pilot, along 
with recommendations, will be completed by September 30th of 
this year and will address program strengths, weaknesses, and 
lessons learned, and make recommendations on the feasibility of 
expansion of the hub concept.
    The hub is the only fiduciary activity operating in a 
paperless environment, which has served its unique 
configuration well. The hub also created a misuse team which 
specializes in these types of investigations.
    The hub is unique in that it has integrated Microsoft 
MapPoint software in the scheduling of field exams within the 
hub's jurisdiction. Utilizing this technology has reduced 
overall travel times and increased the effectiveness of our 
field examiners.
    These are examples of improvements that have been realized 
with this consolidation.
    We also recognize the need to improve the information 
technology systems available to our field fiduciary personnel 
in the administration of this program. The current electronic 
case management system, the Fiduciary Beneficiary System, poses 
some limitations with historical data, as you heard, 
interfacing with other systems currently employed by VA, and 
workload management and fiduciary oversight. We have initiated 
steps to replace the system. We are developing a request for 
information to solicit interest from the private sector in an 
alternative electronic case management system.
    In conclusion, I want to affirm the commitment of VA to 
serve and protect our most vulnerable population of veterans 
and beneficiaries. The interest expressed in our program by the 
Office of Inspector General, the GAO, and this Committee is a 
testament to the very important task we have at hand. VA is 
committed to take every step necessary to ensure that we 
fulfill our obligations to protect this special segment of 
veterans and beneficiaries whom we serve.
    Mr. Chairman, this concludes my prepared remarks. And I 
would be glad to address any questions or comments regarding my 
testimony here today.
    [The prepared statement of Mr. Mayes appears on p. 68.]
    Mr. Hall. Thank you, Mr. Mayes.
    I know the report isn't due until September on the pilot 
western hub. But have you heard anything? Do you have any 
response to the earlier critique about 13 different States' 
differing regulations causing a problem for work being done 
from that hub?
    Mr. Mayes. I am going to defer that question to Ms. Rubens, 
who has management responsibility for the hub.
    [The following was subsequently received from the VA:]

        The analysis of the Western Area Fiduciary Hub has been 
        completed, and the draft report is expected to be finalized by 
        the end of the calendar year. VA will share the report with the 
        Subcommittee at that time.

    Ms. Rubens. Thank you, Mr. Chairman.
    I will tell you that I was the western area director when 
we decided we needed to look at how we do this better within 
the constraints that we live with today.
    One of the things we recognized right off was we would be 
bringing together an amalgam of different States, different 
court systems, different rules. We work closely with the folks 
from General Counsel and the local regional counsels in an 
effort to develop the training program that we would need to 
incorporate for the legal instruments examiners that would be 
living in Salt Lake. We continue to review that in an effort to 
ensure we have made that connection the way we need to.
    At the same time, I would say to you that the field 
examiners all remained out based. They need to be in the 
communities where the veterans are. And so we continue to have 
that local relationship then with our regional council and the 
local courts in an effort to ensure we are aware of changes 
that might come about in individual States and can inform the 
folks in the hub of any of those changes.
    Mr. Hall. Thank you, Ms. Rubens.
    Mr. Mayes, given the persistence of the problems OIG 
identified in the 2006 study and again in the 2010 report, 
could you elaborate on the steps VBA intends to take to address 
these issues that have lingered in the Fiduciary Program?
    Mr. Mayes. Yes, Mr. Chairman. I will break this along two 
lines of discussion.
    One has to do with ensuring that funds are appropriately 
utilized on behalf of a beneficiary who we have determined 
can't manage their affairs for whatever reason. We have 
instituted new bonding requirements. We are checking to make 
sure that bonds are in place every time we do an accounting and 
that they are current.
    We are insisting on pre-approval for any unbudgeted 
expenses in excess of $1,000. We have set a national standard 
on that. We have a requirement that budget expenses that exceed 
15 percent more than what we have in the fund usage agreement, 
require receipts, if we can't determine at the time of the 
annual accounting what those monies were spent on.
    Another thing that we are doing is, during our annual 
accountings, we are requiring bank statements that show all 
transactions during the accounting period. Previously, the 
requirement simply required evidence that funds were in the 
account. And we were concerned that, in particular, fiduciaries 
who were managing multiple beneficiaries might have been moving 
monies around, and then they were appearing at the time of the 
accounting and there was no evidence, from our point of view, 
that those monies weren't in that particular fiduciary's 
account for the entire period.
    So we have done a lot of things along those lines. Any time 
there is an allegation of misuse, we are going to review the 
documentation that either led to a formal misuse 
determination--in other words, there was some merit to the 
misuse allegation, we investigated it, and we did a formal 
determination. We are going to review that. But even in cases 
where we determined that there isn't merit to the allegation, 
we want to see those. So there is much more oversight that we 
are putting in place.
    And the second thing that we are doing is we are focusing 
on the training. The previous panels hit this pretty hard, and 
we agree. That is one of the things that the Government 
Accountability Office said, was we really need to focus on the 
training.
    Gary and his staff have been out to nine stations. We are 
scheduled to visit 20 more stations. They have developed a 
training program to deliver in person to the field examiners 
and the legal instruments examiners in these regional offices. 
So we are hitting the road, basically. I have given him more 
staff, and we are going to hit the road and make sure that 
everybody is up to speed.
    Mr. Hall. Well, that is good to hear.
    I am happy to hear you say that FBS is going to be 
replaced. Do you have a timeline in mind for that, in terms of 
the proposals coming back and one being chosen?
    Mr. Mayes. We have been working with subject-matter experts 
to help us identify the requirements, and we are working 
closely with field representatives, with folks in Ms. Ruben's 
chain of command, to come in.
    Mr. Mayes. We need, as I think someone on an earlier panel 
said, we need those subject matter experts to help us identify 
the requirements.
    We intend to put a request for information (RFI) out on the 
street to solicit interest from the private sector. This is a 
workload management tool that we need to build, to replace. So 
we would like to engage the private sector community to see if 
maybe there is something that we can use off the shelf and not 
rely on in-house development. I believe that we can have that 
RFI on the street within a matter of weeks.
    Mr. Hall. There might be reason to make sure that it is 
compatible with VA's new electronic system that will be 
handling claim, in general, which also is supposed to be 
compatible with DoD so that there will be a continuous stream 
of compatibility. There will be, of course, veterans who move 
from being self-sufficient to being incapacitated and perhaps 
being in the Fiduciary Program, and it might be helpful to have 
all three of these systems talk to each other.
    I also wanted to you ask regarding FBS, during the interim 
now while this search for the new system is going on, is it 
possible to somehow tweak it so it can accept say the last four 
numbers of the Social Security number? I just called one of the 
unions that I belong to because they sent me a letter about 
something, and they wanted to know which John Hall they were 
talking to. It is a fairly common name. They are a national 
organization, and the first person I got on the phone asked for 
the last four digits of my Social, and I gave it and they 
pulled up the right account. As the reports mentioned, that 
would be a quick and easy fix. Hopefully that is an attainable 
improvement.
    Mr. Mayes. Mr. Chairman, we actually have the capability to 
collect a tax ID number in our system. We have mandated that at 
this point, that we collect a tax ID number.
    The key, and Mr. Bertoni made reference to this, the key is 
to make sure that we can associate every veteran or beneficiary 
that is in this program with their fiduciary because there are 
certain requirements that we have with respect to oversight, 
especially in those cases where you have a fiduciary handling 
multiple beneficiaries and certain liabilities that incur as a 
result of legislation.
    So now that is a requirement, whether it be an individual 
Federal fiduciary or a professional fiduciary who is handling 
multiple beneficiaries.
    Mr. Hall. When did that requirement go into effect?
    Mr. Mayes. That requirement just went into effect this past 
week in a policy letter that went out.
    Mr. Hall. That is good. OIG also noted deficiencies in 
staffing and workload models for the program. For example, 
decisions regarding staffing are left to the judgment of 
individual RO directors. As a result, the OIG contends that a 
wide variation exists in the number of beneficiaries managed by 
different individual legal instrument examiners. It is a pretty 
wide variation, from the hundreds to well over a thousand. What 
steps are being taken to remedy this problem, and how long do 
you think it will take to get to a more uniform level?
    Mr. Mayes. Mr. Chairman, I would just like to make one 
point because I heard that from members of the previous panel. 
You know, when we are talking about field exams, the 
circumstances with which we perform these field exams vary 
across jurisdictions. If you are located, for example, in 
Montana, you may have to drive literally hundreds of miles to 
conduct a single field exam as opposed to maybe Chicago where 
while you are not traveling so far, you are in rush hour 
traffic as compared to Topeka, Kansas, where going 10 miles, 
you are there in 10 minutes. So I don't think we can say that 
the requirements in Montana would be exactly the same as they 
would in Kansas vis-a-vis a metropolitan area in the east.
    But we have some work to do here. When we set up the 
western area, Ms. Rubens was very involved in helping us figure 
out what is the proper allocation of resources.
    Ms. Rubens. I can address that. One of the challenges, of 
course, is as we look at the resources we have and how we 
ensure that they are effectively and efficiently spread across 
the organization, there is an overarching resource allocation 
model for the service centers across the country that looks at 
not only receipts in terms of work, but it looks at qualities 
and production and timeliness and all of those things as we 
look at how do we make sure that we distribute resources in a 
way that allows them to be used effectively.
    When we established the western area hub, one of the things 
that we started out with was looking at how many incompetent 
veterans and guardians that we had out there and appointees, as 
well as each individual office, breaking that down, how many 
legal instruments examiners did they have. Quite frankly, part 
of my concern was I didn't think we were doing the job as well 
as we needed to. My hope was to help build a cadre of legal 
instruments examiners that would not be left behind. If there 
were only two and one retired, we have some redundancy built in 
so we can absorb any of those changes that might come 
unexpectedly.
    We have worked hard to ensure that initial staffing model 
which aggregated those legal instruments examiners into Salt 
Lake, as well as maintain those field examiners out there, to 
ensure that we can still get out and do all those field exams.
    It is part of an ongoing review that I regularly talk with 
the now-western area director about in terms of how are we 
doing in performance, are we meeting our obligation to appoint 
those fiduciaries in a timely manner for those initial 
appointments as well as getting those follow-ups done.
    Currently we are going to work with the service to conduct 
that overview of how is it going? Is the fiduciary hub a 
concept that we are ready to advocate as an organization and 
spread across the country? That is a key. At the moment I will 
tell you we continue to evaluate the surges in field exams that 
need to be accomplished when we lose field examiners.
    We have worked with the service employees. AFGE was part of 
a group last year that looked at what are the performance 
standards for our field examiners, and redesigned those in an 
effort to address the issues Brad raised when it comes to the 
different locations that you have. I believe in Salt Lake we 
have the right ratio. As I look at those numbers of 400 per 
field examiner, and I think the 745 per LIE in Salt Lake are 
manageable. We have made some tremendous strides in the 
accountings and in the work we are doing. We have made some 
tremendous strides in ensuring that seriously overdue 
accountings are acted upon timely, that we are appointing 
successor fiduciaries when that is required. But we will have 
an overarching review to ensure that we have those ratios 
proper, that we have the right training and the right standards 
before we make any adjustments about how do we go forward, if 
that is the decision.
    Mr. Hall. Thank you.
    We have all heard and know that, thanks to faster, better 
medical care on the battlefield, that more of our servicemen 
and women are surviving today in OIF, OEF than previously in 
Vietnam, for instance. There is a much higher ratio of injured 
that survive, but much more serious injuries for many of them, 
debilitating injuries. Have you seen an increase percentage-
wise in terms of the recent veterans, post-2001 veterans 
relative to the overall veterans' population who need the 
services of a fiduciary? Or does it still track with the 
veterans' populations based on the age groups and conflicts in 
which veterans served?
    Mr. Mayes. Mr. Chairman, I am going to ask Mr. Chesterton 
to go ahead and take that question.
    Mr. Chesterton. Yes, sir. We have actually recently looked 
at that and we wanted to see if there was an increase 
proportionally as to the total population. What we found is 
proportionally it is growing exactly the same as the total 
beneficiaries.
    Mr. Hall. Thank you. That is interesting. I am sure that 
age probably accounts.
    Mr. Mayes. I was going to say, lots of time that is what 
happens.
    Mr. Hall. It is the great leveler. As a friend of mine 
wrote, Time, the conqueror.
    Can you tell us or if you don't have the information, 
supply it to the Subcommittee later, which RO offices 
experience the highest volume of cases involving the misuse of 
beneficiary funds?
    Mr. Mayes. We will have to take that one for the record, 
Mr. Chairman.

    [The VA subsequently provided the following information:]

        Since FY 2005, when P.L. 108-454 put the requirements in for 
        misuse, the following States had the most misuse allegations/
        determinations: Georgia (Atlanta RO), California (now being 
        processed by Salt Lake City RO), and Alabama (Montgomery RO).

    Mr. Hall. How many cases has the VA discovered on the scale 
of that one involving the fiduciary who embezzled nearly a 
million dollars to support her gambling habit as we understand? 
Is that an isolated incident or are there other cases of that 
scale?
    Mr. Mayes. Mr. Chairman, I would like to give you an 
accurate answer on that because I think you are asking are 
there other cases of fraud in excess of a million dollars?
    Mr. Hall. Or in that ballpark?
    Mr. Mayes. It is isolated, I will tell you that. It is 
certainly isolated, but let me take that question for the 
record and I will give you an accurate answer.
    [The VA subsequently provided the following information:]

        Since enactment of P.L. 108-454, three cases have involved 
        embezzlement of approximately $1.0 million. The three cases 
        were in California, Minnesota, and Texas.

    Mr. Hall. When does the VA plan to launch the new Internet 
portal for VA fiduciaries? What information is currently 
available on the Web site for families and others who are 
interested in securing the appointment of a fiduciary to care 
for their beneficiaries, and what will be up on the new portal 
when it goes up?
    Mr. Mayes. Right now we have actually provided, I have seen 
it, an E-benefits portal. The E-benefits portal is leveraging 
the authentication that exists already within the Department of 
Defense. So as an active duty service person separates, they 
move into VA. They can be in the system and access information 
that is up in this portal. In its infant stages, what we are 
deploying up on the portal are parts of our applications that 
might give an individual for example information on the status 
of their claim. Did VA receive a piece of evidence, for 
example, and that information will be available to an 
accredited representative.
    In the Fiduciary Program, I suppose that we would provide 
access to a family member if they can represent the claimant 
before the VA. So in that respect, they would be able to access 
the information to see what is transpiring in the claims 
process.
    Beyond that, Mr. Chairman, I am not sure what we would put 
out there. In other words, when we set up a fiduciary for a 
veteran or a beneficiary, really the interaction is on a very 
personal level because we are out there conducting a field 
exam. We do follow-up beneficiary exams, and sometimes there is 
interaction when we are doing the annual accountings. We did 
take a note about a 1-800 number, I think was the suggestion, 
some place for someone to go if they have questions about how 
they can utilize those benefits and that is something that we 
will also take back. Maybe we can put that information up and 
have it be accessible through the Web as well, but I don't know 
that it would be in that Web portal because that is designed 
for the individual to access their report.
    Mr. Hall. Thank you. Regarding the OIG report which noted 
that from FY 2005 through 2008, VBA has not included 
statistical information pertaining to misuse of funds as 
required by title 38, U.S. Code, section 5510. When can we 
expect VBA to provide this information?
    Mr. Mayes. There is some information on misuse in the 2009 
and 2010 annual benefits reports. I believe the piece we are 
missing is what we saw in the OIG report. I believe that the 
statute also requires that we report in the Annual Benefits 
Report (ABR) the results of the cases that are referred to the 
OIG. So now that we have that, we will include that in the ABR.
    Mr. Hall. Thank you. Present company excepted, and not to 
raise questions about the honesty of family members, but in 
your experience and the statistics that you have, what is VBA's 
opinion or view of professional versus familial fiduciaries and 
the misuse of funds that occurs?
    Mr. Mayes. For us, we want the most effective, least 
restrictive fiduciary. That's what we care about. We care that 
the fiduciary is willing to serve in that capacity. We care 
that the fiduciary is willing to adhere to our legal 
requirements. We care that they have the beneficiary's best 
interests at heart, and we require that they meet certain 
credit and criminal history requirements. That is what is 
important to us.
    Now, I would suggest that in most cases the most effective, 
least restrictive avenue for achieving what is best for the 
beneficiary is appointing a family member who is willing to act 
in that capacity as a fiduciary. In fact, that is what we find 
in most cases. In a majority of cases, we have family members 
acting in that capacity.
    Unfortunately, in some cases we have seen that family 
members misuse those funds. So it is not about family member 
versus professional fiduciary, it is about who is going to 
discharge that responsibility most effectively. That is what 
the VA cares about.
    Mr. Hall. Regarding some of the testimony before that we 
heard, what is your opinion about the possibility of providing 
VA funds to pay for living expenses that are shared by the 
beneficiary and the caregiver fiduciary and should we consider 
providing compensation to familial fiduciaries?
    Mr. Mayes. Well, Mr. Chairman, I am glad you asked that 
question. When we pay fees, when we authorize fees to a 
professional fiduciary, those fees come out of the benefits to 
the beneficiary. So it is not like there is this extra fee that 
is paid. We are authorizing an amount that has a cap on it by 
law for a professional fiduciary to manage the Federal funds to 
make sure that the beneficiary is taken care of. So when we 
have a family member that is utilizing the veteran's monies, 
funds, benefits, based on the disability or disabilities they 
incurred in the service, it is perfectly reasonable for the 
family fiduciary to use those funds for taking care of their 
family member.
    I think the question here is the level of oversight. I was 
listening to the earlier panels. I know that sometimes it may 
seem intrusive when we come in and we are trying to find out 
who is going to be the most effective, least restrictive 
fiduciary, and we ask to sit down with the family member and go 
through a fund usage agreement.
    But the reality is we don't require bonds for spouse. We 
don't require an annual accounting requirement for a spouse. 
That typically is a 3-year follow-up followed by another 3-year 
follow-up. We do require pre-approval for certain expenses that 
are expenses over a thousand dollars that aren't part of a fund 
usage agreement, and we do require that those funds be utilized 
to take care of the beneficiary.
    So the requirements are a little less restrictive for the 
spouse. And I understand how it might be perceived as being 
onerous, but we have to balance that with the responsibility to 
ensure that the beneficiary is being taken care of.
    Mr. Hall. That is sensible. I am wondering if you think 
that there is enough consistency from one RO to another in 
terms of those thing you just talked about, the degree of 
oversight and the degree of questions asked and standards met 
and going through records. What we have heard is that there 
seems to be some offices that are more zealous or cautious or 
questioning or challenging, even, to family members in this 
position than others. So how can we get everybody on the same 
page and have the same level of scrutiny?
    Mr. Mayes. I think we have some work to do here. No 
question. I know Ms. Rubens, that is one thing that she presses 
me on as program manager. We have to have clear guidance and 
clear policy. I will tell you that we are in the process of 
revising our procedures. And we are bringing in some very 
experienced people from the field to do that. We are about 90 
percent complete. So we have to have that clear policy out 
there.
    But I think even more importantly, we have to get out there 
with these field examiners and these legal instruments 
examiners, and that is why I brought Gary in and Christine 
Alford, the Assistant Director over this shop, and added staff. 
We have to get out there and train. We do have legal 
instruments examiners and field examiners with a couple of 
years' experience. We have gone to nine stations. We are on tap 
to go to 20 more. We are going to hit every station.
    So clarify the policies and procedures, streamline those 
where we can, and then we have to train. I agree that we have 
some work to do.
    Ms. Rubens, did you want to add anything to that?
    Ms. Rubens. Yes, I do want to add one thing, Brad. The 
other thing we are going to do, while you all are going to be 
going out and hitting the road and training, you are also going 
to be bringing in folks from across the country to do an 
overarching training program to ensure that as these new 
policies have come out over the last year, we have a chance to 
visit them together, make sure that there is a clear 
understanding, and work towards that consistency that you 
address.
    Mr. Hall. Thank you. I am sure our families and relatives 
who are acting as fiduciaries will appreciate that. I think we 
all agree there needs to be a level of oversight to ensure 
against abuses. And if there is sort of the same standard that 
everyone is expected to meet, then no one will feel picked on.
    Going back to professional fiduciaries, the compensation is 
capped at 4 percent, as I understand it, and yet there is no 
fixed limit to the number of beneficiaries that one fiduciary 
can manage. In one case, a fiduciary oversees the affairs of 
over 500 beneficiaries; is this a problem in your opinion? Do 
you have concerns with the number of beneficiaries one 
fiduciary can handle; or would you say that it depends on their 
staff and the circumstances?
    Mr. Mayes. I think that certainly some professional 
organizations are more capable of handling greater volume than 
others. I think it behooves the VA, and it was mentioned 
earlier, it behooves us to get out there and recruit more 
organizations that perform this type of work, get out there and 
inform them of the fact that this program exists and encourage 
them to engage us on behalf of our Nation's veterans.
    In fact, Gary and I were just talking about that, and I 
would like for him to share with you some of the things that we 
have done to make some of our professional organizations aware 
of this program.
    Mr. Chesterton. In the previous year, we have started as a 
staff to go out to conferences such as National Guardianship 
Association. We are visiting and speaking at conferences for 
the National Association of Elderly Law Attorneys. We are also 
trying to work with AARP to go to their national convention. 
Our general counsel has gone to the national probate court 
judges conference, all in an effort to provide this outreach, 
provide this information, and to recruit qualified fiduciaries 
nationwide.
    Mr. Hall. Thank you very much. One more question and then 
we will submit some more questions for the record. And I want 
to thank you for your listening skills and all of you for the 
work that you are doing because I know we all have the same 
goal here. We are simultaneously dealing with, VA is dealing 
with, and the Congress is trying to help VA deal with a broad 
spectrum of problems and come up with solutions all at the same 
time, and it is affecting people in real-time in their lives as 
things are happening that matter very much to an individual or 
their family. And they matter to us as a country, too.
    But we realize that this is a big agency with a lot of 
irons in the fire and changes being asked for and developed at 
the same time the work is going on day to day. So we are aware 
of the challenge that you all face. We want to help in any way 
we can.
    I would say to the representatives of the service 
organizations who spoke before, and to the Inspector General 
and the GAO, we are all in a chain of oversight helping each 
other hopefully get to the best possible solution.
    With that, my final question to you Mr. Mayes, can fees 
that are paid to fiduciaries, particularly family members who 
act at fiduciaries, be bonded, to be deducted from the 
beneficiary's account, or must a fiduciary pay out of pocket 
for those fees? And can fiduciaries seek reimbursement from the 
VA for fees that are paid to secure bonding?
    Mr. Mayes. I am going to let Mr. Chesterton answer that 
question. He is our expert in that area.
    Mr. Chesterton. Whenever a fiduciary is required to provide 
a bond, that all comes out of a beneficiary's funds. Any fees 
generally associated with the maintenance of the beneficiary's 
estate come from the beneficiary's funds. The fiduciary is not 
normally required to pay out of pocket at all.
    Mr. Hall. Thank you, Mr. Chesterton, and Mr. Mayes and Ms. 
Rubens for your patience, testimony, and the work you are 
doing. I will be submitting on behalf of the Subcommittee some 
further questions. We will allow 5 days as usual for Members or 
witnesses to revise and extend their remarks.
    And just as the Gold Star Wives were largely unaware of the 
existence of this program, I think much of America is probably 
unaware of it. But it is very important to those who are in it 
and who need the services of the Fiduciary Program, and it is 
part of the contract, part of our honoring our commitment to 
the men and women who served this country and are in the 
position of needing this kind of help as a result.
    So we are looking forward to working with you to help 
improve the program and reduce the opportunities or the 
instances of misuse or abuse of funds to the lowest level 
possible and at the same time streamline the process for those 
families who are either doing it themselves or bringing in a 
professional, we are here to help as well as to do oversight.
    Once again, I believe I speak for all of the Members of 
Congress in expressing gratitude first of all to the veterans 
for their service; and second, to the families and fiduciaries 
for their continuing sacrifice, and finally to all of the 
organizations represented here and you from the VA and from the 
VBA who are working on this day to day. Thanks for your 
testimony. Thank you in advance for answering the questions 
that we are going to send to you in writing, and you are now 
excused.
    This hearing is adjourned.
    [Whereupon, at 4:38 p.m., the Subcommittee was adjourned.]



                            A P P E N D I X

                              ----------                              

  Prepared Statement of Hon. John J. Hall, Chairman, Subcommittee on 
               Disability Assistance and Memorial Affairs

    Good Afternoon.
    Would everyone please rise for the Pledge of Allegiance?
    Flags are located at the front and back of the room.
    I welcome you all here today, just a day after we passed another 
comprehensive veterans' health bill aimed at supporting veterans' 
caregivers as well as enhancing veterans' physical and mental 
wellbeing. I was honored to support this bill, S. 1963, The Caregivers 
and Veterans Omnibus Health Services Act of 2009. This legislation 
combines the recommendations of nearly 20 Members of Congress--
Democrats and Republicans alike. Provisions in S. 1963 will provide 
training, education, and counseling for caregivers of veterans of any 
era. In addition, the bill allows VA to recruit and retain nurses, home 
health aides, and specialty care providers. Finally, this measure will 
help VA better diagnose and treat those who suffer from the invisible 
wounds of war, the stigma associated with them, and many other factors 
that make effective treatment difficult. Specifically, S. 1963 expands 
authority to fund services to treat wounded warriors suffering from 
post-traumatic stress disorder (PTSD), traumatic brain injury (TBI), 
and other combat-related disorders, which lead to homelessness and, in 
some cases, suicides and criminal acts by veterans.
    Our hearing today is entitled ``Examining the VA Fiduciary Program: 
How Can VA Better Protect Vulnerable Veterans and their Families?'' 
This hearing is intended to examine VA's fiduciary program and assess 
how Congress and VA can work together to better protect veterans and 
dependents that are in need of fiduciary services.
    Since 1926 when Congress passed the World War Veterans Act, VA has 
been providing oversight of its benefits paid to those beneficiaries 
who were incapable of handling their own affairs due to injury, 
disease, or infirmities of age. Today, the VA Fiduciary Program 
operates under authority contained in 38 U.S.C. Sec. 5502(a)(1). The 
program is administered by VA Regional Offices and their respective 
Offices of Regional Counsel, which interface directly with VA 
beneficiaries and State courts in guardianship and commitment matters.
    On average, impaired beneficiaries received approximately $14,400 
in fiscal year 2008, about $4,200 more per year than the average for 
all VA compensation and pension beneficiaries. In fiscal year 2008, 
fiduciaries managed approximately $1.5 billion in VA benefits for more 
than 103,000 beneficiaries. Thus far, for FY 2010, VA reports $696 
million in benefits have been paid to more than 102,000 beneficiaries 
with a cumulative estate value of $3.1 billion.
    Recently, both VA's Office of Inspector General (OIG) and the GAO 
issued reports on VA's fiduciary program. These reports underscored the 
benefits of this program, but pointed to insufficient staffing, 
training, and other resources that hamper the effective oversight of 
the fiduciary program. In the absence of adequate oversight and 
accountability, some fiduciaries have misused millions of dollars 
belonging to our veterans and their dependents.
    Let me take a moment to highlight some of the concerns about the 
Fiduciary Program raised by the VA OIG and GAO reports. From October 
1998 to March 2010, the VA OIG's Office of Investigations reports that 
it conducted 315 fiduciary fraud investigations, resulting in 132 
arrests and monetary recoveries of $7.4 million in restitution, fines, 
penalties, and administrative judgments. One of these cases involved 
the submission of false financial reports by a fiduciary who attempted 
to conceal her embezzlement of nearly $1 million from 33 disabled 
veterans whose accounts she managed. The funds embezzled by the 
fiduciary were reportedly used to support her gambling habit.
    It should be noted that these problems are not representative of 
all fiduciaries. However, the fiduciary program is susceptible to abuse 
as a result of deficiencies noted by both the VA OIG and GAO reports. 
Specifically, both the VA OIG and GAO found: (1) VBA was not taking 
effective action to obtain seriously delinquent accountings; (2) VBA 
was not consistently verifying questionable expenses reported by 
fiduciaries; and (3) VBA was not adequately following up and reporting 
on allegations of misuse of beneficiary funds and estates. The VA OIG 
pointed out that VBA has also not been diligent in replacing 
problematic fiduciaries. In one case, a fiduciary was seriously 
delinquent in submitting multiple reports, ranging from 134 to 215 days 
late. In addition, during that period, VBA had received numerous 
complaints concerning that fiduciary's performance. However, the VBA 
took no action to replace this fiduciary.
    On the other end of the spectrum, we will hear from VSOs who 
complain that family-members who serve as fiduciaries are neither 
supported financially nor through training by VBA to discharge their 
duties. Moreover, the VSOs suggest that while it appears that some 
professional fiduciaries are not subjected to as much VBA oversight, 
family-member fiduciaries are viewed with suspicion and mistrust by 
VBA, despite the sacrifices that they make to care for incapacitated 
veterans and/or beneficiaries. For example, the Wounded Warrior Project 
reports that VBA required a mother who served as a fiduciary for her 
mentally disabled veteran son to reimburse funds spent on toilet paper 
for the home.
    This hearing provides a forum to explore these concerns with the VA 
Fiduciary Program. With that, I look forward to the testimony of our 
witnesses and insightful comments and questions from my colleagues on 
the Subcommittee.

                                 
  Prepared Statement of Hon. Doug Lamborn, Ranking Republican Member, 
       Subcommittee on Disability Assistance and Memorial Affairs

    Thank you Mr. Chairman,
    And welcome everyone, to this hearing on the Department of Veterans 
Affairs fiduciary program.
    The fiduciary program provides oversight of VA benefits to 
beneficiaries who are incapable of managing their funds as a result of 
injury or disease.
    When the VA or a court determines that a veteran is incompetent to 
handle his or her finances, the fiduciary program:

      establishes an appropriate benefits payment method,
      appoints a fiduciary to oversee his or her finances,
      and provides continued oversight services.

    Through periodic personal visits to the beneficiary's residence, VA 
Field Examiners monitor the welfare and needs of the veteran.
    My Subcommittee colleagues and I want to ensure that VA's fiduciary 
program is taking every measure and has the support necessary to fully 
safeguard beneficiaries' assets.
    During the 108th Congress, we passed legislation that President 
Bush signed into Public Law 108-454 on December 10, 2004.
    The provision made improvements to increase fiduciary 
accountability and strengthen protections for the beneficiary.
    This included more thorough investigations of fiduciaries prior to 
them being appointed and required VA to reissue benefits that were 
misused in cases where negligence was found.
    Today the Subcommittee would like a report on the effectiveness of 
these provisions and whether further Congressional action is needed to 
ensure that our most vulnerable veterans are afforded the highest level 
of protection possible.
    I look forward to hearing from our witnesses today, and I thank you 
all for your participation.
    Thank you, I yield back.

                                 
 Prepared Statement of Belinda J. Finn, Assistant Inspector General for
          Audits and Evaluations, Office of Inspector General,
                  U.S. Department of Veterans Affairs

INTRODUCTION
    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to discuss how the Department of Veterans Affairs (VA) can 
better protect beneficiaries needing the care of a fiduciary and 
specifically, the recent report from the Office of Inspector General 
(OIG), Veterans Benefits Administration--Audit of the Fiduciary 
Programs' Effectiveness in Addressing Potential Misuse of Beneficiary 
Funds. Accompanying me is Mr. Timothy Crowe, Director of the OIG's 
Audit Operations Division in St. Petersburg, Florida.
    Our 2010 audit showed that many of the program weaknesses persist 
since we last audited the program in 2006. In fact, some planned 
actions provided by the Veterans Benefits Administration (VBA) in 
response to our 2006 report, Audit of Veterans Benefits Administration 
Fiduciary Program Operations, were not completed or did not fully 
address our concerns about the protection of the estates of incompetent 
beneficiaries. We continue to be concerned that VA regional offices 
(VAROs) are not effectively employing some of the primary strategies 
and tools to uncover and address potential misuse of these 
beneficiaries' funds.
BACKGROUND
    Federal fiduciaries are appointed by VA under authority contained 
in Title 38, United States Code, Section 5502(a)(1), Payments to and 
Supervision of Fiduciaries. The fiduciary may be the spouse of a 
veteran; a chief officer of a VA or non-VA institution in which a 
veteran is receiving care; a legal custodian; or another responsible 
person. These beneficiaries are VA's most vulnerable constituencies. In 
the fiscal year (FY) 2010 budget submission, VA reported approximately 
$696 million in benefits payments to more than 102,000 beneficiaries 
with a cumulative estate value of $3.1 billion.
    A State court can appoint a fiduciary whose duties and authority 
are established by Federal statute. In all cases, VA is responsible for 
ensuring that the VA-derived income and estates of incompetent 
beneficiaries are used solely for the care, support, welfare, and needs 
of those beneficiaries. The VBA administers this program at VAROs and 
the respective Regional Counsel offices.
    VBA Field Examiners and Legal Instruments Examiners (LIEs) are 
charged with monitoring the needs of Fiduciary Program beneficiaries 
and the protection of VBA-derived funds. VBA Field Examiners determine 
and appoint fiduciaries for incompetent and/or legally disabled VA 
beneficiaries, establish and authorize the use of VA benefits and 
assets, and provide ongoing case management services through scheduled 
and unscheduled follow-up visits. During visits to the beneficiaries, 
Field Examiners assess the competence, adjustment, and personal welfare 
of the beneficiary; review fund usage, method of payment, and the 
performance of the fiduciary; develop information affecting entitlement 
to current or additional benefits; and ensure that the beneficiary's 
dependents, if any, are adequately provided for with the funds 
available.
    LIEs share the responsibility with supervisors and Field Examiners 
for making administrative and quasi-legal determinations involving the 
overall supervision of beneficiary estates and the protection of rights 
to benefits. LIEs oversee the management of the financial affairs of an 
incompetent beneficiary through activities such as securing and 
analyzing annual accountings filed by fiduciaries. Accountings are the 
fiduciary's written report on the management of a beneficiary's income 
and estate and must include a beginning balance, itemization of income 
and expenses, and a statement of funds remaining at the end of the 
accounting period. The LIEs analysis of accountings is a critical 
component in monitoring fiduciary performance because it is where 
questionable expenses can be detected at the earliest stage. In 
addition, LIEs are to ensure that a required Surety Bond is in place in 
an amount adequate to protect the existing VA estate as well as 
anticipated VA income for the ensuing accounting period. Accounting 
periods are normally 1 year but can be lengthened up to 3 years in 
certain circumstances.
    When the Fiduciary Program does not adequately supervise appointed 
fiduciaries, incompetent beneficiary estates are subject to misuse. For 
example, a joint Federal and State investigation in Minnesota disclosed 
that a fiduciary submitted false accountings in an effort to conceal 
the embezzlement of nearly $1 million from 33 disabled veterans while 
acting as their appointed fiduciary. The defendant admitted to taking 
funds from the veterans' bank accounts to support a gambling habit and 
to submitting false accountings to VA and agreed to make restitution to 
VA, the Social Security Administration, and a bonding company that 
reimbursed the veterans for their losses. Earlier this year, the 
fiduciary was sentenced to 55 months' incarceration after pleading 
guilty to making a false statement to VA.
    Historically, incompetent beneficiary estates have been at risk of 
misappropriation by fiduciaries. The OIG reviews program performance 
through investigations, audits of the program, and inspections of 
fiduciary program operations and individual VAROs. From October 1998 to 
March 2010, the OIG's Office of Investigations conducted 315 fiduciary 
fraud investigations, resulting in 132 arrests and monetary recoveries 
of $7.4 million in restitution, fines, penalties, and administrative 
judgments. Our oversight efforts have shown that Fiduciary staff have 
not always followed VBA policy when processing fiduciary claims or 
providing oversight of fiduciary activities.
OIG Audit Results
    In 2006 and 2010, we issued audit reports on the Fiduciary Program. 
The 2006 report contained seven recommendations to improve Fiduciary 
Program operations. Suggested improvements included ensuring staff 
challenge fiduciary accountings and focus on key fraud indicators; 
determining appropriate case load levels and staffing requirements; 
developing a training program to enhance skills needed to effectively 
conduct fiduciary oversight; and ensuring the accuracy of data reported 
in the Fiduciary-Beneficiary System (FBS), VBA's case management system 
used by the Program to support an array of functions necessary for day-
to-day operations.
    Our 2010 audit found that VBA still needs to improve its management 
infrastructure in the areas of information systems, staffing models, 
and management oversight to support the Fiduciary Program.
    Ineffective Support of Operations
        FBS has functional and data limitations that have severely 
        affected management's ability to use the system as a tool to 
        support program operations effectively. VBA has not implemented 
        upgrades to FBS to address system weaknesses identified both 
        internally and by the OIG in previous reports. However, in 
        October 2009, VBA initiated a study to analyze FBS 
        functionality and to determine whether the system should be 
        modified or replaced to meet the Program's needs. VBA needs a 
        system that can:

            Capture data necessary to target funds at risk of 
        misuse by fiduciaries. FBS does not maintain a list of 
        fiduciaries replaced due to misuse and does not record 
        accounting information such as VA and non-VA benefits, 
        fiduciary expenditures on behalf of beneficiaries, financial 
        institutions account balances, and Surety Bond values.

            Contain reliable and accurate data for decision-
        making and external reporting. For example, FBS currently 
        limits the user to a single entry for the estate value, which 
        according to VA policy, should include both VA and non-VA 
        funds. Since VA and non-VA assets are not recorded separately 
        in FBS, Fiduciary Program management cannot use FBS data to 
        identify VA estates that may require protection. In addition, 
        FBS tracks fiduciaries by name, not a unique identifier, such 
        as Social Security number or tax identification number. This 
        makes it difficult to match a fiduciary to all their 
        beneficiaries since the fiduciary's name is not always entered 
        into the system in a consistent manner.

            Interface with other Compensation and Pension 
        Information Technology systems, such as the Veterans Service 
        Network (VETSNET), an application used to support VBA claims 
        processing. Consequently, FBS cannot automatically notify 
        Fiduciary Program staff of competency determinations or an 
        impending large retroactive payment caused by a change in a 
        beneficiary's service connected status.

            Provide an automated interface for external 
        entities, such as fiduciaries, beneficiaries, or financial 
        institutions. This system shortcoming precludes electronic 
        submission of key data. Therefore, FBS cannot accept or process 
        electronically submitted accounting information from 
        fiduciaries or access financial institutions to secure account 
        balance and transaction information. Instead, fiduciaries must 
        manually prepare and mail accountings to VBA annually and staff 
        must manually review the data provided, check for math errors, 
        and reconcile income, expense, and estate balances to financial 
        institution data.
    Lack of Staffing and Workload Models
        Our recent report also noted that VBA lacks a staffing and 
        workload model for use by VAROs and Fiduciary Program 
        management. Instead, decisions regarding Fiduciary Program 
        staffing are left to the judgment of individual VARO Directors. 
        As a result, a wide variation exists in the number of 
        beneficiaries managed by individual LIEs, ranging from 188 to 
        1,576 beneficiaries per LIE. We found that the active 
        involvement of local Fiduciary Program management in 
        supervising the program was a decisive factor of whether the 
        Fiduciary Program staff took timely and appropriate action to 
        secure delinquent accountings. The Fiduciary Program 
        Headquarters component also indicated that it lacks sufficient 
        resources to address some program deficiencies.

        We previously identified this issue in our 2006 audit. In 
        response to that report, VBA said it would complete a work 
        measurement study and convene a work group to examine Fiduciary 
        Program staffing at the regional office level and make 
        recommendations regarding caseloads. However, VBA's 2007 
        Fiduciary and Field Examination Pilot Implementation Team 
        Report indicated that historical guidelines relating fiduciary 
        activity resources to beneficiaries were long ago abandoned and 
        considered obsolete by program staff and field management.
    Insufficient Guidance to Fiduciaries
        VBA does not provide online information related to fiduciary 
        matters such as guides for best practices, frequently asked 
        questions, training, or other tools to assist fiduciaries. Some 
        coaches and LIEs believe the majority of VARO follow-up for 
        additional information and clarification is due to new 
        fiduciaries not being fully knowledgeable of their duties, 
        responsibilities, and program requirements. The availability of 
        online resources to assist fiduciaries could potentially reduce 
        requests to VBA for assistance and increase compliance with 
        Fiduciary Program requirements.
    Inconsistent Quality Assessment
        VBA is not consistently conducting activities that could 
        potentially increase the effectiveness of the Fiduciary 
        Program. VBA's Systematic Technical Accuracy Review (STAR) and 
        Site Visit programs both review fiduciary program activities to 
        ensure fiduciary staff comply with VBA policies and procedures 
        in areas such as timeliness, payee designation, fund usage, and 
        FBS accuracy. The Fiduciary Program does not analyze or trend 
        STAR errors and Site Visit Program findings nor identify and 
        disseminate best practices employed in the field. For example, 
        some VAROs provide newly appointed fiduciaries with locally 
        developed guidance. The literature discusses topics ranging 
        from fund usage to reporting requirements and includes local 
        VARO contact for the fiduciary activity.
    Lack of Staff Training
        Finally, training staff in this complex program is a continuing 
        problem. Centralized training for Fiduciary Program managers 
        has only occurred three times since 1987 and not at all since 
        2004. Centralized training for LIEs has only occurred twice for 
        LIEs since 1991. According to VBA, Field Examiners and LIEs 
        must complete a total of 80 hours of training each year. Of the 
        80 hours, 60 should be related to VBA-suggested topics while 
        the remaining 20 are at the discretion of the VAROs. In 
        response to our 2006 audit, VBA said it was developing a new 
        training curriculum for LIEs, but has yet to develop a 
        standardized curriculum for new LIEs. During the recent audit, 
        program management indicated that, during FY 2010, VBA would 
        implement standardized training for LIEs, conduct the first of 
        recurring managers training conferences, and deploy training 
        teams to provide 40 hours of standardized training to Field 
        Examiners, LIEs, and managers at each VARO.

    In 2006, we reported that suspected misuse of incompetent 
beneficiary estates went undetected because VARO staff did not follow 
up on questionable or incomplete data in fiduciary annual accounting 
statements and did not require documentation to support claimed 
expenses. The following examples from our 2010 audit show that many of 
the program weaknesses persist today.

        VBA was not taking effective action to obtain seriously 
        delinquent accountings. Seriously delinquent accountings refers 
        to those which are at least 120 days past due. Under specified 
        circumstances, VBA policy requires fiduciaries to submit 
        periodic accountings listing beneficiary assets, income, and 
        expenses. We found that LIEs did not consistently pursue 
        receipt of seriously delinquent accountings from fiduciaries. 
        At 5 of 6 VAROs visited, 44 percent of the accountings drawn 
        from a random sample became delinquent up to 710 days. Further, 
        at 3 of these 5 VAROs, timely and appropriate actions were not 
        taken to secure 63 percent of the sampled delinquent 
        accountings. As a result, we concluded that VBA was not 
        managing the financial risks associated with the aggregate 
        estate value of 17 beneficiaries totaling over $1.5 million nor 
        were appropriate procedures followed to minimize the potential 
        risks related to untimely accountings.

        VBA was not consistently verifying questionable expenses 
        reported by fiduciaries. We identified qualitative weaknesses 
        in the LIE review of expenditures of beneficiary funds by 
        fiduciaries. LIEs consistently failed to take effective action 
        to verify questionable expenses totaling $166,787 for 33 of the 
        137 accountings reviewed. For example, an LIE approved an 
        accounting statement related to one beneficiary's estate that 
        showed house and automobile expenses totaling $17,364 without 
        supporting documents or receipts, and did not challenge the 
        expense. Based on our statistical sample of accountings 
        reviewed, we projected that LIEs may not have adequately 
        verified approximately $2.9 million in expenditures for 551 (29 
        percent) of 1,906 accountings completed between April 1, 2009, 
        and May 22, 2009. Recent policy changes implemented by VBA have 
        strengthened fiduciary accounting requirements. However, VBA 
        lacks an agency-wide policy requiring receipts or other 
        documentation to substantiate unbudgeted and budgeted 
        expenditures that exceed a pre-designated threshold. This has 
        resulted in VAROs and individual staff applying different 
        standards when verifying questionable expenses submitted by 
        fiduciaries. Until VBA standardizes the accounting review 
        process to the extent practical and minimizes the subjectivity 
        in determining what constitutes a questionable expense, it 
        lacks reasonable assurance that unusual or inappropriate 
        expenditures are identified and verified to ensure funds were 
        expended appropriately.

        VBA was not consistently replacing fiduciaries when 
        appropriate. At two VAROs visited, we found a fiduciary with 
        numerous late accountings while managing multiple beneficiary 
        estates. Actions were not in process to replace these 
        fiduciaries, in spite of these performance deficiencies. For 
        example, at one VARO, a fiduciary was seriously delinquent in 
        submitting four accountings ranging from 134 to 215 days late 
        during the period 2004-2009. In addition, the VARO received 
        multiple complaints from veterans regarding the fiduciary's 
        performance during this same period. However, the VARO had not 
        taken any actions to replace this fiduciary. When VBA fails to 
        take appropriate actions in a timely manner to replace 
        fiduciaries that are responsible for multiple delinquent 
        accountings, the potential for misuse or inappropriate 
        diversion of beneficiary funds is increased.

        VBA was not adequately following up and reporting on 
        allegations of misuse of beneficiary funds and estates. Misuse 
        allegations of beneficiary funds may come to VBA as complaints 
        from the beneficiary, their friends and relatives, or other 
        interested parties. VBA policy requires staff to review, and if 
        necessary, investigate allegations of misuse of benefits 
        against a fiduciary within specified time frames. We found that 
        4 of 6 VAROs did not consistently process misuse actions timely 
        or appropriately in 22 (96 percent) of 23 cases reviewed. Two 
        VAROs did not report any misuse activity during the period 
        January 2008-March 2009. However, our audit identified four 
        cases of suspected misuse of funds at one VARO and one case at 
        the other VARO that should have been processed and recorded 
        according to VBA policy. Furthermore, for FYs 2005 through 
        2008, VBA did not include statistical information pertaining to 
        misuse of funds by fiduciaries in the Annual Benefits Report to 
        Congress as required by Title 38, United States Code, Section 
        5510. The required information includes:

            The number of cases in which the fiduciary was 
        changed because of a finding that benefits had been misused and 
        how such cases of misuse of benefits were addressed by the 
        Secretary.

            The final disposition of such cases of misuse of 
        benefits, including the number and dollar amount of any 
        benefits reissued to beneficiaries.

            The number of fiduciary cases referred to the 
        Office of Inspector General and their disposition.

            The total amount of money recovered by the 
        Government in cases arising from the misuse of benefits by a 
        fiduciary.

    In our 2010 report, we recommended that VBA provide a robust 
database to support program operations and develop a staffing workload 
model to guide resource allocation decisions. We also recommended that 
VBA develop and disseminate policies and procedures to improve the 
analysis of annual accountings filed by fiduciaries that can result in 
investigating and reporting allegations of misuse; provide more 
guidance to fiduciaries; ensure regular periodic accountings of the 
financial activities administered by fiduciaries; and ensure VAROs 
conduct local quality assessments of fiduciary operations. The Acting 
Under Secretary for Benefits agreed with our findings and provided 
target dates to complete planned actions that address our 
recommendations. We consider VBA's planned actions responsive to our 
concerns and will follow up on their implementation.
OIG Inspection of VARO Fiduciary Program Operations
    Our ongoing Benefits Inspection Program is an initiative to ensure 
our Nation's veterans receive timely and accurate benefits and 
services. Since April 2009, the OIG's Benefits Inspection Division 
inspected fiduciary procedures to ensure staff provided proper 
oversight of incompetent beneficiaries at four VAROs. We found 
Fiduciary staff did not consistently follow VBA policy when processing 
fiduciary claims or providing oversight of fiduciary activities. Our 
analysis of 115 Personal Guardianship Folders found that 42 (37 
percent) contained errors that affected or had the potential to affect 
beneficiaries benefits.
    Some examples of steps Fiduciary Program staff did not always 
perform include:

            Complete credit checks for potential fiduciaries.

            Document the verification of beneficiaries' funds 
        controlled by the fiduciary.

            Complete agreements with Fiduciaries to ensure how 
        beneficiaries' funds are to be spent.

            Verify annual Fiduciary accountings for accuracy. 
        For example, a beneficiary's estate should have been increased 
        by $200,000 as the result of a property sale. Staff noted the 
        beneficiary had assets of $66.82 after the sale of this 
        property and did not question the disposition of funds 
        resulting from the sale of the property. Consequently, VBA 
        staff lacked assurance that these funds were spent 
        appropriately and solely for the welfare of the beneficiary.

    We will continue to review and report on VARO performance in 
managing the fiduciary and field examination activity in future OIG 
benefit inspections.
CONCLUSION
    VBA needs an effective Fiduciary Program in place to ensure 
consistent and effective monitoring of fiduciaries and beneficiary 
funds and estates. Effective oversight is necessary to the stewardship 
of beneficiaries' financial affairs. During the course of our audit, 
Fiduciary Program management at VBA Headquarters made positive changes 
to the program such as requiring fiduciaries to submit monthly bank 
statements with annual accountings. We believe that more improvements 
are necessary to ensure the integrity of this program and the services 
it provides to vulnerable veterans and their families.
    Mr. Chairman, thank you for the opportunity to discuss these 
important issues. We would be pleased to answer any questions that you 
or other Members of the Subcommittee may have.

                                 
 Prepared Statement of Daniel Bertoni, Director, Education, Workforce, 
   and Income Security Issues, U.S. Government Accountability Office

  VA'S FIDUCIARY PROGRAM: VA Plans to Improve Program Compliance and 
         Policies, but Sustained Management Attention is Needed
                             GAO Highlights
Why GAO Did This Study
    The Department of Veterans Affairs (VA) pays billions of dollars in 
compensation and pension benefits to disabled veterans and their 
dependents. For those beneficiaries who are unable to manage their own 
affairs, VA appoints a third party, called a fiduciary, to manage their 
VA funds. Congress, VA's Office of Inspector General (OIG) and GAO have 
noted that VA does not always have, or adhere to, effective policies 
for selecting and monitoring fiduciaries and therefore, does not fully 
safeguard the assets of beneficiaries in the Fiduciary Program.
    GAO was asked to discuss the Fiduciary Program and possible ways 
that it could be improved to better serve veterans, their families, and 
survivors. This statement is based on GAO's February 2010 report (GAO-
10-241), which examined (1) VA policies and procedures for monitoring 
fiduciaries and safeguarding beneficiary assets and (2) challenges VA 
faces in improving program performance and oversight. To conduct that 
work, GAO reviewed program policies and relevant federal laws and 
regulations, analyzed a nationally representative random sample of case 
files, interviewed Central Office managers and staff, and conducted 
three site visits to Fiduciary Program offices, which accounted for 25 
percent of program beneficiaries.
What GAO Found
    Inconsistent staff compliance with some Fiduciary Program policies 
and weaknesses in others hinder VA's ability to effectively safeguard 
beneficiary assets; however, per GAO's recommendations, VA plans to 
take steps to improve the program. GAO found that VA did not always 
take required actions to monitor fiduciaries within established time 
frames or document in the beneficiary's case file that these actions 
were taken. Inconsistent staff compliance occurred in four areas: (1) 
initial visits to beneficiaries and fiduciaries, (2) follow-up visits 
to beneficiaries and fiduciaries, (3) follow up to obtain annual 
financial reports, and (4) oversight of surety bonds. For example, in 
about 18 percent of the cases GAO reviewed, VA was late in conducting 
required follow-up visits to monitor fiduciaries or did not provide 
sufficient documentation to show whether these visits were conducted. 
Similarly, while GAO estimated that about 39 percent of fiduciaries did 
not submit required annual financial reports on time, VA staff did not 
consistently follow-up with fiduciaries or failed to document actions 
that were taken. In addition to compliance issues, VA's policies for 
conducting on-site reviews of professional fiduciaries who manage funds 
for multiple beneficiaries do not ensure that these fiduciaries are 
effectively identified and monitored. For example, the agency's case 
management system uses the fiduciary's name--which may be entered 
inconsistently--to match them to beneficiaries, rather than requiring a 
unique identifier, such as a Social Security number. As a result, VA 
cannot always identify the fiduciaries that need to be reviewed. 
Moreover, VA does not have a nationwide quality review process to 
ensure that on-site reviews are conducted properly and consistently. 
Per GAO's February 2010 report recommendations, VA agreed to revise its 
Fiduciary Program policies in an effort to enhance its oversight role, 
increase staff understanding and staff compliance, and better safeguard 
beneficiary assets.
    Two key challenges hinder VA's ability to improve Fiduciary Program 
performance and oversight, but VA has plans to address these 
challenges. First, managers and staff said that limitations with VA's 
electronic fiduciary case management system hinder their ability to 
capture key information. Per GAO's recommendation, VA has established a 
work group to evaluate alternative system modifications to meet the 
program's case management needs. Second, managers and staff indicated 
that training may not be sufficient to ensure that they have the 
expertise to properly carry out program responsibilities, as many of 
them had less than 2 years of program experience. In its response to 
GAO's recommendations, VA stated that it would begin providing 
additional standardized training for managers and staff this year. VA 
is also piloting a consolidated Fiduciary Program unit covering 14 VA 
regional offices to improve program performance and oversight. VA 
encountered a number of challenges during the pilot's implementation 
and has not yet evaluated it, but per our recommendation, plans to do 
so by September of this year.

                               __________

    Mr. Chairman and Members of the Subcommittee:
    I am pleased to have the opportunity to comment on how the 
Department of Veterans Affairs (VA) Fiduciary Program can better 
protect vulnerable veterans and their families. Each year, the VA pays 
billions of dollars in compensation and pension benefits to disabled 
veterans and their dependents. For those who are unable to manage their 
own affairs,\1\ VA appoints a third party, called a fiduciary, to help 
manage and protect the beneficiary's funds. A fiduciary can be a spouse 
or other family member, or an entity such as a law firm, hospital, or 
nursing home. In fiscal year 2008, fiduciaries provided services for 
more than 103,000 beneficiaries, and managed nearly 4 percent of the 
$38.6 billion in compensation and pension benefits VA paid out in that 
year. Moreover, the average annual benefit amount for beneficiaries in 
this program was approximately $14,400 in fiscal year 2008, which is 
about $4,200 more per year than the average for all VA compensation and 
pension beneficiaries.
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    \1\ VA regulations state that the agency may appoint fiduciaries 
for beneficiaries and beneficiaries' dependents who are mentally ill 
(incompetent) or under legal disability by reason of minority or court 
action. 38 CFR Sec. 13.55.
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    Over the years, both Congress and VA's Office of Inspector General 
(OIG) have expressed concern that VA's Fiduciary Program is not fully 
safeguarding beneficiaries' assets. Areas of concern included delays in 
conducting visits to select fiduciaries and insufficient monitoring of 
VA fund usage by fiduciaries on behalf of beneficiaries. You asked us 
to discuss such issues and possible ways that the Fiduciary Program 
could be improved to better serve veterans, their families, and 
survivors. My statement draws on our recent report which examined (1) 
VA policies and procedures for monitoring fiduciaries and safeguarding 
beneficiary assets and (2) challenges VA faces in improving program 
performance and oversight.\2\
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    \2\ GAO, VA's Fiduciary Program: Improved Compliance and Policies 
Could Better Safeguard Veterans' Benefits, GAO-10-241 (Washington, 
D.C.: Feb. 26, 2010).
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    Our work included reviewing program policies and relevant federal 
laws and regulations, analyzing a nationally representative random 
sample of 205 case files\3\ and visiting three Fiduciary Program units 
located in VA regional offices--St. Petersburg, Florida; Cleveland, 
Ohio; and Salt Lake City, Utah--where we interviewed managers and staff 
about program policies, procedures, and internal controls.\4\ These 
units accounted for 25 percent of the program's beneficiaries. During 
these visits, we also conducted file reviews of cases where either VA 
suspected that fiduciaries were inappropriately using beneficiary funds 
or fiduciaries were seriously late in submitting annual financial 
reports documenting how beneficiary funds were spent. We also reviewed 
12 VA on-site reviews which are examinations of financial records of 
fiduciaries who oversee multiple beneficiaries, whom we refer to as 
professional fiduciaries. Finally, we interviewed Central Office 
officials and staff as well as Veterans' Service Organizations about 
the performance of the program. We conducted this performance audit 
from December 2008 to February 2010, in accordance with generally 
accepted Government auditing standards. Those standards require that we 
plan and perform the audit to obtain sufficient, appropriate evidence 
to provide a reasonable basis for our findings and conclusions based on 
our audit objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit 
objectives.
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    \3\ We analyzed a sample of case files from a population of about 
103,700 adult beneficiaries. This excluded beneficiaries whom VA 
monitored with alternate methods (such as those who managed their own 
funds for a probationary period and those who VA monitored through 
letters or phone calls in lieu of some personal visits), as well as 
those who had negative estate values. All percentage estimates in this 
testimony have a margin of error of plus or minus 10 percentage points 
or less, unless otherwise noted. For additional information on our 
stratified random sample of cases, file review methodology and the 
reliability of data from the Fiduciary Beneficiary System (FBS), please 
see Appendix 1 in GAO-10-241.
    \4\ GAO, Standards for Internal Control in the Federal Government, 
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
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Background
    Many individuals receiving monthly compensation and pension 
benefits from the VA have mental impairments that can prevent them from 
managing their finances. These conditions may result from injury, 
disease, or infirmities of age. The VA Fiduciary Program matches 
beneficiaries who are unable to manage their financial affairs with a 
fiduciary, giving preference to spouses. If VA is unable to locate a 
qualified spouse who is willing to serve in this capacity, an 
individual or other entity, such as a lawyer or nursing home, will be 
appointed. VA appointed fiduciaries who are not dependents or close 
family members can collect a fee for their services (generally up to 4 
percent of a beneficiary's annual benefit amount) and can oversee 
multiple beneficiaries. Whether a fiduciary is a family member or a 
professional, the responsibilities are generally the same and may 
include receiving the beneficiary's VA benefits, paying the 
beneficiary's expenses, maintaining the beneficiary's budget, and 
generally seeing to the financial well-being--and, in some cases, the 
physical well-being--of the beneficiary. Finally, if a court has 
determined that a beneficiary is unable to handle his or her own 
affairs and appoints its own fiduciary, VA must assess the performance 
of that fiduciary to determine if he or she is suitable for managing VA 
benefits given the needs and welfare of the beneficiary. If VA decides 
to use the court-appointed fiduciary, the agency generally defers to 
certain rules set by the court, such as those pertaining to the fee 
amount that the fiduciary can charge for his or her services.
    Fiduciary Program policies and procedures are developed by 
Fiduciary Program Central Office staff under the Office of Policy and 
Program Management within the Veterans Benefits Administration (VBA). 
Individual Fiduciary Program units are generally colocated in VA 
regional offices that also oversee other VBA programs. One major 
exception to this is the Western Area Fiduciary Hub, where Fiduciary 
Program units and files from 14 western VA regional offices were merged 
into a single unit colocated in the VA regional office in Salt Lake 
City, Utah, beginning in January 2008.
Inconsistent Compliance with Some Policies and Weaknesses in Others 
        Hinder VA's Ability to Safeguard Beneficiary Assets
    Our February 2010 report noted that VA Fiduciary Program staff did 
not always take required actions within established time frames or 
document in the case files that the required actions were taken. Below 
are four areas where program staff did not always comply with program 
policies and, per our recommendations, how VA plans to address them.
    Initial Visits to Beneficiaries and Fiduciaries. VA policy states 
that initial visits to appoint fiduciaries are to be conducted within 
45 days of a request for a fiduciary, and VA's performance goal is to 
conduct at least 90 percent of these visits on time. Conducting timely 
initial visits is important because beneficiaries cannot begin 
receiving VA benefits until they are completed.
    We sampled and reviewed 67 case files in which initial visits were 
supposed to be conducted between July 1, 2006, and June 9, 2009,\5\ and 
found that 37 visits were conducted within the 45-day time frame, and 
10 were from 3 to 39 days late.\6\ For one case, the file lacked 
documentation that an initial visit was made at all.\7\ Managers and 
staff in some offices we visited said compliance with the timeliness 
policy for initial visits was improving, but was still a concern. They 
attributed some compliance issues to a continued lack of staff and 
resources.
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    \5\ VA implemented recommendations from the VA OIG's June 2006 
report on the Fiduciary Program (Report No. 05-01931-158) by July 1, 
2006. Recommendations involved VA's efforts to conduct visits, obtain 
and review fiduciary financial reports, and obtain fiduciary bonds. As 
such, we chose this as the start date of our analysis. The concluding 
date of June 9, 2009, is the date by which we requested all files be 
sent to us.
    \6\ We could not determine if VA met its nationwide performance 
goal of conducting at least 90 percent of initial visits on time 
because the number of cases in our sample for which we could assess 
initial visit timeliness between July 1, 2006 and June 9, 2009 was too 
small to project our results to the population.
    \7\ In the remaining 19 cases, the files included documentation 
that an initial visit occurred; however, we were unable to assess the 
timeliness of these visits because documents lacked the date stamps 
needed to determine when the visits were requested and/or completed. 
Lack of date stamps could indicate that the photocopies of the files 
that VA provided us were of poor quality or that the documents in the 
original files were never stamped with one or both of the necessary 
dates needed to assess timeliness.
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    Follow-Up Visits to Beneficiaries and Fiduciaries. Once the 
fiduciary is selected, staff conduct periodic follow-up visits to re-
evaluate the beneficiary's condition and to determine if funds have 
been properly used and protected. The first routine follow-up visit 
generally takes place 1 year after a fiduciary is selected, and 
subsequent visits typically take place every 1 to 3 years 
thereafter.\8\ According to VA managers, it is VA's policy that follow-
up visits to fiduciaries are to be conducted within 120 days of the 
scheduled date, and the on-time goal for these visits is also 90 
percent. Timely follow-up visits are important to determine the 
continued suitability of the fiduciary and to protect beneficiaries 
from potential misuse of their funds.
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    \8\ In some cases, such as when the fiduciary is a spouse or when 
the beneficiary is institutionalized, some of the subsequent visits may 
be substituted by letters or phone calls.
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    Based on a nationwide sample of VA beneficiaries that had been 
assigned a fiduciary, we estimated that approximately 61,000 adult 
beneficiaries were supposed to have had at least one follow-up visit 
between July 1, 2006, and June 9, 2009. We estimated that 76 percent of 
these visits occurred within the 120-day time frame. In about 18 
percent of the cases, however, VA did not conduct these required 
follow-up visits on time or provided insufficient documentation to show 
whether these visits were conducted at all. For the cases that were 
untimely (12 percent), they were between 1 to 216 days late. In the 
most extreme example among the cases with insufficient documentation to 
show whether visits were conducted (6 percent), the follow-up visit was 
overdue by 16 months.\9\ Similar to initial visits, program managers 
and staff noted that compliance with the 120-day time frame for follow-
up visits can be challenging due in part to a lack of staff and time. 
Program managers said that conducting visits in a timely manner may be 
especially challenging in regional offices with only one or two 
Fiduciary Program staff who may also have responsibilities outside of 
the Fiduciary Program. In addition, managers and staff noted that 
conducting timely visits can be challenging in areas where staff must 
drive long distances to see beneficiaries and fiduciaries.
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    \9\ An additional estimated 6 percent of case files contained the 
report documenting that the visit had occurred, but lacked the date 
stamp necessary to assess timeliness.
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    Annual Financial Reports. VA policy generally requires staff to 
obtain yearly financial reports and bank statements from some 
fiduciaries to determine how beneficiary funds were used. When 
fiduciaries do not submit their financial reports on time, staff are 
required to follow-up with them and document such actions in the 
beneficiaries' files. Staff can follow-up with letters, telephone 
calls, or face-to-face contacts. VA policy requires staff to conduct 
the first of such follow-up actions when fiduciary financial reports 
are 35 to 65 days late and again when they are 90 days late. At that 
time, they may inform the fiduciary of the possible repercussions of a 
failure to comply, which may include legal actions, a referral to the 
OIG, or other actions. After 120 days, the financial reports are 
considered ``seriously delinquent,'' and appropriate action is to be 
taken. Failure to take aggressive action to secure timely financial 
reports may result in a finding of negligence, which will require VA to 
re-issue any misused benefits.
    Based on our nationwide sample, we estimate that fiduciaries for 
about 33,000 beneficiaries were required to submit such reports between 
July 1, 2006, and June 9, 2009. Of these, 39 percent \10\ were 
submitted between 1 and 140 days late and 47 percent \11\ were 
submitted on time.\12\ In addition our sample and site visit file 
reviews showed that follow-up contact was frequently not done or not 
documented by program staff. Of the 30 case files in our sample where 
financial reports were submitted more than 65 days late, 19 case files 
either lacked documentation of any follow-up actions or showed that 
such actions were not taken within required time frames.\13\
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    \10\ The margin of error was approximately plus or minus 12 
percent.
    \11\ The margin of error was approximately plus or minus 13 
percent.
    \12\ It was not possible to determine if or when the remaining 14 
percent of the financial reports were submitted, due to poor file 
documentation, including lack of date stamps. The margin of error was 
approximately plus or minus 11 percent.
    \13\ The number of cases in our sample where financial reports were 
submitted more than 65 days late was too small to project our results 
to the population.
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    Moreover, we found additional instances of inadequate staff follow-
up on seriously delinquent financial reports during file reviews 
conducted at the three regional offices we visited. We reviewed 20 such 
cases, and found only 1 where the initial follow-up contact was taken 
within the required 65 days. For the other 19 cases, contact was either 
between 3 days and 11 months late or there was not adequate 
documentation to determine if or when such contact had occurred. In one 
case, a fiduciary's financial report was submitted more than 2 years 
later than the original due date, and only after VA initiated action to 
suspend payment. In another case, a financial report due in June 2006 
was not submitted until nearly 2 years later. The file did not indicate 
that any follow-up actions had occurred, although the case is now being 
investigated for possible misuse of funds. Staff in all regional 
offices we visited said that they sometimes did not take follow-up 
actions or failed to document actions they did take, in part, because 
they lacked the time or believed that some actions did not warrant 
documentation.
    Surety Bonds. VA generally requires staff to obtain a surety bond 
from fiduciaries overseeing estates with a value of $20,000 or more 
that is attributable to VA funds. A bond ensures that the beneficiary's 
estate will be reimbursed in the event of fiduciary mismanagement or 
abuse of beneficiary funds. Our nationwide sample showed that program 
staff sometimes failed to obtain proof that a fiduciary purchased a 
bond, when required, or did not adequately document in the beneficiary 
case files that the bond requirement was waived.\14\ Of the 52 case 
files in our sample for which fiduciaries were required to purchase a 
bond, 8 case files lacked adequate documentation to indicate whether a 
bond was purchased or that the bond requirement was waived because the 
fiduciary met conditions for an exception. Some of the 8 cases involved 
substantial benefit amounts. For example, 2 cases which contained no 
documentation that bonds were purchased had VA estate values of 
approximately $82,000 and $62,000--leaving these beneficiaries and VA 
vulnerable to a substantial loss if funds were misused. Some staff in 
regional offices we visited said that they were often uncertain about 
what types of bonds are required for certain types of fiduciaries, and 
this was confirmed by our site visit file reviews. For example, in one 
case, a Fiduciary Program staff member was told by a fiduciary who was 
an attorney that an individual bond was unnecessary because the 
fiduciary had a ``blanket'' bond that covered all VA responsibilities. 
Although this staff member documented in the case file that he was 
unsure if this was correct, he took the fiduciary's word that an 
additional bond was not required. However, we were told by managers and 
staff that a blanket bond was most likely not acceptable in this case, 
and the staff person should have required the fiduciary to obtain an 
individual bond.\15\
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    \14\ The number of cases in our sample requiring a bond was too 
small to project our results to the population.
    \15\ Central Office managers explained that fiduciaries need a bond 
for each individual beneficiary unless the fiduciary is a government or 
nonprofit entity, in which case a blanket bond covering all of their 
beneficiaries would be acceptable.
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    In regard to the above findings, we recommended that VA ensure that 
staff understand and carry out policies regarding file documentation, 
follow-up with fiduciaries for late financial reports, and bond 
acquisition. VA concurred and, in its comments to our report, outlined 
several planned actions. For example, VA stated that it would roll out 
additional training for staff in March of this year and expects to hold 
a manager's training conference later in the year. The agency also 
intends to revise the program's policy manual this year to clarify 
existing guidance, establish new policies and procedures, and enhance 
oversight of fiduciary activities.
    In addition to compliance issues, we identified weaknesses in VA's 
policy for conducting periodic on-site reviews of professional 
fiduciaries who manage funds for multiple beneficiaries. Cumulatively, 
such benefits can be a substantial amount of money. On-site reviews 
examine the financial records across all beneficiaries that a 
professional fiduciary manages to detect discrepancies among accounts, 
which may not be detected by examining annual financial reports for a 
single beneficiary. We found two weaknesses associated with the on-site 
review policy VA developed.\16\ First, while VA is required to conduct 
periodic on-site reviews for professional fiduciaries who oversee more 
than 20 beneficiaries with combined benefits totaling $50,000 or more, 
the agency can not ensure that all fiduciaries who need these reviews 
are identified. To generate a list of fiduciaries meeting these 
criteria, each Fiduciary Program unit uses VA's electronic case 
management system to link or match a fiduciary to all of their 
beneficiaries. This computer match is based on a fiduciary's name, 
rather than a unique identifier, such as the fiduciary's Social 
Security number (SSN) or tax identification number (TIN). However, if 
fiduciary names are entered inconsistently into the system, a fiduciary 
for which an on-site review is required may not be identified. While 
VA's case management system includes a field for unique fiduciary 
identifiers, VA policy does not require this information for all 
fiduciaries. Central Office staff acknowledged that requiring a unique 
identifier would decrease VA's chances of making mistakes in 
identifying fiduciaries with multiple beneficiaries who require 
reviews. In response to our recommendation, VA plans to begin requiring 
that all fiduciaries supply unique identifiers (such as SSNs or TINs) 
to better track fiduciaries who manage multiple beneficiaries.
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    \16\ On-site reviews were required by the Veterans' Benefits 
Improvement Act of 2004; VA developed its on-site review policy in 
2005, and began conducting these reviews in 2006.
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    We also found that VA lacks a nationwide quality review process to 
ensure that on-site reviews are conducted properly and consistently. 
While VA has quality review processes to ensure that actions--such as 
conducting initial visits and obtaining financial reports and bonds--
are carried out in accordance with VA policies, Central Office managers 
acknowledged that VA lacks a similar process for on-site reviews.\17\ 
Having such a process is not only a key internal control, but it is 
also important for ensuring that on-site reviews are conducted properly 
and consistently across all Fiduciary Program units nationwide.\18\ Our 
examination of 12 files from the three regional offices we visited 
revealed deficiencies in these exams which could be detected through a 
national quality review process. Four of the files we examined lacked 
key case selection information, preventing managers from determining 
whether they were selected according to VA policy--which states that 
cases associated with beneficiary complaints or a history of late or 
questionable financial reports should receive priority. In addition, 
although VA policy requires that at least 25 percent of a fiduciary's 
beneficiary case files (or up to 25 case files) be examined during the 
on-site reviews, we found that this threshold was not met in four 
instances. At the time of our review, Central Office staff tracked 
whether on-site reviews were completed; but, not whether they were 
conducted in accordance with policy. In response to our recommendation, 
VA noted that they recently began reviewing all completed on-site 
reviews to ensure that they conform to program policy and procedures.
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    \17\ Both regional office managers and Central Office managers and 
staff regularly review a set number of beneficiary case files on either 
a monthly or yearly basis.
    \18\ Internal controls should generally be designed to ensure that 
ongoing monitoring occurs in the course of normal operations, including 
regular management and supervisory activities, comparisons, 
reconciliations, and other actions people take in performing their 
duties. See GAO/AIMD-00-21.3.1.
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System Limitations and Insufficient Training Hamper Program Performance 
        and Oversight; However, VA Is Taking Steps That May Help
    We identified two key challenges that limit VA's ability to improve 
Fiduciary Program performance and oversight. First, VA's electronic 
fiduciary case management system does not provide sufficient 
information to managers and staff about their cases, and it is 
cumbersome to use. Second, some managers and staff may not have 
received sufficient training to ensure that they have the necessary 
expertise to effectively monitor individual fiduciaries and oversee the 
program. VA is taking steps to build expertise about the case 
management system and the program itself by developing additional 
standardized training and piloting a consolidated Fiduciary Program 
unit covering 14 western VA regional offices.
    VA's Electronic Fiduciary Case Management System. The Fiduciary 
Beneficiary System (FBS), VA's electronic fiduciary case management 
system, does not provide sufficient data to effectively manage the 
Fiduciary Program. Although it does provide some useful information on 
individual case files, pending workloads, and program performance, 
several system limitations hamper its ability to maintain accurate and 
timely data and provide management with quality information about the 
program.
    FBS data fields are configured to track a fixed number of pending 
activities, which can limit the accuracy and completeness of 
information in the system. Staff and managers in the three regional 
offices we visited said they often need to track more upcoming actions 
than FBS permits. For example, staff noted that FBS accepts only one 
due date for upcoming financial reports, even though multiple financial 
reports may be due simultaneously if one or more is late. In such 
cases, the due date for the most recent overdue report overrides the 
older due date, even if the older financial report has not yet been 
submitted. To compensate for this FBS limitation, staff may track 
pending actions manually outside of the system or keep personal notes 
as reminder.
    In addition, some managers find that FBS management reports are not 
always easy to generate or helpful in overseeing the program. For 
example, one manager told us that monitoring staff performance was 
difficult because the system does not generate a single report that 
shows all upcoming work that staff need to conduct over a certain 
period of time. Instead, several reports need to be generated and 
cross-referenced, which can be cumbersome. In addition, FBS does not 
store historical information beyond 30 days which would allow managers 
to examine past issues with fiduciaries or staff performance. For 
example, managers in two regional offices said that in order to look at 
historical information on seriously delinquent financial reports, they 
would have to manually examine monthly paper printouts generated in 
prior months by FBS, which can be time consuming. A 2007 internal VA 
report also stated that FBS requires extensive knowledge to use, which 
inhibits effective oversight and management at all levels of the 
program.\19\ Central Office managers acknowledged the shortcomings of 
FBS and in response to our recommendations said that they would create 
a work group to determine the feasibility of enhancing FBS or 
developing a new case management system.
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    \19\ VA, Fiduciary and Field Examination Pilot Implementation Team 
Report, (Washington, D.C. Nov. 5, 2007).
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    VA's Fiduciary Program Training. Managers and staff in all three 
regional offices we visited said the Fiduciary Program is complex and 
requires a great deal of specialized knowledge to effectively monitor 
fiduciaries and provide program oversight. Although the Fiduciary 
Program has a policy manual to guide staff in carrying out their 
responsibilities, managers and staff said there are many nuances and 
exceptions that take time to master, particularly since each fiduciary 
and beneficiary situation may be different. In addition to these 
program complexities, managers in all of the regional offices we 
visited said that high staff turnover has contributed to a large number 
of inexperienced managers and staff in their Fiduciary Program units 
who need training.\20\ For example, in two of the three regional 
offices we visited, only about one-third of staff (15 out of 47) had 
more than 2 years of experience in the program.\21\ During our site 
visits we were told that limited training for managers and staff may 
have contributed to various program problems, including failures to 
properly monitor fiduciaries or document certain actions in beneficiary 
case files.
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    \20\ One common reason managers gave for high staff turnover was 
that Fiduciary Program positions tend to have low pay grade ceilings, 
so if staff want to advance beyond these ceilings, they must leave the 
Fiduciary Program. We attempted to obtain VA data on staff turnover to 
determine both the Fiduciary Program turnover rate and how it compares 
to other programs, but we were told that such data was not readily 
available.
    \21\ The third office, discussed in the next section, was the 
office which consolidated staff from the fiduciary units in 14 western 
regional offices.
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    VA has provided some training to ensure that Fiduciary Program 
managers and staff are proficient in carrying out their 
responsibilities, and some regional offices have developed their own 
training. VA provides a standardized computer-based training program 
for new staff who conduct visits to beneficiaries and fiduciaries and 
for those needing a refresher. Central Office managers and staff also 
said that they hold monthly teleconferences and conduct periodic visits 
to individual Fiduciary Program units to discuss selected topics. In 
addition, managers and staff in all three regional offices we visited 
said that they conduct their own weekly or biweekly training sessions 
on selected topics, such as how to determine whether bonds are 
required, and what kinds of situations constitute misuse. However, they 
noted that individual training occurs primarily on the job, and the 
effectiveness and consistency of such training depends on the expertise 
of staff conducting the training. Central Office managers acknowledged 
that standardized training would be beneficial and stated that they are 
increasing training for managers and staff beginning this year.
    VA's Consolidation of Western Fiduciary Program Units. From January 
to September 2008, VA consolidated Fiduciary Program unit managers, 
staff, and files from 14 western VA regional offices into a single 
location in Salt Lake City, Utah--referred to as the Western Area 
Fiduciary Hub--to improve program performance and oversight. VA 
officials expect the hub to result in increased staff expertise, more 
consistent training, better leveraging of staff resources, and 
increased program efficiencies. For example, the hub created specific 
management positions for the Fiduciary Program and divided staff into 
teams to focus on specific actions and responsibilities in an effort to 
build program expertise, including expertise with FBS. In addition, the 
hub provides opportunities to train more staff at once, which could 
help to further build staff expertise and potentially increase the 
consistency of training. The hub also eliminated jurisdictional 
boundaries that prevented staff from conducting visits that were 
geographically close, but outside of their assigned area of 
responsibility, which VA expects will help balance workloads among 
staff and reduce travel time. Additionally, the hub moved from a paper 
based to an electronic case file system, called Virtual VA, in an 
attempt to more efficiently transfer information between Salt Lake City 
hub staff and the staff conducting visits in other offices.
    While some VA managers and staff in the hub believe consolidation 
can help improve Fiduciary Program performance, they described some 
challenges that have impeded effective implementation of the pilot 
project. The hub's managers explained that there had been multiple 
changes in management and that implementation began before appropriate 
planning and resources were in place. For these reasons, hub managers 
did not consider the hub to be fully functional until January 2009, 
which was approximately 1 year after it opened. During our July 2009 
visit to the hub, managers and staff mentioned such unforeseen 
difficulties as: (1) inconsistent access was granted into Virtual VA; 
(2) paper documents were being scanned into the wrong electronic 
beneficiary case file and (3) substantial amounts of time were being 
spent updating old cases that had been improperly maintained by the 
previous Fiduciary Program units. For some improperly maintained cases, 
staff had not taken required actions to address seriously delinquent 
financial reporting and potential misuse of funds had gone unidentified 
for significant periods of time. This required hub staff to perform 
necessary follow-up actions, in addition to completing incoming new 
work. Managers and staff noted that they have gained valuable insight 
and knowledge in implementing the hub that could help inform future 
office consolidations.
    At the time of our review, the hub was still undergoing multiple 
changes and had not yet been evaluated, thus it was unclear whether 
consolidation of Fiduciary Program units has improved program 
performance and oversight. In response to our recommendation that the 
Central Office evaluate the performance of the hub, VA responded that 
it anticipates completing such an evaluation by September 2010.
Conclusions
    One of VA's most vulnerable populations--beneficiaries who are 
unable to manage their own financial affairs--rely on VA's Fiduciary 
Program to ensure that their benefits are safeguarded. To better serve 
beneficiaries and protect their benefits, VA has taken or plans to take 
a number of actions intended to increase staff understanding and 
compliance with polices as well as enhance program oversight. Revising 
program policies and procedures, increasing training, evaluating 
alternatives to the program's case management system, and evaluating 
the Western Area Fiduciary Hub are important steps. However, in order 
for these actions to successfully address the longstanding shortcomings 
we and others have identified, VA management must pay sufficient 
attention to this program, including exercising adequate oversight of 
its staff. Absent sustained management guidance and staff compliance, 
beneficiaries may remain vulnerable to the consequences of fiduciaries 
misusing their funds.
    Mr. Chairman, this concludes my prepared statement. I would be 
pleased to answer any questions that you or other Members of the 
Subcommittee may have.
    This is a work of the U.S. Government and is not subject to 
copyright protection in the United States. The published product may be 
reproduced and distributed in its entirety without further permission 
from GAO. However, because this work may contain copyrighted images or 
other material, permission from the copyright holder may be necessary 
if you wish to reproduce this material separately.

                                 
    Prepared Statement of Richard F. Weidman, Executive Director for
       Policy and Government Affairs, Vietnam Veterans of America

    Good afternoon, Mr. Chairman. Thank you for the opportunity to 
appear here today to share our concerns and thoughts regarding concerns 
as to how the Veterans Benefits Administration is managing the 
Fiduciary program. This program is designed to protect some of our most 
vulnerable veterans. Unfortunately it appears that the program as 
currently operated falls far short of accomplishing that goal.
    The basis of our comments today are based on the Inspector 
General's Report (IG) 09-1999-120, dated Match 31, 2010, and on the 
General Accountability Office Report GAO-10-241, dated February of 
2010, as well as anecdotal evidence gleaned from our local leaders and 
service representatives around the Nation.
    First and foremost it is clear that there is no coherent plan for 
getting a handle on the parameters of this problem. VA simply does not 
know who is responsible for each veteran involved. Many of these 
veterans have major impairments because of schizophrenia or other 
condition that means that they are unable to properly care for 
themselves to the point that someone else needs to take charge of their 
financial affairs for their protection and well being. Seen from this 
perspective, they are the protectors of these veterans. Yet VA 
apparently does not know exactly who is responsible for each veteran, 
and is not doing even a reasonable job of monitoring to ensure that 
each and every veteran is properly cared for in regard to their safety 
and general well being. The first step is getting a handle on who is 
the fiduciary for each and every veteran involved in the program.
    Second, it would appear that there are not clear guidelines on who 
should be a fiduciary, i.e., meaningful minimum standards and 
determination of eligibility for same. It is clear that such standards 
and certification are needed, hopefully without creating a needlessly 
bureaucratic mass of red tape. It also appears that there is a need for 
training and quality assurance mechanisms that would be appropriate.
    Third, what is perhaps most distressing about the IG report 
referred to above is the lack of follow through and implementation of 
many (most?) of the recommendations in the IG Report from 2006 had not 
been actually implemented as pledged by the Veterans Benefits 
Administration in their Agency response to that 2006 report.
    Fourth, because the majority of the more than 100,000 veterans who 
have fiduciary agents are in poor mental and/or physiological health, 
there should be regular communication between Veterans Health 
Administration (VHA) personnel and whoever is acting as fiduciary 
agent/guardian. Unless we missed it, monitoring of health condition 
does not even appear to be one of the key factors in any evaluation of 
this program. Is the living situation for the veteran appropriate or 
not, given his/her disabilities? Is he/she getting to regular 
appointments at VHA?
    Fifth, the aggregate amount of monthly income is very significant 
for the veterans in this program. The size of the aggregate estate of 
these veterans combined is at least several billion dollars. Any time 
there is that kind of money there had better be accountability 
mechanisms to ensure that it is being used for the intended purpose(s). 
To not have clear guidelines and consistent monitoring only invites 
misuse and misappropriation of these funds. There appears to be so 
little in the way of effective tracking and oversight of this program 
that VA does not have any idea if the funds are being used correctly. 
This is akin to shipping $10 billion in cash into the war zone in Iraq 
and then acting surprised that they could only account for less than a 
third of the money. It is not a prudent or wise thing to do.
    Sixth, the GAO report is much more complete and thoughtful than the 
IG report, and is clearer as to the problems, although both overlooked 
one key thing that may in fact be widespread. We hear anecdotal cases 
about attorneys or others who are acting as agents/guardians for many 
veterans whom they have never met except over the telephone. It seems 
pretty clear to us that these people are getting more than the 4 
percent of funds being handled in the name of the veteran. In fact the 
record keeping at the VBA does not appear to even be to the level where 
this can even be monitored or detected. Looked at from both a fiscal 
point of view as well as a human point of view, this must change.
    To not make a significant effort to put such a system in place as 
quickly as possible (in real time, not traditional VA time) would be 
irresponsible, and leave many of our most vulnerable veterans subject 
to abuse and theft of resources that is rightfully theirs.
    To essentially almost start over is the theme of much of what this 
Committee has heard in testimony the last few years about the 
Compensation & Pension system for adjudication of claims. VVA suggests 
that this is essentially the case with this program. There is finally 
progress toward straightening out the C&P system because VA has 
admitted that they have a problem, and is now recognizing that the VBA 
must treat the Veterans Service Organizations (VSO) as well as state 
and local partners as true equal partners in this process of reform. We 
suggest that the same holds true for the fiduciary program at VA.
    Rightly or wrongly the VA has received much criticism for the 
problems in the C&P system, to the point that many consider it a 
scandal that we have come to the sorry situation we all find ourselves 
with that system. I would suggest that this program is a major scandal 
just waiting to happen.
    The welfare of the individual veterans who are least able to fend 
for him/herself should be enough to drive immediate reform. Added to 
that primary responsibility is the need to properly account for 
taxpayer dollars, and the VA and Congressional responsibility to ensure 
those funds are being used correctly for the welfare of the intended 
recipients.
    Thank you for this opportunity to present our views here today. I 
will be happy to answer any questions.

                                 
   Prepared Statement of Sarah Wade, Coordinator, Family Issues and 
            Traumatic Brain Injury, Wounded Warrior Project

    Chairman Hall, Ranking Member Lamborn, and Members of the 
Subcommittee:
    Thank you for inviting Wounded Warrior Project to testify on VA's 
Fiduciary Program. Through our long work with severely-wounded veterans 
and their family caregivers, many of whom are fiduciaries, Wounded 
Warrior Project brings a unique understanding to the operation, and 
shortcomings, of VA's Fiduciary Program. As a caregiver myself of a 
severely wounded veteran of Operation Iraqi Freedom who sustained 
severe traumatic brain injury, and as one who has worked with many 
other caregivers of severely wounded warriors, I believe I can offer a 
helpful perspective.
    WWP appreciates the important responsibility vested in VA's 
Fiduciary Program to safeguard the benefits of veterans who are unable 
to manage their own affairs. That program unquestionably has a critical 
mission and performs vital work. But we are gravely concerned that in 
managing the program, VA does not take account of, or even recognize, 
the unique circumstances of family members who have devoted themselves 
to the full-time care of severely wounded veterans, and who also serve 
as their fiduciaries. Parents and spouses who have made great 
sacrifices--often giving up careers and depleting savings--to care for 
their loved ones hardly pose a risk of misusing the veteran's benefits, 
and in fact should be free to apply part of their loved one's benefits 
to help maintain a household that they share. We welcome this 
opportunity to document the critical need for VA to revise its policy 
and practice with respect to caregiver-fiduciaries who have 
demonstrated their dedication to the veteran's well-being. Adoption of 
the recommendations we will be discussing would end the often shameful 
and arbitrary treatment that too many families have endured.
    Let me reiterate. WWP recognizes that the risks the VA fiduciary 
program is designed to counter are certainly real, and appropriate 
oversight is needed. In that regard, we appreciate the Government 
Accountability Office's (GAO) emphasis in its February report on the 
importance of improving VBA compliance with Fiduciary Program policies.
    Importantly, those policies recognize that all fiduciary cases do 
not require the same degree of attention and supervision, and that 
field examiners should consider the unique circumstances of each case. 
Unfortunately, there appears to be wide variability in examiners' 
exercise of that judgment with respect to many of the fiduciaries with 
whom WWP works-- family members who are not only fiduciaries for 
severely wounded veterans, but also their full-time caregivers.
    GAO makes an important observation in stating that VA's fiduciary 
case management system does not provide sufficient information to 
managers and staff about their cases. That statement highlights that VA 
is not sufficiently aware of, and not sufficiently attuned to, the 
unique circumstances of these caregiver-fiduciaries.
    The many, many caregivers of wounded warriors whom I've known and 
with whom I've worked over the years have made great personal 
sacrifices to provide daily care to their loved ones. They've chosen to 
give up, or indefinitely suspend, careers or career plans. These family 
members have put their own lives ``on hold'' to be caregivers. Many 
have been appointed fiduciaries. I can assure you that their love and 
dedication to their wounded spouses and children did not change in any 
way by virtue of taking on new responsibilities as a fiduciary.
    Yet, in dealing with caregivers who serve as fiduciaries, the 
Veterans Benefits Administration (VBA) too often fails to recognize 
their sacrifice. Instead, parents and spouses who over time have surely 
proven their dedication to their loved one, too often encounter a VBA 
system marked by its rigidity, intrusiveness, and unreasonableness when 
it conducts oversight of those caregivers in their role as the 
veteran's fiduciary.
    Let me illustrate my point by way of examples:

      A VBA field examiner imposing a summer-vacation 
expenditure limit for a profoundly wounded warrior, his wife and two 
children;
      A mother/caregiver having to explain to a VBA examiner 
why she allowed her wounded-warrior son to spend ``too much'' money on 
Christmas gifts;
      The spouse/caregiver of a traumatically brain-injured 
veteran having to get permission from a VBA field examiner to purchase 
a couch;
      A devoted mother-caregiver to her minimally-conscious son 
being required to pay back money for toilet paper purchased for the 
home with the veteran's funds;
      A family's being questioned about expenditures for 
gasoline when the wounded warrior does not drive or own a car, but the 
fuel was used to transport the veteran;
      Several instances of mothers, who are full-time 
caregivers to wounded veterans, being required to pay rent to the 
veteran rather than residing in the home for ``free;''
      A field examiner denying a mother-caregiver's request to 
replace the (now-wheelchair bound) veteran's 8 year-old high-mileage 
truck that she uses to transport him in a rural, snowy part of the 
country; and
      A mother-caregiver having to relinquish her role as a 
fiduciary because she had had to declare bankruptcy after leaving her 
job to care for her wounded warrior son.

    Let me assure you--from personal knowledge--that these families do 
not deserve to be treated in the demeaning, petty and hurtful manner 
reflected in these examples. At the same time, we would acknowledge 
that VBA examiners have not universally been as unreasonable as these 
examples suggest. Yet these specific illustrations are not isolated 
problems, or remote outliers. Further compounding these problems is 
that as these caregivers have looked to one another for clarity in 
understanding the often-inexplicable workings of VA programs, what 
becomes apparent is the stark variability in VA oversight across the 
system. The impression, frankly, is of a program marked by arbitrary 
and capricious decision-making.
    It should be recognized that a family member or members residing 
with the veteran may have no income--and may well have depleted some of 
their own assets--to become the veteran's caregiver. We see no basis 
whatsoever for precluding such families from drawing on the veteran's 
benefits to pay for the family's living expenses! VA Fiduciary Program 
policy should make that abundantly clear. But even more fundamentally, 
a devoted family member who provides daily care for a severely wounded 
veteran should not be treated as an object of VA suspicion--either in 
terms of rigid management of their budgeting or intrusive home visits--
simply because the individual serves as the veteran's fiduciary. We 
believe these families are owed a presumption of honesty, and should be 
treated with dignity.
    Over the past year we have discussed these concerns with officials 
in the Veterans Benefits Administration, offered to work with them on 
these issues, and arranged for them to meet with a family caregiver-
fiduciary to appreciate better these families' experiences under the 
program with the hope that necessary modifications could be made. But 
more than half a year since first raising these concerns with VA, it 
remains unclear whether promised remedial revisions to Fiduciary 
Program policies will ever come to fruition.
    Separate from the issues of inconsistent oversight and arbitrary 
requirements, VA has acknowledged a need for more training, consistent 
with GAO's findings. WWP strongly agrees. But VA must not only provide 
more training for its fiduciary program staff, it should better inform 
family members of their responsibilities in agreeing to serve as 
fiduciaries. These steps would be helpful, but certainly would not go 
far enough. VBA must substantially revise its policy and practice to 
reflect far greater balance and understanding as it relates to 
caregiver-fiduciaries whose sacrifices have surely demonstrated that 
they do not pose significant risk.
    Given the resource and staffing problems GAO described in reporting 
on the Fiduciary Program, it is particularly difficult to understand 
devoting resources to close scrutiny of family caregiver-fiduciaries 
who have proven themselves over time.
    Indeed, the caregivers are well known to VA. Each has worked 
closely with a Federal Recovery Coordinator and/or case-managers in 
connection with their veteran's care. In the isolated instance in which 
there is some indication of a problem concerning a caregiver, 
caseworkers in the Veterans Health Administration, and often care-
coordinators in other VA offices, become aware of it. From the 
caregivers' perspective, ``VA'' is a single entity, and they have every 
reason to believe VA knows they are reliable and have integrity. So 
imagine how confusing it is for a caregiver who has worked closely, and 
developed relationships of trust, with other VA staff to encounter VBA 
personnel whose fiduciary-requirements convey fundamental mistrust. It 
does not seem too much to ask that VBA and other arms of the Department 
work more closely together to share information relating to caregiver-
fiduciaries, rather than requiring these dedicated individuals to prove 
themselves yet again.
    In short, Mr. Chairman, devoted family members who have clearly 
made great sacrifices to care for their loved ones hardly pose a risk 
of misusing the veteran's benefits. VA Fiduciary Program policies and 
practices must be revised to draw distinctions among categories of 
fiduciaries. A devoted family member who provides consistent, high-
quality daily care for a severely wounded veteran should not be treated 
as an object of VA suspicion simply because the individual serves as 
the veteran's fiduciary. We believe these families are owed a 
presumption of honesty, and should not be subjected to rigid budgeting 
and ongoing intrusive scrutiny without substantial cause. Finally, VA 
must work to achieve more uniform standards and greater consistency in 
its application of fiduciary oversight policy.
    Mr. Chairman, we look forward to working with the Subcommittee 
staff in addressing these concerns regarding the VA's Fiduciary 
Program.
    That concludes our testimony. I'd be pleased to address any 
questions you may have.

                                 
      Prepared Statement of Jacob B. Gadd, Assistant Director for
        Program Management, Veterans Affairs and Rehabilitation
                      Commission, American Legion

    Mr. Chairman and Members of the Subcommittee:
    Thank you for the opportunity to provide The American Legion's 
views on the Department of Veterans Affairs (VA) Fiduciary Program and 
improvements VA can make in providing quality health care and benefits 
for those veterans with mental health injuries or disease. As a 
majority of World War II and Korea veterans are aging, improvements to 
the VA's Fiduciary Program is needed to ensure they receive their 
benefits in a timely manner. Additionally, veterans that are filing 
claims for Post Traumatic Stress Disorder (PTSD), Traumatic Brain 
Injury (TBI) as well as other geriatric illnesses such as Alzheimer's 
or Dementia may require use of a Fiduciary and without effective 
oversight, coordination and management, these veterans will continue to 
experience delays and/or financial hardship in accessing their earned 
benefits.
    Title 38, Code of Federal Regulations (CFR), Sections 13.1 to 
13.111 provides the guidance for VA to manage the Fiduciary Program. VA 
defines a fiduciary as a person or an institution responsible for 
managing money or property for another and exercising a standard of 
care imposed by law or contract in such management activity. VA is 
charged with appointing a fiduciary to manage and handle the veteran's 
VA Compensation and Pension (C&P) benefits, if a veteran is deemed 
mentally incompetent.
    A recent VA Office of the Inspector General (OIG) report, Audit of 
the Fiduciary Program's Effectiveness in Addressing Potential Misuse of 
Beneficiary Funds, found that the ``Veterans Benefits Administration 
(VBA) lacks elements of an effective management infrastructure to 
monitor program performance, effectively utilize staff, and oversee 
fiduciary activities.'' In addition, in VA's Fiscal Year (FY) 2009 
Performance and Accountability Report, VA achieved an 82 percent result 
out of an 88 percent goal, due to challenges with reorganization of 
workflow and the training of 20 new Legal Instruments Examiners. FY 
2009 was the first year that all fiduciary activities for regional 
offices in the Western Area were consolidated to the Western Area Pilot 
Fiduciary Hub in Salt Lake City. Additionally, VA transitioned all 
fiduciary activities to paperless processing in an effort to increase 
its targeted goal for the next fiscal year.
    The Government Accountability Office (GAO) also released a report 
in February 2010, ``Improved Compliance and Policies Could Better 
Safeguard Veterans' Benefits,'' which recommended VA ``strengthen 
Fiduciary Program policies for monitoring fiduciaries, improve staff 
compliance with program policies, evaluate alternative approaches to 
meet electronic case management system needs and evaluate the 
effectiveness of consolidating 14 western Fiduciary Program units.'' VA 
has consolidated the Fiduciary Program to ensure that these policies 
are streamlined and have better centralization of management.
    While VA is moving forward with the Fiduciary Hub in Salt Lake City 
and is taking actions to rectify their Fiduciary Program problems, 
based on the recommendations from OIG and GAO. The American Legion, 
however, continues to have several concerns. These concerns include the 
difficulty and delay in processing the appointed fiduciary, VA's 
national centralization model and feedback from American Legion 
Department (State) Service Officers and Pension Management Center 
staff.
    In researching fiduciary forms required by VA Regional Offices, the 
number of forms, the accompanying delay in processing and the stress it 
places on veterans and their family members is monumental. In fact, as 
noted in the chart below from VA Pamphlet 21-05-1: Federal Fiduciary 
Program Pocket Folder, 21 different VA forms are required to appoint a 
fiduciary.


------------------------------------------------------------------------------------------------------------------------------------------------
1.                               VA Form 21-0509: Notice of Fiduciary
                                  Commission
------------------------------------------------------------------------
2.                               VA Form 21-0520: Certificate of
                                  Commissions Approval
------------------------------------------------------------------------
3.                               VA Form 21-555a: Designation of Payee
------------------------------------------------------------------------
4.                               VA Form 21-555: Certificate of Legal
                                  Capacity to Receive and Disburse
                                  Benefits
------------------------------------------------------------------------
5.                               VA Form 21-592: Request for Appointment
                                  of a Fiduciary, Custodian or Guardian
------------------------------------------------------------------------
6.                               VA Form 21-0792: Fiduciary Statement in
                                  Support of Appointment
------------------------------------------------------------------------
7.                               VA Form 21-3045: Estate Action Record
------------------------------------------------------------------------
8.                               VA Form 21-3190: Minor Beneficiary
                                  Field Examination Request and Report
------------------------------------------------------------------------
9.                               VA Form 21-3537a: Field Examination
                                  Request
------------------------------------------------------------------------
10.                              VA Form 21-3537b: Field Examination
                                  Report
------------------------------------------------------------------------
11.                              VA Form 21-4703: Fiduciary Agreement
------------------------------------------------------------------------
12.                              VA Form 21-4706: Court Appointed
                                  Fiduciary's Accounting
------------------------------------------------------------------------
13.                              VA Form 21-4706b: Federal Fiduciary
                                  Account
------------------------------------------------------------------------
14.                              VA Form 21-4706c: Court Appointed
                                  Fiduciary's Accounting
------------------------------------------------------------------------
15.                              VA Form 21-4707: Estate Summary
------------------------------------------------------------------------
16.                              VA Form 21-4709: Certificate as to
                                  Assets
------------------------------------------------------------------------
17.                              VA Form 21-4716a: Adult Beneficiary
                                  Field Examination Request and Report
------------------------------------------------------------------------
18.                              VA Form 21-4718: Account Book
------------------------------------------------------------------------
19.                              VA Form 21-4718a: Certificate of
                                  Balance on Deposit and Authorization
                                  to Disclose Financial Records
------------------------------------------------------------------------
20.                              VA Form 21-8473: Withdrawal Agreement
------------------------------------------------------------------------
21.                              VA Pamphlet 21-05-1: Federal Fiduciary
                                  Program Pocket Folder
------------------------------------------------------------------------

    Second, The American Legion has been concerned about VA's 
centralization policies and that Veterans' Service Organizations (VSOs) 
are not included in these processes. For example, when VBA consolidated 
general inquiry telephone calls from individual regional offices to 
eight national call centers (NCCs), claimants, beneficiaries and VSOs, 
who had general questions concerning VA benefits programs, were routed 
to one of the eight call centers, rather than being able to call the 
local Regional Office (RO). The American Legion continues to urge VA to 
provide internal access phone numbers for accredited VSO 
representatives, so the representative could bypass the consolidated 
call centers and contact the RO directly in order to access information 
in a timelier manner to provide better service to their clients. VA 
commented on this recommendation stating, ``providing direct internal 
telephone access to VSO representatives at each Regional Office (RO) 
would require the redirection of resources currently dedicated to 
disability claims processing.''
    Mr. Chairman and Members of the Subcommittee, The American Legion 
recommends authorizing personnel solely to administer the Fiduciary 
Program to ensure this program remains their priority and expertise.
    VA has successfully demonstrated that the Consolidated Patient 
Account Centers (CPACs) model has helped mitigate problems with 
veterans' third-party insurances being improperly billed. The American 
Legion understands the importance of collecting data at VA's national 
level so that trends can be analyzed in order to develop best 
practices. The only recommendation The American Legion has is that this 
Subcommittee is to exercise oversight over VA's centralization plans. 
We urge this Subcommittee to monitor the progress to ensure that VSOs 
are given internal access phone numbers to better represent their 
clients.
    The American Legion has approximately 2,000 accredited Department 
(State) Service Officers and County Veterans' Service Officers (CVSO) 
nationwide that help veterans file claims for VA benefits. Several of 
these service officers have witnessed firsthand some of the 
difficulties experienced with the Fiduciary Program. For example, a 
service officer reiterated the concern that, ``it's difficult for 
veterans to contact anyone in the Fiduciary Hub because they do not 
have a `public contact' number dedicated solely to fiduciary issues and 
the general VA public contact line can only provide limited 
information.'' Other service officers commented that the ROs and 
Pension Centers are not always notifying the Hub by way of the VA Form 
21-592 (Request for Appointment of a Fiduciary, Custodian or Guardian) 
that an appointment of a fiduciary is required until someone such as a 
VSO makes an inquiry.
    The third problem American Legion Service officers have encountered 
with the Salt Lake City Hub was that the center inherited a huge 
backlog when they consolidated 14 Western Fiduciary Program units in 
January, 2008. In most cases, the center has improved, to 45 days, the 
backlog of initial visits to appoint fiduciaries. However, the large 
backlog of follow-up visits (over 120 days) remains. The Salt Lake City 
Hub currently is authorized 112 positions, 56 of which are field 
examiners. Although the center is considered to be fully staffed, the 
current staffing level does not appear to be sufficient in light of the 
backlog that still needs to be addressed.
    Additionally, The American Legion has national representatives at 
the three Pension Management Centers (PMCs) in Minneapolis, 
Philadelphia and Milwaukee. American Legion representatives at these 
locations have unanimously voiced their concerns in one area--improving 
the coordination between the Regional Offices of jurisdiction, Pension 
Centers and Fudiciary Hubs. For example, one of our service officers 
helped a veteran file for benefits in August 2009 and the rating 
decision was completed on February 2010 proposing incompetency. On 
March 2010, a letter was sent to the veteran in regards to 
incompetency. The veteran waived due process later in March 2010, which 
enabled VA to act on the claim prior to waiting the 65 days. Waiving 
the due process helped speed up the process. The award letter was sent 
in early April stating the first payment was sent in May, but the 
retroactive benefits will be withheld until the Guardianship Unit can 
make their visit. After all this process is complete, the Pension 
Management Center sends VA Form 21-592 (Request for Appointment of a 
Fiduciary, Custodian or Guardian) to the Hub in Salt Lake City. The Hub 
then notifies the Guardianship unit in the particular RO which can take 
months. Once the field exam is completed, the VA Form 21-555 
(Certificate of Legal Capacity to Receive and Disburse Benefits) is 
sent back to the PMC for authorization of the retro benefits.
    In another case, the Fiduciary process took 4 years which made the 
family bear the cost of this delay. The American Legion service 
officers also reiterated that there is not a dedicated phone number for 
the Fiduciary Hub that a family member or VSO representative can 
contact to check on the status of claim. The American Legion is 
concerned that other veterans are experiencing the same delays, 
financial hardships and inability to reach the Fiduciary Hubs because 
of the lack of seamless coordination between ROs, PMCs, Guardianship 
Units and Field Exams.
    Prior to October 2009, it was VA's policy to withhold benefits 
payable to a beneficiary while competency is considered, and during the 
period required to appoint a fiduciary. VA issued Fast Letter 09-41 in 
October 2009 providing revised procedures for VA to pay all monthly and 
recurring benefits, then withhold only retroactive benefits pending 
appointment of a fiduciary. However, many beneficiaries continue to 
suffer hardships as a result of the delays. The American Legion Service 
Officers have stated that VA workers receive credit for processing the 
case within the 45-day period. If a case is not completed during the 
45-day period, there are not any work credits or staff initiative to 
get the case finalized. In one office, there are over 100 cases over 3 
months to 1 year. Additionally, a service officer in a Pension 
Management Center helped schedule a fiduciary field exam because the 
veteran had been waiting for over 4 years.
    Mr. Chairman, this is unconscionable that a veteran's claim can be 
delayed for this period of time and that the veteran's family member or 
appointed VSO representative cannot access the system through VA's 
computer system or an internal phone number. Our Nation's veterans and 
their beneficiaries deserve better.
    In closing, The American Legion has six recommendations:

    1.  The American Legion recommends an additional Full Time Employee 
(FTE) be funded and authorized within each RO and PMC solely dedicated 
to Fiduciary Program management and oversight.

    2.  The American Legion recommends Congress appropriate funding to 
VBA's Information Technology (IT) budget to set up an IT software 
package within all of the RO's Fiduciary Program Units, PMCs, and Salt 
Lake City Fiduciary Hub to enhance communications between each of these 
offices.

    3.  The American Legion recommends that part of the software 
package include reminders or alerts throughout the process to ensure 
that no paperwork is lost or falls through the cracks.

    4.  The American Legion recommends that Congress assure VSO 
representatives are given an internal access phone number for each of 
the facility's Fiduciary Program Units to improve the timeliness, 
quality and full coordination of the program.

    5.  The American Legion recommends that Congress assure VA creates 
a Fiduciary national toll-free number for family members and the 
general public. The American Legion recommends that Congress direct VA 
to establish a VA Voluntary Service (VAVS) Pilot Program to train 
volunteers on how to become VA Fiduciary Volunteers.

    Mr. Chairman, The American Legion has over 6,000 volunteers that 
serve veterans every day in the community that help veterans in VA 
Medical Centers, Community-Based Outpatient Clinics, Vet Centers, 
Fisher Houses, Domiciliaries and State Veterans Homes. Each year, 
Legionnaires serve over 916,000 hours of service to help veterans. The 
VAVS Program is the largest volunteer program in the Federal 
Government, providing over 64 years of voluntary service to the 
Nation's veterans. In 2008, the VAVS Program developed a pilot program 
for Caregivers and The American Legion is assured that if given the 
necessary training and supervision by the Voluntary Service Program 
Managers at each VA Facility, a program could be similarly developed 
for these volunteers. Additionally, the current Fiduciaries for these 
veterans within the program would receive standardized training and 
evaluation.
    As the Nation's veterans experience mental health trauma or 
diseases, they or their family members should not have to worry about 
receiving their earned benefits. Mr. Chairman and Members of the 
Subcommittee, The American Legion sincerely appreciates the opportunity 
to submit testimony. Thank you.

                                 
     Prepared Statement of Vivianne Cisneros Wersel, Au.D., Chair,
    Government Relations Committee, Gold Star Wives of America, Inc.

        ``With malice toward none; with charity for all; with firmness 
        in the right, as God gives us to see right, let us strive to 
        finish the work we are in; to bind up the Nation's wounds, to 
        care for him who has borne the battle, his widow and his 
        orphan.''
       . . . President Abraham Lincoln, Second Inaugural Address,
                             March 4, 1865

    Chairman Hall, Ranking Member Lamborn and Members of the Disability 
Assistance and Memorial Affairs Subcommittee, I am pleased to be here 
today to testify on behalf of Gold Star Wives of America. My name is 
Vivianne Wersel, Chair of the Gold Star Wives' Government Relations 
Committee. I am the widow of Lt. Col. Richard Wersel, Jr., USMC, who 
died suddenly on February 4, 2005, one week after returning from his 
second tour of duty in Iraq.
    Gold Star Wives of America, Incorporated (GSW), founded in 1945, is 
a Congressionally Chartered organization of spouses of military members 
who died while serving on active duty or as a result of a service-
connected disability. GSW is an all-volunteer organization. We could 
begin with no better advocate than Mrs. Eleanor Roosevelt, at the time 
newly widowed, who helped make Gold Star Wives a truly ``national'' 
organization. Mrs. Roosevelt was an original signer of our Certificate 
of Incorporation as a member of our Board of Directors. Our current 
members are widows and widowers of military members who served during 
World War II, the Korean War, the Vietnam War, the Gulf War, the 
conflicts in both Iraq and Afghanistan, and every period in between.
    We begin by thanking this Committee and our Government for 
providing essential services necessary to help us through our loss, 
many services being done well, in a caring and helpful way. But I also 
want to stress the importance of staying vigilant so that no one who is 
grieving the loss of a loved one will have to endure indignities or a 
lack of benefits because of the lack of knowledge. Therefore, we need 
consistent and relevant assistance before and at the time of the death, 
and for some period of time thereafter. While there have been huge 
strides made over the last several years in alleviating problems with 
benefit and eligibility misinformation coming to those who are 
grieving, confusion about the complete benefits available will be a 
normal beginning, with the best of information provided. We owe 
information to those in the throes of grief about the all the benefits 
available with the best information provided. We owe it to these 
families to help secure their futures with the most accurate 
information possible at an appropriate time--when it is ready to be 
received--because the confusing array of decisions that must be made 
have consequences for the rest of that their lives.
                          VA Fiduciary Program
    Gold Star Wives was unaware of VA's Fiduciary Program until we were 
asked to testify at this hearing. As we delved into the subject matter, 
the research became a game of 20 questions. It's difficult to critique 
or make suggestions for a program of which we were unaware. There have 
been several hearings about the Fiduciary Program over the last 7 
years; today is our first exposure to this VA Fiduciary Program. 
Therefore, Gold Star Wives' main concern about the Fiduciary Program is 
the lack of information provided to eligible surviving spouses. Other 
concerns are the hardships surviving spouses encounter as well as the 
limitations of the VA fiduciary program.
                          Lack of Information
    From the perspective of Gold Star Wives, the major problem is a 
lack of publicity and available information. There is no mention of the 
Fiduciary Program in the VA Handbook for Veterans, Dependents and 
Survivors. The surviving spouse needs prior knowledge of this existing 
program in order to obtain information on the VA Web site. Yet, 
according to VBA, there are 35,000 surviving spouses who are 
beneficiaries in the VA Fiduciary Program. This is a third of the total 
of the approximate 109,000 participating in this program. Furthermore, 
this subject has neither been discussed in prior testimonies that 
included Gold Star Wives nor has it been a topic discussed in the VA/
DoD Survivor Forum quarterly meetings. Lack of information and 
participation does not promote optimal care for the surviving families. 
How can we improve a program if we have no knowledge of the existing 
program? We have many questions that we hope will be answered as the 
result of this meaningful hearing today.
                               Hardships
    Many Gold Star Wives were their spouse's fiduciary before their 
military spouse died. Some were young and required an annual bonding 
fee because their credit score was not sufficient. Why do spouses have 
to pay significant fees to be bonded?
    In 2002, Petty Officer 2nd Class Anthony Palmer collapsed while 
playing basketball. He was kept alive via medical devices. When the 
respirator was removed, he unexpectedly continued living; however, he 
was totally incapacitated. He was then medically retired, but when he 
died 2 years later, his VA disability compensation suddenly stopped. 
His wife and two toddlers were left without support. What role did the 
VA Fiduciary Program play for this new Gold Star Wife with young 
children? Mrs. Palmer sought assistance from the Navy Marine Corps 
Relief Society when the disability compensation ceased. At that time, 
the Navy Marine Corps Relief Society referred her to Gold Star Wives.
                              Limitations
    When the SGLI was assigned by name to Mrs. Palmer's two small 
children, she had to pay several thousand dollars for a civilian court 
guardianship. Why is this required when she is the biological parent of 
the small children? She is one of the many young widows with children 
who are experiencing this problem. Why is the Fiduciary Program not 
used for SGLI, which is administered by the VA?
    Mrs. Dora Aja married her college sweetheart in 1953. His heart 
attack in 1976 eventually left him totally incapacitated. She has to be 
bonded to be a fiduciary at a cost of $250.00 annually. When purchasing 
a home to be closer to family she had to receive permission from VA and 
the Defense Finance and Accounting System to purchase a home. She must 
submit a spreadsheet of all her expenses. Accountability is important; 
however, why does she have to pay to be bonded? Also, are the spouses 
provided with the tools they need to monitor the administration 
required from them annually? Mrs. Aja stated, ``I have cared for him 
and loved him for over 50 years and the Government treats me like a 
juvenile. It is a good thing that my husband is not aware of what is 
happening because he would be angry.'' She is not a widow or a veteran, 
and she is not treated as the dedicated military spouse that she is 
even though she is a soon to be a Gold Star Wife.
    There are approximately 35,000 surviving spouses who are 
incapacitated and have fiduciaries. Who takes the lead when the 
surviving spouse becomes incapacitated? If the surviving spouse wasn't 
a fiduciary for the veteran spouse, they may well not know anything 
about the program and, by extension, neither would their children. How 
many spouses (current and surviving) are also fiduciaries for the 
nearly 18,800 adult disabled children in the program?
                                Concerns
    What I can report to you today is that our number one concern with 
the VA Fiduciary Program is our lack of information. It is imperative 
that we are provided more information on the Fiduciary Program, so it 
provides meaningful support to surviving spouses as well as the soon-
to-be surviving spouses who find themselves in this position. As the 
result of today's hearing we hope our questions will be answered.
    Gold Star Wives of America has the following questions:

    1.  Are there ongoing problems with the program that have yet to be 
fixed?

    2.  Where and how is this program publicized?

    3.  What is the protocol for the information to be provided in a 
timely fashion?

    4.  Is it only provided to those for whom the program is necessary?

    5.  What training is available for the challenged spouse who is 
caring for an incapacitated, perhaps dying veteran, who does not have 
the accounting and clerical skills to manage the tedious, demanding 
paperwork required by the annual audit?

    6.  Some may find it necessary to hire a professional to do the 
reports for the audit at additional expense to them. Is there funding 
for this assistance?

    7.  At what point is a fiduciary necessary? Who makes the 
determination?

    8.  Could the VA select someone other than the spouse?

    Thank you for this opportunity to testify. The families of the 
Nation's fallen have already suffered the greatest loss; there is no 
need to make these families struggle financially unnecessarily. Gold 
Star Wives appreciates the compassionate work which Members of this 
Subcommittee and the staff do on our behalf. We always stand at the 
ready to provide this Subcommittee with any additional needed 
information.

                                 
       Prepared Statement of Katherine R. Pflanz, Field Examiner,
      Winston-Salem Veterans Affairs Regional Office, on behalf of
       American Federation of Government Employees, AFL-CIO, and
                 AFGE National Veterans Affairs Council


Dear Chairman and Members of the Subcommittee:

    The American Federation of Government Employees, AFL-CIO (AFGE) and 
the AFGE National Veterans Affairs Council (NVAC), the exclusive 
representatives of VBA employees working in the Fiduciary Program, 
appreciate the opportunity to present the views of front line employees 
on how to better protect vulnerable veterans and their families.
RECOMMENDATION: PROVIDE NATIONALLY UNIFORM, FORMALIZED TRAINING ON 
        FIDUCIARY ISSUES
    AFGE and NVAC agree with the Government Accountability Office (GAO) 
recommendation for a national training program for the Fiduciary 
Program. Field Examiners (FE) and Legal Instrument Examiners (LIE) need 
formal training prior to assuming their responsibilities and refresher 
training at least every 2 years.
    Standardized formal training is also an invaluable tool to form 
bonds with co-workers across the Nation and share lessons learned and 
best practices. A national Q&A mailbox or employee-only Web site could 
facilitate ongoing sharing of information. This teaching tool would be 
a timesaver and improve quality for the employees trying to protect 
beneficiaries in receipt of VA benefits.
    New employee training should be centralized, as it is for Rating 
Specialists and Veterans Service Representatives (VSR). Currently, the 
initial training for new FEs is woefully inadequate, consisting only of 
online course, without being able to ask questions of an instructor or 
supervisor. This online curriculum is only designed to explain how 
fiduciary process works, e.g. conducting field exams, and does not 
address other critical issues, such as entitlement to pensions and 
other benefits. Only those FEs who have previously worked as VSRs 
received formal training on benefits, which is important to ensuring 
the beneficiary is receiving all the funds to which they are entitled.
    On-the-job training needs to be standardized. New FEs are sent out 
to the field to observe other FEs conducting interviews. While this is 
helpful, there is no standardization to ensure that all new FEs have 
sufficient exposure to different types of cases.
    Inadequate new employee training slows production, increases 
errors, and causes undue duplication of work. Often times more 
experienced FEs and LIEs must interrupt their own work to answer 
questions or correct errors.
    Training for experienced employees is minimal and haphazard. VBA no 
longer provides centralized training that bring FEs into one location, 
e.g. RO, regional or national sites, for face-to-face instruction. 
Ongoing training often consists of conference calls where management 
merely points out common errors, local policy changes, and the newest 
hot topic. This limited time does not provide for proper guidance on 
correcting errors. Also, significant changes in policies and procedures 
are implemented without proper training or input from front line 
employees.
RECOMMENDATION: DISCONTINUE THE HUB PILOT PROGRAM
    AFGE and NVAC have serious concerns about the Hub Pilot Program. 
This model has had serious ramifications; it has adversely affected 
training, case management, case tracking, and the proper application of 
different state rules.
    The Fiduciary Program works with a special population and it is 
critical that the employees oversee all their needs, not just their 
money. The RO model facilitates that oversight far better than the Hub 
model. At the RO, staff has tighter control over the accounting 
process, and is able to work much more closely with both the veteran 
and the payee to ensure the beneficiary lives the best life possible.
RECOMMENDATION: INCREASE STAFFING AND REVISE THE WORK CREDIT SYSTEM AND 
        PERFORMANCE STANDARDS
    The Fiduciary Program is facing increased demand for its services, 
especially among OIF/OEF veterans returning from two wars and an aging 
veteran population from earlier conflicts. In addition, due to our 
mobile society and current economic difficulties, many families are 
less able to assist disabled beneficiaries physically or financially 
than they were in the past. Families look more and more to VBA to 
protect disabled beneficiaries.
    Additional FE hiring has begun but more is needed. FEs are always 
working frantically to meet their production standards, ensure quality, 
maintain personal safety, and keep apprised of all the new changes. The 
expectation is that this can be accomplished with inadequate training, 
experience, and within an 8 hour day. The current performance standards 
are unrealistic for the tools currently provided to the Fiduciary 
staff. When overtime is offered, it frequently raises the production 
expectation which is already unobtainable to the less experienced.
    Managers also need training on the workings of the Fiduciary 
program, as well as employee issues such as personal safety and workers 
compensation claims for injuries incurred in the field.
    As a result of inadequate management, understaffing, unrealistic 
performance standards, and lack of training, the Fiduciary Unit is less 
able to properly serve and protect those who need our protection the 
most in today's environment.
RECOMMENDATION: IMPROVE ACCESS TO IT TOOLS AND OTHER NEEDED EQUIPMENT
    AFGE and NVAC agree with GAO's recommendation for more efficient 
automated tools, including more informative reports from the Fiduciary 
Beneficiary System. In addition, there are a number of problems with 
National Field Examiner Report Generator Program. Although this system 
was intended to increase uniformity in the process of typing field 
exams, in practice, it is a difficult system to use and dramatically 
increases the time required to type reports. For example, FEs spend 
substantial time deleting information from the Initial Appointment 
Report for follow up reports, and the system lacks separate templates 
for reports for Adult Helpless Children, Insurance Cases and Minors. If 
FEs on the front lines had been involved in the design and testing of 
this system before it was rolled out, it would function more 
effectively.
    FEs are not provided with other needed equipment on a sufficient or 
timely basis. There are frequent delays in issuing Government vehicles, 
thus requiring some FEs to share vehicles. As a result, both the well 
being of the beneficiary and FE timeliness suffer.
    Phone access is an essential part of the FE's job each and every 
day, all day long. They have to schedule appointments, find 
beneficiaries, get information over the phone from legal custodians, 
and in some cases, the entire field exam is conducted by phone. 
Currently, the cell phones that are provided to FEs often lack adequate 
geographic coverage. FEs should have a long distance phone card as back 
up.
    In addition, travel funds that FEs need to manage their casework 
are often difficult to obtain due to budget constraints.
RECOMMENDATION: PROVIDE MORE EXPERIENCED LEADERSHIP
    The Fiduciary Program is facing a serious lack of experienced 
coaches to mentor employees. Front line employees are being trained and 
supervised by managers who do not fully understand the fiduciary rules 
and regulations. Coaching is only effective if done by someone with 
extensive hands-on experience and subject matter expertise.
    Too often, the message from management is ``get it done'' to make 
production without an understanding of the mechanics. This approach 
hurts both beneficiaries and the Fiduciary Unit. If managers had more 
direct experience on the front lines, they would have more realistic 
expectations of what is required and how long it takes to do the job 
correctly.
RECOMMENDATION: REVISE REVIEW EXAMINATION SCHEDULES
    FEs are unnecessarily burdened with conducting annual field review 
of claims in cases that already demonstrate accurate discharging of the 
fiduciary responsibilities, thus preventing them from completing work 
needed for other claims. AFGE and NVAC do not advocate complete 
elimination of the field review, but rather, many can be done less 
frequently or on a random basis. The current limitation on review 
examinations that are input in 2 or 5 year increments should be lifted; 
less frequent exams are recommended where there are no questions of 
impropriety or uncertainty about the fiduciary's conduct.
    For example, currently, FEs are required to visit beneficiaries in 
Adult Living Facilities every 3 years. These beneficiaries should be 
reclassified as ``institutionalized'', which would reduce the 
requirement to a phone call every 6 years. This would suffice because 
the VA benefits are totally consumed by cost of care and all their 
housing and medical needs are being met in a safe manner. Also, these 
facilities are monitored by other Federal, state and local agencies.
    More infrequent visits to beneficiaries with dementia who are in 
the locked section of the facility would also suffice. More generally, 
in cases like these, it would be more effective to make unannounced 
visits on a random schedule in addition to scheduled audits.
    VBA could also eliminate field exams for beneficiaries receiving 
small amounts of funds, e.g. the old law pension rate of $61, or anyone 
receiving less than the 30 percent compensation rate. When 
beneficiaries are given the entire VA benefit for person spending, they 
are in effect managing their own funds. Visits for spouse payees 
receiving less than the 30 percent rate could be replaced by an 
occasional call or letter.
    Annual follow-up exams for accounting cases should be conducted on 
a 14-15 month basis to allow for accountings to be reviewed and 
problems to be addressed. Follow up field exams should be limited to 
problem cases.
RECOMMENDATION: IMPROVE COMMUNICATION WITH OTHER AGENCIES
    Although FEs are only responsible for ensuring the proper use of VA 
funds, they are also expected to detect misuse of other benefits such 
as Social Security and military retirement pay. We urge Congress to 
improve the lines of communication between the Fiduciary Program and 
other agencies to enable FEs to alert them to problems. National 
dissemination of reports from Field Examiners at other agencies would 
help VBA understand the proper use of those benefits.
    Currently, Social Security and VBA have a joint program for 
incarcerated beneficiaries; a joint program based on this model for 
Field Examiner fiduciary selection and monitoring should be considered.
    In contrast, we believe that FEs should not be held accountable for 
informing beneficiaries about non-VA rules or benefits such as park 
passes and fishing and hunting licenses; this should be carried out by 
local Veterans Service Organizations.
RECOMMENDATION: INCREASE EMPLOYEE INPUT INTO NEW POLICIES AND PRACTICES
    Frontline Fiduciary Program employees are rarely given the 
opportunity to make suggestions, and when given that opportunity, their 
suggestions are often not seriously considered. Some employees feel 
that they have been chastised or ostracized for making suggestions.
    This program will be greatly improved by input from the people who 
actually know the job--the ones on the front lines who go into 
beneficiaries' homes and nursing facilities on a daily basis. 
Currently, management is making all the decisions based on what they 
feel is best. The front line employees are forced to simply follow 
their lead. Managers make many significant decisions during conference 
calls without considering the effect on FEs and LIEs. Decisions that 
change nationwide directives should not be made without input from the 
field. FEs and LIEs should be included in these conference calls. It is 
too difficult for the managers to communicate all the changes and 
directives after the call takes place.
    Minutes of a meeting should not be policy. Rather, the Fiduciary 
Program should adopt the approach used for Rating Specialists and VSRs 
to issue Fast Letters accompanied by explanations, directives, and 
guidelines.
OTHER RECOMMENDATIONS
    Workforce Recruitment and Retention: The current senior FE career 
ladder--that tops out at a GS-11--is not aligned with recently added FE 
responsibilities. The decisions made by FEs are more consistent with 
the complexity and impact of decisions made by IRS Officers and INS 
agents whose career ladders top out at a GS-12. LIEs should also 
receive have a career ladder that is aligned with that of a VSR. 
Finally, the agency should pay the full cost of FE liability protection 
against civil suits; currently, FEs have to pay half the cost.
    Guidance to Fiduciaries: A subject matter expert should teach a 
structured course on an initial or quarterly basis to inform 
fiduciaries of applicable requirements and their responsibilities. The 
course should include a hands-on component. Their travel costs and lost 
time from work should be reimbursed.
    Quality Assurance: AFGE and NVAC commend VBA for centralizing 
Quality Reviews to increase their consistency, but better training is 
also needed to reduce errors. STAR reviews have become punitive in 
recent years; they are now part of Directors Dashboard, and therefore 
can make or break a performance rating. This also requires employees to 
focus on quantity far more than quality.
    Time Frames for Selection of Fiduciaries: Current time frames for 
completion of initial appointments of fiduciary are not sufficient. 
Given new parameters that apply (with more stringent accounting and 
oversight), it takes more than 45 calendar days to select proper 
fiduciaries who will serve the veteran's best interests. This 45 day 
time frame fails to take into account logistics, and the fact that 
compliance with our requests (including scheduling of appointments and 
returning paperwork) is largely voluntary.
    Case Files: Since there is no need to see the fiduciary after the 
initial appointment, the Principal Guardianship File (PGF) should be 
kept where the beneficiary is, especially because the FE at that 
regional office completes the exam. It is difficult to compare finances 
and accountings without the file. In the alternative, the file could be 
accessed electronically as part of the Virtual VA, which would be 
especially helpful if the fiduciary resides in a different state than 
the beneficiary.
    Improve coordination with state courts. Frequently, state courts 
appoint a fiduciary before VBA gets involved in the case. Problems 
sometimes arise when VBA appoints its own fiduciary, and the court 
dispenses funds in violation of VBA's restrictions that apply to the 
VA-derived portion. Better coordination between the courts and the 
Fiduciary Unit is needed to reduce the incidence of this problem.
    Thank you for the opportunity to testify on this important matter.

                                 
           Prepared Statement of Bradley G. Mayes, Director,
  Compensation and Pension Service, Veterans Benefits Administration,
                  U.S. Department of Veterans Affairs

    Mr. Chairman and Members of the Subcommittee, I am pleased to 
appear before you today to speak of the initiatives underway to enhance 
the Department of Veterans Affairs (VA) Fiduciary Program. I am 
accompanied by Ms. Diana Rubens, Associate Deputy Under Secretary for 
Field Operations; and Mr. Gary Chesterton, Chief, Fiduciary Staff, 
Compensation and Pension (C&P) Service.
    The Fiduciary Program oversees VA benefits paid to those Veterans 
and beneficiaries who, because of injury, disease, or the infirmities 
of age, are unable to manage their financial affairs. VA currently 
supervises more than 108,000 VA beneficiaries with cumulative estates 
exceeding $3 billion. These Veterans, and their widows and children, 
are among our most vulnerable clients.
    VA takes very seriously the recommendations made by the Government 
Accountability Office (GAO) and VA's Office of Inspector General 
(VAOIG) and is working to implement recommendations made in those 
reports as well as other important measures we believe will further 
strengthen the program.
    I would like to highlight some of the strides VA has made within 
the last 18 months, which are contributing to improved service delivery 
and oversight of benefits to this group of Veterans and beneficiaries. 
In September 2008, a new Chief of the Fiduciary Staff was recruited to 
spearhead reform efforts for our Fiduciary Program. Shortly thereafter, 
we selected a new Assistant Compensation and Pension Service Director 
for Veterans Services, who has responsibility for this Program area. 
These individuals bring many years of technical and management 
experience to bear on our efforts to strengthen the Fiduciary Program. 
In addition to these leadership changes, we have increased the staff 
responsible for fiduciary policies and procedures and reassigned a 
portion of the work previously assigned to this staff to VA's National 
Quality Assurance Staff in Nashville, Tennessee. The result is 
significantly more resources dedicated to oversight and policy changes 
aimed at strengthening protections for these Veterans and 
beneficiaries.
    VA is taking steps to clarify existing procedural guidance. The 
operations manual for fiduciary activities, M21-1 MR, Part XI, is 
undergoing a complete revision. Several policy changes are already in 
place to increase protections. Guidance was disseminated to all VA 
regional offices implementing new requirements to obtain documentation 
of any unbudgeted expenses in excess of thresholds agreed to between VA 
and an approved fiduciary in their fund usage agreement. Fund usage 
agreements document recurring expenses that are allowed to be paid out 
of VA benefits to support an incompetent Veteran, beneficiary or 
dependent. Additional requirements are in place for documentation of 
budgeted expenses that exceed pre-approved limits by more than 15 
percent and cannot be verified by bank statements submitted as part of 
the annual accounting requirement. This guidance was issued in C&P 
Service Fast Letter 10-12 dated April 19, 2010.
    Periodic or onsite reviews at a fiduciary's place of business are 
required for those fiduciaries that manage the benefits of 20 or more 
beneficiaries. Increased oversight was established in October 2009 to 
review compliance with this policy. VA's site survey protocol related 
to fiduciary activities now includes an assessment of these onsite 
reviews. Further, policy guidance was released in Fast Letter 10-12, 
which requires the collection of a taxpayer identification number or 
Social Security number for every corporate and individual fiduciary. 
This will assist in identifying those fiduciaries subject to the onsite 
review requirement. The fast letter also requires all onsite review 
reports be submitted to VA Central Office Fiduciary Staff for review 
and analysis. Finally, VA is considering a third-party audit process, 
which could potentially assist with conducting onsite reviews and 
investigations relating to misuse, as well as provide independent 
audits of local fiduciary activities nationwide.
    VA has deployed several measures to improve oversight of 
investigations into allegations of misuse of beneficiary funds. 
Beginning in fiscal year (FY) 2010, the Fiduciary Staff will complete a 
systematic analysis of operations related to VA's misuse determination 
process. This annual review will be incorporated as a standard business 
process for continuous process improvement. The goal of the analysis 
will be to identify areas in which VA fiduciary activities could 
improve in compliance and oversight, and areas in which VA's Fiduciary 
Program could be enhanced to eliminate the potential for misuse of 
Veterans' and beneficiaries' benefits.
    In October 2009, VA's site survey protocol for reviewing fiduciary 
activities at VA regional offices was amended to include a review of 
all documentation pertaining to any misuse allegation. Additionally, in 
cases where a misuse allegation has occurred, policy is now in place 
that requires VA regional office fiduciary activities to forward all 
documentation pertaining to the investigation of these allegations. 
Previously, VA fiduciary activities were required to forward only the 
final misuse determination; however, some allegations had been 
determined to be without merit at the local level and did not warrant a 
formal misuse determination. This policy allows for centralized 
oversight of all allegations, regardless of whether a formal misuse 
determination is determined necessary.
    A major initiative is also underway to develop and deploy 
standardized training for all VA fiduciary activities. The training, 
which is being deployed this month, is an intense, 40-hour session for 
all fiduciary employees nationwide. The training focuses on the 
specific responsibilities of fiduciary managers, field examiners, and 
legal instruments examiners. The prepared course material includes 
instruction on vulnerabilities of the Fiduciary Program, file 
documentation, account audits, estate protection, and fiduciary 
appointments. Additionally, the Fiduciary Staff will conduct a National 
Fiduciary Managers Training Conference in June 2010, to provide in-
depth training on a myriad of fiduciary matters.
    To improve operational efficiencies, VA consolidated the management 
of 14 fiduciary activities within the Western Area under the Fiduciary 
Hub Pilot Program. The Western Area Fiduciary Hub, located at the VA 
Regional Office in Salt Lake City, Utah, is responsible for all 
fiduciary work including field examinations, account audits, fiduciary 
appointments and oversight, and related program responsibilities. VA is 
conducting a full analysis of the Western Area Fiduciary Hub Pilot. The 
analysis with recommendations will be completed by September 30, 2010. 
The analysis will address program strengths, weaknesses, and lessons 
learned, and make recommendations on the feasibility of expansion of 
the hub concept.
    To date, the Western Area Hub has demonstrated improvement in 
processing fiduciary accountings. The standard requires account audits 
to be completed within 14 days of receipt. The Hub has processed 
ninety-four percent of its accountings within the prescribed timeliness 
standard, which is higher than the national average of ninety-three 
percent.
    The Hub is the only fiduciary activity operating in a paperless 
environment, which has served its unique configuration well. Electronic 
forms, field examination packets, and other important information are 
available to every employee of the Hub regardless of the employee's 
location. The Hub also created a Misuse Team, which specializes in 
misuse investigations. The Hub is unique in that it has integrated 
Microsoft MapPoint software in the scheduling of field exams within the 
Western Area Hub's jurisdiction. Utilizing this technology has reduced 
overall travel times and increased the effectiveness of field 
examiners. These are examples of improvements realized with the 
consolidation.
    VA also recognizes the need to improve the information technology 
systems available to its field fiduciary personnel in the 
administration of this program. The current fiduciary electronic case 
management system, the Fiduciary Beneficiary System (FBS), poses some 
limitations with historical data, interfacing with other systems 
currently employed by VA, workload management, and fiduciary oversight. 
We have initiated steps to replace FBS. A project team was established 
in October 2009, to assess the functional requirements for a 
replacement fiduciary case management system. The project team will 
present its findings and recommendations in June 2010. Concurrently, we 
are preparing a request for information to solicit interest from the 
private sector in an alternative electronic case management system.
    Recently, VA had the opportunity to participate in audits of the 
Fiduciary Program conducted by GAO and VAOIG. These audits confirmed 
the validity of our current efforts to eliminate vulnerabilities in 
this important program.
    Finally, VA is taking steps to collaborate with other agencies that 
perform similar functions. We intend to host a round table forum with 
other Federal agencies to share best practices and explore ways to 
strengthen our program.
    In conclusion, I want to affirm the commitment of VA to serve and 
protect our most vulnerable population of Veterans and beneficiaries. 
The interest expressed in our program from VAOIG, GAO, and this 
Committee is a testament to the very important task at hand. VA is 
committed to take every step necessary to ensure we fulfill our 
obligations to protect this special segment of Veterans and 
beneficiaries whom we serve.
    Mr. Chairman, this concludes my prepared remarks. I would be happy 
to address any questions or comments regarding my testimony here today.

                                 
                   MATERIAL SUBMITTED FOR THE RECORD

                                     Committee on Veterans' Affairs
         Subcommittee on Disability Assistance and Memorial Affairs
                                                    Washington, DC.
                                                       May 13, 2010

Honorable Eric K. Shinseki
Secretary
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20420

Dear Secretary Shinseki:

    On Thursday, April 22, 2010, the House Committee on Veterans' 
Affairs' Subcommittee on Disability Assistance and Memorial Affairs' 
convened an oversight hearing entitled ``Examining VA's Fiduciary 
Program: How Can VA Better Protect Vulnerable Veterans and their 
Families?'' Through its Fiduciary Program the Department of Veterans 
Affairs currently supervises more than 108,000 of our most vulnerable 
veterans and their widows and children with cumulative estates of more 
than $3 billion. In FY 2010 VA paid more than $696 million in benefits 
payments to these beneficiaries.
    In 2010, both VA's Office of Inspector General (VA OIG) and the 
Government Accountability Office issued reports criticizing the VA's 
Fiduciary Program for lacking the proper staffing, training, and other 
resources needed for effective oversight of this program and delivery 
of benefits. What is also disturbing is that the issues identified in 
these reports seem to be longstanding because they are almost identical 
to those identified in a 2006 VA OIG Report. In the absence of adequate 
supervision and accountability by VBA, some fiduciaries have misused 
millions of dollars belonging to our veterans and their dependents. 
This is an unacceptable outcome that can be avoided with better 
internal controls.
    In light of the importance of this program, I would like to bring 
to your attention a number of issues that were raised during last 
month's oversight hearing:

      The Veterans Benefit Administration (VBA) has failed to 
(1) obtain seriously delinquent accountings; (2) consistently verify 
questionable expenses reported by fiduciaries; and (3) adequately 
follow up and report on allegations of misuse of beneficiary funds and 
estates.

      VBA's data tracking and case management system, the 
Fiduciary Beneficiary System, does not store data needed to allow the 
agency to effectively manage the Fiduciary Program or accurately target 
vulnerable beneficiary estates.

      The VBA lacks the number of trained staff to fully 
oversee fiduciary-managed estates. Additionally, training for 
fiduciaries may assist VBA in preventing misuse of funds reserved for 
VA beneficiaries.

      The VA OIG noted deficiencies in staffing and workload 
models for the Fiduciary Program. For example, VA OIG observed that 
there was no national fixed maximum number of cases assigned to each 
Field Examiner and Legal Instrument Examiner, nor a fixed limit on the 
number of beneficiaries that any single fiduciary can manage.

      Outreach regarding the Fiduciary Program could be 
improved by updating the material on VA's Web site about the Fiduciary 
Program and including information on the program in the VA Handbook for 
Veterans, Dependents and Survivors and including statistical 
information pertaining to the misuse of funds by VA fiduciaries in the 
Annual Benefits Report to Congress as required by title 38, United 
States Code, section 5510.

    This is an area of serious concern that warrants immediate 
attention. While I appreciate your recent efforts to improve service 
delivery and oversight of benefits, clearly more is needed to improve 
the efficiency and effective of this program. I would appreciate your 
response to these issues by Friday, June 11, 2010. Due to the 
processing delays with Congressional postal mail, please also send your 
responses to Ms. Megan Williams by fax at (202) 225-2034. If you have 
any questions, please call (202) 225-3608.

            Sincerely,

                                                       John J. Hall
                                                           Chairman

Enclosure
KR/tk

                               __________

                                  The Secretary of Veterans Affairs
                                                    Washington, DC.
                                                      July 23, 2010
The Honorable John J. Hall Chairman
Subcommittee on Disability Assistance and Memorial Affairs
Committee on Veterans' Affairs
U.S. House of Representatives
Washington, DC 20515

Dear Mr. Chairman:

    I am responding to your letter in which you listed several 
significant issues raised during your Subcommittee's oversight hearing 
conducted on April 22, 2010, entitled ``Examining the U.S. Department 
of Veterans Affairs' Fiduciary Program: How Can the VA Better Protect 
Vulnerable Veterans and Their Families?''
    I assure you that I share your concerns regarding VA's duty to 
protect our most vulnerable beneficiaries. I agree that the issues 
raised in your letter are vulnerabilities within our Fiduciary Program. 
VA's Chief of Staff, Acting Under Secretary of Benefits, Associate 
Deputy Under Secretary for Field Operations, and Director of the 
Compensation and Pension Service have all been personally involved in 
addressing the deficiencies of the fiduciary program. The process to 
enhance VA's Fiduciary Program began in September 2008 when a new Chief 
was hired to reengineer the program. The enclosure provides the most 
current update on each of your issues of concerns.
    Thank you for your support of VA's efforts to safeguard the assets 
of our most vulnerable Veterans and beneficiaries.

            Sincerely,

                                                   Eric K. Shinseki
Enclosure

                               __________
          Response to Inquiry from the Honorable John J. Hall
            Department of Veterans Affairs Fiduciary Program
    Issue #1: The Veterans Benefits Administration (VBA) has failed to 
obtain seriously delinquent accountings.

    Response: Seriously delinquent accountings are defined as 
accountings that have not been received within 120 days of the due 
date. VBA continues to take all steps necessary to obtain seriously 
delinquent accountings. VA does not simply conduct an accounting on a 
sampling of cases; accountings are required from every fiduciary who 
meets certain criteria (i.e. VA estate exceeds $10,000, the fiduciary 
receives a fee, 100 percent service-connected veteran, court-appointed, 
etc.). Currently, VBA requires 30,444 accountings annually which equate 
to approximately 28 percent of all beneficiaries in the program. To 
eliminate instances of seriously delinquent accountings, VBA developed 
and deployed a national training program that includes methods for 
addressing overdue accountings. The methods include aggressive follow-
up and initiating misuse investigations. In June 2010, VBA hosted a 
National Fiduciary Managers Training Conference, attended by 82 
managers from every regional office, pension management center and area 
office, as well as the Western Area Fiduciary Hub. The training 
conference included comprehensive focus on delinquent accountings and 
methods to obtain them. Since February 2010, VBA reduced the seriously 
delinquent accounting rate from 5.7 percent to 5.2 percent, and 
anticipates making greater progress by the end of the fiscal year.

    Issue 2: VBA has failed to consistently verify questionable 
expenses reported by fiduciaries.

    Response: On April 20, 2010, VBA released Fast Letter 10-12, 
Revised Fiduciary Policies and Procedures (enclosed), which 
significantly heightens the requirements for addressing questionable 
expenditures. This guidance mandates that all non-recurring 
expenditures over $1,000 must have receipts for verification and all 
expenditures exceeding the Fund Usage Agreement by more than 15 percent 
that cannot be verified with financial institution documents must also 
be confirmed by receipts. VBA's Quality Assurance Staff reviews 
completed accountings on a monthly basis for compliance with this 
requirement. Additionally, VBA's Quality Assurance Staff provides a 
quarterly analysis of errors found during the quality reviews.

    Issue 3: VBA has failed to adequately follow up and report on 
allegations of misuse of beneficiary funds and estates.

    Response: VBA's adjudication manual mandates that allegations of 
misuse of beneficiary funds and estates must be addressed by VBA within 
14 days of receipt. In October 2009, the Compensation and Pension 
Service revised the site-visit protocol for VA regional office 
fiduciary activities to include a review of misuse allegations. With 
the release of FL 10-12 on April 20, 2010 (enclosed); every RO 
Fiduciary Activity is now required to submit findings in every instance 
of an allegation of misuse. C&P Service Fiduciary Staff is collecting 
and reviewing these reports. C&P Service will complete an annual 
analysis of misuse processes and procedures to identify areas that may 
be improved.

    Issue 4: VBA's data tracking and case management system, the 
Fiduciary Beneficiary System (FBS), does not store data needed to allow 
the agency to effectively manage the Fiduciary Program or accurately 
target vulnerable beneficiary estates.

    Response: VBA recognizes the need to replace FBS and prepared a 
Request for Information (RFI) seeking private companies with the 
capabilities to provide a replacement product for FBS. The RFI is 
scheduled to be released by the end of fiscal year 2010 and will 
require responses by November 30, 2010. Upon review of the RFI 
responses, VBA will determine the necessary budgetary requirements for 
a replacement program. The proposed timeline calls for a replacement 
FBS program by the end of fiscal year 2011. Additionally, the business 
requirements for the Veterans Benefits Management System (VBMS) include 
a fiduciary component that will allow for greater integration of 
fiduciary functionality.

    Issue 5: VBA lacks the number of trained staff to fully oversee 
fiduciary-managed estates. Additionally, training for fiduciaries may 
further assist VBA in preventing misuse of funds reserved for VA 
beneficiaries.

    Response: Because of a lack of standardized training for VA 
fiduciary activity personnel, VBA deployed a program of standardized 
training in April 2010, which includes a 40-hour classroom-training 
course. Through the end of fiscal year 2011, the training will be 
delivered to approximately 500 VBA employees who staff fiduciary 
activities within the regional offices. Headquarters staff members are 
delivering the training onsite to increase the interactive 
participation and establish a greater level of communication and 
collaboration between Headquarters and the regional offices.
    VBA is also in the process of developing an Internet site for 
private individuals or entities that serve as fiduciaries for our 
veterans and beneficiaries. The proposed site will detail the duties 
and responsibilities of a private fiduciary and provide responses to 
frequently asked questions, links to forms, and links to other sites 
with important information to fiduciaries, e.g. the Social Security 
Administration. The new Web site will be launched by September 30, 
2010.

    Issue 6: The VA OIG noted deficiencies in staffing and workload 
models for the Fiduciary Program. For example, VA OIG observed that 
there was no fixed maximum number of cases assigned to each Field 
Examiner and Legal Instruments Examiner, nor a fixed limit on the 
number of beneficiaries that any single fiduciary can manage.

    Response: The Compensation and Pension Service is currently 
developing staffing and workload models for fiduciary activities 
nationwide. The models will include variations for density of 
population, remoteness of beneficiaries (number of miles traveled), and 
a ratio of field examiners and legal instruments examiners based on the 
number of beneficiaries in the fiduciary program. The models will be 
completed by September 30, 2010.
    VBA does not place a fixed limit on the number of beneficiaries 
assigned to any private fiduciary since each beneficiary's case is 
unique and fiduciary capabilities vary. Fiduciaries with substantial 
experience may be capable of managing a larger number of cases. 
Ultimately, if it is determined that a fiduciary is not performing 
satisfactorily for any or all beneficiaries he or she manages, VBA will 
relieve the fiduciary of cases. Fiduciaries are not VA employees, and 
they are unable to appeal the decision to remove them as fiduciary.

    Issue 7: Outreach and information regarding the Fiduciary Program 
could be improved by updating the material on VA's Web site about the 
Fiduciary Program and including information on the program in the VA 
Handbook for Veterans. Dependents. and Survivors and including 
statistical information pertaining to the misuse of funds by VA 
fiduciaries in the Annual Benefits Report to Congress as required by 
title 38, United States Code, section 5510.

    Response: VBA has significantly broadened outreach efforts to the 
National Guardianship Association, the National Association for Elder 
Law Attorneys, the National College of Probate Court Judges, and 
various State conventions for fiduciaries and guardians. Additionally, 
VBA will provide representation at the American Association of Retired 
Persons (AARP) national convention which is expected to draw 25,000 
attendees. VBA has accepted an invitation to be a plenary speaker at 
the 2010 National Guardianship Association national convention.
    The actions being taken to update VA's Web site regarding the 
Fiduciary Program are addressed in the response to Issue 5. VBA will 
provide information for inclusion in the annual Federal Benefits for 
Veterans, Dependents and Survivors reference guide. VBA anticipates the 
2010 online version will be updated by August 31, 2010, and the 2011 
print version will include the additional fiduciary information.
    VBA is in the process of gathering the data required for the Annual 
Benefits Report (ABR). The ABR is posted on VA's Web site. The next ABR 
will include statistical information, and VBA will amend fiscal year 
2009 ABR to include the data as well.

                                 
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