There are several unresolved management problems facing the Department that could potentially disrupt service delivery to veterans if not addressed in a timely fashion. The following discussion summarizes specific actions taken by VA to resolve identified problem areas. A complete description of our efforts to resolve management problems identified by the VA Inspector General (IG) and the current status of each open GAO recommendation was provided Senator Fred Thompson in an October 15, 1999, letter from the Secretary of Veterans Affairs. The background descriptions provided for these management challenges were drawn directly from documents prepared by the IG and GAO.

Background: The C&P system is outdated and needs to be replaced. The plan for correcting this weakness is to implement the Veterans Service Network (VETSNET) C&P application. The targeted correction date is FY 2003.

• Pursued an incremental strategy to complete development of the C&P payment system.
• Replaced the finance and accounting code currently in the Benefits Delivery Network with a standardized, on-line accounting and payment system that will interface with the Financial Management System.

Background: The loan guaranty system lacks up-to-date interfaces between manual and automated components. There are three major needs for a modernized loan guaranty system: (1) credit reform requirements, including cohort year accounting; (2) interface of loan guaranty systems to FMS; and (3) loan guaranty program modernization projects, including a new payment system to identify duplicate payments automatically. Automatic interfacing of payments cannot be accomplished before VA implements the modernized loan guaranty system. The targeted correction date is to be determined.

• Replaced the Automated Voucher Audit and Payment System with FMS on-line payment processes.
• Placed the Loan Service and Claims System into production at all nine regional loan centers.
• Started consolidating all loan guaranty accounting to the Mortgage Loan Accounting Center in Austin.
• Converted stations merged as part of that consolidation into the FMS general ledger system.

Background: The loan service and claims component of the loan guaranty program is not able to optimally manage supplemental servicing of claims. The primary cause of the loan servicing problems is the lack of effective ADP support in regional offices. Foreclosures are excessive and claims against the Loan Guaranty Revolving Fund and the Guaranty Indemnity Fund exceed by more than $29 million per year the amount considered tolerable. VA is the only major player in the mortgage lending industry without a modernized automated loan servicing program. The targeted correction date is FY 2000.

• Developed a replacement Loan Service and Claims System.
• Completed pre-production testing and installed production sites.

Background: A 1991 GAO report concluded VA’s controls over a large number of prescription drugs were inadequate. Too many employees had access to pharmacy drug stocks, and the stocks were inspected infrequently. VHA issued a directive, "Increased Accountability for Drugs," which required medical centers to maintain a perpetual inventory of bulk supplies of controlled substances. New procedures for screening prospective employees were also established. This weakness is on schedule to be corrected during FY 2000.

• Expanded prime vendor delivery systems for pharmaceuticals to reduce inventories and provide direct delivery of controlled substances to VA pharmacies.
• Removed controlled substances from all Office of Acquisition and Materiel Management warehouses and depots.
• Procured bar-code equipment to inventory controlled substances in Pharmacy Service.
• Moved forward with plans to bar code blood transfusions and medical administration.

• Determined information system needs and began equipment acquisition.
• Completed beta testing of the software at four sites.
• Negotiated national implementation with AFGE.

Background: VA’s central payroll and accounting system, PAID, lacks the ability to expand and accommodate new functions. HR LINK$, the Department’s initiative to replace PAID with a modern human resources and payroll system, became the basis for correcting the weakness in lieu of investing in expensive modifications to existing systems. The targeted correction date is on schedule for FY 2001.

• Began VA-wide implementation of employee self-service functionality and supporting processing by the Shared Service Center (SSC).
• Implemented the use of an expert system for classification, called Coho, resulting in delegations to managers for classification.
• Prototyped the use of Casting, which will qualify employees based on their on-line application and produce the Certificates of Eligibles for manager selection.
• Prototyped new functionality where managers will initiate personnel transactions from their desktop computer, use electronic routing for approvals, and then all approved transactions will flow to the SSC for final processing.
• Developed new replacement corporate HR/payroll system, PeopleSoft, for personnel transactions.
• Scheduled full deployment of all HR LINK$ functionality, including deactivation of the legacy corporate system, to be concluded by August 2001.

Background: The system to support the Montgomery GI Bill (MGIB) selected reserve payment is outdated. Payment delays are frequent because the system relies heavily on manual input. Failure to replace the current system has resulted in significant overpayments, errors in payment, delays in payment, and excessive reliance on adjudicative staff. The targeted correction date is FY 2001.

• Reprogrammed funds to accelerate development of an enhanced MGIB-Selected Reserve system, patterned after the MGIB-Active system.

Background: Credit reform was targeted for correction during FY 1999. VA needed to improve the integration of VBA’s systems and procedures to support credit reform initiatives affecting loan programs. The forced reliance on the manual accumulation of data to prepare major financial reports resulted in untimely reports to Treasury and OMB. Although all milestones have been completed, this material weakness will not be closed until loan guaranty accounting is completely migrated to FMS and audit testing is complete. The new correction date is FY 2000.

• Instituted a series of systems and accounting modifications.
• Used the cohort year general ledgers to produce end-of-year budget executive reports (SF-133s) for FY 1998 and FY 1999.

Background: Under the Loan Sale, or VinnieMac program, VA sells its current portfolio loans to investors with a guaranty of prompt monthly payments and reimbursements for losses on foreclosed loans, including foreclosure costs. When this was declared a material weakness, mechanisms to account for loans sold after they leave VA were not in place. VA needed to develop systems to account for losses on loans, track cash reserves, and establish individual reserves, in accordance with credit reform requirements. The targeted correction date is FY 2000.

• Worked with Treasury to establish a new Financing Account.
• Contracted with a big-5 accounting firm to perform credit reform accounting and budgeting for the loan sales and loans sold program.
• Entered all credit reform data for cohort years 1992 through 1999 into FMS.

Background: Information systems security was identified as a material weakness in FY 1998. The Department’s assets and financial data are vulnerable to error or fraud because of weaknesses in information security management, access to controls and monitoring, and physical access controls. This material weakness is targeted for correction in FY 2003.

• Produced a multi-year program plan and budget proposal.
• Developed slate of initiatives, which in combination are a comprehensive approach to managing risk through continuous assessment, policy, workforce education, security automation, and strong centralized management and oversight.
• Established a permanent central security group under the CIO.
• Initiated a contract for an independent Department-wide assessment of information security risks and development of a plan for managing these risks.
• Acquired commercially-available Web-based awareness training curricula.
• Initiated a contract for a commercial Critical Incident Response Capability (CIRC) service.
• Published a strengthened Department-wide policy on system accounts, passwords, and other internal controls.
• Commended by GAO in its October 1999 audit report on the status of security at VA.

Background: Many VA facilities are deteriorating, inappropriately configured, or no longer needed because of their age and VA’s shift in emphasis from providing specialized inpatient services to providing primary care in an outpatient setting. Despite eliminating about one-half of VA’s hospital beds, excess capacity remains.

• Improved accuracy of data collection processes for nursing home resource management by implementing the Decision Support System.
• Developed a plan for meeting veterans’ needs in the Chicago area.
• Established a comprehensive capital asset management process.

Background: GAO reviews have recommended that VA improve accuracy, reliability, and consistency of information used to measure the extent to which (1) veterans are receiving equitable access to care across the country; (2) all veterans enrolled in VA’s health care system are receiving the care they need; and (3) VA is maintaining its capacity to care for special populations.

• Improved equity in access largely through establishment of CBOCs.
• Developed process to review funding allocations by network directors to medical centers.
• Agreed to identify criteria for networks to use in evaluating health outcomes.

Background: VA does not know how its rapid move toward managed care is affecting the health status of veterans because measures of the effects of its service delivery changes on patient outcomes have not been established. Other public and private health care providers have recognized the necessity—and the difficulty—of creating such criteria and instruments.

• Established a Gulf War Field Advisory Group to strengthen oversight and coordination of Gulf War health care processes.
• Initiated a wide range of research projects related to illnesses of Gulf War veterans, as well as environmental risk factors.
• Worked with DoD to develop a joint computerized patient record system.
• Developed a treatment strategy for homeless veterans.

Background: In managing non-health care benefits programs, VA needs to overcome a variety of difficulties. Currently, VA cannot ensure its veterans’ disability compensation benefits are appropriately and equitably distributed because its disability rating schedule does not accurately reflect veterans’ economic losses resulting from their disabilities. Also, VA is compensating veterans for diseases that are neither caused nor aggravated by military service. In addition, claims processing in VA’s compensation and pension program continued to be slow, and the vocational rehabilitation program has yielded limited results. Moreover, the data VA will use to measure compensation and pension program performance are questionable. Furthermore, VA has inadequate control and accountability over the direct loan and loan sales activities within VA’s Housing program.

• Installed a new Loan Service and Claims System.
• Contracted for services for reconstructing various aspects of loan sales.
• Developed a National Acquisition Strategy for veterans in VR&C programs.
• Tracked critical categories of C&P claims using the Systematic Technical Accuracy Review (STAR) process.
• Created a variety of training packages for claims adjudicators.
• Met with stakeholders to discuss program outcomes, outcome measures, and outcome goals.

Background: VA has made progress in addressing Year 2000 challenges but still has a number of associated issues to address. In addition, VA lacks adequate control and oversight of access to its computer systems and has not yet institutionalized a disciplined process for selecting, controlling, and evaluating information technology investments, as required by the Clinger-Cohen Act.

• Designated information security as a material weakness under FMFIA.
• Launched an entity-wide security management planning program.
• Published a Department-wide technical architecture.
• Developed and implemented a capital investment process for information technology.
• Conducted in-process and post-implementation reviews of IT capital investment projects.
• Completed Y2K renovation, validation, and implementation of applications.

Background: IG audits have shown resource allocations (VHA funding patterns) have not been adequately addressed. Disparities in clinical and administrative staffing levels have resulted because VHA has not yet developed and implemented staffing guidelines or methodologies.

• Changed the method used to fund VAMCs, i.e., Veterans Equitable Resource Allocation (VERA).
• Evaluated network-to-facility allocation to identify best practices.
• Began implementation of a new cost-based data system for clinical and administrative production units.

Background: Despite VA’s largely successful debt management program, unfavorable and mistaken characterizations of the Department’s debt collection efforts persist. As of September 30, 1998, debt owed VA totaled about $3.7 billion. This debt resulted from defaults on home loan guaranties, direct home loans, medical care cost recovery, C&P overpayments, and educational benefits overpayments. Through October 1998, audit coverage of VA’s debt management program has focused on billing and collection of medical care co-payments by veterans or their insurance companies for medical care of non-service connected conditions, and overpayments of C&P benefits.

• Worked with Treasury to implement administrative offset and cross-servicing provisions of Debt Collection Improvement Act.
• Placed over $250 million of benefit overpayment debt and medical care debt with Treasury.
• Referred about $3.2 million to Treasury Debt Management Service Center for cross-servicing.
• Participated in pilot with Treasury to refer first-party ineligible and Emergency/ Humanitarian debts from ten VAMCs.

Background: VA needs to improve the timeliness of claims processing, appeals processing, and medical examinations for veterans applying for C&P benefits. VA claims processing backlog continues to grow and timeliness in benefits claims and appeals processing continues to deteriorate. Claims and appeals processing and timeliness remain among the most important issues affecting much of the veteran population. Veterans view the benefit claims and appeals activities as one process. Thus, gains made in discrete areas of the overall process can only be accepted as partial solutions to the larger problem.

• Established nine Service Delivery Networks that align regional offices geographically so they can share resources and provide support.
• Merged veterans services functions with adjudication functions into Veterans Service Centers.
• Adopted a joint performance indicator called Appeals Resolution Time.
• Formed a joint VBA/BVA work group to develop a methodology to improve overall claims processing timeliness.
• Provided training to VHA physicians.

Background: Information security practices at VA have been the subject of four recent reviews by the General Accounting Office (GAO) and VA’s Office of Inspector General (IG). GAO and IG made several recommendations to improve the quality of information security in the Department.

• Produced a comprehensive VA Information Security Program Requirements and Budget Plan (ISP).
• Concurred with GAO recommendation to designate Information Systems Security as an FMFIA material weakness.
• Established an action plan to remedy this weakness by early 2003.
• Established a permanent central security group under the CIO.
• Initiated a contract for an independent Department-wide assessment of information security risks and development of a plan for managing these risks.
• Acquired commercially-available Web-based awareness training curricula.
• Initiated a contract for a commercial Critical Incident Response Capability (CIRC) service.
• Published a strengthened Department-wide policy on system accounts, passwords, and other internal controls.

Background: VA pays out $140-$145 million annually to injured federal workers. According to the IG, VA’s Workers’ Compensation (WC) program lacks effective management in key areas. For example, current claimants do not always return to work promptly when they are no longer disabled.

• Implemented electronic filing service of initial employee claims to OWCP.
• Developed pilot programs for long-term case management and fraud identification techniques.
• Provided VA field facilities with access to the VA WC Management Information System (WC-MIS).
• Developed a plan for conducting a one-time review of all open and active WC cases.
• Sponsored the First Annual Federal WC Conference and Exposition.
• Provided information, guidance, and support to VA union stewards.

Background: VA needs to develop and implement a more effective method to identify inappropriate benefit payments. Recent IG audits found that the appropriateness of C&P payments has not been adequately addressed.

• Identified Federal prisoners in receipt of VA benefits by computer matching with Bureau of Prisons.
• Entered a computer matching agreement with SSA to receive listings of incarcerated veterans whose benefits may be subject to reduction or termination.
• Installed programming to run computer matching agreement with DoD to identify individuals receiving dual compensation.

Background: The President has set a goal that all Government financial statements will receive a clean (unqualified) opinion by FY 1999. To ensure the effective use of VA’s budgetary resources and the provision of quality services to our Nation’s veterans, achieving a clean audit opinion is a necessity.

• On target to receive an unqualified audit opinion for FY 1999; awaiting final IG audit results.

Background: VA faces the challenge to not only maintain an effective health care quality management (QM) program, but also to adapt the QM program to rapidly changing Department needs. One challenge to the QM program is the transition from the inpatient setting to the ambulatory care setting. Ambulatory care is far more fast-paced, and this more rapid pace of patient care increases the potential for serious error to occur.

• Shifted care from inpatient to outpatient and community settings.
• Instituted a comprehensive measurement and monitoring system to help assure care delivery in outpatient settings.
• Held network directors accountable for a series of performance measures focusing on outpatient care.
• Implemented nationally developed clinical practice guidelines.
• Assessed VA care in both inpatient and outpatient settings using an annual national patient satisfaction survey.

Background: GPRA requires Federal agencies to report performance outcomes annually to Congress. Each of VA’s three major administrations developed performance measures and a system to report outcomes based on these performance measures. VA has numerous automated data collection systems that are needed to support GPRA objectives, and the accuracy and reliability of the data is of paramount importance. Prior IG audits found erroneous data in many VA financial and management systems. Inaccurate data in VA records result in faulty budget and management decisions, and adversely impact program administration.

• Established an Office of the Actuary.
• Completed IG audits of five of VA’s key performance measures.
• Worked to improve internal controls to ensure accurate and reliable data for planning and management purposes.
• Acknowledged data limitations.