Veterans Affairs: Continued Action Needed to Reduce IT Equipment 
Losses and Correct Control Weaknesses (31-JUL-08, GAO-08-918).	 
                                                                 
In July 2004, GAO reported that the six Department of Veterans	 
Affairs (VA) medical centers it audited lacked a reliable	 
property control database and effective inventory policies and	 
procedures. In July 2007, GAO reported that continuing internal  
control weaknesses over IT equipment at four case study locations
at VA resulted in an increased risk of theft, loss, and 	 
misappropriation of IT equipment assets. GAO's two reports	 
included 18 recommendations to improve internal control over IT  
equipment. GAO was asked to perform a follow-up audit to	 
determine (1) whether VA has made progress in implementing GAO's 
prior recommendations for improving internal control over IT	 
equipment and (2) the effectiveness of VA's current internal	 
controls to prevent theft, loss, or misappropriation of IT	 
equipment. GAO reviewed policies and other pertinent		 
documentation, statistically tested IT equipment inventory	 
controls at four geographically disparate locations, and	 
interviewed VA officials.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-918 					        
    ACCNO:   A83239						        
  TITLE:     Veterans Affairs: Continued Action Needed to Reduce IT   
Equipment Losses and Correct Control Weaknesses 		 
     DATE:   07/31/2008 
  SUBJECT:   Accountability					 
	     Audits						 
	     Data storage					 
	     Employees						 
	     Equipment inventories				 
	     Federal property					 
	     Federal property management			 
	     Information technology				 
	     Internal controls					 
	     Inventory control					 
	     IT policies					 
	     Property						 
	     Property and supply management			 
	     Protective equipment				 
	     Records						 
	     Strategic planning 				 
	     Test equipment					 
	     Policies and procedures				 

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GAO-08-918

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Report to the Subcommittee on Oversight and Investigations, Committee 
on Veterans' Affairs, House of Representatives: 

United States Government Accountability Office: 
GAO: 

July 2008: 

Veterans Affairs: 

Continued Action Needed to Reduce IT Equipment Losses and Correct 
Control Weaknesses: 

VA IT Inventory Controls: 

GAO-08-918: 

GAO Highlights: 

Highlights of GAO-08-918, a report to the Subcommittee on Oversight and 
Investigations, Committee on Veterans' Affairs, House of 
Representatives. 

Why GAO Did This Study: 

In July 2004, GAO reported that the six Department of Veterans Affairs 
(VA) medical centers it audited lacked a reliable property control 
database and effective inventory policies and procedures. In July 2007, 
GAO reported that continuing internal control weaknesses over IT 
equipment at four case study locations at VA resulted in an increased 
risk of theft, loss, and misappropriation of IT equipment assets. GAOï¿½s 
two reports included 18 recommendations to improve internal control 
over IT equipment. GAO was asked to perform a follow-up audit to 
determine (1) whether VA has made progress in implementing GAOï¿½s prior 
recommendations for improving internal control over IT equipment and 
(2) the effectiveness of VAï¿½s current internal controls to prevent 
theft, loss, or misappropriation of IT equipment. GAO reviewed policies 
and other pertinent documentation, statistically tested IT equipment 
inventory controls at four geographically disparate locations, and 
interviewed VA officials. 

What GAO Found: 

VA has made significant progress in addressing prior GAO 
recommendations to improve controls over IT equipment. Of the 18 
recommendations GAO made in its two earlier reports, VA completed 
action on 14 recommendations, partially implemented action on 2 
recommendations, and is working to address the 2 remaining open 
recommendations. These recommendations focused on strengthening 
policies and procedures to establish a framework for accountability and 
control of IT equipment. If effectively implemented, VAï¿½s July 2008 
policy changes would address many of the control weaknesses GAO 
identified. Mandated early implementation of this new policy addresses 
user-level accountability and requirements for strengthening physical 
security. In addition, to determine the extent of inventory control 
weaknesses over its IT equipment, VA performed a departmentwide 
physical inventory in 2007. However, as of May 15, 2008, VA reported 
that it could not locate about 62,800 IT equipment items, of which 
9,800 could have stored sensitive information. Because VA does not know 
what, if any, sensitive information resided on the equipment, 
potentially affected individuals could not be notified. 

GAOï¿½s statistical tests of IT equipment inventory controls from 
February through May 2008 at four locations identified continuing 
control weaknesses, including missing items, lack of accountability, 
and errors in IT equipment inventory records. Although these control 
weaknesses may be addressed through early implementation of the July 
2008 policies, the fact that GAO identified missing items only a few 
months after these locations had completed their physical inventories 
is an indication that underlying weaknesses in accountability over IT 
equipment have not yet been corrected. 

Table: IT Inventory Control Test Results at Four Case Study Locations: 

Control failures: Missing items; 
North Texas HCS: 6%; 
Boston HCS: 3%; 
Puget Sound HCS: 1%; 
VA headquarters: 12%. 

Control failures: Incorrect user organization; 
North Texas HCS: 91%; 
Boston HCS: 60%; 
Puget Sound HCS: 76%; 
VA headquarters: 12%. 

Control failures: Incorrect location; 
North Texas HCS: 46%; 
Boston HCS: 17%; 
Puget Sound HCS: 14%; 
VA headquarters: 33%. 

Control failures: Recordkeeping errors; 
North Texas HCS: 9%; 
Boston HCS: 41%; 
Puget Sound HCS: 9%; 
VA headquarters: 4%. 

Source: GAO analysis. 

Note: Each of these estimates has a margin of error, based on a two-
sided, 95 percent confidence interval, of +/- 10 percent or less. 

[End of table] 

GAOï¿½s tests identified 50 missing items, of which 34 could have stored 
sensitive data, but again, notifications to individuals could not be 
made. Further, the lack of user-level accountability and inaccurate 
records on status, location, and item description of IT equipment items 
at the four case study locations make it difficult to determine the 
extent to which actual theft, loss, or misappropriation of IT equipment 
may have occurred. In addition, the four locations had weaknesses in 
controls over hard drives in the property disposal process as well as 
physical security weaknesses at IT storage facilities. These control 
weaknesses present a risk that VA could lose control over new, used, 
and excess IT equipment and that any sensitive personal and medical 
information residing on hard drives in this equipment could be 
compromised. 

What GAO Recommends: 

GAO makes five recommendations to VA for additional actions to 
strengthen the overall control environment and improve specific 
internal control activities and safeguard IT equipment. VAï¿½s initial 
response stated that it generally agreed with four of GAOï¿½s five 
recommendations. After further clarification, VA officials stated that 
they agreed with the intent of all of GAOï¿½s recommendations and were 
taking steps to address them. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-918]. For more 
information, contact Kay L. Daly at (202) 512-9095 or [email protected]. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

VA Has Made Significant Progress in Addressing GAO Recommendations and 
Completing a VA-Wide IT Equipment Inventory: 

Tests of IT Inventory Controls at Case Study Locations Identified 
Continuing Weaknesses: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Status of VA Actions on Recommendations in GAO's July 2007 
and 2004 Reports: 

Appendix III: Comments from the Department of Veterans Affairs: 

Appendix IV: Reports of Survey on Missing IT Equipment for VA Case 
Study Locations: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Overview of Key Controls in VA's IT Property Management 
Process: 

Table 2: Status of VA's Actions on Prior Recommendations: 

Table 3: Summary of VA-Wide Fiscal Year 2007 IT Equipment Physical 
Inventory Results as of May 15, 2008: 

Table 4: Numbers of Missing IT Equipment Items at Four Test Locations 
That Were Identified during the 2007 VA-Wide IT Physical Inventory: 

Table 5: Estimated IT Equipment Inventory Control Failure Rates at Four 
Test Locations: 

Table 6: Number of Missing IT Equipment Items by Headquarters 
Organization and Missing Items That Could Have Stored Sensitive 
Personal Data: 

Table 7: Estimated IT Inventory Control Failure Rates Related to 
Correct User and Location at the Four Test Locations: 

Table 8: Estimated Percentages of Other IT Inventory Recordkeeping 
Failures at Four Test Locations: 

Table 9: Population of VA IT Equipment at Locations Selected for 
Testing: 

Table 10: GAO's 2007 Report Recommendations and Status of VA Actions as 
of July 2008: 

Table 11: GAO's 2004 Report Recommendations and Status of VA Actions as 
of July 2008: 

Table 12: Summary of Reports of Survey as of May 15, 2008, for Case 
Study Locations Covered in GAO Audits: 

Abbreviations: 

AEMS/MERS: Automated Engineering Management System/Medical Equipment 
Repair Service: 

CFR: Code of Federal Regulations: 

CIO: Chief Information Officer: 

EIL: equipment inventory listing: 

ELF: Equipment Loan Form: 

FMFIA: Federal Managers' Financial Integrity Act of 1982: 

HCS: health care system: 

HHS: Department of Health and Human Services: 

HIPAA: Health Information Portability and Accountability Act of 1996: 

IT: information technology: 

NARA: National Archives and Records Administration: 

NCA: National Cemetery Administration: 

OAL: Office of Acquisitions and Logistics: 

OIT: Office of Information and Technology: 

OMB: Office of Management and Budget: 

SMC: Security Management Committee: 

USC: United States Code: 

VA: Department of Veterans Affairs: 

VBA: Veterans Benefits Administration: 

VHA: Veterans Health Administration: 

VISN: Veterans Integrated Service Network: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

July 31, 2008: 

The Honorable Harry E. Mitchell: 
Chairman: 
The Honorable Ginny Brown-Waite: 
Ranking Member: 
Subcommittee on Oversight and Investigations: 
Committee on Veterans' Affairs: 
House of Representatives: 

This report responds to your request that we perform a follow-up audit 
to assess the Department of Veterans Affairs (VA) progress in 
strengthening controls over information technology (IT) equipment. Past 
reports of thefts of laptop computers and data breaches raised concerns 
about the adequacy of controls over VA IT equipment. In July 2004, we 
reported[Footnote 1] that the six VA medical centers we audited lacked 
a reliable property control database and had problems with 
implementation of VA inventory policies and procedures. In July 2007, 
we reported[Footnote 2] that a weak overall control environment and 
pervasive weaknesses in inventory control and accountability at four 
locations we audited put IT equipment at risk of theft, loss, and 
misappropriation, including sensitive personal and medical information 
maintained on this equipment. For example, our statistical tests of IT 
equipment inventory controls at the four VA case study locations 
identified a total of 123 missing IT equipment items, including 53 
computers that could have stored sensitive information. Our 2004 and 
2007 audits found that some medical centers did not account for IT 
equipment valued under $5,000 during physical inventories. Our 2004 
report made 6 recommendations and our 2007 report made 12 
recommendations for VA actions to improve accountability of IT 
equipment inventory and reduce the risk of disclosure of sensitive 
personal and medical information. 

VA's mission is to promote the health, welfare, and dignity of all 
veterans in recognition of their service to the nation by ensuring they 
receive medical care, benefits, social support, and lasting memorials. 
The department's three major components are the Veterans Health 
Administration (VHA), the Veterans Benefits Administration (VBA), and 
the National Cemetery Administration (NCA). During 2007, VA employed 
over 230,000 individuals and relied on an undetermined number of 
contractors, volunteers, and students in carrying out its operations. 
VA provided these individuals with a wide range of IT equipment, 
including desktop and laptop computers, monitors and printers, personal 
digital assistants, unit-level workstations, local area networking 
equipment, and medical equipment capable of storing sensitive personal 
and medical information.[Footnote 3] By the start of fiscal year 2008, 
VA had centralized its IT function at all locations within its Office 
of Information and Technology (OIT). OIT staff share responsibility for 
management of IT equipment inventory with property management 
personnel. Accordingly, it is crucial for the department's Assistant 
Secretary for Information and Technology, who serves as the Chief 
Information Officer (CIO), to have the cooperation of property managers 
to ensure that well-established integrated processes exist for 
controlling IT inventory. Given the continuing nature of IT equipment 
inventory control problems and their significance, you asked us to 
perform additional follow-up work to determine (1) whether VA has made 
progress in implementing our prior recommendations for improving 
internal control over IT equipment and (2) the effectiveness of VA's 
current internal controls to prevent theft, loss, or misappropriation 
of IT equipment. 

To achieve our first objective, we conducted interviews and obtained 
documentation from VA property management and OIT officials on the 
actions taken to address the 12 recommendations in our July 2007 report 
and the 6 property-related recommendations in our July 2004 report. As 
you requested, we also reviewed the process and results of VA's 2007 
departmentwide physical inventory of IT equipment and actions taken to 
resolve discrepancies, including VA inventory results for locations 
tested in our current and prior audits.[Footnote 4] In addition, we 
reviewed policy revisions related to IT equipment controls based on our 
prior recommendations. To achieve our second objective and determine 
the effectiveness of current internal controls for preventing theft, 
loss, or misappropriation of IT equipment, we used a case study 
approach, selecting three geographically disparate VA health care 
systems[Footnote 5] (HCS) located in Dallas, Texas; Seattle, 
Washington; and Boston, Massachusetts. We also selected VA headquarters 
organizations[Footnote 6] as a means of assessing the overall control 
environment, or "tone at the top," as we did in our 2007 audit. At each 
of the four case study locations, we statistically tested IT equipment 
inventory control attributes for existence (meaning IT equipment items 
listed in inventory records exist and can be located), user-level 
accountability, and inventory record accuracy. As in our 2007 audit, at 
each of our case study locations we also evaluated (1) VA's Reports of 
Survey[Footnote 7] on lost and stolen items, (2) controls over computer 
hard drives in the excess property disposal process,[Footnote 8] and 
(3) physical security controls for IT storage facilities. We performed 
sufficient procedures to determine that inventory data at the test 
locations were reliable for the purpose of our audit,[Footnote 9] 
including data analysis, interviews of key officials, and review of VA 
procedures for assuring the reliability of data generated by key 
property inventory systems. 

We conducted this performance audit from January 2008 through July 2008 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. We performed our 
investigative procedures in accordance with quality standards as set 
forth by the President's Council on Integrity and Efficiency. A 
detailed discussion of our objectives, scope, and methodology is 
included in appendix I. 

Results in Brief: 

VA has made significant progress in addressing our previous 
recommendations. These recommendations focused on strengthening 
policies and procedures to establish a framework for accountability and 
control of IT equipment. As of the end of our field work in July 2008, 
VA had completed action on 10 of the 12 recommendations in our July 
2007 report[Footnote 10] and partially implemented actions on 1 other 
recommendation. VA also has actions under way to address the remaining 
recommendation in our 2007 report. Further, VA completed action on 4 of 
6 property-related recommendations in our 2004 report,[Footnote 11] 
partially completed action on a fifth recommendation, and has plans to 
address the remaining 2004 recommendation. Details of VA's actions on 
our recommendations to strengthen controls over IT equipment are 
presented in appendix II. Importantly, VA's Assistant Secretary for 
Management and the CIO have worked together to draft a revised property 
management policy in a new VA Handbook 7002, Logistics Management 
Procedures, which includes requirements for user-level accountability, 
time frames for completing Reports of Survey[Footnote 12] on missing 
and stolen property, and requirements for strengthening physical 
security. On July 3, 2008, VA's Assistant Secretary for Management 
mandated early implementation of the handbook.[Footnote 13] If 
effectively implemented, the handbook changes would address many of the 
control weaknesses we identified. Further, in 2007 VA performed a 
departmentwide physical inventory of IT equipment at the Subcommittee's 
direction. Commensurate with the centralization of IT functions under 
the CIO, including IT asset management, OIT monitored the inventory 
effort. Initially VA's physical inventory determined that approximately 
79,000 IT equipment items were missing. After several months of 
searching and research of property records, as of May 15, 2008, OIT 
reported that approximately 62,800 recorded IT equipment items could 
not be located, of which over 9,800 could have stored sensitive 
information. Because VA does not know what, if any, sensitive 
information resided on the equipment, notifications to potentially 
affected individuals could not be made.[Footnote 14] Facility personnel 
were continuing to search for missing items, and the CIO formed a quick 
response team to help ensure that Reports of Survey on lost and stolen 
items are completed in a timely manner. 

Our tests of IT equipment inventory controls conducted from February 
through May 2008 at four case study locations, including three VA HCS 
and VA headquarters, identified continuing control weaknesses related 
to missing items, lack of accountability, and errors in IT equipment 
inventory records. Our Standards for Internal Control in the Federal 
Government[Footnote 15] requires agencies to establish physical control 
to secure and safeguard vulnerable assets, such as equipment that might 
be vulnerable to risk of loss or unauthorized use, including 
periodically counting the assets and comparing the results to control 
records. Our statistical tests of IT inventory controls excluded 
thousands of IT equipment items identified as missing at the four case 
study locations during VA's 2007 IT equipment inventory effort. 
Therefore, if adequate controls were in place at our test locations, we 
would not have expected to identify any additional missing items, blank 
data fields, or inaccurate inventory records. However, our statistical 
tests and data analysis at the four locations found significant control 
failures related to (1) missing items, (2) blank serial numbers, (3) 
inaccurate information on user organization, (4) inaccurate information 
on user location, and (5) other recordkeeping errors related to item 
description information (e.g., model number and manufacturer). Our 
statistical tests identified a total of 50 missing items, of which 34 
could have stored sensitive information. As with missing items 
identified in VA's departmentwide physical inventory of IT equipment, 
because VA does not know what, if any, sensitive information resided on 
the equipment, notifications to potentially affected individuals could 
not be made. We estimate the percentage of inventory control failures 
related to these missing items to be 1 percent at the Puget Sound HCS, 
3 percent at the Boston HCS, 6 percent at the North Texas HCS, and 12 
percent for VA headquarters organizations.[Footnote 16] Although these 
control weaknesses may be addressed through VA's early implementation 
of the July 2008 policies, the fact that we identified missing items 
only a few months after these locations had completed their physical 
inventories is an indication that the locations had not yet corrected 
underlying control weaknesses related to accountability over their IT 
equipment. We also found that medical equipment with data storage and 
processing capabilities was not included in VA's physical inventory of 
IT equipment.[Footnote 17] The lack of user-level accountability and 
inaccurate records on status, location, and item descriptions found at 
our case study locations make it difficult to determine the extent to 
which actual theft, loss, or misappropriation of IT equipment may have 
occurred. Moreover, our follow-up work at the four case study locations 
found weaknesses in controls over hard drives in the property disposal 
process as well as physical security weaknesses at IT storage 
facilities. These control weaknesses present a risk that VA could lose 
control over new, used, and excess IT equipment and that any sensitive 
personal and medical information residing on hard drives in this 
equipment could be compromised. 

This report contains five recommendations to VA on additional actions 
needed to strengthen the overall control environment and improve key 
internal control activities to help ensure accountability and safeguard 
IT equipment. In initially commenting on our draft report, VA stated 
that it generally agreed with all but one of our five recommendations. 
VA was concerned that our recommendation to develop a list of medical 
equipment with data storage capabilities that should be considered as 
IT equipment for inventory control purposes intended that this 
equipment should be redefined (i.e., reclassified) as IT equipment. In 
a follow-up meeting with VA officials, we clarified that our 
recommendation was intended to provide the CIO visibility over this 
equipment for purposes of assuring accountability and information 
security. Following our discussion and clarifications, VA officials 
said they agreed with the intent of all five of our recommendations and 
noted actions they are taking to address them. VA's comments and our 
analysis are discussed in the Agency Comments and Our Evaluation 
section of this report. VA's comments are reprinted in appendix III. 

Background: 

VA's mission is to serve America's veterans and their families and to 
be their principal advocate in ensuring that they receive medical care, 
benefits, and social support in recognition of their service to our 
nation. VA, headquartered in Washington, D.C., is the second largest 
federal department and reported it had over 230,000 employees as of 
September 30, 2007, including physicians, nurses, counselors, 
statisticians, computer specialists, architects, and attorneys. VA has 
three major line organizations--VHA, VBA, and NCA--and field facilities 
throughout the United States. VHA has 21 Veterans Integrated Service 
Networks (VISN) that oversee medical center activities within their 
areas, which may cover one or more states. VA provides employees, 
contractors, volunteers, and students with a wide range of IT 
equipment,[Footnote 18] including desktop and laptop computers, 
monitors and printers, personal digital assistants, unit-level 
workstations, local area networking equipment, and medical equipment 
with memory and data processing/communication capabilities. By the 
start of fiscal year 2008, VA had centralized its IT function at all 
locations within the realigned OIT. 

VA's IT Property Management Process: 

The Assistant Secretary for Information and Technology heads VA's OIT, 
serves as the CIO for the department, and is the principal advisor to 
the Secretary on matters relating to IT management in the department. 
OIT staff share responsibility for management of IT equipment inventory 
with property management personnel. Accordingly, it is crucial for the 
department's CIO to have the cooperation of property managers to ensure 
that well-established integrated processes exist for controlling IT 
inventory. 

The steps in the IT property management process are key events, which 
should be documented by an inventory transaction, a financial 
transaction, or both, as appropriate. Federal records management law, 
as codified in Title 44 of the U.S. Code and implemented through 
National Archives and Records Administration (NARA) guidance, requires 
federal agencies to adequately document and maintain proper records of 
essential transactions and have effective controls for creating, 
maintaining, and using records of these transactions.[Footnote 19] 
Table 1 provides an overview of VA's IT property management process. 

Table 1: Overview of Key Controls in VA's IT Property Management 
Process: 

Receipt, deployment, and inventory control of items in service: 

Document receipt of new IT equipment items and update financial and 
property records; 
Upon receipt of IT equipment, property management personnel record 
receipt and acceptance for financial reporting and payment. Property 
personnel also affix bar code labels and create property records[A] for 
new IT equipment by entering in the automated property systems serial 
number, description, model number, manufacturer, and original 
acquisition value, among other elements. Timely recording of new IT 
equipment in the central property records reduces the risk of 
misappropriation and lessens the opportunity for undetected loss or 
theft. 

Deploy IT equipment and record user and location information; 
Upon deployment of new IT equipment or deployment of existing equipment 
for reuse, OIT personnel record the property location. OIT personnel 
also record organization and user information. Recording organization 
and user-level information creates an environment of accountability and 
helps ensure that individuals take responsibility for the IT equipment 
items assigned to them. 

Perform physical inventory of IT equipment; 
VA personnel confirm IT equipment existence during annual physical 
inventories. Personnel use handheld scanners to capture IT item bar 
code information and to update location information which helps achieve 
segregation of duties. In addition, VA Handbook 7127/4 requires that 
all completed inventories have a 5 percent verification inventory 
conducted by an accountable officer or designee, a disinterested party, 
and the custodial officer or designee. Comparing those items physically 
identified to the inventory records presents an opportunity to identify 
missing items and to update inventory records for changes in user, 
location, and status, as appropriate. 

Update property records; 
Once personnel have completed physical inventories they update the 
central property records to reflect current information. Missing items 
are reported to VA Police or security officers, as appropriate, and to 
a Board of Survey[B] for further investigation and write-off, if 
necessary. Updating information on a timely basis provides an 
organization with accurate information on the location, quantity, and 
status of its IT equipment for management accountability and decision 
making. 

Turn-in, hard drive cleansing, and disposal of excess IT equipment: 

Document turn-ins of excess IT equipment items; 
Once an IT item has been identified for turn-in or disposal, the user 
or OIT will complete VA Form 2237, "Request, Turn-In, and Receipt for 
Property or Services" or use an electronic turn-in process. Property 
management personnel are responsible for updating the status of the 
item in the inventory records. Accurate status information provides 
asset visibility over items that are in service (in use) and those that 
have been removed from service. 

Secure and remove data from hard drives in the property disposal 
process; 
OIT personnel are responsible for the physical security of computer 
hard drives during the disposal process. Physical security of hard 
drives during the disposal process mitigates the risk of theft or loss 
or compromise of sensitive information. As part of the disposal 
process, OIT personnel either cleanse the hard drives using VA-approved 
software or ship the hard drives to a vendor for physical destruction. 
Recording hard drive serial numbers and the corresponding item bar code 
and serial numbers of the host computers creates an audit trail that 
can be used to determine the system from which a hard drive originated. 
Since hard drives have the capability to store sensitive information, 
control of computer hard drives during the property disposal process is 
essential to safeguarding personal information that may be stored on 
the hard drives.[C] 

Redeploy or dispose excess IT equipment items and update inventory 
status; 
OIT personnel may redeploy IT equipment that is determined to be excess 
to the turn-in user's needs. Ultimately, VA will dispose of items 
excess to its needs by donating them to schools, transferring them to 
the General Services Administration for reuse within the federal 
government or resale, or transferring them to disposal (or scrap) 
vendors. Timely recording of turn-ins and disposal of excess IT 
equipment helps ensure that VA maintains accountability for IT 
equipment throughout its life cycle as well as the accuracy of its IT 
equipment inventory records. 

Source: GAO analysis of VA policies and procedures. 

[A] Medical center personnel use the Automated Equipment Management 
System/Medical Equipment Repair Service (AEMS/MERS) for new IT 
equipment acquisitions. AEMS/MERS is a general inventory management 
system that is local to each VA medical center. Headquarters personnel 
enter records of new IT equipment in the Inte-GreatTM Property Manager 
system. 

[B] VA Handbook 7125, Materiel Management Procedures, mandates that a 
Board of Survey be appointed when there is a possibility that a VA 
employee may be assessed a pecuniary (financial) liability or 
disciplinary action as a result of loss, damage, or destruction of 
property valued at $5,000 or more. The Board of Survey reviews the 
Report of Survey, which identifies IT equipment that is unaccounted for 
and explains efforts to account for missing items. The Board of Survey 
approves final Reports of Survey, including write-offs of missing items 
and determines if disciplinary action is warranted. 

[C] Federal agencies, such as VA, are required to protect sensitive 
data stored on their IT equipment against the risk of data breaches and 
thus the improper disclosure of personal identification information, 
such as names and social security numbers. Such information is 
regulated by privacy protections under the Privacy Act of 1974, 
codified, as amended, at 5 U.S.C. ï¿½ 552a and, when information concerns 
an individual's health, the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA). See Pub. L. No. 104-191, ï¿½ 264, 110 
Stat. 1936, 2033-34 (Aug. 21, 1996), and implementing regulations at 45 
C.F.R. pt. 164. 

[End of table] 

VA Has Made Significant Progress in Addressing GAO Recommendations and 
Completing a VA-Wide IT Equipment Inventory: 

VA has made significant progress in addressing our previous 
recommendations directed at improving policies and procedures for 
control of IT equipment and reducing the risk of disclosure of 
sensitive personal and medical information. As of the end of our field 
work in July 2008, VA had completed action on 10 of our 12 
recommendations from our July 2007 report.[Footnote 20] VA's Assistant 
Secretary for Management and the CIO worked together to draft a revised 
property management policy in a new VA Handbook 7002, Logistics 
Management Procedures, which addresses 7 of our 2007 recommendations. 
This revised policy is an important step in establishing a framework 
for control of IT equipment. On July 3, 2008, the Assistant Secretary 
for Management mandated early implementation of this policy, which 
includes requirements for user-level accountability, time frames for 
completing Reports of Survey on missing and stolen property, and 
requirements for strengthening physical security. VA also partially 
implemented action on one other recommendation and has actions under 
way to address the remaining recommendation from our 2007 report. 
Successful implementation of these efforts will be key to improving 
controls over VA's IT equipment. VA also made progress implementing 
recommendations from our 2004 report[Footnote 21] related to personal 
property and equipment management. VA completed action on four of six 
property-related recommendations in our 2004 report and partially 
completed action on a fifth recommendation. VA has plans to address the 
remaining 2004 recommendation. In addition, in response to your 
concerns about VA-wide controls based on our previous audits, VA 
required departmentwide physical inventories of IT equipment to be 
completed by December 31, 2007. OIT monitored the 2007 physical 
inventory effort for IT equipment and reported that as of May 15, 2008, 
VA was unable to locate approximately 62,800 recorded IT equipment 
items, of which over 9,800 could have stored sensitive information. The 
CIO formed a "tiger team"[Footnote 22] to monitor efforts under the 
Report of Survey[Footnote 23] system and to help ensure that Reports of 
Survey are completed in a timely manner. 

VA Has Made Significant Progress in Addressing GAO Recommendations: 

To address recommendations in our July 2007 report, VA completed action 
on 10 of our 12 recommendations, partially implemented actions on one 
other recommendation, and has actions under way to address the 
remaining recommendation. VA actions on our 2007 report recommendations 
included the establishment of specific time frames for finalizing 
Reports of Survey, granting OIT personnel access to the central 
property database, and holding employees financially liable for lost IT 
equipment. In addition, VA completed action on four of the six 
recommendations in our July 2004 report, partially completed action on 
a fifth recommendation, and has plans to address the remaining 
recommendation. For example, VA revised its policy through VA Handbook 
7127/4, Materiel Management Procedures, to state that sensitive items 
include IT equipment and named several types of IT equipment items. 
VA's revised policy also stated that IT equipment items valued under 
$5,000 are to be included in physical inventories. Further, VA has 
drafted policies that provide a framework for strengthening controls 
over IT equipment, including VA Handbook 7002, Logistics Management 
Procedures.[Footnote 24] On July 3, 2008, VA's Assistant Secretary for 
Management mandated early implementation of this handbook. Effective 
implementation of this new policy will be essential to ensuring 
adequate control and accountability of VA's IT equipment and any 
sensitive information residing on that equipment. Table 2 provides a 
summary of our 2007 and 2004 recommendations and the current status of 
VA actions. For a more detailed explanation of VA's actions taken and 
planned on our recommendations, see appendix II. 

Table 2: Status of VA's Actions on Prior Recommendations: 

2007 GAO recommendations: VA-wide recommendations: 

1. Revise VA property management policy and procedures to include 
detailed requirements for what transactions must be recorded to 
document inventory events and to clearly establish individual 
responsibility for recording all essential transactions in the property 
management process; 
Status: Fully implemented. 

2. Revise VA purchase card policy to require purchase card holders to 
notify property management officials of IT equipment and other property 
items acquired with government purchase cards at the time the items are 
received so that they can be recorded in property management systems; 
Status: Fully implemented. 

3. Establish procedures to require specific, individual user-level 
accountability for IT equipment. In implementing this recommendation, 
consideration should be given to making the unit head, or a designee, 
accountable for shared IT equipment; 
Status: Fully implemented. 

4. Enforce user-level accountability and IT coordinator responsibility 
by taking appropriate disciplinary action, including holding employees 
financially liable, as appropriate, for lost or missing IT equipment; 
Status: Fully implemented. 

5. Establish specific time frames for finalizing a Report of Survey 
once an inventory has been completed so that research on missing items 
is completed expeditiously and does not continue indefinitely without 
meeting formal reporting requirements; 
Status: Fully implemented. 

6. Establish a mechanism to monitor adherence by the San Diego and 
Houston medical centers and other VA organizations, as appropriate, to 
VA policy for performing annual inventories of sensitive items under 
$5,000, including IT equipment; 
Status: Fully implemented. 

7. Require that information resource management and IT Services 
personnel at the various medical centers be given access to the central 
property database and be furnished with hand scanners so they can 
electronically update the property control records, as appropriate, 
during installation, repair, replacement, and relocation or disposal of 
IT equipment; 
Status: Partially implemented. 

8. Require physical security personnel to perform inspections of 
buildings and storage facilities to identify informal and undesignated 
IT storage locations so that security assessments are performed and 
corrective actions are implemented, where appropriate; 
Status: Fully implemented. 

2007 GAO recommendations: Recommendations for the CIO: 

9. Establish a formal policy requiring a review of the results of 
annual inventories to ensure that IT equipment inventory records are 
properly updated and no blank fields remain; 
Status: Fully implemented. 

10. Establish a process for reviewing Reports of Survey for lost, 
missing, and stolen IT equipment items to identify systemic weaknesses 
for appropriate corrective action; 
Status: Open. 

11. Establish and implement a policy requiring information resource 
management personnel and IT coordinators to inform physical security 
officers of the site of all IT equipment storage locations so that 
these store rooms can be subjected to required inspections; 
Status: Fully implemented. 

12. Establish and implement a policy for reviewing the results of 
physical security inspections of IT equipment storerooms and ensure 
that needed corrective actions are completed; 
Status: Fully implemented. 

2007 GAO recommendations: 2004 GAO recommendations related to personal 
property and equipment: 

1. Clarify existing guidance and establish consistent parameters for 
personal property that is required to be accounted for in the property 
control records and that is subject to physical inventory to include 
sensitive property;
Status: Fully implemented. 

2. Provide a more comprehensive list of the type of personal property 
assets that are considered sensitive for accountability purposes; 
Status: Fully implemented. 

3. Direct that physical inventories of personal property be performed 
by the Acquisition and Materiel Management staff or other parties who 
are independent of those with property custodian responsibilities; 
Status: Partially implemented. 

4. Reinforce VA's requirement to attach bar code labels to agency 
personal property; 
Status: Fully implemented. 

5. At the six VA medical centers we visited, determine the location or 
disposition of personal property items not found during our site 
visits; 
Status: Fully implemented. 

6. At the six VA medical centers we visited, review property records to 
identify and correct erroneous or incomplete data fields; 
Status: Open. 

Source: GAO interviews of agency officials and analysis of VA 
documentation. 

[End of table] 

VA's 2007 Physical Inventory Effort Demonstrated Continuing Problems 
with Controls over IT Equipment: 

VA's 2007 departmentwide inventory initially identified approximately 
79,000 missing IT equipment items, underscoring the need to effectively 
implement the new policies and procedures mandated on July 3, 2008. In 
the 6 months following completion of the physical inventory, VA 
facilities undertook efforts to locate or determine reasons for missing 
items. VA was able to locate several thousand of the missing equipment 
items. However, as summarized in table 3, on May 15, 2008, OIT reported 
that VA was unable to locate approximately 62,800 recorded IT equipment 
items, of which over 9,800 could have stored sensitive information. 
Because VA does not know what, if any, sensitive information resided on 
the equipment and when the equipment was lost, notifications to 
potentially affected individuals could not be made in accordance with 
OMB guidance.[Footnote 25] We interviewed VA officials and obtained 
documentation on the VA-wide inventory; however, we did not validate 
the results. According to VA, many of the missing items were old 
equipment and may have been disposed of through VA's excess property 
program. However, because VA facilities had not always documented IT 
equipment disposal for many years, there was no way to determine 
whether any of the missing items were lost or stolen. Further, during 
our work, we discovered that not all IT equipment items were included 
in the departmentwide inventory. Consequently, the numbers of missing 
items could be higher. For example, VA's 2007 physical inventory did 
not include medical equipment with data storage or processing 
capabilities. In addition, IT equipment items not accounted for in the 
OIT equipment inventory listing (EIL) were not subject to the 2007 
physical inventory at some VA facilities. Further, limited completeness 
tests we performed as part of our data reliability procedures at case 
study locations identified some IT equipment items recorded to EILs for 
organizations other than OIT. Prior to the establishment of OIT, EILs 
were aligned organizationally and some IT equipment assigned to other 
EILs had not yet been reassigned to the OIT EIL and, therefore, were 
omitted from the 2007 physical inventory. We discussed our finding with 
OIT officials, and they told us that they had met in June 2008 to 
develop strategies for moving all IT equipment items assigned to other 
EILs to the OIT EIL. 

Table 3: Summary of VA-Wide Fiscal Year 2007 IT Equipment Physical 
Inventory Results as of May 15, 2008: 

VA location: Region 1; (VISNs 18 - 22); 
Total missing items: 10,004; 
Open Reports of Survey items that could have stored sensitive data: 
1,429; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Desktop computers: 1,207; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Main frame systems: 0; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Laptop computers: 153; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Personal digital assistants: 4; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Other: 65. 

VA location: Region 2; (VISNs 12, 15-17, and 23); 
Total missing items: 18,966; 
Open Reports of Survey items that could have stored sensitive data: 
3,089; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Desktop computers: 2,899; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Main frame systems: 20; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Laptop computers: 140; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Personal digital assistants: 3; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Other: 27. 

VA location: Region 3; (VISNs 6 - 11); 
Total missing items: 18,623; 
Open Reports of Survey items that could have stored sensitive data: 
2,736; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Desktop computers: 2,038; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Main frame systems: 72; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Laptop computers: 593; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Personal digital assistants: 22; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Other: 11. 

VA location: Region 4; (VISNs 1 - 5); 
Total missing items: 13,475; 
Open Reports of Survey items that could have stored sensitive data: 
2,037; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Desktop computers: 1,688; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Main frame systems: 12; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Laptop computers: 281; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Personal digital assistants: 22; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Other: 43. 

VA location: Veterans Benefits Administration; 
Total missing items: 8; 
Open Reports of Survey items that could have stored sensitive data: 4; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Desktop computers: 4; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Main frame systems: 0; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Laptop computers: 0; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Personal digital assistants: 0; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Other: 0. 

VA location: Field Program Offices; 
Total missing items: 490; 
Open Reports of Survey items that could have stored sensitive data: 1; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Desktop computers: 0; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Main frame systems: 0; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Laptop computers: 0; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Personal digital assistants: 0; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Other: 1. 

VA location: VA Headquarters Organizations; 
Total missing items: 1,314; Open Reports of Survey items that could 
have stored sensitive data: 570; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Desktop computers: 157; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Main frame systems: 0; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Laptop computers: 197; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Personal digital assistants: 119; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Other: 97. 

VA location: Total; 
Total missing items: 62,880; 
Open Reports of Survey items that could have stored sensitive data: 
9,866; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Desktop computers: 7,993; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Main frame systems: 104; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Laptop computers: 1,364; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Personal digital assistants: 170; 
Types of missing items on open Reports of Survey that could have stored 
sensitive data: Other: 244. 

Source: VA OIT data. 

Notes: According to VA officials, the "main frame systems" category 
refers to mini computers (a largely obsolete term for a class of multi 
user, middle range computers). The "other" category includes thumb 
drives (small, lightweight, removable data storage devices) and 
servers. 

VA officials also stated that the mathematical differences for Region 4 
data may be due to minor reporting variations. 

[End of table] 

In compliance with VA Handbook 7125, General Procedures, VA personnel 
submitted Reports of Survey for IT equipment items that were not 
located during the departmentwide physical inventory and subsequent 
follow-up investigation. A CIO tiger team was responsible for 
monitoring the Report of Survey process and helping to ensure that it 
was completed in a timely manner. Local Boards of Survey were 
responsible for investigating missing items and approving write-offs of 
IT equipment items that could not be located during the departmentwide 
physical inventory. However, as of May 15, 2008, VA had over 43,000 
items that were listed on open Reports of Survey and facility personnel 
were continuing to search for missing items. The 2007 physical 
inventories were a massive undertaking and required significant effort 
over several months to resolve discrepancies. Although we would have 
expected the VA locations that we previously tested to have few, if 
any, missing items, as of May 15, 2008, 6 of the 12 locations reported 
from 1,269 to 6,427 missing IT items; 4 locations had from 115 to 863 
missing IT items; and only 2 locations had fewer than 100 missing 
items. A summary of Reports of Survey data on missing IT equipment and 
the reported original acquisition cost identified in VA's 2007 physical 
inventory related to sites we tested in our 2004, 2007, and 2008 audits 
are presented in appendix IV. 

Tests of IT Inventory Controls at Case Study Locations Identified 
Continuing Weaknesses: 

Our tests of IT equipment inventory controls at four case study 
locations, including three VA HCS and VA headquarters, identified 
continuing control weaknesses related to missing items, lack of 
accountability, and errors in IT equipment inventory records. VA's 2007 
departmentwide physical inventory effort was intended to establish a 
reliable IT equipment inventory baseline going forward. Accordingly, 
our tests excluded from the population of IT equipment thousands of 
items identified as missing during VA's 2007 IT physical inventory 
effort. Given the new baseline, if adequate controls had been in place 
by the end of this inventory process, we would not have expected to 
identify missing items, blank data fields, or inaccurate inventory 
records at our test locations. As previously noted, in July 2008 VA 
mandated early implementation of revised policy related to control of 
IT equipment. Although the early implementation of July 2008 policy 
changes may address IT equipment control weaknesses, this policy was 
not in effect at the time of our tests. Our Standards for Internal 
Control in the Federal Government[Footnote 26] states that a positive 
control environment provides discipline and structure as well as the 
climate that influences the quality of internal control. Further, these 
standards require agencies to establish physical control to secure and 
safeguard vulnerable assets, such as equipment that might be vulnerable 
to risk of loss or unauthorized use, including periodically counting 
the assets and comparing the results to control records. However, our 
tests of IT equipment inventory controls at the four case study 
locations, including three VA HCS and VA headquarters, identified 
continuing problems with (1) inventory control and accountability, (2) 
control over computer hard drives in the excess property disposal 
process, and (3) physical security of IT equipment storage locations. 
For example, our statistical tests at the four locations from February 
through May of 2008 identified significant numbers of missing items, 
several of which could have stored sensitive personal and medical 
information. Overall, our statistical tests and data analysis at the 
four locations found significant failures related to IT inventory 
control and accountability including (1) missing items, (2) blank 
serial numbers, (3) inaccurate information on user organization, (4) 
inaccurate information on user location, and (5) other recordkeeping 
errors. We also identified weaknesses in the controls over computer 
hard drives in the property disposal process at the four test 
locations, involving (1) lack of timely sanitization and disposal, (2) 
inadequate recordkeeping, and (3) physical security. In addition, we 
found physical security weaknesses at IT storage facilities at all four 
locations. These weaknesses increase the risk that sensitive personal 
and medical information could be compromised. 

GAO's IT Inventory Control Tests Found Continuing Problems: 

Our 2008 statistical tests of key IT equipment inventory controls and 
data analysis found significant inventory control failures related to 
(1) missing items, (2) blank serial numbers, (3) inaccurate information 
on user organization, (4) inaccurate information on user location, and 
(5) other recordkeeping errors. As noted previously, VA performed a 
2007 physical inventory of IT equipment. We excluded from our 
populations the missing items identified during VA's physical inventory 
at the four case study locations. Table 4 shows the 2007 VA-wide 
inventory results related to missing items at our four case study 
locations. 

Table 4: Numbers of Missing IT Equipment Items at Four Test Locations 
That Were Identified during the 2007 VA-Wide IT Physical Inventory: 

Inventory results: Date of VA inventory[A]; 
North Texas HCS: December 2007; 
Puget Sound HCS: December 2007; 
Boston HCS: December 2007; 
VA headquarters: January 2008. 

Inventory results: Missing items as of December 31, 2007; 
North Texas HCS: 5,309; 
Puget Sound HCS: 1,383; 
Boston HCS: 3,663; 
VA headquarters: 1,595. 

Inventory results: Missing items located as of May 15, 2008; 
North Texas HCS: 1; 
Puget Sound HCS: 114; 
Boston HCS: 437; 
VA headquarters: 281. 

Inventory results: Missing items not located as of May 15, 2008; 
North Texas HCS: 5,308; 
Puget Sound HCS: 1,269; 
Boston HCS: 3,226; 
VA headquarters: 1,314. 

Inventory results: Missing items as of May 15, 2008, that could have 
stored sensitive information; 
North Texas HCS: 3,351; 
Puget Sound HCS: 443; 
Boston HCS: 725; 
VA headquarters: 608. 

Source: GAO analysis of VA 2007 inventory results at four case study 
locations. 

[A] The dates of the VA inventories are completion dates. 

[End of table] 

Given our exclusions of missing items from the VA inventories, if 
adequate controls had been in place by the end of this inventory 
process, we would not have expected to identify missing items, blank 
data fields, or inaccurate inventory records at our test locations. 
Table 5 shows the results of our statistical tests at the four case 
study locations. We present our results as point estimates of control 
failure rates. Each point estimate has a margin of error, based on a 
two-sided, 95 percent confidence interval, of plus or minus 10 percent 
or less. 

Table 5: Estimated IT Equipment Inventory Control Failure Rates at Four 
Test Locations: 

Control failures: Missing items in sample; 
North Texas HCS: 6%; 
Boston HCS: 3%; 
Puget Sound HCS: 1%; 
VA headquarters: 12%. 

Control failures: Blank serial numbers (actual);
North Texas HCS: 59%; 
Boston HCS: 17%; 
Puget Sound HCS: 1%; 
VA headquarters: 1%. 

Control failures: Incorrect user organization; 
North Texas HCS: 91%; 
Boston HCS: 60%; 
Puget Sound HCS: 76%; 
VA headquarters: 12%. 

Control failures: Incorrect user location; 
North Texas HCS: 46%; 
Boston HCS: 17%; 
Puget Sound HCS: 14%; 
VA headquarters: 33%. 

Control failures: Recordkeeping errors; 
North Texas HCS: 9%; 
Boston HCS: 41%; 
Puget Sound HCS: 9%; 
VA headquarters: 4%. 

Source: GAO analysis of statistical test results. 

Notes: The blank serial number failure rate represents the actual blank 
data field in the population of recorded IT equipment items in each 
location's property system. 

Each of the other estimates is based on our statistical tests, which 
have a margin of error based on a two-sided, 95 percent confidence 
internal of +/-10 percent or less. The details of our statistical 
testing are explained in appendix I. Because the four test locations 
did not record all IT equipment items in their inventory records, our 
estimated failure rates relate to current (recorded) inventory in the 
OIT EIL and not the population of all IT equipment at those locations. 

[End of table] 

Serial number control is essential to accountability for sensitive 
items, such as IT equipment, because it identifies unique items. The 
property bar code label alone is not a sufficient identifier for 
sensitive items because these labels are removable and can be replaced, 
if lost or damaged. In addition, because VA has not yet put in place a 
control for user-level accountability, accurate information on user 
organization and user location is key to maintaining accountability for 
IT equipment items. Further, recordkeeping errors impair the 
reliability of IT inventory information for management decision making. 
For example, inaccurate inventory records on item name, model number, 
and manufacturer impair asset visibility and affect decision making on 
timing of IT equipment upgrades. 

As discussed previously, limited completeness testing performed as part 
of our data reliability procedures identified IT equipment that was not 
included in the populations of recorded IT equipment used for our 
control tests. For example, our completeness tests at two of the four 
locations we tested identified three IT equipment items that were 
recorded to EILs for Psychology, Radiology, and Acquisition and 
Material Management rather than the OIT EIL. Our completeness tests 
also identified one item not recorded to an EIL. VA officials could not 
tell us the quantity of IT equipment items that were not included in 
the four case study IT equipment populations from which we selected our 
samples for testing. 

GAO Tests Identified Significant Numbers of Missing IT Equipment Items: 

Our tests of physical inventory controls from February through May of 
2008 identified 50 missing IT equipment items, including 9 medical 
equipment items. Of the 50 missing items, 34 items could have stored 
sensitive personal and medical information. Because VA does not know 
what, if any, sensitive information resided on the equipment, 
notifications to potentially affected individuals could not be made. 
Following the recent completion of VA inventories of IT equipment and 
adjustment of inventory records at the four test locations, we would 
not have expected to identify any additional missing items. The 
continuing occurrences of missing items indicate that underlying 
control weaknesses have not yet been corrected. Lost and missing IT 
equipment pose both a financial risk as well as a security risk 
associated with sensitive information maintained on computer hard 
drives. The scope of our IT equipment inventory tests was broader than 
VA's IT inventory because we included medical items with data storage 
capability. Medical equipment with data storage capability is not 
currently included in VA's definition of IT equipment. VA CIO officials 
told us they are aware of the need to control medical equipment with 
data storage capability and plan to address control of IT components of 
this equipment. The following discussion summarizes the results of our 
inventory control tests at the four case study locations. 

* North Texas HCS. As noted in table 5, our physical inventory testing 
of the North Texas HCS--which covered the Dallas VA Medical Center and 
Fort Worth Outpatient Clinic components--found high control failure 
rates for all of our inventory control tests. Our existence test 
identified seven missing items, including two that had the capability 
to store sensitive information. One of the missing items was a piece of 
medical equipment. As noted in table 5, we estimated a 6 percent 
failure rate related to the missing items in the recorded population of 
12,172 IT equipment items from which we selected our sample. In 
addition, our analysis of the population of recorded IT equipment found 
that 7,164, or about 59 percent, did not have their serial numbers 
recorded in the physical inventory records. Serial numbers are 
essential to proper identification of sensitive computer equipment. 

* Boston HCS. Our physical inventory testing of the Boston HCS--which 
covered the Brockton, Jamaica Plain, and West Roxbury Campuses-- 
identified 10 missing items, including 7 that had the capability to 
store sensitive information. The 7 missing items included four medical 
analyzers, two microcomputers, and a radiology equipment item. As noted 
in table 5, we estimated a 3 percent failure rate related to the 
missing items in the recorded population of 15,706 IT equipment items 
from which we selected our sample. 

* Puget Sound HCS. The Puget Sound HCS had an estimated failure rate of 
1 percent related to missing items in the recorded population of 11,474 
IT equipment items, allowing us to conclude that the HCS's controls 
over existence of IT equipment inventory are effective. Further, the 
one item we determined to be missing related to a computer monitor 
which did not have the capability to store data. However, the Puget 
Sound HCS had high failure rates for the user information and 
recordkeeping tests. 

* VA Headquarters Organizations. Our physical inventory testing of VA 
headquarters organizations IT equipment items identified an estimated 
failure rate of 12 percent related to missing items in the recorded 
population of 34,735 items. Our population included strata for VHA, 
VBA, OIT, Acquisition and Materiel Management, General Counsel, Policy 
and Planning, and a seventh strata with all other headquarters 
organizations. Table 6 identifies missing IT equipment items in our 
stratified sample by VA headquarters organization. 

Table 6: Number of Missing IT Equipment Items by Headquarters 
Organization and Missing Items That Could Have Stored Sensitive 
Personal Data: 

Test location: Acquisition and Material Management; 
Number of missing IT items in stratified sample: 0 of 10; 
Missing items with data storage capability: 0. 

Test location: General Counsel; 
Number of missing IT items in stratified sample: 0 of 10; 
Missing items with data storage capability: 0. 

Test location: Information and Technology; 
Number of missing IT items in stratified sample: 21 of 96; 
Missing items with data storage capability: 17 of 21. 

Test location: Policy and Planning; 
Number of missing IT items in stratified sample: 0 of 10; 
Missing items with data storage capability: 0. 

Test location: Veterans Health Administration; 
Number of missing IT items in stratified sample: 6 of 95; 
Missing items with data storage capability: 5 of 6. 

Test location: Veterans Benefits Administration; 
Number of missing IT items in stratified sample: 2 of 94; 
Missing items with data storage capability: 1 of 2. 

Test location: All other[A]; 
Number of missing IT items in stratified sample: 3 of 34; 
Missing items with data storage capability: 2 of 3. 

Source: GAO analysis of statistical test results. 

[A] All other includes 13 additional VA headquarters organizations. The 
missing items are from the Construction & Facilities Management Office, 
the Human Resource Management Office, and the Resolution Management 
Office. The missing items with data storage capability are from the 
Human Resource Management Office and the Resolution Management Office. 

[End of table] 

Lack of User-Level Accountability for IT Equipment at Case Study 
Locations: 

As was the case with our 2007 audit of VA IT equipment inventory 
controls, we found a lack of user-level accountability at the four case 
study locations in our current tests. As shown in table 7, VA has not 
yet assured accurate IT inventory records with regard to user 
organization and location. Information on organization and location are 
key to maintaining visibility and accountability for IT equipment 
items. VA property management policy[Footnote 27] and VA Handbook 7002 
include guidelines for holding employees and supervisors pecuniarily 
(financially) liable for loss, damage, or destruction because of 
negligence or misuse of government property. Several VA facilities have 
provided us with current examples where VA employees have been held 
liable for lost and missing IT equipment. Since the completion of our 
tests, VA has mandated early implementation of Handbook 7002 which also 
requires assignment of user-level accountability for most IT equipment 
items. To be effective, the new policy will need to be adequately 
implemented and enforced. 

Table 7: Estimated IT Inventory Control Failure Rates Related to 
Correct User and Location at the Four Test Locations: 

Test location: North Texas HCS; 
Incorrect user organization: 91%; (85% to 95%); 
Incorrect user location: 46%; (36% to 56%). 

Test location: Boston HCS; 
Incorrect user organization: 60%; (50% to 70%); 
Incorrect user location: 17%; (10% to 25%). 

Test location: Puget Sound HCS; 
Incorrect user organization: 76%; (66% to 84%); 
Incorrect user location: 14%; (8% to 22%). 

Test location: VA headquarters organizations; 
Incorrect user organization: 12%; (8% to 17%); 
Incorrect user location: 33%; (26% to 40%). 

Source: GAO analysis of statistical test results. 

Note: The percentages represent point estimates and the two-sided, 95 
percent confidence intervals. 

[End of table] 

The following discussion summarizes the results of our tests for user- 
level accountability. 

* North Texas HCS. The North Texas HCS components we tested had very 
high failure rates related to accountability--an estimated 91 percent 
for correct user organization and an estimated 46 percent for correct 
user location. North Texas HCS staff provided us with evidence of sign- 
out sheets and hand receipts for some IT equipment items such as 
pagers, cellular telephones, and personal digital assistants. However, 
for a majority of IT equipment items, the North Texas HCS did not 
assign user-level accountability through hand receipts or record user 
information in the inventory system. For medical IT equipment items, 
the inventory system included user organizations (e.g., radiology or 
anesthesiology), but did not assign the items to unit heads. 

* Boston HCS. The Boston HCS campuses we tested also had high failure 
rates related to accountability--an estimated 60 percent for correct 
user organization and an estimated 17 percent for correct user 
location. At our exit briefing in May 2008, Boston HCS staff reported 
that they are working with engineering personnel to better identify 
physical locations to aid in the tracking of mobile IT equipment items. 
For traditional IT equipment items, the Boston HCS generally did not 
record user organization in its IT equipment inventory records. 
Further, the Boston HCS generally did not assign user-level 
accountability through recorded user information or hand-receipts with 
the exception of pagers, cell phones, and laptops that have been 
assigned to specific users. For medical IT equipment items, the 
inventory system included user organizations (e.g., radiology or 
anesthesiology). However, the inventory records for some of the 
equipment listed the user as "Medical" or "Nursing" and did not specify 
what unit in the hospital was accountable for the equipment. 

* Puget Sound HCS. The Puget Sound HCS components we tested also had 
high failure rates related to accountability--an estimated 76 percent 
for correct user organization and an estimated 14 percent for correct 
user location. The Puget Sound HCS staff provided us with evidence of a 
locally developed supplemental application for AEMS/MERS, known as the 
Equipment Loan Form (ELF). Puget Sound HCS staff use the ELF to record 
user-level information for mobile IT equipment items (e.g., laptop 
computers) or IT equipment items taken off-site (e.g., a desktop 
computer at an employee's home). However, for traditional IT equipment 
items (e.g., desktop computers, printers, and monitors at HCS 
facilities), the HCS did not assign user-level accountability with 
recorded user information or hand-receipts. For traditional IT 
equipment items, the inventory records generally did not identify the 
user organizations. For medical IT equipment items, the inventory 
system included user organizations (e.g., radiology or anesthesiology), 
but did not assign accountability for shared items to unit heads. 

* VA Headquarters Organizations. Our statistical tests for accurate 
user organization information identified an estimated 12 percent error 
rate for VA headquarters organizations. In addition, our statistical 
tests for correct user information identified an estimated 52 percent 
error rate. Out tests included IT equipment coordinators--who are 
responsible for control of equipment shared by multiple users--and 
individual user employees. In situations where equipment, such as a 
printer, was shared by multiple employees, we based our tests on 
whether the inventory records correctly listed the equipment 
coordinator. In other situations where equipment was in possession and 
use by an individual employee, we tested to see if that employee was 
listed in the property record. Overall, we found 147 errors out of a 
sample of 349 records tested. Regarding user location, our statistical 
tests found an estimated 33 percent error rate related to situations 
where inventory records were not updated to reflect the transfer or 
relocation of IT equipment. 

We also identified inconsistencies in the use of hand receipts for 
assigning user-level accountability of mobile IT equipment that can be 
removed from VA offices for use by employees who are on travel or are 
working at home. For example, we requested hand receipts for 38 mobile 
IT equipment items in our statistical sample that were being used by VA 
headquarters employees. These items either could be or were taken off- 
site. We received 20 hand receipts--4 that were dated after the date of 
our request and 16 that were valid. We did not receive hand receipts 
for the other 18 devices. 

Recordkeeping Errors in IT Equipment Inventory Status and Item 
Description Information: 

As shown in table 8, we found some problems with the accuracy of IT 
equipment inventory records, ranging from an estimated 4 percent at VA 
headquarters to an estimated 41 percent at the Boston HCS. 
Recordkeeping errors included inaccurate information on the status (in 
use, turned-in, disposal), serial numbers, and item descriptions. 
Although the estimated overall failure rates for these tests were lower 
than the failure rates for the other control attributes we tested, they 
were significant for the various recordkeeping attributes we tested at 
the four locations. 

Table 8: Estimated Percentages of Other IT Inventory Recordkeeping 
Failures at Four Test Locations: 

Test location: North Texas HCS; 
Inventory status: 2%; (0% to 7%); 
Serial number: 1%; (0% to 6%); 
Item description: 6%; (3% to 12%); 
Total recordkeeping failures: 9%; (5% to 16%). 

Test location: Boston HCS; 
Inventory status: 8%; (4% to 16%); 
Serial number: 15%; (8% to 24%); 
Item description: 26%; (17% to 36%); 
Total recordkeeping failures: 41%; (32% to 51%). 

Test location: Puget Sound HCS; 
Inventory status: 1%; (0% to 6%); 
Serial number: 3%; (1% to 9%); 
Item description: 5%; (2% to 12%); 
Total recordkeeping failures: 9%; (4% to 16%). 

Test location: VA headquarters organizations; 
Inventory status: 0%; (0% to 2%); 
Serial number: 1%; (0% to 3%); 
Item description: 3%; (1% to 7%); 
Total recordkeeping failures: 4%; (1% to 7%). 

Source: GAO analysis of statistical test results. 

Notes: The percentages represent point estimates and the two-sided, 95 
percent confidence intervals. 

Inventory status includes items in use, turned-in, and disposed. The 
item description includes name, model number, and manufacturer. 

[End of table] 

Accurate IT equipment inventory records are important to management 
decision making because these records are used to determine the types, 
quantities, and age of equipment as well as life cycle and replacement 
time frames. Inaccurate information on the status of items--in service, 
sent for repair, turned in for disposal--masks visibility of items that 
are not available for use and may need to be replaced. Serial number 
errors, such as typographical errors, can impair accountability. 
Further, inaccurate inventory information can cause significant waste 
and inefficiency during physical inventories because it may require 
additional time to locate and verify the status of the items. 

Our review of the data submissions from all four test locations we 
visited identified data consistency and standardization issues with 
recorded names, models, and manufacturers of IT equipment. As a result, 
management at facilities we tested could not tell how many items of a 
certain model they had in service. Because property system data fields 
for item description are free-form and do not provide for data 
standardization, accurate data entry is critical to the identification 
of like items. For example, North Texas HCS inventory data showed one 
Solar 8000 physiological monitor listed as model "soalr 8000," one 
listed as "Solar 800," 26 listed as "Solar 8000," and 70 listed as 
"Solar8000." Although some of these differences appear to be 
typographical errors, when searching for Solar 8000 equipment in the 
database, there is no assurance that other variations of the item name 
would appear in the search results. Further, this situation hindered 
the North Texas HCS staff's identification of medical IT equipment 
items that store or process patient data, requiring us to select a 
second sample and make an additional site visit. At the Boston HCS, we 
found that Samsung monitor model number 150N was referred to 
inconsistently as a "Monitor" 4 times, "Neoware" 3 times, "Samsung 15 
Inch" 33 times, and a "Samsung Monitor" 58 times. VA's policy does not 
address data consistency and standardization. Our Internal Control 
Management and Evaluation Tool[Footnote 28] states that an agency 
should: 

* establish a variety of control activities suited to information 
processing systems to ensure accuracy and completeness, 

* consider whether edit checks are used in controlling data entry, and: 

* consider accuracy control in relation to data entry design features. 

Although this tool is not required to be used, it is intended to 
provide a systematic, organized, and structured approach for federal 
agency use in assessing internal control structure. The failure to 
maintain consistent information on identical items or classes of items 
impairs visibility over IT assets as well as analysis and management 
decision making on existing IT equipment and replacements. 

Weaknesses in Controls over Hard Drives in the Disposal Process: 

Although VA requires that hard drives of IT equipment and medical 
equipment be sanitized prior to disposal to prevent unauthorized 
release of sensitive personal and medical information, we found 
weaknesses in the disposal process at each of our test locations that 
pose a risk that sensitive personal and medical information could be 
compromised.[Footnote 29] Specifically, we found weaknesses related to 
(1) timeliness of data sanitization, (2) adequacy of inventory 
recordkeeping for hard drives removed from their host computers, and 
(3) physical security controls. Currently, VA OIT personnel are not 
cleansing all hard drives in the property disposal process because of 
the guidance from VA's Office of General Counsel to preserve electronic 
information relevant to a class action lawsuit filed against VA in 2007 
(the litigation hold),[Footnote 30] which heightens the need to 
maintain control over the hard drives in the property disposal process. 
However, two case study locations had not performed timely sanitization 
and disposal of hard drives prior to the effective date of the 
litigation hold. Specifically, one of our HCS test locations had stored 
excess hard drives for 3 to 4 years and another HCS test location 
indicated some of its excess hard drives dated back to the 1980s. Two 
HCS locations did not record dates that all hard drives were received. 
VA headquarters organizations did not keep records on hard drives in 
the disposal process prior to February 2008. In addition, adequate 
control over computer hard drives in the property disposal process 
requires accurate and complete recordkeeping, such as recording the 
hard drive serial number along with property identification and serial 
numbers of the original host computer. The ability to identify hard 
drives with the host computer inventory records also provides a means 
to determine the type of data that may have been stored on the hard 
drives. However, two of our four test locations did not record 
sufficient information to identify hard drives with host computers, and 
VA did not have a standard procedure to address this issue. Moreover, 
although storage locations used for excess hard drives are subject to 
access controls in VA Handbook 0730/1, Security and Law Enforcement, 
including motion detection intrusion alarm systems and special key 
(access) controls, three of our four case study locations did not 
comply with these requirements. Weaknesses in the controls over hard 
drives in the property disposal process create an unnecessary risk that 
sensitive personal information protected under the Privacy Act of 1974 
[Footnote 31] and health information accorded additional protections 
under the Health Insurance Portability and Accountability Act of 1996 
(HIPAA)[Footnote 32] could be compromised. The following discussion 
summarizes our findings at the four case study locations. 

* North Texas HCS. We found that the North Texas HCS had weaknesses in 
controls over hard drives in the property disposal process related to 
timely sanitization, inadequate recordkeeping, and lack of access 
controls. According to North Texas HCS staff, they were not sanitizing 
data from any hard drives in the property disposal process at the time 
of our site visit because of the litigation hold related to the class 
action lawsuit. The North Texas HCS also indicated that not all hard 
drives received for sanitization and disposal had been logged in their 
tracking system. However, for those drives that were recorded, we found 
that the hard drive disposal records contained sufficient information 
for identifying hard drives with their original host computers. In 
addition, the disposal records contained the dates on which the hard 
drives were removed from their original host computers. The North Texas 
HCS also maintained a file on certifications of drives that had been 
cleansed. Further, we observed that one of the two storage locations 
storing hard drives had inadequate physical security because of the 
absence of an access control system and intrusion detection alarm 
system, as required by VA Handbook 0730/1. 

* Boston HCS. Our work identified recordkeeping weaknesses in the hard 
drive disposal process at the Boston HCS. Specifically, we found that 
the hard drive disposal records did not contain sufficient information 
for identifying hard drives with their original host computers. 
Further, these records did not indicate the dates on which OIT 
personnel removed hard drives from their original host computers, which 
would impede an assessment of timely sanitization or disposal. The 
Boston HCS also had a practice of storing used hard drives in unsecured 
locations, such as closets and cabinets, and indicated that it had hard 
drives dating back to the 1980's. The Boston HCS Information Security 
Officer is in the process of establishing a centralized storage 
facility for computer hard drives. 

* Puget Sound HCS. We identified control weaknesses in the hard drive 
disposal process at the Puget Sound HCS related to a lack of timely 
sanitization and disposal and inadequate recordkeeping. Although Puget 
Sound HCS officials are holding drives because of the litigation hold 
related to the class action lawsuit, they told us that approximately 
100 of the hard drives we observed had been in storage for 
approximately 3 or 4 years, and therefore are not related to the 
litigation hold. In addition, the hard drive disposal records at the 
Puget Sound HCS did not contain sufficient information for identifying 
hard drives with their original host computers. After our site visit, 
Puget Sound HCS staff provided us with revised hard drive records that 
include property identification numbers and hard drive serial numbers 
and identify hard drives with their original host computers. The Puget 
Sound HCS stored hard drives in a location that was in full compliance 
with physical security requirements in VA Handbook 0730/1. 

* VA Headquarters Organizations. Weaknesses we identified in controls 
involved the lack of recordkeeping prior to February 2008 and the lack 
of access controls of hard drive storage facilities. We found that the 
current hard drive disposal records at VA headquarters contain 
sufficient information for identifying hard drives with their original 
host computers. Specifically, OIT records hard drive information in a 
log that requires, among other elements, the bar code and serial 
numbers of the original host computer from which OIT personnel removed 
the hard drive and the serial number of the hard drive. OIT also 
records the dates on which hard drives are removed from original host 
computers. However, according to OIT officials and our review of the 
hard drive records, VA headquarters did not maintain a central record 
of hard drives prior to February 2008. Further, one of the two hard 
drive storage locations that we observed at VA headquarters had 
inadequate physical security because of the absence of an access 
control system and intrusion detection alarm system, as required by VA 
Handbook 0730/1. 

Physical Security Weaknesses Increase Risk of Loss, Theft, and 
Misappropriation: 

VA Handbook 0730/1, Security and Law Enforcement, prescribes physical 
security requirements for storage of new and used IT equipment. 
Specifically, the handbook requires warehouse-type storerooms to have 
walls to ceiling height with either masonry or gypsum wall board 
reaching the underside of the slab (floor) above. OIT storerooms are 
required to have overhead barricades that prevent "up and over" access 
from adjacent rooms. Warehouse, OIT, and medical equipment storerooms 
are all required to have motion intrusion detection alarm systems that 
detect entry and broadcast an alarm of sufficient volume to cause an 
illegal entrant to abandon a burglary attempt. Finally, OIT storerooms 
also are required to have special key control, meaning room door lock 
keys and day lock combinations that are not master keyed for use by 
others. 

Our investigator's inspection of physical security at officially 
designated IT warehouses and storerooms that held new and used IT 
equipment at the four case study locations found that most of these 
storage facilities met the requirements in VA Handbook 0730/1. However, 
we identified some deficiencies. For example, our investigator found at 
least one room at all four case study locations that did not have an 
electronic access control system or an intrusion detection system. 
Designated IT equipment storage locations at the Seattle Division of 
the Puget Sound HCS met the physical security requirements in VA 
Handbook 0730/1. However, IT workrooms and other informal, undesignated 
storage facilities did not. 

Despite the established physical security requirements, we found 
numerous informal, undesignated IT equipment storage locations that did 
not meet VA physical security requirements. For example, we observed an 
excess property storage room at the North Texas HCS that contained 
boxes of 86 hard drives that needed to be disposed of or sanitized. 
This room lacked a motion detection alarm system and the type of 
locking system prescribed in VA policy. North Texas HCS staff believed 
this room was not subject to the security provisions of VA Handbook 
0730/1 because it was not formally designated as a storeroom or 
warehouse. Our investigator also identified an IT equipment work room 
at the North Texas HCS that lacked adequate physical security measures 
and was considered temporary in nature. In addition, at the Boston HCS, 
our investigator found that security personnel were unaware of several 
temporary storage rooms that contained IT equipment. Some of these 
rooms were initially established by OIT personnel as temporary storage 
areas, but had been in use for several years. Because these storerooms 
had not been formally designated as IT storage facilities, they were 
not subjected to required physical security inspections. Weaknesses in 
physical security heighten the risk that sensitive information 
contained on IT equipment stored in unsecured warehouses and storerooms 
could be compromised. 

Conclusions: 

Our audits and VA's departmentwide physical inventory of IT equipment 
identified pervasive control weaknesses that resulted in tens of 
thousands of missing IT equipment items that were purchased with 
taxpayer dollars. About 9,800 of these items have data storage 
capabilities and therefore pose a risk of improper disclosure of 
veterans' personal and medical information. Further, VA's lack of user- 
level accountability and its failure to maintain accurate and complete 
IT inventory records have hindered efforts to locate missing items. In 
the past year, VA has made significant progress in implementing its 
realigned OIT organization and strengthening policies for control over 
IT equipment. However, ensuring that IT inventory records are complete 
and that they are updated as changes in status occur will be key to 
maintaining accuracy and accountability over IT equipment items. VA's 
continued efforts to establish and maintain control over IT assets will 
be essential if VA is to adequately safeguard those assets from theft, 
loss, and misappropriation and protect sensitive personal and medical 
information of the nation's veterans. 

Recommendations for Executive Action: 

We recommend that the Secretary of Veterans Affairs require the CIO, 
with the support of medical centers and VA headquarters organizations 
we tested and other VA organizations, as appropriate, to take the 
following five actions to improve accountability of IT equipment 
inventory and reduce the risk of disclosure or compromise of sensitive 
personal and medical information: 

* Review property inventory records and confirm that all IT equipment, 
regardless of the organizational equipment inventory listing, is 
identified in the property system. 

* Establish and implement a policy requiring development of 
standardized naming classifications for IT equipment--including item 
name, manufacturer, and model--for recording IT equipment into local 
property inventory systems. 

* Develop a list of medical equipment with data storage capability that 
should be considered as IT equipment for inventory control purposes. 

* Develop a procedure for identifying hard drive serial numbers with 
both the property identification numbers and serial numbers of host 
computers. 

* Revise the definition of IT storage locations in VA's Handbook 0730/ 
1, Security and Law Enforcement, to include informal IT storage 
locations, such as OIT work rooms, and require these locations to be 
included in physical security inspections. 

Agency Comments and Our Evaluation: 

In its July 28, 2008, written comments on our report, which are 
reprinted in appendix III, VA generally agreed with four of our five 
recommendations. VA initially disagreed with our recommendation 
concerning inventory control over medical equipment because it 
interpreted our recommendation as requiring them to redefine (i.e., 
reclassify) medical equipment with data storage capability as IT 
equipment. Instead, our recommendation was directed at developing a 
list of medical equipment with data storage capability and including 
this equipment in physical inventories of IT equipment to provide for 
CIO oversight of these items. We followed up with VA officials to 
clarify the intent of our recommendation. We also made appropriate 
changes to our report to clarify the intent of our recommendation. 

In addition, while agreeing with the intent of our recommendation 
concerning the development of standard naming classifications for its 
IT equipment, VA initially commented that it differed with part of our 
recommendation concerning who should be responsible for the development 
of standardized naming classifications. However, VA's comments indicate 
that it interpreted this recommendation as requiring classification 
action to occur on a decentralized basis at each VA facility. This was 
not our intent. In follow-up discussions with VA officials, we 
explained that our recommendation was directed at taking action to 
establish VA-wide naming conventions that would be used by all VA 
facilities in recording property information in their local inventory 
systems. We clarified the wording in our recommendation accordingly. 

Based on our follow-up meeting, VA officials said they agreed with all 
five of our recommendations. They reiterated actions noted in VA's 
comment letter on steps taken as well as planned actions to improve the 
accuracy and consistency of information in VA's property inventory 
systems. 

We are sending copies of this report to interested congressional 
committees; the Secretary of Veterans Affairs; the Veterans Affairs 
Chief Information Officer; the Under Secretary of Health, Veterans 
Health Administration; and the Director of the Office of Management and 
Budget. We will make copies available to others upon request. In 
addition, this report will be available at no charge on the GAO Web 
site at [hyperlink, http://www.gao.gov]. 

Please contact me at (202) 512-9095 or [email protected], if you of your 
staff have any questions concerning this report. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Major contributors to this report are 
acknowledged in appendix V. 

Signed by: 

Kay L. Daly: 
Acting Director: 
Financial Management and Assurance: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

Given the continuing nature of information technology (IT) equipment 
inventory control problems and their significance, the Chairman and 
Ranking Member of the House Committee on Veterans' Affairs, 
Subcommittee on Oversight and Investigations asked us to perform 
additional follow-up work to determine (1) whether the Department of 
Veterans Affairs (VA) has made progress in implementing our prior 
recommendations for improving internal control over IT equipment and 
(2) the effectiveness of VA's current internal controls to prevent 
theft, loss, or misappropriation of IT equipment. 

We evaluated VA's progress in implementing our previously reported 
recommendations by reviewing agency documentation and interviewing 
property management and Office of Information Technology (OIT) 
officials on actions taken in response to recommendations in our 2007 
and 2004 reports.[Footnote 33] In concert with the Subcommittee request 
that VA perform a departmentwide physical inventory of IT assets, we 
reviewed the results of VA's 2007 physical inventory of IT equipment 
items and VA's process for completing Reports of Survey[Footnote 34] on 
lost and stolen items. We also evaluated policies that include guidance 
for improving accountability of IT equipment and accuracy of inventory 
records, related memorandums, and other documentation, such as action 
summaries. In addition, we interviewed cognizant VA officials about 
specific actions under way or completed, the component organizations 
responsible for those actions, and the status and targeted completion 
dates of those actions. 

Our assessment of the effectiveness of current VA IT equipment 
inventory controls included statistical tests of key control attributes 
at four case study locations, including the health care systems (HCS) 
in North Texas, Boston, and Puget Sound, and VA headquarters 
organizations. We also assessed controls over hard drives in the excess 
property disposal process, and our investigators made physical security 
inspections of IT storage locations at our four case study locations. 

We used as our criteria applicable law and VA policy, as well as our 
Standards for Internal Control in the Federal Government[Footnote 35] 
and our Internal Control Management and Evaluation Tool.[Footnote 36] 
We reviewed applicable program guidance provided by the test locations 
and interviewed officials about their IT inventory processes and 
controls. 

In selecting our case study locations, we chose three geographically 
disparate VA HCS. We also tested inventory at VA headquarters 
organizations as a means of assessing the overall control environment, 
or "tone at the top," as we did in our 2007 audit. Table 9 shows the VA 
locations selected for IT equipment inventory control testing, the 
sample size, and the reported number and value of IT equipment items at 
each location. 

Table 9: Population of VA IT Equipment at Locations Selected for 
Testing: 

VA location: North Texas HCS; 
Sample size and number of VA IT equipment items: 167 of 12,172; 
Value of VA IT equipment inventory: $49,097,365. 

VA location: Boston HCS; 
Sample size and number of VA IT equipment items: 148 of 15,706; 
Value of VA IT equipment inventory: 48,972,306. 

VA location: Puget Sound HCS; 
Sample size and number of VA IT equipment items: 147 of 11,474; 
Value of VA IT equipment inventory: 33,969,881. 

VA location: VA headquarters; 
Sample size and number of VA IT equipment items: 349 of 34,735; 
Value of VA IT equipment inventory: 48,996,332. 

Source: GAO analysis of VA facility IT equipment inventory data. 

Note: The data represent current inventory at the time we selected our 
samples. The reported value is the original acquisition cost, though 
not all items in VA's property management systems included original 
acquisition values. 

[End of table] 

We performed appropriate data reliability procedures, including an 
assessment of each VA test location's procedures for assuring data 
reliability, reasonableness checks on electronic data, and tests to 
assure that IT equipment inventory was sufficiently complete for the 
purposes of our work. As in our 2007 work, we relied on biomedical 
engineers to provide lists of medical equipment with the ability to 
store or process electronic data. We performed analytical procedures to 
confirm reasonableness of the medical equipment listings provided by 
the three HCS. Our analysis determined that the original listing 
submitted by the North Texas HCS staff was incomplete regarding medical 
equipment meeting our definition as IT equipment. We revisited our 
criteria for identifying medical equipment with data storage and 
processing capability with North Texas HCS officials and asked them to 
provide us a new medical equipment listing to support our sampling and 
control tests. Our procedures and test work also identified a 
limitation related to the completeness of IT equipment inventory at our 
four test locations. The VA North Texas and Boston HCS maintained some 
IT equipment records outside of their central listings of IT equipment. 
We also identified evidence that the VA Puget Sound and VA headquarters 
did not record all IT equipment items in the official property records. 
Further, our statistical tests determined that some IT equipment was 
recorded in inventory categories other than IT. We disclosed this 
limitation in the discussion of our test results. As a result of these 
limitations, the population of IT equipment is not known for VA overall 
or by location and we were not able to project our test results to the 
population of IT equipment inventory at each of our four test 
locations. However, we determined that these data were sufficiently 
reliable for us to project our test results to the population of 
current, recorded IT equipment inventory at each of the four locations. 

From the population of current, recorded IT equipment inventory at the 
time of our tests,[Footnote 37] we selected stratified random 
probability samples of IT equipment, including medical equipment with 
data storage capability, at each of the three HCS locations. For the 19 
VA headquarters organizations, we stratified our sample by 6 major 
offices and used a seventh stratum for the remaining 13 organizations. 
With these statistically valid samples, each item in the population for 
the four case study locations had a nonzero probability of being 
included, and that probability could be computed for any item. Each 
sample item for a test location was subsequently weighted in our 
analysis to account statistically for all items in the population for 
that location, including those that were not selected. 

We performed tests on statistical samples of IT equipment inventory 
transactions at each of the four case study locations to assess whether 
the system of internal control over physical IT equipment inventory was 
effective (i.e., provided reasonable assurance of the reliability of 
inventory information and accountability of the individual items). For 
each IT equipment item in our statistical sample, we assessed whether 
(1) the item existed (meaning that the item recorded in the inventory 
records could be located), (2) inventory records and processes provided 
adequate accountability, and (3) identifying information (property 
number, serial number, model number, and location) was accurate. We 
explain the results of our existence tests in terms of control failures 
related to missing items and recordkeeping errors. The results of our 
statistical samples are specific to each of the four test locations and 
cannot be projected to the population of VA IT inventory as a whole. We 
present the results of our statistical samples for each population as 
point estimates representing (1) our projection of the estimated error 
overall for each control attribute and (2) the two-sided, 95 percent 
confidence intervals for the failure rates. 

To assess VA's controls over computer hard drives in the property 
disposal process, at each HCS and VA headquarters we interviewed OIT 
officials, observed hard drive storage locations, and obtained copies 
of VA documentation related to hard drives in the disposal process at 
the time of our site visits. 

Our investigators supported our tests of IT physical inventory controls 
by assessing the physical security of various IT equipment storage 
facilities at each of our four case study locations. As part of our 
assessment, one of our investigators interviewed VA Police at the three 
HCS locations and federal agency law enforcement officers at VA 
headquarters and met with physical security specialists at each of the 
test locations to discuss the results of our physical security 
inspections and the status of VA actions on identified weaknesses. 

We briefed VA managers at our three HCS test locations and VA 
headquarters, including VA HCS directors and OIT and property 
management officials, on the details of our audit, our findings, and 
their implications. On July 15, 2008, we requested comments on a draft 
of this report. We received comments from the Secretary of Veterans 
Affairs on July 28, 2008, and we had follow-up discussions with 
cognizant VA officials. We have summarized VA's comments and our follow-
up discussions in the Agency Comments and Our Evaluation section of 
this report. We conducted this performance audit from January 2008 
through July 2008 in accordance with generally accepted government 
auditing standards. Those standards require that we plan and perform 
the audit to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We performed our investigative work in accordance with standards 
prescribed by the President's Council on Integrity and Efficiency. 

[End of section] 

Appendix II: Status of VA Actions on Recommendations in GAO's July 2007 
and 2004 Reports: 

Table 10 lists the 12 recommendations from our 2007 report, summarizes 
VA's actions, and presents the status of each recommendation. VA 
property officials from the Office of Acquisition and Logistics (OAL) 
and officials in the Office of Information and Technology (OIT) worked 
together to create a new VA Handbook 7002, Logistics Management 
Procedures, which updates VA policy for property management, including 
specific policy pertaining to information technology (IT) equipment. 
The Assistant Secretary for Management mandated early implementation of 
VA Handbook 7002 on July 3, 2008. 

Table 10: GAO's 2007 Report Recommendations and Status of VA Actions as 
of July 2008: 

2007 VA-wide recommendations: 

GAO recommendation: 
1. Revise VA property management policy and procedures to include 
detailed requirements for what transactions must be recorded to 
document inventory events and to clearly establish individual 
responsibility for recording all essential transactions in the property 
management process; 
VA action on the recommendation: VA mandated early implementation of 
Handbook 7002, Logistics Management Procedures, which requires the 
recording of key inventory events, including the recording of IT 
equipment information upon receipt, changes in item status, and turn-in 
and disposal; 
Status of GAO recommendation: Fully implemented. 

GAO recommendation: 
2. Revise VA purchase card policy to require purchase card holders to 
notify property management officials of IT equipment and other property 
items acquired with government purchase cards at the time the items are 
received so that they can be recorded in property management systems; 
VA action on the recommendation: VA mandated early implementation of VA 
Handbook 4080, Government Purchase Card Procedures, which requires 
purchase cardholders to notify the property officer of IT equipment 
acquired with the purchase card so that these items may be recorded in 
the property management system. Handbook 7002 includes the same 
requirement; 
Status of GAO recommendation: Fully implemented. 

GAO recommendation: 
3. Establish procedures to require specific, individual user-level 
accountability for IT equipment. In implementing this recommendation, 
consideration should be given to making the unit head, or a designee, 
accountable for shared IT equipment; 
VA action on the recommendation: Handbook 7002 requires employees to 
sign for IT equipment assigned exclusively for individual use and 
department heads or service chiefs to sign for shared IT equipment; 
Status of GAO recommendation: Fully implemented. 

GAO recommendation: 
4. Enforce user-level accountability and IT coordinator responsibility 
by taking appropriate disciplinary action, including holding employees 
financially liable, as appropriate, for lost or missing IT equipment; 
VA action on the recommendation: VA facilities provided several fiscal 
year 2008 examples of bills sent to VA personnel for lost and damaged 
IT equipment items; 
Status of GAO recommendation: Fully implemented. 

GAO recommendation: 
5. Establish specific time frames for finalizing a Report of Survey 
once an inventory has been completed so that research on missing items 
is completed expeditiously and does not continue indefinitely without 
meeting formal reporting requirements; 
VA action on the recommendation: In May 2008, OAL issued an information 
letter implementing immediately an overall Report of Survey timeline of 
60 days. In addition, Handbook 7002 requires the Report of Survey 
process to be completed within 60 days; 
Status of GAO recommendation: Fully implemented. 

GAO recommendation: 
6. Establish a mechanism to monitor adherence by the San Diego and 
Houston medical centers and other VA organizations, as appropriate, to 
VA policy for performing annual inventories of sensitive items under 
$5,000, including IT equipment; 
VA action on the recommendation: VA established the Office of 
Information Technology Oversight and Compliance in February 2007, which 
reviewed compliance with established VA policy. VA also established a 
tiger team in May 2007, which reviewed the results of the VA-wide 2007 
physical inventory of IT equipment; 
Status of GAO recommendation: Fully implemented. 

GAO recommendation: 
7. Require that information resource management and IT Services 
personnel at the various medical centers be given access to the central 
property database and be furnished with scanners so they can 
electronically update the property control records, as appropriate, 
during installation, repair, replacement, and relocation or disposal of 
IT equipment; 
VA action on the recommendation: VA has granted OIT personnel access to 
the central property database (AEMS/MERS). Furthermore, VA has begun to 
furnish OIT employees with hand scanners that may be used to scan 
equipment during routine maintenance. VA reports that it is currently 
assessing how many hand scanners various VA facilities need; 
Status of GAO recommendation: Partially implemented. 

GAO recommendation: 
8. Require physical security personnel to perform inspections of 
buildings and storage facilities to identify informal and undesignated 
IT storage locations so that security assessments are performed and 
corrective actions are implemented, as appropriate; 
VA action on the recommendation: In September 2007, VA established 
Handbook 6500, Information Security Program, requiring that the 
Information Security Officer conduct and document physical security 
reviews as part of the annual review of the system security plan to 
help analyze any new or existing physical security vulnerabilities; 
Status of GAO recommendation: Fully implemented. 

2007 Recommendations for the CIO: 

GAO recommendation: 
9. Establish a formal policy requiring a review of the results of 
annual inventories to ensure that IT equipment inventory records are 
properly updated and no blank fields remain; 
VA action on the recommendation: VA Handbook 7002 requires the 
accountable officer to ensure that property records have been updated 
correctly at the completion of each physical inventory and that no 
blank fields remain; 
Status of GAO recommendation: Fully implemented. 

GAO recommendation: 
10. Establish a process for reviewing Reports of Survey for lost, 
missing, and stolen IT equipment items to identify systemic weaknesses 
for appropriate corrective action; 
VA action on the recommendation: VA's OIT is working with OAL and the 
Office of Prosthetics and Clinical Logistics to develop an integrated 
approach for Report of Survey monitoring. OIT's tiger team also is 
reviewing VA facilities' internal controls for IT equipment and the 
results of the 2007 physical inventory, which included IT equipment 
items submitted for Report of Survey processing. However, VA has not 
yet established a formalized process for reviewing Reports of Survey; 
Status of GAO recommendation: Open. 

GAO recommendation: 
11. Establish and implement a policy requiring information resource 
management personnel and IT coordinators to inform physical security 
officers of the site of all IT equipment storage locations so that 
these store rooms can be subjected to required inspections; 
VA action on the recommendation: VA Handbook 7002 requires that 
facilities' Security Management Committees (SMC) develop local 
strategic security plans as guides to identify physical and procedural 
security needs. Handbook 7002 requires the IT custodial officer to 
provide the facility information security officer a list of all IT 
storage areas and that access to IT equipment storage areas be provided 
to facility security personnel for use in performing regular 
inspections; 
Status of GAO recommendation: Fully implemented. 

GAO recommendation: 
12. Establish and implement a policy for reviewing the results of 
physical security inspections of IT equipment storerooms and ensure 
that needed corrective actions are completed; 
VA action on the recommendation: VA Handbook 7002 states that the IT 
custodial officer will coordinate with the SMC to develop a plan to 
address IT-related security requirements identified in the strategic 
security plan. The handbook also requires the IT custodial officer to 
develop a plan to address all corrective actions identified in the 
Report of Physical Security Inspection of IT Equipment Store Rooms 
within 10 days of receipt of the report from security personnel; 
Status of GAO recommendation: Fully implemented. 

Source: GAO interviews of agency officials and analysis of VA 
documentation. 

[End of table] 

Table 11 lists the 6 property-related recommendations from our 2004 
report, summarizes VA's actions, and presents the status of each 
recommendation. 

Table 11: GAO's 2004 Report Recommendations and Status of VA Actions as 
of July 2008: 

2004 Property-related recommendations: 

GAO recommendation: 
1. Clarify existing guidance and establish consistent parameters for 
personal property that is required to be accounted for in the property 
control records and that is subject to physical inventory to include 
sensitive property; 
VA action on the recommendation: In October 2005, VA issued a 
modification to VA Handbook 7127/4, Materiel Management Procedures, 
which stated that sensitive items, regardless of cost, should be 
included in annual equipment inventories. In addition, the guidance 
provided an expanded list of eight categories of sensitive items; 
Status of GAO recommendation: Fully implemented. 

GAO recommendation: 
2. Provide a more comprehensive list of the type of personal property 
assets that are considered sensitive for accountability purposes; 
VA action on the recommendation: In October 2005, VA issued a 
modification to VA Handbook 7127/4, Materiel Management Procedures, 
which provided an expanded list of eight categories of sensitive items, 
including handheld and portable communication devices, printers, 
desktop and laptop computers, and video imaging equipment; 
Status of GAO recommendation: Fully implemented. 

GAO recommendation: 
3. Direct that physical inventories of personal property be performed 
by the Acquisition and Materiel Management staff or other parties who 
are independent of those with property custodian responsibilities; 
VA action on the recommendation: In October 2005, VA issued a 
modification to Handbook 7127/4, Materiel Management Procedures, which 
required that all completed inventories have a 5 percent verification 
inventory conducted by an accountable officer or designee, a 
disinterested party, and the custodial officer or designee. However, 
the handbook did not direct that the independent party should perform 
the physical inventories, and 5 percent verifications do not suffice 
for independent inventories. In addition, VA has begun to furnish OIT 
employees with hand scanners that may be used to scan equipment. VA 
reports that it is currently assessing how many hand scanners its 
facilities need. The use of hand scanners for capturing IT equipment 
bar code label and serial number information during physical 
inventories would help achieve necessary independence; 
Status of GAO recommendation: Partially implemented. 

GAO recommendation: 
4. Reinforce VA's requirement to attach bar code labels to agency 
personal property; 
VA action on the recommendation: During a June 2008 property conference 
call with property management personnel from VA field locations across 
the nation, OAL personnel reinforced VA's requirement to attach bar 
code labels to agency personal property; 
Status of GAO recommendation: Fully implemented. 

GAO recommendation: 
5. For the six sites we visited in 2004, determine the location or 
disposition of personal property items not found during our site 
visits; 
VA action on the recommendation: VA reported in its Fiscal Year 2006 
Budget Submission that the six identified medical centers were directed 
to conduct inventories of equipment inventory listings by March 31, 
2005. VA further reported that upon completion of the inventories, the 
network director must submit certification that inventories were 
accomplished, any discrepancies were identified, and required Reports 
of Survey were prepared on items that could not be found; 
Status of GAO recommendation: Fully implemented. 

GAO recommendation: 
6. For the six sites we visited in 2004, review property records to 
identify and correct erroneous or incomplete data fields; 
VA action on the recommendation: In June 2008, VA's Office of 
Information and Technology Oversight and Compliance planned to review 
the erroneous and blank data fields at the six medical centers we 
visited. In addition, VA officials indicated that they plan to review 
the data fields at a national level using a data warehouse and provide 
reports to the six sites by September 1, 2008. However, VA has not yet 
reviewed or corrected these erroneous and blank data fields; 
Status of GAO recommendation: Open. 

Source: GAO interviews of agency officials and analysis of VA 
documentation. 

[End of table] 

[End of section] 

Appendix III: Comments from the Department of Veterans Affairs: 

The Secretary Of Veterans Affairs: 
Washington: 

July 28, 2008: 

Ms. Kay L. Daly: 
Acting Director: 
Financial Management and Assurance: 
U. S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Ms. Daly: 

The Department of Veterans Affairs (VA) has reviewed your draft report, 
Veterans Affairs: Continued Action Needed to Reduce IT Equipment Losses 
and Correct Control Weaknesses (GAO-08-918), and generally agrees with 
all but one of the recommendations. VA does not agree with the 
recommendation that medical devices with data storage capability be 
considered information technology (IT) equipment for the purpose of 
inventory control. Not only is this counter to the Joint Commission 
accreditation requirements, a separate inventory of medical equipment 
is a necessity to address the Food and Drug Administration's recalls 
and other hazard notifications related to patient safety. VA does agree 
that sensitive information must be protected, and VA has established 
policy to deal with this issue. VA agrees with GAO's recommendation 
regarding the development of a standardized naming classification for 
IT equipment, but differs on the responsibility for implementing the 
recommendation. 

The enclosure specifically addresses GAO's recommendations and provides 
additional discussion and comments to the draft report. VA appreciates 
the opportunity to comment on your draft report. 

Sincerely yours. 

Signed by: 
James B. Peake, M.D. 

Enclosure: 

Department of Veterans Affairs (VA) Comments to Government 
Accountability Office (GAO) Draft Report: 

Continued Action Needed To Reduce It Equipment Losses And
Correct Control Weaknesses (GAO-08-918): 

GAO recommends that the Department of Veterans Affairs take the 
following five actions: 

* Review property inventory records and confirm that all IT equipment, 
regardless of the organizational equipment inventory listing, is 
identified in the property system. 

Concur- VA Handbook 7002 requires the senior information technology 
(IT) official at each facility to review property inventory records and 
ensure that all IT equipment is identified in the VA property system. 
The senior IT official is responsible for establishing and implementing 
a process to identify, account for, track, monitor, inventory, and 
dispose of IT items that are capable of storing information 
electronically but are not assigned catalog stock numbers (CSN). The 
senior IT official will coordinate perpetual inventory activities as 
well as schedule and conduct an annual physical inventory of expendable 
IT items to verify the accuracy of the data contained in the sensitive 
expendable IT item listing (SEIIL). The senior IT official will 
document and report any discrepancies identified during inventory 
activities. 

The senior IT official will also coordinate perpetual inventory 
activities and conduct an annual physical inventory of IT equipment 
items assigned a CSN in accordance with the schedule established by 
Logistic Services to verify the accuracy of the data contained in the 
equipment inventory listing (EIL). The senior IT official is 
responsible for documenting and reporting any discrepancies identified 
during inventory activities. The annual EIL/SEIIL inventories include 
an audit to ensure accurate documentation in the inventory tracking 
systems. Following an inventory of IT items, or whenever an IT 
equipment item is identified as not accounted for', the senior IT 
official will review the documentation for discrepancies and coordinate 
with Logistic Services regarding a determination as to the need for 
report of survey (ROS) action. IT items on ROS must be resolved within 
60 days of initiation. Any exceptions will be documented in a plan of 
action and approved by the facility director. The facility director is 
accountable for all equipment in their facility and is responsible for 
ensuring adherence to all applicable policies. Performance measures are 
being established for Office of Information and Technology (OI&T) 
regional directors and Veterans Health Administration (VHA) facility 
directors related to the accountability of IT equipment under their 
cognizance. 

* Establish and implement a policy requiring facility CIOs to develop 
standardized naming classifications for IT equipment, including item 
name, manufacturer, and model, for recording IT equipment into local 
property inventory systems. 

Partially Concur-VA concurs that standardized naming classifications 
are required to support tracking of IT equipment. However, VA does not 
concur that the standardized naming classifications should be 
established at the facility level. VA employs a cataloging process to 
categorize equipment using CSNs. The CSNs are assigned according to the 
schema established in VA Catalog No. 3, Section V, which provides a 
description for each CSN. This provides for a standardized naming 
classification system that applies across the Department. 

In the Fall of 2006 a group of subject matter experts assembled to 
develop standard operating procedures (SOP) for Veterans Health 
Administration (VHA) on asset management. These SOPs were issued March 
8, 2007. One of the SOPs (AM 1 SOP) specifically addresses the data 
elements required to be included in the local property inventory system 
maintained in the Automated Engineering Management System/Medical 
Equipment Repair Service (AEMS/MERS) system. These data elements 
include item name, manufacturer, and model number/designation for each 
item of IT equipment. 

Prosthetics and Clinical Logistics Office (P&CLO) will be assessing 
compliance with this requirement by September 2008. Monthly reports 
will be generated and analyzed to identify facilities with incomplete 
data. P&CLO will send notifications to OI&T regional directors and VI-
IA facility directors of non-compliant sites. Copies of reports will 
also be provided to the IT Asset Advisory Group (ITAAG) for trend 
analysis and to support the identification of systemic issues requiring 
corrective action. 

* Develop a list of medical equipment with data storage capability that 
should be considered as IT equipment for inventory control purposes. 

Partially Concur - VA does concur with maintaining an inventory of all 
equipment, including medical for inventory control purposes. In 
accordance with VA Handbook 7002, the facility director is responsible 
for ensuring that all nonexpendable equipment items, and sensitive 
equipment items regardless of cost, are entered into the VA property 
system for inventory control purposes. The Joint Commission verifies 
that medical devices are subjected to inspection before deployment; 
this inspection process includes the entry of these items into the 
property system. VA Handbook 6500 addresses the requirements associated 
with the management and protection of sensitive information and applies 
to all organizational components of the Department. 

VA does not concur with redefining medical equipment as IT equipment. 
Joint Commission accreditation requirements include maintenance of a 
separate and distinct medical equipment inventory to manage and 
document quality assurance activities. Medical devices are highly 
regulated by the Food and Drug Administration and a separate and 
accurate inventory is a necessity to address recall and other hazard 
notifications to minimize potential impact on patient safety. 

* Develop a procedure for identifying hard drive serial numbers with 
both the property identification numbers and serial numbers of host 
computers. 

Concur- VA agrees that hard drives need to be tracked and matched to 
host computers. OI&T and P&CLO will develop a procedure for identifying 
hard drive serial numbers with both the property identification numbers 
and serial numbers of host computers by the end of fiscal year 2008. 
This procedure will delineate organizational responsibilities and the 
process for ensuring appropriate mapping of hard drives to host 
computers. 

* Revise the definition of IT storage locations in VA's Handbook 
0730/1, Security and Law Enforcement, to include informal IT storage 
locations, such as OIT work rooms and require these locations to be 
included in physical security inspections. 

Concur- OI&T will work with Security and Law Enforcement to revise the 
definition of IT storage locations to include informal IT storage 
locations. Meanwhile, IT custodial officers are responsible for 
identifying all IT storage areas for security personnel. The following 
requirements are included in VA Handbook 7002: 

The IT Custodial Officer will provide a list of all IT storage areas to 
the Facility IT Security Officer (FISO). This list will be updated as 
necessary to ensure it is maintained current.... 

Access to IT equipment storage locations will be provided to facility 
security personnel to perform regular inspections. Security personnel 
will provide a Report of Physical Security inspection of IT Equipment 
Store Rooms to the IT Custodial Officer at the facility within 10 days 
of completing a physical security inspection. The report will document 

[End of section] 

Appendix IV: Reports of Survey on Missing IT Equipment for VA Case 
Study Locations: 

Table 12 summarizes Report of Survey[Footnote 38] information related 
to VA's 2007 physical inventories of IT equipment for the 12 case study 
locations covered in our 2004, 2007, and 2008 audits. We used the 
original acquisition value as the best available data for the cost of 
IT equipment items that could not be located during VA's 2007 physical 
inventory. 

Table 12: Summary of Reports of Survey as of May 15, 2008, for Case 
Study Locations Covered in GAO Audits: 

Location: Atlanta medical center; 
Date physical inventory completed: Aug. 2007; 
Dates VA closed Reports of Survey: Apr. 2008; 
Items missing as of 12/31/07: 198; 
Items missing as of 5/15/08: 129; 
Reported original acquisition value of missing items as of 5/15/08: 
$220,115. 

Location: Boston healthcare system; 
Date physical inventory completed: Dec. 2007; 
Dates VA closed Reports of Survey: Ongoing; 
Items missing as of 12/31/07: 3,663; 
Items missing as of 5/15/08: 3,226; 
Reported original acquisition value of missing items as of 5/15/08: 
$5,026,271. 

Location: North Texas healthcare system; 
Date physical inventory completed: Dec. 2007; 
Dates VA closed Reports of Survey: Ongoing; 
Items missing as of 12/31/07: 5,309; 
Items missing as of 5/15/08: 5,308; 
Reported original acquisition value of missing items as of 5/15/08: 
$5,615,070. 

Location: Washington D.C. medical center; 
Date physical inventory completed: Sept. 2007; 
Dates VA closed Reports of Survey: May 2008; 
Items missing as of 12/31/07: 139; 
Items missing as of 5/15/08: 115; 
Reported original acquisition value of missing items as of 5/15/08: 
$120,048. 

Location: Houston medical center; 
Date physical inventory completed: Dec. 2007; 
Dates VA closed Reports of Survey: Ongoing; 
Items missing as of 12/31/07: 6,485; 
Items missing as of 5/15/08: 6,427; 
Reported original acquisition value of missing items as of 5/15/08: 
$7,737,917. 

Location: Indianapolis medical center; 
Date physical inventory completed: Dec. 2007; 
Dates VA closed Reports of Survey: May 2008; 
Items missing as of 12/31/07: 113; 
Items missing as of 5/15/08: 82; 
Reported original acquisition value of missing items as of 5/15/08: 
$29,986. 

Location: Los Angeles medical center; 
Date physical inventory completed: Dec. 2007; 
Dates VA closed Reports of Survey: Ongoing; 
Items missing as of 12/31/07: 1,767; 
Items missing as of 5/15/08: 1,648; 
Reported original acquisition value of missing items as of 5/15/08: 
$1,273,144. 

Location: VA headquarters; 
Date physical inventory completed: Jan. 2008; 
Dates VA closed Reports of Survey: Ongoing; 
Items missing as of 12/31/07: 1,595; 
Items missing as of 5/15/08: 1,314; 
Reported original acquisition value of missing items as of 5/15/08: 
$3,316,951. 

Location: San Diego healthcare system; 
Date physical inventory completed: Dec. 2007; 
Dates VA closed Reports of Survey: Feb. 2008; 
Items missing as of 12/31/07: 930; 
Items missing as of 5/15/08: 863; 
Reported original acquisition value of missing items as of 5/15/08: 
$717,805. 

Location: San Francisco medical center; 
Date physical inventory completed: Dec. 2007; 
Dates VA closed Reports of Survey: May 2008; 
Items missing as of 12/31/07: 39; 
Items missing as of 5/15/08: 39; 
Reported original acquisition value of missing items as of 5/15/08: 
$105,298. 

Location: Puget Sound healthcare system; 
Date physical inventory completed: Dec. 2007; 
Dates VA closed Reports of Survey: Ongoing; 
Items missing as of 12/31/07: 1,383; 
Items missing as of 5/15/08: 1,269; 
Reported original acquisition value of missing items as of 5/15/08: 
$1,536,840. 

Location: Tampa medical center; 
Date physical inventory completed: Dec. 2007; 
Dates VA closed Reports of Survey: Ongoing; 
Items missing as of 12/31/07: 815; 
Items missing as of 5/15/08: 690; 
Reported original acquisition value of missing items as of 5/15/08: 
$638,946. 

Source: GAO analysis of VA-reported 2007 inventory results and related 
Reports of Survey data. 

[End of table] 

[End of section] 

Appendix V GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Kay L. Daly, (202) 512-9095 or [email protected]: 

Acknowledgments: 

In addition to the contact named above, Gayle L. Fischer, Assistant 
Director; Andrew O'Connell, Assistant Director and Supervisory Special 
Agent; F. Abe Dymond, Assistant General Counsel; Doreen S. Eng, 
Assistant Director; Bamidele A. Adesina; James D. Ashley; Deyanna J. 
Beeler; Francine M. DelVecchio; Lauren S. Fassler; Steven M. Koons; 
Kelly A. Richburg; Ramon J. Rodriguez, Special Agent; Daniel E. Silva; 
Chevalier C. Strong; Danietta S. Williams; and Matthew L. Wood made key 
contributions to this report. 

[End of section] 

Footnotes: 

[1] GAO, VA Medical Centers: Internal Control over Selected Operating 
Functions Needs Improvement, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-04-755] (Washington, D.C.: July 21, 2004). 

[2] GAO, Veterans Affairs: Inadequate Controls over IT Equipment at 
Selected VA Locations Pose Continuing Risk of Theft, Loss, and 
Misappropriation, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-
505] (Washington, D.C.: July 16, 2007). 

[3] For the purpose this audit, we included in our definition of IT 
equipment any equipment capable of storing or processing data, 
regardless of how VA classifies it. Therefore, medical devices that 
would typically not be classified as IT equipment, but may capture, 
process, or store patient data, were considered IT equipment for this 
audit. For example, we included electrocardiograph, anesthesiology, and 
ultrasound equipment in our tests. 

[4] Our 2007 audit covered medical centers in Washington, D.C.; 
Indianapolis, Ind.; San Diego, Calif.; and VA headquarters 
organizations. Our 2004 audit covered medical centers in Atlanta, Ga.; 
Houston, Tex.; Los Angeles, Calif.; San Francisco, Calif.; Tampa, Fla.; 
and Washington, D.C. 

[5] Each of the three HCS locations included multiple medical 
facilities. 

[6] Our tests of VA headquarters consist of separate strata for 6 
organizations and a seventh strata for all other organizations. 

[7] The Report of Survey system is the method used by VA to obtain an 
explanation of the circumstances surrounding loss, damage, or 
destruction of government property other than through normal wear and 
tear. 

[8] As used in this report, the term excess property refers to property 
that a federal agency leases or owns that is not required to meet 
either the agency's needs or any other federal agency's needs. 

[9] The population of IT equipment items for the four test locations 
did not include the population of all IT equipment at those locations. 
Therefore, we can project our test results to the population of 
current, recorded IT equipment inventory at each location, but not the 
population of all IT equipment. Our tests were specific to each of the 
case study locations and cannot be projected to VA IT equipment 
inventory as a whole. 

[10] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-505]. 

[11] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-755]. 

[12] The Report of Survey system is the method used by VA to obtain an 
explanation of the circumstances surrounding loss, damage, or 
destruction of government property other than through normal wear and 
tear. 

[13] The Assistant Secretary for Management's July 3, 2008, information 
letter states that although the draft handbook was under final review 
within VA, the contents of the handbook "are of such importance that 
the policies and procedures need to be implemented as soon as 
possible." 

[14] See Office of Management and Budget (OMB), Safeguarding Against 
and Responding to the Breach of Personally Identifiable Information, 
Memorandum (Washington, D.C: May 22, 2007). This memorandum requires 
agencies to develop and implement an information breach notification 
policy. 

[15] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). This document was prepared to 
fulfill our statutory requirement under 31 U.S.C. 3512 (c), (d), 
commonly known as the Federal Managers' Financial Integrity Act of 
1982, to issue standards that provide the overall framework for 
establishing and maintaining internal control. 

[16] Each of these estimates has a margin of error, based on a two- 
sided, 95 percent confidence interval, of +/-10 percent or less. 

[17] We included medical equipment with the capability to store or 
process data in our tests; such items were excluded from the 2007 VA- 
wide physical inventory of IT equipment. 

[18] For the purpose of this audit, we include in our definition of IT 
equipment any equipment capable of storing or processing data, 
regardless of how VA classifies it. Therefore, medical devices that 
would typically not be classified as IT equipment, but may capture, 
process, or store patient data, were considered IT equipment for this 
audit. For example, we included electrocardiograph, anesthesiology, and 
ultrasound equipment in our tests. 

[19] 44 U.S.C. ï¿½ï¿½ 3101 and 3102, and implementing NARA regulations at 
36 C.F.R. ï¿½ 1222.38. This is consistent with the more general 
requirement for agencies to establish internal controls under 31 U.S.C. 
ï¿½ 3512 (c), (d), commonly known as the Federal Managers' Financial 
Integrity Act of 1982 (FMFIA), and [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/AIMD-00-21.3.1]. 

[20] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-505]. 

[21] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-755]. 

[22] A tiger team is a quick response team formed to determine causes 
of identified problems and develop corrective action plans. 

[23] The Report of Survey system is the method used by VA to obtain an 
explanation of the circumstances surrounding loss, damage, or 
destruction of government property other than through normal wear and 
tear. 

[24] This policy combines information originally contained in VA 
Handbooks 7125, General Procedures, and 7127, Materiel Management 
Procedures, and would rescind these policies when approved in final 
form. 

[25] See OMB, Safeguarding Against and Responding to the Breach of 
Personally Identifiable Information, Memorandum (Washington, D.C: May 
22, 2007). This memorandum requires agencies to develop and implement 
an information breach notification policy. 

[26] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1]. 

[27] VA Handbook 7125, Materiel Management General Procedures, ï¿½ 5003 
(Oct. 11, 2005). 

[28] GAO, Internal Control Management and Evaluation Tool, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-01-1008G] (Washington, D.C.: 
August 2001). This document was prepared to assist agencies in 
maintaining or implementing effective internal control and, when 
needed, to help determine what, where, and how improvements can be 
implemented. 

[29] VA OIT personnel and contractors follow National Institute of 
Standards and Technology Special Publication 800-88 guidelines, which 
require performing three separate erasures for media sanitization. 

[30] On August 21, 2007, VA distributed a "litigation hold" memorandum 
that explained issues in Veterans for Common Sense v. Peake, a class 
action lawsuit filed in July 2007 against VA, and VA's ongoing 
obligation to identify and preserve electronic information relevant to 
those issues. VA directed employees not to preserve all information, 
only information relevant to the lawsuit. 

[31] Privacy Act of 1974, codified, as amended, at 5 U.S.C. ï¿½ 552a. 

[32] HIPAA, Pub. L. No. 104-191, ï¿½ 264, 110 Stat. 1936, 2033-34 (Aug. 
21, 1996). The HHS Secretary has prescribed standards for safeguarding 
health information in the HIPAA Medical Privacy Rule. See 45 C.F.R. pt. 
164. 

[33] GAO, Veterans Affairs: Inadequate Controls over IT Equipment at 
Selected VA Locations Pose Continuing Risk of Theft, Loss, and 
Misappropriation, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-
505] (Washington, D.C.: July 16, 2007) and GAO, VA Medical Centers: 
Internal Control over Selected Operating Functions Needs Improvement, 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-755] (Washington, 
D.C.: July 21, 2004). 

[34] The Report of Survey system is the method used by VA to obtain an 
explanation of the circumstances surrounding loss, damage, or 
destruction of government property other than through normal wear and 
tear. 

[35] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). This document was prepared to 
fulfill our statutory requirement under 31 U.S.C. 3512 (c), (d), 
commonly known as the Federal Managers' Financial Integrity Act of 
1982, to issue standards that provide the overall framework for 
establishing and maintaining internal control. 

[36] GAO, Internal Control Management and Evaluation Tool, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-01-1008G] (Washington, D.C.: 
August 2001). This document was prepared to assist agencies in 
maintaining or implementing effective internal control and, when 
needed, to help determine what, where, and how improvements can be 
implemented. Although this tool is not required to be used, it is 
intended to provide a systematic, organized, and structured approach to 
assessing the internal control structure. 

[37] The population of IT equipment from which we selected our samples 
excluded IT equipment items identified as missing at the time of each 
of our tests. 

[38] The Report of Survey system is the method used by VA to obtain an 
explanation of the circumstances surrounding loss, damage, or 
destruction of government property other than through normal wear and 
tear. 

[End of section] 

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Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: [email protected]: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Ralph Dawn, Managing Director, [email protected]: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, D.C. 20548: 

Public Affairs: 

Chuck Young, Managing Director, [email protected]: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: 

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