Department of Veterans Affairs
Long-standing Weaknesses in Miscellaneous Obligation and Financial Reporting Controls Gao ID: GAO-10-939T July 28, 2010In September 2008, GAO reported internal control weaknesses over the Veteran Health Administration's (VHA) use of $6.9 billion in miscellaneous obligations in fiscal year 2007. In November 2009, GAO reported on deficiencies in corrective action plans to remediate financial reporting control deficiencies. This testimony is based on these previous reports that focused on (1) VHA miscellaneous obligation control deficiencies and (2) Department of Veterans Affairs (VA) financial reporting control deficiencies and VA plans to correct them. For its review of VHA miscellaneous obligations, GAO evaluated VA's policies and procedures and documentation, interviewed cognizant agency officials, and conducted case studies at three VHA medical centers. For its review of financial reporting control deficiencies, GAO evaluated VA financial audit reports from fiscal years 2000 to 2008 and analyzed related corrective action plans.
In September 2008, we reported that VHA recorded over $6.9 billion of miscellaneous obligations for the procurement of mission-related goods and services in fiscal year 2007. We also reported that VA policies and procedures were not designed to provide adequate controls over the authorization and use of miscellaneous obligations, placing VA at significant risk of fraud, waste, and abuse. We made four recommendations with respect to (1) oversight by contracting officials, (2) segregation of duties, (3) supporting documentation for the obligation of funds, and (4) oversight mechanisms. In January 2009, VA issued new policies and procedures aimed at addressing the deficiencies identified in GAO's September 2008 report. In November of 2009, we reported that VA's independent public auditor had identified two of VA's three fiscal year 2008 material weaknesses--in financial management system functionality and IT security controls--every year since fiscal year 2000 and the third--financial management oversight--each year since fiscal year 2005. While VA had corrective action plans in place that intended to result in near-term remediation of its internal control deficiencies, many of these plans did not contain the detail needed to provide VA officials with assurance that the plans could be effectively implemented on schedule. For example, 8 of 13 plans lacked key information about milestones for steps to achieve the corrective action and how VA would validate that the steps taken had actually corrected the deficiency. While VA began to staff a new office responsible for, in part, assisting VA and the three administrations in executing and monitoring corrective action plans, we made three recommendations to improve corrective action plan development and oversight. VA concurred with our recommendations and took some steps to address them. In fiscal year 2009, VA's own internal VA inspections and financial statement audit determined that the internal control deficiencies identified in our prior reports on miscellaneous obligations and material weaknesses identified in prior financial audits continued to exist. VA conducted 39 inspections, which identified problems with how VHA facilities had implemented VA's new miscellaneous obligation policies and procedures. Similarly, VA's independent auditor reported that VA continued to have material weaknesses in financial management system functionality, IT security controls, and financial management oversight in fiscal year 2009. To the extent that the deficiencies we identified continue, it will be critical that VA have an effective "tone at the top" and mechanisms to monitor corrective actions related to deficient internal controls. In its September 2008 report, GAO made four recommendations to improve VA's internal controls over miscellaneous obligations. In its November 2009 report, GAO made three recommendations to improve VA corrective action plans to remediate financial reporting control deficiencies. VA generally concurred with these recommendations and has since reported taking actions to address the recommendations.
GAO-10-939T, Department of Veterans Affairs: Long-standing Weaknesses in Miscellaneous Obligation and Financial Reporting Controls
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Testimony:
Before the Committee on Veterans Affairs, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 10:00 a.m. EDT:
Wednesday, July 28, 2010:
Department of Veterans Affairs:
Long-standing Weaknesses in Miscellaneous Obligation and Financial
Reporting Controls:
Statement of Susan Ragland, Director:
Financial Management and Assurance:
GAO-10-939T:
GAO Highlights:
Highlights of GAO-10-939T, a testimony before the Committee on
Veterans Affairs, House of Representatives.
Why GAO Did This Study:
In September 2008, GAO reported internal control weaknesses over the
Veteran Health Administration‘s (VHA) use of $6.9 billion in
miscellaneous obligations in fiscal year 2007. In November 2009, GAO
reported on deficiencies in corrective action plans to remediate
financial reporting control deficiencies. This testimony is based on
these previous reports that focused on (1) VHA miscellaneous
obligation control deficiencies and (2) Department of Veterans Affairs
(VA) financial reporting control deficiencies and VA plans to correct
them.
For its review of VHA miscellaneous obligations, GAO evaluated VA‘s
policies and procedures and documentation, interviewed cognizant
agency officials, and conducted case studies at three VHA medical
centers. For its review of financial reporting control deficiencies,
GAO evaluated VA financial audit reports from fiscal years 2000 to
2008 and analyzed related corrective action plans.
What GAO Found:
In September 2008, we reported that VHA recorded over $6.9 billion of
miscellaneous obligations for the procurement of mission-related goods
and services in fiscal year 2007. We also reported that VA policies
and procedures were not designed to provide adequate controls over the
authorization and use of miscellaneous obligations, placing VA at
significant risk of fraud, waste, and abuse. We made four
recommendations with respect to (1) oversight by contracting
officials, (2) segregation of duties, (3) supporting documentation for
the obligation of funds, and (4) oversight mechanisms. In January
2009, VA issued new policies and procedures aimed at addressing the
deficiencies identified in GAO‘s September 2008 report.
In November of 2009, we reported that VA‘s independent public auditor
had identified two of VA‘s three fiscal year 2008 material weaknesses”
in financial management system functionality and IT security controls”
every year since fiscal year 2000 and the third”financial management
oversight”each year since fiscal year 2005. While VA had corrective
action plans in place that intended to result in near-term remediation
of its internal control deficiencies, many of these plans did not
contain the detail needed to provide VA officials with assurance that
the plans could be effectively implemented on schedule. For example, 8
of 13 plans lacked key information about milestones for steps to
achieve the corrective action and how VA would validate that the steps
taken had actually corrected the deficiency. While VA began to staff a
new office responsible for, in part, assisting VA and the three
administrations in executing and monitoring corrective action plans,
we made three recommendations to improve corrective action plan
development and oversight. VA concurred with our recommendations and
took some steps to address them.
In fiscal year 2009, VA‘s own internal VA inspections and financial
statement audit determined that the internal control deficiencies
identified in our prior reports on miscellaneous obligations and
material weaknesses identified in prior financial audits continued to
exist. VA conducted 39 inspections, which identified problems with how
VHA facilities had implemented VA‘s new miscellaneous obligation
policies and procedures. Similarly, VA‘s independent auditor reported
that VA continued to have material weaknesses in financial management
system functionality, IT security controls, and financial management
oversight in fiscal year 2009. To the extent that the deficiencies we
identified continue, it will be critical that VA have an effective ’
tone at the top“ and mechanisms to monitor corrective actions related
to deficient internal controls.
What GAO Recommends:
In its September 2008 report, GAO made four recommendations to improve
VA‘s internal controls over miscellaneous obligations. In its November
2009 report, GAO made three recommendations to improve VA corrective
action plans to remediate financial reporting control deficiencies. VA
generally concurred with these recommendations and has since reported
taking actions to address the recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-10-939T] or key
components. For more information, contact Susan Ragland at (202) 512-
9095 or raglands@gao.gov.
[End of section]
Mr. Chairman and Members of the Committee:
I am pleased to be here today to discuss the findings from our prior
work that are relevant to the subject of this hearing on VA internal
controls. Specifically, I will highlight findings from our reports on
(1) Veterans Health Administration's (VHA) use of miscellaneous
obligations,[Footnote 1] and (2) the Department of Veterans Affairs
(VA) plans to correct financial reporting control deficiencies. In
September 2008, we reported on VHA's use of miscellaneous obligations
and identified related control deficiencies.[Footnote 2] Although the
VA developed new policies and procedures in response to our
recommendations, recent internal VA inspections indicate that the
deficiencies we identified have not yet been corrected. In November
2009, we reported that VA had long-standing financial reporting
control deficiencies.[Footnote 3] These deficiencies continue to be
reported by VA's independent public auditor.
My testimony today summarizes findings of these prior two engagements.
I will also provide an update regarding the information we have
obtained from VA concerning recent internal inspections on the use of
miscellaneous obligations and pertinent sections of VA's fiscal year
2009 financial audit report.
For our prior work regarding VHA's use of miscellaneous obligations,
we obtained and analyzed a copy of VHA's Integrated Funds
Distribution, Control Point Activity, Accounting and Procurement
(IFCAP) database of miscellaneous obligations.[Footnote 4] We also
reviewed VA policies and procedures, interviewed financial management
and procurement officials, and conducted case studies at three VHA
medical centers. For our review of VA corrective actions to remediate
financial reporting control deficiencies, we analyzed financial
statement audit reports from fiscal years 2000 to 2008, interviewed VA
and Office of Inspector General (OIG) officials and VA's independent
auditor, and reviewed VA documents and independent auditor work
papers. We also analyzed VA corrective action plans to remediate
significant deficiencies underlying two of the three financial
reporting material weaknesses. Appendixes to our prior reports provide
additional details on our scope and methodologies.
We conducted the work for the report on VHA miscellaneous obligations
from November 2007 through July 2008, and the work for the report on
VHA corrective action plans to remediate financial reporting control
deficiencies from November 2008 to November 2009, in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audits to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings
and conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. We also summarize
information VA provided us on its actions to address our
recommendations in these two reports, as well as pertinent sections
from VA's independent public auditor's report on the VA fiscal year
2009 financial statements. Because of the relatively short time
between the request to testify and the hearing date, we did not have
sufficient time to validate VA's information on the status of actions
taken to address our prior recommendations.
Background:
VHA provides a broad range of primary and specialized health care, as
well as related medical and social support services through a network
of more than 1,200 medical facilities. In carrying out its
responsibilities, VHA uses "miscellaneous obligations" to obligate (or
administratively reserve) estimated funds against appropriations for
the procurement of a variety of goods and services when specific
quantities and time frames are uncertain.[Footnote 5] According to VA
policy,[Footnote 6] miscellaneous obligations can be used to record
estimated obligations to facilitate the procurement of goods and
services, such as fee-based medical and nursing services and
beneficiary travel.
In fiscal year 2007, VHA recorded over $6.9 billion of miscellaneous
obligations for the procurement of mission-related goods and services.
According to VHA fiscal year 2007 data, almost $3.8 billion (55.1
percent) of VHA's miscellaneous obligations was for fee-based medical
services and another $1.4 billion (20.4 percent) was for drugs and
medicines. The remainder funded, among other things, state homes for
the care of disabled veterans, transportation of veterans to and from
medical centers for treatment, and logistical support and facility
maintenance for VHA medical centers nationwide.
Miscellaneous Obligation Control Deficiencies:
In September 2008, we reported that VA policies and procedures were
not designed to provide adequate controls over the authorization and
use of miscellaneous obligations with respect to (1) oversight by
contracting officials, (2) segregation of duties, and (3) supporting
documentation for the obligation of funds. Collectively, these flaws
increased the risk of fraud, waste, and abuse. Our case studies at
three medical centers showed, for example, that VA did not have
procedures in place to document any review by contracting officials,
and none of the 42 obligations we reviewed had such documented
approval. Effective oversight and review by trained, qualified
officials is a key factor in helping to ensure that funds are used for
their intended purposes. Without control procedures to help ensure
that contracting personnel review and approve miscellaneous
obligations prior to their creation, VHA is at risk that procurements
do not have the necessary safeguards. In addition, our analysis of VA
data identified 145 miscellaneous obligations, amounting to over $30.2
million, that appeared to have been used in the procurement of such
items as passenger vehicles; furniture and fixtures; office equipment;
and medical, dental and scientific equipment. VA officials told us,
however, that the acquisition of such assets should be done by
contracting rather than through miscellaneous obligations.
Our 2008 report also cited inadequate segregation of duties. Federal
internal control standards provide that for an effectively designed
control system, key duties and responsibilities need to be divided or
segregated among different people to reduce the risk of error or
fraud.[Footnote 7] These controls should include separating the
responsibilities for authorizing transactions, processing and
recording them, reviewing the transactions, and accepting any acquired
assets. In 30 of the 42 obligations reviewed, one official performed
two or more of the following functions: requesting, approving, or
recording the miscellaneous obligation of funds, or certifying
delivery of goods and services and approving payment. In two instances
involving employee grievance settlements, one official performed all
four of these functions. In 2007, the VA OIG noted a similar problem
in its review of alleged mismanagement of funds at the VA Boston
Healthcare System.[Footnote 8] For example, according to OIG
officials, they obtained documents showing that a miscellaneous
obligation was used to obligate $200,000. This miscellaneous
obligation was requested, approved, and obligated by one fiscal
official. The OIG concluded that Chief of the Purchasing and
Contracting Section and four other contracting officers executed
contract modifications outside the scope of original contracts and the
Chief of the Fiscal Service allowed the obligation of $5.4 million in
expired funds. In response to the OIG recommendations, VA officials
notified contracting officers that the practice of placing money on a
miscellaneous obligation for use in a subsequent fiscal year to fund
new work was a violation of appropriations law, and that money could
no longer be "banked" on a miscellaneous obligation absent a contract
to back it up. Similarly, an independent public accountant's July 2007
report found, among other things, that the segregation of duties for
VA's miscellaneous obligation process was inadequate.[Footnote 9]
Without the proper segregation of duties, risk of errors, improper
transactions, and fraud increases.
Our 2008 case studies also identified a lack of adequate supporting
documentation at the three medical centers we visited. Specifically,
VA policies and procedures were not sufficiently detailed to require
the type of information needed such as purpose, vendor, and contract
number that would provide crucial supporting documentation for the
obligation. In 8 of 42 instances, we could not determine the nature,
timing, or the extent of the goods or services being procured from the
description in the purpose field. As a result, we could not confirm
that the miscellaneous obligations were for bona fide needs or that
the invoices reflected a legitimate use of federal funds.
Our report concluded that without basic controls in place over
billions of dollars in miscellaneous obligations, VA is at significant
risk of fraud, waste, and abuse. In the absence of effectively
designed key funds and acquisition controls, VA has limited assurance
that its use of miscellaneous obligations is kept to a minimum, for
bona fide needs, and in the correct amounts. We made four
recommendations, concerning review by contracting officials,
segregation of duties, supporting documentation, and oversight
mechanisms. These recommendations aimed at reducing the risks
associated with the use of miscellaneous obligations.
In response to our recommendations, in January of 2009, VA issued
Volume II, Chapter 6, of VA Financial Policies and Procedures--
Miscellaneous Obligations, which outlines detailed policies and
procedures aimed at addressing control deficiencies identified in our
September 2008 report. Key aspects of the policies and procedures VA
developed in response to our four recommendations included:
* Review of miscellaneous obligations by contracting officials--The
request and approval of miscellaneous obligations are to be reviewed
by contracting officials, and the contracting reviews are to be
documented.[Footnote 10]
* Segregation of duties--No one official is to perform more than one
of the following key functions: requesting the miscellaneous
obligation; approving the miscellaneous obligation; recording the
obligation of funds; or certifying the delivery of goods and services
or approving payment.
* Supporting documentation for miscellaneous obligations--New
procedures require providing the purpose, vendor, and contract number
fields before processing obligation transactions, including specific
references, the period of performance, and the vendor name and
address.[Footnote 11]
* Oversight mechanism to ensure control policies and procedures are
fully and effectively implemented--Each facility is now responsible
for performing independent quarterly oversight reviews of the
authorization and use of miscellaneous obligations. Further, the
results of the independent reviews are to be documented and
recommendations tracked by facility officials. The policies and
procedures also note that the Office of Financial Policy is to conduct
quarterly reviews of VA miscellaneous obligation usage to ensure
compliance with the new requirements.
Recent VA Inspections Identify Continuing Control Problems:
As part of its fiscal year 2009 review activities, VA's Office of
Business Oversight (OBO)[Footnote 12] Management Quality Assurance
Service (MQAS) evaluated VA compliance with new VA policies and
procedures concerning the use of miscellaneous obligations--Financial
Policies and Procedures, Volume II, Chapter 6, Miscellaneous
Obligations. According to its executive summary report, the MQAS
reviewed 476 miscellaneous obligations at 39 different medical
centers, health care systems, and regional offices in fiscal year
2009. The MQAS found 379 instances of noncompliance with the new
policies and procedures. Examples include:
* Inadequate oversight of miscellaneous obligations by contracting
officials--Many miscellaneous obligations were not submitted for the
required approval by the Head of Contracting Activity. Further, some
miscellaneous obligation were used for invalid purposes, including
employee tuition, utilities, general post, lab tests, and blood
products.
* Segregation of duties--Many miscellaneous obligations had inadequate
segregation of duties concerning the requesting, approving, and
recording of miscellaneous obligations, and the certifying receipt of
goods and services and approving payment. For example, the MQAS
identified 48 instances where two individuals performed all four of
these functions.
* Supporting documentation for miscellaneous obligations--Some
miscellaneous obligations also lacked adequate supporting
documentation concerning the vendor name, performance period, and the
contract number.
These noncompliance issues were similar to those we identified in our
September 2008 report on VHA miscellaneous obligations.
Overall, MQAS found that there was a lack of timely dissemination of
the new miscellaneous obligation policy, and issued 34 recommendations
to VA facility officials. Fiscal year 2010 facility-level
recommendations included the need to develop standard operating
procedures for implementing the policy, to provide training for new
accounting personnel, to require documentation establishing
segregation of duties, and to institute facility-level quarterly
reviews. According to the MQAS Associate Director, VHA facilities are
in the process of taking corrective actions to address the MQAS
recommendations.
VA Has Had Long-standing Material Weaknesses in Financial Reporting:
In November of 2009, we reported that VA had three long-outstanding
material weaknesses[Footnote 13] in internal control over financial
reporting identified during VA's annual financial audits.[Footnote 14]
* Financial management oversight--reported as a material weaknesses
since fiscal year 2005. This issue was also identified as a
significant deficiency[Footnote 15] in fiscal years 2000 through 2004.
This weakness stemmed from a variety of control deficiencies,
including the recording of financial data without sufficient review
and monitoring, a lack of sufficient human resources with the
appropriate skills, and a lack of capacity to effectively process a
significant volume of transactions.
* Financial management system functionality--reported since fiscal
year 2000--is linked to VA's outdated legacy financial systems
affecting VA's ability to prepare, process, and analyze financial
information that is timely, reliable, and consistent. Legacy system
deficiencies necessitated significant manual processing of financial
data and a large number of adjustments to the balances in the system.
* IT security controls--also reported since fiscal year 2000--resulted
from the lack of effective implementation and enforcement of an
agencywide information security program. Security weaknesses were
identified in the areas of access control, segregation of duties,
change control, and service continuity.
We also found that while VA had corrective action plans in place
intended to result in near-term remediation of its significant
deficiencies, many corrective action plans did not contain the detail
needed to provide VA officials with assurance that the plans could be
effectively implemented on schedule. Eight of the 13 plans we reviewed
lacked key information regarding milestones for completion of specific
action steps and/or validation activities. Consequently, VA managers
could not readily identify and address slippage in remediation
activities, exposing VA to continued risk of errors in financial
information and reporting. VA recognized the need to better oversee
and coordinate agencywide oversight activities for financial reporting
material weaknesses, and began to staff a new office responsible for,
in part, assisting VA and the three administrations and staff offices
in executing and monitoring corrective actions plans. Our report
concluded that actions to provide a rigorous framework for the design
and oversight of corrective action plans will be essential to ensuring
the timely remediation of VA's internal control weaknesses, and that
continued support from senior VA officials and administration CFOs
would be critical to ensure that key corrective actions are developed
and implemented on schedule. We made three recommendations to help
improve corrective action plan development and oversight. VA concurred
with the recommendations and said that it took some actions to address
the recommendations, including developing a manual with guidance on
corrective action planning and monitoring, creating a corrective
action plan repository, and establishing a Senior Assessment Team of
senior VA officials as the coordinating body for corrective action
planning, monitoring, reporting, and validation of deficiencies
identified during financial audits.
Recent VA Financial Reporting Indicates Continuing Material Weaknesses:
VA's independent auditor fiscal year 2009 financial audit report
included the three material weaknesses that have been reported as
deficiencies since 2000. In addition, it also included a new material
weakness concerning compensation, pension, and burial liabilities.
[Footnote 16] Furthermore, VA's reporting indicated remediation
timetables for the previously reported material weaknesses appear to
be slipping. In the fiscal year 2009 Performance and Accountability
Report, VA officials noted that in fiscal year 2009 they had closed 10
of the underlying significant deficiencies reported in fiscal year
2008, but that their timetables had slipped for remediating the IT
security controls and financial management oversight material
weaknesses to 2010 and 2012, respectively.[Footnote 17] In addition,
milestones for remediating the new material weakness--compensation,
pension, and burial liabilities--had yet to be determined.
According to the independent auditor, the causes for the fiscal year
2009 material weaknesses related to:
* outdated systems,
* challenges to implement security policies and procedures,
* a lack of sufficient personnel with the appropriate knowledge and
skills,
* a significant volume of transactions, and:
* decentralization.
These findings are consistent with those we identified in our 2009
report and are all long-standing issues at the VA. The auditor noted
that VA did not consistently monitor, identify, and detect control
deficiencies. The auditor recommended that VA assess the resource and
control challenges associated with operating in a highly decentralized
accounting function, and develop an immediate interim review and
monitoring plan to detect and resolve deficiencies.
In summary, while we have not independently validated the status of
VA's actions to address our 2008 and 2009 reports' findings concerning
VA's controls over miscellaneous obligations and financial reporting,
VA's recent inspections and financial audit report indicate that the
serious, long-standing deficiencies we identified are continuing.
Effective remediation will require well-designed plans and diligent
and focused oversight by senior VA officials. Further, the extent to
which such serious weaknesses continue raises questions concerning
whether VA management has established an appropriate "tone at the top"
necessary to ensure that these matters receive the full, sustained
attention needed to bring about their full and effective resolution.
Until VA's management fully addresses our previous recommendations, VA
will continue to be at risk of improper payments, waste, and
mismanagement.
Mr. Chairman, this concludes my prepared statement. I would be happy
to respond to any questions you or other members of the committee may
have at this time.
GAO Contact and Staff Acknowledgments:
For further information about this testimony, please contact Susan
Ragland, Director, Financial Management and Assurance at (202) 512-
9095, or raglands@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this testimony. Major contributors to this testimony included
Glenn Slocum, Assistant Director; Richard Cambosos; Debra Cottrell;
Daniel Egan; Patrick Frey; W. Stephen Lowrey; David Ramirez; Robert
Sharpe; and George Warnock.
[End of section]
Footnotes:
[1] An obligation is a definite commitment that creates a legal
liability of the government for the payment of goods and services
ordered or received, or a legal duty on the part of the United States
that could mature into a legal liability by virtue of actions on the
part of the other party beyond the control of the United States.
Payment may be made immediately or in the future.
[2] GAO, Veterans Health Administration: Improvements Needed in Design
of Controls over Miscellaneous Obligations, [hyperlink,
http://www.gao.gov/products/GAO-08-976] (Washington, D.C., Sept. 11,
2008).
[3] GAO, Department of Veterans Affairs: Improvements Needed in
Corrective Action Plans to Remediate Financial Reporting Material
Weaknesses, [hyperlink, http://www.gao.gov/products/GAO-10-65]
(Washington, D.C., Nov. 16, 2009)
[4] IFCAP is used to create miscellaneous obligations at VA and serves
as a feeder system for VA's Financial Management System, the
department's financial reporting system of record used to generate VA
financial statements and other reports.
[5] A miscellaneous obligation can be used as a funds control document
to commit (reserve) funds that will be obligated under a contract or
other legal obligation at a later date. VA Office of Finance
Directive, VA Controller Policy MP-4, part V, chapter 3, section A,
paragraph 3A.01 states in pertinent part that "it will be noted that
in many instances an estimated miscellaneous obligation (VA Form 4-
1358) is authorized for use to record estimated monthly obligations to
be incurred for activities which are to be specifically authorized
during the month by the issuance of individual orders, authorization
requests, etc. These documents will be identified by the issuing
officer with the pertinent estimated obligation and will be posted by
the accounting section to such estimated obligation."
[6] Department of Veterans Affairs, VA Financial Policies and
Procedures, Volume II, Chapter 6--Miscellaneous Obligations (January
2009).
[7] 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).
[8] Department of Veterans Affairs, Office of Inspector General, Audit
of Alleged Mismanagement of Government Funds at the VA Boston
Healthcare System, Report No 06-00931 (Washington, D.C.: May 31, 2007).
[9] Grant Thornton, Department of Veterans Affairs, OMB Circular A-
123, Appendix A--Findings and Recommendations Report (Procurement
Management) (July 18, 2007).
[10] Review is required except for those miscellaneous obligations
used for previously approved purposes listed on an Exception List
attached to the new policies and procedures.
[11] The vendor name and address must be provided, except in the case
of multiple vendors; and the contract number must be included on the
miscellaneous obligation document.
[12] The OBO, created in February 2004, consolidated VA review
organizations and functions that once existed across the department.
The OBO has a Director's Office, located in Washington, D.C., and
three supporting services located in Austin, Texas: (1) the Management
Quality Assurance Service (MQAS), (2) the Systems Quality Assurance
Service (SQAS), and (3) the Internal Controls Service (ICS). The MQAS
has oversight responsibility, under the purview of the Assistant
Secretary for Management, to ensure VA officials comply with laws,
policies, and directions from OMB, the Treasury, GAO, and the
Congress. MQAS is to perform quality assurance oversight for the
financial, capital asset management, contracting, logistics, and
inventory operations. The SQAS serves as the primary office for
managing and overseeing the independent verification and validation of
internal control areas for financial and interfacing automated
information systems within VA. The ICS is to plan and conduct
departmentwide reviews of internal controls over financial reporting
and departmentwide financial management system reviews. This includes
testing internal controls over financial reporting, which forms the
basis for VA's annual statement of assurance on the effectiveness of
internal controls.
[13] A material weakness is a significant deficiency, or a combination
of significant deficiencies, that results in more than a remote
likelihood that a material misstatement of the financial statements
will not be prevented or detected by the entity's internal control.
[14] GAO, Department of Veterans Affairs: Improvements Needed in
Corrective Action Plans to Remediate Financial Reporting Material
Weaknesses, [hyperlink, http://www.gao.gov/products/GAO-10-65]
(Washington, D.C.: Nov. 16, 2009).
[15] A significant deficiency is a control deficiency, or a
combination of control deficiencies, that adversely affects the
entity's ability to initiate, authorize, record, process, or report
financial data reliably in accordance with generally accepted
accounting principles such that there is more than a remote likelihood
that a misstatement of the entity's financial statements that is more
than inconsequential will not be prevented or detected by the entity's
internal control.
[16] Department of Veterans Affairs, Department of Veterans Affairs
Fiscal Year 2009 Performance and Accountability Report, (Washington,
D.C, Nov. 16, 2009).
[17] In its fiscal year 2008 Performance and Accountability Report, VA
reported that it planned to remediate the IT security controls and
financial management oversight material weaknesses in 2009.
[End of section]
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