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Before the Subcommittee on Disability Assistance and Memorial Affairs, 
Committee on Veterans' Affairs, House of Representatives: 

United States Government Accountability Office: 

For Release on Delivery: 
Expected at 2:00 p.m. EST:
Thursday, April 22, 2010: 

VA'S Fiduciary Program: 

VA Plans to Improve Program Compliance and Policies, but Sustained 
Management Attention is Needed: 

Statement of Daniel Bertoni, Director: 
Education, Workforce, and Income Security: 


GAO Highlights: 

Highlights of GAO-10-635T, a testimony before the Subcommittee on 
Disability Assistance and Memorial Affairs, Committee on Veterans' 
Affairs, House of Representatives. 

Why GAO Did This Study: 

The Department of Veterans Affairs (VA) pays billions of dollars in 
compensation and pension benefits to disabled veterans and their 
dependents. For those beneficiaries who are unable to manage their own 
affairs, VA appoints a third party, called a fiduciary, to manage 
their VA funds. Congress, VA’s Office of Inspector General (OIG) and 
GAO have noted that VA does not always have, or adhere to, effective 
policies for selecting and monitoring fiduciaries and therefore, does 
not fully safeguard the assets of beneficiaries in the Fiduciary 

GAO was asked to discuss the Fiduciary Program and possible ways that 
it could be improved to better serve veterans, their families, and 
survivors. This statement is based on GAO’s February 2010 report (GAO-
10-241), which examined (1) VA policies and procedures for monitoring 
fiduciaries and safeguarding beneficiary assets and (2) challenges VA 
faces in improving program performance and oversight. To conduct that 
work, GAO reviewed program policies and relevant federal laws and 
regulations, analyzed a nationally representative random sample of 
case files, interviewed Central Office managers and staff, and 
conducted three site visits to Fiduciary Program offices, which 
accounted for 25 percent of program beneficiaries. 

What GAO Found: 

Inconsistent staff compliance with some Fiduciary Program policies and 
weaknesses in others hinder VA’s ability to effectively safeguard 
beneficiary assets; however, per GAO’s recommendations, VA plans to 
take steps to improve the program. GAO found that VA did not always 
take required actions to monitor fiduciaries within established time 
frames or document in the beneficiary’s case file that these actions 
were taken. Inconsistent staff compliance occurred in four areas: (1) 
initial visits to beneficiaries and fiduciaries, (2) follow-up visits 
to beneficiaries and fiduciaries, (3) follow up to obtain annual 
financial reports, and (4) oversight of surety bonds. For example, in 
about 18 percent of the cases GAO reviewed, VA was late in conducting 
required follow-up visits to monitor fiduciaries or did not provide 
sufficient documentation to show whether these visits were conducted. 
Similarly, while GAO estimated that about 39 percent of fiduciaries 
did not submit required annual financial reports on time, VA staff did 
not consistently follow-up with fiduciaries or failed to document 
actions that were taken. In addition to compliance issues, VA’s 
policies for conducting on-site reviews of professional fiduciaries 
who manage funds for multiple beneficiaries do not ensure that these 
fiduciaries are effectively identified and monitored. For example, the 
agency’s case management system uses the fiduciary’s name – which may 
be entered inconsistently – to match them to beneficiaries, rather 
than requiring a unique identifier, such as a Social Security number. 
As a result, VA cannot always identify the fiduciaries that need to be 
reviewed. Moreover, VA does not have a nationwide quality review 
process to ensure that on-site reviews are conducted properly and 
consistently. Per GAO’s February 2010 report recommendations, VA 
agreed to revise its Fiduciary program policies in an effort to 
enhance its oversight role, increase staff understanding and staff 
compliance, and better safeguard beneficiary assets. 

Two key challenges hinder VA’s ability to improve Fiduciary Program 
performance and oversight, but VA has plans to address these 
challenges. First, managers and staff said that limitations with VA’s 
electronic fiduciary case management system hinder their ability to 
capture key information. Per GAO’s recommendation, VA has established 
a work group to evaluate alternative system modifications to meet the 
program’s case management needs. Second, managers and staff indicated 
that training may not be sufficient to ensure that they have the 
expertise to properly carry out program responsibilities, as many of 
them had less than 2 years of program experience. In its response to GAO
’s recommendations, VA stated that it would begin providing additional 
standardized training for managers and staff this year. VA is also 
piloting a consolidated Fiduciary Program unit covering 14 VA regional 
offices to improve program performance and oversight. VA encountered a 
number of challenges during the pilot’s implementation and has not yet 
evaluated it, but per our recommendation, plans to do so by September 
of this year. 

View [hyperlink,] or key 
components. For more information, contact Daniel Bertoni at (202) 512-
7215 or 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to have the opportunity to comment on how the Department 
of Veterans Affairs (VA) Fiduciary Program can better protect 
vulnerable veterans and their families. Each year, the VA pays 
billions of dollars in compensation and pension benefits to disabled 
veterans and their dependents. For those who are unable to manage 
their own affairs,[Footnote 1] VA appoints a third party, called a 
fiduciary, to help manage and protect the beneficiary's funds. A 
fiduciary can be a spouse or other family member, or an entity such as 
a law firm, hospital, or nursing home. In fiscal year 2008, 
fiduciaries provided services for more than 103,000 beneficiaries, and 
managed nearly 4 percent of the $38.6 billion in compensation and 
pension benefits VA paid out in that year. Moreover, the average 
annual benefit amount for beneficiaries in this program was 
approximately $14,400 in fiscal year 2008, which is about $4,200 more 
per year than the average for all VA compensation and pension 

Over the years, both Congress and VA's Office of Inspector General 
(OIG) have expressed concern that VA's Fiduciary Program is not fully 
safeguarding beneficiaries' assets. Areas of concern included delays 
in conducting visits to select fiduciaries and insufficient monitoring 
of VA fund usage by fiduciaries on behalf of beneficiaries. You asked 
us to discuss such issues and possible ways that the Fiduciary Program 
could be improved to better serve veterans, their families, and 
survivors. My statement draws on our recent report which examined (1) 
VA policies and procedures for monitoring fiduciaries and safeguarding 
beneficiary assets and (2) challenges VA faces in improving program 
performance and oversight.[Footnote 2] 

Our work included reviewing program policies and relevant federal laws 
and regulations, analyzing a nationally representative random sample 
of 205 case files[Footnote 3] and visiting three Fiduciary Program 
units located in VA regional offices--St. Petersburg, Florida; 
Cleveland, Ohio; and Salt Lake City, Utah--where we interviewed 
managers and staff about program policies, procedures, and internal 
controls.[Footnote 4] These units accounted for 25 percent of the 
program's beneficiaries. During these visits, we also conducted file 
reviews of cases where either VA suspected that fiduciaries were 
inappropriately using beneficiary funds or fiduciaries were seriously 
late in submitting annual financial reports documenting how 
beneficiary funds were spent. We also reviewed 12 VA on-site reviews 
which are examinations of financial records of fiduciaries who oversee 
multiple beneficiaries, whom we refer to as professional fiduciaries. 
Finally, we interviewed Central Office officials and staff as well as 
Veterans' Service Organizations about the performance of the program. 
We conducted this performance audit from December 2008 to February 
2010, in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 


Many individuals receiving monthly compensation and pension benefits 
from the VA have mental impairments that can prevent them from 
managing their finances. These conditions may result from injury, 
disease, or infirmities of age. The VA Fiduciary Program matches 
beneficiaries who are unable to manage their financial affairs with a 
fiduciary, giving preference to spouses. If VA is unable to locate a 
qualified spouse who is willing to serve in this capacity, an 
individual or other entity, such as a lawyer or nursing home, will be 
appointed. VA appointed fiduciaries who are not dependents or close 
family members can collect a fee for their services (generally up to 4 
percent of a beneficiary's annual benefit amount) and can oversee 
multiple beneficiaries. Whether a fiduciary is a family member or a 
professional, the responsibilities are generally the same and may 
include receiving the beneficiary's VA benefits, paying the 
beneficiary's expenses, maintaining the beneficiary's budget, and 
generally seeing to the financial well-being--and, in some cases, the 
physical well-being--of the beneficiary. Finally, if a court has 
determined that a beneficiary is unable to handle his or her own 
affairs and appoints its own fiduciary, VA must assess the performance 
of that fiduciary to determine if he or she is suitable for managing 
VA benefits given the needs and welfare of the beneficiary. If VA 
decides to use the court-appointed fiduciary, the agency generally 
defers to certain rules set by the court, such as those pertaining to 
the fee amount that the fiduciary can charge for his or her services. 

Fiduciary Program policies and procedures are developed by Fiduciary 
Program Central Office staff under the Office of Policy and Program 
Management within the Veterans Benefits Administration (VBA). 
Individual Fiduciary Program units are generally colocated in VA 
regional offices that also oversee other VBA programs. One major 
exception to this is the Western Area Fiduciary Hub, where Fiduciary 
Program units and files from 14 western VA regional offices were 
merged into a single unit colocated in the VA regional office in Salt 
Lake City, Utah, beginning in January 2008. 

Inconsistent Compliance with Some Policies and Weaknesses in Others 
Hinder VA's Ability to Safeguard Beneficiary Assets: 

Our February 2010 report noted that VA Fiduciary Program staff did not 
always take required actions within established time frames or 
document in the case files that the required actions were taken. Below 
are four areas where program staff did not always comply with program 
policies and, per our recommendations, how VA plans to address them. 

* Initial Visits to Beneficiaries and Fiduciaries. VA policy states 
that initial visits to appoint fiduciaries are to be conducted within 
45 days of a request for a fiduciary, and VA's performance goal is to 
conduct at least 90 percent of these visits on time. Conducting timely 
initial visits is important because beneficiaries cannot begin 
receiving VA benefits until they are completed. 

We sampled and reviewed 67 case files in which initial visits were 
supposed to be conducted between July 1, 2006, and June 9, 2009, 
[Footnote 5] and found that 37 visits were conducted within the 45-day 
time frame, and 10 were from 3 to 39 days late.[Footnote 6] For one 
case, the file lacked documentation that an initial visit was made at 
all.[Footnote 7] Managers and staff in some offices we visited said 
compliance with the timeliness policy for initial visits was 
improving, but was still a concern. They attributed some compliance 
issues to a continued lack of staff and resources. 

* Follow-Up Visits to Beneficiaries and Fiduciaries. Once the 
fiduciary is selected, staff conduct periodic follow-up visits to re-
evaluate the beneficiary's condition and to determine if funds have 
been properly used and protected. The first routine follow-up visit 
generally takes place 1 year after a fiduciary is selected, and 
subsequent visits typically take place every 1 to 3 years 
thereafter.[Footnote 8] According to VA managers, it is VA's policy 
that follow-up visits to fiduciaries are to be conducted within 120 
days of the scheduled date, and the on-time goal for these visits is 
also 90 percent. Timely follow-up visits are important to determine 
the continued suitability of the fiduciary and to protect 
beneficiaries from potential misuse of their funds. 

Based on a nationwide sample of VA beneficiaries that had been 
assigned a fiduciary, we estimated that approximately 61,000 adult 
beneficiaries were supposed to have had at least one follow-up visit 
between July 1, 2006, and June 9, 2009. We estimated that 76 percent 
of these visits occurred within the 120-day time frame. In about 18 
percent of the cases, however, VA did not conduct these required 
follow-up visits on time or provided insufficient documentation to 
show whether these visits were conducted at all. For the cases that 
were untimely (12 percent), they were between 1 to 216 days late. In 
the most extreme example among the cases with insufficient 
documentation to show whether visits were conducted (6 percent), the 
follow-up visit was overdue by 16 months.[Footnote 9] Similar to 
initial visits, program managers and staff noted that compliance with 
the 120-day time frame for follow-up visits can be challenging due in 
part to a lack of staff and time. Program managers said that 
conducting visits in a timely manner may be especially challenging in 
regional offices with only one or two Fiduciary Program staff who may 
also have responsibilities outside of the Fiduciary Program. In 
addition, managers and staff noted that conducting timely visits can 
be challenging in areas where staff must drive long distances to see 
beneficiaries and fiduciaries. 

* Annual Financial Reports. VA policy generally requires staff to 
obtain yearly financial reports and bank statements from some 
fiduciaries to determine how beneficiary funds were used. When 
fiduciaries do not submit their financial reports on time, staff are 
required to follow-up with them and document such actions in the 
beneficiaries' files. Staff can follow-up with letters, telephone 
calls, or face-to-face contacts. VA policy requires staff to conduct 
the first of such follow-up actions when fiduciary financial reports 
are 35 to 65 days late and again when they are 90 days late. At that 
time, they may inform the fiduciary of the possible repercussions of a 
failure to comply, which may include legal actions, a referral to the 
OIG, or other actions. After 120 days, the financial reports are 
considered "seriously delinquent," and appropriate action is to be 
taken. Failure to take aggressive action to secure timely financial 
reports may result in a finding of negligence, which will require VA 
to re-issue any misused benefits. 

Based on our nationwide sample, we estimate that fiduciaries for about 
33,000 beneficiaries were required to submit such reports between July 
1, 2006, and June 9, 2009. Of these, 39 percent[Footnote 10] were 
submitted between 1 and 140 days late and 47 percent[Footnote 11] were 
submitted on time.[Footnote 12] In addition our sample and site visit 
file reviews showed that follow-up contact was frequently not done or 
not documented by program staff. Of the 30 case files in our sample 
where financial reports were submitted more than 65 days late, 19 case 
files either lacked documentation of any follow-up actions or showed 
that such actions were not taken within required time frames.[Footnote 

Moreover, we found additional instances of inadequate staff follow-up 
on seriously delinquent financial reports during file reviews 
conducted at the three regional offices we visited. We reviewed 20 
such cases, and found only 1 where the initial follow-up contact was 
taken within the required 65 days. For the other 19 cases, contact was 
either between 3 days and 11 months late or there was not adequate 
documentation to determine if or when such contact had occurred. In 
one case, a fiduciary's financial report was submitted more than 2 
years later than the original due date, and only after VA initiated 
action to suspend payment. In another case, a financial report due in 
June 2006 was not submitted until nearly 2 years later. The file did 
not indicate that any follow-up actions had occurred, although the 
case is now being investigated for possible misuse of funds. Staff in 
all regional offices we visited said that they sometimes did not take 
follow-up actions or failed to document actions they did take, in 
part, because they lacked the time or believed that some actions did 
not warrant documentation. 

* Surety Bonds. VA generally requires staff to obtain a surety bond 
from fiduciaries overseeing estates with a value of $20,000 or more 
that is attributable to VA funds. A bond ensures that the 
beneficiary's estate will be reimbursed in the event of fiduciary 
mismanagement or abuse of beneficiary funds. Our nationwide sample 
showed that program staff sometimes failed to obtain proof that a 
fiduciary purchased a bond, when required, or did not adequately 
document in the beneficiary case files that the bond requirement was 
waived.[Footnote 14] Of the 52 case files in our sample for which 
fiduciaries were required to purchase a bond, 8 case files lacked 
adequate documentation to indicate whether a bond was purchased or 
that the bond requirement was waived because the fiduciary met 
conditions for an exception. Some of the 8 cases involved substantial 
benefit amounts. For example, 2 cases which contained no documentation 
that bonds were purchased had VA estate values of approximately 
$82,000 and $62,000--leaving these beneficiaries and VA vulnerable to 
a substantial loss if funds were misused. Some staff in regional 
offices we visited said that they were often uncertain about what 
types of bonds are required for certain types of fiduciaries, and this 
was confirmed by our site visit file reviews. For example, in one 
case, a Fiduciary Program staff member was told by a fiduciary who was 
an attorney that an individual bond was unnecessary because the 
fiduciary had a "blanket" bond that covered all VA responsibilities. 
Although this staff member documented in the case file that he was 
unsure if this was correct, he took the fiduciary's word that an 
additional bond was not required. However, we were told by managers 
and staff that a blanket bond was most likely not acceptable in this 
case, and the staff person should have required the fiduciary to 
obtain an individual bond.[Footnote 15] 

In regard to the above findings, we recommended that VA ensure that 
staff understand and carry out policies regarding file documentation, 
follow-up with fiduciaries for late financial reports, and bond 
acquisition. VA concurred and, in its comments to our report, outlined 
several planned actions. For example, VA stated that it would roll out 
additional training for staff in March of this year and expects to 
hold a manager's training conference later in the year. The agency 
also intends to revise the program's policy manual this year to 
clarify existing guidance, establish new policies and procedures, and 
enhance oversight of fiduciary activities. 

In addition to compliance issues, we identified weaknesses in VA's 
policy for conducting periodic on-site reviews of professional 
fiduciaries who manage funds for multiple beneficiaries. Cumulatively, 
such benefits can be a substantial amount of money. On-site reviews 
examine the financial records across all beneficiaries that a 
professional fiduciary manages to detect discrepancies among accounts, 
which may not be detected by examining annual financial reports for a 
single beneficiary. We found two weaknesses associated with the on-
site review policy VA developed.[Footnote 16] First, while VA is 
required to conduct periodic on-site reviews for professional 
fiduciaries who oversee more than 20 beneficiaries with combined 
benefits totaling $50,000 or more, the agency can not ensure that all 
fiduciaries who need these reviews are identified. To generate a list 
of fiduciaries meeting these criteria, each Fiduciary Program unit 
uses VA's electronic case management system to link or match a 
fiduciary to all of their beneficiaries. This computer match is based 
on a fiduciary's name, rather than a unique identifier, such as the 
fiduciary's Social Security number (SSN) or tax identification number 
(TIN). However, if fiduciary names are entered inconsistently into the 
system, a fiduciary for which an on-site review is required may not be 
identified. While VA's case management system includes a field for 
unique fiduciary identifiers, VA policy does not require this 
information for all fiduciaries. Central Office staff acknowledged 
that requiring a unique identifier would decrease VA's chances of 
making mistakes in identifying fiduciaries with multiple beneficiaries 
who require reviews. In response to our recommendation, VA plans to 
begin requiring that all fiduciaries supply unique identifiers (such 
as SSNs or TINs) to better track fiduciaries who manage multiple 

We also found that VA lacks a nationwide quality review process to 
ensure that on-site reviews are conducted properly and consistently. 
While VA has quality review processes to ensure that actions--such as 
conducting initial visits and obtaining financial reports and bonds-- 
are carried out in accordance with VA policies, Central Office 
managers acknowledged that VA lacks a similar process for on-site 
reviews.[Footnote 17] Having such a process is not only a key internal 
control, but it is also important for ensuring that on-site reviews 
are conducted properly and consistently across all Fiduciary Program 
units nationwide.[Footnote 18] Our examination of 12 files from the 
three regional offices we visited revealed deficiencies in these exams 
which could be detected through a national quality review process. 
Four of the files we examined lacked key case selection information, 
preventing managers from determining whether they were selected 
according to VA policy--which states that cases associated with 
beneficiary complaints or a history of late or questionable financial 
reports should receive priority. In addition, although VA policy 
requires that at least 25 percent of a fiduciary's beneficiary case 
files (or up to 25 case files) be examined during the on-site reviews, 
we found that this threshold was not met in four instances. At the 
time of our review, Central Office staff tracked whether on-site 
reviews were completed; but, not whether they were conducted in 
accordance with policy. In response to our recommendation, VA noted 
that they recently began reviewing all completed on-site reviews to 
ensure that they conform to program policy and procedures. 

System Limitations and Insufficient Training Hamper Program 
Performance and Oversight; However, VA Is Taking Steps That May Help: 

We identified two key challenges that limit VA's ability to improve 
Fiduciary Program performance and oversight. First, VA's electronic 
fiduciary case management system does not provide sufficient 
information to managers and staff about their cases, and it is 
cumbersome to use. Second, some managers and staff may not have 
received sufficient training to ensure that they have the necessary 
expertise to effectively monitor individual fiduciaries and oversee 
the program. VA is taking steps to build expertise about the case 
management system and the program itself by developing additional 
standardized training and piloting a consolidated Fiduciary Program 
unit covering 14 western VA regional offices. 

* VA's Electronic Fiduciary Case Management System. The Fiduciary 
Beneficiary System (FBS), VA's electronic fiduciary case management 
system, does not provide sufficient data to effectively manage the 
Fiduciary Program. Although it does provide some useful information on 
individual case files, pending workloads, and program performance, 
several system limitations hamper its ability to maintain accurate and 
timely data and provide management with quality information about the 

FBS data fields are configured to track a fixed number of pending 
activities, which can limit the accuracy and completeness of 
information in the system. Staff and managers in the three regional 
offices we visited said they often need to track more upcoming actions 
than FBS permits. For example, staff noted that FBS accepts only one 
due date for upcoming financial reports, even though multiple 
financial reports may be due simultaneously if one or more is late. In 
such cases, the due date for the most recent overdue report overrides 
the older due date, even if the older financial report has not yet 
been submitted. To compensate for this FBS limitation, staff may track 
pending actions manually outside of the system or keep personal notes 
as reminder. 

In addition, some managers find that FBS management reports are not 
always easy to generate or helpful in overseeing the program. For 
example, one manager told us that monitoring staff performance was 
difficult because the system does not generate a single report that 
shows all upcoming work that staff need to conduct over a certain 
period of time. Instead, several reports need to be generated and 
cross-referenced, which can be cumbersome. In addition, FBS does not 
store historical information beyond 30 days which would allow managers 
to examine past issues with fiduciaries or staff performance. For 
example, managers in two regional offices said that in order to look 
at historical information on seriously delinquent financial reports, 
they would have to manually examine monthly paper printouts generated 
in prior months by FBS, which can be time consuming. A 2007 internal 
VA report also stated that FBS requires extensive knowledge to use, 
which inhibits effective oversight and management at all levels of the 
program.[Footnote 19] Central Office managers acknowledged the 
shortcomings of FBS and in response to our recommendations said that 
they would create a work group to determine the feasibility of 
enhancing FBS or developing a new case management system. 

* VA's Fiduciary Program Training. Managers and staff in all three 
regional offices we visited said the Fiduciary Program is complex and 
requires a great deal of specialized knowledge to effectively monitor 
fiduciaries and provide program oversight. Although the Fiduciary 
Program has a policy manual to guide staff in carrying out their 
responsibilities, managers and staff said there are many nuances and 
exceptions that take time to master, particularly since each fiduciary 
and beneficiary situation may be different. In addition to these 
program complexities, managers in all of the regional offices we 
visited said that high staff turnover has contributed to a large 
number of inexperienced managers and staff in their Fiduciary Program 
units who need training.[Footnote 20] For example, in two of the three 
regional offices we visited, only about one-third of staff (15 out of 
47) had more than 2 years of experience in the program.[Footnote 21] 
During our site visits we were told that limited training for managers 
and staff may have contributed to various program problems, including 
failures to properly monitor fiduciaries or document certain actions 
in beneficiary case files. 

VA has provided some training to ensure that Fiduciary Program 
managers and staff are proficient in carrying out their 
responsibilities, and some regional offices have developed their own 
training. VA provides a standardized computer-based training program 
for new staff who conduct visits to beneficiaries and fiduciaries and 
for those needing a refresher. Central Office managers and staff also 
said that they hold monthly teleconferences and conduct periodic 
visits to individual Fiduciary Program units to discuss selected 
topics. In addition, managers and staff in all three regional offices 
we visited said that they conduct their own weekly or biweekly 
training sessions on selected topics, such as how to determine whether 
bonds are required, and what kinds of situations constitute misuse. 
However, they noted that individual training occurs primarily on the 
job, and the effectiveness and consistency of such training depends on 
the expertise of staff conducting the training. Central Office 
managers acknowledged that standardized training would be beneficial 
and stated that they are increasing training for managers and staff 
beginning this year. 

* VA's Consolidation of Western Fiduciary Program Units. From January 
to September 2008, VA consolidated Fiduciary Program unit managers, 
staff, and files from 14 western VA regional offices into a single 
location in Salt Lake City, Utah--referred to as the Western Area 
Fiduciary Hub--to improve program performance and oversight. VA 
officials expect the hub to result in increased staff expertise, more 
consistent training, better leveraging of staff resources, and 
increased program efficiencies. For example, the hub created specific 
management positions for the Fiduciary Program and divided staff into 
teams to focus on specific actions and responsibilities in an effort 
to build program expertise, including expertise with FBS. In addition, 
the hub provides opportunities to train more staff at once, which 
could help to further build staff expertise and potentially increase 
the consistency of training. The hub also eliminated jurisdictional 
boundaries that prevented staff from conducting visits that were 
geographically close, but outside of their assigned area of 
responsibility, which VA expects will help balance workloads among 
staff and reduce travel time. Additionally, the hub moved from a paper 
based to an electronic case file system, called Virtual VA, in an 
attempt to more efficiently transfer information between Salt Lake 
City hub staff and the staff conducting visits in other offices. 

While some VA managers and staff in the hub believe consolidation can 
help improve Fiduciary Program performance, they described some 
challenges that have impeded effective implementation of the pilot 
project. The hub's managers explained that there had been multiple 
changes in management and that implementation began before appropriate 
planning and resources were in place. For these reasons, hub managers 
did not consider the hub to be fully functional until January 2009, 
which was approximately 1 year after it opened. During our July 2009 
visit to the hub, managers and staff mentioned such unforeseen 
difficulties as: (1) inconsistent access was granted into Virtual VA; 
(2) paper documents were being scanned into the wrong electronic 
beneficiary case file and (3) substantial amounts of time were being 
spent updating old cases that had been improperly maintained by the 
previous Fiduciary Program units. For some improperly maintained 
cases, staff had not taken required actions to address seriously 
delinquent financial reporting and potential misuse of funds had gone 
unidentified for significant periods of time. This required hub staff 
to perform necessary follow-up actions, in addition to completing 
incoming new work. Managers and staff noted that they have gained 
valuable insight and knowledge in implementing the hub that could help 
inform future office consolidations. 

At the time of our review, the hub was still undergoing multiple 
changes and had not yet been evaluated, thus it was unclear whether 
consolidation of Fiduciary Program units has improved program 
performance and oversight. In response to our recommendation that the 
Central Office evaluate the performance of the hub, VA responded that 
it anticipates completing such an evaluation by September 2010. 


One of VA's most vulnerable populations--beneficiaries who are unable 
to manage their own financial affairs--rely on VA's Fiduciary Program 
to ensure that their benefits are safeguarded. To better serve 
beneficiaries and protect their benefits, VA has taken or plans to 
take a number of actions intended to increase staff understanding and 
compliance with polices as well as enhance program oversight. Revising 
program policies and procedures, increasing training, evaluating 
alternatives to the program's case management system, and evaluating 
the Western Area Fiduciary Hub are important steps. However, in order 
for these actions to successfully address the longstanding 
shortcomings we and others have identified, VA management must pay 
sufficient attention to this program, including exercising adequate 
oversight of its staff. Absent sustained management guidance and staff 
compliance, beneficiaries may remain vulnerable to the consequences of 
fiduciaries misusing their funds. 

Mr. Chairman, this concludes my prepared statement. I would be pleased 
to answer any questions that you or other Members of the Subcommittee 
may have. 

[End of section] 


[1] VA regulations state that the agency may appoint fiduciaries for 
beneficiaries and beneficiaries' dependents who are mentally ill 
(incompetent) or under legal disability by reason of minority or court 
action. 38 C.F.R. § 13.55. 

[2] GAO, VA's Fiduciary Program: Improved Compliance and Policies 
Could Better Safeguard Veterans' Benefits, [hyperlink,] (Washington, D.C.: Feb. 26, 

[3] We analyzed a sample of case files from a population of about 
103,700 adult beneficiaries. This excluded beneficiaries whom VA 
monitored with alternate methods (such as those who managed their own 
funds for a probationary period and those who VA monitored through 
letters or phone calls in lieu of some personal visits), as well as 
those who had negative estate values. All percentage estimates in this 
testimony have a margin of error of plus or minus 10 percentage points 
or less, unless otherwise noted. For additional information on our 
stratified random sample of cases, file review methodology and the 
reliability of data from the Fiduciary Beneficiary System (FBS), 
please see Appendix 1 in [hyperlink,]. 

[4] GAO, Standards for Internal Control in the Federal Government, 
(Washington, D.C.: November 1999). 

[5] VA implemented recommendations from the VA OIG's June 2006 report 
on the Fiduciary Program (Report No. 05-01931-158) by July 1, 2006. 
Recommendations involved VA's efforts to conduct visits, obtain and 
review fiduciary financial reports, and obtain fiduciary bonds. As 
such, we chose this as the start date of our analysis. The concluding 
date of June 9, 2009, is the date by which we requested all files be 
sent to us. 

[6] We could not determine if VA met its nationwide performance goal 
of conducting at least 90 percent of initial visits on time because 
the number of cases in our sample for which we could assess initial 
visit timeliness between July 1, 2006 and June 9, 2009 was too small 
to project our results to the population. 

[7] In the remaining 19 cases, the files included documentation that 
an initial visit occurred; however, we were unable to assess the 
timeliness of these visits because documents lacked the date stamps 
needed to determine when the visits were requested and/or completed. 
Lack of date stamps could indicate that the photocopies of the files 
that VA provided us were of poor quality or that the documents in the 
original files were never stamped with one or both of the necessary 
dates needed to assess timeliness. 

[8] In some cases, such as when the fiduciary is a spouse or when the 
beneficiary is institutionalized, some of the subsequent visits may be 
substituted by letters or phone calls. 

[9] An additional estimated 6 percent of case files contained the 
report documenting that the visit had occurred, but lacked the date 
stamp necessary to assess timeliness. 

[10] The margin of error was approximately plus or minus 12 percent. 

[11] The margin of error was approximately plus or minus 13 percent. 

[12] It was not possible to determine if or when the remaining 14 
percent of the financial reports were submitted, due to poor file 
documentation, including lack of date stamps. The margin of error was 
approximately plus or minus 11 percent. 

[13] The number of cases in our sample where financial reports were 
submitted more than 65 days late was too small to project our results 
to the population. 

[14] The number of cases in our sample requiring a bond was too small 
to project our results to the population. 

[15] Central Office managers explained that fiduciaries need a bond 
for each individual beneficiary unless the fiduciary is a government 
or nonprofit entity, in which case a blanket bond covering all of 
their beneficiaries would be acceptable. 

[16] On-site reviews were required by the Veterans' Benefits 
Improvement Act of 2004; VA developed its on-site review policy in 
2005, and began conducting these reviews in 2006. 

[17] Both regional office managers and Central Office managers and 
staff regularly review a set number of beneficiary case files on 
either a monthly or yearly basis. 

[18] Internal controls should generally be designed to ensure that 
ongoing monitoring occurs in the course of normal operations, 
including regular management and supervisory activities, comparisons, 
reconciliations, and other actions people take in performing their 
duties. See [hyperlink,]. 

[19] VA, Fiduciary and Field Examination Pilot Implementation Team 
Report, (Washington, D.C. Nov., 5, 2007). 

[20] One common reason managers gave for high staff turnover was that 
Fiduciary Program positions tend to have low pay grade ceilings, so if 
staff want to advance beyond these ceilings, they must leave the 
Fiduciary Program. We attempted to obtain VA data on staff turnover to 
determine both the Fiduciary Program turnover rate and how it compares 
to other programs, but we were told that such data was not readily 

[21] The third office, discussed in the next section, was the office 
which consolidated staff from the fiduciary units in 14 western 
regional offices. 

[End of section] 

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