Senator Pushes for Expedited Reform of Controversial VA Fiduciary Program

by U.S. Medicine

January 11, 2013

By Sandra Basu

WASHINGTON — The VA has been under pressure by Congress to reform management of its policy of appointing fiduciaries to oversee care for veterans unable to do it themselves.

Now, a New York senator is demanding that the VA move forward more quickly on finalizing and implementing new regulations for the program, which has been criticized for not having adequate controls to prevent fraud and theft.

“While the VA has worked on a draft proposed rule-making to reform existing fiduciary policy, I understand that it has yet to be discharged to the Office of Management and Budget,” Sen. Charles Schumer (D-NY) wrote in a letter to VA Secretary Eric Shinseki. “I would urge VA and OMB to discharge this rulemaking and the VA to expeditiously finalize strong fiduciary regulations. It is imperative that final fiduciary regulation include robust reforms to protect the most vulnerable members of our veteran community.”

A VA spokesperson could not provide a timeline of when the new regulations would be released but told U.S. Medicine in a written statement that the department has received Schumer’s letter and “is preparing a formal response.”

“The Department of Veterans Affairs works diligently to protect veterans and has already made significant changes to the Fiduciary Program,” the spokesperson said.

$3.3 Billion in Funding

In 2012, VA reported it was overseeing approximately 95,000 fiduciaries who provide services to more than 121,000 beneficiaries, with cumulative VA funding exceeding $3.3 billion.

Fiduciaries are responsible for assuring that the funds are used to meet veterans’ daily needs, such as clothing, medical expenses and food. The scope of authority for fiduciaries is governed by VA rules that prohibit, for example, borrowing or loaning the money provided for care. Fiduciaries also must follow VA reporting requirements in keeping receipts and complete record and agree to notify the VA if a beneficiary’s condition improves to the point where they no longer need to be part of the program.

Reports from the U.S. Government Accountability Office (GAO), as well as beneficiary groups and lawmakers, have called for reforms to the fiduciary system.

Last June, a Hearst Newspapers investigation revealed that “gambling addicts, psychiatric cases and convicted criminals are among the thieves who have been handed control of disabled veterans’ finances” by the VA, according to their reports.

Noting that VA has removed 467 fiduciaries for misuse of funds in the past six years, the newspaper investigative report pointed out that “or decades, theft and fraud have plagued the fiduciary program, in which the VA appoints a family member or a stranger to manage money for veterans the government considers incapacitated. The magnitude and pace of those thefts has increased, despite VA promises of reform. Three of the largest scams — ranging from about $900,000 to $2 million — each persisted 10 years or more before being discovered.”

When asked about the media reports at a congressional hearing this summer, VA Director of Pension and Fiduciary Service David McLenachen defended efforts to reform the system and pointed out that the fiduciary misuse rate during FY 2011 was less than one-half of 1%.

“I disagree with the view that the fiduciary program is plagued with fraud,” he told a House Committee on Veterans’ Affairs subcommittee. “I am aware of those articles, and it is our position that any misuse of VA benefits is unacceptable, that is our prevention. We work hard to prevent that type of misuse. That is why we do 30,000 accounting audits every year and 70,000 or more field examinations every year.”

Fiduciary Reform

A VA spokesperson said in a written statement that the agency has taken steps to improve the program.

“Recognizing the need to protect the nation’s most vulnerable veterans who due to injury, disease or the infirmities of age are unable to manage their own financial affairs, the Secretary of Veterans Affairs authorized a reorganization within the Veterans Benefits Administration to create a new Pension and Fiduciary Service, which was fully staffed in January 2012,” according to that statement. “In this new Service, we are dedicated to working with our almost 700 field fiduciary personnel to improve VA’s fiduciary program, under which we monitor the well-being of this special group of beneficiaries and appoint and conduct oversight of fiduciaries who manage their VA benefits.”

For his part, Schumer said he would like to see changes made to the system as soon as possible. A written statement said his office has handled more than 100 cases in which VA beneficiaries experience “significant red tape” in the assignment of a VA fiduciary.

According to the senator’s office, “in an effort to manage an elderly parent’s affairs, sons and daughters have reported running into serious frustrations and roadblocks in being assigned as a fiduciary. Until a VA fiduciary is assigned, the beneficiary is technically expected to apply for benefits on their own.”

Schumer also pointed to an example in Syracuse, NY, of a woman who stole tens of thousands of dollars from two elderly and disabled veterans and another case in Buffalo in which a daughter stole thousands of dollars from her father.

“With more and more veterans returning home from Iraq and Afghanistan, there will only be more individuals in need of reliable financial protection, and the VA and then the OMB must finalize these new regulations and begin enactment immediately,” he added.

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