Insufficient Oversight of VA’s Undelivered Orders

The VA Office of Inspector General (OIG) conducted this audit to determine if VA’s management of undelivered orders (UDO) ensured the most effective use of appropriated funds. UDOs are items or services ordered that have not been received, and their value represents legal financial commitments. Sometimes the final cost for ordered items or services may be less than the amount of the original obligation estimate—for example, if the price of goods or services ordered is reduced before delivery, or if a project order is canceled. When this happens, VA policy requires VA to deobligate the excess funds. These funds can then be reobligated for other goods and services to benefit veterans. If funds are not reobligated on time, however, they must be returned to the Department of the Treasury. The OIG found that VA did not effectively ensure that appropriated funds that were no longer needed were identified and deobligated. The audit team estimated that VA had not deobligated at least $132.6 million out of $3.5 billion in excess funds in a timely manner, and approximately 3,900 of 10,624 orders in the audit sample. The audit team determined that VA staff did not adequately monitor or reconcile open UDOs as required due to conflicting guidance and did not identify and deobligate excess funds or provide supporting documentation. The OIG recommended that VA leaders develop a process for monitoring the department’s performance on reconciling open orders, as well as a plan to share results with appropriate officials for action. VA leaders should also ensure that obligation policy includes timeframes for communications among departments to identify funds that could be deobligated. Other recommendations focused on compliance with existing policies for reviewing, adjusting, and maintaining documentary evidence for obligations.