[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]





 
     THE STATUS OF VA FINANCIAL MANAGEMENT BUSINESS TRANSFORMATION

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

                                HEARING

                               before the

                SUBCOMMITTEE ON TECHNOLOGY MODERNIZATION

                                 of the

                     COMMITTEE ON VETERANS' AFFAIRS

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                         TUESDAY, JUNE 20, 2023

                               __________

                           Serial No. 118-21

                               __________

       Printed for the use of the Committee on Veterans' Affairs
       
       
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                    Available via http://govinfo.gov
                    
                               ______

             U.S. GOVERNMENT PUBLISHING OFFICE 
 53-080              WASHINGTON : 2024        
                    
                    
                    
                    
                     COMMITTEE ON VETERANS' AFFAIRS

                     MIKE BOST, Illinois, Chairman

AUMUA AMATA COLEMAN RADEWAGEN,       MARK TAKANO, California, Ranking 
    American Samoa, Vice-Chairwoman      Member
JACK BERGMAN, Michigan               JULIA BROWNLEY, California
NANCY MACE, South Carolina           MIKE LEVIN, California
MATTHEW M. ROSENDALE, SR., Montana   CHRIS PAPPAS, New Hampshire
MARIANNETTE MILLER-MEEKS, Iowa       FRANK J. MRVAN, Indiana
GREGORY F. MURPHY, North Carolina    SHEILA CHERFILUS-MCCORMICK, 
C. SCOTT FRANKLIN, Florida               Florida
DERRICK VAN ORDEN, Wisconsin         CHRISTOPHER R. DELUZIO, 
MORGAN LUTTRELL, Texas                   Pennsylvania
JUAN CISCOMANI, Arizona              MORGAN MCGARVEY, Kentucky
ELIJAH CRANE, Arizona                DELIA C. RAMIREZ, Illinois
KEITH SELF, Texas                    GREG LANDSMAN, Ohio
JENNIFER A. KIGGANS, Virginia        NIKKI BUDZINSKI, Illinois

                       Jon Clark, Staff Director
                  Matt Reel, Democratic Staff Director

                SUBCOMMITTEE ON TECHNOLOGY MODERNIZATION

              MATTHEW M. ROSENDALE, SR., Montana, Chairman

NANCY MACE, South Carolina           SHEILA CHERFILUS-MCCORMICK, 
KEITH SELF, Texas                        Florida, Ranking Member
                                     GREG LANDSMAN, Ohio

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

                              ----------                              

                         TUESDAY, JUNE 20, 2023

                                                                   Page

                           OPENING STATEMENTS

The Honorable Matthew M. Rosendale, Sr., Chairman................     1
The Honorable Sheila Cherfilus-McCormick, Ranking Member.........     2

                               WITNESSES

Ms. Teresa Riffel, Deputy Assistant Secretary for Financial 
  Management Business Transformation, Financial Management 
  Business Transformation Service, U.S. Department of Veterans 
  Affairs........................................................     3

        Accompanied by:

    Mr. Charles Tapp II, Chief Financial Officer, Veterans 
        Benefits Administration, U.S. Department of Veterans 
        Affairs

    Mr. Daniel McCune, Deputy Chief Information Officer, Software 
        Product Management, Office of Information & Technology, 
        U.S. Department of Veterans Affairs

Mr. Sidney Getz, Senior Vice President, CGI Federal..............     5

Mr. Nick Dahl, Deputy Assistant Inspector General for Audits and 
  Evaluations, Office of Inspector General, U.S. Department of 
  Veterans Affairs...............................................     6


     THE STATUS OF VA FINANCIAL MANAGEMENT BUSINESS TRANSFORMATION

                              ----------                              


                         TUESDAY, JUNE 20, 2023

             U.S. House of Representatives,
          Subcommittee on Technology Modernization,
                            Committee on Veterans' Affairs,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 3:06 p.m., in 
room 390, Cannon House Office Building, Hon. Matt Rosendale 
(chairman of the subcommittee) presiding.
    Present: Representatives Rosendale, Self, Landsman, and 
Cherfilus-McCormick.

      OPENING STATEMENT OF MATTHEW M. ROSENDALE, CHAIRMAN

    Mr. Rosendale. Good afternoon. The subcommittee will come 
to order. We are here today to review VA's progress in the 
Financial Management Business Transformation program, or FMBT. 
FMBT is the VA's third attempt to modernize its hodgepodge of 
aging inadequate financial and accounting systems. These 
systems are a serious problem. Every year, the VA barely 
manages to pass its financial statement audit with a clean 
opinion, despite carrying the same material weaknesses and 
deficiencies for a decade. At the same time, the Department's 
purchase card spending continues to be much similar to the Wild 
West.
    It has been nearly 10 years since the former VA senior 
procurement executive blew the whistle on billions of dollars 
of unauthorized commitments, and nothing has fundamentally 
changed. With so many purchase cards in so many different 
facilities and no central tracking, the Department is 
practically helpless to enforce its policies, much less root 
out waste and fraud. Basic financial management functions 
stretch the capabilities of the systems, like maintaining 
records when the VA transferred the Coronavirus Aid, Relief and 
Economic Security (CARES) and America Rescue Plan (ARP) funds.
    When the committee asked basic questions about how the 
funding was handled during last month's hearing, the VA 
witnesses struggled to answer. Additionally, one witness showed 
contempt to members for even trying to perform our basic 
oversight duties. This situation is untenable, and I appreciate 
that our witnesses today are attempting to solve it. Simply 
put, the FMBT program has to succeed. After a false start in 
2016 and 2017, VA relaunched the effort in 2018. Since then, 
the Integrated Financial and Acquisition Management System, or 
iFAMS, has been implemented in the National Cemetery 
Administration, a few offices within the Veterans Benefits 
Administration, the Office of Information and Technology, the 
Office of the Inspector General, and part of the Office of 
Acquisition, Logistics, and Construction.
    From the information we have, the system seems to be 
relatively successful in those offices, but there is still 
reason to be concerned. These organizations only add up to a 
few thousand users and a small fraction of the VA's budget. 
Implementing the iFAMS in the major organizations like the 
Veterans Health Administration and the big spenders within the 
Veterans Benefits Administration keeps getting pushed out, and 
now it is not scheduled for a rollout until 2024 and beyond.
    Meanwhile, the program's implementation costs continue to 
rise. I am not suggesting that we have another Electronic 
Health Record (EHRM) here on our hands. Let me be clear. I 
believe most of the premises of the FMBT are sound. This effort 
does seem to be suffering from some of the familiar problems, 
like poor coordination between the various organizations within 
the VA, struggles to fit VA's operational practices with 
commercial software, and extremely long schedules. It has been 
3-1/2 years since the subcommittee last examined the FMBT 
program. I think veterans and taxpayers are overdue for an 
update.
    I appreciate our witnesses joining us today to help us 
better understand the challenges that you face. I look forward 
to working to overcome the difficulties and deliver this system 
successfully. With that, I would yield opening statement time 
to Ranking Member Cherfilus-McCormick. Thank you.

OPENING STATEMENT OF SHEILA CHERFILUS-MCCORMICK, RANKING MEMBER

    Ms. Cherfilus-McCormick. Thank you, Mr. Chairman. First, I 
would like to say that I am happy that we are having this 
hearing on an IT modernization program that is so important to 
the future of VA. As the Inspector General has reported, the 
use of the aging financial management system has led to manual 
workarounds which impedes VA's and Congress's ability to 
conduct oversight and spending. VA is the second largest 
Federal agency, and it relies on IT infrastructure that is 
decades old.
    While we are all aware of the failures in healthcare record 
and supply chain modernization, this program has largely gone 
unnoticed. This is a good thing. When an IT program goes well, 
we usually do not hear about them. Unfortunately, this program 
is now experiencing delays. Given the importance of this 
program, this committee needs to understand the underlying 
issues. This program is foundational to creating not only 
financial efficiency for the Department, but for accountability 
and oversight of Congress. I hope to hear from our witnesses 
from VA and the CGI Federal today an honest account of how we 
can ensure the successful and timely development of iFAMS.
    I will not belabor a point I have made at every hearing we 
have had in this subcommittee this Congress. VA obviously does 
not have the management infrastructure in place to coordinate 
and ensure the success of these large IT modernization efforts. 
There are bills that have cosponsors that would, at the very 
least, start moving them in the right direction. I hope that we 
can start acting on these soon here in the House.
    IT modernization is mandatory, not optional. It is in 
everyone's interest to finally do this in a way that does not 
upset veterans and employees and waste billions of dollars. 
Commitment to management and standardization of processes 
across the Department is essential to our future success. Thank 
you again, Chairman. I look forward to hearing from our 
witnesses this morning.
    Mr. Rosendale. Thank you Ranking Member Cherfilus-
McCormick. I will now introduce the witnesses on our first 
panel. First, from the Department of Veterans Affairs, we have 
Ms. Teresa Riffel, the Deputy Assistant Secretary for Financial 
Management Business Transformation. We also have Mr. Charles 
Tapp, the Chief Financial Officer for the Veterans Benefits 
Administration, and Mr. Daniel McCune, Deputy Chief Information 
Officer for Software Product Management at the Office of 
Information and Technology. Next, we have Mr. Sidney Getz, 
Senior Vice President for CGI Federal. Finally, we have Mr. 
Nick Dahl, Deputy Assistant Inspector General for Audits and 
Evaluations at the Office of Inspector General for the 
Department of Veterans Affairs. If you all would please rise 
and raise your right hand.
    [Witnesses sworn]
    Mr. Rosendale. Thank you. Let the record reflect that all 
witnesses have answered in the affirmative. Ms. Riffel, you are 
now recognized for 5 minutes to deliver your opening statement.

                   STATEMENT OF TERESA RIFFEL

    Ms. Riffel. Good afternoon Chairman Rosendale, Ranking 
Member Cherfilus-McCormick, and all members of the 
subcommittee. Thank you for the opportunity to testify today in 
support of the Department of Veterans Affairs Financial 
Management Business Transformation program and its 
implementation of the Integrated Financial and Acquisition 
Management System. I am accompanied by Daniel McCune, Deputy 
Chief Information Officer for Software Product Management, and 
Charles Tapp, Chief Financial Officer of the Veterans Benefits 
Administration.
    VA cannot continue to rely on its legacy financial 
management system due to the enormous risk it presents to VA 
operations. It is becoming increasingly difficult to support 
from a technical and functional ability standpoint, cannot 
correct new audit findings, and is not compliant with today's 
internal control standards.
    I am proud to report that iFAMS is no longer proof of 
concept. It is successfully replacing VA's antiquated 1980's-
era financial management system. It has been successfully up 
and running at VA for almost 3 years. VA completed six 
successful deployments of iFAMS, encompassing 20 offices and 
4,700 users across the enterprise. That includes the entirety 
of the National Cemetery Administration, a portion of Veterans 
Benefits Administration, and several major staff offices, 
including the Office of Information and Technology, Office of 
Inspector General.
    iFAMS users have collectively processed over 3.5 million 
transactions, representing almost $10 billion in treasury 
disbursements. iFAMS is stable, achieving over 99.9 percent 
uptime. On June 12, 2023, VA went live with its largest 
deployment to date, increasing the current user base by 60 
percent. It was also the first time VA went live simultaneously 
with both the finance and acquisition components of iFAMS, 
which demonstrates iFAMS is a viable solution capable of 
becoming the next generation financial and acquisition solution 
for VA.
    It is important to understand that iFAMS is not just a new 
core accounting and acquisition system. It is crucial to 
transforming VA's business processes and capabilities both so 
we can meet our goals and objectives in compliance with 
financial management legislation and continue to successfully 
execute our mission to provide veterans with the healthcare and 
benefits they have earned and deserve. With so much at stake, 
both in terms of taxpayer dollars and the Department's ability 
to serve veterans, it is vital that VA accurately track and 
report how funds are used. Fortunately, iFAMS significantly 
improves funds tracking capabilities, which, among many other 
benefits, will help ensure proper tracking of The Sergeant 
First Class Heath Robinson Honoring our Promise to Address 
Comprehensive Toxics (PACT) Act expenditures.
    Through the use of iFAMS, VA is increasing the 
transparency, accuracy, and timeliness, and reliability of 
financial information. VA is gaining enhanced planning, 
analysis, and decision-making capabilities because of improved 
data integrity, reporting functionality, and business 
intelligence. VA is demonstrating these achievements through a 
range of metrics and associated targets based on industry best 
practices.
    iFAMS and process changes are part of VA's strategy to 
resolve long standing financial material weaknesses and 
strengthen internal controls. For example, and in contrast to 
our current system, which cannot capture transaction approvals, 
iFAMS routes documents to approving officials and allows 
supporting documentation to be attached directly to the 
transaction. Additionally, iFAMS requires additional levels of 
approval for high-dollar transactions.
    iFAMS also eliminates the need for an external tool to 
adjust entries for financial reporting. Perhaps most 
importantly, iFAMS complies with reporting requirements from 
the Office of Management and Budget and the Department of the 
Treasury, to capture various account attributes and conform to 
the U.S. Standard General Ledger. VA's current system is unable 
to meet those requirements, which has led to extensive and 
inefficient manual workarounds, and iFAMS will remediate all of 
these.
    Our success has been, and continues to be, built on 
partnerships, mutual respect, and two-way collaboration with 
our users. Accordingly, iFAMS established a dedicated chief 
experience officer to coordinate user interactions and change 
management activities. FMBT's change management practices place 
a heavy emphasis on continuous improvement. Using customer 
feedback in our own observations, audit findings, and industry 
best practices, we establish lessons learned during each wave 
and incorporate those lessons into subsequent wave deployments.
    FMBT continues to stay on budget despite changes. Our 
successes would not be possible without the ongoing support of 
Congress, and we appreciate the opportunity today to discuss 
this important initiative. We will continue to work judiciously 
with veterans foremost in mind to modernize VA's financial and 
acquisition management system and provide you with updates as 
we make further progress.
    Although we are encouraged by our success to date, we are 
keenly focused on the difficult work that lies ahead and are 
steadfast in our commitment to see this initiative through its 
successful conclusion. Chairman Rosendale, Ranking Member 
Cherfilus-McCormick, and subcommittee members, this concludes 
my opening statement. I would be happy to answer any questions.

    [The Prepared Statement Of Teresa Riffel Appears In The 
Appendix]

    Mr. Rosendale. Thank you, Ms. Riffel. The written statement 
of Ms. Riffel will be entered into the hearing record. Mr. 
Getz, you are now recognized for 5 minutes to deliver your 
opening statement.

                    STATEMENT OF SIDNEY GETZ

    Mr. Getz. Chairman Rosendale, Ranking Member Cherfilus-
McCormick, and other distinguished members of the subcommittee, 
thank you for the opportunity to appear today. My name is Sid 
Getz, and I am a senior vice president at CGI Federal. For the 
last five years, I have served as the project manager on CGI 
Federal's contract with the VA for the Financial Management 
Business Transformation program, known as FMBT. At the 
subcommittee's invitation, I am here today to provide the 
requested status update and underscore CGI Federal's ongoing 
commitment to the success of VA's FMBT program.
    As you know, in 2016, the VA established the FMBT program 
to modernize its 30-year-old legacy core Financial Management 
System, FMS, in compliance with applicable regulatory 
requirements. To accomplish this complex modernization effort, 
the VA selected CGI Federal to deploy its Momentum Enterprise 
Resource Planning Solution.
    Momentum, known at the VA as the Integrated Financial and 
Acquisition Management System, or iFAMS, is an Office of 
Management and Budget (OMB)-approved financial management 
system that is operational at many Federal Government agencies. 
To mitigate program risk, the FMBT program is migrating users 
from the VA's Legacy financial and acquisition systems to iFAMS 
using an incremental deployment approach. Each deployment, or 
wave, delivers specifically configured iFAMS capabilities to a 
defined set of the VA's organization using an agile-based 
implementation methodology. To date, the FMBT program has 
completed six waves deploying iFAMS to 4,700 users at 20 
different VA offices.
    While there are still milestones and challenges ahead to be 
sure, iFAMS is already delivering benefits to the VA's finance 
and acquisitions user communities. These benefits include 
improved strategic and daily decision-making, process 
automation, compliance with Federal accounting regulations, 
maintaining clean audits, and accommodating new regulatory 
requirements. A prime example of how iFAMS is helping the VA 
user community is the power of its real-time transaction 
processing and on-demand reporting. Today, iFAMS users can 
easily generate standard financial acquisitions reports and 
drill down into current accurate data on demand. This is 
because when transactions are entered in iFAMS, they are first 
verified to meet VA standards and then automatically update 
budgets in the general ledger in real time. iFAMS users also 
have the capability to refresh reports hourly rather than 
daily, and can run most reports at the enterprise level, 
administration level, or lower levels of the VA organization.
    Before iFAMS, some similar reports took days to produce 
through a manual, resource intensive, spreadsheet-based 
process. As with other complex programs, success often depends 
on the stakeholders' focus on key performance factors. The same 
holds true here, where the team's focus on collaboration and 
transparency, enterprise-wide standardization, continuous 
improvement, diligent change management, and execution of its 
risk-based incremental delivery approach has kept the program 
moving forward.
    To illustrate this point, let me share how the team has 
maximized the value of formal user acceptance testing, also 
known as UAT. In the first few waves, users performed hands-on 
UAT toward the end of each wave. This is a common and standard 
approach. Lessons learned taught us that we would improve user 
adoption by having users perform iterative hands-on testing of 
iFAMS functionality and business processes much earlier in each 
wave. We refined the program implementation methodology and 
applied this approach to the three most recent waves.
    By helping users gain an earlier appreciation of iFAMS, the 
team gained useful feedback for change management and training. 
It also has allowed us to identify and resolve issues earlier, 
saving both time and resources. I end this testimony where I 
began by reiterating CGI Federal's unwavering commitment to 
collaborating with the FMBT program to deliver iFAMS to the 
entire VA user base for the benefit of our veterans. I look 
forward to answering your questions.

    [The Prepared Statement Of Sidney Getz Appears In The 
Appendix]

    Mr. Rosendale. Thank you, Mr. Getz. The written statement 
of Mr. Getz will be entered into the hearing record. Mr. Dahl, 
you are now recognized for 5 minutes to deliver your opening 
statement.

                     STATEMENT OF NICK DAHL

    Mr. Dahl. Chairman Rosendale, Ranking Member Cherfilus-
McCormick, and subcommittee members, thank you for the 
opportunity to discuss our oversight of VA's financial 
management challenges. Since 2015, the audit of VA's financial 
statements has reported a material weakness due to problematic 
financial management systems. Full implementation of iFAMS 
could help resolve this persistent material weakness and 
increase the transparency, accuracy, timeliness, and 
reliability of financial information across VA. Accordingly, we 
began oversight of the implementation shortly after it went 
live at National Cemetery Administration (NCA) in November 
2020.
    Prior modernization efforts failed in part because of poor 
planning and flawed execution combined with challenges 
transitioning from legacy systems. Decentralized oversight, 
unrealistic timelines, inadequate engagement of stakeholders 
and end users, and minimal testing have plagued IT projects. 
The resulting delays, changes in direction in vendors, and user 
resistance all carry steep costs. In the most recent audit of 
VA's financial statements, the auditor found three material 
weaknesses and two significant deficiencies. The material 
weakness most pertinent to this testimony focuses on the 
limited functionality of the current system to meet VA's 
financial management and reporting needs. Over time, VA's 
complex and antiquated financial system has deteriorated and no 
longer meets increasingly stringent requirements mandated by 
the Treasury Department and OMB.
    Deficiencies in VA's financial management system are 
illustrated in findings we made related to VA's use of COVID-19 
funding, which showed VA lacked assurance that those funds were 
spent as intended. Generally, our three reports found VA is 
complying with Transparency and Trust Act reporting 
requirements. However, we identified concerns with the 
completeness and accuracy of VA's reporting. A major cause for 
this is Veterans Health Administrations (VHA's) reliance on 
several systems for payroll and purchase card transactions 
requiring manual entries by staff, which increases the risk of 
reporting errors.
    The practice of manual expenditure transfers led to a lack 
of transparency and accountability over VHA purchases seen in 
our audit on VA's use of CARES Act funds. We found VHA staff 
not properly documenting the transfers and inadequate guidance 
from VHA's Office of Finance. This happened because of 
financial reporting systems limitations and a lack of oversight 
that resulted in VHA medical facility staff determining on 
their own what constituted appropriate documentation. 
Additionally, staff did not follow basic controls like 
documenting purchasing authority, splitting duties between 
requesting and purchasing items, and verifying ordered goods 
were received. As a result, we reported an estimated $187 
million in questioned costs.
    We felt early oversight of the iFAMS project was critical 
to help VA achieve program goals, and we initially issued two 
memoranda. One detailed that FMBTS had not ensured NCA had the 
comprehensive reports needed to monitor budget and operations 
for months after the initial iFAMS go-live date, requiring 
staff to engage in workarounds. The second identified other 
potential risks related to financial reporting for FMBTS to 
consider addressing.
    In March 2023, our audit found FMBTS needed to do more work 
to fully address some barriers related to the program's goal of 
streamlining processes and improving information reliability, 
with a focus on contracts converted into iFAMS from the legacy 
contract system. Our findings related to system functionality 
and procedures, and we made five recommendations to implement 
controls and processes to reduce risk and enhance communication 
on requirements, develop methodologies to prioritize user 
feedback, and include legacy systems, converted contracts, and 
system testing. We will soon begin the follow-up process on 
these recommendations.
    In summary, the transition to iFAMS could mitigate major 
issues in producing VA's financial statements and improving VA 
operations. These initial findings are early opportunities for 
improvement that may yield results for VA as they continue 
implementing this complicated system. We urge VA to dedicate 
the resources to resolve issues and remain ready to identify 
the challenges that may arise in the months and years ahead. 
That concludes my statement, and I will be happy to answer any 
questions you may have.

    [The Prepared Statement of Nick Dahl appears in the 
Appendix]

    Mr. Rosendale. Thank you, Mr. Dahl. The written statement 
of Mr. Dahl will be entered into the hearing record. We now 
move and proceed to the questioning, and I will recognize 
myself for 5 minutes.
    Ms. Riffel, during last month's hearing on VA CARES Act 
spending, I asked the Chief Financial Officer, Mr. Rychalski, 
about a $714,235 expenditure transfer where the medical center 
could not produce any documents establishing an audit trail 
because the person who processed it had retired. VA has still 
not explained how much money was actually paid out, for what 
purpose, and who approved it. How would the iFAMS system 
prevent or resolve this type of a situation?
    Ms. Riffel. Thank you for that question. iFAMS will resolve 
that. We have the ability now for those customers that are in 
iFAMS to actually trace expenditures down to that level, so we 
are able to load the budget and actually reflect expenditures 
against it. I want to give one caveat around payroll, and I 
think in the response that VA recently provided, we stated this 
as well, is that we do have to work with our interface partners 
predominantly on the payroll side to make sure that they are 
sending us the information to be able to trace it and record it 
appropriately against the right account. The answer is yes, 
sir, iFAMS will address this 100 percent.
    Mr. Rosendale. As long as the proper information is entered 
in.
    Ms. Riffel. That is correct, sir.
    Mr. Rosendale. Junk in, junk out. Good information in, good 
information out.
    Ms. Riffel. Correct.
    Mr. Rosendale. Ms. Riffel, VA struggles to manage its 
purchase card spending because employees at thousands of 
individual facilities make purchases, and the data on those 
purchases is fragmented. Can you explain why this is the case 
and how the iFAMS system would track that data?
    Ms. Riffel. Yes, so in iFAMS, the purchase card ability to 
purchase with a purchase card is substantially different than 
what it is in legacy system today. We will see advancements in 
terms of traceability on what individuals are purchasing. I 
would also defer to Office of Acquisition Logistics and 
Construction (OALC), as I know I am on a couple of 
subcommittees with them, and they are making concerted efforts 
on reducing the use of the purchase card and driving users to 
contracts where contracts are appropriate. Again, I would defer 
to them on more elaboration on that effort that is underway.
    Mr. Rosendale. Thank you very much. In last month's 
hearing, Mr. Rychalski touted the reduction in VA's improper 
payment rate. You still had $3.5 billion in improper payments 
last year. Your annual purchase card spending is about $5 
billion. How much of that $3.5 billion represents purchase card 
spending? Would the iFAMS system ever allow you to get that 
number down to or at least near zero?
    Ms. Riffel. Yes, so I will have to take that particular 
question for the record in terms of the amounts there.
    Mr. Rosendale. Okay. Mr. Dahl, your report on VA CARES Act 
spending found that every single one of the 10,064 supply 
purchases and service contracts had some sort of procedural 
noncompliance. This led to your office questioning over $187 
million of transactions, most of which were made using purchase 
cards. Which of the VA's current systems process the purchase 
card transactions? What is wrong with them? Why is this such a 
big liability for financial management?
    Mr. Dahl. I think the issue with the purchase card comes 
down to oversight. Purchase card, as you have mentioned, many 
purchase card holders in VA that use their cards without 
appropriate oversight from the purchase card accountable 
officials, you know, there is nothing that is going to stop 
people from using the purchase cards. Every cardholder has an 
accountable official who should be reconciling the spending on 
a monthly basis to make sure that the purchases are appropriate 
and supported, and we are just not seeing that.
    Mr. Rosendale. Is it that the, in your opinion, are the 
supervisors not given good guidance on what is acceptable and 
what is not, and the processes, or are they not conveying that 
information down to their subordinates?
    Mr. Dahl. I would say it is likely a mix of both of those 
situations.
    Mr. Rosendale. Okay. Mr. McCune and Ms. Riffel, I 
understand the iFAMS system went live in the Office of 
Information Technology last week, and all the purchase card 
transactions are now being run through the system. How is it 
that Office of Information and Technology's (OIT's) process is 
different now, and what improvements has it made?
    Ms. Riffel. Thank you for that question. Actually, I just 
talked with OIT a few minutes ago before this hearing, just to 
check in, make sure how things were going, going very well. 
Again, the purchase card module within iFAMS is substantially 
different than what they currently do with Integrated Funds 
Distribution Control Point Activity Accounting and Procurement 
(IFCAP) today. We are consistently working with users to make 
sure that they understand those differences.
    I would tell you also that the reconciliation process 
substantially different in iFAMS than what it is in legacy. So 
far, and again, we are only one week in with that user 
community, but we have no issues that have been expressed or 
concerns from that group at this time.
    Mr. Rosendale. Very good. Thank you very much. I will now 
yield 5 minutes to Representative Cherfilus-McCormick for your 
questions.
    Ms. Cherfilus-McCormick. Thank you, Mr. Chairman. As the 
Office of Inspector General highlighted in their report last 
month, the need for modernization for VA's financial system is 
imperative. VA is the second largest agency in the Federal 
Government and has to rely on a 30-year-old system to manage 
billions of dollars it receives from the Congress every year. 
Mr. Dahl, the limited functionality of the financial management 
system continues to be a material weakness in VA's financial 
system audits. Can you explain the ramifications of not having 
a modern financial management system, not only to your work, 
but to the success of managing the funds of VA?
    Mr. Dahl. Well, without a modern system, VA is very likely 
to continue to have a material weakness on their annual 
financial statement audit. They are going to continue to have 
to rely on manual processes and interventions to accomplish 
certain transactions. They are going to be lacking the 
transparency and accountability over the use of funds. I would 
say those would be the key concerns.
    Ms. Cherfilus-McCormick. Now, with the manual overrides, 
how do you catch any mistakes?
    Mr. Dahl. Well, that would come down to if there is a 
supervisor checking on that, and, frankly, I am not sure that 
that is always happening. Of course, if you are doing that, 
there is always a risk of error. You know, as Mr. Rosendale 
said, ``garbage in, garbage out.'' It is probably more likely 
to happen when someone is having to manually process a 
transaction.
    Ms. Cherfilus-Mccormick. When we look at waste, do you feel 
like we have an adequate understanding of how much waste is 
going on without an automated system that is fully functioning?
    Mr. Dahl. It would be hard for me to characterize that. FMS 
was conceived in the 1980's. I mean, it is so far back in the 
past. Certainly, people were not envisioning the current needs, 
the current environment. I think it would be a huge step 
forward to bring a modern system online.
    Ms. Cherfilus-Mccormick. Thank you Mr. Tapp, I am sure you 
have heard about the manual workarounds that we have required 
as a result of not being able to use FMS for the transfer of 
supplemental funds. Can you provide to the committee some 
insight into the restrictions that antiquated technology puts 
on you as the Chief Financial Officer (CFO) of the Veterans 
Benefits Administration?
    Mr. Tapp. Yes, ma'am. Thank you for the question. 
Antiquated systems basically limit our ability to have 
strategic decision-making capability for us to be able to look 
across the enterprise and be able to look at the resources that 
we have been provided to be able to make decisions on changes 
in priorities and also make changes day to day. Those certainly 
limit our ability. It also limits our ability to implement new 
legislation and to provide the proper insights in terms of what 
has been spent and how quickly it has been spent without using 
Excel spreadsheets or other things that are offline. You 
certainly want to use your system of record to be able to 
capture that information.
    Since we have implemented iFAMS, we can certainly say for 
the general operating expense, we have been able to provide a 
more granular response when it comes down to reporting on 
expenses that we have in Veterans Benefits Administration 
(VBA). The system is working as intended for the general 
operating expense, but certainly using the legacy system, it 
had some limitations that we are glad that iFAMS will help 
resolve.
    Ms. Cherfilus-Mccormick. Now, in my past experience, I was 
a Chief Executive Officer (CEO) of a healthcare company, and it 
was extremely difficult to--I could not imagine doing a manual 
override to forecast expenses and also forecast what we are 
saving. How are you able to realistically forecast the next 
year of savings and actually what you are actually losing, such 
as waste?
    Mr. Tapp. That has certainly been a challenge with FMS 
because of how expenses are grouped together by a budget object 
class, or by BOC, because they are lumped together. Certainly, 
iFAMS again, allows us to be more dynamic in terms of seeing at 
a more granular level what we have spent and allow us to 
certainly do more analysis as we look forward using, again, the 
granular details that we are able to pick in iFAMS. Again, the 
transparency and the level of granularity is certainly enhanced 
with iFAMS.
    Ms. Cherfilus-McCormick. Thank you. Mr. Chairman, I yield 
back.
    Mr. Rosendale. Thank you very much, representative. I yield 
5 minutes to Representative Self.
    Mr. Self. Thank you, Mr. Chairman. Mr. Dahl has basically 
said people are involved in everything. I think that is a fair 
summary. Ms. Riffel, are you getting pushback from the field on 
fielding this new system?
    Ms. Riffel. Thanks for that question. Certainly, we are 
carrying a risk around change management from a program 
perspective overall. What I would tell you, though, is that as 
we get more and more into VA, what we are starting to see is 
people really coming around and being encouraged by what they 
see. I think that we are I would not say we are over the hurdle 
by any means, because change is hard, but I will tell you that 
we are not seeing as much pushback as we were if you were to 
ask me this question 2 years ago.
    Mr. Self. Okay. Now I understand you have got about 4,700 
users out of a workforce, total workforce of 400,000 
thereabouts. You have spent a billion dollars on 1/2 of 1 
percent of the users out of a budget of, what, $7 billion odd. 
Are you going to make the $7 billion? You now have 1/2 of 1 
percent that you have rolled the system out to.
    Ms. Riffel. Yes, so actually, we are expected to have 
124,910 users on the system at full deployment. We have 
currently got, as we said, about 4,700 on the system. What I 
will acknowledge is that obviously, VHA is the largest 
organization that we have yet to implement. I would also tell 
you that that is by design. We want to make sure that we are 
addressing any improvements that we need to make with our 
deployment strategy before we tackle VHA. Also, the complex 
programs that VBA has remaining. Those obviously would impact 
veterans in some way if we do not do them correctly. We have 
purposely established the schedule in the manner that we have 
so that we can ensure that we are learning from what we have 
already done. By the time we get to VHA, we will leverage all 
of those improvement activities when we implement.
    Mr. Self. Is there any chance that your delayed systems, 
VBA loan guaranty, VBA insurance, VBA acquisition can be moved 
faster as you learn lessons, or are you committed to your as 
late as 29?
    Ms. Riffel. Yes, so thanks for that question. What I would 
tell you is right now we just completed a 3-day lock-in with 
VBA on loan guaranty. We have addressed the six items that were 
remaining to ensure that we are in agreement with VBA on 
exactly how we are going to implement Loan Guaranty Service 
(LGY). We are in the process of rebaselining that schedule 
right now. As soon as we finalize that, we will actually 
address whether there is opportunity to accelerate and move 
other VBA programs to the left after we finalize that rebase 
line.
    Mr. Self. Okay, very good. In your written testimony, you 
talked about the two Government Accountability Office (GAO) 
reports and the eight recommendations. I pulled the most recent 
GAO recaps of this program. You said that there was one 
remaining open. The GAO currently references seven are open and 
one is closed. As recently as February 2023, they have at least 
three open with that date. Can you reconcile for me your 
testimony with the GAO updates?
    Ms. Riffel. Yes, I believe that those I will get back to 
you. I will take that for the record. We will reconcile that. 
It may be a timing issue on some of those, but we will make 
sure we have got that reconciled for you, sir.
    Mr. Self. Okay. Again, at least three of them, I can find a 
date of February 2023, they were still open according to the 
GAO. I know that GAO makes recommendations, but I still would 
like to see a response on your implementation of the GAO 
recommendations. With that, Mr. Chairman, I yield back.
    Mr. Rosendale. Thank you very much, Representative Self. 
Ms. Riffel, you are getting near the midpoint of the FMBT 
program and many of the important milestones are being delayed 
while the cost estimate continues to rise. These are the 
concerns that I have when I start looking back at some of the 
other software programs that we have invested in. I understand 
you did not initially include the operations and maintenance 
costs for the life of the systems through 2047, but the 
implementation costs have also been increasing from $2.3 
billion up to $4.2 billion, and completion has slipped from 
2028 to 2030 or later. Similar to Representative Self's 
question, why is the implementation cost increasing? Can you 
guarantee me it will not go above that $4.2 billion mark?
    Ms. Riffel. Thanks for that question. Currently the 
projected lifecycle cost estimate is at 7.46 going out to 2047, 
which is accounting for the useful life, as you indicated. What 
we will tell you is that based on the methodology that we are 
using to deploy, there will be instances from time to time 
where we find, for example, a new interface that was not 
originally identified. As you can imagine in VA, we are doing 
constant modernization across the enterprise. We are going to 
have discovery from time to time. What I would tell you is that 
the way that we are structured in an agile fashion, it has 
allowed us to continue to proceed, to actually move other waves 
forward or begin activity on another wave while we are pending, 
getting more intel on a modernization interface or something 
like that.
    Although you are seeing some increases, what you are also 
seeing is our ability to flex with that and to ebb and flow as 
those modernization efforts continue. I can tell you in VA the 
size that it is, we will continue to have modernization that is 
happening simultaneously. Our program, the way we are 
structured, you have to be structured to be able to absorb that 
and to be able to flex with it.
    Mr. Rosendale. Look, I understand, I really do. I 
understand as you are going through this process and you find, 
like you say, some enterprises and some functions that nobody 
had anticipated. It is sort of like doing the renovation on an 
old home, okay, and you pull the wall out and you start finding 
additional things. That is why all these jobs are based on 
typically time and materials, okay, when you come to old 
construction. However, we are using taxpayers' funds. All I am 
trying to do is establish some kind of a cap. Can you assure me 
that we are not going to go over that $4.2 billion range?
    Ms. Riffel. That is our lifecycle cost estimate at this 
point in time, sir.
    Mr. Rosendale. Okay. That would be an estimate. You cannot 
guarantee that that is where we are going to finish up for 
that?
    Ms. Riffel. Not guarantee that, no.
    Mr. Rosendale. Mr. Getz, the VA has spent over $1 billion 
on this project so far. How much of that has your company 
received?
    Mr.Getz. Approximately $440 million since----
    Mr. Rosendale. Excuse me?
    Mr. Getz.--$440 million since the inception of the contract 
in August 2018.
    Mr. Rosendale. Mr. Getz, how much of the $7.5 billion life 
cycle cost, including implementing the system as well as 
maintaining it, does your company expect to get paid?
    Mr. Getz. Sir, I have not even thought about that. At the 
moment we are focused on just the implementation piece.
    Mr. Rosendale. You have not run a lifecycle cost estimate 
and to determine how much you should estimate?
    Mr. Getz. We have not, no.
    Mr. Rosendale. How is it that the VA then has their 
estimate if you were not included in that?
    Mr. Getz. I think the I would certainly defer to Ms. Riffel 
on this, but what we look at is what is the cost implementation 
plus the operations and maintenance costs for, you know, 
whatever contract we have. At some point, the lifecycle turns 
over to operations and maintenance, and then, you know, that is 
a different way of looking at what those future costs are.
    Mr. Rosendale. Again, so, I have got the----
    Mr. Getz. Yes.
    Mr. Rosendale.--lifecycle estimate, but they had to get 
those numbers from somewhere. That is why I am trying to figure 
out how much of it would be from you. They had to get some kind 
of estimate from you.
    Mr. Getz. I would defer to Ms. Riffel if I could on that.
    Ms. Riffel. Yes, thanks for that. We have data that we have 
used, obviously, from the implementations to date. When you do 
a lifecycle cost estimate, you are forecasting for the rest of 
that, obviously understanding what your implementation has been 
to date based on size, complexity of the wave. That was a lot 
of the basis that was used in going into it. Then certainly we 
have got program costs related to the organization supporting 
the wave.
    Mr. Rosendale. Sure, you were forecasting. I understand.
    Ms. Riffel. Yes.
    Mr. Rosendale. I understand the estimate and best forecast 
of information. How much have you plugged in for Mr. Getz' 
company then?
    Ms. Riffel. What is in front of you I believe there, sir, 
is the overall categories of cost that we have. From a 
technology and program management perspective, it is inclusive 
of a couple of the other contractors that are supporting some 
activity in that area. I would have to take for the record 
specifically what is out of that category is CGI.
    Mr. Rosendale. Okay, thank you very much. I will yield 
another 5 minutes to Representative Cherfilus-McCormick.
    Ms. Cherfilus-McCormick. Thank you, Mr. Chairman. Ms. 
Riffel, with the task of executing a program of this size is an 
incredible challenge in itself, the dependency of this program 
to integrate with IT modernization efforts that are currently 
not in existence seems to me to be a recipe for failure. We 
know that this program has gone from needing to integrate with 
EHRM to now being required to integrate with a modern supply 
chain system that has suffered from years of delays. What are 
you, as the leader of FMBT, able to do to mitigate the risk of 
your program?
    Ms. Riffel. Yes, thank you for that. A couple of things 
that we have done recently is that we have worked significantly 
with VHA and with supply chain. In order for FMBT to proceed 
with VHA, understanding where the other initiatives are right 
now, we are proceeding with integrating with legacy supply 
chain. As we move into VHA, which obviously we have been 
working with VHA for the past 2 years, but we are at the point 
now where we need to start really, in earnest, working on the 
implementation we will implement with legacy.
    With EHRM, we have been coordinating with that office since 
inception. They have all of our requirements, detailed 
requirements. We will continue to do that collaboration across 
the board. Then, you know, as they continue to move out, when 
they do, we will be prepared for that integration.
    Ms. Cherfilus-McCormick. How confident that these 
mitigations that you just mentioned are going to be successful?
    Ms. Riffel. For VHA they will because it allows me to 
integrate with what is available right now as I am going to 
implement at a site. Also understanding that when the 
enterprise supply chain solution becomes available, we will 
pivot and we will actually integrate with that future solution. 
We know we need to do it, but in the interim we are going to 
integrate with what is available right now so we can proceed.
    Ms. Cherfilus-McCormick. Do you feel that FMBT should be 
allowed to deploy across VA without having to depend on 
successful implementation of programs like EHRM and the supply 
chain?
    Ms. Riffel. Yes, so I think what I just laid out in terms 
of how we are going to actually do the future state for VHA and 
then the end state for VHA once supply chain is known, is a 
solid plan to allow us to proceed with FMBT.
    Ms. Cherfilus-McCormick. Thank you. Mr. McCune, OIT has an 
impossible task of coordinating a number of large IT 
modernization programs at once included in EHRM, supply chain, 
and HR modernization. How does OIT manage the development and 
delivery of these disperate power programs?
    Mr. McCune. Thank you, ma'am, for that question. Thank you 
for appreciating the complexity of managing three modernization 
efforts at the same time. I think a solid project management 
process allows us to do this effectively. I look at, number 
one, having clear business objectives. Number two, looking at 
solid risk and issue management process. I look at tight 
coordination with the customer around change management. By 
following these established best practices in project 
management, we are allowed to keep these projects moving at the 
same time.
    Ms. Cherfilus-McCormick. Who is ultimately responsible for 
the timing and coordination of these programs?
    Mr. McCune. Yes, that is a joint responsibility. In the 
case of FMBT, the business office is office management, and 
accountability is the CFO. In OIT, we focus on the technology 
and the security of the system. We use Federal Risk and 
Authorization Management Program (FedRAMP), Authority of 
Operate (ATO), and Federal Information Technology Acquisition 
Reform Act (FITARA) process, and that falls under the Chief 
Information Officer (CIO).
    Ms. Cherfilus-McCormick. Does OIT have enough authority 
within VA to make significant changes to schedules of these 
programs to mitigate issues as they arise?
    Mr. McCune. Yes, ma'am, we do, given the tight coordination 
with our customer. I think we are seeing that now as we build 
the wave schedule for FMBT. Now even adjustments with LGY, OIT 
is at the table helping build that schedule.
    Ms. Cherfilus-McCormick. Thank you. Mr. Chairman. I yield 
back.
    Mr. Rosendale. Thank you very much, representative. 
Representative Self, I recognize you for an additional 5 
minutes.
    Mr. Self. I think I will yield for the time being, Mr. 
Chairman. Thank you.
    Mr. Rosendale. Okay. Mr. Getz, how are payments structured 
in your contract?
    Mr. Getz. A couple of different ways. There are parts of 
the contract that are for fixed price, and there are parts of 
the contract that are time and materials.
    Mr. Rosendale. Are you being paid for each implementation 
wave or another method?
    Mr. Getz. Another method. We are being paid--the wave 
implementation component of the contract is time and materials 
because of the, you know, a lot of uncertainty around that. We 
are what we do is for each the beginning of each fiscal year, 
prior to the beginning of each fiscal year, we would work with 
the program to determine what the work is to be done in the 
next fiscal year, agree to that, provide an estimate, and then 
we are paid on a time and materials basis for that piece.
    Mr. Rosendale. Okay. Some of the most important waves have 
been delayed by multiple years. How has that affected your 
payments, if at all?
    Mr. Getz. Since they are all time and materials, again, 
those payments are determined by the work done in whatever the 
next Fiscal Year is.
    Mr. Rosendale. Okay. We have got the estimates of what the 
rollout of this project is supposed to be, and yet, as we have 
been discussing, the smallest portion of them has been 
implemented and we have the back end, okay. A lot more work is 
left to be done. How much is each implementation wave worth, 
and roughly what percentage is that of the contract's annual 
value?
    Mr. Getz. Sorry, sir, could you repeat the question?
    Mr. Rosendale. If it is not being based on the wave, okay, 
it is being based on estimates of time and material, and we 
have the total estimate of the cost of this project. We know 
that this is getting to the crux of what is the eventual cost 
going to be. We see that not that many people are being served 
right now, okay. Not that many services are being accounted for 
right now. The back end is where the work is going to be piled 
up, and yet a lot of this contract value has been burned up 
already. What I am trying to get at is, how are we going to 
reconcile that?
    Mr. Getz. Well, again, I think Ms. Riffel has referred to 
the fact that there is some planning going on with VHA and VBA 
to determine what the rest of the waves would look like, in 
what order, and the degree to which they would be parallel or 
combined. Once we have that, we will be able to provide a solid 
estimate on what the rest of the work looks like.
    Mr. Rosendale. I am just having a really difficult time 
reconciling this because you are telling me you have estimates. 
Again, when a layman looks at this and sees that there is a 
very small percentage of this work that has been done and the 
contract value, a lot of that has been utilized already. This 
is not reconciling. Mr. Dahl, does the structure of this 
contract sound typical based on what you have seen elsewhere in 
the VA?
    Mr. Dahl. I personally do not have any teams that have been 
involved in looking at the contract. There is a team within the 
Office of Audits that is looking at the contract. I could take 
that for the record.
    Mr. Rosendale. I would really appreciate that. Do you 
believe it is sufficient to drive accountability when they look 
at this contract? Someone is going to need to report back to us 
and let us understand if it was structured in such a way as to 
provide accountability for the work that is being done based 
upon the projected total cost of that project.
    Mr. Dahl. I would not be in a position to answer that, sir.
    Mr. Rosendale. Okay. Ms. Riffel, you have already spent 5 
years and more than $1 billion to implement the iFAMS system in 
seven offices. I understand this project has a lot of startup 
costs and fixed costs. Got that. This is an enormous amount of 
money to cover with just a few of the offices. Where is the 
money going besides the implementation of the waves?
    Ms. Riffel. Yes, so, I think it is important to understand 
what all it takes to actually implement a wave. We have a large 
portion is going to a project management contract to help us 
make sure planning the execution of the documentation 
surrounding project management and how you are going to 
actually implement. We also have data conversion, which is a 
huge effort for us. We do a number of mock conversions up front 
for every wave to make sure of the accuracy, et cetera. 
Development effort in terms of interface development that is 
needed. Substantial cost. You know, this is an enterprise 
solution, both acquisition and finance. The cost is going to be 
significant to get it done.
    The other huge piece of the Project Management Office (PMO) 
contract is the organizational change management activities. 
Substantial work there. We have been actually increasing some 
of the work there based on lessons learned, making sure that we 
get that user adoption as we need to. You know, to me, there is 
a lot going on to make sure we get it right.
    Mr. Rosendale. I agree with that and this is exactly the 
concern that I have, okay. As you go through and do all these 
conversions and all these startup costs, okay, with the smaller 
institutions, we are going to have to do those exact same 
things for the larger ones, are we not?
    Ms. Riffel. Mm-hmm, absolutely.
    Mr. Rosendale. How is it then that you can tell me that you 
can sit here in front of this committee and not tell me that 
this estimate is going to be too low?
    Ms. Riffel. Well, part of it is how we are estimating that 
future for VHA. We are talking about predominantly VHA here. 
For VBA, we have probably about 300 additional users and we 
have a lot of activity due around interfaces for the remainder 
of VBA's, complex programs.
    For VHA, that is where a lot of the hard work is going to 
come in. We have been working with VHA for 2-1/2 years now. We 
have a lot of information and understanding about VHA. VHA, and 
credit to them, has actually been working on data cleanse 
activities, which is substantial for data conversion for the 
past couple of years. They continue to do that. VHA has worked 
on standardizing their accounting classification structure and 
where possible, looking at standardizing business processes. A 
lot of work has gone into VBA. A lot of discovery is already 
known about VHA, which has helped contribute to our estimates 
on what VHA is going to look like.
    Mr. Rosendale. I, again, still do not understand when you 
say that they are larger institutions, we have to go through 
the conversions, we have to go through the startup, how that is 
going to cost less than the much, much smaller organizations 
that we have already brought on. I am not reconciling that, so. 
Representative Cherfilus-McCormick.
    Ms. Cherfilus-McCormick. Thank you, Mr. Chairman. As is 
often the case when discussed issues with IT modernization 
programs, technology is usually not the root cause of VA's 
issues. Many joke that when you have been to one VA, you have 
been to one VA. I personally do not find that funny. This 
organization has languished progress in IT modernization 
specifically because there is little to no standardization 
across the system. Ms. Riffel, has your staff begun efforts 
with VHA to standardize workflows for using the new financial 
systems across the country?
    Ms. Riffel. Thanks for that question. Yes, so as I just 
mentioned, we have actually been working with VHA for the past 
couple of years. We have standardized their accounting 
classification structure at a certain level so that they will 
have visibility and to spend at an enterprise level. There is a 
few uniquenesses to VHA, though, I would say. Some medical 
centers have spinal cord and injury activity, others have, you 
know, open heart surgery. Where necessary, we will look to be 
able to record and track cost for those specific organizations 
that are a little bit different.
    Otherwise, from an accounting perspective, a lot of it is 
very similar and they are looking at it from a standardization 
perspective there. That does not mean that the business 
processes are universal at each medical center. Change 
management at VHA is going to be critical to make sure that we 
meet those users where they are. You know, how they operate at 
their medical center, what they do. We will work with them to 
make sure that we standardize as best we can their business 
processes. We absolutely are standardizing their accounting to 
be able to track.
    Ms. Cherfilus-McCormick. Given the uniqueness of the VA's 
facilities, each individual one, has it been difficult to 
identify best practices?
    Ms. Riffel. Well, we have not gone out into VHA in earnest 
yet, but I can tell you that the senior executive that is 
leading that effort for VHA, and she actually has field 
experience, which I think is very good, she is looking to 
actually do that standardization where it makes sense within 
VHA.
    Ms. Cherfilus-McCormick. How long do you perceive that this 
process of standardization, identifying best practices will 
take?
    Ms. Riffel. Well, our intent is that we will address that 
in the first couple of pilots so that we can make sure that we 
take the lessons learned from those pilots and that we are 
prepared at that point to evaluate can we accelerate VHA at 
all. You know, we want to get a couple of pilots under our belt 
to make sure that we get it correct for VHA.
    Ms. Cherfilus-McCormick. If we are looking at full 
implementation, what is the rough timeline?
    Ms. Riffel. Right now on the schedule it is 2029. We 
actually have a sit-down schedule session with them coming up 
in the month of July based on the known direction now with 
supply chain. We will start to lay in that work a little bit 
more definitively with VHA now.
    Ms. Cherfilus-Mccormick. What are the risks to success of 
FMBT if user adoption is not prioritized in the medical and 
contracting centers?
    Ms. Riffel. Obviously, you know, user adoption is front and 
center for all of us. I would tell you that our upfront, 
collaboration, and transparency with the users all the way from 
the senior executive down to the person doing the receding, is 
critical to being successful and, you know, meeting people 
where they are.
    I feel like our program is structured in a manner that we 
are geared for success the way that we have approached the 
change management within VA. I have been with VA 37 years. I 
understand the cultural, you know, really difficult change that 
VA is going to undergo here. I think that you have to make sure 
that people are heard, they feel like they are heard, and you 
actually not just feel like, but that you are and that you are 
listening to them making adjustments where you need to.
    Ms. Cherfilus-McCormick. Now, Mr. Tapp, I saw you nodding 
your head, so I would like you to answer the same question. 
What are the risks to success of FMBT if user adoption is not 
prioritized by VBA?
    Mr. Tapp. You hit the nail on the head. The biggest risk is 
user adoption. In VBA, and I would definitely say across VA, we 
are in the people business. We are people serving people. As we 
start looking at iFAMS, it is so important that we keep our 
employees and the users of the system at the center. Again, as 
we implemented and started at the beginning, we use them as a 
part of our user stories and then use them as a part of the 
testing.
    The most important thing as we look point forward, 
particularly for the General Operating Expenses (GOE) wave, is 
that training is not a one-time event. It is iterative and we 
have to be engaged. For me, particularly around iFAMS and its 
adoption, implementation, and to continue to be a part of the 
culture that we have as far as this is not a tool, it is a part 
of our culture. It requires that I am personally engaged in 
terms of reaching out to our user community to understand, 
number one, they have an advocate, number one. Number two is 
that you have someone who is going to listen. Number three, we 
have a great partnership and we will use that with Ms. Riffel 
and her team to continue to make the improvements that we need 
to so as different generations of users come on board, that 
they are able to use the system, get the training they need to 
be successful.
    Right now, we have at least three generations of users, 
folks who are 5 years or less, people who are mid-tier, and 
some folks who have been working with VA for two decades or 
longer. Each of them see the system differently. We have to 
make sure we meet them all where they are from a training 
perspective.
    Ms. Cherfilus-McCormick. Thank you so much. Mr. Chairman, I 
yield back.
    Mr. Rosendale. Thank you, representative. Representative 
Self, you are recognized your 5 minutes.
    Mr. Self. Thank you, Mr. Chairman. I have been doing some 
scratching here, and I am with the Chairman. I just cannot make 
the figures work. What are you using as an estimate of 
inflation? Let us just start there.
    Ms. Riffel. Yes, so, sir, I will have to take that for the 
record, but we certainly can give you the detail and the 
methodology behind our lifecycle cost estimate.
    Mr. Self. That is going to degrade your figures here.
    Ms. Riffel. Yes.
    Mr. Self. Is this scalable, because it looks to me like, of 
the users that you gave us, you have got about less than 4 
percent of your users are currently on the system. If I am 
reading your charts right, you have already used right at 25 
percent taking out operations and maintenance. I just do not 
know how you are going to get there.
    Let me ask you a specific question, though. There is a huge 
percentage of your implementation--your development and 
implementation costs--in project management. Break down for me 
of your development cost and implementation cost--and let us 
get a little more granular than your chart--how much is let us 
just use procurement, training, infrastructure, organizational, 
organizational change. I am just trying to get a handle on why 
there is such a huge percentage in program management.
    Ms. Riffel. Yes, thanks for that question. I can partially 
answer, sir, is the program management includes implementation 
cost are within that particular category, as well as 
organizational change management. In the piece for technology, 
that is really the hardware and some of the licensing and, 
where appropriate, the interface development work there. That 
is where I can tell you the preponderance of the category of 
things that make up those cost components.
    Mr. Self. I question your lifecycle the way you have got it 
laid out. I just do not think you have got enough to get it 
done. We will see if it is--because you are going to have to 
get a whole lot more efficient as you move forward.
    Ms. Riffel. Yes.
    Mr. Self. A whole lot more efficient.
    Ms. Riffel. Yes, we would expect to get efficient. The 
other thing I would just offer, which is part of the GAO audit, 
sir, is we have an independent group doing a lifecycle cost, 
independent lifecycle cost right now for the program. That will 
certainly inform us if we are off base with what we have done 
ourselves on this cost estimate. That is expected in the 
December timeframe, sir.
    Mr. Self. Well, I will tell you in the GAO summaries of 
these eight that we mentioned, eight recommendations that we 
mentioned, the word metrics is scattered throughout many of 
them. I think that goes back to what I am asking here. What are 
the metrics of moving forward that you are going to have to 
meet in order to meet your goals? I look forward to that 
explanation. Thank you. Mr. Chairman, I yield back.
    Mr. Rosendale. Thank you very much, representative. Ms. 
Riffel, separate from your FMBT project, VA has attempted two 
different supply chain modernization efforts over the past 4 
years. I understand that you need to integrate the iFAMS system 
with an inventory management system, and you still do not know 
what the inventory management system is going to be. First of 
all, how long have you been waiting for this decision and what 
problems has the uncertainty caused?
    Ms. Riffel. Thanks for that question. As I indicated, we 
have been continuously working with VHA. Even absent 
understanding what the future supply chain solution was, there 
was still valid work that we could do with VHA to move that 
particular implementation forward, which we continue to do. In 
terms of the inventory package, because we are going to be 
implementing with legacy, at least right now in the beginning, 
until enterprise supply chain is known, we will integrate with 
the generic inventory package, which is part of the Veterans 
Health Information Systems and Technology Architecture (VistA) 
application in order for the facilities to maintain their 
inventory levels. We do not want to do any disruption to what 
happens today.
    Mr. Rosendale. Do you anticipate, because of working with 
these other programs and the investment of time and energy and 
resources that you are using, that you are going to--once 
another decision is made--that you are going to have to go 
through all of the conversion work and everything again, to 
have this duplication of efforts when a final decision is made?
    Ms. Riffel. In terms of conversion, for us, it would be no. 
Certainly, supply chain will have to evaluate how they are 
going to do conversion activities. We would want to be in 
alignment where there is interdependencies on that data, and we 
would certainly work toward that with them once they understand 
exactly where they are going. We have accounted for 
understanding that once they get an enterprise solution and the 
integration is known that we will move to that at that point. 
We understand that, and we are, you know, going to continue and 
work that direction.
    Mr. Rosendale. Okay. Right on that same line, what 
capabilities does the interim state lack that are supposed to 
be in the final State, and what do you need in order to proceed 
to that final state?
    Ms. Riffel. Yes, so I can respond as it relates to the 
iFAMS solution. What we are doing is implementing the inherent 
Momentum Commercial Off-The-Shelf (COTS) functionality across 
the enterprise. There is two major components that are 
specifically supply chain driven that obviously iFAMS does not 
do. One is the catalogue ordering capability where they need to 
go in and determine what they are ordering out of the 
catalogue. The other is the inventory piece.
    The other components that IFCAP performs today, iFAMS will 
do. Again, we will work directly with, and we have commitment 
from supply chain on our legacy, you know, integrating with 
legacy. It is a slightly different group, but we will want to 
work in close coordination because obviously we are touching 
VHA. It could impact patient care, all of that. Very mindful of 
that.
    Mr. Rosendale. How long have you been waiting for the 
decision to find out exactly what you are going to be dealing 
with for this other system?
    Ms. Riffel. For us, particularly, and I do not want to 
speak for supply chain because I am not sure how long they have 
been working the effort, but for us directly, it is probably 
been, you know, almost close to 2 years. As I indicated, we 
continued to work with VHA in the absence of understanding what 
that would look like. I do not think that we have had like 
significant wasted time. We have continued to move that effort 
forward.
    Mr. Rosendale. Okay. Mr. McCune, is this a technical 
problem or a lack of management?
    Mr. McCune: Sir, I appreciate the question. I think I would 
defer to the supply chain program office. I am not sure we have 
got the right people here to answer that question today. I 
would be happy to take that for the record.
    Mr. Rosendale. Please do. Please do. You cannot address a 
problem if you do not know what it is and who is responsible 
for, you know, bringing the answer forward. Please have them 
check in.
    Mr. Dahl, your office has written many reports about 
problems with VA's inventory management and the current 
inventory system called Generic Inventory Package (GIP). How 
much improvement will adding iFAMS make? What else does VA need 
to truly improve the inventory management?
    Mr. Dahl. I think an updated system is obviously overdue. 
GIP is an old system as well. You know, again, though, people 
are involved. Part of the issues we see when we go out is that, 
you know, people are not accurately tracking what they take or 
what they put into inventory. We go to facilities where they 
are not using, you know, barcodes. They are ordering based on 
walking rather than, you know, relying on automated software 
that should trigger ordering.
    Mr. Rosendale. Some of this stuff is just personal 
responsibility. People not taking the initiative to do what 
they are supposed to do, to follow process.
    Mr. Dahl. I would say that that is certainly part of it. 
Part of it could be the frustration with the system.
    Mr. Rosendale. Okay. Well, that is the purpose.
    Mr. Dahl. Right.
    Mr. Rosendale. Right. Right, right, okay. Thank you very 
much. Representative Cherfilus-McCormick.
    Ms. Cherfilus-McCormick. Thank you, Mr. Chairman. Mr. Dahl, 
what are the risks at VA for not standardizing their financial 
management practices and implementing this system?
    Mr. Dahl. Well, I talked a little bit about, you know, 
continuing material weaknesses would be likely. They would 
still be doing the manual workarounds for certain things. I 
would say bigger picture, you have to look at it that VA 
recognized the need to replace FMS more than 2 decades ago. 
They were not successful with Core Financial and Logistics 
System (CoreFLS) or Financial and Logistics Integrated 
Technology Enterprise (FLITE). They are now working with iFAMS. 
I would say that, you know, if this system is not successful, 
how much longer will it take to get a modern system? How much 
effort? How much financial resource? I am very hopeful that 
iFAMS is going to be successful, because obviously we are 
dealing with a system that is 40 years old, and it is not 
meeting the needs. It really is, I think, vital that VA does 
all they can to get this system online.
    Ms. Cherfilus-McCormick. Now, I have a broader question 
which is in the same vein. What would it take for VA to change 
their culture around IT modernization? We have seen the issue 
from your report with compliance, with cybersecurity, best 
practices. I am assuming there is an even larger issue that 
have contributed to the lack of success for all IT 
modernization programs.
    Mr. Dahl. I think that VA is in a challenging situation 
right now, needing to replace these number of major systems all 
at once. I think it is an opportunity right now for improved 
communication and coordination with the various aspects of the 
Department that need to be involved in these.
    I think that there is opportunities or a need for people to 
engage the stakeholders, adequately define requirements, come 
up with reliable and reasonable project schedules, cost 
estimates. I think it is important that they do systems 
testing, that user feedback stays at the forefront, that they 
consider the concerns of the users. That they take the lessons 
learned from whatever system they are currently working or any 
other system that they have implemented in the recent past, 
take those lessons learned and go forward with that.
    Ms. Cherfilus-McCormick. Mr. McCune, could you please 
answer the same question? What would it take to change the 
culture?
    Mr. McCune. Thank you for the question. I think what we are 
finding is that all these programs are not the same, right. 
Some of them, FMBT in particular, has the advantage of an early 
start, and we are definitely looking at best practices from 
FMBT and applying those to the other products. I am excited 
about what we are seeing on FMBT, the success to date. 
Certainly, that early coordination, particularly that business 
process reengineering that happens early to make sure we have 
got consistency and standardization on the business processes, 
the incremental releases, the wave strategy, which allows you 
to do multiple things in parallel. Those are all best practices 
that we are seeing on FMBT, and we are looking at applying 
those elsewhere as well.
    Ms. Cherfilus-McCormick. How could Congress assist and 
support you in changing that culture?
    Mr. McCune. I think Congress is supporting us in that, and 
we certainly welcome your ongoing support.
    Ms. Cherfilus-McCormick. Thank you so much. Mr. Chairman, I 
yield back.
    Mr. Rosendale. Representative Self.
    Mr. Self. Thank you, Mr. Chairman. I am not going to be-
labor this, but my questions, I will turn to the Fiscal Year 
2022 audit findings. There are 10 findings here of the previous 
year's findings. Of the 10, three are modified repeat material 
weaknesses. These are financial audits. Two are significant 
deficiencies. Five are noncompliance. Those are the internal 
audits, I do believe. Mr. Dahl, would you like to comment on 
these 10?
    Mr. Dahl. VA has a number of challenges. We have talked 
quite a bit today about the financial management and reporting 
systems. That is a material weakness. It is not likely to go 
away without upgrading and getting a modern system online. We 
are likely years away from that. Other material weaknesses 
revolve around information technology security, and over at 
VBA, the need to work on the estimates for future liabilities. 
Those are the ones that the auditors are most concerned with, 
the material weaknesses. You are right, we find the same or 
almost the same thing year after year.
    Mr. Self. I think that is my point. How can you assure us 
that this time it is going to be different? The Chicago Cubs 
did that for 50 years.
    Mr. Dahl. Yes, my Red Sox did it for longer, unfortunately. 
You know, I wish I had a crystal ball and could say that this 
is going to solve all of VA's problems, but it is not. This is 
just one piece. It is a significant piece. It is one piece of 
VA's solution toward having an easier time of getting a clean 
audit opinion.
    Mr. Self. Thank you. Mr. Chairman, I yield back.
    Mr. Rosendale. Thank you, representative. I have just one 
more question, Ms. Riffel. According to your schedule, the 
iFAMS system will not be implemented in the majority of the 
Veterans Health Administration for another 4 years. It will not 
be implemented in the Veterans Benefits Administration 
Disability Compensation Service, which spends more than half of 
the Department's entire budget, until 2029. When do you 
consider the project to have reached critical mass and 
demonstrated success?
    Ms. Riffel. Yes, thanks for that question. One of the 
things I would like to point out about Veterans Benefits 
Administration is that although we still have loan guaranty, 
Compensation and Pension (C&P), and education, and insurance 
left to do, we do have approximately 70 percent of their 
expected users in the system right now. Most of the work with 
these mission critical programs is surrounding interface work. 
They have about 100 users for each one of those programs that 
will come on to support those programs. I just want to point 
out for VBA, we do have a large percentage of those users in 
the system.
    For VHA, as I mentioned earlier, we are in the process now 
of laying out what their schedule will actually look like given 
the direction with supply chain. I do believe that, you know, 
once we get a couple of pilots, get lessons learned, make any 
modifications we need to, we will look for opportunities in the 
future to accelerate that. I would say, and I do not want to 
speak for Charles, but I think for VBA, as we rebaseline the 
VBA schedule, we will certainly look to work with VBA to try to 
accelerate the remainder of that work.
    Mr. Rosendale. Okay. Any more questions?
    Ms. Cherfilus-McCormick. No.
    Mr. Self. No.
    Mr. Rosendale. Representative Self. Okay. I would like to 
thank all the witnesses for their testimony today, and the 
panel is excused from the witness table. With that, I will 
yield to Ranking Member Cherfilus-McCormick for your closing 
statement.
    Ms. Cherfilus-McCormick. Thank you, Chairman Rosendale. I 
appreciate the testimony and answers from our witnesses this 
afternoon. I feel there is consensus on what we need to do to 
move forward and be successful. I truly do not want to see this 
program suffer the same fate as other modernization programs. I 
feel that the management in charge is very capable of 
succeeding, but I want to ensure she is not burdened by the 
lack of success of other failed programs. Employees, veterans, 
and Members of Congress have had enough with the current lack 
of success, and I look forward to working together to ensure we 
have more positive outcomes in the future. Thank you, Mr. 
Chairman. I yield back.
    Mr. Rosendale. Thank you, Ranking Member Cherfilus-
McCormick. I want to thank the witnesses for joining us this 
afternoon. Congress has always prioritized veterans' healthcare 
and benefits, and the size of the VA budget, $325 billion, 
reflects that. It is inexcusable and downright irresponsible 
for the Department to be managing that much money with an 
accounting system that is barely functioning.
    The FMBT program has to succeed, and despite some 
significant bumps in the road, I do believe that it can. We 
need to see the iFAMS system rolled out to the key offices that 
handle the majority of the VA budget. This committee will be 
watching if the improvements that have been promised are 
actually delivered. We will be monitoring whether this project 
is able to hit its timelines and recover its delays. I am 
committed to keeping it moving forward, not stumbling 
repeatedly like the EHRM system. No more projects can be 
permitted to fail again and again yet continue to receive 
funding from the taxpayers. That is unacceptable.
    With that, I ask unanimous consent that all members have 
five legislative days to revise and extend their remarks and 
include extraneous material. With no objection, so ordered. 
This hearing is adjourned.
    [Whereupon, at 4:18 p.m., the subcommittee was adjourned.]

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                         A  P  P  E  N  D  I  X

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                    Prepared Statement of Witnesses

                              ----------                              


                  Prepared Statement of Teresa Riffel

    Good afternoon, Chairman Rosendale, Ranking Member Cherfilus-
McCormick, and Members of the Subcommittee. Thank you for the 
opportunity to testify today in support of the Department of Veterans 
Affairs' Financial Management Business Transformation (FMBT) program 
and its implementation of the Integrated Financial and Acquisition 
Management System (iFAMS). I am accompanied by Daniel McCune, Deputy 
Chief Information Officer for Software Product Management and Charles 
Tapp, Chief Financial Officer of the Veterans Benefits Administration.
    VA cannot continue to rely on its legacy financial management 
system due to the enormous risk it presents to VA operations. It is 
becoming increasingly difficult to support the antiquated application 
from a technical and functional ability standpoint, and VA cannot 
correct new audit findings. In addition, our legacy financial system is 
not compliant with today's internal control standards. As a real-world 
example of the frailty of our current financial system, while it was 
down for year-end annual processing last October, unforeseen problems 
arose that very nearly kept us from bringing the system back up, which 
would have been catastrophic. VA has overcome cultural, technical, and 
operational challenges that have been building for over 30 years, and 
our embedded Change Management efforts have helped ease the transition 
to the iFAMS solution.
    I am proud to report that iFAMS is no longer a proof of concept, 
and it is successfully replacing VA's antiquated, 1980's-era financial 
management system. It has been successfully up and running at VA for 
almost three years. VA completed six successful deployments of iFAMS, 
encompassing 20 offices and 4,700 users across the enterprise. That 
includes the entirety of the National Cemetery Administration (NCA), a 
portion of the Veterans Benefits Administration (VBA), and several 
major staff offices, including Office of Information and Technology and 
Office of Inspector General. iFAMS users have collectively processed 
over 3.5 million transactions, representing almost $10 billion in 
Treasury disbursements. iFAMS is stable and achieving over 99.9 percent 
uptime. On June 12, 2023, VA went live with its largest deployment to 
date, increasing the current user base by 60 percent. It was also the 
first time VA went live simultaneously with both the finance and 
acquisition components of iFAMS--which demonstrates iFAMS is a viable 
solution capable of becoming the next generation financial and 
acquisition solution for VA.
    It's important to understand that iFAMS is not just a new core 
accounting and acquisitions system. It is crucial to transforming VA's 
business processes and capabilities both so we can meet our goals and 
objectives in compliance with financial management legislation and 
continue to successfully execute our mission to provide Veterans with 
the health care and benefits they have earned and deserve. With so much 
at stake, both in terms of taxpayer dollars and the Department's 
ability to serve Veterans, it is vital that VA accurately track and 
report how funds are used. Fortunately, iFAMS significantly improves 
funds tracking capabilities, which--among many other benefits--will 
help ensure proper tracking of PACT Act expenditures.
    Through the use of iFAMS, VA is increasing the transparency, 
accuracy, timeliness, and reliability of financial information. VA is 
gaining enhanced planning, analysis, and decision-making capabilities 
because of improved data integrity, reporting functionality, and 
business intelligence. VA is demonstrating these achievements through a 
range of metrics and associated targets based on industry best 
practices.
    iFAMS and process changes are part of VA's strategy to resolve 
long-standing financial material weaknesses and strengthen internal 
controls. For example, and in contrast to our current system which 
cannot capture transaction approvals, iFAMS routes documents to 
approving officials and allows supporting documentation to be attached 
directly to the transaction. Additionally, and unlike our current 
system, iFAMS requires additional levels of approvals for high-dollar 
transactions. iFAMS also eliminates the need for an external tool to 
adjust entries for financial reporting. Perhaps most importantly, iFAMS 
complies with reporting requirements from the Office of Management and 
Budget and the Department of the Treasury to capture various account 
attributes and conform to the U.S. Standard General Ledger. VA's 
current system is unable to meet those requirements, which has led to 
extensive and inefficient manual workarounds, and iFAMS will remediate 
all of these. Achieving these improvements is well within our grasp, 
and we've proven iFAMS is a viable solution.
    iFAMS does not operate in a vacuum. In fact, its connectivity to 
other key systems across the enterprise is what will make it powerful 
in remediating our long-standing financial weaknesses. We have numerous 
interdependencies with key feeder systems, many of which are also 
outdated. Establishing connectivity to these systems and verifying the 
accuracy of the data is both necessary and time-consuming. Accordingly, 
FMBT has a support contract specifically dedicated to developing iFAMS 
interfaces and converting data from legacy systems.
    Our success has been and continues to be built on partnerships, 
mutual respect, and two-way collaboration with our users. Accordingly, 
iFAMS established a dedicated Chief Experience Officer to coordinate 
user interactions and change management activities. Through End User 
Validation and User Acceptance Testing sessions, we work with users to 
identify requirement gaps, test common scenarios, and execute end-to-
end process flows. This due diligence establishes a layer of confidence 
that the system is configured to meet our end users' business needs.
    To keep the users informed, we have a dedicated, experienced 
communications team who produces a wide range of frequent newsletters, 
email blasts, informational summaries, training reminders, and websites 
targeted and tailored to each organization and type of end user. This 
communications engagement starts as soon as an implementation wave 
begins and lasts through go-live and beyond. We also produce live and 
pre-recorded webinars, process reviews, and system reviews to give 
future end users a foundation for subsequent training activities.
    In addition to the system training before go-live and the 
sustainment training after go-live, users must complete a financial 
core competency curriculum which assigns specific courses based on 
their role in iFAMS. Prior to go-live, authorized users have access to 
sandbox environments for risk-free practice and experimentation in the 
system. Once user preparation leading up to go-live is complete, the 
iFAMS Service Desk provides support immediately following each go-live. 
This support continues uninterrupted until the customer agrees that the 
system is functioning properly, and users are proficient in the system.
    FMBT's change management practices place a heavy emphasis on 
continuous improvement. Using customer feedback, our own observations, 
audit findings, and industry best practices, we establish lessons 
learned during each wave and incorporate those lessons into subsequent 
wave deployments. We incorporate user feedback into the periodic system 
enhancements we deliver to improve the end user experience. For 
example, following our first go-live, we heard from the customer that 
certain forms and screens in iFAMS had unnecessary fields for some of 
their users, which caused a frustrating amount of effort to accomplish 
their tasks. We took that feedback to heart and developed a simplified 
interface for those users, which we call iFAMS EZ. This simplified 
interface was so well received that we developed two additional iFAMS 
EZ interfaces for other user groups. This exercise gave our team 
valuable experience with a human-centered design approach, which we are 
applying to future deployments.
    Since the program's inception in 2016, iFAMS has implemented an 
Independent Verification and Validation capability into our operating 
framework to provide an objective assessment that the system is 
delivering on defined requirements and performance standards. We are 
looking forward to a major upgrade of the iFAMS software in December 
2023, which will bring a range of technical improvements and usability 
enhancements to the system.
    We are also well into the VBA Loan Guaranty implementation, which 
handles a particularly high volume of financial transactions. In 2021, 
VBA guaranteed over 1.4 million loans, and the estimated loan amounts 
for 2023 total to over $314 million.
    Last month, VA held a three-day in-person working session with VBA 
leadership and subject matter experts to revalidate system requirements 
and review the schedule. We are currently evaluating the outcomes of 
that session and will deliver an updated schedule next month for the 
VBA Loan Guaranty implementation.
    Our implementation strategy for VA's largest administration, the 
Veterans Health Administration (VHA), is evolving. As the Department 
works to modernize its Supply Chain Program, FMBT will initially 
integrate with legacy supply chain systems, then once it is available, 
the future enterprise supply chain solution.
    While FMBT works hard to meet defined milestones in our project 
schedule, we recognize the need to be flexible. Adapting to new 
information and circumstances is critical to our success, and we have 
demonstrated this flexibility by continuing to move forward while 
making improvements. This is made possible through our Scaled Agile 
approach that supports multiple concurrent implementations and an 
iterative delivery of system functionality. Because Agile requires 
constant customer engagement and frequent testing, we can identify 
issues much earlier than in traditional program management approaches. 
This process of continuous improvement helps reduces the amount of 
future rework and allows the program to pivot as needed.
    FMBT continues to stay on budget despite changes. Our successes 
would not be possible without the ongoing support of Congress, and we 
appreciate the opportunity today to discuss this important initiative. 
We will continue to work judiciously, with Veterans foremost in mind, 
to modernize VA's financial and acquisition management system, and 
provide you with updates as we make further progress. FMBT FY 2022 
program costs were 7.8 percent under projections while costs from 
inception through FY 2022 are 8.75 percent over projections. The 
general industry standard for project management considers variances 
over 10 percent to be significant--and we are well within that range.
    Separate from our operating budget is FMBT's program life cycle 
cost estimate. Per the FY 2022 life cycle cost estimate, the total 
program cost estimate is now $7.46 billion compared to the previous 
year's estimate of $3.24 billion. This difference is due to expanding 
the cost estimate to encompass all 37 years of the projected useful 
life of iFAMS, which was done in accordance with the latest GAO Cost 
Estimating and Assessment Guide. The life cycle cost estimate now 
extends through the end of FY 2047.
    In addition to providing their helpful cost estimating and 
scheduling guides, GAO has conducted two audits of the FMBT program, 
each lasting about 8 months in duration and involving dozens of 
document requests, briefings, and personnel interviews. Of the eight 
recommendations in those two reports, only one remains open, and it 
will be closed this December following completion of the Independent 
Cost Estimate.
    FMBT also completed a 21-month Inspector General (IG) audit of our 
NCA deployment. Of the five recommendations in that report, we have 
submitted three for closure and are addressing the remainder. Two 
additional IG audits of iFAMS acquisition functionality and iFAMS 
training are in progress. We are in compliance with the initial 
reporting requirements established by the Department of Veterans 
Affairs Information Technology Reform Act of 2022, which was part of 
the Cleland-Dole Act in the recent appropriations act. As variances 
arise, we will provide notification as the Act requires. Although we 
are encouraged by our success to date, we are keenly focused on the 
difficult work that lies ahead and are steadfast in our commitment to 
see this initiative through its successful conclusion.
    Chairman Rosendale, Ranking Member Cherfilus-McCormick, and 
subcommittee members, this concludes my opening statement. I would be 
happy to answer any questions.
                                 ______
                                 

                   Prepared Statement of Sidney Getz

INTRODUCTION

    Chairman Rosendale, Ranking Member Cherfilus-McCormick, and other 
distinguished members of the Subcommittee on Technology Modernization, 
my name is Sidney L. Getz. I am a Senior Vice President at CGI Federal 
Inc. (``CGI Federal''). CGI Federal, a wholly owned U.S. operating 
subsidiary of CGI Inc. (``CGI''),\1\ is dedicated to partnering with 
federal agencies to provide solutions for defense, civilian, 
healthcare, justice, intelligence, and international affairs missions. 
For the last 5 years, I have served as the Project Manager on CGI 
Federal's contract with the Department of Veterans' Affairs (the 
``VA'') for the Financial Management Business Transformation (``FMBT'') 
Program. On behalf of CGI Federal's 7,100 dedicated employees providing 
services to over 100 departments and agencies across the federal 
government, I am pleased to submit this written testimony to the 
Subcommittee on the status of the VA's FMBT Program.
---------------------------------------------------------------------------
    \1\ Founded in 1976, CGI is among the largest independent 
information technology (``IT'') and business consulting services firms 
in the world. With 90,250 consultants and professionals across the 
globe, CGI delivers an end-to-end portfolio of capabilities from 
strategic IT and business consulting to systems integration, managed IT 
and business process services, and intellectual property solutions. CGI 
works with clients through a local relationship model complemented by a 
global delivery network that helps clients digitally transform their 
organizations and accelerate results.

---------------------------------------------------------------------------
FMBT PROGRAM OVERVIEW

    In 2016, the VA established the FMBT Program to modernize its 
legacy core Financial Management System (``FMS'') in accordance with 
the Office of Management and Budget (``OMB'') Memorandum M-13-08, 
``Improving Financial Systems through Shared Services,''dated March 25, 
2013. This modernization initiative seeks to enable the VA to, among 
other things: (1) produce enhanced performance information to improve 
strategic and daily decision-making; (2) provide improved data 
analysis, data management, automated data reconciliation, and automated 
consolidated financial statements; (3) meet applicable federal 
accounting regulations; (4) maintain clean audit opinions; and (5) 
accommodate new regulatory requirements to avoid material audit 
weaknesses and/or significant deficiencies.
    Since 2016, CGI Federal has been under contract to support the VA's 
FMS modernization effort. The primary objective of CGI Federal's 10-
year FMBT contract with the VA is to deploy a new, OMB-approved 
financial management system at the VA using CGI Federal's Enterprise 
Resource Planning (``ERP'') system. CGI Federal's ERP system, known as 
Momentum Financials and Acquisitions (``Momentum''), already is 
operational at many federal government agencies, including four cabinet 
agencies.
    To accomplish this complex modernization effort, the VA is 
executing the FMBT Program through an incremental deployment approach 
by migrating its current financial management and acquisition 
environment to the new Integrated Financial and Acquisition Management 
System (``iFAMS'') using CGI Federal's Momentum cloud-based solution 
and an Agile implementation methodology. Each deployment, referred to 
as a ``wave,'' delivers capabilities to a subset of the VA 
organization. The work in each wave includes: defining the VA 
organization(s) covered; clarifying the Treasury symbols involved; 
reviewing the business processes and appropriately configuring iFAMS; 
testing; business intelligence; conversion of data from legacy systems; 
interfaces; organizational change management, communications, and 
training; and cutover planning.
    To date, the FMBT team has completed six waves, going-live with: 
(1) finance users at the National Cemetery Administration (``NCA'') in 
November 2020; (2) finance users at the Veterans Benefits 
Administration (``VBA'') for General Operating Expense in February 2021 
(Phase 1); (3) finance users at the VBA for General Operating Expense 
in May 2021 (Phase 2); (4) acquisition users at the NCA in April 2022; 
(5) finance users at the Office of Revolving Funds, the Office of 
Enterprise Asset Management, the Board of Veterans Appeals, and the 
General Administration in October 2022; and (6) finance users at the 
Office of Information and Technology (``OIT'') and finance and 
acquisition users at the Office of Construction and Facilities 
Management (``CFM'') and the Office of Inspector General (``OIG''), all 
in June 2023. In addition, the FMBT team currently has two additional 
waves in progress at the VBA Loan Guaranty Service and the Veterans' 
Health Administration (``VHA'').

KEY BENEFITS REALIZED

    While there are still milestones and challenges ahead, the FMBT 
Program is delivering on its promise to modernize the VA's FMS. For 
example, there are currently 4,700 live users in 20 different VA 
offices in iFAMS. These users have processed over 3.5 million iFAMS 
transactions, use iFAMS to view approximately 8,500 business 
intelligence reports every week, and have disbursed over 8.5 billion 
dollars through the U.S. Treasury.

    To date, the iFAMS implementation has delivered the following 
benefits to the VA:

      Improved strategic and daily decision-making:

        o iFAMS data is more timely and accurate. By eliminating legacy 
        systems, more transactions are processed in iFAMS to update 
        budgets in real time. Unlike FMS, the iFAMS general ledger is 
        updated in real time as opposed to on a nightly batch basis. 
        Finally, iFAMS also interacts directly with federal-wide 
        solutions such as Treasury's G-invoicing and Collections 
        Information Repository (``CIR''), HHS' Payments Management 
        System for Grants, and the U.S. Bank's purchase and fleet 
        cards.

        o New Account Code Structure (ACS). The new ACS provides 
        standardization across the VA and complies with federal 
        policies and guidance, including the Treasury's U.S. Standard 
        Standard General Ledger (``USSGL'') and OMB Circular A-11, 
        Preparation, Submission, and Execution of the Budget, at 
        Section 83, Object Classification (Max Schedule O), which 
        classifies IT obligations among various object classes. As a 
        result, iFAMS has a federally compliant, enterprise-wide 
        accounting classification structure that includes a uniform 
        chart of accounts, object classes, fund codes, programs, and 
        projects that will drive standardization across the VA, improve 
        data integrity and the accuracy of financial reporting, and 
        greatly improve auditability, while simultaneously being 
        flexible enough to accommodate the unique business needs of the 
        VA's various lines of business.

        o Accessing the data is easier. iFAMS reports provide quick 
        access to data refreshed on an hourly basis, replacing legacy 
        reports refreshed on a daily basis. For example the iFAMS NCA 
        ``blotter'' report, which helps NCA cemeteries review their 
        budgets and spending, is refreshed every hour. The legacy 
        process for developing the same report was a time-consuming, 
        resource intensive MS Excel spreadsheet-based process.

        o iFAMS data analysis tools are flexible. iFAMS allows users to 
        quickly filter, slice, and dice report data, reducing the need 
        for ad hoc report requests and data calls. In the legacy 
        reporting solution, users must either re-run the report with 
        different parameters or download large amounts of data into MS 
        Excel spreadsheets and create their own reports.

        o iFAMS data can be consolidated to all hierarchical levels of 
        the enterprise. Users with appropriate permissions can run the 
        same reports to view data at the enterprise level, the 
        administration level, or at lower levels of an administration. 
        Because data is standardized across the enterprise, iFAMS 
        provides VA management with enterprise-wide visibility into 
        financial and acquisitions data and the ability to ``roll up'' 
        or ``drill down'' into specific data as needed.

      Process Automation:

        o iFAMS produces the Government-wide Treasury Account Symbol 
        Adjusted Trial Balance System (``GTAS'') reports directly out 
        of the core financial system rather than an external system, 
        speeding up the process and making it less prone to manual 
        error.

        o Contract writing is more integrated with financials. With 
        commitment accounting now available in iFAMS, funds are set-
        aside (committed against the budget) for future awards and 
        those committed funds are then promptly and accurately 
        obligated in iFAMS in real time upon contract award. With 
        iFAMS, Contract Officers now have visibility into the contract 
        award itself, as well as all financial transactions against the 
        awarded contract. This capability also supports acquisition 
        planning for contract extensions and renewals as well as 
        contract closeout by reducing outstanding undelivered orders 
        (``UDOs'').

        o Payments from the Invoice Payment Processing System 
        (``IPPS'') are processed in near real time in iFAMS, 
        identifying errors more quickly than batch processes and 
        resulting in faster payments to vendors.

        o New, non-contract vendors are updated automatically in iFAMS 
        from the vendor portal.

        o iFAMS has a more robust and auditable workflow process. For 
        example, iFAMS: permits users to attach supporting 
        documentation; allows for multiple levels of approval depending 
        on dollar amount; and notifies users via email and dashboards 
        if they need to take action such as transaction approvals.

      Meeting applicable federal accounting regulations:

        o Critically, iFAMS brings the VA into compliance with the 
        following federal accounting standards and best practices:

                  OMB Circular A-11, Section 83 to Level 3 for 
                Object Classes;

                  USSGL-compliant General Ledger (``GL'') 
                Accounts and posting models aligned to Treasury Account 
                Transactions and capture of required reporting 
                attributes for federal reporting;

                  Internal Controls and VA policies are 
                integrated into iFAMS businesses processes;

                  iFAMS captures data at the transaction level 
                to support internal and federal reporting standards;

                  Reduced use of Journal Vouchers due to 
                compliance with the USSGL GL Accounts and associated 
                attributes (e.g., federal and non-federal, trading 
                partner, etc.); and

                  Compliance with Reimbursable Authority 
                regulations.

      Maintaining clean audits:

        o The VA has maintained a clean audit opinion since the first 
        iFAMS go-live in November 2020.

      Accommodating new regulatory requirements:

        o CGI Federal releases periodic Momentum software updates to 
        allow federal agencies to keep current with new regulatory 
        requirements. The VA deploys regular iFAMS upgrades and plans 
        to implement the next upgrade in December 2023. A recent 
        example is the March 26, 2022 iFAMS upgrade to version 7.9 of 
        Momentum, which included new functionality to comply with the 
        Treasury Department's October 2022 G-Invoicing implementation 
        deadline for new orders.

KEY PERFORMANCE FACTORS

    On complex programs like FMBT, success often depends on diligent 
stakeholder focus on key performance factors to keep things on track. 
Several key factors have contributed to the progress achieved by the 
FMBT Program to date, including:

      Collaboration and Transparency:

    The FMBT team, led by Deputy Assistant Secretary (``DAS'') Terry 
Riffel, and CGI Federal have, from the very beginning, operated with a 
high degree of collaboration, transparency, and sound governance. This 
same collaborative approach extends to other key FMBT ``partners'' such 
as: the Office of Acquisitions and Logistics (``OAL''); the Financial 
Services Center (``FSC''); the Office of Management (``OM''); the 
Office of Information and Technology (``OIT''); program advisors and 
subject matter experts from across VA Administrations and Staff 
Offices; and other FMBT contractors responsible for program support, 
conversion and interface development, and independent verification and 
validation (``IV&V''). This culture of collaboration and transparency 
lowers program risk by encouraging an environment where all partners 
speak freely with each other, collectively identify and share risks and 
issues early, and then work as an integrated team to resolve issues and 
mitigate risks. As DAS Terry Riffel often says, ``We are one team.''

      Enterprise-Wide Standardization:

    One of the first activities conducted by the FMBT Program, in 
collaboration with the VA Administrations and Staff Offices, was to 
identify the financial and acquisition business processes and financial 
and acquisition data that could be standardized throughout the VA 
enterprise. These processes and data were then configured in iFAMS (the 
``Enterprise Configuration'') and now act as a starting point for the 
configuration of the system for each wave of users and functionality. 
Standardized processes encourage the creation of a reliable and 
accurate set of process descriptions, streamline training, reduce 
errors, and simplify customer support. Data standardization facilitates 
the ability to view consistently defined and edited data at various 
levels of the VA organization, including Staff Office and Division-
level, Administration-level, and Enterprise-wide reporting. Data 
standardization also supports compliance with federal financial and 
acquisition reporting. While business process and data standardization 
are important program goals, the FMBT team recognizes that the many 
different lines of business at the VA require unique iFAMS 
configurations to meet their specific business needs. The iFAMS 
configuration model anticipates this requirement. In fact, an early 
step in each wave is to identify and incorporate these unique business 
processes, while still maintaining the iFAMS data standards.

      Incremental Approach:

        Implementing iFAMS across the VA enterprise is a complex 
        endeavor. To reduce program risk, the VA has wisely chosen a 
        SAFe Agile-based implementation philosophy to execute the FMBT 
        Program. At a macro level, the enterprise user base is divided 
        into logical groups and then each user group is added to iFAMS 
        incrementally in a ``wave.'' As mentioned earlier, the FMBT 
        team has completed six waves successfully. At a micro-level 
        within each wave, the FMBT team also proceeds iteratively in 3-
        week ``sprints,'' consulting with user representatives 
        throughout each sprint. This incremental approach reduces 
        program risk by allowing future users to review work in 
        progress and provide early feedback that allows the FMBT team 
        to adapt quickly. The net effect of this incremental approach 
        is to mitigate and reduce costs by identifying and resolving 
        issues early while associated impacts are manageable.

      Continuous Improvement:

        Another benefit of the Program's incremental delivery approach 
        is that it allows the FMBT team to capture lessons-learned and 
        implement those lessons in the next sprint. The FMBT team uses 
        this approach in the areas of change management, training, 
        iFAMS user configuration, Operations & Maintenance, and even 
        wave management. While there are always improvements and 
        enhancements borne from user experience in the production 
        environment on complex programs like FMBT, CGI Federal believes 
        that the FMBT team is well equipped to address those challenges 
        as they arise. An example of such an improvement is the 
        creation of the so-called ``EZ'' web pages for occasional 
        users, which used a human-centered design approach to reduce 
        the number of required data elements to improve the user 
        experience.
        The FMBT team also recently launched a continuous improvement 
        initiative. The focus of this initiative is to work with 
        already-live iFAMS users to identify, prioritize, and resolve 
        any areas of concern using a variety of approaches including 
        business process reengineering, additional training, iFAMS 
        configuration changes, automation, Artificial Intelligence and 
        Machine Learning, as well as potential changes to CGI Federal's 
        baseline Momentum software.
        Finally, CGI Federal routinely seeks input from the Momentum 
        user community for planning improvements and future software 
        releases. A VA working group already is working with CGI 
        Federal's Momentum product development team to define new 
        contract-writing features that will be included in future 
        Momentum software releases.

      Change Management:

        iFAMS represents a significant change for users who are 
        accustomed to using legacy systems and processes that have been 
        in place at the VA for over 30 years. The FMBT team employs 
        industry best practices for change management to engage and 
        train users and promote user adoption. The FMBT team 
        understands the need to capture lessons-learned from each wave 
        deployment and incorporate those lessons into the change 
        management and training approaches for the next wave 
        deployment. By following this process, the FMBT team expects to 
        continuously improve user adoption and minimize the stress of 
        change on the VA user community. For example, a lesson learned 
        from prior waves is not to wait until the latter part of the 
        wave to match users with their iFAMS roles. In the VHA wave now 
        under way, the FMBT team plans to identify user roles early in 
        the process, which is expected to facilitate improved user 
        communications throughout the wave.

CONCLUSION

    CGI Federal appreciates the urgency of fully implementing iFAMS as 
quickly as is feasible and stands ready to work with its FMBT partners 
to do just that. CGI Federal is extremely proud to support the FMBT 
Program in helping the VA improve its financial and acquisition 
processes. While the work is challenging, every CGI Federal member on 
the FMBT team is dedicated to the mission and takes great pride in 
serving our Nation's Veterans.
                                 ______
                                 

                    Prepared Statement of Nick Dahl

    Chairman Rosendale, Ranking Member Cherfilus-McCormick, and 
Subcommittee Members, thank you for the opportunity to discuss the 
Office of Inspector General's (OIG) oversight of VA's work to modernize 
its finance and accounting systems, and to address longstanding 
financial management challenges.
    VA has faced significant challenges with improving its financial 
processes and systems--some of which result from deficiencies in 
information technology and lack of controls, while others are due to 
weaknesses in governance or the clarity of roles and responsibilities. 
More effective financial management is key to VA's ability to better 
plan, direct, monitor, and control its resources. Advances could also 
enhance efforts to safeguard its assets and the timely payment of its 
obligations. Reliable and accurate financial information would help VA 
and Congress identify links between resources and results, and to 
understand and improve the value gained from appropriated funds.
    As detailed below, since 2015, the audit of VA's financial 
statements has reported a material weakness due to problematic 
financial management systems.\1\ VA's legacy core financial management 
and general ledger system, the Financial Management System (FMS), has 
limited functionality to meet VA's current needs. After failed attempts 
to replace FMS in 2004 and 2010, VA established the Financial 
Management Business Transformation (FMBT) program. FMBT's mission has 
been to increase the transparency, accuracy, timeliness, and 
reliability of financial information across VA, ultimately resulting in 
improved care and services for veterans and greater accountability to 
taxpayers.\2\ Central to the FMBT program is the multiyear deployment 
of the Integrated Financial and Acquisition Management System (iFAMS) 
that began with the National Cemetery Administration (NCA) and 
continued with the Veterans Benefits Administration's (VBA) General 
Operating Expense Fund.
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    \1\ The audit reports of VA's annual financial statements can be 
found on the OIG's reports webpage at www.va.gov/oig/apps/info/
OversightReports.aspx.
    \2\ This modernization effort also affects in various ways VA's 
work to modernize its supply chain infrastructure and information 
technology systems, including the electronic health record 
modernization program. The OIG has issued numerous reports and 
testified at congressional hearings on these endeavors (see the OIG 
website at www.va.gov/oig/).
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    Prior modernization efforts failed, in part, because of poor 
planning and deficient execution of new information technology (IT) 
systems and challenges with transitioning from legacy systems. 
Decentralized oversight, unrealistic timelines, inadequate engagement 
of all stakeholders and end users, and minimal testing for some systems 
have plagued IT projects. The resulting delays, changes in direction 
and vendors, and user resistance all carry steep costs.
    This testimony highlights (1) relevant financial management 
findings from the OIG's audit of VA's financial statements for fiscal 
years 2021 and 2022, (2) recent examples of how the lack of controls 
affected VA's ability to track COVID-19 supplemental appropriated 
funds, and (3) initial findings and recommendations from OIG's 
oversight of the iFAMS deployment. Taken together, these issues 
underscore the need for VA to address previously identified problems to 
successfully modernize its financial management system during this most 
recent effort.

FINANCIAL SYSTEMS AND REPORTING REMAIN A MATERIAL WEAKNESS IN THE AUDIT 
OF VA'S FINANCIAL STATEMENTS

    The Chief Financial Officers Act of 1990, as amended, requires the 
OIG to conduct an audit of VA's consolidated financial statements. This 
work helps ensure accountability for taxpayer-funded resources. Since 
2000, the OIG has contracted with an independent public accounting firm 
to conduct the detailed and time-intensive audit.
    VA's consolidated financial statements are published in its 
mandated annual agency financial report.\3\ These statements summarize 
VA's financial results, financial condition, and the status of 
budgetary resources. While VA has received an unmodified or ``clean'' 
opinion on its consolidated financial statements from the contract 
auditor, VA has continuously faced challenges in achieving those 
results. The contract auditor has regularly identified and reported on 
these ``material weaknesses'' and ``significant deficiencies.'' \4\
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    \3\  VA's consolidated financial statements can be found on their 
website at Agency Financial Report - U.S. Department of Veterans 
Affairs.
    \4\ A ``material weakness'' is a deficiency, or a combination of 
deficiencies, in internal controls related to 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 individuals 
charged with governance.
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    In the audit for fiscal years 2021 and 2022, the auditor found 
three material weaknesses, all repeated in some manner since 2016, and 
two significant deficiencies.\5\ The first material weakness 
highlighted the need for further improvement in VBA's processes for 
producing critical accounting estimates for veteran benefit liabilities 
that are reported in the financial statements. The second material 
weakness, most pertinent to this testimony, focuses on the limited 
functionality of FMS to meet VA's financial management and reporting 
needs. The third material weakness identifies IT security control 
weaknesses in configuration management, access controls, security 
management, and contingency planning.
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    \5\ VA OIG, Audit of VA's Financial Statements for Fiscal Years 
2022 and 2021, December 7, 2022.
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    The second material weakness addressing the limited functionality 
of FMS is manifested in several ways that affect VA's ability to be 
strong stewards of taxpayer dollars. VA has several legacy subsidiary 
IT systems that no longer meet financial management system requirements 
and do not have a two-way interface with FMS. VA does not perform 
comprehensive reconciliations between these legacy systems and FMS. In 
addition, VA continues to record a large number of journal entries, 
which are manual adjustments to the accounting records, to produce a 
set of auditable financial statements. Manual adjustments carry an 
inherent risk of introducing errors into financial reports. VA also 
does not have a complete, centralized repository for all active 
agreements that it has with other federal agencies to support and 
facilitate reconciliation of account balances with those agencies.
    Overall, VA's financial management systems do not substantially 
comply with the requirements of the Federal Financial Management 
Improvement Act of 1996. Additionally, over time, VA's complex, 
disjointed, and antiquated financial management system architecture has 
continued to deteriorate and no longer meets 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 continues to struggle with consistently and 
proactively enforcing its policies and procedures for all legacy 
applications and systems. The most recent financial statement audit 
report made 25 recommendations pertaining to the three material 
weaknesses ranging from targeted actions to broad improvements in 
policies, processes, and systems--many repeated from prior years.

FINANCIAL MANAGEMENT SYSTEM INADEQUACIES HINDERED CONTROLS OVER COVID-
19 SUPPLEMENTAL FUNDS

    The deficiencies in VA's financial management system are 
illustrated in a series of OIG reports finding that VA has lacked 
assurance that funds allocated specifically for COVID-19-related 
purposes had been spent as intended.\6\
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    \6\ Congress provided VA with $60 million in pandemic-related 
supplemental funding in the Families First Coronavirus Response Act and 
then another $19.6 billion through the Coronavirus Aid, Relief, and 
Economic Security Act. About $17.2 billion of these funds was 
appropriated to the Veterans Health Administration (VHA), including 
$14.4 billion allocated to the VHA medical services fund, which is the 
fund for direct patient care. Families First Coronavirus Response Act, 
Pub. L. No. 116-127, 134. Stat. 178 (March 2020); Coronavirus Aid, 
Relief, and Economic Security Act, Pub. L. 116-136, 134 Stat. 281 
(March 2020). Later, in March 2021, VA received another $17.1 billion 
in supplemental funding from the America Rescue Plan Act of 2021 (ARP). 
ARP, Pub. L. No. 117-2, tit. VIII, 135 Stat. 4, 112-17 (March 2021).
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    Following the issuance of OMB guidance for tracking and reporting 
supplemental funding, the OIG initiated a June 2021 review of VHA's 
efforts to establish financial oversight mechanisms.\7\ The OIG found 
that VA did meet the Families First Coronavirus Response Act and the 
Coronavirus Aid, Relief, and Economic Security (CARES) Act requirements 
to submit reports to OMB and Congress. VA supplemented policies 
providing accounting structures to use during declared emergencies. 
However, the OIG identified concerns with the completeness and accuracy 
of VA's reports. VHA's reliance on several accounting subsystems for 
payroll and purchase card transactions required staff to manually 
identify and adjust COVID-19 obligations and expenditures to the proper 
accounts. VHA and VA's Office of Management implemented the OIG's 
recommendations to develop procedures to validate data to ensure that 
information in reports accurately represents the underlying source 
transactions.
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    \7\ VA OIG, Review of VHA's Financial Oversight of COVID-19 
Supplemental Funds, June 10, 2021.
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    To provide for greater oversight of VA's spending of these 
supplemental funds, the VA Transparency & Trust Act of 2021 
(Transparency Act) requires the OIG to report semiannually on VA's 
actual obligations and expenditures of the supplemental funds compared 
to its plans.\8\ To date, the OIG has published three reports. The 
inaugural report concluded that VA only partially complied with the 
Transparency Act. The OIG found it was unclear whether all of the 
planned uses of America Rescue Plan (ARP) Act of 2021 funds were 
captured in the plan VA submitted to Congress, as the plan did not 
include a projected cost to support maintaining IT projects originally 
started with CARES Act funds.\9\ The OIG made two recommendations to 
the assistant secretary for management/chief financial officer, and 
both were closed after VA provided sufficient evidence of 
implementation progress.
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    \8\ VA Transparency & Trust Act of 2021, Pub. L. No. 117-63, Sec.  
2(c), 135 Stat. 1484, 1485 (November 2021).
    \9\ VA OIG, VA's Compliance with the VA Transparency & Trust Act of 
2021, March 22, 2022.
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    In the second Transparency Act report, the OIG found VA generally 
complied with the act because justification was provided for spend plan 
programs, which were generally aligned with expenditures.\10\ However, 
VA relied on expenditure transfers (a manual adjustment process to 
transfer funds from one account to another) for nearly half of its ARP 
Act obligations and expenditures. The OIG found that VA's manual 
process resulted in at least 53 potential reporting errors, which the 
department corrected.
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    \10\ VA OIG, VA's Compliance with the VA Transparency & Trust Act 
of 2021 Semiannual Report: September 2022, September 22, 2022.
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    While VA was again found to have generally complied in the OIG's 
third Transparency Act review, it did not provide sufficient supporting 
documentation requested by the review team to assess line-level details 
needed to make a full assessment.\11\ Additionally, VA's Office of 
Management acknowledged that ``manual processes for expenditure 
transfers can lead to potential reporting errors and data reliability 
issues'' and that replacing its ``antiquated legacy financial 
management system by implementing a modern solution'' will reduce these 
potential errors.
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    \11\ VA OIG, VA's Compliance with the VA Transparency & Trust Act 
of 2021 Semiannual Report: March 2023, March 21, 2023.
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    The use of manual expenditure transfers contributed to a lack of 
transparency and accountability for VHA's purchases using CARES Act 
funds as well. In May 2023, the OIG published a proactive audit on the 
controls over VHA's use of supplemental funds. The audit identified 
weaknesses involving the two methods used by VHA medical facility staff 
to process COVID-19-related transactions: (1) manual expenditure 
transfers and (2) the direct obligation of funds from the CARES Act 
medical services funds.\12\ First, manual expenditure transfers require 
staff to use journal vouchers to document the transfers in VA's FMS. 
Staff were not always properly preparing the journal vouchers, 
providing supporting documentation, or having an authorizing official 
sign them. This happened, in part, because VHA's Office of Finance did 
not ensure VA medical facilities were following VA financial policies. 
Essentially, VHA medical facility staff were left to determine what 
documentation would be sufficient to ensure the vouchers were supported 
without the benefit of proper guidance or internal controls.
---------------------------------------------------------------------------
    \12\ VA OIG, VHA Can Improve Controls Over Its Use of Supplemental 
Funds, May 9, 2023.
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    Second, medical facility staff did not comply with key controls 
when they made pandemic-related purchases directly from CARES Act 
supplemental funds. In an estimated more than 10,000 transactions, 
medical facility staff did not always

      have documented purchase authority;

      segregate duties so the same employee making the request 
was not also approving the purchase;

      certify and pay invoices properly; and/or

      track the receipt of goods to ensure the quantities 
ordered were received.

    These issues occurred because VHA did not develop accounting 
processes that outlined clear roles and expectations related to the 
oversight of purchases made with supplemental funds. As a result, the 
OIG reported an estimated $187 million in questioned costs related to 
VA's use of CARES Act funds, and the OIG made nine recommendations to 
the Office of Management and VHA to resolve these problems.\13\ 
Notably, the OIG recommended that VA assess iFAMS to determine whether 
integration with payroll subsystems can be accomplished to resolve some 
of the payroll-related expenditure transfers. VA concurred, stating it 
would develop interfaces for an end-to-end automated solution by 
September 2030.
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    \13\ The OIG considers all recommendations currently open pending 
the submission of sufficient documentation that would support that 
adequate progress has been made on implementation to close them. The 
OIG requests updates on the status of all open recommendations every 90 
days. This is reflected on the recommendations dashboard found on the 
OIG website. For this report, the OIG will request the first update on 
or about August 9, 2023.

THE OIG FINDINGS ON IFAMS DEPLOYMENT HAS IDENTIFIED SEVERAL WAYS FOR 
---------------------------------------------------------------------------
FMBTS TO IMPROVE ITS WORK

    The fully successful deployment of iFAMS could help resolve a 
persistent material weakness and increase the system's potential to 
increase the transparency, accuracy, timeliness, and reliability of 
financial information across VA. The OIG, therefore, began overseeing 
iFAMS implementation shortly after it went live at NCA in November 
2020. VA's Office of Management is administering the iFAMs deployment 
through its Financial Management Business Transformation Service 
(FMBTS). Resolving or mitigating deployment issues at NCA, which is 
VA's smallest administration with less than 1 percent of VBA's and 
VHA's budget, could help prevent those issues from compounding at the 
larger administrations and staff offices. To that end, the OIG alerted 
VA leaders to early implementation concerns by publishing two 
memoranda.

OIG Memoranda Detailed iFAMS Reporting Issues Needing Early Resolution

    In September 2021, the OIG issued a management advisory memorandum 
on inadequate business intelligence (BI) reporting capabilities in 
iFAMS that hindered NCA's ability to easily monitor its budget and 
operations.\14\ The findings were part of a broader audit to determine 
if the program office identified and addressed deficiencies from 
iFAMS's first deployment. The reporting capabilities are critical to 
strengthening planning, analysis, and decision-making capabilities; 
however, the program office had not ensured NCA had the comprehensive 
BI reports needed to monitor budget and operations. Although FMBTS was 
aware of these issues and attempted some corrective actions, as of July 
2021, NCA was still experiencing significant challenges, such as not 
having a comprehensive report showing the total amount of funds 
available to the administration. Other high-priority reports used to 
track and forecast payroll and full-time equivalent employees were also 
not available for widespread NCA use. NCA staff spent considerable time 
trying to understand and validate reports by extracting data from other 
reports and queries and manipulating that data in spreadsheets. FMBTS 
confirmed it knew of these issues, and the OIG recognized that FMBTS 
was attempting to take positive steps toward resolution, and they 
deployed the needed capabilities to NCA during the broader audit.
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    \14\ VA OIG, Inadequate Business Intelligence Reporting 
Capabilities in the Integrated Financial and Acquisition Management 
System, September 8, 2021.
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    In June 2022, the OIG published the results of a consult by its 
contracted independent public accounting firm related to iFAMS 
financial reporting controls at NCA.\15\ This consulting engagement 
provided the OIG with information about iFAMS to assist in planning for 
future financial statement audits. The consulting letter identified 
potential risks to accurate financial reporting and provided 
management's comments on actions taken or planned to address those 
risks.
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    \15\ VA OIG, Results of Consulting Engagement Related to Selected 
Financial Reporting Controls for the Integrated Financial and 
Acquisition Management System at the National Cemetery Administration, 
June 15, 2022.
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    While the OIG used both memoranda to raise concerns and identify 
risks for FMBTS, the OIG did not make specific recommendations for 
follow-up in either document. The memoranda provide information to help 
VA decision-makers identify what additional corrective actions, if any, 
are needed.

Improved Risk Management, System Testing, and Communication with Users 
Could Advance Implementation

    In March 2023, the OIG published its first audit on NCA's 
deployment issues.\16\ Building on the September 2021 memorandum, the 
audit identified issues that should be addressed as VA moves forward 
with further deployments. While iFAMS provided much of the core 
financial functionality NCA needed, FMBTS did not fully address some 
barriers related to the program's objectives of streamlining processes 
and improving information reliability. The OIG made the following 
findings:
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    \16\ VA OIG, Improvements Needed in Integrated Financial and 
Acquisition Management System Deployment to Help Ensure Program 
Objectives Can Be Met, March 28, 2023.

      The iFAMS user interface initially increased the 
complexity of purchase card orders and contracting requests, which are 
high-volume transactions. To address the complexity of purchase card 
orders and contracting requests, FMBTS began rolling out a simplified 
user interface in late 2021, with generally positive user feedback. 
Even so, staff experienced inefficient processing for a significant 
portion of NCA's transactions for over one year after going live. The 
key principle that should be considered going forward is that FMBTS 
will need to prioritize user feedback in its risk management process to 
identify and develop other potential system enhancements. Specifically, 
ensuring iFAMS improves efficiency will become even more critical as 
implementation continues to VHA, which is expected to have about 
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115,000 users compared to fewer than 1,200 users at NCA.

      FMBTS did not establish comprehensive controls to reduce 
data reliability risks posed by a manual contracting process. NCA staff 
must still manually adjust the obligation amounts when reducing amounts 
available in iFAMS and eCMS, VA's contract management system, on 
contracts that existed before iFAMS went live. These contracts are 
known as ``converted contracts.'' Obligation amounts need to be 
reduced, for example, when the needed quantity of goods or services has 
been received with funds remaining on the obligation or a contract is 
canceled. Manual processes in legacy systems have been a long-standing 
risk to the accuracy and completeness of financial reporting, and these 
risks continue in iFAMS because FMBTS felt automating an interface 
between iFAMS and eCMS to automatically update these types of changes 
to converted contracts was not worth the costs. There are some process 
controls on these manual contracting processes, and the program office 
was working toward developing a reconciliation report, but as of 
February 2023, this risk remained active.

      Compliance with the FMBTS risk management process could 
enable the program office to better respond to all identified risks. A 
central repository called a risk register is part of the FMBTS risk 
management process enabling the documentation, categorization, and 
tracking of risks. FMBTS did not prioritize user feedback and did not 
use the risk register to document and assess manual obligation risks. 
Before NCA's deployment, FMBTS acknowledged the risk of staff finding 
the iFAMS user interface to be difficult but categorized the 
probability and impact as low. Low user adoption was a recognized risk, 
and user feedback before going live should have led FMBTS to assess a 
higher probability and impact rating. While FMBTS has been taking steps 
to deal with issues such as the complex user interface, FMBTS must 
continually assess and prioritize user feedback in the future. The OIG 
also found that FMBTS did not formally identify and document the risk 
associated with a manual deobligation process, despite prior OIG audit 
findings that identified significant control deficiencies with manual 
processes in the legacy system. FMBTS felt the risk would decrease over 
time as the converted contracts ended. While FMBTS limited the number 
of users with manual adjustment permissions, this particular risk-
mitigation strategy will be difficult to scale across the rest of VA. 
If FMBTS does not formally identify obvious risks in the register, the 
program cannot properly assess, prioritize, redress, and monitor them.

      iFAMS implementation initially complicated the process of 
paying some invoices, with a mitigation taking several months. 
Modifications to the converted contracts required NCA staff to review 
unnecessary information when paying invoices, which could lead to human 
error and unreliable data that inaccurately displays available funding 
amounts, the nature of the expense, or the correct fiscal year. In FY 
2021, the NCA chief financial officer (CFO) expressed a lack of 
confidence in the accuracy of recorded amounts.

      FMBTS did not comprehensively test converted contracts 
and so was unaware of the above payment issue. Robust testing, 
including converted contracts and payments, could have prompted FMBTS 
to mitigate the impact before going live and is critical moving forward 
because converted contracts will be an issue for years while iFAMS is 
implemented.

      All of NCA's priority BI reporting functionality was not 
available at go-live. This issue was addressed in the OIG's September 
2021 management advisory memorandum.

      NCA did not receive the BI reporting functions as 
expected because FMBTS did not communicate well regarding NCA's high-
priority requirements. During the development period, NCA worked with 
FMBTS to develop requirements and explanations of the reports' 
functions. As the process went on, NCA staff, leaders, and product 
owners communicated requirements and prioritization goals. The OIG's 
review made clear that NCA and FMBTS did not share the same 
understanding of the requirements. FMBTS could mitigate this by 
formally acknowledging whether requests have been accepted as 
requirements. This step can help other VA administrations and offices 
determine whether requirements need to be revised so that critical BI 
reporting functionality is available at go-live.

    The OIG made five recommendations to the deputy assistant secretary 
for FMBTS: (1) implement controls to mitigate the risk that data are 
unreliable and inconsistently recorded between the legacy system and 
iFAMS when staff deobligate funds for converted contracts; (2) 
implement a methodology to prioritize user feedback in the risk 
management process; (3) use the risk register to document and assess 
the risks associated with the manual deobligation process; (4) ensure 
that converted contracts are included in integrated system and user 
acceptance testing; and (5) implement a process to formally acknowledge 
whether high-priority business intelligence reports requests have been 
accepted as requirements. At the end of June 2023, the OIG will begin 
to follow up on VA's implementation efforts.

STRONG GOVERNANCE AND CLARITY OF ROLES AND RESPONSIBILITIES

    Finally, the decentralized nature of governance for VA's financial 
management structure can contribute to problem identification and 
correction. Under the Chief Financial Officers Act, the VA CFO has the 
responsibility for establishing financial policy, systems, and 
operating procedures for all VA financial entities. VA administrations 
and other offices are responsible for implementing those policies and 
producing financial information, but they are not under the supervision 
of the VA CFO. This fragmented structure has been a consistent concern 
and finding in the audit of VA's consolidated financial statements.\17\ 
Without active involvement from VA's senior leaders to overcome 
organizational silos and ensure collaboration, problems at the 
administration level may not be elevated for resolution.
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    \17\ VA OIG, Audit of VA's Financial Statements for Fiscal Years 
2022 and 2021, December 7, 2022.

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CONCLUSION

    The OIG has repeatedly found that VA's failure to effectively 
modernize its financial management systems leads to significant 
challenges in assuring accountability and transparency in how it 
obligates and expends funds; makes it difficult for VA staff to plan, 
order, and track expenditures for supplies and services; and hampers 
transparency and oversight of VA's use of these funds. The transition 
to iFAMS has the potential to mitigate major issues in producing VA 
financial statements and improving VA operations. However, the 
transition is exceptionally complicated--requiring intensive and 
continuous attention from VA--and demands strong organizational 
leadership and coordination. The OIG urges VA to dedicate the time and 
resources to resolving the early opportunities for improvement in the 
iFAMS transition, being vigilant in identifying challenges that will 
arise in the forthcoming deployments, and developing processes for 
timely and effective responses. Chairman Rosendale, Ranking Member 
Cherfilus-McCormick, and members of the Subcommittee, this concludes my 
statement. I would be happy to answer any questions you may have.