    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

             WASTE, FRAUD, AND ABUSE IN VA'S PURCHASE CARD PROGRAM

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

                                    HEARING

                                   before the
                  SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                     of the

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

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                             THURSDAY, MAY 14, 2015

                                   __________

                               Serial No. 114-20
                                   __________

           Printed for the use of the Committee on Veterans' Affairs

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                         COMMITTEE ON VETERANS' AFFAIRS

                         JEFF MILLER, Florida, Chairman

    DOUG LAMBORN, Colorado               CORRINE BROWN, Florida, Ranking
    GUS M. BILIRAKIS, Florida, Vice-         Minority Member
        Chairman                         MARK TAKANO, California
    DAVID P. ROE, Tennessee              JULIA BROWNLEY, California
    DAN BENISHEK, Michigan               DINA TITUS, Nevada
    TIM HUELSKAMP, Kansas                RAUL RUIZ, California
    MIKE COFFMAN, Colorado               ANN M. KUSTER, New Hampshire
    BRAD R. WENSTRUP, Ohio               BETO O'ROURKE, Texas
    JACKIE WALORSKI, Indiana             KATHLEEN RICE, New York
    RALPH ABRAHAM, Louisiana             TIMOTHY J. WALZ, Minnesota
    LEE ZELDIN, New York                 JERRY McNERNEY, California
    RYAN COSTELLO, Pennsylvania
    AMATA COLEMAN RADEWAGEN, American
        Samoa
    MIKE BOST, Illinois
                           Jon Towers, Staff Director
                    Don Phillips, Democratic Staff Director

                  SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATION

                        MIKE COFFMAN, Colorado, Chairman

    DOUG LAMBORN, Colorado               ANN M. KUSTER, New Hampshire,
    DAVID P. ROE, Tennessee                  Ranking Member
    DAN BENISHEK, Michigan               BETO O'ROURKE, Texas
    TIM HUELSKAMP, Kansas                KATHLEEN RICE, New York
    JACKIE WALORSKI, Indiana             TIMOTHY J. WALZ, Minnesota

    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

                                  ----------

                             Thursday, May 14, 2015

                                                                       Page

    Waste, Fraud, and Abuse in VA's Purchase Card Program............     1

                               OPENING STATEMENTS

    Mike Coffman, Chairman...........................................     1
        Prepared Statement...........................................    34
    Hon. Beto O'Rourke...............................................     2
    Ann Kuster, Ranking Member
        Prepared Statement...........................................    35

                                   WITNESSES

    Mr. Edward J. Murray, Acting Assistant Secretary for Management
      and Interim Chief Financial Officer, Office of Management,
      Department of Veterans Affairs.................................     4
        Prepared Statement...........................................    35

        Accompanied by:

    Mr. Jan Frye, Deputy Assistant Secretary and Senior Procurement
      Executive, Office of Acquisition and Logistics, Department of
      Veteran Affairs................................................     7
    Prepared Statement...............................................    46

            Mr. Gregory Giddens, Principal Executive Director, Office
                of Acquisition, Logistics and Construction,
                Department of Veterans Affairs

            Mr. Norbert Doyle, Chief Procurement & Logistics Officer,
                Veterans Health Administration, Department of
                Veterans Affairs
    Ms. Linda A. Halliday, Assistant Inspector General for Audits and
      Evaluations, Office of Inspector General, Department of
      Veterans Affairs...............................................     5
        Prepared Statement...........................................    39

        Accompanied by:

            Mr. Quentin G. Aucoin, Deputy Assistant Inspector General
                for Investigations (Field Operations), Office of
                Inspector General, Department of Veterans Affairs

            Mr. Murray Leigh, Director, Financial Integrity Division,
                Office of Audits and Evaluations, Office of Inspector
                General, Department of Veterans Affairs

            Mr. Kent Wrathall, Director, Atlanta Office of Audits and
                Evaluations, Office of Inspector General, Department
                of Veterans Affairs

                            STATEMENT FOR THE RECORD

    Letter & Questions From: Chairman Mike Coffman, To: VA...........    83
    Questions From: Chairman Mike Coffman and Responses From: VA.....    84
    Questions From: Subcommittee and Response From: VA...............    86
    Department of Veterans Affairs, Attachment for Purchase Card
      Hearing........................................................    93
    Department of Veterans Affairs, Credit Card System...............    94
    Letter & Questions, From: Richard Griffin To: VA.................    95
    Memorandum from Jan R. Frye......................................    98
    Department of Veterans Affairs Government Purchase Card..........    99

             WASTE, FRAUD, AND ABUSE IN VA'S PURCHASE CARD PROGRAM

                                  ----------

                             Thursday, May 14, 2015

                 U.S. House of Representatives,
                        Committee on Veterans' Affairs,
                   Subcommittee on Oversight and Investigation,
                                                       Washington, D.C.
        The subcommittee met, pursuant to notice, at 10:31 a.m., in
    Room 334, Cannon House Office Building, Hon. Mike Coffman
    [chairman of the subcommittee] presiding.
        Present:  Representatives Coffman, Miller, Lamborn, Roe,
    Benishek, Huelskamp, Walorski, Kuster, O'Rourke, Rice, and
    Walz.

               OPENING STATEMENT OF CHAIRMAN MIKE COFFMAN

        Mr. Coffman. Good morning. This hearing will come to order.
    I want to welcome everybody to this hearing, ``Waste, Fraud,
    and Abuse of the VA's Purchase Card Program,'' the deficiencies
    of VA's implementation and oversight of its government Purchase
    Card Program.
        The use of government purchase cards is intended to
    streamline payment procedures and improve cash management
    practices at the Department. However, the program has had a
    history of weak internal controls and serious violations of
    procurement laws, including the Competition in Contracting Act
    and the Federal Acquisition Regulation.
        Due to inadequate oversight of the Purchase Card Program,
    especially at the Veterans Health Administration, we have
    learned that VA may have committed as much as $5 billion a year
    in improper and unauthorized procurement expenditures for at
    least the last 5 years. This is truly a staggering amount.
        Given the high number of transactions, 6.2 million in
    fiscal year 2014, and the aggregate billions at risk, it is
    crucial that VA implement effective oversight controls to
    ensure its uses of taxpayer resources are efficiently used for
    veterans. Even after multiple reports from the OIG, the GAO, VA
    continues to leave its program vulnerable to massive waste,
    fraud, and abuse.
        In this regard, for fiscal year 2015, the VA OIG has
    identified the following seven risk areas: number one,
    exceeding authorized purchase limits individually or in
    aggregate; number two, an excessive number of purchase
    cardholders with inadequate justification; number three, an
    unmanageable span of control, the ratio of cardholders to
    approving officials is very high; number four, inadequate
    financial controls prohibiting duplicative or split payments;
    number five, inadequate reporting of financial information;
    number six, insufficient oversight of year-end spending; and
    number seven, inadequate review of purchases by reviewing
    officials.
        Violations of procurement laws are not mere technicalities.
    It is not just a matter of paying a little more for needed
    supplies and services, as some apologists for VA have asserted.
    Among other things, purchase card abuse invites cronyism and
    the directing of business to favored vendors, including those
    who may employ former VA officials.
        Moreover, buying of biologics and medical supplies without
    contracts imperils patient safety. Without contracts, FDA
    certifications are not a legal requirement, nor are the Buy
    America Act or Trade Agreement Act provisions applicable. If
    veterans are later harmed by these products, VA would have
    little recourse without contracts with the vendor.
        Recognizing the importance of compliance with procurement
    laws in Purchase Card Programs, Congress has passed the
    Government Charge Card Abuse Prevention Act of 2012, requiring
    periodic audits, reports, and risk assessments. It also
    requires that agencies hold employees who violate purchase card
    guidelines or make erroneous, improper, or illegal purchases
    accountable through adverse personnel actions, including
    dismissal. Under existing law, agencies may also hold such
    employees personally liable.
        However, rather than following the law and holding its
    employees accountable, VA has often sought to institutionally
    ratify unauthorized commitments, sometimes in wholesale, for
    years of illegal purchases.
        I am sure many of you know that The Washington Post
    published an article this morning involving these very issues,
    citing to a 35-page letter sent to Secretary McDonald months
    ago--months ago--detailing these problems. We distributed that
    letter to every member of this subcommittee and would like to
    get an answer from VA as to what it plans to do to fix the
    litany of problems explained within it.
        In conclusion, VA needs to explain to the subcommittee, to
    taxpayers, and to veterans its continuing and longstanding
    mismanagement of the Purchase Card Program. Each time VA makes
    illegal purchases taxpayers are forced to foot the bill,
    resources to care for veterans are squandered, and the veteran,
    as well as the government assumes all the risk.
        I look forward to the discussion we will have here today on
    this important issue.
        With that, I now yield to the Ranking Member, Mr. O'Rourke,
    for any opening remarks he may have.

        [The prepared statement of Chairman Mr. Mike Coffman
    appears in the Appendix]

                OPENING STATEMENT OF HON. BETO O'ROURKE

        Mr. O'Rourke. Thank you, Mr. Chairman. And thank you for
    holding this hearing. I look forward to the testimony from our
    panel and to their answers from our questions.
        I'll waive any opening remarks, but I'll ask that Ranking
    Member Kuster's full written opening remarks be submitted for
    the record.
        Mr. Coffman. Thank you, Mr. O'Rourke.
        Ask all members waive their opening remarks as per this
    committee's custom.
        With that, I invite the first and only panel to the witness
    table. On the panel from VA, we have Mr. Edward Murray, Acting
    Assistant Secretary for Management and Interim Chief Financial
    Officer of the Office of Management; Mr. Greg Giddens,
    Principal Executive Director of the Office of Acquisitions,
    Logistics and Construction.
        Is Mr. Giddens here? Okay. I think you ought to be at the
    panel. Okay. That's fine.
        Okay. Mr. Jan Frye. Okay. VA Senior Procurement Executive
    and Deputy Assistant Secretary for the Office of Acquisition
    and Logistics. And Mr. Norbert Doyle, Chief Procurement and
    Logistics Officer of the Veterans Health Administration.
        From the Office of Inspector General we have Ms. Linda
    Halliday, Assistant Inspector General for Audits and
    Evaluations. She is accompanied by Mr. Quentin Aucoin, Deputy
    Assistant Inspector General for Investigations, Mr. Kent
    Wrathall, Director of the Atlanta Office of Audits and
    Evaluations, and Mr. Murray Leigh, Director of the Office of
    Audits and Evaluations, Financial Integrity Division, of the
    Office of Inspector General.
        I'd ask the witnesses to please stand and raise your hand.
        [Witnesses sworn.]
        Mr. Coffman. Please be seated.
        Prior to hearing from our witnesses, I would like to note
    the considerable effort VA exerted to substitute witnesses in
    place of those who I requested for this hearing. I requested
    that Mr. Frye, who serves as VA's senior procurement executive,
    attend as the lead witness for VA since it is his role and has
    been for about 8 years to act as VA's chief contracting
    officer. For some unexplainable reason VA pushed back, stating
    that it would not send Mr. Frye and instead would send Mr.
    Giddens, who just passed his fifth week in the position of
    Executive Director of VA's Acquisition Office, which admittedly
    makes him Mr. Frye's superior.
        What strikes me as strange is that VA decided that it would
    be better to send an individual who has been at the helm of
    VA's Contracting Office for just over a month to discuss
    matters that have been affecting VA for years. I specifically
    asked for Mr. Frye to attend because he can speak with
    firsthand experience on the specifics of VA's acquisitions,
    whereas Mr. Giddens can only do so by what he has been told
    about them.
        When this committee makes specific requests for witnesses
    to attend it is because it knows those witnesses can speak to
    the issues in question. We are not asking VA to attempt to
    substitute its judgment for that of the committee in what can
    only be seen as yet another attempt to avoid responding in a
    fully open, candid, and accurate manner to our questions. In
    other words, we do not want a person who has just joined a
    particular office to come and, when asked a question, take it
    for the record since they have only been there for a short
    time.
        Unfortunately, this has become a continuing VA tactic, but
    appears to be a means to avoid answering questions publicly
    when the answer might reflect poorly on VA. All that does is
    stifle the conversation, which defeats the entire purpose of
    having a hearing. Perhaps that is the point.
        Ultimately, VA relented and agreed to send Mr. Frye and Mr.
    Giddens, which is why we have had to seat some witnesses behind
    those who sit at the table.
        With that, Mr. Murray, you are now recognized for 5
    minutes.

     STATEMENT OF MR. EDWARD J. MURRAY, ACTING ASSISTANT SECRETARY
     FOR MANAGEMENT AND INTERIM CHIEF FINANCIAL OFFICER, OFFICE OF
    MANAGEMENT, DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY MR.
       GREGORY GIDDENS, PRINCIPAL EXECUTIVE DIRECTOR, OFFICE OF
        ACQUISITIONS, LOGISTICS AND CONSTRUCTION, DEPARTMENT OF
    VETERANS AFFAIRS, MR. JAN FRYE, DEPUTY ASSISTANT SECRETARY AND
        SENIOR PROCUREMENT EXECUTIVE, OFFICE OF ACQUISITION AND
      LOGISTICS, DEPARTMENT OF VETERANS AFFAIRS, AND MR. NORBERT
     DOYLE, CHIEF PROCUREMENT & LOGISTICS OFFICER, VETERANS HEALTH
             ADMINISTRATION, DEPARTMENT OF VETERANS AFFAIRS

                     STATEMENT OF EDWARD J. MURRAY

        Mr. Murray. Good morning, Chairman Coffman, Ranking Member
    Kuster, and members of this subcommittee. Thank you for the
    opportunity to participate in this hearing and to discuss the
    Department of Veterans Affairs' implementation and oversight of
    our Purchase Card Program. I'm accompanied today by Mr. Greg
    Giddens, Principal Executive Director, Office of Acquisitions,
    Logistics and Construction; Mr. Jan Frye, Deputy Assistant
    Secretary for Acquisitions and Logistics; and Mr. Norbert
    Doyle, Chief Procurement Logistics Officer for the Veterans
    Health Administration.
        I, with the senior leadership at this table and across the
    VA, am committed to ensuring VA's Purchase Card Program is run
    efficiently and effectively. VA relies on the program to buy
    supplies and services in direct support to our veterans. For
    instance, purchase cards are used to buy prosthetics and
    sensory aids to promote veteran health and quality of life.
        As with many large programs, we have experienced
    challenges, as noted in the recent report by the Office of
    Inspector General. We value the recommendations provided by the
    inspector general and have implemented needed improvements to
    strengthen our controls over VA's Purchase Card Program.
        We now close the account or have reduced the card spending
    limits due to inactivity, invalid training certificates, and
    lack of valid warrants, or when employees separate. In December
    2012, our Financial Services Center became the single point of
    control in VA for setting single purchase limits for
    cardholders. Using these controls and others, we have not
    identified any unwarranted cardholders with single purchase
    limits above the micro-purchase limit since January 2013.
        Within VA, VHA has the largest number of purchase
    cardholders, generating a little over 98 percent of the
    purchase card transactions in fiscal year 2014. VHA purchase
    cardholders spend about $3.7 billion annually on approximately
    6 million transactions. As the inspector general noted in their
    2013 report, use of the purchase card is a way for VHA to
    increase purchasing efficiency and cost-effectiveness. VHA's
    Office of Procurement and Logistics provides additional
    oversight for VHA's Purchase Card Program.
        In May 2014, the inspector general issued a report on the
    review of alleged unauthorized commitments regarding purchase
    card transactions in fiscal year 2012. The IG substantiated
    allegations that cardholders made unauthorized commitments and
    that VA had not performed ratification actions on identified
    unauthorized commitments. In total, OIG made nine
    recommendations to VA, all of which were closed by October
    2015--I mean, I'm sorry, April 2015.
        VA has made significant strides in recent years in its
    Purchase Card Program, and we recognize the need to continue to
    expand and improve our oversight internal controls. The Charge
    Card Act has supported our improved program, and we continue to
    develop and refine training for all government Purchase Card
    Program participants.
        Mr. Chairman, this concludes my opening statement. My
    colleagues and I are prepared to answer any questions you or
    other members of the committee may have.

        [The prepared statement of Mr. Edward J. Murray appears in
    the Appendix]

        Mr. Coffman. Thank you, Mr. Murray.
        Ms. Halliday, you are now recognized for 5 minutes.

    STATEMENT OF MS. LINDA A. HALLIDAY, ASSISTANT INSPECTOR GENERAL
       FOR AUDITS AND EVALUATIONS, OFFICE OF INSPECTOR GENERAL,
     DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY MR. QUENTIN G.
     AUCOIN, DEPUTY ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS
    (FIELD OPERATIONS), OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF
        VETERANS AFFAIRS, MR. MURRAY LEIGH, DIRECTOR, FINANCIAL
    INTEGRITY DIVISION, OFFICE OF AUDITS AND EVALUATIONS, OFFICE OF
    INSPECTOR GENERAL, DEPARTMENT OF VETERANS AFFAIRS, AND MR. KENT
     WRATHALL, DIRECTOR, ATLANTA OFFICE OF AUDITS AND EVALUATIONS,
      OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF VETERANS AFFAIRS

                     STATEMENT OF LINDA A. HALLIDAY

        Ms. Halliday. Chairman Coffman and members of the
    subcommittee, thank you for the opportunity to provide
    testimony concerning the OIG's work related to VA's Purchase
    Card Program.
        VA's program enables authorized employees to make purchases
    on behalf of the Federal Government to support VA's mission.
    From fiscal year 2011 to 2014, the value of VA's purchase card
    transactions increased by just over 100 percent, from $1.8
    billion to $3.7 billion.
        Considering the high value and the volume of the purchase
    card transactions, ensuring compliance with policies and
    controls over the use of purchase cards is critical to
    providing and protecting taxpayers' funds in an efficient and
    effective manner.
        The Government Charge Card Abuse Prevention Act of 2012
    requires agencies to establish and maintain safeguards and
    internal controls over purchase cards. OIGs must conduct
    periodic risk assessments of agency purchase cards to analyze
    the risks of illegal, improper, or erroneous payments. Based on
    our risk assessments, we conduct and plan audits and reviews
    that can continue to address high risk areas, inefficiencies,
    and help limit the financial risks to VA.
        Overall, we consider VA's Purchase Card Program at medium
    risk of fraud. However, our recent risk assessments identified
    significant control weaknesses that did not detect or prevent
    transactions involving unauthorized commitments, improper
    payments, split purchases, and purchases that lacked
    appropriate supporting documentation. We identified seven high-
    risk weaknesses in the controls. I won't restate those since
    your opening statement did.
        On May 2014, our report titled ``Review of Alleged
    Unauthorized Commitments Within VA'' substantiated allegations
    that purchase cardholders made unauthorized commitments and
    violated the law by not performing proper ratification actions
    on these unauthorized commitments. An unauthorized commitment
    circumvents Federal competition requirements and increases the
    risks of paying excessive prices and misuses taxpayer funds.
    Ratification is an act of approving an unauthorized commitment
    by an official who has the authority to do so.
        Our review of these alleged unauthorized commitments
    estimated that during fiscal year 2012 and 2013, VA made about
    15,600 potential unauthorized commitments. We projected a value
    of $85.6 million, which was a conservative range, that required
    ratification actions. In one instance, we identified one
    cardholder that made 18 unauthorized commitments totaling
    approximately $4.6 million.
        These commitments occurred over a 10-month period without
    being detected. VA could have prevented and reduced the number
    of unauthorized commitments with stronger controls and early
    detection by ensuring regular oversight.
        VA used a practice of institutionally ratifying bundled
    unauthorized commitments in the past. This practice, in our
    view, does not hold individuals accountable for this serious
    offense and it does not ensure that reasonable prices were
    obtained.
        Given these types of purchase card risks and noncompliance
    with purchasing requirements, we are examining compliance with
    purchase card requirements in VA conference management
    activities for fiscal year 2015. Additionally, in response to
    information obtained during the course of a criminal
    investigation involving purchase card abuses at a VA New Jersey
    Health Care System, we have initiated a follow-on review to
    determine whether the practice of continuing to split
    purchasing is pervasive throughout that healthcare system. Our
    data mining, risk assessments, audits, and reviews are
    complemented with the work performed by the Office of
    Investigations, who performs criminal investigations involving
    purchase card fraud.
        Misuse of purchase cards throughout VA is unacceptable. It
    has existed for years and it contributes to the erosion of
    public trust that taxpayer dollars are being spent wisely and
    effectively.
        We have reported since 1995 inadequate VA controls that
    allowed cardholders to make thousands of unauthorized purchase
    commitments. VA must significantly strengthen its Purchase Card
    Program to prevent future misuse of taxpayer dollars.
        Mr. Chairman, this concludes my statement, and we'd be
    pleased to answer any questions.
        [The prepared statement of Ms. Halliday appears in the
    Appendix]
        Mr. Coffman. Thank you, Ms. Halliday, for your testimony.
        Mr. Frye, at my invitation to VA to testify I originally
    asked for you to provide an opening statement, so I now invite
    you to the table and will recognize you for 5 minutes to do so.

                         STATEMENT OF JAN FRYE

        Mr. Frye. Chairman Coffman, Ranking Member Kuster, and
    members of the subcommittee, thank you for inviting me to
    testify before you this morning.
        Today I find myself in a position I never envisioned myself
    to be in: I'm testifying as a whistleblower.
        Before I go further, I want to assure you I do not enjoy
    being a whistleblower. I am not a disgruntled VA senior
    executive. I am definitely not seeking attention or celebrity.
    I'm here before you because I've been unsuccessful in my
    persistent attempts to bring massive violations of Federal
    acquisition and fiscal laws and regulations to a halt in VA.
        Each of us engaged in Federal acquisition and fiscal
    processes have an overriding responsibility to taxpayers. Those
    of us in leadership positions must always lead in a manner so
    as to maintain the public trust while upholding the integrity
    of the Federal acquisition and financial systems.
        Over the past 5 years, some senior VA acquisition and
    finance officials have woefully violated the public trust while
    Federal procurement and financial laws were debased. Their
    overt actions and dereliction of duties combined have resulted
    in billions of taxpayer dollars being spent without regard to
    Federal laws and regulations, making a mockery of Federal
    statutes.
        I'm not aware of a single senior acquisition leader being
    held accountable for wrongdoing or dereliction in the nearly 10
    years I've been in my present VA position.
        While intentional violations of Federal acquisition and
    fiscal laws add to VA's now infamous corrosive culture,
    recently cited by the White House, these unlawful acts may
    potentially result in serious harm or death to America's
    veterans. When VA procures pharmaceuticals or medical devices
    without terms and conditions afforded via written contracts,
    the government forfeits all legal protections afforded by
    contract law. Efficacy and safety mandates are nonexistent.
    Without contracts, Food and Drug Administration certifications
    are not a legal requirement, nor Trade Agreement Act or Made in
    America provisions.
        Unfortunately, the government has little recourse if
    veterans are harmed by products or services obtained without
    protection of contract terms and conditions.
        In addition, doors are flung wide open for fraud, waste,
    and abuse when contracts are not executed. For example, by law,
    prices paid for goods or services subject to contracts can only
    be determined to be fair and reasonable by duly appointed
    contracting offices. I can state without reservation that VA
    has and continues to waste millions of dollars by paying
    excessive prices for goods and services due to breaches of
    Federal procurement laws.
        Further, traceability and auditability of public funds
    spent without regard for established laws and regulations are
    difficult, if not impossible to realize. Contract award data is
    required statutorily to be recorded in the Federal Procurement
    Data System, which is accessible by the general public. When
    contracts are not executed, the taxpayers are not afforded
    access to data describing these expenditures.
        Also, VA's small business goal accomplishments have been
    and continue to be overstated. Illegal procurements without
    contracts are not included in calculations to determine
    federally mandated small business goals. Thus, we've duped the
    veteran-owned business community we're required by law to
    advocate for.
        The overarching questions are these: How is it possible the
    VA procurement and finance systems have been allowed to operate
    where potentially billions of dollars in goods and services are
    acquired without contracts as required by Federal law? Why are
    VA senior procurement and finance officials not actively
    enforcing acquisition and fiscal laws?
        You just heard Mr. Murray provide the VA's official
    statement in response to your request for this hearing. There
    are no false affirmations in our statement that I'm aware of.
    However, senior leaders before you today know the Department is
    not telling the whole story.
        We hope you won't ask us any questions that will force us
    to tell you about the important pieces we premeditatedly left
    out. If you happen to ask us about what we failed to tell you,
    we hope we can answer your question in such a way as to quickly
    extinguish follow-on questions. In short, obfuscation is our
    game.
        I will no longer be you a party to these VA games. The
    vaunted Veterans Affairs ICARE values, with integrity being
    first, make an attractive lapel pin, but little else if we
    don't live these values daily. We continue to flout integrity,
    the most basic and necessary foundational footing, the very
    core of our being.
        In the recent past, because VA senior leaders would not
    conduct themselves appropriately, I was forced to request
    assistance from congressional Members. For instance,
    Representative Donnelly, now Senator Donnelly, assisted me in
    halting the ubiquitous violations of Federal law in the
    procurement of VA pharmaceuticals in 2012 through hearings he
    mustered. Former Representative Buyer assisted me twice in
    arresting massive violations in the use of miscellaneous
    obligations in 2008 and again in 2010 through hearings.
        In 2013, I attempted to report massive illegal acts to the
    House Oversight and Government Reform Committee, including
    matters involving illegal purchase card use. I was thwarted in
    my efforts when that committee's senior counsel and a VA senior
    acquisition executive, who are friends, conspired to keep my
    letter from Chairman Issa.
        Approximately 7 weeks ago, I disclosed illegal matters in a
    35-page report to Secretary McDonald, which included
    recommendations going forward. My labors have not yet been
    acknowledged. I took to heart the Secretary's invitation for
    whistleblowers to step forward. I believed the Secretary was
    sincere when entreating all VA employees to abide by the words
    found in the West Point Cadet Prayer: ``Make us to choose the
    harder right instead of the easier wrong.''
        However, I hope we can resolve to also live up to the
    remainder of the sentence in which those words are contained,
    and let me read that entire sentence for you: ``Make us to
    choose the harder right instead of the easier wrong and never
    to be content with a half-truth when the whole can be won.''
        Mr. Chairman, this concludes my testimony, and I'm prepared
    to answer questions you or other members of the subcommittee
    may have.

        [The prepared statement of Mr. Jan Frye appears in the
    Appendix]

        Mr. Coffman. Thank you, Mr. Frye, for your remarks.
        Unless there is any member objection, the written
    statements of those who have just provided oral testimony will
    be entered into the hearing record. Hearing none, so ordered.
    And we will now proceed to questioning.
        Mr. Murray, according to VA emails, in late 2012, Mr. Frye
    clearly informed you and others that stopping the illegal use
    of purchase cards does not adversely impact veterans' care. In
    fact, stopping the practice would actually better protect
    veterans and the government by putting contracts in place and
    providing the protections offered under the law.
        So why are the issues identified in 2012 by Mr. Frye still
    not fixed?
        Mr. Murray. If I recall that email, and some of this is
    just going to be recollection, because it was a while ago, and
    I think this occurred after a meeting that we had as well, a
    Senior Assessment Team meeting, but the issue there was we
    agreed to establish a work group, both the Health
    Administration participants as well as the Office of
    Acquisitions and Logistics, to look into these matters. And
    that work group did meet, and the Office of Business Oversight
    did try to pursue those important issues.
        Mr. Coffman. Well, Mr. Murray, obviously there's
    documentation that this practice has gone on for years and has
    been reported to the OIG repeatedly, so it doesn't seem as if
    you're in a hurry to fix it.
        Mr. Frye, why are the issues you outlined in 2012 still not
    fixed?
        Mr. Frye. Well, first of all, let me make sure the
    committee knows what hasn't been fixed. As you know, the IG
    report identified over 2,000 persons where cards were issued,
    and these persons did not have the authority to use the card
    above $3,000. That's one issue.
        But the second issue the IG didn't choose to look in,
    because they had limited their scope, was whether there were
    contracts in place. That's the other element that is absolutely
    essential when cards are used above $3,000.
        Cards used above $3,000 are not a procurement methodology,
    they're a payment methodology. It goes without saying, to pay
    on a contract, you must have a contract. That is the issue in
    question here. That's the issue that some of my colleagues have
    not been willing to talk too much about. And that's primarily
    where we have very, very much abused the system.
        The reason these have not been fixed is because of poor
    leadership. There simply is not the leadership, the
    leadership's will to get them fixed. We know what's wrong.
        The VA has a very complex supply chain system, but we have,
    I think, a relatively easy procurement system. What we buy are
    commercial off-the-shelf products, for the most part. We aren't
    sending people to the moon, we're not sending rovers to Mars,
    we're not prosecuting a war in Southwest Asia. We're buying
    commercial off-the-shelf products and services, and so it's an
    easy procurement mission. But for some reason we've decided,
    and we've been following this model for a long time, that it's
    just too hard for us to put contracts in place in accordance
    with the law.
        So I would say leadership is the lacking ingredient.
        Mr. Coffman. And, Mr. Murray, on January 8, 2013, Glenn
    Haggstrom informed the Deputy Secretary and VA Chief of Staff
    of, quote, ``significant problems in how purchasing was being
    done,'' unquote, basically outlining that contracts weren't
    being created and purchase cards were being misused.
        On January 9, 2013, Mr. Frye published rules for proper
    prosthetics procurement in VHA, but VHA is still circumventing
    the rules, regulations, and law. Why? And I want to remind, you
    are under oath.
        Mr. Murray. I'm not aware of any circumvention that VHA is
    involved in. I will tell you that we have stringent controls
    over our card program and we've made them more stringent since
    2012. We ensure that everybody that purchases under the card
    for authorities greater than the micro-purchase threshold do
    have a valid contracting warrant.
        But as Mr. Frye will tell you, possessing a valid
    contracting warrant requires a high degree of training and a
    high degree of responsibility. So I think that it would be
    something that would be in the procurement space in terms of
    whether those contracts are valid or not.
        Mr. Coffman. Okay. Well, Mr. Murray, I have a copy of the
    email right here in front of me, and it says--again, from Mr.
    Haggstrom to Mr. Gould--prosthetics on purchase cards have
    significant problems in how purchasing was being done by non-
    1102 prosthetic folks holding a warrant. Essentially, there
    were no contracts in place.
        Mr. Frye, why are the laws and regulations being broken by
    VHA procurement?
        Mr. Frye. In the particular case that you bring up, at the
    end of that year, at the end of 2012, I discovered by chance
    that there was an organization, VISN 3 in VHA, that had
    obligated over $50 million in procurement buys without
    contracts. That led me and my staff to believe that the problem
    might be a lot larger.
        As we began to look into it, we discovered wholesale abuse.
    What we discovered was that VHA had warranted contracting
    officers, over 1,100 of them, but these contracting officers
    were not putting contracts in place, they were simply using
    their warrant as their justification to call vendors, order, no
    matter what the amount, and pay for those particular purchases
    with the government purchase card. Of course, that is illegal.
    A contract must be in place before the purchases are made.
        What we accomplished immediately, after some pushback from
    the senior leadership of VA, is we put a temporary provision in
    place that allowed VHA personnel, non-1102s, because they were
    very, very short of qualified people, that the non-1102s were
    allowed to place contracts in place up to $25,000, but they had
    to be supervised by a qualified 1102 contracting officer. From
    $25,000 up to the simplified acquisition threshold of $150,000,
    Mr. Doyle required 1102 contracting officers to put those
    contracts on file.
        So we had to come up with a system to try and mitigate the
    damage that had been in place. And these weren't events that
    just emerged. These were events that had taken place for
    probably many years and probably billions of dollars spent
    without benefit of contracts.
        I remember the first instance that I heard, I was in the
    Washington hospital, and one of the senior prosthetics
    personnel stated that they had ordered a $143 prosthesis and
    paid for it with a government purchase card. And I then asked:
    So you had a contract? He said no. That was the first
    indication of this malfeasance.
        Mr. Coffman. Thank you, Mr. Frye.
        Mr. O'Rourke. you are now recognized.
        Mr. O'Rourke. Thank you. Thank you, Mr. Chair.
        In the little time that I have, I'm going to try to see if
    we can shed some light on how bad this problem was and perhaps
    still is, who has been held accountable that was responsible
    for these problems, whether or not the necessary fixes are in
    place, and then, if we have time, what concerns we have going
    forward.
        So to get to how bad this was and perhaps still is, Mr.
    Frye, you said that these lack of safeguards and controls in
    the practices at the VA when it came to the purchase card could
    have led to serious harm or death. Do we have any specific
    examples of that being the case?
        Mr. Frye. I don't know of any examples, but certainly
    without the safeguards that are included in contracts, you're
    open only to the largesse of the suppliers. For instance, that
    $142,000 prosthetic that I just mentioned, if that prosthesis
    broke the day after we bought it, we've got to rely on the
    contractor to make good, because we have no contractual
    provisions to force him to make good.
        Mr. O'Rourke. I understand and I share your concern about
    that.
        But beyond speculation, Ms. Halliday, do we have with any
    evidence that this practice has caused serious harm or death?
        Ms. Halliday. I don't have absolute evidence that it has
    caused harm or death. I think what we always see is the
    practice is justified because of lack of planning, and it's
    just the easy course. And it seems that to try to get
    compliance VA-wide, enterprise-wide to ensure that everyone is
    taking the proper precautions just doesn't occur.
        Mr. O'Rourke. Okay.
        And for Mr. Murray, can you tell us about what you've done
    to hold those responsible accountable? I think that has been a
    recurring necessary theme on this committee. More than
    resources, I think the VA needs accountability. So could you
    address that?
        Mr. Murray. Yes, sir. Thank you for the question.
        So upon the Charge Card Act of 2012 being implemented, we
    worked with our partners in Human Resources to come up with a
    table of offenses for misuse of either the travel, the
    purchase, or the fleet card. First offense is, in that table of
    penalties, is admonishment all the way to removal.
        Mr. O'Rourke. And has anybody been admonished or removed?
        Mr. Murray. We have reported in the three semi-annual
    reports, two removals, two dismissals.
        Mr. O'Rourke. Two removals related to this problem?
        Mr. Murray. To misuse of a card.
        Mr. O'Rourke. Great. And then if I heard you correctly, Mr.
    Murray, you said that all of the outstanding OIG concerns were
    addressed and closed as of April 2015. Did I hear you
    correctly?
        Mr. Murray. From the unauthorized commitment report that
    they issued in 2014, we closed all those recommendations
    working with the Office of Acquisitions and Logistics.
        Mr. O'Rourke. Okay.
        And, Ms. Halliday, would you care to comment on that? Does
    OIG have any outstanding concerns, and do you agree with Mr.
    Murray's conclusion on that?
        Ms. Halliday. Mr. Murray's team fixed the controls to our
    satisfaction. That's why we closed those recommendations.
    However, you have to have compliance with those controls or you
    still have serious problems. This is the area I think VA really
    struggles with.
        Mr. O'Rourke. And would you care to comment on Mr. Frye's
    statement about how narrow your focus was in addressing some of
    the issues that he has unsuccessfully, it seems, tried to bring
    to the attention of senior VA leadership and whether that
    warrants expanding OIG's investigation of the Purchase Card
    Program?
        Ms. Halliday. When we decided to take a look at the
    purchase cards, we scoped out specific objectives. The issue
    that Mr. Frye is talking about is putting contracts in place,
    and I have other teams that look at contracts.
        The reason we narrowed our focus at the time was VA was
    moving forward to put an integrated operating procedure in
    place to build quality into its contracts. It had put a QA
    program and these, I think if I get it right, the head
    contracting officials would be monitoring the contracts. We
    thought at some point as that started to take hold we would see
    some improvement in this. We had tested those controls and they
    worked when they were used. Unfortunately VA, in our other work
    that we did, we found that they just circumvented the controls
    or ignored them.
        Mr. O'Rourke. And then just briefly, Mr. Frye, going
    forward, can you comment on any change you've seen in
    leadership related to these control issues, accountability, and
    ensuring that we're safeguarding taxpayer dollars under this
    new administration, under Secretary McDonald, compared to
    Secretary Shinseki?
        Mr. Frye. Let me just relate that several months ago I was
    asked to visit three VA healthcare centers. The last one we
    visited remarked that they had just discontinued this illegal
    practice in October of 2014. They were supposed to have
    discontinued this illegal practice in January of 2013. That's
    as far as we've dug into it, but I can assure you that if we
    were to do an investigation, a full investigation, we would
    find that many of these issues still exist.
        I provided to this subcommittee a document that shows the
    potential for $1.2 billion spent without contracts paid for
    with the government purchase cards for fiscal year 2013 and
    half of fiscal year 2014. That information was obtained by us.
    We hired a supplier to come in and help us out. No
    investigation has been made into these potential unauthorized
    commitments. So I would say based on that, they said they
    stopped, but they continued.
        Mr. O'Rourke. Thank you.
        Thank you, Mr. Chairman.
        Mr. Coffman. Dr. Roe, you're now recognized for 5 minutes.
        Dr. Roe. Thank you, Mr. Chairman.
        I think, first of all, Ms. Halliday, if I could get your
    address. You're here so much, I want to send you a Christmas
    card. Okay? You seem to be here so much in front of our
    committee.
        Ms. Halliday. I would appreciate that.
        Dr. Roe. Anyway, one of the things that has been brought up
    is trust. And we look at the Veterans Choice Card, yesterday we
    held a hearing, problems. We look at VA hospital construction.
    We look at now this purchase card. This reminds me of a story
    you're going to see about every year in the local newspaper of
    the secretary at the church that has the credit card and
    overspends and finally gets caught sometimes. That's what this
    reminds me of.
        And you've got 2,000 cards out there without supervision.
    Most of these employees are honest people. I certainly
    understand that. They are. They're not going to do anything
    wrong. But without oversight, it just opens itself up for
    abuse, I think. And I think that's what we're hearing, that
    this has occurred. And we don't know how deep it is because we
    haven't delved into it as deeply as we probably should.
        Let me tell you what happens in the private world of
    Medicare. As a physician, if I go out and pull some of the
    stuff that happened here, I end up in a Federal pen. There are
    huge penalties against what we've done and what has happened
    here without contracts. If you do that in the private world
    under a government contract with Medicare, you're in deep
    trouble in the private world.
        I have heard maybe two people lost their positions from
    this. And that continues to be a problem with the VA, is no one
    is held accountable when these egregious events occur. And it's
    just business as usual.
        And, look, I get it. It's a whole lot easier to take your
    credit card and just purchase something than it is to go out
    and get a contract. That's a lot simpler to do and you
    circumvent a lot of issues and problems, but it's not the way
    the business needs to be done.
        And I'll get to a question.
        Mr. Frye, Colonel, thank you for your service. In any of
    the reviews you've conducted, have you found examples of
    unauthorized purchase cards used in retail businesses like
    Amazon or PayPal or things like that?
        Mr. Frye. As a matter of fact, when this subject first
    emerged in October of 2013 we did hear that there were some
    charges made in the VA central office for PayPal, Amazon.com,
    and, as I recall, some steakhouses, and there seems to have
    been one other, which I can't remember. I don't know whether
    those were adjudicated, but the head of the contracting
    activity at that time in the VA central office informed myself
    and Mr. Haggstrom of these issues.
        Dr. Roe. And, Ms. Halliday, did the OIG find any
    inappropriate purchases to retailers?
        Ms. Halliday. In our annual risk assessments we
    consistently identify transactions we think are high risk or
    suspicious. We had teams go out and look at some purchases
    where we identified in Las Vegas where there was rooms at
    casinos, there was alcohol purchased, things like that. And as
    they drilled down, and this is very resource intensive, we
    found a preponderance of transactions that were made for
    veterans. Happened that the liquor store, the shuttle bus was
    right near the hospital, they were filling up gas there. The
    casinos, the veterans placed in those rooms at night had gone
    through chemotherapy and they were too sick to drive home.
        So it's very hard to find where you find absolute fraud and
    the intent for personal gain. And that's why I think so many of
    these ratifications are occurring, because the VA has gotten
    the benefit. There are costs associated with that, excessive
    prices, things like that.
        When we find an issue that we absolutely think is fraud, we
    hand it over to the Office of Criminal Investigations, and
    Quentin's group would take that, and that is also very resource
    intensive.
        I'd like to ask him to talk to an issue up in East Orange
    that I think you might.
        Mr. Aucoin. We conducted an investigation in East Orange.
    We had a senior supervisory engineer that had brought in a
    contractor of his choosing. And there are two parts to this.
    Part of this was a service-disabled veteran-owned business
    fraud, but also there was a huge element of purchase card
    fraud. There were a lot of transactions set up to be below the
    thresholds for additional scrutiny, and they processed so many
    that we had about $3.4 million of purchase card fraud at this
    facility.
        That case is now pending sentencing. There has been a
    conviction. And the splitting of purchase cards was one of the
    ways they used to conceal this. And upon conviction, we brought
    in our audit group, and they're doing some follow-up work to
    see if they've cleaned up their act, but also this is something
    that we can certainly look at, at other facilities.
        Dr. Roe. So the more you continued to drill down, the more
    you found, is what I'm hearing.
        Mr. Aucoin. Yes. Absolutely.
        Dr. Roe. I don't think we started the buzzer. I've had more
    than adequate time. And I just want to finish by what Colonel
    Frye said. What happened to duty, honor, and country? Yield
    back.
        Mr. Coffman. Ranking Member Kuster, you are now recognized.
        Ms. Kuster. Thank you very much, Mr. Chair. And I
    apologize. I was at a markup in the Ag Committee.
        So thank you all for being with us. And Mr. Frye certainly
    shared my shock reading The Washington Post this morning with
    my colleagues on both sides of the aisle. I am concerned,
    though, about allegations, and maybe it was misquotes, but it's
    a pretty severe allegation to say that people might have died
    for this, and I think if we don't have examples of that, it
    would be best not to sort of catastrophize. But I do understand
    that this is a serious problem.
        So I want to drill down a bit, if I could, and either for
    Ms. Halliday or for Mr. Frye, if you have further information
    on this. I want to drill down on the thousands of
    pharmaceutical purchases and prosthetic purchases without
    contract files to document the purchases, whether they were
    included in this figure of 15,600 unauthorized commitments in
    the IG report. If you know the answer to that, that would be
    helpful.
        I'm trying to narrow the universe as to what is the most
    typical transaction and how this committee, subcommittee, can
    narrow in on changes to improve procedures going forward. So if
    you could, pharmaceutical purchases and prosthetics.
        Mr. Frye. Let me start with pharmaceuticals. I don't know
    that we have any issues in pharmaceuticals right now. We have
    issues that were reported to this bigger committee, the entire
    committee back in 2012.
        Back in 2011, in December of 2011, to be exact, the
    Secretary wrote a letter to Congressman Donnelly and said that
    our illegal activities had ended. Between December 2011 and
    August of 2012, the VHA self-reported 9,700 illegal
    transactions in the purchase of pharmaceuticals. Those
    transactions were never reported to Congress that I know of,
    they were swept under the rug.
        And, frankly, when a report was submitted by Mr. Haggstrom
    and others, and some of the people at the table were
    signatories on that report, they simply omitted those figures
    on a document that was presented to the Secretary to tell him
    about the health of the Department of Veterans Affairs. I
    consider it an absolute lie. It should never have taken place.
    I was not a signatory on the document, for obvious reasons.
        Now let me go to prosthetics. Prosthetics, as I stated
    earlier, we found in 2013, at the same time, and I may have my
    years confused here because I don't have notes in front of me,
    but at the same time we found that we had 2,000 purchase cards
    that had been provided to personnel who didn't have authority
    to use the purchase cards over the $3,000, we at the same time
    discovered that prosthetics personnel were buying prosthetics
    without contracts. They were simply making phone calls to their
    suppliers and buying prosthetics and then liquidating that
    obligation with a government purchase card.
        In a normal situation where you have a contract and you buy
    something, that something is verified by the receiver, usually
    a contracting officer representative or somebody in the
    hospital, they check the block and say, we got it. That receipt
    then goes to the finance center. The finance center takes a
    look at that receipt that's now payable and they confirm that
    there is a legal obligation for that product.
        If there is not a legal obligation, in other words, if they
    don't have a contract number, they get ahold of the person that
    was responsible and tell them: We've got a problem here. We've
    got an unauthorized commitment. A ratification has to take
    place.
        By using the cards, the purchasers simply ignore that
    process. They're able to liquidate that unauthorized
    commitment, no pain, no stain, nobody ever knows. The only
    people who would know are the people that run the Purchase Card
    Program or the people that run the contracting program in the
    organization where those infractions are taking place. And
    that's what's happened in----
        Ms. Kuster. Is there----
        Mr. Frye. Go ahead.
        Ms. Kuster. I want to understand. Is there any record of
    the prosthetic? Because, I mean, we had a hearing recently
    about trying to keep track of an identification. So for recalls
    and the like, you're telling me there's no paperwork, there's
    no file, there's no record of this purchase other than perhaps
    the monthly card statement?
        Mr. Frye. There was undoubtedly some record of the
    purchase, because they paid for that purchase with a purchase
    card, but there is supposed to be a contract. Federal law
    requires contracts be put in place for all requirements above
    $3,000. They must have a contract in place. Something as simple
    as determining a fair and reasonable price can only be made by
    a contracting officer, no one else, by law.
        Ms. Kuster. My time is up. Thank you.
        Mr. Coffman. Mr. Huelskamp, you're now recognized.
        Dr. Huelskamp. Thank you, Mr. Chairman. I appreciate you
    calling this hearing on a very important topic.
        A headline in one of the newspapers was $6 billion in
    illegal spending. Mr. Frye, I can't find that figure. What's
    your range guesstimate? $6 billion that I see, $6 billion to
    $10 billion. Which are you suggesting?
        Mr. Frye. Well, first of all, I never intended that
    document to be sent to the press. I intended for the Secretary,
    when I sent it to him 7 weeks ago, my intent was to do what he
    asked us to do, which was to give him information that he might
    be able to act upon.
        Those ranges are there because we know we spend $5 billion
    a year in fee basis care, and that's where you walk--a veteran
    like myself walks into a VA hospital, for instance----
        Dr. Huelskamp. I want to follow up on the Secretary issue,
    but $6 billion, is that the bottom line? Is it $6 billion to
    $10 billion, is that where that figure comes from?
        Mr. Frye. Without a proper investigation, we'll never know.
        Dr. Huelskamp. No, I understand.
        Mr. Frye. But I'm confident that it's at least $5 billion.
        Dr. Huelskamp. Okay, I appreciate that.
        My second question would be, you sent that letter to
    Secretary McDonald. What was the response from his office?
        Mr. Frye. I have not received a response from his office.
        Dr. Huelskamp. Allegations of up to $6 billion in illegal
    spending, and you have had no response from the Secretary's
    office?
        Mr. Frye. I have not had any response from the Secretary's
    office. I know that he received it, because his assistant
    assured me that both he and Deputy Secretary Gibson had
    received hard copies.
        Dr. Huelskamp. I appreciate that.
        And, Mr. Chairman, I don't know who was called in as a
    witness, but I think that's devastating, that these type of
    allegations and no response. Perhaps Mr. Murray is here to
    respond to that. But I want to ask Mr. Murray about another
    issue.
        In Mr. Frye's letter to the Secretary, when did you read
    that letter?
        Mr. Murray. I have not seen that letter.
        Dr. Huelskamp. You're here to discuss this this morning.
    When were you aware of the letter?
        Mr. Murray. I just found out about this letter this
    morning.
        Dr. Huelskamp. How did you find out about it?
        Mr. Murray. Through discussions with people here.
        Dr. Huelskamp. I guess I'm dumbfounded. You're here to
    speak for the VA about allegations of $6 billion in illegal
    spending and you've never seen the allegations?
        Let me ask you about a meeting July 11, 2014. According to
    Mr. Frye, you were at a meeting discussing many of these
    issues. Do you recall this meeting? Were you actually present
    there?
        Mr. Murray. If this was a Senior Assessment Team meeting, I
    was.
        Dr. Huelskamp. Okay. Did you keep notes of this meeting?
        Mr. Murray. I do.
        Dr. Huelskamp. Will you provide those notes to the
    committee?
        Mr. Murray. I absolutely will.
        Dr. Huelskamp. Okay.
        Mr. Murray. Along with our request to Mr. Frye to provide
    the information he alleged he had from the----
        Dr. Huelskamp. Actually, sir, I make the requests, not you.
        Mr. Murray. Okay.
        Dr. Huelskamp. But I would like to see those notes. Mr.
    Frye alleges that it was proposed by top-level officials that
    violations of the law would continue. Tell me what you heard at
    that particular meeting and were you aware of Mr. Frye's
    concerns.
        Mr. Murray. So Mr. Frye raised his concerns with the CFOs
    at the senior assessment team meeting. The particular item that
    was being--being reviewed at the time he raised those concerns
    was the medical necessity documentation that a physician or
    clinician would provide to authorize care. It was not a
    contracting issue, but he raised the issue of contracting to
    wit we--we said let's get a team together, let's review these
    allegations, let's see the data that you have on this
    particular issue, the----
        Dr. Huelskamp. Did he say he thought the VHA was violating
    the law at this meeting?
        Mr. Murray. I'm sure he did.
        Dr. Huelskamp. Well, I don't know. You were there, I was
    not, Mr. Frye was there. Did he say that?
        Mr. Murray. Yes, I believe he probably--yes, I would say he
    did.
        Dr. Huelskamp. Okay. Well, we'll find that in the notes
    where you referenced it. Did you do anything with that
    information? Now you're in a position to do something with it,
    I guess, for 5 weeks now.
        Mr. Murray. We did. We--so based on that meeting, we put
    together a work group to--to review these allegations. They
    were serious allegations. The work group did meet with VHA. Jan
    Frye did not attend, so the idea was to get to the bottom, to
    get the data that apparently would either substantiate or
    refute these allegations.
        Dr. Huelskamp. I hope you can provide that to the
    committee. Last question would be, I guess, for you, Mr.
    Murray, I'm about out of time for the first round. How many
    active purchase cards are available to VA employees?
        Mr. Murray. I believe the number is about 25,000.
        Dr. Huelskamp. 25,000 cards. How many employees are
    authorized to use 25,000 cards? Is that the same number or is
    it----
        Mr. Murray. No, no, fewer employees have cards. So total
    cards is 25,500, roughly.
        Dr. Huelskamp. I would like documentation of that.
        Mr. Murray. Sure.
        Dr. Huelskamp. How many employees are using----
        Mr. Murray. I have 23,000 cardholders.
        Ms. Rice. How many?
        Mr. Murray. 23,500 cardholders--25,515. I mean, the number
    is ballpark, but cards.
        Dr. Huelskamp. And are you able to indicate how many
    dollars of annual purchases are on these 25,000 active cards?
        Mr. Murray. $3.74 billion is spent, of which 98 percent is
    the health administration.
        Dr. Huelskamp. Okay. Who is the card--the company that
    issues those cards, who's the vendor for that?
        Mr. Murray. That's U.S. Bank.
        Dr. Huelskamp. U.S. Bank. All right. I yield back to my
    next round of questions, Mr. Chairman.
        Mr. Coffman. Thank you, Mr. Huelskamp.
        Ms. Rice. you are now recognized.
        Ms. Rice. Thank you, Mr. Chairman.
        Mr. Frye, I want to start with you. So these cards that are
    issued, whoever is issued those cards is able to make a
    purchase up to $3,000 just without any record kept; is that
    correct?
        Mr. Frye. The purchases made up to $3,000 are called--are
    called ``micro purchases.'' There are records kept. The
    purchase cardholder must keep records, and then the purchase
    cardholder has someone who provides oversight to that
    cardholder, and normally these approving officials, or
    authorizing officials, have a number of cardholders under them,
    so records are kept.
        Ms. Rice. Okay. So anything over 3,000----
        Mr. Frye. I'm sorry?
        Ms. Rice. Anything over--any purchase over $3,000 requires
    a contract?
        Mr. Frye. That's correct. Every purchase over $3,000
    requires a contract. The card can be used above $3,000 to pay
    for those products that are bought under a contract, but it is
    not a contractual instrument. A contractual instrument must be
    in place, by law, above $3,000.
        Ms. Rice. And who enters into that contract? The
    cardholder?
        Mr. Frye. No, cardholders, unless they're also----
        Ms. Rice. There has to be an existing contract within VA.
        Mr. Frye. There has to be a contracting officer above----
        Ms. Rice. Got it.
        Mr. Frye [continuing]. $3,000.
        Ms. Rice. Okay. So the one think I'd--I just want to ask
    you very quickly. The--in New York, obviously I'm from New
    York, so I was a little surprised at this, there was recorded
    $50 million in prosthetic purchases in increments of $24,999,
    which is $1 under the charging limit on each card. Is that--and
    maybe I should direct this question to you, actually, Ms.
    Halliday, is that a red flag?
        Ms. Halliday. It's definitely a red flag. We look at the
    splitting of orders. This is part of the problem in one of the
    high-risk areas that I identified that we focus on the
    transactions and try and take a closer look.
        Ms. Rice. So did you take a closer look at this instance of
    all the----
        Ms. Halliday. No, I was unaware of the example that Mr.
    Frye put out there.
        Ms. Rice. Would you be able to go--I mean, upon a request
    of this committee.
        Ms. Halliday. Obviously we could look at that, and we would
    want to do that. I've stood up an entire new financial
    integrity team to put more oversight under these purchase cards
    because the value of the purchase cards is just skyrocketing,
    and I never saw that the controls were getting strong enough to
    make sure that the program was run effectively.
        Ms. Rice. Well, to me, that's a major red flag, and I
    appreciate your willingness to go back and look at that. You
    made a statement before the controls were fixed, but the VA--by
    the VA, but that compliance is still something that the VA
    struggles with. In your opinion, why?
        Ms. Halliday. Holding people accountable to make sure that
    they really execute their job. I think, in many cases,
    purchases made using the purchase cards, they always say, well,
    they needed to get immediate services to the veteran in the
    medical center. And then when you look at the type of purchase,
    you're like, really, that's just not the case.
        It's lack of planning, but by using a purchase card is a
    quicker method to get the goods and services into the medical
    center.
        Ms. Rice. That's if you're using it to purchase goods and
    services.
        Ms. Halliday. Correct.
        Ms. Rice. Okay. So----
        Ms. Halliday. You know, we--we struggle with when there is
    fraud, a lot of times the documentation is just not there, or
    the audit trail to really look at it because it's been
    destroyed.
        Ms. Rice. So let me ask you--oh, that's the another thing
    that I want you to look into because when they were asked for
    the records regarding the prosthetic purchases in New York,
    they were told that all the records were destroyed by
    Superstorm Sandy----
        Mr. Coffman. Is that right?
        Ms. Rice [continuing]. And they have not been--right? And
    they have not been able to document that to--I mean, we don't
    know that that's true. So maybe you could also inquire into
    that as part of looking into that.
        So I'm just going to ask you two questions to see if you
    can give a specific number. In the past 2 years, how many
    instances of fraud, waste, and abuse with purchase card use
    were found by you?
        Ms. Halliday. I can't get that number. I have to submit it
    for the record.
        Ms. Rice. Okay. So that, and what was the percentage of
    fraud, waste, and abuse found out of the total number of
    purchase card transactions during this time period as well?
    That would be great if you could look into that as well and get
    that number to us.
        So, Mr. Murray, I just have one question for you, and this
    is just an observation that I have made, and it's very
    disturbing. I understand that you were sent here and I
    understand that you have a role to play, but I have--I don't
    think I have ever seen a member of the VA come before this
    committee in the relatively short time that I have been here.
    I've been here for about 5 seconds, right, but I haven't seen
    one member of the VA come and talk about whistleblowers and how
    they're treated, a lack of retaliators being held accountable,
    this allegations of waste, fraud, and abuse with all this
    money, and show any level of outrage. Can you explain that to
    me?
        Mr. Murray. I am outraged. If the allegations are correct,
    I am very outraged, and we take our program responsibilities
    very seriously. We closed the IG recommendations in a year. I
    meet with Ms. Halliday and her team quarterly.
        Ms. Rice. So your response to her saying that while you
    have--controls were fixed by the VA and yet she still sees a
    difficulty in compliance by the VA, what is your response to
    that, and maybe you can--do you have a reason for the lack of
    compliance?
        Mr. Murray. When we meet with the IG on a quarterly basis,
    we take everything seriously. We look at these compliance
    issues, but a lot of what we see is personal responsibility at
    a local level.
        For instance, let me explain. So a cardholder doesn't make
    a purchase by themselves. They have to get their supervisor or
    approving official to approve it. That approving official needs
    to reconcile those transactions with U.S. Bank and certify
    they've reconciled them at the end of every month.
        We review those reconciliations and follow up with the
    field for those self-approving officials that have not been
    executing their fiduciary responsibilities. So, you know, we
    put in place at the departmental level every detective control
    and strong policy on people's responsibilities. For instance,
    the cardholder is supposed to keep records of all the receipts.
    The approving official is supposed to ensure that that--those
    items were, in fact, receipted for, received for, and that they
    were good goods.
        So there is a hierarchy of--of strong policy requirements
    to have a card. In fact, you have to take training to get a
    card, not just on the card itself but on authorized
    commitments.
        Ms. Rice. No, I understand that, but clearly those systems
    are not working. Just Mr. Chairman, with your indulgence. I'm 1
    of 10 kids. If my parents gave all of us a credit card, none of
    us would have gotten a college education, and that's 10 people.
    You're talking about 25,000--35,000--25,500 credit cards. I
    think that has to be looked at as well. That number is just
    enormous.
        Thank you, Mr. Chairman.
        Mr. Coffman. Thank you, Miss Rice.
        Ms. Walorski, you are now recognized.
        Ms. Walorski. Thank you, Mr. Chairman.
        Mr. Murray, I just have to ask. You know, I guess to echo
    many of the things that have just been said here, we have--I've
    been on--this is my third year on this committee, and the
    questions I get asked at home after people watch these hearings
    on C-SPAN, Americans are listening, Americans hear this,
    Americans are at the table, and the expectation for
    transparency and accountability has never been higher in this
    country, and it's been a year since we've had a transfer of
    Secretaries, but the requirements of the American people are
    enough's enough.
        And what I get asked when I go home is this question: How
    do you guys individually not have a gut check on doing right
    for the sake of right? So Mr. Frye identifies this, he comes
    and he talks about it, and you are aware of it. You stand under
    a subpoena in front of a committee that has heard these same
    stories in just about every area of the VA for 3 years and
    longer. Mr. Frye talked about having issues longer than I've
    been here, and doesn't--didn't you have a gut check when these
    allegations came up that even though the VA has been operating
    illegally for all these years, that when it's on your watch,
    that something in your gut says, ``You know what, we have to
    stop this, this is wrong, it's illegal activity,'' did that
    ever dawn on you that this is illegal activity?
        Mr. Murray. We have strong--we have a group of--the office
    of business oversight that actually goes out and checks these
    things.
        Ms. Walorski. That's not the question, and the question
    isn't about the work group. Mr. Murray, do you now think that
    what was going on in the place that you worked was wrong and
    that some day, with all the oversight going on with the VA,
    you're going to sit here under oath with a couple of hours'
    notice and you're going to say what to the American people? Do
    you think what happened is wrong?
        Mr. Murray. So, you know, we've spoken to our office of
    general counsel. I've spoken to contracting officials in the
    health administration. There are different views.
        Ms. Walorski. What's your view, Mr. Murray? You're
    employed, you're under oath to stand here and represent the
    entire Veterans Administration. You are sitting here telling us
    what? This is okay? You were compliant with it? It's wrong, you
    knew it, you agree with Mr. Frye? What's your gut say about it?
        Mr. Murray. My gut is that the--a lot of different parts of
    the organization have looked at this issue and that there are--
    are different views on this issue.
        Ms. Walorski. Mr. Murray, I'm asking you.
        Mr. Murray. And it is a complicated issue.
        Mrs. Walorski. With all due respect, you're representing
    the VA today. I have, you know, three-quarters of a million
    people that pay me to do a job, and the job is to ask you,
    because America's up to here, right, with many areas. You are
    sitting here today, and you're saying what? Do you believe this
    is right or wrong? Are these allegations right or wrong? What
    does your gut say? It sounds like you're taking the Fifth.
        Mr. Murray. So--so--but my--so what I do know is that 99
    percent of these purchases above $3,000 are prosthetics and
    sensory aid purchases, and there is ambiguity in those type of
    purchases, what the controlling legal authority, I thing is
    what they call it, Norb, is. And under the Choice Act, for
    instance, and I think there's legislation up here now to
    provide the VA some flexibility on how we--how we procure, at
    least care in the community in this case. And so the whole--the
    whole issue to me is there is no--there are differences in
    opinion from very, very senior people on.
        Ms. Walorski. Sir, I understand that. Were you afraid of
    losing your job if you identified this? Were you afraid of your
    job security of raising flags?
        Mr. Murray. I am trying to give you the--I'm giving you the
    answer that--there are different people at this table, you
    would get a different----
        Ms. Walorski. But I'm not asking the other people at the
    table, sir. We have an inspector general who has been reliable.
    We have a whistleblower who I thank again for every
    whistleblower that comes in here. We are trying to get to the
    bottom of this to help put the pieces together because we want
    the VA to work.
        So my question is, is this right or wrong? What does your
    gut say? I'm going to take that as you're taking the Fifth, and
    I guess, you know--Mr. Frye, I want to again thank you for the
    multiyear commitment you've made to this, and our district,
    obviously, is very active. I mean, the second district now as
    well, and we are very active because of the amount of veterans
    and families we have. But I think that when America sees this
    kind of response, you know, again it begs the question from
    you, has this department that Mr. Murray been involved in, have
    they done enough to correct this issue? Do you see the remedial
    steps they've taken as being enough?
        Mr. Frye. Absolutely not. I brought these issues up time
    and time and time again. Those of us who bring these issues up
    are scorned, shut aside. For the last 4 years I have--I have
    been shelved because I--because I went to Senator Donnelly----
        Ms. Walorski. Yes.
        Mr. Frye [continuing]. Then Representative Donnelly and
    reported the wrongdoing in the VA. I guarantee you that those
    who--those of us who want to do right are shoved to the side.
    And that is what's happened over at the last 4 years. But I've
    been--I've got record after record where I've addressed these
    issues in emails. There are people that have heard me say this
    below VA about these issues in meeting after meeting after
    meeting, and people simply don't want to hear it.
        Ms. Walorski. I appreciate it. I yield back my time, Mr.
    Chairman.
        Mr. Coffman. Chairman Miller.
        Mr. Miller. Mr. Coffman, I would yield my time to Mr. Walz
    first, and then I----
        Mr. Walz. I will pass to you, Jeff. Thank you.
        Mr. Miller. I hope VA is embarrassed, ashamed at the way
    they treat the people that try to bring problems forward. I'm
    tired of hearing the same thing over and over and over again
    from the VA. Nothing is changing. Regardless of what leadership
    is telling this committee, nothing is changing.
        I talked with the Secretary, and he says, you know, this
    committee needs to quit looking in the past. We need to look at
    where VA is going. I don't trust where they're going. I don't
    think you know where you're supposed to go. The whole idea is
    to serve those who have served this Nation, not to build a
    bureaucracy that serves itself.
        I came into this hearing because I had been monitoring on
    my television in the office, and I couldn't believe the lack of
    specificity that we were hearing, how poorly people have been
    treated. The Office of Inspector General has a job to do, and
    sometimes we get crosswise with them, but that's okay. But on
    this instance they are dead on the mark. And to let this
    continue on and on and on and not be furious about it defies
    anybody's rational thinking. And I hope the Secretary hears
    back from you that this committee is not going to take any more
    steps of faith with the VA.
        Our patience is gone. The American public's patience is
    gone, and the veterans of this country are not being served
    appropriately. So Mr. Chairman, thank you and to your ranking
    member for holding this hearing, and I'm sure that there will
    be more than just this. I am speechless, absolutely speechless.
    I yield back.
        Mr. Coffman. Thank you, Chairman Miller. Dr. Benishek, you
    are now recognized.
        Dr. Benishek. Thank you, Mr. Chairman. Well, I, too, am
    truly amazed by the testimony that we've heard here today, and
    I think it brings to mind, frankly, for me, a piece of
    legislation that I have been trying to get forward here, and
    that is to--when the Office of Inspector General identifies a
    problem with the VA, it seems like there is nobody in charge of
    solving the problem.
        So I'm trying to have a piece of legislation that makes--
    identifies an employee who is supposed to deal with the IG
    report, identifies them by name, and then makes them comply to
    the IG report within 30 days or that person gets disciplined. I
    mean, I think that's a reasonable thing, because right now, we
    have Ms. Halliday talking about stuff, we have Mr. Frye, but
    nobody seems to be the person in charge of fixing it. That's--I
    see as a common theme whenever this stuff comes up here in this
    committee.
        Ms. Halliday, do you think that's a reasonable idea that--I
    mean, a lot of times the VA will agree with your findings and
    never act on it. Do you ever see that happen?
        Ms. Halliday. Absolutely. First, when we give them
    recommendations, we believe that they're telling us in good
    faith what their corrective actions plans are, and what their
    implementation schedule is. The reason we do follow-up is to
    find out if the actions have been effective. So we see that all
    the time.
        Dr. Benishek. You know, the----
        Ms. Halliday. As far as----
        Dr. Benishek. Yes, go ahead.
        Ms. Halliday. As holding someone accountable, I would want
    to tie it to the senior official or the program official
    responsible, not just a person in administration.
        Dr. Benishek. Yes, well, I want to see some somebody's
    name, because otherwise they all say, well, nobody ever took
    care of this, and it wasn't me who was responsible for it. And
    this is in response to IG reports that have gone over 30 years
    as far as physician recruitment that you've made
    recommendations like eight times in the last 30 years. The VA
    has agreed with you, but they never implemented the changes
    that you recommended over 30 years, and this is just another
    example of nobody being responsible for doing anything to fix
    this problem.
        And Mr. Frye, I must congratulate you on your efforts. I'm
    very disappointed in Mr. Murray's testimony here today, but
    just as--I agree with the chairman, this is just outrageous and
    another example of what's going on here, and my disappointment
    for the administration here is exceedingly high at this point.
    I yield back.
        Mr. Coffman. Thank you, Dr. Benishek.
        And Chairman Miller, you had mentioned another hearing on
    the topic of procurement, and this subcommittee will hold
    another hearing on the 1st of June.
        Let me just say, Mr. Murray, I think you're one of the
    reasons why Secretary McDonald is failing. Simply because of
    the fact that he's unwilling, when he came aboard, to remove
    what I would consider the deadwood that is not leading this
    agency, and you're absolutely doing nothing to make a
    difference on this issue, and I--I'm very disappointed in your
    testimony today and in your conduct in this committee. Okay.
        Mr. Frye, can you speak to the potential that one person
    might be buying, paying, and receiving goods in VA and what
    pitfalls that creates?
        Mr. Frye. Absolutely. We need a separation of duties. If,
    for instance, a person is issued a card and if that person buys
    a product with that card, and then pays for the card at the
    same time, there's a chance for waste, fraud, and abuse.
        So, for instance, if we have a contracting officer who also
    has authority to pay above the $3,000 threshold, and they write
    a contract and products, let say, are delivered, let's say for
    the sake of argument they're televisions and they have those
    televisions delivered to their house and they're also able to
    pay for those televisions, perhaps no one would ever catch that
    problem. So we must have a separation of duties.
        Mr. Coffman. Mr. Murray, in your testimony you indicated
    that VA employees made 6.1 million transactions in fiscal year
    2014. Does U.S. Bank card charge a transaction fee?
        Mr. Murray. They do, but we receive rebates for every
    charge that VA makes.
        Mr. Coffman. So is there a net cost to the taxpayer?
        Mr. Murray. There is not. In fact, we got $75 million in
    rebates back to the appropriation from which those costs came
    from last year in fiscal year 2014.
        Mr. Coffman. So it's a real benefit to U.S. Bank Corp then?
        Mr. Murray. Excuse me, sir?
        Mr. Coffman. So it's--you see it as a benefit to the VA?
        Mr. Murray. Sir, the card program was established primarily
    for small items below the micro purchase of $3,000 threshold.
        Mr. Coffman. We know that's not happening. We know that
    they are breaking the purchases up and doing things that were
    in violation of current law. We know that; is that correct?
        Mr. Murray. We have examples of it.
        Mr. Coffman. We know that. Mr. Murray, in 2012, VA
    confirmed that employees were using purchase cards even though
    they did not have the legal authority to obligate the
    government or to use the cards.
        Given the risk to VA, as the OIG can attest, why is VA
    allowing this practice to continue, and why is no one being
    held accountable for breaking regulations in the law?
        Mr. Murray. So VA, we took strong measures upon learning of
    this, so in 2013, the only way an individual, a cardholder can
    hold a card is if they have a contracting warrant. And we now
    check the warrant before the individual gets the card to make
    sure they have the warrant before they get the card with the--a
    threshold above $3,000, and we also check on a periodic basis
    to ensure that they haven't left the agency, they haven't left
    their position, their warrant hasn't changed, so we put a
    strong control there in that only warranted officials,
    contracting officials, can purchase above the micro purchase
    threshold.
        Mr. Coffman. Mr. Murray, we have evidence that there are
    people that do not have the authority that you have stated that
    they have that are still using those credit cards. Are you
    aware of that?
        Mr. Murray. I am not.
        Mr. Coffman. Do you go out of your way to become unaware?
        Mr. Murray. No, sir. We do these checks on a weekly basis.
    We rely on the Office of Acquisitions to provide us accurate
    and complete warrant information. My staff very diligently
    check the cardholder or thresholds against those warrants, so
    no--and the minute we determine that someone no longer has a
    warrant, we reduce the card to a dollar and then close it if
    they can't produce it.
        Mr. Coffman. Mr. Frye.
        Mr. Frye. Yes. Let me respond to that. It is important,
    it's absolutely essential that whomever has a card with
    authority above $3,000 has a warrant, but that's only one of
    two elements. The other element is, is there a contract in
    place? The card is issued for a single purpose, above $3,000,
    and that's to pay the bills, so to speak, for products that are
    purchased through this contract.
        So I applaud the improvement in making sure that people
    have warrants, but what we've got to do is make sure the
    contracts are put in place as well, and that is the piece that
    has not been looked at effectively. We certainly found that
    beginning in December of 2012 and on into 2013 when we put the
    procedure in place so that prosthetics personnel would
    hopefully quit--even though they had warrants, they were
    buying, and buying millions of dollars' worth of products
    without contracts. And hopefully we put that to bed now. But
    again, as I said, I was in a hospital just several months ago,
    and in that hospital they claimed they had just stopped that
    illegal practice in October of 2014.
        Mr. Coffman. Mr. O'Rourke, you are now recognized.
        Mr. O'Rourke. Thank you, Mr. Chairman.
        Ms. Halliday, do we have any idea of how these failures
    compare to those that we might find in other Federal
    departments or agencies? In the backup that I read for this
    hearing, there were instances within the Department of Homeland
    Security and the Department of Defense where you had abuse or
    lack of safeguards in purchase cards. Can you shed some light
    on that?
        Ms. Halliday. I think that there's several Federal agencies
    struggling with these same issues. To the extent that they hold
    their purchase cardholders accountable and their approving
    officials, you're going to have differences. I saw that GSA
    ranked their program medium risk the same as I've ranked this,
    and I want to clarify something on that for you.
        I clarified it medium risk because at 2 percent of the
    total value of the purchases, I'd have to find some $72 million
    worth of fraud, and I hadn't found that. My unauthorized
    commitment report was over 2 years, 85, so half of that.
        I do think that our problems are pervasive enough that this
    needs attention. The way to get to that attention is to make
    sure we hold the approving officials responsible. They're down
    at the lowest level looking at these cards, looking at the
    justification, the need, the appropriateness of the buying, and
    I don't see that as happening.
        Mr. O'Rourke. Yes. So perhaps relative to other Federal
    departments, this is a similar problem, and you know, despite,
    I think, some very valid concerns raised by Mr. Frye, we don't
    have any proof yet of specific instances where someone has died
    or been injured because of this practice. You gave us an
    anecdote that helped show us that at least so far, this money
    wasn't used for poker chips and booze. You know, maybe there
    are instances forthcoming that we should know about, but it's
    deeply troubling nonetheless.
        But what makes it absolutely unacceptable is that this just
    follows in a litany of unaccountability at the VA, and it's the
    $1.1 billion overrun in Aurora, it's the Choice program
    yesterday that we heard about which was budgeted to be spent,
    the entire $10 billion within the next 6 months, and we've only
    spent $500 million.
        So it really raises profound concerns about control and
    accountability at the VA, and whether we use your number of $85
    million in the last 2 years that were unauthorized or we use
    The Washington Post $6 billion number, the fact that only two
    people have been disciplined in any significant way, they both
    lost their jobs to this, makes me uncomfortable with where the
    VA is going.
        And I appreciate Mr. Murray's answers to our questions. But
    really we need the Secretary to respond to this.
        And I 100 percent agree with him that we need to be need to
    be focused on the future and getting this right for the veteran
    going forward. But unless we're sure that these concerns have
    been addressed--and I'm not, following all of these instances
    and the hearing today--it's hard to have that faith.
        And when the VA asks us to expedite the purchasing program
    going forward it makes it hard for us to do that. When the VA
    says let's shift a billion dollars over from this account to
    the other, this lack of control and accountability gives me
    some pause in authorizing that.
        So I really appreciate, Mr. Frye, your work on this, Ms.
    Halliday, what you've shed light on, and also hopefully your
    commitment to further investigate some of the issues that have
    been brought up by different members of the committee. I think
    we're all interested in those answers.
        And I think this committee certainly wants to be a
    constructive partner with the VA. I want to find a way that we
    get these things addressed. Because in El Paso and almost every
    other congressional district we are still seeing wait times 1
    year later after Phoenix that have not improved at all, despite
    the billions of additional dollars that have been authorized
    and the hundreds of millions of dollars that have been
    obligated.
        So we really need some significant, bold, dramatic change.
    It has to be in accountability control.
        Ms. Halliday, you mentioned this erosion in the public's
    confidence in the VA. I mean, this is one more cut against
    that. And I'm really worried about this.
        And so look forward to hearing from the Secretary on how we
    can be his partner in getting this fixed, but we need to see a
    demonstration on the part of the VA that they take this
    seriously. So I appreciate everyone's work on this.
        And I yield back, Mr. Chair.
        Mr. Coffman. Thank you, Mr. O'Rourke.
        And after this committee meeting, we'll be distributing
    some reports whereby the Veterans Administration did purchase
    drugs and tissue on the open market and found it to be
    contaminated.
        Dr. Huelskamp, you are now recognized.
        Dr. Huelskamp. Thank you, Mr. Chairman.
        And after 8 weeks since the memo was sent that they
    indicated that there was a mockery of spending rules, I guess
    I'm still stunned that Mr. Murray was unaware of the memo till
    this morning.
        But, Mr. Doyle, you've been here and haven't had the great
    opportunity to answer many questions. When were you aware of
    the memo from Mr. Frye?
        Mr. Doyle. This morning.
        Dr. Huelskamp. This morning.
        Mr. Doyle. I read it in the news clips, yes, sir.
        Dr. Huelskamp. And your position at the VA is what again?
        Mr. Doyle. I am the Chief Procurement and Logistics Officer
    for VHA.
        Dr. Huelskamp. Don't you think you should have seen this
    memo that had allegations of $6 billion in improper spending,
    most of it directly beneath your purview? Don't you think you
    should have heard about this before today?
        Mr. Doyle. It was shocking, the memo, even the existence of
    it, I guess, but I imagine I've heard issues that were brought
    up in the memo before.
        Dr. Huelskamp. Do you have authority over VHA contracting
    officers assigned to procure prosthetics?
        Mr. Doyle. Yes, I do.
        Dr. Huelskamp. In the memo, Mr. Frye alleges that you claim
    to have no such authority. So is that incorrect in the memo?
        Mr. Doyle. Well, a little bit of history, sir. It's really
    a split. Three years ago we came before some subcommittees, I
    believe this one, on what we called the prosthetics transfer at
    the time. For whatever reason, in VA, years ago, people who
    were not contracting officers had contracting officer warrants.
    We started that process to take the warrants back from all the
    people in pharmacy, logistics, sterile processing, and
    prosthetics.
        That was a deliberate process, and we were very deliberate
    about it because we did not want to hurt veterans at the end of
    this process. It's a quality of life issue for an individual
    veteran. We wanted to make sure we did not impact that.
        We finished that process in October 2013. Since that point,
    every procurement above $3,000 in prosthetics is bought by a
    warranted contracting officer. Now, I say that, that's only,
    although that's still close to 100,000 actions per year, that's
    still only 3 percent of the overall prosthetic actions. Less
    than $3,000 are bought by the procurement folks who work under
    the purview of the medical center directors.
        Dr. Huelskamp. Now, I've got concerns about under $3,000. I
    have concerns about over. One thing I'm not clear, I understand
    the $3,000 threshold, but what is the cap per card? What is the
    maximum that can be charged to each card?
        Mr. Doyle. It varies. It depends on what limits that are
    asked for and approved for that individual. There's a $3,000
    cap for an individual procurement usually. It doesn't even have
    to be up to $3,000. But then there are, I think, monthly,
    monthly limits on how much can be procured in total for that
    individual.
        Dr. Huelskamp. What's the maximum allowed on any card?
    Maybe Mr. Murray has that answer.
        Mr. Doyle. Well, if it's a contracting officer who has the
    card, it's the limit of that contracting officer's warrant. If
    it's below----
        Dr. Huelskamp. What is that limit?
        Mr. Doyle. Well, it can vary by the contracting officer.
        Dr. Huelskamp. What's the highest limit?
        Mr. Doyle. Well, the highest is, for contracting officers,
    an unlimited warrant.
        Dr. Huelskamp. Unlimited, there is no----
        Mr. Doyle. Unlimited, yes, sir.
        Dr. Huelskamp. Okay. I had seen some figures somewhere
    about $150,000, but it's unlimited.
        Mr. Doyle. Well, subcontracting officers have a warrant
    that's limited to $150,000, some might be a million. It varies
    depending on the----
        Dr. Huelskamp. On the--and maybe Mr. Murray--we have 25,500
    cards. Is that active?
        Mr. Murray. That's correct.
        Dr. Huelskamp. And do you know the cumulative limit of
    those cards?
        Mr. Murray. I'd have to get back with you with that number.
        Dr. Huelskamp. Okay. And that number, that limit, if there
    is a limit, is that a monthly limit or is that a cap for a year
    or----
        Mr. Murray. There's both single purchase limits, which
    means per transaction, as well as monthly totals that are
    allowed.
        Dr. Huelskamp. And the variance in totals, that was for the
    monthly or the single purchase, single transaction?
        Mr. Doyle. Well, in the normal course of events an
    individual will have a card that authorizes them up to $3,000.
    If an approving official decides that person does not need that
    $3,000, that cap can be set at some lower dollar value.
        Dr. Huelskamp. Well, I'm worried about the $150,000 or the
    unlimited, which is no cap whatsoever, which seems to be a
    problem area.
        And let me ask Ms. Halliday a question on split purchasing.
    Do you have any evidence that VA employees engage in split
    purchasing transactions on their cards to steer contracts to
    favored vendors?
        Ms. Halliday. If they're splitting purchase orders and
    they're trying to stay below the threshold based on their
    authority, that to me isn't to steer to somebody. They're just
    making those purchases.
        Now, do they have a favorite vendor like the chairman said?
    Possibly. They are circumventing Federal competition
    requirements.
        Dr. Huelskamp. And, Mr. Doyle, are you aware of that
    occurring, and what have you done to stop that?
        Mr. Doyle. Unfortunately, split requirements do happen. I
    don't know if they go to their favorite contractor to benefit.
    The vast majority of unauthorized commitments, I'm convinced,
    because I cite the ratification actions in VHA, are for a bona
    fide need for that facility.
        Dr. Huelskamp. It's not a bona fide need. It's being
    engaged in favoritism in the purchase. We're not saying the
    needs aren't. That's another question. But it's splitting
    purchase so you can avoid that cap, that threshold. Is that
    occurring, and what have you done to stop it?
        Mr. Doyle. I don't have a specific knowledge of it
    occurring. It may be someone gets steered to the IG.
        Dr. Huelskamp. Could be in the memo. Could be in dozens of
    memos you've never seen. But I presume, since this has
    occurred, you've sent an email or contacted the Secretary's
    office to ask him why he didn't see the memo. Have you tried to
    contact him?
        Mr. Doyle. I would not contact the Secretary's office
    directly. I would go through my chain of command in VHA.
        Dr. Huelskamp. Yes, well, you better hurry.
        And I yield back, Mr. Chairman.
        Mr. Coffman. Thank you.
        Ms. Rice. you are now recognized.
        Ms. Rice. Thank you, Mr. Chairman.
        So, Ms. Halliday, I'd just like to go back, and I don't
    know if this has been touched on since I just had to run out.
    But during the course of your investigation did you see any,
    either during it or post issuing it, did you see any
    significant level of accountability for people who were
    engaging in fraudulent, wasteful spending with these cards by
    the VA?
        Ms. Halliday. I think I did cover it. No----
        Ms. Rice. You didn't see any.
        Ms. Halliday [continuing]. Would be the answer.
        Ms. Rice. Okay.
        Ms. Halliday. I do think when we identify an issue that
    goes to criminal investigations there are very specific actions
    that have to take place, criminal prosecutions, restitution,
    penalties, those type of things. I think our investigative
    group takes care of that to the extent that they know it's
    happening.
        Ms. Rice. Now, is there anything that you think we could
    work with the issuing bank on? You know, if you are traveling
    abroad and you use your credit card abroad and it seems like it
    might be a fraudulent activity, they'll deny a charge to make
    sure that it's you.
        And is there any way that you think--I mean, is that one of
    the recommendations that you made? Do you think that would be
    helpful? I mean, I'm just trying to figure out, if you're not
    going to close the universe of people who are given these cards
    and the ability to purchase money, purchase products that cost
    the amount of money that we're talking about.
        Ms. Halliday. Yes, I think the Office of Management has
    started to reduce the purchasing limits on the cards with
    inactive cards and not being able to demonstrate a need for the
    card. I would say, from an IG perspective, we do significant
    data mining and look for all those outliers and anomalies, and
    we do research as many of them as we can. Normally I pick
    financial risk or a pattern to see if there is a problem with
    fraud and then work with investigations.
        Ms. Rice. Okay.
        Mr. Murray, is there--I think it was Mr. Huelskamp that
    asked this question, I think, about the number of people who
    are held accountable. You gave us two, I guess it was a
    reprimand. What were the two things that could be done?
        Mr. Murray. Removals. They were removals. We reported two
    removals.
        Ms. Rice. I'm sorry?
        Mr. Murray. Two removals. Dismissals, removals.
        Ms. Rice. Okay. So from 2010, 2011 to----
        Mr. Murray. It was three semi-annual reporting periods, so
    had to be about 18-month period.
        Ms. Rice. In an 18-month period there were two people who
    were what?
        Mr. Murray. Removed from service, dismissed.
        Ms. Rice. Removed. Anyone reprimanded?
        Mr. Murray. I don't have that information in front of me.
    I'm sorry.
        Ms. Rice. The people who were removed, are you seeking to
    get restitution from them?
        Mr. Murray. I'd have to get back to you with that.
        Ms. Rice. Okay. So, Mr. Murray, the question I have is, if
    there is going to be real systemic reform at the VA, which
    everyone agrees that we need in a bunch of different areas, not
    just in the construction area but the actual procurement area,
    the actual getting medical care to people, the wait times, all
    of those things, would you agree with me that there has to be a
    significant shift in the culture at the VA?
        Mr. Murray. Absolutely would agree with you, and I
    absolutely agree that Secretary McDonald is trying to shift the
    culture. And I believe that I am working with him, and me and
    my staff are doing our very utmost to try to move the culture
    to be more accountable and transparent.
        Ms. Rice. And I do not doubt that at all, and I think that
    Secretary McDonald has that as his main goal as well. But my
    observation is that if you take any one of these cardholders
    who are abusing this system and taking money away from service
    to veterans, and they see their higher-ups coming into this
    room and testifying in the way that they do, that is not going
    to do anything to dissuade people from breaking the rules
    because they know that their higher-ups are going to sit at
    that table right there and they're going to defend the practice
    and never want to admit that they did anything wrong.
        So they can act with complete impunity, it seems to me. So
    if there is going to be a shift in the culture, it has to come
    from the top, and the people underneath you have to know that
    when you come here and you're asked questions like this, you're
    going to say: You're right, this is horrible, and we are going
    to get to the bottom of it, and we are going to hold people
    accountable. It's just a thought.
        Mr. Murray. Yes, ma'am.
        Ms. Rice. Thank you.
        Thank you, Mr. Chairman.
        Mr. Coffman. Mr. Walz.
        Mr. Walz. Well, thank you, Mr. Chairman. Thank you and the
    ranking member for continuing to do what is asked and tasked
    and required of us in our oversight.
        And I passed on my time earlier. Mainly the frustration
    that you heard out of the chairman and many of our members is
    where I'm at, and I want to get solutions other than just
    venting my frustrations, which I think is probably fairly
    important, though.
        And again, Ms. Halliday, welcome, and I echo the sentiments
    of my colleagues. You've been here many times and been very
    helpful.
        I used to have a saying when I'd be here that I'm the VA's
    staunchest supporter and their harshest critic. I'm
    reevaluating that over the years because the first part is not
    having much stick with me.
        You've heard it from folks. Miss Rice was articulating this
    too. There's not much granular detail here. There will be.
    It'll come one way or another, and we'll find out about it and
    get more on it. But I hope everyone was listening. I think the
    ranking member made a very important and clear point about this
    and it was echoed by many other members. There's some advice.
    You all knew what was going to get asked here. Hire somebody to
    tell you what's going to come here. Because, yes, part of this
    is the optics, is what's happening here.
        And then what breaks my heart is, is the VA is damaged for
    a generation. And what kills me is the veterans' lack of trust.
    That's the one I hear all the time. And this makes them
    really--puts our veterans in a really tough spot because they
    have ownership for the VA, and it breaks their heart to see
    these stories in the news because many of them will come to me
    and say: You know, I'm getting really good care at my VA.
        It happens all time. We know that. But these things are
    happening. And it tests their faith, it makes them not be
    advocates that we need them to be for this. And to be very
    honest with you, if there were a fix and they could run into
    the private sector and get the specialized care, that would be
    one thing, but we know that's not there. We know that's what
    the VA is there for in many cases. And if it's not fulfilling
    that, it's not happening.
        So this isn't added on. All of you know. We are so damn--I
    mean, it's just a cliche. The bureaucracy is so siloed up that
    you come today and can't realize this is going to play on
    years' worth. This has to do with Phoenix. This has to do with
    the other issues. And then to try and take us into a kind of
    arcane balancing act on accounting, that wasn't the main
    purpose. The main purpose is to get the answers, and you heard
    people saying this. And I'm not expecting you to violate
    someone's due process or throw them under the bus, but this is
    repeating itself over and over and over again.
        And let's be clear, when the VA comes from now on, you do
    not get the benefit of the doubt. So when you go back and talk
    to your colleagues, you're not getting the benefit of the doubt
    when you come here. And the frustration these members are
    feeling is because they are hearing it from their constituents.
        I have talked about this for 9 years. I talked about
    culture change. That's my job. I'm a cultural geographer. I
    don't for a second believe there is an attempt, especially on
    the levels below, to make that true change.
        You have no time. This is not a multiyear process. It has
    to start today. And the damage is getting deeper, it's getting
    much more difficult to repair, and you're testing the patience
    beyond anything I have witnessed since I've been here.
        So my two cents on this is, is that this Kabuki dance is
    not going to play itself anymore. Be very clear. Someone will
    fix this for you. Someone will fix it for you, and the way our
    system is, that's our responsibility by the American people.
        So thank you, Chairman. I applaud both of your efforts on
    your doggedness on this. And be very clear, while we may have
    differences politically, this is an issue that has unified us
    in a way that I have not witnessed. And so I would say that
    bodes well for us to at least figure out how to get this right.
        I yield back.
        Mr. Coffman. Thank you, Mr. Walz.
        Mr. Lamborn, you are now recognized.
        Mr. Lamborn. Thank you, Mr. Chairman. Thank you for having
    this hearing. I'll just jump right in.
        Mr. Murray, does the VA collect rebates for its use of the
    purchase cards? If so, how much? And also, to what account is
    this deposited?
        Mr. Murray. Thank you for that question. VA collected $75.5
    million in rebates in fiscal year 2014, and that money is
    returned to the accounts that did the original purchase, which
    is primarily the healthcare accounts.
        Mr. Lamborn. Okay. Thank you.
        And also, a VA employee in VISN 3 committed $54 million in
    purchase card authorization without contracts and violated the
    law by using split purchasing to pay for the purchases. How
    could such a large aggregation of unauthorized expenditures
    occur without detection?
        Mr. Murray. There are a number of people use a number of
    cards with a number of approving officials and put change
    vendors, change amounts, put time between the purchases. There
    can be some sophistication in people trying to avoid the
    appearance of a split purchase, and sometimes it's not always
    clear that a purchase is a split purchase.
        Mr. Lamborn. Mr. Frye, would you care to comment on that
    question as well?
        Mr. Frye. Yes. Actually this was a classic case of an
    employee in VISN 3 trying to deceive the public. These amounts
    that were being hand jammed into the Federal Procurement Data
    System, as I recall, were from 2010 and 2011, and these dollars
    were being jammed into the Federal Procurement Data System, I
    think, in a way to make it look like this VISN had increased
    its small business efforts. Don't know for sure because there
    was no--again, nothing is ever--nothing seems to ever be
    investigated to the fullest extent.
        But as you know, it took us nearly 11 months to answer the
    questions. We received a request from Mr. Johnson. It took us
    so long to reply that Mr. Johnson retired, and that response
    went to Mr. Coffman. The response that I received in my office
    for me to chomp on was just ridiculous. It was full of
    obfuscation, falsehoods. And I absolutely blew a gasket. I
    threw it in the trash, and I rewrote it. And then it was signed
    by my boss, then Mr. Haggstrom, and further signed by the
    Secretary, and it came to Mr. Coffman.
        It was deplorable to me that we got responses out of VHA
    that made absolutely no sense whatsoever. But that's why it
    took 11 months to gin up the answer. The first answer we got
    was that the hurricane ruined the files. Complete falsehood.
    There were no files. There were no contract files. No contracts
    were put in place. Prosthetics personnel simply made--it
    appears the prosthetics personnel simply made purchases without
    the benefit of contracts and paid for those using the cards.
        The individual that was caught hand jamming those into FPDS
    didn't actually make the purchases. They were just trying to
    thank--or take credit, we believe, for small business, and they
    were putting purchases in from previous years.
        So it's probably a lot more complex than I've depicted
    here, but no formal investigation was ever done. That's $55
    million, or nearly $55 million, that can't be accounted for
    that the taxpayer never saw it. And worse, maybe that should
    have been set aside for a veteran-owned service-disabled or
    veteran-owned small businesses. It wasn't.
        Mr. Lamborn. Thank you. I appreciate that.
        Mr. Chairman, I yield back.
        Mr. Coffman. All right. Thanks to the witnesses today. Are
    there any more comments? Questions?
        Prior to excusing you, Mr. Murray, I would like to get your
    guarantee and assurances that Mr. Frye, who has testified as a
    whistleblower today, will not be subjected to any retaliation
    by VA for doing so. Will you make that guarantee to me?
        Mr. Murray. I will.
        Mr. Coffman. Very well.
        You are now excused. Thank you for your testimony.
        Today we have had a chance to hear about problems that
    exist within the Department of the Veterans Affairs with regard
    to oversight of its Government Purchase Card Program. Based on
    the testimony provided and questions asked today, it appears
    that VA is failing to adequately monitor the use of its
    purchase cards and those who hold them, which is resulting in
    the waste of billions of taxpayer dollars and should be used to
    serve our veterans.
        As such, this hearing was necessary to accomplish a number
    of items, to, number one, identify the continuing widespread
    problems with VA with regard to the use of Government Purchase
    Cards; two, to allow VA to provide answers as to why these
    problems will exist and have been allowed to continue for so
    long; and three, assess next steps that must be taken by the
    Department in order to stem the continued waste out of taxpayer
    dollars.
        I ask unanimous consent that all members have 5 legislative
    days to revise and extend their remarks and include extraneous
    materials. Without objection, so ordered.
        Mr. Coffman. I would like to once again thank all of the
    witnesses and audience members for joining in today's
    conversations. With that, this meeting is adjourned.
        [Whereupon, at 12:25 p.m., the subcommittee was adjourned.]

                                    APPENDIX

             Prepared Statement of Chairman Mike Coffman, Chairman

        Oversight and Investigations Remarks
        ``Waste, Fraud, and Abuse in VA's Purchase Card Program''
        May 14, 2015
        Good morning. This hearing will come to order.
        I want to welcome everyone to today's hearing titled, ``Waste,
    Fraud, and Abuse in VA's Purchase Card Program.'' This hearing will
    examine the deficiencies in VA's implementation and oversight of its
    government Purchase Card Program.
        The use of Government Purchase Cards is intended to streamline
    payment procedures and improve cash management practices at the
    Department. However, the program has had a history of weak internal
    controls resulting in serious violations of procurement laws, including
    the Competition in Contracting Act and the Federal Acquisition
    Regulation. Due to inadequate oversight of the Purchase Card Program,
    especially at the Veterans Health Administration, we have learned that
    VA may have committed as much as $5 billion a year in improper and
    unauthorized procurement expenditures for at least the last five years.
        This is a truly staggering amount. Given the high number of
    transactions--$6.2 million in FY 2014--and the aggregate billions at
    risk, it is crucial that VA implement effective oversight controls to
    ensure it uses taxpayer resources efficiently for veterans. Even after
    multiple reports from the OI-G and GA-O, VA continues to leave its
    program vulnerable to massive waste, fraud, and abuse. In this regard,
    for fiscal year 2015, VA OI-G has identified the following seven high
    risk areas:
        1) Exceeding authorized purchase limits individually or
    aggregately;
        2) An excessive number of purchase cardholders with inadequate
    justification;
        3) An unmanageable span of control (ratio of cardholders to
    approving officials is high);
        4) Inadequate financial controls prohibiting duplicative or split
    payments;
        5) Inadequate recording or reporting of financial information;
        6) Insufficient oversight of year-end spending; and
        7) Inadequate review of purchases by reviewing officials.
        Violations of procurement laws are not mere technicalities. It is
    not just a matter of paying a little more for needed supplies and
    services as some apologists for VA have asserted. Among other things,
    purchase card abuse invites cronyism and the directing of business to
    favored vendors, including those who may employee former VA officials.
    Moreover, buying biologics and medical supplies without contracts
    imperils patient safety. Without contracts, F-D-A certifications are
    not a legal requirement nor are the Buy American Act or Trade Agreement
    Act provisions. If veterans are later harmed by these products, VA
    would have little recourse without contracts with the vendor.
        Recognizing the importance of compliance with procurement laws in
    Purchase Card Programs, Congress passed the Government Charge Card
    Abuse Prevention Act of 2012 requiring periodic audits, reports, and
    risk assessments. It also requires that agencies hold employees who
    violate purchase card guidelines or make erroneous, improper, or
    illegal purchases accountable through adverse personnel actions,
    including dismissal. Under existing law, agencies may also hold such
    employees personally liable. However, rather than following the law and
    holding its employees accountable, VA has often sought to
    institutionally ratify unauthorized commitments, sometimes in
    wholesale, for years of illegal purchases.
        I am sure many of you now know that the Washington Post published
    an article this morning involving these very issues, citing to a 35-
    page letter sent to Secretary McDonald months ago detailing these
    problems. We distributed that letter to every member of this
    Subcommittee and would like to get answers from VA as to what it plans
    to do to fix the litany of problems explained within it.
        In conclusion, VA needs to explain to this Subcommittee, to
    taxpayers, and to veterans, its continuing and longstanding
    mismanagement of the Purchase Card Program. Each time VA makes illegal
    purchases, taxpayers are forced to foot the bill, resources to care for
    veterans are squandered, and the Veteran as well as the government
    assumes all the risk.
        I look forward to the discussion we will have here today on this
    important issue. With that, I now yield to Ranking Member Kuster for
    any opening remarks she may have.

               Prepared Statement of Ranking Member Ann M. Kuster

     Thank you Mr. Chairman.
     Purchase cards simplify the often-cumbersome practice of
    procurement. The use of purchase cards by Federal agencies, including
    the VA, is estimated to save these agencies $1.7 billion per year. But
    their very ease of use sometimes invites abuse.
     Recent reports have detailed abuses in the Departments of
    Defense and Homeland Security. The work of the VA Inspector General has
    highlighted areas of abuse and concern with the VA's use of purchase
    cards. It is my hope today that we can discuss the benefits of this
    program, as well as the problems, and that we can work together to find
    solutions that strengthen the VA's internal controls and oversight to
    ensure that VA has more resources to spend on our veterans, and that
    these resources are used for proper purposes.
     The recent VA Inspector General findings, while not as
    shocking as the DoD and DHS scandals, are still troubling. I am
    concerned about the VA's lax oversight over purchase cards, and the
    lack of accountability for purchase card holders. While purchase cards
    are necessary to VA operations, we must thoroughly examine the policies
    and processes in place to prevent further misuse and hold VA employees
    accountable for violations of federal acquisition law and regulations.
     The data is concerning: from 2012 to 2013, 15,600 purchase
    card transactions valued at $85.6 million may have been unauthorized
    purchases. Although the vast majority of these purchases were for
    legitimate purposes--not fraud, waste, and abuse--acquisition law was
    still violated and employees were not held accountable. Many of these
    card holders allegedly exceeded their authorized purchase limit. In
    other instances, card holders split purchases--which is the practice of
    improperly dividing what should have been a single purchase into
    separate purchases to avoid micro-purchase thresholds and Federal
    Acquisition Regulation (FAR) competition requirements. Additionally,
    due to the large volume of unauthorized purchases, VA failed to follow
    proper procedures to ratify each of these unauthorized purchases, which
    meant that VA employees were not held accountable for circumventing the
    law.
     One of the areas I would like us to focus on this morning is
    whether VA has an adequate number of Approving Officials to ensure that
    purchases are scrutinized before they are made, and not just looked at
    afterwards. Does VA have the resources to provide adequate oversight,
    and the focus on this program that I believe they need. Are cardholders
    provided a suitable level of training in order for them to avoid making
    improper or unauthorized purchases?
     Another area I would like to explore is whether technology may
    provide us with an additional layer of oversight and scrutiny. The use
    of financial algorithms similar to those used by credit card companies
    to detect fraud can also be used to detect improper use.
     I look forward to hearing the testimony from our witnesses,
    and working with each of you to strengthen oversight of VA procurement.
     Thank you Chairman Coffman, and I yield back the balance of my
    time.

                    Prepared Statement of Mr. Edward Murray

        Good morning, Chairman Coffman, Ranking Member Kuster, and Members
    of the Subcommittee. Thank you for the opportunity to discuss the
    Department of Veterans Affairs' (VA) implementation and oversight of
    our Government Purchase Card Program. I am accompanied today by Mr.
    Gregory Giddens, Principal Executive Director, Office of Acquisitions,
    Logistics and Construction (OALC), Mr. Jan Frye, Deputy Assistant
    Secretary for the Office of Acquisition and Logistics and Mr. Norbert
    Doyle, Chief Procurement and Logistics Officer for the Veterans Health
    Administration (VHA).
        VA has a robust Government Purchase Card Program with 25,515 card
    accounts generating $3.7 billion worth of purchases in 6.1 million
    transactions as of the end of Fiscal Year (FY) 2014. We rely on this
    program to aide in the expeditious acquisition of supplies and services
    in support of our Veterans. For example, purchase cards are used for
    acquisition of prosthetics and sensory aids that promote health,
    independence and quality of life for Veterans. As with many large
    programs, we have experienced challenges in implementing the Government
    Purchase Card Program as noted in recent reports by VA's Office of the
    Inspector General (OIG). We value the recommendations provided by OIG
    and have implemented needed improvements to strengthen controls over
    VA's Purchase Card Program.

    Background

        Implementation, including oversight and internal controls, of VA's
    Purchase Card Program is a collaborative effort across the Department.
    Key Department-level participants include OALC, VHA, and the Office of
    Management (OM). In implementing our program we are acutely aware of
    the need to effectively manage taxpayer resources; as such, we maximize
    use of the Government Purchase Card Program to reduce administrative
    overhead costs while earning rebates.
        OALC is responsible for the acquisition policy for the Department.
    In this role, OALC manages the delegation from the Secretary for the
    micro-purchase authority (less than $3,000). OALC further delegated the
    micro-purchase authority, which is specific to the Governmentwide
    commercial Purchase Card Program, to OM. OALC maintains responsibility
    for procurement policy of the program above the micro-purchase
    threshold, while OM is responsible for providing policy up to the
    micro-purchase threshold.
        OM establishes purchase card policies and procedures defining roles
    and responsibilities, ensuring separation of duties, and overseeing the
    management of VA's Purchase Card Program. OM also ensures that VA
    purchase card policies are in compliance with Appendix B of the Office
    of Management and Budget (OMB) Circular A-123, ``Improving the
    Management of Government Charge Card Programs,'' and with the
    Government Charge Card Abuse Prevention Act of 2012.
        In October 2011, VA took a significant step toward strengthening
    internal controls by consolidating the Purchase Card Program under the
    Financial Services Center (FSC). This action enabled centralized
    oversight, management, and consolidation of the Purchase Card Program,
    thus reducing the number of purchase card accounts VA-wide by 31
    percent from approximately 37,000 in FY2011 to 25,515 by the end of
    FY2014.
        VA is committed to continuous monitoring and improvement of its
    Government Purchase Card Program and has implemented a number of
    processes and internal controls to minimize and eliminate fraud, waste,
    and abuse. For example, we close or reduce card spending limits due to
    inactivity, invalid training certificates, lack of valid warrants, or
    for separated employees. Controls have been implemented with the U.S.
    Bank to limit the use of the government purchase card for specific
    types of merchants. We also have mandated the use of the U.S. Bank on-
    line portal for reconciliations of purchase card transactions and
    monitor the completion of reconciliations on a monthly basis. Training
    is required prior to the issuance of a card, with refresher training
    required every two years. In addition, controls have been implemented
    to ensure active government purchase card holders are compliant with
    these training requirements. As noted, with centralized control within
    FSC, we are able to monitor purchase card activity across VA on a
    daily, weekly and monthly basis. Using these controls, we have not
    identified any cardholders with single purchase limits above the micro-
    purchase threshold who were not warranted since January 2013.
        OM also conducts two types of oversight reviews of the Purchase
    Card Program at the transactional level--data mining and statistical
    sampling. The data mining process involves collecting, filtering, and
    analyzing approximately 1.5 million transactions each Fiscal Quarter to
    seek patterns or relationships in the data and identify areas of
    potential non-compliance with policy requirements. The statistical
    sampling seeks to select and evaluate a representative sample of
    transactions from the same population to review for compliance with
    policy. OM issues quarterly memoranda to responsible officials to
    notify them of potential unauthorized commitments such as split
    purchases and transactions that exceeded micro-purchase limits that may
    require ratification. Beginning in 2015, if no response is received
    from the initial responsible official, OM elevates the potential
    unauthorized commitments to officials in the cardholder's chain of
    command--with 30 day intervals between each elevation. In calendar year
    2014, we issued nine elevation memos for 95 ratifications pending
    completion at the time of the OIG review. We also continue to
    aggressively elevate unresolved ratifications identified during
    quarterly reviews, and have issued eight additional elevation memos to
    date in 2015 for 49 open ratifications.
        Within VA, VHA has the largest number of government purchase
    cardholders, generating a little over 98 percent of purchase card
    transactions in the Department in FY2014. VHA purchase cardholders
    spend about $3.7 billion annually on approximately 6 million
    transactions. VHA has approximately 11,000 cardholders and 6,000
    approving officials (AOs); typically the AO is a supervisor within the
    cardholder's chain of command. VHA's Procurement and Logistics Office
    provides additional oversight over VHA's Purchase Card Program.

    Government Charge Card Abuse Prevention Act of 2012

        On October 5, 2012, the President signed into law the Government
    Charge Card Abuse Prevention Act of 2012 (Charge Card Act), Public Law
    112-194, which reinforced Administration and Congressional efforts to
    prevent waste, fraud, and abuse of Governmentwide charge card programs.
    In September 2013, OMB issued guidance to Departments and Agencies on
    implementation of the Charge Card Act. In December 2013, VA's Financial
    Policy was updated to comply with the Charge Card Act and OMB guidance.
        A chief purpose of the Charge Card Act was to deter employee misuse
    of government cards, by implementing penalties for charge card
    violations. Additionally, VA revised Human Resources policy to outline
    penalties, adverse personnel actions, or other appropriate disciplinary
    actions for misuse of the purchase card.

    Corrective Actions To Address OIG Findings

        In the report ``Administrative Investigation of VA's FY2011 Human
    Resources Conferences in Orlando, FL'', issued September 2012, OIG
    found that at least one VA employee held at least 3 purchase cards with
    single purchase limits above the micro-purchase threshold and had
    inappropriately made purchases above the micro-purchase threshold. OIG
    recommended that VA complete a special review of purchase card
    transactions in support of VA Learning University conferences. OM took
    this weakness in internal controls very seriously and opted to expand
    this review VA-wide across the entire Purchase Card Program.
        During its review, OM identified a total of 2,022 unwarranted
    purchase card accounts with single purchase limits over the micro-
    purchase threshold. OM initiated a reconciliation and corrective action
    process, which resulted in the systematic reduction of single purchase
    limits as prescribed in the cardholder's valid warrant. That process
    was completed by January 2013.
        Concurrent to the review, in December 2012, the FSC became the
    single centralized point of control in VA for setting the single
    purchase limit for a cardholder. All requests to raise or lower the
    single purchase limit on a purchase card account must be submitted to
    the FSC. Requests to raise the single purchase limit over the micro-
    purchase threshold are reviewed to verify that the cardholder possesses
    a valid warrant on the most recent OALC warrant report. In addition, as
    of December 2013, U.S. Bank routes the request for the issuance of new
    Government Purchase Cards to FSC for review and approval or rejection.
    FSC then works to ensure full compliance with policy and validates
    training and warrants during the review process.
        In May 2014, OIG issued a report on the ``Review of Alleged
    Unauthorized Commitments'', which reviewed purchase card transactions
    from FY2012, substantiated allegations that cardholders had made
    unauthorized commitments, and that VA had not performed ratification
    actions on identified unauthorized commitments. In total, OIG made nine
    recommendations to VA, all of which were closed by April 2015.
        In its report, OIG also projected 15,600 potential unauthorized
    commitments, valued at approximately $85.6 million in FY2012 and
    FY2013. OIG recommended OM review FY2012 and FY2013 purchase card
    transactions exceeding $3,000 to identify unauthorized commitments made
    by cardholders who did not have appropriate warrant authority. In 2014,
    OM conducted the review of 57,577 high risk transactions valued at
    $586.5 million. OM determined that roughly 29 percent, 16,686
    transactions, valued at $221.2 million were potentially unauthorized
    commitments and needed research and validation from Heads of
    Contracting Activity (HCA) before a final ratification determination
    could be made. The result of the initial review of the 16,686
    transactions by HCAs identified 4 percent or 680 unauthorized
    commitments totaling $10.7 million. VA continues to review these
    transactions for appropriate action.

    Path Forward

        VA has made tremendous strides in recent years in its Purchase Card
    Program, however, we recognize the need to continue to expand and
    improve our oversight and internal controls. The Charge Card Act has
    supported our improved program and we continue to develop and refine
    training for all Government Purchase Card Program participants; to
    develop and continuously monitor data analytics to identify trends of
    misuse and abuse and elevate for appropriate remediation; and to seek
    ways to develop a cross-functional mechanism of continuous
    improvements.
        Mr. Chairman, this concludes my testimony. My colleagues and I are
    prepared to answer any questions you, or other Members of the
    Committee, may have.

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                       Prepared Statement of Jan R. Frye

        Chairman Coffman, Ranking Member Kuster, and Members of the
    Subcommittee. Thank you for inviting me to testify before you this
    morning. Today I find myself in a position I never envisioned myself to
    be in. I am testifying as a whistle blower.
        Before I go further, I want to assure you I do not enjoy being a
    whistle blower. I am not a disgruntled VA Senior Executive. I am
    definitely not seeking attention or celebrity. I am here before you,
    because I have been unsuccessful in my persistent attempts to bring
    massive violations of Federal acquisition and fiscal laws and
    regulations to a halt in VA.
        Each of us engaged in Federal acquisition and fiscal processes have
    an overriding responsibility to taxpayers. Those of us in leadership
    positions must always lead in a manner so as to maintain the public
    trust, while upholding the integrity of the Federal acquisition and
    financial systems.
        Over the past five years, some senior VA acquisition and finance
    officials have willfully violated the public trust while Federal
    procurement and financial laws were debased. Their overt actions and
    dereliction of duties combined have resulted in billions of taxpayer
    dollars being spent without regard to Federal laws and regulations,
    making a mockery of Federal Statutes. I am not aware of a single senior
    acquisition leader being held accountable for wrongdoing or dereliction
    in the nearly 10 years I've been in my present VA position.
        While intentional violations of Federal acquisition and fiscal laws
    add to the VA's now infamous ``corrosive culture'' recently cited by
    the White House, these unlawful acts may potentially result in serious
    harm or death to America's veterans. When VA procures pharmaceuticals
    or medical devices without terms & conditions afforded via written
    contracts, the government forfeits all legal protections afforded by
    contract law. Efficacy and safety mandates are nonexistent.
        Without contracts, Food and Drug Administration certifications are
    not a legal requirement, nor are Trade Agreement Act or Made-in-America
    provisions. Unfortunately, the government has little recourse if
    veterans are harmed by products or services obtained without protection
    of contract terms & conditions.
        In addition doors are flung wide-open for fraud, waste and abuse
    when contracts are not executed. For example, by law, prices paid for
    goods or services subject to contracts can only be determined to be
    fair-and-reasonable by duly appointed contracting officers. I can state
    without reservation that VA has and continues to waste millions of
    dollars by paying excessive prices for goods and services due to
    breaches of Federal procurement laws.
        Further, traceability and auditability of public funds spent
    without regard for established laws and regulations are difficult if
    not impossible to realize. Contract award data is required statutorily
    to be recorded in the Federal Procurement Data System (FPDS), which is
    accessible by the general public. When contracts are not executed,
    taxpayers are not afforded access to data describing these
    expenditures.
        Also, VA small-business goal accomplishments have been and continue
    to be overstated. Illegal procurements without contracts are not
    included in calculations to determine Federally mandated small-business
    goals. Thus we've duped the veteran-owned business community we are
    required by law to advocate for.
        The overarching questions are these: How is it possible the VA
    procurement and finance systems have been allowed to operate where
    potentially billions of dollars in goods and services are acquired
    without contracts as required by Federal law? Why are VA senior
    procurement and finance officials not actively enforcing acquisition
    and fiscal laws?
        You have just heard Mr. Murray provide the VA's official statement
    in response to your request for this hearing. There are no false
    affirmations in our statement that I am aware of. However, senior
    leaders before you today know the Department is not telling the whole
    story. We hope you won't ask us any questions that will force us to
    tell you about the important pieces we've premeditatedly left out. If
    you happen to ask us about what we've failed to tell you, we hope we
    can answer your questions in such a way as to quickly extinguish
    potential follow-on questions. In short, obfuscation is our game.
        I will no longer be a party to these VA games. The vaunted Veterans
    Affairs ICARE values, with Integrity being first, make an attractive
    lapel pin, but little else if we don't live these values daily. We
    continue to flout Integrity, the most basic and necessary foundational
    footing, the very core of our being.
        In the recent past, because VA senior leaders would not conduct
    themselves appropriately, I was forced to request assistance from
    Congressional members. For instance, Rep. Donnelly, now Senator
    Donnelly, assisted me in halting ubiquitous violations of Federal law
    in the procurement of VA pharmaceuticals in 2012, through hearings he
    mustered. Former Rep. Buyer assisted me twice in arresting massive
    violations in the use miscellaneous obligations, in 2008 and again in
    2010, through hearings.
        In 2013 I attempted to report massive, illegal acts to the House
    Oversight and Government Reform Committee, including matters involving
    illegal purchase card use. I was thwarted in my efforts when that
    Committee's Senior Counsel and a VA Senior Acquisition Executive, who
    are friends, conspired to keep my letter from Chairman Issa.
        Approximately seven weeks ago, I disclosed illegal matters in a 35-
    page report to Secretary McDonald, which included recommendations going
    forward. My labors have not yet been acknowledged. I took to heart the
    Secretary's invitation for ``whistle blowers'' to step forward. I
    believed the Secretary was sincere when entreating all VA employees to
    abide by words found in the West Point Cadet Prayer ``Make us to choose
    the harder right instead of the easier wrong.'' However, I hope we can
    also live up to the remainder of the sentence in which those words are
    contained, which reads ``and never to be content with a half-truth when
    the whole can be won.''
        Mr. Chairman, this concludes my testimony. I am prepared to answer
    questions you or other members of the Subcommittee may have.

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