VA's Fiduciary Program
VA Plans to Improve Program Compliance and Policies, but Sustained Management Attention is Needed Gao ID: GAO-10-635T April 22, 2010The 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, VA appoints a third party, called a fiduciary, to manage their VA funds. Congress, VA's Office of Inspector General (OIG) and GAO have noted that VA does not always have, or adhere to, effective policies for selecting and monitoring fiduciaries and therefore, does not fully safeguard the assets of beneficiaries in the Fiduciary Program. GAO was asked to discuss the Fiduciary Program and possible ways that it could be improved to better serve veterans, their families, and survivors. This statement is based on GAO's February 2010 report (GAO-10-241), which examined (1) VA policies and procedures for monitoring fiduciaries and safeguarding beneficiary assets and (2) challenges VA faces in improving program performance and oversight. To conduct that work, GAO reviewed program policies and relevant federal laws and regulations, 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.
Inconsistent staff compliance with some Fiduciary Program policies and weaknesses in others hinder VA's ability to effectively safeguard beneficiary assets; however, per GAO's recommendations, VA plans to take steps to improve the program. GAO found that VA did not always take required actions to monitor fiduciaries within established time frames or document in the beneficiary's case file that these actions were taken. Inconsistent staff compliance occurred in four areas: (1) initial visits to beneficiaries and fiduciaries, (2) follow-up visits to beneficiaries and fiduciaries, (3) follow up to obtain annual financial reports, and (4) oversight of surety bonds. For example, in about 18 percent of the cases GAO reviewed, VA was late in conducting required follow-up visits to monitor fiduciaries or did not provide sufficient documentation to show whether these visits were conducted. Similarly, while GAO estimated that about 39 percent of fiduciaries did not submit required annual financial reports on time, VA staff did not consistently follow-up with fiduciaries or failed to document actions that were taken. In addition to compliance issues, VA's policies for conducting on-site reviews of professional fiduciaries who manage funds for multiple beneficiaries do not ensure that these fiduciaries are effectively identified and monitored. For example, the agency's case management system uses 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. As a result, VA cannot always identify the fiduciaries that need to be reviewed. Moreover, VA does not have a nationwide quality review process to ensure that on-site reviews are conducted properly and consistently. Per GAO's February 2010 report recommendations, VA agreed to revise its Fiduciary program policies in an effort to enhance its oversight role, increase staff understanding and staff compliance, and better safeguard beneficiary assets. Two key challenges hinder VA's ability to improve Fiduciary Program performance and oversight, but VA has plans to address these challenges. First, managers and staff said that limitations with VA's electronic fiduciary case management system hinder their ability to capture key information. Per GAO's recommendation, VA has established a work group to evaluate alternative system modifications to meet the program's case management needs. Second, managers and staff indicated that training may not be sufficient to ensure that they have the expertise to properly carry out program responsibilities, as many of them had less than 2 years of program experience. In its response to GAO's recommendations, VA stated that it would begin providing additional standardized training for managers and staff this year. VA is also piloting a consolidated Fiduciary Program unit covering 14 VA regional offices to improve program performance and oversight. VA encountered a number of challenges during the pilot's implementation and has not yet evaluated it, but per our recommendation, plans to do so by September of this year.
GAO-10-635T, VA's Fiduciary Program: VA Plans to Improve Program Compliance and Policies, but Sustained Management Attention is Needed
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Testimony:
Before the Subcommittee on Disability Assistance and Memorial Affairs,
Committee on Veterans' Affairs, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 2:00 p.m. EST:
Thursday, April 22, 2010:
VA'S Fiduciary Program:
VA Plans to Improve Program Compliance and Policies, but Sustained
Management Attention is Needed:
Statement of Daniel Bertoni, Director:
Education, Workforce, and Income Security:
GAO-10-635T:
GAO Highlights:
Highlights of GAO-10-635T, a testimony before the Subcommittee on
Disability Assistance and Memorial Affairs, Committee on Veterans'
Affairs, House of Representatives.
Why GAO Did This Study:
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, VA appoints a third party, called a fiduciary, to manage
their VA funds. Congress, VA‘s Office of Inspector General (OIG) and
GAO have noted that VA does not always have, or adhere to, effective
policies for selecting and monitoring fiduciaries and therefore, does
not fully safeguard the assets of beneficiaries in the Fiduciary
Program.
GAO was asked to discuss the Fiduciary Program and possible ways that
it could be improved to better serve veterans, their families, and
survivors. This statement is based on GAO‘s February 2010 report (GAO-
10-241), which examined (1) VA policies and procedures for monitoring
fiduciaries and safeguarding beneficiary assets and (2) challenges VA
faces in improving program performance and oversight. To conduct that
work, GAO reviewed program policies and relevant federal laws and
regulations, 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.
What GAO Found:
Inconsistent staff compliance with some Fiduciary Program policies and
weaknesses in others hinder VA‘s ability to effectively safeguard
beneficiary assets; however, per GAO‘s recommendations, VA plans to
take steps to improve the program. GAO found that VA did not always
take required actions to monitor fiduciaries within established time
frames or document in the beneficiary‘s case file that these actions
were taken. Inconsistent staff compliance occurred in four areas: (1)
initial visits to beneficiaries and fiduciaries, (2) follow-up visits
to beneficiaries and fiduciaries, (3) follow up to obtain annual
financial reports, and (4) oversight of surety bonds. For example, in
about 18 percent of the cases GAO reviewed, VA was late in conducting
required follow-up visits to monitor fiduciaries or did not provide
sufficient documentation to show whether these visits were conducted.
Similarly, while GAO estimated that about 39 percent of fiduciaries
did not submit required annual financial reports on time, VA staff did
not consistently follow-up with fiduciaries or failed to document
actions that were taken. In addition to compliance issues, VA‘s
policies for conducting on-site reviews of professional fiduciaries
who manage funds for multiple beneficiaries do not ensure that these
fiduciaries are effectively identified and monitored. For example, the
agency‘s case management system uses 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.
As a result, VA cannot always identify the fiduciaries that need to be
reviewed. Moreover, VA does not have a nationwide quality review
process to ensure that on-site reviews are conducted properly and
consistently. Per GAO‘s February 2010 report recommendations, VA
agreed to revise its Fiduciary program policies in an effort to
enhance its oversight role, increase staff understanding and staff
compliance, and better safeguard beneficiary assets.
Two key challenges hinder VA‘s ability to improve Fiduciary Program
performance and oversight, but VA has plans to address these
challenges. First, managers and staff said that limitations with VA‘s
electronic fiduciary case management system hinder their ability to
capture key information. Per GAO‘s recommendation, VA has established
a work group to evaluate alternative system modifications to meet the
program‘s case management needs. Second, managers and staff indicated
that training may not be sufficient to ensure that they have the
expertise to properly carry out program responsibilities, as many of
them had less than 2 years of program experience. In its response to GAO
‘s recommendations, VA stated that it would begin providing additional
standardized training for managers and staff this year. VA is also
piloting a consolidated Fiduciary Program unit covering 14 VA regional
offices to improve program performance and oversight. VA encountered a
number of challenges during the pilot‘s implementation and has not yet
evaluated it, but per our recommendation, plans to do so by September
of this year.
View [hyperlink, http://www.gao.gov/products/GAO-10-635T] or key
components. For more information, contact Daniel Bertoni at (202) 512-
7215 or bertonid@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to have the opportunity to comment on how the Department
of Veterans Affairs (VA) Fiduciary Program can better protect
vulnerable veterans and their families. Each year, the VA pays
billions of dollars in compensation and pension benefits to disabled
veterans and their dependents. For those who are unable to manage
their own affairs,[Footnote 1] VA appoints a third party, called a
fiduciary, to help manage and protect the beneficiary's funds. A
fiduciary can be a spouse or other family member, or an entity such as
a law firm, hospital, or nursing home. In fiscal year 2008,
fiduciaries provided services for more than 103,000 beneficiaries, and
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.
Over the years, both Congress and VA's Office of Inspector General
(OIG) have expressed concern that VA's Fiduciary Program is not fully
safeguarding beneficiaries' assets. Areas of concern included delays
in conducting visits to select fiduciaries and insufficient monitoring
of VA fund usage by fiduciaries on behalf of beneficiaries. You asked
us to discuss such issues and possible ways that the Fiduciary Program
could be improved to better serve veterans, their families, and
survivors. My statement draws on our recent report which examined (1)
VA policies and procedures for monitoring fiduciaries and safeguarding
beneficiary assets and (2) challenges VA faces in improving program
performance and oversight.[Footnote 2]
Our work included reviewing program policies and relevant federal laws
and regulations, analyzing a nationally representative random sample
of 205 case files[Footnote 3] and visiting three 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, procedures, and internal
controls.[Footnote 4] These units accounted for 25 percent of the
program's beneficiaries. During these visits, we also conducted file
reviews of cases where either VA suspected that fiduciaries were
inappropriately using beneficiary funds or fiduciaries were seriously
late in submitting annual financial reports documenting how
beneficiary funds were spent. We also reviewed 12 VA on-site reviews
which are examinations of financial records of fiduciaries who oversee
multiple beneficiaries, whom we refer to as professional fiduciaries.
Finally, we interviewed Central Office officials and staff as well as
Veterans' Service Organizations about the performance of the program.
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.
Background:
Many individuals receiving monthly compensation and pension benefits
from the VA have mental impairments that can prevent them from
managing their finances. These conditions may result from injury,
disease, or infirmities of age. 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. VA appointed fiduciaries who are not dependents or close
family members can collect a fee for their services (generally 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
determined that a beneficiary is unable to handle his or her own
affairs and appoints its own fiduciary, VA must assess the performance
of that fiduciary to determine if he or she is suitable for managing
VA benefits 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 for his or her services.
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 (VBA).
Individual Fiduciary Program units are generally colocated in VA
regional offices that also oversee other VBA 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.
Inconsistent Compliance with Some Policies and Weaknesses in Others
Hinder VA's Ability to Safeguard Beneficiary Assets:
Our February 2010 report noted that VA Fiduciary Program staff did not
always take required actions within established time frames or
document in the case files that the required actions were taken. Below
are four areas where program staff did not always comply with program
policies and, per our recommendations, how VA plans to address them.
* Initial Visits to Beneficiaries and Fiduciaries. 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 timely
initial visits is important because beneficiaries cannot begin
receiving VA benefits until they are completed.
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 5] and found that 37 visits were conducted within the 45-day
time frame, and 10 were from 3 to 39 days late.[Footnote 6] For one
case, the file lacked documentation that an initial visit was made at
all.[Footnote 7] 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 to Beneficiaries and Fiduciaries. Once the
fiduciary is selected, staff conduct periodic follow-up visits to re-
evaluate 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 8] 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.
Based on a nationwide sample of VA beneficiaries that had been
assigned a fiduciary, we 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. In about 18
percent of the cases, however, VA did not conduct these required
follow-up visits on time or provided insufficient documentation to
show whether these visits were conducted at all. For the cases that
were untimely (12 percent), they were between 1 to 216 days late. In
the most extreme example among the cases with insufficient
documentation to show whether visits were conducted (6 percent), the
follow-up visit was overdue by 16 months.[Footnote 9] 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 staff to
obtain yearly financial reports and bank statements from some
fiduciaries to determine how beneficiary funds were used. When
fiduciaries do not submit their financial reports on time, staff are
required to follow-up with them and document such actions in the
beneficiaries' files. Staff can follow-up with letters, telephone
calls, or face-to-face contacts. VA policy requires staff to conduct
the first of such follow-up actions when fiduciary 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. After 120 days, the financial reports are
considered "seriously delinquent," and appropriate action is to be
taken. Failure to take aggressive action to secure timely financial
reports may result in a finding of negligence, which will require VA
to re-issue any misused benefits.
Based on our nationwide sample, we estimate that fiduciaries for about
33,000 beneficiaries were required to submit such reports between July
1, 2006, and June 9, 2009. Of these, 39 percent[Footnote 10] were
submitted between 1 and 140 days late and 47 percent[Footnote 11] were
submitted on time.[Footnote 12] In addition our 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 required time frames.[Footnote
13]
Moreover, we found additional instances of inadequate staff follow-up
on seriously delinquent financial reports during file reviews
conducted at the three regional offices we visited. We reviewed 20
such cases, and found only 1 where the initial follow-up contact was
taken within the required 65 days. For the other 19 cases, contact was
either between 3 days and 11 months late or there was not adequate
documentation to determine if or when such contact had occurred. 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. 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.
* Surety Bonds. 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. 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 14] 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 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 15]
In regard to the above findings, we recommended that VA ensure that
staff understand and carry out policies regarding file documentation,
follow-up with fiduciaries for late financial reports, and bond
acquisition. VA concurred and, in its comments to our report, outlined
several planned actions. For example, VA stated that it would roll out
additional training for staff in March of this year and expects to
hold a manager's training conference later in the year. The agency
also intends to revise the program's policy manual this year to
clarify existing guidance, establish new policies and procedures, and
enhance oversight of fiduciary activities.
In addition to compliance issues, we identified weaknesses in VA's
policy for conducting periodic on-site reviews of professional
fiduciaries who manage funds for multiple beneficiaries. Cumulatively,
such benefits can be a substantial amount of money. On-site reviews
examine the financial records across all beneficiaries that a
professional fiduciary manages to detect discrepancies among accounts,
which may not be detected by examining annual financial reports for a
single beneficiary. We found two weaknesses associated with the on-
site review policy VA developed.[Footnote 16] First, 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, the agency can not ensure that all
fiduciaries who need these reviews are identified. To generate a list
of fiduciaries meeting these criteria, each Fiduciary Program unit
uses VA's electronic case management system to link or match a
fiduciary to all of their beneficiaries. This computer match is based
on a fiduciary's name, rather than a unique identifier, such as the
fiduciary's Social Security number (SSN) or tax identification number
(TIN). However, if fiduciary names are entered inconsistently into the
system, a fiduciary for which an on-site review is required may not be
identified. While VA's case management system includes a field for
unique fiduciary identifiers, VA policy does not require this
information for all fiduciaries. 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. In response to our recommendation, VA plans to
begin requiring that all fiduciaries supply unique identifiers (such
as SSNs or TINs) to better track fiduciaries who manage multiple
beneficiaries.
We also found that VA lacks a nationwide quality review process to
ensure that on-site reviews are conducted properly and consistently.
While VA has quality review processes to ensure that actions--such as
conducting initial 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 17] Having such a process is not only a key internal
control, but it is also important for ensuring that on-site reviews
are conducted properly and consistently across all Fiduciary Program
units nationwide.[Footnote 18] Our examination of 12 files from the
three regional offices we visited revealed deficiencies in these exams
which could be detected through a national quality review process.
Four of the files we examined lacked key case selection information,
preventing managers from determining whether they were selected
according to VA policy--which states that cases associated with
beneficiary complaints or a history of late or questionable financial
reports should receive priority. 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 instances. At the
time of our review, Central Office staff tracked whether on-site
reviews were completed; but, not whether they were conducted in
accordance with policy. In response to our recommendation, VA noted
that they recently began reviewing all completed on-site reviews to
ensure that they conform to program policy and procedures.
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 Electronic Fiduciary Case Management System. The Fiduciary
Beneficiary System (FBS), VA's electronic fiduciary case management
system, does not provide sufficient data to effectively manage the
Fiduciary Program. Although it does provide some useful information on
individual case files, pending workloads, and program performance,
several system limitations hamper its ability to maintain accurate and
timely data and provide management with quality information about the
program.
FBS data fields are configured to track a fixed number of pending
activities, which can limit the accuracy and completeness of
information in the system. 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 overdue report overrides
the older due date, even if the older financial report has not yet
been submitted. To compensate for this FBS limitation, staff may track
pending actions manually outside of the system or keep personal notes
as reminder.
In addition, some managers find that FBS management reports are not
always 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 which 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, which can be time consuming. 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 19] Central Office managers acknowledged the
shortcomings of FBS and in response to our recommendations said that
they would create a work group to determine the feasibility of
enhancing FBS or developing a new case management system.
* VA's Fiduciary Program Training. 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 20] 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 21]
During our site visits we were told that limited training for managers
and staff may have contributed to various program problems, including
failures to properly monitor fiduciaries or document certain actions
in beneficiary case files.
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. Central Office
managers acknowledged that standardized training would be beneficial
and stated that they are increasing training for managers and staff
beginning this year.
* VA's Consolidation of Western Fiduciary Program Units. From January
to 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 result in 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 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 also eliminated jurisdictional
boundaries that prevented staff from conducting visits that were
geographically close, but outside of their assigned area of
responsibility, which VA expects will help balance workloads among
staff and reduce travel time. Additionally, the hub moved from a paper
based to an electronic case file system, called Virtual VA, in an
attempt to more efficiently transfer information between Salt Lake
City hub staff and the 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 that implementation began before appropriate
planning and resources were in place. For these reasons, hub managers
did not consider the hub to be fully functional until January 2009,
which was approximately 1 year after it opened. During our July 2009
visit to the hub, managers and staff mentioned such unforeseen
difficulties as: (1) inconsistent access was granted into Virtual VA;
(2) paper documents were being scanned into the wrong electronic
beneficiary case file and (3) substantial amounts of time were being
spent updating old cases that had been improperly maintained by the
previous Fiduciary Program units. For some improperly maintained
cases, staff had not taken required actions to address seriously
delinquent financial reporting and potential misuse of funds had gone
unidentified for significant periods of time. This required hub staff
to perform necessary follow-up actions, in addition to completing
incoming new work. Managers and staff noted that they have gained
valuable insight and knowledge in implementing the hub that could help
inform future office consolidations.
At the time of our review, the hub was still undergoing multiple
changes and had not yet been evaluated, thus it was unclear whether
consolidation of Fiduciary Program units has improved program
performance and oversight. In response to our recommendation that the
Central Office evaluate the performance of the hub, VA responded that
it anticipates completing such an evaluation by September 2010.
Conclusions:
One of VA's most vulnerable populations--beneficiaries who are unable
to manage their own financial affairs--rely on VA's Fiduciary Program
to ensure that their benefits are safeguarded. To better serve
beneficiaries and protect their benefits, VA has taken or plans to
take a number of actions intended to increase staff understanding and
compliance with polices as well as enhance program oversight. Revising
program policies and procedures, increasing training, evaluating
alternatives to the program's case management system, and evaluating
the Western Area Fiduciary Hub are important steps. However, in order
for these actions to successfully address the longstanding
shortcomings we and others have identified, VA management must pay
sufficient attention to this program, including exercising adequate
oversight of its staff. Absent sustained management guidance and staff
compliance, beneficiaries may remain vulnerable to the consequences of
fiduciaries misusing their funds.
Mr. Chairman, this concludes my prepared statement. I would be pleased
to answer any questions that you or other Members of the Subcommittee
may have.
[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] GAO, VA's Fiduciary Program: Improved Compliance and Policies
Could Better Safeguard Veterans' Benefits, [hyperlink,
http://www.gao.gov/products/GAO-10-241] (Washington, D.C.: Feb. 26,
2010).
[3] We analyzed a sample of 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. All percentage estimates in this
testimony have a margin of error of plus or minus 10 percentage points
or less, unless otherwise noted. For additional information on our
stratified random sample of cases, file review methodology and the
reliability of data from the Fiduciary Beneficiary System (FBS),
please see Appendix 1 in [hyperlink,
http://www.gao.gov/products/GAO-10-241].
[4] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington, D.C.: November 1999).
[5] VA implemented recommendations from the 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.
[6] 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.
[7] In the remaining 19 cases, the files included documentation that
an initial visit occurred; however, we were unable to assess the
timeliness of these visits because documents 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.
[8] 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 by letters or phone calls.
[9] An additional estimated 6 percent of case files contained the
report documenting that the visit had occurred, but lacked the date
stamp necessary to assess timeliness.
[10] The margin of error was approximately plus or minus 12 percent.
[11] The margin of error was approximately plus or minus 13 percent.
[12] It was not possible to determine if or when the remaining 14
percent of the financial reports were submitted, due to poor file
documentation, including lack of date stamps. The margin of error was
approximately plus or minus 11 percent.
[13] The number of cases in our sample where financial reports were
submitted more than 65 days late was too small to project our results
to the population.
[14] The number of cases in our sample requiring a bond was too small
to project our results to the population.
[15] Central Office managers explained that fiduciaries need a bond
for each individual beneficiary unless the fiduciary is a government
or nonprofit entity, in which case a blanket bond covering all of
their beneficiaries would be acceptable.
[16] On-site reviews were required by the Veterans' Benefits
Improvement Act of 2004; VA developed its on-site review policy in
2005, and began conducting these reviews in 2006.
[17] 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.
[18] 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].
[19] VA, Fiduciary and Field Examination Pilot Implementation Team
Report, (Washington, D.C. Nov., 5, 2007).
[20] 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.
[21] The third office, discussed in the next section, was the office
which consolidated staff from the fiduciary units in 14 western
regional offices.
[End of section]
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