Inadequate Financial Controls and Payments Related to VA-Affiliated Nonprofit Corporations

The OIG examined whether VA medical centers have adequate controls for, and provide sufficient oversight of, payments to affiliated nonprofit corporations. Under Intergovernmental Personnel Act agreements, VA reimburses nonprofit corporations for all or part of the salaries and associated costs for employees working on mutually beneficial research, education, and training activities. The OIG previously evaluated complaints involving nonprofit corporations affiliated with five VA medical centers. For this audit, the team added two medical centers in Albuquerque, New Mexico, and Palo Alto, California. The OIG estimated that the Albuquerque and Palo Alto medical centers made about $17.9 million in improper payments to affiliated nonprofit corporations. The reason for improper payments was the same for all seven VA medical centers reviewed. Specifically, procedures for approving invoices did not satisfy VA policy requirements because they did not require verification that the services were provided. The audit team also noted an absence of required periodic reviews by VA supervisors of approved invoices at all seven medical centers. Furthermore, triennial reviews by VA’s Nonprofit Program Office did not identify that the lack of evidence that services were provided was a problem. The OIG made three national recommendations. These included recommending that the assistant under secretary for health for discovery, education and affiliate networks establish procedures to ensure that (1) designated medical center staff verify that services invoiced by affiliated nonprofit corporations were provided before approving payment, and (2) Research and Development Budget Office supervisors conduct periodic reviews of invoices from VA affiliated nonprofit corporations that staff authorized for payment. The OIG also recommended that (3) the program office director add a step to the triennial review procedures to verify that nonprofits include evidence of providing services when they submit invoices to VA.