Veterans Health Administration
Improvements Needed in Design of Controls over Miscellaneous Obligations Gao ID: GAO-08-1056T July 31, 2008The 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's testimony provides preliminary findings related to (1) how VHA used miscellaneous obligations during fiscal year 2007, and (2) whether the Department of Veterans' Affairs (VA) policies and procedures were designed to provide adequate controls over their authorization and use. GAO recently provided its related draft report to the Secretary of Veterans Affairs for review and comment and plans to issue its final report as a follow-up to this testimony. 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. GAO's related draft report includes four recommendations to strengthen internal controls governing the authorization and use of miscellaneous obligations, in compliance with applicable federal appropriations law and internal control standards.
VHA recorded over $6.9 billion of miscellaneous obligations for the procurement of mission-related goods and services in fiscal year 2007. According to VHA officials, miscellaneous obligations were used to facilitate the 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, based on GAO's preliminary results, 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 the case studies at Pittsburgh, Cheyenne, and Kansas City. In May 2008, VA issued revised guidance concerning 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 in ensuring that the policies and procedures comply with applicable federal appropriations law and internal control standards.
GAO-08-1056T, Veterans Health Administration: Improvements Needed in Design of Controls over Miscellaneous Obligations
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United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 10:00 a.m. EDT:
Thursday, July 31, 2008:
Veterans Health Administration:
Improvements Needed in Design of Controls over Miscellaneous
Obligations:
Statement of Kay L. Daly, Acting Director:
Financial Management and
Assurance:
GAO-08-1056T:
GAO Highlights:
Highlights of GAO-08-1056T, a testimony before the Subcommittee on
Oversight and Investigations, Committee on Veterans' Affairs, House of
Representatives.
Why GAO Did This Study:
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‘s testimony provides preliminary findings related to (1) how VHA
used miscellaneous obligations during fiscal year 2007, and (2) whether
the Department of Veterans' Affairs (VA) policies and procedures were
designed to provide adequate controls over their authorization and use.
GAO recently provided its related draft report to the Secretary of
Veterans Affairs for review and comment and plans to issue its final
report as a follow-up to this testimony. 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.
GAO's related draft report includes four recommendations to strengthen
internal controls governing the authorization and use of miscellaneous
obligations, in compliance with applicable federal appropriations law
and internal control standards.
What GAO Found:
VHA recorded over $6.9 billion of miscellaneous obligations for the
procurement of mission-related goods and services in fiscal year 2007.
According to VHA officials, miscellaneous obligations were used to
facilitate the 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, based on GAO‘s preliminary results, 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 the
case studies at Pittsburgh, Cheyenne, and Kansas City.
Table: Summary of Control Design Deficiencies at Three Case Study
Locations:
Station: Pittsburgh;
Number of obligations reviewed: 14;
No documented approval by contracting official: 14;
Inadequate segregation of duties: 9;
Inadequate supporting documentation: Incomplete purpose description: 3;
Inadequate supporting documentation: Blank vendor field: 6;
Inadequate supporting documentation: Blank contract field: 3.
Station: Cheyenne;
Number of obligations reviewed: 11;
No documented approval by contracting official: 11;
Inadequate segregation of duties: 11;
Inadequate supporting documentation: Incomplete purpose description: 1;
Inadequate supporting documentation: Blank vendor field: 6;
Inadequate supporting documentation: Blank contract field: 4.
Station: Kansas City;
Number of obligations reviewed: 17;
No documented approval by contracting official: 17;
Inadequate segregation of duties: 10;
Inadequate supporting documentation: Incomplete purpose description: 4;
Inadequate supporting documentation: Blank vendor field: 8;
Inadequate supporting documentation: Blank contract field: 9.
Station: Totals;
Number of obligations reviewed: 42;
No documented approval by contracting official: 42;
Inadequate segregation of duties: 30;
Inadequate supporting documentation: Incomplete purpose description: 8;
Inadequate supporting documentation: Blank vendor field: 20;
Inadequate supporting documentation: Blank contract field: 16.
Source: GAO analysis of VHA data.
[End of table]
In May 2008, VA issued revised guidance concerning 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 in ensuring that
the policies and procedures comply with applicable federal
appropriations law and internal control standards.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-1056T]. For more
information, contact Kay L. Daly at (202) 512-9095 or dalykl@gao.gov.
[End of section]
United States Government Accountability Office: Washington, DC 20548:
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to discuss the Veterans Health
Administration's (VHA) use of miscellaneous obligations. VHA officials
said that they have been using miscellaneous obligations for over 60
years to record estimates of obligations[Footnote 1] to be incurred at
a later time.[Footnote 2] According to the Department of Veterans'
Affairs (VA) policy,[Footnote 3] miscellaneous obligations can be used
to record estimated obligations to facilitate the procurement of a
variety of goods and services, including fee-based medical and nursing
services; beneficiary travel; and for other purposes.
VHA officials briefed your subcommittee staff in September 2007 about
various financial reporting weaknesses in the agency and initiatives
under way to address them. In the briefing, VHA officials disclosed
that $4.8 billion (56 percent) of the reported $8.6 billion in
procurements through the third quarter of fiscal year 2007 had been
done using funds categorized as miscellaneous obligations. In addition,
VA's Office of Inspector General (OIG) issued a report in May 2007 on
the alleged mismanagement of funds at the VA Boston Healthcare System.
According to OIG officials, they obtained documents showing that a
miscellaneous obligation for $200,000 was requested, approved, and
obligated by the same fiscal official, calling into question the
adequacy of the segregation of duty controls over miscellaneous
obligations.[Footnote 4] In light of these concerns, you requested that
we review whether the design of VHA's internal controls over the use of
miscellaneous obligations was adequate for fiscal year 2007.
Today, my testimony will focus on our preliminary observations related
to (1) how VHA used miscellaneous obligations during fiscal year 2007,
and (2) whether VA's policies and procedures are designed to provide
adequate controls over the authorization and use of miscellaneous
obligations. We recently provided our draft report, including
recommendations, on the results of our audit to the Secretary of
Veterans Affairs for review and comment. We plan to incorporate VA's
comments as appropriate and issue our final report as a follow-up to
this testimony. We conducted this audit from November 2007 through July
2008 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives. Details on
our scope and methodology are included in appendix I. Further
background information on VHA's operations is included in appendix II.
Summary:
According to our preliminary analysis, in fiscal year 2007, available
information from the Integrated Funds Distribution, Control Point
Activity, Accounting and Procurement (IFCAP) database show that VHA
used miscellaneous obligations to record over $6.9 billion against its
appropriations for the procurement of mission-related goods and
services. According to the IFCAP data, almost $3.8 billion of this
total (55.1 percent) was for fee-based medical and dental services for
veterans and another $1.4 billion (20.4 percent) for drugs, medicines,
and hospital supplies. The remainder covered, 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. VHA officials
said they used miscellaneous obligations to administratively reserve
estimated funds required to facilitate the payments for goods and
services for which specific quantities and time frames were uncertain.
Another cited benefit was that miscellaneous obligations simplify the
procurement process when no underlying contract or purchase order
exists. For example, VHA centers used miscellaneous obligations to
record estimated obligations for an umbrella agreement for fee-based
medical services that can then be used to fund the work performed by a
number of different physicians. Nonetheless, without effectively
designed mitigating controls, using miscellaneous obligations may also
expose VHA to increased risk of fraud, waste, and abuse.
Our preliminary findings indicate that VA policies and procedures were
not designed to provide adequate controls over the use of miscellaneous
obligations with respect to oversight by contracting officials,
segregation of duties, and supporting documentation for recording the
obligation of funds. Specifically, although VA's September 29, 2006,
policy required contracting officials to review miscellaneous
obligations to help ensure their proper use, the supporting procedures
did not describe how such reviews should be carried out. Further, the
design of the current control process did not include detailed
procedures for conducting either an automated or manual review of
miscellaneous obligations by contracting officials. With regard to
segregation of duties, the miscellaneous obligation automated system
and associated policies and procedures were not designed to prevent one
person from performing multiple roles in the process of authorizing and
executing miscellaneous obligations. Finally, with regard to
documentation, we found that current guidance did not include detailed
procedures on what was to be included in the purpose field of the
miscellaneous obligation authorization document and did not require
that the vendor name and contract number be included. These control
design flaws were confirmed in our case studies at Pittsburgh,
Cheyenne, and Kansas City. Such VHA-wide policy and procedure design
flaws increase the risk of fraud, waste, and abuse at the 129 VHA
stations using miscellaneous obligations in fiscal year 2007. New
guidance for the use of miscellaneous obligations was issued in May
2008. This guidance, while it offered some improvement, did not fully
address the three problem areas. Also, we understand that VA attorneys
have not reviewed these policies to help ensure compliance with
applicable appropriations law and other requirements.
Our draft report, recently provided to the Secretary for review and
comment, included four recommendations for actions that, if effectively
implemented, should reduce the risks associated with using
miscellaneous obligations.
Miscellaneous Obligations Used Extensively for Mission-Related
Activities in Fiscal Year 2007:
According to the IFCAP database, in fiscal year 2007 nearly 132,000
miscellaneous obligations, with a total value of nearly $9.8 billion,
were created (see table 1). While VA's Central Office had $2.9 billion
in miscellaneous obligations during fiscal year 2007, our review
focused on the $6.9 billion in miscellaneous obligations used by VHA's
129 stations,[Footnote 5] located in every Veterans Integrated Services
Network (VISN) throughout the country, for a variety of mission-related
activities. (See app. III for a listing of the use of miscellaneous
obligations by VISN, and app. IV for a listing of the use of
miscellaneous obligations by station.)
Table 1: Miscellaneous Obligations at VHA and VA for Fiscal Year 2007
(Dollars in billions):
VISN name: VHA[A];
Number of miscellaneous obligations: 127,070;
Dollar amount of miscellaneous obligations: $6.9;
Percentage of total dollar value: 70%.
VISN name: VA's Central Office[B];
Number of miscellaneous obligations: 4,839;
Dollar amount of miscellaneous obligations: $2.9;
Percentage of total dollar value: 30%.
VISN name: Total;
Number of miscellaneous obligations: 131,909;
Dollar amount of miscellaneous obligations: $9.8;
Percentage of total dollar value: 100%.
Source: GAO analysis of IFCAP data.
[A] Includes miscellaneous obligations for VISNs 1-12 and 15-23 (VISNs
13 and 14 were consolidated and designated VISN 23).
[B] VA's Central Office (VISN 0) is responsible for the administration
of the Consolidated Mail Outpatient Pharmacy (CMOP) initiative that
provides mail order prescriptions to veterans using automated
distribution centers located throughout the country. In fiscal year
2007, VISN 0 obligated about $2.08 billion in miscellaneous obligations
for drugs, medicines, and other supplies, and almost $800 million for
various fee-based medical, dental, and other services.
[End of table]
According to available VHA data, VHA used miscellaneous obligations to
record estimated obligations of over $6.9 billion for mission-related
goods and services. As shown in figure 1, about $3.8 billion (55.1
percent) was for fee-based medical and dental services for veterans,
and another $1.4 billion (20.4 percent) was for drugs, medicines, and
hospital supplies. The remainder was for, among other things, state
veterans homes,[Footnote 6] transportation of veterans to and from
medical centers for treatment, and logistical support and facility
maintenance for VHA medical centers nationwide.
Figure 1: VHA Miscellaneous Obligations for Fiscal Year 2007:
[See PDF for image]
This figure is a pie-chart depicting the following data:
VHA Miscellaneous Obligations for Fiscal Year 2007:
* Services including fee base physician, nursing, dental,
hospitalization stays, research, and prosthetic repair: $3,805 million
(55.1%);
* Supplies including drugs, medicines, hospital supplies, blood
products, and prosthetic supplies: $1,412 million (20.4%);
* Rent, communications, and utilities including gas, electricity,
water, sewer, and phone: $628 million (9.1%);
* State homes and homeless veteran support: $553 million (8%);
* Transportation of persons/things: $301 million (4.4%);
* Other, such as dietetic provisions, operating supplies, cleaning
services, and data processing: $210 million (3%).
Source: GAO analysis of VHA data.
[End of figure]
According to VHA contracting and fiscal service officials, using
miscellaneous obligations tends to reduce administrative workload and
facilitates the payment for contracted goods and services, such as
drugs, medicines, and transportation, and for goods and services for
which no pre-existing contracts exist, such as fee-basis medical and
dental services and utilities.
VHA officials stated that miscellaneous obligations facilitate the
payment for contracted goods and services when the quantities and
delivery dates are not known. A miscellaneous obligation can be created
for an estimated amount and then modified as specific quantities are
needed or specific delivery dates are set. When a purchase order is
created, however, the obligated amount cannot be changed without a
modification of the purchase order. According to VHA officials, the
need to prepare numerous modifications to purchase orders could place
an undue burden on the limited contracting personnel available at
individual centers and could also require additional work on the part
of fiscal services personnel.
VHA officials stated that the use of miscellaneous obligations can
simplify the procurement process when no pre-existing contract or
purchase order exists. For example, providing medical care on a fee-
basis to veterans outside of VHA medical centers may involve the
services of thousands of private physicians nationwide. Attempting to
negotiate a separate agreement or contract with each of these
individuals would be a difficult task for VHA's contracting staff.
Under the policies and procedures in place during fiscal year 2007, VHA
centers could use miscellaneous obligations as umbrella authorizations
for fee-based medical services for work performed by a number of
different physicians. In effect, in cases for which there is no pre-
existing contract, the miscellaneous obligation form becomes the record
of an obligation. However, use of miscellaneous obligations may also
increase the risk of fraud, waste, and abuse. Consequently, mitigating
controls must be designed to help compensate for the lack of a
negotiated contract. Absent contractual terms, one risk area is the
authorized fee schedule for the medical services being provided. In
this case, federal regulations call for payments to non-VA physician
services associated with outpatient and inpatient care provided at non-
VA facilities to be the lesser of the amount billed or the amount
calculated using the formula developed by the Department of Health and
Human Services under Medicare's participating physician fee schedule
for the period in which the service is provided.[Footnote 7] However,
we did not verify that VHA officials were properly following the fee
schedule.
Deficiencies in Design of Controls over Miscellaneous Obligations
Increase the Risk of Fraud, Waste, and Abuse:
Our preliminary observations on VA policies and procedures indicate
they were not designed to provide adequate controls over the use of
miscellaneous obligations. According to GAO's Standards for Internal
Control in the Federal Government, agency management is responsible for
developing detailed policies and procedures for internal control
suitable for their agency's operations and ensuring that they provide
for adequate monitoring by management, segregation of duties, and
supporting documentation for the need to acquire specific goods in the
quantities purchased. We identified control design flaws in each of
these oversight areas, and we confirmed that these weaknesses existed
at the three locations where we conducted case studies. Collectively,
these control design flaws increase the risk of fraud, waste, and abuse
(including employees converting government assets to their own use
without detection). New guidance for the use of miscellaneous
obligations was released in January 2008 and finalized in May 2008. We
reviewed the new guidance and found that while it offered some
improvement, it did not fully address the specific control design flaws
we identified. Furthermore, VA officials told us that this guidance was
not subject to any legal review. Such an analysis is essential to help
ensure that the design of policies and procedures comply with all
applicable federal appropriations law and internal control standards.
We reviewed 42 miscellaneous obligations at the three case study
locations and developed illustrative, more detailed information on the
extent and nature of these control design flaws. Table 2 summarizes the
locations visited, the miscellaneous obligations reviewed at each
location, and the extent and nature of control design deficiencies
found.
Table 2: Summary of Case Study Results:
Station: Pittsburgh;
Number of obligations reviewed: 14;
Dollar value of obligations reviewed: $6,694,853;
No documented approval by contracting official: 14;
Inadequate segregation of duties[A]: 9;
Inadequate supporting documentation: Incomplete purpose description[B]:
3;
Inadequate supporting documentation: Blank vendor field: 6;
Inadequate supporting documentation: Blank contract field[C]: 3.
Station: Cheyenne;
Number of obligations reviewed: 11;
Dollar value of obligations reviewed: $2,076,648;
No documented approval by contracting official: 11;
Inadequate segregation of duties[A]: 11;
Inadequate supporting documentation: Incomplete purpose description[B]:
1;
Inadequate supporting documentation: Blank vendor field: 6;
Inadequate supporting documentation: Blank contract field[C]: 4.
Station: Kansas City[D];
Number of obligations reviewed: 17;
Dollar value of obligations reviewed: $27,274,395;
No documented approval by contracting official: 17;
Inadequate segregation of duties[A]: 10;
Inadequate supporting documentation: Incomplete purpose description[B]:
4;
Inadequate supporting documentation: Blank vendor field: 8;
Inadequate supporting documentation: Blank contract field[C]: 9.
Station: Totals;
Number of obligations reviewed: 42;
Dollar value of obligations reviewed: $36,045,896;
No documented approval by contracting official: 42;
Inadequate segregation of duties[A]: 30;
Inadequate supporting documentation: Incomplete purpose description[B]:
8;
Inadequate supporting documentation: Blank vendor field: 20;
Inadequate supporting documentation: Blank contract field[C]: 16.
Source: GAO analysis of VHA data.
[A] In 30 of the 42 obligations we reviewed, one official performed two
or more of the following functions: requesting, creating, approving or
obligating funds for the original miscellaneous obligations, or
certifying delivery of goods and services and approving payment.
[B] In 8 of 42 instances, we could not determine the nature, timing, or
the extent of the goods and/or services being procured from the
description in the purpose field without reference to supporting
invoices.
[C] In these instances, we confirmed that contracts existed, but no
contract number was listed on the miscellaneous obligation document.
[D] Includes facilities located in Kansas City, KS; Wichita, KS;
Columbia, MO; and eastern Kansas.
[End of table]
Inadequate Contracting Oversight of Miscellaneous Obligations:
To help minimize the use of miscellaneous obligations, VA policy stated
that miscellaneous obligations would not be used as obligation control
documents unless the contracting authority for a station had determined
that purchase orders or contracts would not be required. Furthermore,
VA policy required review of miscellaneous obligations by contracting
officials to help ensure proper use in accordance with federal
acquisition regulations, but did not address the intended extent and
nature of these reviews or how the reviews should be documented.
Contracting officials were unable to electronically document their
review of miscellaneous obligations and no manual documentation
procedures had been developed. Our review of 42 miscellaneous
obligations prepared at three VHA stations showed that contracting
officers were at times familiar with specific miscellaneous obligations
at their facilities, but that they had no documented approvals
available for review. Furthermore, none of the three sites we visited
had procedures in place to document review of the miscellaneous
obligations by the appropriate contracting authorities.
Effective oversight and review by trained, qualified officials is a key
factor in identifying a potential risk for fraud, waste, or abuse.
Without control procedures to help ensure that contracting personnel
review and approve miscellaneous obligations prior to their creation,
VHA is at risk that procurements will not have safeguards established
through a contract approach. For example, in our case study at the VA
Pittsburgh Medical Center, we found 12 miscellaneous obligations,
totaling about $673,000, used to pay for laboratory services provided
by the University of Pittsburgh Medical Center (UPMC). The Chief of
Acquisition and Materiel Management for the VA Pittsburgh Medical
Center stated that she was not aware of the UPMC's laboratory testing
service procurements and would review these testing services to
determine whether a contract should be established for these
procurements. Subsequently, she stated that VISN 4, which includes the
VA Pittsburgh Medical Center, was going to revise procedures to procure
laboratory testing services through purchase orders backed by reviewed
and competitively awarded contracts, instead of funding them through
miscellaneous obligations.
Another Pittsburgh miscellaneous obligation for about $141,000 was used
to fund the procurement of livers for transplant patients. Local
officials said that there was a national contract for the services, and
that livers were provided at a standardized price of $21,800. However,
officials could not provide us with a copy of the contract, nor
documentation of the standardized pricing schedule. Therefore, we could
not confirm that VHA was properly billed for these services or that the
procurement was properly authorized.
Furthermore, in the absence of review by contracting officials,
controls were not designed to prevent miscellaneous obligations from
being used for unauthorized purposes, or for assets that could be
readily converted to personal use. Our analysis of the IFCAP database
for fiscal year 2007 identified 145 miscellaneous obligations for over
$30.2 million that appeared to be used in the procurement of such items
as passenger vehicles; furniture and fixtures; office equipment; and
medical, dental, and scientific equipment. Although the VA's
miscellaneous obligation policy did not address this issue, VA
officials stated that acquisition of such assets should be done by
contracting officials and not through miscellaneous obligations.
Without adequate controls to review and prevent miscellaneous
obligations from being used for the acquisition of such assets, it is
possible that the VHA may be exposing the agency to unnecessary risks
by using miscellaneous obligations to fund the acquisitions of goods or
services that should have been obtained under contract with
conventional controls built in.
Inadequate Segregation of Duties:
One tenet of an effectively designed control system is that key duties
and responsibilities need to be divided or segregated among different
people to reduce the risk of error or fraud.[Footnote 8] These controls
should include separating the responsibilities for authorizing
transactions, processing and recording them, reviewing the
transactions, and accepting any acquired assets. The basic principle is
that no one individual should be permitted to control all key aspects
of a transaction or event, such as acquiring a good or service.
However, IFCAP control design allows a single official to perform
multiple key roles in the process of creating and executing
miscellaneous obligations, and VA policies and procedures do not
specifically prohibit this practice. Control point officials are
authorized to create, edit, and approve requests for miscellaneous
obligations. In addition, these same individuals can certify the
delivery of goods and services and approve payment. Such weak control
design could enable a VHA employee to convert VHA assets to his or her
own use, without detection (such as the personal property acquired
through the use of miscellaneous obligations described in the previous
section).
Our review of the previously mentioned 42 miscellaneous obligations at
three case study locations indicated that controls in place at these
locations were not designed to ensure sufficient segregation of duties
for procurements. Specifically, as noted in table 3, we found
inadequate segregation of key duties in 30 of the 42 obligations we
reviewed. In these instances, controls were not designed to prevent one
official from performing two or more of the following key functions:
(1) requesting the miscellaneous obligation, (2) approving the
miscellaneous obligation, (3) recording the obligation of funds, or (4)
certifying delivery of goods and services and approving payment.
Table 3: Case Study Analysis of Segregation of Duties:
Number of functions performed by agency officials[A]: One official
performed two out of the four functions;
Obligations: 15.
Number of functions performed by agency officials[A]: One official
performed three out of the four functions;
Obligations: 13.
Number of functions performed by agency officials[A]: One official
performed all four functions;
Obligations: 2.
Number of functions performed by agency officials[A]: Subtotal -
Inadequate Segregation of Duties;
Obligations: 30.
Number of functions performed by agency officials[A]: Adequate
segregation of duties--different officials performed each of the four
functions;
Obligations: 12.
Number of functions performed by agency officials[A]: Total;
Obligations: 42.
Source: GAO analysis.
[A] Agency officials performed various combinations of the following
four functions: (1) requesting the miscellaneous obligation, (2)
approving the miscellaneous obligation, (3) obligating funds, and (4)
certifying receipt of goods and services and approving payment.
[End of table]
As noted in table 3, in 13 of the 42 obligations we examined, the same
official performed three of the four functions. In 11 of these cases,
the same official requested and approved the miscellaneous obligations,
and then certified receipt of goods and services. For example, in one
case in Pittsburgh, one official requested and approved a miscellaneous
obligation of over $140,000 for medical services and then certified
receipt and approved payment for at least $43,000 of those services. In
another case in Cheyenne, we found one miscellaneous obligation for
utilities where one official requested, approved, and certified receipt
and approved payment of over $103,000 in services.
In two instances in Cheyenne involving employee grievance settlements
for about $22,000, one official performed all four functions. While our
review found that these obligations were for legitimate purposes, the
fact that one official was able to perform multiple functions is
indicative of an inherent control system flaw. One individual,
controlling all of the key stages of the transaction, leaves VHA
vulnerable to potential fraud, waste, or abuse because of the
opportunity for the creation of inappropriate, perhaps fraudulent,
transactions.
The VA OIG noted a similar problem in its review of the alleged
mismanagement of funds at the VA Boston Healthcare System.[Footnote 9]
According to OIG officials, they obtained documents showing that a
miscellaneous obligation was used to obligate $200,000, and was
requested, approved, and obligated by the same fiscal official. The OIG
officials said that this transaction called into question the adequacy
of segregation of duty controls over funds obligated through
miscellaneous obligations.
Similarly, a July 2007 report by an independent public accountant (IPA)
also found, among other things, the segregation of duties for VA's
miscellaneous obligation process was inadequate.[Footnote 10] The
report noted that control point officials at a VISN, VA's Central
Office, and two medical centers had the ability to act as the requester
and approving official for the same transaction. This condition was
observed at four of the six locations the IPA reviewed. The IPA
recommended that the medical centers update their local policies to
prevent control point officials from acting as a requester and
approving official on the same transaction. Similarly, in 23 of the 42
miscellaneous obligations we reviewed in our case studies, the same
individual served as the requester and approver for a miscellaneous
obligation.[Footnote 11]
Lack of Adequate Supporting Documentation:
Another tenet of an effectively designed control system is that all
transactions need to be clearly documented and all documentation and
records should be properly managed and maintained.[Footnote 12]
Adequate documentation is essential to support an effective funds
control system, is crucial in helping to ensure that a procurement
represents a bona fide need, and reduces the risk of fraud, waste, and
abuse. When a legal obligation is recorded, it must be supported by
adequate documentary evidence of the liability.[Footnote 13] An agency
should use its best estimate to reserve an amount for future obligation
when the amount of the government's final liability is undefined.
Further, the basis for the estimate and the computation must be
documented. Although VA's form entitled "Estimated Miscellaneous
Obligation or Change in Obligation" (VA Form 4-1358) includes three key
fields--the purpose, vendor, and contract number fields--that provide
crucial supporting documentation for the obligation, VA policies and
procedures were not sufficiently detailed to specifically require this
type of information needed to adequately document miscellaneous
obligations. During the period covered by our review, VA did not have
specific guidance as to what information should be included in the
purpose field, including such essential data as the nature and extent
of the transaction. Further, during our case studies, we found many
instances where these fields on the miscellaneous obligation form were
left blank or did not provide adequate information as a result of this
control design flaw.
Specifically, in our case studies, we found that these control design
flaws resulted in the purpose field on 8 of the 42 miscellaneous
obligations having insufficient data to determine whether the
miscellaneous obligation represented a bona fide need. In many
instances, while the stated purposes may have been adequate for the
requesters and approving officials in the using services, this level of
documentation was not sufficient for an independent reviewer to
determine from the purpose field what items were procured and whether
the appropriate budget object code was charged. As a result of these
deficiencies in the design of controls, in several cases we had to rely
on invoices to determine the probable purpose of the miscellaneous
obligation and whether it represented a bona fide need. For example, in
Kansas City, we found one miscellaneous obligation for over $1.3
million whose purpose was listed as "To obligate funds for the Oct 06
payment," while the associated invoices showed that the miscellaneous
obligation was used to cover the services of medical resident staff. In
another instance, we found a miscellaneous obligation for over $53,000
whose purpose was listed as "October billing," while the associated
invoices showed that the miscellaneous obligation was used for the
automated prescription services provided at the Kansas Soldiers Home in
October 2007. In another case in Pittsburgh, we found a miscellaneous
obligation for over $45,000 whose purpose was listed as "LABCORP 5/1-5/
31/07," while the associated invoices showed that the obligation was
for laboratory testing services. Without procedures calling for more
definitive descriptions of the purpose, we could not confirm that these
miscellaneous obligations were for bona fide needs or that the invoices
reflected a legitimate use of federal funds.
Although appropriation law provides that the basis for the amount
obligated should be documented, we found deficient VA control design
resulted in several miscellaneous obligations at one location with
inadequate support for the recorded obligations.[Footnote 14] For
example, according to our analysis of the IFCAP database, 12
miscellaneous obligations, for a total of almost $1.3 million, were
created using no-year funds[Footnote 15] by the VA Pittsburgh Medical
Center on September 28, 2007, to support the St. Clairsville community-
based outpatient clinic. One miscellaneous obligation for $106,400
covered March 2008 services, and another miscellaneous obligation for
$108,400 covered April 2008 services by the clinic. The purpose fields
for the two miscellaneous obligations did not provide an explanation of
how the estimates were calculated. When asked, medical center officials
stated that the estimates were based on historical trends or
calculations, but they did not provide any documentation to support the
estimates. Furthermore, established control procedures did not require
them to do so. In another instance, the VA Kansas City Medical Center
obligated $200,000 for "patient care services at the Kirksville
community-based outpatient clinic from 10/01/06 to 12/31/06." The
purpose field did not provide an explanation of how the estimate was
calculated.
Further, in the absence of explicit documentation requirements, data
fields were left blank on a number of the miscellaneous obligations we
examined. For example, the vendor field was left blank in 20 of the 42
miscellaneous obligations we reviewed. Current VA guidance states that
the vendor field is to be left blank when multiple vendors exist since
the IFCAP system allows only one vendor to be listed; however, we
observed several cases where the field was left blank even when there
was only one vendor. For example, in Kansas City we found obligations
for electricity and natural gas where only one vendor historically had
been used, but the vendor field was left blank. Similarly, in Kansas
City another miscellaneous obligation was used in the procurement of
$8.6 million in services at the Warrensburg Veteran's Home in
Warrensburg, Missouri, but the vendor field was left blank. While
payment was made to the vendor that invoiced VA in these instances,
leaving the vendor field blank poses several problems for agency
management, including establishing that the vendor is appropriate for
the purpose of the miscellaneous obligation and verifying that the
correct, authorized vendor is paid.
We also found the contract number field left blank in 16 of the 42
miscellaneous obligations reviewed, even though supporting contracts
did exist for these miscellaneous obligations. VA guidance did not
require that the contract number be included in order to process the
miscellaneous obligation. However, missing contract numbers make it
difficult to determine whether VA is receiving the appropriate type and
quantity of goods and services at the correct price.
Inadequate control requirements for supporting documentation and
completing data fields concerning the purpose, vendor information, and
contract numbers can hinder oversight by senior VA management
officials. The Deputy Assistant Secretary for Logistics and Acquisition
[Footnote 16] said that he and other VHA officials use the IFCAP
database to monitor the extent and nature of miscellaneous obligations
nationwide, including analyzing the number and dollar amounts of
miscellaneous obligations and identifying the types of goods and
services procured using miscellaneous obligations. He told us that he
was concerned with the extent and nature of the use of miscellaneous
obligations at VA that he lacked adequate oversight or control over
procurements made through miscellaneous obligations and that he often
did not know what was being bought or who it was being bought from. Our
analysis of the IFCAP database found that over 88,000 (69 percent) of
127,070 miscellaneous obligations did not include vendor information,
accounting for over $5 billion of the $6.9 billion in recorded
miscellaneous obligations in fiscal year 2007. Similarly, the IFCAP
database did not have information on the quantities purchased or a
description of what was purchased. As a result, important management
information was not available to senior VA procurement officials.
New Guidance Does Not Address All Control Weaknesses:
In January 2008, VA issued interim guidance effective for all
miscellaneous obligations created after January 30, 2008, concerning
required procedures for using miscellaneous obligations.[Footnote 17]
The guidance provides that prior to creating a miscellaneous
obligation, fiscal service staff are required to check with the
contracting activity to ensure that a valid contract is associated with
the miscellaneous obligation, except in specific, itemized cases. Under
this guidance, the using service is to have the contracting activity
determine (1) if a valid procurement authority exists, (2) if a
procurement needs to be initiated, and (3) the appropriate method of
obligation. Also, this guidance requires that a copy of the head
contracting official's approval be kept with a copy of the
miscellaneous obligation for future audit purposes. In addition, the
guidance provides that the fiscal service may not create a
miscellaneous obligation without appropriate information recorded in
the purpose, vendor, and contract number fields on the document. The
guidance specifically cites a number of invalid uses for miscellaneous
obligations, including contract ambulance, lab tests, blood products,
and construction, but did not always specify a procurement process to
be used for these items.
In May 2008, VHA management finalized the interim guidance.[Footnote
18] This guidance represents a step in the right direction. It includes
a manual process for documenting contracting approval of miscellaneous
obligations and specifically states that a miscellaneous obligation
cannot be created if the vendor, contract number, and purpose fields
are incomplete. However, the new guidance does not address the
segregation of duties issues we and others have identified and does not
establish an oversight mechanism to ensure that control procedures
outlined are properly implemented.
In our view, VHA has missed an opportunity to obtain an important legal
perspective on this matter. According to VA officials, these policies
have not been subject to any legal review. Such a review is essential
in ensuring that the policies and procedures comply with federal funds
control laws and regulations and any other relevant VA policies or
procedures dealing with budgetary or procurement matters. For example,
such a review would help ensure that the guidance adequately addresses
Federal Acquisition Regulations, requiring that no contract shall be
entered into unless the contracting officer ensures that all
requirements of law, executive orders, regulations, and all other
applicable procedures, including clearances and approvals, have been
met.[Footnote 19] In addition, a review could help to ensure that this
guidance (1) provides that all legal obligations of VA are supported by
adequate documentation to meet the requirements of the recording
statute 31 U.S.C. §1501(a) and (2) prevents any individual from
committing the government for purchases of supplies, equipment, or
services without being delegated contracting authority as a contracting
officer, purchase card holder, or as a designated representative of a
contracting officer.[Footnote 20] The absence of a legal review to
determine the propriety of VA's miscellaneous obligations policies and
procedures places VA at risk of not complying with important laws and
regulations.
In conclusion, Mr. Chairman, without basic controls in place over
billions of dollars in miscellaneous obligations, VA is at significant
risk of fraud, waste, and abuse. Effectively designed internal controls
serve as the first line of defense for preventing and detecting fraud,
and they help ensure that an agency effectively and efficiently meets
its missions, goals, and objectives; complies with laws and
regulations; and is able to provide reliable financial and other
information concerning its programs, operations, and activities.
Although miscellaneous obligations can facilitate and streamline the
procurement process, they require effectively designed mitigating
controls to avoid impairing full accountability and transparency. In
the absence of effectively designed key funds and acquisition controls,
VA has limited assurance that its use of miscellaneous obligations is
kept to a minimum, for bona fide needs, in the correct amount, and to
the correct vendor. Improved controls in the form of detailed policies
and procedures, along with a management oversight mechanism, will be
critical to reducing the government's risks from VA's use of
miscellaneous obligations.
To that end, our draft report includes specific recommendations,
including a number of preventive actions that, if effectively
implemented, should reduce the risks associated with the use of
miscellaneous obligations. We are making recommendations to VA to
modify its policies and procedures, in conjunction with VA's Office of
General Counsel, to better ensure adequate oversight of miscellaneous
obligations by contracting officials, segregation of duties throughout
the process, and sufficient supporting documentation for miscellaneous
obligations.
Mr. Chairman, this completes my prepared statement. I would be happy to
respond to any questions you or other Members of the Subcommittee may
have at this time.
GAO Contact:
For more information regarding this testimony, please contact Kay Daly,
Acting Director, Financial Management and Assurance, at (202) 512-9095
or dalykl@gao.gov. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
testimony.
[End of section]
Appendix I: Scope and Methodology:
In order to determine how VHA used miscellaneous obligations during
fiscal year 2007, we obtained and analyzed a copy of VHA's Integrated
Funds Distribution, Control Point Activity, Accounting and Procurement
(IFCAP) database of miscellaneous obligations for that year. IFCAP is
used to create miscellaneous obligations (VA Form 4-1358) at VA, and
serves as a feeder system for VA's Financial Management System (FMS)--
the department's financial reporting system of record. According to VA
officials, FMS cannot be used to identify the universe of miscellaneous
obligations at VHA in fiscal year 2007 because FMS does not identify
the procurement method used for transactions (i.e., miscellaneous
obligations, purchase card, purchase order). Furthermore, FMS does not
capture the contract number, requester, approving official, and
obligating official for obligations. However, according to senior
agency officials, the IFCAP database is the most complete record of
miscellaneous obligations available at VHA and can be used to provide
an assessment of how miscellaneous obligations were used during fiscal
year 2007.
IFCAP's data included information on the appropriation codes, vendors,
budget object codes (BOC), date and amount of obligations, obligation
numbers, approving officials, and VISN and VHA station for VHA
miscellaneous obligations. We converted the database to a spreadsheet
format and sorted the data by VISN, station, and BOC to determine where
and how miscellaneous obligations were used in fiscal year 2007 (see
app. III and IV).
To determine whether VHA's polices and procedures are designed to
provide adequate controls over the use of miscellaneous obligations, we
first reviewed VHA's policies and procedures governing the use of
miscellaneous obligations at VA. Specifically, we reviewed the VA
Controller Policy, MP-4, Part V, Chapter 3, Section A, Paragraph 3A.02
- Estimated Miscellaneous Obligation or Change in Obligation (VA Form 4-
1358); the VA Office of Finance Bulletin 06GA1.05, Revision to MP-4,
Part V, Chapter 3, Section A, Paragraph 3A.02 - Estimated Miscellaneous
Obligation or Change in Obligation (VA Form 4-1358), dated September
29, 2006; VA Interim Guidance on Miscellaneous Obligations, VA Form
1358, dated January 30, 2008; VHA Revised Guidance for Processing of
Miscellaneous Obligations, VA Form 1358, dated May 18, 2008; and other
VA and VHA directives, policies, and procedures. We also used relevant
sections of the Federal Acquisition Regulations (FAR); VA's Acquisition
Regulations; appropriation law; and GAO's Standards for Internal
Control in the Federal Government in assessing the design of VA's
policies and procedures, and we met with VA and VHA officials in
Washington, D.C., and coordinated with VHA's Office of Inspector
General staff to identify any previous audit findings relevant to our
audit work. We also interviewed representatives of VA's independent
public accounting firm and reviewed copies of their reports.
In order to better understand the extent and nature of VA policy and
procedure design deficiencies related to miscellaneous obligations, we
conducted case studies at three VHA stations in Cheyenne, Wyoming;
Kansas City, Missouri; and Pittsburgh, Pennsylvania.[Footnote 21] The
stations in Kansas City and Pittsburgh were selected because they had a
high volume of miscellaneous obligation activity, and they were located
in different regions of the country. We conducted field work at the
Cheyenne, Wyoming, station during the design phase of our review to
better understand the extent and nature of miscellaneous obligation
control design deficiencies at a small medical center. Inclusion of the
Cheyenne facility in our review increased the geographic diversity of
our analysis and allowed us to compare the extent and nature of
miscellaneous obligation design deficiencies at medical centers in the
eastern, midwestern, and western portions of the United States.
During the case studies, we met with senior medical center
administrative, procurement, and financial management officials to
discuss how VA policies and procedures were designed with regard to
specific obligations, and assess the control environment design for
using miscellaneous obligations at the local level. We discussed how
miscellaneous obligations were used as part of the procurement process
and the effect of new VHA guidance on medical center operations. We
also reviewed the design of local policies and procedures for executing
miscellaneous obligations and conducted walk-throughs of the processes.
To provide more detailed information on the extent and nature of the
control design deficiencies we found at our case study locations, we
identified a nongeneralizable sample of obligations for further review
at each site. Through data mining techniques, we identified a total of
42 miscellaneous obligations for more detailed examination at our case
studies: 11 from Cheyenne, 17 from Kansas City, and 14 from Pittsburgh.
We based our selection on the nature, dollar amount, date, and other
identifying characteristics of the obligations. For each miscellaneous
obligation selected, we accumulated information on the extent and
nature of control design weaknesses concerning miscellaneous
obligations:
* review and documentation by contracting officials;
* segregation of duties during the procurement process; and;
* the purpose, timing, and documentation for obligations.
Concerning the adequacy of control design with respect to contracting
review, we reviewed miscellaneous obligations for evidence of review by
contracting officials and, for selected miscellaneous obligations,
followed up with contracting officials to discuss contracts in place
for miscellaneous obligations, whether review by contracting officials
was needed, and when and how this review could occur and be documented.
Concerning the control design deficiencies with respect to segregation
of duties, we reviewed miscellaneous obligation documents to determine
which officials requested, approved, and obligated funds for the
original miscellaneous obligations and then which officials certified
delivery of goods and services and approved payment. We noted those
instances where control design deficiencies permitted one official to
perform multiple functions.
With respect to control design deficiencies relating to the supporting
documentation for the miscellaneous obligations, we reviewed the
purpose, vendor, and contract number fields for each obligation. For
the purpose field, we assessed whether the required description was
adequate to determine the nature, timing, and extent of the goods and/
or services being procured and whether controls provided for an
adequate explanation for any estimated miscellaneous obligation
amounts. For the vendor and contract number fields, we assessed whether
controls were designed to ensure entered information was correct, and
we identified those instances where control deficiencies permitted
fields to be left blank.
Because of time limitations, we did not review VHA's procurement or
service authorization processes. In addition, in our case study
approach, we were unable to analyze a sufficient number of obligations
to allow us to generalize our conclusions to the sites visited, nor to
the universe of VHA medical centers. The 42 obligations represented a
total of approximately $36.0 million; however, the results cannot be
projected to the overall population of miscellaneous obligations in
fiscal year 2007. While we found no examples of fraudulent or otherwise
improper purchases made by VHA, our work was not specifically designed
to identify such cases or estimate its full extent.
Data Reliability Assessment:
We assessed the reliability of the IFCAP data provided by (1)
performing various testing of required data elements, (2) reviewing
related policies and procedures, (3) performing walkthroughs of the
system, (4) interviewing VA officials knowledgeable about the data, and
(5) tracing selected transactions from source documents to the
database. In addition, we verified that totals from the fiscal year
2007 IFCAP database agreed with a method of procurement compliance
report provided to Subcommittee staff during a September 7, 2007
briefing. We did not reconcile the IFCAP miscellaneous obligations
reported to us to FMS--the VA system of record--and published VA
financial statements because FMS does not identify the procurement
method used for transactions (i.e., miscellaneous obligations, purchase
card, purchase order). We determined that the data were sufficiently
reliable for the purposes of our report and that they can be used to
provide an assessment of how miscellaneous obligations were used during
fiscal year 2007.
We briefed VA and VHA headquarter officials, including the Deputy
Assistant Secretary for Logistics and Acquisition, as well as VHA
officials at the three case study locations, on the details of our
audit, including our findings and their implications. During the
briefings officials generally agreed with our findings and said that
they provided useful insights into problems with the miscellaneous
obligation process and corrective actions that could be taken to
address them. We conducted this audit from November 2007 through July
2008 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives. We recently
provided our draft report to the Secretary of Veterans Affairs for
review and comment. Following this testimony, we plan to issue a
report, which will incorporate VA's comments as appropriate and include
recommendations for improving internal controls over miscellaneous
obligations.
[End of section]
Appendix II: Background:
The Department of Veterans Affairs (VA) is responsible for providing
federal benefits to veterans. Headed by the Secretary of Veterans
Affairs, VA operates nationwide programs for health care, financial
assistance, and burial benefits. In fiscal year 2007, VA received
appropriations of over $77 billion, including over $35 billion for
health care and approximately $41.4 billion for other benefits. The
Congress appropriated more than $87 billion for VA in fiscal year 2008.
The Veterans Health Administration (VHA) is responsible for
implementing the VA medical assistance programs. In fiscal year 2007,
VHA operated more than 1,200 sites of care, including 155 medical
centers, 135 nursing homes, 717 ambulatory care and community-based
outpatient clinics, and 209 Readjustment Counseling Centers. VHA health
care centers provide a broad range of primary care, specialized care,
and related medical and social support services. The number of patients
treated increased by 47.4 percent from 3.8 million in 2000 to nearly
5.6 million in 2007 due to an increased number of veterans eligible to
receive care.
As shown in figure 2, VHA has organized its health care centers under
21 Veterans Integrated Services Networks (VISN),[Footnote 22] which
oversee the operations of the various medical centers and treatment
facilities within their assigned geographic areas. During fiscal year
2007, these networks provided more medical services to a greater number
of veterans than at any time during VA's long history.
Figure 2: Veterans Integrated Services Networks (VISN):
[See PDF for image]
This figure is a map of the United States depicting the areas served by
the Veterans Integrated Services Networks (VISN), as follows:
1. New England Health Care System.
2. VA Healthcare Network Upstate NY.
3. VA NY/NJ Veterans Health Care Network.
4. Stars & Stripes Healthcare Network.
5. Capitol Health Care Network.
6. The Mid-Atlantic Network.
7. The Atlanta Network.
8. VA Sunshine Healthcare Network.
9. Mid South Veterans Healthcare Network.
10. VA Healthcare System of Ohio.
11. Veterans Integrated Service Network.
12. The Great Lakes Health Care System.
15. VA Heartland Network.
16. South Central Healthcare Network.
17. VA Heart of Texas Health Care Network.
18. VA Southwest Health Care Network.
19. Rocky Mountain Network.
20. Northwest Network.
21. Sierra Pacific Network.
22. Desert Pacific Healthcare Network.
23. Minneapolis and Lincoln Offices.
Source: U.S. Department of Veterans Affairs.
[End of figure]
VA Policies and Procedures Concerning the Use of Miscellaneous
Obligations:
VA has used "Estimated Miscellaneous Obligation or Change in
Obligation" (VA Form 4-1358) to record estimated obligations for goods
and services for over 60 years. According to VA policy,[Footnote 23]
miscellaneous obligations can be used to record obligations against
appropriations for the procurement of a variety of goods and services,
including fee-based medical, dental, and nursing services; non-VA
hospitalization; nursing home care; beneficiary travel; rent;
utilities; and other purposes. The policy states that miscellaneous
obligations should be used as obligation control documents when a
formal purchase order or authorization is not required, and when
necessary to record estimated obligations to be incurred by the
subsequent issue of purchase orders. The policy also states that the
use of miscellaneous obligations should be kept to an absolute minimum,
consistent with sound financial management policies regarding the
control of funds, and should only be used in cases where there was a
bona fide need for the goods and services being procured.
In September 2006, VA policy for miscellaneous obligations was revised
in an attempt to minimize the use of miscellaneous obligations as an
obligation control document.[Footnote 24] The revision states that
miscellaneous obligations should not be used as an obligation control
document unless the head contracting official for the station has
determined that a purchase order[Footnote 25] or contract will not be
required. However, the policy provides that fiscal staff can use
miscellaneous obligations as a tracking mechanism for obligations of
variable quantity contracts,[Footnote 26] as well as for public
utilities. In January 2008, VA issued interim guidance regarding the
use of miscellaneous obligations;[Footnote 27] however, the guidance
did not apply to the fiscal year 2007 miscellaneous obligations we
reviewed.
In recent years VHA has attempted to improve its oversight of
miscellaneous obligations. For example, VHA's Clinical Logistics Group
created the Integrated Funds Distribution, Control Point Activity,
Accounting and Procurement (IFCAP) system database in April 2006 to
analyze the use of miscellaneous obligations agencywide. The database
is updated on a monthly basis and contains information on the
miscellaneous obligations created monthly by the 21 VISN offices and
their associated stations. VHA officials are using the IFCAP database
to (1) analyze the number and dollar amounts of procurements being done
using contracts and purchase cards, and recorded using miscellaneous
obligations, and (2) identify the types of goods and services recorded
as miscellaneous obligations. Prior to the creation of the IFCAP
database, such information on the use of the miscellaneous obligations
nationwide was not readily available to VHA upper level management.
VHA's Current Miscellaneous Obligation Process:
The creation and processing of miscellaneous obligations (VA Form 4-
1358) is documented in IFCAP--a component of VA's Veterans Health
Information System and Technology Architecture (VISTA). The
miscellaneous obligation request passes through several stages
illustrated in figure 3.[Footnote 28]
Figure 3: VA's Miscellaneous Obligation Process:
[See PDF for image]
This figure is an illustration of VA's Miscellaneous Obligation
Process, as follows:
The Funding Stage:
* Congress appropriates funds for VA and OMB apportions the
appropriations;
* VA allocates funds to VHA;
* VHA allocates funds to medical facilities through VISN offices.
The Approval to Reserve Funds Stage:
* Medical facility official requests the creation of a miscellaneous
obligation;
* Fund Control Point Clerk creates a miscellaneous obligation;
* Fund Control Point Official approves the miscellaneous obligation.
The Obligation Stage:
* Accounting Technician in Fiscal Services reviews the miscellaneous
obligation, assigns an obligation number, and records the obligation of
funds.[A]
The Order/Delivery Stage:
* IFCAP notifies Control Point Official that funds have been obligated;
* Control Point Official notifies the Vendor to perform service.[B]
* Vendor performs the service and sends invoice to VHA.
The Payment Stage:
* Invoice recorded and directed to an official at the medical facility
(usually the Control Point Official) for certification;
* Certifying official certifies that goods or services have been
received and approves the invoice for payment;
* Payment for goods or services made by VA‘s Financial Services Center
in Austin, Texas.
Source: GAO analysis of VA policy and procedures.
[A] In many transactions, the amount recorded reflects an
administrative reservations of funds for which no obligations have yet
been incurred.
[B] Our review did not include the processes VHA officials may use to
incur legal obligations such as the issuance of purchase orders,
delivery orders, or by other means.
[End of figure]
[End of section]
Appendix III: Miscellaneous Obligations by VISN in Fiscal Year 2007:
VISN[A]: 1;
VISN name: New England Healthcare System;
Number: 6,638;
Dollar amount: $360,762,340;
Percent of total: 5.2%.
VISN[A]: 2;
VISN name: VA Healthcare Network Upstate New York;
Number: 2,910;
Dollar amount: $160,799,144;
Percent of total: 2.3%.
VISN[A]: 3;
VISN name: VA New York/New Jersey Veterans Healthcare Network;
Number: 7,248;
Dollar amount: $256,453,022;
Percent of total: 3.7%.
VISN[A]: 4;
VISN name: Stars and Stripes Healthcare Network;
Number: 12,321;
Dollar amount: $328,355,399;
Percent of total: 4.8%.
VISN[A]: 5;
VISN name: Capitol Health Care Network;
Number: 2,024;
Dollar amount: $185,679,821;
Percent of total: 2.7%.
VISN[A]: 6;
VISN name: The Mid-Atlantic Network;
Number: 2,808;
Dollar amount: $304,500,111;
Percent of total: 4.4%.
VISN[A]: 7;
VISN name: The Atlanta Network;
Number: 4,548;
Dollar amount: $440,137,101;
Percent of total: 6.4%.
VISN[A]: 8;
VISN name: VA Sunshine Healthcare Network;
Number: 9,985;
Dollar amount: $496,497,019;
Percent of total: 7.2%.
VISN[A]: 9;
VISN name: Mid South Veterans Healthcare Network;
Number: 4,461;
Dollar amount: $356,353,797;
Percent of total: 5.2%.
VISN[A]: 10;
VISN name: VA Healthcare System of Ohio;
Number: 5,093;
Dollar amount: $247,515,982;
Percent of total: 3.6%.
VISN[A]: 11;
VISN name: Veterans Integrated Service Network;
Number: 3,947;
Dollar amount: 261,290,926;
Percent of total: 3.8%.
VISN[A]: 12;
VISN name: The Great Lakes Health Care System;
Number: 4,284;
Dollar amount: $293,466,391;
Percent of total: 4.2%.
VISN[A]: 15;
VISN name: VA Heartland Network;
Number: 5,941;
Dollar amount: $300,314,177;
Percent of total: 4.3%.
VISN[A]: 16;
VISN name: South Central Healthcare Network;
Number: 9,859;
Dollar amount: $551,236,444;
Percent of total: 8.0%.
VISN[A]: 17;
VISN name: VA Heart of Texas Health Care Network;
Number: 2,388;
Dollar amount: $292,273,251;
Percent of total: 4.2%.
VISN[A]: 18;
VISN name: VA Southwest Healthcare Network;
Number: 6,308;
Dollar amount: $346,135,243;
Percent of total: 5.0%.
VISN[A]: 19;
VISN name: Rocky Mountain Network;
Number: 3,332;
Dollar amount: $220,514,581;
Percent of total: 3.2%.
VISN[A]: 20;
VISN name: Northwest Network;
Number: 9,370;
Dollar amount: $360,007,803;
Percent of total: 5.2%.
VISN[A]: 21;
VISN name: Sierra Pacific Network;
Number: 11,262;
Dollar amount: $403,378,623;
Percent of total: 5.8%.
VISN[A]: 22;
VISN name: Desert Pacific Healthcare Network;
Number: 1,906;
Dollar amount: $388,244,689;
Percent of total: 5.6%.
VISN[A]: 23;
VISN name: Minneapolis & Lincoln Offices;
Number: 10,437;
Dollar amount: $354,911,219;
Percent of total: 5.1%.
Total:
Number: 127,070;
Dollar amount: $6,908,827,084;
Percent of total: 100%.
Source: GAO analysis of IFCAP database:
[A] VISNs 13 and 14 were consolidated and designated as VISN 23:
[End of table]
[End of section]
Appendix IV: VHA Stations Ranked by Use of Miscellaneous Obligations:
Rank: 1;
Station: Omaha;
Facility Number: 636;
VISN: 23;
Number: 6,832;
Amount: $ 158,912,717.
Rank: 2;
Station: North Florida/South Georgia VHA;
Facility Number: 573;
VISN: 8;
Number: 4,131;
Amount: $145,875,702.
Rank: 3;
Station: Kansas City;
Facility Number: 589;
VISN: 15;
Number: 3,603;
Amount: $171,613,075.
Rank: 4;
Station: Pittsburgh HCS-University Dr;
Facility Number: 646;
VISN: 4;
Number: 3,567;
Amount: $69,880,889.
Rank: 5;
Station: VA New York Harbor HCS - NY CA;
Facility Number: 630;
VISN: 3; Number: 3,280;
Amount: $85,275,329.
Rank: 6;
Station: San Francisco;
Facility Number: 662;
VISN: 21;
Number: 3,200;
Amount: $89,361,982.
Rank: 7;
Station: N. California HCS-Martinez;
Facility Number: 612;
VISN: 21;
Number: 3,166;
Amount: $88,567,989.
Rank: 8;
Station: Upstate New York HCS;
Facility Number: 528;
VISN: 2;
Number: 2,910;
Amount: $160,799,144.
Rank: 9;
Station: Philadelphia;
Facility Number: 642;
VISN: 4;
Number: 2,536;
Amount: $77,015,657.
Rank: 10;
Station: VA Boston HCS-Boston Div.;
Facility Number: 523;
VISN: 1;
Number: 2,351;
Amount: $102,803,146.
Rank: 11;
Station: St. Louis-John Cochran;
Facility Number: 657;
VISN: 15;
Number: 2,338;
Amount: $128,701,102.
Rank: 12;
Station: Seattle;
Facility Number: 663;
VISN: 20;
Number: 2,030;
Amount: $110,264,551.
Rank: 13;
Station: G. V. (Sonny) Montgomery VAMC;
Facility Number: 586;
VISN: 16;
Number: 1,964;
Amount: $84,782,426.
Rank: 14;
Station: VAMC Bronx;
Facility Number: 526;
VISN: 3;
Number: 1,743;
Amount: $37,336,434.
Rank: 15;
Station: Northern Arizona HCS;
Facility Number: 649;
VISN: 18;
Number: 1,706;
Amount: $30,897,276.
Rank: 16;
Station: Miami;
Facility Number: 546;
VISN: 8;
Number: 1,686;
Amount: $64,028,264.
Rank: 17;
Station: Middle Tennessee HCS;
Facility Number: 626;
VISN: 9;
Number: 1,644;
Amount: $102,901,107.
Rank: 18;
Station: Cleveland-Wade Park;
Facility Number: 541;
VISN: 10;
Number: 1,642;
Amount: $119,323,832.
Rank: 19;
Station: Portland;
Facility Number: 648;
VISN: 20;
Number: 1,602;
Amount: $88,110,706.
Rank: 20;
Station: VA Palo Alto HCS-Palo Alto;
Facility Number: 640;
VISN: 21;
Number: 1,498;
Amount: $100,993,614.
Rank: 21;
Station: Clarksburg;
Facility Number: 540;
VISN: 4;
Number: 1,470;
Amount: $25,244,100.
Rank: 22;
Station: Amarillo HCS;
Facility Number: 504;
VISN: 18;
Number: 1,453;
Amount: $32,694,257.
Rank: 23;
Station: Central California HCS (Fresno);
Facility Number: 570;
VISN: 21;
Number: 1,403;
Amount: $30,528,159.
Rank: 24;
Station: Fayetteville AR;
Facility Number: 564;
VISN: 16;
Number: 1,386;
Amount: $42,468,351.
Rank: 25;
Station: Boise;
Facility Number: 531;
VISN: 20;
Number: 1,385;
Amount: $35,371,800.
Rank: 26;
Station: New Orleans;
Facility Number: 629;
VISN: 16;
Number: 1,369;
Amount: $57,125,143.
Rank: 27;
Station: VA New Jersey HCS;
Facility Number: 561;
VISN: 3;
Number: 1,366;
Amount: $65,538,526.
Rank: 28; Station: W Palm Beach;
Facility Number: 548;
VISN: 8;
Number: 1,318;
Amount: $56,059,142.
Rank: 29;
Station: Dayton;
Facility Number: 552;
VISN: 10;
Number: 1,306;
Amount: $43,574,791.
Rank: 30;
Station: Fort Meade;
Facility Number: 568;
VISN: 23;
Number: 1,284;
Amount: $28,139,258.
Rank: 31;
Station: Bay Pines;
Facility Number: 516;
VISN: 8;
Number: 1,128;
Amount: $76,081,613.
Rank: 32;
Station: Lebanon;
Facility Number: 595;
VISN: 4;
Number: 1,105;
Amount: $29,330,151.
Rank: 33;
Station: Alaska HCS;
Facility Number: 463;
VISN: 20;
Number: 1,090;
Amount: $55,377,371.
Rank: 34;
Station: Togus;
Facility Number: 402;
VISN: 1;
Number: 1,085;
Amount: $52,777,782.
Rank: 35;
Station: Baltimore;
Facility Number: 512;
VISN: 5;
Number: 1,060;
Amount: $92,856,732.
Rank: 36;
Station: Chillicothe;
Facility Number: 538;
VISN: 10;
Number: 1,037;
Amount: $16,704,890.
Rank: 37;
Station: Oklahoma City;
Facility Number: 635;
VISN: 16;
Number: 1,020;
Amount: $80,419,697.
Rank: 38;
Station: Roseburg HCS;
Facility Number: 653;
VISN: 20;
Number: 996;
Amount: $21,172,773.
Rank: 39;
Station: Lexington-Leestown;
Facility Number: 596;
VISN: 9; Number: 987;
Amount: $48,090,092.
Rank: 40;
Station: Milwaukee WI;
Facility Number: 695;
VISN: 12;
Number: 974;
Amount: $59,113,209.
Rank: 41;
Station: Walla Walla;
Facility Number: 687;
VISN: 20;
Number: 964;
Amount: $13,199,190.
Rank: 42;
Station: Dallas VAMC;
Facility Number: 549;
VISN: 17;
Number: 942;
Amount: $100,556,097.
Rank: 43;
Station: Fargo;
Facility Number: 437;
VISN: 23;
Number: 937;
Amount: $26,988,919.
Rank: 44;
Station: Wilmington;
Facility Number: 460;
VISN: 4;
Number: 923;
Amount: $24,534,375.
Rank: 45;
Station: Providence;
Facility Number: 650;
VISN: 1;
Number: 900;
Amount: $31,961,444.
Rank: 46;
Station: Pacific Islands HCS (Honolulu);
Facility Number: 459;
VISN: 21;
Number: 894;
Amount: $57,759,481.
Rank: 47;
Station: Southern Oregon Rehabilitation;
Facility Number: 692;
VISN: 20;
Number: 883;
Amount: $11,294,874.
Rank: 48;
Station: Phoenix;
Facility Number: 644;
VISN: 18;
Number: 879;
Amount: $84,069,252.
Rank: 49;
Station: Columbia SC;
Facility Number: 544;
VISN: 7;
Number: 870;
Amount: $70,594,890.
Rank: 50;
Station: Wilkes Barre;
Facility Number: 693;
VISN: 4; Number: 861;
Amount: $26,987,646.
Rank: 51;
Station: Houston;
Facility Number: 580;
VISN: 16;
Number: 855;
Amount: $67,739,913.
Rank: 52;
Station: Augusta;
Facility Number: 509;
VISN: 7;
Number: 846;
Amount: $53,390,674.
Rank: 53;
Station: Tampa;
Facility Number: 673;
VISN: 8;
Number: 838;
Amount: $116,270,986.
Rank: 54;
Station: Alexandria;
Facility Number: 502;
VISN: 16;
Number: 830;
Amount: $25,417,175.
Rank: 55;
Station: Gulf Coast HCS;
Facility Number: 520;
VISN: 16;
Number: 823;
Amount: $46,044,544.
Rank: 56;
Station: Hines;
Facility Number: 578;
VISN: 12;
Number: 813;
Amount: $72,402,760.
Rank: 57;
Station: Eastern Colorado HCS;
Facility Number: 554;
VISN: 19;
Number: 803;
Amount: $82,599,599.
Rank: 58;
Station: Salt Lake City HCS;
Facility Number: 660;
VISN: 19; Number: 803;
Amount: $68,390,644.
Rank: 59;
Station: San Antonio VAMC;
Facility Number: 671;
VISN: 17; Number: 801;
Amount: $113,175,496.
Rank: 60;
Station: Butler;
Facility Number: 529;
VISN: 4;
Number: 792;
Amount: $15,272,087.
Rank: 61;
Station: West Haven;
Facility Number: 689;
VISN: 1;
Number: 731;
Amount: $80,337,724.
Rank: 62;
Station: Ann Arbor HCS;
Facility Number: 506;
VISN: 11;
Number: 715;
Amount: $50,017,830.
Rank: 63;
Station: N. Indiana HCS-Marion;
Facility Number: 610;
VISN: 11;
Number: 706;
Amount: $33,501,439.
Rank: 64;
Station: Coatesville;
Facility Number: 542;
VISN: 4;
Number: 702;
Amount: $17,933,344.
Rank: 65;
Station: Chicago HCS;
Facility Number: 537;
VISN: 12;
Number: 700;
Amount: $53,085,848.
Rank: 66;
Station: El Paso HCS;
Facility Number: 756;
VISN: 18;
Number: 699;
Amount: $24,242,716.
Rank: 67;
Station: Madison WI;
Facility Number: 607;
VISN: 12;
Number: 696;
Amount: $46,845,867.
Rank: 68;
Station: VA Sierra Nevada HCS;
Facility Number: 654;
VISN: 21;
Number: 691;
Amount: $31,948,186.
Rank: 69;
Station: Huntington;
Facility Number: 581;
VISN: 9;
Number: 690;
Amount: $32,256,564.
Rank: 70;
Station: Greater Los Angeles HCS;
Facility Number: 691;
VISN: 22; Number: 670;
Amount: $113,284,821.
Rank: 71;
Station: Detroit (John D. Dingell);
Facility Number: 553;
VISN: 11;
Number: 667;
Amount: $41,810,942.
Rank: 72;
Station: New Mexico HCS;
Facility Number: 501;
VISN: 18;
Number: 666;
Amount: $84,082,667.
Rank: 73;
Station: Tuscaloosa;
Facility Number: 679;
VISN: 7;
Number: 650;
Amount: $20,128,372.
Rank: 74;
Station: Temple VAMC;
Facility Number: 674;
VISN: 17;
Number: 645;
Amount: $78,541,658.
Rank: 75;
Station: Indianapolis;
Facility Number: 583;
VISN: 11;
Number: 645;
Amount: $54,906,324.
Rank: 76;
Station: Muskogee;
Facility Number: 623;
VISN: 16;
Number: 645;
Amount: $39,781,639.
Rank: 77;
Station: Montana HCS;
Facility Number: 436;
VISN: 19;
Number: 645;
Amount: $32,278,047.
Rank: 78;
Station: Durham;
Facility Number: 558;
VISN: 6;
Number: 639;
Amount: $61,960,744.
Rank: 79;
Station: Sheridan;
Facility Number: 666;
VISN: 19;
Number: 629;
Amount: $12,501,607.
Rank: 80;
Station: Manchester;
Facility Number: 608;
VISN: 1;
Number: 606;
Amount: $27,003,396.
Rank: 81;
Station: White River Jct;
Facility Number: 405;
VISN: 1; Number: 580;
Amount: $28,279,283.
Rank: 82;
Station: S. Arizona HCS;
Facility Number: 678;
VISN: 18;
Number: 578;
Amount: $69,574,532.
Rank: 83;
Station: Columbus;
Facility Number: 757;
VISN: 10;
Number: 570;
Amount: $25,461,020.
Rank: 84;
Station: Central AR. Veterans HCS LR;
Facility Number: 598;
VISN: 16;
Number: 564;
Amount: $70,779,560.
Rank: 85;
Station: Washington;
Facility Number: 688;
VISN: 5; Number: 563;
Amount: 65,013,443.
Rank: 86;
Station: Illiana HCS (Danville);
Facility Number: 550;
VISN: 11;
Number: 543;
Amount: 19,659,628.
Rank: 87;
Station: Cincinnati;
Facility Number: 539;
VISN: 10;
Number: 538;
Amount: 42,451,450.
Rank: 88;
Station: Minneapolis;
Facility Number: 618;
VISN: 23; Number: 534;
Amount: 93,816,762.
Rank: 89;
Station: Mountain Home;
Facility Number: 621;
VISN: 9;
Number: 517;
Amount: 57,849,934.
Rank: 90;
Station: Orlando;
Facility Number: 675;
VISN: 8;
Number: 505;
Amount: $9,342,539.
Rank: 91;
Station: San Diego HCS;
Facility Number: 664;
VISN: 22;
Number: 503;
Amount: $76,890,097.
Rank: 92;
Station: Decatur;
Facility Number: 508;
VISN: 7;
Number: 494;
Amount: $103,798,914.
Rank: 93;
Station: Richmond;
Facility Number: 652;
VISN: 6;
Number: 490;
Amount: $50,242,036.
Rank: 94;
Station: Montgomery;
Facility Number: 619;
VISN: 7;
Number: 488;
Amount: 33,582,736.
Rank: 95;
Station: Birmingham;
Facility Number: 521;
VISN: 7; Number: 481;
Amount: 75,609,201.
Rank: 96;
Station: Iron Mountain MI;
Facility Number: 585;
VISN: 12;
Number: 459;
Amount: 16,882,679.
Rank: 97;
Station: St. Cloud;
Facility Number: 656;
VISN: 23;
Number: 456;
Amount: 17,539,831.
Rank: 98;
Station: Louisville;
Facility Number: 603;
VISN: 9;
Number: 438;
Amount: 51,080,527.
Rank: 99;
Station: W.G. (Bill) Hefner Salisbury V;
Facility Number: 659;
VISN: 6;
Number: 438;
Amount: $50,753,235.
Rank: 100;
Station: VAMC Northport;
Facility Number: 632;
VISN: 3;
Number: 433;
Amount: $45,155,858.
Rank: 101;
Station: VA Hudson Valley HCS-Montrose;
Facility Number: 620;
VISN: 3;
Number: 426;
Amount: $23,146,875.
Rank: 102;
Station: Spokane;
Facility Number: 668;
VISN: 20;
Number: 420;
Amount: $25,216,539.
Rank: 103;
Station: Manila;
Facility Number: 358;
VISN: 21;
Number: 410;
Amount: $4,219,213.
Rank: 104;
Station: Charleston;
Facility Number: 534;
VISN: 7;
Number: 407;
Amount: $44,239,266.
Rank: 105;
Station: Overton Brooks VAMC;
Facility Number: 667;
VISN: 16;
Number: 403;
Amount: $36,677,997.
Rank: 106;
Station: Martinsburg;
Facility Number: 613;
VISN: 5;
Number: 401;
Amount: $27,809,646.
Rank: 107;
Station: Sioux Falls;
Facility Number: 438;
VISN: 23;
Number: 394;
Amount: $29,513,732.
Rank: 108;
Station: San Juan;
Facility Number: 672;
VISN: 8;
Number: 379;
Amount: $28,838,772.
Rank: 109;
Station: North Chicago IL;
Facility Number: 556;
VISN: 12;
Number: 353;
Amount: $31,553,133.
Rank: 110;
Station: Battle Creek;
Facility Number: 515;
VISN: 11; Number: 337;
Amount: $43,990,975.
Rank: 111;
Station: Saginaw;
Facility Number: 655;
VISN: 11;
Number: 334;
Amount: $17,403,788.
Rank: 112;
Station: West Texas HCS;
Facility Number: 519;
VISN: 18;
Number: 327;
Amount: $20,574,543.
Rank: 113;
Station: Salem;
Facility Number: 658;
VISN: 6;
Number: 326;
Amount: $30,946,603.
Rank: 114;
Station: Dublin;
Facility Number: 557;
VISN: 7;
Number: 312;
Amount: $38,793,048.
Rank: 115;
Station: Loma Linda VAMC;
Facility Number: 605;
VISN: 22;
Number: 298;
Amount: $64,213,454.
Rank: 116;
Station: Tomah;
Facility Number: 676;
VISN: 12;
Number: 289;
Amount: $13,582,895.
Rank: 117;
Station: Beckley;
Facility Number: 517;
VISN: 6;
Number: 274;
Amount: $11,949,194.
Rank: 118;
Station: Cheyenne;
Facility Number: 442;
VISN: 19;
Number: 250;
Amount: $13,484,935.
Rank: 119;
Station: Fayetteville NC;
Facility Number: 565;
VISN: 6;
Number: 243;
Amount: $42,688,173.
Rank: 120;
Station: Southern Nevada HCS;
Facility Number: 593;
VISN: 22;
Number: 236;
Amount: $95,628,301.
Rank: 121;
Station: Bedford;
Facility Number: 518;
VISN: 1;
Number: 229;
Amount: $13,576,881.
Rank: 122;
Station: Asheville-Oteen;
Facility Number: 637;
VISN: 6;
Number: 203;
Amount: $28,266,374.
Rank: 123;
Station: Grand Junction;
Facility Number: 575;
VISN: 19;
Number: 202;
Amount: $11,259,749.
Rank: 124;
Station: Long Beach HCS;
Facility Number: 600;
VISN: 22;
Number: 199;
Amount: $38,228,015.
Rank: 125;
Station: Hampton;
Facility Number: 590;
VISN: 6;
Number: 195;
Amount: $27,693,752.
Rank: 126;
Station: Erie;
Facility Number: 562;
VISN: 4;
Number: 191;
Amount: $15,333,253.
Rank: 127;
Station: Memphis;
Facility Number: 614;
VISN: 9;
Number: 185;
Amount: $64,175,573.
Rank: 128;
Station: James E. Van Zandt VA(Altoona);
Facility Number: 503;
VISN: 4; Number: 174;
Amount: $26,823,897.
Rank: 129;
Station: Northampton;
Facility Number: 631;
VISN: 1;
Number: 156;
Amount: $24,022,684.
Total:
Facility Number: 127,070;
Amount: $6,908,827,084.
[End of table]
Source: GAO analysis of IFCAP database.
[End of section]
Footnotes:
[1] An obligation is a definite commitment that creates a legal
liability of the government for the payment of goods and services
ordered or received, or a legal duty on the part of the United States
that could mature into a legal liability by virtue of actions on the
part of the other party beyond the control of the United States.
Payment may be made immediately or in the future.
[2] A miscellaneous obligation can be used as a funds control document
to commit (reserve) funds that will be obligated under a contract or
other legal obligation at a later date. VA Office of Finance Director,
VA Controller Policy MP-4, Part V, Chapter 3, Section 3 A.01 states in
pertinent part that "it will be noted that in many instances an
estimated miscellaneous obligation (VA Form 4-1358) is authorized for
use to record estimated monthly obligations to be incurred for
activities which are to be specifically authorized during the month by
the issuance of individual orders, authorization requests, etc. These
documents will be identified by the issuing officer with the pertinent
estimated obligation and will be posted by the accounting section to
such estimated obligation."
[3] VA Office of Finance Directives, VA Controller Policy, MP-4, Part
V, Chapter 3, Section A, Paragraph 3A.02 - Estimated Miscellaneous
Obligation or Change in Obligation (VA Form 4-1358).
[4] Department of Veterans Affairs, Office of Inspector General, Audit
of Alleged Mismanagement of Government Funds at the VA Boston
Healthcare System, Report No. 06-00931-139 (Washington, D.C.: May 31,
2007).
[5] The IFCAP database included 129 VHA stations. A VHA station may
include more than one medical center.
[6] State veterans homes are established by individual states and
approved by VA for the care of disabled veterans. The homes include
facilities for domiciliary nursing home care and adult day health care.
[7] 38 CFR 17.56.
[8] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1]
(Washington, D.C.: November 1999).
[9] Department of Veterans Affairs, Office of Inspector General, Audit
of Alleged Mismanagement of Government Funds at the VA Boston
Healthcare System, Report No. 06-00931-139 (Washington, D.C.: May 31,
2007).
[10] Grant Thornton, Department of Veterans Affairs, OMB Circular A-
123, Appendix A - Findings and Recommendations Report (Procurement
Management), (July 18, 2007).
[11] In 8 of the 23 cases, one official requested and approved a
miscellaneous obligation. For the remaining 15 cases, one official
performed those two tasks plus one or more other key tasks, such as
recording the obligation of funds and certifying receipt of goods and
services and approving payment.
[12] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1]
(Washington, D.C.: November 1999).
[13] 31 U.S.C. §1501(a).
[14] GAO, Principles of Federal Appropriations Law: Third Edition,
Volume II, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-382SP]
(Washington, D.C.: Feb. 1, 2006).
[15] No-year funds are appropriations for which budget authority
remains available for obligation for an indefinite period of time. A no-
year appropriation is usually identified by language such as "to remain
available until expended."
[16] This official acts as VA's Senior Procurement Executive and
oversees the development and implementation of policies and procedures
for departmentwide acquisition and logistics programs supporting all VA
facilities.
[17] Department of Veterans Affairs Memorandum, Interim Guidance on
Miscellaneous Obligations, VA Form 4-1358, dated January 30, 2008.
[18] Department of Veterans Affairs Memorandum, Revised Guidance for
Processing of Miscellaneous Obligations, VA Form 4-1358, dated May 18,
2008.
[19] 48 C.F.R. 1.602-1 (b).
[20] 48 C.F.R. 801.601 (b).
[21] We visited the Cheyenne VA Medical Center in Cheyenne, Wyoming;
the Kansas City VA Medical Center in Kansas City, Missouri; and the VA
Pittsburgh Healthcare System, H. John Heinz III Progressive Care Center
in Pittsburgh, Pennsylvania.
[22] VISNs 13 and 14 were consolidated and designated VISN 23.
[23] VA Office of Finance Directives, VA Controller Policy, MP-4, Part
V, Chapter 3, Section A, Paragraph 3A.02 - Estimated Miscellaneous
Obligation or Change in Obligation (VA Form 4-1358), accessed from
[hyperlink, http://www.va.gov] on 12/12/2007.
[24] VA Office of Finance Bulletin 06GA1.05, Revision to MP-4, Part V,
Chapter 3, Section A, Paragraph 3A.02 - Estimated Miscellaneous
Obligation or Change in Obligation (VA Form 4-1358), dated September
29, 2006.
[25] A purchase order is written authorization for a supplier to ship
products to an agency at a specified price. Purchase orders may be
supported by an underlying contract or function as the sole legally
binding document.
[26] In variable quantity contracts, the quantity of goods to be
furnished or services to be performed may vary. Variations may be at
the option of VA or the contractor. Under variable quantity contracts,
normally no amount is obligated at the time the contract is signed. The
order, which comes after the contract, obligates VA for goods or
services and the obligation must be recorded for the exact amount, or a
reasonable estimate of the order.
[27] Department of Veterans Affairs Memorandum, Interim Guidance on
Miscellaneous Obligations, VA Form 1358, dated January 30, 2008.
[28] Further details on processes in place are described in the
Integrated Funds Distribution Control Point Activity, Account and
Procurement (IFCAP) PPM Accountable Officer User's Guide, Version 5.1,
Revised May 2007.
[End of section]
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