To assess the implementation effectiveness  of the key control activities for the three areas of operation, we used a case  study approach, reviewing transaction documentation at six VA medical  centers selected based on size and medical specialization diversity of the  location’s part-time physicians and other factors. The property control records were such that  we could not select a statistical sample of test items that would allow our  results to be projected to the location’s entire property universe. At five locations, VHA officials found from 13 to 39 of the 100  items we tested at each location to determine if they were on hand, while at  the sixth medical center, Atlanta, 62 of 100 items were found. A 1997 addition to VA’s Handbook 7127, “Materiel Management  Procedures,” established a $5,000 threshold for property that must be  inventoried. The Information Resources Management department (IRM) at the six  medical centers we visited had developed alternative procedures to  maintain accountability for computer equipment that cost less than $5,000. However, all six locations lacked information about which drugs  qualified for credit, and only one pharmacy inventoried non-narcotic drugs  before they were turned over to the contractor. However, we found that each of  the six medical centers we visited essentially used an honor system for  returning drugs to manufacturers for credit, relying on contractors that  collected and processed recalled, expired, or deteriorated drugs. We found  that at four of the six pharmacies visited, physical control over non- narcotic drugs held for return was lacking. Anyone with access to the pharmacy also had access to the drugs. The  combination of weaknesses in record keeping and physical controls over  non-narcotic drugs held for return exposed them to potential loss, theft, or  unauthorized use. Controls over Part-time Physician Time and Attendance Could Be Strengthened Further

Our review of part-time physician time and attendance documentation for  the two pay periods ending in September 2003 showed that scheduled and  actual hours worked were not always documented according to policy at  the six medical centers we visited. We also found that latitude  provided in VHA’s Directive 2003-001, issued in January 2003, on time  and attendance of part-time physicians was a factor in the various ways the  six locations carried out part-time physician attendance monitoring  responsibilities. On the day we reviewed part-time physician  sign-in sheets at the Houston medical center, we noted that only 2 of 15  physicians scheduled to work had signed in. We recommend that the Secretary of Veterans Affairs direct  the Assistant Secretary for Management to  clarify existing guidance and establish consistent parameters for  personal property that is required to be accounted for in the property  control records and that is subject to physical inventory to include  sensitive property,  provide a more comprehensive list of the type of personal property  assets that are  considered sensitive for accountability purposes,  direct that physical inventories of personal property be performed by  the A&MM staff or other parties who are independent of those with  property custodian responsibilities, and  reinforce VA’s requirement to attach bar code labels to agency personal  property. To improve oversight of medical center operations, we recommend that the  Acting Under Secretary for Health  designate a headquarters-level staff office to monitor medical facilities’  credits for returned drugs;  review returned drug credits and related pertinent information for VA  medical facilities and determine, especially for those with unusual  performance patterns, whether there might be additional opportunities  for credits;   develop procedures to periodically test whether the amount of credits  received for returned drugs is correct;  implement procedures to periodically test whether the amount of  credits that medical centers received for returned drugs is correct;  conduct a best practices review of procedures implemented by VA  medical centers and service areas to identify those most effective in  documenting daily attendance of part-time physicians and periodically  monitoring employee compliance with time and attendance  requirements; and  use the results of the best practices review to provide more definitive  policy guidance to improve control effectiveness over part-time  physician attendance monitoring. To address the weaknesses noted during our visits to six VA medical  centers, we recommend that the Acting Under Secretary for Health require  the directors of those medical centers to  determine the location or disposition of personal property items not  found during our site visits;   review property records to identify and correct erroneous or incomplete   prepare a running list of all non-narcotic drugs held for return in facility  pharmacies as they are removed from current supplies to compare with  contractor-prepared lists of returned drugs;  improve physical security over non-narcotic drugs held for return in  facility pharmacies as they are removed from current supplies; and  analyze information regarding drugs returned to manufacturers to  identify potential improvements that might increase the amount of  credits received, such as improving the timeliness of returning drugs  consistently turned in too late to qualify for credit.
Why GAO Did This Study

The Department of Veterans Affairs (VA) provides health care to veterans through the $27 billion Veterans Health Administration (VHA) medical programs. VHA administers and operates VA's medical system, providing care to nearly 5 million patients in 2003. As of September 2003, VHA operated 160 hospitals, 847 outpatient clinics, 134 nursing homes, 42 domiciliaries, and 73 comprehensive home care programs, including facilities in every state, Puerto Rico, the Philippines, and Guam. VHA is responsible for effective stewardship of the resources provided to it by Congress, which asked GAO to review internal controls in three areas of operation at selected VHA medical centers. GAO conducted a review to assess the effectiveness of control activities over (1) personal property, (2) drugs returned for credit, and (3) part-time physician time and attendance.

What GAO Found

GAO's review found that six selected VA medical centers lacked a reliable property control database. The property databases for the six medical centers contained incomplete information. As a result, GAO could not select a statistical sample of test items so that results could be projected to each location's entire property universe. Key policies and procedures established by VA to control personal property provided facilities with substantial latitude in conducting physical inventories and maintaining their property management systems, which resulted in reduced property accountability. For example, VA's Materiel Management Procedures handbook allowed the person responsible for custody of VA property to attest to the existence of that property rather than requiring independent verification. Also, personnel at some locations interpreted a policy that established a $5,000 threshold for property that must be inventoried as a license to ignore VA requirements to account for lower cost items that are susceptible to theft or loss, such as personal computers and peripheral equipment. These weak practices, combined with lax implementation, resulted in low levels of accountability and heightened risk of loss. VHA personnel located fewer than half of the 100 items GAO selected at each of five medical centers and 62 of 100 items at the sixth medical center. The process for obtaining credit for recalled, expired, or deteriorated drugs was, in essence, an honor system. Each of the six pharmacies GAO visited used a contractor to return drugs to the manufacturer for credit, but only one of the pharmacies inventoried non-narcotic drugs before they were turned over to the contractor. None of the pharmacies had enough information about which drugs qualified for credit to be able to reconcile the credits they received with the drugs they had turned over to the contractor. There was no agency-level oversight of returned drug information to help identify improvements that might increase the credits that VA receives. At four of the six facilities, non-narcotic drugs held for return were stored in unsecured open bins accessible to anyone in the pharmacy. The combined lack of record keeping and physical controls over non-narcotic drugs held for return exposed them to potential loss, theft, or unauthorized use. Scheduled and actual hours worked by part-time physicians at the six locations GAO visited were not always documented in accordance with a January 2003 VHA directive. Five of the six locations had not prepared written work schedules for all part-time physicians as required. GAO found that latitude provided in the directive resulted in wide variation in procedures used by the six medical centers to verify physician compliance with work schedules. While some timekeepers used informal notes to record daily attendance, one facility required physicians to sign in. However, on the day of GAO's review, only two of 15 scheduled physicians had signed in. Attendance monitoring procedures at the six locations varied in frequency and included monitoring all part-time physicians once per quarter at one location and 5 percent of part-time physicians each month at another.