Hearing Transcript on Examining the U.S. Department of Veterans Affairs’ Fiduciary Program: How Can the VA Better Protect Vulnerable Veterans and Their Families?
EXAMINING THE U.S. DEPARTMENT OF VETERANS AFFAIRS FIDUCIARY PROGRAM: HOW CAN VA BETTER PROTECT VULNERABLE VETERANS AND THEIR FAMILIES?
SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL AFFAIRS
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
APRIL 22, 2010
SERIAL No. 111-72
Printed for the use of the Committee on Veterans' Affairs
U.S. GOVERNMENT PRINTING OFFICE
For sale by the Superintendent of Documents, U.S. Government Printing Office
COMMITTEE ON VETERANS' AFFAIRS
CORRINE BROWN, Florida
STEVE BUYER, Indiana, Ranking
Malcom A. Shorter, Staff Director
SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL AFFAIRS
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Veterans' Affairs are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined.
C O N T E N T S
April 22, 2010
Examining the U.S. Department of Veterans Affairs Fiduciary Program: How Can VA Better Protect Vulnerable Veterans and Their Families?
U.S. Department of Veterans Affairs:
Belinda J. Finn, Assistant Inspector General for Audits and Evaluations, Office of Inspector General
Prepared statement of Ms. Finn
Bradley G. Mayes, Director, Compensation and Pension Service, Veterans Benefits Administration
Prepared statement of Mr. Mayes
U.S. Government Accountability Office, Daniel Bertoni, Director, Education, Workforce, and Income Security
Prepared statement of Mr. Bertoni
American Federation of Government Employees, AFL-CIO and, AFGE National Veterans Affairs Council, Katherine R. Pflanz, Field Examiner, Winston-Salem Veterans Affairs Regional Office
Prepared statement of Ms. Pflanz
American Legion, Jacob B. Gadd, Assistant Director for Program Management, Veterans Affairs and Rehabilitation Commission
Prepared statement of Mr. Gadd
Gold Star Wives of America, Inc., Vivianne Cisneros Wersel, Au.D., Chair, Government Relations Committee
Prepared statement of Dr. Wersel
Vietnam Veterans of America, Richard F. Weidman, Executive Director for Policy and Government Affairs
Prepared statement of Mr. Weidman
Wounded Warrior Project, Sarah Wade, Coordinator, Family Issues and Traumatic Brain Injury
Prepared statement of Ms. Wade
MATERIAL SUBMITTED FOR THE RECORD
Post-Hearing Follow-up Letter and Response:
Hon. John J. Hall, Chairman, Subcommittee on Disability Assistance and Memorial Affairs, Committee on Veterans' Affairs, to Hon. Eric K. Shinseki, Secretary, U.S. Department of Veterans Affairs, letter and attachment, dated May 13, 2010, and response letter, dated July 23, 2010
EXAMINING THE U.S. DEPARTMENT OF VETERANS AFFAIRS FIDUCIARY PROGRAM: HOW CAN VA BETTER PROTECT VULNERABLE VETERANS AND THEIR FAMILIES?
Thursday, April 22, 2010
U. S. House of Representatives,
Subcommittee on Disability Assistance and Memorial Affairs,
Committee on Veterans' Affairs,
The Subcommittee met, pursuant to notice, at 2:05 p.m., in Room 334, Cannon House Office Building, Hon. John J. Hall [Chairman of the Subcommittee] presiding.
Present: Representatives Hall, Donnelly, Kirkpatrick, and Lamborn.
Mr. HALL. Good afternoon and welcome to the House Committee on Veterans' Affairs, Subcommittee on Disability Assistance and Memorial Affairs, hearing on Examining the U.S. Department of Veterans Affairs (VA) Fiduciary Program, How Can VA Better Protect Vulnerable Veterans and Their Families?
Please rise for the Pledge of Allegiance.
[Pledge of Allegiance.]
Thank you. My apologies for being late. I was on the phone trying to straighten out a problem for an individual in Darrell Issa's district. A friend of mine called across country to help, and fortunately, Congressman Issa has staff who are capably taking care of the issue at this moment.
We are here today just a day after we passed another comprehensive veterans' health bill that supports veterans' caregivers and enhances the veterans' physical and mental well-being of America's veterans.
I was happy to support Chairman Filner in winning unanimous passage of this bipartisan legislation, S. 1963, the "Caregivers and Veterans Omnibus Health Services Act of 2009." This bill incorporates the recommendations of nearly 20 Members of Congress, Democrats and Republicans alike.
Provisions in S. 1963 will provide training, education and counseling for caregivers of veterans of any era. In addition, the bill allows VA to recruit and retain nurses, home health aides and specialty care providers. It will help VA to better diagnose and treat those who suffer from the invisible wounds of war, the stigma associated with them, and many other factors that make effective treatment difficult.
Specifically, the bill expands authority to fund services to treat wounded warriors suffering from post-traumatic stress disorder (PTSD), traumatic brain injury (TBI), and other combat-related disorders which lead to homelessness and in some cases, suicide and criminal acts in some unfortunate instances by veterans who are suffering from these disorders.
Our hearing today is entitled, "Examining the VA Fiduciary Program: How Can VA Better Protect Vulnerable Veterans and Their Families?" This hearing is intended to examine VA's Fiduciary Program and assess how Congress and VA can work together to better protect veterans and dependents who are in need of fiduciary services.
Since 1926 when Congress passed the World War Veterans Act, VA has been providing oversight of its benefits paid to those beneficiaries who are incapable of handling their own affairs due to injury, disease, or infirmities of age.
Today, the Fiduciary Program that VA runs with authority contained in 38 U.S.C. 5502 is administered by VA regional offices (ROs) and their respective offices of regional counsel which interface directly with VA beneficiaries and State courts on guardianship and commitment matters.
On average, impaired beneficiaries received approximately $14,400 in fiscal year 2008, about $4,200 more per year than the average for all VA compensation and pension beneficiaries. In fiscal year 2008, fiduciaries managed approximately $1.5 billion in VA benefits for more than 103,000 beneficiaries. Thus far, for fiscal year 2010, VA reports $396 million in benefits have been paid to more than 102,000 beneficiaries with a cumulative estate value of $3.1 billion.
Recently, both the VA's Office of Inspector General (OIG) and the U.S. Government Accountability Office (GAO) issued reports on VA's Fiduciary Program. These reports underscored the benefits of the program, and there are many; but it also pointed to insufficient staffing, training, and other resources that hampered effective oversight of the Fiduciary Program.
In the absence of adequate oversight and accountability, some fiduciaries have misused millions of dollars belonging to our veterans and their dependents.
Let me take a moment to highlight some of the concerns about the Fiduciary Program that were raised by the OIG and GAO reports. From October 1998 to March 2010, the VA OIG's Office of Investigations reports that it conducted 315 fiduciary fraud investigations resulting in 132 arrests and monetary recoveries of $7.2 million in restitution, fines, penalties and administrative judgments. One of these cases involved the submission of false financial reports by a fiduciary who attempted to conceal her embezzlement of nearly $1 million from 33 disabled veterans whose accounts she managed. The funds embezzled by the fiduciary were reportedly used to support her gambling habit.
It should be noted that these problems are not representative of all fiduciaries. The vast majority are doing an honorable and honest job of taking care of our veterans, who cannot handle their own affairs, many of whom are family members. However, the program is susceptible to abuse as a result of deficiencies noted by both OIG and GAO reports. Specifically, they found that first, the Veterans Benefits Administration (VBA) was not taking effective action to obtain seriously delinquent accountings. Second, VBA was not consistently verifying questionable expenses reported by fiduciaries. And, third, VBA was not adequately following up and reporting on allegations of misuse of beneficiary funds and estates.
The VA OIG pointed out that VBA has also not been diligent in replacing problematic fiduciaries. In one case, a fiduciary was seriously delinquent in submitting multiple reports ranging from 134 days to 215 days late. In addition, during that period, VBA received numerous complaints concerning that particular fiduciary's performance. However, the VBA took no action to replace this particular fiduciary.
On the other end of the spectrum, we will hear from veterans service organizations (VSOs) who complain that family members who serve as fiduciaries are neither supported financially nor through training by VBA to discharge their duties. Moreover, the VSOs suggest that while some professional fiduciaries are not subjected to enough oversight by the VBA, family member fiduciaries often feel they are viewed with suspicion and mistrust by the VBA, despite the sacrifices they make to care for relatives who are incapacitated veterans and/or beneficiaries.
For example, the Wounded Warrior Project reports that VBA required a mother who served as a fiduciary for her mentally disabled veteran son to reimburse funds spent on toilet paper for their home.
This hearing provides a forum to explore concerns across the spectrum regarding the Fiduciary Program, and I look forward to the testimony of our witnesses and insightful comments or questions from my colleagues on the Subcommittee.
I would now like to recognize Ranking Member Lamborn for his opening statement.
[The prepared statement of Chairman Hall appears in the Appendix.]
Mr. LAMBORN. Thank you, Mr. Chairman, and welcome everyone to this hearing on the Department of Veterans Affairs Fiduciary Program. The Fiduciary Program provides oversight of VA benefits to beneficiaries who are incapable of managing their funds as a result of injury or disease. When the VA or a court determines that a veteran is incompetent to handle his or her finances, the Fiduciary Program establishes an appropriate benefits payment method, appoints a fiduciary to oversee his or her finances, and provides continued oversight services. Through periodic personal visits to the beneficiary's residence, VA field examiners monitor the welfare and needs of the veteran.
My Subcommittee colleagues and I want to ensure that VA's Fiduciary Program is taking every measure and has the support necessary to fully safeguard beneficiaries' assets. During the 108th Congress, Congress passed legislation that President Bush signed into law on December 10, 2004 (P.L. 108-454). The law included provisions to make improvements to increase fiduciary accountability and strengthen protections for the beneficiary. This included more thorough investigation of fiduciaries prior to them being appointed, and required VA to reissue benefits that were misused in cases where negligence was found.
Today the Subcommittee would like to hear about the effectiveness of these provisions and whether further Congressional action is needed to ensure that our most vulnerable veterans are afforded the highest level of protection possible. I look forward to hearing from our witnesses today, and I want to thank you all for your participation.
Unfortunately, I have to leave soon for the airport, but you will all be in good hands with our Chairman.
[The prepared statement of Congressman Lamborn appears in the Appendix.]
Mr. HALL. Thank you, Mr. Lamborn.
Votes are done. The good news is we will not be interrupted by votes as we sometimes are. Unfortunately, the Ranking Member and other Subcommittee Members may need to leave early.
There are no other opening statements, so we will move right along to our first panel. I would like to welcome Belinda J. Finn, Assistant Inspector General For Audits and Evaluations, Office of Inspector General, U.S. Department of Veterans Affairs, and Daniel Bertoni, Director, Education Workforce and Income Security with the Government Accountability Office. They are accompanied by Timothy Crowe, also with the VA Office of Inspector General. Welcome and thank you for being here today and for the work you do.
Ms. Finn, and all of the witnesses, your statements, written statements are entered into the record. I would like to ask you to present a 5-minute version if you can. You are now recognized, Ms. Finn.
STATEMENTS OF BELINDA J. FINN, ASSISTANT INSPECTOR GENERAL FOR AUDITS AND EVALUATIONS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY TIMOTHY CROWE, DIRECTOR, AUDIT OPERATIONS DIVISION, ST. PETERSBURG, FL, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF VETERANS AFFAIRS; AND DANIEL BERTONI, DIRECTOR, EDUCATION, WORKFORCE, AND INCOME SECURITY, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Ms. FINN. Thank you, Chairman Hall and Members of the Subcommittee. Thank you for the opportunity to talk today about how the Department of Veterans Affairs can better protect vulnerable veterans and their families.
With me today is Mr. Tim Crowe, Director of the Audit Operations Division in Bay Pines, Florida.
VA annually provides benefits totaling more than $40 billion to over 3 million veterans and dependents. When a VA beneficiary cannot handle their own finances because of injury, disease or the infirmities of age, VBA or the courts appoint a fiduciary to receive monies and make necessary payments for the beneficiary's living expenses. VBA reports that fiduciaries managed the finances of over 100,000 beneficiaries with cumulative estate values of over $3 billion and those beneficiaries receive annual benefit payments of around $700 million.
VBA employees at regional offices are responsible for overseeing the fiduciaries to ensure that the VA-derived income and estates are used solely for the care, support, welfare, and other needs of VA beneficiaries.
From the OIG's perspective as an oversight agency, we know firsthand that a dishonest fiduciary can misuse funds and how they might hide that misuse. We recently completed a review of the Fiduciary Program's effectiveness in addressing potential misuse. We concluded that VBA lacks the elements of an effective management infrastructure to support the program. A previous audit in 2006 had identified some of the same weaknesses.
VBA's case management system, the Fiduciary Beneficiary System, or FBS, has functional and data limitations that severely limit its usefulness as a tool to support program operations. For example, FBS stores only 2 months' worth of data at any time and does not interface with other critical VBA systems. Further, the system cannot receive financial information electronically, and this means that program personnel must deal with manual reports and statements from fiduciaries and financial institutions. Late last year, however, VBA did start work to compare the current capabilities of the FBS system with their program needs.
VBA also needs a staffing and workload model to guide resource allocations across the program. For example, we found that the number of beneficiaries managed by individual VBA staff ranged from under 200 to over 1,500.
Finally, VBA needs to consistently assess the quality of operations at regional offices, provide more guidance to fiduciaries, and analyze the findings from program evaluations.
The program management issues lead to oversight lapses that can affect the safety of beneficiary funds. We found that VBA is not always taking effective action to obtain delinquent reports that detail beneficiary assets, income, and expenses. It also does not always verify the questionable expenditures that are reported by fiduciaries.
Veterans and dependents that need the services of a fiduciary depend on VA to oversee their financial well-being. We believe that the Fiduciary Program can better monitor the performance of fiduciaries with improved systems, staffing, and information on program operations. As an OIG, we will continue to work with VBA to improve the oversight of fiduciaries and ensure that vulnerable veterans and their families are protected.
Mr. Chairman, thank you for the opportunity to be here today and discuss these important issues. Mr. Crowe and I will be happy to answer any questions that you or the other Subcommittee Members may have.
[The prepared statement of Ms. Finn appears in the Appendix.]
Mr. HALL. Thank you, Ms. Finn.
Mr. BERTONI. Mr. Chairman, Members of the Subcommittee, good afternoon. I am pleased to discuss the Department of Veterans Affairs Fiduciary Program and how it can be improved to better serve veterans and their families.
As you know, VA appoints fiduciaries to protect the funds of veterans who are unable to manage their own affairs. The fiduciary may be a spouse, other family member, or a private party that provide such services for a fee. Last year, fiduciaries served more than 100,000 beneficiaries and managed over 4 percent of all benefits paid by VA.
For years GAO, VA's inspector general and others have expressed concern that the program is not fully safeguarding beneficiary assets. You asked us to discuss areas of continuing vulnerability and possible ways the program can be improved. My statement draws on a recent report assessing VA's policies for safeguarding beneficiary assets, as well as challenges to program oversight and performance.
In summary, we found that VA did not always take required actions or sufficiently document the records to protect beneficiaries. First, our analysis of case file data showed that VA did not always conduct initial visits within required time frames to assess a fiduciary's suitability to manage VA benefits.
Beyond their value as a key screening tool, timely initial visits are important because individuals often cannot begin receiving benefits until they are completed. Moreover, in 18 percent of the cases we reviewed, the VA was also late in completing required follow-up visits to monitor beneficiaries and fiduciaries, or lacked sufficient documentation for us to determine whether any action occurred at all. Similarly, while we estimated that about 39 percent of fiduciaries were late in submitting financial reports, program staff did not consistently follow-up to obtain required information or failed to document their actions. Many cases involved reports that were more than 120 days late and considered seriously delinquent under program rules. In the most egregious case, we found a fiduciary submitted financial reports almost 2 years late and only after VA initiated action to suspend payment.
We also identified weaknesses and staff confusion around VA's processes for ensuring that fiduciaries who oversee high-dollar-value estates are properly bonded. Of the cases we reviewed that required a bond, 13 percent lacked documentation that one was purchased or that the requirement was appropriately waived. Some cases have estate values approaching $100,000 leaving beneficiaries exposed to substantial loss if funds were misused. We have recommended that VA take additional steps to ensure that staff better understand and execute program policies for file documentation, initial and follow-up visits, and bond acquisition. The agency concurred with our recommendations and is moving to revise key policies and enhance its oversight role.
In addition to program compliance issues, we identified weaknesses in VA's ability to monitor professional fiduciaries who manage substantial funds for multiple beneficiaries. Although VA is required to conduct on-site financial reviews of these fiduciaries, the agency did not use a unique identifier such as a Social Security number (SSN) or taxpayer identification number to identify and match them to all beneficiaries they may serve. Thus, the VA cannot be ensured that all required reviews are being conducted and beneficiary funds appropriately spent. However, per our recommendation, the VA recently noted that it plans to require staff to begin obtaining SSN or tax ID numbers for all professional fiduciaries.
Finally, our report identified limitations in VA's electronic fiduciary case management system and the training provided to fiduciary staff as two key challenges to improving program performance going forward. Specifically, we found that restricted data fields in the current system prohibit staff from systematically recording important case management information such as when multiple financial reports are due or tracking historical information on prior performance problems with fiduciaries. In so many other areas, this system falls short in terms of helping staff monitor their very complex workloads.
In regard to training management and staff in the offices we visited, we observed that available training was insufficient to ensure that they had the necessary expertise to carry out their responsibilities.
In two of the three locations we visited, most fiduciary staff and managers had less than 2 years of programmatic experience. Managers at these locations told us that staff inexperience and limited training has likely contributed to the problems we identified, including failure to properly monitor fiduciaries or document certain actions in beneficiary case files.
We have issued recommendations in both of these areas, and VA is moving to address them.
Mr. Chairman, this concludes my statement. I am happy to answer any questions that you or other Members of the Subcommittee may have. Thank you very much.
[The prepared statement of Mr. Bertoni appears in the Appendix.]
Mr. HALL. Thank you, Mr. Bertoni.
I will have one question of both of you, and then I will ask Mrs. Kirkpatrick if she would like to go first, and then Mr. Lamborn because they may have travel plans sooner than mine. Mr. Mayes' prepared testimony on our third panel states that the GAO and OIG reports "confirm the validity of the VA's current efforts."
Do you believe that VA is complying with the OIG and GAO's recommendations?
Ms. FINN. Our current effort found problems with how the Department had implemented our recommendations from 2006. Several of our recommendations were similar to what we had issued in 2006, and the Department's efforts had not quite fixed the problem.
For the current audit, though, of course they certainly took action during our audit on issues that we brought up. They have concurred with all of our recommendations, and the actions we see seem to indicate that they are moving forward on those recommendations.
Mr. BERTONI. In the case of our report that we just issued at the end of February, and what we have is essentially concurrence with our recommendations and a litany of things that they have either planned or are underway.
In some areas, I believe they have already taken action. I believe they are now requiring that professional fiduciaries are tracked via their Social Security number or tax identification number. I think that is very important.
If you have a fiduciary who is perhaps less than honest and wants to game the system, under the old way they could list their name as John Smith. In another case, John Q. Smith and Johnny Smith. In that kind of situation they could have multiple beneficiaries and you wouldn't know it. With a unique identifier like a Social Security number or tax number, you will be able to tie them all together and follow a financial trail.
In other areas in the on-site reviews, we were concerned that there was no national quality assurance process. My understanding is that there is one now in place, or at least beginning.
In several areas it looks like they have already begun to initiate action per our recommendations. In others, what they plan to do sounds like sound practice.
Mr. HALL. Thank you. I am sure when Mr. Mayes speaks, he will elaborate.
Current efforts to move in the direction your reports have suggested is progress, and we like progress. We are not expecting perfection, but we are after progress here.
Mrs. KIRKPATRICK. Thank you, Mr. Chairman, for letting me go first. I do have to leave for a flight.
I am very concerned about this program. Before I was elected to office, I did a lot of guardianships and conservatorships in my law practice, and then served for a period as a judge pro tem just reviewing guardianship and conservatorship accountings. As a judge, we have the power of the court to crack down and apply fairly swift sanctions. But I will tell you just the mere nature that you are combining resources that aren't really having to be accounted for to me just raises a huge red flag. So I have a couple of questions for both of you.
Ms. Finn, first of all, is there training for the fiduciaries? Are there specific rules and regulations within the VA as to what the money can be spent for and are the fiduciaries trained?
Ms. FINN. Mr. Crowe will answer that.
Mr. CROWE. I would characterize the training that is given when they are appointed as being limited to a listing of their responsibilities. One of the things we brought up in our report was that a Web portal that lists responsibilities, training aids, frequently asked questions and answers, might be helpful in this regard.
Mrs. KIRKPATRICK. That concerns me. I hope to see some improvement in the training.
My personal experience in the area led me to believe that a lot of people don't understand the nature of a fiduciary relationship. They think that money is their money and they can spend it any way they wish, and there really has to be tight control on that.
Mr. Bertoni, I wanted to ask you, are there limitations on fiduciary fees? I want to tell you, there is a high-profile case in Arizona right now where a million dollars went to the fiduciaries and their attorneys leaving the ward almost bankrupt. Can you tell me, are there limitations on what the fiduciaries can charge themselves?
Mr. BERTONI. Yes. Generally the fee is 4 percent of the annual benefit amount. There are exceptions to that, as well as exceptions when it is related to the courts. The courts often mandate higher fees. I believe VA is required to comply with the court's dictates. So yes, they can go higher, and oftentimes it is due to a court-ordered fee.
Mrs. KIRKPATRICK. I noticed in some of the statements that were submitted that it appears in the Department of Veterans Affairs, someone can be appointed a fiduciary. In my county, we have public fiduciaries. That is one person with a staff, but that person can be appointed the fiduciary. Do we have something similar in the VA system?
Ms. FINN. The VA appoints the fiduciary and many, many times it is a family member, in a lot of cases, not necessarily a professional fiduciary.
Mrs. KIRKPATRICK. Are there professional fiduciaries within the VA who can serve in that capacity if the person doesn't have a family member who can serve?
Ms. FINN. They are not employed by the VA. They register with VA but are not part of VA.
Mrs. KIRKPATRICK. My last question is I am very concerned about the lack of timely reporting and accounting and lack of documentation to support that. What kind of sanctions are there in the system if someone delays in reporting?
Mr. BERTONI. In the financial area?
Mrs. KIRKPATRICK. Any kind of sanction. For instance, I would oftentimes remove a fiduciary who wasn't compliant. I always took a pretty strict approach because they are really dealing with someone else's money. So is there a process for removing them or fining them or some kind of sanction?
Mr. BERTONI. Sure. In terms of the annual financial reports, I believe it is sort of a sequential process. If someone is late in filing, in the first 35 to 65 days, the VBA is are required to reach out and remind them in various ways to submit reports. Once that gets up to be 90-plus days, then the VBA is required to reach out again and can in fact suspend benefits at that point. After 120 days, it becomes what is known "seriously delinquent" and then again the VBAy can take more rigorous actions, which could be suspending the benefits and pursuing the funds.
Mrs. KIRKPATRICK. I hope we can do some more work on this. I do appreciate you appearing here today. The Chairman and I talked about wanting to do some additional oversight. I have a concern about the sanction of removing benefits hurts the veteran who needs the care. But we can keep talking.
Mr. Chairman, thank you very much.
Mr. HALL. Thank you, Congresswoman Kirkpatrick. I hate to say it because it sounds like a joke, but we may have stumbled upon a fiduciary backlog.
Mr. LAMBORN. Thank you, Mr. Chairman. I have a couple of questions to build on the questions that Representative Kirkpatrick already asked.
As she noted, there is a State process. In Colorado, it is through the probate courts and the judge will grant someone's application normally, sometimes appoint a guardian ad litem. Does the VA just accept what the State courts, whoever has been appointed by the State courts, or is there a parallel process? Just so I understand better.
Ms. FINN. I can't give you a specific answer on that right now mainly because our report didn't focus on the appointment process. At this point in time, we focused more on the misuse of funds.
Mr. BERTONI. We have done some work in guardianship in the court systems. Generally I believe they defer to the court in terms of the arrangement that was made, the fee collection agreement, and the entity that is going to be the guardian and/or the fiduciary.
I believe their controls allow them to screen at a later point to determine whether that person still meets the bar in terms of being suitable for being a fiduciary. But I would defer the specifics to VA on that.
Mr. LAMBORN. If I am not here to ask questions of the VA panelists, I will possibly use the option of submitting questions in writing.
Along that line, and I know you may not know the answer to this, if there is a contest as happens occasionally with heirs or other interested parties, does the VA ever take sides and determine between contesting applicants? Do you ever get into disputes over who is the guardian?
Mr. BERTONI. We have not done that level of work to answer that question.
Ms. FINN. I think that is a VA question.
Mr. LAMBORN. So that is not so much GAO matter of review. Okay, then I have some other technical questions. I will defer them to the VA. Thank you for being here and for the information you provided.
I yield back.
Mr. HALL. Thank you, Mr. Lamborn.
Ms. Finn, your OIG report indicates that the program is plagued by VBA's inability to detect the misuse of incompetent beneficiary estates, insufficient staff follow-up on questionable or incomplete data in fiduciary annual accounting statements, and the failure of VBA to require documentation from fiduciaries to support expenses that are claimed. These challenges were identified in your 2006 audit, and in your 2010, which audit show that these weaknesses still exist. What steps does the OIG plan to take to ensure that VA resolves these issues to protect the beneficiaries who are unable to protect themselves?
Ms. FINN. We have a multifaceted approach right now. We are currently conducting a new audit where we are looking at the large, retroactive payments that are made to beneficiaries through a fiduciary. We are concentrating on those large payments over $10,000.
We also work with our Office of Investigations on investigations as they take on fiduciary fraud. We are doing some work in our benefit inspections as we go into each regional office and we look at the Fiduciary Program across the board, not just misuse but we look at issues related to appointments and accountings and anything that comes to our attention in those regional offices.
Finally, we will continue to follow-up on our recommendations and conduct future work in the program to look at other aspects that we may not have been able to address at this point. It is a pretty large program and we focused really on one aspect for this period of time.
Mr. HALL. Thank you. From a statistical sample of Fiduciary Program reports, the OIG anticipates that legal instruments examiners may not have adequately verified approximately $2.9 million in expenditures for 551 of 1,906 accountings. That is 29 percent of the accountings completed between April 1, 2009, and May 22, 2009. Based on this 29 percent error rate, how many of the Nation's 104,000 incompetent beneficiaries do you predict or estimate are at risk of fiduciary misuse?
Ms. FINN. Our statistical sample was somewhat constrained by the fact that the system included only 2 month's worth of data on accountings that were due and that is what we pulled our sample from. So we didn't have a whole year's worth of accountings, we just had 2 months of data. In the absence of data, we cannot do an estimate of possible impact to the program.
Mr. HALL. Thank you. That would be welcomed.
OIG contends in the 2010 report that VBA was not taking effective action to obtain the delinquent financial accountings from fiduciaries. Your report was based upon visits to a number of regional offices. What in your observation distinguishes a regional office that is properly overseeing a Fiduciary Program from one that is having problems?
Mr. CROWE. I think the lack of a strong national management oversight infrastructure of the program, which meant that there were great performance variances from regional office to regional office. The effectiveness of the program largely fell to the abilities of local staff and management. We saw great differences.
Mr. HALL. That is good for us to know since having consistency, training, and standards that everyone is expected to meet and taught to meet, are goals I am sure we would all support.
The OIG's recent report notes that from fiscal year 2005 through 2008, VBA has failed to include statistical information pertaining to misuse of funds by fiduciaries in the annual benefits report to Congress as required by title 38 U.S. Code section 5510. We know that the failure to provide this report to Congress impairs our ability to effectively provide oversight of the Fiduciary Program. How has this reporting failure in your opinion harmed veterans and other beneficiaries? And if so, what can we do to address this issue?
Mr. CROWE. I think investigating allegations of misuse go to the heart of the mission of this program. I think we were surprised to find that their policies were not being followed largely because it appears that their performance in this area was not being measured by performance standards or any other measurements. And certainly some staff, I wouldn't characterize everybody, but some staff talked about this as being a lower priority, and we considered it to be a very high priority. And some of the misuse actions that they had taken in investigating these allegations were either untimely or not documented. Therefore, if they weren't reported in their system, what was being reported to Congress would be understated by definition.
When you get allegations of misuse from a beneficiary, from a family member or from a friend, I think these are very important leads that something is going wrong and a great way for them to find out. We were trying to emphasize to the VBA the importance of making sure that this becomes a higher priority among their staff.
Mr. HALL. Mr. Bertoni, in the GAO report to the Subcommittee, you observed that the Fiduciary Program is hindered by its electronic fiduciary case management system or FBS which some VA staff have called antiquated and cumbersome. I understand that this system prevents VBA from identifying all fiduciaries in the program since it may not be able to connect a Social Security number with a name, or it may have the same person's name entered in different ways and perhaps the VA cannot tell the difference or identify the sameness of John Hall, John J. Hall, John Joseph Hall, et cetera. Are there better systems that could be used by VA that are being used by other agencies that you oversee that could replace FBS and what recommendations do you have regarding the FBS system?
Mr. BERTONI. I can't speak to specific systems, but I can speak to other Federal benefit programs, and to my knowledge, as I said, I have disability portfolios that entail the U.S. Department of Defense (DoD), VA, and the Social Security Administration (SSA), 20 other agencies, and within those 20 agencies, 200 Federal programs, and it is a rarity not to capture the full Social Security number as the control number.
In this situation, you can have a fiduciary in California who runs a afoul of the rules and regulations and pulls up stakes and ends up in Oregon and changes his name slightly and you would never know that. If you had a unique identifier, you could catch that kind of activity. That is just one example.
I don't know what the system is. I do know that they are not capturing it now. I don't think it is a matter of capability. I think we were told that they could capture the Social Security number under the existing system. But I would say that FBS is problematic.
In our case, you asked why the Legal Instruments Examiners (LIEs) were missing so many of their accountings. Well, if the system only holds the most recent account due, then the four prior that the fiduciary didn't submit drop off the radar screen. When we went out into the field, we found field examiners who had sticky notes on the wall to sort of remind them that this particular fiduciary was late in four accountings. The system wasn't doing that. These folks were working in their own paper system outside the electronic system.
So as far as the apparent lack of attention on the LIE's part, I think much of that can be attributed to, number one, the system is not helping them. Second, the ratio of wards to staff. What I heard just a moment ago in terms of how many folks that these LIEs and field examiners are managing, that is alarming. At some point folks and tasks are going to fall through the cracks. If you look at the consolidated hub, I think the ratio is 800 wards per LIE and 400 wards per field examiner. I don't know if that is appropriate, but at least they know what they want to achieve.
Mr. HALL. Thank you for that information. Regarding the site visits that GAO conducted to three of the 43 program units, St. Petersburg, Cleveland and Salt Lake City, which is the location of the western hub, I understand that the western hub is a new initiative and your examination did not yield conclusive findings, but you predicted this consolidation effort has promised to standardize training procedures and implementation. How long do you think it will take before the western hub shows those results?
Mr. BERTONI. GAO, in general, is on record for much of the consolidation of workloads and activities that are happening at VA. They are consolidating a lot of workloads across a lot of different activities, and conceptually that makes sense to us. When you can pull together that many States and that many field examiners, give them consistent training, give them an opportunity to specialize in what they do instead of being the generalist, jack of all trades, I think there are real opportunities to increase timeliness and accuracy and consistency of the workload.
Our concern is that we heard some noise out there in terms of how the hub came about, perhaps it was rolled out when there weren't enough support systems in place. How some of the cases that came in were not what I would say appropriately worked and they had to be reworked to make sure that the accountings were up to date. So I think there were some speed bumps in terms of implementation. We have asked that they do an evaluation to see lessons learned and what they could do different going forward. I believe that is underway or will be soon.
As far as when it will be up to maximum productivity, I don't know. But I am starting to see some data that they are starting to exceed national targets in terms of submissions of the reviews of the financial accountings.
Mr. HALL. Thank you. I have a couple of more questions for you and then we will give you some more in writing next week. I am going to try to get to our other panels here while we are all still awake and on solid food. But in your estimation, Ms. Finn or Mr. Bertoni, what misuse of beneficiary funds occurs more, that by fiduciaries who are related to beneficiaries or by professional, nonfamilial fiduciaries?
Ms. FINN. It is hard to say what we don't know, but I can tell you that our Office of Investigations has told me that more than half of their investigations are related to a family member. I find that very sad to speak of, especially on Bring Your Child to Work Day, but that is the case.
Mr. HALL. Well, we are talking about a lot of money and human beings here, so I guess we shouldn't be surprised that the temptation certainly exists.
Mr. BERTONI. We couldn't answer that specifically either. We haven't done that work. But I do believe that when you have this level to date of management inattention, that that invites and can open the door to misuse.
If you have structured oversight of the program, strong program integrity tools in place, I think that clamps down the temptation for abuse.
I did get a call this week from a citizen, I get these quite frequently, who was having trouble contacting VA in terms of getting a fiduciary. I tried to work through various scenarios for that person, and I kept going back to: Do you have a family member that could take this on? And that person had family members but did not feel that they could trust their funds with a family member. But that is all I know.
Mr. HALL. Just a couple of more things. We have some reports from family members who are acting as fiduciaries who have been barred from using VA funds for living expenses. One question is have you an opinion about that and also do you think that VA should consider paying familial fiduciaries?
Ms. FINN. I would hesitate to voice an opinion on that. I guess if I were in that situation, I would hope my child would do that without a salary. But I can see where the occasion could arise where it is a large undertaking to take care of someone who needs that level of attention.
Mr. BERTONI. Again, I don't have any work to bear any of this out, but I would say expenses should be associated with the care and well-being of the beneficiary. There are other programs, aide and attendants that can be sort of rolled into the equation to meet the supplementary needs of the beneficiary. But I have no opinion on whether living expenses should be part of it.
Mr. HALL. My last question is do you have an opinion as to whether we should put a cap on the number of beneficiaries that one fiduciary may handle or whose affairs they may handle?
Ms. FINN. It would seem to me to be a prudent undertaking to do because a professional fiduciary who is managing the funds of many beneficiaries has the greatest ability to move funds between fiduciaries and the most funds are at risk. Certainly that is where we really need the controls to ensure that all of the funds for the many beneficiaries that may be under a fiduciary's management are well accounted for. I don't have a specific number that I would recommend, however.
Mr. BERTONI. Is your question should we place a cap on the number of beneficiaries that professional fiduciaries can serve?
Mr. HALL. Right.
Mr. BERTONI. I would say, just as the point I made a few moments ago regarding the ratio of LIE to wards and field examiners to wards, I think at a certain point it becomes very difficult to manage the finances of folks when you have many, many beneficiaries to worry about. I don't know what that is, but I think at some point you have to look at does this person have the capacity or entity have the capacity to serve the needs of the beneficiaries.
Mr. HALL. Thank you, sir. I would assume it would possibly vary depending on the degree of disability and impairment of the veteran beneficiary, but there is probably a limit to what any one person can do competently, even assuming total honestly.
Mr. BERTONI. And it also depends on the capacity of the professional fiduciary. There are probably organizations and entities out there that have support staff in place that can sort of help with that. You really need to look at it on a case-by-case basis as to which entities might be able to handle more.
Mr. HALL. Thank you very much, Mr. Bertoni, Ms. Finn, and Mr. Crowe. Your testimony has been very helpful. We will submit some more questions to you most likely. We thank you. You are excused, and now we welcome the second panel.
Our witnesses are Richard Weidman, Executive Director for Policy and Government Affairs, Vietnam Veterans of America (VVA); Sarah Wade, Coordinator, Family Issues and Traumatic Brain Injury, Wounded Warrior Project (WWP); Jacob Gadd, Assistant Director for Program Management of the American Legion; Vivianne Cisneros Wersel, Gold Star Wives of America; and Katherine Pflanz, Field Examiner from the Winston Salem VA Regional Office and American Federal of Government Employees (AFGE) representative. Welcome. Thank you for your patience. Again, it is good to see those of you who we have seen many times before. Your written statements are in the record. You are recognized for 5 minutes each, and then we will have some questions.
We will start with Mr. Weidman.
STATEMENTS OF RICHARD F. WEIDMAN, EXECUTIVE DIRECTOR FOR POLICY AND GOVERNMENT AFFAIRS, VIETNAM VETERANS OF AMERICA; SARAH WADE, COORDINATOR, FAMILY ISSUES AND TRAUMATIC BRAIN INJURY, WOUNDED WARRIOR PROJECT; JACOB B. GADD, ASSISTANT DIRECTOR FOR PROGRAM MANAGEMENT, VETERANS AFFAIRS AND REHABILITATION COMMISSION, AMERICAN LEGION; VIVIANNE CISNEROS WERSEL, AU.D., CHAIR, GOVERNMENT RELATIONS COMMITTEE, GOLD STAR WIVES OF AMERICA, INC.; AND KATHERINE R. PFLANZ, FIELD EXAMINER, WINSTON-SALEM VETERANS AFFAIRS REGIONAL OFFICE, ON BEHALF OF AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO, AND AFGE NATIONAL VETERANS AFFAIRS COUNCIL
Mr. WEIDMAN. Mr. Chairman, thank you for the opportunity for Vietnam Veterans of America to present some thoughts about the fiduciary reports that you all are considering today, one by the OIG and one by GAO and looking at the overall problem.
One thing is clear from both anecdotal experience that we have as an organization both directly and through our local leadership around the company as well as our service representatives in that things in this program have been not good for a very long period of time, mostly because it hasn't been paid attention to.
So first and foremost, after reading both of these reports, there is not a good solid program. The axiom that is always useful to remember is that a unit does well is that which a commander checks well. And because this thing is not set up well, you can't even check well what is happening with each and every veteran.
My second concern has to do with standards for the fiduciaries as well as training, and this is something that needs to be done.
Three, we are very troubled that most of the 2006 recommendations were not followed and implemented or at least a number of them were not.
And the next observation that we have really has to do with care. Both of these reports focused on the fiduciary and the financial obligation that VA has to make sure that taxpayer dollars go to the intended recipient for his or her benefit and don't end up elsewhere. And that is an important function. But equally important is that these are folks in pretty rough shape, these 103,000 folks. They need medical care on an ongoing basis. They need lots of things on an ongoing basis, not the least of which is to make sure that they eat right.
We, frankly, are not all that concerned where it is a spouse, which is true in a number of cases. We are concerned with those who have many, or perhaps even hundreds, in their caseload because that element of making sure that people get the medical care that they need when they need it, we believe, is a key part of this program. And of course, we have the exposure of billions of dollars potentially.
It is almost akin when you don't have a system to check and follow-up to the genius idea of sending $10 billion in cash into the war zone into Iraq and then being surprised that more than 70 percent of it couldn't be accounted for. It is almost that foolhardy that you don't have checks and balances in this system that really make a great deal of sense. But it is easily done and we would urge Mr. Mayes and his folks that produce information technology (IT) that can give you that capability and start constructing a parallel system virtually immediately.
We believe that some of the progress that has been made recently on the compensation and pension (C&P) system and a change in attitude on the part of VBA leadership towards those of us who are partners with them, and major stakeholders, is something that means that we can move towards solving the C&P problems within the next year and a half or 2 years. We need the same sort of attention and the same collegiality, if you will, and the same openness of attitude toward new solutions and working with stakeholders at the State, national as well as at the local level in order to solve the problems of the fiduciaries.
With that, I will conclude my statement. I look forward to any questions you may have, sir.
[The prepared statement of Mr. Weidman appears in the Appendix.]
Mr. HALL. Thank you, Mr. Weidman. Ms. Wade?
Ms. WADE. Chairman Hall, Ranking Member Lamborn and Members of the Subcommittee, thank you for inviting Wounded Warrior Project to testify on VA's Fiduciary Program. Through our work with severely wounded veterans and their family caregivers, many of whom are fiduciaries, Wounded Warrior Project has a unique perspective on this program. As a caregiver myself of a severely wounded veteran of both Operation Enduring Freedom (OEF) and Operation Iraqi Freedom (OIF) who sustained a severe traumatic brain injury, and as someone who has worked with many caregivers of severely wounded warriors, I believe I can provide helpful insight.
WWP appreciates the critical mission and vital work performed by the VA's Fiduciary Program, but we are gravely concerned that in managing the program, VA fails to take account of the unique circumstances of family members who are devoting themselves to the full-time care of severely wounded warriors and who also serve as their fiduciaries. Many have given up careers and depleted their own savings to care for these wounded warriors. Family members who have made these kinds of sacrifices hardly pose a risk of misuing the veterans' benefits.
WWP recognizes the need for the VA Fiduciary Program and for appropriate oversight, and we appreciate the Government Accountability Office's helpful report on the need to strengthen the program and improve compliance with fiduciary policies. Importantly, those policies recognize that all fiduciary cases do not require the same degree of attention and supervision and that field examiners should consider the unique circumstances of each individual case. Unfortunately, we see wide variability in how the judgment is exercised.
The many caregivers of wounded warriors, who are my friends and with whom I have worked over the years, have put their own lives on hold to be caregivers. Typically they have chosen to give up or independently suspend their own career plans and made other financial sacrifices. I can assure you of one thing regarding those who have been appointed fiduciaries: their dedication to their wounded spouses or children did not change by virtue of taking on responsibilities of a fiduciary, yet VBA's fiduciary oversight seldom recognizes the sacrifice of those who are also caregivers. Too often these family members encounter a VBA oversight system marked by rigidity, intrusiveness and unreasonable decisionmaking.
Let me illustrate by way of a few examples. A VBA field examiner imposing a summer vacation expenditure limit for a profoundly wounded warrior, his wife and two children; a mother caregiver having to explain to a VBA examiner why she allowed her wounded warrior son to spend "too much money" on Christmas gifts; the spouse caregiver of a traumatically brain injured veteran having to get permission from their VBA field officer to purchase a couch for their home.
As Chairman Hall mentioned in opening remarks, a devoted mother caregiver was required to pay back money for toilet paper purchased for the home. A family being questioned about expenditures for gasoline that was used in transportation of the wounded veteran; several instances of mothers who are full-time caregivers being required to pay rent to the wounded veteran rather than residing in their home for "free." A field examiner denying a mother caregiver's request to place the now-wheelchair bound veteran's 8-year old high mileage truck that she uses to transport him in a rural, snowy area; a mother caregiver having to relinquish her role as a fiduciary because she had had to declare bankruptcy after leaving the workforce to care for her wounded warrior son.
Let me assure you from personal knowledge that these families do not deserve to be treated this way. Not every case is mishandled, but these aren't isolated problems. Moreover, caregivers experience stark variability in VA's oversight across the country. The impression frankly is of a program marked by arbitrary