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October 27, 2011: 

Subject: VA Philippines Office: Maintain Operations, but More 
Information Needed to Determine Future Presence: 

Congressional Committees: 

The Department of Veterans Affairs (VA) operates a regional office in 
the Republic of the Philippines--the only one of its 57 regional 
offices that is located in a foreign country. Over the last two 
decades, Congress has periodically reauthorized the office for an 
average of 3 years each time. The Philippines was a U.S. territory 
prior to World War II and was granted independence in 1946. Congress 
authorized limited benefits for Filipino veterans who served under the 
command of the United States during the war, and authorized VA to 
operate a regional office to administer these benefits. In 1958, the 
office expanded to include an outpatient health clinic. VA estimates 
that about 18,000 Filipino WWII veterans were alive as of 2010, down 
from an estimated 452,000 in 1977. In light of this declining 
population eligible for benefits, maintaining the office may no longer 
be warranted at some point. Public Law 111-275 extended the authority 
for VA to operate this office until December 31, 2011, and directed GAO 
to submit this report. Our objectives are to (1) describe the primary 
activities undertaken by the VA regional office in the Philippines, and 
(2) identify the estimated costs and benefits of maintaining this 
office in its current location versus moving its activities to the U.S. 

To address these objectives, we: 

* reviewed VA's historical, current, and projected office workloads; 

* visited the Philippines office and observed its activities; 

* reviewed relevant reports from VA, the Social Security Administration 
(SSA), and the Department of State (State); 

* interviewed officials from VA, SSA, and State in the Philippines and 
in the U.S; and: 

* reviewed VA's actual costs for operating the Philippines office and 
its estimated costs for conducting some of the office's activities in 
the U.S. 

We reviewed these data and determined they were sufficiently reliable 
for the purposes of this report. 

We conducted this performance audit from February 2011 to October 2011 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

On October 12 and 13, 2011 we briefed your staff on the results of our 
analysis (see enclosure I for the briefing slides). This report 
formally conveys the information provided during those briefings. In 
summary: 

* The VA Philippines office processes disability compensation, and 
survivor, pension and other VA benefits for all Filipino WWII veterans 
and dependents, as well as for U.S. veterans and dependents living in 
the Philippines.[Footnote 1] For example, the office processes monthly 
compensation for about 6,000 Filipino WWII veterans with disabilities 
and dependents, a significant decrease from almost 34,000 in 1976. The 
office also processes disability compensation and pension benefits for 
about 8,500 U.S. veterans and dependents who live in the Philippines. 
In fiscal year 2010, the office processed $187 million in compensation 
and pension benefits for both Filipino and U.S. veterans. According to 
VA officials, in order to combat high levels of fraud the office staff 
use a variety of methods, including using photographs and interviews to 
determine identity, verifying claims using forensic analysis, and using 
WWII Japanese records to determine whether a Filipino WWII veteran 
collaborated with the enemy during the war. The Philippines office also 
provides medical exams through its outpatient clinic to support 
compensation and pension claims and provides other health care services 
for U.S. veterans. In fiscal year 2010, about 4,600 veterans made 
almost 24,000 visits to the clinic, which serves primarily U.S. 
veterans; Filipino WWII veterans are not eligible for services other 
than compensation and pension exams, and no dependents are eligible for 
these services. Some of the on-site services and benefits the 
Philippines office provides are not available in other foreign 
countries. For example, U.S. veterans with service-connected conditions 
receive treatment at the outpatient clinic for both their service-
connected and non-service-connected conditions, and receive 
prescription drugs at no charge.[Footnote 2] VA staff also process SSA 
benefits for individuals--which includes veterans and nonveterans--
living in the Philippines and 41 other countries throughout the East 
Asia Pacific region.[Footnote 3] In fiscal year 2010, the Philippines 
office administered more than $200 million in total Social Security 
benefits to about 29,000 beneficiaries. Of this total, about $11 
million was a special benefit for about 1,800 Filipino WWII veterans 
and U.S. veterans. 

* Currently, the benefits of maintaining the Philippines office likely 
outweigh its costs; however, more information will be needed to 
determine the need for its continued presence in the future. Financial 
savings from lower personnel costs and fraud detection efforts 
currently offset or lower some of the office's operating costs. The 
cost of processing VA benefits in the Philippines office is about $5.1 
million per year. However, VA estimates that the personnel cost is 
about $5.5 million less than it would be in the U.S. because most 
employees in the Philippines office are local staff who are paid 
substantially less than staff would be paid in the U.S. In addition, VA 
estimated that this office recently prevented over $4 million in 
fraudulent payments through fraud prevention and 
investigation.[Footnote 4] The operating cost for the outpatient clinic 
was $10.1 million in fiscal year 2010. VA has not estimated the costs 
or savings that would occur if the outpatient clinic were closed and/or 
some of its health services were administered from the United States, 
such as through VA's Foreign Medical Program. According to VA, there 
are cost savings associated with completing the compensation and 
pension exams in-house by VA rather than having the exams completed by 
Philippine private sector physicians because this sector is known for 
pervasive fraud. Beyond financial savings, other benefits of the 
Philippines office support its presence in the short-term. According to 
State officials, the VA office plays an important role in U.S. foreign 
relations with the Republic of the Philippines, and its closure could 
adversely affect the countries' relations. The Philippines is an 
important ally in Asia and a strategic partner in fighting terrorism. 
VA has not developed information that would help decide the status of 
the office in the future, such as projections of the number of veterans 
and dependents in the Philippines and their future impact on office 
workloads. Other factors to consider in maintaining or closing the 
office include the capacity to investigate fraud, the impact on 
services to veterans in the Philippines (such as health services in an 
outpatient clinic), and geopolitical considerations. 

Conclusions and Matters for Congressional Consideration: 

Currently, continuing operations appears to be warranted because of 
lower payroll costs, the specialized workload, and other factors. 
However, as the population of Filipino WWII veterans and dependents 
declines, so should the need for specialized staff and extensive fraud 
investigation activities. Over the past two decades, Congress has 
reauthorized a series of short-term extensions (averaging 3 years in 
length) to allow VA to operate this office. A 3-year extension beyond 
the December 31, 2011, deadline would allow VA to conduct a thorough 
analysis of future feasibility. Congress should consider extending 
authority for the Philippines office, but require VA to assess and 
report to Congress on the feasibility of maintaining a future presence 
in the Philippines. In conducting this analysis, VA should be required 
to consult with SSA and State to develop and use information on the 
potential future workload of the office based on the projected number 
of Filipino WWII veterans, U.S. veterans, and dependents in the 
Philippines; the costs and benefits of alternative ways to provide 
services to veterans in the Philippines, such as delivering medical 
services through the Foreign Medical Program and providing some 
services from the United States while maintaining fraud investigation 
staff in the Philippines; and the foreign policy implications of 
maintaining or closing the VA office in the Philippines. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Secretary of Veterans 
Affairs, the Secretary of State, and the Commissioner of the Social 
Security Administration for their review and comment. VA said it agreed 
with our conclusion recommending that Congress consider extending 
authority for the office and, if requested by Congress, VA would 
reassess the costs and benefits of maintaining operations in the 
Philippines. VA also noted that there has been a recent increase in 
parts of its workload and that its office in the Philippines performs 
work that is not performed at most regional offices in the United 
States. See enclosure II for VA's written comments. SSA said that it 
agreed that it is important to consider the many foreign policy 
implications of closing or maintaining the office and that it would 
welcome participation in future discussions on the status of the 
office. State said that it had no comments. VA and SSA provided 
additional technical comments which we incorporated where appropriate. 

We are sending copies of this report to relevant congressional 
committees, the Secretary of Veterans Affairs, the Secretary of State, 
the Commissioner of the Social Security Administration, and other 
interested parties. In addition, the report will be available at no 
charge on the GAO Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202)512-7215 or bertonid@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff members who made key 
contributions to this report are listed in enclosure III. 

Signed by: 

Daniel Bertoni: 

Director, Education, Workforce, and Income Security Issues: 

Enclosures (3): 

List of Committees: 

The Honorable Patty Murray: 
Chairman: 
The Honorable Richard Burr: 
Ranking Member: 
Committee on Veterans' Affairs: 
United States Senate: 

The Honorable Tim Johnson: 
Chairman: 
The Honorable Mark Kirk: 
Ranking Member: 
Subcommittee on Military Construction, Veterans Affairs, and Related 
Agencies: 
Committee on Appropriations: 
United States Senate: 

The Honorable Jeff Miller: 
Chairman: 
The Honorable Bob Filner: 
Ranking Member: 
Committee on Veterans' Affairs: 
House of Representatives: 

The Honorable John Culberson: 
Chairman: 
The Honorable Sanford Bishop: 
Ranking Member: 
Subcommittee on Military Construction, Veterans Affairs, and Related 
Agencies: 
Committee on Appropriations: 
House of Representatives: 

[End of section] 

Enclosure I: Briefing Slides: 

VA Philippines Office: Maintain Operations, but More Information Needed 
to Determine Future Presence: 

Briefing for Staff Members of Congressional Committees: 

October 12-13, 2011: 

For more information, contact Dan Bertoni, bertonid@gao.gov, (202) 512-
7215. 

Briefing Overview: 
Introduction: 
Objectives: 
Summary of Findings: 
Scope and Methodology: 
Background: 
Findings: 
Conclusions: 
Matter for Congressional Consideration:  

Introduction: 

The Department of Veterans Affairs (VA) operates a regional office in 
the Republic of the Philippines—its sole office in a foreign country. 

The Philippines became a U.S. territory in 1898. 

About 500,000 Filipinos fought alongside U.S. soldiers in World War 
Congress authorized the VA office, which administers benefits to 
veterans who fought in the war. 

Congress has reauthorized the office for specific periods of time, 
averaging 3 years over the last two decades. The current authorization 
expires December 31, 2011. 

Because of the declining population of Filipino WWII veterans, the need 
for the office is being reassessed. 

The Veterans' Benefits Act of 2010, Pub. L. No. 111-275, § 807(b), 
directed GAO to report on the regional office in the Philippines. 

Objectives: 

1. Describe the primary activities undertaken by the U.S. Department of 
Veterans Affairs (VA) regional office in the Philippines. 

2. Identify the estimated costs and benefits of maintaining this office 
in its current location versus moving its activities to the U.S. 

Summary of Findings: 

The VA Philippines office processes VA benefits, delivers health 
services to U.S. veterans, and processes Social Security benefits for 
individuals in the East Asia Pacific region. 

The office provides veterans in the Philippines with on-site services 
not available to veterans in other foreign countries, such as health 
services delivered through an outpatient clinic. 

Currently, the benefits of maintaining the office in the Philippines 
likely outweigh its costs because of financial savings and other 
benefits. 

Additional information is needed to assess the costs and benefits of 
maintaining this office in the future, including the number of veterans 
and dependents in the Philippines. 

Scope and Methodology: 

Reviewed VA's historical, current, and projected office workloads. 

Visited the Philippines office and observed its activities. 

Reviewed relevant reports from VA, the Social Security Administration 
(SSA), and the U.S. Department of State (State). 

Interviewed officials from VA, SSA, and State in the Philippines and 
the U.S. 

Reviewed VA's actual costs for operating the Philippines office, and 
its estimated costs for conducting some of the office's activities in 
the U.S. 

We determined these data were sufficiently reliable for the purposes of 
this report. 

We were unable to obtain data on the estimated costs of conducting all 
of the Philippines office's activities in the U.S. because VA has not 
developed this information. 

Background: 

Figure: History of VA in the Philippines: 

[Refer to PDF for image: timeline and globe illustration] 

Timeline: 

Year: 1922; 
VA begins presence in the Philippines, a U.S. territory. 

World War II: 1941-1945: 

Year: 1941; 
U.S. enters WWII. 

Year: 1942; 
Japan occupies Philippines. 

Year: 1945; 
Japan surrenders, occupation ends. 

Year: 1946; 
U.S. grants independence to Philippines. 

Year: 1947; 
Congress authorizes VA to operate a regional office in the newly 
independent Philippines. 

Year: 1958; 
VA establishes outpatient clinic in Manila. 

Year: 1960; 
VA begins administering SSA benefits. 

Year: 2011; 
VA moves into new office at U.S. Embassy's Seafront Compound. 

Source: GAO. 

[End of figure] 

Major Groups of Veterans and Dependents in the Philippines: 

Filipino WWII veterans (estimated 18,000) who served under the command 
of the U.S. during WWII in one of the following Philippine military 
groups: 

* Commonwealth Army of the Philippines. 

* Recognized Guerrilla Forces. 

* New Philippine Scouts. 

U.S. veterans (unknown number living in the Philippines) who served in 
the U.S. Armed Forces: 

* Regular Philippine Scouts[A] 

* Filipinos recruited from the Philippines since WWII and Filipino-
Americans who moved to the Philippines. 

* Veterans from the U.S. who moved to the Philippines for reasons such 
as its low cost of living, English-speaking population, warm climate, 
and U.S. presence. 

Dependents of Filipino WWII and U.S. veterans (unknown number): 

* Surviving spouses. 

* Dependent children. 

* Dependent parents. 

[A] The Regular Philippine Scouts were members of a small, regular 
component of the U.S. Army that was considered to be in regular active 
service. 

VA Philippines Office Processes VA Benefits, Delivers Outpatient Health 
Services, and Processes SSA Benefits: 

Processes VA benefits (7 U.S. officials and 106 local staff): 

* Disability compensation, survivor, pension, and other benefits. 
* Anti-fraud activities. 

Delivers health care (2 U.S. officials and 79 local staff): 

* Outpatient services. 
* Pharmacy services. 

Processes SSA benefits and serves as liaison for other federal agencies 
(1 U.S. official and 31 local staff)[A] 

* SSA retirement, disability, and survivor benefits. 
* Covers 42 countries through East Asia Pacific region. 

[A] VA provides staff for SSA pursuant to a memorandum of understanding 
between the agencies. 

VA Philippines Office Has Specialized Workload: 

Filipino WWII veterans' claims: Office has sole jurisdiction over these 
claims, including administering a one-time, lump-sum Filipino Veterans 
Equity Compensation (FVEC) benefit established in 2009 for about 18,000 
Filipino WWII veterans[A]. 

Payments for disabled Filipino WWII veterans and dependents: Office 
processes monthly VA benefit claims. The total number of these 
beneficiaries has declined from almost 34,000 in 1976 to about 16,000 
in 1992, and to slightly more than 6,000 in 2011. 

Pension and certain education claims: Office processes these benefits, 
which are not typically processed by VA regional offices in U.S. 

Languages and dialects: Services are provided in multiple languages and 
dialects spoken by veterans and dependents. 

[A] The FVEC benefit was established as part of the American Recovery 
and Reinvestment Act of 2009, § 1002, Pub. L. No. 111-5, 123 Stat. 115, 
200. All Filipino WWII veterans were eligible for this benefit, 
including disabled and nondisabled veterans. 

Fraud prevention, detection, and investigation: Office conducts these 
activities to combat high levels of fraud, which occur primarily with 
claims associated with Filipino WWII veterans and dependents, according 
to VA officials: 

VA benefits represent significant income in a country with extreme 
poverty and limited economic opportunity, giving rise to potentially 
fraudulent claims. 

Staff verify claims using WWII Japanese records[A], forensic analysis 
of documents, handwriting analysis, fingerprints, photographs, and 
field investigations. 

[A] According to VA, staff use confiscated Japanese WWII records to 
determine whether a person claiming benefits based on Filipino Page 11 
WWII service collaborated with the enemy during the war. 

Table: Beneficiaries and expenditures as of February 2011 (dollars in 
millions):  

Benefit: Dependency and Indemnity Compensation (survivors); 
Filipino WWII veterans and U.S. veterans and dependents[A]: 
Beneficiaries: 4,123; 
Filipino WWII veterans and U.S. veterans and dependents[A]: Monthly 
expenditures: $2.7; 
U.S. Veterans and dependents in the Philippines: Beneficiaries: 1,500; 
U.S. Veterans and dependents in the Philippines: Monthly expenditures: 
$1.8. 

Benefit: Compensation for service-connected disability; 
Filipino WWII veterans and U.S. veterans and dependents[A]: 
Beneficiaries: 2,024; 
Filipino WWII veterans and U.S. veterans and dependents[A]: Monthly 
expenditures: $2.0; 
U.S. Veterans and dependents in the Philippines: Beneficiaries: 3,721; 
U.S. Veterans and dependents in the Philippines: Monthly expenditures: 
$6.6. 

Benefit: Death pension (survivors); 
Filipino WWII veterans and U.S. veterans and dependents[A]: 
Beneficiaries: not eligible; 
Filipino WWII veterans and U.S. veterans and dependents[A]: Monthly 
expenditures: n/a; 
U.S. Veterans and dependents in the Philippines: Beneficiaries: 2,706; 
U.S. Veterans and dependents in the Philippines: Monthly expenditures: 
$1.6. 

Benefit: Non-service-connected pension; 
Filipino WWII veterans and U.S. veterans and dependents[A]: 
Beneficiaries: not eligible; 
Filipino WWII veterans and U.S. veterans and dependents[A]: Monthly 
expenditures: n/a; 
U.S. Veterans and dependents in the Philippines: Beneficiaries: 612; 
U.S. Veterans and dependents in the Philippines: Monthly expenditures: 
$0.7. 

Benefit: Filipino Veterans Equity Compensation[B]; 
Filipino WWII veterans and U.S. veterans and dependents[A]: 
Beneficiaries: 17,949; 
Filipino WWII veterans and U.S. veterans and dependents[A]: Total 
program: $216.0[C]; 
U.S. Veterans and dependents in the Philippines: Beneficiaries: not 
eligible; 
U.S. Veterans and dependents in the Philippines: Total program: n/a. 

Source: VA. 

[A] All beneficiaries are paid in U.S. dollars. Filipino WWII veterans 
and dependents are paid at the rate of $0.50 for each dollar 
authorized. 38 U.S.C. § 107(a). 

[B] Filipino WWII veterans were eligible to apply between February 2009 
and February 2010 for a one-time, lump sum benefit payment of $9,000 
(if not a U.S. citizen) or $15,000 (if a U.S. citizen). 

[C] This represents the total expenditures for the program as of 
January 2011 when about 99 percent of claims had been processed. 

[End of table] 

Outpatient Clinic Delivers Services to Veterans for Service-connected 
Conditions and Other Needs: 

Clinic provides: 

* compensation and pension exams to support disability claims 
processing; 

* primary and specialty care for veterans with service-connected 
conditions; 

* care for non-service-connected conditions for veterans with service-
connected conditions, within available clinic resources; 

* prescription drugs at no cost to veterans; 

About 4,600 veterans visited the clinic a total of almost 24,000 times 
in fiscal year (FY) 2010. 

The clinic serves primarily U.S. veterans with service-connected 
conditions; Filipino WWII veterans are not eligible for clinic services 
other than C&P exams. 

No dependents are eligible for these services. 

Figure: Outpatient Clinic Delivers Services to Veterans for Service-
connected Conditions and Other Needs: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

Table: Philippines Office Provides On-Site Services and Benefits That 
VA Does Not Provide in Other Foreign Countries: 

Claims processing: Communication with benefits processing office; 
Veterans living in: the Philippines: Face-to-face, phone, mail, or 
Internet; 
Veterans living in: all other foreign countries: Phone, mail, or 
Internet with VA offices in U.S. that handle claims from veterans 
living abroad. 

Claims processing: Compensation and pension exams to determine extent 
of veteran's disability; 
Veterans living in: the Philippines: On-site at VA clinic; 
Veterans living in: all other foreign countries: Arranged with local 
medical facility and reimbursed through VA's Foreign Medical 
Program[A]. 

Health services (U.S. veterans with service-connected conditions only): 
Outpatient treatment for non-service-connected conditions; 
Veterans living in: the Philippines: On-site at VA clinic; 
Veterans living in: all foreign countries: Arranged with local medical 
facility and reimbursed through VA's Foreign Medical Program. 

Health services (U.S. veterans with service-connected conditions only): 
Outpatient treatment for non-service-connected conditions; 
Veterans living in: the Philippines: On-site at VA clinic at no cost, 
if resources available; 
Veterans living in: all foreign countries: Not provided. 

Health services (U.S. veterans with service-connected conditions only): 
Prescription drugs; 
Veterans living in: the Philippines: On-site at VA clinic (for service-
connected conditions); 
Veterans living in: all foreign countries: Arranged with local pharmacy 
and reimbursed through Foreign Medical Program, for service-connected 
conditions only. 

Source: VA. 

[A] The Foreign Medical Program assumes payment responsibility for 
necessary exams and treatment of service-connected conditions for U.S. 
veterans in all foreign countries except the Philippines. 

[End of table] 

Office Processes Social Security Benefits and Serves as Liaison for 
Other Programs: 

VA staff process SSA retirement, disability, and survivor benefits for 
individuals living in the Philippines and 41 other countries throughout 
the East Asia Pacific region, which could include veterans. 

- In FY 2010, the Philippines office processed claims for more than 
$200 million in Social Security benefits to about 29,000 beneficiaries. 

- Of this total, about $11 million was for special benefit payments for 
about 1,800 Filipino WWII veterans and U.S. veterans.[A] 

The VA clinic performs exams to determine eligibility for Social 
Security Disability Insurance. 

VA staff serve as liaison for other federal benefit programs, including 
those administered by the Railroad Retirement Board and the Office of 
Personnel Management. 

SSA reimburses VA for the operating costs of conducting these 
activities ($1.1 million in FY 2010). 

[A] 2 U.S.C. § 1001 et seq. This amount includes California Veterans 
Cash Benefit payments. 

Finding 2: 

Currently, Benefits of the Philippines Office Likely Outweigh Costs, 
but More Information Is Needed to Decide Its Future Status: 

Some of the office's operating costs are currently lower than or offset 
by financial savings from lower estimated personnel expenses and fraud 
prevention and detection activities. 

Benefits, such as positive foreign relations with the Philippines, on-
site fraud prevention, and timely compensation and pension exams, 
currently suggest a continued need for the Philippines office. 

More comprehensive information is needed to decide the status of the 
office in the future, such as projections of the number of Filipino 
WWII veterans, U.S. veterans, and dependents in the Philippines, and 
the estimated costs for processing benefits in the U.S. 

Some of the Philippines Office's Operating Costs Are Offset by 
Financial Savings: 

While the operating cost of processing VA benefits in the Philippines 
office was about $5.1 million in FY 2010, VA estimates that its annual 
personnel costs for these activities is about $5.5 million less than if 
these activities were performed in the U.S.[A] 

* Most of the employees in the Philippines office are local staff who 
are paid substantially less than staff would be paid in the U.S. 

VA estimated it recently prevented about $4.3 million in fraudulent 
payments using its expertise in fraud prevention and investigation: 

* $400,000 in disability and survivor compensation claims in FY 
2010;[B] and: 

* $3.9 million for FVEC claims. 

[A] VA compared payroll costs in the Philippines to payroll costs in 
San Diego, the regional office in the continental United States that is 
geographically closest to the Philippines. 

[B] If these fraudulent claims had not been detected, according to VA, 
the amount of these fraudulent payments could have run into millions of 
dollars over time. 

The operating cost for the outpatient clinic was about $10.1 million in 
FY 2010. 

VA has not estimated the costs or savings that would occur if the 
outpatient clinic were closed and/or some of its health services were 
administered from the U.S., such as through the Foreign Medical 
Program. 

Benefits of the Office's Presence Support Its Need in the Short-Term: 

According to State officials, the VA office plays an important role in 
U.S. foreign relations with the Republic of the Philippines. 

* The Philippines is an important ally in Asia and a strategic partner 
in fighting terrorism. 

* The people of the Philippines are cognizant of how the U.S. treats 
Filipino WWII veterans. 

* Closing the VA office could adversely affect relations between the 
two countries. 

According to VA officials, local staff are adept at preventing and 
detecting fraudulent claims. 

* Most VA benefits fraud in the Philippines occur with Filipino WWII 
veterans' and dependents' claims, such as forged medical evidence and 
assumed identity. 

* The savings from fraud prevention and investigation activities might 
not have been achieved if the claims had been processed in the U.S. and 
staff did not have face-to-face contact with claimants. 

The outpatient clinic provides timely and reliable compensation and 
pension exams. According to VA officials, these exams generally take 
longer in foreign countries that do not have VA outpatient clinics.  

More Information Is Needed to Assess the Costs and Benefits of 
Maintaining the Philippines Office in the Future: 

Except for its estimate of annual payroll savings for processing VA 
benefits in the Philippines, VA has not developed comprehensive 
information that would help decide the status of the office in the 
future, such as: 

* projections of the number of Filipino WWII veterans, U.S. veterans, 
and dependents in the Philippines and their potential future impact on 
office workloads; 

* cost of any additional office space in the U.S. needed to handle 
Philippines-related claims; 

* cost to train U.S. benefits-processing staff to handle claims for 
Filipino WWII veterans and dependents; 

* costs of State assuming SSA benefits processing responsibilities; • 
costs or savings from services furnished by the Foreign Medical Program 
if the clinic were closed; and: 

* savings from consolidating other functions, such as human resources 
and call center services in the U.S. 

Other factors to consider in maintaining or closing the office include 
the capacity to investigate fraud, the impact on services to veterans 
in the Philippines such as health services in an outpatient clinic),  
and geopolitical considerations, given the country's strategic position 
as a U.S. ally in Asia. 

Conclusions: 

VA has a unique history and role in the Philippines because it was a 
U.S. territory and a military ally during WWII. 

The VA presence continues to foster positive U.S. relations with this 
strategic ally in Asia. 

Currently, maintaining the VA Philippines office could be justified, 
given its lower payroll costs, specialized workload, and other factors. 

As the number of Filipino WWII veterans' and dependents' claims 
declines, so should the need for specialized staff and extensive fraud 
investigation activities. Determining the continuing need for this 
office will also provide an opportunity for reexamining VA service 
delivery to U.S. veterans in the Philippines. 

Without the insight provided by a full array of information on the 
veteran population and comparative costs, a decision to either maintain 
or close the office could have adverse effects, such as higher overall 
costs to VA or reduced program integrity. 

Congress has granted limited extensions averaging 3 years over the last 
two decades. A similar extension appears reasonable given the current 
environment, and it would allow VA to do a more thorough analysis of 
longer-term feasibility. 

Matters for Congressional Consideration: 

Congress should consider extending authority for VA's regional office 
in the Philippines, but require VA to assess and report to Congress on 
the feasibility of maintaining a future presence in the Philippines. As 
a part of this assessment, VA should be required to consult with SSA 
and State to develop information on: 

* projections of the number of Filipino WWII veterans, U.S. veterans, 
and dependents in the Philippines, and the potential future workload of 
the office; 

* the costs and benefits of alternative ways to provide services to 
veterans in the Philippines, such as delivering medical services 
through the Foreign Medical program, processing benefits from the U.S., 
and/or maintaining some fraud investigation staff in the Philippines; 
and: 

* the foreign policy implications of maintaining or closing the VA 
office in the Philippines. 

[End of section] 

Enclosure II: Comments from the Department of Veterans Affairs: 

Department Of Veterans Affairs: 
Washington DC 20420: 

October 3, 2011: 

Mr. Daniel B. Bertoni: 
Director, Education, Workforce and Income Security Issues: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Bertoni:

The Department of Veterans Affairs (VA) has reviewed the Government 
Accountability Office's (GAO) draft report, "VA Philippines Office: 
Maintain Operations but More Information Needed to Determine Future 
Presence" (GAO-12-20R) and is providing comments in the enclosure. VA 
appreciates the opportunity to comment on your draft report. 

Sincerely,

Signed by: 

John R. Gingrich: 
Chief of Staff: 

Enclosure: 

Department of Veterans Affairs (VA) Comments to Government 
Accountability Office (GAO) Draft Report: VA Philippines Office: 
Maintain Operations but More Information Needed to Determine Future 
Presence (GAO-12-20R): 

VA comments:

VA agrees with GAO's conclusion recommending Congress consider 
extending authority for VA's Manila Regional Office (RO) in the 
Republic of the Philippines. If requested by Congress, VA will reassess 
the costs and benefits of maintaining operations in the Philippines. 

The GAO assessment discussed the decrease in the World War II (WWII) 
Filipino population. However, VA notes there has been a 12 percent 
increase in the number of Gulf War-era Veterans on the Manila RO's 
rolls since January 2011, and a 23 percent increase in annual 
disability claim receipts when comparing fiscal year (FY) 2010 receipts 
through August 2010 to FY 2011 receipts through August 2011. 

There is significant work performed at the Manila RO that is not 
performed at most stateside ROs. Specifically, pension, education, 
fiduciary, survivor benefits, and telephone service are all elements of 
VA work that are performed by the Manila RO that were not mentioned in 
the GAO report, but represent significant workload in addition to 
disability claims. 

The GAO report mentions using Japanese WWII records to verify wartime 
service. This needs to be clarified, as the records are not used to 
verify service. The confiscated Japanese WWII records are used to 
fulfill the legal requirements to determine whether a person claiming 
benefits based on Filipino WWII service collaborated with the enemy 
during the war. 

VA does not believe that footnote 4 on page 2 accurately portrays the 
level of savings and potential savings from fraud prevention and 
detection efforts. Since most of the RO's anti-fraud resources were 
dedicated to Filipino Veterans Equity Compensation (FVEC) claims in 
2010, this is where most of the fraud savings were found. The Manila RO 
has other significant fraud detection and prevention measures that were 
not mentioned. In 2010, the Manila RO detected over $4.2 million in 
overpayments. The Manila RO conducts education benefit oversight and 
compliance reviews at universities and colleges in the Philippines. 
This oversight has resulted in de-certifying multiple schools and 
universities for VA education benefit programs because they were found 
to be non-compliant in reporting when students stopped attending 
school. The key point is that footnote 4 seems to indicate that fraud 
detection was critical during only the FVEC year, which is not the 
case. 

The area of fraud prevention is also a critical aspect of the 
Outpatient Clinic's function. In the discussion of clinic costs, it 
should be noted that there are cost savings associated with completing 
the compensation and pension exams in-house by VA, rather than having 
the exams completed by Philippine private-sector physicians. This 
sector is known for pervasive fraud, as evidenced by the recent TRICARE 
fraud scandal in the Philippines. 

[End of section] 

Enclosure III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Daniel Bertoni, (202) 512-7215 or bertonid@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Brett Fallavollita (Assistant 
Director), Paul Schearf (Analyst-in-Charge), Dana Hopings, and Jill 
Yost made key contributions to this product. We also acknowledge the 
contributions made by James Bennett, Hal Brumm, Jean McSween, James 
Rebbe, Kathleen van Gelder, and Margaret Weber. 

[End of section] 

Footnotes: 

[1] Recently, VA staff processed the Filipino Veterans Equity 
Compensation (FVEC) benefit, which provided one-time, lump-sum payments 
to about 18,000 Filipino WWII veterans, whether disabled or not. FVEC 
was authorized by the American Recovery and Reinvestment Act of 2009, 
Pub. L. No. 111-5, § 1002, 123 Stat. 115, 200.VA had paid out $216 
million in FVEC benefits as of January 2011. 

[2] For veterans living in all foreign countries except the 
Philippines, the VA Foreign Medical Program assumes payment 
responsibility for necessary treatment of service-connected conditions. 
Moreover, there are no VA-operated clinics outside the Philippines, and 
treatment for non-service-connected conditions, including prescription 
drug services, is not covered. 

[3] VA administers SSA benefits under a memorandum of understanding 
with SSA. SSA reimburses VA for the operating costs of conducting these 
activities. 

[4] Most of these savings, about $3.9 million, came from investigating 
claims for the one-time FVEC benefit. According to VA, the office's 
fraud detection work has also detected overpayments, and it has 
detected noncompliance with VA education benefit programs at schools 
and universities in the Philippines. 

[End of section] 

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