	Background

VA’s Office of Small and Disadvantaged Business Utilization (OSDBU)  has overall responsibility for the verification program. VA uses contractors to  support its verification program and federal employees oversee the  contractors and review and approve verification decisions. Our  most recent work on this program in 2013 found that VA had made  significant changes to address previously identified program weaknesses,  but that it still faced challenges establishing a stable and efficient program  to verify firms on a timely and consistent basis. Therefore, we  recommended that VA (1) refine and implement a strategic plan with  outcome-oriented long-term goals and performance measures, and (2)  integrate efforts to modify or replace the program’s data system with a  broader strategic planning effort to ensure the system addresses the  program’s short- and long-term needs. VA Took Steps to Improve Its Verification Program and Communication with Veterans

Based on our preliminary observations, VA has improved its timeliness for  application processing, followed its policies for verifying businesses,  continued to refine quality controls for the program, and improved  communications with veterans. For instance, CVE reported its processing  times have improved by more than 50 percent since October 2012, going  from an average processing time of approximately 85 days to 41 days in  fiscal year 2015. For example, CVE has developed detailed written  work instructions for each part of the verification process, and developed  a quality manual that documents the requirements of its quality  management system. Additionally, CVE implemented an internal audit and  continuous improvement process. As of September 2015, CVE had taken  action on and closed 364 of 379 (96 percent) internal audit  recommendations made from June 2014 through August 2015. CVE also conducted post-verification site visits to 606 firms in fiscal year  2015 to check the accuracy of verification decisions and help ensure that  firms continued to comply with program regulations. We will  continue to monitor these issues and report our final results early next  year. Our preliminary work revealed that since our 2013 report, VA has made  several changes to improve veterans’ experiences with the verification  program and reduced the percentage of firms that receive denials from 66  percent in 2012 to 5 percent in 2015, according to agency data. Three of the four  verification assistance counselors we spoke with stated that VA’s new  policies to allow veterans to withdraw or submit changes to their  application represented a positive change. They also said VA was interacting more with veteran  service organizations and veterans at conferences for veteran-owned  small businesses and town hall meetings. However, three of the four verification assistance counselors noted that  resources on VA’s website for the verification program can be difficult to  locate and representatives from one veteran service organization said VA  does not provide adequate documentation of the program standards for  applicants. VA Has Addressed Some Program Challenges, but Preliminary Findings Indicate That VA Lacks a Comprehensive Operational Plan

Despite the significant improvements VA has made to its verification  program, it continues to face challenges establishing a more cost- effective, veteran-friendly verification process, and acquiring an  information technology system that meets the agency’s needs. The efforts  that VA has either made or currently has underway include restructuring  the verification process, revising verification program regulations,  changing the program’s organizational structure, and developing a new  case management system—some of which have been ongoing since our  January 2013 report. While these efforts are intended to help address  some of the challenges associated with the verification program, VA lacks  a comprehensive operational plan with specific actions and milestone  dates for managing these efforts and achieving its long-term objectives  for the program. VA intends to restructure part of  the verification process in an effort to make it more veteran-focused and  cost-effective. In August  2015, VA began a pilot for a new verification process that makes a case  manager the point of contact for the veteran and the coordinator of staff  evaluating the application. Officials stated that VA plans to  finalize the new process in October 2015 and fully transition to the new  process by April 2016. We plan to  include additional information on this study in our upcoming report. Since 2011, CVE has had  three different directors, the last two of which have been acting directors. VA has faced delays in replacing  the verification program’s outdated case management system. If the  pilot is successful, VA plans to issue a solicitation and award a contract  for development of a full system by April 2016 and fully transition to the  new system by September 2016. But, the plan does not have an integrated schedule  that includes specific actions and milestone dates for achieving program  changes or discuss how the various efforts described above might be  coordinated. Useful practices and lessons learned from organizational  transformation show that organizations should set implementation goals  and a timeline to build momentum and show progress from day one. We are continuing to assess the issues discussed in this  statement and as we finalize our work for issuance early next year, we  will consider making recommendations, as appropriate. I  would be happy to answer any questions at this time.
Why GAO Did This Study

VA must give contracting preferences to service-disabled and other veteran-owned small businesses and verify the ownership and control of firms seeking such preferences. GAO found in 2013 ( GAO-13-95 ) that VA faced challenges in verifying firms on a timely and consistent basis, developing and implementing long-term strategic plans, and enhancing information technology infrastructure. This testimony discusses preliminary observations on (1) VA's progress in establishing a timely and consistent verification program and improving communication with veterans, and (2) the steps VA has taken to identify and address verification program challenges and long-term goals.
This statement is based on GAO's ongoing review of VA's verification program. GAO reviewed VA's verification procedures and strategic plan, reviewed a random sample of 96 verification applications, and interviewed VA officials, and representatives from two veterans' organizations, and four verification assistance counselors.

What GAO Found

Based on GAO's preliminary observations, the Department of Veterans Affairs (VA) has made significant improvements to its verification process and communication with veterans since GAO's 2013 report. VA reported it reduced its average application processing times by more than 50 percent—from 85 days in 2012 to 41 in 2015. GAO reviewed a randomly selected sample of verification applications and found that VA followed its procedures for reviewing applications. VA continued to refine its quality management by developing written work instructions for every part of the verification process, and implemented an internal audit process. As of September 2015, VA had taken action on and closed 364 of 379 (96 percent) of internal audit recommendations. The agency also conducted post-verification site visits to 606 firms in fiscal year 2015 to check the accuracy of verification decisions and help ensure continued compliance with program regulations. Since 2013, VA has made several changes to improve veterans' experiences with the program. For example, VA revised procedures to allow veterans additional opportunities to withdraw their applications or submit additional information and has partnered with federally supported assistance centers to provide assistance to veterans applying for verification. Correspondingly, the percentage of firms that received denials has dropped from 66 percent in 2012 to 5 percent in 2015. Veterans' organizations and verification counselors with whom GAO spoke noted improvements in VA's communications and interactions with veterans, although most verification counselors we spoke with suggested the program's website and letters to veterans could be clearer.
VA has multiple efforts underway to make its verification program more cost-effective and veteran-friendly, but GAO's preliminary results indicate that it lacks a comprehensive operational plan to guide its efforts. For instance, VA intends to restructure part of its verification process and in August 2015, began a pilot that gives veterans one point of contact (a case manager, who would be aware of the specifics of the application throughout the verification process). VA plans to fully transition to this new process by April 2016. VA also plans to change the program's organizational structure and hire a director for the program, which has had three different directors, the last two of which have been acting directors, since 2011. Finally, VA plans to replace the program's outdated case management system, but has faced delays due to contractor performance issues. Efforts are under way to develop and evaluate a pilot system by January 2016 and fully transition to the new case management system by September 2016. VA has developed a high-level operating plan that identified objectives for the office overseeing the verification program—the Office of Small and Disadvantaged Business Utilization (OSDBU). But the plan does not include an integrated schedule with specific actions and milestone dates for achieving the multiple program changes under way or discuss how these various efforts might be coordinated within OSDBU. GAO's work on organizational transformations states that organizations should set implementation goals and a timeline to show progress. Such a plan is vital to managing multiple efforts to completion and achieving long-term program objectives, particularly when senior-level staffing for the verification program has lacked continuity. GAO continues to assess these issues and will report its results early next year.

What GAO Recommends

GAO is not making recommendations at this time; as it finalizes its work for issuance early next year, it will consider making recommendations, as appropriate. GAO obtained comments from VA and incorporated them as appropriate.