Pre-hearing Deliverables
House Committee on Veterans’ Affairs
Subcommittee on Disability Assistance and Memorial Affairs
Hearing on Veterans Benefits Administration’s (VBA) Fiduciary Program
Pre-hearing Deliverables
Deliverable 1: For the first quarter of Fiscal Year (FY) 2015, and for each of the past three FYs (FY 2012, FY 2013, and FY 2014), please provide:
- The total number of allegations of misuse of beneficiary funds the VBA Fiduciary Program received and/or investigated
- The total number of misuse determinations made by VBA Fiduciary Program
- For each such misuse determination, describe the actions VBA took in response to identifying misuse of funds, such as replacing the fiduciary and/or requesting repayment
- The total amount of beneficiary funds VBA determined were misused; and
- The total amount of benefits VBA reissued to beneficiaries.
Response: 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 emphasized the identification and reporting of misuse allegations to fiduciary field personnel, resulting in an increase in documented allegations. VA centralizes these allegations of misuse within its National Call Centers. Corresponding to the increase in allegations, VA is conducting more misuse investigations and determinations. Each allegation is reviewed to determine if further investigation is warranted. For cases where further investigation is necessary, a VA field examiner may collect evidence through: an interview with the fiduciary, review of the fiduciary’s financial records, and contact with the beneficiary. VA continues the investigation until there is a preponderance of evidence to support a conclusion. For cases requiring investigation, VA prepares a formal misuse determination. VA provides the fiduciary with a copy of the formal decision, and the fiduciary then has 30 days to submit new and material evidence regarding the misuse case.
VA is aggressively pursuing recoupment of VA benefits in all cases of misuse – this is particularly important 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, initiating debt collection activities, and referring debts to the U.S. Department of the Treasury for offset against other Federal payments, including Federal tax returns. Through formal guidance and field staff training, VA significantly increased the number and amount of debt established as the result of fiduciary misuse.
Under 38 United States Code (U.S.C.) § 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. 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.
VA designed its new information technology (IT) system, the Beneficiary Fiduciary Field System (BFFS), to add misuse controls and reporting of misuse data and protocol timeliness. VA’s previous antiquated IT system only maintained limited misuse case data and did not monitor or track the misuse protocol. In addition, VA continues to build additional internal controls in BFFS to ensure the integrity of debt collection and benefit reissuance data. For example, in June 2015, VA will release a BFFS enhancement containing rules-based criteria and real time misuse reporting capability.
To ensure the quality and timeliness of misuse work, VA developed mandatory misuse training for all fiduciary field personnel, included misuse protocol timeliness as a performance measure, and is developing procedures for expanding the quality assurance program for fiduciary work to include the tasks associated with investigating fiduciary misuse.
The following chart reflects the progress VA has made in documenting misuse allegations and taking corrective action when misuse is found, to include appointing a successor fiduciary and initiating debt collection procedures.
Note: Misuse actions often span more than a single fiscal year. The data in this chart reflects only the specific actions within the misuse protocol completed during that fiscal year.
Deliverable 2: Please also provide a copy of VA’s written guidance provided to Regional Hub Managers with respect to determining how many beneficiaries a single trust entity is able to effectively and efficiently manage.
Response: When appointing a fiduciary for a beneficiary, VA performs the best interest determination required by 38 U.S.C. § 5507(a)(2). As a result of this requirement, more than 80 percent of the beneficiaries in VA’s fiduciary program have a one-to-one relationship with their fiduciary. VA seeks out and appoints fiduciaries based on the person or entity that can serve in the least-restrictive, most effective manner, which seldom results in the appointment of a paid, professional fiduciary. In selecting fiduciaries, VA gives preference to family members, who normally serve without a commission. In some cases, however, VA determines that someone other than a family member is best suited to serve as a fiduciary.
While VA does not prescribe a specific limit on the number of beneficiaries a single fiduciary may serve or have formal written guidance on this topic, the hub manager will consider whether the fiduciary has the capacity to manage additional appointments without degrading the service that the fiduciary provides to any other beneficiary. In addition to services potentially degraded due to exceeding a fiduciary’s capacity, service to other beneficiaries could be degraded if a fiduciary with a large number of beneficiaries suddenly decides that it wants to get out of the business of providing fiduciary services. Such a decision could disrupt VA’s delivery of benefits to affected beneficiaries if VA is unable to timely appoint a large number of successor fiduciaries.
VA recognizes that larger companies may have a greater capacity to serve a large number of beneficiaries. However, the decision to appoint a fiduciary is also based upon the potential adverse impact to the program if a large corporate fiduciary suddenly decides to change its business model. Any limitation on appointment of a specific fiduciary for multiple beneficiaries is based upon the total number of beneficiaries the fiduciary serves, the fiduciary’s demonstrated capacity to provide quality service, and whether additional appointments would degrade the services provided by the fiduciary. VA’s new BFFS provides each fiduciary hub with national data on fiduciary appointments, to include the total number of beneficiaries that each fiduciary serves.