Financial Audit:

Department of Veterans Affairs Financial Statements for Fiscal Years 1989 and 1988

AFMD-91-6: Published: Nov 14, 1990. Publicly Released: Nov 14, 1990.

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GAO reviewed the Department of Veterans Affairs' (VA): (1) consolidated financial statements for the fiscal years ended September 30, 1989 and 1988; (2) financial operations and appropriation activity; and (3) self-assessment of internal controls.

GAO found that, except for property and equipment, the consolidated financial statements presented fairly the financial position of VA as of September 30, 1989 and 1988. GAO qualified its opinion due to missing or undocumented values of VA assets and inconsistent adherence to capitalization and depreciation policies by VA field personnel. GAO also found that: (1) VA net operating costs decreased slightly from 1988 to 1989; (2) VA health care and veterans benefits costs remained steady but could change in the future; (3) veterans' housing credit assistance would require substantial future appropriations; (4) the veterans' life insurance program was secure; (5) VA general administrative costs did not grow significantly; (6) VA had serious credit management problems; (7) Congress and VA management needed greater assurance that unused and unliquidated appropriations were properly accounted for; (8) automatic data processing (ADP) software maintenance and data integrity control weaknesses continued at all three VA data processing centers; (9) internal controls were ineffective in preventing and recovering erroneous benefit payments on behalf of deceased recipients; and (10) VA major accounting systems failed to conform with accounting principles and standards for ADP, property management, personnel and organizational management, program management, and accounting and financial management systems.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: VA Circular 00-91-2 was a joint product of the VA Office of Acquisition and Facilities and the Office of Finance. These procedures require fiscal, engineering, and supply officers to jointly certify annually that all real property is properly capitalized or expensed in accordance with the requirements of the circular, i.e., title II requirements.

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretaries for Finance and Planning and for Acquisition and Facilities to jointly develop policies and procedures for properly recording and reporting transactions affecting the capitalization of VA construction and maintenance and repair projects to be followed at the VA Finance Center as well as at all field engineering stations.

    Agency Affected: Department of Veterans Affairs

  2. Status: Closed - Implemented

    Comments: This recommendation is being addressed as part of the most current audit efforts of the VA's Office of Inspector General. Because VA is required to continue its audits on an annual basis as a result of the Chief Financial Officers Act of 1990, similar or identical recommendations will be repeated until corrective action has been achieved. Therefore, VA considers prior-year recommendations closed. However, corrective actions continue.

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretaries for Finance and Planning and for Acquisition and Facilities to jointly establish policies and procedures to remove all equipment items from the equipment system database that do not meet the VA capitalization threshold.

    Agency Affected: Department of Veterans Affairs

  3. Status: Closed - Implemented

    Comments: This recommendation is being addressed as part of the most current audit efforts of VA's Office of Inspector General. Because VA is required to continue its audits on an annual basis as a result of the Chief Financial Officers Act of 1990, similar or identical recommendations will be repeated until corrective action has been achieved. Therefore, VA considers prior-year recommendations closed. However, corrective actions continue.

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretaries for Finance and Planning and for Acquisition and Facilities to jointly establish policies and procedures to distinguish the capitalized equipment from noncapitalized equipment, for accounting purposes.

    Agency Affected: Department of Veterans Affairs

  4. Status: Closed - Implemented

    Comments: This recommendation is being addressed as part of the most current audit efforts of VA's Office of Inspector General. Because VA is required to continue its audits on an annual basis as a result of the Chief Financial Officers Act of 1990, similar or identical recommendations will be repeated until corrective action has been achieved. Therefore, VA considers prior-year recommendations closed. However, corrective actions continue.

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretaries for Finance and Planning and for Acquisition and Facilities to jointly establish policies and procedures to reconcile, and make necessary adjustments for, the capitalized equipment component of the equipment property system, to agree with the general ledger control account balance.

    Agency Affected: Department of Veterans Affairs

  5. Status: Closed - Implemented

    Comments: This recommendation is being addressed as part of the most current audit efforts of VA's Office of Inspector General. Because VA is required to continue its audits on an annual basis as a result of the Chief Financial Officers Act of 1990, similar or identical recommendations will be repeated until corrective action has been achieved. Therefore, VA considers prior-year recommendations closed. However, corrective actions continue.

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretaries for Finance and Planning and for Acquisition and Facilities to jointly establish policies and procedures to determine an appropriate method for maintaining the general control account and the subsidiary system in balance.

    Agency Affected: Department of Veterans Affairs

  6. Status: Closed - Implemented

    Comments: The VA Assistant Secretary for Information Resources Management has developed procedures for independent testing of software program code changes. The new procedures were implemented for the PAID Redesign System (Payroll) with the initial data entry phase installation in January 1991. In addition, the other two centers have a software quality and control division to test all program code changes.

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretary for Information Resources Management and the Chief Benefits Director to jointly revise existing ADP internal control policy and procedures to ensure that each of the three VA data processing centers provide for independent testing of all software program code changes.

    Agency Affected: Department of Veterans Affairs

  7. Status: Closed - Implemented

    Comments: All recommendations have been implemented at the Austin Center and at other centers, where applicable. All three centers have been realigned under different management since GAO audit and prior issues will be revisited and a corrective action plan, if warranted, completed by the end of FY 1991.

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretary for Information Resources Management and the Chief Benefits Director to jointly revise existing ADP internal control policy and procedures to ensure that each of the three VA data processing centers provide for limiting programmers' access to systems' operating programs and production programs and data files to that which is necessary to carry out their job requirements.

    Agency Affected: Department of Veterans Affairs

  8. Status: Closed - Implemented

    Comments: VA has revised existing ADP internal control policies and procedures to ensure that an operationally tested disaster recovery plan exists at its Hines and Austin data processing centers. The contingency and disaster recovery plans were implemented in December 1993 at the Hines Benefit Center and in March 1994 at the Austin Automation Center. VA's disaster recovery plan for its Philadelphia Center was updated in October, 1994 and appeared to be sound according to independent auditors. Although revisions have not been fully tested, the auditors believe these revisions would not have a serious impact on VA's financial statements. VA's IG will continue to follow up and monitor contingency and disaster recovery planning at the data processing centers as part of its annual financial statement audits.

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretary for Information Resources Management and the Chief Benefits Director to jointly revise existing ADP internal control policy and procedures to ensure that each of the three VA data processing centers provides for a documented and operationally tested contingency plan.

    Agency Affected: Department of Veterans Affairs

  9. Status: Closed - Implemented

    Comments: This recommendation is being addressed as part of the most current audit efforts of the VA's Office of Inspector General. Because VA is required to continue its audits on an annual basis as a result of the Chief Financial Officers Act of 1990, similar or identical recommendations will be repeated until corrective action has been achieved. Therefore, VA considers prior-year recommendations closed. However, corrective actions continue.

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretary for Finance and Planning to revise existing internal control and accounting policies and procedures for VA property, equipment, and related depreciation to meet the requirements of generally accepted accounting principles.

    Agency Affected: Department of Veterans Affairs

  10. Status: Closed - Implemented

    Comments: Policy and procedural guidance for identifying and recovering erroneous payments were developed and implemented in December 1992 with the issuance of VBA Circular 20-91-24, "Recertification Procedures for CARD Death Cases."

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretary for Finance and Planning and the Chief Benefits Director to jointly issue policy and procedural guidance to ensure the prompt identification and recovery of all erroneous benefit payments.

    Agency Affected: Department of Veterans Affairs

 

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