Audit of Fiduciary Program Controls Addressing Beneficiary Fund Misuse

We conducted this audit to determine whether the Veterans Benefits Administration (VBA) protects the VA-derived income and estates of beneficiaries who are unable to manage their financial affairs when misuse of beneficiary funds is alleged. VBA did not process 147 of 304 (48 percent ) required actions associated with 122 beneficiaries timely or according to policy in response to allegations or indications of misuse of beneficiary funds during calendar year (CY) 2013. VBA also did not replace two fiduciaries who misused beneficiary funds. Specifically, VBA did not: Timely complete 117 of 265 (44 percent) required actions to determine if misuse of funds occurred in response to allegations and indications of beneficiary fund misuse. Complete 30 of 39 (77 percent) required actions after VBA concluded misuse of funds occurred, such as reissuing (restoring) misused funds, performing effective collection actions, and completing internal negligence determinations. Replace two fiduciaries that misused beneficiary funds and allowed both to continue to manage the combined estates of 48 other beneficiaries. Fiduciary Hub management generally attributed untimely misuse actions to increases in Fiduciary Hub workload. Required actions after VBA concluded misuse of funds occurred were not completed due to a lack of policies and VBA staff not being clear about some policies. Also, VBA did not monitor or perform quality reviews of all misuse activities, which contributed to untimely and uncompleted misuse actions. If VBA does not timely complete misuse actions, beneficiary funds are at increased risk of misuse. We project, during CY 2013, VBA did not timely complete required misuse actions to ensure the protection of 758 beneficiaries’ VA‑derived estates valued at about $45.2 million. VBA also did not restore approximately $2.1 million of misused beneficiary funds. Additionally, unless VBA improves the timeliness of actions in response to allegations and indications of misuse, we project VBA may not adequately protect annual benefit payments to beneficiaries valued at approximately $16 million, or $80 million during CYs 2014 through 2018.