WASHINGTON – A federal whistleblower has revealed that the Veterans Health Administration may have improperly spent up to $5 billion in improper and unauthorized procurement expenditures over each of the last five years and lawmakers are demanding an explanation.
An internal Department of Veterans Affairs memo determined that the agency violated federal contracting rules to pay for medical care and supplies. The communique, addressed to VA Secretary Robert McDonald and written by Deputy Assistant Secretary Jan Frye, asserts that the VA “has and continues to waste millions of dollars by paying excessive prices for goods and services due to breaches in federal law.”
The memo maintained, for instance, that VA officials failed to stop the Veterans Health Administration from using purchase cards – generally utilized to make minor purchases of less than $3,000 — on the acquisition of more than $1 billion in prosthetics and other medical supplies outside the competitive bidding process. At least some of the buys, Frye said, were made by unauthorized personnel.
Frye claimed the agency is responsible for “gross mismanagement.”
During a hearing before the Subcommittee on Oversight and Investigations of the Committee on Veterans Affairs, Rep. Mike Coffman (R-Colo.), the panel chairman, said the agency “has had a history of weak internal controls resulting in serious violations of procurement laws,” adding that inadequate oversight resulted in “improper and unauthorized procurement expenditures.”
“This is a truly staggering amount,” Coffman said. “Given the high number of transactions – $6.2 million in fiscal year 2014 – and the aggregate billions at risk, it is crucial that VA implement effective oversight controls to ensure it uses taxpayer resources efficiently for veterans.”
Testifying before the subcommittee, Frye alleged that some senior VA acquisition and finance officials “have willfully violated the public trust while federal procurement and financial laws were debased.”
“Their overt actions and dereliction of duties combined have resulted in billions of taxpayer dollars being spent without regard to federal laws and regulations, making a mockery of federal statutes,” he said.
Frye told lawmakers he is “not aware of a single senior acquisition leader being held accountable for wrongdoing or dereliction in the nearly 10 years I’ve been in my present VA position.”
“These unlawful acts may potentially result in serious harm or death to America’s veterans,” he asserted. “When VA procures pharmaceuticals or medical devices without terms and conditions afforded via written contracts, the government forfeits all legal protections afforded by contract law. Efficacy and safety mandates are nonexistent.”
Frye said senior leaders within the VA “are not telling the whole story,” adding that, “I will no longer be a party to these VA games.”
Representatives of the Veterans Health Administration appeared at the hearing but their testimony was pushed to the rear when Veterans Affairs Secretary Robert McDonald issued a statement acknowledging that he had received Frye’s letter and referred the missive to the Inspector General’s office for further review. Any evidence of wrongdoing will then be referred to the Justice Department.
“It is clear that serious allegations have been made regarding VA’s purchase authorities and we are working diligently to review them,” McDonald said.
The secretary went on to say that while he appreciates Frye stepping forward with the information, he noted “there are many acquisition paths within VHA” and that most of the sited purchases went to provide needed care for veterans.
A handful of VA officials, led by Edward Murray, the acting assistant secretary for management and the interim financial officer, appeared at the hearing to assuage concerns of lawmakers on both sides of the aisle – with little success.
Much of the controversy centers on the distribution of purchase cards, used by VA officials to obtain items necessary to carry out the agency’s duties. Some of those holding the cards, Frye alleged, were unqualified.
Murray told the panel that VA has “a robust government purchase card program” with 25,515 accounts generating $3.7 billion worth of purchases in 6.1 million transactions as of the end of fiscal year 2014.
“We rely on this program to aide in the expeditious acquisition of supplies and services in support of our veterans,” he said. “For example, purchase cards are used for acquisition of prosthetics and sensory aids that promote health, independence and quality of life for veterans.”
Like other large agencies, Murray said, “we have experienced challenges in implementing the government purchase card program” and regulations have been “to strengthen controls over VA’s purchase card program.”
In October 2011, Murray said, VA “took a significant step toward strengthening internal controls” by placing the purchase card program under the agency’s Financial Services Center, thus enabling central oversight and reducing the number of purchase card accounts.
“VA is committed to continuous monitoring and improvement of its government purchase card program and has implemented a number of processes and internal controls to minimize and eliminate fraud, waste and abuse,” he said. “For example, we close or reduce card spending limits due to inactivity, invalid training certificates, lack of valid warrants, or for separated employees. Controls have been implemented with the U.S. Bank to limit the use of the government purchase card for specific types of merchants.”
Transactions, he said, are monitored on a monthly basis.
Subcommittee members were not assured by Murray’s testimony. Rep. Jackie Walorski (R-Ind.) maintained that VA officials should have experienced a “gut check” when Frye’s allegations came to light.
“That we have to stop this, this is wrong,” Walorski said. “It’s illegal activity. Did that never dawn on you, Mr. Murray?”
But Murray ultimately maintained that “there’s some ambiguity” in the purchasing law and some difference of opinion exists regarding whether the Veterans Health Administration violated federal statutes.
Rep. Tim Walz (D-Minn.), reflecting the bipartisan nature of the inquiry, cited a White House report issued in June 2014 describing a “corrosive culture” within the Veterans Affairs health care system.
“I don’t for a second believe there’s an attempt to make that change,” Walz said.