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United States Government Accountability Office: 
GAO: 

Report to the Chairman, Subcommittee on Oversight and Investigations, 
Committee on Veterans' Affairs, House of Representatives: 

August 2014: 

Land-Use Agreements: 

Department of Veterans Affairs Needs to Improve Data Reliability and 
Monitoring: 

GAO-14-501: 

GAO Highlights: 

Highlights of GAO-14-501, a report to the Chairman, Subcommittee on 
Oversight and Investigations, Committee on Veterans' Affairs, House of 
Representatives. 

Why GAO Did This Study: 

VA manages one of the nation's largest federal property portfolios. To 
manage these properties, VA uses land-use authorities that allow VA to 
enter into various types of agreements for the use of its property in 
exchange for revenues or in-kind considerations. GAO was asked to 
examine VA's use of land-use agreements. 

This report addresses the extent to which VA (1) maintains reliable 
data on land-use agreements and the revenue they generate, (2) 
monitors the billing and collection processes at selected VA medical 
centers, and (3) monitors land-use agreements at selected VA medical 
centers. GAO analyzed data from VA's database on its land-use 
agreements for fiscal year 2012, reviewed agency documentation, and 
interviewed VA officials. GAO also visited three medical centers to 
review the monitoring of land-use agreements and the collection and 
billing of the associated revenues. GAO selected medical centers with 
the largest number of agreements or highest amount of estimated 
revenue. The site visit results cannot be generalized to all VA 
facilities. 

What GAO Found: 

According to the Department of Veterans Affairs' (VA) Capital Asset 
Inventory system-—the system VA utilizes to record land-use agreements 
and revenues-—VA had hundreds of land-use agreements with tens of 
millions of dollars in estimated revenues for fiscal year 2012, but 
GAO's review raised questions about the reliability of those data. For 
example, one land-use agreement was recorded 37 times, once for each 
building listed in the agreement, 13 agreements terminated before 
fiscal year 2012 had not been removed from the system, and more than 
$240,000 in revenue from one medical center had not been recorded. VA 
relies on local medical center staff to enter data timely and 
accurately, but lacks a mechanism for independently verifying the 
data. Implementing such a mechanism and working with medical centers 
to make corrections as needed would better position VA to reliably 
account for its land-use agreements and the associated revenues they 
generate. 

GAO found weaknesses in the billing and collection processes for land-
use agreements at three selected VA medical centers due primarily to 
ineffective monitoring. For example, VA incorrectly billed its sharing 
partners for 14 of 34 agreements at the three centers, which resulted 
in VA not billing $300,000 of the nearly $5.3 million owed. In 
addition, at the New York center, VA had not billed a sharing partner 
for several years' rent that totaled over $1 million. VA began 
collections after discovering the error; over $200,000 was outstanding 
as of April 2014. VA stated that it did not perform systematic reviews 
of the billing and collection practices at the three centers and had 
not established mechanisms to do so. VA officials at the New York and 
North Chicago centers stated that information is also not timely 
shared on the status of agreements with offices that perform billing 
due to lack of collaboration. Until VA addresses these issues, VA 
lacks assurance that it is collecting the revenues owed by its sharing 
partners. 

VA did not effectively monitor many of its land-use agreements at two 
of the centers. GAO found problems with unenforced agreement terms, 
expired agreements, and instances where land-use agreements did not 
exist. Examples include the following: 

* In West Los Angeles, VA waived the revenues in an agreement with a 
nonprofit organization—$250,000 in fiscal year 2012 alone—due to 
financial hardship. However, VA policy does not allow revenues to be 
waived. 

* In New York, one sharing partner—a local School of Medicine—with 
seven expired agreements remained on the property and occupied the 
premises without written authorization during fiscal year 2012. 

* The City of Los Angeles has used 12 acres of VA land for 
recreational use since the 1980s without a signed agreement or 
payments to VA. An official said that VA cannot negotiate agreements 
due to an ongoing lawsuit brought on behalf of homeless veterans about 
its land-use agreement authority. 

VA does not perform systematic reviews and has not established 
mechanisms to do so, thus hindering its ability to effectively monitor 
its agreements and use of its properties. 

What GAO Recommends: 

GAO is making six recommendations to VA including recommendations to 
improve the quality of its data, foster collaboration between key 
offices, and enhance monitoring. VA concurred with the recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-14-501]. For more 
information, contact Steve Lord at (202) 512-6722 or lords@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

VA Does Not Maintain Reliable Data on the Number of Land-use 
Agreements and Their Associated Revenues: 

Additional Monitoring at Three VA Medical Centers Could Improve the 
Billing and Revenue-Collection Process for Land-use Agreements: 

VA Did Not Effectively Monitor Many of Its Land-use Agreements at Two 
of the Three Selected Medical Centers: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Court Decision on Sharing Agreements at the West Los 
Angeles Medical Center: 

Appendix II: Comments from the Department of Veterans Affairs: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Department of Veterans Affairs Land-use Authorities by 
Maximum Duration of Terms: 

Figure: 

Figure 1: Sharing Partner Installing Irrigation System at Golf Course 
without Prior Approval: 

Abbreviations: 

CAI: Capital Asset Inventory: 

EUL: enhanced use lease: 

IG: Office of Inspector General: 

NCA: National Cemetery Administration: 

OAEM: Office of Asset Enterprise Management: 

VA: Department of Veterans Affairs: 

VBA: Veterans Benefits Administration: 

VHA: Veterans Health Administration: 

[End of section] 

United States Government Accountability Office: GAO:
441 G St. N.W. 
Washington, DC 20548: 

August 18, 2014: 

The Honorable Mike Coffman: 
Chairman: 
Subcommittee on Oversight and Investigations: 
Committee on Veterans' Affairs: 
House of Representatives: 

Dear Mr. Chairman: 

With over 7,400 buildings situated on over 35,000 acres of land, the 
Department of Veterans Affairs (VA) continues to rank amongst the 
largest federal land-holding organizations, and also operates one of 
the largest health care-related real estate portfolios in the nation. 
Since the 1990s, VA's portfolio has been shaped by changes to its 
organizational mission--transitioning from predominately hospital-
based care to outpatient-based services for veterans and their 
families. As a result of this organizational transformation and other 
factors, millions of square feet of VA's property at its medical 
facilities and centers in the past was underutilized or vacant. 
[Footnote 1] To effectively manage the challenges associated with this 
portfolio, Congress provided VA with several legal authorities that 
enable the department to enter into agreements with public or private 
entities for the use of its underutilized or vacant property in 
exchange for cash or some other benefit. For instance, VA has 
authority to enter into a particular type of lease, called an enhanced-
use lease (EUL), which allows the agency to enter into long-term 
agreements with public and private entities for the use of VA 
property, resulting in cash or in-kind consideration for VA. 
Additionally, VA has authority to enter into sharing agreements with 
entities to provide the use of VA space for the benefit of veterans or 
nonveterans in exchange for payment or services. Other authorities 
include outleases, licenses, and permits.[Footnote 2] 

In exchange for use of the space, VA receives revenue, or in-kind 
considerations, or both. The in-kind considerations can be used to 
offset the costs of maintaining its property through cost avoidance or 
savings, or to enhance the availability of the services it offers to 
veterans or its employees. Examples of the benefits derived from 
leasing its property can include providing additional care options to 
homeless veterans, making parking available for veterans seeking 
treatment, and providing child-care services for VA employees and 
others. VA agreements may also offer benefits to the community as a 
whole, such as recreational facilities and credit unions. However, 
while VA's underutilized and vacant space can be leased for the 
benefit of veterans or the public at large, VA's policy is to 
prioritize making agreements that in no way result in a diminution of 
services for veterans and also focus on providing supportive housing 
or service centers for homeless veterans.[Footnote 3] 

For all federal agencies, including VA, we have identified the 
management of real federal property as a high-risk area and have 
included it on GAO's High-Risk List since 2003.[Footnote 4] In 
February 2013, we reported that federal departments and agencies have 
given high-level attention to this issue and have made progress in 
real property management. However, the underlying challenges remain. 
Specifically, the government continues to lack consistent, accurate, 
and useful data to support decision making. Likewise, the VA Office of 
Inspector General (IG) reported in February and September 2012 that VA 
could improve its monitoring and oversight of EUL agreements.[Footnote 
5] Specifically, the IG found that the EUL agreements were not always 
effectively monitored in a way that served the best interests of 
veterans and the department. Additionally, the IG found that VA could 
not fully determine the effectiveness of leased space due to 
inaccurate reporting on benefits, and that decision making by local VA 
staff sometimes lacked transparency. These findings, while specific to 
the EUL program, raise concerns related to potential deficiencies in 
the management of other land-use agreements such as sharing 
agreements, outleases, licenses, and permits. 

You asked us to review information on what is known about VA's use of 
certain land-use authorities, the agreements executed under those 
authorities, and their outcomes. This report addresses the extent to 
which VA: (1) maintains reliable data on land-use agreements and the 
revenue they generate, (2) monitors the billing and revenue-
collections processes at selected VA medical centers, and (3) monitors 
the land-use agreements at selected VA medical centers. 

To determine the extent to which VA maintains reliable data on its 
land-use agreements and the revenue generated from those agreements, 
we analyzed land-use agreement data contained in VA's Capital Asset 
Inventory (CAI) for fiscal year 2012, the most recent data available 
at the time we initiated our review.[Footnote 6] We took steps to 
assess the reliability of the data in CAI by interviewing agency 
officials knowledgeable about the data, reviewing systems 
documentation, analyzing the data to assess accuracy and completeness, 
and taking steps to corroborate certain data from CAI to land-use 
agreements and other source documents at three selected sites: New 
York City, New York; North Chicago, Illinois; and West Los Angeles, 
California. These sites were selected because they had among the 
largest number of agreements or highest amount of estimated revenue 
maintained in CAI. Our testing of the existence and completeness of VA 
land-use agreement records determined that VA records were neither 
accurate nor complete, as discussed later in this report. As such, we 
determined that while the CAI data were reliable enough to select our 
three sites for review, the data were not sufficiently reliable for 
the purposes of reporting the total number of agreements held by VA 
and the revenue those agreements generated in fiscal year 2012 for 
this audit. 

Over the course of this engagement, we visited the three selected 
sites to corroborate some of the data maintained in CAI and to 
accomplish other audit objectives. During these site visits, our 
overall approach included interviewing local medical center officials 
such as medical facilities' directors, contracting officials, and 
fiscal officials. With our interviews, we made inquiries on VA's 
processes and controls related to the billing and collection of its 
revenues, and tested billing and collections on fiscal year 2012 land-
use agreements provided to us by the medical centers. Finally, we 
toured the facilities and recorded our observations about the space 
relative to the terms as documented in the agreements. 

To determine the extent to which VA monitors the billing and 
collection processes at selected VA medical centers, we examined VA 
policies and procedures as they relate to billing and collections of 
land-use agreements, interviewed VA officials responsible for billing 
and collecting revenues from land-use agreements at the three selected 
sites (New York City, New York; North Chicago, Illinois; and West Los 
Angeles, California) and reviewed all billing and collection documents 
associated with the land-use agreements at those sites. Because the VA 
IG performed recent work on EULs, our work for this objective was 
limited to other land-use agreements types (i.e., sharing agreements, 
outleases, licenses, and permits). In addition, for one of those 
sites, West Los Angeles, the VA IG is conducting an investigation in 
which the IG seized all records related to land-use agreements. As 
such, our audit was limited to only copies of those records that VA 
officials had separately maintained. We made inquiries to the 
investigation, but VA OIG staff declined to discuss the nature or 
scope of the investigation. We assessed VA's efforts, including VA 
policies and procedures, using federal internal control standards. 
[Footnote 7] We did not perform a systematic review of VA's internal 
controls outside of the three selected sites, and therefore the 
findings for this objective cannot be generalized to other VA medical 
centers. 

To determine the extent to which VA monitors the management of its 
land-use agreements, we examined VA policies and procedures and 
interviewed VA officials responsible for monitoring land-use 
agreements. We also reviewed the land-use agreements and conducted 
observations about the monitoring of the property associated with all 
land-use agreements at the three selected sites. As noted above, our 
work at West Los Angeles was limited by a current investigation being 
performed by the VA IG, who seized all records related to land-use 
agreements. We assessed VA's controls using federal internal control 
standards. We did not perform a systematic review of VA's internal 
controls outside of the three selected sites and therefore the 
findings for this objective cannot be generalized to other VA medical 
centers. 

We conducted this performance audit from May 2013 to August 2014 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. 

Background: 

Federal Role: 

VA's three operational administrations--the Veterans Health 
Administration (VHA), the Veterans Benefits Administration (VBA), and 
the National Cemetery Administration (NCA)--each manage their own 
separate regional network of facilities to provide program services to 
veterans and their families. These services include a diverse array of 
educational, disability, survivor, and health benefits. 

VHA holds the nation's largest integrated health care system 
consisting of, among other things, medical centers and community-based 
outpatient clinics that are decentralized across 21 Veterans 
Integrated Service Networks. In addition to its primary program 
mission area of providing health care to veterans, VHA--specifically--
is also responsible for managing the majority of the department's 
underutilized and excess property and land-use agreements at the local 
level.[Footnote 8] It should be noted that the management of 
underutilized and vacant spaces can be costly. Decision making on how 
to use these properties may involve competing considerations such as 
budgetary constraints, legal limitations, and stakeholder input. 

Types of Land-use Agreements and Their Benefits: 

VA utilizes various leasing authorities as a means of avoiding or 
decreasing its costs by maximizing available resources through the 
joint use of facility space. VA may use these authorities to enter 
into agreements that include outleases, licenses, permits, sharing 
agreements, and EUL agreements with public or private entities to use 
land and buildings for revenue or in-kind consideration. See table 1 
below for the various types of authorities available to VA, a brief 
description of the authority, and how proceeds may be used if revenue 
is generated. 

Table 1: Department of Veterans Affairs Land-use Authorities by 
Maximum Duration of Terms: 

Authority: 38 U.S.C. § 8122; 
Duration and definition: 
Outlease: VA may lease real property to public or private interests 
outside of VA for up to 3 years. Consideration for the lease may 
include maintenance, protection, or restoration of the property; 
License: VA may give a nonfederal party permission to enter upon and 
do a specific act or series of acts upon the land without possessing 
or acquiring any estate therein. A license typically can be revoked at 
any time; 
Permit: VA may give another federal agency permission to enter upon 
and do a specific act or series of acts upon the land; 
Proceeds: Generally, proceeds generated from outleases of space, minus 
expenses for maintenance, operation, and repair of buildings leased 
for building quarters, are deposited into the Department of the 
Treasury as miscellaneous receipts. Proceeds generated from licenses 
and permits are also deposited into the Department of the Treasury. 

Authority: Sharing agreements; 
38 U.S.C. §§ 8151-8153; 
Duration and definition: VA may enter into sharing agreements to 
provide the use of health care resources for the benefit of veterans 
or nonveterans in exchange for payment or services, or both, if VA's 
resources would not be used to their maximum effective capacity, and 
the sharing agreement would not adversely affect the care of veterans. 
Current VA policy provides that sharing agreements can be entered into 
for up to 10 years, with the initial term not to exceed 5 years; 
Proceeds: Proceeds generated from sharing agreements are to be 
credited to the applicable department medical appropriation of the 
facility that furnished the space. 

Authority: Enhanced-use leases; 
38 U.S.C. §§ 8161-8169; 
Duration and definition: VA may lease property under its jurisdiction 
or control (typically underutilized or vacant property) to a public or 
private entity for up to 75 years to provide for supportive housing as 
defined in 38 U.S.C. § 8161(3); 
Proceeds: Enhanced use lease proceeds are deposited into VA's medical 
care collections fund per 38 U.S.C. § 8165(a)(1). Enhanced use lease 
disposal proceeds are deposited into VA's major or minor construction 
project accounts, as the Secretary of the Veterans Affairs deems 
appropriate. 

Source: GAO. GA0-14-501. 

Notes: 

VA has other authorities available. For example, VA has the authority 
to transfer any interest in real property to a state for use as a 
state nursing home or domiciliary (38 U.S.C. § 8122)(a)(3)(A); or 
transfer the real property to the General Services Administration for 
disposal (38 U.S.C. § 8122(d)). In addition, VA may enter into 
interagency agreements with other federal agencies for the use of 
property. 

[End of table] 

Depending upon the terms specified and the type of agreement, 
agreements may generate revenue, in-kind considerations (such as cost 
savings or avoidance, or enhanced services), or both for the benefit 
of veterans, VA's operations, or the community at large. When veterans 
benefit directly from these agreements, they may enjoy access to an 
expanded range of services that would otherwise not be available on VA 
medical center campuses because in some cases VA is not authorized to 
provide such services itself. VA benefits from land-use agreements by 
offsetting or avoiding altogether the costs associated with operating 
and maintaining underutilized or vacant properties. Finally, local 
communities may also benefit from agreements through the provision of 
services such as credit unions, daycare, or the placement of rooftop 
antennas to strengthen cell-phone reception. 

Land-use Agreement Data and Monitoring: 

Details about land-use agreements, including estimated revenue and 
indications of in-kind considerations, are to be recorded in VA's CAI 
system by administration, network, or medical facility personnel who 
are responsible for those agreements. According to VA, it uses this 
system to evaluate property management by its administrations, 
regional networks, and medical centers. The inventory data from this 
system are to form the basis for decision making used in VA's 
strategic capital-investment planning processes.[Footnote 9] CAI data 
are also reported to external stakeholders, including Congress and 
GAO.[Footnote 10] 

To be entered into CAI, each land-use agreement must have its own 
revenue source and accounting codes. VA headquarters staff process 
requests and register the land-use agreements with these codes. Once 
assigned, the codes are to be entered into the CAI database. VA 
medical centers in VA's 21 service networks are then responsible for 
updating the land-use agreement information into CAI immediately after 
they are notified that the codes have been entered as well as updating 
CAI at the time of execution of the land-use agreement. VA medical 
centers are also required to immediately update the CAI database for 
any subsequent changes in the land-use agreements. Each year, VA 
headquarters staff initiate a call for the VA medical centers to 
review existing data in CAI, including land-use agreements; update any 
needed changes to CAI; and certify the data are complete and accurate 
at that point in time. 

Enhanced use leases (EUL) are centrally managed at headquarters by the 
Office of Asset Enterprise Management (OAEM). OAEM is responsible for 
administering and managing the EUL program, with support from local 
facility staff from VA's administrations. This monitoring includes 
tracking lease requirements and identifying benefits and expenses for 
EUL projects, once leases are executed. VA is also responsible for 
producing an annual consideration report to Congress for EULs that 
includes information on revenue, cost avoidance, cost savings, 
enhanced services, and expenses paid by VA. 

Unlike the central management of revenues and agreements associated 
with EULs, VA generally uses a decentralized approach in the 
monitoring of sharing agreements, outleases, licenses, and permits. 
[Footnote 11] The scope of projects can be diverse, ranging from space 
for medical research, day care, and rooftop telecommunications 
equipment, to 1-day special events for community causes. Regardless of 
the type of project, roles and responsibilities may vary by medical 
facility when overseeing land-use agreements. The monitoring of 
agreements, including ensuring the space is properly maintained or 
occupied, may involve offices responsible for asset management or 
contracting, for instance. According to VA officials, the medical 
centers are allowed considerable discretion in their management of 
these agreements. 

VA Does Not Maintain Reliable Data on the Number of Land-use 
Agreements and Their Associated Revenues: 

Based on our review of land-use agreement data for fiscal year 2012, 
VA does not maintain reliable data on the total number of land-use 
agreements and VA did not accurately estimate the revenues those 
agreements generate.[Footnote 12] According to the land-use agreement 
data provided to us from VA's CAI system, VA reported that it had over 
400 land-use agreements with over $24.8 million in estimated revenues 
for fiscal year 2012. However, in the course of our testing the 
reliability of the data, one of VA's administrations--VHA--initiated 
steps to verify the accuracy and validity of the data it originally 
provided to us. During this verification process, VHA made several 
corrections to the data that raised questions about their accuracy, 
validity, and completeness. Examples of these corrections include the 
following: 

* VHA reported multiple entries for a single land-use agreement. 
Specifically, VHA had 37 separate land-use entries for the same 
agreement entered in CAI--one for each building listed in the 
agreement--that were, in fact, for only one agreement at VA's facility 
in Perry Point, Maryland. 

* VHA also noted in its revisions that there were 13 agreements that 
had been terminated prior to fiscal year 2012 that should have been 
removed from the system. 

At the three VA medical centers we reviewed, we also found examples of 
errors in the land-use agreement data. Examples of these errors 
include the following: 

* VHA did not include 17 land-use agreements for the medical centers 
in New York and North Chicago, collectively. 

* VHA initially reported that it had 9 non-EUL land-use agreements 
that generated about $3.2 million in revenues at its North Chicago 
medical center in fiscal year 2012. In its revisions, VHA stated that 
its North Chicago medical center maintained 7 land-use agreements that 
generated no revenue, instead of 9 agreements that generated revenues. 
However, on the basis of our independent review of revenue receipts, 
we found that 5 agreements generated more than $240,000 in revenue in 
fiscal year 2012. 

* For the medical center in West Los Angeles, VHA revised its 
estimated revenues from all land-use agreements in fiscal year 2012 
from about $700,000 to over $810,000. However, our review of VA's land-
use agreements at this medical center indicated that the amount that 
should have been generated was approximately $1.5 million. 

Guidance in this area states that reliable data can be characterized 
as being accurate, valid, and complete.[Footnote 13] Reliable data 
means that data are reasonably complete and accurate, can be used for 
their intended purposes, and have not been subject to inappropriate 
alteration. Additionally, data in systems should also be consistent--a 
subset of accuracy--and valid. Consistency can be impaired when data 
are entered at multiple sites and there is an inconsistent 
interpretation of what data should be entered. Finally, data that are 
valid actually represent what is being measured. Thus, despite the 
corrections made by VHA, we cannot conclude that the revised number of 
land-use agreements held by VA or the amount of revenue these 
agreements generated in fiscal year 2012 are sufficiently reliable. 

VA policy requires that CAI be updated quarterly until the agreement 
ends. VA's approach on maintaining the data in CAI relies heavily on 
data being entered timely (quarterly) and accurately by a staff person 
in the local medical center. VA OAEM makes annual requests to medical 
centers to update the data in CAI, which also calls for the medical 
centers staff to verify the data.[Footnote 14] VA officials stated 
that a number of deficiencies remained after an annual update of the 
data in CAI. According to VA officials, the errors may be a result of 
manual data entry or medical centers not adhering to the guidance for 
updating CAI on a quarterly basis. Our review found that VA does not 
currently have a mechanism to ensure that the data in CAI are updated 
quarterly as required and that the data are accurate, valid, and 
complete. Federal internal control standards state that relevant, 
reliable, and timely information is to be available for external 
reporting purposes and management decision making.[Footnote 15] 
Additionally, these standards also state that management should put in 
place control mechanisms and activities to enable it to enforce its 
directives and achieve results, such as providing relevant, reliable, 
and timely information. 

VA officials recognize the importance of maintaining quality data. 
According to VA's guidance on CAI, the maintenance of high-quality 
data is critical to the organization's credibility and is an 
indication of VA's commitment to responsible capital asset portfolio 
management. Additionally, VA contends that high-quality data are 
needed to be responsive to policymakers and others. Officials at the 
VA headquarters reported that they undertake a few activities 
throughout the year to improve their data, such as the annual update. 
For example, an official told us that staff at headquarters had 
recently deployed a training session in 2014 that focused on updating 
data in CAI. According to a VA official, six sessions have been 
provided through June 2014. While these activities are positive steps, 
they do not provide the assurance needed that the data maintained in 
CAI are reliable. By implementing a mechanism that will allow it to 
assess whether medical centers have timely entered the appropriate 
land-use agreement data into CAI, and working with the medical centers 
to correct the data, as needed, VA would be better positioned to 
reliably account for land-use agreements and the associated revenues 
that they generate. 

Additional Monitoring at Three VA Medical Centers Could Improve the 
Billing and Revenue-Collection Process for Land-use Agreements: 

Weaknesses Noted in Various Aspects of the Revenue Collection Process 
at the Selected Medical Centers: 

At the three medical centers we visited, we found weaknesses with the 
billing and collection processes that impair VA's ability to 
effectively and timely collect land-use agreement revenues from its 
sharing partners. Specifically, we found inadequate billing practices 
at all three medical centers we visited, as well as opportunities for 
improved collaboration at two of the three medical centers, and duties 
that were not properly segregated at one medical center. Because we 
did not perform a systematic review of VA's internal controls outside 
of the three selected sites, our findings in this section cannot be 
generalized to other VA medical centers. 

Inadequate Billing Practices: 

At the three sites that we visited, we found that VA had billed 
partners in 20 of 34 revenue-generating land-use agreements for the 
correct amount; however, the partners in the remaining 14 agreements 
were not billed for the correct amount.[Footnote 16] Based on our 
analysis of the agreements, we found that VA underbilled by almost 
$300,000 of the approximately $5.3 million that was due under the 
agreements, a difference of about 5.6 percent. For most of these 
errors, we found that VA did not adjust the revenues it collected for 
inflation. According to the department's guidance on sharing 
agreements, VA must incorporate an annual inflation adjustment to 
multiple-year agreements to ensure that its maintenance and operating 
costs--such as future utility costs--continue to be recouped, or 
exceeded. However, for some of these incorrectly billed agreements, 
the sharing partners paid the correct amount of rent as specified in 
the agreement even though the bill stated an incorrect amount. In 
addition, we found that the West Los Angeles medical center 
inappropriately coded the billing so that the proceeds of its sharing 
agreements, which totaled over $500,000, were sent to its facilities 
account. According to the West Los Angeles chief fiscal officer, these 
proceeds were mainly used to fund maintenance salaries. However, 
according to VA policy, proceeds from sharing agreements are required 
to be deposited in the medical care appropriations account that 
benefits veterans.[Footnote 17] 

According to the policy for sharing agreements, each agreement must 
include the amount of rent for the space, when the rent is expected to 
be paid, and the number of payments to be made over a specified period 
by the sharing partners. In the absence of a bill from VA, the sharing 
partner still is required to make payments as stipulated under the 
agreement. However, at all three sites that we visited, we found 
problems with the billing of rent for the land-use agreements: 

* At the New York City location, VA officials were not aware that a 
sharing partner--an academic department with the local university--
renewed its agreement to remain at the VA in 2008. As a result and 
according to a VA New York fiscal official, VA did not bill the 
sharing partner for several years' rent that totaled over $1 million. 
After it discovered this error, VA began to take collection action on 
the unpaid rent in 2012, but over $200,000 in delinquent rent remained 
outstanding as of April 2014. 

* At the West Los Angeles location, officials did not send periodic 
invoices to sharing partners as required by policy or under its 
agreements. As a result, two of its sharing partners did not always 
submit timely payments. And in a third case, VA has not fully 
collected on the total amount of past due rent from a sharing partner 
that it did not bill as expected. Specifically, in August 2011, VA 
stopped billing a hospitality corporation that operated a laundry 
facility on the campus. Since that time, the sharing partner has not 
made any payments as required under the terms of its agreement. The 
partner vacated the space in December 2013, and owes hundreds of 
thousands of dollars to VA. A contracting officer in Long Beach, who 
is responsible for the management of the land-use agreements in West 
Los Angeles, stated during a February 2014 meeting with GAO that he 
advised the West Los Angeles location to evict the sharing partner for 
occupying VA space beyond its agreement term because they were 
"trespassing" and lacked authorization to remain in the space. The 
contracting official also stated that VA should bill the sharing 
partner for the rent due and, if necessary, seek guidance to initiate 
available collection actions. A West Los Angeles VA official 
acknowledged that eviction was one of the options that could be 
pursued; however, the medical center continued to allow the sharing 
partner to remain in the space so that the agreement could be 
terminated "amicably." During our visit in December 2013, that same 
West Los Angeles official also stated that VA would continue to 
negotiate with the sharing partner on the final payment to be 
received; and those negotiations would take into account the value of 
certain inventory items and parts that the partner left in the space. 
This official later reported to GAO that, as of May 2014, VA would 
bill the sharing partner for the full amount of past due rent without 
offsetting the value of the property remaining in the space. We asked 
for a copy of the letter that would be sent to the sharing partner, 
but as of June 2014 VA had not provided it. 

* The medical center at West Los Angeles also did not bill a federal 
government agency sharing space at the Sepulveda Ambulatory Care 
Center during fiscal year 2012. Instead, the medical center submitted 
the bill for about $480,000 to the federal agency on October 1, 2012, 
the day after the end of fiscal year 2012. As a result, the sharing 
partner did not make any monthly rental payments during fiscal year 
2012. The sharing partner subsequently made the full rental payment in 
November 2012. 

* At the North Chicago medical center, VA officials did not bill one 
of its sharing partners for about $3,000 for the month of August 2012. 
Officials were not aware that they had not billed for this agreement 
until we brought the matter to their attention in January 2014. 
According to a VA official, the North Chicago medical center submitted 
a bill to the sharing partner in June 2014. 

VA officials acknowledged that the department did not perform 
systematic reviews of the billings and collections practices at the 
three medical centers, which we discuss in more detail later. Federal 
internal control standards state that management is to ensure that 
transactions are promptly recorded to maintain their relevance and 
value to management in controlling operations and making 
decisions.[Footnote 18] This applies to the entire process or life 
cycle of a transaction or event from its initiation and authorization 
through its final classification in summary records. In addition, the 
standards call for agencies to design control activities to help 
ensure that all transactions are completely and accurately recorded. 
These standards and OMB guidance also state that management should put 
in place control mechanisms and activities to enable it to enforce its 
directives and achieve results. Because VA lacks a mechanism that 
ensures its transactions are promptly and accurately recorded, VA is 
not consistently collecting revenues that the sharing partners owe to 
VA at these three medical centers. 

Opportunities for Improved Collaboration: 

At two of the three sites we visited, we found that VA could improve 
collaboration amongst key staff that could enhance the collections of 
proceeds for its land-use agreements. Examples include the following: 

* At the New York site, VA finance staff created spreadsheets to 
improve the collection of its revenues for more than 20 agreements. 
However, the fiscal office did not have all of the renewed contracts 
or amended agreements that could clearly show the rent due since the 
contracting office failed to inform the fiscal office of the new 
agreements. According to a VA fiscal official at the New York office, 
repeated requests were made to the contracting office for these 
documents; however, the contracting office did not respond to these 
requests by the time of our visit in January 2014. According to the 
New York Harbor Healthcare System director and the fiscal officials at 
New York, collection activities suffered because the contracting 
office was not responsive. 

* At the North Chicago medical center, the finance staff identified 
differences between what they billed from the sharing partners and 
what they collected for some agreements. As a result, a North Chicago 
medical center finance staff official stated that the center's staff 
had to undertake extra, time-consuming measures--including speaking to 
the sharing partners themselves--to resolve these differences. At that 
time, the finance staff discovered that VA was not billing for the 
increase in rent for inflation. North Chicago did not have a mechanism 
to communicate the specific terms (such as inflation adjustments) and 
did not have access to the land-use agreements across offices, 
according to another North Chicago finance official. Such sharing of 
information would have helped to expedite the explanation of these 
differences. 

Collaboration can be broadly defined as any joint activity that is 
intended to produce more public value than could be produced when 
organizations act alone. Best practices state that agencies can 
enhance and sustain collaborative efforts by engaging in several 
practices that are necessary for a collaborative working relationship. 
These practices include: 

* defining and articulating a common outcome; 

* agreeing on roles and responsibilities; and: 

* establishing compatible policies, procedures, and other means to 
operate across agency boundaries.[Footnote 19] 

By taking additional steps to foster a collaborative environment, VHA 
could improve its billing and collection practices. For example, 
rather than contacting sharing partners to confirm the accuracy of its 
billing, fiscal staff in the North Chicago VA could work with the 
office that holds the agreements, the contracting office, to confirm 
the accuracy of its billing and to correct errors. 

Segregation of Duties: 

Based on a walkthrough of the billing and collections process we 
conducted during our field visits, and an interview with a West Los 
Angeles VA official, we found that West Los Angeles did not utilize 
proper segregation of duties. Specifically, the office responsible for 
monitoring agreements also bills the invoices, receives collections, 
and submits the collections to the agent cashier for deposit. This 
assignment of roles and responsibilities for one office is not typical 
of the sites we examined. At the other medical centers we visited, 
these same activities were separated amongst a few offices, as 
outlined in VA's guidance on deposits.[Footnote 20] Federal internal 
control standards state that for an effectively designed control 
system, key duties and responsibilities need to be divided or 
segregated among different people to reduce the risk of error or 
fraud.[Footnote 21] 

These controls should include separating the responsibilities for 
authorizing transactions, processing and recording them, reviewing 
them, and accepting any acquired assets. Without proper segregation of 
duties, risk of errors, improper transactions, and fraud increases. 
According to West Los Angeles officials, the medical center is 
considering steps to correct the segregation of duties issue by 
assigning certain duties to the fiscal office. However, the West Los 
Angeles site did not provide any details on the steps it would take or 
the timeline it would follow to implement these actions. Federal 
internal control standards emphasize the need for federal agencies to 
establish plans to help ensure goals and objectives can be met 
[Footnote 22]. Because of the lack of appropriate segregation of 
duties at West Los Angeles, the revenue collection-process has 
increased vulnerability to potential fraud and abuse. 

Opportunities for Improved Monitoring of Billing and Collections at 
Selected Medical Centers: 

VA headquarters officials informed us that program officials located 
at VA headquarters do not perform any systematic review to evaluate 
the medical centers' processes related to billing and collections at 
the local level. VA officials further informed us that VHA 
headquarters also lacks critical data--the actual land-use agreements--
that would allow it to routinely monitor billing and collection 
efforts for land-use agreements across the department. Federal 
internal control standards require that departments and agencies 
assess program quality and performance over time and work to address 
any identified deficiencies. Further, management must continually 
assess and evaluate these controls to assure that the activities being 
used are sufficient and effective. In response to our findings, one VA 
headquarters official told us that the agency is considering the 
merits of dispatching small teams of staff from program offices 
located at VA's headquarters to assist the local offices with 
activities such as billing and collections. However, as of May 2014, 
VA had not implemented this proposed action or any other mechanism for 
monitoring the billing and collections activity at the three medical 
centers. Federal internal control standards also state that management 
should put in place control mechanisms and activities to enable it to 
enforce its directives and achieve results. Until VA performs 
systematic reviews, VA will lack assurance that the three selected 
medical centers are taking all required actions to bill and collect 
revenues generated from land-use agreements, as expected. 

VA Did Not Effectively Monitor Many of Its Land-use Agreements at Two 
of the Three Selected Medical Centers: 

VA did not effectively monitor the status of the land-use agreements 
at the medical center level for two selected sites that we visited. As 
a result, we identified problems associated with many of the land-use 
agreements including unenforced agreement terms, expired agreements 
with partners remaining in VA space, and organizations occupying VA 
space without a written agreement. Because we did not perform a 
systematic review of VA's internal controls outside of the three 
selected sites, our findings in this section cannot be generalized to 
other VA medical centers. 

Several Agreements Lacked Proper Enforcement of Terms: 

During our site visit to West Los Angeles, we noted several sharing 
agreements that lacked proper enforcement. These agreements included 
the following: 

* Authorization and Reporting Terms for Parking Services Agreement Not 
Enforced. VA did not enforce two key modification terms of a West Los 
Angeles sharing agreement. One modification for this agreement allowed 
for the receipt of in-kind considerations--such as road repaving and 
the installation of speed bumps--in lieu of revenue, as originally 
agreed. This agreement modification stipulates that the sharing 
partner will provide services (such as paving) as determined necessary 
by the contracting official. However, the medical center's current 
contracting officer--an official located in the Long Beach office--
stated that he had not approved any services under the agreement since 
his appointment in June 2012. Another provision in the modification 
requires the sharing partner to provide an annual reconciliation to 
the contracting officer.[Footnote 23] According to a West Los Angeles 
VA official that was previously responsible for monitoring the 
agreement, this report reconciles the costs of the in-kind services 
provided to VA to the revenues generated through the agreement each 
year. This official could not provide us with either documentation or 
information regarding any services that were provided during fiscal 
year 2012, including the value of such services. According to the 
current contracting officer in Long Beach, neither the sharing partner 
nor officials at West Los Angeles medical center have provided the 
reconciliation reports for 2012.[Footnote 24] We also requested the 
2012 reconciliation report from VA West Los Angeles officials, but 
they could not provide us with a copy.[Footnote 25] 

* Original Payment Terms with Nonprofit Organization Not Enforced. A 
West Los Angeles VA agreement with a nonprofit organization to provide 
space and services for homeless veterans included a rental provision 
that, if enforced, would have collected over $250,000 in revenue in 
2012.[Footnote 26] However, according to a West Los Angeles VA 
official, no revenue was collected that fiscal year because the rental 
provision was waived. According to this same official, the waiver for 
the rental provision may have occurred in the late 2000s due to the 
nonprofit experiencing financial hardship.[Footnote 27] However, from 
our review of the VA solicitation for award, demonstrating financial 
viability was one of the criteria considered in evaluating this 
partner. Further, VA policy requires the monitoring of sharing 
agreements and does not have a provision that allows for the waiving 
of such revenues. According to the contracting officer at the Long 
Beach VA office, VA has given this nonprofit organization an unfair 
advantage over other organizations that provide similar services by 
lowering its operating costs. 

* Agreement Terms with Golf Course Manager Not Enforced. During our 
site visit to West Los Angeles, we observed the installation of an 
irrigation system to upgrade a nine-hole golf course (shown in fig. 1) 
located at the medical center. As part of this agreement, the partner 
managing the golf course is required to obtain prior approval from the 
VA contracting officer before making any improvements to VA's 
property. The Long Beach contracting officer told us that, he was 
unaware of the improvements to the golf course and had not authorized 
them, in contrast to what was stipulated in the agreement. 

Figure 1: Sharing Partner Installing Irrigation System at Golf Course 
without Prior Approval: 

[Refer to PDF for image: photograph] 

Source: GAO. GAO-14-501. 

[End of figure] 

* Improper Subleasing of VA Space. VA guidance does not allow sharing 
partners to sublease the space obtained through sharing agreements. 
However, we found that a nonprofit organization--a botanic garden--
subleased its space to two other organizations, including an exotic 
bird sanctuary and a food pantry. The Long Beach VA contracting 
officer told us that he was not aware of this sublease prior to our 
audit. 

Expired Agreements: 

We found expired agreements at two of the three VA medical centers we 
reviewed where the sharing partners were still occupying the space. At 
the West Los Angeles medical center, a university athletics 
department, a laundry-services company, and a soccer club occupied VA 
space after their agreements had expired. According to a West Los 
Angeles VA official, VA did not renegotiate an extension for these 
agreements because of an ongoing lawsuit.[Footnote 28] The university 
athletics department and soccer club continued to pay rent although 
they generally did not fully comply with the schedule of payment terms 
outlined in the expired agreement. However, as previously discussed, 
the laundry-services company had not made any payments to VA since 
2011 but remained in the building until it vacated the space in 
December 2013.[Footnote 29] According to the current contracting 
officer, he advised West Los Angeles to remove the laundry-services 
company from the premises, but medical center officials did not act on 
this advice. West Los Angeles VA officials told us that they discussed 
sending month-to-month tenancy letters to sharing partners that 
authorized them to operate on the VA property in the absence of an 
agreement. However, according to the contracting official at Long 
Beach, the letters were not sent to the partners because the lawsuit 
prohibited such actions. 

At the New York medical center, seven agreements expired and were not 
renewed timely. Because of the lack of monitoring, one sharing 
partner--a local School of Medicine--with seven expired agreements 
remained on the property and occupied the premises without written 
authorization during fiscal year 2012. Our review of VA's policy on 
sharing agreements did not have any specific guidance on how to manage 
agreements before they expired including the renewal process. Federal 
internal control standards state that the policies and procedures are 
needed to enforce management directives such as the process for 
managing expiring agreements.[Footnote 30] They help ensure that 
actions are taken to address risks. Without such guidance, VA may find 
it difficult to adequately manage agreements scheduled to expire at 
any time or determine what specific actions should be taken when an 
agreement has expired. 

Lack of Written Agreements: 

At both the New York and West Los Angeles medical centers, VA did not 
have written agreements with some organizations that were using VA 
space. As a result, VA may be vulnerable to claims of liability and 
other risks. VA's guidance requires that a written agreement be in 
place for spaces occupied by non-VA entities. During the course of 
this review, we found VA lacked agreements in the following: 

* Rooftop Antennas. During our site visit to the New York medical 
center, we observed more antennas on the roof of a VA facility than 
the New York medical center had recorded in CAI. After we brought this 
to their attention, New York VA officials researched the owners of 
these antennas and could not find written agreements or records of 
payments received for seven antennas. VA did not have written 
agreements associated with these antennas. According to New York VA 
officials, now that they are aware of the antennas, they will either 
establish agreements with the tenants or disconnect the antennas. 

* Dog Park and Baseball Fields. The City of Los Angeles has utilized a 
12-acre field--Barrington Park--on VA property for recreational use 
(e.g., dog park and baseball fields) without a written agreement. 
[Footnote 31] The city has posted signs about local ordinances at the 
site, which purport to show the space is under the city's 
jurisdiction. VA is forgoing potential revenue for use of this 
facility by not having a written agreement in place. In the absence of 
a written agreement, it is also unclear what party should respond to 
any emergency situation that may occur at the park and fields. 
[Footnote 32] The lack of an agreement in this instance could 
potentially increase VA's risk of liability. 

VA officials stated there could be a number of reasons that these 
spaces lacked agreements such as agreements could have been disposed 
of or misplaced. VA officials acknowledged that agreements are not 
centrally managed or stored and that CAI does not include all terms of 
the agreements that are needed for monitoring activity. However, VA's 
guidance calls for written sharing agreements with all non-VA 
partners. Further, federal internal control standards state that all 
transactions and other significant events need to be clearly 
documented, and the documentation should be readily available for 
examination and the documentation should be properly managed and 
maintained.[Footnote 33] 

We found that VA had not established mechanisms to monitor the various 
agreements at the West Los Angeles and New York medical centers. VA 
officials acknowledged that they had not performed systematic reviews 
of these agreements and had not established mechanisms to enable them 
to do so. Federal internal control standards also state that 
management should put in place control mechanisms and activities to 
enable it to enforce its directives and achieve results. Federal 
internal control standards require that departments and agencies 
assess program quality and performance over time and work to address 
any identified deficiencies. Further, management must continually 
assess and evaluate these controls to assure that the activities being 
used are effective. Without a mechanism for accessing land-use 
agreements to perform needed monitoring activities, VA lacks 
reasonable assurance that the partners are meeting the agreed-upon 
terms, agreements are renewed as appropriate, and agreements are 
documented in writing, as required. This is particularly important if 
sharing partners are using VA land for purposes that may increase risk 
to VA's liability. Finally, with lapsed agreements, VA not only 
forgoes revenue, but it also misses opportunities to provide 
additional services to veterans in need of assistance and to enhance 
its operations. 

Conclusions: 

For the past decade, we have reported that the management of federal 
property is at risk for fraud, waste, and abuse. As one of the U.S. 
government's largest property holders, many of the issues we 
identified across the federal government can be found in VA's 
management of its underutilized and vacant property. VA's system for 
managing its numerous land-use agreements, including its system for 
recording associated revenues and benefits, is in need of corrective 
action. Because we found that the VHA data maintained in CAI are 
unreliable, these data cannot be used to accurately and reliably 
manage the bulk of VA's land-use agreements as intended. Developing a 
mechanism to assess the accuracy, validity, and completeness of land-
use agreement data in CAI would better position VHA to reliably 
account for the current land-use agreements and the associated 
revenues that they generate. 

VA has opportunities to enhance the effectiveness of its land-use 
agreements processes at the three selected medical centers. As noted 
in our report, deficiencies in its monitoring of the billing and 
collection of revenues have impaired VA in the timely collection of 
all revenues due from its sharing partners and the proper recording of 
the revenues to its medical-care appropriations account at one of the 
medical centers. In addition, VA did not have mechanisms in place at 
two medical centers to ensure that different individuals charged with 
the responsibility of executing and managing agreements and collecting 
revenues worked together in a collaborative manner. Further, VA lacked 
adequate processes that enabled it to readily access land-use 
agreements and perform monitoring of the execution of its land-use 
agreements at two of the three selected sites, which resulted in land-
use agreement terms not being properly documented in writing or being 
enforced by VA and the failure to execute renewals when the agreements 
have expired. The ineffective monitoring of land-use agreements at the 
VA medical centers is further exacerbated by the lack of any detailed 
guidance by VA on how to manage the expiration of land-use agreements. 
Finally, the lack of appropriately segregated duties at its West Los 
Angeles medical center is also problematic and needs to be immediately 
addressed; however, officials at that medical center have not 
developed a plan for doing so. This lapse of a key internal control 
increases the likelihood that revenues from land-use agreements may be 
vulnerable to potential fraud and abuse. Until VA effectively 
addresses these weaknesses, it will likely continue to miss 
opportunities to maximize revenues that can be used to offset VA 
operational costs--thereby placing a higher burden on taxpayers--or 
provide additional services to veterans in need of assistance. 

Recommendations for Executive Action: 

In order to improve the quality of the data collected on specific land-
use agreements (i.e., sharing, outleases, licenses, and permits), 
enhance the monitoring of its revenue process and monitoring of 
agreements, and improve the accountability of the VA in this area, we 
recommend that the Secretary of Veterans Affairs take the following 
six actions: 

* develop a mechanism to independently verify the accuracy, validity, 
and completeness of VHA data for land-use agreements in CAI; 

* develop mechanisms to: 

- monitor the billing and collection of revenues for land-use 
agreements to help ensure that transactions are promptly and 
accurately recorded at the three medical centers; 

- foster collaboration between key offices to improve billing and 
collections practices at the New York and North Chicago medical 
centers; and: 

- access and monitor the status of land-use agreements to help ensure 
that agreement terms are enforced, agreements are renewed as 
appropriate, and all agreements are documented in writing as required 
at the New York and West Los Angeles selected medical centers; 

* develop a plan for the West Lost Angeles medical center that 
identifies the steps to be taken, timelines, and responsibilities in 
implementing segregation of duties over the billing and collections 
process; and: 

* develop guidance on managing expiring agreements at the three 
medical centers. 

Agency Comments: 

We provided the Departments of Veterans Affairs with a draft of this 
report for its review and comment. In its written comments, reprinted 
in appendix II, the Department concurred with our recommendations and 
provided technical comments that we incorporated, as appropriate. 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to the 
appropriate congressional committees and the Secretary of Veterans 
Affairs. In addition, the report will be available at no charge on the 
GAO website at [hyperlink, http://www.gao.gov. 

If you have any questions concerning this report, please contact me at 
(202) 512-6722 or lords@gao.gov. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. Key contributors to this report are listed in 
appendix III. 

Sincerely yours, 

Signed by: 

Stephen M. Lord 
Managing Director, Forensic Audits and Investigative Service: 

[End of section] 

Appendix I: Court Decision on Sharing Agreements at the West Los 
Angeles Medical Center: 

On August 29, 2013, a federal judge found that certain sharing 
agreements in the West Los Angeles medical center were unauthorized 
under the land-use authority under which they were executed.[Footnote 
34] This authority states that the Secretary of Veterans Affairs may 
enter into agreements to share health care resources with health care 
providers in support of the Department of Veterans Affairs' (VA) 
mission. As a result, the federal judge voided several sharing 
agreements with entities other than health care providers; thus, the 
district court case called into question whether VA can enter into 
sharing agreements with entities other than health care providers. The 
case is under appeal at the United States Court of Appeals for the 
Ninth Circuit. 

If this opinion stands, this ruling may affect other sharing 
agreements VA holds with nonmedical providers nationwide. Our review 
of VA's land-use agreements at West Los Angeles, North Chicago, and 
New York found just over 40 percent of VA's sharing agreements were 
with nonmedical providers, such as telecommunication companies that 
lease space for rooftop antennas, and collectively generate hundreds 
of thousands of dollars in revenue each year. 

[End of section] 

Appendix II: Comments from the Department of Veterans Affairs: 

Department of Veterans Affairs: 
Washington DC 20420: 

July 10, 2014: 

Mr. Stephen M. Lord: 
Managing Director, Forensic Audits and Investigative Service: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Lord: 

The Department of Veterans Affairs (VA) has reviewed the Government
Accountability Office's (GAO) draft report, "Land Use Agreements: 
Department of Veterans Affairs Needs to Improve Data Reliability and 
Monitoring" (GAO-14-501). VA generally agrees with GAO's conclusions 
and concurs with GAO's recommendations to the Department. 

The enclosure specifically addresses GAO's recommendation in the draft 
report, provides an action plan, and offers technical comments to the 
draft report. 

VA appreciates the opportunity to comment on your draft report. 

Sincerely, 

Signed by: 

Jose D. Riojas: 
Chief of Staff: 

Enclosure: 

Department of Veterans Affairs (VA) Response to Government 
Accountability Office (GAO) Draft Report: 

"Land Use Agreements: Department of Veterans Affairs Needs to Improve
Data Reliability and Monitoring" (GAO-14-501): 

GAO Recommendation: In order to improve the quality of the data 
collected on specific land use agreements (i.e. sharing, outleases, 
licenses, and permits), enhance the monitoring of its revenue process 
and monitoring of agreements, and improve the accountability of the VA 
in this area, we recommend that the Secretary of the Department of 
Veterans' Affairs take the following six actions: 

Recommendation 1: Develop a mechanism to independently verify the 
accuracy, validity, and completeness of VHA data for land use 
agreements in CAI. 

VA Comment: Concur. The Office of Asset Enterprise Management (OAEM) 
will develop additional business rules, data integrity enforcement, 
data validity reporting, and other clarifying enhancements to the 
Capital Asset Inventory (CAI) database. OAEM will develop written 
policy guidance (e.g., Handbooks and/or Directives) to reflect
the changes. 

The Veterans Health Administration's (VHA) Office of Capital Asset 
Management and Engineering Support (OCAMES) will develop written 
policy guidance (e.g., Handbooks and/or Directives) and provide 
training to field engineers and contracting offices on the proper use 
of CAI to ensure: 

* All new and existing land use agreements, sharing agreements, 
licenses, outleases, and permits are entered and updated accurately in 
the CAI database. 

* Updates to the CAI database are made quarterly or as needed when 
information changes with the sharing partner. 

* OCAMES will verify the accuracy and validity of all information for 
the sharing agreements on a quarterly basis or as needed to ensure 
that the concept paper documentation that was submitted for approval 
was entered accurately in the CAI database. 

Target Completion Date: January 31, 2015. 

Recommendation 2: Develop mechanisms to monitor the billing and 
collection of revenues for land use agreements to help ensure that 
transactions are promptly and accurately recorded at the three medical 
centers. 

VA Comment: Concur. VHA OCAMES will develop written policies (e.g., 
Handbooks and/or Directives) to ensure that the following corrective 
measures are instituted long term. 

* No later than 5 days after execution, the contracting officer will 
be required to forward all new and updated licenses, outleases, 
permits, and sharing agreements to their fiscal offices to monitor the 
billing and collection of revenue for land use agreements. 

* A copy of each executed sharing agreement shall also be sent to 
OCAMES. 

* OCAMES with support from the Office of Management/Finance (OMF) will
review, as needed, processes for the recognition of revenue, billings, 
collections, and for financial reporting to ensure that adequate 
controls are in place and that processes comply with VA financial 
policies and Federal accounting standards. 

* To ensure the completeness of financial data for land use agreements,
OCAMES, with support from OMF, will define applicable internal controls,
accounting entries, financial policies, and accounting report 
requirements. 

* OCAMES will validate land use agreements from the CAI database 
quarterly for completeness at the three medical centers. After 
verification, OCAMES will provide the data to VHA's Office of Finance 
to validate the billing and collection of revenues at the three 
medical centers. 

Target Completion Date: January 31, 2015. 

Recommendation 3: Develop mechanisms to foster collaboration between key
offices to improve billing and collections practices at the New York 
and North Chicago medical centers. 

VA Comment: Concur. North Chicago and New York have already begun
implementing the following mechanisms: 

* The fiscal department at North Chicago has hired a Management and 
Program Analyst, who serves as a liaison between fiscal, facilities 
management, and business offices. 

* New York has assigned the contracting officer representative (COR) 
duty to an existing staff member. This position now serves as a 
central point of contact for the medical center's agreements to 
include land use agreements. 

* The COR has reviewed all Sharing Agreements and identified the 
correct billing amounts, projected dates, and any incremental option 
period funding shifts that may apply during the life of the agreement. 

* This information has been provided to the contracting office to 
validate and has been shared with the biller and fiscal. 

* Once bills are submitted, the COR will follow up with the Agent 
Cashier to verify payment. 

North Chicago leadership is developing a local Sharing and Support 
Agreement Policy and Joint Policy Instruction, which delineates 
responsibilities and procedures. This will be shared with all North 
Chicago staff. New York is scheduling a meeting to discuss the 
development of a local Sharing and Support Agreement Policy. The 
creation of the local policy is a joint effort between all involved 
parties which should result in a more cohesive and uniform process. 

Target Completion Date: November 30, 2014. 

Recommendation 4: Develop mechanisms to access and monitor the status of
land use agreements to help ensure that agreement terms are enforced,
agreements are renewed as appropriate, and that all agreements are 
documented in writing as required at the three selected medical 
centers. 

VA Comment: Concur. VHA OCAMES will visit each of the three sites with 
a team consisting of a member of our compliance engineering group, a 
member of our capital consulting group, and the program manager. While 
on each of these three visits, our team will meet with the medical 
center director, the pertinent facility engineering staff, the 
pertinent contracting staff. possibly with finance team members, and 
any other functional area personnel deemed necessary. These visits 
will happen in the near term and have the purpose of ensuring that 
appropriate billing and collections are made, and that expired 
agreements are identified and addressed. The Office of Acquisition,
Logistics, and Construction (OALC) Real Property Service will support 
the medical centers to the extent modification of existing agreements 
or post-transactional assistance with real estate matters is 
necessary. Lastly, OCAMES will work with OAEM on developing reports 
and notifications, via CAI, to help identify potential issues. with
data related to land use agreements. 

Target Completion Date: January 31, 2015. 

Recommendation 5: Develop a plan for the West Los Angeles medical 
center that identifies the steps to be taken, timelines, and 
responsibilities in implementing segregation of duties over the 
billing and collections process. 

VA Comment: Concur. VA's Greater Los Angeles Asset Management Office and
Fiscal Service are currently working to develop a plan for the West 
Los Angeles Medical Center which will further segregate duties related 
to billing and collections for land use agreements. Progress to date 
includes obtaining access to the required Veterans Health Information 
Systems and Technology Architecture (VistA) billing menus for key 
personnel. This will allow identified Asset Management Office 
employees to be delegated authority for a specific part of the billing 
and collections process, rather than having one department responsible 
for all elements of the process. The Asset Management Office and 
Fiscal Service managers continue to refine the new process, but in 
essence, Asset Management Office staff will continue to monitor land use
agreements as the COR and will initiate billing; Fiscal Service staff 
will be responsible for accounts receivables and processing the actual 
payments made pursuant to land use agreements. 

Asset Management Office staff are being trained on the use of the 
VistA billing menus during the week of June 30, 2014. Asset Management 
Office and Fiscal Service leadership will be meeting throughout the 
month of July 2014 to establish the protocols for our respective 
staffs. The process is planned to be fully implemented in August 2014. 

Asset Management Office and Fiscal Service staff who are involved in 
the billing/collections process will be trained at in-person training 
and meetings. Local Standard Operating Procedures will be developed 
memorializing the protocols associated with this new process. Target 
Completion Date: August 31, 2014. 

Recommendation 6: Develop guidance on managing expiring agreements at 
the three medical centers. 

VA Comment: Concur. VHA OCAMES will visit each of the three sites with 
a team consisting of a member of our compliance engineering group, a 
member of our capital consulting group, and the program manager. While 
on each of these three visits, our team will meet with the medical 
center director, the pertinent facility engineering staff, the 
pertinent contracting staff, possibly with finance team members, and 
any other functional area personnel deemed necessary. These visits 
will happen in the near term and have the purpose of ensuring that 
appropriate billing and collections are made, and that expired 
agreements are identified and addressed. OALC's Real Property Service 
will support the medical centers to the extent modification of 
existing agreements or post-transactional assistance with real estate 
matters is necessary. Lastly, OCAMES will work with OAEM on developing 
reports and notifications, via CAI, to provide advance notice of 
agreements that are nearing expiration so that appropriate action can 
be taken. Target Completion Date: January 31, 2015. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Stephen Lord, (202) 512-6722 or lords@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Matthew Valenta (Assistant 
Director), Erika Axelson, Carla Craddock, Debra Draper, Olivia Lopez, 
Elke Kolodinski, Edward Laughlin, Barbara Lewis, Paul Kinney, Jeffrey 
McDermott, Maria McMullen, Linda Miller, Lorelei St. James, April 
VanCleef, Shana Wallace, and William Woods made key contributions to 
this report. 

[End of section] 

Footnotes: 

[1] In September 2008, we reported that the aging of VA's medical 
facilities and the costs associated with their renovation rendered 
many structures inappropriate for care delivery, leaving the 
department with millions of underutilized or vacant square feet of 
space. More recently, in June 2012, we reported that VA said that it 
had reduced the number of underutilized facilities in part through the 
use of land-use agreements. GAO, Federal Real Property: Progress Made 
in Reducing Unneeded Property, but VA Needs Better Information to Make 
Further Reductions, [hyperlink, 
http://www.gao.gov/products/GAO-08-939] (Washington, D.C.: Sept. 10, 
2008) and Federal Real Property: National Strategy and Better Data 
Needed to Improve Management of Excess and Underutilized Property, 
[hyperlink, http://www.gao.gov/product]s/GAO-12-645 (Washington, D.C.: 
June 20, 2012). 

[2] For outleases, VA leases real property to public or private 
interests outside of VA for up to 3 years. For licenses, VA gives a 
nonfederal party permission to enter upon and do a specific act or 
series of acts upon the land without possessing or acquiring any 
estate therein. For permits, VA gives another federal agency 
permission to enter upon and do a specific act or series of acts upon 
the land. 

[3] See Veterans Health Administration Handbook 1820.1. VA space may 
be offered to a sharing partner for the benefit of veterans or 
nonveterans. If the former, high priority needs to be given to 
partners who are offering to provide supportive housing or service 
centers for homeless veterans. If the latter, then this type of 
agreement must ensure that the service or space is within the scope of 
VA's authority, and in no way will it negatively affect the care of 
veterans. 

[4] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-13-283] (Washington, D.C.: Feb. 14, 
2013). 

[5] Department of Veterans Affairs Office of Inspector General, Audit 
of the Enhanced-Use Lease Program, Report No. 11-00002-74 (Feb. 29, 
2012) and Review of the Enhanced Use Lease between the Department of 
Veterans Affairs and Veterans Development, LLC Report No. 12-00375-290 
(Sept. 28, 2012). According to VA officials, all recommendations from 
IG Report No. 11-00002-74 have been closed by the IG. 

[6] CAI is the database of record for VA's real property portfolio, 
including all of the department's owned and leased assets. The CAI 
database also houses facility condition assessment data, agreement 
information, and historical asset information for the portfolio. CAI 
is managed through the Office of Asset Enterprise Management. 

[7] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[8] Staff within the Office of Asset Enterprise Management (OAEM) work 
with the administrations, the regional networks, and medical centers 
to manage VA's portfolio and undertake other tasks such as performance 
monitoring and data management. 

[9] The Strategic Capital Investment Planning process is an annual 
process designed to capture the full extent of VA's capital needs and 
inform the annual budget process. Strategic Capital Investment 
Planning is a department-wide planning process that results in the 
creation of a single, integrated, prioritized list of projects from 
all capital investment accounts. 

[10] Other stakeholders include the Federal Real Property Council, 
General Services Administration, and Office of Management and Budget. 

[11] OAEM monitors EULs, which are the only land-use agreements that 
are entirely managed at the department level. According to VA 
officials, some NCA outleases and long-term permits and licenses are 
also managed centrally. 

[12] For purposes of this report, we define revenues as any proceeds 
or receipts received by VA for EULs, sharing agreements, outleases, 
licenses, and permits. Not all land-use agreements generate revenues. 

[13] GAO, Assessing the Reliability of Computer-Processed Data, 
[hyperlink, http://www.gao.gov/products/GAO-09-680G], External Version 
I (July 2009). 

[14] Each year, the VA Central Office issues instructions to staff at 
the local medical centers alerting them about the need to update data 
in CAI. As part of this process, local centers are also asked to check 
data for accuracy, completeness, and validity. 

[15] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[16] We reviewed a total of 59 land-use agreements; of these, 25 did 
not generate revenue in fiscal year 2012. 

[17] Department of Veterans Affairs, Sharing Use of Space, Veterans 
Health Administration Handbook 1820.1 (Mar. 7, 2005). 

[18] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[19] Other practices include identifying and addressing needs by 
leveraging resources; developing mechanisms to monitor, evaluate, and 
report on results of the collaboration; reinforcing the agency's 
accountability for collaborative efforts through its plans and 
reports; and reinforcing individual accountability for collaborative 
efforts through performance-management systems. GAO, Results-Oriented 
Government: Practices That Can Help Enhance and Sustain Collaboration 
among Federal Agencies, [hyperlink, 
http://www.gao.gov/products/GAO-06-15] (Washington, D.C. Oct. 21, 
2005). This report identifies key practices that can help enhance and 
sustain agency collaboration. To identify practices for sustaining 
collaboration, we reviewed academic literature and prior GAO and 
Congressional Research Service reports in this area. We interviewed 
experts in coordination, collaboration, partnerships, and networks 
from organizations such as the National Academy of Public 
Administration, the IBM Center for The Business of Government, and the 
University of California at Berkeley. We also considered how the 
Government Performance and Results Act and the Office of Management 
and Budget address collaboration among agencies. 

[20] Department of Veterans Affairs, Administrative Fiscal Policies 
and Procedures, vol. VIII, ch. 1 (October 2013). 

[21] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[22] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[23] After executing an agreement in 2002 with a partner to provide 
vehicular parking spaces on the medical campus, a former VA 
contracting official modified a key term of that agreement 1 week 
later. Based on VA's proposal for the project, the department had 
intended to generate revenues by allowing the community to park in 
underutilized parking lots at various events. Specifically, the 
original agreement required the sharing partner to pay to VA 60 
percent of all gross revenues the sharing partner generates. Under the 
terms of the original agreement, VA would have received $960,000 in 
revenue for fiscal year 2012. According to the Long Beach contracting 
officer, who was responsible for this agreement at the time of our 
review, the timing and type of modification was unusual. Officials at 
VA headquarters stated that they could not recall if this modification 
was reviewed and approved by VA headquarters officials. 

[24] According to the current contracting officer, he has requested on 
several occasions all land-use agreements from West Los Angeles that 
he is responsible for monitoring, but West Los Angeles has not 
responded to his requests. 

[25] According to VA officials, the VA IG is conducting an 
investigation in which the IG seized all records related to land-use 
agreements. As such, we cannot determine whether such reports were 
provided, as required, to West Los Angeles officials and were reviewed 
by those officials. 

[26] The agreement would have also generated rental revenue in 
subsequent years. 

[27] According to West Los Angeles officials, the VA IG is conducting 
an investigation in which the IG seized all records related to land-
use agreements at the medical center. As such, we cannot determine 
whether the revenue provision was waived. 

[28] In August 2013, a federal judge found that certain sharing 
agreements in West Los Angeles medical center were unauthorized under 
the land-use authority under which they were executed. App. I provides 
more information about this ongoing litigation. 

[29] A West Los Angeles VA official stated that the company wanted an 
agreement for 10 years, but because of the ongoing lawsuit on sharing 
agreements VA could not extend the term of the agreement beyond 18 
months as a license. The company also wants to be reimbursed for the 
amount of improvements made to the space during the lease. 

[30] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[31] According to a West Los Angeles official, in 2012, West Los 
Angeles began negotiations with Los Angeles officials to formalize a 
sharing agreement for the city's use of the park. However, the 
official stated that negotiations were suspended as a result on 
ongoing litigation related to sharing agreements at the medical center. 

[32] In contrast, some of the sharing agreements we reviewed 
specifically include a provision that makes clear which party is 
responsible for securing/patrolling certain areas. VA policy requires 
a provision for security to be included in its written agreements. 

[33] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[34] The U.S. District Court for the Central District of California 
ruled in Valentini v. Shinseki--a case filed on behalf of disabled and 
homeless veterans--that VA violated the nature of its sharing 
authority when it leased portions of the campus surrounding the West 
Los Angeles medical center to 11 business and organizations for 
purposes unrelated to providing health care and treatment to veterans. 

[End of section] 

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