VA Medical Centers:

Internal Control over Selected Operating Functions Needs Improvement

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

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

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

Recommendations for Executive Action

  1. Status: Closed - Implemented

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

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

    Agency Affected: Department of Veterans Affairs

  2. Status: Closed - Implemented

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

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

    Agency Affected: Department of Veterans Affairs

  3. Status: Closed - Implemented

    Comments: In 2011, VA implemented VA Handbook 7002/1, Logistics Management Procedures, which required the Office of Logistics, the responsible service line, and a disinterested party to conduct a 5 percent verification of the completed scheduled annual inventory which ensures the service line has actually conducted a true and verifiable inventory.

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

    Agency Affected: Department of Veterans Affairs

  4. Status: Closed - Implemented

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

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

    Agency Affected: Department of Veterans Affairs

  5. Status: Closed - Implemented

    Comments: The requirements for the VA Time and Attendance System (VATAS) were developed in concert with all VA Administrations, including VHA. VHA is an active member of the VATAS Executive Steering Committee, and the VATAS Configuration Control Board. Part-time physicians working on an adjustable work schedule now have what is called a subsidiary record in VATAS; the record is completed by the physician and requires the part-time physician to account for regularly scheduled hours and unscheduled hours. The time for regular part-time physicians is tracked from the VATAS timesheet and could include regularly scheduled hours and unscheduled hours for a day.

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

    Agency Affected: Department of Veterans Affairs

  6. Status: Closed - Implemented

    Comments: In 2008, VA implemented VHA Directive 2008-021: Monitoring of Non-Controlled Substance Medication Returns, which requires the Deputy Chief Consultant, Pharmacy Benefits Management (PBM) to biannually review reverse distribution vendor data for unusual reimbursement patterns to identify potential improvements for revenue recovery, thereby improving oversight of credits received for returned drugs.

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

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

  7. Status: Closed - Implemented

    Comments: In 2008, VA implemented VHA Directive 2008-021: Monitoring of Non-Controlled Substance Medication Returns, which requires the Deputy Chief Consultant, Pharmacy Benefits Management (PBM) to biannually review reverse distribution vendor data for unusual reimbursement patterns to identify potential improvements for revenue recovery.

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

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

  8. Status: Closed - Implemented

    Comments: In 2008, VA implemented VHA Directive 2008-021: Monitoring of Non-Controlled Substance Medication Returns, which requires the Deputy Chief Consultant, Pharmacy Benefits Management (PBM) to biannually review reverse distribution vendor data for unusual reimbursement patterns to identify potential improvements for revenue recovery.

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

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

  9. Status: Closed - Implemented

    Comments: In FY 2008, VA implemented VHA Directive 2008-021, Monitoring of Non-Controlled Substance Medication Returns. This Directive requires (1) the review of reverse distribution vendor data nationally for unusual reimbursement patterns and to identify potential improvements for revenue recovery; and, (2) the communication of identified findings and opportunities for improvement from analytic reviews to Pharmacy Chiefs or Pharmacy Managers, VISN Formulary Leaders, PBM Managers, and CMOP Directors. The focus of these reviews is to potentially identify opportunities to reduce the amount of returnable and non-returnable drugs that enter the reverse distribution pathway.

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

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

  10. Status: Closed - Implemented

    Comments: VA published VHA Directive 1035, Oversight and Improvement of the Part-Time Physician Program on November 29, 2013, which establishes procedures and roles and responsibilities for oversight and improvement of the part-time physician time and attendance program, including monitoring compliance and taking or initiating disciplinary action where appropriate. We consider the action taken meets the intent of our recommendation

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

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

  11. Status: Closed - Implemented

    Comments: VA published VHA Directive 1035, Oversight and Improvement of the Part-Time Physician Program on November 29, 2013, which establishes procedures for oversight and improvement of the part-time physician time and attendance program. In addition to monitoring of time and attendance reporting, the VHA Directive provides "accountability systems" for assuring the effectiveness of the part-time physician program by establishing steps to ensure that there is a need for the part-time physician, the assigned duties are appropriate, and that the part-time physician has been conscientious and productive in meeting obligations and assignments. We consider the action taken as meeting the intent of our recommendation.

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

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

  12. Status: Closed - Implemented

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

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

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

  13. Status: Closed - Implemented

    Comments: In FY 2014, VHA's Procurement and Logistics Office (P&LO) conducted a detailed review of property records to identify erroneous and/or incomplete data fields within the six Veterans Integrated Service Networks (VISNs) of the facilities identified in the original GAO report. P&LO found that each facility identified by GAO in the report is consistently managing its property records in accordance with VHA standards. In addition, P&LO also reviewed the property records for 34 additional facilities to identify erroneous and/or incomplete data fields. P&LO found that these facilities are managing their property records in accordance with VHA standards.

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

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

  14. Status: Closed - Implemented

    Comments: In 2008, the VA implemented VHA Directive 2008-021, Monitoring of Non-Controlled Substance Medication Returns. This Directive requires the Chief of Pharmacy, Pharmacy Manager, or CMOP Director to: (1) maintain a running list of non-controlled substance medications held for return for credit in facility pharmacies as they are removed from current supplies, and (2) compare the pharmacy list to the vendor list and resolve any discrepancies identified.

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

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

  15. Status: Closed - Implemented

    Comments: In 2008, VA issued VHA Directive 2008-021, Monitoring of Non-Controlled Substance Medication Returns. This Directive requires the Chief of Pharmacy, Pharmacy Manager, or CMOP Director in each VAMC and CMOP to ensure the physical security of outdated non-controlled substance medications. For example, the Directive requires the following: (1) drug products designated for return must be stored in a secure locked area separate from normal inventory, (2) the returned drugs inventory must be reviewed when unusual access patterns are noted during security reviews, and 3) the effectiveness of existing physical security measures must be monitored for medications awaiting return for credit and report discrepancies.

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

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

  16. Status: Closed - Implemented

    Comments: In 2008, VA issued VHA Directive 2008-021, Monitoring of Non-Controlled Substance Medication Returns. The Directive requires the Chief of Pharmacy, Pharmacy Manager, or CMOP Director in each VAMC and CMOP to ensure that each facility monitors credits received for returned medications. For example, the Chief of Pharmacy, Pharmacy Manager, or CMOP Director, must review the vendor reports to: (1) reconcile credits received against drugs returned, (2) take corrective action on any identified discrepancy, and (3) identify any opportunities for improvements.

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

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

  17. Status: Closed - Implemented

    Comments: VA identified specific recommendations in our report that it determined are applicable to all VA medical facilities.

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

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

 

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