VA's Fiduciary Program
Improved Compliance and Policies Could Better Safeguard Veterans' Benefits Gao ID: GAO-10-241 February 26, 2010Many individuals receiving monthly compensation and pension benefits from the Department of Veterans Affairs (VA) have mental impairments that prevent them from managing their finances. VA's Fiduciary Program selects and oversees third parties, called fiduciaries, to help manage and protect beneficiaries' funds. GAO examined (1) how effective program policies and procedures are in monitoring fiduciaries and safeguarding beneficiary assets, and (2) challenges VA faces in improving program performance and oversight. GAO reviewed program policies, analyzed a nationally representative random sample of case files, interviewed Central Office managers and staff, and conducted three site visits to Fiduciary Program offices which accounted for 25 percent of program beneficiaries. During these visits GAO interviewed regional office managers and staff and conducted 32 file reviews.
VA's Fiduciary Program has policies in place that are intended to ensure that qualified fiduciaries are selected and regularly monitored; however, insufficient staff compliance with some policies and weaknesses in others hinder VA's ability to safeguard veterans' benefits. For example, VA was late in conducting required follow-up visits to monitor fiduciaries or provided insufficient documentation to show whether these visits were conducted in about 18 percent of the cases GAO reviewed. In addition, while GAO estimated that nearly 40 percent of fiduciaries who were required to submit financial reports to demonstrate how beneficiary funds are managed turned their reports in late, VA did not always take actions to obtain them on time or provide documentation that an attempt had been made, as required by VA policy. GAO also found that files did not always contain documentation that a bond was secured when required to safeguard beneficiary estates or that the requirement was waived. Fiduciary Program managers and staff said that they did not always comply with VA policies due, in part, to a lack of time, resources, and staff. In addition, VA's policies for conducting on-site reviews of professional fiduciaries who manage funds for multiple beneficiaries do not ensure these fiduciaries are effectively identified and monitored. For example, VA's policy may not ensure that all fiduciaries who need to be reviewed are identified because the agency's policy allows the use of the fiduciary's name--which may be entered inconsistently--to match them to beneficiaries rather than requiring a unique identifier, such as a Social Security number. Moreover, VA does not have a nationwide quality review process to ensure that these reviews are conducted properly and consistently. GAO identified two key challenges that hinder VA's ability to improve Fiduciary Program performance and oversight. First, managers and staff in the three regional offices visited said VA's electronic fiduciary case management system does not provide sufficient information and is cumbersome to use. For example, the system limits staff's ability to track multiple actions on a case or enter all needed information. Also, the system does not generate comprehensive management reports that would facilitate effective oversight. In addition, managers and staff indicated that available training may not be sufficient to ensure they have the necessary expertise to carry out program responsibilities. Moreover, many managers and staff had less than 2 years of program experience, and the lack of sufficient training may have contributed to inconsistent compliance with some program policies. VA is developing standardized training that it expects to implement some time in fiscal year 2010. VA is also piloting a consolidated Fiduciary Program unit covering 14 western units, in part, to address program challenges. While the pilot is intended to improve program performance and oversight, managers and staff noted that difficulties, such as not having resources in place and up-to-date case files, impeded effective implementation. VA has not yet evaluated the impact and effectiveness of this model.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
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Report to the Chairman, Subcommittee on Disability Assistance and
Memorial Affairs, Committee on Veterans' Affairs, House of
Representatives:
United States Government Accountability Office:
GAO:
February 2010:
VA'S Fiduciary Program:
Improved Compliance and Policies Could Better Safeguard Veterans'
Benefits:
GAO-10-241:
GAO Highlights:
Highlights of GAO-10-241, a report to the Chairman, Subcommittee on
Disability Assistance and Memorial Affairs, Committee on Veterans'
Affairs, House of Representatives.
Why GAO Did This Study:
Many individuals receiving monthly compensation and pension benefits
from the Department of Veterans Affairs (VA) have mental impairments
that prevent them from managing their finances. VA‘s Fiduciary Program
selects and oversees third parties, called fiduciaries, to help manage
and protect beneficiaries‘ funds. GAO examined (1) how effective
program policies and procedures are in monitoring fiduciaries and
safeguarding beneficiary assets, and (2) challenges VA faces in
improving program performance and oversight. GAO reviewed program
policies, analyzed a nationally representative random sample of case
files, interviewed Central Office managers and staff, and conducted
three site visits to Fiduciary Program offices which accounted for 25
percent of program beneficiaries. During these visits GAO interviewed
regional office managers and staff and conducted 32 file reviews.
What GAO Found:
VA‘s Fiduciary Program has policies in place that are intended to
ensure that qualified fiduciaries are selected and regularly
monitored; however, insufficient staff compliance with some policies
and weaknesses in others hinder VA‘s ability to safeguard veterans‘
benefits. For example, VA was late in conducting required follow-up
visits to monitor fiduciaries or provided insufficient documentation
to show whether these visits were conducted in about 18 percent of the
cases GAO reviewed. In addition, while GAO estimated that nearly 40
percent of fiduciaries who were required to submit financial reports
to demonstrate how beneficiary funds are managed turned their reports
in late, VA did not always take actions to obtain them on time or
provide documentation that an attempt had been made, as required by VA
policy. GAO also found that files did not always contain documentation
that a bond was secured when required to safeguard beneficiary estates
or that the requirement was waived. Fiduciary Program managers and
staff said that they did not always comply with VA policies due, in
part, to a lack of time, resources, and staff. In addition, VA‘s
policies for conducting on-site reviews of professional fiduciaries
who manage funds for multiple beneficiaries do not ensure these
fiduciaries are effectively identified and monitored. For example, VA‘
s policy may not ensure that all fiduciaries who need to be reviewed
are identified because the agency‘s policy allows the use of the
fiduciary‘s name”which may be entered inconsistently”to match them to
beneficiaries rather than requiring a unique identifier, such as a
Social Security number. Moreover, VA does not have a nationwide
quality review process to ensure that these reviews are conducted
properly and consistently.
GAO identified two key challenges that hinder VA‘s ability to improve
Fiduciary Program performance and oversight. First, managers and staff
in the three regional offices visited said VA‘s electronic fiduciary
case management system does not provide sufficient information and is
cumbersome to use. For example, the system limits staff‘s ability to
track multiple actions on a case or enter all needed information.
Also, the system does not generate comprehensive management reports
that would facilitate effective oversight. In addition, managers and
staff indicated that available training may not be sufficient to
ensure they have the necessary expertise to carry out program
responsibilities. Moreover, many managers and staff had less than 2
years of program experience, and the lack of sufficient training may
have contributed to inconsistent compliance with some program
policies. VA is developing standardized training that it expects to
implement some time in fiscal year 2010. VA is also piloting a
consolidated Fiduciary Program unit covering 14 western units, in
part, to address program challenges. While the pilot is intended to
improve program performance and oversight, managers and staff noted
that difficulties, such as not having resources in place and up-to-
date case files, impeded effective implementation. VA has not yet
evaluated the impact and effectiveness of this model.
What GAO Recommends:
GAO recommends that VA strengthen Fiduciary Program policies for
monitoring fiduciaries; improve staff compliance with program
policies; evaluate alternative approaches to meet electronic case
management system needs; and evaluate the effectiveness of
consolidating 14 western Fiduciary Program units. VA agreed with our
recommendations and noted plans to address them.
View [hyperlink, http://www.gao.gov/products/GAO-10-241] or key
components. For more information, contact Daniel Bertoini at (202) 512-
7215 or bertonid@gao.gov.
[End of section]
Contents:
Letter:
Background:
Inconsistent Compliance with Some Policies and Weaknesses in Others
Hinder VA's Ability to Monitor Fiduciaries and Safeguard Benefits:
System Limitations and Insufficient Training Hamper Program
Performance and Oversight; However, VA Is Taking Steps That May Help:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Department of Veterans Affairs:
Appendix III: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Timeliness and Documentation of Financial Reports:
Table 2: Timeliness of First Follow-Up Action for Cases with Seriously
Late Delinquent Financial Reports:
Abbreviations:
FBS: Fiduciary Beneficiary System:
OIG: Office of Inspector General:
SDP: supervised direct payment:
VA: Department of Veterans Affairs:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
February 26, 2010:
The Honorable John J. Hall:
Chairman:
Subcommittee on Disability Assistance and Memorial Affairs:
Committee on Veterans' Affairs:
House of Representatives:
Dear Mr. Chairman:
Each year, the Department of Veterans Affairs (VA) pays billions of
dollars in compensation and pension benefits to disabled veterans and
their dependents. For those beneficiaries who are unable to manage
their own affairs due to mental impairments,[Footnote 1] VA appoints a
third party to help manage and protect the beneficiary's funds. This
third party, called a fiduciary, can be a spouse or other family
member, or an entity such as a law firm, hospital, or nursing home.
Fiduciaries are selected and monitored through VA's Fiduciary Program.
In fiscal year 2008, this program oversaw fiduciaries for more than
103,000 beneficiaries, and these individuals managed nearly 4 percent
of the $38.6 billion in compensation and pension benefits VA paid out
in that year. Moreover, the average annual benefit amount for
beneficiaries in this program was approximately $14,400 in fiscal year
2008, which is about $4,200 more per year than the average for all VA
compensation and pension beneficiaries. VA's oversight of beneficiary
funds is especially important because the financial management of a
person's funds is entrusted to a third party, thus, there is a risk
that these funds could be used inappropriately.
Over the years, both Congress and VA's Office of Inspector General
(OIG) have expressed concern that VA is not fully safeguarding
beneficiaries' assets in the Fiduciary Program. Areas of concern
included delays in conducting visits to select fiduciaries and
insufficient monitoring of VA fund usage by fiduciaries on behalf of
beneficiaries. As a result, the Veterans' Benefits Improvement Act of
2004 increased the degree to which VA is held accountable to its
beneficiaries by requiring it to reissue any benefit amount that is
misused by a fiduciary due to VA's negligence.[Footnote 2] The act
also increased VA's fiduciary oversight authority and
responsibilities. For example, the act requires VA to conduct periodic
on-site reviews of professional fiduciaries[Footnote 3] who oversee
more than 20 beneficiaries with total combined benefits exceeding
$50,000. You asked us to examine current policies and procedures the
VA Fiduciary Program uses to select and monitor fiduciaries, as well
as their effectiveness in safeguarding benefits and estates of
beneficiaries. Specifically, we examined: (1) how effective VA
policies and procedures are in monitoring fiduciaries and safeguarding
beneficiary assets and (2) challenges VA faces in improving program
performance and oversight.
To address the first objective, we reviewed the Fiduciary Program's
policies and procedures manuals and applicable federal laws and
regulations. In addition, we collected and analyzed case-level data
from a nationwide stratified random sample of 205 beneficiary case
files. We selected these files using data as of March 31, 2009, from
VA's electronic case information and workload management system, which
we found to be sufficiently reliable for the purpose of sampling cases
for review. Our selection methodology allowed us to generalize some of
the data we obtained from our case file review to nearly all adult
beneficiaries within the Fiduciary Program.[Footnote 4] All percentage
estimates in this report have a margin of error of plus or minus 10
percentage points or less, unless otherwise noted. We also used the
same electronic case management system data to assess how reliably
fiduciaries managing multiple beneficiaries could be identified. To
obtain information on both objectives, we interviewed appropriate
managers at VA's Central Office and conducted site visits to 3 of 43
Fiduciary Program units located in VA regional offices--St.
Petersburg, Florida; Cleveland, Ohio; and Salt Lake City, Utah--where
we interviewed managers and staff about program policies and
procedures, as well as VA's internal controls for meeting the
program's mission and goals and ensuring its integrity.[Footnote 5]
During these site visits and in Washington, D.C., we also spoke with
veterans service organization representatives regarding their
experiences working with beneficiaries under the Fiduciary Program. In
addition, during our site visits we conducted 32 file reviews based on
a judgmental sample of cases where either VA suspected that
fiduciaries were inappropriately using beneficiary funds or
fiduciaries were seriously late in submitting one or more annual
financial reports that documented how beneficiary funds were spent. We
also collected and reviewed 12 VA on-site reviews of the performance
of professional fiduciaries. We chose these reviews based on
professional fiduciaries identified in our 32 site visit file reviews.
We selected the sites we visited based on differences in geographic
location, size of the Fiduciary Program unit, and number of cases with
misuse allegations. We specifically selected the Salt Lake City
regional office because it is the site of a pilot project to merge 14
western Fiduciary Program units into one hub office.
We conducted this performance audit from December 2008 to February
2010, 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. Further
details on our objectives, scope, and methodology can be found in
appendix I.
Background:
Many individuals receiving monthly compensation and pension benefits
from the VA have mental impairments that can prevent them from
managing their finances.[Footnote 6] These conditions may result from
injury, disease, or infirmities of age. In 1935, Congress created an
early version of the VA Fiduciary Program to select and oversee
responsible third parties, called fiduciaries, who help manage and
protect beneficiaries' funds. In fiscal year 2008, fiduciaries managed
approximately $1.5 billion in VA benefits for more than 103,000
beneficiaries.
The VA Fiduciary Program matches beneficiaries who are unable to
manage their financial affairs with a fiduciary, giving preference to
spouses. If VA is unable to locate a qualified spouse who is willing
to serve in this capacity, an individual or other entity, such as a
lawyer or nursing home, will be appointed. Fiduciaries who are
appointed by VA who are not dependents or close family members can
collect a fee for their services (up to 4 percent of a beneficiary's
annual benefit amount) and can oversee multiple beneficiaries. Whether
a fiduciary is a family member or a professional, the responsibilities
are generally the same and may include receiving the beneficiary's VA
benefits, paying the beneficiary's expenses, maintaining the
beneficiary's budget, and generally seeing to the financial well-
being--and, in some cases, the physical well-being--of the
beneficiary. Finally, if a court has already determined that a
beneficiary is unable to handle his or her own affairs and has
appointed its own fiduciary, VA must assess the performance of the
fiduciary and determine if he or she is suitable for the position
given the needs and welfare of the beneficiary. If VA decides to use
the court-appointed fiduciary, the agency generally defers to certain
rules set by the court, such as those pertaining to the fee amount
that the fiduciary can charge the beneficiary for his or her services.
VA has established a number of policies to guide the selection of
qualified fiduciaries and ensure regular monitoring of them. The
procedures for carrying out these policies include the following:
* Visits to beneficiaries and fiduciaries. VA policy requires staff to
conduct initial visits to assess the competence and welfare of the
beneficiary, determine whether a fiduciary is required and, if so,
select and appoint the most appropriate type of fiduciary. These
evaluations typically include a general background check of the
potential fiduciary, which could include contacting character
witnesses and reviewing a recent credit report. VA staff, in
conjunction with potential fiduciaries, may develop a spending plan
for the beneficiary's funds. Once the fiduciary is selected, staff
conduct periodic subsequent visits to reevaluate the beneficiary's
condition and to determine if funds have been properly used and
protected. The first routine follow-up visit generally takes place 1
year after a fiduciary is selected, and subsequent visits typically
take place every 1 to 3 years thereafter.[Footnote 7] Unscheduled
visits may also be conducted under certain circumstances.
* Annual reviews of financial reports. VA policy generally requires
staff to obtain yearly financial reports and bank statements from some
fiduciaries to determine how beneficiary funds were used. Reports are
generally due on the anniversary of a fiduciary's appointment or as
otherwise required in the case of court-appointed fiduciaries.
[Footnote 8] When fiduciaries do not submit their financial reports on
time, staff are required to follow-up with them to obtain these
reports and to document these contacts in the beneficiaries' files.
For example, if a report is not received within 90 days of the
deadline, VA staff can follow-up with fiduciaries by letter,
telephone, or face-to-face contact and may describe the possible
repercussions of failing to supply the report, which could include
legal action or referral to the OIG.
* Confirmation of surety bond acquisition. When it is necessary to
protect the interests of the beneficiary, VA generally requires staff
to obtain a surety bond from fiduciaries overseeing estates with a
value of $20,000 or more that is attributable to VA funds. A bond
ensures that the beneficiary's estate will be reimbursed in the event
of fiduciary mismanagement or abuse of beneficiary funds. Generally,
the bond amount should be adequate to cover the value of the
beneficiary's accumulated estate derived from VA funds plus 1 year of
VA benefits.[Footnote 9] Fiduciary Program staff are required to
obtain documentation showing that the fiduciary has an adequate bond.
[Footnote 10] VA is required to assess the need for a bond and the
bond amount each time it reviews the fiduciary's yearly financial
report.
* Periodic on-site reviews of professional fiduciaries. In addition to
visits, VA staff are required to conduct on-site reviews of
professional fiduciaries who oversee more than 20 beneficiaries with
combined benefits of at least $50,000 once every 3 years. Unscheduled
reviews may also be conducted as needed. During the on-site reviews,
staff are to examine the financial records of multiple beneficiaries
concurrently and examine any questionable expenses. VA developed this
policy in 2005 as a result of new requirements included in the
Veterans' Benefits Improvement Act of 2004.
Fiduciary Program policies and procedures are developed by Fiduciary
Program Central Office staff under the Office of Policy and Program
Management within the Veterans Benefits Administration. Individual
Fiduciary Program units are generally colocated in VA regional offices
that also oversee other Veterans Benefits Administration programs. One
major exception to this is the Western Area Fiduciary Hub, where
Fiduciary Program units and files from 14 western VA regional offices
were merged into a single unit colocated in the VA regional office in
Salt Lake City, Utah, beginning in January 2008.[Footnote 11]
Each regional office is held accountable for meeting performance
measures established by VA, including workload timeliness and accuracy
measures. For example, performance measures for Fiduciary Program
units include the timeliness of visits and the accuracy of beneficiary
case file documentation, as measured through VA's internal quality
review processes. VA tracks Fiduciary Program performance measures for
timeliness by generating reports based on case-level data recorded in
its electronic case management system, known as the Fiduciary
Beneficiary System (FBS). Because FBS only maintains this case-level
data for about 30 days, we could not validate the accuracy of the
performance reports and, therefore, could not use them in our study.
VA's OIG has reported on the inappropriate use of beneficiary funds by
fiduciaries over the years, and Congress, GAO, and VA's OIG have cited
a number of concerns with VA's efforts to safeguard beneficiaries'
assets. In 2006, VA's OIG noted concerns regarding overdue visits,
which may increase the risk of inappropriate use of beneficiary funds.
[Footnote 12] In addition, the report cited concerns with VA's efforts
to follow up with fiduciaries and obtain late financial reports. The
report further noted concerns regarding missing or undocumented bond
information, as well as the adequacy of the amount of coverage
required under the bond. In 2004, GAO cited concerns about the lack of
systematic coordination between VA, the courts, and other federal
agencies in regards to overseeing third parties who manage the funds
of others.[Footnote 13]
Inconsistent Compliance with Some Policies and Weaknesses in Others
Hinder VA's Ability to Monitor Fiduciaries and Safeguard Benefits:
Program Staff Do Not Always Comply with Policies for Conducting Visits
and Obtaining Timely Financial Reports and Bonds:
Although VA has established Fiduciary Program policies intended to
ensure that qualified fiduciaries are selected and regularly
monitored, staff did not always take required actions within
established time frames or document in the case files that required
actions were taken. Such actions included conducting initial and
follow-up visits to beneficiaries and fiduciaries, following up with
fiduciaries to obtain late financial reports, and ensuring that
fiduciaries managing large beneficiary estates purchased bonds.
Initial Visits:
VA policy states that initial visits to appoint fiduciaries are to be
conducted within 45 days of a request for a fiduciary, and VA's
performance goal is to conduct at least 90 percent of these visits on
time. Conducting initial visits on time is important because
fiduciaries cannot begin receiving and handling VA benefits until
these visits are completed, and beneficiaries may depend on VA funds
for basic living expenses.
We sampled and reviewed 67 case files in which initial visits were
supposed to be conducted between July 1, 2006, and June 9, 2009,
[Footnote 14] and found that 37 visits were conducted within the 45-
day time frame, and 10 were from 3 to 39 days late.[Footnote 15] For
one case, the file lacked documentation that an initial visit was made
at all.[Footnote 16] Managers and staff in some offices we visited
said compliance with the timeliness policy for initial visits was
improving, but was still a concern. They attributed some compliance
issues to a continued lack of staff and resources.
Follow-up Visits:
According to VA managers, it is VA's policy that follow-up visits to
fiduciaries are to be conducted within 120 days of the scheduled date,
and the on-time goal for these visits is also 90 percent. Timely
follow-up visits are important to determine the continued suitability
of the fiduciary and to protect beneficiaries from potential misuse of
their funds.
Our sample estimated that approximately 61,000 adult beneficiaries
were supposed to have had at least one follow-up visit between July 1,
2006, and June 9, 2009. We estimated that 76 percent of these visits
occurred within the 120-day time frame, and approximately 12 percent
were 1 to 216 days late. About 6 percent of cases lacked documentation
to indicate that a scheduled follow-up visit occurred at all and, in
the most extreme case, there was no documentation that a follow-up
visit had been conducted although it was overdue by 16 months as of
June 9, 2009. Finally, an additional estimated 6 percent lacked
documentation as to when the visits were conducted.[Footnote 17]
Similar to initial visits, program managers and staff noted that
compliance with the 120-day time frame for follow-up visits can be
challenging due in part to a lack of staff and time. Program managers
said that conducting visits in a timely manner may be especially
challenging in regional offices with only one or two Fiduciary Program
staff who may also have responsibilities outside of the Fiduciary
Program. In addition, managers and staff noted that conducting timely
visits can be challenging in areas where staff must drive long
distances to see beneficiaries and fiduciaries.
Annual Financial Reports:
VA policy generally requires that some fiduciaries submit annual
financial reports documenting how they managed beneficiaries' funds.
Based on our nationwide sample, we estimate that fiduciaries for about
33,000 beneficiaries were required to submit such reports for the time
period we reviewed. Table 1 shows that, for more than one-half of
these files, fiduciaries either submitted their financial reports late
or it was not possible to determine if or when they were submitted.
Late financial reports were submitted between 1 and 140 days late.
Table 1: Timeliness and Documentation of Financial Reports:
Submission of financial reports: Financial reports submitted on time;
Percentage: 47%[A].
Submission of financial reports: Financial reports submitted late;
Percentage: 39%[B].
Submission of financial reports: No documentation that financial
reports were ever submitted;
Percentage: 8%[C].
Submission of financial reports: No documentation of when financial
reports were submitted;
Percentage: 6%[D].
Submission of financial reports: Total;
Percentage: 100%.
Source: GAO analysis Of VA documents.
[A] The margin of error was approximately plus or minus 13 percent.
[B] The margin of error was approximately plus or minus 12 percent.
[C] The margin of error was approximately plus or minus 11 percent.
[D] These reports lacked the date stamps necessary to assess
timeliness.
[End of table]
VA policy requires staff to contact fiduciaries when their financial
reports are 35 to 65 days late and again when they are 90 days late.
At that time, they may inform the fiduciary of the possible
repercussions of a failure to comply, which may include legal actions,
a referral to the OIG, or other actions.[Footnote 18] After 120 days,
the financial reports are considered "seriously delinquent," and
appropriate action is to be taken. Staff in one regional office we
visited acknowledged that follow-up contact is important because
without it, precedent can be set for fiduciaries to continually turn
in late financial reports. Moreover, failure to take action to secure
timely financial reports may result in a finding of negligence, which
will require VA to reissue any misused benefits.[Footnote 19]
Our nationwide sample and site visit file reviews showed that follow-
up contact was frequently not done or not documented by program staff.
Of the 30 case files in our sample where financial reports were
submitted more than 65 days late, 19 case files either lacked
documentation of any follow-up actions or showed that such actions
were not taken within VA established time frames. This included two
cases where the files did not contain any documentation of follow-up
actions, and the most recent financial reports were submitted nearly 5
months late. Moreover, we found additional instances of inadequate
staff follow-up on seriously delinquent financial reports during our
site visit file reviews. We reviewed 20 such cases, and table 2 shows
that, for the most recent financial reports submitted in these cases,
staff were generally either late in conducting such follow-up actions
or did not document the file to show if such actions were taken. The
14 late actions in table 2 were between 3 days and about 11 months
late, with 8 actions being more than 4 months late.
Table 2: Timeliness of First Follow-Up Action for Cases with Seriously
Late Delinquent Financial Reports:
Follow-up actions: Timely first follow-up action (within 65 days of
financial reports being late);
Number of cases: 1.
Follow-up actions: Untimely first follow-up action;
Number of cases: 14.
Follow-up actions: No documentation that actions occurred;
Number of cases: 4.
Follow-up actions: No documentation of when actions occurred;
Number of cases: 1.
Follow-up actions: Total number of cases;
Number of cases: 20.
Source: GAO analysis of VA documents.
[End of table]
In one case, a fiduciary's financial report was submitted more than 2
years later than the original due date, and only after VA initiated
action to suspend payment. However, VA's policy notes that this action
can be taken when a fiduciary is more than 90 days late submitting a
financial report. In another case, a financial report due in June 2006
was not submitted until nearly 2 years later. The file did not
indicate that any follow-up actions had occurred, although the case is
now being investigated for possible misuse of funds. Staff in all
regional offices we visited said that they sometimes did not take
follow-up actions or failed to document actions they did take, in
part, because they lacked the time or believed that some actions did
not warrant documentation.
Bonds:
According to VA managers, VA policy generally requires staff to
consider requiring fiduciaries who oversee estates with a value of
$20,000 or more in VA funds to purchase a bond to protect
beneficiaries' estates. Our nationwide sample showed that program
staff sometimes failed to obtain proof that a fiduciary purchased a
bond, when required, or did not adequately document in the beneficiary
case files that the bond requirement was waived.[Footnote 20] Of the
52 case files in our sample for which fiduciaries were required to
purchase a bond, 8 case files lacked adequate documentation to
indicate whether a bond was purchased or that the bond requirement was
waived because the fiduciary met conditions for an exception. Some of
the 8 cases involved substantial benefit amounts. For example, 2 cases
in our sample, which contained no documentation that bonds were
purchased, had VA estate values of approximately $82,000 and $62,000--
leaving these beneficiaries and VA vulnerable to a substantial loss if
funds were misused. Some staff in regional offices we visited said
that they were often uncertain about what types of bonds are required
for certain types of fiduciaries, and this was confirmed by our site
visit file reviews. For example, in one case, a Fiduciary Program
staff member was told by a fiduciary who was an attorney that an
individual bond was unnecessary because the fiduciary had a "blanket"
bond that covered all VA responsibilities. Although this staff member
documented in the case file that he was unsure if this was correct, he
took the fiduciary's word that an additional bond was not required.
However, we were told by managers and staff that a blanket bond was
most likely not acceptable in this case, and the staff person should
have required the fiduciary to obtain an individual bond.[Footnote 21]
VA's Policy for Periodic On-site Reviews Does Not Ensure Effective
Monitoring of Professional Fiduciaries:
In 2005, VA developed a new policy requiring Fiduciary Program staff
to conduct periodic on-site reviews of professional fiduciaries
[Footnote 22] as required by the Veterans' Benefits Improvement Act of
2004.[Footnote 23] These financial reviews examine records kept by
fiduciaries who manage funds for multiple beneficiaries. Cumulatively,
such benefits can be a substantial amount of money and the reviews can
help detect discrepancies among beneficiary accounts, which may not be
detected by examining annual financial reports for a single
beneficiary. Though managers and staff in regional offices we visited
and in the Central Office said that on-site reviews are useful when
conducted properly, we found two associated policy weaknesses: (1) not
all fiduciaries who need these reviews can be reliably identified and
(2) VA lacks a nationwide quality review process to ensure that these
on-site reviews are conducted properly and consistently.
Not all fiduciaries who need reviews can be reliably identified. While
VA is required to conduct periodic on-site reviews for professional
fiduciaries who oversee more than 20 beneficiaries with combined
benefits totaling $50,000 or more, we found that VA cannot reliably
identify all those who meet this criteria. Each Fiduciary Program unit
generates a list of fiduciaries meeting this criteria by using VA's
electronic case management system to link or match a fiduciary to all
of their beneficiaries. However, this computer match is based on a
fiduciary's name, rather than a unique identifier, such as the
fiduciary's Social Security number or tax identification number.
Central Office managers and staff, as well as managers in two regional
offices we visited, acknowledged that these matches may not reliably
identify all the beneficiaries managed by a fiduciary because
fiduciary names can be entered inconsistently into the system. For
example, if a fiduciary's name is entered using different spellings or
abbreviations, such as JOHN SMITH versus JON H. SMITH, it may not show
up in the system as the same fiduciary across multiple beneficiary
case files. While VA's case management system includes a field for
unique fiduciary identifiers, VA policy does not require this
information. Central Office staff acknowledged that requiring a unique
identifier would decrease VA's chances of making mistakes in
identifying fiduciaries with multiple beneficiaries who require
reviews.
VA lacks a nationwide quality review process to ensure that periodic
on-site reviews are conducted properly and consistently. While VA has
nationwide quality review processes to ensure that actions--such as
conducting visits and obtaining financial reports and bonds--are
carried out in accordance with VA policies, Central Office managers
acknowledged that VA lacks a similar process for on-site reviews.
[Footnote 24] Having such a process is not only a key internal
control,[Footnote 25] but it is also important for ensuring that the
on-site reviews are conducted properly and consistently across all
Fiduciary Program units nationwide. While local managers are required
to examine the on-site review files and reports after completion, our
examination of 12 files from the three regional offices we visited
suggests that requiring only a local review may be insufficient. Four
of the files we examined lacked key case selection information,
preventing managers from determining whether cases were selected
according to VA policy. This policy states that cases associated with
beneficiary complaints or those with a history of late or questionable
financial reports should receive priority consideration for review. In
addition, although VA policy requires that at least 25 percent of a
fiduciary's beneficiary case files (or up to 25 case files) be
examined during the on-site reviews, we found that this threshold was
not met in four reports. While Central Office staff track whether on-
site reviews are completed, and noted that they have considered
implementing a national quality review process to ensure that they are
conducted properly, such a process has not yet been developed.
System Limitations and Insufficient Training Hamper Program
Performance and Oversight; However, VA Is Taking Steps That May Help:
We identified two key challenges that limit VA's ability to improve
Fiduciary Program performance and oversight. First, VA's electronic
fiduciary case management system does not provide sufficient
information to managers and staff about their cases, and it is
cumbersome to use. Second, some managers and staff may not have
received sufficient training to ensure that they have the necessary
expertise to effectively monitor individual fiduciaries and oversee
the program. VA is taking steps to build expertise about the case
management system and the program itself by developing additional
standardized training and piloting a consolidated Fiduciary Program
unit covering 14 western VA regional offices.
VA's Fiduciary Case Management System Provides Insufficient
Information and Is Cumbersome to Use:
VA's electronic fiduciary case management system, FBS, does not
provide sufficient data to effectively manage the Fiduciary Program.
FBS provides some useful information on individual case files, pending
workloads, and program performance; however, many managers and staff
characterized it as an antiquated system that is cumbersome to use.
Several system limitations hamper the agency's ability to maintain
accurate and timely data and provide management with quality
information about the program--typical internal control standards by
which government agencies are expected to operate.[Footnote 26]
Managers and staff cited several system weaknesses, including: (1)
data field limitations and (2) difficulties generating useful
management information.
Data field limitations: The accuracy and completeness of the
information that FBS provides is limited because the system's data
fields are configured to track a fixed number of pending activities
and because some of the data fields are too restrictive. As a result,
fiduciaries may be ineffectively monitored. For example, a required
visit might not be scheduled due to restrictive data fields that
prohibit tracking crucial dates or omit important information about
the performance of a fiduciary.
Staff and managers in the three regional offices we visited said they
often need to track more upcoming actions than FBS permits. For
example, staff noted that FBS accepts only one due date for upcoming
financial reports, even though multiple financial reports may be due
simultaneously if one or more is late. In such cases, the due date for
the most recent over-due report overrides the older due date, even if
the older financial report has not yet been submitted. In one case we
reviewed, Fiduciary Program staff had to follow up on two financial
reports from a professional fiduciary that were due in 2006 and 2007,
while simultaneously tracking an upcoming financial report due in
2008. To compensate for this FBS limitation, staff in one regional
office we visited and staff in Central Office said that such actions
are tracked manually outside of the system. Some staff, for example,
keep personal notes as reminders of pending actions while others input
data into spreadsheets.
Fiduciary Program staff also told us that the usefulness of FBS is
limited because not enough information is captured about cases due to
restrictive data fields. For example, staff sometimes use a "remarks"
data field to enter notes that help managers and staff understand
certain events and oversee a case, but said they may need to omit some
information because of limitations on the number of characters for
that field. In addition, one Central Office official we spoke with
said that some FBS data fields can be too general to adequately convey
important case information. For example, one entry option in FBS to
denote why a fiduciary has been removed from a case is "resignation".
However, fiduciaries can resign for a variety of reasons, such as
because of changes in personal circumstances or because program staff
encouraged the fiduciary to resign due to poor money management
practices. Another entry option--unfit--also does not adequately
convey the reasons for removal. For example, fiduciaries may become
unfit due to a serious illness or may be deemed unfit because they
were not adhering to the VA approved spending plan. The Central Office
official we spoke with also provided further evidence that the entry
options for removal are too general, stating that the option "other"
was one that staff frequently chose, due to lack of more precise
options.[Footnote 27]
Difficulties with FBS-generated management reports: Managers at the
three regional offices we visited told us that they do not always find
the FBS management reports easy to generate or helpful in overseeing
the program. For example, one manager told us that monitoring staff
performance was difficult because the system does not generate a
single report that shows all upcoming work that staff need to conduct
over a certain period of time. Instead, several reports need to be
generated and cross-referenced, which can be cumbersome. In addition,
FBS does not store historical information beyond 30 days that would
allow managers to examine past issues with fiduciaries or staff
performance. For example, managers in two regional offices said that
in order to look at historical information on seriously delinquent
financial reports, they would have to manually examine monthly paper
printouts generated in prior months by FBS. Managers explained that
finding these printouts in their archives is time-consuming and,
because they are not required to keep printouts beyond 2 years,
information beyond that time may not be available. A 2007 internal VA
report also stated that FBS requires extensive knowledge to use, which
inhibits effective oversight and management at all levels of the
program.[Footnote 28] The report recommended that VA begin long-term
planning to replace FBS with a more user-friendly workload tool that
is comparable to other operational management systems within VA.
Although there is acknowledgment among Fiduciary Program management
that FBS is outdated, VA has no formal plan or time line to replace
it. Managers and staff at the Central Office said that VA has not yet
submitted a request to VA's Office of Information Technology to update
FBS. One Central Office official told us that although VA intends to
make such a request in the future, it has not done so yet because of
the need to focus on other aspects of the program. This official also
mentioned that the Central Office will offer nationwide FBS training
to managers in fiscal year 2010 to increase both managers' knowledge
about the system and their willingness to use it.
VA Provides Some Training for Fiduciary Managers and Staff, but
Additional Standardized Training Is Needed:
Managers and staff in all three regional offices we visited said the
Fiduciary Program is complex and requires a great deal of specialized
knowledge to effectively monitor fiduciaries and provide program
oversight. Although the Fiduciary Program has a policy manual to guide
staff in carrying out their responsibilities, managers and staff said
there are many nuances and exceptions that take time to master,
particularly since each fiduciary and beneficiary situation may be
different. In addition to these program complexities, managers in all
of the regional offices we visited said that high staff turnover has
contributed to a large number of inexperienced managers and staff in
their Fiduciary Program units who need training.[Footnote 29] For
example, in two of the three regional offices we visited, only about
one-third of staff (15 out of 47) had more than 2 years of experience
in the program.[Footnote 30] In addition, we were told that many
managers at the regional offices we visited had been in their position
for less than 2 years and had little or no Fiduciary Program
experience.[Footnote 31] Managers noted that limited training for
these managers and staff may have contributed to various program
problems, including failures to properly monitor fiduciaries or
document certain actions in beneficiary case files. Our case file
review showed that about 15 percent of the files in our nationwide
sample lacked sufficient documentation of at least one required action
between July 1, 2006, and June 9, 2009, making it impossible to know
whether staff acted as required but failed to document it, or failed
to complete the action.[Footnote 32]
VA has provided some training to ensure that Fiduciary Program
managers and staff are proficient in carrying out their
responsibilities, and some regional offices have developed their own
training. VA provides a standardized computer-based training program
for new staff who conduct visits to beneficiaries and fiduciaries and
for those needing a refresher. Central Office managers and staff also
said that they hold monthly teleconferences and conduct periodic
visits to individual Fiduciary Program units to discuss selected
topics. In addition, managers and staff in all three regional offices
we visited said that they conduct their own weekly or biweekly
training sessions on selected topics, such as how to determine whether
bonds are required, and what kinds of situations constitute misuse.
However, they noted that individual training occurs primarily on the
job, and the effectiveness and consistency of such training depends on
the expertise of staff conducting the training.
Given the complexity of the program and the level of staff experience
at many Fiduciary Program units, managers and staff in the three
regional offices we visited said that additional standardized training
is needed. Central Office managers acknowledged that such training
would be beneficial and noted that they are in the process of
developing two standardized training programs. Central Office
management said that they expect to implement these training programs
some time in fiscal year 2010.
VA Consolidated Western Fiduciary Program Units to Improve Performance
and Oversight but Has Not Yet Evaluated the Outcomes of This Effort:
Beginning January 2008 through September 2008, VA consolidated
Fiduciary Program unit managers, staff, and files from 14 western VA
regional offices into a single location in Salt Lake City, Utah--
referred to as the Western Area Fiduciary Hub--to improve program
performance and oversight. VA officials expect the hub to achieve
these improvements through increased staff expertise, more consistent
training, better leveraging of staff resources, and increased program
efficiencies. For example, the hub created specific management
positions for the Fiduciary Program and divided some staff into teams
to focus on specific actions and responsibilities in an effort to
build program expertise, including expertise with FBS. In addition,
the hub provides opportunities to train more staff at once, which
could help to further build staff expertise and potentially increase
the consistency of training. The hub eliminated jurisdictional
boundaries that prevented staff from conducting visits that were
geographically close, but outside of their assigned jurisdiction or
area of responsibility, which VA expects will help balance workloads
among staff and reduce travel time. Additionally, the hub moved its
paper-based beneficiary case file system to an electronic file system,
called Virtual VA, by scanning in paper documents in an attempt to
more efficiently transfer information between the hub and staff
conducting visits in other offices.
While some VA managers and staff in the hub believe consolidation can
help improve Fiduciary Program performance, they described some
challenges that have impeded effective implementation of the pilot
project. The hub's managers explained that there had been multiple
changes in management and, until January 2009, they did not consider
the hub to be fully functional, which was approximately 1 year after
it opened. Managers and staff also told us that the hub was
implemented before appropriate planning and resources were in place.
For example, new standard operating procedures specific to the hub, as
well as new phone systems, were put in place over 15 months after the
initial rollout. During our visit, managers and staff agreed that all
of the necessary equipment to conduct visits, such as computers,
printers, and navigational systems, were still not fully in place. Hub
managers and staff also said there were unforeseen difficulties with
Virtual VA, such as inconsistent access and system crashes multiple
times a day. In addition, managers and staff noted that documents were
sometimes scanned into the wrong electronic beneficiary case file, and
a backlog of incoming documents to be scanned meant they could not be
certain that case files in Virtual VA were up to date. Managers also
said that the beneficiary case files they received from some regional
offices had not been properly maintained, which slowed the hub's
ability to meet performance goals and time frames. In some cases, for
example, staff had not taken required actions to address seriously
delinquent financial reporting and that potential misuse of funds had
gone unidentified for significant periods of time. As a result, hub
staff spent a large portion of time updating old cases and performing
necessary follow-up actions, in addition to completing incoming work.
Managers and staff noted that they have gained valuable insight and
knowledge in implementing the hub that could help inform future office
consolidations.
Because the hub is still undergoing multiple changes and has not yet
been evaluated, it is unclear whether consolidation of Fiduciary
Program units has improved program performance and oversight. Central
Office staff told us that the agency has been focusing on getting the
hub fully operational as opposed to evaluating its performance.
However, a VA official from the Office of Field Operations said that
the agency may conduct an evaluation of the hub in early 2010, but has
not yet developed a specific time frame or a plan to conduct such a
study.
Conclusions:
The Fiduciary Program provides a valuable service in ensuring that
billions of dollars in benefits to one of VA's most vulnerable
populations--those who are unable to manage their own financial
affairs due to mental impairments--are safeguarded.
Past reports show that this program can be susceptible to misuse of
funds, so it is important that VA take actions to minimize risks to
its beneficiaries. Since 2005, VA has made several efforts to better
monitor fiduciaries and oversee the program, such as adding on-site
reviews to help ensure that professional fiduciaries are appropriately
managing beneficiaries' funds as required in the Veterans' Benefits
Improvement Act of 2004 and consolidating western Fiduciary Program
units to improve performance. However, VA continues to face challenges
safeguarding Fiduciary Program benefits because staff inconsistently
comply with program policies, some policies are weak or unclear and,
as program managers and staff stated, the program lacks adequate
resources and tools.
Insufficient compliance with VA policies for monitoring fiduciaries,
including lack of timely follow-up on late financial reports, presents
the opportunity for funds to be used inappropriately and could
preclude VA's prompt detection of such use. In addition, failure to
ensure that fiduciaries purchase bonds when necessary can leave
beneficiaries' estates unsecured and VA liable for replacing misused
funds. Further, in the absence of stronger policies and procedures for
on-site reviews of professional fiduciaries, staff may lack key
information to determine if fiduciaries who serve multiple
beneficiaries are performing satisfactorily and in the best interest
of the beneficiaries. Although improving compliance and policies in
these areas may take additional resources, such an investment will
likely lead to improved staff and program performance. Additionally,
without investing in a case management system that provides sufficient
information and can be more efficiently navigated, managers and staff
may not readily have all the information they need to effectively
monitor fiduciaries and oversee the program. Also, in the absence of
sufficient standardized training, managers and staff may not have the
expertise needed to effectively carry out program responsibilities.
Finally, although VA's Western Area Fiduciary Hub has the potential to
enhance program expertise and consistency, improve the delivery of
training, and help VA better leverage staff resources, it has not yet
been evaluated. Without a formal evaluation of hub outcomes, VA will
not be able to determine its impact and whether this effort can
address long-standing problems in the program.
Recommendations for Executive Action:
To ensure that maximum efforts are made to safeguard beneficiary
assets, we recommend that the Secretary of Veterans Affairs take the
following four actions:
* Ensure that policies regarding file documentation, follow-up with
fiduciaries for late financial reports, and bond acquisition are
understood and carried out by staff. This might be accomplished by
increasing standardized training for staff, clarifying certain
policies, and improving management review and oversight.
* Improve the policies for periodic on-site reviews of professional
fiduciaries by taking additional actions such as:
- Requiring a unique identifier for all fiduciaries to better
determine which professional fiduciaries meet the criteria to have on-
site reviews.
- Implementing a nationwide systematic quality review process to
examine completed on-site review reports.
* Evaluate alternative approaches to effectively and efficiently meet
the electronic case management system needs of Fiduciary Program
managers and staff. This could include developing or acquiring a
replacement system or enhancing the existing system.
* Move forward with developing a plan to systematically evaluate the
extent to which the hub pilot project is addressing identified program
weaknesses. This could include documenting lessons learned during
implementation.
Agency Comments and Our Evaluation:
We provided a draft of this report to VA for review and comment. VA
generally agreed with our conclusions and concurred with our
recommendations. Its written comments are reproduced in appendix II.
VA agreed with our recommendation that it ensure that policies
regarding file documentation, follow-up with fiduciaries for late
financial reports, and bond acquisition are understood and carried out
by staff and cited actions it is taking to do so. VA's actions include
preparing additional interim guidance and standardized training that,
among other things, will address file documentation and appropriate
follow-up. The standardized training, which will be provided to all
fiduciary managers and staff nationwide who are directly involved in
administering the Fiduciary Program, is scheduled to begin in March
2010. VA is also planning a Fiduciary Managers Training Conference in
2010 to provide in-depth training on a variety of fiduciary topics. In
addition, VA expects to publish a revised policy manual by September
30, 2010, that will clarify existing guidance, establish new policies,
and enhance oversight.
VA also agreed with our recommendation that it improve its policies
and procedures for conducting on-site reviews of professional
fiduciaries. The agency stated that its revised policy will require
staff to obtain Social Security numbers or tax identification numbers
for organizations and businesses that serve as fiduciaries, in
addition to its current practice of requiring this information on
individual fiduciaries. The agency plans to issue interim guidance and
standardized training on this new requirement in March 2010. Also
effective March 31, 2010, VA will begin requiring that all completed
on-site reviews of professional fiduciaries be submitted to its
Central Office for review and analysis. The Central Office's
assessment of on-site reviews is an important first step in ensuring
that these reviews are conducted consistently across all offices and
in accordance with program policy.
VA also agreed with our recommendation to evaluate alternative
approaches to effectively and efficiently meet the electronic case
management system needs of the Fiduciary Program. VA has established a
work group that will evaluate the current FBS and submit its findings
and recommendations in June 2010 for either enhancing or replacing the
system.
Finally, VA agreed with our recommendation to move forward with
developing and implementing a plan to systematically evaluate the
extent to which the Western Area Fiduciary Hub is addressing
identified program weaknesses. VA intends to complete such an
evaluation by September 30, 2010. We encourage VA to take steps to
ensure that the evaluation's design and criteria yield valid
information that will help the agency decide whether the consolidation
of the western Fiduciary Program units has effectively addressed
identified program weaknesses.
VA noted a concern in its comments regarding GAO's extrapolation of
case data across the Fiduciary Program population. Specifically, VA
commented that a stratified random sample of 205 cases is not large
enough to provide precise predictions about the 106,000 adults in the
Fiduciary Program. However, we determined our estimates regarding the
overall population based on this sample with a precision of plus or
minus 10 percentage points. We believe that this was sufficient for
the purposes of our report and that our sample size was large enough
to achieve this precision. In addition, all margins of error have been
disclosed in the report, including footnotes for those estimates of
subpopulations with margins of error larger than plus or minus 10
percentage points.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies to the
Secretary of Veterans Affairs and others who are interested. The
report also will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staff have any questions concerning this report, please
contact me at (202) 512-7215 or bertonid@gao.gov. Contact points for
our Office of Congressional Relations and Public Affairs may be found
on the last page of this report. Staff members making key
contributions to this report are listed in appendix III.
Sincerely yours,
Signed by:
Daniel Bertoni:
Director, Education, Workforce, and Income Security Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
The objectives of our report on the Department of Veterans Affairs
(VA) Fiduciary Program were to examine (1) how effective program
policies and procedures are in monitoring fiduciaries and safeguarding
beneficiary assets and (2) challenges VA faces in improving program
performance and oversight.
Effectiveness of Program Policies and Procedures:
To address the first objective, we reviewed existing information on
the Fiduciary Program. We then collected and analyzed data from a
stratified random sample of 205 beneficiary case files. We also
assessed the reliability of VA's Fiduciary Beneficiary System (FBS)
because it was the source for our sample selection. We found the data
to be reliable for the purpose of providing a sampling frame.
To address both the first objective and obtain necessary background
information on the program, we reviewed available information on the
Fiduciary Program, such as the Fiduciary Program's policies and
procedures manuals and internal program documents. These included the
FBS user's guide to learn how VA tracks and measures Fiduciary Program
performance, such as the timeliness of visits. We also reviewed
relevant federal laws and regulations. In addition, we examined VA
Office of Inspector General (OIG) reports and congressional hearings
about the Fiduciary Program to understand previously identified
weaknesses in safeguarding beneficiary assets.
We also collected and analyzed case-level data from a stratified
random sample of 205 beneficiary case files to generate performance
estimates for processes that Fiduciary Program staff use to monitor
fiduciaries, such as the timeliness in obtaining financial reports or
conducting visits.[Footnote 33] Our sample was from a population of
over 106,000 adult beneficiaries and was stratified based on estate
values that were $20,000 and under, and over $20,000. The data was
also stratified based on the beneficiary's status as a supervised
direct payment (SDP) beneficiary.[Footnote 34] Ultimately, our
analysis did not focus on the SDP strata because we found that these
cases represented such a small portion of all Fiduciary Program
activity.[Footnote 35] After excluding these SDP cases, our sample
allowed us to generalize to a population of over 103,000 adult
beneficiaries and to some subpopulations. This population included all
adult beneficiaries, other than those who VA planned to monitor with a
method other than visits and those who had negative estate values, as
of March 31, 2009. All estimates in this report have a margin of error
of plus or minus 10 percentage points or less, at the 95 percent
confidence level, unless otherwise noted. We developed a data
collection instrument to record information from the case
files.[Footnote 36] Activities documented in the beneficiary case
files after July 1, 2006, provided the basis for our analysis of
recent case activities. We chose to focus our analysis on these recent
case activities because, by this date, VA had implemented
recommendations from the agency's June 2006 OIG report on the
Fiduciary Program. The end date for our sample file review was June 9,
2009.[Footnote 37] One limitation of the file review was that a
limited number of cases did not contain the relevant information we
needed to complete our review. One reason was that VA provided us with
photocopies of the case files, and some of the date stamps VA used to
assess the timeliness of staff activities may not have been legible on
the copies. In other instances, the original documents may never have
been stamped with the date that the actions began or were completed.
For some categories (such as follow-up visits), we used the date that
the appropriate document was signed to approximate a missing date
stamp in a particular case. We did this when the average difference
for all cases in that category which included both the date signed and
the date stamped was no more than 7 days. For initial and follow-up
visits, we substituted the date signed for the date stamped,
respectively, in 10 and 25 cases. For categories where such a
difference exceeded this average (such as the request for an initial
visit), or if we could not otherwise substitute the missing date stamp
to calculate timeliness, we simply classified cases as having missing
date stamps.[Footnote 38] Additionally, if there was an indication in
the file that a visit was scheduled but there was no documentation
that the visit occurred, or if a financial report or bond was due, but
there was no indication that it was submitted, we classified the
activity as having no documentation.[Footnote 39]
Further, we conducted several tests to assess the reliability of FBS
as the source for our sample selection and for other case file
information because prior VA OIG findings and some of our interviews
raised questions about some FBS data. First, we reviewed existing
documentation about FBS and prior VA OIG reports that discussed FBS,
and we interviewed knowledgeable staff about how FBS data was
collected, stored, and used. Second, we conducted electronic testings
of FBS data reliability, such as checking for missing data elements.
Third, we traced selected information to the source documents in the
case files. Specifically, we compared the estate values in FBS with
the documented estate values in the case files for 10 randomly
selected cases and found them to be accurate enough for our purposes.
Overall, we found FBS to be sufficiently reliable for the purposes of
sampling cases for review. We also used FBS data to assess how
reliably fiduciaries managing multiple beneficiaries could be
identified.
Program Effectiveness and Challenges:
To obtain information for both objectives, we interviewed managers and
staff at VA's Central Office. We also conducted site visits to three
Fiduciary Program units in VA regional offices to assess how Fiduciary
Program units oversee fiduciary cases. Finally, we spoke with
representatives from veterans service organizations and other
Fiduciary Program units.
During our interviews with Fiduciary Program managers and staff at
VA's Central Office and regional offices, we asked about program
policies and procedures and internal control standards used to ensure
effective program performance and safeguard cash benefits.[Footnote
40] We also asked about program performance goals and standards, and
how the Fiduciary Program interacts with other VA offices and
programs. Among others, we spoke with the Chief Fiduciary and his
staff, officials from the Office of Enterprise Development,
Compensation and Pensions, and staff familiar with FBS.
Of the 43 Fiduciary Program Units in VA regional offices, we conducted
site visits to three--St. Petersburg, Florida; Cleveland, Ohio; and
Salt Lake City, Utah--during which we interviewed staff and managers,
reviewed case files, and examined on-site reviews of professional
fiduciaries. We considered several factors in selecting the Fiduciary
Program units to visit. First, we wanted to maximize the number of
beneficiary cases being handled at the offices we visited. Taken
together, these three sites oversaw more than 25 percent of all
Fiduciary Program beneficiaries in fiscal year 2008. Second, to obtain
geographical variation, we chose units in three of the four regions.
[Footnote 41] Third, we selected the Salt Lake City regional office
because it is the site of a pilot project that consolidated 14 western
regional offices into one hub. Our purpose in conducting these site
visits was to gather information about how individual units handled
fiduciary cases, including the extent to which staff complied with
policies and procedures, and managers and staff understood them and
found them useful. To do so, we interviewed program managers and staff
and also reviewed a total of 32 site visit files for which there were
allegations of misuse or for which financial reports were more than
120 days overdue. We selected these files based on a judgmental sample
of files stored at the three VA regional offices we visited. We also
collected and reviewed 12 on-site reviews of professional fiduciaries
who managed funds for more than 20 beneficiaries with total combined
total benefits of at least $50,000. We chose these fiduciaries from
our 32 site visit file reviews.
Finally, to gain further perspective on the program, we interviewed
representatives from 10 veterans service organizations during our site
visits and in Washington, D.C.,[Footnote 42] and spoke to managers and
staff at Fiduciary Program units in Oakland, California, and
Baltimore, Maryland.
We conducted this performance audit from December 2008 to February
2010, 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.
[End of section]
Appendix II: Comments from the Department of Veterans Affairs:
Department of Veterans Affairs:
Office of the Secretary:
January 29, 2010:
Mr. Daniel Bertoni:
Director:
Education, Workforce, and Income Security Issues:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Bertoni:
The Department of Veterans Affairs (VA) has reviewed the Government
Accountability Office's (GAO) draft report, VA's FIDUCIARY PROGRAM:
Improved Compliance and Policies Could Better Safeguard Veterans'
Benefits (GAO-10-241) and generally agrees with GAO's conclusions and
concurs with GAO's recommendations to the Department.
The enclosure specifically addresses GAO's recommendations and
provides additional comments to the draft report. VA appreciates the
opportunity to comment on your draft report.
Sincerely,
Signed by:
John R. Gingrich:
Chief of Staff:
Enclosure:
[End of letter]
Enclosure:
Department of Veterans Affairs (VA) Comments to Government
Accountability Office (GAO) Draft Report: VA's Fiduciary Program:
Improved Compliance and Policies Could Better Safeguard Veterans'
Benefits (GA0-10-241):
GAO Recommendation: To ensure that maximum efforts are made to
safeguard beneficiary assets, we recommend that the Secretary of
Veterans Affairs take steps to:
Recommendation 1: Ensure that policies regarding file documentation,
follow-up with fiduciaries for late financial reports, and bond
acquisition are understood and carried out by staff. This might be
accomplished by increasing standardized training for staff, clarifying
certain policies, and improving management review and oversight.
VA Comments: Concur. The Compensation and Pension (C&P) Service is
preparing additional interim guidance and standardized national
training, to include file documentation, account audits and
appropriate follow-up, surety bonds, fiduciary appointments, and
workload management. The guidance and training will also address
policies and procedures involving fiduciary units. The standardized
training will be provided to all fiduciary managers, field examiners,
and legal instrument examiners nationwide and is scheduled to begin in
March 2010.
The C&P Fiduciary Staff is revising the fiduciary policies and
procedures in the manual M21-IMR, Part XI. The revision will clarify
existing guidance, establish new policies and procedures, and enhance
oversight of fiduciary activities. The manual revision is projected to
be published by September 30, 2010.
The C&P Fiduciary Staff is also planning a Fiduciary Managers Training
Conference for 2010 to provide in-depth training on workload
management, misuse of funds, accounting follow-up, field examinations,
surety bonds, and other fiduciary topics.
Recommendation 2: Improve the policies for periodic on-site reviews of
professional fiduciaries by taking additional actions such as:
* Requiring a unique identifier for all fiduciaries to better
determine which professional fiduciaries meet the criteria to have on-
site reviews.
* Implementing a nationwide systematic quality review process to
examine completed on-site review reports.
VA Comments: Concur. Measures requiring the entry of a social security
number or tax identification number for each individual serving as a
fiduciary are currently in place. The revised policy will require
fiduciary units to obtain and enter this information for organizations
and businesses that serve as fiduciaries, as well as individuals.
Interim guidance and standardized training will be provided in March
2010. This guidance will later be incorporated into the revised manual.
To provide oversight of onsite reviews, C&P Fiduciary staff conduct
triennial site surveys of all fiduciary units. Beginning in October
2009, the site survey protocol for fiduciaries includes a requirement
to assess on-site review records. The assessment is designed to ensure
all necessary reviews are scheduled and conducted to confirm the
adequacy of the reports. Additionally, at the onset of each fiscal
year, each regional office fiduciary unit must submit a list of all on-
site reviews to be conducted in that year. Effective March 31, 2010,
all completed on-site review reports will be provided to C&P Service
for review and analysis.
Recommendation 3: Evaluate alternative approaches to effectively and
efficiently meet the electronic case management system needs of the
Fiduciary Program managers and staff. This could include developing or
acquiring a replacement system or enhancing the existing system.
VA Comments: Concur. VBA has established a workgroup to evaluate the
current Fiduciary Beneficiary System and provide recommendations for
either enhancing or replacing it. The workgroup will complete its
findings and submit recommendations in June 2010.
Recommendation 4: Move forward with developing a plan to
systematically evaluate the extent to which the Hub pilot project is
addressing identified program weaknesses. This could include
documenting lessons learned during implementation.
VA Comments: Concur. VBA will complete a full analysis of the Western
Area Fiduciary Hub pilot by September 30, 2010. The analysis will
address program weaknesses, as well as lessons learned.
Additional Comment:
VBA has concerns about the extrapolation of data across the
population. The sample size of 205 cases does not provide for precise
predictions about population of 106,000 beneficiaries. This sample is
further stratified making the sample size for each strata about 100
cases, which is not sufficient to make estimations about population.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Daniel Bertoni, Director, (202) 512-7215 or bertonid@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Shelia Drake, Assistant
Director; Nancy Cosentino; Laura Henry; Wiktor Niewiadomski; Nhi
Nguyen; and Nyree Ryder Tee made significant contributions to this
report. Roger Thomas provided legal assistance; Jim Ashley, Melinda
Cordero, and Walter Vance provided assistance with design methodology
and data analysis; and Kathleen Van Gelder assisted in report
development.
[End of section]
Footnotes:
[1] VA regulations state that the agency may appoint fiduciaries for
beneficiaries and beneficiaries' dependents who are mentally ill
(incompetent) or under legal disability by reason of minority or court
action. 38 C.F.R. § 13.55.
[2] Pub. L. No. 108-454.
[3] For purposes of this report, professional fiduciaries include
institutions (such as nursing homes), professional fiduciary services,
nonprofit agencies, and state hospitals.
[4] We analyzed case files from a population of about 103,700 adult
beneficiaries. This excluded beneficiaries whom VA monitored with
alternate methods (such as those who managed their own funds for a
probationary period and those who VA monitored through letters or
phone calls in lieu of some personal visits), as well as those who had
negative estate values.
[5] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington, D.C.: Nov. 1999).
[6] Beneficiaries can be veterans, surviving spouses, or veterans'
dependent children or parents.
[7] In some cases, such as when the fiduciary is a spouse or when the
beneficiary is institutionalized, some of the subsequent visits may be
substituted for with letters or phone calls.
[8] Financial reports are required for fiduciaries who oversee
beneficiary estates of $10,000 or more, who are appointed by a court,
who are authorized to collect a fee, who oversee estates of
beneficiaries who receive the maximum disability payment possible, who
are appointed temporarily, or in other situations. Some exceptions
generally include fiduciaries who are spouses and chief officers of
federal institutions. The time frame for submitting financial reports
may vary for court-appointed fiduciaries based on an agreement with
the courts.
[9] Bond amounts may vary for court-appointed fiduciaries.
[10] If it is not reasonable or practical to require a surety bond, VA
may, in some cases, instead require that the fiduciary enter into a
"withdrawal agreement," by which the fiduciary may only withdraw
beneficiary funds from a financial institution with the written
consent of VA.
[11] Fiduciary Program units that were merged into the hub were units
from the following VA regional offices: Albuquerque, Anchorage, Boise,
Denver, Fort Harrison (Montana), Honolulu, Los Angeles, Oakland,
Phoenix, Portland, Reno, Salt Lake City, San Diego, and Seattle.
[12] See, for example, Department of Veterans Affairs Office of
Inspector General, Audit of Veterans Benefits Administration Fiduciary
Program Operations, Report No. 05-01931-158 (Washington, D.C.: June
27, 2006) and Audit and Appointment and Supervision of Fiduciaries,
Report No. 7R5-B13-074 (Washington, D.C.: May 1, 1997).
[13] GAO, Guardianships: Collaboration Needed to Protect Incapacitated
Elderly People, [hyperlink, http://www.gao.gov/products/GAO-04-655]
(Washington, D.C.: July 13, 2004).
[14] VA implemented recommendations from VA OIG's June 2006 report on
the Fiduciary Program (Report No. 05-01931-158) by July 1, 2006.
Recommendations involved VA's efforts to conduct visits, obtain and
review fiduciary financial reports, and obtain fiduciary bonds. As
such, we chose this as the start date of our analysis. The concluding
date of June 9, 2009, is the date by which we requested all files be
sent to us.
[15] We could not determine if VA met its nationwide performance goal
of conducting at least 90 percent of initial visits on time because
the number of cases in our sample for which we could assess initial
visit timeliness between July 1, 2006, and June 9, 2009, was too small
to project our results to the population.
[16] While the remaining 19 cases included documentation that an
initial visit occurred; we were unable to assess the timeliness of
these visits because documents in the file lacked the date stamps
needed to determine when the visits were requested and/or completed.
Lack of date stamps could indicate that the photocopies of the files
that VA provided us were of poor quality or that the documents in the
original files were never stamped with one or both of the necessary
dates needed to assess timeliness.
[17] In this 6 percent, while the files contained the report
documenting that the visit had occurred, these reports lacked the date
stamp necessary to assess timeliness.
[18] VA primarily tracks case file referrals to its OIG using its
electronic case management system, FBS. We did not use this
information in our study, however, because we could not validate its
accuracy. This is because FBS does not retain information on referrals
beyond 30 days after the referral is acted upon.
[19] The statute provides that if there is a negligent failure to
investigate or monitor a fiduciary that results in a misuse of
benefits, VA will make up that loss to the beneficiary. 38 U.S.C. §
6107.
[20] The number of cases in our sample requiring a bond was too small
to project our results to the population.
[21] Central Office explained that fiduciaries typically need a bond
for each individual beneficiary. A blanket bond is generally only
acceptable if the fiduciary is a government entity, in which case a
blanket bond covering all of their beneficiaries would be acceptable
as long as the amount was adequate.
[22] VA began conducting these reviews in 2006.
[23] Pub. L. No. 108-454, § 504 (codified at 38 U.S.C. § 5508).
[24] Both regional office managers and Central Office managers and
staff regularly review a set number of beneficiary case files on
either a monthly or yearly basis.
[25] Internal controls should generally be designed to ensure that
ongoing monitoring occurs in the course of normal operations,
including regular management and supervisory activities, comparisons,
reconciliations, and other actions people take in performing their
duties. See [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[26] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[27] The remaining entry options for fiduciary removal include "death
of a fiduciary," "beneficiary moved to a new jurisdiction," and
"misuse of funds." Central Office officials noted that the "misuse of
funds" option was only to be used in cases of proven illegal misuse of
funds.
[28] VA, Fiduciary and Field Examination Pilot Implementation Team
Report (Washington, D.C.: Nov. 5, 2007).
[29] One common reason managers gave for high staff turnover was that
Fiduciary Program positions tend to have low pay grade ceilings, so if
staff want to advance beyond these ceilings, they must leave the
Fiduciary Program. We attempted to obtain VA data on staff turnover to
determine both the Fiduciary Program turnover rate and how it compares
to other programs, but we were told that such data was not readily
available.
[30] The third office, discussed in the next section, was the office
which consolidated staff from the fiduciary units in 14 western
regional offices.
[31] Managers explained that regional offices may rotate managers
through different units, and some managers we spoke to had collateral
responsibilities for other units as well.
[32] These actions were previously discussed in this report and
include failure to properly document: (1) required follow-up actions
to obtain late financial reports, (2) initial and follow-up visits to
beneficiaries and fiduciaries were conducted, (3) fiduciary financial
reports were received, and (4) the purchase of bonds or the waiving of
the bond requirement.
[33] We requested 209 files from VA, but the agency was unable to
provide four of them because the cases had been closed and the files
destroyed.
[34] SDP beneficiaries manage their own funds under VA supervision for
a probationary period of up to 3 years, after which program policy
requires that they either be moved out of the program or assigned a
fiduciary, unless extenuating circumstances justify their remaining in
SDP status.
[35] The population contained fewer than 3,000 SDP cases, which was
approximately 2.5 percent of the population.
[36] To ensure that our data collection efforts conformed to GAO's
data quality standards, all cases that GAO analysts recorded were
reviewed by another GAO analyst. When the analysts' views on how the
data were recorded differed, they met to reconcile any differences.
[37] To determine if the activity was within our time frame of
interest, we looked to the documentation of the bond requirement, or
to the end date of the financial reporting period. For initial and
follow-up visits, we looked to the date stamp indicating that VA
received the report of the visit, or if this was not available, to the
date the report was signed. For one initial visit, the date stamped
received or signed was not available, so we calculated whether the
activity would be within our time frame based on VA guidelines for the
maximum time allowed between the request date and the date the report
of the visit should have been stamped.
[38] There were three cases for which, while the initial visit
occurred, the request date for the initial visit was missing. We
classified these visits as having no date stamp because we did not
have the dates necessary to calculate the timeliness.
[39] For seven cases, the file indicated that a follow-up visit was
scheduled to occur within our time frame of interest, but the file had
no documentation that the visit occurred. For these exams, we
determined that the visit should have occurred within our time frame
by reviewing the scheduled date as written in the previous visit and
checking the file to ensure that the visit was not postponed for an
acceptable reason.
[40] See [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[41] We visited offices in the Southern, Western, and Eastern regions,
but not the Central region.
[42] The American Legion, AMVETS, Catholic War Veterans of the USA,
Inc., Disabled American Veterans, Florida Department of Veterans'
Affairs, Military Order of the Purple Heart, Paralyzed Veterans of
America, Utah Department of Veterans' Affairs, Veterans of Foreign
Wars of the United States, and Vietnam Veterans of America.
[End of section]
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