How VA missed $213M in overpayments

The Veterans Affairs Department might have found as much as $213 million in additional overpayments during a recent internal audit if it had used better methodology and more objective risk assessments, according to a new report from VA’s Office of Inspector General.

Auditors reviewed VA’s “High-Dollar Overpayments Report” for the first quarter of fiscal 2010, which listed 101 overpayments totaling $1.1 million. The Veterans Benefits Administration reported 67 overpayments, while the Veterans Health Administration reported 34 overpayments. However, the IG’s staff found several areas in which reporting by VBA and VHA was incomplete or insufficient.

Specifically, auditors identified 143 overpayments totaling $623,434 that VBA did not include in its total, wrote Belinda Finn, VA’s assistant IG for audits and evaluations, in the report.

Related stories:

Auditors estimate $2.8B in improper payments at SSA, FEMA

Administration uses IT to cut improper payments

The lapses were primarily due to VBA misinterpreting White House guidance on how to define overpayment thresholds and not including some overpayments due to administrative errors, Finn wrote. The report recommends that those deficiencies be corrected, and VA officials generally agreed with the recommendation.

Furthermore, VBA might have missed an additional 39,208 incidents of potential overpayments totaling $213 million, also as a result of its misinterpretation of White House guidance, Finn wrote.

“We determined that these 39,208 overpayments met some of the criteria used in determining reportable high-dollar overpayments,” the report states. “VBA did not request sufficient information or conduct analysis to determine which overpayments met all of the criteria and should have been reported. This occurred because VA misinterpreted [the Office of Management and Budget’s] guidance on determining high-dollar overpayments.”

VBA did not apply thresholds accurately or report prior-period overpayments identified in the first quarter, overpayments caused by administrative errors or overpayments when documentation was insufficient to determine if high-dollar thresholds were met, the report states.

In addition, the audit discovered problems with VHA’s risk-assessment programs that suggest that additional improper payments are going unrecorded.

“We also found VHA’s fiscal 2009 risk assessment did not adequately assess the level of risk associated with their programs,” the report states. “VHA relied upon a self-assessment process that consisted of a checklist.” And that process appeared to be self-serving.

“Personnel who performed the self-assessments lacked objectivity,” the report states. “Financial assistance auditors stated the assessments resulted in extremely low error rates that did not reconcile with findings reported by independent audits.”

The report recommends that VHA improve its risk assessments, and officials agreed with the recommendation.