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Financial Efficiency Inspection of the VA Palo Alto Health Care System in California

Report Information

Issue Date
Report Number
22-01565-29
VA Office
Veterans Health Administration (VHA)
Report Author
Office of Audits and Evaluations
Report Type
Financial Inspection
Report Topic
Financial Management
Major Management Challenges
Stewardship of Taxpayer Dollars
Recommendations
10
Questioned Costs
$0
Better Use of Funds
$0
Congressionally Mandated
No

Summary

Summary

The VA Office of Inspector General (OIG) conducted this inspection to assess the stewardship and oversight of funds by the VA Palo Alto Health Care System in California. This inspection assessed financial activities and administrative processes to determine whether appropriate controls and oversight were in place. These included open obligations, purchase card use, inventory and supply management, and pharmacy operations. Because personnel were not aware of review requirements, the team could not verify that anyone reviewed 10 obligations as required. VA’s reconciliation reports in the financial and accounting systems reflected accurate dates and order amounts for the 10 obligations; however, two had residual funds totaling approximately $3,102 that should have been deobligated. When assessing purchase card use, the team estimated that the healthcare system could have identified noncompliance errors in approximately 7,200 of 16,700 transactions, totaling about $26.9 million in costs. The team found that the effectiveness and efficiency of inventory management could improve by ensuring stock levels and inventory values are correct, establishing processes and procedures for monitoring inventory, implementing a training plan, and ensuring supply chain performance measures are maintained. The team found that pharmacy efficiency could improve by narrowing the gap between observed and expected costs, bringing turnover rates closer to the recommended level, and meeting reconciliation reporting requirements. The OIG made nine recommendations to the healthcare system director and one to the director of contracting for the Network Contracting Office 21 including making staff aware of requirements, conducting reviews on inactive open obligations, deobligating excess funds, complying with record retention requirements, and establishing controls for purchase card and contract use. The recommendations also specified providing supply chain procedures training, improving inventory system data reliability, ensuring physical inventory compliance, implementing a plan to increase inventory turnover, and consistent and timely reconciliation.

Open Recommendation Image, SquareOpenClosed and Implemented Recommendation Image, CheckmarkClosed-ImplementedNot Implemented Recommendation Image, X character'Closed-Not Implemented
No. 1
Closed and Implemented Recommendation Image, Checkmark
to Veterans Health Administration (VHA)
Ensure that healthcare system finance office staff are made aware of policy requirements and that reviews are conducted on all inactive open obligations, and deobligate any identified excess funds as required by VA Financial Policy, vol. 2, chap. 5, “Obligations Policy.”
No. 2
Closed and Implemented Recommendation Image, Checkmark
to Veterans Health Administration (VHA)
Ensure cardholders comply with record retention requirements as required by VA Financial Policy, vol. 16, chap. 1B, “Government Purchase Card for Micro-Purchases,”
No. 3
Closed and Implemented Recommendation Image, Checkmark
to Veterans Health Administration (VHA)
Establish controls to confirm approving officials and purchase cardholders review purchases for VA policy compliance and ensure contracting is used when it is in the best interest of the government.
No. 4
Closed and Implemented Recommendation Image, Checkmark
to Veterans Health Administration (VHA)
Require purchase cardholders to submit a request for ratification for any unauthorized commitments identified.
No. 5
Closed and Implemented Recommendation Image, Checkmark
to Veterans Health Administration (VHA)
Ensure purchase card reviews are performed as required by VA Financial Policy, vol. 16, chap. 1B, “Government Purchase Card for Micro-Purchases,”
No. 6
Closed and Implemented Recommendation Image, Checkmark
to Veterans Health Administration (VHA)
Ensure the chief of supply chain services establishes local processes and procedures so that all necessary reports are monitored on Supply Chain Common Operating Picture, the Generic Inventory Package, or other inventory sites or software systems, on a routine basis, as required in the Veterans Health Administration’s Directive 1761 Supply Chain Management Operations.
No. 7
Open Recommendation Image, Square
to Veterans Health Administration (VHA)
Ensure supply chain management staff implement a plan for staff training to increase awareness of internal controls and data reliability within the Generic Inventory Package.
No. 8
Closed and Implemented Recommendation Image, Checkmark
to Veterans Health Administration (VHA)

Ensure the chief of supply chain services signs quarterly physical inventory memorandums of “A” classified items and make them available to Veterans Integrated Service Network personnel as required in the Veterans Health Administration’s Directive 1761 Supply Chain Management Operations.

No. 9
Open Recommendation Image, Square
to Veterans Health Administration (VHA)
Develop and implement a plan to increase inventory turnover to meet the level recommended by the Veterans Health Administration Pharmacy Benefits Management Office.
No. 10
Open Recommendation Image, Square
to Veterans Health Administration (VHA)
Develop and implement a plan to complete monthly B09 reconciliation consistently to ensure discrepancies are corrected in a timely manner.
Total Monetary Impact of All Recommendations
Open: $ 0.00
Closed: $ 26,903,102.00