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Office of Budget

Fiscal Year 2005 Performance and Accountability Report
Published November 15, 2005

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OIG4. FINANCIAL MANAGEMENT

Since 1999, VA has achieved unqualified audit opinions on its consolidated financial statements (CFS). However, material weaknesses related to information technology controls and the lack of an integrated financial management system continue. VA expects to take several years to complete the corrective actions to address these weaknesses.

While VA has addressed many of our concerns over the last few years, OIG audits and reviews continue to identify major challenges where VA could improve financial management controls, data validity, and debt management. VA also needs to correct problems identified in the Federal employees Workers' Compensation Program (WCP) operations.

4A. OIG Issue-Financial Management Control

Annual CFS audit work continues to report the lack of an integrated financial management system at VA as a material weakness, as well as a noncompliance issue with the Federal financial management systems requirements under the Federal Financial Management Improvement Act (FFMIA). VA continues to experience difficulties related to the preparation, processing, and analysis of financial information to support the efficient and effective preparation of VA's CFS. While significant efforts are made at the component and consolidated levels to assemble, compile, and review the necessary financial information for annual reporting requirements, in many cases, components of certain feeder systems and financial applications are not integrated with VA's core financial management system. As a result, CFS work in VA requires significant manual compilations and labor-intensive processes for the preparation of auditable reports. The lack of an integrated financial management system also increases the risk of materially misstating financial information.

To address the lack of an integrated financial management system, VA deployed a new computerized financial management and logistics system, CoreFLS. VA believed that CoreFLS would resolve OIG concerns. Operational testing of CoreFLS began in October 2003 at three VA facilities, with implementation at further sites to be phased in, and full implementation scheduled for March 2006. However, after our August 2004 report titled Issues at VA Medical Center Bay Pines, Florida and Procurement and Deployment of the Core Financial and Logistics System (CoreFLS) (Report No. 04-1371-177) was issued, VA responded by discontinuing implementation of CoreFLS and the test sites resumed operation within VA's existing financial management system in early 2005. Three financial management and control recommendations remain unimplemented.

VA is now evaluating how it will proceed with the deployment of a functioning financial management system. Currently an executive project committee, chaired by VA's Assistant Secretary for Information and Technology and comprised of other senior leaders, is examining the results of the operational testing of CoreFLS and will make recommendations to the VA Secretary concerning the future of the program. In looking at VA's program response and based on OIG experience with the CoreFLS review, we view the Office of Finance's plan to develop a Web-based single system that will improve the accessibility of financial data, provide ad-hoc reports, and secure access within an integrated computer environment in 2006 as a positive interim step towards correcting the material weakness; but this interim step also represents a formidable major management challenge.

VA's Program Response to OIG4A:

VA has contracted with an independent consulting firm to provide an "As is" and "To be" analysis of VA's finance and logistics system and processes, including a plan to address the material weakness "Lack of an Integrated Financial Management System."

The Office of Finance has developed and is implementing a remediation plan that creates a dual path to substantially reduce the material audit weaknesses associated with the lack of an integrated financial management system. The first path focuses on improving the quality and timeliness of VA's financial data by developing a single and centralized Web-based data repository of information that is currently maintained in several different legacy systems. We will provide the user with a commercial off-the-shelf financial statement reporting system tool that will improve the accessibility of financial data, provide ad-hoc reports, and secure access to our customers within an integrated computer environment. The second path will reduce the significant manual compilation and labor-intensive processes for the preparation of VA's consolidated financial statements and other standardized automated accounting reports. Under the new system, VA's consolidated financial statements, Treasury's Governmentwide Financial Reporting System and Federal Agency's Centralized Trial-Balance System II budgetary reports, and intra-governmental reporting will be produced from a single database using standardized formats. The new system decreases the risk of materially misstating financial information, strengthens reporting controls, automates the collection and consolidation of accounting data, and reduces the reporting lead time required to produce reports. Scheduled for implementation in 2006, the remediation plan should reduce the material weaknesses and make VA's financial management system substantially compliant with the Federal Financial Management Improvement Act.

The current status of the three open management and control recommendations is as follows:

Recommendation: Initiate a review of all payments to BearingPoint to determine whether there were any improper or erroneous payments for collections.

Status of Implementation: The Office of Business Oversight (OBO) continues to review expenditures made to the CoreFLS vendors. In August 2005 OBO issued a report of findings and recommendations regarding BearingPoint. The report is currently under review by the VA Chief Management Officer. OBO is drafting a report of findings and related recommendations regarding Oracle. The estimated report issuance date is October 2005. OBO will begin drafting a report of findings and related recommendations regarding Information Control in September 2005.

Recommendation: If the discounts offered for Phase IV work and/or the award fee cannot be recovered, take appropriate administrative action against the responsible VA personnel.

Status of Implementation: The certified letter to BearingPoint has been rescinded; the issue of discounts for Phase IV work and/or the award fee will be considered within the context of the OIG's continuing investigation of this matter.

Recommendation: Conduct a complete review of all travel vouchers submitted by BearingPoint since commencing work in January 2000 to:

  • Determine if the claimed costs are allowable in accordance with the provisions of the Joint Travel Regulations.
  • Coordinate findings with the Office of Inspector General.
  • Collect any amounts found to be in excess of those allowable under regulations.
  • Clarify return home allowable expenses.
  • Check rebates.

Status of Implementation: OBO continues to review all travel expenditures submitted by BearingPoint. In June 2005 OBO received a large volume of critical supporting documentation for BearingPoint travel claims. As of September 2005 OBO has fully audited over 4,100 claims. OBO's findings include potentially recoverable amounts by VA due to some inconsistencies with the Federal Travel Regulation and the lack of supporting documentation from the traveler. In addition, OBO has identified several key management issues. OBO anticipates a completion date for the report issuance by the first quarter of 2006.

4B. OIG Issue-Data Validity

The Government Performance and Results Act (GPRA) requires agencies to develop measurable performance goals and report results against those goals. Successful implementation requires that information be accurate and complete. While VA has made progress in implementing GPRA, OIG audits have identified a need to improve data validity so that stakeholders have accurate and reliable performance data. Starting in 1997, we conducted a series of audits assessing the quality of data used to compute VA's key performance measures. While VA has corrected the deficiencies cited in our first eight reports, involving seven of nine key measures where we identified data validity problems, we are concerned that the remaining key performance measures that have not been reviewed may have similar problems.

Our July 2005 report, Audit of the Veterans Health Administration's Outpatient Scheduling Procedures (Report No. 04-02887-169), indicated outpatient scheduling procedures need to be improved to ensure accurate reporting of veterans' waiting times and facility waiting lists. VHA strives to schedule at least 90 percent of all next available appointments for veterans within 30 days. Of the 1,104 appointments reviewed, schedulers created 315 (28 percent) as next available appointments. We determined that 505 of the 1,104 appointments should have been created as a next available appointment. Of the 505 appointments, only 330 appointments (65 percent) were scheduled with 30 days of the desired date-well below the VHA goal of 90 percent and the medical facilities directors' reported accomplishment of 81 percent. Although the recalculated average waiting time of 30.1 days was consistent with VHA's goal of scheduling appointments within 30 days, it was 44 percent more that the reported average waiting time of 20.9 days. Even though the report was just issued in July 2005, VHA has already completed action on one of eight recommendations.

Until the remaining key measures are reviewed, this issue will remain a major management challenge. While we plan to review a key performance reporting measure annually, and will work with VA program officials to identify these critical measures, VA staff should do a thorough review of the remaining issues and provide the OIG assurance that data validity problems do not exist or have been corrected.

VA's Program Response to OIG4B:

The Office of Policy (OP) in the Office of Policy, Planning, and Preparedness is responsible for making the official estimates and forecasts of the veteran population and their characteristics. The estimates of the size and composition of the veteran population are based on data updates from DoD, the Bureau of Census, internal VA sources, and other sources. To further improve the quality of the veteran statistical estimating process, OP completed an independent review in 2005 of the methods used to make these estimates. OP also administers the National Survey of Veterans program to collect extensive data on the characteristics of the veteran population and selected cohorts. These data are supplemented with data from other federal agencies.

OP is the official source for the public, Congress, and other agencies for a variety of data on the veteran population and their use of benefits, services, and resources. OP continually reviews the methods of analysis and data to ensure that the data are accurate and consistent with previously released information. To further improve the quality of veteran data, VA will create the National Center for Veteran Statistics, which is envisioned to be a federal statistical data center.

VHA recognizes that since scheduling involves interactions by human beings, there will always be issues with data validity. However, VHA continues to work at ensuring accurate data entry. Facilities are providing training for schedulers who are instructed that new patients are to be scheduled to be seen within 30 days of request unless the patient or provider specifically requests a later appointment date. In addition, VHA revised its process for measuring wait times for new patients that effectively tracks wait times for these patients, regardless of whether these patients are given a next available or non-next available appointment, so that facilities can now clearly identify where there are real problems with wait times in excess of 30 days for new patients (rather than merely the appearance of wait time problems created by appointment labeling errors) and take actions to correct any such problems.

VBA continues to review the validity, not only of key performance measures, but of all workload and performance data. Program services conduct data system reviews and on-site visits throughout the year at the regional offices. The Office of Performance Analysis and Integrity (PA&I) conducts specific data validation studies. PA&I also maintains the corporate Data Warehouse and Operational Data Store that enables VBA to have realistic, timely, and accurate data.

The issue of data validity is also stressed in national training programs. PA&I is routinely asked to participate in a number of such programs, with the primary focus being the use of the Data Warehouse to support data/performance analysis. Data validity and its importance are discussed during each of the sessions, with an emphasis on understanding that managing workload or directing improvement efforts will fall short unless data are reliable and accurate.

NCA determines the percent of veterans served by existing national and state veterans' cemeteries within a reasonable distance of their residence by analyzing census data on the veteran population. In 1999, the OIG performed an audit assessing the accuracy of the data used for this measure. Audit results showed that NCA personnel generally made sound decisions and accurate calculations in determining the percent of veterans served. Data were revalidated in the 2002 report entitled Volume 1: Future Burial Needs, prepared by an independent contractor as required by the Veterans Millennium Health Care and Benefits Act, P.L. 106-117.

NCA has established an Organizational Assessment and Improvement Program to identify and prioritize improvement opportunities and to enhance program accountability by providing managers and staff at all levels with one NCA "scorecard." As part of the program, assessment teams conduct site visits to all national cemeteries on a rotating basis to validate performance reporting.

For further information on the Department's efforts to improve its data quality, see the Assessment of Data Quality section.

4C. OIG Issue-Workers' Compensation Program (WCP)

VA continues to suffer significant risk for WCP abuse, fraud, and unnecessary costs from inadequate case management and fraud detection. VA did not fully implement prior OIG audit recommendations (2) to enhance VA's case management and fraud detection efforts and to avoid inappropriate dual benefit payments. Reducing the risk of abuse, fraud, and unnecessary costs is important because of the significance of VA's WCP costs. Since 1998, VA costs have totaled more than $1 billion. Our work demonstrates that WCP costs could be significantly lower if VA had fully implemented our prior audit recommendations for case management improvements.

Our August 2004 report, Follow-Up Audit of Department of Veterans Affairs WCP Cost (Report No. 02-03056-182), found that ineffective case management and program fraud resulted in potential unnecessary/inappropriate costs to VA totaling $43 million annually. These costs represent potential lifetime compensation payments to claimants totaling $696 million. Additionally, an estimated $113 million in avoidable past compensation payments were made that are not recoverable. Given the continued risk of program abuse, fraud, and unnecessary costs, we recommend that VA continue to designate the WCP as an internal high priority area with increased program monitoring and oversight.

VA faces a significant liability for future compensation payments estimated at more than $2 billion. VA's decentralized approach to WCP administration is not effective. There is a lack of effective case management and fraud detection Department-wide and VA needs to establish a more coordinated approach to program administration. While the Department has begun to take action, only 1 of 15 recommendations is fully implemented by the Office of Human Resources and Administration.

2 Audit of VA's Workers' Compensation Program Cost (Report No. 8D2-G01-67), July 1, 1998, and Audit of High Risk Areas in the Veterans Health Administration's Workers' Compensation Program (Report No. 99-00046-16), December 21, 1999.

VA's Program Response to OIG4C:

Since the last report, VA has implemented significant initiatives to address the findings and recommendations presented in OIG Report No. 02-03056-182. VA formed a Workers' Compensation (WC) Strategic Planning Committee in October 2004. The Strategic Management Council approved the WC strategic plan on February 8, 2005. The WC Strategic Planning Committee, chaired by the Principal Deputy Assistant Secretary for Human Resources and Administration, is comprised of representatives from throughout VA. WC programs are currently being developed to promote professional development, case file review, WC education, and quality assurance programs. The strategic plan is comprised of the following goals and objectives:

Strategic Goal 1 - Case Management

  • Recruit, develop, and retain a cadre of world class case managers.
  • Document accidents and illnesses in a timely, accurate, and consistent manner.
  • Ensure that access to clinical treatment is appropriately received with a focus on rehabilitation, recovery, and return to work.
  • Ensure that case managers coordinate with the employees, the Department of Labor (DOL), medical professionals, and supervisors during the entire claims process.
  • Ensure that case managers monitor and oversee the status/progress of all employees on WC.
  • Ensure that the quarterly Office of Workers' Compensation Programs (OWCP) Chargeback Report is utilized so that VA can better manage WC by reemploying injured employees in appropriate positions.

Strategic Goal 2 - Return to Work

  • Conduct a one-time review of legacy cases.
  • Ensure that case documentation with functional capacity is received in a timely manner.
  • Ensure that a job offer is made or the OWCP Form 5 is completed by the provider and requested by VA.

Strategic Goal 3 - Education

  • Develop WC training programs that address education needs for all beneficiaries and stewards of the program.
  • Deploy an effective curriculum of training programs to increase awareness of OWCP policies and procedures.
  • Provide relevant training that continually meets the needs of the VA WC program.

Strategic Goal 4 - Partnerships

  • Improve relations with DOL at the national and district levels.
  • Improve partnerships with other federal agencies.
  • Enhance relations with unions to address WC issues.
  • Improve internal collaboration and performance in WC.

Strategic Goal 5 - Identify and Reduce Fraud, Waste, and Abuse

  • VA and the OIG will develop and deploy a communication plan.
  • Develop a comprehensive strategy between the OIG and VA's three administrations for identifying, reporting, investigating, and prosecuting fraud.
  • Explore establishing an independent WC fraud investigation group in the OIG.
  • Upon development of probable cause to suspect fraud, the OIG will partner with the Department of Justice to take appropriate action.

The WC Strategic Planning Committee meets monthly to review progress toward these goals. Four of the 15 identified items have already been completed, and substantial progress has been achieved on the remaining items. A number of the recommendations involve complex organizational issues that are currently under development by WC subcommittees.

4D. OIG Issue-Federal Energy Management Cost

Our March 2005 report, Evaluation of VA Compliance with Federal Energy Management Policies (Report No. 04-00986-101), found that VA needed to strengthen compliance with Federal energy management policies and improve the reliability of data. OIG concluded VA did not comply with Federal energy management policies or give sufficient priority to its energy management program. We recommended the Assistant Secretary for Management require each administration appoint an energy supervisor for each of its facilities, ensure facility energy supervisors received specialized training, perform energy audits for 10 percent of VA's facilities each year, and train acquisition staff on requirements to purchase energy-efficient products. We estimated VA could better use $12.9 million annually if it achieved the 2000 goal of reducing energy consumption 20 percent compared to 1985 energy consumption.

VA's Program Response to OIG4D:

The Office of Asset Enterprise Management (OAEM) in the Office of Management assumed leadership of VA's energy conservation program in March 2003 and issued a new energy policy directive and handbook in July 2003. The directive and handbook direct each VA administration to audit 10 percent of its facilities each year, train acquisition and energy management staff, and designate energy managers for each region. Accomplishments to date are as follows:

Energy Audits

  • Through its energy conservation pilot program, VA exceeded the energy audit goal in fiscal years 2003 and 2004.

Training

  • More than 500 VA employees have completed the online training for "green purchasing," which covers energy-efficient products that the Office of Personnel Management offers on its Go Learn Web site. In addition, VA's Office of Acquisition and Materiel Management provides information about energy-efficient product purchasing at quarterly materiel management seminars.

Energy Managers

  • Energy managers are in place in 19 out of the 21 VHA networks.

OAEM will revise the 2003 VA Energy Conservation Program policy directive and handbook by the first quarter of 2006 to reflect the new requirements for federal agencies regarding an annual reduction in energy consumption.

NCA has designated an office to serve as the energy liaison with the Department and coordinate NCA's energy program in conjunction with NCA subject matter experts.

NCA is currently modifying the Management and Decision Support System database to improve and enhance data collection on energy use and consumption. Changes to the system include collection of energy cost data and a requirement to report both energy cost and usage information on a monthly rather than quarterly basis. During site visits under the Organizational Assessment and Improvement Program, teams validate the energy data as reported by the cemeteries.

NCA completed an energy audit of its largest national cemetery, Riverside, in 2004 as part of a larger VA pilot energy study. Study findings identified several measures that are applicable not only to Riverside but to other cemeteries as well. Funds are requested in the President's FY 2006 budget to perform additional energy and water audits at national cemeteries. Through these audits, NCA will identify new techniques to reduce energy and water consumption, implement environmentally sound landscaping practices, and minimize the impact of national cemeteries on the environment.

VHA has an energy coordinator responsible for the implementation of energy initiatives throughout the Administration. VHA has been working with OAEM to develop a comprehensive energy policy.

To improve the reliability of data, the VISN Service Support Center (VSSC) has added data validation to identify any errors during data entry. Quarterly reports are sent to facilities with the errors identified for correction. Because of these improvements, the accuracy of data entry has drastically improved.

VBA designated an energy management official and energy liaisons to serve on VA's Energy Team. The team serves as the point of contact for data collection, analysis, and reporting of VBA energy conservation efforts. Energy liaisons have been designated for each of the five VBA-owned or direct-leased facilities that are not under the purview of VHA. VBA has retained a professional engineering firm to assess the training needs of energy liaisons and develop an appropriate training plan to comply with federal energy management policies. VBA contracted with a professional engineering firm to perform facility condition assessments and energy audits at the five VBA-owned facilities. The Montgomery VA Regional Office audit was completed in June 2005, four additional audits are planned in 2005, and three audits are planned for 2006. By the end of 2006, 60 percent of VBA-owned facilities will have completed energy audits.

VBA offices do not have local contracting authority. The regional offices will continue to work with the Office of Acquisition and Materiel Management and servicing medical center staffs to ensure requirements pertaining to ENERGY STAR and other energy-efficient products are procured.

4E. OIG Issue-Medical Care Collections Fund

In our December 2004 report, Evaluation of Selected Medical Care Collections Fund (MCCF) First Party Billings and Collections (Report No. 03-00940-38), we evaluated the appropriateness of MCCF first party billings and collections for certain veterans receiving C&P benefits. Veterans receiving compensation for service-connected disabilities rated 50 percent or higher, or VA pensions based on being totally disabled with low income, are generally exempt from copayments and should not be billed. We found that 89 percent of the veteran cases reviewed had debts referred inappropriately to VA's Debt Management Center (DMC) because of inaccurate eligibility information regarding the veteran's C&P status in the Veterans Health Information Systems and Technology Architecture system. We made recommendations to prevent inappropriate billings and collections of inappropriately established debts. Currently, two of four recommendations remain unimplemented. They require medical facilities to access veterans' benefits information through VBA to obtain the effective dates for veterans awarded service-connection, verify that debts are appropriate before issuing bills or referring debts to the DMC for collection, and ensure that Health Eligibility Center management follows up timely on rejected award information and uploads the correct information into its database so that veterans' status changes can be updated in medical facility systems.

In 2005, CAP reviews examining Medical Care Collections Fund activities found deficiencies at 19 of 21 facilities tested. We found staff did not obtain insurance information from veterans at the time of treatment; also, staff recorded inadequate and untimely documentation relating to services provided, had episodes of billable care not identified, and did not forward fee-basis care documentation to veterans' health insurers for payment. In addition, we continue to find billing backlogs being processed in alphabetical order instead of by date of treatment. Facility management needs to strengthen billing procedures to avoid missed billing opportunities, improve timeliness of billings, improve accuracy of diagnostic and procedure coding, and aggressively pursue accounts receivable.

VA's Program Response to OIG4E:

During the October 2004 Chief Business Office (CBO) nationwide conference call, guidance was provided instructing field staff to follow up with VBA when new awards are made to determine the effective date of the award. Additionally, during its February 16, 2005, nationwide conference call, the CBO provided specific guidance to field facilities recommending that the Diagnostic Measures First Party Follow-up report be run monthly. This report enables medical centers to identify cases for which eligibility may have changed and helps prevent billings and collections of inappropriately established debts.

The Health Eligibility Center (HEC) staff continues to place a priority on resolving the C&P status changes that require manual resolution. In reviewing the cases requiring manual processing, the HEC identified a problem with how its information system processes VBA updates when VBA fails to include the entitlement codes. Although the data sharing specification requires an entitlement code, we have identified a number of records received without this data element. Because the HEC is able to ascertain the VBA benefit without these codes, the current review file filter, which routes such updates into the manual review file, has been determined inappropriate. A new software enhancement will include the change necessary to fix this problem and will allow automatic update of the veteran's eligibility status. This enhancement is expected to be released concurrent with VBA/VHA data sharing improvements no later than the end of the first quarter of 2006. VHA believes that the combination of continued priority processing of the review file cases and this new enhancement to improve automated processing of VBA updates will effectively address the OIG recommendation.

In support of the need to strengthen billing procedures to avoid missed billing opportunities, improve timeliness of billings, improve accuracy of diagnostic and procedure coding, and aggressively pursue accounts receivable, VHA has initiated a comprehensive assessment of ongoing activities within the revenue program in an effort to develop "industry best practices" and identify project initiatives designed to improve and standardize business processes. The goal is to ensure that to the maximum extent practical, VHA is properly compensated for the services provided to those veterans with private health insurance coverage. Included in this body of work is a series of electronic data interchange initiatives that include, and in some instances exceed, the Health Insurance Portability and Accountability Act (HIPAA) requirements.

With regards to fee billing, the VHA CBO has established a field committee comprised of both field and Central Office staff to identify best practices associated with capturing potentially billable cases and the development of automation to support that process.

VBA will continue working cooperatively with VHA to improve and enhance data and information exchange.

During 2005 the Office of Business Oversight (OBO) increased reviews of revenue operations, performing reviews of nine VA medical facilities. As part of these reviews, OBO assessed insurance identification, insurance verification, billing, and accounts receivable processes. OBO provided suggestions for improvement to each facility director and will issue a summary report to VHA officials at the end of the fiscal year.

OBO also assisted VHA in reducing outstanding third party accounts receivable by performing an analysis of the outstanding receivable balances. As part of this analysis, receivables were categorized and recommendations made to medical facility, VHA, and Office of General Counsel officials for eliminating receivables that were not collectible.