Joint Hearing of the Committee on Homeland Security and Governmental Affairs of the U.S. Senate and the Committee on Veterans’ Affairs of the U.S. House of Representatives at 1:00 p.m. CDT.
Witness Testimony of Dave McLenachen, Director of Pension and Fiduciary Service, U.S. Department of Veterans Affairs
Mr. Chairman and Members of the Subcommittee, thank you for the opportunity to present the views of the Department of Veterans Affairs (VA) on several bills of interest to Veterans and VA. VA has not had time to develop a position or estimate costs on H.R. 3730, the “Veterans Data Breach Timely Notification Act,” which would impose on VA various notification requirements in the event of a data breach, or H.R. 4481, the “Veterans Affairs Employee Accountability Act,” which would deny bonuses to VA employees who knowingly violate the Federal Acquisition Regulation or the Veterans Affairs Acquisition Regulation. VA will provide its views and costs on H.R. 3730 and H.R. 4481 in a letter for the record.
H.R. 2985, the “Veteran’s I.D. Card Act,” would establish a program under which VA would issue a Veteran identification card, produced by VA, upon request by a Veteran who was discharged from the Armed Forces under honorable conditions. The Veteran would have to present to VA a copy of his or her DD-214 form or other official document from his or her official military personnel file describing his or her service, as well as pay a fee set by VA to recoup the cost of implementing the program.
The bill makes clear that issuance of a card would not serve as proof of entitlement to any VA benefits, nor would it establish eligibility for benefits in its own right. The purpose of the card, made clear in section 2(a)(3) and (4) of the bill, would be for Veterans to use to secure goods, services, and the benefit of promotional activities offered by public and private institutions to Veterans without having to carry official discharge papers to establish proof of service.
VA understands and appreciates the purpose of this bill, to provide Veterans a practical way to show their status as Veterans to avail themselves of the many special programs or advantages civic-minded businesses and organizations confer upon Veterans. However, VA does not support this bill. The same benefit to Veterans can best be achieved by VA and the Department of Defense (DoD) working with the states, the District of Columbia, and United States territories to encourage programs for them to issue such identification cards. Those entities already have the experience and resources to issue reliable forms of identification.
VA is already working with states on these efforts. For example, VA and the Commonwealth of Virginia just launched a program to allow Veterans to get a Virginia Veteran’s ID Card from its Department of Motor Vehicles (DMV). The program will help thousands of Virginia Veterans identify themselves as Veterans and obtain retail and restaurant discounts around the state. On May 30, 2012, the program was launched in Richmond, and a DMV “2 Go” mobile office was present to process Veterans' applications for the cards.
Virginia Veterans may apply for the cards in person at any Virginia DMV customer service center, at a mobile office, or online. Each applicant presents an unexpired Virginia driver's license or DMV-issued ID card, a Veterans ID card application, his or her DoD Form DD-214, DD-256, or WD AGO document, and $10. The card, which does not expire, is mailed to the Veteran and should arrive within a week. In the meantime, the temporary Veterans ID card received at the time of the in-person application can be used as proof of Veteran status.
Other jurisdictions can use this model to establish similar programs without creating within VA a new program that may not be cost-efficient. It is not known whether enough Veterans would request the card to make necessary initial investments in information technology and training worthwhile.
Also, a VA-issued card could create confusion about eligibility. Although the bill’s drafters took care to provide that a card would not by itself establish eligibility, there could nonetheless be misunderstandings by Veterans that a Government benefit is conferred by the card. As the Subcommittee knows, entitlement to some VA benefits depends on criteria other than Veteran status, such as service connection or level of income. Confusion may also occur because the Veterans Health Administration issues identification cards for Veterans who are eligible for VA healthcare. Having two VA-issued cards would pose the potential for confusion.
Because it is difficult to predict how many Veterans would apply for such a card, VA cannot provide a reliable cost estimate for H.R. 2985. Although the bill is intended to allow VA to recoup its costs by charging Veterans for the cards, in reality VA could be assured of recouping its costs only if it knew in advance what those costs would be, and those costs cannot be reliably estimated without knowing how many Veterans would request the card.
H.R. 5948, the “Veterans Fiduciary Reform Act of 2012,” would make several changes to VA’s administration of its fiduciary program for beneficiaries who cannot manage their own VA benefits. VA appreciates the Committee’s oversight and interest in improving VA’s fiduciary program, but finds provisions of the bill problematic, as set out in detail below. Although VA does not support this bill, VA does recognize the need for better oversight of the fiduciary program. VA would welcome the opportunity to discuss its fiduciary program and the goals of and intent behind this bill with you or your staff.
Section 2(a) of the bill would add to title 38, United States Code, a new section 5511, which would govern VA adjudications of incompetence. Section 5511 would require VA, when adjudicating whether a beneficiary is considered mentally incapacitated or deemed mentally incompetent, to consider a determination made by a state court or other court of competent jurisdiction and an evaluation made by a medical professional, taking into account the role of financial management in the beneficiary’s rehabilitation. Section 5511 would permit a beneficiary whom VA has determined to be mentally incapacitated or deemed mentally incompetent to appeal VA’s determination and would require VA to consider in such an appeal court determinations and medical and lay evidence offered by the appellant. Section 5511 would also permit certain individuals to file with VA “a claim” to terminate any fiduciary relationship created by VA. Such a claim could be filed by an individual whom VA has determined to be mentally incapacitated or mentally incompetent, for whom VA has appointed a fiduciary, and whom, after such appointment, a State court or other court of competent jurisdiction or a medical professional has determined to be competent.
VA opposes the provisions requiring consideration of medical evaluations because they are unnecessary and would result in delay that could cause undue hardship for affected beneficiaries, the majority of whom are elderly or severely disabled and in immediate need of benefits. VA currently considers determinations made by State courts of competent jurisdiction and evaluations by medical professionals in determining a beneficiary’s ability to manage his or her financial affairs. However, new section 5511 would require that a medical evaluation take into account the "role of financial management in the rehabilitation of the individual." This requirement could result in VA having to conduct significant evidentiary development, which is not currently required, for determinations of ability to manage financial affairs and thereby delay fiduciary appointments.
Although the provisions concerning appeals and removal of fiduciaries generally codify current VA policy, VA opposes the removal provision to the extent that it restricts removal to beneficiaries who have a court or medical professional determination of competency. Under current VA policy, VA may also consider a beneficiary's demonstrated ability to manage his or her own VA benefits. A court or medical professional determination of competency is not required. This provision could limit a beneficiary's ability to have his or her competency restored and could unnecessarily require the expense and delay of a court proceeding or a medical examination to certify ability to manage financial affairs.
Section 2(b) of the bill would clarify the statutory definition of “fiduciary” in 38 U.S.C. § 5506. It would clarify that the term “person” in that definition includes a State or local government agency whose mission is to carry out income maintenance, social service, or healthcare-related activities; any State or local government agency with fiduciary responsibilities; or any nonprofit social service agency that VA determines regularly provides fiduciary services concurrently to five or more individuals and is not a creditor of any such individual. It would also require VA to maintain a list of State or local agencies and nonprofit social service agencies that are qualified to act as a fiduciary.
VA opposes this provision because it is unnecessary and could cause confusion regarding the applicability of other statutes. Current 38 U.S.C. § 5507 requires VA to conduct an inquiry or investigation of any "person" to be appointed as a fiduciary to determine the person’s fitness to serve as a fiduciary. Defining the term “person” to include State and local government and nonprofit social service agencies would imply that VA must conduct the inquiry or investigation required by section 5507 to determine such agency’s fitness to serve as a fiduciary. However, some provisions of section 5507, such as those requiring VA to obtain a credit report and to request information concerning criminal convictions, cannot be made applicable to agencies. VA already appoints such agencies under current law if VA determines that it is in a beneficiary's interest. However, VA does not consider such agencies "persons" for purposes of completing the inquiry and investigation requirements of section 5507.
VA also opposes the provision that would require VA to compile and maintain a list of State or local, and nonprofit agencies qualified to serve as a fiduciary for beneficiaries because it would be too burdensome and divert limited resources away from the primary program mission. There are as many as 3,009 counties, 64 parishes, 16 boroughs, and 41 independent municipalities in the United States. In addition, there are over 19,000 municipal governments and more than 30,000 incorporated cities in the Nation. The resources needed to compile and maintain such a list would exceed by far any benefit for VA beneficiaries in the fiduciary program. VA currently appoints fiduciaries according to an order of preference, which begins with the beneficiary's preference and otherwise seeks to appoint family members, friends, or other individuals who are willing to serve without a fee. Rarely does VA need to appoint a state, local, or nonprofit agency as a fiduciary for a beneficiary.
Section 2(c) of the bill would revise the statute governing VA qualification of fiduciaries. It would strike the phrase “to the extent practicable” from current statutory language requiring a face-to-face interview with a person before certifying the person as a fiduciary; would add to the list of items required to form the basis of a fiduciary appointment adequate evidence that the person to serve as fiduciary uses a secure, encrypted Internet connection when conducting activity on the Internet relating to the beneficiary’s financial information; and would strike from the statutory language requiring an inquiry into criminal convictions the limitation to offenses under Federal or State law “which resulted in imprisonment for more than one year.”
VA opposes the provision that would require a face-to-face interview with every proposed fiduciary because it does not account for the circumstances actually encountered by VA in the administration of the program, would needlessly delay some initial fiduciary appointments, and thus could harm affected beneficiaries. In some cases, a face-to-face interview of a proposed fiduciary is not practicable and should be waivable. For example, a face-to-face interview would not be practicable for natural parents of minor children or certain persons who already manage funds for multiple beneficiaries. VA also opposes the provision that would require adequate evidence that a proposed fiduciary uses a secure, encrypted Internet connection when conducting online activity related to beneficiary financial information. VA agrees that data security is important, but the purpose of the provision is unclear and the provision is unnecessary. VA-appointed fiduciaries provide services for beneficiaries through use of the banking system. If the bank offers online banking services, it is the bank that provides the secure portal for account access, not the customer. This provision would require significant oversight and staffing to implement and enforce. Further, it would require VA intrusion into the lives of spouses and other family members appointed as fiduciaries, which current VA policy attempts to limit. VA supports the provision that would require inquiry into any criminal conviction regardless of the length of any resulting imprisonment.
Section 2(c) of the bill would also remove the current statutory authority permitting VA to waive any inquiry or investigation requirement with respect to certain classes of proposed fiduciaries and would add to that list of proposed fiduciaries a person who is authorized under to durable power of attorney to act on a beneficiary’s behalf.
VA opposes the waiver provision because it would needlessly delay certain fiduciary appointments, such as appointments of legal guardians and certain parents, for whom one or more of the inquiry or investigation requirements are not needed. In the case of a beneficiary’s immediate family members seeking to provide fiduciary services, the proposal would result in greater intrusion into family matters with no real benefit for beneficiaries. VA does not oppose permitting VA to expedite the inquiry or investigation regarding any proposed fiduciary.
Section 2(c) would also require VA to conduct the required face-to-face interview with a proposed fiduciary not later than 30 days after beginning the inquiry or investigation and to conduct a background check in accordance with provisions requiring inquiry into criminal convictions and to determine whether the proposed fiduciary will served the beneficiary’s best interest, including by conducting a credit check. It would require VA to conduct the criminal history and credit history background check at no cost to the beneficiary and each time a person is proposed as a fiduciary, regardless of whether he or she is serving or has served as a fiduciary; to maintain records of any person who has previously served as a fiduciary and had the fiduciary status revoked by VA; to check those records as part of the background check; and if a VA-appointed fiduciary is convicted of any crime while serving as a fiduciary “for any person,” to notify the beneficiary not later than 14 days after learning of such conviction. It would also require each proposed fiduciary to disclose to VA the number of beneficiaries on whose behalf the fiduciary acts.
VA has not been able to discern a need for a face-to-face interview to be conducted within 30 days after beginning a fitness inquiry or investigation. Therefore, VA does not support this provision. To the extent that this provision could be interpreted to require VA to appoint a fiduciary within 30 days of receiving a request from a rating authority, VA opposes this provision. VA’s current standard is to complete all initial appointment field examinations within 45 days. The face-to-face interview is only one element of the field examination. VA must also meet with the beneficiary, check the proposed fiduciary's criminal background and credit history, and develop additional information as necessary prior to recommending appointment. Other factors that can affect the timeliness of initial appointment field examinations include travel, availability of beneficiaries and proposed fiduciaries, workload, and availability of resources. Mandating the completion of an appointment within 30 days without VA having significant additional resources would jeopardize VA’s ability to conduct full and effective examinations. VA also opposes the provision that would, without exception, require VA to report conviction of any crime by a fiduciary to a beneficiary within 14 days, regardless of whether such conviction has any effect on the fiduciary relationship or disqualifies the fiduciary, or whether disclosure of such information would harm the beneficiary.
Section 2(c) of the bill would also require VA to ensure that each fiduciary has adequate training and knowledge to effectively use an encrypted, secure internet connection when conducting activity related to the beneficiary’s financial information. It would, if VA has reason to believe that a fiduciary may be misusing all or part of a beneficiary’s benefit, require VA to thoroughly investigate the veracity of the belief and, if veracity is established, transmit to certain officials a report of the investigation. The recipient individuals would be the Attorney General and each head of a Federal department or agency that pays to a fiduciary or other person benefits under any law administered by such department of agency for the use and benefit of a minor, incompetent, or other beneficiary.
VA also opposes the provision that would require VA personnel to train fiduciaries on the use of encrypted, secure internet connections. Even if such connections were necessary to conduct the banking and bill payment business of a fiduciary (and they are not), VA does not have the resources or expertise to provide such training on a rolling basis to more than 95,000 individuals and entities who currently act as fiduciaries. VA does not oppose the investigation-of-misuse provisions because they codify current VA policy. However, upon a determination of misuse, VA provides the decision to the VA Office of Inspector General (OIG) for review and a determination regarding referral to the Department of Justice for prosecution. The Inspector General Act and Attorney General Guidelines already require the OIG to notify the Attorney General if the OIG has reason to believe that a Federal criminal law has been violated. VA opposes these provisions to the extent that they mandate dissemination of information to specific agencies regardless of VA's own internal review.
Section 2(c) would authorize VA to require a proposed fiduciary to serve as a fiduciary only with respect to VA benefits, except for the beneficiary’s family members and individuals whom the beneficiary has pre-designated to serve as the beneficiary’s fiduciary. It would require VA, in requiring the furnishing of a bond, to ensure that the bond is not paid using any beneficiary funds and to consider the care a proposed fiduciary has taken to protect the beneficiary’s interests and the proposed fiduciary’s capacity to meet the financial requirements of a bond without sustaining hardship. It also would require a VA-appointed fiduciary to operate independently of VA to determine the actions that are in the beneficiary’s interest. Finally, section 2(c) would require each VA regional office to maintain a list of the name and contact information for each fiduciary, the date of each fiduciary’s most recent VA background check and credit check, the date any bond was paid, the name and contact information of each beneficiary for whom the fiduciary acts, and the amount that the fiduciary controls for each beneficiary.
VA opposes the provision that would authorize VA to limit the appointment of a fiduciary to management of VA funds. The purpose of this provision is unclear and unnecessary because VA appoints fiduciaries only for the limited purpose of receiving VA benefits on behalf of a beneficiary. Finally, VA strongly opposes the provisions that would require fiduciaries to pay annual surety bond premiums. Requiring the fiduciary to pay the annual premium would be a disincentive for both volunteer and paid fiduciaries and would significantly impair VA’s ability to find qualified fiduciaries in some of its most difficult cases. Most fiduciaries are family members or friends who may not have the funds needed to meet the cost of the bond premium. With respect to paid fiduciaries who agree to take some of VA's most difficult cases, the cost of a bond premium might consume the entire nominal fee authorized by Congress. It is standard practice in the guardianship industry to allow for payment of surety bond premiums out of estate funds. If this provision is enacted, VA anticipates a dramatic increase in the number of fiduciaries who are also court appointed. Courts will allow the deduction of the cost of the bond and a substantial fee, generally between 5 and 15 percent of estate value, from the beneficiary’s funds. VA cannot support the inequitable treatment of, and significant harm to, beneficiaries that would likely result from the enactment of this provision.
Section 2(d) of the bill would require VA to include on its prescribed compensation and pension application forms an opportunity for the claimant to designate an individual as a fiduciary if needed, a description of what a fiduciary is and the role served by a fiduciary, and a description of the actions VA will take if the claimant does not designate a fiduciary on the application. Section 2(d) would also require VA, in appointing a fiduciary for a claimant who has not designated one, to appoint the beneficiary’s court-appointed guardian or a person authorized to act on the beneficiary’s behalf under a durable power of attorney. If VA appoints a fiduciary other than the one designated by the beneficiary, VA would have to notify the beneficiary of the reasons for not appointing the designated individual and of the beneficiary’s ability to file a claim to change the appointed fiduciary. Finally, section 2(d) would permit a beneficiary for whom VA has appointed a fiduciary to file with VA a claim to remove the appointed fiduciary and have a new one appointed. VA would have to ensure that any removal or new appointment of a fiduciary does not delay or interrupt the beneficiary’s receipt of benefits.
VA opposes the provisions that would require modification of the compensation and pension application to include fiduciary designation information. The intent appears to be that VA would allow beneficiaries to designate a proposed fiduciary upon application. This would be unnecessary and not in the best interest of VA beneficiaries. There are currently over four million VA compensation or pension beneficiaries but only approximately 125,000 beneficiaries in VA’s fiduciary program. VA has recently received feedback regarding the length and complexity of its application forms and has an aggressive plan to address those concerns. This provision of the bill would require VA to add further complexity to its application forms for a purpose for which most beneficiaries will not have an immediate need. Further, as a result of VA's increased outreach and collaboration with the Department of Defense, many individuals complete their initial benefit application early in their lifetime when they have no need for fiduciary services. Designating a fiduciary decades prior to any actual need for a fiduciary would likely render the initial designation stale and of no use to the beneficiary or VA. Also, VA's current appointment policy gives preference to the beneficiary's choice and family members' or guardian's desires as expressed at the time of the field examination, which VA believes is the best available and most relevant information for purposes of making a best-interest determination. Such determination should not be based upon stale information.
VA also opposes the provision that would give priority in appointment consideration to individuals holding a beneficiary's durable power of attorney (POA). Under current policy, VA first considers the beneficiary's preference and then considers family members, friends, and other individuals who are willing to serve, which may include individuals designated in a POA. However, based upon VA experience, it would not be good policy to give a person holding a beneficiary's POA priority over all other candidates based only on the existence of a POA. Veterans and other beneficiaries in the fiduciary program can be extremely vulnerable and easily coerced into signing documents. Additionally, a POA can be executed and revoked by the beneficiary at any time. If an individual is holding a POA, VA would have no way of determining whether the POA is still in effect or if the beneficiary had the capacity to execute a legally enforceable POA under state law at the time. Implementing policies and procedures related to the assessment of POAs would needlessly complicate and delay the fiduciary-appointment process. Also, under current law, VA has a duty to appoint, based upon a field examination and consideration of the totality of the circumstances, the individual or entity that is in the beneficiary's best interest. While such a determination might conclude that appointment of an individual who holds the beneficiary's POA is in the beneficiary's interest, VA strongly opposes giving undue preference to an individual named in a POA. Under current law, VA appoints the person or entity who will provide the least restrictive fiduciary relationship. Thus, VA first considers the beneficiary's preference, followed by a spouse, other family member, or friend or other individual who is willing to serve as fiduciary without a fee. Such appointments constitute the overwhelming majority of VA's fiduciary appointments. Nonetheless, under this provision of the bill, if a beneficiary has not designated a proposed fiduciary, VA would be required to consider first the beneficiary's court-appointed guardian or an individual who holds the beneficiary's durable POA. It would require priority consideration for more restrictive arrangements, contrary to current VA policy.
VA also opposes the provision mandating preference for the beneficiary's court-appointed guardian because it would generally be bad policy for VA's most vulnerable beneficiaries. Appointment of a court-appointed guardian often is the most restrictive method of payment and the most costly. Under current law, a VA-appointed fiduciary may collect a maximum fee of 4 percent of the VA benefits paid to the beneficiary each year. Further, under current VA policy interpreting the law, a fee may not be based upon retroactive, lump-sum, or other one-time payments or upon accumulated funds under management. However, under State law, guardians may collect fees in excess of the 4-percent Federal limit. Although the fee structure varies from State to State, basic fees range between 5 percent of all income received by the guardian to as high as 10 to 15 percent of all income and funds under management by the guardian. Additionally, courts often allow extraordinary fees in excess of the standard fee. The appointment of a guardian often results in the guardian incurring the cost of attorney fees for filing motions and annual court accountings. These fees and costs can be as much as thousands to tens of thousands of dollars per year and are paid from the beneficiary's VA benefits. Also, VA cannot conduct consistent and effective oversight of guardians, who are appointed by a court, resulting in undesirable disparate treatment for vulnerable beneficiaries depending upon the State of residence. VA believes that Congress established the fiduciary program for the express purpose of ensuring a nation-wide, Federal standard for beneficiaries who cannot manage their own benefits.
VA does not oppose the provision that would require VA to notify beneficiaries of the reasons for appointing someone other than the individual designated by the beneficiary. Under current VA policy, a beneficiary may at any time for good cause shown request the appointment of a successor fiduciary. Accordingly, VA does not oppose the provision that would allow such a request. However, VA opposes the provision to the extent that it would imply that such a request is a "claim." Characterizing a request for a successor fiduciary as a claim would likely engender costly and time-consuming litigation over whether such requests are subject to all the provisions of law currently applicable to claims, such as VA’s duty to notify the claimant of the information and evidence necessary to substantiate a claim, VA’s duty to assist in obtaining the evidence necessary to substantiate a claim, and the ability to retroactively reverse or revise a decision on a claim based on clear and unmistakable error. The appointment of a fiduciary after VA has awarded benefits to a beneficiary is not a decision on a claim for benefits.
If a fiduciary is removed and a successor fiduciary is being appointed, VA’s objective is to ensure the continuation of benefits. However, in some cases beyond VA’s control, benefits do get delayed or interrupted when a fiduciary is being replaced. VA opposes this provision to the extent that it would prohibit, without exception or qualification, any delay in the delivery of benefits upon removal of a fiduciary. Under current law, VA must conduct the inquiry or investigation prescribed by Congress in 38 U.S.C. § 5507 when it replaces a fiduciary, and sometimes VA encounters an uncooperative beneficiary or beneficiary's representative. Some delay may be unavoidable in these cases.
Section 2(e) of the bill would make several changes with respect to the commission payable for fiduciary services. It would: (1) authorize a reasonable monthly commission limited to the lesser of 3 percent of the monthly monetary benefits paid or $35; (2) prohibit a commission based on any “back pay” or retroactive benefit payment; (3) prohibit a commission if VA determines that the fiduciary misused a benefit payment; and (4) permit VA to revoke the appointment if VA determines that the fiduciary has misused any benefit payment.
VA opposes this provision. Payment of a suitable fee is necessary if there is no other person who is qualified and willing to serve as a fiduciary without compensation. In some instances, a beneficiary's interests can be served only by the appointment of a qualified paid fiduciary. As of April 30, 2012, VA has identified and appointed fiduciaries willing to serve without a fee for more than 92 percent of its beneficiaries.
Under current VA policy, fiduciaries are more than mere bill payers. VA's emerging view is that fiduciaries should remain in contact with the beneficiaries they serve and assess those beneficiaries’ needs. Without such an assessment, fiduciaries who serve VA's most vulnerable beneficiaries would be unable to fulfill their obligation to determine whether disbursement of funds is in the beneficiary's interest. As noted above, for the overwhelming majority of beneficiaries, a relative or close personal friend will perform the duties without cost to the beneficiary. However, there are difficult cases in which VA has no alternative but to turn to an individual or entity that is willing to serve Veterans and their survivors for a suitable fee. Reducing the allowable fee when VA is attempting to strengthen the role of fiduciaries in the program would create a disincentive for serving these vulnerable beneficiaries. VA strongly opposes such a reduction because it would harm beneficiaries and needlessly hinder the program, which has a clear preference for volunteer service but recognizes the need for a pool of paid fiduciaries who are willing to accept appointment for a suitable fee in some of VA's most difficult cases. However, VA supports the provisions that would codify VA's current policy regarding limitations on fees and has no objection to the remaining fee provisions because they appear to restate current law.
Current 38 U.S.C. § 6107 requires VA to reissue benefits that a fiduciary has misused as a result of VA’s negligent failure to investigate or monitor the fiduciary. The law deems certain situations as such a negligent failure, including any case in which actual negligence is shown. Section 1(f) of the bill would specify that VA’s failure to conduct, in accordance with governing law, an inquiry or investigation into an individual’s qualifications to serve as a fiduciary shall constitute such negligent failure.
VA does not oppose this provision, but the proposed amendment may insert ambiguity where it does not currently exist. The amendment would be to a statute that requires VA to reissue benefits if actual VA negligence is shown. The amendment would imply that "not acting in accordance with [38 U.S.C. §] 5507" constitutes a showing of actual negligence. Whether that implication is true in a given case would depend upon the circumstances.
Section 2(g) would mandate that VA require a fiduciary to file an annual report or accounting and that VA transmit the report or accounting to the beneficiary and any legal guardian of the beneficiary. It would also require that a report or accounting include for each beneficiary the amount of benefits that accrued during the year, the amount spent, and the amount remaining and an accounting of all sources of benefits or other income other than VA benefits that are overseen by the fiduciary.
VA opposes these provisions because they would burden fiduciaries, most of whom are volunteer family members or friends, but would not significantly improve VA's oversight of fiduciaries. Under current policy, which is based upon VA's experience in administering the program, VA generally requires fiduciaries to submit an annual accounting in cases in which: the beneficiary’s annual VA benefit amount equals or exceeds the compensation payable to a single Veteran with service-connected disability rated totally disabling; a beneficiary’s accumulated VA funds under management by the fiduciary is $10,000 or more; the fiduciary was appointed by a court; or the fiduciary receives a fee. These accountings are comprehensive and must be supported by financial documentation that identifies all transactions during the accounting period. VA audits more than 30,000 accountings each year.
VA currently pays benefits to more than 17,000 spouse fiduciaries, many of whom are also caring for severely disabled or infirm Veterans. Countless other beneficiaries receive only $90 each month and reside in the protected environment of a Medicaid-approved nursing home. Many other beneficiaries are cared for by family members who, due to the beneficiaries’ recurring needs, expend all available VA benefits each month for the beneficiaries’ care. The additional burden of documenting income and expenditure annually for the majority of our beneficiaries would be an undue hardship and would not result in any benefit to the beneficiary or the program. VA does not otherwise oppose the provisions, which restate current law or codify current VA policy regarding the information that must be included in an accounting.
Section 2(h) would require a separate annual report from VA on information concerning VA-appointed fiduciaries to be submitted to the House and Senate Committees on Veterans’ Affairs by July 1st of each year. Section 2(i) of the bill would require VA to comprehensively report, not later than one year after enactment, to the Committees on the implementation of the amendments made by this bill, including detailed information on the establishment of new policies and procedures and training provided on them.
Under current law, VA's publicly-available Annual Benefits Report includes information regarding VA's oversight of the fiduciary program, specifically with respect to its misuse-of-benefits determinations and the Government's prosecution of misuse cases. VA opposes section 2(h) because providing the information solely to Congress excludes stakeholders and does not promote program transparency. VA does not oppose the submission of any report that Congress deems necessary to track VA's progress in implementing legislation. However, requiring a report not later than one year following enactment might be unreasonably soon given that rulemaking would be required to implement certain provisions.
Enactment of H.R. 5948 would not result in any mandatory benefit costs. VA estimates that implementing this bill would result in GOE costs of $40.3 million in the first year, $200.3 million over five years, and $444.1 million over ten years. In addition, VA estimates that information technology costs would be $1.6 million in the first year, $5.3 million over five years, and $9.9 million over ten years.
This concludes my statement, Mr. Chairman. I would be happy to entertain any questions you or the other Members of the Subcommittee may have.