Financial Controls and Payments Related to VA-Affiliated Nonprofit Corporations: Boston VA Research Institute

This audit was conducted in response to OIG hotline complaints and a congressional request alleging violations of law and VA policy at the Boston VA Research Institute (BVARI), a VA-affiliated nonprofit corporation. Among the allegations was the inappropriate use of agreements allowing VA and BVARI to collaborate on mutually beneficial projects while VA subsidized part or all of the salary and fringe benefits of participating employees. The audit team identified serious lapses in oversight and weak internal controls, which allowed a pattern of inappropriate payments to BVARI. Such payments risk the loss of VA funds and are not in the best interest of veterans as required by law. The OIG found that VA Boston Healthcare System officials authorized about $1.6 million in inappropriate payments to BVARI because they did not follow VA policy. This included $685,000 in administrative fees that BVARI intentionally invoiced for about three years and $576,000 in administrative salaries and benefits for positions prohibited by VA policy. The healthcare system also made $341,000 in duplicate payments for retirement contributions. The OIG also estimated the healthcare system made $22.8 million in improper payments to BVARI because employees did not verify that services were performed before making payments, as VA policy requires. The OIG did not substantiate allegations that officials in Boston attempted to cover up payment of prohibited administrative fees or interfered with audits of VA-affiliated nonprofits or efforts to recoup overpayments to BVARI. The OIG made seven recommendations, including that the under secretary for health confer with the VA Office of General Counsel and human resources officials about whether administrative actions should be taken against officials responsible for inappropriate payments to BVARI for ineligible administrative staff and duplicate retirement contributions.