VA Revolving Funds: Are Veterans Being Shortchanged?

Behind the strength and success of our nation, stand our veterans. Yet what the Committee of Veterans Affairs seeks to answer, is how do we support them?

By Marcus Emmanuel January 18, 2024

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SUBJECT: VA Revolving Funds: Are Veterans Being Shortchanged?

DATE: January 17, 2024

OVERVIEW: The Subcommittee on Oversight and Investigations of the Committee on Veterans' Affairs convened to examine the Department of Veterans Affairs (VA) revolving funds, specifically the Franchise Fund and Supply Fund. The hearing focused on transparency, financial management, and whether the operation of these funds aligns with the VA’s mission to serve veterans. Key concerns included the funds' management practices, the use of retained earnings, and partnerships with other federal agencies like Immigration and Customs Enforcement (ICE).

HEARING RECORDING LINK: https://govinfo.gov

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Witnesses

  • Ms. Teresa Riffel, Deputy Assistant Secretary for Financial Management Business Transformation, VA 
  • Mr. Leroy Larkins, Executive Director, Office of Revolving Funds, VA 
  • Mr. Phillip Christy, Deputy Executive Director, Office of Acquisition, Logistics, and Construction, VA 
  • Ms. Julie Matta, Deputy General Counsel, U.S. Government Accountability Office (GAO)

Key Themes & Highlights

  • Republican Concerns:
    • Transparency in Financial Reporting: Criticized the lack of public disclosure regarding the Supply Fund's financial statements and enterprise-specific profits or losses. Questioned discrepancies in reported financial performance, including a $37 million loss in the Supply Fund that was characterized as a profit.
    • ICE Partnership: Raised concerns about the VA’s involvement in processing medical claims for ICE detainees, arguing it could detract from resources intended for veterans.
    • Oversight Deficiency: Highlighted the need for improved oversight to prevent potential misuse or inefficiencies in revolving funds.
  • Democratic Concerns:
    • Efficiencies from Shared Services: Emphasized that revolving funds reduce costs and increase efficiency, enabling the VA to reinvest in technology and mission-critical services.
    • Impact on Veterans: Defended the partnership with ICE as cost-effective and not detracting from VA services for veterans; while also praising the role of revolving funds in advancing programs like the Community Care initiative.
    • Accountability Measures: Pointed out the rigorous auditing and internal oversight mechanisms that ensure fiscal responsibility.
  • Witness Testimonies:
    • Ms. Teresa Riffel: Explained the operational structure and benefits of the Franchise and Supply Funds, including cost savings and enhanced services for veterans. Riffel also clarified that ICE reimburses the VA for claims processing services and that this work does not involve VA healthcare professionals or funding.
    • Mr. Leroy Larkins: Highlighted the importance of maintaining reserves to ensure operational stability and respond to unanticipated needs. Larkins also discussed workforce development programs, including training for veterans transitioning to careers in contracting.
    • Mr. Phillip Christy: Provided insights into the acquisition and logistics operations funded through the Supply Fund, emphasizing cost-effectiveness and adherence to federal guidelines.
    • Ms. Julie Matta: Addressed the legal and financial frameworks governing revolving funds, emphasizing their role in enhancing government efficiency while remaining subject to congressional oversight.
  • Contentious Points:
    • Republicans: Voiced skepticism over the VA’s ability to balance its commitments to veterans while supporting other federal agencies, arguing for stricter oversight and clearer financial reporting.
    • Democrats: Defended the funds as models of efficiency and innovation, asserting they do not compromise the VA’s mission to serve veterans.
  • Key Discussions:
    • ICE Agreement: Explored the scope of the VA’s agreement with ICE, including ancillary services like mailroom support and help desk operations. Republicans questioned whether this partnership could lead to veterans being deprioritized for care.
    • Financial Reserves: Examined the necessity and size of the funds’ reserves, with Republicans questioning whether the amounts held are excessive.
    • Transparency & Reporting: Addressed calls for greater transparency in the financial operations of revolving funds, including the public release of financial statements for the Supply Fund. 

In-Depth Notes

  • Chairwoman Jennifer Higgins (R-VA): Criticized the lack of transparency in the Supply Fund’s financial reporting and called for clearer oversight mechanisms to ensure accountability.
  • Ranking Member Frank J. Mrvan (D-IN): Praised the efficiency and cost savings achieved through the revolving funds, arguing they benefit both veterans and taxpayers.
  • Representative Matt Rosendale (R-MT): Focused on the ICE partnership, raising concerns about its potential to impact veterans' access to care and questioning the necessity of large reserves.
  • Representative Chris Pappas (D-NH): Highlighted the positive impact of the Community Care initiative and the VA’s training programs for law enforcement personnel.