Department Of Veterans Affairs Repeatedly Violated Ban Against

Diverting Health Care Funding.


AFGE Calls For Immediate Criminal Investigation Of Veterans Affairs Management

The American Federation of Government Employees (AFGE) is asking the Department of Justice to open a criminal investigation into the Department of Veterans Affairs' (VA) efforts to use funds appropriated for the Veterans Health Administration to pay for the conduct of expensive outsourcing studies that set the stage for the elimination of federal jobs.

In a letter sent in early December 2005 to U.S. Attorney General Alberto Gonzales, AFGE National President John Gage asked for "an immediate criminal investigation of current management at the VA" for violations of 38 U.S.C. 8110 (a)(5) and the Anti-Deficiency Act, 31 U.S.C. 1341(a), laws that prohibit the diversion of appropriated health care dollars to pay for outsourcing studies. 

"For over 20 years, Congress and administrations of both political parties have honored the law and worked to improve health care delivery in a bi-partisan fashion," said Gage in the letter to Attorney General Gonzales.  "Sadly, this no longer appears to be the case."

AFGE has made previous attempts to alert the VA of the violations. In July 2003, AFGE officials sent a formal Cease and Desist letter to Former VA Secretary Anthony J. Principi informing him that the VA's actions were against the law. In November 2003, after learning that the VA management was once again using scarce health care appropriated funds to illegally perform outsourcing studies, AFGE again contacted VA officials and requested that they cease and desist from their illegal activities. 

The VA's actions have also caught the attention of the United States Government Accountability Office (GAO). November 2005, GAO issued the results of an investigation that verified the VA's illegal use of funds appropriated for veterans' healthcare.  Despite these findings, and the AFGE Cease and Desist letters, the VA has denied any wrongdoing and has indicated it will continue with its illegal use of appropriated health care dollars to
fund outsourcing studies. 

"Since AFGE has previously given notice to the VA about the illegal use of appropriated funds and now that GAO has investigated and verified the illegality," said Gage in the AFGE letter to Attorney General Gonzales.


"...We believe that only a proper and thorough criminal investigation and appropriate prosecution will deter VA management from continuing its violation of the law."

To protect federal dollars earmarked for healthcare, Congress enacted 38 U.S.C. 8110 (a)(5), a 24-year-old safeguard that protects funds appropriated for veterans' healthcare from being spent improperly.  In addition to violating 38 U.S.C. 8110 (a)(5), the union also says the VA is in violation of the Anti-Deficiency Act, 31 U.S.C. 1341 (a) a law which makes it illegal for an "officer or employee of the United States Government" to "make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure of obligation.”

“As a result of chronic understaffing and under funding issues, the VA has to deny thousands of veterans the healthcare they were promised when they put their lives on the line for this country," said Gage.  "Earlier this summer we learned that the VA faced a $3 billion shortfall because of inexplicable miscalculations.  To divert health care dollars to pay for outsourcing studies when the VA faces a budget crisis is criminal at best."

The Veterans Affairs Department has violated a 1981 law that prohibits the diversion of funds appropriated to medical care accounts to research on the cost of keeping work in-house versus that of contracting it out, the Government Accountability Office reported November 30th, 2005.  VA officials disagree. 

Between fiscal 2001 and fiscal 2004, the department used Veterans Health Administration appropriations to conduct cost comparisons associated with a larger effort to determine whether health care services at existing facilities would be able to meet future needs, GAO said.  Language in Title 38 of the U. S. Code bars VA from using the health administration's appropriations for this purpose unless Congress provides specific instructions to do so, the auditors said. 

VA also used the accounts to finance research on the costs of keeping medical center laundry services in-house versus that of outsourcing them, the report http://www.gao.gov/new.items/d06124r.pdf

GAO-06-124R) stated.  At least 16 of the cost comparison studies listed in the department's fiscal 2002 annual performance report also were illegal, GAO said. 

Agencies that spend money that hasn't yet been appropriated, or that exceeds the appropriated levels for a given activity, are in violation of the Antideficiency Act and must report the transgression to Congress and the White House unless they are able to correct the problem, the auditors noted.

VA could avoid the reporting requirement, and punishments for noncompliance, by rescinding the amounts improperly charged to the health administration accounts and taking the money from other departmental appropriations accounts with balances left, GAO said.  But the department failed to track how much it spent on the illegal cost-comparison studies, and would have difficulty determining how much money would need to be de-obligated from the health accounts, the auditors said. 

It is also unclear whether the balances from previous fiscal years remaining in accounts that could legally fund the studies--such as those for construction projects--would be high enough to cover all expenses related to the cost comparisons, GAO said.

VA officials disagree with GAO's interpretation of the 1981 law and with the auditors' recommended fixes. In a Nov. 4 letter to McCoy Williams, director of financial management and assurance at GAO, VA Secretary R. James Nicholson said the language is intended only to prevent the unsanctioned use of health administration funds for cost-comparisons related to formal competitive sourcing studies run using rules in Office of Management and Budget Circular A-76.

Many of the violations cited by GAO did not involve official A-76 studies, the department argued.  For instance, the auditors said cost comparisons conducted as part of the Capital Asset Realignment for Enhanced Services effort, a broader restructuring project initiated in 2000, were illegal.  With the exception of contractors used in the initial phases of the CARE project, the employees conducting those comparisons were paid primarily from health administration accounts, GAO said. 

That would have been OK had appropriators designated money in those accounts for cost comparisons, the report stated.  But for fiscal years 2001 to 2004, the department sought appropriations--ranging from $16 million to $50 million--to conduct cost comparison studies, and lawmakers denied the requests. 

Nicholson acknowledged that VA cannot use health administration funds for formal competitive sourcing studies, but argued that "Congress clearly did not intend to preclude all manner of cost analysis necessary for the day-to-day administration of our health-care system and, to the contrary, has directed [VA] . . . to establish and manage our programs in a manner promoting cost-effective care delivery."

GAO's interpretation of the 1981 law "makes sense only if one ignores its legislative history and the rest of Title 38," Nicholson wrote. 

But in the report, auditors argued that both the legislative history and the "clear and unambiguous words in the.. cost comparison funding prohibition" indicate that the law applies to more than traditional A-76 studies. 

"At the crux of our disagreement with VA is the meaning of the word 'study,' " GAO noted. "According to a well-recognized dictionary of the sort that might have been available to the Congress in 1981, a 'study' is defined broadly as a careful examination or analysis of a phenomenon, development or questions, or the publication of a report of such an examination or analysis."

"The other important word in the language of the prohibition is the word 'any,' which modified the word 'study,' " the auditors noted.


Regardless of how the law is interpreted, VA would benefit from keeping better track of the costs associated with cost comparisons, the report said.  The department's inability to say how much it spent on such research is "part of a bigger problem," the report stated. 

"VA lacks reliable cost accounting information needed to manage its operations and budget effectively."

That problem manifested itself over the summer, the report noted, when Congress had to provide $1.5 billion in emergency fiscal 2005 funding for the department's health care programs.  The shortfall necessitating the supplement stemmed from "inaccurate data and outdated assumptions," department officials acknowledged at a congressional hearing.