We are here today to examine an issue of great importance.  The Department of Veterans Affairs is the second largest in the federal government.  It is authorized to spend billions of dollars of the taxpayers’ money every year to care for those who bravely stepped forward to defend our nation.

We have an obligation to ensure that the VA uses these funds appropriately and they are not lost through waste, fraud, or abuse.  We must also be sure that they use adequate internal financial controls and management.

Unfortunately, the VA does not have adequate internal controls.  Worse, is that this problem is not new – VA’s auditors yearly have found material weaknesses in VA’s financial management system functionality and in financial management oversight.

We will hear from the Government Accountability Office that the VA procured billions of dollars in goods and services by way of “Miscellaneous Obligations” that should not have been procured this way.  Improper use of Miscellaneous Obligations obscures how taxpayer money is being spent.  In addition, goods and services that should have been procured competitively can be subverted using this process.

Even when Miscellaneous Obligations are properly used, GAO’s review disclosed significant defects in VA’s internal financial controls and reporting.  For example, VA employees often failed to describe the purpose of a Miscellaneous Obligation or used uncertain descriptions like “3rd quarter invoice,” which would not adequately describe its purpose to an unbiased audit.

GAO’s review also disclosed serious failures in a bedrock principle of financial management – the segregation of duties. 

It is elementary that the person authorized to sign the checks cannot be the same person that approves the expense.  In 30 out of 42 transactions that GAO looked at, VA failed to ensure the proper segregation of duties.

Just a few years ago, VA spent 350 million dollars on a failed attempt to create a modern electronic financial system.  VA has embarked on redoing that project, but even if successful it is many years away from completion.  We cannot wait.  Even with the imperfect financial and procurement systems it has, VA must ensure compliance with basic principles of financial control.  We look forward to hearing today from VA about how it is going to do this.