VA Medical Centers:

Internal Control over Selected Operating Functions Needs Improvement

GAO-04-755: Published: Jul 21, 2004. Publicly Released: Jul 21, 2004.

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The Department of Veterans Affairs (VA) provides health care to veterans through the $27 billion Veterans Health Administration (VHA) medical programs. VHA administers and operates VA's medical system, providing care to nearly 5 million patients in 2003. As of September 2003, VHA operated 160 hospitals, 847 outpatient clinics, 134 nursing homes, 42 domiciliaries, and 73 comprehensive home care programs, including facilities in every state, Puerto Rico, the Philippines, and Guam. VHA is responsible for effective stewardship of the resources provided to it by Congress, which asked GAO to review internal controls in three areas of operation at selected VHA medical centers. GAO conducted a review to assess the effectiveness of control activities over (1) personal property, (2) drugs returned for credit, and (3) part-time physician time and attendance.

GAO's review found that six selected VA medical centers lacked a reliable property control database. The property databases for the six medical centers contained incomplete information. As a result, GAO could not select a statistical sample of test items so that results could be projected to each location's entire property universe. Key policies and procedures established by VA to control personal property provided facilities with substantial latitude in conducting physical inventories and maintaining their property management systems, which resulted in reduced property accountability. For example, VA's Materiel Management Procedures handbook allowed the person responsible for custody of VA property to attest to the existence of that property rather than requiring independent verification. Also, personnel at some locations interpreted a policy that established a $5,000 threshold for property that must be inventoried as a license to ignore VA requirements to account for lower cost items that are susceptible to theft or loss, such as personal computers and peripheral equipment. These weak practices, combined with lax implementation, resulted in low levels of accountability and heightened risk of loss. VHA personnel located fewer than half of the 100 items GAO selected at each of five medical centers and 62 of 100 items at the sixth medical center. The process for obtaining credit for recalled, expired, or deteriorated drugs was, in essence, an honor system. Each of the six pharmacies GAO visited used a contractor to return drugs to the manufacturer for credit, but only one of the pharmacies inventoried non-narcotic drugs before they were turned over to the contractor. None of the pharmacies had enough information about which drugs qualified for credit to be able to reconcile the credits they received with the drugs they had turned over to the contractor. There was no agency-level oversight of returned drug information to help identify improvements that might increase the credits that VA receives. At four of the six facilities, non-narcotic drugs held for return were stored in unsecured open bins accessible to anyone in the pharmacy. The combined lack of record keeping and physical controls over non-narcotic drugs held for return exposed them to potential loss, theft, or unauthorized use. Scheduled and actual hours worked by part-time physicians at the six locations GAO visited were not always documented in accordance with a January 2003 VHA directive. Five of the six locations had not prepared written work schedules for all part-time physicians as required. GAO found that latitude provided in the directive resulted in wide variation in procedures used by the six medical centers to verify physician compliance with work schedules. While some timekeepers used informal notes to record daily attendance, one facility required physicians to sign in. However, on the day of GAO's review, only two of 15 scheduled physicians had signed in. Attendance monitoring procedures at the six locations varied in frequency and included monitoring all part-time physicians once per quarter at one location and 5 percent of part-time physicians each month at another.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretary for Management to clarify existing guidance and establish consistent parameters for personal property that is required to be accounted for in the property control records and that is subject to physical inventory to include sensitive property.

    Agency Affected: Department of Veterans Affairs

    Status: Closed - Implemented

    Comments: On October 11, 2005, VA's Chief Management Officer issued a modification to VA's Materiel Management Procedures, Handbook 7127/4, which stated that sensitive items, regardless of cost, should be included in annual equipment inventories. In addition, the guidance provided an expanded list of eight categories of sensitive items, including handheld and portable communication devices such as PalmPilots and Blackberries, printers, data storage equipment including desktop computers and laptops, video imaging equipment, and cell phones. By emphasizing the importance of tracking sensitive items subject to theft, loss, or conversion, these new policies will improve accountability over personal property and equipment at VA medical centers.

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretary for Management to provide a more comprehensive list of the type of personal property assets that are considered sensitive for accountability purposes.

    Agency Affected: Department of Veterans Affairs

    Status: Closed - Implemented

    Comments: On October 11, 2005, VA's Chief Management Officer issued a modification to VA's Materiel Management Procedures, Handbook 7127/4, stated that sensitive items, regardless of cost, should be included in annual equipment inventories. In addition, the guidance provided an expanded list of eight categories of sensitive items, including handheld and portable communication devices such as PalmPilots and Blackberries, printers, data storage equipment including desktop computers and laptops, video imaging equipment, and cell phones. By emphasizing the importance of tracking sensitive items subject to theft, loss, or conversion, these new policies will improve accountability over personal property and equipment at VA medical centers.

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretary for Management to direct that physical inventories of personal property be performed by the A&MM staff or other parties who are independent of those with property custodian responsibilities.

    Agency Affected: Department of Veterans Affairs

    Status: Open

    Comments: On October 11, 2005, the Department of Veterans Affairs Chief Management Officer issued VA Handbook 7127/4. This handbook updated VA's Materiel Management Procedures to require that all completed Equipment Inventory Listing (EIL) inventories will have a 5 percent verification inventory conducted by an Accountable Officer or designee, a disinterested party, and the Custodial Officer or designee. However, the handbook did not direct that the independent party should perform the physical inventories and 5 percent verifications do not suffice for independent inventories. During fiscal year 2008, the Department of Veterans Affairs (VA) began furnishing the Office of Information and Technology (OIT) employees with hand scanners for use scanning property identification data on information technology (IT) equipment into the property inventory systems. VA reports they are currently assessing how many hand scanners their facilities need. The use of hand scanners for capturing IT equipment bar code label and serial number information during physical inventories would be an alternate means of achieving independence. However, VA has not provided us with information on how many hand scanners they need nor how many facilities currently have hand scanners. For this reason, the recommendation remains open.

    Recommendation: The Secretary of Veterans Affairs should direct the Assistant Secretary for Management to reinforce VA's requirement to attach bar code labels to agency personal property.

    Agency Affected: Department of Veterans Affairs

    Status: Closed - Implemented

    Comments: Our 2007 and 2008 follow-up audits at several VA locations confirmed use of bar code labels on information technology (IT) equipment items. In addition, on June 25, 2008, VA conducted a national property conference call with local property representatives at various field locations. During the conference call, Office of Acquisition and Logistics officials reinforced VA's requirement to attach bar code labels to agency personal property, including computer equipment.

    Recommendation: To improve accuracy of VA's time and attendance records for part-time physicians, the Secretary of Veterans Affairs should direct the Assistant Secretary for Management to coordinate all time and attendance system changes with VHA, in order to ensure that the time and attendance system facilitates entry of actual hours and days worked by part-time physicians into VA's permanent electronic time and attendance record.

    Agency Affected: Department of Veterans Affairs

    Status: Open

    Comments: The Department of Veterans Affairs reported in its Fiscal Year 2006 Budget Submission (Summary Volume) that VHA's effort to reform physician timekeeping practices is continuing, with progress being monitored by the National Leadership Board (NLB) through the Human Resources Committee (HRC). In addition, the Budget Submission noted that an effort was underway to move from a paper timekeeping record system to an electronic system. However, GAO has not received documentation of this or any other time and attendance system change, or of its coordination by the Assistant Secretary for Management.

    Recommendation: To improve oversight of medical center operations, the Acting Under Secretary for Health should designate a headquarters-level staff office to monitor medical facilities' credits for returned drugs.

    Agency Affected: Department of Veterans Affairs: Office of the Under Secretary for Health

    Status: Open

    Comments: Pharmacy managers at 3 of the 6 Department of Veterans Affairs medical centers where we conducted testing reported that the tracking of drugs returned for credit has improved through the use of more detailed reporting and online tracking capabilities. However, officials at the Veterans Health Administration headquarters have not provided documentation of specific efforts they have initiated to improve oversight of drugs returned for credit.

    Recommendation: To improve oversight of medical center operations, the Acting Under Secretary for Health should review returned drug credits and related pertinent information for VA medical facilities and determine, especially for those with unusual performance patterns, whether there might be additional opportunities for credits.

    Agency Affected: Department of Veterans Affairs: Office of the Under Secretary for Health

    Status: Open

    Comments: Pharmacy managers at 3 of the 6 Department of Veterans Affairs medical centers where we conducted testing reported that the tracking of drugs returned for credit has improved through the use of more detailed reporting and online tracking capabilities. However, officials at the Veterans Health Administration headquarters have not provided documentation of specific efforts they have initiated to improve oversight of drugs returned for credit.

    Recommendation: To improve oversight of medical center operations, the Acting Under Secretary for Health should develop procedures to periodically test whether the amount of credits received for returned drugs is correct.

    Agency Affected: Department of Veterans Affairs: Office of the Under Secretary for Health

    Status: Open

    Comments: Pharmacy managers at 3 of the 6 Department of Veterans Affairs medical centers where we conducted testing reported that the tracking of drugs returned for credit has improved through the use of more detailed reporting and online tracking capabilities. However, officials at the Veterans Health Administration headquarters have not provided documentation of specific efforts they have initiated to improve oversight of drugs returned for credit.

    Recommendation: To improve oversight of medical center operations, the Acting Under Secretary for Health should implement procedures to periodically test whether the amount of credits that medical centers received for returned drugs is correct.

    Agency Affected: Department of Veterans Affairs: Office of the Under Secretary for Health

    Status: Open

    Comments: Pharmacy managers at 3 of the 6 Department of Veterans Affairs medical centers where we conducted testing reported that the tracking of drugs returned for credit has improved through the use of more detailed reporting and online tracking capabilities. However, officials at the Veterans Health Administration headquarters have not provided documentation of specific efforts they have initiated to improve oversight of drugs returned for credit.

    Recommendation: To improve oversight of medical center operations, the Acting Under Secretary for Health should conduct a best practices review of procedures implemented by VA medical centers and service areas to identify those most effective in documenting daily attendance of part-time physicians and periodically monitoring employee compliance with time and attendance requirements.

    Agency Affected: Department of Veterans Affairs: Office of the Under Secretary for Health

    Status: Open

    Comments: According to the Department of Veterans Affairs (VA) Fiscal Year 2006 Budget Submission Handbook, VA has accepted the "hours bank" concept for tracking part-time physician time and attendance. Under this concept, participating physicians will be paid a level amount over a period of time agreed to in a signed Memorandum of Service Level Expectations (MSLE). Prior to each pay period, the supervisor will negotiate with the participating physician and develop a schedule for the upcoming pay period based on VA requirements. A subsidiary record will track the number of hours actually worked, and a reconciliation will be performed at the end of the MLSE period. According to the Budget Handbook, the policy and details of the MSLE would be provided in a revision to VA Handbook 5011. We checked all revisions to VA Handbook 5011, however, and did not find details of the MSLE policy. VA has not provided additional documentation to confirm that any best practices have been studied or implemented.

    Recommendation: To improve oversight of medical center operations, the Acting Under Secretary for Health should use the results of the best practices review to provide more definitive policy guidance to improve control effectiveness over part-time physician attendance monitoring.

    Agency Affected: Department of Veterans Affairs: Office of the Under Secretary for Health

    Status: Open

    Comments: According to the Department of Veterans Affairs (VA) Fiscal Year 2006 Budget Submission Handbook, VA has accepted the "hours bank" concept for tracking part-time physician time and attendance. Under this concept, participating physicians will be paid a level amount over a period of time agreed to in a signed Memorandum of Service Level Expectations (MSLE). Prior to each pay period, the supervisor will negotiate with the participating physician and develop a schedule for the upcoming pay period based on VA requirements. A subsidiary record will track the number of hours actually worked, and a reconciliation will be performed at the end of the MLSE period. According to the Budget Handbook, the policy and details of the MSLE would be provided in a revision to VA Handbook 5011. We checked all revisions to VA Handbook 5011, however, and did not find details of the MSLE policy. VA has not provided additional documentation to confirm that any best practices have been studied or implemented.

    Recommendation: To address the weaknesses noted during our visits to six VA medical centers, the Acting Under Secretary for Health should require the directors of those medical centers to determine the location or disposition of personal property items not found during our site visits.

    Agency Affected: Department of Veterans Affairs: Office of the Under Secretary for Health

    Status: Closed - Implemented

    Comments: VA's Deputy Under Secretary for Health for Operations and Management directed that the six medical centers conduct wall to wall inventories of Equipment Inventory Listings (EILs) by March 31, 2005. VA further required that upon completion of the wall to wall inventories, the Network Director must submit certification that inventories were accomplished, identifying any discrepancies and required reports of surveys on items that could not be found. At two of the medical centers, these wall to wall equipment surveys had been conducted as required by VA management, and the reports of surveys for items that could not be located had been issued. At the other four locations, the wall to wall inventory surveys are in the process of being conducted. In requiring that the medical centers conduct these inventories and report on equipment that could not be found, VA has taken appropriate measures to improve oversight and visibility of personal property and equipment items at the 6 medical centers where we conducted testing.

    Recommendation: To address the weaknesses noted during our visits to six VA medical centers, the Acting Under Secretary for Health should require the directors of those medical centers to review property records to identify and correct erroneous or incomplete data fields.

    Agency Affected: Department of Veterans Affairs: Office of the Under Secretary for Health

    Status: Open

    Comments: In June 2008, Department of Veterans Affairs (VA) Office of Information and Technology Oversight and Compliance (ITOC) officials advised us that they planned to review the erroneous and blank data fields at the six medical centers we visited. In addition, VA officials indicated they plan to review the data fields at a national level using a data warehouse and will provide reports to the sites by September 1, 2008. Since VA has not yet reviewed or corrected these erroneous and blank data fields, this recommendation remains open.

    Recommendation: To address the weaknesses noted during our visits to six VA medical centers, the Acting Under Secretary for Health should require the directors of those medical centers to prepare a running list of all non-narcotic drugs held for return in facility pharmacies as they are removed from current supplies to compare with contractor-prepared lists of returned drugs.

    Agency Affected: Department of Veterans Affairs: Office of the Under Secretary for Health

    Status: Open

    Comments: Pharmacy managers at 3 of the 6 Department of Veterans Affairs medical centers where we conducted testing reported that the tracking of drugs returned for credit has improved through the use of more detailed reporting and online tracking capabilities. However, officials at the Veterans Health Administration headquarters have not provided documentation of specific efforts they have initiated to improve oversight of drugs returned for credit.

    Recommendation: To address the weaknesses noted during our visits to six VA medical centers, the Acting Under Secretary for Health should require the directors of those medical centers to improve physical security over non-narcotic drugs held for return in facility pharmacies as they are removed from current supplies.

    Agency Affected: Department of Veterans Affairs: Office of the Under Secretary for Health

    Status: Open

    Comments: Pharmacy managers at 3 of the 6 Department of Veterans Affairs medical centers where we conducted testing reported that the tracking of drugs returned for credit has improved through the use of more detailed reporting and online tracking capabilities. However, officials at the Veterans Health Administration headquarters have not provided documentation of specific efforts they have initiated to improve oversight of drugs returned for credit.

    Recommendation: To address the weaknesses noted during our visits to six VA medical centers, the Acting Under Secretary for Health should require the directors of those medical centers to analyze information regarding drugs returned to manufacturers to identify potential improvements that might increase the amount of credits received, such as improving the timeliness of returning drugs consistently turned in too late to qualify for credit.

    Agency Affected: Department of Veterans Affairs: Office of the Under Secretary for Health

    Status: Open

    Comments: Pharmacy managers at 3 of the 6 Department of Veterans Affairs medical centers where we conducted testing reported that the tracking of drugs returned for credit has improved through the use of more detailed reporting and online tracking capabilities. However, officials at the Veterans Health Administration headquarters have not provided documentation of specific efforts they have initiated to improve oversight of drugs returned for credit.

    Recommendation: The Acting Under Secretary for Health should determine whether the above recommendations pertaining to the facilities we visited are applicable to all VA medical facilities.

    Agency Affected: Department of Veterans Affairs: Office of the Under Secretary for Health

    Status: Open

    Comments: The Department of Veterans Affairs reported in its Fiscal Year 2006 Budget Submission (Summary Volume) that all Veterans Integrated Service Networks were directed to submit a listing of all equipment that should be identified as a sensitive item for accountability purposes. Listings are due by March 31, 2005. Once received, a Clinical Logistics Work Group will be formed to develop a master comprehensive listing of item identified as sensitive and forwarded to the field for implementation. In addition, all Networks were directed to submit a listing of equipment within the facility, identifying each by name, number of line items and annual inventory date. Quarterly reports will be required identifying all inventories accomplished during the rating period with discrepancies noted. Further, the Budget Submission noted that VHA's effort to reform physician timekeeping practices is continuing, with progress being monitored by the National Leadership Board (NLB) through the Human Resources Committee (HRC). In addition, the Budget Submission noted that an effort was underway to move from a paper timekeeping record system to an electronic system. However, we have not received documentation of VA's implementation of these agency-wide efforts, and we have not received documentation of headquarter-level efforts to improve oversight of drugs returned for credit.

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