This is the accessible text file for GAO report number GAO-03-434 
entitled 'Small Business: The National Veterans Business Development 
Corporation's Progress in Providing Small Business Assistance to 
Veterans' which was released on April 30, 2003.

This text file was formatted by the U.S. General Accounting Office 
(GAO) to be accessible to users with visual impairments, as part of a 
longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov.

Report to Congressional Committees:

April 2003:

Small Business:

The National Veterans Business Development Corporation's Progress in 
Providing Small Business Assistance to Veterans:

GAO-03-434:

GAO Highlights: 

Highlights of GAO-03-434, a report to the House and Senate Committees 
on Small Business and Veterans' Affairs. 

Why GAO Did This Study:

The Veterans Entrepreneurship and Small Business Development Act of 
1999 (Act) created the National Veterans Business Development 
Corporation (The Veterans Corporation) to address perceived gaps in 
providing small business and entrepreneurship assistance to veterans.  
The Act requires GAO to review The Veterans Corporation.  As agreed 
with committee staff, GAO described The Veterans Corporation’s (1) 
efforts to provide small business assistance to veterans, including 
service-disabled veterans; (2) use of and controls over federal funds 
in providing these services; and (3) efforts to become financially 
self-sufficient.  

What GAO Found:

The Veterans Corporation is providing veterans with entrepreneurial 
training, on-line educational resources, micro loans, business 
insurance, and an on-line marketplace.  The Veterans Corporation 
identified initial challenges that slowed program progress, including 
getting information on transitioning military personnel; and veteran-
owned businesses; and delays in making management appointments.  
Because the programs are new, it is too early to determine their 
effectiveness.

During its first 2 years of operation, The Veterans Corporation spent 
about $5 of $8 million in total federal appropriations; about $1 
million in fiscal year 2001; and about $4 million in fiscal year 2002, 
with the largest part of the increase due to salaries and program costs.  An external audit for fiscal year 2001 identified internal control issues, such as the lack of adequate supporting documentation for disbursements and untimely reconciliation of bank accounts.  According to the external auditor, all but one of the deficiencies was addressed in 2002.

The Veterans Corporation has developed a financial self-sufficiency 
plan based on four major revenue sources—an on-line marketplace, a 
credit card program, an insurance service program, and fund-raising.  
At the time of GAO’s review, most of these efforts were just beginning 
to produce revenue.  According to the plan, The Veterans Corporation is 
not expected to achieve self-sufficiency until the fourth quarter of 
fiscal year 2004.  If outcomes do not meet projections, Veterans 
Corporation officials stated that they would explore alternatives.

www.gao.gov/cgi-bin/getrpt?GAO-03-434.

To view the full report, including the scope
and methodology, click on the link above.
For more information, contact William O. Jenkins, Jr. at (202) 
512-8757, or JenkinsWO@gao.gov.

[End of section]

Letter:

Results in Brief:

Background:

The Veterans Corporation Initiates Entrepreneurial Services to 
Veterans:

The Veterans Corporation's Use of and Controls over Federal Funds 
Received:

Financial Self-Sufficiency Plan in Place but Too Early to Determine the 
Likelihood of Success:

Agency Comments and Our Evaluation:

Appendixes:

Appendix I: Scope and Methodology:

Appendix II: Timeline of The Veterans Corporation’s Key Efforts and
Activities:

Appendix III: The Veterans Corporation’s Initiatives in Response to
Statutory Requirements: 

Appendix IV: The Veterans Corporation’s Revenue and Expenses for Fiscal
Years 2001 and 2002:

Appendix V: The Veterans Corporation’s Salary, Bonus, and Payments to
Staff for Fiscal Years 2001 and 2002:

Appendix VI: Comments from The Veterans Corporation:

Appendix VII: GAO Contacts and Staff Acknowledgments:

GAO Contacts:

Acknowledgments:

Tables:

Table 1: The Veterans Corporation's Schedule of Expenses for Fiscal 
Years Ending September 30, 2001, and 2002:

Table 2: The Veterans Corporation's Schedule of Appropriations for 
Fiscal Years Ending September 30, 2001, and 2002:

Table 3: The Veterans Corporation's Schedule of Revenue for Fiscal Years 
Ending September 30, 2001, and 2002:

Table 4: The Veterans Corporation's Schedule of Contributions 
Receivable as of September 30, 2002:

Table 5: The Veterans Corporation's Federally Funded Expenses by 
Function for Fiscal Years Ending September 30, 2001, and 2002:

Table 6: The Veterans Corporation's Aggregate Compensation for 
Executive Management and All Other Staff for Fiscal Years Ending 
September 30, 2001, and 2002:

Figures:

Figure 1: The Veterans Corporation: Description and Status of Key 
Initiatives, as of March 2003:

Figure 2: The Veteran Corporation's Federally Funded Expenses by 
Function for Fiscal Years Ending September 30, 2001, and 2002 (dollars 
in thousands):

Figure 3: Sources of Other Income from Fund-raising and Activities for 
Fiscal Year Ending September 30, 2002 (dollars in thousands):

CCR: Central Contractor Registration:

CEO: Chief Executive Officer:

CFO: Chief Financial Officer:

DOD: Department of Defense:

FAR: Federal Acquisition Regulations:

OGC: Office of General Counsel:

PCAB: Professional Certification Advisory Board:

PCLAC: Professional Certification and Licensing Advisory Committee:

PRO-Net: Procurement Marketing and Access Network:

SBA: Small Business Administration:

SBIC: Small Business Investment Corporation:

UMET: Use Your Military Experience and Training:

VA: Department of Veteran Affairs:

VET: Veterans Entrepreneurial Training:

This is a work of the U.S. Government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. It may contain 
copyrighted graphics, images or other materials.
Permission from the copyright holder may be necessary should you wish to reproduce
copyrighted materials separately from GAO’s product.

Letter April 30, 2003:

Congressional Committees:

A Congressional report released in January 1999, identified gaps in the 
federal government's delivery of entrepreneurial services to 
veterans.[Footnote 1] Recognizing the need to assist the nation's 
veterans who choose to start or expand small businesses in their 
transition from military to civilian life, Congress created the 
National Veterans Business Development Corporation (The Veterans 
Corporation)--a chartered corporation--to provide small business and 
entrepreneurship assistance. The Veterans Entrepreneurship and Small 
Business Development Act of 1999 (Act), as amended, created The 
Veterans Corporation and, among other things, requires it to (1) 
improve access to technical assistance that promotes entrepreneurship, 
and (2) use public and private resources to assist veterans, including 
service-disabled veterans, with the formation and expansion of small 
businesses.[Footnote 2] To carry out these activities, the Act 
authorized the appropriation of $12 million in federal funds to The 
Veterans Corporation over a 4-year period. It also required that The 
Veterans Corporation implement a plan to raise private funds and become 
a self-sustaining corporation.

The Act also required GAO to evaluate the effectiveness of The Veterans 
Corporation in providing services to veterans. Because The Veterans 
Corporation's programs are still in their early stages, we agreed with 
the staffs of the House and Senate Committees on Small Business and 
Veterans' Affairs to describe (1) The Veterans Corporation's efforts in 
providing small business assistance to veterans, including service-
disabled veterans; (2) the use of and controls over federal funds to 
provide these services; and (3) the efforts of The Veterans Corporation 
to become financially self-sufficient.

To complete our work, we obtained and analyzed program information and 
corporate documents provided by The Veterans Corporation. To meet our 
objective to describe The Veterans Corporation's use of federal funds, 
we interviewed officials at The Veterans Corporation. We also obtained 
and analyzed The Veterans Corporation's fiscal years 2001 and 2002 
financial statements, obtained and reviewed minutes of board of 
directors meetings, and interviewed The Veterans Corporation's external 
auditors. We also interviewed officials from the staff and board of The 
Veterans Corporation, as well as officials from federal agencies, 
partnering organizations, and veteran service organizations. Please see 
appendix I for a more complete description of our scope and 
methodology.

We conducted our review from June 2002 through April 2003 in accordance 
with generally accepted government auditing standards. Written comments 
on a draft of this report from The Veterans Corporation appear in 
appendix VI. We also obtained technical comments from the Small 
Business Administration (SBA) and the Department of Veterans' Affairs 
(VA) that have been incorporated where appropriate.

Results in Brief:

The Veterans Corporation has made progress toward providing 
entrepreneurial services to veterans, despite some initial challenges. 
The Veterans Corporation officials stated that they have been careful 
not to duplicate existing services. The Veterans Corporation has 
launched efforts to provide entrepreneurial education and training 
through classroom instruction, seminars, and on-line educational 
resources. It has also started to provide entrepreneurial services to 
veteran-owned small businesses such as micro loans, business insurance, 
and on-line buying and selling of veteran-owned products and services. 
Officials identified some initial challenges that they faced, such as 
the difficulty in obtaining information from government sources on 
transitioning military personnel and veteran businesses, limited 
government participation in The Veterans Corporation activities, and 
delays in management appointments. Because The Veterans Corporation 
programs and processes are relatively new, it is too early to determine 
their effectiveness. However, The Veterans Corporation plans to assess 
program effectiveness periodically. As required by the Act, The 
Veterans Corporation has established a Professional Certification 
Advisory Board (PCAB) to (1) assist in creating uniform guidelines for 
the professional certification of transitioning members of the military 
and (2) remove license and certification barriers.

In fiscal years 2001 and 2002, Congress appropriated a total of $8 
million for The Veterans Corporation. These funds remain available to 
The Veterans Corporation until expended. According to The Veterans 
Corporation's audited financial statements for these 2 years, the 
Corporation spent about $4.7 million of the $8 million primarily on 
start-up costs, leaving an available balance of about $3.3 million as 
of September 30, 2002. Management has stated that its approach is to 
spend conservatively on programs and operating expenses in the start-up 
period so that unused federal appropriations can be used in future 
years. In fiscal year 2001, The Veterans Corporation spent about 
$985,000 for salaries, professional services, and other start-up costs, 
all funded by its federal appropriations and related interest earnings. 
In fiscal year 2002, The Veterans Corporation used federal funds to pay 
for salaries, professional services, start-up expenses, and program 
activities, including expenses related to The Veterans Marketplace--an 
on-line service that allows veteran-owned businesses to sell goods and 
services over the Internet. In fiscal year 2002, The Veterans 
Corporation began to realize other revenues, such as pledges, 
contributed services and in-kind contributions from nonfederal sources. 
As a result, federal appropriations accounted for about 57 percent of 
The Veterans Corporation's total revenues for fiscal year 2002. The 
Board of Directors is required to prescribe the manner in which the 
obligations of The Veterans Corporation may be incurred and how its 
expenses are allowed and paid. In The Veterans Corporation's first 
fiscal year, 2001, its external auditor identified some internal 
control issues, such as the failure to reconcile bank accounts on a 
timely basis and segregate cash duties, as well as the failure to 
maintain a filing system for accounting records. According to the 
external auditor, The Veterans Corporation has implemented corrective 
measures in fiscal year 2002 to address all but one of the identified 
deficiencies. The Veterans Corporation has acknowledged the remaining 
deficiency and plans to take corrective action in fiscal year 2003.

The Veterans Corporation has developed a plan to achieve financial 
self-sufficiency by September 30, 2004. The plan is based on four major 
sources of revenue: (1) an on-line electronic marketplace for veteran-
owned business goods and services, (2) a credit card program targeted 
to veteran-owned businesses, (3) an insurance service program designed 
to meet the needs of veteran-owned small businesses, and (4) fund-
raising. To calculate revenue assumptions, The Veterans Corporation 
relied on input from their partners on these efforts, which operate 
similar programs. It is too early to determine whether The Veterans 
Corporation will achieve its goal of becoming financially self-
sufficient by September 30, 2004. At the time of our review, three of 
the efforts were just beginning to produce revenue. Further, according 
to the plan, The Veterans Corporation is not expected to achieve self-
sufficiency until the fourth quarter of fiscal year 2004. Additionally, 
The Veterans Corporation earned about $2.8 million in cash, cash 
pledges, contributed services, and in-kind donations in fiscal year 
2002, fulfilling the Act's mandate that it raise an amount equal to 
one-half of its $4 million fiscal year 2002 federal appropriation. The 
Veterans Corporation intends to evaluate the plan on a quarterly basis 
to assess whether its strategies are sufficient to meet targeted 
projections. If these projections are not met, The Veterans Corporation 
officials stated that they would then consider alternative revenue 
sources to allow them to meet their self-sufficiency goal.

Background:

In the Veterans Entrepreneurship and Small Business Development Act of 
1999, as amended, Congress established various programmatic 
requirements for The Veterans Corporation to address perceived 
shortfalls in federally provided services for veterans. The Veterans 
Corporation is required to, among other things, (1) expand the 
provision of and improve access to technical assistance regarding 
entrepreneurship; (2) assist veterans with the formation and expansion 
of small businesses by working with and organizing public and private 
resources; (3) establish and maintain a network of information and 
assistance centers for use by veterans; (4) establish a PCAB to create 
uniform guidelines and standards for the professional certification of 
members of the armed services; and (5) assume the duties, 
responsibilities, and authority of the Advisory Committee on Veterans 
Business Affairs from the SBA by October 1, 2004.[Footnote 3]

To fund The Veterans Corporation, Congress authorized $12 million in 
federal appropriations over 4 fiscal years--$4 million in the first 
year, $4 million in the second year, and $2 million in each of the 
following 2 years--with the expectation that The Veterans Corporation 
would become financially self-sufficient. The Veterans Corporation 
received its first appropriation in March 2001. The Veterans 
Corporation is a nonprofit corporation chartered in the District of 
Columbia and has authority to, among other things, manage the manner in 
which it conducts business, enter into contracts, hire and dismiss 
officers and employees, and solicit, disburse, and manage its funds and 
assets.

The Act requires The Veterans Corporation to raise funds in order to 
match its federal appropriations. For the first fiscal year (fiscal 
year 2001), no matching requirement applied. For the second fiscal year 
(fiscal year 2002), The Veterans Corporation was required to raise $1 
for every $2 of federal appropriations. For the remaining 2 fiscal 
years, The Veterans Corporation is required to raise matching funds on 
a dollar-for-dollar basis.

A 12-member board of directors governs The Veterans Corporation. Nine 
voting members are presidential appointees, with not more than five 
members of the same political party. The three remaining members are 
nonvoting, representing the Administrator of the SBA, the Secretary of 
Defense, and the Secretary of Veterans Affairs. Voting members serve 6-
year terms; however, the terms of the initial appointees are staggered: 
three for a term of 2 years and three for a term of 4 years. The 
chairperson is one of the nine voting members and is elected by these 
members for a 2-year term. The chairperson supervises and controls all 
affairs of The Veterans Corporation in accordance with policies and 
directives approved by the board of directors. The board is organized 
into four committees: (1) executive, (2) corporate governance, (3) 
audit, and (4) business development. The corporate governance committee 
is responsible for, among other things, overseeing the strategic and 
business plans. The Veterans Corporation staff, of which there are 14, 
use these plans to help define their overall strategy and assess how 
well they are achieving their goals and objectives. Goals and 
objectives are then evaluated at the board meetings. The board met for 
the first time in September 2000; the board currently meets 
approximately on a quarterly basis.

The Veterans Corporation Initiates Entrepreneurial Services to 
Veterans:

The Veterans Corporation has several initiatives under way to provide 
small business education, training, and entrepreneurial services to 
veterans. Officials additionally have identified some initial 
challenges that have slowed the progress of these efforts, including 
(1) the inability to collect data on the veteran population, (2) 
limited government participation in The Veterans Corporation 
activities, (3) delays in appointing management, and (4) unclear 
corporate legal status of The Veterans Corporation. The Veterans 
Corporation has broad performance measures in place to monitor its 
programs at this early stage and are planning to develop more refined 
measures to assess effectiveness as the programs mature. The Veterans 
Corporation has established a PCAB--a body mandated by Congress to 
assist service members transition from the military to private-sector 
employment--but the issues surrounding private-sector recognition of 
military experience and training are large and complex, according to 
some officials.

Educational and Training Programs Under Way and The Veterans 
Corporation Is Developing Entrepreneurial Services:

According to an official at The Veterans Corporation, their corporate 
strategy has been to organize, coordinate, enhance, and expand existing 
business programs and services to military veterans interested in 
entrepreneurship. Additionally, their strategy is to provide programs 
not otherwise available to veteran-owned businesses. Officials at The 
Veterans Corporation said that they have been careful not to duplicate 
existing services but rather to leverage existing services whenever 
possible. The Managing Director of Operations and Government Relations 
at The Veterans Corporation stated that their approach is to develop 
public and private resources that may include coordinating with local 
business services where appropriate.

	Education and Training:

In response to veteran needs for small business education and training, 
The Veterans Corporation has offered classroom instruction, seminars, 
and on-line educational resources. The Veterans Corporation has hosted 
three initial Veterans Entrepreneurial Training (VET) programs, which 
produced 64 graduates, for veterans interested in starting a business 
or seeking to improve their current business. The initial locations 
included Riverside, California; Portland, Maine; and Arlington, 
Virginia. The VET program incorporates classroom instruction, 
mentoring, networking, and technology training. An official at The 
Veterans Corporation stated that program participants pay $350 of the 
program's $1,850 cost for 45 hours of classroom instruction and, as an 
added benefit, receive a voucher valued at $675 to purchase a Gateway 
computer upon successfully completing the program. The Veterans 
Corporation officials said that the program is a partnership with the 
Ewing Marion Kauffman Foundation's FastTrac Program, a successful 
entrepreneurship-training program. Statistics from The Veterans 
Corporation's Web site makes reference to the Kauffman Foundation's 
overall success, which indicates that 60,000 people have completed the 
FastTrac program since 1987. Additionally, of this number, 88 percent 
were still in business 2 years later, and 77 percent were still in 
business and turning a profit 5 years later; overall, 64 percent have 
seen their sales increase. An official at The Veterans Corporation said 
that for fiscal year 2003, they are planning a total of 30 VET courses. 
The official added that the program draws support from local Service 
Corps of Retired Executives chapters and Small Business Development 
Centers, whose members and staff serve as either mentors or classroom 
speakers.

The Veterans Corporation has also piloted two, 1-day Veterans Business 
Success Seminars on the skills needed to start a business. The seminars 
were held in Boise, Idaho, and Cleveland, Ohio, and included 
discussions on business plans, marketing analysis, and financing. 
According to an official at The Veterans Corporation, 30 veterans 
participated in the first two seminars. The official explained that 
they are adopting a new strategy to more consistently meet the mandate 
to establish and maintain a network of information and assistance 
centers for use by veterans and the public. Under this strategy, The 
Veterans Corporation will utilize community-based organizations to 
provide veterans support with a combination of workshops, seminars and 
courses tailored to local needs. The official added that The Veterans 
Corporation is in discussions with the SBA on funding four test sites 
to be launched by May 2003.

	On-Line Educational Resources:

In April 2002, The Veterans Corporation's Web site became operational; 
it contains information on training, capital, and other business 
resources. A board member of The Veterans Corporation told us that The 
Veterans Corporation views this Web site as helping to fulfill the 
requirement under the Act to establish and maintain a network of 
information and assistance centers for use by veterans and the public. 
The board member explained that building brick and mortar development 
centers would be prohibitively expensive and that the board's initial 
goal was to focus on leveraging existing services rather than 
duplicating private-sector services. For example, the Web site has 
links to other small business resources, including Entreworld, an on-
line small business resource library. Entreworld, which is sponsored by 
the Ewing Marion Kauffman Foundation, was one of the first Web sites 
assisting small businesses since 1996, according to the Entreworld Web 
site. Additionally, The Veterans Corporation's Web site has links to 
other on-line resources for veterans, such as those of the Department 
of Defense (DOD), SBA, and Department of Veterans Affairs (VA).

	Services to Entrepreneurs:

The Veterans Corporation has launched or started to develop various 
initiatives to provide entrepreneurial services, such as access to 
capital through a micro loan program, business insurance, and on-line 
buying and selling of veteran-owned goods and services. While these 
services are intended to assist veterans with formulating or expanding 
businesses, some of the services also provide revenue to The Veterans 
Corporation. (We discuss The Veterans Corporation's efforts to become 
self-sufficient later in this report.):

:

* Micro loan program. To help veterans gain access to capital, The 
Veterans Corporation established a regional micro loan program[Footnote 
4] for start-up businesses. The Veterans Corporation is working with 
regional banks to provide the loans. Participating banks in the micro 
loan program may also use SBA loan guarantees to help veterans obtain 
access to capital. An official told us that as of January 2003, the 
first early stage loan of $25,000 was made to a start-up, veteran-owned 
business and two other SBA lines of credit up to $150,000 were close to 
being finalized. As of April 2003, The Veterans Corporation has an 
agreement with Newtek Small Business Finance, Inc., to offer SBA loans 
and other services. The Veterans Corporation will be able to provide 
nationwide service in conjunction with its existing lenders.

* Veterans Marketplace. The Veterans Marketplace is an on-line purchase 
program for products and services produced by veteran-owned small 
businesses. The Veterans Corporation is partnering with eScout, a 
company that operates a similar electronic procurement business. The 
Veterans Marketplace targets procurements of $2,500 or less using an 
electronic purchase card system. Although the system is operational, 
The Veterans Corporation is in the process of building their customer 
lists of government and private companies. As of January 2003, there 
were 16 veteran-owned business sellers and 150 veteran-owned business 
buyers listed on The Veterans Marketplace. The Veterans Corporation 
plans to earn income from this effort through a revenue-sharing 
agreement with eScout that is based on volume of transactions, new 
member agreements, on-line purchases, and auction events hosted.

* Business Insurance Program. In December 2002, The Veterans 
Corporation started offering insurance services through the Aon 
Financial Institution Alliance to veteran-owned businesses. The 
services include health insurance for employees, legal representation, 
and, for small businesses, computer protection assistance against 
viruses and hackers. The Veterans Corporation anticipates producing 
revenue from this effort by collecting commissions from the Aon 
Financial Institution Alliance. An official at The Veterans Corporation 
stated that as of April 2003, the first small group health insurance 
policy was sold as well as over 100 quotes requested or applications 
completed.

* Veterans Corporation Platinum BusinessCard. The Veterans Corporation 
began offering a veterans business credit card in January 2003. The 
card includes features such as a business credit line and cash back on 
purchases. According to an official at The Veterans Corporation, 165 
credit cards have been approved and issued, as of April 2003.

* Veterans Capital Fund. The Veterans Corporation is also seeking to 
establish a venture capital fund to invest in both veteran-owned and 
other businesses. The fund will be structured as a Small Business 
Investment Company (SBIC), which is licensed by SBA and features 
opportunities to leverage private equity investments for government 
guarantees. Once operational, The Veterans Corporation will own 10 
percent of the limited partnership and 17.5 percent of the general 
partnership. According to an official at Equisource, a management 
investment firm that is acting as a placement agent for the Veterans 
Corporation, the fund will seek to invest partly, but not only, in 
veteran-owned businesses. The official said that The Veterans 
Corporation would use profits realized from the fund to provide for 
veteran programs and services.

Figure 1 shows The Veterans Corporation's status of key initiatives. 
Additionally, appendix II contains a chronology of The Veterans 
Corporation's key activities, and appendix III lists The Veterans 
Corporation's activities that address the statutory requirements of the 
Act.

Figure 1: The Veterans Corporation: Description and Status of Key 
Initiatives, as of March 2003:

[See PDF for image]

Note: GAO analysis of The Veterans Corporation data.

[End of figure]

	Outreach to Service-Disabled Veterans:

Officials at The Veterans Corporation describe their outreach as 
targeting all veterans, including service-disabled veterans. 
Generally, they do not have separate efforts for the service-disabled 
population. The officials, however, referenced efforts to make certain 
programs and services available to the service-disabled population. For 
example, the VET program reserves 10 spaces in each class for the 
service-disabled. In the first three VET courses completed, 19 of 64 
graduates, or 30 percent, registered as service-disabled veterans. In 
another effort just recently launched, service-disabled veterans who 
purchase insurance products through The Veterans Corporation will 
receive an additional discount. Officials further said that in the 
future, they would like to offer distance learning in their 
entrepreneurial training program to provide greater access to the 
physically disabled veteran.

Initial Challenges Slow Progress of The Veterans Corporation's Programs 
and Initiatives:

The Veterans Corporation officials said that progress on programs has 
been hampered by their inability to collect information from government 
sources on military personnel transitioning to civilian life and 
existing veteran-owned businesses. One of the officials explained that 
the success of programs such as The Veterans Marketplace and VET 
program is largely dependent on their ability to identify and reach 
transitioning service members and veteran-owned businesses. The 
Veterans Corporation officials said that if they were not successful in 
obtaining this data, they would have to rely on developing data from 
attendance lists from their training and education programs and other 
available sources. Officials stressed that this would slow the 
development of a client database.

Privacy Issues Prevent Government Agencies from Sharing Information on 
Veterans; Publicly Available Data Are Limited:

The Veterans Corporation has requested information from DOD and VA, 
respectively, on (1) military service members nearing retirement or 
separation and (2) veteran-owned and service-disabled, veteran-owned 
businesses. Both DOD and VA officials said that privacy laws prohibit 
them from providing personal information such as names and addresses of 
the military and veteran population. A DOD official stated that their 
policy prohibits them from releasing private information on enlisted 
military to any public or private organization. The DOD official 
further cited a November 9, 2001, memorandum for DOD Freedom of 
Information Act Offices that supports the withholding of personally 
identifiable information for security reasons in response to the events 
of September 11, 2001. VA's Office of the General Counsel (OGC) issued 
a legal opinion on December 12, 2002, which states that the Act does 
not direct the Secretary of VA to construct a database for use by The 
Veterans Corporation. Furthermore, VA's OGC stated that there are no 
provisions within existing confidentiality laws that would permit the 
sharing of information as proposed. However, in response to our draft 
report, VA concluded that it could disclose a list of names and 
addresses of veterans and their small businesses to the public, 
including The Veterans Corporation. Further, VA officials stated that 
arrangements are under way to make this information available on their 
Web site. However, it remains to be seen whether the information that 
will be available on VA's Web site will meet The Veterans Corporation's 
needs.

The Veterans Corporation has obtained access to some government 
databases as well as other publicly available information on veterans-
-for example, SBA's Procurement Marketing and Access Network (PRO-Net) 
database, which contains information on veteran-owned business. The 
Veterans Corporation has also gained access to DOD's Central Contractor 
Registration (CCR) database that contains information on prime and 
subcontractors of the federal government. CCR contains over 200,000 
business listings of which 30,000 were listed as veteran-owned. DOD has 
required that The Veterans Corporation sign a standard nondisclosure 
agreement. But, an official at The Veterans Corporation said that the 
agreement contains language that they "shall not use such data for 
commercial purposes;" the agreement is currently under legal review at 
The Veterans Corporation. According to SBA officials, PRO-Net is 
currently merging with CCR, and current registrants from both databases 
are being asked to reregister into the combined database.

The Veterans Corporation has also utilized some publicly available 
information on veterans, but the information is in aggregate form and 
does not enable them to identify individuals seeking entrepreneurial 
assistance. According to officials at The Veterans Corporation, they 
were not aware of any public sources of data with names and addresses 
that could be used to identify veterans who may be seeking 
entrepreneurial assistance. For instance, The Veterans Corporation 
officials said they used public data from the VA Web site for 
information on where veterans live, by state and county and for age and 
gender. This information was used to help determine locations for VET 
classes and Veterans Business Success Seminars. Additionally, The 
Veterans Corporation identified a private data source that lists about 
190,000 veteran-owned businesses. An official said that the private 
data source does not collect E-mail addresses and questioned whether 
the records have current mailing addresses. Officials said that this 
effort has been put on hold because it was not viewed as worth the 
$90,000 acquisition cost.

Government Agencies Had Limited Participation in The Veterans 
Corporation Activities:

The Veterans Corporation is required to work with and organize public 
and private resources, including those of the federal government. An 
official at The Veterans Corporation indicated that collaboration with 
other federal agencies has been limited because of other priorities at 
these agencies and because agencies are not required to carry out these 
multiagency initiatives. As stated previously, due to privacy issues 
The Veterans Corporation has had difficulty in obtaining data from DOD 
on military personnel transitioning to civilian life and from VA on 
veteran-owned businesses. The Veterans Corporation official suggested 
that a federal directive, such as a presidential executive order or 
Office of Management and Budget guidance, would help federal agencies 
understand The Veterans Corporation's mission and provide the agencies 
with instructions for assisting in these efforts.

Government officials with whom we spoke provided some examples of early 
collaboration with The Veterans Corporation. For instance, an SBA 
official stated that they have been active participants at board 
meetings, helped develop initiatives such as The Veterans Capital Fund 
(see fig. 1), and provided technical assistance. According to the 
official, SBA envisions that there will be additional, mutually 
beneficial relationships with other programs. A VA official stated that 
collaboration between VA and The Veterans Corporation has included 
establishing links on the respective Web sites, and invitations to 
speak at VA conferences. A DOD official also mentioned that the DOD Web 
site has a link to The Veterans Corporation's Veterans Entrepreneurial 
Training Program.

Delays in Management Appointments Slowed The Veterans Corporation's 
Activity:

Officials at The Veterans Corporation said that progress on their 
programs was initially hampered by delays in management appointments 
for positions such as the Chief Executive Officer (CEO) and board 
members. The officials explained that much time was spent searching for 
a permanent CEO. The CEO was appointed in October 2001. Until August 
2001, the staff at The Veterans Corporation were temporary employees, 
operating as contractors. Subsequently, the entire management team was 
hired in fiscal year 2002. Additionally, the Act called for the initial 
board members to be appointed by the President of the United States no 
later than 60 days after the legislation was enacted on August 17, 
1999. The initial presidential appointments, however, did not occur 
until a year after enactment. Eight of the nine voting members were 
appointed between August and December 2000, while the ninth member was 
appointed in November 2001.

Although initial board members had diverse backgrounds such as banking, 
engineering, and social services, Veterans Corporation and board 
officials said they would like to have board members with specific 
qualifications such as connections to corporations for fund-raising or 
political clout, experience on other boards of successful businesses, 
or first-hand entrepreneurial experience. Further, The Veterans 
Corporation staff believes that once government funding ends, they may 
benefit from a board whose voting members are not wholly presidentially 
appointed. They explained that the discretion to recruit board members 
from the private sector would allow The Veterans Corporation to augment 
the board's membership with the required business expertise necessary 
for The Veterans Corporation's long-term success. The Act does not 
include any specific rules or guidance for how The Veterans Corporation 
is to make the transition from a largely government-funded to a 
private, self-sufficient corporation. As one step in this transition, 
The Veterans Corporation has proposed that the Act creating the 
corporation be revised to give The Veterans Corporation input into the 
selection of the board after government funding ends. Specifically, the 
proposal calls for a board structure similar to that of Fannie Mae, a 
government-sponsored enterprise that engages in secondary loan market 
activity, in which only one-third of the directors are presidentially 
appointed.

Status of The Veterans Corporation as a Public Agency or Private 
Corporation Is Open to Interpretation:

Officials at The Veterans Corporation have indicated that differences 
in interpretation regarding the legal status of The Veterans 
Corporation as either a public agency or private corporation have, at 
times, complicated organizational and program development efforts. The 
Veterans Corporation has obtained various legal opinions on its 
corporate legal status with respect to personnel and procurement 
requirements with differing results. They referenced an opinion from 
the Office of Personnel Management on whether the provisions of Title 5 
of the U.S.C. applied to The Veterans Corporation. In a letter dated 
November 13, 2001, the Office of Personnel Management concluded that 
The Veterans Corporation was a government-controlled corporation and is 
subject to most provisions of Title 5, including provisions related to 
premium pay, awards, leave, and health benefits, among other things. In 
contrast, a law firm performing pro bono legal assistance to The 
Veterans Corporation--Fried, Frank, Harris, Shriver & Jacobson--issued 
a memorandum dated December 5, 2001, that stated "considering all the 
relevant factors, we believe that a court would find the NVBDC 
[Veterans Corporation] is not a Government-controlled corporation under 
5 U.S.C. §103 to which the 5 U.S.C. §5373 pay cap applies." In another 
instance, another law firm that also represents The Veterans 
Corporation--Hale and Dorr LLP--issued a memorandum dated April 2, 
2002, that stated that The Veterans Corporation "does not meet the 
definition of an executive agency [executive department, military 
department, wholly-owned government corporation, or independent 
establishments] triggering FAR [Federal Acquisition Regulations] 
mandates for procurement.":

The Veterans Corporation Plans to Put Evaluative Performance Measures 
in Place:

It is too early to determine the effectiveness of The Veterans 
Corporation programs to the veteran population because the programs are 
relatively new and, in some cases, just under way. Officials indicated 
that they have broad performance measures for programs such as 
participants' satisfaction ratings of the VET program and quantitative 
measures, such as the number of credit cards and insurance policies 
issued, and dollar volume of transactions for the Veterans Marketplace, 
which are used to determine whether they are meeting early program 
objectives. The Veterans Corporation's business plan has outlined some 
corporate objectives for fiscal year 2003, including delivering VET 
programs to at least 500 veterans and transitioning military personnel. 
Other objectives identified in the business plan include constructing a 
database that contains accurate information on at least 250,000 veteran 
business owners and expanding the micro loan program nationwide.

According to The Veterans Corporation officials, corporate objectives 
will be reviewed quarterly. As programs mature, The Veterans 
Corporation intends to assess program effectiveness periodically. 
Officials indicated that they do not yet have refined and tested 
measures to assess the extent their programs impact Veterans who seek 
to develop or expand their own businesses. The officials explained that 
at this early stage, there is a lack of historical [baseline] 
information against which to measure progress. Additionally, they plan 
to continue developing performance measures that assess overall program 
effectiveness.

Professional Certification Advisory Board Established but Progress Is 
Limited Because of Complex Issues:

As mandated by the Act, The Veterans Corporation formed a Professional 
Certification Advisory Board (PCAB) to (1) create uniform guidelines 
and standards for the professional certification of military personnel 
transitioning to civilian occupations and (2) remove potential 
licensure and certification barriers. Officials from another 
certification group told us that veterans traditionally have a hard 
time transitioning into private-sector employment because prospective 
employers have difficulty understanding military experience and 
training. Private sector employers are increasingly requiring proof or 
certification of certain skills. Licensing and certification are the 
two primary types of credentialing for individuals seeking civilian 
positions that are equivalent to enlisted military occupations. 
Occupations within the military that require private-sector 
certification or licensing include, among other things, automotive 
mechanic, dental assistant, electrician, flight engineer, medical 
laboratory technician, plumber, police officer, and truck driver. 
Licenses are granted by federal, state, and local government agencies 
while certification is the process by which a nongovernmental agency, 
association, or private sector company recognizes certain 
qualifications. PCAB officials agreed that the task at hand is quite 
large, involving multiple government entities.

The PCAB held its first meeting in October 2001. Subsequent, initial 
meetings were spent identifying the scope of issues and key players. 
The PCAB meets quarterly and has 26 members that serve voluntarily. The 
board established three committees, including the (1) Barriers 
Identification Committee, which is tasked with reviewing studies and 
research to identify barriers that affect transitioning military 
personnel; (2) Information Clearinghouse Committee, which is 
responsible for obtaining and disseminating certification, licensure, 
and small business development information; and (3) Research and 
Legislative Action Committee, which will analyze barriers and develop 
recommendations. According to the PCAB chairman, the committees are 
developing their goals and have not yet produced deliverables. The 
chairman explained that the Research and Legislation Action Committee 
would use information from the other two committees to develop 
recommendations.

One PCAB member acknowledged that while progress has been slow, he was 
uncertain whether the PCAB committees could work any faster. He 
stressed that the task at hand is quite large and that the pace of work 
is dependent on the collective efforts of 26 members who serve on a 
voluntary basis. For instance, one of the PCAB's committees established 
to identify certification and licensing obstacles is looking at which 
of the 105 identified military occupations have barriers, and it is 
reviewing the licensing procedures of 53 states and jurisdictions.

Some PCAB members also represent other certification groups, such as 
the Council of Licensure, Enforcement, and Regulation and the 
Commission for Certification in Geriatric Pharmacy. A few board members 
told us that representation from other certification efforts helps to 
avoid duplication and complements the efforts of other groups. For 
instance, one board member who also oversees the Department of Labor's 
"Use Your Military Experience and Training" (UMET) Web site on 
certification and licensing information stated that there is no overlap 
of effort. In fact, he said that the PCAB is utilizing UMET as a 
resource to obtain information on certification issues. Another board 
member, who also chairs VA's Professional Certification and Licensing 
Advisory Committee (PCLAC), agreed that the groups did not duplicate 
each other's efforts and explained that VA offers financial assistance 
to service members to cover the cost of certification, up to $2,000. 
PCLAC advises VA on the certification requirements that entities must 
meet in order to qualify for payment.

A Veterans Corporation board member with whom we spoke identified some 
concerns about communication between the PCAB and The Veterans 
Corporation board of directors. For instance, the official commented 
that there has been limited interaction between the PCAB and The 
Veterans Corporation board of directors. Others, including an official 
at The Veterans Corporation and a veterans group with whom we spoke, 
question whether The Veterans Corporation was the appropriate 
organization to carry out the PCAB's mission. They stated that the PCAB 
might distract The Veterans Corporation's management and board of 
directors from their principal activities. An official at The Veterans 
Corporation explained that producing uniform standards and guidelines 
for certification was a large and complicated task and inconsistent 
with the overall goals of The Veterans Corporation, which are to 
provide entrepreneurial services.

The Veterans Corporation's Use of and Controls over Federal Funds 
Received:

In its first 2 years of operations, The Veterans Corporation received 
$8 million in federal appropriations and spent about $4.7 million of 
the federal funds primarily on start-up costs. In fiscal year 2001, The 
Veterans Corporation spent about $985,000 for salaries, professional 
services, and other start-up costs.[Footnote 5] In fiscal year 2002, 
The Veterans Corporation spent approximately $3.7 million in 
appropriations for that year on expenditures related to establishing 
its programs, as well as salaries, professional services, and other 
start-up costs. The Veterans Corporation has implemented various 
controls over its obligation and expenditure payment processes, 
including limits on the ability of management officials to make check 
disbursements without board of director approval. According to The 
Veterans Corporation's external auditor, The Veterans Corporation had 
internal control issues in fiscal year 2001. However, the external 
auditor determined that these deficiencies did not constitute material 
weaknesses and that all but one of the deficiencies had been corrected 
in fiscal year 2002.

Most of The Veterans Corporation's Expenditures
to Date Have Been Start-up Costs:

The Veteran Corporation's management officials stated that their 
approach was to spend conservatively on program and operating expenses 
in the start-up period so that unused federal appropriations could be 
spent in future periods. During fiscal year 2001, The Veterans 
Corporation's sole sources of funding were from federal appropriations 
and related interest earnings. Of the $4 million in appropriations 
received during fiscal year 2001, it spent less than $1 million on 
start-up costs such as salaries, professional services, and other 
administrative costs. In fiscal year 2002, The Veterans Corporation 
spent approximately $3.7 million of its federal funds to establish its 
Veterans Marketplace--an on-line service for selling goods and services 
of veteran-owned businesses--as well as for other program activities, 
salaries, professional services, and other start-up costs. Beginning in 
fiscal year 2002, The Veterans Corporation also began to receive other 
revenue, such as cash pledges, contributed services and in-kind 
contributions from nonfederal sources. As of September 30, 2002, The 
Veterans Corporation had approximately $3.3 million in unexpended 
federal appropriations--approximately 40 percent of its $8 million in 
total appropriations. The Veterans Corporation's federal 
appropriations are provided on a "no year" basis; therefore, unused 
appropriations can be carried forward and applied to expenses in future 
fiscal years.

Federal appropriations have been a major source of revenue to The 
Veterans Corporation since its inception. In fiscal year 2001, The 
Veterans Corporation's sole sources of funding were from federal 
appropriations and related interest earnings. Beginning in fiscal year 
2002, The Veterans Corporation recognized cash contributions and 
pledges of approximately $1.3 million and contributed services and in-
kind contributions of approximately $1.5 million as revenue from other 
sources. Contributed services included legal services, Web site design, 
and use of a proprietary Web site. As a result, the federal 
appropriations used in fiscal year 2002 made up approximately 57 
percent of The Veterans Corporation's total revenues. Appendix IV 
provides more detail on The Veterans Corporation's revenue and expenses 
for fiscal years 2001 and 2002.

As shown in table 1, the Corporation incurred various start-up costs 
for its programs in 2001 and 2002. The Veterans Corporation's expenses 
increased significantly in 2002 primarily due to it hiring permanent 
employees and the fees related to establishing The Veterans 
Marketplace. Since its inception, The Veterans Corporation has spent 
about $4.7 million of the $8 million total received to date in federal 
appropriations. In fiscal year 2001, The Veterans Corporation spent 
approximately $985,000 for salaries, professional services, and other 
start-up costs. In fiscal year 2002, The Veterans Corporation used 
federal funds to pay for expenses related to an on-line service for 
selling goods and services of veteran-owned businesses, as well as its 
other program activities, salaries, professional services, and other 
start-up costs. For further analysis of salaries, bonus, and payments 
to staff for fiscal years 2001 and 2002, see appendix V.

Table 1: The Veterans Corporation's Schedule of Expenses for Fiscal 
Years Ending September 30, 2001, and 2002:

Dollars in thousands.

Salaries and benefits; Dollars in thousands: 2001: $101; Dollars in 
thousands: 2002: $1,275; Dollars in thousands: Combined total: $1,376.

Professional services; Dollars in thousands: 2001: 500; Dollars in 
thousands: 2002: 596; Dollars in thousands: Combined total: 1,096.

Travel and recruitment; Dollars in thousands: 2001: 122; Dollars in 
thousands: 2002: 94; Dollars in thousands: Combined total: 216.

Marketplace fees and; E-commerce; Dollars in thousands: 2001:N/A; 
Dollars in thousands: 2002:1,187; Dollars in thousands: Combined 
total:1,187.

Rent; Dollars in thousands: 2001: 77; Dollars in thousands: 2002: 136; 
Dollars in thousands: Combined total: 213.

Other; Dollars in thousands: 2001: 185; Dollars in thousands: 2002: 
467; Dollars in thousands: Combined total: 652.

Total expenses using federal appropriations; Dollars in thousands: 
2001:$985; Dollars in thousands: 2002:$3,754; Dollars in 
thousands: Combined total:$4,740.

Nonfederal expenses:; Dollars in thousands: 2001: [Empty]; Dollars in 
thousands: 2002: [Empty]; Dollars in thousands: Combined total: 
[Empty].

Donated Services[A]; Dollars in thousands: 2001: N/A; Dollars in 
thousands: 2002: 1,417; Dollars in thousands: Combined total: 1,417.

Other; Dollars in thousands: 2001: N/A; Dollars in thousands: 2002: 44; 
Dollars in thousands: Combined total: 44.

Total expenses; Dollars in thousands: 2001: $985; Dollars in thousands: 
2002: $5,216; Dollars in thousands: Combined total: $6,201.

Source: The Veterans Corporation.

Notes: Numbers may not sum to total because of rounding.

Information derived from audited financial statements.

N/A means not applicable.

[A] Under the American Institute of Certified Public Accountants' Audit 
and Accounting Guide, Not-for-Profit Organizations, donated services 
are a form of in-kind contribution and are recognized as revenues and 
expenses.

[End of table]

Figure 2 shows The Veterans Corporation's expenses for both fiscal 
years 2001 and 2002 by function (program, administrative, and fund-
raising). Financial reporting under U.S. generally accepted accounting 
principles requires expenses by type and function.


Figure 2: The Veteran Corporation's Federally Funded Expenses by 
Function for Fiscal Years Ending September 30, 2001, and 2002 (dollars 
in thousands):

[See PDF for image]

Notes: Analysis of The Veterans Corporation's audited financial 
statements.

[End of figure]

Percentages may not total to 100 because of rounding.

The majority of The Veterans Corporation's federally funded functional 
expenses pertain to program activities--59 percent for fiscal year 2001 
and 64 percent for fiscal year 2002. Fund-raising costs were less than 
20 percent for both fiscal years: 3 percent for fiscal year 2001 and 13 
percent for fiscal year 2002. Administrative costs were 39 percent for 
fiscal year 2001, which primarily represented legal fees and 
recruitment costs, and were 23 percent for fiscal year 2002, which 
primarily represented salaries and board expenses. As The Veterans 
Corporation's operations expand, we expect that the amount of program 
activities relative to total expenses will grow and the ratio of 
administrative and fund-raising to total expenditures will decrease.

:

Board of Directors Vests Expense Approval Authority in Executive Staff:

The board of directors is required to prescribe the manner in which the 
obligations of The Veterans Corporation may be incurred and how its 
expenses are allowed and paid. To fulfill this responsibility, the 
board approved a financial policy in December 2000, before it received 
its first appropriations; officials of The Veterans Corporation were 
unable to locate the text of the policy. However, minutes from the 
March 2001 board meeting show that the board established initial 
disbursement authority for executive-level staff in March 2001, the 
same month in which they were hired. The board authorized the acting 
CEO and the acting associate director to sign checks, drafts, or orders 
(1) in amounts no greater than $50,000 without further action of the 
board; (2) in amounts greater than $50,000 but less than $100,000 with 
the additional signature of one member of the executive committee; and 
(3) in amounts greater than $100,000 with the additional signature of 
one member of the executive committee and to notify all board members 
in writing of the disbursement, at least 7 days prior to issuance for 
checks, drafts, or orders.[Footnote 6]

Minutes of an executive committee meeting in May 2001 show that the 
executive committee reduced the limit on expense authority from $50,000 
to $10,000. All amounts in excess of $10,000 would require the 
signature of one executive committee member and also require 
notification to the chair of the executive committee. In January 2002, 
the board again amended the expense authority based upon a proposal of 
the Chief Financial Officer (CFO). Since January 2002, the board has 
retained authority to approve expenditures in excess of $25,000 and has 
delegated disbursement authority to executive-level staff. For example, 
the board authorizes the CEO to disburse up to $25,000 per transaction; 
single transactions in excess of $25,000 and contracts with a total 
value greater than $25,000 require the approval of either the executive 
committee or the full board of directors. In addition, the board 
resolved that checks written in amounts of $5,000 or less require one 
authorized signature; those in excess of $5,000 require two authorized 
signatures. Both the CEO and the Managing Director of Operations are 
authorized to sign checks.

:

Early Financial Management Practices Showed Weaknesses, but Were 
Addressed by New Leadership:

According to The Veterans Corporation's external auditor, The Veterans 
Corporation had internal control issues that could have adversely 
affected its ability to administer a major federal program in 
accordance with applicable laws, regulations, contracts, and 
grants.[Footnote 7] However, the external auditor determined that these 
conditions did not cause The Veterans Corporation to misrepresent its 
financial condition or operating results for fiscal year 2001. 
Specifically, the external auditor found in its fiscal year 2001 audit 
that The Veterans Corporation did not:

* reconcile bank accounts on a timely basis and segregate cash duties;

* maintain adequate internal controls surrounding payroll processing;

* provide supporting documentation marked with an indication of review, 
approval, and payment for all cash disbursements;[Footnote 8] and:

* maintain a filing system for accounting records.

The external auditor classified these internal control matters as 
reportable conditions, and did not identify any instances of material 
weaknesses, which would indicate a potentially greater detrimental 
effect on an entity's internal controls.[Footnote 9] These reportable 
conditions were detailed in a letter to management.[Footnote 10] The 
partner of The Veterans Corporation's external auditor, who oversaw the 
audit, stated that such accounting deficiencies are not unusual for 
start-up small businesses. According to The Veterans Corporation's 
external auditor, the reported deficiencies have been addressed in 
fiscal year 2002, with one exception--reconciliation of bank accounts 
on a timely basis.

Financial Self-Sufficiency Plan in Place but Too Early to Determine the 
Likelihood of Success:

To address the requirement to become a self-sustaining entity, The 
Veterans Corporation has developed a plan to become self-sufficient 
based on four major sources of revenue--an electronic marketplace, a 
credit card program, an insurance program, and fund-raising. According 
to an official at The Veterans Corporation, the revenue assumptions 
were developed based on discussions and input from their partners such 
as eScout, Advanta, and Aon Financial Institution Alliance. Revenue 
assumptions contained in the self-sufficiency plan cover fiscal years 
2003 and 2004. At the time of our review, three of the four efforts--
the electronic marketplace, credit card and insurance services--were 
just starting to produce revenue. According to the CFO, fund-raising 
goals are targeted toward supporting education and training efforts. In 
fiscal year 2002, The Veterans Corporation earned approximately $2.8 
million to satisfy federal matching requirements. Additionally, the 
plan calls for quarterly reviews to assess targeted projections. 
Officials said that if projections are not met, unsuccessful programs 
may be discontinued and alternative revenue sources will be developed.

:

The Veterans Corporation Implements Self-Sufficiency Plan:

The Act requires that The Veterans Corporation raise private funds and 
become a self-sustaining corporation. The Veterans Corporation has 
implemented a plan to achieve financial self-sufficiency by September 
30, 2004, that is based on four major sources of revenue:

* Veterans Marketplace. According to the plan, The Veterans Marketplace 
is expected to generate the greatest share of revenue--approximately 43 
percent--to The Veterans Corporation in fiscal year 2004, the final 
fiscal year of federal funding. The revenue sharing agreement between 
The Veterans Corporation and eScout, which operates the on-line 
marketplace, allows for The Veterans Corporation to collect 49 percent 
of revenues received from on-line purchases and other transactional 
services purchased by members of The Veterans Marketplace, as well as 
20 percent of the fees paid by members who access products.

* Veterans Platinum BusinessCard. About 19 percent of fiscal year 2004 
revenue will come from the credit card program for each new activated 
account as well as a share (0.2 percent) of eligible purchases made 
with the card.

* Veterans Affinity Insurance Program. Approximately 19 percent of 
revenue will come from sales of business insurance and other products 
to veteran-owned businesses. According to its agreement with Aon 
Financial Institution Alliance, The Veterans Corporation receives 
commissions or fees, which are structured differently for each 
insurance product.

* Fund-raising. The Veterans Corporation has implemented a multiyear, 
multimillion-dollar, fund-raising campaign primarily to support The 
Veterans Entrepreneurial Training program. The self-sufficiency plan 
includes only a part of their fund-raising goals (15 percent of funds 
raised that are retained for overhead costs) plus any interest income. 
In fiscal year 2004, this is expected to account for 19 percent of 
revenue.

Although The Veterans Corporation has other initiatives under way that 
are expected to generate revenue, such as The Veterans Capital Fund or 
micro loan program, they were not considered to be primary revenue 
sources for meeting self-sufficiency.

:

The CFO at The Veterans Corporation said that the revenue assumptions 
were based on input from partners that operate similar programs. For 
instance, revenue assumptions for The Veterans Marketplace were based 
on a discussion with eScout personnel on (1) building similar private 
exchanges and (2) customer and revenue projections. The process was 
similar for the credit card and insurance programs, and included 
discussions with Advanta and Aon Financial Institution Alliance, 
respectively. The official indicated that both Advanta and Aon were 
reluctant to offer revenue projections, but they provided enough 
information to enable The Veterans Corporation to project revenue. The 
self-sufficiency plan is based on revenue assumptions over fiscal years 
2003 and 2004.

It is too early to determine if The Veterans Corporation will become 
financially self-sufficient by September 30, 2004. At the time of our 
review, three of its efforts were just beginning to produce revenue. 
For instance, The Veterans Marketplace, while operational since June 
2002, was in the process of building a customer list. The other two 
efforts, the credit card and insurance services, were just launched in 
January 2003 and December 2002, respectively. Further, according to the 
plan, total revenue from these activities is not expected to exceed 
expenses until the fourth quarter of fiscal year 2004.

Because The Veterans Corporation's federal appropriations are provided 
on a "no year" basis, unused appropriations can be carried over into 
future fiscal years and, thus, are available to cover future years' 
expenses. An official at The Veterans Corporation stated that they 
expect to have a surplus of funds at the end of the fourth year of 
government support which, if necessary, would cover their operating 
costs in the following year.

Funds Raised Will Be Used to Support the VET Program:

The Veterans Corporation has a fund-raising goal of $2.5 million in 
fiscal year 2003 and $3 million in fiscal year 2004 to support 
education and training efforts, primarily the VET program. In fiscal 
year 2002, The Veterans Corporation earned about $2.8 million, 
exceeding its goal of $2 million. To help raise funds, they contracted 
with Changing Our World, a fund-raising organization, and are 
establishing a fund-raising advisory board of approximately 12 to 15 
individuals. A Veterans Corporation official explained that it 
initially planned to rely on fund-raising to support operations until 
other revenue sources were in place, but the corporation refocused in 
light of current economic conditions and limited success in raising 
funds for operations. The corporation's revised fund-raising strategy 
focuses on financing VET program costs. The official further explained 
that money raised would be used for direct program expenses and not for 
The Veterans Corporation administrative expenses. VET course 
administration and materials cost The Veterans Corporation about $1,850 
per student, of which enrollees pay $350. As identified in its business 
plan, the VET corporate objective for fiscal year 2003 is to deliver 
the program to 500 participants.

The Veterans Corporation Is Developing Other Sources of Income:

While The Veterans Corporation only had two sources of income for 
fiscal year 2001, which were federally appropriated funds and the 
interest earned on them, sources of income for fiscal year 2002 
included federal appropriations and interest income plus cash 
donations, pledges for future cash donations, contributed services, in-
kind donations, contract revenue from the federal government, and other 
sources. It is important to note however, that approximately $1.2 
million of The Veterans Corporation's fiscal year 2002 revenues were 
pledges for future payments to The Veterans Corporation.[Footnote 11] 
Figure 3 shows The Veterans Corporation's income for fiscal year 2002, 
exclusive of federally appropriated funds and interest earned on those 
funds.

Figure 3: Sources of Other Income from Fund-raising and Activities for 
Fiscal Year Ending September 30, 2002 (dollars in thousands):

[See PDF for image]

Notes: Analysis of The Veterans Corporation's audited financial 
statements.

[End of figure]

Percentages may not total to 100 because of rounding.

Most of the other funds raised in fiscal year 2002 were in the form of 
contributed services, such as legal services and ability to provide the 
EntreWorld on-line library through The Veterans Corporation's Web site 
at no cost to The Veterans Corporation, as well as pledges for future 
payments of cash. Ten pledges were made, two of which are collectible 
over a period of 10 years. The Veterans Corporation raised 
approximately $66,000 in cash, $5,100 in contract revenue from the 
federal government, and $5,900 in other funds in fiscal year 2002.

The Veterans Corporation Will Measure Progress Toward Self-Sufficiency 
in Fiscal Year 2003:

The Veterans Corporation intends to evaluate the self-sufficiency plan 
on a quarterly basis to assess whether its strategies are sufficient to 
meet targeted projections. The CFO of The Veterans Corporation said 
that management would review the progress of the plan, including 
decisions to discontinue unsuccessful programs. In the event that 
projections are not met for 2003, a Veterans Corporation official 
stated that they would then consider alternative revenue sources to 
allow them to meet their self-sufficiency goal. In addition, officials 
at The Veterans Corporation told us that they continuously look for 
potential business opportunities to complement their efforts and have 
had some early discussions on other possible ventures.

Agency Comments and Our Evaluation:

We received written comments on a draft of this report from The 
Veterans Corporation. We also obtained technical comments from SBA and 
VA that have been incorporated into this report where appropriate.

* The Veterans Corporation commented that their programs have broad 
measures, quantitative and/or qualitative, that are used to assess 
early program objectives. In addition, corporation representatives 
pointed out that they have not yet refined and tested measures to 
assess whether their programs ultimately have a positive effect on 
veterans who own or want to start their own businesses. We discussed 
this issue with The Veterans Corporation and obtained additional 
documentation supporting these broad measures and noted this in the 
report.

* Representatives of The Veterans Corporation expressed their concern 
with the inability to obtain information about transitioning service 
members and Veterans from federal agencies. In response to our draft 
report, VA concluded that they could disclose a list of names and 
addresses of veterans and their small businesses to the public, 
including The Veterans Corporation. Further, VA officials stated that 
arrangements are under way to make this information available on their 
Web site. However, it remains to be seen whether the information that 
will be available on VA's Web site will meet The Veterans Corporation's 
needs.

* The Veterans Corporation reiterated that the Professional 
Certification Advisory Board would be more appropriately led by an 
entity other than The Veterans Corporation and that it has not been 
provided adequate funding or appropriate authority to achieve the goal 
of creating uniform standards for professional certification. However, 
The Veterans Corporation stated their commitment to carrying out the 
Professional Certification Advisory Board's mission as mandated in the 
Act.

* In reference to The Veterans Corporation's reported accounting 
deficiency for fiscal year 2002, it submitted a copy of management's 
response, which outlines the steps that it plans to take in response to 
this issue.

:

We will send copies of this report to interested congressional 
committees and the President and CEO of The Veterans Corporation. We 
will make copies available to others on request. In addition, this 
report will also be available at no charge on our homepage at http://
www.gao.gov:

If you or your staff have any questions on this report, please contact 
me at (202) 512-8678, jenkinswo@gao.gov or Harry Medina at (415) 904-
2000, medinah@gao.gov. Key contributors are listed in appendix VII.

William O. Jenkins, Jr.
Director, Financial Markets and Community Investment:

Signed by William O. Jenkins, Jr.:

List of Committees:

The Honorable Olympia Snowe
Chairwoman
The Honorable John Kerry
Ranking Minority Member
Committee on Small Business and Entrepreneurship
United States Senate:

The Honorable Donald Manzullo
Chairman
The Honorable Nydia Velazquez
Ranking Minority Member
Committee on Small Business
House of Representatives:

The Honorable Arlen Specter
Chairman
The Honorable Bob Graham
Ranking Minority Member
Committee on Veterans' Affairs
United States Senate:

The Honorable Christopher Smith
Chairman
The Honorable Lane Evans
Ranking Minority Member
Committee on Veterans' Affairs
House of Representatives:

[End of section]

Appendixes:

Appendix I: Scope and Methodology:

To describe The Veterans Corporation's efforts in providing small 
business assistance to veterans, we collected and analyzed program 
information such as planning documents, contracts, legal opinions, and 
program literature. Additionally, we interviewed staff and board 
officials from The Veterans Corporation, as well as partnering 
organizations including officials from eScout, Changing Our World, 
Equisource, and Southern Financial Bank. We also interviewed officials 
from federal agencies, including the Small Business Administration, 
Department of Defense, Department of Veterans Affairs, and Department 
of Labor, and officials from a veteran service organization, the 
Vietnam Veterans of America, as well as a consultant--Halsey, Rains, 
and Associates.

To meet our objective to describe The Veterans Corporation's use of and 
controls over federal funds, we:

* Obtained and analyzed The Veterans Corporation's fiscal year 2001 and 
2002 financial statements and audit reports, and management letter for 
2001. We did not evaluate the quality of the other auditor's work on 
the financial statement or conduct our own tests of the financial 
statement balances;

* Reviewed The Veterans Corporation's contract with the external 
auditor for the 2002 financial statement audit to understand the nature 
of the audit services to be provided and the extent of the auditor's 
proposed work on internal control;

* Obtained and reviewed minutes of meetings of the board of directors 
and the board's executive committee to determine the board's policies 
as they related to the disbursement and use of federal funds;

* Communicated with The Veterans Corporation's external auditor to, 
among other things, determine the extent of financial management 
deficiencies in The Veterans Corporation; and:

* Interviewed the Chief Financial Officer (CFO) of The Veterans 
Corporation.

To determine what efforts The Veterans Corporation made to become 
financially self-sufficient, we reviewed their self-sufficiency plan 
and discussed it with The Veterans Corporation's CFO. We did not 
independently assess the financial assumptions presented in the plan.

[End of section]

Appendix II: Timeline of The Veterans Corporation's Key Efforts and 
Activities:

Effective date: October 1998; Efforts and activities: Report of the 
Small Business Administration Veterans Affairs Task Force for 
Entrepreneurship, "Leading the Way: What Veterans Need From the SBA," 
presented to Congress.

Effective date: August 1999; Efforts and activities: Veterans 
Entrepreneurship and Small Business Development Act (Public Law 106-50) 
enacted.

Effective date: October 1999; Efforts and activities: National Veterans 
Business Development Corporation is incorporated in the District of 
Columbia.

Effective date: August - December 2000; Efforts and activities: 
President appoints eight board members.

Efforts and activities: Effective dateMarch 2001: First Board of 
Directors meeting in September 2000.

Effective date: March 2001; Efforts and activities: The Veterans 
Corporation receives initial federal funding ($4 million).

Effective date: October 2001; Efforts and activities: The Veterans 
Corporation receives second installment of federal funding ($4 
million).

Efforts and activities: Effective date: Charles R. Henry hired as CEO 
and president.

Efforts and activities: Effective dateNovember 2001: First meeting of 
the Professional Certification Advisory Board (PCAB).

Effective date: November 2001; Efforts and activities: The President 
appoints ninth and final board member.

Effective date: December 2001; Efforts and activities: Kauffman 
Foundation grants The Veterans Corporation permission to use 
EntreWorld.

Effective date: January 2002; Efforts and activities: Agreement reached 
with eScout to develop the Veterans Marketplace.

Efforts and activities: Effective dateFebruary 2002: Agreement reached 
with Equisource to create the Veterans Capital Fund.

Effective date: February 2002; Efforts and activities: Micro loan 
program initiated with Southern Financial Bank, Virginia.

Effective date: April 2002; Efforts and activities: 
www.veteranscorp.org Web site operational.

Efforts and activities: Effective dateMay 2002: Brigadier General 
Robert Cocroft (United States Army Retired) appointed chairman of the 
PCAB.

Effective date: May 2002; Efforts and activities: Agreement signed with 
eScout to license the Veterans Marketplace.

Efforts and activities: Effective dateJuly 2002: Legacy Bank, 
Pennsylvania, enters micro loan program.

Effective date: July 2002; Efforts and activities: Changing Our World 
engaged to lead fund-raising effort.

Efforts and activities: Effective dateAugust 2002: First Tennessee 
Bank, Tennessee, enters micro loan program.

Effective date: August 2002; Efforts and activities: Public service 
announcements launched with Time-Warner Cable Television.

Effective date: September 2002; Efforts and activities: PCAB committees 
formed.

Efforts and activities: Effective date: Memorandum of Understanding 
signed with National Defense Industrial Association (NDIA) to conduct 
joint meetings nationwide to emphasize business opportunities for 
veterans and NDIA.

Efforts and activities: Effective date: Agreement reached with Advanta 
Bank to develop The Veterans Corporation Platinum BusinessCard.

Efforts and activities: Effective date: Agreement reached with First 
American Engineering to sponsor Veteran Business Success Seminars.

Efforts and activities: Effective dateOctober 2002: Agreement reached 
with Defense Logistics Agency to enhance business assistance to 
veterans and service-disabled veterans.

Effective date: October 2002; Efforts and activities: Contract signed 
with Gateway Computer for computers and computer training for Veteran 
Entrepreneurial Training (VET) graduates.

Efforts and activities: Effective date: Agreement reached with Aon 
Financial Institution for insurance/benefits program.

Efforts and activities: Effective date: Agreement reached with Lee 
Wayne Inc., to promote independent business opportunities for veterans.

Efforts and activities: Effective date: First Veteran Business Success 
Seminar, Idaho.

Efforts and activities: Effective date: 15 Facilitators trained to 
teach VET program.

Efforts and activities: Effective date: Site agreement reached with 
George Mason University, Virginia, and Riverside Community District 
College, California for VET Program.

Efforts and activities: Effective dateEfforts and activities: First 3 
VET programs launched in Maine, California, and Virginia.

Source: GAO.

Note: Analysis of The Veterans Corporation data.

[End of table]:

[End of section]

Appendix III: The Veterans Corporation's Initiatives in Response to 
Statutory Requirements:

Statutory requirement: PROGRAMMATIC: Expand provision of and improve 
access to technical assistance regarding entrepreneurship for 
veterans.; Initiative: * www.veteranscorp.org; * EntreWorld on-line 
small business resource library; * Veterans Entrepreneurial Training 
program; * Veterans Business Success seminars.

Statutory requirement: PROGRAMMATIC: Assist veterans, including 
service-disabled veterans, with the formation and expansion of small 
businesses.; Initiative: * Micro loan program; * Veterans 
Entrepreneurial Training program; * Veterans Marketplace; * Veterans 
Capital Fund; * Veterans Corporation Platinum BusinessCard; * 
Insurance/benefits program; * America's Business Network; * Develop 
business opportunities for veterans through alliances: Lee Wayne, Inc., 
Defense Logistics Agency, National Defense Industrial Association, 
First American Engineering.

Statutory requirement: PROGRAMMATIC: Organize public and private 
resources, including those of federal agencies.; Initiative: * Meetings 
with federal agencies: DOL, DOD, SBA, VA; * Veterans Capital Fund; * 
Micro loan program.

Statutory requirement: PROGRAMMATIC: Establish and maintain a network 
of information and assistance centers for use by veterans and the 
public.; Initiative: * www.veteranscorp.org.

Statutory requirement: PROGRAMMATIC: Establish Professional 
Certification Advisory Board.; Initiative: * 26-member board; * Three 
committees.

Statutory requirement: PROGRAMMATIC: Assume duties, responsibility, 
and authority of the Advisory Committee on Veterans Affairs on October 
1, 2004.; Initiative: * Business plan.

Statutory requirement: PROGRAMMATIC: ORGANIZATION DEVELOPMENT; 
Initiative: [Empty].

Statutory requirement: PROGRAMMATIC: Institute and implement a fund-
raising and self-sufficiency plan.; Initiative: * Business plan; * 
Self-sufficiency plan; * Revenue-producing ventures: Veterans 
Marketplace, Veterans Corporation Platinum BusinessCard, Insurance/
benefits, Veterans Capital Fund, Micro loan program.

Statutory requirement: PROGRAMMATIC: Raise matching funds to fulfill 
conditions for receipt of federal funds.; Initiative: * Changing Our 
World; * Fund-raising advisory board.

Statutory requirement: PROGRAMMATIC: Transmit an annual report to the 
President and to Congress.; Initiative: * Annual reports.

Statutory requirement: PROGRAMMATIC: Board of Directors oversight of 
Corporation's obligations and expenses.; Initiative: * Audit committee.

Source: The Veterans Corporation.

Note: GAO analysis of 15 U.S.C. Sec. 657c and The Veterans Corporation 
data.

[End of table]:

[End of section]

Appendix IV: The Veterans Corporation's Revenue and Expenses for Fiscal 
Years 2001 and 2002:

As noted in table 2, The Veterans Corporation received federal 
appropriations of $4 million in each of fiscal years 2001 and 2002 and 
used approximately $1 million and $3.7 million in fiscal years 2001 and 
2002, respectively. At the end of fiscal years 2001 and 2002, The 
Veterans Corporation had approximately $3 million and $3.3 million, 
respectively, in unexpended appropriations.

Table 2: The Veterans Corporation's Schedule of Appropriations for 
Fiscal Years Ending September 30, 2001, and 2002:

Dollars in thousands.

Federal appropriations received; Dollars in thousands: 2001: $4,000; 
Dollars in thousands: 2002: $4,000.

Federal appropriations used; Dollars in thousands: 2001: 985; Dollars 
in thousands: 2002: 3,754.

Subtotal: current year's unused appropriations; Dollars in thousands: 
2001: 3,015; Dollars in thousands: 2002: 246.

Unexpended appropriations, beginning balance; Dollars in thousands: 
2001: N/A; Dollars in thousands: 2002: 3,015.

Unexpended appropriations, ending balance; Dollars in thousands: 2001: 
$3,015; Dollars in thousands: 2002: $3,261.

Source: The Veterans Corporation.

Notes: Data from audited financial statements.
:

N/A means not applicable.

[End of table]

As shown in table 3, federal appropriations were the major source of 
revenue to The Veterans Corporation in fiscal years 2001 and 2002. 
Beginning in fiscal year 2002, The Veterans Corporation began to 
realize revenue from cash contributions and pledges, as well as 
contributed services and in-kind contributions.

Table 3: The Veterans Corporation's Schedule of Revenue for Fiscal 
Years Ending September 30, 2001, and 2002:

[See PDF for image]

Source: The Veterans Corporation.

Notes: Data from audited financial statements.

Numbers may not sum to total because of rounding.

N/A means not applicable.

[End of table]

The Veterans Corporation reported approximately $1.3 million in cash 
contributions and pledges in 2002 as revenue. The majority of the 
revenue, $1.2 million, pertained to unconditional pledges that The 
Veterans Corporation recognized as temporarily restricted revenue when 
the corporation was notified of the pledges. The Veterans Corporation 
recorded the pledges it expects to receive in future years as 
contributions receivable at their present value in accordance with U.S. 
generally accepted accounting principles for not-for-profit 
organizations. See table 4 for a schedule of The Veterans Corporation's 
contributions receivable as of September 30, 2002.

Table 4: The Veterans Corporation's Schedule of Contributions 
Receivable as of September 30, 2002:

Dollars in thousands; [Dollars]; [Percent].

Less than 1 year; $262; 22.

One to 5 years; 784; 66.

Greater than 5 years; 303; 25.

Subtotal; $1,349; 113.

Less: present value discount; 152; 13.

Contributions receivable; $1,197; 100.

Source: The Veterans Corporation.

Note: Data from audited financial statements.

[End of table]

Table 5 presents The Veterans Corporation's federally funded expenses 
by functional area for fiscal years 2001 and 2002. Expenses related to 
program activities represent the majority of the Corporation's expenses 
and we expect them to grow, as the percentage of fund-raising and 
administrative expenses would decrease over time relative to total 
expenditures.

Table 5: The Veterans Corporation's Federally Funded Expenses by 
Function for Fiscal Years Ending September 30, 2001, and 2002.

[See PDF for image]

[End of table]

[End of section]

Appendix V: The Veterans Corporation's Salary, Bonus, and Payments to 
Staff for Fiscal Years 2001 and 2002:

Table 6 shows The Veterans Corporation's aggregate compensation amounts 
for executive management and all other staff for fiscal years 2001 and 
2002.[Footnote 12] Six employees comprised executive management and all 
other staff consisted of 13 employees, however not all staff were 
employed concurrently. For fiscal year 2001, the data are disaggregated 
by salary and payments to contract workers for the provision of 
services. Prior to August 2001, the board of The Veterans Corporation 
did not hire permanent employees. Instead, they executed contracts with 
individuals to provide services. These payments are represented as 
payments to contract workers, as shown in table 6 below. For fiscal 
year 2002, the salary data is disaggregated by wage and bonus payments.

Table 6: The Veterans Corporation's Aggregate Compensation for 
Executive Management and All Other Staff for Fiscal Years Ending 
September 30, 2001, and 2002:

[See PDF for image]

[End of table]

[End of section]

Appendix VI: Comments from The Veterans Corporation:

[See PDF for image]

[End of figure]

[See PDF for image]

[End of figure]

[See PDF for image]

[End of figure]

[End of section]

Appendix VII GAO Contacts and Staff Acknowledgments:

GAO Contacts	:

William O. Jenkins, Jr. (202) 512-8678
Harry Medina (415) 904-2000:

Acknowledgments:

In addition to the persons named above, Janet Fong, Jeanette M. 
Franzel, Marc W. Molino, Charles E. Norfleet, Julie T. Phillips, 
Barbara M. Roesmann, Kathryn M. Supinski, and Paul G. Thompson made key 
contributions to this report.

:

(250090):

			:

:

FOOTNOTES

[1] Report of the Congressional Commission on Servicemembers and 
Veterans Transition Assistance, (Arlington, Virginia: January 1999).

[2] Public Law 106-50, 113 Stat. 233 (1999) (found at 15 U.S.C. §657c).

[3] The Advisory Committee on Veterans Business Affairs was created by 
the same legislation that created The Veterans Corporation. The purpose 
of the Advisory Committee on Veterans Business Affairs is to serve as 
an independent source of advice and policy recommendations to the 
Administrator of the SBA, the Associate Administrator for Veterans 
Business Development of the SBA, the Congress, the President, and other 
policymakers. It consists of 15 members, who are veteran small business 
owners or representatives of veteran's organizations and appointed by 
the Administrator of the SBA to serve 3-year terms. 

[4] The Veterans Corporation's micro loan program is not affiliated 
with SBA's micro loan program.

[5] Professional services include accounting, auditing, legal, 
consultants, and writers.

[6] The executive committee consists of four board members who 
generally may make decisions on behalf of the full board.

[7] The financial audit of The Veterans Corporation was not designed to 
provide assurance on internal controls. However, in planning and 
performing the audit, the auditors considered The Veterans 
Corporation's internal controls sufficient to plan the audit to 
determine the nature, timing, and extent of its auditing procedures for 
the purpose of expressing an opinion on the Corporation's financial 
statements. The auditors also evaluated the effectiveness of controls 
relevant to preventing or detecting material noncompliance with 
requirements applicable to the Corporation resulting from its receipt 
of federal appropriations.

[8] The external auditor found that The Veterans Corporation initially 
lacked documentation to support $212,800 in payments to consultants, 
but support was later located for $115,000 of this amount. The auditor 
subsequently satisfied themselves as to the reasonableness of the 
remaining $97,800 by conducting alternative procedures to justify the 
reported payments.

[9] Reportable conditions are matters coming to the auditor's attention 
that, in his/her judgment, should be communicated to the board of 
directors because they represent significant deficiencies in the design 
or operation of internal controls, which could adversely affect the 
organization's ability to record, process, summarize, and report 
financial data consistent with the assertions of management in the 
financial statements.

[10] The external auditor identified other internal control matters in 
the letter to management, such as the lack of a written procurement 
policy, but did not classify them as reportable conditions.

[11] The Veterans Corporation recorded the pledges it expects to 
receive in future years as contributions receivable at their present 
value in accordance with U.S. generally accepted accounting principles 
for not-for-profit organizations.

[12] The Veterans Corporation's payments to consultants were $403,291 
in fiscal year 2001 and $845,530 in fiscal year 2002.

GAO's Mission:

The General Accounting Office, the investigative arm of Congress, 
exists to support Congress in meeting its constitutional 
responsibilities and to help improve the performance and accountability 
of the federal government for the American people. GAO examines the use 
of public funds; evaluates federal programs and policies; and provides 
analyses, recommendations, and other assistance to help Congress make 
informed oversight, policy, and funding decisions. GAO's commitment to 
good government is reflected in its core values of accountability, 
integrity, and reliability.

Obtaining Copies of GAO Reports and Testimony:

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through the Internet. GAO's Web site ( www.gao.gov ) contains 
abstracts and full-text files of current reports and testimony and an 
expanding archive of older products. The Web site features a search 
engine to help you locate documents using key words and phrases. You 
can print these documents in their entirety, including charts and other 
graphics.

Each day, GAO issues a list of newly released reports, testimony, and 
correspondence. GAO posts this list, known as "Today's Reports," on its 
Web site daily. The list contains links to the full-text document 
files. To have GAO e-mail this list to you every afternoon, go to 
www.gao.gov and select "Subscribe to daily E-mail alert for newly 
released products" under the GAO Reports heading.

Order by Mail or Phone:

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to:

U.S. General Accounting Office

441 G Street NW,

Room LM Washington,

D.C. 20548:

To order by Phone: 	

	Voice: (202) 512-6000:

	TDD: (202) 512-2537:

	Fax: (202) 512-6061:

To Report Fraud, Waste, and Abuse in Federal Programs:

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470:

Public Affairs:

Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800 U.S.

General Accounting Office, 441 G Street NW, Room 7149 Washington, D.C.

20548: