Financial Efficiency Review of the VA Black Hills Health Care System in South Dakota

The VA Office of Inspector General (OIG) conducted this review to assess the oversight and stewardship of funds by the VA Black Hills Health Care System in South Dakota and to identify potential cost efficiencies in carrying out its functions. The review assessed the following financial activities and administrative processes to determine whether the healthcare system had appropriate oversight and controls in place: open obligations oversight. purchase card use, inventory and supply management, and pharmacy operations. The review team identified several opportunities for improvement: • The healthcare system did not properly manage open obligations as required, risking funds not being used in the year they were appropriated. • It did not always process purchase card transactions in compliance with VA policy, consider the most appropriate purchasing mechanism, or leverage its purchasing power through using competitively priced contracts. It also did not maintain an accurate, up-to-date VA Form 0242 for all cardholders. • While inventory managers provided oversight to maintain stock levels for expendable supply items, the effectiveness and efficiency of inventory management could be improved by ensuring conversion factors, stock levels, and inventory values are recorded correctly in the Generic Inventory Package. • The healthcare system could improve pharmacy efficiency by narrowing the gap between the facility’s observed drug costs and expected drug costs, bringing the turnover rates closer to the VHA recommended level, and avoiding end-of-year purchases. The OIG made seven recommendations to the healthcare system director. The recommendations address issues that, if left unattended, may eventually interfere with effective financial efficiency practices and the strong stewardship of VA resources.