Good morning.  The U.S. Department of Veterans Affairs is the second largest agency in our system of government; and each year, they are authorized billions of dollars to care for our nation’s veterans.

Miscellaneous obligations are used by the VA to obligate funds in circumstances where the amount to be spent is uncertain.  They are used to reduce administrative workload and to facilitate payment for contracted goods and services when quantities and delivery dates are unknown.

In 2008, the Subcommittee on Oversight and Investigations held a hearing to assess the Department’s inadequate controls of these funds, shedding light on material weaknesses in VA financial management systems.

Today, we will examine what actions the VA has taken since 2008 to ensure that these financial material weaknesses are corrected and that improvements are being made in its internal financial control reporting.

The Secretary’s recent decision to cancel the Integrated Financial Accounting System project effectively eliminates the Financial and Logistics Integrated Technology Enterprise (FLITE) program, which was intended to integrate and standardize the agency’s financial and asset management processes across all offices of the Department by 2014 at an estimated cost of $570 million. 

Though the FLITE program was not the ultimate end all, VA had parallel efforts under way to fix the material weaknesses.  We are here today to make certain that the process is credible and ensure integrity of the process.    

In fiscal year 2009, the VA spent almost $12 billion on miscellaneous obligations, up nearly $6 billion from reported fiscal year 2007 levels.

The Government Accountability Office reviewed VA’s financial reporting system and cited that the Department has made some improvements, but they still have not fully addressed the specific control design flaws.

The GAO made four recommendations to the VA to develop and implement policies and procedures intended to improve overall control, including:  improved oversight of miscellaneous obligations by contracting officials; segregation of duties; improved supporting documentation of miscellaneous obligations; and, oversight mechanisms to ensure control policies and procedures are fully and effectively implemented.

We will hear today that the VA is making significant strides in its financial accounting employing policies and procedures to improve its oversight of miscellaneous obligations and implement GAO’s recommendations.  However, I am anxious to hear from the VA when they plan to implement these policies.

Effective oversight and review by trained, qualified officials is a key factor in identifying potential risk for fraud and waste.

It is obvious that without basic controls over these billions of dollars in miscellaneous obligations, the VA is at a significant risk of fraud, and effectively designed internal controls would help mitigate these concerns.

As we ensure there is more accountability in miscellaneous obligations, we do not want to infringe on VA’s abilities to provide quality care to veterans.

While the VA’s mission is to care for those who have sacrificed so much, we must also ensure proper use of taxpayer money, and financial accountability.