Failure to Act Increases the Risk of Waste, Fraud, and Abuse of Funds Directed to Caring for America’s Veterans
Washington, D.C. – On Wednesday, July 28, 2010, House Committee on Veterans’ Affairs Chairman Bob Filner (D-CA) conducted a hearing to assess recent actions taken by the Department of Veterans Affairs (VA) to improve its oversight of procurement practices. Specifically, the Committee reviewed the procurement mechanism known as miscellaneous obligations (MO), which is used when the amount to be spent is uncertain, but funds need to be obligated to ensure they are available when the actual expenditures occur. In fiscal year 2009, the VA spent almost $12 billion on miscellaneous obligations, up nearly $6 billion from reported fiscal year 2007 levels.
“The mission of this Committee is to best equip the VA to provide quality care to veterans,” said Chairman Filner. “As we honor America’s veterans by keeping the promises made to them, it is critical that we ensure proper use of taxpayer money and financial accountability. Two years ago, the $6 billion spent on miscellaneous obligations initiated an oversight hearing. It is very troubling to see that amount double to almost $12 billion the next year. This is totally unacceptable and increased oversight and transparency of spending is overdue.”
According to the GAO, the use of MOs may increase the risk of fraud, waste, and abuse in VA procurement contracting. This can occur when VA medical personnel with procurement authority issue an MO as opposed to working with contracting personnel in order to make a purchase. Contracting personnel are familiar with federal procurement law, understand existing regulations, may keep costs down by using a competitive bid process, and can generally review the final contract. The GAO made four recommendations to the VA to develop and implement policies and procedures intended to improve overall control, including: improved oversight of miscellaneous obligations by contracting officials; segregation of duties; improved supporting documentation of miscellaneous obligations; and, oversight mechanisms to ensure control policies and procedures are fully and effectively implemented.
VA officials report that new policies and procedures have been crafted in response to Congressional oversight and recommended by reports from the Government Accountability Office (GAO). Members pressed to see an itemized list of MO spending, which VA witnesses could not provide, and insisted that new policies be implemented with expedience. VA Deputy Assistant Secretary for Finance Edward Murray testified, “Although we are certain VA’s policies are clear, we must take the needed steps to assure that compliance with the policies is applied consistently throughout VA.”
Filner concluded: “I am angry that the VA leadership continues to be unresponsive to these issues on cost controls. I understand the need to obligate funds before you know the exact cost, however, these expenditures need to be tracked, itemized, and carefully reviewed. This particular procurement process is a disaster waiting to happen. As the Committee charged with oversight of the VA, we will continue to press for action until we are assured that waste, fraud, and abuse is prevented.”
WITNESS LIST
Panel 1:
- Susan Ragland, Director of Financial Management and Assurance, U.S. Government Accountability Office
Accompanied by:
- Glenn Slocum, Assistant Director, Financial Management and Assurance, U.S. Government Accountability Office
Panel 2:
- Edward Murray, Deputy Assistant Secretary for Finance, U.S. Department of Veterans Affairs
Accompanied by:
- W. Paul Kearns III, FACHE, FHFMA, CPA, Chief Financial Officer, Veterans Health Administration, U.S. Department of Veterans Affairs
- Frederick Downs, Jr., Chief Procurement and Clinical Logistics Officer, Veterans Health Administration, U.S. Department of Veterans Affairs
- Jan R. Frye, Deputy Assistant Secretary, Office of Acquisition and Materiel Management, U.S. Department of Veterans Affairs
Prepared testimony and a link to the webcast of the hearing are available on the internet at this link: http://veterans.house.gov/hearings/hearing.aspx?newsid=614
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