Fiscal Year 2005 Performance and Accountability Report Published November 15, 2005
Back to Table of Contents
VBA has made progress improving benefits processing in recent years, but significant challenges remain in terms of ensuring the accuracy and timeliness of payments to veterans, reducing backlogs in claims processing, and addressing the quality and consistency of disability rating decisions and practices. VBA faces challenges to effectively address fundamental benefits processing problems, including variances in average annual compensation payments caused by factors such as participation and rating inconsistencies. A major restructuring of the rating schedule is long overdue.
Veteran participation in VA's compensation benefits needs further assessment to identify and effectively position outreach services to ensure certain veteran populations such as World War II and Korean Conflict veterans, or veterans living in specific locales, receive appropriate service. Because of the high dollar value of claims, large volume of transactions, complexity of the criteria used to compute benefits payments, and significance of the erroneous and improper payments, we consider these high-risk areas. These issues pose a major management challenge impacting benefits processing and continue to impair VA's efforts to meet its strategic goals of providing timely and responsive support to veterans.
In 2004, approximately 2.5 million veterans in the 50 states received disability compensation benefits totaling $20.9 billion. In May 2005, we issued the report, State Variances in VA Disability Compensation Payments (Report No. 05-00765-137). The review evaluated factors contributing to variances in average annual compensation payments by state, ranging from $6,961 for Illinois veterans to $12,004 for New Mexico veterans. Because of many factors, both within and outside VA influence, we expected some variance in compensation payments. However, our analysis of rating decisions showed that some disabilities are inherently more susceptible to variations in rating determinations. This is attributed to a combination of factors, including a disability rating schedule based on a 60-year-old model and some diagnostic conditions that lend themselves to more subjective decision-making. In fact, VA's rating schedule does not reflect modern concepts of disability.
Data showed that the variance in 100 percent post-traumatic stress disorder (PTSD) cases is a primary factor contributing to the variances in average annual compensation payments by state. We concluded that VAROs approached stressor verification requirements differently from state to state, and that 25 percent of the 2,100 PTSD claims reviewed had insufficient verification of claimed service-related stressors. VBA's quality review program did not detect the problems we found in PTSD cases. The number and percentage of PTSD cases increased significantly between 1999 and 2004. The potential associated monetary risk for questionable payments VA-wide is about $19.8 billion over the lifetime of the veterans. As a result, the consistency of rating decisions is considered a major management challenge.
We made eight recommendations to VBA including that it conduct a scientifically sound study of influences on compensation payments and develop methods and data to monitor and address variances. We also recommended VBA undertake a more detailed analysis to identify differences in claims submission patterns to determine if certain veterans have been underserved, along with outreach efforts to ensure all veterans have equal access to VA benefits. VBA is in the process of addressing the eight unimplemented recommendations identified in our report. VBA is reviewing the same 2,100 PTSD claims used in our May 2005 report. VBA has referred cases from the first stage of their review to regional offices for additional development and corrective actions.
VA's Program Response to OIG2A:
VA is committed to improving the quality and consistency of benefits decisions and is aggressively acting on the OIG's recommendations to correct noted deficiencies. The review was precipitated by the OIG's findings that VA had failed, in some cases, to obtain all required evidence to fully document decisions to award or increase disability compensation for PTSD.
VBA is reviewing the same 2,100 PTSD cases that the OIG reviewed and used to support its findings. This review was undertaken to give VBA a better understanding of the deficiencies found by the OIG so that additional training and guidance can be provided. VBA is identifying those cases lacking sufficient evidentiary development and determining what additional development is needed. VBA has completed the first stage of the review of the 2,100 cases, and cases needing additional development have been referred to the regional offices for corrective actions. VBA will analyze the results of the additional development undertaken to correct the deficiencies found.
In 2006, VBA will begin reviewing specific cases during site visits. VBA will examine cases after extensive data analysis to identify the disability evaluations most prone to inconsistency. In addition, VBA will analyze rating and claims data on an ongoing basis to identify any unusual patterns or variance by regional office or diagnostic code for further review.
VBA will continue to work closely with the OIG to provide regular status updates containing detailed implementation plans and actions taken to address the eight recommendations.
Although VA had made some progress in addressing its claims processing backlog that once peaked at over 600,000 total outstanding claims, its efforts have been impeded by a variety of issues to include the complexity of claims, a court decision, and the war on terrorism. That court decision held that unless VA could grant a benefits claim, VA was required to wait 1 year before it could deny the claim in order to afford the claimant time to submit information to substantiate the claim. Legislation in December 2003 allowed VA to make claims decisions before the expiration of the 1-year period.
VBA reported 418,000 total claims pending in June 2003, then the backlog increased to 469,000 as of June 2004, and then to over 504,000 by the end of September 2005. When examining just the rating related claims pending, VBA reported 253,000 for September 2003, an increase to 321,000 as of September 2004, and a total of over 346,000 by the end of September 2005. VBA attributed these recent increases to the impact of claims filed by servicemembers returning from Operations Enduring Freedom and Iraqi Freedom.
VA credits improvements in reducing backlogs from the original peak to the reforms recommended by the Secretary's Claims Processing Task Force report of October 2001. The report recommended measures to increase the efficiency and productivity of VBA operations, shrink claims backlogs, reduce claims processing time, and improve the accuracy of decisions. The VA Task Force made 34 recommendations, and VBA defined 70 actions to accomplish those recommendations. As of August 2005, VBA reported all approved task force recommendations have been implemented. VBA remains challenged to reduce the outstanding backlog and to process benefits claims in a timely, accurate, and consistent manner. In light of VBA's assertion that all VA Task Force recommendations were implemented, we will initiate a review to determine why pending claims have increased in the past 2 years and to measure the relevancy of VA Task Force recommendations to the increase in pending claims, or if new barriers to timely claims processing exist.
While the number of claims pending rating decisions has increased, Compensation and Pension (C&P) rating actions that averaged 189 days for completion in January 2004 are averaging 167 days as of September 2005, demonstrating improvement in the timeliness of claims processing. Although VA established that processing claims in a timely and accurate manner is a top priority, the performance goal of 145 days for completing rating-related actions on C&P claims has not been met.
Progress in achieving rating-related decision timeliness is significantly affected by the increasing numbers of claims being received and the increased complexity of those claims. While VBA had reduced its rating-related pending claims to approximately 253,000 in September 2003, the backlog increased to over 321,000 as of September 2004, and to over 346,000 by the end of September 2005. Disability claims from returning war veterans as well as from veterans of earlier periods increased from 578,773 in 2000 to 771,115 in 2004. In 2004 this represents an increase of more than 192,000 claims or 33 percent over the 2000 base year. Receipts in 2005 continue to increase.
Claims have also become increasingly more complex, particularly because of evolving legal interpretations of requirements issued by the Court of Appeals for Veterans Claims such as a ruling that required decisions on issues not claimed by the veteran but which are "reasonably raised by the medical evidence of record" ("inferred issues"). The Veterans Claims Assistance Act (VCAA), passed in November 2000, increased VA's notification and development duties considerably, adding more steps to the claims process and lengthening the time it takes to develop and decide a claim and also requiring that VA review the claims at more points in the decision process. When processing "inferred issues" claims, VCAA requires additional notice and development requirements.
In addition to the increased volume and complexity of claims, the number of conditions for which veterans claim entitlement to disability compensation continues to increase. In 2004, VBA received 194,706 original compensation claims. Of that number, 36,401, or 18.7 percent, were claims in which the veteran claimed eight or more disabling conditions. Under the VCAA, each condition must be addressed within a VA medical examination and often multiple specialty examinations. In addition, medical opinions are generally required. These evidence requirements complicate the claims process considerably.
As a result of the factors cited above, VA changed its strategic target for processing disability compensation and pension rating-related actions from 90 days to 125 days and changed the performance goal for 2005 to 145 days. VBA continues to focus its efforts on improving both the timeliness and quality of claims processing. Timeliness of processing for 2005 through September averaged 167 days. At the end of September, there were approximately 346,000 pending rating claims.
As of August 2005 VBA considers action on the Task Force recommendations completed. Action has been taken to implement 68 of the 70 action items. The remaining two action items were not approved by the Secretary.
In 1999, the Under Secretary for Benefits asked the OIG for assistance to help identify internal control weaknesses that might facilitate, or result in, fraud in VBA's C&P program. In response, we conducted a vulnerability assessment of the management implications of employee thefts from the C&P system and identified 18 internal control vulnerabilities. In our July 2000 follow-up report, Audit of the C&P Program's Internal Controls at VARO St. Petersburg, FL (Report No. 99-00169-97), we identified that 16 of the 18 previously reported categories of vulnerability remained present at VA's largest VARO. We made 26 recommendations for improvement. After over 5 years, 2 of 26 recommendations remain unimplemented, including controlling adjudication of employee claims and use of a third-person authorization control to monitor large payments.
In 2005, C&P internal controls continue to be identified as a weakness during CAP reviews at VAROs. Specifically, physical security controls over sensitive records needed improvement at 10 of 16 facilities. Semiannual reviews of hardcopy and electronic file security were not performed as required, access to file cabinets containing employee-veteran claims folders and other sensitive records were not properly controlled, sensitive files were not secured in locked files, claims folders were not maintained at the designated regional offices of jurisdiction, and sensitive electronic records were not secured through the common security user manager application. Since VBA points to VETSNET as an important step in strengthening internal controls, the OIG Office of Audit will be evaluating VETSNET design, development, and project management to determine if the application met design specifications, achieved project milestones, and improved accuracy of benefit payments.
VA's Program Response to OIG2C:
VBA has made major strides in eliminating internal control weaknesses and remains committed to final resolution of the recommendations for improvement. The two recommendations not fully implemented are tied to implementation of the VETSNET Award application. VETSNET is a combination of applications being deployed to replace the current Benefits Delivery Network.
The first recommendation is related to systemic controls over adjudication of employee claims at the employing VA regional office (VARO). VETSNET Award has security features to prevent processing of both employee-veteran and Veteran Service Officer claims at the station where the individual is employed. While this will provide the needed internal control, further system testing is required. At the present time, VETSNET Award is being tested in two facilities that do not share employee-veteran jurisdiction. The projected completion date for testing is December 2005.
The second recommendation requires the use of an automated third-person authorization control to monitor payments greater than $25,000. In June 2005 VBA demonstrated the completed systemic controls in VETSNET Award for third-person authorization of large payments. VBA provided further support for closing the recommendation based on the interim C&P large-payment review process instituted in 2001. This process continues to be reviewed during C&P Service site visits and is also validated through the OIG CAP review process. In July 2005 the OIG reported that it will close the recommendation after the system is implemented and used by all VAROs. The OIG will verify that it is operating accurately. VETSNET Award implementation is slated for December 2006.
Regarding weaknesses identified by OIG CAP reviews, the C&P Service reviews OIG findings prior to all site visits and follows up to determine if the CAP review findings have been corrected. C&P Service findings from site visits are forwarded to the VAROs via site visit reports. VAROs are required to provide C&P Service with an implementation plan for the noted action items within 60 days from the date of the report. VARO implementation plans include steps taken to address the action items or a description of how and when they will be implemented.
In February 2004 VA created the Office of Business Oversight (OBO) in the Office of Management to conduct oversight and monitoring of financial, capital asset management, acquisition, and logistics activities across the Department. During 2005 OBO initiated research on physical security controls over hardcopy and electronic files related to the C&P program. This research included:
- Reviewing VA and VBA security guidelines and VARO documentation such as Privacy Act compliance procedures, security badge procedures, and work-at-home agreements.
- Observing VARO facility access vulnerabilities as well as control and accountability over claims folders.
- Interviewing VARO management, employees, and security personnel such as Information Security Officers.
- Learning about the Control of Veterans Records System and associated bar coding of claims folders.
- Expanding understanding of Benefits Delivery Network controls and security exception reporting.
Further, OBO has explored other C&P physical security control issues such as record control at veterans service organizations; VARO assessment of veteran, employee, and other threats; and the removal of electronic information from VAROs with portable flash drives.
OBO is planning to include physical security controls as a formal objective of C&P reviews during 2006. OBO will formally report any findings to VARO directors with recommendations for corrective action and will also issue an annual report with recommendations.
Public Law 107-103, The Veterans Education and Benefits Expansion Act of 2001, enacted December 27, 2001, prohibits veterans who are fugitive felons, or their dependents, from receiving specified veterans benefits. At the direction of the Secretary, the OIG established a fugitive felon program to identify VA benefits recipients and employees who are fugitives from justice. This program is a collaborative effort involving the OIG, VBA, VHA, and VA Police Service. The program consists of conducting computerized matches between fugitive felon files of law enforcement organizations and VA benefit files. We provide location information to the law enforcement organization responsible for serving the warrant for those veterans identified as fugitive felons. Subsequently, we provide fugitive information to VA to suspend benefits and to recover erroneous payments.
OIG completed agreements to match records with the U.S. Marshals Service; Federal Bureau of Investigation National Crime Information Center (NCIC); and the States of Alabama, Arizona, California, Massachusetts, New York, Ohio, Pennsylvania, Tennessee, Delaware, and Washington. OIG is seeking additional agreements with states that do not enter all felony warrants into the NCIC. In addition, the VA Secretary signed a directive establishing VA procedures for dealing with fugitive felons.
As of May 2005, more than 6.9 million warrant files received from law enforcement agencies have been matched to more than 11 million records contained in VA benefit system files, resulting in the identification of 45,136 matched records. The records match resulted in 17,469 referrals to various law enforcement agencies throughout the country and led to the apprehension of 872 fugitive felons, including the arrest of 58 VA employees. In addition, 13,509 fugitive felons identified in these matches have been referred to VA for benefit suspension resulting in the creation of $79 million identified for recovery and an estimated cost avoidance of $174.5 million. With an estimated 1.9 million felony warrants outstanding in the United States and an estimated 2 million new felony warrants added each year, we project full implementation cost avoidance reaching $209.6 million per year.
Since the beginning of the program, VBA has received over 5,700 referrals from the VA OIG and has used new policies and procedures to implement the benefit suspension requirements of the law. While VA OIG has identified an overpayment recovery of $79 million from the referrals, VA's program response indicating VBA has established about $48 million in overpayments seems to indicate a time lag in processing actions as a result of the referrals. As of June 2005, VHA received over 7,800 referrals from the VA OIG. VHA's handbook outlining procedures for the Fugitive Felon Program was approved in December 2004, and we now expect full implementation by VHA. We view the Fugitive Felon Program as fully implemented in VBA and agree it is no longer a major management challenge there, but our assessment of implementation in VHA continues.
VA's Program Response to OIG2D:
VHA provided copies of the VHA Fugitive Felon Program Handbook published in January 2005 to network directors and also provided copies of fugitive felon listings at the end of June 2005. Networks are now validating warrants. Sixty-day due process notification letters will be mailed to the veterans identified with active warrants. Both the validation process and the mailing of notification letters are expected to begin in the first quarter of 2006 and will be ongoing. After the 60-day due process period, benefits will be terminated, and collection letters will be forwarded to veterans who received VHA services while in a fugitive felon status.
VBA continues to work closely with the OIG in implementing the Fugitive Felon Program. The Vocational Rehabilitation and Employment Service (VR&E) received 13 veteran fugitive felon referrals from the OIG and notified the appropriate regional offices with jurisdiction. VR&E published guidance in October 2004 on handling veteran fugitive felons participating in the VR&E program. As of July 2005 C&P Service received 5,403 referrals from the OIG and forwarded them to field stations. C&P Service monitors regional office action on these referrals and has reported $47,482,358 in overpayments since the beginning of the program. To date, Education regional processing offices have processed a total of 97 fugitive felon referrals, creating slightly over $420,000 in debts. Loan Guaranty Service (LGY) staff worked with the OIG to determine how LGY can meet the requirements of the Fugitive Felon Act. Under the current arrangement, the OIG has agreed to provide LGY with the OIG list of fugitive felons. LGY agreed to work with the OIG to check LGY databases against the listings to determine whether any individual on the felons list has attempted to use his/her home loan benefit. Any matches will be forwarded to the OIG for action. The OIG referred 262 fugitive felon names to the Insurance Service, of which 207 cases remain in a "no release of funds" status. The Insurance Service will continue to monitor fugitive felon lists for signs of activity, and will continue cooperation with the OIG. VBA has established procedures to effectively manage the Fugitive Felon Program and does not consider this a major management challenge.
|