Summary
The Veterans Health Administration (VHA) has been using miscellaneous obligations for over 60 years to record estimates of obligations to be incurred at a later time. The large percentage of procurements recorded as miscellaneous obligations in fiscal year 2007 raised questions about whether proper controls were in place over the authorization and use of billions of dollars. GAO was asked to review (1) how VHA used miscellaneous obligations during fiscal year 2007, and (2) whether Department of Veterans Affairs (VA) policies and procedures were designed to provide adequate controls over their authorization and use. GAO obtained and analyzed available VHA data on miscellaneous obligations, reviewed VA policies and procedures, and reviewed a nongeneralizable sample of 42 miscellaneous obligations at three case study locations.
VHA recorded over $6.9 billionof miscellaneous obligationsfor the procurement of mission-related goods and services in fiscal year 2007. According to VHA officials, miscellaneous obligations were used to facilitate payment for goods and services when the quantities and delivery dates are not known. According to VHA data, almost $3.8 billion (55.1 percent) of VHA's miscellaneous obligations was for fee-based medical services for veterans and another $1.4 billion (20.4 percent) was for drugs and medicines. The remainder funded, among other things, state homes for the care of disabled veterans, transportation of veterans to and from medical centers for treatment, and logistical support and facility maintenance for VHA medical centers nationwide. GAO's Standards for Internal Control in the Federal Government states that agency management is responsible for developing detailed policies and procedures for internal control suitable for their agency's operations. However, VA policies and procedures were not designed to provide adequate controls over the authorization and use of miscellaneous obligations with respect to oversight by contracting officials, segregation of duties, and supporting documentation for the obligation of funds. Collectively, these control design flaws increase the risk of fraud, waste, and abuse (including employees converting government assets to their own use without detection). These control design flaws were confirmed in our case studies at VHA Medical centers in Pittsburgh, Pennsylvania; Cheyenne, Wyoming; and Kansas City, Missouri. In May 2008, VHA issued revised guidance on required procedures for authorizing and using miscellaneous obligations. GAO reviewed the revised guidance and found that while it offered some improvement, it did not fully address the specific control design flaws GAO identified. Furthermore, according to VA officials, VA's policies governing miscellaneous obligations have not been subject to legal review by VA's Office of General Counsel. Such a review is essential to ensure that policies and procedures comply with applicable federal appropriations law and internal control standards.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
Kay L. Daly
Government Accountability Office: Financial Management and Assurance
(202) 512-9312
Recommendations for Executive Action
Recommendation: In order for VA to reduce the risks associated with the use of miscellaneous obligations, the Secretary of Veterans Affairs, should, in conjunction with VA's Office of General Counsel, develop and implement policies and procedures consistent with federal appropriations law and internal control standards that establish a process for the review of miscellaneous obligations by contracting officials, including requiring appropriate documentation that the review has occurred.
Agency Affected: Department of Veterans Affairs
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: In order for VA to reduce the risks associated with the use of miscellaneous obligations, the Secretary of Veterans Affairs, should, in conjunction with VA's Office of General Counsel, develop and implement policies and procedures consistent with federal appropriations law and internal control standards that segregate duties for (1) creating, approving, and recording miscellaneous obligations; (2) the certification and payment of invoices; and (3) the receipt of the resulting goods or services.
Agency Affected: Department of Veterans Affairs
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: In order for VA to reduce the risks associated with the use of miscellaneous obligations, the Secretary of Veterans Affairs, should, in conjunction with VA's Office of General Counsel, develop and implement policies and procedures consistent with federal appropriations law and internal control standards that document the purposes, vendors, and contract numbers of miscellaneous obligations.
Agency Affected: Department of Veterans Affairs
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: In order for VA to reduce the risks associated with the use of miscellaneous obligations, the Secretary of Veterans Affairs, should, in conjunction with VA's Office of General Counsel, develop and implement policies and procedures consistent with federal appropriations law and internal control standards that establish an oversight mechanism to ensure that these control policies and procedures are fully and effectively implemented.
Agency Affected: Department of Veterans Affairs
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
