[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


                        VA FINANCIAL MANAGEMENT

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

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

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                        WEDNESDAY, MAY 24, 2017

                               __________

                           Serial No. 115-15

                               __________

       Printed for the use of the Committee on Veterans' Affairs
       
       
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                     COMMITTEE ON VETERANS' AFFAIRS

                   DAVID P. ROE, Tennessee, Chairman

GUS M. BILIRAKIS, Florida, Vice-     TIM WALZ, Minnesota, Ranking 
    Chairman                             Member
MIKE COFFMAN, Colorado               MARK TAKANO, California
BRAD R. WENSTRUP, Ohio               JULIA BROWNLEY, California
AMATA COLEMAN RADEWAGEN, American    ANN M. KUSTER, New Hampshire
    Samoa                            BETO O'ROURKE, Texas
MIKE BOST, Illinois                  KATHLEEN RICE, New York
BRUCE POLIQUIN, Maine                J. LUIS CORREA, California
NEAL DUNN, Florida                   KILILI SABLAN, Northern Mariana 
JODEY ARRINGTON, Texas                   Islands
JOHN RUTHERFORD, Florida             ELIZABETH ESTY, Connecticut
CLAY HIGGINS, Louisiana              SCOTT PETERS, California
JACK BERGMAN, Michigan
JIM BANKS, Indiana
JENNIFFER GONZALEZ-COLON, Puerto 
    Rico
                       Jon Towers, Staff Director
                 Ray Kelley, Democratic Staff Director

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                    JACK BERGMAN, Michigan, Chairman

MIKE BOST, Illinois                  ANN MCLANE KUSTER, New Hampshire, 
BRUCE POLIQUIN, Maine                    Ranking Member
NEAL DUNN, Florida                   KATHLEEN RICE, New York
JODEY ARRINGTON, Texas               SCOTT PETERS, California
JENNIFER GONZALEZ-COLON, Puerto      KILILI SABLAN, Northern Mariana 
    Rico                                 Islands

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

                              ----------                              

                        Wednesday, May 24, 2017

                                                                   Page

VA Financial Management..........................................     1

                           OPENING STATEMENTS

Honorable Jack Bergman, Chairman.................................     1
Honorable Ann Kuster, Ranking Member.............................     2

                               WITNESSES

Ms. Laurie Park, Deputy Assistant Secretary for Finance, Office 
  of Management, U.S. Department of Veterans Affairs.............     4
    Prepared Statement...........................................    26

        Accompanied by:

    Mr. Mitchel Sturm, Acting Deputy Chief Financial Officer, 
        Veterans Benefits Administration, U.S. Department of 
        Veterans Affairs

Ms. Beryl Davis, Director, Financial Management and Assurance, 
  U.S. Government Accountability Office..........................     6
    Prepared Statement...........................................    29

Mr. Nick Dahl, Deputy Assistant, Inspector General for Audits and 
  Evaluations, Office of Inspector General, U.S. Department of 
  Veterans Affairs...............................................     8
    Prepared Statement...........................................    41

        Accompanied by:

    Ms. Sue Schwendiman, Director, Financial Audit Division, 
        Office of Inspector General, U.S. Department of Veterans 
        Affairs

Ms. Julie Larsen, Team Leader, Pension Maintenance Center and 
  Debt Management, The American Legion...........................     9
    Prepared Statement...........................................    45

                   MATERIALS SUBMITTED FOR THE RECORD

Attachment 1.....................................................    49
Attachment 2.....................................................    62
Attachment 3.....................................................    73
VA Response to HVAC..............................................    78

 
                        VA FINANCIAL MANAGEMENT

                              ----------                              


                        Wednesday, May 24, 2017

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
                      Subcommittee on Disability Assistance
                                      and Memorial Affairs,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to notice, at 2:00 p.m., in 
Room 334, Cannon House Office Building, Hon. Jack Bergman 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Bergman, Bost, Poliquin, Dunn, 
Arrington, Kuster, and Peters.
    Also present: Representative Roe.

          OPENING STATEMENT OF JACK BERGMAN, CHAIRMAN

    Mr. Bergman. Good afternoon. This hearing will come to 
order. I want to welcome everyone to today's hearing.
    Earlier today, we had the opportunity to hear from 
Secretary Shulkin about the administration's budget priorities 
for the Department of Veterans Affairs. Now, we will examine 
how VA actually manages the money that taxpayers provide.
    Many of the numbers involved are astoundingly large and the 
audit speak can be confusing, but the core of the issue is very 
simple. The VA chief financial officer must move the right 
amount of money from Point A to Point B at the right time. The 
CFO must have strong internal controls, effective employees, 
and IT systems that work in order to accomplish that.
    We will hear about VA's fiscal year 2016 financial report 
and the officer of the Inspector General will present its audit 
of those financial statements.
    OIG and the Government Accountability Office will explain 
their work on the troubling issue of improper payments. The 
American Legion will also share its observations on VA's debt-
collection practices.
    The department has a troubling number of weaknesses and 
deficiencies in internal financial controls. First, persistent 
IT security weaknesses are, unfortunately, well known to this 
Committee. The financial IT systems are inadequate, obsolete, 
and potentially only a few years away from complete failure; 
however, the problems go well beyond IT. The CFO organization 
is weak and hobbled by fragmentation. VA struggled to account 
for its education, mortgage, compensation, and pension 
liabilities.
    For years, VA has had difficulties in obligating and de-
obligating funds, especially in the area of Community Care and 
undelivered orders; in other words, VA has a hard time 
estimating how much a purchase will cost, setting aside the 
money when it will be needed, and then reclaiming the unspent 
money to use for other purposes. Billions of dollars are often 
tied up on the books, unavailable for the intended use. Last 
year, VA had about $5.5 billion in improper payments.
    An improper payment, as our fine witnesses will explain, is 
one that should not have been made, is the wrong amount, went 
to the wrong person, was made for items not received, or lacks 
necessary documentation.
    Not all improper payments are lost, but they represent a 
significant amount of government waste. VA has never been able 
to fully comply with the Improper Payments Elimination and 
Recovery Act and the improper payments are forecast to continue 
rising.
    VA deserves credit for its transparency on improper 
payments, but beyond transparency, I look forward to hearing a 
credible plan to solve the problem.
    Finally, sometimes, benefits are paid out incorrectly and 
recouping those improper payments necessarily entails debt 
collection. VA's debt management center in St. Paul, Minnesota, 
does the work. In most instances, especially when the improper 
payment is through no fault of the veteran, the debt management 
center operates flexibly and constructively. VA policy is not 
to charge interest on these debts; however, after a payment is 
delinquent for 120or 180 days, the law requires VA to turn it 
over to the Treasury for collection.
    The Treasury operates much more aggressively and adds 
interest and fees that can be substantial. This debt- 
collection system must operate to the highest standard. 
Administrative errors have grave consequences for veterans and 
their beneficiaries.
    In conclusion, Members of Congress and presidents of both 
parties have demonstrated a commitment to funding the benefits 
our veterans have earned. But no matter how many resources are 
provided, if the dollars are mismanaged or wasted, VA will not 
succeed in its mission.
    And now, I will yield to my friend, colleague, Ranking 
Member Kuster for her opening remarks.

        OPENING STATEMENT OF ANN KUSTER, RANKING MEMBER

    Ms. Kuster. Thank you, Mr. Chairman.
    Good afternoon and welcome to the Oversight and 
Investigations Committee. This afternoon's hearing is an 
opportunity to discuss current issues facing VA financial 
mismanagement or management.
    VA's financial management system is of critical importance 
to the VA, especially VA health care. The VA relies on these 
systems to account for the procurement of needed medical and 
surgical supplies, prosthetics, adaptive sports equipment, 
which are critical to a veteran's quality of life, and VA's 
extensive community-care programs that we have discussed so 
frequently in our Committee.
    Year after year, the VA fails to fully comply with the 
Improper Payments Elimination and Recovery Act and year after 
year, this Committee struggles to ensure that the VA has the 
funds necessary to provide veterans with the benefits and care 
that they have earned.
    We know that in fiscal year 2015, $5.5 billion in improper 
payments were made which went mostly to providing veterans care 
in the community, but this is unacceptable and we need to get 
this under control. I will have some questions today, however, 
about the definition, so we all have a common understanding of 
what that--how those funds were expended.
    The issues facing the VA's financial management system are 
complex and I appreciate the opportunity to gain insight from 
the expert witnesses assembled today from the VA, the GAO, the 
IG, and The American Legion.
    As you are all aware, this morning, our Committee heard 
from Secretary Shulkin about the VA's proposed budget. With 
VA's financial management challenges, I am concerned that the 
VA is unable to properly forecast its requirements, which 
contributes to VA's many challenges that we discussed in our 
hearing this morning.
    Toward that end--toward the end of last year, the VA 
announced its selection of the Department of Agriculture as its 
Federal shared service provider. While I understand that 
selection of an FSSP can allow a department to better focus on 
its mission and replace its 50-year-old financial management 
system, I would like more details on the costs and 
implementation of this shared system and whether this will meet 
VA's needs going forward.
    VA's IT system is the backbone of the organization. All too 
often, this Subcommittee discuss the lack of IT infrastructure 
when we are discussing the agitating factors that led to a 
particular crisis. The VA's partnership with the USDA seems to 
be a move in the right direction, but the VA's financial IT 
system is not the only cause, as the Chairman has mentioned, 
for the VA's faulty finances.
    As in many other departments, the VA's chief financial 
officers operate under piecemeal protocols and cannot follow 
recommendations intended to remedy complex and expensive 
problems within the system.
    I hope to learn more about these witnesses within the VA 
from our witnesses. The GAO and IG have completed multiple 
investigations into the VA's improper payments and financial 
structure; however, the VA has not always agreed with the 
recommendations made by the agencies and today I hope to hear 
about why that is.
    We have been asked to pass legislation that would allow VA 
to enter into provider agreements and other contracts that do 
not require compliance with certain parts of the Federal 
acquisition regulations. Well, in some circumstances, this 
appears to be the best solution. I also know from previous 
hearings, that VA's failure to follow policies, its broken 
promises, and lack of oversight still contribute to many of 
VA's challenges and I am not convinced that simply passing such 
a legislation will solve this problem.
    I look forward to the discussion ahead of us this 
afternoon, so we can get VA's financial management program on 
track so that it can support the important VA mission to get 
veterans the benefits, care, and support they so desperately 
need and deserve.
    So, thank you, Chairman Bergman. I yield back the balance 
of my time.
    Mr. Bergman. Thank you, Ranking Member Kuster.
    I ask that 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 we have Ms. Laurie Park, Deputy Assistant 
Secretary for Finance in the VA Office of Management; she is 
accompanied by Mr. Mitchel Sturm, Acting Deputy Chief financial 
officer for VBA.
    We have Ms. Beryl Davis, Director of Financial Management 
and Assurance for GAO.
    We also have Mr. Nick Dahl, Deputy Assistant Inspector 
General for Audits and Evaluations; he is accompanied by Ms. 
Sue Schwendiman, Director of OIG's Financial Audit Division.
    And we have Ms. Julie Larsen, Team Leader for Debt 
Management and The Pension Maintenance center The American 
Legion.
    I ask the witnesses to please stand and raise your right 
hand.
    [Witnesses sworn.]
    Mr. Bergman. And let the record reflect that all witnesses 
have answered in the affirmative.
    Ms. Park, you are now recognized for five minutes.

                    STATEMENT OF LAURIE PARK

    Ms. Park. Good afternoon, Chairman Bergman, Ranking Member 
Kuster, and Members of the Subcommittee. Thank you for the 
opportunity to discuss the actions the Department of Veterans 
Affairs is taking to improve financial management.
    As the VA Deputy Assistant Secretary for Finance, I am 
responsible for department-wide financial management 
activities.
    I am here today with my esteemed colleague, Mitch Sturm, 
Acting Deputy Chief Financial Officer for the Veterans Benefits 
Administration.
    Over the last several years, through our improper-payment 
reviews, insights from the Office of Inspector General reports 
and detailed deep dives into root causes of audit findings, it 
has become clear that the foundation of our financial 
management practices is failing us. We have based our day-to-
day acquisition and financial management process on a fragile 
network of systems that routinely require our workforce in the 
field to rely upon manual double-entry processes, complex 
workarounds, manual reconciliations, and procedures that cannot 
keep pace with current financial management requirements, set 
forth by the Office of Management and Budget and the Department 
of the Treasury.
    Efforts to remediate these complex issues within our 
current foundation, coupled with a workforce that has not been 
trained in best practices has limited our progress. VA must 
focus on modernizing our financial management and acquisition 
systems, strengthening our internal controls, reengineering 
business processes, and investing in a trained workforce.
    Recognizing these challenges, we have recruited talented 
financial management professionals, seasoned project managers, 
experienced data architects, and a strong leadership team to 
lead initiatives that will improve financial management at VA.

    Examples of this important work include:

    In October of 2016, we kicked off VA's financial management 
business transformation initiative. This agency top-priority, 
brings acquisition, financial, information technology, supply-
chain, and frontline health care and benefit experts from 
across the department in collaborative sessions to transform 
the way that VA does business. This multi-year effort will 
standardize, integrate, and streamline financial management and 
acquisition processes within Department of Agriculture's shared 
service solution.
    My office is charged with the responsibility to spearhead a 
new department-wide effort, the financial management training 
initiative, providing education to financial management and 
acquisition professionals across the department through a 
centralized and standardized curriculum. An important aspect of 
this initiative is the partnership between financial management 
and acquisition professionals, which is needed to address many 
of our complex challenges and support VA's financial management 
business transformation.
    In the last ten months, we have held both, virtual web- 
based and in-person events where VA employees participated in a 
total of 71 separate classes. Two more events, one virtual and 
one in-person, are planned over the next nine months.
    Over the past three years, VA has completed a deep-dive 
review of over 75 programs to identify internal control 
failures that result in improper payments. This led to a 
significant increase of VA's reported improper payments.
    Currently the legislative improper payment definition 
includes any payment that experienced an error during the 
acquisition or payment process, as well as those made to the 
wrong person, the wrong amount, and where services were not 
received. This results in many payments being reported as 
improper, even though the government has not lost money.
    Currently, we estimate about 90 percent of our $5.5 billion 
in reported improper payments do not represent a loss to the 
government and cannot be recovered; further, about 80 percent 
are attributed to errors in the acquisition process, 
specifically in our programs providing care in the community, 
because a contract did not exist that followed Federal 
acquisition regulations.
    While we are committed to recovering identified losses, VA 
can only collect payments that have been specifically 
identified during an internal review process. VA cannot collect 
on a projected amount of improper payments, even a loss, 
because the payees or documentation supporting a collection 
cannot be identified or created from projections.
    Debt collection is also an essential part of strong 
financial management where VA is making improvements. VA 
balances Veteran debt collection with a strong sense of 
compassion, as well as compliance with Federal debt-collection 
statutes and policy. We have collaborated closely with Veterans 
and veteran service organizations to understand the challenges 
facing Veterans when a debt exists.
    Our approach includes educating Veterans on strategies to 
avoid debt, understanding the debt-collection process, and 
leveraging options available when a debt is established. Even 
with these many efforts, VA recognizes it has many challenges 
to overcome, while at the same time, providing Veterans the 
benefits and services that they have earned and deserve.
    VA acknowledges its current challenges and audit findings 
in financial management that reflect a need for improved 
financial stewardship. We believe that the initiatives we are 
working on will improve VA's financial management and better 
serve our Veterans.
    Thank you for the opportunity to appear before you today 
and for your continued support of Veterans. I look forward to 
your questions.

    [The prepared statement of Laurie Park appears in the 
Appendix]

    Mr. Bergman. Okay. Thank you.
    You have got to turn the microphone on first. It doesn't--
it is not voice-activated.
    Thank you, Ms. Park.
    Ms. Davis, you are recognized.

                    STATEMENT OF BERYL DAVIS

    Ms. Davis. Chairman Bergman, Ranking Member Kuster, and 
Members of the Subcommittee, I am pleased to be here today to 
discuss the issue of improper payments at both the government-
wide level and at the Department of Veterans Affairs.
    Improper payments remain a significant and pervasive 
government-wide issue. For several years, GAO has reported that 
the Federal government is unable to determine the full extent 
to which improper payments occur and reasonably assure that 
actions are taken to reduce them.
    Since fiscal year 2003, when certain agencies began 
reporting improper payments, as required by law, cumulative 
government-wide improper payment estimates have totaled over 
$1.2 trillion. For fiscal year 2016, agencies reported improper 
payment estimates totaling over $144 billion, an increase of 
more than $7 billion from the previous year's estimate. For the 
same year, the Department of Veterans Affairs reported an 
improper payment estimate that totaled 5.5 billion, an increase 
of about 500 million from the prior year. The VA improper 
payment error rate was 4.5 percent of related program outlays; 
the VA Community Care Program, reporting $3.6 billion in 
improper payments; and the Purchase Long-Term Services and 
Support Program, reporting $1.2 billion in improper payments 
accounted for about 87 percent of VA's estimated improper 
payments for fiscal year 2016.
    These two programs also had the two highest error rates 
government-wide in that fiscal year with error rates of about 
76 percent and 69 percent respectively.
    VA has not developed improper payment estimates for all of 
the programs and activities it has identified as susceptible to 
significant improper payments. For fiscal year 2016, VA did not 
report improper payment estimates for four such programs. 
Because VA did not report estimates for these programs, its 
overall improper payment estimate is understated and the agency 
is hindered in its efforts to reduce improper payments in these 
programs. Strong financial management practices, including 
effective internal control, are important for Federal agencies 
to better detect and prevent improper payments.
    The VA faces significant financial management challenges. 
In 2015, GAO designated VA health care as a high- risk area 
because of concern about VA's ability to ensure its resources 
are being used cost-effectively and efficiently and to improve 
veterans' timely access to health care and to ensure the 
quality and safety of that care.
    In addition, in VA's fiscal year 2016 agency financial 
report, the independent auditor cited material weaknesses and 
significant deficiencies in the design or operation of internal 
controls of our financial reporting. To reduce improper 
payments, VA can use root-cause analysis to identify why 
improper payments are occurring and to develop corrective 
actions.
    According to VA's fiscal year 2016 agency financial report, 
the root cause for over three-quarters of VA's improper 
payments was program design or structural issues. To reduce the 
amount of improper payments in this area, VA stated that it 
will make the procurement practices more compliant with Federal 
acquisition regulation provisions.
    In addition, to help reduce improper payments, VA can 
complete its implementation of GAO's recommendations. VA pays 
billions of dollars to millions of disabled veterans, thus, 
accurate claims decisions help ensure that VA is paying 
disability benefits only to those eligible for such benefits 
and in the correct amounts; however, two GAO reports have found 
problems with how VA processed its claims to reasonably assure 
the accuracy of or eligibility for the disability benefits, 
increasing the risk of the improper payments.
    For example, in a November 2014 report, GAO found that VA 
had, among other things, shortcomings in its quality review 
practices that could reduce its ability to ensure accurate and 
consistent processing of disability compensation claims 
decisions. To date, VA has implemented six of the report's 
eight recommendations and expects to implement the other two 
this summer.
    In conclusion, in light of VA's significant financial 
management challenges, we continue to be concerned about VA's 
ability to ensure its resources are being used cost-effectively 
and efficiently. It is critical that VA take actions to reduce 
improper payments, especially given that VA's payments amounts 
are likely to increase in fiscal year 2017.
    While VA has taken several actions to prevent improper 
payments, further efforts are needed to help minimize the risk 
of improper payments across its programs.
    Chairman Bergman, Ranking Member Kuster, and Members of the 
Subcommittee, this concludes my prepared remarks. I look 
forward to answering any questions you may have.

    [The prepared statement of Beryl Davis appears in the 
Appendix]

    Mr. Bergman. Thank you, Ms. Davis.
    Mr. Dahl, you are now recognized for five minutes.

                     STATEMENT OF NICK DAHL

    Mr. Dahl. Mr. Chairman, Ranking Member Kuster, and Members 
of the Subcommittee, thank you for the opportunity to discuss 
our work regarding VA's financial management.
    I will focus on the results of the fiscal year 2016 audit 
of VA's consolidated financial statements and our work related 
to IPERA. As mentioned, I am joined by my colleague, Sue 
Schwendiman.
    Effective financial management is important because it 
enables an agency to plan, direct, monitor, and control its 
financial resources. The CFO Act requires the OIG to conduct an 
audit of VA's financial statements. We contracted with the 
independent public accounting firm, CliftonLarsonAllen, to 
perform the audit.
    Although VA has received an unmodified or clean opinion on 
its consolidated financial statements from our contracted 
auditors, VA has continuously faced challenges in achieving 
that result. A clean opinion means that financial statements 
are presented fairly in all material respects, in accordance 
with accounting principles, generally accepted in the United 
States. It does not, however, mean VA easily obtained that 
opinion or that VA does not have internal control weaknesses.
    The most recent audit of VA's financial statements 
identified six material weaknesses and two significant 
deficiencies, which was two more in total than the previous 
year. A material weakness is a deficiency in internal controls, 
such that there is a reasonable possibility a material 
misstatement will not be prevented or detected and corrected in 
a timely basis.
    Three of these material weaknesses are repeated from the 
prior year's audit, including information technology security 
controls; Community Care obligations, reconciliations, and 
accrued expenses; and, financial reporting.
    Three others were new material weaknesses; first, education 
benefits accrued liability. For this, CLA reported VA did not 
use the appropriate method to account for veterans education 
benefits and, therefore, did not report an estimated liability 
for future benefit payments until fiscal year 2016.
    Second, the control environment surrounding the 
compensation, pension, and burial actuarial estimates. After 
VA's chief actuary retired, CLA noted the lack of succession 
planning to replace the actuary, who was responsible for 
calculating VA's unfunded veterans compensation and burial 
liability, which totaled over $2 trillion.
    Third, the CFO organizational structure for VA and the 
Veterans Health Administration, CLA elevated this from a 
significant deficiency to a material weakness and reported VA's 
decentralized and fragmented organizational structure for 
financial management and reporting did not operate in a fully 
integrated manner.
    CLA also reported two significant deficiencies, which are 
deficiencies in internal controls, less severe than material 
weaknesses, yet important enough to merit attention by those 
charged with governance. First, procurement, undelivered 
orders, accrued expenses, and reconciliations: CLA reported 
issues concerning reconciliation among various procurement 
systems and VA's financial management system, VA's extensive 
use of miscellaneous obligating documents, the lack of an 
adequate process to validate estimated accrued expenses against 
payment data, and procurement issues, such as untimely 
liquidation of undelivered orders or the untimely recording of 
contracts in FMS.
    Second, VA's loan guarantee liability: CLA reported the 
Veterans Benefits Administration needed to revise certain model 
assumptions used for estimating future cash flows and 
determining the cost of its loan guarantees for financial 
reporting purposes, which led to a reduced reported liability.
    Overall, CLA reported VA's legacy financial management 
system no longer met increasingly stringent and demanding 
financial management and reporting requirements. CLA made 
recommendations to address identified issues.
    Additionally, VA is currently working with the U.S. 
Department of Agriculture as a shared services provider to 
obtain financial services.
    In fiscal year 2017, VA began efforts to standardize 
business processes and identify changes required for this 
systems modernization effort.
    Last week, we issued our annual determination on VA's 
compliance with IPERA. We reported VA did not comply with two 
of OMB's six IPERA requirements, specifically, that VA did not 
maintain a gross improper payment rate of less than 10 percent 
for the VA Community Care Program and the Purchased Long Term 
Services and Support Program, and also, VA did not meet 
reduction targets for six VHA programs.
    We made several recommendations to agency leadership to 
take steps to reduce improper payment rates, achieve reduction 
targets, and improve improper payment estimates.
    In conclusion, VA's financial management and system 
challenges are many and complex. VA plans to move to a shared 
services provider to gain access to modern technology, but VA 
will need strong organizational leadership and coordination or 
cooperation to manage this significant change.
    Mr. Chairman, this concludes my statement. We would be 
happy to answer any questions you or other Members of the 
Subcommittee may have.

    [The prepared statement of Nick Dahl appears in the 
Appendix]

    Mr. Bergman. Thank you, Mr. Dahl.
    Ms. Larsen, you are now recognized for five minutes.

                   STATEMENT OF JULIE LARSEN

    Ms. Larsen. Chairman Bergman, Ranking Member Kuster, and 
distinguished Members who proudly serve on the Subcommittee, on 
behalf of Charles E. Schmidt, the national commander of the 
largest veterans service organization in the United States, 
representing more than two million members, it is my duty and 
honor to present The American Legion's position on this 
important issue regarding veteran debt and collection and 
assist the Committee in understanding the Department of 
Veterans Affairs debt-collection process, and highlight areas 
of improvement, as well as provide insight as to how The 
American Legion assists the veterans in these matters.
    I am The American Legion subject matter expert on debt 
collection within the VA and work at the VA's Regional Office 
in St. Paul, Minnesota. There, I assist veterans who have 
incurred debts.
    Often, these debts are being collected from VA benefits or 
other sources of income, such as tax refunds. Older debts are 
referred for collection to the U.S. Treasury Department, which 
will employ collection methods, such as garnishment of wages or 
Social Security benefits.
    Once a debt is owed to the VA, the case is referred to the 
debt management center for collection. The DMC sends the 
claimant a letter detailing the reason for the debt, along with 
the amount due. It also provides information on repayment 
options and requesting a waiver and rights of appeal.
    If there is no response to the letter within 30 days and 
the person is receiving VA benefits, the VA will recover the 
full amount of debt from those benefits.
    In cases where an individual is not receiving VA benefits, 
demand letters will be sent and credit agencies are notified. 
Eventually, these debts will be referred to the U.S. Treasury 
Department for further collection action.
    There are a number of ways that The American Legion tries 
to assist claimants. For example, we help explain the process 
to the claimant and inform them of their options. We will 
request additional information from debt management center 
staff to develop a repayment plan; additionally, we will 
contact the Regional Office staff if the debt appears to be 
erroneous.
    I would like now to share a few case scenarios with you. A 
case where the daughter of a veteran incurred a sixteen-
thousand-dollar overpayment, because she was incorrectly 
receiving death and education benefits when she was not 
entitled to receive both. She had applied for a waiver on time, 
but because her request was misplaced, the waiver was never 
processed. As a result, DMC garnished her entire-eight-
thousand-dollar tax refund in order to recover a portion of the 
debt.
    I later learned that the daughter had a delivery 
confirmation from the U.S. Postal Service, verifying that the 
waiver request had, indeed, been received by the VA. 
Fortunately, in this case, the VA granted the waiver, due to 
the financial hardship and the $8,000 was later refunded.
    The next case concerns a homeless female veteran who 
incurred a large debt after the VA removed her dependence from 
her benefits retroactively to 2005. Due to her homelessness, 
she was unable to receive the VA's letter advising her of the 
debt. Because she was unaware of her options such as a 
repayment plan, DMC began recovering all of the debt from her 
compensation. This went on for about a year before we 
intervened.
    What made matters even worse for this female veteran, and 
if being homeless wasn't hard enough, she also had to deal with 
her vehicle being repossessed. Fortunately, we were successful 
in getting two months of her benefits refunded and a small 
withholding set up. I am pleased to report that her benefits 
were restored completely and she received a retroactive 
payment.
    As you all well know, the VA system is complex and 
difficult for many veterans to understand. In both the examples 
that we have shared with you, the primary issue is how the VA 
collected and processed that information; letters sent to 
homeless veterans were returned and a debt was incurred. 
Veterans who submitted requested information never made it to 
the debt management center. These are areas we feel the VA can 
improve upon.
    Fortunately, The American Legion and other veteran service 
organizations maintain staff in every Regional Office to aid 
veterans and their dependents with claims and other VA issues, 
such as debts. We specialize in identifying VA errors and 
solving problems for veterans and their families. Thank you.

    [The prepared statement of Julie Larsen appears in the 
Appendix]

    Mr. Bergman. Thank you, Ms. Larsen.
    The written statements of those who have just provided oral 
testimony will be entered into the hearing record.
    We will now proceed with questioning. I will yield myself 
the first five minutes. Ms. Park, I would like to start with 
the headline here, ``Community Care and purchased long term 
services and supports have the highest improper payments in the 
Federal government''; about 3.5 billion and 1.2 billion of 
overpayments, respectively.
    I understand VA's position that most of this money is not 
necessarily misspent, just designated as improper, because it 
is not backed up by bona fide contracts. VA categorizes about 
3.3 billion and 900 million that way.
    Can you assure me and all of us that none of that money is 
wasted?
    Ms. Park. So, thank you for the question, sir.
    So, in doing the test of those two programs, Community Care 
and PLTSS, our testers do sample and they dig into the actual, 
did we have the proper paperwork that supports those payments? 
Did they get to the right place? The right amount? Were they 
paid the Medicare rate?
    So, yes, I can assure you that they were correct.
    Mr. Bergman. So, yes or no, regardless, is it fair to say a 
payment that lacks a bona fide contract could also be made in 
the wrong amount or sent to the wrong place?
    Ms. Park. So, when you talk about the huge number of 
payments that we have, I think there is always opportunity for 
something to go wrong; however, during our sampling, we found 
that the payments were made to the right person for the right 
amounts.
    Mr. Bergman. Ms. Davis, putting aside this issue of 
contracts or no contracts, there was still about $200 million 
and $300 million of overpayment in the two programs 
respectively. Can you tell us about what they are?
    Ms. Davis. I cannot speak to what they are. I can state 
that in addition to the structural issues that have been 
referred to regarding the two programs, Community Care and 
Purchase Long Term Services and Support, there are a number of 
improper payments that are made in the compensation program and 
those are due to administrative errors.
    This is based on information that is provided by the agency 
itself as to how it is categorizing its improper payments, 
using the categories that are established by the Office of 
Management and Budget.
    Mr. Bergman. Thank you.
    Mr. Dahl, OIG rejected the improper payment estimates VA 
submitted for two programs: VHA Purchasing of Supplies and 
Materials and the Post-9/11 G.I. Bill.
    VA said the improper payments were 22 million and 3.9 
million, respectively, and OIG said they were 78 million and 
250 million, respectively; that is a huge difference.
    Can you explain how OIG came up with its numbers?
    Mr. Dahl. What we did was questioned the depth of the 
testing that they did when they were verifying those payments, 
and we found that, for example, with the Post-9/11 G.I. Bill, 
that they weren't verifying the tuition charges against, in the 
old days, it would be a course catalog; today it might be more 
likely something posted on a Web site. But in our opinion, they 
didn't independently validate that the tuition that they were 
billed was proper. So that is why there was such a large delta 
there.
    Mr. Bergman. Ms. Park, would you like to comment on that?
    Ms. Park. Sure. For the supplies and materials--so, the 
supplies and materials issue actually ended up being that when 
the IG actually sampled, they were looking for precise 
schedule--fee schedules that actually matched the time in which 
we were invoiced from someone--Care in the Community was--for a 
supply--I'm sorry--for a supply.
    So, what we found was, because of the disconnect between 
our acquisition and our financial systems, we couldn't make 
that link. We didn't have a report that we could actually 
demonstrate to the IG that we had actually paid the right 
amount for those supplies, so that was generally the issue. I 
can defer to Mitch about the education.
    Mr. Sturm. Thank you. Yeah, for education, we did go back 
and look at 30 of the samples the IG pulled and they were 
right; we were not verifying back to the old catalog, but all 
30--all 30 of them were proper. But because we didn't have the 
proper support, the IG determined them to be improper for this 
review, is we are going to expand our testing for next year and 
this year to include that look at those catalogs or online Web 
sites.
    Mr. Bergman. Thank you. I see my time has expired.
    Ranking Member Kuster is recognized for five minutes.
    Ms. Kuster. Thank you, Mr. Chair.
    I want to follow up on this whole issue about the improper 
payments, because I have a concern about expectations going 
forward based on the White House budget presentation. The White 
House has stated the budget will save the American people $150 
billion in improper payment savings and we have discussed here 
today that according to the 2016 agency financial report, the 
VA issued over 5.5 billion in improper payments in fiscal year 
2016; 5.3 billion of this is overpayments.
    But Ms. Park, your testimony is that 90 percent of that 
cannot be recovered. And would you please clarify for my 
colleagues and for anyone watching this hearing, this whole 
issue about the contracts in the Community Care programs, 
because we have a serious disconnect if the White House is 
assuming that these funds can be recovered and, in fact, we are 
not going to go back--these services have been provided. We are 
not going to go back out into the community--I hope not, in my 
district--and take these monies back from rural hospitals that 
barely get by.
    So, could you explain the reality of this situation?
    Ms. Park. Yeah, I am very happy to do that.
    So, take the example for a Veteran that receives care in 
the community where there is no Federal acquisition regulation 
based contract exists; they are going to get care in the 
community. What our sampling and testing has indicated is that 
this payment was for the correct amount to the right person--we 
verified the rate--but because the provider agreement was not 
based on a FAR[NMF1] contract, it is improper.
    According to the improper payment rate, we should be able 
to go back to that provider and collect that payment. And that 
is something that we don't want to do because we did receive a 
service. The Veteran was helped, so we are not going to move 
forward with those collections.[NMF2]
    Ms. Kuster. Thank you very much, Ms. Park.
    And I just want to say to Ms. Larsen, you broke my heart. I 
cannot imagine that we--the U.S. Government, through the VA, 
goes after a homeless woman because of some retroactive change 
in her benefits that she knew nothing about and takes money out 
of her paycheck and repossesses her car.
    So, I certainly hope we don't go forward with going after 
rural hospitals for services that have already been provided.
    All right. So we are going to move toward this USDA 
financial product--I am sorry, I don't have the correct term--
and the VA, how is this going to help with the payments of 
veterans benefits, medical center operations, non-far based 
contracts? I feel like we are going to be back here for another 
hearing another day, so help us understand how this is going to 
get better and is there anything that we could do to help with 
legislation if these Community Care contracts are not going to 
be far-based contracts, let's not put them under this improper 
payment category; let's define it some other way.
    Ms. Park. So, when we talk about moving to a Federal 
financial system and how it is actually going to help us with 
the issues that you have seen, so the way--VA is different than 
what you look at for most big departments. They will have a 
singular financial system where they do all of their accounting 
activities, so I am talking about status of funds, funds 
distribution, obligations, contract ordering, payments, 
accounts receivable.
    So, VA built things way differently and it started out a 
program area, so they built programs like care in the 
community, veteran benefit programs, the education programs; 
they built systems to meet those needs and then they slapped 
accounting on top of it. So, that causes all of these 
disconnects. That is why we rely so heavily on these 
reconciliations between systems out in the field.
    So, what we are going to do with a new shared service 
provider, just like any other Federal government agency, we are 
going to put that finance stuff into one financial and 
acquisition system that is already integrated, so we are not 
going to have the fat fingering in between the systems and all 
the reconciliations that occur.
    So that will give us, not only visibility into our 
financials, but it is also going to resolve a lot of our 
issues. So--and so it will also make our programs more 
efficient, I believe, as well.
    Ms. Kuster. Yeah, I appreciate it. My time is up, but I do 
think we are going to have to deal with this community contract 
as an issue.
    And I just want to say for myself, having worked for many, 
many years with hospitals and hospital economics, the quote 
that I have heard over and over is ``Hospital economics are 
wear the rubber meets the blue sky.'' So, good luck with 
keeping track of how these dollars are spent.
    Thank you, I yield back.
    Mr. Bergman. Thank you.
    Mr. Poliquin, you are recognized for five minutes, sir.
    Mr. Poliquin. Thank you, Mr. Chairman, very much.
    Ms. Park, let me ask you a couple of questions. I want to 
make sure I understand this. The VA contracts for goods and 
services, whether it be providing health care for our heroes in 
a community setting or to buy band aids or aspirin, correct?
    Ms. Park. Yes, sir.
    Mr. Poliquin. Okay. And anytime you use those or you don't 
use those monies, you return them to the United States 
Treasury, correct?
    Ms. Park. In some cases. There are some authorities where 
we are allowed to keep the money, but, generally, yeah.
    Mr. Poliquin. Okay. Yeah, and in 2016, there was $4.2 
billion of funds that were contracted for various purposes that 
were unused by the VA; is that correct?
    Ms. Park. I am not familiar with that number, sir.
    Mr. Poliquin. Okay. Well, that is the number that I have 
here, but there is a lot of money every year that goes back to 
the U.S. Treasury. We appreciate it so the taxpayers don't have 
to spend it because it wasn't used for whatever purposes it was 
supposed to, right?
    Do you tell this Committee how much money in each category 
was unused so we don't have to appropriate the money to you 
every year?
    Ms. Park. So, through our financial reporting, that 
information is available. I don't have it on hand right now.
    Mr. Poliquin. Okay. So I want to make sure I understand 
this. So, your budget is $185 billion this year; that is what 
the president has asked for, okay. And six years ago, it was 50 
percent less. So, it has it gone up 50 percent from 120 to 
about $185 billion in six years. That is a lot of money and we 
want to make sure it goes to our veterans, okay.
    So, I want to make sure I understand this. So, when money 
is appropriated to the VA, but not used, you send it back to 
the Treasury, but you don't tell this Committee that it was 
unused in a specific category, so we don't know if we 
appropriate that amount of money to you or not; is that right?
    Ms. Park. No, I don't agree with that statement at all.
    Mr. Poliquin. All right.
    Ms. Park. So, first of all, there are many different 
appropriations that govern the way that we do business at VA. 
And a lot of those appropriations are no-year accounts and that 
money doesn't expire, so that is--so put that aside.
    For money that is expired, we do report that through our 
financial management--
    Mr. Poliquin. Well, here is what I am trying to get at, Ms. 
Park--
    Ms. Park [continued]. --reporting.
    Mr. Poliquin [continued]. --is there a way that you can 
tell us beforehand, before the budgeting process or the 
executive branch--but you are in the executive branch--the 
White House, such that money is not appropriated to you that 
you don't use, then you send it back to the U.S. Treasury, can 
we avoid that step to make sure we don't lose any of that money 
and to make sure that we are budgeting properly--
    Ms. Park. That information is reported to the Department of 
Treasury on a monthly basis.
    Mr. Poliquin. Okay. But we appropriate it. Is it reported 
to us?
    Ms. Park. I assume you guys get the Treasury reports, but 
we are happy to give you that information.
    Mr. Poliquin. That would be great.
    Ms. Park. Uh-huh.
    Mr. Poliquin. Let's move on to something else.
    Improper payments, I want to make sure I understand this. 
Ms. Davis would probably be the person that I should ask. Did 
you say--did I hear this correctly--that since 2003, which is 
roughly 15 years, over one--I almost can't say this--one 
trillion dollars of improper payments have been made throughout 
the Federal government?
    Ms. Davis. One point--over $1.2 trillion--
    Mr. Poliquin. $1.2 trillion--
    Ms. Davis [continued]. --have been estimated, yes.
    Mr. Poliquin [continued]. --in this year alone.
    2016, alone, last year, it was about $140 billion?
    Ms. Davis. Yes, reported as estimate.
    Mr. Poliquin. Okay. And we found out about that because of 
audits that we are doing; is that correct?
    Ms. Davis. It is some--it comes from the agency's financial 
reports on an annual basis and we at GAO have accumulated those 
statistics.
    Mr. Poliquin. Okay. And at the VA, it was 5.5 billion, 
right?
    Ms. Davis. Correct.
    Mr. Poliquin. Okay. I come from a state--in Maine and we 
have an annual budget in the state of Maine, an annual budget 
of about three and a half billion dollars. This is 5.5 billion 
of improper payments. This is about 70 percent larger than our 
entire state budget.
    And then I see something right here, a request from you 
folks, saying that you want to now, discontinue the use of 
outside auditors when it deals with improper payments and do it 
internally. Why in the Dickens would we trust you people to 
audit yourself internally when you can't keep track of this 
money? Why would we do that? Somebody answer the question; who 
wants to take a shot at it?
    Okay. So, for the record, nobody wants to defend the fact 
that they are asking us to discontinue the use of--
    Ms. Park. Sir, I don't know where that reference came from, 
but it didn't come from the department.
    Mr. Poliquin. Okay. Well, go ahead and tell us why you 
think you can audit yourself better when you can't keep track 
of $5.5 billion--
    Ms. Park. I don't believe that came from the VA, sir.
    Mr. Poliquin. Who did this come from?
    Ms. Park. I am not familiar with it.
    Mr. Poliquin. Okay. Let me ask you this, does anybody--
okay, fine; I have four seconds left--does anybody on this 
panel think it is a good idea to let you audit yourself instead 
of outside folks doing it?
    Thank you, Mr. Chairman.
    Mr. Bergman. Mr. Arrington, you are recognized for five 
minutes, sir.
    Mr. Arrington. Thank you, Mr. Chairman.
    Sorry to come in late, and we have a few hearings today, so 
today is a challenge to keep up, but this is incredibly 
important and I just have a few questions--pretty broad 
questions for you.
    I guess, Ms. Park, are you the senior-most VA official here 
today?
    Ms. Park. Yes, I am, sir.
    Mr. Arrington. Who is responsible for improper payments and 
reducing improper payments, managing, having a game plan, if 
you would, for reducing improper payments at the VA?
    Ms. Park. Sure. So, we do have a structure of 
accountability for improper payments. Our chief financial 
officer, Ed Murray, is responsible to ensure that we have an 
appropriate program to address improper payments.
    In addition to that, for every high-risk program, we 
designate a senior accountable official. So, for all of our 
large programs with large improper payments, we do have a 
senior accountable official, and they are responsible for 
developing corrective actions and making sure that, you know, 
each year they are making progress on those.
    Mr. Arrington. Has anybody ever been fired for not managing 
the improper payments down, as you described, is the job 
description of those folks accountable?
    Ms. Park. So, I would not be aware of that because those 
programs are in those--within the agency. We would have to 
refer that to the Office of Accountability.
    Mr. Arrington. Okay. Could you--I am a new Member, but I 
would like to get the answer to who has been and when was the 
last time somebody was fired because they didn't perform in 
oversight to manage improper payments down. The improper 
payments actually went up and they didn't achieve whatever the 
desired outcome, whatever the management goal, I would like to 
know the answer to that question.
    Ms. Park. So, if I may, I would like to say that part of 
the work we have done is actually doing a deep dive to identify 
the improper payments, so that was very purposeful so that we 
knew what our baseline was for improvement.
    So, in this case, I think that in some ways it is positive 
that we are being very open and honest about this rate, sir.
    Mr. Arrington. Yeah, I guess being open and honest is 
positive, but a change in behavior and change in delivery and 
performance is the goal. So, the VBA, VHA, NCA, I assume they 
all have heads. I don't know if they are political in career, 
but is there a political in career senior-most person at each 
of those bureaus?
    Ms. Park. Yes, sir, there are.
    Mr. Arrington. Has any--when is the last time somebody in 
those roles were fired because they didn't do their job to 
manage their financial affairs, in this case, improper 
payments?
    Ms. Park. Again, sir, I am not aware of anything--
    Mr. Arrington. Could you get me the answer for that?
    Ms. Park [continued]. --but we can take that for the 
record.
    Mr. Arrington. So, rank order for me the most important 
factor in not being able to manage improper payments better: 
organizational structure, H.R. policies or policies that govern 
how you manage people, IT systems--I will just start there; 
rank order the most challenging aspect to the desired outcome 
here, based on those three.
    Ms. Park. I would say IT systems, sir.
    Mr. Arrington. And I understand there is a legacy system, 
financial management system that is in play to replace or to 
upgrade, modernize; is that correct?
    Ms. Park. It will replace several systems, yes.
    Mr. Arrington. And how long will that take?
    Ms. Park. So, we are looking at a five-year plan right 
now--five-to eight-year plan.
    Mr. Arrington. And how much money is that?
    Ms. Park. So, the current--so we--this is our first year of 
really diving into this project and our initial estimates with 
our shared service provider are about 400 million, but we do 
need to do a deep dive over the next 18 months where we are 
really looking at--I talked a little bit earlier about is we 
really need to pull this financial management information out 
of all of these program systems and we really need to do a deep 
dive into how much that is going to cost, so we will be 
refining that in the next 18 months.
    Mr. Arrington. Did you mention how much it cost, I am 
sorry?
    Ms. Park. Four hundred million, sir. We--in our initial 
estimates, without the work that we are doing over the next 18 
months.
    Mr. Arrington. I appreciate your time and I yield back to 
the Chairman.
    Mr. Bergman. Thank you.
    And it appears as though we have got time for a second 
round and I would like to start the second round by yielding to 
myself for five minutes.
    Ms. Davis, your report notes that 20--the 24 biggest 
agencies only reported preventing $680,000 worth of improper 
payments in 2015 using the ``do not pay'' system. That under is 
astoundingly low, considering the billions and billions of 
dollars of improper payments that we are talking about.
    Why are agencies not using the ``do not pay'' system 
effectively?
    Ms. Davis. Our audit at the ``do not pay'' system, which 
was recently completed, determined that not all the databases 
that the agency has access to are actually being used. Also, 
the databases are--the two databases that are most frequently 
used are the death master file and then what is commonly 
referred to as the ``excluded parties list,'' which includes 
contractors who cannot do business with the Federal government.
    The process includes payment integration, which is a 
process whereby Treasury's payments at the time of payment are 
bumped up against certain databases and if there is an issue of 
a potential improper payment, that payment is flagged and it 
goes back to the agency for adjudication.
    Now, there is a time lag there, so, for example, if it is 
determined upon adjudication that there is an improper payment, 
that can affect future payments or future flows of that 
particular stream of improper payments; for example, a benefit 
that goes on a recurring basis, you can stop future payments, 
but you cannot stop the improper payment at the time that it 
goes through the ``do not pay'' system. So, there are 
limitations.
    Mr. Bergman. Did I hear you say on the front-end that there 
are more system capabilities than being utilized?
    Ms. Davis. That is correct, yes.
    Mr. Bergman. So, we got some folks who are using the 
system, they are just kind of cherry-picking what they want?
    Ms. Davis. Not exactly. There are issues with agreements in 
order to obtain the six databases that are supposed to be 
utilized and those agreements have not been finalized and those 
databases have not been pulled in by Treasury in order to, you 
know, utilize the payment streams that come from the various 
agencies.
    We have made recommendations, a number of recommendations, 
to Treasury and OMB, including recommendations for OMB to look 
at its guidance in how agencies are utilizing the system.
    Mr. Bergman. So, two of six are being used?
    Ms. Davis. Correct.
    Mr. Bergman. Okay. Well, how long have the four--how long--
we have four other possible tools out there that are not being 
used.
    Ms. Davis. Yeah, right.
    Mr. Bergman. How long has that been going on?
    Ms. Davis. I cannot answer that. That is a question for the 
agency to answer.
    I want to be very clear that there are certain aspects of 
some of those other day streams or databases that are being 
utilized, but they are not fully integrated. They are not fully 
utilized by the agencies. The only two that are being fully 
utilized are the ones that I just mentioned.
    Mr. Bergman. Okay. Well, then I guess it is fair to then--
Ms. Park, how is the VA, you know, using the ``do not pay'' 
system now and what are the plans to use more widely in the 
future?
    Ms. Park. Okay. So we have a really great partnership with 
Treasury. My team and that finance service center in Austin 
works directly with Treasury; they meet monthly[NMF3] with 
them. One of the things that we found with do not pay is that 
you really have to look at it for--you can't run all of your 
payments through it at once. You really have to look at it from 
a program-by-program perspective, so that takes time.
    And that is what we are doing with Treasury right now, is 
we are going through each one of our programs with them. We are 
tailoring the ``do not pay'' tool and we are using it to not 
only improve the way Treasury does business, but the way that 
we do business.
    Mr. Bergman. Okay. And one final, and more of a comment 
with a follow-up: Ms. Park, I would be remiss if I did not 
raise an important and related issue. On the 14th of April, I 
requested purchase card transactions data from the DC VA 
Medical Center. So far, nothing has been provided.
    An environment with no inventory controls is the sort of 
environment where government credit cards could be misused. Can 
you estimate for me or tell me when the data listed in my 
letter will be provided.
    Ms. Park. Sir, I was not aware of that request, but I will 
go back and I will get that to you in the next day or two. I 
can get that pretty quickly.
    Mr. Bergman. Great. Thank you very much.
    I yield back. Ranking Member Kuster is recognized for five 
minutes.
    Ms. Kuster. Thank you very much, Mr. Chair.
    I think we still have some misunderstanding, at least from 
Members of this Committee and perhaps from the public at large, 
about these--the impact of our provider agreements on this 
dramatically inflated improper payment, that people are getting 
the impression that there is improper payments that could be 
recouped and you walked us through that. But would it be 
helpful--I understand that there is legislation that we have 
considered with regard to provider payments that could maybe 
take them out from underneath the far so that we need to get to 
the reality, if there are questions that have been asked, if 
there are improper payments the way that any layperson would 
understand that--too much money being paid or paid to the wrong 
person--vendor, but we are going to expend a tremendous amount 
of time and energy here on something that is not ever going to 
be recouped and if we don't correct this going forward, we are 
just going to pass this on to future generations.
    I just want to get to the bottom of this at this hearing, 
because otherwise, we are sending the wrong impression.
    Ms. Park. So, I don't feel that there is an easy answer; 
that is always the case here, isn't it?
    Ms. Kuster. Well, I am just trying to say this whole 
testimony--with all due respect to my colleague about your--and 
by the way, this language, it has nothing to do with you; it 
showed up in the budget. It sounds like maybe it didn't even 
come through the VA--so that is another question; there is a 
mystery as to why it came to us--we have language in the budget 
asking that there not be an annual outside audit, asking that 
the audit be done internally and we would like to get to the 
bottom of the mystery behind this, but if you don't know about 
it, you are not going to be the person who can help us.
    But, I am just guessing that somebody has decided that 
calling these payments to our community providers--this is 
Community Care in our communities, rural hospitals, providing 
services to veterans, getting paid, and that has been 
characterized as improper because of a Federal regulation that 
is typically in place when you have a different contracting 
system.
    Ms. Park. Right. So, I think would be good to read the 
Improper Payment Act and see if it is really effective, right, 
and especially the definition of the improper payment rate. The 
problem is when you start talking about let's move away from 
far-based contracts, you do put the veteran at risk, because 
the far-based contracts do protect them in a lot of instances.
    So, that is where, from my perspective, it gets a little 
dicey.
    Ms. Kuster. But I think--look, I can't speak for the 
secretary and I can't speak for this administration, I just 
think it is duplicitous for them to pretend that we are going 
to recoup millions, billions of dollars--my colleague is 
talking about trillions of dollars--we are not getting that 
back, but hopefully, you can take it back to the secretary that 
colleagues on both sides of the aisle want improvement in the 
process of community-based care contracts that do not lead to 
this level of misunderstanding in an O & I hearing about 
trillions of dollars that may be recouped. That is all.
    Ms. Park. Yes, and we are working with OMB, too, on that 
definition. They are looking at revising some of their 
guidance, too, and we hope that will have some impact on this.
    Ms. Kuster. Great. Thank you very much.
    Thank you for your service to our country and our veterans.
    I yield back.
    Mr. Bergman. Thank you.
    Mr. Poliquin, you are recognized for five minutes, sir.
    Mr. Poliquin. Thank you, Mr. Chairman, very much.
    Just for the record, my colleagues on the Committee and for 
you folks right here, this is Page 333 of the medical programs 
and information technology volume of the VA budget request 2018 
congressional submission, Page 333 where somebody at the VA 
requests, since you hired more people at the VA to do this, you 
are able to better audit yourselves than have outside folks 
audit yourselves. And I would strongly disagree and will object 
to any effort to go forward in that regard.
    Let me ask you folks, you have an agency that you help run 
or are connected with that has 360--365,000 employees. You have 
a budget of about $185 billion per year and we are here to hear 
about the problems in seeing how the money is spent, where it 
is going, who is keeping track of it to make sure that we get 
every dollar we can to provide clinical services to our 
veterans and at the same time, the taxpayers.
    So, I will start with you, Mr. Sturm. You are there; I am 
not. What is the biggest problem you see at the VA when it 
comes to financial management?
    Mr. Sturm. I would say it is my legacy systems and not 
being fully integrated between my business-line systems and 
into the modern--
    Mr. Poliquin. Okay. So, we know we have addressed that this 
morning in another hearing is that the information technology, 
the IT systems, you have several of them that have come up 
through the years, and so now the VA is in the computer 
software business, and I know you are about to replace that 
with one system that is integrated across all platforms; is 
that what you mean?
    Mr. Sturm. Yes, sir.
    Mr. Poliquin. Okay. Ms. Park, what is the biggest problem 
you see in making sure that we keep track of all this money so 
we know where it is gone--going and to make sure that we help 
our veterans the maximum amount?
    Ms. Park. Again, sir, it is our IT systems.
    Mr. Poliquin. Okay. Ms. Davis?
    Ms. Davis. I am not in a position to address that question.
    Mr. Poliquin. Okay. Ms. Davis, when you look at the 
financial management at the VA, you look, if I am not mistaken, 
at different financial problems across different agencies, not 
just the VA; is that right?
    Ms. Davis. Correct.
    Mr. Poliquin. How is the VA doing, relative to the--how 
many different agencies do you look at?
    Ms. Davis. Oh, we look at numerous agencies--
    Mr. Poliquin. How many, 10, 15, 20?
    Ms. Davis. Oh, many more than that.
    Mr. Poliquin. Okay. Thirty, 40?
    Ms. Davis. If you are talking GAO-wide, we can look at any 
agency; we have the ability to do that.
    Mr. Poliquin. Okay. So, I am not going to get an answer 
here. I am just going to say--I will pick a number--30: how are 
we doing at the VA, relative to the other 29?
    Ms. Davis. Are you referring to improper payments or--
    Mr. Poliquin. Yes, let's start with improper payments.
    Ms. Davis. Okay.
    Mr. Poliquin. The $5.5 billion of improper payments that 
were transacted last year.
    Ms. Davis. Okay. The agency that has the largest amount of 
improper payments is HHS and that is because it includes 
Medicare, the three Medicare programs--
    Mr. Poliquin. So, how is the VA doing, relative to the 
other 29 agencies?
    Ms. Davis. Well, if you want to look at the rate, we can 
refer to the rate, as I mentioned in my oral statement, that 
the rate for those two programs are 76 and 69 percent and 
that--those are the highest rates government-wise.
    The next highest rate is 24 percent and that is the earned 
income tax credit.
    Mr. Poliquin. Okay. So, if I understood this correctly, the 
VA is doing a poor job, relative to the other people you are 
looking at?
    Ms. Davis. I would not make that statement; I would only 
give you the facts that I have.
    Mr. Poliquin. Well, the facts lead us somewhere, right? You 
have the responsibility of looking at multiple agencies; I am 
just trying to figure out how the VA is doing.
    Ms. Davis. Yeah, well, and the numbers there, the total 
number for this past fiscal year was 144 billion government-
wide, and you know, a large portion of that or not a large 
portion, but certainly a significant portion, is the 5.5 
billion.
    Mr. Poliquin. At the VA?
    Ms. Davis. Correct.
    Mr. Poliquin. Ms. Larsen--thank you, Ms. Davis--Ms. Larsen, 
what is the biggest problem you see at the VA when it comes to 
financial management and keeping track of all this money?
    Ms. Larsen. Sir, a lot of it is just that people don't take 
care of what they need to do when something is sent out to them 
and that creates their own issues. So--and they ignore letters 
that are sent out to them and then they all of a sudden, the 
veteran calls and says, what happened, how come I didn't get my 
check?
    Mr. Poliquin. Uh-huh.
    Ms. Larsen. And I am like, well, sir, you didn't respond to 
what the VA wanted you to do or debt management or whatever.
    Mr. Poliquin. Uh-huh.
    Ms. Larsen. And a lot of it is on their own accord, but yet 
I am there--
    Mr. Poliquin. So, it is the veteran's fault?
    Ms. Larsen. Oh, in some respects it is.
    Mr. Poliquin. Uh-huh.
    Ms. Larsen. And that is when they get kind of--they call me 
and go, what can you do for me, can you get me my money back? 
And I say I will try.
    Mr. Poliquin. Uh-huh. Do you think, given all of that, that 
it is a good idea to have the inside people at the VA audit 
themselves, which has been requested at Page 333 of this 
document?
    Ms. Larsen. I am really not one that would be able to 
answer that.
    Mr. Poliquin. Mr. Dahl, do you have an opinion--if I may, 
Mr. Chair--of what the biggest thing we need to fix when it 
comes to financial management at the VA?
    Mr. Dahl. I would just like to point out that we are the 
independent auditors.
    Mr. Poliquin. Good. I should have started with you.
    Mr. Dahl. Not to get into too much detail--but we report on 
the financial statements year after year. This year we did have 
the six material weaknesses and the two significant 
deficiencies.
    Mr. Poliquin. And do you do individual audits for other 
agencies, not just the VA?
    Mr. Dahl. No, we are the Office of Inspector General. Our 
purview is any VA program.
    Mr. Poliquin. Does any other agency you know in the Federal 
government ask to audit themselves?
    Mr. Dahl. I hesitate to answer that because I am not 
exactly clear on what--
    Mr. Poliquin. Do you think it is a good idea that any 
agency audits itself?
    Mr. Dahl. Excuse me?
    Mr. Poliquin. Do you think that it is a good idea that any 
agency requests to audit themselves?
    Mr. Dahl. It may be a useful tool for them, but I would 
think that there would still need to be someone like the 
Inspector General or maybe a contract auditor to also come in 
behind that.
    Mr. Poliquin. Thank you, Mr. Chairman, for the additional 
time. Thank you, sir.
    Mr. Bergman. Thank you.
    Mr. Arrington, you are recognized for five minutes.
    Mr. Arrington. Thank you, Mr. Chair.
    Mr. Dahl, you report to the secretary, correct?
    Mr. Dahl. No, I report to the Inspector General, who is 
independent of the Secretary.
    Mr. Arrington. Who manages his budget and who manages him?
    Mr. Dahl. We have oversight committees like this. The IG 
manages our office's budget.
    Mr. Arrington. That is kind of how I felt when I was 
working at the--in the Federal government, I never knew who the 
OIG was accountable to, but I think they serve an appropriate 
role, and so I am going to ask you some of the same questions I 
asked Ms. Park.
    What are your--what do you see as the challenge--and maybe 
I am reiterating a question and point that my colleague made 
about organizational structure. I saw that you made mention of 
the convoluted system and the lack of authority with CFOs.
    So maybe start there, but just give me a comprehensive view 
of the breakdown and potentially even the dysfunction to 
managing for the desired outcome of reducing improper payments.
    Mr. Dahl. The organizational structure, from our 
perspective, is a concern. We don't know what the solution is, 
but we do believe that there needs to be more integration and 
cooperation within the department in that you have a CFO in the 
Office of Management, but then within VHA, VBA, NCA, they all 
have their own CFO structures and VHA takes it even further 
with further levels of reporting.
    It probably is fair to say it makes it difficult for the 
CFO to pull together all that he or she needs to prepare 
financial statements every year. The folks from the department 
have mentioned the systems. The systems are certainly a 
challenge, but the systems are just a tool to get where they 
need to be. VA has had challenges with implementing financial 
systems before.
    I remain guardedly optimistic that this solution will be 
more successful than the last attempt.
    Mr. Arrington. Was the last attempt to implement an IT 
system a fail?
    Mr. Dahl. Well, there have been a couple of high-profile 
systems, Core FLS and FLITE, where they have been mainly 
developed in- house and they have not been successful and that 
is why we still have FMS a quarter century after it started.
    Mr. Arrington. Yeah, it seems like we had a hearing on IT--
I think it was one of the first hearings we had--and it just 
seemed like this there was an agency-wide issue with getting 
the systems in place. They would start and stop things. They 
would spend millions of dollars on a project. They would try to 
do it in-house, instead of going, you know, off the shelf or 
custom, and it was just the most convoluted thing I have ever 
heard.
    There was no real architecture, enterprise-wide 
architecture, no sensible, well-managed IT system across the 
agency, it seemed to me. Is that fair to say--
    Mr. Dahl. Well, there are a lot of different users in the 
department with a lot of different needs and I think that 
challenges a department, making sure that they can define and 
meet all those needs.
    Mr. Arrington. Is there a CIO?
    Mr. Dahl. There is. Well, there is currently--I believe he 
is an acting CIO--but there is that position.
    Mr. Arrington. Okay. Who is accountable for the--
ultimately--for improper payments, the management of improper 
payments or the poor management or even good management, 
ultimately?
    Mr. Dahl. Overall, I would say that the Assistant Secretary 
for Management bears the highest level of responsibility.
    Mr. Arrington. And what is the senior most career person 
that is responsible for?
    Mr. Dahl. I believe he is a career employee.
    Mr. Arrington. The assistant secretary?
    Mr. Dahl. For management, yeah. He is acting right now.
    Mr. Arrington. But if he weren't acting, would it be a 
political appointee?
    Mr. Dahl. I believe so.
    Mr. Arrington. So, who is the career, senior most person 
responsible; is it decentralized? Is it centralized? Who is 
accountable?
    Mr. Dahl. I think that I would have to have the department 
answer that question.
    Mr. Arrington. Yeah, I am not sure who is accountable. That 
has been my problem, quite frankly, Mr. Chairman, in just about 
every issue I have sat on this dais and listened issue after 
issue; that becomes my recurring theme, accountability. I am 
never clear about it and the results speak for themselves.
    So, anyway, thank you for your time. I yield back to the 
Chairman.
    Mr. Bergman. Our thanks to all the witnesses. You are now 
excused.
    Today, we have had the opportunity to hear from an 
impressive panel of financial and audit experts. I hope 
everyone watching will carry with them a focus on managing the 
money after the budget is agreed upon.
    Partisan and interest group battles over spending get much 
of the attention. Internal controls are deficient is not a very 
good headline, but the nuts and bolts of financial management 
have a huge impact.
    This Subcommittee will continue to monitor VA's progress in 
resolving the internal control weaknesses and deficiencies and 
eliminating the improper payments. Modernizing the financial IT 
systems is a major part of the effort, so the Subcommittee is 
giving that special scrutiny.
    But obsolete IT is not the whole story and organizational 
and procedural problems cannot be ignored. VA's financial 
challenges are hardly unique, but they are substantial and I 
would like to be able to hold the department up as an example 
of sound financial management.
    I ask unanimous consent that all Members have five 
legislative days to revise and extend their remarks and include 
extraneous material.
    Without objection, so ordered.
    I would like, once again, to thank all of our witnesses and 
the audience members for joining in today's conversation. With 
that, this hearing is adjourned.

    [Whereupon, at 3:25 p.m., the Subcommittee was adjourned.]

                            A P P E N D I X

                              ----------                              

                   Prepared Statement of Laurie Park
Introduction

    Good afternoon, Chairman Bergman, Ranking Member Kuster, and 
Members of the Subcommittee. Thank you for the opportunity to discuss 
the actions the Department of Veterans Affairs (VA) is taking to 
improve financial management. As the VA Deputy Assistant Secretary for 
Finance, I am responsible to the Acting Chief Financial Officer (CFO) 
for Department-wide financial management activities.
    Over the last several years, through our improper payment reviews, 
insights from the Office of Inspector General (OIG) reports, and 
detailed deep dives into root causes of audit findings, it has become 
clear that the foundation of our financial management practices is 
failing us. We have based our day-to-day acquisition and financial 
management processes on a fragile network of systems that routinely 
require our workforce in the field to rely on manual double entry 
processes, complex work-arounds, manual reconciliations, and processes 
that cannot keep pace with current financial management best practices 
set forth by guidance from the Office of Management and Budget (OMB) 
and the Department of the Treasury. Efforts to remediate these complex 
issues within our current foundation, coupled with a workforce that has 
not been trained in best practices, has limited our success. VA must 
focus on modernizing our financial management and acquisition systems, 
strengthen our internal controls, adopt best practices, and invest in a 
trained workforce.

Reforming VA at the Root Cause: Financial Management Business 
    Transformation

    Recognizing these challenges, with support from Secretary Shulkin, 
Interim Deputy Secretary Blackburn, and my boss, Ed Murray, the Acting 
CFO, we have recruited talented financial management professionals, 
seasoned project managers, experienced data architects, and a strong 
leadership team to lead initiatives to modernize our systems, adopt 
best practices, and train our workforce. Our Financial Management 
Business Transformation (FMBT) initiative is ongoing now and with 
continued management support and openness to change will take a focused 
effort over the next 5-8 years to be successful. We are committed to 
addressing audit findings in our current environment as much as 
possible, but because many of the findings are a result of our aged 
systems, our main focus will be on the transformation.
    We have made progress on ensuring FMBT is well managed and headed 
for success. During fiscal year (FY) 2016, following guidance from OMB 
to migrate to a Federal Shared Service Provider, VA explored two 
Federal shared service providers as directed by the Unified Shared 
Service Management Office and conducted in-depth evaluation sessions. I 
utilized subject matter experts from across the agency to determine 
which provider was the best fit for VA. After a detailed and thorough 
process, VA selected the United States Department of Agriculture 
(USDA). In collaboration with USDA, we are in the engagement phase of 
the effort, performing business process engineering, developing 
conversion strategies, and evaluating technical data interface 
alternatives. It is imperative that the FMBT initiative take the 
necessary steps to ensure that VA is fully prepared to replace our 
legacy systems with an integrated, modern system and reap the 
functional and technical benefits.

Independent Auditor's Report on VA's Financial Statements

    OIG, utilizing an independent auditor, issued VA's 18th consecutive 
unmodified (``clean'') audit opinion in FY 2016 reporting six material 
weaknesses:

    1.Office of Information Technology (OIT) security controls - The 
material weakness in OIT Information Technology security controls is a 
long-standing issue and the Chief Information Officer has taken 
aggressive action to remediate these findings. In 2018, OIT fully 
expects to remedy this finding.

    2.Veterans Benefits Administration's (VBA) education benefits 
accrued liability - This new finding relates to the inaccurate 
interpretations of accounting standards for post-employment benefits. 
In addition, several education programs were not included in the FY 
2016 estimates. Currently VBA is building valid models that meet 
actuarial standards for all required education programs. Difficulties 
in hiring certified actuaries and initiating necessary experience 
studies will most likely delay resolution of this finding until FY 
2018.

    3.VBA control environment surrounding the compensation, pension, 
and burial actuarial estimates - This new finding resulted from the 
unexpected retirement of VA's Chief Actuary. The lack of a qualified 
actuary managing and taking full responsibility for VA's compensation, 
pension, and burial actuarial model resulted in a lack of segregation 
of duties and outdated assumptions used in the model. Difficulties in 
hiring certified actuaries and initiating necessary updates to critical 
assumptions will most likely delay resolution of this finding until FY 
2018.

    4.Veterans Health Administration (VHA) Community Care obligations, 
reconciliations, and accrued expenses - This long-standing issue is 
directly related to the lack of modern integrated financial and 
acquisition systems. While efforts have been made to strengthen manual 
workarounds and improve reconciliations, these processes are short-term 
solutions and are not sustainable for the long-term. Until the new FMBT 
system is implemented, the burden to resolve these findings relies on 
the workforce rather than a modern system. Many of the issues 
identified here also contributed to the improper payment rates and 
findings in the Improper Payments Elimination & Recovery Act (IPERA) 
review for Community Care. This finding will remain until we move to a 
new system.

    5.Financial reporting - This long-standing issue is a result of our 
antiquated financial system. Due to our legacy financial system's 
limited functionality, VA has to exercise complex analysis and 
inefficient work-arounds to fully meet Treasury and OMB reporting 
requirements. This finding will remain until we move to a new system.

    6.CFO organizational structure for VA and VHA - VA's CFO community 
has worked to improve their communication and cooperation through a 
series of joint initiatives. The FY 2017 audit is ongoing, and we 
expect to receive OIG's feedback on our efforts.

    Many of the findings are due to long-standing problems inherent in 
the legacy financial management system. VA will continue to work to 
address audit findings that will improve our position in the short-
term. We will not see the large-scale improvements needed to remediate 
VA's financial management challenges and audit findings until the 
legacy Financial Management System is replaced.

Commitment to Training VA's Workforce

    In the spring of 2016, I instituted the Financial Management 
Training Initiative (FMTI). The overall objective of FMTI is to educate 
financial management professionals across the Department in order to 
help remediate current audit findings and avoid repeat or new findings 
during the annual financial statement audit. My FMTI strategy is to 
centralize and standardize a financial management training curriculum 
throughout the Department. The initiative will reinforce accurate daily 
financial transactional processes; increase employee levels of 
knowledge, skill, and proficiency; remediate audit findings and 
deficiencies with targeted sessions related to findings and 
recommendations; and support change management for the FMBT effort-our 
new financial management system. In pursuit of this goal, my office 
held a virtual, 3-day, web-based event in August 2016 and an in-person, 
3-day event in Nashville, Tennessee, in January 2017. In total, 1,560 
VA employees participated in a total of 71 separate classes. Many of 
the classes were focused directly on remediating audit findings, 
including: capitalization of assets; reconciliations; undelivered 
orders; interagency agreements and intragovernmental reconciliation; 
accounting for community care; essentials of Federal appropriations and 
fiscal law; the Anti-Deficiency Act; major, minor, and non-recurring 
maintenance accounting; future of VA Form 1358; helping VA fight fraud; 
improper payments; and internal controls. There are two more events 
planned over the next 9 months-another virtual event in August 2017 and 
another in-person event in late January 2018.

Commitment to Accurate Reporting, Remediating, and Ensuring 
    Accountability for VA Resources

    Whereas modernizing VA's financial management system is a 
desperately needed, multi-year effort that will truly transform VA's 
ability to address root causes of audit findings, VA is also leading 
initiatives in areas that can affect change now.
    Over the past three years, VA has worked to increase senior 
leadership collaboration and awareness of improper payment challenges. 
We also established a new oversight office, the Improper Payments 
Remediation and Oversight Office (IPRO), focused on driving 
identification and remediation of improper payments. We recruited staff 
with expertise in IPERA compliance, internal control assessment, 
systemic issue identification, and corrective action development. This 
office will also lead Secretary Shulkin's new ``Seek to Prevent Fraud, 
Waste, and Abuse (STOP)'' effort. Recent accomplishments include:

      Ensuring consistent application of the definition of 
improper payments across the Department in the area of acquisitions. VA 
issued acquisition guidance mandating testing procedures and providing 
instructions on what constitutes a proper payment. This guidance is 
iterative and is updated to address complex acquisition issues 
identified during testing;
      Revision of IPERA policy to clearly define roles and 
responsibilities, in addition to processes and procedures; and
      Review of improper payment risk assessments, testing 
plans, and corrective action plans for each program to ensure a 
consistent enterprise-wide approach and compliance with policy.

    Although these efforts have not yet resulted in an overall 
reduction of improper payments, VA did report a decrease in improper 
payments in more than half of the 14 programs reporting in FY 2016. VA 
cannot fully address systemic issues without accurate identification of 
errors and root causes and acknowledges that this means its reported 
improper payment rate will continue to rise until such time as efforts 
underway in program's such as VA's Community Care begin to garner 
results.
    In FY 2017, VA is leading efforts to analyze improper payments to 
determine the percentage that are accurate, but must still be reported 
as improper due to failure to comply with policy versus those that 
represent a true loss to the Government. This will aid leadership in 
targeting resources to areas that will result in cost-benefits to VA. 
Further, as part of VA's STOP fraud, waste, and abuse initiative, VA 
will establish the baseline of existing fraud, waste, and abuse 
activities, to include identifying savings; determine areas most at 
risk of fraud, waste, and abuse; explore partnership opportunities with 
the private sector and other federal agencies to maximize efficiencies; 
and leverage the Financial Services Center Data Analytics capabilities 
to improve VA's fraud, waste, and abuse prevention efforts. These 
capabilities are enabled by a robust, enterprise-level analytics 
technology platform leveraging commercial-off-the-shelf and advanced 
open source programming/analytic tools; a team of data scientists, 
statisticians, data engineers, and data/program analysts; and an 
extended organizational ecosystem that includes internal and external 
partners in fraud, waste, and abuse analytics and management. 
Organizations included in the analytic ecosystem include the top ranked 
McCombs School of Business, University of Texas; Centers for Medicare 
and Medicaid Services; Interagency Fraud and Risk Data Mining 
Workgroup; VA's Office of Compliance and Business Integrity; VA's 
Office of Internal Controls; IPRO; and others. This important 
initiative will reap great rewards for VA.
    Debt collection is also an essential part of strong financial 
management where VA is making improvements. VA balances Veteran debt 
collection with a strong sense of compassion, as well as compliance 
with Federal debt collection statutes and policy. VA works with 
Veterans to resolve their debt through extended payment plans, benefit 
offset, waivers, dispute resolution, and even refunds, if Veterans are 
found to be in hardship. Federal statutes also require VA to send non-
tax debt to Treasury for collection. In December 2016, VA began 
transferring delinquent debt for non-service connected medical care co-
payments to the Treasury Cross Servicing program for collection. As of 
April 30, over 800 thousand delinquent debts totaling about $71 million 
were referred for recovery. Veterans receive at least three debt 
notices before Treasury takes offsets from tax refunds and/or Federal 
salaries.
    The Department's comprehensive efforts to improve financial 
management will assist in improving activities to identify fraud, 
waste, and abuse, reducing improper payments, and strengthening VA's 
financial statements. However, VA cannot emphasize enough how important 
the FMBT effort is to strengthen VA's overall financial management 
position. This includes VA's ability to meet Federal regulations and 
mandates and remediate VA's material weaknesses for the financial 
statements.

Path Forward

    Even with these efforts, VA recognizes it has many challenges to 
overcome, while at the same time providing Veterans the benefits and 
services they have earned and deserve. VA acknowledges its current 
challenges and audit findings in financial management that reflect a 
need for improved financial stewardship. We believe that the 
initiatives we are working on will improve VA's financial management 
and better serve our Veterans.
    Thank you for the opportunity to appear before you today and for 
your continued support of Veterans. I look forward to your questions.

                                 
                  Prepared Statement of Beryl H. Davis
                            
                            VETERANS AFFAIRS
      Improper Payment Estimates and Ongoing Efforts for Reduction

    Chairman Bergman, Ranking Member Kuster, and Members of the 
Subcommittee:

    As the steward of taxpayer dollars, the federal government is 
accountable for how it spends hundreds of billions of taxpayer dollars 
annually. However, improper payments remain a significant and pervasive 
government-wide issue. For several years, we have reported improper 
payments as a material weakness \1\ in our audit reports on the 
consolidated financial statements of the U.S. government because the 
federal government is unable to determine the full extent to which 
improper payments occur and reasonably assure that actions are taken to 
reduce them. \2\ In addition, agency auditors continued to report 
internal control deficiencies over financial reporting in their 2016 
financial statement audit reports, such as financial system limitations 
and information system control weaknesses. Such deficiencies could 
significantly increase the risk that improper payments may occur and 
not be detected promptly.
---------------------------------------------------------------------------
    \1\ A material weakness is a deficiency, or a combination of 
deficiencies, in internal control over financial reporting such that 
there is a reasonable possibility that a material misstatement of the 
entity's financial statements will not be prevented, or detected and 
corrected, on a timely basis. A significant deficiency is a deficiency, 
or a combination of deficiencies, in internal control that is less 
severe than a material weakness, yet important enough to merit 
attention by those charged with governance. A deficiency in internal 
control exists when the design or operation of a control does not allow 
management or employees, in the normal course of performing their 
assigned functions, to prevent, or detect and correct, misstatements on 
a timely basis.
    \2\ GAO, Financial Audit: Fiscal Years 2016 and 2015 Consolidated 
Financial Statements of the U.S. Government, GAO 17 283R (Washington, 
D.C.: Jan. 12, 2017).
---------------------------------------------------------------------------
    Under the Improper Payments Information Act of 2002 (IPIA), as 
amended, an improper payment is defined as any payment that should not 
have been made or that was made in an incorrect amount (including 
overpayments and underpayments) under statutory, contractual, 
administrative, or other legally applicable requirements. Among other 
things, an improper payment includes payment to an ineligible 
recipient, payment for an ineligible good or service, and any duplicate 
payment. In addition, Office of Management and Budget (OMB) guidance 
instructs agencies to report as improper payments any payments for 
which insufficient or no documentation was found. Reducing improper 
payments is critical to safeguarding federal funds and could help 
achieve cost savings and improve the government's fiscal position.
    Strong financial management practices, including effective internal 
controls, are important for federal agencies to better detect and 
prevent improper payments. The Department of Veterans Affairs (VA) 
faces significant financial management challenges. In 2015, we 
designated VA health care as a high-risk area because of our concern 
about VA's ability to ensure that its resources are being used cost-
effectively and efficiently to improve veterans' timely access to 
health care, and to ensure the quality and safety of that care. \3\ 
Further, improving and modernizing federal disability programs has been 
on GAO's high-risk list since 2003, in part because of challenges that 
VA has faced in providing accurate, timely, and consistent decisions 
related to disability compensation. \4\ In addition, in VA's fiscal 
year 2016 agency financial report, the independent auditor reported 
material weaknesses and significant deficiencies in internal control 
over financial reporting. Finally, the VA Office of Inspector General 
(OIG) has reported that VA has been noncompliant with the criteria 
listed in Section 3 of the Improper Payments Elimination and Recovery 
Act of 2010 (IPERA) since fiscal year 2011, the first year that the OIG 
reported on the agency's compliance under that provision. \5\
---------------------------------------------------------------------------
    \3\ GAO, High Risk Series: Progress on Many High-Risk Areas, While 
Substantial Efforts Needed on Others, GAO 17 317 (Washington, D.C.: 
Feb. 15, 2017).
    \4\ GAO 17 317.
    \5\ IPERA, Pub. L. No. 111-204, 124 Stat. 2224 (July 22, 2010), 
established a requirement for entity inspectors general to report 
annually on entities' compliance with specific criteria. The six 
criteria are that the entity has (1) published an annual financial 
statement and accompanying materials in the form and content required 
by the Office of Management and Budget for the most recent fiscal year 
and posted that report on the entity website; (2) conducted a risk 
assessment for each specific program or activity that conforms with 
IPIA, as amended; (3) published estimates of improper payments for all 
programs and activities identified as susceptible to significant 
improper payments under the entity's risk assessment; (4) published 
corrective action plans for programs and activities identified as 
susceptible to significant improper payments; (5) published and met 
annual reduction targets for all programs and activities identified as 
susceptible to significant improper payments; and (6) reported a gross 
improper payment rate of less than 10 percent for each program and 
activity for which an improper payment estimate was obtained and 
published. For purposes of this report, program encompasses both 
programs and activities.
---------------------------------------------------------------------------
    Today, my statement will discuss improper payments on both the 
government-wide level and at VA. It will also discuss certain actions 
that VA has taken and other actions that VA can take to reduce improper 
payments. My statement is primarily based on VA's financial reports, VA 
OIG reports, and our recent improper payments related work at VA. \6\ 
The products cited throughout this statement include details on the 
scope and methodology used to conduct that work. The work upon which 
this statement is based was conducted in accordance with all sections 
of GAO's Quality Assurance Framework that are relevant to our 
objectives. The framework requires that we plan and perform the 
engagement to obtain sufficient and appropriate evidence to meet our 
stated objectives and to discuss any limitations in our work. We 
believe that the information and data obtained, and the analysis 
conducted, provide a reasonable basis for any findings and conclusions 
in this product.
---------------------------------------------------------------------------
    \6\ GAO, Veterans' Disability Benefits: Improvements Could Further 
Enhance Quality Assurance Efforts, GAO 15 50 (Washington, D.C.: Nov. 
19, 2014) and GAO, Veterans' Disability Benefits: VA Can Better Ensure 
Unemployability Decisions Are Well Supported, GAO 15 464 (Washington, 
D.C.: June 2, 2015).

---------------------------------------------------------------------------
Background

    VA's mission is to promote the health, welfare, and dignity of all 
veterans in recognition of their service to the nation by ensuring that 
they receive medical care, benefits, social support, and lasting 
memorials. It is the second largest federal department and, in addition 
to its central office located in Washington, D.C., has field offices 
throughout the United States, as well as the U.S. territories and the 
Philippines.
    The department has three major components that are primarily 
responsible for carrying out its mission:

      the Veterans Benefits Administration (VBA), which 
provides a variety of benefits to veterans and their families, 
including disability compensation, educational opportunities, 
assistance with home ownership, and life insurance;
      the Veterans Health Administration (VHA), which provides 
health care services, including primary care and specialized care, and 
performs research and development to serve veterans' needs; and
      the National Cemetery Administration (NCA), which 
provides burial and memorial benefits to veterans and their families.

    Collectively, the three components rely on approximately 340,000 
employees to provide services and benefits. These employees work in 167 
VA medical centers, approximately 800 community-based outpatient 
clinics, 300 veterans centers, 56 regional offices, and 131 national 
and 90 state or tribal cemeteries.
    For fiscal year 2016, VA reported about $176 billion in net 
outlays, an increase of about $16 billion from the prior fiscal year. 
\7\ VBA and VHA account for about $102 billion (about 58 percent) and 
$72 billion (about 41 percent) of VA's reported net outlays, 
respectively. The remaining net outlays were for NCA and VA's 
administrative costs. The fiscal year 2017 appropriations act that 
covered VA provided approximately $177 billion to the agency, about a 
$14 billion increase from the prior fiscal year. \8\
---------------------------------------------------------------------------
    \7\ The amount of money paid out by the government is known as 
outlays. Because of the timing of agency payments, appropriations may 
not correspond to outlays in a given fiscal year. Net outlays are 
disbursements net of offsetting collections.
    \8\ Military Construction, Veterans Affairs, and Related Agencies 
Appropriations Act, 2017, Pub. L. No. 114-223, div A, 130 Stat. 857 
(Sept. 29, 2016). Appropriations provide budget authority to federal 
agencies to make financial commitments (``obligations'') and make 
payments from the Department of the Treasury for specified purposes in 
specified amounts. Some payments for obligations are made soon after 
being incurred (for example, employees' salaries) and some are made 
over several years (for example, payments to contractors for major 
construction projects).

Improper Payments Remain a Significant and Pervasive Government-Wide 
---------------------------------------------------------------------------
    Issue

    As we recently reported, improper payments remain a significant and 
pervasive government-wide issue. \9\ Since fiscal year 2003-when 
certain agencies began reporting improper payments as required by IPIA-
cumulative reported improper payment estimates have totaled over $1.2 
trillion, as shown in figure 1. \10\
---------------------------------------------------------------------------
    \9\ GAO, The Nation's Fiscal Health: Action is Needed to Address 
the Federal Government's Fiscal Future, GAO 17 579T (Washington, D.C.: 
May 3, 2017).
    \10\ IPIA-as amended by IPERA-requires executive branch agencies to 
(1) review all programs and activities, (2) identify those that may be 
susceptible to significant improper payments, (3) estimate the annual 
amount of improper payments for those programs and activities, (4) 
implement actions to reduce improper payments and set reduction 
targets, and (5) report on the results of addressing the foregoing 
requirements. ``Significant improper payments'' are defined as gross 
annual improper payments in a program exceeding (1) both 1.5 percent of 
program outlays and $10 million of all program or activity payments 
during the fiscal year reported or (2) $100 million (regardless of the 
percentage of outlays).

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


    For fiscal year 2016, agencies reported improper payment estimates 
totaling $144.3 billion, an increase of over $7 billion from the prior 
year's estimate of $136.7 billion. \11\ The reported estimated 
government-wide improper payment error rate was 5.1 percent of related 
program outlays. \12\ As shown in figures 2 and 3, the government-wide 
reported improper payment estimates-both dollar estimates and error 
rates-have increased over the past 3 years, largely because of 
increases in Medicaid's reported improper payment estimates.
---------------------------------------------------------------------------
    \11\ These amounts do not include the Department of Defense's 
Defense Finance and Accounting Service Commercial Pay program because 
of concerns about the reliability of the program's estimate.
    \12\ Reported error rates reflect the estimated improper payments 
as a percentage of total program outlays.

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


    For fiscal year 2016, overpayments accounted for approximately 93 
percent of the government-wide reported improper payment estimate, 
according to www.paymentaccuracy.gov, with underpayments accounting for 
the remaining 7 percent.
    Although primarily concentrated in three areas (Medicare, Medicaid, 
and the Earned Income Tax Credit), the government-wide reported 
improper payment estimates for fiscal year 2016 were attributable to 
112 programs spread among 22 agencies. (See fig. 4.)

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    We found that not all agencies had developed improper payment 
estimates for all of the programs they identified as susceptible to 
significant improper payments. Eight agencies did not report improper 
payment estimates for 18 risk-susceptible programs. (See table 1.)

[[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


    As we have previously reported, the federal government faces 
multiple challenges that hinder its efforts to determine the full 
extent of and reduce improper payments. \13\ These challenges include 
potentially inaccurate risk assessments, agencies that do not report 
improper payment estimates for risk-susceptible programs or report 
unreliable or understated estimates, and noncompliance issues.
---------------------------------------------------------------------------
    \13\ GAO 17 579T.

Changes in VA's Evaluation Procedures Caused Significant Increases in 
---------------------------------------------------------------------------
    Reported Improper Payment Estimates since Fiscal Year 2013

    For fiscal year 2016, VA's reported improper payment estimate 
totaled $5.5 billion, an increase of about $500 million from the prior 
year. The reported VA improper payment error rate was 4.5 percent of 
related program outlays for fiscal year 2016, a slight increase from 
the 4.4 percent reported error rate for fiscal year 2015. As shown in 
table 2, VA's Community Care and Purchased Long-Term Services and 
Support programs accounted for the majority of VA's estimated improper 
payments. \14\ Specifically, for fiscal year 2016, VA's reported 
improper payment estimate for VA's Community Care was approximately 
$3.6 billion (about 65 percent of VA's total reported improper payments 
estimate) and for VA's Purchased Long-Term Services and Support was 
approximately $1.2 billion (about 22 percent of VA's total reported 
improper payments estimate).
---------------------------------------------------------------------------
    \14\ Community Care is a program through which VA authorizes 
veteran care at community care facilities when the needed services are 
not available through VA, or when a veteran is unable to travel to a VA 
facility. Purchased Long-Term Services and Support strives to advance 
quality care for aging and chronically ill veterans by providing policy 
direction for the development, coordination, and integration of 
geriatrics and long-term care clinical programs.

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    As shown in figures 5 and 6, VA's reported improper payment 
estimates have increased over the past 3 years, and the reported 
---------------------------------------------------------------------------
improper payment error rates have increased over the past 2 years.

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    The significant increase in VA's reported improper payment 
estimates and error rates primarily occurred, according to the VA OIG, 
because VA changed its sample evaluation procedures in fiscal year 
2015, which resulted in more improper payments being identified. In 
response to a finding by the VA OIG, \15\ VA began classifying every 
payment as improper when it made a payment that did not follow all 
applicable Federal Acquisition Regulation (FAR) and Veterans Affairs 
Acquisition Regulation (VAAR) provisions. The OIG reported that when 
those purchases do not follow applicable legal requirements, such as 
having FAR-compliant contracts in place, the resulting payments are 
improper because they ``should not have been made or were made in an 
incorrect amount under statutory, contractual, administrative, or other 
legally applicable requirements, according to the definition of 
improper payments set forth in OMB Circular A-123, Appendix C.'' As a 
result of the change in its sample evaluation procedures, VA reported 
significant increases in estimated improper payments for both its 
Community Care and Purchased Long-Term Services and Support programs.
---------------------------------------------------------------------------
    \15\ Department of Veterans Affairs Office of Inspector General, FY 
2014 Review of VA's Compliance With the Improper Payments Elimination 
and Recovery Act, 14-03380-356 (Washington, D.C.: May 14, 2015).
---------------------------------------------------------------------------
    As shown in table 3, VA's Community Care and Purchased Long-Term 
Services and Support programs' reported improper payment error rates 
are the two highest reported error rates government-wide for fiscal 
year 2016. Specifically, VA's Community Care and Purchased Long-Term 
Services and Support programs had reported improper payment error rates 
of about 75.9 percent and 69.2 percent, respectively. The reported 
improper payment error rates for these two programs were each over 45 
percentage points higher than the reported improper payment error rate 
for the next highest federal program-the Department of the Treasury's 
Earned Income Tax Credit program.

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    In its fiscal year 2016 agency financial report, VA did not report 
improper payment estimates for four programs it identified as 
susceptible to significant improper payments. These four programs were

      Communications, Utilities, and Other Rent;
      Medical Care Contracts and Agreements;
      Prosthetics; and
      VA Community Care Choice payments made from the Veterans 
Choice Fund.

    Because VA did not report improper payment estimates for these 
risk-susceptible programs, VA's improper payment estimate is 
understated and the agency is hindered in its efforts to reduce 
improper payments in these programs. In its fiscal year 2016 agency 
financial report, VA stated that it will report improper payment 
estimates for these programs in its fiscal year 2017 agency financial 
report.

Ongoing Efforts for Reducing Improper Payments at VA

    According to OMB guidance, to reduce improper payments, VA can use 
root cause analysis to identify why improper payments are occurring and 
develop effective corrective actions to address those causes. In 
addition, our two prior reports identified problems with how VA 
processed its claims to reasonably assure the accuracy of or 
eligibility for the disability benefits, increasing the risk of 
improper payments. VA can implement our recommendations from these two 
reports to better ensure the accuracy of or eligibility for disability 
benefits.

Root Cause Analysis

    Root cause analysis is key to understanding why improper payments 
occur and to developing and implementing corrective actions to prevent 
them. In 2014, OMB established new guidance to assist agencies in 
better identifying the root causes of improper payments and assessing 
their relevant internal controls. \16\ Agencies across the federal 
government began reporting improper payments using these more detailed 
root cause categories for the first time in their fiscal year 2015 
financial reports. Figure 7 shows the root causes of VA's estimated 
improper payments for fiscal year 2016, as reported by VA.
---------------------------------------------------------------------------
    \16\ Office of Management and Budget, Appendix C to Circular No. A-
123, Requirements for Effective Estimation and Remediation of Improper 
Payments, OMB Memorandum M-15-02 (Washington, D.C.: 2014).

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    According to VA's fiscal year 2016 agency financial report, the 
root cause for over three-fourths of VA's reported fiscal year 2016 
improper payment estimates was program design or structural issues. As 
noted above, most of the improper payments occurred in VA's Community 
Care and Purchased Long-Term Services and Support programs. In the 
fiscal year 2016 agency financial report, VA provided details on how it 
plans to correct some program design issues by making its procurement 
practices compliant with relevant laws and regulations. The agency 
stated that it has made certain changes, such as issuing of new 
policies that can reduce the amount of improper payments in this area. 
For example, in VA's fiscal year 2016 agency financial report, VA 
stated that it issued guidance in May 2015 to appropriately purchase 
care, such as hospital care or medical services, in the community 
through the use of VAAR-compliant contracts. VA stated that the 
implementation of this guidance is ongoing with full impact and 
compliance anticipated during fiscal year 2017.
    According to VA's fiscal year 2016 agency financial report, the 
second largest root cause for VA's reported improper payments was 
administrative or process errors made by the federal agency. VA 
reported that most of these errors occurred in its Compensation 
program. These errors, such as failure to reduce benefits 
appropriately, affected the payment amounts that veterans and 
beneficiaries received. To address this root cause, VA stated in its 
fiscal year 2016 agency financial report that it is updating procedural 
guidance to reflect such things as changes in legislation and policy. 
In addition, VA stated that it will train employees on specific 
subjects related to errors found during improper payment testing and 
quality reviews.

VA Has Implemented Steps to Improve the Accuracy of and Eligibility 
    Determinations for its Disability Benefits

    Accurate claim decisions help ensure that VA is paying disability 
benefits only to those eligible for such benefits and in the correct 
amounts. Thus, it is critical that VA follows its claims processes 
accurately and consistently. However, we previously reported problems 
with how VA processed its claims to reasonably assure the accuracy of 
or eligibility for the disability benefits, increasing the risk of 
improper payments.
    In November 2014, we reported that while VA pays billions of 
dollars to millions of disabled veterans, there were problems with VA's 
ability to ensure that claims were processed accurately and 
consistently by its regional offices. \17\ VA measures the accuracy of 
disability compensation claim decisions mainly through its Systematic 
Technical Accuracy Review (STAR). Specifically, for each of the 
regional offices, completed claims are randomly sampled each month and 
the data are used to produce estimates of the accuracy of all completed 
claims.
---------------------------------------------------------------------------
    \17\ GAO 15 50.
---------------------------------------------------------------------------
    In our November 2014 report, we reported that VA had not always 
followed generally accepted statistical practices when calculating 
accuracy rates through STAR reviews, resulting in imprecise performance 
information. We also identified shortcomings in quality review 
practices that could reduce their effectiveness. We made eight 
recommendations to VA to review the multiple sources of policy guidance 
available to claims processors and evaluate the effectiveness of 
quality assurance activities, among other things. In response to the 
draft report, VA agreed with each of our recommendations and identified 
steps it planned to take to implement them.
    To date, VA has implemented six of the report's eight 
recommendations. For example, VA has revised its sampling methodology 
and has made its guidance more accessible. VA has initiated action on 
the remaining two recommendations related to quality review of the 
claims processes. VA reported that it is in the process of making 
systems modifications to its electronic claims processing system that 
will allow VA to identify deficiencies during the claims process. In 
addition, VA is developing a new quality assurance database that will 
capture data from all types of quality reviews at various stages of the 
claims process. VA stated that this new database will support increased 
data analysis capabilities and allow the agency to evaluate the 
effectiveness of quality assurance activities through improved and 
vigorous error rate trend analysis. VA stated that it anticipates 
deploying the systems modifications and the new quality assurance 
database by July 2017.
    In June 2015, \18\ we reported that VA's procedures did not ensure 
that Total Disability Individual Unemployability (TDIU) benefit 
decisions were well-supported. \19\ To begin receiving and remain 
eligible for TDIU benefits, veterans must meet the income eligibility 
requirements. VA first determines a claimant's income by requesting 
information on the last 5 years of employment on the claim form and 
subsequently requires beneficiaries to annually attest to any income 
changes. VA uses the information provided by claimants to request 
additional information from employers and, when possible, verifies the 
claimant's reported income, especially for the year prior to applying 
for the benefit. In order to receive verification, VA sends a form to 
the employers identified on the veteran's benefit claim and asks them 
to provide the amount of income earned by the veteran. However, VA 
officials indicated that employers provided the requested information 
only about 50 percent of the time.
---------------------------------------------------------------------------
    \18\ GAO 15 464.
    \19\ VA generally provides TDIU benefits to disabled veterans of 
any age who are unable to maintain employment with earnings above the 
federal poverty guidelines because of service-connected disabilities.
---------------------------------------------------------------------------
    In our 2015 report, we reported that VA previously conducted audits 
of beneficiaries' reported income by obtaining income verification 
matches from Internal Revenue Service (IRS) earnings data through an 
agreement with the Social Security Administration (SSA), but was no 
longer doing so despite the standing agreement. In 2012, VA suspended 
income verification matches in order to develop a new system that would 
allow for more frequent, electronic information sharing. VA officials 
told us that they planned to roll out a new electronic data system that 
would allow for compatibility with SSA data sources in fiscal year 
2015. They noted that they planned to use this system to conduct more 
frequent and focused income verifications to help ensure beneficiaries' 
continued entitlement. VA officials also anticipated being able to use 
the system to conduct income verifications for initial TDIU applicants. 
However, at the time of our 2015 report, VA could not provide us with a 
plan or timeline for implementing this verification system. In the 2015 
report, we recommended that VA verify the self-reported income provided 
by veterans (1) applying for TDIU benefits and (2) undergoing the 
annual eligibility review process by comparing such information against 
IRS earnings data, which VA currently has access to for this purpose.
    To date, VA is developing processes to use IRS earnings data from 
SSA in verifying income eligibility requirements. According to VA, in 
February 2016, it launched a national workload distribution tool within 
its management system to improve its overall production capacity and 
assist with reaching claims processing goals that will be used in 
implementing our recommendation. To determine if new beneficiaries are 
eligible for TDIU benefits, VA stated that it is expanding the data-
sharing agreement with SSA to develop an upfront verification process. 
Specifically, when VA receives a TDIU claim, it will electronically 
request the reported IRS income information from SSA and receive a 
response within 16 days. In addition, according to VA, it is also 
planning to begin a process for checking incomes of veterans to 
determine whether they remain eligible for TDIU benefits. Specifically, 
VA has reinstituted the data match agreement with SSA that was set to 
expire in December 2016 to allow VA to compare reported income earnings 
of TDIU beneficiaries to earnings actually received. According to VA, 
it also has drafted a new guidance manual for the annual eligibility 
review process. VA stated that it planned to fully implement the 
upfront and annual eligibility verification processes by the summer of 
2017.
    In conclusion, in light of VA's significant financial management 
challenges, we continue to be concerned about VA's ability to 
reasonably assure its resources are being used cost-effectively and 
efficiently. Because VA's payment amounts are likely to increase with 
the increase in appropriations for fiscal year 2017, it is critical 
that VA takes actions to reduce the risks of improper payments. While 
VA has taken several actions to help prevent improper payments, further 
efforts are needed to help minimize the risks of improper payments 
across its programs.
    Chairman Bergman, Ranking Member Kuster, and Members of the 
Subcommittee, this completes my prepared statement. I would be pleased 
to respond to any questions that you may have at this time.

GAO Contacts and Staff Acknowledgements

    If you or your staff have any question about this testimony, please 
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page of this statement. GAO staff who made key contributions to this 
testimony are Matthew Valenta (Assistant Director), Daniel Flavin 
(Analyst in Charge), Marcia Carlsen, Francine Delvecchio, Robert 
Hildebrandt, Melissa Jaynes, Jason Kelly, and Jason Kirwan.

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7814, Washington, DC 20548

                                 
                  Prepared Statement of Nicholas Dahl
    Mr. Chairman, Ranking Member Kuster, and Members of the 
Subcommittee, thank you for the opportunity to discuss the Office of 
Inspector General's (OIG) work regarding VA's financial management. Our 
statement today focuses on the results of the fiscal year (FY) 2016 
Audit of VA's Consolidated Financial Statements, and our work related 
to the Improper Payments and Recovery Act (IPERA). I am accompanied by 
Ms. Sue Schwendiman, Director, OIG's Financial Audits Division.

BACKGROUND

    Effective financial management is important because it enables VA 
to plan, direct, monitor, and control its financial resources. It 
supports the safeguarding of VA's assets and the timely payment of its 
obligations. Good financial information helps users identify links 
between resources and results, and to understand and improve value for 
appropriated funds. It can also be used to manage risk effectively and 
support decisions through financial analysis.
    The Chief Financial Officers Act of 1990 (Public Law 101-576), as 
amended, requires the OIG to conduct an audit of VA's consolidated 
financial statements. Since 2000, we have contracted with an 
independent public accounting firm to conduct the audit; and since 
2010, we have contracted with CliftonLarsonAllen LLP (CLA). This work 
helps ensure accountability for public resources.
    VA's consolidated financial statements are published in VA's annual 
Agency Financial Report, and these statements summarize VA's financial 
results, financial condition, and the status of budgetary resources. 
Although VA has received an unmodified or ``clean'' opinion, on its 
consolidated financial statements from our contracted auditors, VA has 
continuously faced challenges in achieving those results. A clean 
opinion means the financial statements are presented fairly, in all 
material respects, in accordance with accounting principles generally 
accepted in the United Statement of America. It does not, however, mean 
VA can easily obtain that opinion or that VA does not have internal 
control weaknesses.
    The contract auditor has regularly identified and reported on 
material weaknesses and significant deficiencies. A material weakness 
is a deficiency, or a combination of deficiencies, in internal controls 
such that there is a reasonable possibility that a material 
misstatement of VA's financial statements will not be prevented, or 
detected and corrected, on a timely basis. A significant deficiency is 
a deficiency, or combination of deficiencies, in internal controls that 
is less severe than a material weakness, yet important enough to merit 
attention by those charged with governance.

FISCAL YEAR 2016 FINANCIAL STATEMENT AUDIT RESULTS

    The audit of VA's FY 2016 consolidated financial statements 
identified six material weaknesses and two significant deficiencies-two 
more in total than the prior year. As described above, these material 
weaknesses make it more difficult for management to ensure the accuracy 
of VA's financial statements and also more difficult to audit the 
statements.

    The material weaknesses are:

      Information technology security controls - This is a 
repeat finding that our contract auditors have reported since FY 2000. 
Weaknesses existed in configuration management, such as untimely 
patching to mitigate security vulnerabilities; access controls, 
including inconsistent enforcement of password standards; security 
management; and contingency planning. Without good information 
technology security controls, VA's financial information may not be 
safe in terms of confidentiality, integrity, and availability.
      Community care obligations, reconciliations, and accrued 
expenses - This is a repeat finding from the FY 2015 audit. CLA 
identified numerous examples of obligations for Community Care Programs 
that were overstated compared to actual payments. As a result, VA 
management performed its own analysis and recorded journal entries of 
approximately $1.9 billion to reduce overstated Choice Program 
obligations and $2.6 billion to reduce other overstated Community Care 
Program obligations in VA's general ledger on September 30, 2016. The 
overestimation of obligations also resulted in a large overstatement of 
accrued expenses, which management also reduced through journal 
entries.

    CLA identified several causes of these overstatements, but overall, 
significant system limitations hindered effective and efficient 
operations and controls. CLA also reported that methods to estimate the 
cost of care were inconsistent at medical centers and the Office of 
Community Care's procedures for its monitoring activities were not 
adequate. For most of FY 2016, the Office of Community Care had not 
performed a nationwide consolidated reconciliation of obligations and 
disbursements between VA's Financial Management System (FMS) and the 
system used to authorize and process individual non-VA care claims.

      Financial reporting - This is a repeat finding from the 
FY 2015 audit. VA's financial management and general ledger system is 
FMS. Since its implementation in 1992, Federal financial reporting 
requirements have become more complicated and the level of financial 
information needed by management and oversight bodies has become 
increasingly complex. Due to FMS' limited functionality to meet current 
financial reporting needs, VA utilizes another system to create 
financial statements for external reporting. However, this process 
requires significant manual intervention and workarounds to ensure 
accurate financial reporting. CLA reported that VA recorded a large 
number of adjustments (called journal vouchers) to its accounts in 
order to prepare VA's financial statements. Also, significant abnormal 
account balances (that is, an account balance that shows a debit 
balance when it should be a credit balance or vice versa) were not 
researched and cleared timely. These weaknesses increase the risk of 
material errors in financial reporting. Although VA has made 
improvements in areas such as the reduced use of journal vouchers, many 
issues have existed for years and require extensive efforts to 
implement solutions to resolve them.
      Education benefits accrued liability - This is a new 
finding identified during the FY 2016 audit. CLA reported VA did not 
use the appropriate method to account for veterans' education benefits. 
VA manages several education benefit programs with total disbursements 
of approximately $14.5 billion in FY 2016, with the Post 9/11 G.I. Bill 
Program being the largest. Prior to FY 2016, management did not view 
education benefit payments as post-employment benefits. As a result, VA 
did not report an estimated liability for future benefit payments as 
required by accounting standards. In FY 2016, VA reported this 
liability in the amount of approximately $60 billion for the first time 
on its balance sheet.
      Control environment surrounding the compensation, 
pension, and burial actuarial estimates - This is a new finding 
identified during the FY 2016 audit. It resulted from the lack of 
succession planning for the chief actuary who was responsible for the 
calculation of VA's unfunded veterans' compensation and burial 
liability amount. This amount was reported on VA's balance sheet as of 
September 30, 2016, as approximately $2.5 trillion. The chief actuary 
left VA in July 2016, and VA did not have a successor actuary with the 
appropriate qualifications and experience to take full responsibility 
to manage the actuarial model assumptions and review the related 
calculations. Management subsequently obtained the services of a 
credentialed actuary on detail from another department. VA also noted 
its model's assumption for the rate of new compensation cases was 
outdated and adjusted its balance sheet by $277 billion. CLA reported 
VA needed to review the reasonableness of its key model assumptions, 
which would include comparing relevant actuarial information from the 
Department of Defense.
      CFO organizational structure for VA and VHA - This was 
elevated from a significant deficiency in FY 2015 to a material 
weakness in FY 2016. CLA reported VA has a decentralized and fragmented 
organizational structure for financial management and reporting that 
did not operate in a fully integrated manner. The VA CFO establishes 
financial policy and produces VA's consolidated financial statements. 
Business components, such as the Veterans Health Administration (VHA), 
the Veterans Benefits Administration (VBA), and the National Cemetery 
Administration, have their own CFOs, who oversee financial management 
operations and follow the chain of command within those organizations. 
VHA's financial management structure was further fragmented, with three 
different CFO organizational structures within the Administration. CLA 
observed instances where procedures the VA CFO depended on were not 
completed by VA components or communication issues existed.

    CLA concluded the decentralization of financial management 
functions among the VA component entities without organizational 
reporting and accountability back to the VA CFO decreased the VA CFO's 
ability to affect financial management at the component level and 
across the VA enterprise, and also presented a risk to VA's planned 
conversion to a shared service provider in order to modernize its 
financial systems.
    CLA also reported two significant deficiencies. As stated above, a 
significant deficiency is a deficiency or combination of deficiencies 
in internal controls that is less severe than a material weakness, yet 
important enough to merit attention by those charged with governance

      Procurement, Undelivered Orders, Accrued Expenses, and 
Reconciliations - Regarding this significant deficiency, CLA reported:

      Centralized, complete, and consolidated reconciliations 
among various procurement subsidiary systems and FMS were not 
performed.
      VA used miscellaneous obligating documents, also called 
``1358s'', extensively, but lacked sufficient controls, such as 
monitoring to ensure obligations and accrued expenses were not 
overstated.
      VA did not have an adequate process to validate estimated 
accrued expenses against actual payment data.
      Pervasive and long standing procurement related issues, 
including instances of untimely liquidation of undelivered orders, 
untimely recording of contracts and modifications in FMS, recording of 
obligations prior to contract execution, over-obligation of funds, and 
obligations recorded months or years after receiving goods or services.

      Loan Guaranty Liability - VBA uses complex models to 
estimate future cash flows and determine the cost of its loan 
guarantees on a present value basis for budgetary and financial 
reporting purposes. CLA reported structural deficiencies in model 
design have impacted VA's ability to forecast future program cash flows 
following the housing crisis. VBA's models have consistently shown 
significant differences between model forecasts and actual program 
performance. Based on the auditor's discussions with management 
regarding this issue, VBA revised certain model assumptions, thus 
reducing the Loan Guaranty Liability as of September 30, 2016, by $830 
million.

    Additionally, CLA noted that VA reported two violations of the 
Antideficiency Act \1\ in August 2016 and was in the process of 
reporting four other violations at the time of their audit report.
---------------------------------------------------------------------------
    \1\ 31 CFR Sec. 1341(a) and 1517(a)
---------------------------------------------------------------------------
    Overall, CLA reported VA's financial management systems do not 
substantially comply with the requirements of the Federal Financial 
Management Improvement Act of 1996. \2\ VA's complex, disjointed, and 
legacy financial management system architecture continued to 
deteriorate and no longer met increasingly stringent and demanding 
financial management and reporting requirements mandated by the U.S. 
Department of the Treasury and the Office of Management and Budget 
(OMB). VA continued to be challenged in its efforts to apply consistent 
and proactive enforcement of established policies and procedures 
throughout its geographically dispersed portfolio of legacy 
applications and systems.
---------------------------------------------------------------------------
    \2\ Public Law-104-208, Sec. 803(a), Federal Financial Management 
Improvement Act of 1996
---------------------------------------------------------------------------
    FMS' limitations required VA to use another system to produce 
financial statements. However, VA still had to re-enter or re-perform 
numerous manual journal vouchers, reconciliations, and analyses for 
each reporting period to produce VA's financial statements and trial 
balances for submission to the U.S. Department of the Treasury. During 
FY 2016, FMS was not centrally and completely reconciled with key 
subsidiary systems such as the Electronic Contract Management System; 
Integrated Funds Distribution Control Point Activity, Accounting and 
Procurement System; and the Fee Basis Claims System.
    VA is currently working with the U.S. Department of Agriculture to 
obtain financial services, which is consistent with OMB guidance to 
obtain financial services from a shared service provider. \3\ The VA 
Office of Finance, within the Office of Management, is leading the 
Financial Management Business Transformation program along with the 
Office of Acquisition and Logistics and the Office of Information and 
Technology. In FY 2017, VA began efforts to standardize business 
processes and identify potential levels of change required for the 
transformation.
---------------------------------------------------------------------------
    \3\ OMB Memorandum 13-08, Improving Financial Management Through 
Shared Services
---------------------------------------------------------------------------
    In the FY 2016 audit report, \4\ CLA made recommendations for VA to 
address the identified material weaknesses and significant 
deficiencies. Those recommendations ranged from specific, targeted 
actions to broader improvements in policies, processes, and systems.
---------------------------------------------------------------------------
    \4\ Audit of VA's Financial Statements for Fiscal Years 2016 and 
2015 (Report No. 16-01484-82, November 15, 2016)

---------------------------------------------------------------------------
THE IMPROPER PAYMENTS ELIMINATION AND RECOVERY ACT

    We recently issued our annual determination on VA's compliance with 
the Improper Payments Elimination and Recovery Act (IPERA) \5\ finding 
VA did not comply with two of the six requirements in OMB's guidance 
for compliance with IPERA \6\. Specifically, VA did not:
---------------------------------------------------------------------------
    \5\ Review of VA's Compliance With the Improper Payments 
Elimination and Recovery Act for FY 2016 (Report No. 16-04416-231, May 
15, 2017)
    \6\ OMB Circular A-123, Appendix C, Part II-A(1), Responsibilities 
of Agency Inspectors General.

      Maintain a gross improper payment rate of less than 10 
percent for two programs -the VA Community Care Program and the 
Purchased Long Term Services and Support (PLTSS) Program-reported in 
the Agency Financial Report.
      Meet reduction targets for six programs reported in the 
Agency Financial Report.

    VA met the other four IPERA requirements:

      Published the FY 2016 Agency Financial Report on VA's 
website
      Performed risk assessments
      Published improper payments estimates for programs 
identified as susceptible to significant improper payments
      Provided information on corrective action plans.

    Although VA published improper payment estimates as required, we 
determined estimates for the Supplies and Materials Program and the 
Post-9/11 G.I. Bill Program were not reliable because of weaknesses in 
sample evaluation procedures. Overall, VA reported improper payment 
estimates totaling approximately $5.5 billion in VA's Agency Financial 
Report for FY 2016, compared with $5 billion for FY 2015.

Areas of Non-Compliance

    The two programs that exceeded the 10 percent improper payment rate 
threshold were the VA Community Care Program and the PLTSS Program. 
Improper payment rates for these programs were high at approximately 76 
percent and 69 percent, respectively. This is a repeat of last year's 
determination of noncompliance, but the rates were lower last year at 
approximately 55 percent and 59 percent, respectively. VA reported the 
improper payment rate for the VA Community Care Program was high 
because VHA purchased a significant amount of medical care from non-VA 
providers using individual authorizations. The individual 
authorizations were not compliant with the Federal Acquisition 
Regulation (FAR). The high PLTSS improper payment rate was also due to 
the lack of FAR-compliant contracts. VA must generally follow the FAR 
when other legal authorities are not available for the procurement of 
goods and services. According to OMB's definition of improper payments, 
``an improper payment is any payment that should not have been made or 
that was made in an incorrect amount under statutory, contractual, 
administrative, or other legally applicable requirements.'' Therefore, 
when purchases do not follow applicable legal requirements, such as 
having contracts in place that comply with the FAR, the resulting 
payments are improper. As such, VA counted payments for non-FAR 
compliant medical care purchases as improper.
    VA also did not meet its annual reduction targets for six programs. 
VA provided the following explanations for missing the reduction 
targets in these programs:

      VA Community Care Program - The improper payment rate 
increased due to the inclusion of individual authorizations under 
$2,500 in the improper payment estimate.
      PLTSS - The higher improper payment rate was due to 
contracting errors and the inclusion of individual authorizations under 
$2,500 in the improper payment estimate.
      Beneficiary Travel - Other priorities, such as access to 
care and timely payment processing, have taken precedence over meeting 
the reduction target.
      Civilian Health and Medical Program of the Department of 
Veterans Affairs - System improvements are needed to address identified 
system issues and expand automated business rules that would reduce the 
number of human entries and decisions.
      State Home Per Diem Grants - VHA identified an increase 
in improper payments associated with missing or incomplete 
documentation for domiciliary residents, due in part to a change in 
sampling stratification.
      Supplies and Materials Program--Our review identified 
additional improper payments, primarily due to insufficient supporting 
documentation that increased the improper payment rate above the target 
rate.

    We also noted the VA Community Care Program and PLTSS Program did 
not achieve the expected level of precision for their improper payment 
estimates because of larger than expected variances in sample results. 
Despite not meeting expectations, VHA did design its sampling 
methodology appropriately.
    We made several recommendations to Agency leadership in VHA, VBA, 
the Office of Management, and the Office of Acquisition, Logistics, and 
Construction, to take steps to reduce improper payment rates, achieve 
reduction targets, and improve improper payment estimates. VA 
management agreed with our recommendations and provided plans for 
corrective action. We will follow-up on their implementation during the 
FY 2017 IPERA review.

CONCLUSION

    VA's financial management and system challenges are many and 
complex. VA plans to move from FMS to a shared services provider to 
gain access to modern technology. Initial operational capacity is 
scheduled for FY 2020. VA will need strong organizational leadership 
and cooperation to manage this significant change. VA also faces 
challenges in reducing improper payments related to the procurement of 
medical care through contracts that are not compliant with the Federal 
Acquisition Regulation. As we review these areas annually, we will 
monitor VA's actions to address its financial management and systems 
challenges and its compliance with IPERA.
    Mr. Chairman, this concludes my statement. We would be happy to 
answer any questions you or other Members of the Committee may have.

                                 
                 Prepared Statement of Julie L. Larsen
    Chairman Bergman, Ranking Member Kuster, and distinguished members 
who proudly serve on this subcommittee; On behalf of Charles E. 
Schmidt, the National Commander of the largest Veteran Service 
Organization in the United States of America representing more than 2.2 
million members; we thank you for the opportunity to comment on this 
important issue regarding veteran debt collection. It is my duty and 
honor to represent The American Legion and assist this Committee in 
understanding the Department of Veterans Affairs (VA) debt collection 
process and touch on areas of improvement, as well as provide insight 
on how The American Legion assists in these matters.
    The American Legion has worked extensively on matters concerning VA 
debt management and recognizing the importance of these issues has had 
a dedicated representative at the Debt Management Center (DMC) in Saint 
Paul, MN since 1978 specifically to support and assist veterans who 
fall into debt with VA. With nearly 40 years of service our 
representative has been instrumental in assisting thousands of veterans 
avoid financial hardships by; filing waivers, negotiating offsets of 
current VA benefits, establishing reasonable monthly payment plans to 
avoid financial burdens, and has assisted in ending erroneous 
collection actions; and has correct or helped to reclaim improper 
collections.
    The VA categorizes debt into six different areas;

      Benefit debt, (including benefits for veterans and 
burial, and first and third party debts for medical care and hospital 
services),
      VA program debt (including capital grants, and emergency 
and humanitarian care debt),
      Vendor debt,
      Employee debt (including payroll, travel, agent cashier, 
property),
      Intra-governmental debt, and
      Freedom of Information Act debt. \1\
---------------------------------------------------------------------------
    \1\ https://drive.google.com/file/d/0B70--mGYT1tJETzZGWUZKYzdGXzg/
view
---------------------------------------------------------------------------
    Benefit debt is the most common type of debt affecting veterans, 
which is why The American Legion's primary focus in our debt collection 
management office is assisting veterans affected by overpayments of 
benefits, and addressing how to best mitigate or repay the funds owed. 
Of the millions of dollars in benefits awarded to veterans by the VA 
every year, thousands of veterans are paid incorrect amounts. When 
these incorrect payments are more than the amount due to a veteran, 
debt is incurred and collection actions will ultimately be triggered. A 
VA benefit debt can be generated through a number of actions, like; 
change in income or net worth, dependent status, receipt of retired 
pay, school attendance, failure to obtain the release of home loan 
liability, hospitalization, treatment co-payments, overpayments to 
schools while using the G.I. Bill, and double payments of drill pay and 
VA benefits pay to members of the Reserves and National Guard.

               VA Debt Collection Process within the VHA

    According to VA, in 2014, 88% of all debts owed were related to the 
Veteran Health Administration (VHA), whereas only 8% of all debts owed 
originated at the Veteran Benefits Administration (VBA). \2\ Once a 
debt has been created at the regional office of jurisdiction, VA is 
required to send notice in writing to the subject of the alleged debt. 
This notice must include the exact amount of the debt, the reason for 
the debt, and the individuals' rights and remedies in connection with 
the debt. Additionally, it must inform the debtor that collection may 
be made through offset of current or future benefits and that interest 
and administrative costs may be assessed. Once the debt is generated, 
it is referred to the Debt Management Center (DMC) for collection 
actions.
---------------------------------------------------------------------------
    \2\ https://drive.google.com/file/d/0B70--mGYT1tJETzZGWUZKYzdGXzg/
view
---------------------------------------------------------------------------
    Within 30 days the DMC sends a collection due process letter 
advising the debtor of the debt amount and provides a notice of their 
rights and obligations. If the debtor is actively drawing benefits, the 
letter will indicate that failure to respond will result in a full 
benefit offset beginning with the first pay period 60 days after the 
date of the notification letter. If the debtor is not actively drawing 
benefits a second letter is mailed 30 days later as a reminder to take 
action. The letter advises that if the debt is not satisfied, or an 
agreeable repayment plan is not established within 60 days, the account 
will be reported to Credit Collection Agencies as delinquent. The 
letter will further state that the Treasury Department may refer the 
account to private collecting agencies and the account may be subject 
to garnishment of non-federal wages under the Treasury's Administrative 
Wage Garnishment Program. If no action is taken, third and fourth 
letters are mailed 30 days apart. If no action is taken 60 days after 
the third letter, the account is referred to the Treasury Department 
for active collection.
    In our experience, the VA makes every attempt to keep these debts 
``in-house'' and tries to notify the veteran in numerous ways. 
According to the Code of Federal Regulations (C.F.R.) 1.911 (d), VA is 
required to send a notice of debt that must include the exact amount of 
the debt, the reason for the debt, the individual's rights and remedies 
in connection with the debt, and inform the debtor that collection may 
be made through offset of current or future benefits and that interest 
and administrative costs may be added.
    Sometimes, notification letters are sent to wrong addresses due to 
updated information not being provided to the VA debt collection team. 
Failure to update the system with the correct and current contact 
information can lead to a veteran who owes a debt not being properly 
informed of their rights. The American Legion calls upon VA to 
continually update their contact database to ensure the most up-to-date 
information for a veteran is available so the VA may contact the 
veteran for a multitude of reasons, including debt collection.
    Additionally, a veteran may request copies of the debt and 
coinciding information from the original office of jurisdiction where 
the overpayment was created. If the veterans feels necessary, they may 
file an appeal with VA. If the veteran chooses to file an appeal, then 
they will need to notify the VA in writing before the 30-day deadline 
if they are requesting a hearing to contest the debt. The debtor's 
right to inspect the record is also included in the original debt 
notification letter.
    Many of the issues associated with a veteran incurring a VA based 
debt is caused by the lack of an integrated records system within the 
VA. The American Legion recommends the VA implement an integrated 
system that all VA branches can access for the most up-to-date 
information regarding a veteran's most recent contact information. 
Through American Legion Resolution No. 44, we support the VA in 
creating and implementing an updated and modernized integrated system. 
\3\
---------------------------------------------------------------------------
    \3\ The American Legion Resolution No. 44 (2016): Department of 
Veterans Affairs Rural Healthcare Program
---------------------------------------------------------------------------
    Furthermore, The American Legion believes that overpayments to 
veterans who receive benefit pay and drill pay during their Reserve, 
National Guard drill or Active Duty period can be easily remedied if 
the VA and Department of Defense (DOD)compare drill records once a 
month, and not once year or however often they currently do it. When a 
soldier is activated for their Reserve or National Guard training, or 
even Active Duty, they are not eligible to receive VA disability 
payments. The soldier has the option of either receiving either drill 
or VA disability, and they typically choose the higher of the two. If 
VA does not stop the payment, then an overpayment is created. It has 
been our experience that DOD and VA only compare this information every 
year, or sometimes every few years, sending servicemembers into debt 
that accumulates over many years. Errors like this are preventable and 
put unnecessary stress on our nation's heroes. We support any 
legislation that aims to address this issue using Resolution No. 228: 
Timely Processing of Overpayments for Reserve Components and/or Active 
Duty Pay, which states that The American Legion supports ``plac[ing] 
greater emphasis on processing of these overpayments for the 
performance of Reserved Component and/or Active Duty pay so not to have 
multiple years processed at the same time''. \4\
---------------------------------------------------------------------------
    \4\ American Legion Resolution No. 228 (2016): Timely Processing of 
Overpayments for Reserve Components and/or Active Duty Pay

---------------------------------------------------------------------------
               VA Debt Collection Process within the VBA

    When a veteran is attending an institution of higher learning VA 
pays the institution the amount owed for the veteran to attend the 
school. Sometimes, because of improper reporting, the school is 
overpaid, and other times the veteran may change his or her course 
schedule which often results in an overpayment of benefits to the 
school. Many veterans are unaware their schedule adjustment triggers an 
overpayment because there is little or no guidance provided to enrolled 
veterans on VA's policy.
    In a study conducted by the Government Accountability Office (GAO), 
GAO noted that education institutions make frequent errors when 
reporting enrollment information to VBA and that not all schools send 
their certifying officials to attend the various training opportunities 
offered by VBA, contributing to additional improper education claims 
being filed on behalf of the veteran. \5\
---------------------------------------------------------------------------
    \5\ https://www.gao.gov/products/GAO-16-42
---------------------------------------------------------------------------
    The American Legion recommends that educational institutions 
authorized to accept GI Bill payments review GAO's report and ensure 
that they comply with all findings in an effort to avoid future 
overpayments.

                    VA Partnership with the Treasury

    In most cases, delinquent accounts over 120 days are referred to 
the Treasury Department for collection. Once a debt is referred to the 
Treasury Department the debtor is subjected to the Treasury's 
collection tools, interest, and any administrative fees and veteran 
service organizations are no longer empowered to assist. The American 
Legion strongly recommends that veterans who receive debt notification 
letters from DMC immediately contact an advocate like The American 
Legion for assistance to prevent the debt from spiraling out of 
control. It has been the experience of The American Legion that the VA 
DMC office is much easier and sensitive to the veterans particular 
circumstances and needs than the Treasury department, which is why 
veterans need to act quickly to avoid garnishment actions and negative 
credit reporting.
    Finally, the DMC does not charge interest or fees when collecting 
on compensation and pension debt, a policy that The American Legion 
strongly. While the DMC does not charge interest on compensation and 
pension debt, they do assess interest on Home Loan Guaranty, Chapter 34 
and Chapter 35 education debts where the rate of interest is 4% for 
these types of debt.

                               Conclusion

    Debt collection within the VA and Treasury Departments are 
complicated and nuanced. The American Legion sees room for improvement, 
and we have highlighted some of those suggestions in this testimony. 
Overall The American Legion believes that VA does an adequate job in 
protecting veterans from added exposure when they are identified as 
having been overpaid and want to ensure that veterans are aware of 
their rights, resources, and consequences should they neglect to 
address these issues right away.
    And finally, The American Legion calls on DoD and VA to integrate 
their systems seamlessly so that the responsibility does not fall to 
the veteran to make notifications to either VA or DoD that should be 
the responsibility of the departments and the Administration as 
highlighted in GAO report 16-42.
    As always, The American Legion thanks this committee for the 
opportunity to elucidate the position of the over 2.2 million veteran 
members of this organization. For additional information regarding this 
testimony, please contact Mr. Derek Fronabarger, Deputy Director of The 
American Legion Legislative Division at [email protected] or 
(202) 861-2700.

                         Statements For The Record

                              Attachment 1

    Department of Veterans Affairs (VA) Financial Management Training
 Initiative (FMTI)Financial Management Leadership Training (FMLT) Course
                                Offerings
------------------------------------------------------------------------
          Course Title            Course Description     Date (Method)
------------------------------------------------------------------------
A New Paradigm for Internal       This course         August 2016 (via
 Controls - Entity Level           provides a          Webinar)
 Internal Control Assessment       demonstration of
 (ELICA) Tool Processes/           the integration
 Statement of Assurance (SOA).     of internal
                                   controls into all
                                   aspects of
                                   management;
                                   explanation of
                                   the necessity of
                                   internal controls
                                   for mission
                                   completion; walk-
                                   through of ELICA
                                   Tool along with a
                                   demonstration of
                                   effectiveness of
                                   the internal
                                   controls system..
------------------------------------------------------------------------
Avoiding Travel Pitfalls: Travel  This course will    August 2016 (via
 with Data Analytics Tool.         help attendees      Webinar)
                                   gain an
                                   understanding of
                                   the Concur.Gov
                                   "How To" when
                                   certifying,
                                   reviewing or
                                   approving travel
                                   documents; gain a
                                   basic
                                   understanding of
                                   the Federal
                                   Travel
                                   Regulations (FTR)
                                   and Department of
                                   Veterans Affairs
                                   (VA) Policy
                                   requirements when
                                   certifying,
                                   reviewing or
                                   approving travel
                                   documents..
------------------------------------------------------------------------
Capitalization - Know Your        This course         August 2016 (via
 Assets.                           explains policies   Webinar)
                                   related to
                                   Capitalization of
                                   Construction
                                   Projects and Real
                                   Property;
                                   explains the VA
                                   Capitalization
                                   process related
                                   to Construction
                                   and Real
                                   Property;
                                   expresses when
                                   timely
                                   capitalization of
                                   Construction
                                   Projects and Real
                                   Property should
                                   occur; identifies
                                   supporting
                                   documentation
                                   required for
                                   capitalization of
                                   Construction
                                   Projects and Real
                                   Property;
                                   identifies useful
                                   reports and
                                   potential general
                                   ledger issues..
------------------------------------------------------------------------
Financial Management Business     The course will     August 2016 (via
 Transformation (FMBT).            increase            Webinar)
                                   awareness of the
                                   Department's
                                   decision to
                                   migrate to a
                                   Federal Shared
                                   Service Provider
                                   (FSSP) offering
                                   of an integrated
                                   financial
                                   management and
                                   acquisition
                                   system solution;
                                   provide an
                                   overview and
                                   current status of
                                   the FMBT program..
------------------------------------------------------------------------
Financial Management Vision.....  The course          August 2016 (via
                                   provides an         Webinar)
                                   opportunity for
                                   the Acting Deputy
                                   CFO to share her
                                   vision and major
                                   goals for the VA
                                   financial
                                   management
                                   community. From
                                   encouraging
                                   attendees to
                                   assist in
                                   maintaining our
                                   clean audit
                                   opinion by
                                   reducing the
                                   number of
                                   Material Weakness
                                   and Significant
                                   Deficiencies to
                                   pressing forward
                                   with
                                   modernization of
                                   our Financial
                                   Management System
                                   through our FMBT
                                   initiative, this
                                   served as the
                                   opening to
                                   virtual training
                                   event..
------------------------------------------------------------------------
Fiscal Law Basics -               This course serves  August 2016 (via
 Appropriation Law.                as an               Webinar)
                                   introduction to
                                   fiscal law basics-
                                   where federal
                                   money comes from,
                                   what it can be
                                   used for, when
                                   you can spend it,
                                   and when you
                                   can't. In
                                   addition
                                   attendees will
                                   understand how
                                   federal funding
                                   moves, gets used,
                                   and budget
                                   planning tools.
                                   The course also
                                   covers the Anti-
                                   Deficiency Act-
                                   how to avoid
                                   obligating
                                   appropriations
                                   you do not have
                                   and avoiding jail
                                   and a career-
                                   ending fiscal
                                   disaster; how
                                   agencies do
                                   business between
                                   themselves;
                                   explanation of
                                   the Economy Act
                                   as the basis for
                                   intra and
                                   interagency
                                   transactions; and
                                   securing services
                                   and supplies
                                   without going to
                                   the private
                                   sector..
------------------------------------------------------------------------
Hey! Got Debt?: Debt Collection.  This course helps   August 2016 (via
                                   attendees develop   Webinar)
                                   greater
                                   understanding of
                                   Federal laws and
                                   VA policies and
                                   procedures
                                   related to Debt
                                   Collection;
                                   increase
                                   awareness and the
                                   impact Debt
                                   Collection has on
                                   Veterans,
                                   schools, tax
                                   payers, and other
                                   stakeholders;
                                   ensure compliance
                                   throughout VA
                                   with Debt
                                   Collection
                                   statutes..
------------------------------------------------------------------------
Interagency Agreements (IAA) and  This course         August 2016 (via
 the General Post Fund: Lawful     discusses the       Webinar)
 Agreements.                       General Post Fund-
                                   the softer side
                                   of funding aid
                                   for patients,
                                   members, and
                                   residents in VA
                                   medical
                                   facilities; along
                                   with where
                                   philanthropy and
                                   government come
                                   together..
------------------------------------------------------------------------
Purchase Cards - Avoiding Common  This course         August 2016 (via
 Purchase Card Errors.             provides a clear    Webinar)
                                   understanding of
                                   what constitutes
                                   a split purchase
                                   transaction; the
                                   consequences of
                                   intentionally
                                   splitting a
                                   transaction in
                                   order to
                                   circumvent the
                                   micro-purchase
                                   limit; and
                                   alternate
                                   procurement
                                   options in order
                                   to prevent a
                                   split
                                   transaction..
------------------------------------------------------------------------
The Joys of Balancing:            This course         August 2016 (via
 Reconciliations.                  provides            Webinar)
                                   information to
                                   promote the
                                   Veteran
                                   Integrated
                                   Service Network
                                   (VISN)/Medical
                                   Center staff
                                   compliance with
                                   reconciliation
                                   policies and
                                   procedures; focus
                                   station resources
                                   and attention on
                                   critical
                                   reconciliations;
                                   provide better
                                   oversight and
                                   guidance to
                                   station staff on
                                   key
                                   reconciliation
                                   tools and
                                   techniques..
------------------------------------------------------------------------
Undelivered Orders (UDO) and      This course         August 2016 (via
 Accruals - UDOs not UFOs.         promotes            Webinar)
                                   compliance with
                                   Federal and VA
                                   policies related
                                   to obligations
                                   and accruals;
                                   record an
                                   obligation in FMS
                                   with the proper
                                   accrual flag; and
                                   perform timely
                                   reviews of open
                                   undelivered
                                   orders..
------------------------------------------------------------------------
Understanding Interagency         This course         August 2016 (via
 Agreements (IAA) and              highlights the      Webinar)
 Intragovernmental                 successful
 Reconciliation.                   process for an
                                   IAA to help with
                                   proper
                                   reconciliation
                                   within and
                                   between federal
                                   agencies; comply
                                   with applicable
                                   VA and Treasury
                                   policy relating
                                   to IAAs; and
                                   identify the
                                   types of
                                   agreements and
                                   when to use each
                                   form..
------------------------------------------------------------------------
2017 Audit Site Visit             This course will    January 2017 (In-
 Preparation.                      provide an          Person)
                                   understanding of
                                   the audit cycle;
                                   associated roles
                                   and
                                   responsibilities;
                                   how to be
                                   prepared and
                                   effective during
                                   the site audit;
                                   how to work with
                                   the auditors to
                                   address audit
                                   exceptions and
                                   findings; proper
                                   preparation for
                                   the audit site
                                   visit, collecting
                                   and providing
                                   source and
                                   evidentiary
                                   documents to the
                                   auditors,
                                   answering
                                   auditors'
                                   questions, and
                                   ask questions for
                                   clarification..
------------------------------------------------------------------------
A Day in the Life of a Fiscal     This course         January 2017 (In-
 Officer.                          provides insight    Person)
                                   into the daily
                                   work of the Chief
                                   Fiscal Officer at
                                   a VA medical
                                   center, and
                                   provides best
                                   practices along
                                   with helpful
                                   hints in the
                                   areas of the
                                   financial
                                   statement audit,
                                   allocation of
                                   resources,
                                   travel, payroll,
                                   budget, and care
                                   in the community..
------------------------------------------------------------------------
Accounting for Community Care...  This course         January 2017 (In-
                                   provides an         Person)
                                   overview of
                                   standard process
                                   within the
                                   Medical Center,
                                   VISN and all of
                                   the Veterans
                                   Health
                                   Administration
                                   (VHA), including
                                   mandatory uses
                                   for estimates,
                                   obligations and
                                   reconciliations
                                   of purchased
                                   care. In addition
                                   the course
                                   provided tips on
                                   how to avoid year
                                   end adjusting
                                   entries; develop
                                   a greater
                                   understanding of
                                   Federal and VA
                                   policies over
                                   obligations in
                                   order to prevent
                                   overstating
                                   obligations;
                                   provide tools and
                                   options to reduce
                                   rework and make
                                   the new financial
                                   management system
                                   transition
                                   easier; prior
                                   year obligations
                                   clean-up and an
                                   overview of when
                                   you can use prior
                                   year funds..
------------------------------------------------------------------------
Anti-deficiency act (ADA)         This course offers  January 2017 (In-
 violations, Major, Minor and      an increased        Person)
 NRM Accounting.                   understanding of
                                   ADA, Major,
                                   Minor, and NRM
                                   construction
                                   programs; root
                                   causes of ADA
                                   violations; and
                                   oversight
                                   techniques to
                                   detect and
                                   prevent ADA
                                   violations on
                                   Minor and NRM
                                   projects..
------------------------------------------------------------------------
Appropriations Law Basics.......  The course          January 2017 (In-
                                   provides an         Person)
                                   understanding of
                                   the basic
                                   principles of how
                                   federal funds are
                                   used; the Anti-
                                   Deficiency Act
                                   and why you want
                                   to avoid it;
                                   understanding
                                   enough about
                                   fiscal law to
                                   know if there is
                                   a problem, or at
                                   least, what
                                   questions to ask;
                                   how to comply
                                   with funding
                                   requirements;
                                   know how to
                                   partner with the
                                   Office of General
                                   Counsel (OGC)..
------------------------------------------------------------------------
Budget Execution - Getting More   The course          January 2017 (In-
 Bang for Your Buck.               provides an         Person)
                                   understanding of
                                   how to improve
                                   the accuracy and
                                   management of
                                   reported
                                   obligations, the
                                   impact of
                                   improperly
                                   managed funds,
                                   and the ways to
                                   improve the
                                   accuracy of
                                   reported
                                   information..
------------------------------------------------------------------------
Budget Process..................  The course          January 2017 (In-
                                   provides an         Person)
                                   increased
                                   understanding of
                                   the Federal and
                                   Department's
                                   budget processes;
                                   unique aspects of
                                   the FY 2018
                                   budget cycle;
                                   anticipated FY
                                   2019-2020 budget
                                   process and
                                   timeline; and
                                   where to obtain
                                   information on
                                   the budget status
                                   for the
                                   Department..
------------------------------------------------------------------------
Business Process Reengineering    The course          January 2017 (In-
 (BPR) - Your World is Changing.   provides an         Person)
                                   overview, vision
                                   and goals of
                                   Business Process
                                   Reengineering
                                   (BPR) and the
                                   importance of
                                   this endeavor to
                                   the successful
                                   implementation of
                                   a federal shared
                                   service provider
                                   solution at the
                                   Department of
                                   Veterans Affairs..
------------------------------------------------------------------------
Business Processing               The course          January 2017 (In-
 Reengineering: BPR 101 What to    provides a          Person)
 Expect.                           detailed look at
                                   business process
                                   reengineering and
                                   the necessities
                                   of business
                                   process
                                   standardization
                                   efforts for the
                                   success of the
                                   FMBT program..
------------------------------------------------------------------------
Corrective Action Plan (CAP)      The course          January 2017 (In-
 Development and Execution.        provides an         Person)
                                   overview of the
                                   Office of
                                   Financial Process
                                   Improvement and
                                   Audit Readiness
                                   (FPIAR) fiscal
                                   year (FY) 17 CAP
                                   oversight
                                   approach;
                                   understand the
                                   relationship
                                   between the CAP
                                   cycle and audit
                                   timeline;
                                   introduce the
                                   enhanced CAP
                                   template; define
                                   the key elements
                                   of a deficiency;
                                   discuss how to
                                   identify the root
                                   causes of the
                                   FY16 audit
                                   material
                                   weaknesses (MW)
                                   and significant
                                   deficiencies..
------------------------------------------------------------------------
Cash Reconciliations: Suspense    The course          January 2017 (In-
 and Deposit Funds.                provides an         Person)
                                   understanding of
                                   audit findings
                                   relating to
                                   reconciliations
                                   and timely
                                   clearing of
                                   suspense accounts
                                   (clearing and
                                   deposit funds)
                                   and how to take
                                   appropriate
                                   action to
                                   remediate..
------------------------------------------------------------------------
Centralized Receivables Service   The course          January 2017 (In-
 (CRS).                            educates business   Person)
                                   partners on how
                                   the Debt
                                   Management Center
                                   (DMC) can ease
                                   the burden of the
                                   debt collection
                                   process by using
                                   Treasury's CRS
                                   tool..
------------------------------------------------------------------------
Chief Financial Officer (CFO)     The course          January 2017 (In-
 Dotted Line of Accountability.    provides an         Person)
                                   overview of VA's
                                   actions to
                                   address the FY
                                   2016 financial
                                   statement audit
                                   finding
                                   concerning the
                                   CFO
                                   Organizational
                                   Structure with
                                   financial leaders
                                   from the
                                   Administrations
                                   and Staff Offices
                                   detailing how VA
                                   is building a
                                   collaborative
                                   work environment
                                   to resolve
                                   emerging
                                   challenges.
------------------------------------------------------------------------
Debt Collection - From Treasury   The course          January 2017 (In-
 Offset Program (TOP) to the       provides an         Person)
 Treasury Report on Receivables    overview of the
 (TROR).                           debt collection
                                   process from
                                   establishment to
                                   collection and
                                   clarifies the
                                   Agency's legal
                                   responsibility.
------------------------------------------------------------------------
Enterprise Risk Management......  The course          January 2017 (In-
                                   provides an         Person)
                                   orientation on
                                   establishing and
                                   achieving goals,
                                   seizing
                                   opportunities to
                                   improve
                                   operations,
                                   providing
                                   reliable
                                   reporting, and
                                   maintaining
                                   compliance with
                                   laws and
                                   regulations..
------------------------------------------------------------------------
Financial Management Vision:      This course         January 2017 (In-
 Status Update.                    provides an         Person)
                                   update regarding
                                   expectations to
                                   achieve VA's
                                   vision for
                                   financial
                                   management,
                                   including best
                                   practices in
                                   preparing
                                   facilities to
                                   support
                                   activities
                                   related to the
                                   financial
                                   statement audit
                                   and FMBT..
------------------------------------------------------------------------
Financial Policy - Making it      The course          January 2017 (In-
 Work for You!.                    provides an         Person)
                                   overview of the
                                   hierarchy of
                                   laws, regulations
                                   and policies; a
                                   walkthrough of
                                   the financial
                                   policy process &
                                   web layout; an
                                   update on recent
                                   policy changes;
                                   and potential
                                   policy changes
                                   derived during
                                   FMBT..
------------------------------------------------------------------------
Financial Services Center (FSC):  This course shares  January 2017 (In-
 Strategy Drivers in Delivery of   the Financial       Person)
 Services.                         Service Center's
                                   (FSC) core
                                   services and
                                   explores
                                   additional
                                   opportunities to
                                   leverage their
                                   shared service
                                   platform..
------------------------------------------------------------------------
Financial Statement Audit Review  This course         January 2017 (In-
                                   provides a high     Person)
                                   level review of
                                   the FY2016
                                   material
                                   weaknesses and
                                   significant
                                   deficiencies and
                                   highlights major
                                   challenges to
                                   maintain a clean
                                   audit opinion..
------------------------------------------------------------------------
Financial Management Business     This course         January 2017 (In-
 Transformation: Change            provides an         Person)
 Management.                       overview of
                                   impacts that
                                   changes have on
                                   daily activities
                                   in people's work
                                   assignment and
                                   discusses the
                                   organizational
                                   change management
                                   (OCM) approach
                                   and best
                                   practices as they
                                   are applicable to
                                   the participant's
                                   organizations as
                                   we begin FMBT..
------------------------------------------------------------------------
Financial Management Business     This course         January 2017 (In-
 Transformation Overview:          provided an         Person)
 Setting Expectations.             opportunity for
                                   the financial
                                   management
                                   leadership from
                                   both VA and the
                                   United States
                                   Department of
                                   Agriculture
                                   (USDA) to discuss
                                   the selection of
                                   the Momentum
                                   solution
                                   utilizing the
                                   shared service
                                   model. This
                                   question and
                                   answer platform
                                   offers attendees
                                   the chance to
                                   gain insight on
                                   the new financial
                                   management system
                                   and how it will
                                   be implemented at
                                   VA..
------------------------------------------------------------------------
Funding Follies: Cautionary       The course          January 2017 (In-
 Tales.                            provides an         Person)
                                   understanding of
                                   the color of
                                   money, bonafide
                                   needs rule, Anti-
                                   Deficiency Act,
                                   Purpose Statute
                                   and how to avoid
                                   embarrassing
                                   fiscal mistakes
                                   of the past..
------------------------------------------------------------------------
Future of VA Form 1358..........  This interactive    January 2017 (In-
                                   session serves as   Person)
                                   an opportunity to
                                   gather
                                   information on
                                   how and why VA
                                   offices use 1358s
                                   and discusses
                                   potential changes
                                   to the 1358
                                   process as the
                                   result of the
                                   financial
                                   management system
                                   modernization..
------------------------------------------------------------------------
Great Responsibility: Certifying  This course         January 2017 (In-
 Invoices Correctly.               demonstrates        Person)
                                   responsibilities
                                   and potential
                                   legal
                                   ramifications for
                                   Invoice Review
                                   and Certification
                                   as promulgated by
                                   Treasury
                                   Financial Policy
                                   and VA Financial
                                   Policy Volume
                                   VIII - Chapter 1A
                                   and the relevant
                                   capabilities of
                                   the FSC Invoice
                                   Payment
                                   Processing System
                                   (IPPS)..
------------------------------------------------------------------------
Help VA Fight Fraud.............  This course         January 2017 (In-
                                   highlights the      Person)
                                   definition of
                                   fraud, waste and
                                   abuse; introduces
                                   the Data
                                   Analytics and
                                   Fraud Act of
                                   2015; discusses
                                   fraud cases
                                   within the VA;
                                   and explains how
                                   you can help
                                   fight fraud,
                                   waste and abuse..
------------------------------------------------------------------------
How to Avoid A-123 Appendix A     This course         January 2017 (In-
 Findings at the Facility.         provides a brief    Person)
                                   history of Office
                                   of Management and
                                   Budget (OMB)
                                   Circular A-123
                                   and how employees
                                   can use its
                                   principals to
                                   strengthen
                                   financial
                                   reporting within
                                   the Department..
------------------------------------------------------------------------
Improper Payments - Do This, Not  This course         January 2017 (In-
 That.                             provides an         Person)
                                   overview of
                                   legislation and
                                   the circular
                                   covering improper
                                   payments, all
                                   reporting
                                   requirements,
                                   VA's Improper
                                   Payments and
                                   Elimination and
                                   Recovery Act
                                   (IPERA) Program,
                                   the importance of
                                   corrective
                                   actions, and
                                   examples of
                                   actions that
                                   result in
                                   Improper
                                   Payments..
------------------------------------------------------------------------
Internal Control Overview: What   The course          January 2017 (In-
 Are You Responsible For?.         provides and        Person)
                                   overview of
                                   internal
                                   controls;
                                   internal control
                                   requirements
                                   under relevant
                                   laws and
                                   regulations; how
                                   internal controls
                                   ensure
                                   organizations
                                   meet their
                                   objectives; how
                                   internal controls
                                   are an integral
                                   part of every
                                   aspect of
                                   management
                                   through
                                   explaining
                                   necessity of
                                   carrying out the
                                   agency mission at
                                   all levels and in
                                   all operations..
------------------------------------------------------------------------
Information Technology (IT) /Non- This course         January 2017 (In-
 IT Policy.                        highlights the      Person)
                                   revision of VA
                                   Directive 6008-
                                   Acquisition and
                                   Management of VA
                                   Information
                                   Technology
                                   Resources along
                                   with the recent
                                   significant steps
                                   towards
                                   implementing
                                   improved internal
                                   controls across
                                   VA for making
                                   proper funding
                                   decisions for all
                                   IT related
                                   acquisitions..
------------------------------------------------------------------------
Meet the Chief Financial          This course         January 2017 (In-
 Officers.                         illustrates the     Person)
                                   changing role of
                                   the CFO function
                                   in the face of
                                   various
                                   challenges as we
                                   move the
                                   Department
                                   forward in
                                   improving
                                   financial
                                   management..
------------------------------------------------------------------------
Moving Forward - VA Agreements    The course          January 2017 (In-
 and You.                          provides an         Person)
                                   understanding of
                                   accounting
                                   elements within
                                   Interagency
                                   Agreements
                                   (IAAs); new
                                   requirements for
                                   processing IAAs
                                   within VA,
                                   including
                                   requirements for
                                   Intra-agency and
                                   IAAs and use of
                                   the Agreement
                                   Repository; and
                                   how IAAs affect
                                   the federal
                                   financial audit..
------------------------------------------------------------------------
Navigating the National           The course          January 2017 (In-
 Acquisition Center (NAC),         provides an         Person)
 Strategic Acquisition Center      overview of the
 (SAC) & Technology Acquisition    acquisition
 Center (TAC).                     organization and
                                   processes,
                                   highlighting key
                                   enterprise
                                   vehicles
                                   available at the
                                   NAC, SAC & TAC,
                                   and how to gain
                                   access to them..
------------------------------------------------------------------------
Preparing for Your VA Time and    The course          January 2017 (In-
 Attendance System (VATAS)         provides and        Person)
 Deployment.                       understanding of
                                   the VATAS
                                   deployment model
                                   and strategies
                                   along with
                                   lessons learned
                                   and keys to a
                                   successful
                                   deployment..
------------------------------------------------------------------------
Preparing Now for the Future of   This course         January 2017 (In-
 Financial Management.             outlines the        Person)
                                   importance of the
                                   Financial
                                   Management
                                   Training
                                   Initiative in
                                   support of the
                                   Department's goal
                                   to: reduce
                                   material
                                   weaknesses and
                                   significant
                                   deficiencies;
                                   modernize our
                                   Financial
                                   Management
                                   System; and
                                   incorporate a
                                   dotted line of
                                   accountability
                                   for financial
                                   officers across
                                   VA..
------------------------------------------------------------------------
Preventing Late Capitalization..  This course         January 2017 (In-
                                   provides an         Person)
                                   overview of VA's
                                   capitalization
                                   policy and the
                                   need for timely
                                   capitalization,
                                   including a
                                   discussion of
                                   widespread
                                   capitalization
                                   issues identified
                                   in prior
                                   Financial
                                   Statement Audits..
------------------------------------------------------------------------
Procurement/Purchase Card         This course         January 2017 (In-
 Violations.                       highlights the      Person)
                                   importance of
                                   internal controls
                                   in the purchase
                                   card program, as
                                   well as the
                                   common pitfalls
                                   to avoid; and
                                   provides the
                                   auditors
                                   perspective
                                   related to recent
                                   reviews by the
                                   Office of
                                   Internal
                                   Controls..
------------------------------------------------------------------------
Project Management Best           This course         January 2017 (In-
 Practices: How FMBT Will Be Run.  provides an         Person)
                                   overview of the
                                   program and
                                   project
                                   management; FMBT
                                   Program
                                   Objectives; how
                                   best practices
                                   will be leveraged
                                   for FMBT..
------------------------------------------------------------------------
Reconciliation and Data Cleanup.  This course         January 2017 (In-
                                   discusses the       Person)
                                   data cleanup and
                                   migration
                                   framework as part
                                   of our move to
                                   the new financial
                                   management system
                                   solution;
                                   outlines best
                                   practices on data
                                   cleanup and
                                   migration
                                   approaches;
                                   identifies
                                   specific but
                                   preliminary
                                   options that
                                   organizations may
                                   want to consider;
                                   discusses
                                   preliminary
                                   timelines and
                                   requirements..
------------------------------------------------------------------------
Role of the Inspector General...  This course         January 2017 (In-
                                   informs the         Person)
                                   attendees about
                                   the role of the
                                   Inspector General
                                   and the various
                                   activities of
                                   Office of the
                                   Inspector
                                   General..
------------------------------------------------------------------------
Shared Services - Adopting the    This course         January 2017 (In-
 Common Solution.                  provides an         Person)
                                   overview of why
                                   the government is
                                   utilizing shared
                                   services;
                                   potential
                                   challenges for
                                   FMBT, and a high
                                   level vision for
                                   how to achieve
                                   our objectives..
------------------------------------------------------------------------
Solutions to Navigating Public    This course         January 2017 (In-
 Law 111-163.                      promotes intra-     Person)
                                   agency
                                   understanding to
                                   better leverage
                                   knowledge,
                                   insight and skill
                                   across the
                                   agency;
                                   understanding the
                                   challenges
                                   associated with
                                   Public Law 111-
                                   163, the progress
                                   made to date, and
                                   the agency's
                                   solution to
                                   becoming
                                   compliant..
------------------------------------------------------------------------
The Power of Data Analytics in    This course         January 2017 (In-
 VA Charge Card Programs.          provides a high-    Person)
                                   level overview of
                                   data analytics
                                   and how to use
                                   its power to
                                   improve program
                                   performance,
                                   including a
                                   demonstration of
                                   the FSC's Travel/
                                   Purchase Card
                                   Dashboards and
                                   the VATAS
                                   scorecard..
------------------------------------------------------------------------
The Power of Programming and      This course         January 2017 (In-
 Cost Analysis.                    provides an         Person)
                                   introduction to
                                   the Programming,
                                   Analysis and
                                   Evaluation (PA&E)
                                   organization and
                                   its
                                   responsibilities.
                                   PA&E is new to
                                   the Office of
                                   Management and
                                   has the lead for
                                   one of VHA's GAO
                                   High Risk list
                                   items, related to
                                   the proper
                                   allocation of
                                   resources and
                                   accurate cost
                                   analysis, for
                                   both VHA and
                                   Department level
                                   improvements..
------------------------------------------------------------------------
Undelivered Orders (UDOs) and     This course         January 2017 (In-
 Accruals - The Lookback           provides an         Person)
 Analysis.                         understanding of
                                   how to maintain
                                   valid general
                                   ledger balances
                                   for UDOs and
                                   accruals with
                                   proper supporting
                                   documentation..
------------------------------------------------------------------------
Understanding the Payroll         This course         January 2017 (In-
 Process and Resources.            provides an         Person)
                                   understanding of
                                   the inter-
                                   dependencies of
                                   the various
                                   systems involved
                                   to produce a
                                   payroll check, as
                                   well as the
                                   avenues and point
                                   of contacts to
                                   resolve payroll
                                   issues..
------------------------------------------------------------------------
Anti-Deficiency Act (ADA),        This course         August 2017 (via
 Major, Minor and Non-Recurring    provides            Webinar)
 Maintenance (NRM) Accounting.     information to
                                   assist with the
                                   decrease of Anti-
                                   Deficiency Act
                                   (ADA) violations
                                   involving VA
                                   construction
                                   programs; educate
                                   VA financial
                                   managers on ADA
                                   and ways to
                                   detect and
                                   prevent
                                   violations on
                                   Minor and Non-
                                   Recurring
                                   Maintenance (NRM)
                                   projects..
------------------------------------------------------------------------
Appropriations Law..............  This course         August 2017 (via
                                   provides an         Webinar)
                                   overview of basic
                                   fiscal law for
                                   federal
                                   employees..
------------------------------------------------------------------------
Capitalization..................  This course         August 2017 (via
                                   provides a policy   Webinar)
                                   overview and best
                                   practices to
                                   resolve
                                   widespread issues
                                   with capitalizing
                                   fixed assets late
                                   along with
                                   educating VA on
                                   the timely
                                   capitalization of
                                   assets to
                                   remediate audit
                                   findings..
------------------------------------------------------------------------
Cash Reconciliations............  This course         August 2017 (via
                                   details the FSC's   Webinar)
                                   application for
                                   matching Treasury
                                   and General
                                   Ledger
                                   Transactions;
                                   Treasury
                                   Reconciliation
                                   matching and re-
                                   classification;
                                   effective use of
                                   Treasury
                                   Reconciliation
                                   Website; and tips
                                   for reconciling
                                   specific
                                   transactions..
------------------------------------------------------------------------
Commitment Accounting...........  This course         August 2017 (via
                                   answers the         Webinar)
                                   question, what is
                                   commitment
                                   accounting? In
                                   addition it
                                   highlights VA's
                                   current financial
                                   environment; how
                                   commitment
                                   accounting will
                                   improve funds
                                   management; and
                                   commitment
                                   accounting in the
                                   shared services
                                   environment..
------------------------------------------------------------------------
Interagency Agreements (IAAs)     This course will    August 2017 (via
 and Intragovernmental             provide             Webinar)
 Reconciliation.                   information
                                   regarding recent
                                   audit issues;
                                   types of IAAs;
                                   real-world
                                   examples of
                                   reimbursable
                                   activity;
                                   important
                                   accounting
                                   elements required
                                   within an IAA;
                                   new requirements
                                   for processing
                                   IAAs within VA;
                                   accounting
                                   treatment for
                                   IAAs within the
                                   Financial
                                   Management System
                                   (FMS)..
------------------------------------------------------------------------
Internal Control Review (ICR)     This course         August 2017 (via
 Fundamentals.                     details major       Webinar)
                                   financial
                                   statement
                                   assertions which
                                   all transactions
                                   and accounts at
                                   VA must satisfy
                                   for users of the
                                   financial
                                   statements;
                                   including
                                   controls, the
                                   purpose,
                                   objective and
                                   attributes of a
                                   control,
                                   designing a
                                   control and how
                                   to design a
                                   control..
------------------------------------------------------------------------
Improper Payments...............  This course         August 2017 (via
                                   provides an         Webinar)
                                   understanding
                                   VA's Improper
                                   payments, causes,
                                   and impact..
------------------------------------------------------------------------
Reconciling the Fee Basis Claims  This course         August 2017 (via
 System (FBCS) to FMS.             provides an         Webinar)
                                   overview of
                                   Public Law 112-
                                   194 compliance;
                                   basic internal
                                   controls; the
                                   importance of
                                   timely
                                   reconciliation;
                                   new account
                                   applications; and
                                   reducing
                                   unnecessary
                                   accounts..
------------------------------------------------------------------------
Travel Update...................  This course         August 2017 (via
                                   highlights how to   Webinar)
                                   avoid pitfalls
                                   when on official
                                   travel..
------------------------------------------------------------------------
Undelivered Orders (UDO) and      This course         August 2017 (via
 Accruals.                         provides an         Webinar)
                                   overview of
                                   Public Law 112-
                                   194 compliance;
                                   basic internal
                                   controls; the
                                   importance of
                                   timely
                                   reconciliation;
                                   new account
                                   applications; and
                                   reducing
                                   unnecessary
                                   accounts..
------------------------------------------------------------------------
Travel Update...................  This course         August 2017 (via
                                   highlights how to   Webinar)
                                   avoid pitfalls
                                   when on official
                                   travel..
------------------------------------------------------------------------
Undelivered Orders (UDO) and      This course         August 2017 (via
 Accruals.                         provides            Webinar)
                                   information on
                                   how an obligation
                                   originates,
                                   accruals
                                   recorded, and
                                   close out; how
                                   obligations and
                                   accruals are
                                   recorded and
                                   monitored at VA
                                   (automated and
                                   manual
                                   processes);
                                   accounting
                                   guidelines for
                                   recognizing
                                   accruals
                                   (automated and
                                   manual
                                   processes);
                                   undelivered
                                   orders and how we
                                   should monitor
                                   the information
                                   to be fiscally
                                   responsible with
                                   our funds..
------------------------------------------------------------------------
VA Form 1358....................  This course         August 2017 (via
                                   highlights the      Webinar)
                                   importance of
                                   reducing the use
                                   of Form 1358
                                   (miscellaneous
                                   obligations) for
                                   legal compliance;
                                   strategy for
                                   reducing the use
                                   of miscellaneous
                                   obligations pre
                                   and post-Momentum
                                   implementation..
------------------------------------------------------------------------
VA Time and Attendance System     This course         August 2017 (via
 (VATAS) Update.                   provides a VATAS    Webinar)
                                   progress update,
                                   deployment
                                   status; system
                                   enhancements and
                                   development;
                                   VATAS and payroll
                                   processes; time
                                   and attendance
                                   metrics;
                                   compliance
                                   metrics; and
                                   VATAS helpdesk
                                   support..
------------------------------------------------------------------------
Accounting Classification         This course         August 2017 (via
 Structure (ACS).                  provides an         Webinar)
                                   overview of the
                                   ACS; key
                                   definitions and
                                   concepts of the
                                   ACS in Momentum;
                                   how the ACS
                                   relates to the
                                   budget, general
                                   ledger and
                                   spending
                                   transactions; and
                                   how current
                                   functionality in
                                   FMS translates
                                   into Momentum
                                   capabilities..
------------------------------------------------------------------------
Data Cleanup....................  The course          August 2017 (via
                                   addresses data      Webinar)
                                   cleanse
                                   activities and
                                   the necessity of
                                   their occurrence
                                   after a data
                                   quality
                                   assessment is
                                   performed. This
                                   training will
                                   cover the data
                                   cleansing
                                   framework,
                                   process to
                                   cleanse data and
                                   the roles and
                                   responsibilities
                                   of the
                                   administrations,
                                   FSC and Veterans
                                   Affairs Central
                                   Office (VACO).
                                   This will be
                                   accomplished by
                                   provided a use
                                   cases to provide
                                   practical
                                   examples for
                                   attendees..
------------------------------------------------------------------------
Financial Business Process        This course         August 2017 (via
 Reengineering.                    provides an         Webinar)
                                   overview of
                                   business process
                                   reengineering
                                   principals,
                                   concepts, and
                                   application for
                                   the VA Financial
                                   Management
                                   Business
                                   Transformation
                                   (FMBT) to a
                                   Federal Shared
                                   Service Provider
                                   as well as an
                                   update of
                                   activities that
                                   have occurred to
                                   date..
------------------------------------------------------------------------
Office of Information and         This course         August 2017 (via
 Technology (OI&T) Update.         details the role    Webinar)
                                   of OI&T in the
                                   FMBT program, the
                                   relationship with
                                   USDA, and the
                                   challenges to be
                                   overcome in the
                                   future..
------------------------------------------------------------------------


                                
                              Attachment 2
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                              Attachment 3

 
----------------------------------------------------------------------------------------------------------------
                                                                                                Other Discussion
                                                                                                       on
                                                                                 Performance     Accountability
            Program                   SAO           Title          Office          Measure       Provided by the
                                                                                                 Program Office/
                                                                                                       SAO
----------------------------------------------------------------------------------------------------------------
Beneficiary Travel............  Tammy           Assistant      VHA            2016 Non-         Each individual
                                 Czarnecki.      Deputy Under   Operations     Compliant         reporting
                                                 Secretary      and            Program           Program Office
                                                 for Health     Management     (program did      Director and
                                                 for            (10NC).        not meet          corresponding
                                                 Administrati                  reduction         subordinates
                                                 ve                            target): SAO is   are also held
                                                 Operations.                   accountable for   accountable to
                                                                               ensuring          the Senior
                                                                               execution of      Executive
                                                                               corrective        performance
                                                                               action plans.     plan
                                                                               The SAO's         expectations.
                                                                               FY2017            Unique program
                                                                               performance       corrective
                                                                               plan includes a   action plans
                                                                               measure to meet   are tracked and
                                                                               the measurable    monitored for
                                                                               milestones with   routine
                                                                               90 percent        reporting. In
                                                                               success based     November 2015,
                                                                               on date and       Member Services
                                                                               action. Step      added a
                                                                               down              Compliance and
                                                                               performance       Internal
                                                                               measures is set   Controls
                                                                               as 80 percent     Program Office
                                                                               and 70 percent..  to assist in
                                                                                                 creating
                                                                                                 additional
                                                                                                 internal
                                                                                                 controls for
                                                                                                 its programs
                                                                                                 inclusive of
                                                                                                 Beneficiary
                                                                                                 Travel. This
                                                                                                 increases
                                                                                                 accountability
                                                                                                 and Senior
                                                                                                 Executive
                                                                                                 knowledge and
                                                                                                 understanding
                                                                                                 of the
                                                                                                 complexity
                                                                                                 related to
                                                                                                 Beneficiary
                                                                                                 Travel payments
                                                                                                 and the IPERA
                                                                                                 process. The
                                                                                                 additional
                                                                                                 oversight also
                                                                                                 allows for new
                                                                                                 insight into
                                                                                                 the root causes
                                                                                                 of improper
                                                                                                 payments most
                                                                                                 notably
                                                                                                 identifying how
                                                                                                 VA is
                                                                                                 streamlining
                                                                                                 business
                                                                                                 practices to
                                                                                                 align payment
                                                                                                 processing to
                                                                                                 abide with laws
                                                                                                 while
                                                                                                 vigilantly
                                                                                                 upholding core
                                                                                                 values. VA's
                                                                                                 evaluation of
                                                                                                 the Veteran
                                                                                                 experience from
                                                                                                 transportation
                                                                                                 request to
                                                                                                 reimbursement
                                                                                                 has fostered
                                                                                                 key
                                                                                                 collaborative
                                                                                                 efforts and
                                                                                                 initiatives
                                                                                                 leading to long-
                                                                                                 term solutions.
----------------------------------------------------------------------------------------------------------------
CHAMPVA.......................  Gene            Executive      VHA Office of  2016 Non-         OCC has the
                                 Migliaccio.     Director of    Community      Compliant         primary
                                                 Delivery       Care (10D1B).  Program           responsibility
                                                 Operations.                   (program did      for the
                                                                               not meet          processing of
                                                                               reduction         CHAMPVA claims
                                                                               target): SAO is   and works to
                                                                               accountable for   address and
                                                                               ensuring          correct
                                                                               execution of      improper
                                                                               corrective        payments. When
                                                                               action plans.     errors are
                                                                               The SAO's         identified, OCC
                                                                               FY2017            supervisors
                                                                               performance       work to
                                                                               plan includes a   identify trends
                                                                               measure to meet   and provide
                                                                               the measurable    education to
                                                                               milestones with   the voucher
                                                                               90 percent        examiners
                                                                               success based     regarding the
                                                                               on date and       issue both
                                                                               action. Step      individually
                                                                               down              and as a group.
                                                                               performance       The Director of
                                                                               measures is set   Claims
                                                                               as 80 percent     Adjudication
                                                                               and 70 percent..  and
                                                                                                 Reimbursement's
                                                                                                 performance
                                                                                                 plan includes
                                                                                                 goals for
                                                                                                 financial
                                                                                                 stewardship and
                                                                                                 the
                                                                                                 identification
                                                                                                 and
                                                                                                 implementation
                                                                                                 of corrective
                                                                                                 actions to
                                                                                                 address
                                                                                                 improper
                                                                                                 payments.
----------------------------------------------------------------------------------------------------------------
VA Communnity Care (part of     Gene            Executive      VHA Office of  2016 High-        OCC has the
 Non-VA Medical Care (NVC) fee   Migliaccio.     Director of    Community      Priority          primary
 program in 2013, separated in                   Delivery       Care (10D1B).  Program/Non-      responsibility
 2014).                                          Operations.                   Compliant         for the
                                                                               Program (did      processing of
                                                                               not meet          CHAMPVA claims
                                                                               reduction         and works to
                                                                               target and        address and
                                                                               error rate is >   correct
                                                                               10%): SAO is      improper
                                                                               accountable for   payments. When
                                                                               ensuring          errors are
                                                                               execution of      identified, OCC
                                                                               corrective        supervisors
                                                                               action plans.     work to
                                                                               The SAO's         identify trends
                                                                               FY2017            and provide
                                                                               performance       education to
                                                                               plan includes a   the voucher
                                                                               measure to meet   examiners
                                                                               the measurable    regarding the
                                                                               milestones with   issue both
                                                                               90 percent        individually
                                                                               success based     and as a group.
                                                                               on date and       The Director of
                                                                               action. Step      Claims
                                                                               down              Adjudication
                                                                               performance       and
                                                                               measures is set   Reimbursement's
                                                                               as 80 percent     performance
                                                                               and 70 percent..  plan includes
                                                                                                 goals for
                                                                                                 financial
                                                                                                 stewardship and
                                                                                                 the
                                                                                                 identification
                                                                                                 and
                                                                                                 implementation
                                                                                                 of corrective
                                                                                                 actions to
                                                                                                 address
                                                                                                 improper
                                                                                                 payments.
----------------------------------------------------------------------------------------------------------------
PLTSS (part of NVC fee program  Richard Allman  GEC Chief      VHA            2016 High-
 in 2013, separated in 2014).                    Consultant.    Geriatrics     Priority
                                                                and Extended   Program/Non-
                                                                Care (10P).    Compliant (did
                                                                               not meet
                                                                               reduction
                                                                               target and
                                                                               error rate is >
                                                                               10%): SAO is
                                                                               accountable for
                                                                               ensuring
                                                                               execution of
                                                                               corrective
                                                                               action plans.
                                                                               The SAO's
                                                                               FY2017
                                                                               performance
                                                                               plan includes a
                                                                               measure to meet
                                                                               the measurable
                                                                               milestones with
                                                                               90 percent
                                                                               success based
                                                                               on date and
                                                                               action. Step
                                                                               down
                                                                               performance
                                                                               measures is set
                                                                               as 80 percent
                                                                               and 70 percent..
----------------------------------------------------------------------------------------------------------------
State Home Per Diem...........  Gene            Executive      VHA Office of  2016 Non-         The State Home
                                 Migliaccio.     Director of    Community      Compliant         Per Diem
                                                 Delivery       Care (10D1B).  Program           Program Office
                                                 Operations.                   (program did      has the primary
                                                                               not meet          responsibility
                                                                               reduction         for overseeing
                                                                               target): SAO is   the processing
                                                                               accountable for   claims and
                                                                               ensuring          works directly
                                                                               execution of      with the
                                                                               corrective        facility when
                                                                               action plans.     improper
                                                                               The SAO's         payments are
                                                                               FY2017            identified, as
                                                                               performance       well as broadly
                                                                               plan includes a   across the
                                                                               measure to meet   program through
                                                                               the measurable    monthly
                                                                               milestones with   training
                                                                               90 percent        events. The
                                                                               success based     Director of
                                                                               on date and       Claims
                                                                               action. Step      Adjudication
                                                                               down              and
                                                                               performance       Reimbursement's
                                                                               measures is set   performance
                                                                               as 80 percent     plan includes
                                                                               and 70 percent..  goals for
                                                                                                 financial
                                                                                                 stewardship and
                                                                                                 the
                                                                                                 identification
                                                                                                 and
                                                                                                 implementation
                                                                                                 of corrective
                                                                                                 actions to
                                                                                                 address
                                                                                                 improper
                                                                                                 payments.
----------------------------------------------------------------------------------------------------------------
Supplies and Materials........  Tammy           Assistant      VHA            2016 Non-
                                 Czarnecki.      Deputy Under   Operations     Compliant
                                                 Secretary      and            Program
                                                 for Health     Management     (program did
                                                 for            (10NC).        not meet
                                                 Administrati                  reduction
                                                 ve                            target): SAO is
                                                 Operations.                   accountable for
                                                                               ensuring
                                                                               execution of
                                                                               corrective
                                                                               action plans.
                                                                               The SAO's
                                                                               FY2017
                                                                               performance
                                                                               plan includes a
                                                                               measure to meet
                                                                               the measurable
                                                                               milestones with
                                                                               90 percent
                                                                               success based
                                                                               on date and
                                                                               action. Step
                                                                               down
                                                                               performance
                                                                               measures are
                                                                               set as 80
                                                                               percent and 70
                                                                               percent..
----------------------------------------------------------------------------------------------------------------
Prosthetics...................  Penny           National       VHA            2016 Newly        New programs
                                 Nechanicky.     Program        Rehabilitati   Identified High-  determined to
                                                 Director for   on and         Risk Program.     be susceptible
                                                 Prosthetic &   Prosthetic     Projected         to improper
                                                 Sensory Aids   Services       improper          payments as a
                                                 Service.       (10P4R).       payments,         result of the
                                                                               corrective        FY 2016 risk
                                                                               action plans,     assessments
                                                                               and               will design and
                                                                               accountability    implement
                                                                               measures will     appropriate
                                                                               be reported in    statistical
                                                                               agencies 2017     sampling and
                                                                               Annual            estimation
                                                                               Financial         methods to
                                                                               Report..          produce
                                                                                                 statistically
                                                                                                 valid improper
                                                                                                 payment
                                                                                                 estimates the
                                                                                                 fiscal year
                                                                                                 following (FY
                                                                                                 2017) the
                                                                                                 fiscal year in
                                                                                                 which the risk
                                                                                                 assessment was
                                                                                                 conducted in
                                                                                                 accordance with
                                                                                                 OMB Circular A-
                                                                                                 123 Appendix C.
----------------------------------------------------------------------------------------------------------------
Medical Care Contracts and      Tammy           Assistant      VHA            2017 Newly        New programs
 Agreements.                     Czarnecki.      Deputy Under   Operations     Identified High-  determined to
                                                 Secretary      and            Risk Program.     be susceptible
                                                 for Health     Management     Projected         to improper
                                                 for            (10NC).        improper          payments as a
                                                 Administrati                  payments,         result of the
                                                 ve                            corrective        FY 2016 risk
                                                 Operations.                   action plans,     assessments
                                                                               and               will design and
                                                                               accountability    implement
                                                                               measures will     appropriate
                                                                               be reported in    statistical
                                                                               agencies 2017     sampling and
                                                                               Annual            estimation
                                                                               Financial         methods to
                                                                               Report..          produce
                                                                                                 statistically
                                                                                                 valid improper
                                                                                                 payment
                                                                                                 estimates the
                                                                                                 fiscal year
                                                                                                 following (FY
                                                                                                 2017) the
                                                                                                 fiscal year in
                                                                                                 which the risk
                                                                                                 assessment was
                                                                                                 conducted in
                                                                                                 accordance with
                                                                                                 OMB Circular A-
                                                                                                 123 Appendix C.
----------------------------------------------------------------------------------------------------------------
Communications, Utilities, and  Tammy           Assistant      VHA            2018 Newly        New programs
 Other Rents.                    Czarnecki.      Deputy Under   Operations     Identified High-  determined to
                                                 Secretary      and            Risk Program.     be susceptible
                                                 for Health     Management     Projected         to improper
                                                 for            (10NC).        improper          payments as a
                                                 Administrati                  payments,         result of the
                                                 ve                            corrective        FY 2016 risk
                                                 Operations.                   action plans,     assessments
                                                                               and               will design and
                                                                               accountability    implement
                                                                               measures will     appropriate
                                                                               be reported in    statistical
                                                                               agencies 2017     sampling and
                                                                               Annual            estimation
                                                                               Financial         methods to
                                                                               Report..          produce
                                                                                                 statistically
                                                                                                 valid improper
                                                                                                 payment
                                                                                                 estimates the
                                                                                                 fiscal year
                                                                                                 following (FY
                                                                                                 2017) the
                                                                                                 fiscal year in
                                                                                                 which the risk
                                                                                                 assessment was
                                                                                                 conducted in
                                                                                                 accordance with
                                                                                                 OMB Circular A-
                                                                                                 123 Appendix C.
----------------------------------------------------------------------------------------------------------------
Compensation..................  Danny Devine..  Deputy         Compensation   2016 Compliant,   The Compensation
                                                 Director of    Service.       but High-         Service (CS)
                                                 Policy and                    Priority          Senior
                                                 Procedures.                   Program - From    Accountable
                                                                               the SAO's         Official (SAO)
                                                                               performance       is responsible
                                                                               measure:          for all
                                                                               Critical          completed CS
                                                                               Element 5;        IPERIA
                                                                               Performance       activities to
                                                                               Requirement 5:    include:
                                                                               "Oversee the     - approval of
                                                                               development of    IPERIA test
                                                                               policy guidance   sampling plans,
                                                                               and              - IPERIA testing
                                                                               promulgation of   and review of
                                                                               regulations       all improper
                                                                               that improve      payments for
                                                                               VA's              the given
                                                                               compensation      annual fiscal
                                                                               benefits          year (FY),
                                                                               programs.        - annual
                                                                               Conduct           corrective
                                                                               systematic        action plan
                                                                               reviews of        creation and
                                                                               current           execution,
                                                                               policies and     - implementation
                                                                               procedures to     and monitoring
                                                                               identify          of CS
                                                                               changes that      supplemental
                                                                               may improve       measures as a
                                                                               program           high priority
                                                                               integrity or      program, and
                                                                               facilitate       - reports of CS'
                                                                               efficient         progress to the
                                                                               delivery of       periodic
                                                                               benefits. Take    Governing Board
                                                                               action to         meetings held
                                                                               implement all     by the Office
                                                                               necessary         of Management.
                                                                               changes.".       The CS SAO is
                                                                                                 further
                                                                                                 responsible
                                                                                                 for:
                                                                                                - determining,
                                                                                                 and meeting
                                                                                                 reduction
                                                                                                 targets in an
                                                                                                 annual testing
                                                                                                 FY,
                                                                                                - monitoring
                                                                                                 recapture and
                                                                                                 recovery
                                                                                                 activities that
                                                                                                 are performed
                                                                                                 and,
                                                                                                - identifying
                                                                                                 high dollar
                                                                                                 overpayments.
                                                                                                The SAO reports
                                                                                                 annually on the
                                                                                                 CS program
                                                                                                 assessment of
                                                                                                 risk, as a high
                                                                                                 priority
                                                                                                 program. He/she
                                                                                                 maintains all
                                                                                                 fiscal activity
                                                                                                 with annual FY
                                                                                                 testing to
                                                                                                 include
                                                                                                 monitoring for
                                                                                                 any fraud
                                                                                                 activities
                                                                                                 involving CS
                                                                                                 payments.
----------------------------------------------------------------------------------------------------------------
Pension.......................  Cheryl Rawls..  Director.....  Pension &      Ensures Service   None
                                                                Fiduciary.     develops and
                                                                               maintains
                                                                               efficient
                                                                               systems of
                                                                               internal and
                                                                               external
                                                                               program
                                                                               integrity
                                                                               controls..
                                                                              - Manages the
                                                                               Service
                                                                               responsibilitie
                                                                               s under the
                                                                               Improper
                                                                               Payment
                                                                               Elimination and
                                                                               Recovery Act
                                                                               and other
                                                                               internal
                                                                               auditing
                                                                               practices
                                                                               established by
                                                                               law..
                                                                              - Ensures
                                                                               recommendations
                                                                               for business
                                                                               requirements
                                                                               for IT systems
                                                                               are IPERA
                                                                               compliant and
                                                                               certifies that
                                                                               system designs
                                                                               meet program
                                                                               needs..
                                                                              - Makes certain
                                                                               that
                                                                               transactions
                                                                               performed are
                                                                               in accordance
                                                                               to established
                                                                               policies,
                                                                               regulations and
                                                                               procedures..
                                                                              - Discuss and
                                                                               coordinates
                                                                               program
                                                                               integrity
                                                                               issues with the
                                                                               VA Office of
                                                                               Inspector
                                                                               General and
                                                                               Government
                                                                               Accountability
                                                                               Office..
                                                                              - Develops and
                                                                               certifies that
                                                                               Service
                                                                               corrective
                                                                               measures are
                                                                               implemented as
                                                                               part of the
                                                                               operations
                                                                               function..
                                                                              - Conducts on-
                                                                               site visits,
                                                                               national
                                                                               reviews and
                                                                               meets with
                                                                               management/
                                                                               leadership to
                                                                               address
                                                                               hindrances and
                                                                               provides
                                                                               constructive
                                                                               feedback with
                                                                               regards to
                                                                               goals of
                                                                               significant
                                                                               impact on
                                                                               Service
                                                                               outcomes..
                                                                              - Ensures
                                                                               organizational
                                                                               standards
                                                                               related to
                                                                               quality,
                                                                               customer
                                                                               service and
                                                                               timeliness are
                                                                               met..
----------------------------------------------------------------------------------------------------------------
VR&E..........................  Jack Kammerer.  Director.....  Vocational     Performance       "The SAO
                                                                Rehabilitati   evaluation        oversees the
                                                                on &           criteria such     reduction of
                                                                Employment.    as a              improper
                                                                               performance       payments for
                                                                               agreement on      the Chapter 31
                                                                               the success of    program.
                                                                               the elimination   Responsibilitie
                                                                               of improper       s include but
                                                                               payments has      are not limited
                                                                               not been          to
                                                                               implemented.     - coordinating
                                                                               While VR&E        and monitoring
                                                                               Service can       improper
                                                                               implement         payment testing
                                                                               policy changes   - reviewing
                                                                               to assist with    improper
                                                                               eliminating       payment results
                                                                               improper         - reporting
                                                                               payments, the     improper
                                                                               business line     payments
                                                                               does not have     results to
                                                                               direct            appropriate
                                                                               authority over    stakeholders
                                                                               the field        - identifying
                                                                               offices who       potential areas
                                                                               make the          of fraud and
                                                                               individual        risk for
                                                                               payments..        improper
                                                                                                 payments,
                                                                                                - developing and
                                                                                                 implementing
                                                                                                 corrective
                                                                                                 action plans to
                                                                                                 reduce improper
                                                                                                 payments, and
                                                                                                - addressing
                                                                                                 inquiries from
                                                                                                 IPRO and ORM
----------------------------------------------------------------------------------------------------------------
Education - Chapter 33........  Robert Worley.  Director.....  Education      The Senior        The SAO current
Education - Chapter 1606......                                  Services.      Accountable       performance
Education - Chapter 1607......                                                 Official (SAO)-   standards
                                                                               Robert M.         includes a
                                                                               Worley II,        performance
                                                                               Director,         evaluation
                                                                               Education         criteria that
                                                                               Service           requires the
                                                                               currently does    individual to
                                                                               not have a        assess and
                                                                               performance       adjust to
                                                                               evaluation        changing
                                                                               criteria for      situations,
                                                                               improper          implementing
                                                                               payment           innovative
                                                                               metrics.          solutions to
                                                                               However, the      make
                                                                               SAO is            organizational
                                                                               responsible for   improvements,
                                                                               overseeing        ranging from
                                                                               improper          incremental
                                                                               payments.         improvements to
                                                                               Oversight         major shifts in
                                                                               includes          direction or
                                                                               quality reviews   approach, as
                                                                               conducted by      appropriate.
                                                                               Education         Balances change
                                                                               Service to        and continuity;
                                                                               include           continually
                                                                               quarterly         strives to
                                                                               reviews,          improve service
                                                                               special           and program
                                                                               projects, and     performance;
                                                                               Improper          creates a work
                                                                               Payment           environment
                                                                               Elimination and   that encourages
                                                                               Recover Act       creative
                                                                               audits. In        thinking,
                                                                               addition, the     collaboration,
                                                                               SAO is held       and
                                                                               accountable by    transparency;
                                                                               being directly    and maintains
                                                                               responsible for   program focus,
                                                                               passing IPERA     even under
                                                                               audits each       adversity.
                                                                               fiscal year and
                                                                               ensuring
                                                                               Corrective
                                                                               Action Plans
                                                                               are developed
                                                                               and
                                                                               implemented.
                                                                               Overpayments
                                                                               are audited and
                                                                               referred back
                                                                               to the Regional
                                                                               Processing
                                                                               Offices for
                                                                               corrections and
                                                                               potential
                                                                               collections
                                                                               where
                                                                               appropriate..
----------------------------------------------------------------------------------------------------------------
Disaster Relief - Hurricane     George          Associate      003C4........  Ensure improper
 Sandy.                          Szwarcman.      Executive                     payments are
                                                 Director.                     improved by
                                                                               exceeding the
                                                                               reduction
                                                                               target
                                                                               estimated in
                                                                               2016.
----------------------------------------------------------------------------------------------------------------
Payments to Federal Employees-  Carin Otero,    Associate      HR&A/OHRM....  The "Payments to  By establishing
 Payroll.                        Acting.         Deputy                        Federal           continued
                                                 Assistant                     Employees -       collaborative
                                                 Secretary,                    Payroll" SAO      efforts between
                                                 HR Policy                     left VA in May    HR&A and the
                                                 and Planning.                 2017. While       Office of
                                                                               Carin Otero is    Finance,
                                                                               acting in this    communication
                                                                               role to ensure    plans can be
                                                                               that ongoing      developed that
                                                                               corrective        facilitates
                                                                               action            better sharing
                                                                               activities        of information
                                                                               continue, a       with station HR
                                                                               performance       and payroll
                                                                               metric will be    offices as it
                                                                               added to the      relates to
                                                                               new SAO's         audit findings,
                                                                               performance       corrective
                                                                               plan once HRA     action plans,
                                                                               has recruited     and strategies
                                                                               and filled the    to reduce
                                                                               position..        improper
                                                                                                 payments.
----------------------------------------------------------------------------------------------------------------


                                 
                          VA Responses to HVAC
1. Please provide a copy of the financial management training 
    initiative curriculum that Ms. Park referenced in her testimony. 
    This should include, at a minimum, course titles, a summary of each 
    course's content, whether the course is taught in person or through 
    the internet, and information about how frequently and to whom the 
    courses are taught.

VA Response: The Financial Management Training Initiative (FMTI) offers 
    two mandatory Financial Management Leadership Training (FMLT) 
    events annually to VA's financial community. The Office of 
    Management hosted an online training event in August 2016 and an in 
    person one in January 2017. Currently, there is an online session 
    planned for August 2017, and an in person event scheduled for 
    January or February 2018.Select sessions will offer Continuing 
    Professional Education (CPE) credits. The complete course offerings 
    for all sessions are seen in attachment 1.

2. Please provide the most recent monthly unexpended funds report that 
    VA submitted to the Treasury. The Subcommittee's intent is to 
    evaluate whether the content of this report meets the 
    Subcommittee's needs and then decide whether the report should be 
    provided on an ongoing basis.

VA Response: Please see April 2017 Unexpended Funds Report (Attachment 
    2.)

3. Please identify the accountable officials, to include at a minimum 
    their names and offices, for each program designed as high risk for 
    improper payments. Please explain how they are accountable, for 
    example being assigned performance evaluation criteria that include 
    improper payment metrics. Please also identify the formal 
    responsibilities for overseeing improper payments detection, 
    elimination, and recovery of the VBA, VHA, and NCA chief financial 
    officers and any chief financial officers for major subdivisions of 
    the three administrations.

VA Response: The accountable officials and detailed information 
    regarding their accountability and performance evaluation criteria 
    for each program designated as a high risk for improper payments 
    are included in Attachment 3.

Department of Veterans Affairs Financial Policy "Volume VII Financial 
    Reporting - Erroneous and Improper Volume VII - Chapter 9 Payment 
    Reporting under OMB Circular A - 123 Appendix C," January 2017, 
    assigns roles and responsibilities, and requires the establishment 
    of an accountability mechanism with appropriate incentives and 
    consequences tied to the success of the senior officials who lead 
    efforts to achieve improper payment compliance. The complete policy 
    can be found at: https://www.va.gov/finance/docs/VA-
    FinancialPolicyVolumeVIIChapter09.pdf

Specific policy excerpts to address formal responsibilities for CFOs 
    and other accountable officials include:

0904 ROLES AND RESPONSIBILITIES
(pgs. 6-7 of 84) Administration and Staff Office CFOs are responsible 
    for accurate testing, projections and reporting and must coordinate 
    activities with OM through the IPRO Office. The Administration and 
    Staff Office CFOs are responsible for oversight of the Senior 
    Accountable Officials (SAOs) in their Administrations and Staff 
    Offices to ensure that corrective action plans are created and 
    monitored and that recapture and recovery activities are performed 
    - all in accordance with VA policy. Administration and Staff Office 
    CFOs in collaboration with SAOs are also responsible for providing 
    oversight of progress made to implement supplemental measures and 
    preparation of the request for relief from reporting high-risk 
    programs. Administration and Staff Office CFOs in collaboration 
    with SAOs are responsible for coordinating all data analytics 
    activities with FSC and IPRO regarding the Fraud Reduction and Data 
    Analytics Act of 2015 (herein after referred to as Fraud Act) as 
    well as identifying any fraud risk within their respective 
    programs. Administration and Staff Office CFOs will ensure that 
    test plans include attributes designed to identify potential fraud 
    and ensure any risks identified during testing are properly 
    addressed by the SAO in the program CAPs.

(pg. 7 of 84) Senior Accountable Officials (SAOs) are responsible for 
    remediating improper payments and overseeing payment recapture 
    audits, development and implementation of CAPs, and development of 
    supplemental measures when the program or activity is deemed high-
    priority as well as quality of testing reviews. Additionally, SAOs 
    are responsible for focusing on identifying and eliminating the 
    highest improper payments, reducing improper payments, and 
    coordinating Federal, State, and local government action in 
    identifying and eliminating improper payments. SAOs are also 
    responsible for notifying and coordinating with the IPRO Office and 
    their Administration or Staff Office CFO on any reviews or audits 
    that are associated with improper payments. SAOs, in conjunction 
    with responsible Administration or Staff Office CFOs, are 
    responsible for preparing the request for relief from reporting 
    high-risk programs. SAOs, in collaboration with Administration and 
    Staff Office CFOs, are responsible for coordinating all data 
    analytics activities with FSC and IPRO regarding the Fraud Act, 
    identifying any fraud risk within their respective programs, 
    testing for potential fraud, and ensuring CAPs address any 
    identified fraud risk.

090609 Improper Payment Reporting B. ii. For Noncompliant Programs (pg. 
    21 of 84) - The designation of a SAO, a member of the SES, who 
    shall be accountable for the progress of the program coming into 
    compliance. As such, the SAO must have the span of control 
    necessary to affect change in the program or activity determined to 
    be noncompliant; and the establishment of an accountability 
    mechanism, such as a performance agreement, with appropriate 
    incentives and consequences tied to the success of the SAO in 
    leading efforts to achieve compliance for the program or activity. 
    VA interprets this requirement to mean a performance measure that 
    provides transparency into whether the measure was met and when 
    incentives/consequences are enforced.

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