[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
EXPLORING VBA'S FIDUCIARY PROGRAM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL AFFAIRS
OF THE
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
THURSDAY, JUNE 11, 2015
__________
Serial No. 114-26
__________
Printed for the use of the Committee on Veterans' Affairs
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COMMITTEE ON VETERANS' AFFAIRS
JEFF MILLER, Florida, Chairman
DOUG LAMBORN, Colorado CORRINE BROWN, Florida, Ranking
GUS M. BILIRAKIS, Florida, Vice- Minority Member
Chairman MARK TAKANO, California
DAVID P. ROE, Tennessee JULIA BROWNLEY, California
DAN BENISHEK, Michigan DINA TITUS, Nevada
TIM HUELSKAMP, Kansas RAUL RUIZ, California
MIKE COFFMAN, Colorado ANN M. KUSTER, New Hampshire
BRAD R. WENSTRUP, Ohio BETO O'ROURKE, Texas
JACKIE WALORSKI, Indiana KATHLEEN RICE, New York
RALPH ABRAHAM, Louisiana TIMOTHY J. WALZ, Minnesota
LEE ZELDIN, New York JERRY McNERNEY, California
RYAN COSTELLO, Pennsylvania
AMATA COLEMAN RADEWAGEN, American
Samoa
MIKE BOST, Illinois
Jon Towers, Staff Director
Don Phillips, Democratic Staff Director
SUBCOMMITTEE ON DISABILITY ASSISTANCE AND MEMORIAL AFFAIRS
RALPH ABRAHAM, Louisiana, Chairman
DOUG LAMBORN, Colorado DINA TITUS, Nevada, Ranking Member
LEE ZELDIN, New York JULIA BROWNLEY, California
RYAN COSTELLO, Pennsylvania RAUL RUIZ, California
MIKE BOST, Illinois
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Veterans' Affairs are also
published in electronic form. The printed hearing record remains the
official version. Because electronic submissions are used to prepare
both printed and electronic versions of the hearing record, the process
of converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
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Thursday, June 11, 2015
Page
Exploring VBA's Fiduciary Program................................ 1
OPENING STATEMENTS
Ralph Abraham, Chairman.......................................... 1
Dina Titus, Ranking Member....................................... 3
WITNESSES
Mr. David R. McLenachen, Acting Deputy Under Secretary for
Disability Assistance Director, Pension and Fiduciary Service,
VBA, U.S. Department of Veterans Affairs....................... 5
Prepared Statement........................................... 24
Accompanied by:
Mr. Michael R. Stephens, Director, Indianapolis Regional
Office, Veterans Benefits Administration, U.S.
Department of Veterans Affairs
And
Marcia Hempy, Acting Deputy Director, Pension and
Fiduciary Service and Manager, Columbia Fiduciary
Hub, Veterans Benefits Administration, U.S.
Department of Veterans Affairs
Mr. Gary Abe, Deputy Assistant Inspector General for Audits and
Evaluations, Office of Inspector General, U.S. Department of
Veterans Affairs............................................... 5
Prepared Statement........................................... 30
Accompanied by:
Quentin Aucoin, Assistant Inspector General for
Investigations, Office of Inspector General, U.S.
Department of Veterans Affairs
And
Timothy Crowe, Director, St. Petersburg Office of Audits
and Evaluations, Office of Inspector General, U.S.
Department of Veterans Affairs
Mr. Zachary Hearn, Deputy Director for Claims, Veterans Affairs
and Rehabilitation Division, The American Legion............... 15
Prepared Statement........................................... 38
Mr. Sam J. Albritton, III, Executive Vice President, Regions Bank 15
Prepared Statement........................................... 43
Mr. Douglas J. Rosinski, Attorney, Veterans Justice Group, LLC 15
Prepared Statement........................................... 51
FOR THE RECORD
Deliverable...................................................... 65
EXPLORING VBA'S FIDUCIARY PROGRAM
----------
Thursday, June 11, 2015
House of Representatives,
Committee on Veterans' Affairs,
Subcommittee on Disability Assistance and Memorial Affairs,
Washington, D.C.
The subcommittee met, pursuant to notice, at 3:09 p.m., in
Room 334, Cannon House Office Building, Hon. Ralph Abraham
[chairman of the subcommittee] presiding.
Present: Representatives Abraham, Lamborn, Costello, Bost,
Titus, and Brownley.
Also Present: Representative Johnson.
OPENING STATEMENT OF CHAIRMAN RALPH ABRAHAM
Mr. Abraham. Good afternoon, everyone. Thank you for your
patience.
This oversight hearing of the subcommittee on Disability
Assistance and Memorial Affairs will now come to order. The
purpose of this hearing is to explore VBA's fiduciary program,
which is intended to protect veterans, who, due to their
injury, disease, or other infirmity, are unable to manage their
own financial affairs.
According to the VA, in 2014, this program covered more
than 172,800 beneficiaries who received approximately $2.9
billion in VA benefit payments.
The fiduciary program is supposed to help protect our
Nation's most vulnerable veterans, and it is absolutely
essential that this subcommittee has the most up-to-date
information about whether the changes to the program over the
last few years have been effective.
Today's hearings will review the criteria VA uses to
determine whether a veteran needs help managing his or her
finances and how VA determines who should be appointed as
fiduciary.
We will also look at VA's oversight of fiduciaries,
including use of the field exam, which helps assess the
veteran's general welfare, and evaluate how well the fiduciary
is managing the veteran's finances.
Inevitably, this hearing will focus on oversight of the
fiduciaries and how to protect veterans from fraud. But I want
to acknowledge at the onset that the vast majority of
fiduciaries are doing the right thing and serving the veterans
to the best of their ability. In most cases, the fiduciary is a
loving family member who is naturally committed to ensuring the
veteran's health and welfare.
There are also many businesses that as a way to show their
appreciation to our veterans develop significant resources to
provide this service for veterans and their families.
However, serious concerns have been raised about the VBA's
oversight of fiduciaries. On June 1st, 2015, the Office of
Inspector General issued a report substantiating allegations
that VBA has not conducted field examinations in a timely
manner in 42 percent of cases in 2013. Let me repeat that. The
VBA did not conduct 42 percent of field examinations in a
timely manner.
VBA is supposed to conduct field examinations in order to
assess the welfare of the beneficiary and evaluate the overall
performance of the fiduciary.
According to the OIG, the delay in conducting field
examination placed $360.7 million in benefit payments and
$487.6 million in estate value at increased risk.
According to the VA figures, fiduciaries have misused
almost $19.3 million of veterans benefits in a little more than
3 years, money that was intended to ensure the care and comfort
of some of the Nation's most valuable heroes.
Although taxpayers re-issued $5.6 million to replace some
of these lost benefits, the veterans involved may have lost as
much as $14 million.
Another problem previously highlighted by the OIG in 2014
reports that 89 percent of the merit reviews, which are
investigations into allegations of misuse of funds, were not
completed by the EAFH within VBA's performance standard of 14
days after receipt of an allegation. This is unacceptable.
I look forward to hearing VA's plan to implement the OIG's
recommendation as well as other initiatives to improve the
oversight of fiduciaries. The welfare of veterans served by the
fiduciary program should be one of VA's top priorities.
This hearing will also address whether there are any
negative, unintended consequences for the veteran after the VA
determines that a beneficiary is incompetent.
While the fiduciary program is essential to protect the
welfare of veterans who are unable to manage their own
financial affairs, it is also crucial that the VA ensure that
our Nation's heroes are not deprived of the constitutional
rights they have fought so hard to defend.
Before we begin, I have to say that I am extremely
frustrated that the VA's eastern area hub manager is not here
to answer questions, despite the fact that my staff
specifically requested the individual's presence in light of
the findings of the 2014 OIG report.
VA has not indicated that there were any scheduling
conflicts that would have prevented the eastern area hub
manager to appear, so I am forced to question whether this
absence is because VA did not want this particular hub manager
to answer questions related to the problems uncovered by the
OIG.
This appears to be another example of VA's failure to
follow through on Secretary McDonald's promise of improving
VA's transparency and accountability. Our Nation's veterans
deserve better than the status quo. Although I am pleased that
Ms. Marcia Hempy, the Columbia Area Hub manager, is here to
answer some of these questions, I note that she is only here
because I directed that subcommittee staff insist that a
regional hub manager be present to answer questions about this
vital problem in this program, and that Ms. Hempy is currently
working from the VA central office here in Washington. Going
forward, I hope VA will more fully cooperate with the
subcommittee's requests and help us to conduct effective
oversight so that we can work together to provide veterans with
the service they deserve.
I am looking forward to hearing from our witnesses. With
that, I would like unanimous consent that our colleague,
Representative Johnson of Ohio, be allowed to participate in
today's hearing. Representative Johnson has been working on
fiduciary issues for a long time and recently introduced H.R.
2605, the Veterans Fiduciary Reform Act of 2015.
Hearing no objections, so ordered.
I now call on distinguished Ranking Member Ms. Titus for
her opening statement.
OPENING STATEMENT OF RANKING MEMBER DINA TITUS
Ms. Titus. Thank you, Mr. Chairman, and thank you for
holding this hearing on the VBA's fiduciary program. It is very
important that we look at this program, because it was designed
to protect some of our most vulnerable veterans.
I would like to welcome Mr. Abe from the VA Office of
Inspector General, and also Undersecretary McLenachen and thank
them and their team for the diligent work that they are doing
on this subject.
I am like you, though, I share some of your concerns. After
reviewing today's testimony and the figures that have been
shared with us by our witnesses, I fear that the fiduciary
program may be much under-resourced and in need of critical
changes. Part of the problem appears to be that the VA failed
to anticipate the need for more field examiners and other
employees when they submitted their 2015 budget request.
Instead, much like with the appeals process, which we are also
trying to address, they have allowed the problem to fester and
grow before asking for additional resources.
A basic and important responsibility of the fiduciary
program is to conduct field examinations. That is how qualified
veterans gain access to the program and how the integrity of
the work that the fiduciaries are doing is maintained. So if
the VBA fails to complete timely examinations and to review and
investigate misuse allegations, then the well-being of the
beneficiaries is put at risk.
Yet, according to the IG, as you stated, 42 percent of
field examinations are not being completed in a timely fashion.
And even more concerning is the fact that the VA hasn't
completed 89 percent of its misuse allegations in a timely
manner, leaving some veterans in challenging, perhaps even
dangerous, situations for about a half a year on average.
To this point, I was also surprised to learn that VA field
examiners are expected to visit only one veteran a day. Surely,
we can visit more than one veteran a day. And I would welcome
your suggestions on what we can do to better utilize the
resources that we have to be more efficient in the meantime.
I am also curious about how those in the hub offices, now
that it is been reorganized, track and oversee those in the
field, those field examiner positions, because they can be as
far away as from St. Louis to Honolulu. If you look at the
western regional hub, you can see that is pretty long
distances, and I wonder what kind of leadership and scrutiny is
occurring in those field offices to try to bring these numbers
down.
So in short, I am afraid the program is drastically under-
resourced and not scrutinized by leadership. So it is clearly
time that we had a complete review of the fiduciary program's
effectiveness. These are some of our most vulnerable veterans,
and we have to do all we can to ensure their financial and
physical well-being.
So, Mr. Chairman, I look forward to working with you in the
bipartisan spirit of this committee to address some of these
questions and improve the program. And I would yield back.
Mr. Abraham. Thank you, Ms. Titus. I ask that all members
waive their opening as per this committee's custom.
I would like to welcome our first panel. Thank you for
coming today, and thank you, again, for your patience.
David McLenachen, the Director of Pension and Fiduciary
Service and Acting Deputy Under Secretary for Disability
Assistance of the Veterans Benefits Administration. He is
accompanied by Mr. Michael Stephens, the Director of the
Indianapolis office; and Ms. Marcia Hempy, the Manager of the
Columbia Fiduciary Hub and Acting Deputy Director of Pension
and Fiduciary Service.
Mr. Gary Abe, the Deputy Assistant Inspector General for
Audits and Evaluations. He is accompanied by Mr. Aucoin,
Assistant Inspector General for Investigations, and Mr. Timothy
Crowe, the Director of the St. Petersburg's Office of Audits
and Evaluations.
And after we conclude panel 1, we will seat a second panel
consisting of Mr. Zachary Hearn, the Deputy Director for
Claims, Veterans Affairs and Rehabilitation Division of the
American Legion; Mr. Samuel J. Albritton, the Executive Vice
President of Regions Bank, and Mr. Douglas Rosinski, a founding
member and attorney with the Veterans Justice Group, LLC.
I want to remind the witnesses that your complete written
statements will be entered into the hearing record, and because
of the time constraints, the panel has agreed to waive their
opening statement. We can go straight to questions. We have all
your opening statements in our books, and I have actually read
them.
STATEMENTS OF DAVID R. MCLENACHEN, ACTING DEPUTY UNDER
SECRETARY FOR DISABILITY ASSISTANCE, DIRECTOR, PENSION AND
FIDUCIARY SERVICE, VETERANS BENEFITS ADMINISTRATION, U.S.
DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY MR. MICHAEL R.
STEPHENS, DIRECTOR, INDIANAPOLIS REGIONAL OFFICE, VETERANS
BENEFITS ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS,
AND MARCIA HEMPY, ACTING DEPUTY DIRECTOR, PENSION AND FIDUCIARY
SERVICE AND MANAGER, COLUMBIA FIDUCIARY HUB, VETERANS BENEFITS
ADMINISTRATION U.S. DEPARTMENT OF VETERANS AFFAIRS; GARY ABE,
DEPUTY ASSISTANT INSPECTOR GENERAL FOR AUDITS AND EVALUATIONS,
OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF VETERANS
AFFAIRS, ACCOMPANIED BY QUENTIN AUCOIN, ASSISTANT INSPECTOR
GENERAL FOR INVESTIGATIONS, OFFICE OF INSPECTOR GENERAL, U.S.
DEPARTMENT OF VETERANS AFFAIRS, AND TIMOTHY CROWE DIRECTOR, ST.
PETERSBURG OFFICE OF AUDITS AND EVALUATIONS OFFICE OF INSPECTOR
GENERAL, U.S. DEPARTMENT OF VETERANS AFFAIRS
Mr. Abraham. So I will begin the questioning.
Mr. McLenachen, VA testified in 2012 that the misuse rate
for beneficiary funds was less than one-tenth of 1 percent at
the time. And I have a few follow-up questions. Is that rate
still accurate?
Mr. McLenachen. That is still correct.
Mr. Abraham. Okay. And how did the VBA calculate that
figure?
Mr. McLenachen. It is based on the number of beneficiaries
and the number of misuse cases.
Mr. Abraham. Okay. All right. Can you be a little more
specific on that, sir, please?
Mr. McLenachen. Sure. The process that we go through is we
can have misuse allegation, and within 14 days, we look at that
allegation to see whether it merits further investigation.
If it is determined that it does, we will investigate that
misuse allegation, and the investigation has to be completed
within a period of time, the entire process.
Mr. Abraham. You think those calculations are good
calculations? You think there is any misalignment of the
numbers?
Mr. McLenachen. In the prehearing information that we
provided, you will see that those numbers grow from over the
last few years. The reason for that is, after we did the hub
consolidation in March 2012, it allowed us to get better
control of this work. And so we have been involved in a
cleanup--essentially, a cleanup effort over the last few years.
And that is why when you look at that data, you will see over
the last 3 years, those numbers have grown. And we have done a
better job of detecting misuse.
Mr. Abraham. So VBA still stands by those figures at this
point so to speak?
Mr. McLenachen. Yes. And those numbers are based on when we
make a determination that there has been misuse in a case, that
number is based on the number of beneficiaries in the program.
Mr. Abraham. Now, is VBA's suggestion that it can
effectively measure all misuse of the beneficiary funds that
has taken place, and is that rate of misuse almost negligible?
Is that what you are saying?
Mr. McLenachen. It is a very low number. And if you are
asking is there misuse out there that we are not detecting, I
hope there is not. But for me to guarantee that, I cannot
guarantee that. The important role of the fiduciary program is
to detect misuse. And as you saw in the inspector general's
testimony, there is a number of criminal cases that they have
prosecuted, and the majority of those have been detected by our
program and referred to the inspector general's office. So it
is a very important role for the fiduciary program.
And if you look at the data that we have provided prior to
the hearing, you will see that the allegation numbers have gone
up. We are doing a much better job now of getting allegations
of misuse and acting upon them. We did a couple of different
things. We centralized allegations of misuse in our phone
centers, so our phone centers are tracking that information as
it comes in, referring it to the fiduciary hubs.
Mr. Abraham. Mr. Abe, would you agree with those figures?
Do you think they are accurate?
Mr. Abe. Well, I would like to turn that over to Mr. Crowe,
because he has actually reviewed that statistic, and he can
explain how we view it.
Mr. Crowe. It does represent the dollar amount of misuse
that VBA has determined that occurred, I presume, divided by
the total States they are managing. Would that be correct?
Given the magnitude of the number of beneficiaries out
there and the kind of money you are talking about, we would
tend to think that there is misuse going on out there that has
not been detected.
Mr. Abraham. Mr. McLenachen, as of 2013, the VBA procedure
required the VBA to initiate debt collection procedures for all
fiduciaries who misused funds. What specific controls have you
implemented to ensure debt collection procedures are conducted
effectively?
Mr. McLenachen. That is one of the significant changes that
we made in the program recently in the misuse area.
Prior to that we were, admittedly, not doing a good job of
establishing debts when the fiduciaries misused benefits. We
initiated new procedures. We did training in the area of debt--
establishing debts. In 2014, we deployed a new IT system, which
has built into it the entire misuse protocol for managing the
misuse work. The protocol is what we go through to make a
misuse determination.
Mr. Abraham. Before I run out of time, what are those
procedures, per se? Could you give me a couple of examples?
Mr. McLenachen. Well, we have a pretty significant and
detailed procedure that our finance activities, local offices
and the fiduciary hubs are supposed to follow. If I have time,
sir, I could maybe ask Ms. Hempy, she could probably give you a
better idea of what she does in her hub under those new
procedures.
Mr. Abraham. Well, I am out of time. But if you will just
give me a copy of those procedures later, I would appreciate
that.
Mr. McLenachen. I would be happy to.
Mr. Abraham. Ms. Titus.
Ms. Titus. Thank you, Mr. Chairman.
Mr. Secretary, do you have some figures that are broken
down within the regions that you can tell me how this process
is working in Nevada?
Mr. McLenachen. I do. We, nationally--and I am going to
distinguish the national number for you, and I am specifically
referring to our initial appointments, initial appointment
field exams, which is a very point in the process, because that
is when we start payment of benefits to a fiduciary.
Nationally, we have driven that number down, thanks to the
hard work in our hubs, down to about an average of 33 days for
those initial appointment field examinations.
However, in Nevada, the State of Nevada, we are at about 68
days. So we have a lot of work to do in Nevada to get it down
to the point--the standard for those is 45 days. So we are
above standard in the State of Nevada. You might ask why that
is. There are only three field examiners in Nevada right now.
We lost one recently. However, to address that concern, the hub
has already adjusted to get some assistance, for southern
Nevada from Utah. One of the good points of the consolidation
is that we are able to move our resources across State lines,
which we were not able to do before.
In addition to that, they are hiring another field
examiner. So they will be up to 5 field examiners with one in
Reno, two in Vegas, and then an additional person that they are
hiring, and a person in Utah. So hopefully that will help
address that situation.
I just want to point out, one of the resource management
hard issues in the fiduciary program is it depends on the
nature of the area where we are doing the field examinations.
In a rural area, can be a challenging resource area, compare an
urban--densely-populated urban issue, less travel,
beneficiaries are closer together, it is a different resource
issue. So Nevada, we have a lot of rural areas to cover.
Ms. Titus. Do you have any patterns for the people who need
these services; older, younger, men, women? Anything that
stands out?
Mr. McLenachen. We are actually putting that data together
right now, and we would be happy to provide it to the committee
after the hearing once we get that completed. That is not data
that we routinely track in the program, but we are working on
pulling that data and putting the report together.
Ms. Titus. I think that would be interesting. I appreciate
that.
And I would just ask you, Ms. Hempy, if you could address
the comment I made earlier about how you oversee your field
examiners when you are located in Salt Lake City they are in
Hawaii or Nevada, wherever. I realize your district isn't that
large, but the one in the west is.
Do you have proper oversight? Do you go out and visit in
the field occasionally yourself? Do you follow up on their
cases? How do you do that?
Ms. Hempy. Thank you for that question. Currently, we touch
base with our field examiners daily to make sure that their
needs are met and we know their schedule. We have weekly
meetings with the entire group to discuss policy and procedures
and any changes in the program that we need to implement, or
any problems that they may be having out in the field that we
could address as a leadership team.
We also have an open communication line that they can call
the leadership or email the leadership at any time if they need
assistance. We do make periodic visits out into the field and
do supervisory visits and ride-alongs with each of our field
examiners to ensure that they are properly doing their job and
holding them accountable for those things. And I personally do
go out and do spot checks of those types of supervisory visits
and ride-alongs.
Ms. Titus. So do you think that seeing only one or maybe
slightly over one a day is an efficient use of time? Is there
something we can do to increase those numbers? Is it a function
of geography? Would you address that issue?
Ms. Hempy. Yes, ma'am. Currently, we are working with a
standard, and we hold our employees accountable for that
standard. What we do is we encourage our employees to work
above that standard, and many of them do. And we address those
that are not working to that standard.
Ms. Titus. How do you address them?
Ms. Hempy. We would evaluate their performance, and we put
them on a performance improvement plan, and try to make them
successful, address what needs they have, whether it be
training or more oversight. And if they are not successful in
that plan, then we take action to either remove that employee
or find a more suitable job for them.
Ms. Titus. I would ask the Secretary, do you think you have
the resources you need to put in place the recommendations made
by the inspector general? President's fiscal year 2016 budget
we requested 85 additional FTE. I think that is critical to us
making progress on the IG's recommendations. We are taking them
very seriously.
Ms. Titus. Thank you. Mr. Chairman.
Mr. Abraham. Mr. Lamborn.
Mr. Lamborn. Thank you, Mr. Chairman. Thank you for having
this hearing.
Mr. McLenachen.
Mr. McLenachen. Yes, sir.
Mr. Lamborn. Okay. If--as you told the chairman, one-tenth
of 1 percent of cases have problems. That is one out of a
thousand. Do you stand by that number?
Mr. McLenachen. Based on the data that I have available to
me, yes.
Mr. Lamborn. Okay. Now, there was a disturbing Houston news
expose in June of 2012, which alleged that the VA had appointed
gambling addicts, psychiatric cases, and convicted criminals as
fiduciaries. Has that problem been cleaned up? Was that
accurate to start with? And are any current fiduciaries in one
of those categories?
Mr. McLenachen. Based on what I know, that was not
accurate. Let me explain.
In 2004, Congress amended the law to require us to do a
specific investigation to qualify a fiduciary. We follow that
law. It requires us to do a criminal background check, a credit
check, and do a complete investigation to determine whether
appointing a specific individual is in the best interest of a
particular beneficiary.
Regarding, for example, criminal convictions, we can still
appoint somebody under that law if they have a criminal
conviction, if we think it is in the best interest of that
beneficiary to appoint that person. But as a general rule, that
is not our policy. And we clarified those policies in the
proposed rules that we published and that we hope to finalize
soon.
It is not my belief that this is the case; however, this
program has been around for a long time, and it is possible
that there is a fiduciary out there that was appointed before
Congress changed the law.
Mr. Lamborn. Okay. Thank you.
Now, Mr.--is it Abe?
Mr. Abe. Abe.
Mr. Lamborn. Aucoin.
Mr. Aucoin. Yes, sir.
Mr. Lamborn. And Mr. Crowe, do any of you have reason to
doubt the one out of 1,000 number that the Deputy Secretary
thought was the current situation of bad cases?
Mr. Abe. Well, I think the assumption is misleading in a
sense that they are basing their that rate on the misuse that
they have identified. So they are assuming that they have
identified all the misuse, which is probably not the case. And
so the number is higher and I think that they would agree.
Mr. Lamborn. Then how can they do a better job of
identifying those additional problems? Do any of the three of
you have suggestions for the VA on how to do a better job of
rooting those out?
Mr. McLenachen asked for additional FTE, but is that all
there is to it, or are the processes in some way lacking?
Mr. Aucoin. No, sir that is not all there is to it. When I
looked at our statistics on our referreds of allegations of
fraud, they either come from VBA or come from some outside
source I looked at the data starting in fiscal year 2010 to
present date, there is an over 91 percent increase in those
allegations of fiduciary fraud that have come to us for
investigation.
The referrals that we converted to full investigations
during the same time frame have gone up 48 percent. The numbers
are increasing. Whether it is a good scrubbing, as has been
mentioned, or we are just getting more fraud brought to our
attention, I can't say.
But what I can say is when we look at these things, there
are certain weaknesses that seem to occur time and time again
in the fraud cases. The accountings are being falsified a
number of times. The funds that are supposed to be certified as
being on deposit in the banks are not accurate. There are times
where the certificates are presented to the bank, by the
fiduciary the bank stamps it and say, yes, this is, in fact
what is on deposit, but it is then given back to the fiduciary.
The fiduciary takes it and then brings it in with their
accounting. But while they have that form in their possession,
they alter the form and add additional funds that they have
stolen, and they add it to the form to pretend that the funds
are still on deposit. And that showed up time and time and time
again in our fraud cases.
Mr. Lamborn. Then how can we do a better job of making sure
that doesn't continue to happen?
Mr. Aucoin. I think getting the field exams done in a
timely fashion, spending more time on-site with the actual
fiduciaries would do that. You have got to look at the
documentation and make sure that it adds up.
The bank statements that are turned in to VA in today's
time frame, a bank statement that looks official because it
looks like it came from the bank, can be altered by the
fiduciary and turned in as if it is the official bank
statement.
We also found that with multiple fiduciaries--multiple
beneficiaries under one fiduciary, if the money is taken out of
one account and the accountings are turned in on an annual
basis, which is when the fiduciary took that beneficiary on,
you have multiple accounts, you can shift money from one
account to another. So if I go to look at that one account and
if everything looks fine, that is because the money was shifted
from another account to hide fraud. We found that scheme more
than once.
Mr. Lamborn. Thank you all for the work that you are doing
in trying to protect our veterans.
Mr. Abraham. Mr. Costello.
Mr. Costello. The hub model and whether it is been
successful, and if it is not been entirely successful, what
reforms need to be made in order to button up some of the
management criticisms that were made in the June 1st, 2015, OIG
report? Can you comment on that?
Mr. McLenachen. Yes. I am glad to have the opportunity to
address that, because I know there have been some concerns
about our consolidation in the hub model. I will tell you it is
very, very successful in our view because of the things that
you are hearing about today, which is doing a better job of
having control of the work that we have. We went from 56
offices that had a fiduciary activity to 6, not counting the
Manila regional office, that now we have a complete and, I
guess, transparent view of what the workload is in this
program. And that is why you see those allegations going up,
because we are doing a better job of tracking those and making
sure that there is no misuse to the best of our ability. And I
don't dispute that there might be some other misuse out there.
However, the hub model has really been a significant change
for us and it has improved the program. And if I could, I would
like to let--one of the best, probably, examples is in the
Indianapolis hub. Mr. Stephens experienced that prehub and
posthub, and he can tell you what impact it has had on the
program in his area.
Mr. Costello. Okay. Yes.
Mr. Stephens. Good afternoon. Thank you for the opportunity
to respond.
I have worked as a director or in leadership in regional
offices, both preconsolidation and postconsolidation of
fiduciary operations. I can tell you that, my experience, when
it was decentralized, is that it was very difficult to show the
proper amount of oversight to that operation. It was a very
small part of what 56 different regional offices do. Once we
consolidated, we were able to--we are able to recognize and
realize efficiencies, and also we have improved consistency in
operations through consistent training and consistent
management through our region.
The amount of progress we have been able to make, I will
give you an example. We have improved--or reduced, rather, the
number and the amount of over 45-day-old initial exams, which
is our standard for timeliness. Over 45-day initial
appointments we have reduced by 98 percent since their peak. We
have reduced the number of follow-up, old follow-up field
exams, by 38 percent in Indianapolis. You would see similar
results across the other hubs.
Mr. Costello. So the OIG report 2013 relative to the
timeliness standards, you are saying that in the past 2 years
with the hub, you have seen marked improvement on the
percentages related to timeliness?
Mr. Stephens. Absolutely. Like I said, 98 percent reduction
in the number of old initial appointments.
Mr. Costello. And, Mr. McLenachen--I apologize if I
butchered that.
Mr. McLenachen. Sure.
Mr. Costello. The definition of success, or when I ask has
it been successful, you had indicated that the ability to
identify the absconding of funds, or the misuse of funds has
gone up. So, in other words, you are able to identify more
misappropriation for lack of a better term?
Mr. McLenachen. We are doing a much better job of that now.
And that is due to a number of factors. The consolidation is
one piece, but we have a new IT system. We have done--we have
misuse training that we deployed. And so, really, it is a
matter of having control of the work, and doing a better job of
identifying that type of conduct. There is a number of ways we
do that. It is through accounting, and follow-up field
examinations. We do on-site reviews of fiduciaries that handle
multiple beneficiaries. I think my message is that the
oversight is much better today than it was a few years ago.
Mr. Costello. Another question. The proposed regulatory
changes, can you share with me your observations. Are you
welcoming them? What constructive comments do you have to make
them better? It seems to me, most particularly, that the intent
is to make sure that the fiduciary appointment process, as well
as the training of fiduciaries, will weed out some of the bad
actors before they have the ability to misappropriate.
Mr. McLenachen. Yes. The regulations that we proposed
address that aspect of the program to include bars to
appointment. So we have a section that we proposed that would
bar somebody from acting as a fiduciary for a variety of
reasons, a long list of reasons.
The regulations are a critical component of the
transformation of this program. And we have a number of things
that we need to get in place before we go final, such as
training, procedures manual, guidance to the field, our IT
system, which we put out last year. We are about at the point
where we have all that stuff together where we can go final
with those regulations. And it will kind of be the end piece of
transforming the program. That doesn't mean the work's done,
though.
Mr. Abraham. Thank you. Mr. Johnson.
Mr. Johnson. Well, thank you, Mr. Chairman. And thanks to
the committee for allowing me to participate.
And thank the panel for being here today.
Mr. McLenachen, as you may recall, I chaired the Oversight
Investigation Subcommittee in the 112th Congress, and we
conducted an investigation and oversight hearing that revealed
shocking behavior on the part of some of the VA's fiduciaries
at that time and some gross misfeasance on the part of the VA
in addressing the issues; things from egregious examples of
appointing fiduciaries embezzling their veteran beneficiaries
funds to examples of the VA arbitrarily removing a veteran's
wife and replacing her with a paid fiduciary, unknown to the
family without provocation.
It was clear then that the VBA's fiduciary program was in
dire need of reform. And I have to tell you, you know, it
sounds like there might be an echo in the room, because here we
are 3 years later, and we are still talking about some of the
same issues.
And that is concerning to me, Mr. Chairman, that after 3
years, that we are still dealing with some of the basics.
Mr. Stephens, I acknowledge you. You say there have been
some improvement. And I am not going to say that there hasn't
been some improvement in some areas, but these are very, very
serious problems for our Nation's heroes that need to be taken
care of.
So let me ask just a few very specific questions.
Mr. McLenachen, how quickly is a fiduciary, who has been
found to have misused a beneficiary's funds, removed from their
role as a fiduciary?
Mr. McLenachen. Our policy is once a misuse determination
has been made, they will be removed and they will not be
appointed to any another----
Mr. Johnson. How quickly? The question was, how quickly is
a fiduciary that has been found to have misused a beneficiary's
funds removed? Is it the same day? Same week? A month later?
What is it?
Mr. McLenachen. Immediately upon an allegation of misuse
that is substantiated, they are removed and a successor
fiduciary is appointed.
Mr. Johnson. Okay. Great.
Can you tell me in the last 12 months how many fiduciaries
have been removed?
Mr. McLenachen. I do not have that data with me, but I can
certainly provide that to you.
Mr. Johnson. Please. I would like to see that.
If a fiduciary is handling--let's say a fiduciary is
identified to have misused funds and they are removed from
that--their role as a fiduciary, if they are handling more than
one beneficiary, is he or she removed from their role in all
cases or just one?
Mr. McLenachen. Our policy is that they would be removed
from all cases.
Mr. Johnson. Great. I love that.
Are there any criminal pursuits, charges, against
fiduciaries that do this kind of thing?
Mr. McLenachen. I will defer to the inspector general for
that, but what we do and our procedures are that when we make a
misuse determination, we refer those matters to the IG for
evaluation. So that is the next step in the process.
Mr. Johnson. Mr. Abe, one of you, are there criminal
charges and pursuits of criminal investigations against these
folks?
Mr. Aucoin. Absolutely. If misuse referral is sent over to
the Office of Inspector General, we will look at it, and we
will investigate it.
Mr. Johnson. Okay.
Mr. Aucoin. The VBA is certainly briefed on our findings,
and in some cases, the fiduciaries may have a surety bond and
we have assisted the Department to go after and get some of the
funds back. Not every fiduciary has a surety bond, but
especially in one of the examples that we listed, we worked
hand in hand with regional counsel once the case was done to
recoup the money, and get it back to the Department.
Mr. Johnson. That leads me to the next question, and you
answered a little bit of it there. If they have a security
bond, then you are able to get some of the money back?
Mr. Aucoin. Yes, sir.
Mr. Johnson. But what, in a broader scope, Mr. McLenachen,
is done for that veteran who has had his or her funds abused or
misused, what is done to help them recover that?
Mr. McLenachen. So there is a number of things, a number of
tools. The biggest issue is that in 2004, Congress changed the
law to allow us to re-issue benefits. So in the cases where we
have been authorized to re-issue benefits, that is the first
thing that we will do.
Mr. Johnson. And one final question, and then you can
respond to all of it, if they will give us the time, how is the
veteran taken care of during that time that the investigation
is going on? Let's say there is a fiduciary that has been
accused and you are doing the investigation, what happens in
that interim time while that investigation----
Mr. McLenachen. So we remove the fiduciary that misused--
has been alleged to have misused the benefits--and appoint a
successor fiduciary. The goal is to try to do that quickly
enough that there is no interruption of benefits. So the
monthly benefits will continue to flow. The fiduciary that has
been removed has to transfer funds to the successor fiduciary,
so it should be a seamless process for the beneficiary. That is
the way the program is supposed to run.
Mr. Johnson. Okay. Well, I certainly sense a desire to fix
these problems. I really do. It is the slow moving wheels of a
massive bureaucracy that I know you are dealing with that makes
it awfully frustrating for me as a veteran and someone who is
concerned, as I know you are, about our Nation's heroes.
Mr. McLenachen. I assure we have made a lot of changes
since you and I last spoke in this setting.
Mr. Johnson. Well, this one was a much better conversation,
I think. Thank you.
Mr. Abraham. Thank you, Mr. Johnson.
Ms. Brownley.
Ms. Brownley. Thank you, Mr. Chairman and Ranking Member.
And I apologize to all of you for being late.
But Mr. McLenachen, I wanted to--in your testimony you
talked a little bit about current law in the VA and their, sort
of, inability to re-issue benefits to veterans in cases of
fiduciary misuse when the fiduciary in question manages
benefits for nine--I think nine or fewer veterans.
Mr. McLenachen. Yes.
Ms. Brownley. So veterans are out, if they have a family
matter--member, excuse me, that has misused the funds, the
veteran just loses his or her benefits, correct? That is
current law?
Mr. McLenachen. So that was another--Representative Johnson
brought up the point of what can we do. And we have a
legislative proposal that was in the President's budget to
address this concern. There is essentially an inequity within
the law for re-issuance of benefits. A fiduciary that is
handling 10 or more beneficiaries, or that is a corporate
entity, we can re-issue benefits automatically. If it is a
beneficiary, though, that has a fiduciary that handles nine or
less, the only way that we can recoup their benefits and make
them whole is, one, if VA was neglect. If the VA was neglect,
and I make that determination, we can re-issue benefits.
Otherwise, we are talking about collecting on a surety
bond, restitution from a criminal case, our options are very
limited. And I see no reason at all why we should treat two
beneficiaries that are situated exactly the same way as far as
their disability differently just because there is an arbitrary
cutoff between nine and 10 individuals that are handled. So I
would appreciate any support we could get for that particular
legislative proposal.
Ms. Brownley. Well, thank you for that. And I really do
thank the administration for the proposal in the budget. And I
have discussed with my staff and the staff here and plan to
introduce legislation, as you suggested, that will ensure that
every veteran who is the victim----
Mr. McLenachen. Thank you.
Ms. Brownley [continuing]. Would receive the benefits that
they have earned and deserve. And certainly, would love the
help and support from the committee and all the committee
members to join me in that legislation.
It seems, though, it is your judgment, then, if the VA
has--is negligent, then the veteran has recourse. But if the VA
is not doing its appropriate oversight and making sure that the
fiduciaries are fulfilling their duties and doing so
appropriately, isn't that--wouldn't that fall into the category
of the VA being negligent?
Mr. McLenachen. Those decisions are centralized in my
office, and I assure you that I use the most liberal possible
negligent standards I can possibly use----
Ms. Brownley. I am sure you do.
Mr. McLenachen [continuing]. To make sure that we re-issue
whatever benefits we can. That is the guidance in my office,
and that is what we do.
Because in those cases, there may not be that many
opportunities for recouping the benefits. And so, just so you
all know, in our program, about 90 percent of the beneficiary
fiduciary relationships are one-on-one relationships with a
family member or a caregiver or friend that volunteers their
services. Most of those people are not covered by re-issuance
of benefits, because we are not going to be negligent in every
case, thankfully.
Ms. Brownley. So in terms of the number of the cases that
you review, can you give us a sense of how many are----
Mr. McLenachen. We provided----
Ms. Brownley [continuing]. Successful.
Mr. McLenachen. We provided some information in some
prehearing data. As far as negligence determinations, if you
can refer to that in fiscal year 2013--and this is where we
really started trying to clean up this work as I mentioned--
having a million dollars we re-issued due to negligence. And,
by the way, negligence--for example, by statute, if we do not
act on a misuse allegation within 60 days, it is negligence.
But also, the statute contains a general negligence provision,
which we apply, like I say, very liberally to try to re-issue
as much as we can.
Fiscal year 2014, we re-issued approximately $3 million in
benefits, and so far this fiscal year, $1.4 million in benefits
due to negligence.
Ms. Brownley. Very good.
My time is done, but I look forward to working with you to
come up with an appropriate solution.
And I yield back.
Mr. Abraham. All right, ladies and gentlemen, thank you,
again, for your testimony on behalf of the subcommittee. Thank
you for your time. We certainly realize that time is a rare
commodity in this part of the world, so thank you, again.
You are now excused. And we will pause for just a minute to
seat the second panel.
[The prepared statements of Mr. McLenachen and Mr. Abe
appear in the Appendix]
Mr. Abraham. Thank you for coming again. We have got a vote
coming up in just a bit, so in the interest of time, we are
going to forgo the spoken testimony. We have the written
testimony, and I have actually read it. So we are going to go
straight to questions.
STATEMENTS OF ZACHARY HEARN, DEPUTY DIRECTOR FOR CLAIMS,
VETERANS AFFAIRS AND REHABILITATION DIVISION, THE AMERICAN
LEGION; SAM J. ALBRITTON, III, EXECUTIVE VICE PRESIDENT,
REGIONS BANK; AND DOUGLAS J. ROSINSKI, ATTORNEY, VETERANS
JUSTICE GROUP, LLC
Mr. Abraham. Mr. Hearn, I am going to start with you, sir.
In your written testimony you described a situation in which
the VA denied a veteran's request that his wife serve as a
fiduciary because VA says his spouse was unable to properly
take care of the veteran. Instead, the VA appointed an unknown
individual to serve as fiduciary at a cost of up to 4 percent
of the veteran's benefit.
Do you think the VA handled that case appropriately?
Mr. Hearn. Thank you, Chairman.
That situation came out of--our experience has been that
these issues have been centralized with certain fiduciary hubs.
This dealt, in particular, with the Lincoln fiduciary hub.
In this situation, speaking with the service officer, it
was kind of silly. The veteran's wife just paid the bills. My
wife pays the bills. I mean, so it was just a question. The way
it was asked was that the--who handles the financial
responsibilities of the household, and the veteran and the
veteran's wife just answered honestly; well, she does.
So things were a little bit misconstrued there. In that
situation, obviously, we don't believe that the VA handled that
properly.
Mr. Abraham. Okay. And I will stay with you for this next
one. In your written testimony you also note that delays in
appointing fiduciaries can create serious challenges for
veterans and their families. Expound on that a little bit for
me.
Mr. Hearn. Okay. And we have a seasoned service officer,
and he was explaining the situation where it was a World War II
veteran that was in a nursing home. Alzheimer's requires a
fiduciary. Thankfully, the veteran's nursing home recognized
the situation, and they weren't going to kick the veteran out
of the nursing home and lose that care. But there have been
situations where there has been a significant concern.
Now, the problem with this is, that the veterans can't get
involved--or the veteran's family can't get involved in
commingling of funds, and at that point, the family members, do
they inherit an additional responsibility that they are biting
off more than they can chew? That, really, this should be
falling upon--that deal with the retroactive payment. And so
that is where that problem lies.
And, actually, that deals with--that situation dealt more
with the Salt Lake City fiduciary hub.
Mr. Abraham. All right, sir. What would you tell the VA do
to improve those situations?
Mr. Hearn. One of the most common things we have heard, and
I know Mr. Stephens is here from Indianapolis. And we heard
glowing remarks of that fiduciary hub from service officers
from that region of the country.
Other regions of the country, just like the regional
officers, you have good ones and you have bad ones. One of the
biggest concerns that the American Legion has had is that
through the decentralization of programs, theoretically, it
would work. Specialization of skills tends to increase
efficiency. However, that hasn't proven to be the case in a lot
of places such as Lincoln, such as Salt Lake City. And so what
we would like to have is our service officers do not have
access to those adjudicators, so those people out in the field,
at the level that they had in the past, and we would like for
them to return those responsibilities back to the local
regional offices.
Mr. Abraham. Mr. Albritton, in your written testimony you
note that the VA does not currently have clearly defined
standards to guide regional hub manager's decisions with
respect to determining how many beneficiaries a single trust
entity is able to serve. What factors do you think the VA
should consider when determining how many beneficiaries a
single trust entity should manage?
Mr. Albritton. Well, thank you, Mr. Chairman. It is a
pleasure to be here today.
First off, I just want to point out that Regions Bank has
been in this business for 25 years serving veterans. We have
never had any case of misuse. We enjoy this business serving
our veterans, and it is a core policy of our organization.
Mr. Abraham. We appreciate it.
Mr. Albritton. We feel that there should be a designation
made between professional third-party fiduciary that has
standards with internal controls that has been in this business
that has bonding to cover any instances of any misuse, and
there should be a distinction in terms of appointing those
types of fiduciaries versus fiduciaries that maybe provide
services for smaller amount of beneficiaries.
I believe the OIG report pointed out there were several
instances in which there were 2 to 50 beneficiaries under a
provider, and unfortunately, in those type of situations, there
were situations in which illness, someone went on vacation,
bills weren't paid, and the process broke down. So there, we
would suggest that there is some standards set to govern a
professional-type fiduciary, and that type of orientation would
be beneficial for the VA.
Mr. Abraham. Okay. Thank you.
Ms. Titus.
Ms. Titus. Thank you. I want to ask you, Mr. Hearn, what is
your general impression of the hub reorganization system. Do
you think there is enough oversight? Do you think that having a
centralized office and a large area to cover is working out for
this program?
Mr. Hearn. Thank you, Ranking Member.
This was something that I specifically addressed with
service officers as they came back to me, because this is how
important it is. These service officers, it is hard for us to
advocate for policy unless we listen and listen intently.
And for the overwhelming majority of them, especially the
ones living in the western part of the country, those living in
the southwest part of the country, that are dealing with a
handful of fiduciary hubs, they are saying it is not working,
they are not noticing any sort of measurable uptick. And the
quality of service as far as the relationship dealing with the
adjudicators is down. And so while you may have picked up a day
or two here or a day or two there, everybody that I have spoken
to, especially in those parts of the country, are asking for it
to be returned back to the regional office.
Ms. Titus. Is there any difference in terms of the veterans
that you serve that you have noticed in different ages,
different circumstances of the impressions that they have of
this program?
Mr. Hearn. Was that to me?
Ms. Titus. Yes.
Mr. Hearn. Sorry. I can check on that for you and get back
to you, for the record. That wasn't an issue that was brought
up, but I will certainly ask that on your behalf.
Ms. Titus. Thank you.
Mr. Hearn. You are welcome.
Ms. Titus. Mr. Albritton, I just--I think we heard earlier
that 90 percent of the veterans who need this service have a
family member or close friend. That would leave 10 percent to
either be assigned to a bank or a lawyer or some kind of
official professional fiduciary.
I just wondered, how do you generate revenue from--this is
part of your business? Is there a service charge? How much does
that cut into the benefit that the veteran receives? What kind
of services do they get that a person doesn't get by having
their wife take care of the books? Would you just kind of
describe what you do?
Mr. Albritton. Certainly. Thank you.
There is the 10 percent that is available for third-party
professional beneficiary, and the standard fee is 4 percent
that is paid to that third-party professional fiduciary.
In our instance, our unit is based in Kingsport, Tennessee.
The employees that man this unit have, on average, 16 years of
experience working with veterans. They have developed a
personal relationship with the veterans that they serve. A lot
of different examples of where they built homes for our
veterans and bought furniture, arranged that furniture, set
them up completely, or assisted them in escaping a situation
where family members were using the funds intended for the
veteran for their own sake.
So we assist hands-on and have personalized service with
those veterans. But for that 4 percent, we are looking at--we
are looking at--we have internal audits that we perform. We
look at investment reviews. We have the monthly account
administration reviews of the accounts, and then we have
dedicated phone lines that the veterans can call into 24-hour
response. And so any or--or all of those accounting and other
procedures that would be necessary to show that there is huge
amount of accountability that we are able to provide for that 4
percent.
In addition to that, we have investment officers, trust
officers, real estate professionals, others that can probate
accounts, if there is no one there to probate the estate. So
for that 4 percent, there are a lot of services that are
performed for the veteran, and they seem to be very
appreciative of that.
Ms. Titus. I would imagine. I know there are caps on a
certain number that you can serve. And I think that is to keep
it more personal and more closely supervised. Do you have any
comment on those caps?
Mr. Albritton. I do. I am not aware that there is any
formalized cap. It is interesting, since 2012, we have been
frozen out of any new accounts. In 2012, we had 530 accounts,
veterans that we worked with. We are down now to 298. We were
not told officially any sort of limitation that was in place.
We were not pointed to any written policy that was in place,
and yet we have been frozen out for 2 years. Our standard right
now is one associate in our VA beneficiary hub per 100
veterans. And I think if you look at that and you compare it to
the number of field officers that the VA has assigned, which I
believe is one in 350, 375, there is a lot of personalized
service. In fact, our team goes out and visits with the
veterans, they visit with the field service officers.
So there is a lot of one-on-one interaction. But as far as
I understand, there is no written policy for a limitation,
although it has been quoted to us and we have been frozen out
of any new accounts. And we would like to build this business
and serve our veterans more.
Ms. Titus. Thank you, Mr. Chairman.
Mr. Abraham. Thank you, Ms. Titus. Mr. Costello.
Mr. Costello. Thank you, Mr. Chairman. Mr. Rosinski, I have
two questions for you. In your written testimony, you describe
cases in which the VA inappropriately sought to appoint a
fiduciary for veterans who were able to manage their own
affairs without VA's help. Can you elaborate on the standards
you think the VA should adopt to ensure that the due process
rights of veterans are protected and that the VA's decision to
appoint a fiduciary is proper?
Mr. Rosinski. Yes, sir. First of all, I have seen actual
cases that I have represented people where they have said
something about their wife signing the checks or handling their
finances, which were placed in the VA fiduciary program, one
being a man who suffered from ALS, who really wanted to try
explain, but was cut off that he could not write and that it
caused him great pain to write his name, so he had his wife
sign the checks. And it took us over a year to get him out of
the program.
Other cases where lives have been completely overlooked. A
61-year marriage, the spouse was not even considered, and was
given to a third-party, which was a bank, which was not as
qualified as this gentleman's bank. And that case has been in
Veterans court, has been in local court, has been in State
court, has been in Federal court. But the issue is the
standards, yes. The standards are the State standards for
appointing a person of these capacities. I think we are all
missing that the statute that Congress passed here is solely
limited to the ability to handle their finances. It has nothing
to do with the legal definition of incompetency. And what is
happening more and more is that if you are adjudicated a high
mental health rating, PTSD being the largest one, you are
automatically considered incompetent unless you can prove
otherwise. And that is coming from many parts of the country
through the legal clinic people that I speak with. And it is at
an increasing rate. And the second thing is because of those
standards, the field examiners are wandering far outside the
boundaries of that and demanding, again, my clients and sworn
testimony, they are wandering outside of that into personal
finances of the family's, using up their time, using up the
field examiner's time on areas they should not be in.
Mr. Costello. So to clarify, since we are talking about due
process rights, it seems like you are getting into burden of
proof here, and you are saying with PTSD, the burden of proof
sort of automatically shifts for a VA beneficiary to have to
prove they are competent and not----
Mr. Rosinski. Absolutely. All it takes to get into the
fiduciary program, or be proposed into the program is a check
box, yes or no, on a VA medical form, usually DBQ for a mental
health condition. There are some that come through that are
just checked ``yes,'' no explanation. The proposal comes out.
If it says ``check,'' wife handles the funds, they are into the
program and then the burden shifts to them to find someone who
can convince the VA that they have had sufficient tests or
mental health tests or whatever, which varies from office to
office, how to get out.
Mr. Costello. I want to get to my next question, but it
appears to me that you are saying that we are painting with too
broad of a brush.
Mr. Rosinski. Absolutely.
Mr. Costello. So what kind of standards do you incorporate
in order to sort of make that a little bit more precise?
Mr. Rosinski. If VA would define the standards, instead of
just a check box by some VA health care manager, one, we could
reduce the number that get into the proposal stage, that need
field examinations, that get into the program and get the
problems caused, even if it is 1 percent or 10 percent. The
broad brush brings in a lot of people that don't need to be in
the program, don't need to take up the resources of VA.
Mr. Costello. You also indicated you think it is important
for VA to conduct criminal background and credit checks when
assigning new beneficiaries to known fiduciaries. Is that a
good use of VA resources for fiduciaries that have already been
approved by VA? And maybe even an added question, why do you
think that we should be doing that?
Mr. Rosinski. I think it would be a wonderful requirement,
because right now the law is the requirement that when a
fiduciary is appointed, they are supposed to do a credit check
and a criminal background check. Every single case of which I
am aware, and I admit I only see very few, they have waived
both of those for fiduciaries who already have one case. So the
people, most of the people that are being caught have multiple
cases. They have never gone back and done a credit check to see
if the guy suddenly has bought a million dollar boat, or opened
up any other bank accounts. To me, that is exactly what is
required every time you give them another case.
Mr. Costello. I can see it on the credit check, because
obviously, if there has been a lot of consumer activity
incommensurate to the type of salary that one might be drawing.
But how about the criminal check?
Mr. Rosinski. That one would be my second choice. But also,
as we found out, and I was asked information on those previous
media reports, that is how they found those people. Some had
criminal activity after they were appointed their first or
second or third case. And I think it is very relevant that if
they know they are going to do checks maybe every fifth one, I
don't know, to go back and see if someone who has got in the
gate has turned on their beneficiaries.
Mr. Costello. I appreciate your work and your testimony
here today.
Mr. Abraham. Ms. Brownley.
Ms. Brownley. Thank you, Mr. Chairman. Mr. Hearn, I just
wanted to ask you if--I talked a little bit in the first panel
about trying to put forward some legislation that would ensure
veterans who are misguided by their fiduciary, that they would
indeed--we figure out a way in which to make sure that they are
in receipt of their benefits that they earned and deserved. I
am sure you have a process by which you go through, but just
wanted to get an idea from you if that is something that you
feel like the American Legion could support?
Mr. Hearn. Yes, Congresswoman. Thank you. The American
Legion would be happy to work with you and your office on this.
This is a program, when I was preparing the testimony, it
becomes increasingly clear--I mean, it smacks you in the face
that these are some of the most vulnerable veterans in our
Nation. And we need to ensure that we put these protections in
place because we don't want there to be a situation where it
just spirals out of control. So we would be more than thrilled
to work with you on trying to get something together.
Ms. Brownley. Thank you for that. And, you know, I was also
just sort of curious, I mean, clearly, we have aging population
with our veterans. And with that aging population it is going
to be more Alzheimer's, other kinds of things where this seems
at least we are going to go through, I would imagine, a bubble
where we are going to have the growth there. And certainly the
numbers that were given by the OIG, if you just look at the
fiscal year 2015 quarter one, it looks as though there is a
trajectory here that is trend-lined as, you know, could take a
real leap, because in other full years, they have already had
at least almost the amount of requests in just the first
quarter, of allegations, I should say, than--they have more
than they did in all of fiscal year 2012.
So it seems as though that trajectory is definitely going
in a direction where it is clear that we need to set up some
better procedures to make sure that it doesn't happen, but if
it does happen, that we treat our veterans and take care of our
veterans appropriately. So thank you for that. And I would look
forward to working with you. You know, from your vantage point,
if there are some particular stories that you have or
particular members who have struggled with this, if you could
share any of that, I would certainly appreciate it.
Mr. Hearn. This is one of those programs where it is
imperative to have a strong relationship with VA. That if a
veteran is being injured by his or her fiduciary, it is kind of
difficult for the veteran to oftentimes get in contact with the
Veterans Service Officer. So we don't hear about it usually
firsthand. We have heard anecdotal stories. But as far as--we
are almost solely relying upon IG or VA to do the
investigation. Unfortunately, a lot of times we don't hear
about it until it is later, just because of the reporting
structure and everything along those lines. The veterans don't
really have necessarily the ability to pick up the phone and
call, because if they have a fiduciary, they generally don't
have access to the funds. That is the whole purpose of the
program.
But getting back to the point of the age, back in 2010 the
average male veteran was 64.9 years old. I think in 1967 was
the biggest year of the draft during the Vietnam War. You can
do the math and figure out where we are the baby boomers, the
Vietnam War was no longer your father's war, it was your
grandfather's war. And it is something that we definitely need
to get hold of before it spirals out of control.
Ms. Brownley. Thank you, sir, and I yield back.
Mr. Abraham. Mr. Johnson.
Mr. Johnson. Thank you, Mr. Chairman. Mr. Rosinski, in your
experience, have background checks been waived, and have felons
been able to serve or appointed to serve as fiduciaries? And if
so, can you explain?
Mr. Rosinski. I am not aware of a felon in any of my
clients' cases. I believe, though, that if you look at the
people who are in jail, they have multiple dozens, a hundred in
some cases, I believe, veterans under their charge, and they
stole from most, if not all of them, over a period of years.
And that is what has stimulated the thought to me--and that
they were waived. I know that some of those were waived. I
don't know if every single one was. But everything when I have
seen they have waived it because they are inside the door
already, inside the program. They are trusted. So the harm is
even worse when someone you trusted turns around not to have
that trust. And here we are trying to verify that trust.
Mr. Johnson. What do you think about the periodic--what if
the VA were to do periodic background checks, especially on
situations like you just described where you have hundreds of
veterans in a particular fiduciary pool? Maybe you think we
should have a policy that requires periodically that they go
through a background investigation just to make sure they are
still clean?
Mr. Rosinski. Yes, sir, I do. And a credit check and a
background check is push a button on a computer, as far as I
know, and make a request. And the costs are very, very trivial.
And certainly a lot easier to do that from a service that
provides that type of information than have a field examiner
run around a community to see if somebody knows something bad
about a person.
Mr. Johnson. Right. Okay. For the entire panel, I know it
is the VA's current policy to appoint fiduciaries by first
considering the individual entity, whether it is a family
member or whoever, that the beneficiary requests. In your
experience, and I will give each of you a chance to answer, in
your experience is this policy widely practiced?
Mr. Albritton. If they are appointing an individual, is it
widely practiced that they are appointing an individual first
and foremost? Yes, I believe that policy is widely practiced. I
think from our standpoint, when you do work down the process
and get to where you need a third-party professional fiduciary,
you need to be careful about who you appoint, because you could
have the same misuse even with that fiduciary as you would
possibly an individual misusing funds.
And that is one of the many reasons we believe that a
consolidated fiduciary program like what we have seen with HUD
in section 8 housing vouchers for a statewide contract, putting
together a 2- to 3-year contract so that not only the agency
knows that the entity will be there to provide those services,
but also the entity that is providing those services has a
clear roadmap to know how much they need to staff up, and are
committed to that. And so there is that relationship.
But to directly answer your question, yes, I do believe
they are, from my perspective, going through that process
effectively.
Mr. Rosinski. Congressman, in my experience, and maybe it
is because of the nature of my cases I have seen, that is not
the case. And actually, I would submit also the first choice by
statute is the veteran himself. Even if they have been found
to, quote-unquote, ``be incompetent,'' the first choice is
still the veteran himself unless there is some reason that that
would not be to his benefit. That is completely missed. And
indeed, my mantra that I have here for the opening statement
was, first, do no harm. Most of these veterans that have
anybody in their life have successfully navigated--usually they
are 70 or 80 or 90 now--a long time without any about VA
benefits, or with minimal VA benefits, and they have managed
their money and they are not in debt. And they are scraping
along.
But VA completely overlooks that and goes down the list.
And like I said, my experience has been has overlooked spouses
or has specifically excluded spouses or sisters or brothers
that have had 20, 30 years of dealing with this veteran through
all stages.
And also we are going to see another bubble, because as I
said before, it is the TBI people who are now getting sucked
into this program. And there is a lot of that coming up where
they are being found incompetent because they have some
residuals of TBI. And in that case again, they are not looking
at how those people have negotiated their finances while
suffering from whatever condition they have, and have jumped
right into fiduciaries much less qualified than the bank that
we have described here. And that is compounding the problem.
Mr. Johnson. Right. Sir.
Mr. Hearn. Thank you, Congressman. From what we have seen,
if you want to paint with a broad brush, VA is taking the
necessary efforts to make sure that the family members are
being given an opportunity. The times that we have noticed that
fiduciaries have been appointed that fall outside of that
realm, you have family members that may not qualify for one
reason or the other. And so we understand that that is there as
a protection for the veteran. And we want to make sure that
that continues. The biggest problem that we have noticed is,
there is confusion that goes on when that examination is
occurring between, perhaps, an elderly couple that really
aren't understanding where the examiner is going with the
questions, as was given by the chairman's question about the
veteran's wife paid the bills, so the veteran was financially
irresponsible, I guess. So with a broad brush, yes, VA is
meeting its requirements.
[The prepared statements of Mr. Hearn, Mr. Albritton, and
Mr. Rosinski appear in the Appendix]
Mr. Johnson. Okay. Mr. Chairman, I yield back.
Mr. Abraham. Thank you, Mr. Johnson. Again, on behalf of
this subcommittee, we thank you so much for being here. Thank
you for your patience. The testimony here today has raised
serious concerns about how VBA is managing the fiduciary
program and serving our most vulnerable veterans. I look
forward to working through these issues with the Department, my
colleagues on the committee, and the stakeholders who took time
to present those concerns today, and those who work to assist
veterans who need help managing their financial affairs. Again,
thanks to everyone for being here. And as initially noted, the
complete written statements of today's witnesses will be
entered into the hearing record. I ask unanimous consent that
all members have 5 legislative days to revise and extend their
remarks and include extraneous material. Hearing no objection,
so ordered. I thank the members and the witnesses for their
attendance and participation. This hearing is now adjourned.
[Whereupon, at 4:27 p.m., the subcommittee was adjourned.]
APPENDIX
STATEMENT OF DAVID R. McLENACHEN
Mr. Chairman and Members of the Subcommittee, thank you for the
opportunity to discuss the Department of Veterans Affairs (VA)
fiduciary program. I am accompanied by Mr. Michael Stephens, Director,
Indianapolis Regional Office, who oversees the activities of VA's
Eastern Area Fiduciary Hub.
In the fiduciary program, VA appoints and oversees fiduciaries for
Veterans and other beneficiaries who, because of injury, disease, or
the infirmities of advanced age, are unable to manage their VA
benefits. In 2014, VA protected more than 172,800 Veterans and their
survivors, who were in receipt of VA benefits, which is a 41 percent
increase in the number of beneficiaries overseen from 2011.
Approximately 138,900 fiduciaries provided services to these
beneficiaries who received annual VA benefit payments of almost $2.9
billion. The number of beneficiaries in the program will continue to
grow as VA decides more benefit claims and the beneficiary population
ages.
VA is working hard to implement fiduciary program improvements to
enhance service delivery and protection of beneficiaries. These efforts
include implementing operational efficiencies, clarifying and
strengthening policies and procedures, modernizing information
technology systems, and providing training to fiduciary program staff
and fiduciaries. VA appreciates the Committee's oversight and interest
in improving the fiduciary program, and welcomes the opportunity to
highlight recent program enhancements, as set out in detail below.
Organizational Changes
VA has consistently noted the need for heightened awareness
regarding the Department's most vulnerable beneficiaries, who rely on
the services of VA-appointed fiduciaries to properly manage their VA
benefits. Recognizing the need for program reforms and additional
oversight, VA reorganized to create its Pension and Fiduciary (P&F)
Service in 2011. P&F Service focuses on the unique needs of these
beneficiaries, more than 50 percent of whom are also in VA's needs-
based pension program, and on strengthening oversight of VA-appointed
fiduciaries. This reorganization has allowed VA to increase the staff
responsible for fiduciary program policies and procedures, quality,
training, and site visits.
In March 2012, VA consolidated the management of its fiduciary
activities at six fiduciary hubs nationwide. VA moved all fiduciary
workload from individual VA Regional Offices (ROs) to the hubs to
improve controls and consistency in processing the work. These hubs are
located at the Salt Lake City, Lincoln, Milwaukee, Indianapolis,
Louisville, and Columbia VA ROs. Under this hub concept, fiduciary hub
managers deploy their field examination resources according to the
location of beneficiaries within the hub and without regard to state
borders or VA regional office jurisdiction, while centralizing all
other fiduciary functions at the hub site.
In August 2014, VA established claims processing teams in each of
the fiduciary hubs to improve the internal procedures for delivering
benefits to individuals who require the assistance of a fiduciary.
These teams produce beneficiaries' final ratings of incompetency,
initiate monthly benefit payments to fiduciaries on behalf of
beneficiaries, and release beneficiaries' retroactive benefits to their
fiduciaries. The new process eliminates the hand offs between VA's
Pension Management Centers and Veterans Service Centers and the
fiduciary hubs and ensures more timely release of benefits to
fiduciaries.
Strengthening Oversight Through Policy and Procedures
In January 2014, VA published proposed fiduciary regulations that
would prescribe new rules for all aspects of the fiduciary program's
administration. This is the first major update of fiduciary regulations
since 1975. VA rewrote the proposed regulations in easier to understand
language and proposed policy changes that would modernize VA's
oversight of beneficiaries and fiduciaries. The proposed regulations
would also incorporate statutory changes and court decisions that have
had an impact on the program over the past decade. Among other things,
the new regulations would prescribe beneficiary rights and fiduciary
responsibilities, and define VA's oversight role in ensuring that
fiduciaries properly manage VA benefits for the beneficiaries they
serve. We anticipate publishing the final regulations in 2015.
Effective in October 2014, VA changed its policies and procedures
to allow the fiduciary hubs to expand the use of streamlined oversight
for certain less vulnerable beneficiaries. In some cases, the
beneficiary's well-being is assessed by other means, including by the
beneficiary's spouse, through programs approved by the Veterans Health
Administration, or by the licensed health care facility where the
beneficiary resides. For example, a beneficiary in a Medicaid-eligible
nursing home is in a protected environment monitored by a government
agency and does not require duplicative oversight by VA. This new
policy provides more frequent oversight through other means such as
telephone calls or correspondence in order to provide less intrusive
oversight of these beneficiaries, when appropriate. It also allows VA
to shift resources to improving its oversight of its most severely
disabled beneficiaries.
Strengthening Oversight Through Technology
In May 2014, VA deployed a new information technology system for
the fiduciary program, called the Beneficiary Fiduciary Field System
(BFFS). Use of the previous antiquated system was discontinued and all
useful data was migrated to BFFS. VA designed the system to improve
workload management, to deploy streamlined processing tools, and to
enhance beneficiary and fiduciary oversight. In addition, BFFS provides
real time reporting capabilities; robust and meaningful data capture to
identify trends and conduct analysis; custom workflows designed to
automatically and effectively assign fiduciary work; and audit tracking
to improve user monitoring and data integrity. BFFS also provides
improved oversight of fiduciaries and affords more effective safeguards
against misuse of benefits through improved fiduciary misuse reporting
and monitoring.
In January 2015, VA deployed its electronic Knowledge Management
(KM) system to all fiduciary program staff. KM replaced the fiduciary
intranet site and is the official source for all fiduciary guidance,
including the Fiduciary Program Manual, regulations, statutes, and
other program guidance. This innovative tool, which an individual
employee can tailor to his or her personal needs and can collect
employee feedback for Pension and Fiduciary Service's consideration, is
the single source of all fiduciary reference material in an easily
searchable format.
In 2012, VA established phone units in the hubs to respond to
direct inquiries from beneficiaries and fiduciaries and ensure
consistent service delivery. The fiduciary hubs have a toll-free number
dedicated to answering fiduciary program inquiries. VA is in the
process of modernizing the current telephone system to improve call
routing and reporting capabilities and allow for the recording of
telephone calls for quality monitoring.
Strengthening Oversight Through People
VA has improved its internal training programs and delivery of
fiduciary-related information to external stakeholders. First, VA
designed a National Training Curriculum to promote standardized
practices for its field fiduciary program personnel. Since 2013, VA has
provided an 80-hour training course to 217 fiduciary field examiners
who had less than 12-months of experience. In 2014, VA deployed an
online self-study training course for more experienced field examiners
and will train over 160 journey-level field examiners using this course
in 2015. In addition, VA developed a web-based misuse training course
designed for the specific roles of fiduciary field personnel. The
misuse training is mandatory for all fiduciary staff and provides the
knowledge and tools necessary to properly address misuse allegations,
conduct investigations, and finalize misuse determinations. In addition
to these centralized training efforts, onsite training is provided to
field fiduciary program personnel on hub-specific topics, such as
misuse procedures, BFFS tools and reports, and error trends discovered
during quality reviews or site visits.
Second, the Veterans Benefits Administration (VBA) has developed a
standardized computer-based training module for fiduciaries that VA
hosts on its internet site. VA also published A Guide for VA
Fiduciaries, which is a reference booklet for fiduciaries that helps
them understand their responsibilities and perform their duties. The
guide book is available in hard copy and electronically on the VA
fiduciary program internet site at http://www.benefits.va.gov/
fiduciary/index.asp. As an additional tool for fiduciaries, VA is
developing an on-line accounting assistant to aid fiduciaries in
completing their accounting forms. All of these products aim to educate
fiduciaries on beneficiary rights, fiduciary responsibilities,
management of funds, and accounting and audit procedures.
Currently, VBA is conducting a Work Measurement Study (WMS) of all
fiduciary work tasks. This study is under contract and should be
completed in June 2015. The fiduciary program has experienced
tremendous growth and significant revisions to policies and procedures,
and the WMS is capturing work performance in this new fiduciary program
environment. With the information provided through the WMS, VA will be
able to more accurately define and quantify the time involved in
completing fiduciary program work and will be able to refine fiduciary
program resource requirements.
Fiduciary Appointment and Oversight
Under current policy, VA appoints fiduciaries by first considering
the individual or entity that the beneficiary requests. If the
beneficiary does not state a preference, VA considers the beneficiary's
family members, friends, and other acquaintances who are willing to
serve without charging a fee. Absent such an appointment, VA will
appoint an individual or entity that will provide fiduciary services
for a fee. VA's policy is to select the least restrictive and most
effective method of payment for a beneficiary. Currently, about 80
percent of the beneficiaries in the program have a one-to-one
relationship with their fiduciary and approximately 90 percent of
fiduciaries perform their duties without cost to the beneficiary.
As required by 38 United States Code (U.S.C.) Sec. 5507, VA
conducts an investigation prior to appointing a person as a fiduciary
for a beneficiary. As part of that investigation, VA has a face-to-face
meeting with the proposed fiduciary and obtains a copy of a credit
report regarding the proposed fiduciary. VA also checks the proposed
fiduciary's criminal history, determines whether appointment of the
proposed fiduciary would be in the interest of the beneficiary, and
requires the proposed fiduciary to obtain a surety bond if necessary.
Fiduciaries must enter into an agreement with VA regarding their
responsibilities, such as meeting the beneficiary's needs, maintaining
a separate financial institution account for the beneficiary,
accounting for funds under management, and protecting any reserved
funds. VA ensures that an individual or entity that serves as a
fiduciary meets each of these qualification requirements.
It is VA's obligation to oversee the fiduciaries it appoints to
manage VA benefits for beneficiaries. VA conducts this oversight
through visits with the beneficiary and fiduciary, by auditing the
fiduciary's annual accounting and supporting financial documentation,
by conducting on-site reviews, by verifying surety bonds, and by
investigating misuse allegations.
VA confirms that the fiduciary is fulfilling his or her obligation
to determine and meet the needs of the beneficiary through periodic,
follow up field examinations. During the follow up field examination,
VA interviews the beneficiary and fiduciary, and either recommends
continuing the appointment or replacing the fiduciary. VA may perform
these follow up field examinations through face-to-face contact, or a
telephone call or letter. VA schedules the first follow up field
examination one year after the initial appointment field examination
and then schedules subsequent follow up on one- to three-year intervals
based on the beneficiary's situation. In addition, VA conducts an
unscheduled field exam when it identifies a problem in the beneficiary-
fiduciary relationship, receives a public report of concern, or the
fiduciary fails to respond or inappropriately responds to a VA
telephone or correspondence inquiry.
Under 38 U.S.C. Sec. 5509(a), Congress authorized VA to require
fiduciaries to file reports or accountings regarding the management of
funds by the fiduciary. Currently, VA requires annual accountings when:
the fiduciary is also the beneficiary's court-appointed guardian; VA
has authorized a fee; or, the funds under management by the fiduciary
for the beneficiary exceed $10,000. VA requires fiduciaries to provide
detailed financial documents, including bank records, with their annual
accountings. Collection of this additional information allows VA to
verify reported expenditures and identify potential misuse of funds for
further investigation. This requirement also serves as a misuse
deterrent for fiduciaries. To ensure transparency for beneficiaries, VA
changed its accounting procedures to include instructing fiduciaries to
provide a copy of any VA-approved accounting to the beneficiary. VA
audits approximately 35,000 accountings each year.
Congress also authorized VA to conduct on-site reviews of
fiduciaries who handle 20 or more beneficiaries. In these cases, VA
visits the fiduciary's place of business and inspects the fiduciary's
activities on behalf of VA beneficiaries. There are currently 264
fiduciaries that meet the statutory requirements for on-site reviews.
VA schedules these reviews once every three years; however, VA may
conduct an unscheduled on-site review as part of a misuse
investigation, in response to a complaint, or upon failure of the
fiduciary to submit a timely accounting or appropriately respond to VA
contact.
Management and Oversight of Fiduciary Hub Managers
Each fiduciary hub manager reports to and has his or her
performance evaluated by the Director of the VA Regional Office where
the hub is located. Fiduciary hub managers are responsible for meeting
fiduciary program performance measures, to include the timely
completion of initial appointment field examinations, follow up field
examinations, fiduciary accountings, and the misuse protocol, to
include investigating misuse allegations and making misuse
determinations. In addition, VA conducts recurring quality reviews of
fiduciary field work to measure the accuracy of the work and identify
error trends. VA analyzes these trends to identify training gaps,
clarify policies and procedures, and modify the information technology
requirements for the fiduciary program.
In December 2014, VA revised its site survey protocol to ensure
that Pension and Fiduciary Service's site visit teams conduct
comprehensive inspections of fiduciary hub compliance with program
policies and procedures. During a site visit, the assigned team reviews
the hub's organizational structure, workload management plans, and
performance data to determine whether the hub is appropriately using
its resources. Prior to the visit and while on-site, the site visit
team reviews processing operations and station controls for data
integrity, quality and training. During this fiscal year, VA has
conducted site visits at two fiduciary hubs.
Fiduciary Misuse of VA Funds
VA has implemented several procedures to enhance its prevention and
identification of misuse of beneficiary funds. First, as noted above,
VA requires fiduciaries to submit detailed financial documents,
including bank records, with their annual accountings. This policy
allows VA to detect inappropriate movement of funds for the purpose of
concealing misuse. VA also centralized allegations of misuse within its
National Call Centers, developed mandatory misuse training for all
fiduciary personnel, and modified its new information technology system
to add internal controls for the misuse work process and reporting of
misuse data and protocol timeliness. VA is also developing procedures
for expanding the quality assurance program for fiduciary work to
include the tasks associated with investigating fiduciary misuse of
beneficiary funds.
After fiduciary hub consolidation in 2012, VA began an effort to
identify and complete all pending misuse matters, including final
misuse determinations, debt establishment, and benefit reissuance.
Although misuse of benefits is rare in the fiduciary program,
approximately one-tenth of one percent of beneficiaries are the victims
of fiduciary misuse. VA recognizes that fiduciary misuse of benefits
can cause financial hardship for beneficiaries.
VA is aggressively pursuing recoupment of VA benefits in all cases
of misuse, particularly in cases where VA is not authorized to reissue
benefits. In November 2013, VA implemented formal procedures for
creating a debt against a fiduciary who misused VA benefits, for
initiating debt collection activities, and for referring debts to the
U.S. Department of the Treasury for offset against other Federal
payments, including Federal tax return refunds. If a bond was in place
when a fiduciary misused a beneficiary's benefits, the fiduciary hub
manager will attempt to recoup benefits from the surety company.
Under 38 U.S.C. Sec. 6107, VA must reissue benefits to victims of
fiduciary misuse when the fiduciary is not an individual, or when the
fiduciary is an individual who manages benefits for 10 or more
beneficiaries. In all other cases of fiduciary misuse, VA's authority
to reissue benefits is limited to cases in which VA was negligent in
its appointment or oversight of the fiduciary. This law leaves many
beneficiaries unprotected because VA-appointed fiduciaries are
generally family members, friends, or care providers who have a one-to-
one relationship with the beneficiary they serve. It is also arbitrary
because VA must treat two beneficiaries, who have the same disability
and the same inability to manage their financial affairs differently
depending upon the fiduciary that it appoints.
Under current law, if one beneficiary has an individual fiduciary
who manages benefits for nine other beneficiaries, that beneficiary has
the added protection of VA's reissuance of benefits upon a VA finding
of fiduciary misuse. If the other beneficiary has a fiduciary who
manages benefits for eight other beneficiaries, that beneficiary has
the added protection of reissuance of benefits only if VA determines
that it was negligent. Absent negligence in these cases, the
Government's ability to make the beneficiary whole is limited to court-
ordered restitution in a criminal or civil action or recovery under a
surety bond that the fiduciary purchased. To address this problem, VA
submitted a legislative proposal during the 2016 budget process that
would authorize VA to automatically reissue misused benefits in all
cases of fiduciary misuse.
Challenges
Despite VA's successful implementation of many program enhancements
over the past few years, challenges remain. As noted previously, the
VA's fiduciary program is experiencing extraordinary growth. The
program's current staffing levels are inadequate to further strengthen
oversight of beneficiaries, resulting in an increasing workload of
initial appointment and follow up field examinations. In 2014,
fiduciary program personnel conducted almost 85,000 field examinations,
however, almost 42,000 field examinations remained pending at the end
of the fiscal year. From 2011 to 2014, the field employee allocation
increased 22 percent (703 to 855 employees); however, staffing has not
kept pace with program growth. VA completed 19 percent more field
examinations in 2014 than in 2012, but the number of field examinations
received increased by 32 percent during the same period. Even though
fiduciary hubs are completing more work through increased staffing and
improved efficiency, the inventory of pending field examinations
continues to grow.
VA implemented a fiduciary program workload management plan at four
fiduciary hubs to improve the timeliness of initial appointment field
examinations. The national average days pending for an initial
appointment field examination decreased to 33 days in April 2015, down
from 142 days in October 2012. VA's emphasis on average days pending
prioritizes the oldest pending initial appointment field examination.
As a result, VA improved the number of initial appointments pending
less than 45 days from 34 percent in September 2012, to 83 percent in
April 2015. While VA successfully reduced the length of time a
beneficiary must wait for the appointment of a fiduciary, the average
days pending for follow up field examinations increased to 244 days in
April 2015, up from 199 days in October 2012. If VBA's FY 2016 budget
request isn't provided, beneficiary protection will be compromised by
increased intervals between visits.
VA is grateful for funding in 2015 to hire 50 fiduciary employees
and has requested funding in the 2016 budget process to hire another 85
fiduciary employees.
Conclusion
In conclusion, I want to affirm VA's commitment to serve and
protect our most vulnerable population of Veterans and other
beneficiaries. VA has significantly improved the fiduciary program to
ensure that these beneficiaries receive the benefits and services they
have earned. The interest in our program expressed by this Committee
reflects the importance of this effort. I assure you that VA is
committed to taking all steps necessary to ensure we fulfill our
obligation to protect the beneficiaries in this program.
Mr. Chairman, this concludes my prepared remarks. I would be happy
to address any questions or comments regarding my testimony today.
STATEMENT OF GARY K. ABE
Mr. Chairman and Members of the Subcommittee, thank you for the
opportunity to discuss the work of the Office of Inspector General
(OIG) related to the Department of Veterans Affairs (VA) Fiduciary
Program and how the Veterans Benefits Administration (VBA) can better
protect veterans, who, because of injury, disease, or the infirmities
of age, are in need of assistance managing their financial affairs. I
am accompanied today by Mr. Quentin Aucoin, Assistant Inspector General
for Investigations, and Mr. Timothy Crowe, Director, OIG Bay Pines
Audit Operations Division.
Background
VBA can determine a veteran or other beneficiary is unable to
manage his or her financial affairs based on receipt of medical
documentation or if a court of competent jurisdiction has already made
this determination. VA will then appoint a fiduciary, either an
individual or entity, and with the authority contained in Section
5502(a)(1) of Title 38, United States Code, Payments to and Supervision
of Fiduciaries, will disburse VA benefits on behalf of the beneficiary
for the use and benefit of the beneficiary.
Fiduciaries appointed by VBA may be the spouse of a veteran; the
chief officer of an institution in which a veteran is receiving care; a
legal custodian who is the person or entity caring for the beneficiary
and his or her estate; or another responsible person. Payments may also
be made to a state court-appointed fiduciary, to a fiduciary whose
duties and authority are established by Federal statute, or by means of
supervised direct payment to an adult beneficiary. In all cases, VBA
maintains oversight responsibility to ensure that the VA-derived income
and estates of incompetent beneficiaries are used solely for the care,
support, welfare, and needs of those beneficiaries. The Fiduciary
Program reported overseeing more than 147,000 beneficiaries who
received approximately $2.6 billion in VA benefit payments in fiscal
year (FY) 2013, which represents the most recent program data reported
by VBA. In response to a recent OIG report, VBA stated that the program
supervised almost 173,000 beneficiaries in FY 2014.
Since our 2010 report, Audit of the Fiduciary Program's
Effectiveness in Addressing Potential Misuse of Beneficiary Funds
(March 31, 2010), VBA has made significant changes to the structure of
the Fiduciary Program. In April 2011, VBA established the Pension and
Fiduciary Service, in part, to strengthen oversight of VA-appointed
fiduciaries. In March 2012, VBA completed consolidation of Fiduciary
Program operations from 56 VA Regional Offices (VAROs) to 6 Fiduciary
Hubs and the Fiduciary Activity at the VARO in Manila, Philippines.
VA's FY 2014 Budget Submission stated the consolidation was intended to
improve operational efficiencies. The Hubs are located in Indianapolis,
Indiana; Louisville, Kentucky; Lincoln, Nebraska; Columbia, South
Carolina; Salt Lake City, Utah; and Milwaukee, Wisconsin.
OIG Oversight of the Fiduciary Program
The OIG has an aggressive and comprehensive program in place to
provide oversight of VBA's Fiduciary Program through a combination of
audits, recurring inspections of VARO operations, review of allegations
received by the OIG Hotline, and criminal investigations. OIG audit and
evaluation reports, Hotline reviews, and inspection reports conducted
by our Benefits Inspection Division since FY 2009 have consistently
identified the vulnerability of VA-derived beneficiary estates to
fraud, as well as opportunities for VBA to provide more consistent and
effective oversight of the Fiduciary Program.
Investigative Work
The OIG Office of Investigations through its criminal investigation
activities, aggressively combats fiduciary fraud by pursing prosecution
and court-ordered restitution against those individuals diverting funds
intended for VA beneficiaries and highlights Fiduciary Program
vulnerabilities that are exploited by unscrupulous individuals at the
expense of VA beneficiaries. From April 1, 2010, to March 31, 2015, the
OIG conducted 216 investigations involving fiduciary fraud and arrested
94 fiduciaries and/or associates. For example:
In Houston, Texas, an attorney and his wife, who
served as his legal assistant, were sentenced to 46 months'
incarceration, 3 years' supervised release, and ordered to pay
restitution of $2,352,107 to VA and $282,112 to the Internal
Revenue Service. The OIG investigation revealed that the
attorney, who served as a court-appointed guardian and Federal
fiduciary for 54 veterans, and his wife conspired to steal
$2,352,107 from veterans' fiduciary bank accounts and failed to
report the stolen income on their Federal tax returns. Prior to
becoming a guardian for veteran clients, the attorney was
employed by the VA's Regional Counsel in Houston, Texas. His
duties were consistent with duties now performed by VBA Field
Examiners. After a reorganization of VA legal services, he was
assigned to the Fiduciary Section of VARO Houston. He retired
from his position and opened a private law practice.
In Memphis, Tennessee, a former VBA Field Examiner and
a former court-appointed fiduciary were sentenced to 3 and 2
years in prison, respectively. They were also ordered to pay
$889,626.87 in restitution to VA. An OIG and FBI investigation
revealed that from 1999 until October 2008, both individuals
conspired to alter annual accountings to conceal the theft of
$889,626.87 from 13 veterans. The investigation also revealed
that the former Field Examiner suggested to the fiduciary that
they take money from the guardianship accounts.
In Tuskegee, Alabama, an administrative assistant for
an attorney appointed as a fiduciary for several VA
beneficiaries was sentenced to imprisonment for 33 months
followed by 60 months of supervised probation. She was ordered
to make restitution in the amount of $681,965. The OIG
investigation revealed that the administrative assistant
devised a scheme to embezzle $681,965 from 25 beneficiary
accounts.
In Lexington, Kentucky, an attorney serving as a VA
fiduciary for a VA beneficiary was sentenced to 41 months'
imprisonment, 36 months' supervised release, ordered to pay
$460,679 in restitution to VA, as well as $176,246 restitution
to the Social Security Administration. The investigation
revealed that the fiduciary embezzled VA and Social Security
benefits from a veteran. Following the conviction in this case,
in April 2013, the OIG issued a management implication notice
to the former VBA Deputy Undersecretary for Field Operations,
detailing Fiduciary Program weaknesses exploited by this
defendant.
In Newfields, New Hampshire, the daughter of an
incompetent veteran serving as the fiduciary was sentenced to
366 days' incarceration, followed by 24 months' supervised
release. Prior to sentencing the defendant paid full
restitution to VA in the amount of $251,534. The OIG
investigation revealed that the daughter admitted to taking her
father's VA benefits and falsifying the annual accountings and
supporting bank records to conceal her illegal activities from
VA.
In Pearl, Mississippi, a former local prosecutor was
sentenced to 120 months of incarceration followed by 60 months
of supervised probation. The sentence also included a
restitution order of $198,669. The OIG investigation revealed
that while serving as the appointed fiduciary for five
veterans, the fiduciary embezzled funds from accounts under his
care as legal custodian.
In Mansfield, Massachusetts, an attorney who was the
VA-appointed fiduciary for his disabled veteran brother-in-law
was sentenced to 6 months' home confinement, 5 years of
supervised probation, and ordered to pay restitution to VA in
the amount of $137,493. The OIG investigation revealed that the
fiduciary embezzled the VA funds from his disabled brother-in-
law while serving as a VA-appointed fiduciary.
In Manchester, New Hampshire, the daughter who was the
VA-appointed fiduciary of a disabled veteran was sentenced to
18 months' imprisonment and 24 months' supervised probation.
She was also ordered to pay restitution of $221,905 to VA and
$22,768 to the Social Security Administration. The
investigation revealed that the fiduciary depleted her father's
savings and continued diverting VA benefit payments for her own
personal use.
In Greenville, Mississippi, a former VA-appointed
fiduciary was sentenced to 5 years' supervised probation and
ordered to pay VA restitution of $30,240 after pleading guilty
to embezzlement. An OIG investigation revealed that the
fiduciary failed to notify VA that a widow beneficiary had
died. The fiduciary subsequently received and negotiated VA
benefit checks issued after the beneficiary's death and used
the funds for personal expenses.
Audit Work
The OIG last testified about the Fiduciary Program in April 2010
shortly after releasing our audit report, Audit of the Fiduciary
Program's Effectiveness in Addressing Potential Misuse of Beneficiary
Funds. In that report, we concluded the Fiduciary Program was
inconsistent in taking timely actions to ensure VA-derived funds and
estates of beneficiaries determined to be unable to manage their
financial affairs were used solely for the care, support, welfare, and
needs of those beneficiaries or adequately protected from diversion or
misuse. Specifically, the Fiduciary Program was not consistently:
Taking effective action to obtain the fiduciary's
written accounting of his/her management of a beneficiary's
income and estate which had become seriously delinquent
Verifying questionable beneficiary expenditures
reported by fiduciaries
Replacing fiduciaries when appropriate
Reviewing and investigating allegations of misuse of
beneficiary funds by fiduciaries
We concluded that this occurred because the Fiduciary Program
lacked the elements of an effective management infrastructure to guide
the program. Specifically, we determined that the program's case
management system had severe functional and data limitations that
negatively affected management's ability to support program operations.
The program also lacked a staffing and workload model to guide resource
allocation decisions and other elements necessary to effectively
monitor the program. In response to our report, the then Acting Under
Secretary for Benefits indicated that VBA would undertake a series of
measures in response to our report's findings.
VBA took steps to address our concerns to improve Fiduciary Program
operations. For example, in 2014, VBA replaced the program's inadequate
case management system, implemented policy requiring receipts for some
unbudgeted and budgeted expenses meeting specified thresholds, now
includes misuse allegations processing data in the Fiduciary Program
section of VBA's Annual Benefits Report, developed a program staffing
model for the Fiduciary Hubs, and launched a web-based portal providing
resources to assist fiduciaries. However, work the OIG conducted
recently concerning some of the Fiduciary Program's most important
functions indicates that VBA still faces challenges in meeting its
mission of protecting some of VA's most vulnerable constituencies.
Review of Alleged Mismanagement at VBA's Eastern Area Fiduciary Hub
In May 2013, the OIG Hotline received allegations of mismanagement
at the Eastern Area Fiduciary Hub (EAFH) located in Indianapolis,
Indiana. This Hub is responsible for all beneficiaries in VBA's Eastern
Area, which spans 14 states and encompasses fiduciary activities of 16
VA Regional Offices. We substantiated the three allegations in our
report, Review of Alleged Mismanagement at VBA's Eastern Area Fiduciary
Hub (May 28, 2014), which concerned processing allegations of misuse of
beneficiary funds, processing in-coming correspondence, and completing
field examinations timely.
Hub staff did not timely complete various steps required by VBA
policy after receipt of allegations of misuse of beneficiary funds. We
analyzed 214 merit reviews and 23 investigations to determine
compliance with VBA timeliness standards and policies. Additionally, in
those cases where VBA determined that misuse of beneficiary funds had
occurred, we followed up with EAFH and Pension and Fiduciary Service to
determine whether misused funds had been repaid by the fiduciary and
reissued to the beneficiary. We found the following:
The Hub did not timely review and investigate misuse
of beneficiary fund allegations. Of the 214 merit reviews of
allegations of fiduciary misuse of funds initiated by the Hub,
190 (89 percent) were not completed within 14 days of receipt,
as required by program policy. It took Hub staff an average of
162 days to review the 190 allegations for merit, which
includes 87 reviews that were not completed as of July 2013,
the time we completed onsite field work at the Hub. We also
found the Hub EAFH had not processed and completed 17 of 23
fiduciary misuse of funds investigations (74 percent) within 45
days of the completed merit review, as required. The average
time to complete the 17 investigations was 174 days, which
included 5 investigations that were not completed as of July
2013.
We also determined the Hub made 12 determinations
concluding fiduciaries misused approximately $944,000 of
beneficiary funds. However, required actions in response to
identifying misuse of funds, such as replacing the fiduciary or
requesting repayment from former fiduciaries, were not
completed or completed timely by EAFH. For example, it took the
Hub an average of 98 days from the date the misuse allegation
was received to replace 5 of the 12 fiduciaries, ranging from
72-175 days. For the remaining seven determinations, three
fiduciaries were replaced timely, three beneficiaries passed
away prior to the Hub receiving the allegation, and one was an
allegation against a previously replaced fiduciary.
Internal reviews by Pension and Fiduciary Service
staff to determine if VBA was negligent in its oversight of the
fiduciaries in instances where misuse of funds occurred were
not consistently conducted as required.
We also substantiated the allegation that the Hub had a large
backlog of pending field examinations by identifying more than 11,000
(69 percent) of 16,000 pending field examinations that exceeded VBA
timeliness standards. Field examinations, which consist of in-person
visits by program staff, are a critical tool for VBA to assess the
competency and welfare of beneficiaries who are unable to manage their
financial affairs. Initial Appointment (IA) field examinations assess
the competency and welfare of the beneficiary and, if needed, the
appointment of a fiduciary to receive VA benefits. Subsequent to an IA
field examination, program staff conduct Fiduciary-Beneficiary
Fiduciary-Beneficiary field examinations to periodically reassess
the welfare of the beneficiary and the continued suitability of the
fiduciary. As a result of a large backlog of field examinations not
being completed timely by VBA, the general health and well-being of
beneficiaries are placed at increased and unnecessary risk.
We also identified more than 3,200 pieces of mail that had yet to
be processed and exceeded EAFH's timeliness standards, some of which
were time-critical. VBA policy requires Fiduciary Program staff to
review all correspondence in conjunction with the fiduciary folder and
provide a response, if necessary, generally within 10 workdays of
receipt. The Hub had a local goal of processing incoming mail within 5
days of receipt. Delays in processing the 3,200 pieces of mail ranged
from 11 to 486 workdays, with an average delay of 30 workdays. Mail not
processed timely included allegations of misuse of beneficiary funds,
competency restoration requests, and retroactive payment requests. By
not effectively managing incoming mail, those receiving VA benefits may
be affected.
In response to our report, VBA stated that the conditions we
identified concerning processing allegations of misuse, field
examination backlogs, and unprocessed incoming correspondence occurred
primarily due to an increased workload and insufficient staff when
consolidation of VA regional office Fiduciary Program operations into
the EAFH were completed.
Audit of the Fiduciary Program's Management of Field Examinations
Following the results of our work at the Indianapolis Fiduciary
Hub, we conducted work nationwide concerning the Fiduciary Program's
field examination function. We issued our final report, Audit of the
Fiduciary Program's Management of Field Examinations on June 1, 2015.
Our work was conducted at four of the remaining five Fiduciary Hubs:
Columbia, South Carolina; Salt Lake City, Utah; Louisville, Kentucky;
and Lincoln, Nebraska.
We concluded that VBA faces a large and growing backlog of field
examinations. Specifically, we determined VBA did not meet timeliness
standards for about 45,500 (42 percent) of approximately 109,000
pending and completed field examinations during calendar year (CY)
2013, of which 18,100 (40 percent) were still pending and not completed
as of December 31, 2014. We followed-up by examining reported program
performance for the first 9 months of CY 2014 and determined that field
examinations not completed and already exceeding timeliness standards
increased approximately 15 percent from about 19,000 in January 2014 to
approximately 21,900 in September 2014.
This occurred because Field Examiner staffing did not keep pace
with the growth in the beneficiary population, VBA did not staff the
Hubs according to their staffing plan developed in conjunction with
Fiduciary Program consolidation to the six Hubs, and did not use all
relevant performance measures for the field examination function. The
2011 VBA staffing plan set a target of 1 Field Examiner for every 325
beneficiaries. However, our analysis of VBA staffing reports for the
period of January 2013 through December 2013 showed the Fiduciary
Program had an average of 1 Field Examiner for every 363 beneficiaries.
The situation did not improve during the first 9 months of 2014. As of
September 30, 2014, VBA employed 1 Field Examiner for every 386
beneficiaries supervised under the Fiduciary Program. While Field
Examiner staffing has generally increased, the Fiduciary Program did
not meet its staffing goal for Field Examiners in part due to the
substantial growth in the beneficiary population. Specifically,
although the beneficiary population increased by 10 percent from
January 2013 through December 2013, the number of field examiners
increased only 2 percent during this same period.
As a result, untimely field examinations placed approximately
$360.7 million in benefit payments and $487.6 million in estate values
at increased risk. In addition, we determined that VBA did not schedule
required field examinations for a projected 1,800 beneficiaries in CY
2013. Lapses in field examination scheduling occurred because of
inadequate management oversight to ensure required field examinations
were scheduled. As a result, we project the Fiduciary Program did not
schedule field examinations for about 1,800 beneficiaries, placing
beneficiaries' well-being and approximately $36.1 million in benefit
payments at increased risk in CY 2013.
We recommended the Under Secretary for Benefits implement a plan to
meet timeliness standards, expand program performance measures, improve
controls to identify unscheduled field examinations and enhance case
management system functionality. The Under Secretary concurred with our
recommendations and provided acceptable plans to complete all
corrective actions.
Audit of the Fiduciary Program's Processing of Misuse Allegations
We recently provided VBA with a draft report on the extent to which
VBA protects the VA-derived income and estates of beneficiaries who are
unable to manage their financial affairs when misuse of beneficiary
funds is alleged. This work was a direct result of our work at the Hub
located at Indianapolis, Indiana, and our follow-up work in the
management of field examinations.
Section 6106(b) of Title 38, United States Code, Misuse of Benefits
by Fiduciaries, defines misuse as any case where a fiduciary receives
payment under the laws administered by the VA Secretary, for the use
and benefit of a beneficiary and uses any part of the payment for other
than for the use and benefit of a beneficiary or the beneficiary's
dependents. VBA is made aware of allegations or indications of misuse
of funds by fiduciaries through multiple sources, such as the
beneficiaries themselves, third parties, or VBA employees while
performing duties. Once misuse is alleged or indicators of misuse
exist, program policy requires staff take specific actions to review,
investigate, and determine misuse within specified timeliness
standards.
If VBA does not timely complete misuse actions, beneficiary funds
are at increased risk of misuse. We projected VBA did not timely
complete required misuse actions to ensure the protection of 758
beneficiaries' Vader estates valued at about $45.2 million. VBA also
did not restore approximately $2.1 million of misused funds to
beneficiaries. Additionally, unless VBA improves the timeliness of
actions in response to allegations and indications of misuse, we
project VBA may not adequately protect annual benefit payments to
beneficiaries valued at approximately $16 million, or $80 million
during Cyst 2014 through 2018.
Conclusion
Despite some of the significant changes to structure, oversight and
operation of the Fiduciary Program since our 2010 audit, significant
challenges remain. The OIG's most recent work demonstrates that
conditions that put beneficiaries and their VA-derived estates at
unnecessary risk persist. Past and recent cases have uncovered
unscrupulous fiduciaries who have misappropriated tens of thousands to
even millions of dollars from the accounts of unsuspecting VA
beneficiaries under the supervision of the Fiduciary Program. This type
of theft can only be stopped by aggressive and consistent oversight by
the Fiduciary Program.
As the veteran population ages, more VA beneficiaries will likely
require the appointment of a fiduciary to assist them in managing the
monetary benefits provided by VA. In order to meet these challenges,
VBA needs to revisit its staffing model and resource allocation
decisions for the Fiduciary Program, as well as the programs' work
processes and tools. Without more effective controls, including more
consistently and timely completion of some of the Program's most
important functions, unacceptable risks to the general well-being and
VA benefits of some of VA's most vulnerable beneficiaries will remain.
Mr. Chairman, this concludes my statement and we would be happy to
answer any questions that you or Members of the Committee may have.
STATEMENT OF ZACHARY HEARN
Chairman Abraham, Ranking Member Titus, and distinguished members
of the subcommittee, on behalf of National Commander, Michael Helm, and
the more than 2 million members of The American Legion, we thank you
for the opportunity to testify regarding The American Legion's
positions on the Department of Veterans Affairs Fiduciary programs.
An unfortunate aspect of military service is that some service
members and veterans develop mental health illnesses, and in some cases
physical injuries that can diminish their capacity to manage financial
affairs on a day to day basis. Whether a veteran suffers from
posttraumatic stress disorder (PTSD) or develops depression secondarily
to a previously service connected conditions, the nature of these
disorders can impact multiple areas of their, and their family's daily
life.
With severe conditions such as TBI or PTSD, veterans can struggle,
either temporarily or over a long term, to perform certain tasks
associated with their personal finances, and sometimes suffer
diminished mental health capacity as well. Due to this diminished
capacity, veterans may be deemed incompetent in accordance with the
Code Federal Regulations (C.F.R.), which defines mental incompetency as
one who because of injury or disease lacks the mental capacity to
contract or to manage their own affairs to include disbursement of
funds without limitation.\1\ If a veteran is deemed incompetent to
handle his/her financial affairs, the Department of Veterans Affairs
(VA) appoints a fiduciary. A fiduciary is an individual or entity that
has been appointed to receive funds on behalf of a beneficiary for the
use and benefit of the beneficiary and their dependents. The appointed
fiduciary is allowed to charge a fee up to four percent of the VA
benefits that are paid to the beneficiary. If the beneficiary is
married the spouse may receive payments on behalf of the veteran. A
selection of a fiduciary involves an analysis of current credit
reports, disclosure of criminal background, and consideration of the
opinion of character witnesses.\2\
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\1\ CFR Title 38, Chapter 1, Part 3, Subpart A, Section 3.353.
\2\ The American Legion Testimony: ``VA Fiduciary Program'':
February 9, 2012.
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VA's fiduciary program is designed to benefit the veteran and their
family. The American Legion recognizes that veterans who are suffering
from mentally debilitating injuries may need the assistance of
fiduciaries to manage their VA benefits as well as their personal
finances. Unfortunately, the program can lead to appointed fiduciaries
who may take advantage of veterans and their benefits.
In recent years, allegations of fraud within the fiduciary program
have been reported. After conducting an investigation in June 2012, the
Hearst News Service discovered the program had ``gambling addicts,
psychiatric cases, and convicted criminals who were among the thieves
who have been handed control of disabled veterans' finances''.\3\
Reports of these allegations do little to breed confidence in a program
designed to protect some of our nation's most vulnerable veterans.
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\3\ http://www.usmedicine.com/agencies/department-of-veterans-
affairs/senator-pushes-for-expedited-reform-of-controversial-va-
fiduciary-program/.
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Beginning in May 2014, VA switched from the Fiduciary-Beneficiary
System (FBS) to the new Beneficiary and Fiduciary Field System (BFFS)
which is a new computer-based processing system that enables fiduciary
employees to work more effectively and efficiently. The new system
maintains larger quantities of data, tracks fiduciary information,
retains information on previous fiduciaries and is a substantially more
robust and powerful tracking system.
Recommendations for Improvement:
A chief concern of The American Legion is the location of the
fiduciary branches. These locations are often separate from the VA
regional office (VARO). For instance, the fiduciary location for the
Muskogee, Oklahoma VARO is located in Lincoln, Nebraska. For the Denver
VARO, its fiduciary hub is in Salt Lake City, Utah. Similar to other VA
administrative processes, there is a backlog in adjudicating
competency. This backlog proves frustrating to veterans as they
complete their portion of the process, submit the medical evidence to
rebut the incompetency claims, and then it languishes awaiting
adjudication.
The centralization of these processes is not unique to the
fiduciary program, and The American Legion has expressed concerns about
the impact of centralization of Veterans Benefits Administration VBA)
programs dating back to 2003 with opposition to the consolidation of
pension operations into Regional Pension Maintenance Centers.\4\ While
VBA has continued to justify the centralized locations as a way to
reduce the backlog of benefits processes, backlogs in adjudication
continue even at the central locations, and communication between
service officer advocates and VBA employees that could resolve common
sense problems and expedite service is severely hampered. The
centralization of programs has not provided the benefit intended, and
therefore The American Legion believes more programs should be brought
back into VAROs where direct communication can help facilitate an
environment where obstacles are more rapidly overcome.
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\4\ Resolution No. 120: Discontinue Department of Veterans Affairs
Regional Pension Maintenance Centers - AUG 2003.
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The American Legion has over 2,500 accredited representatives
located throughout the country who represented more than 716,000
veterans in 2014 alone, and continues to advise and advocate for
veterans across the United States. While providing advocacy to
veterans, The American Legion is able to gather feedback regarding the
implementation and effectiveness of VA programs.
According to our research:
The program has had problems that have needed to be
addressed from its onset, our Service Offers reported an
experience where a veteran was labeled incompetent because he
indicated that he does not pay his bills; however, after
further review, it was determined that in the division of
household responsibilities, the veteran's spouse held that
responsibility.
Another incident included a veteran who indicated that
he wanted his wife to serve as his fiduciary, and VA denied the
request stating that she was unable to properly take care of
the veteran. To find a veteran incompetent, VA needs a medical
examination to support the finding; in the case of this
veteran's wife, no medical examination was afforded, and a VA
field examiner awarded the fiduciary to an individual unknown
to the veteran or his wife which cost the veteran up to four
percent of his benefits annually.
Once an individual is determined to be incompetent a
letter is sent to the vet proposing incompetency. This letter
allows 60 days for due process which delays the awarding of the
back pay amounts due the veteran. Unfortunately, because of the
immediate financial needs of these vulnerable veterans, some
representatives are waiving the due process to get the
fiduciary appointment moving but these letters of waiver are
frequently ignored, and the 60 day window remains. This delays
approving the appointed representative and consequently, the
back pay.
In a number of cases, this money is needed to pay owed
amounts to nursing homes and private caregivers. Delaying this
decision to award the back pay is placing undue hardship on
facilities and families and, if continued, will lead to
situations where nursing facilities or care facilities do not
want to take on veteran patients if they require fiduciaries
because of the VA filing delays. There often can be a delay of
up to six months to get awarded amounts.
In a conversation with the Salt Lake City fiduciary
hub last week, one representative heard that the assigning of
the fiduciary is almost four months in duration. If we add four
months to the claim adjudication, which can take four to six
months at a minimum, we are now looking at least 10 months to
get needed money to families. Nursing homes are attempting to
have families pay for the care of their loved ones up front and
this can cause a co-mingling of funds and can leave the family
responsible for any owed money. The American Legion does not
recommend that a family pay anything for the care up front, as
this can become a potential legal issue for the family.
The service officers of The American Legion have also
seen a number of claims that are not being expedited as they
should be, based on the age of the veteran. When a veteran is
above a certain age or has qualifying severe medical
conditions, or is suffering unique and imminent financial
hardships, the veteran is eligible to have their claim
processed under an expedited procedure. However, American
Legion service officers routinely remind VA that the client is
entitled to this expedited treatment because it doesn't happen
automatically. With VA's advanced digital and electronic
capabilities and the electronic claims process almost fully
implemented, the age factor should be identified by an
automated process, but in addition, there should be better
procedures built into the process to identify these factors and
help the veteran.
Many of these concerns could be overcome with more direct contact
between advocates such as service officers and the VBA employees who
process the claims, the centralization process inhibits this
communication and leads to a disjointed process that ultimately does
not serve the veterans or their families.
Beyond the implementation of the program throughout the nation, The
American Legion has concerns regarding how being determined incompetent
affects the veteran. According to VA's definition, veterans are defined
as incompetent ``due to injury, disease, or due to age, are unable to
manage their financial affairs''.\5\ Unfortunately, being deemed
incompetent to manage financial affairs can have further consequences,
as veterans deemed unable to manage finances are required to relinquish
their weapons and are prohibited from purchasing weapons.\6\ Utilizing
this logic, any American that files bankruptcy due to financial
mismanagement should be subjected to the same recourse from the federal
government. The fact that veterans are the only group in the United
States subject to this scrutiny and can have their constitutional
rights infringed without a more detailed and considered due process, is
unfair and unjust.
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\5\ http://www.benefits.va.gov/fiduciary/.
\6\ http://www.benefits.va.gov/fiduciary/beneficiary.asp.
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The American Legion is a strong supporter of the Second Amendment;
by resolution adopted at our National Convention in August 2014, we
urge ``our nation's lawmakers to recognize, as part of their oaths of
office, that the Second Amendment guarantees law-abiding citizens the
right to keep and bear the arms of their choice, as do the millions of
American veterans who have fought, and continue to fight, to preserve
those rights, hereby advise the Congress of the United States and the
Executive Department to cease and desist any and all efforts to
restrict these rights by any legislation or order.'' \7\
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\7\ Resolution No. 92: Second Amendment-AUG 2014.
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If veterans are made to fear that by asking for needed help they
may see their rights taken away, it may prevent those who need help
from seeking it, and place the veteran in a bad position. Reform of
this policy that automatically places veterans requiring a fiduciary on
a list to remove their Second Amendment rights is critical to ensuring
veterans who have need of the fiduciary program need not fear seeking
the help they require to properly manage their financial and family
affairs.
Conclusion
The American Legion recognizes the importance of a successful
fiduciary program. With an aging veteran population and veterans
returning after serving years in combat where the signature wounds of
TBI and PTSD can impact cognitive functioning, it is necessary to have
a robust and effective fiduciary program. The American Legion believes,
based on our research gathered from the experiences of thousands of
service officers in the field, that the system can be improved by
returning the fiduciary programs to direct contact in the VAROs, and by
reforming the automatic reporting mechanism that can needlessly strip
veterans of their constitutional right to bear arms for seeking help
with financial matters.
As always, The American Legion thanks this subcommittee for the
opportunity to explain the position of the over 2 million veteran
members of our organization. For additional information regarding this
testimony, please contact Mr. Warren J. Goldstein at The American
Legion's Legislative Division at (202) 861-2700 or
[email protected].
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