Audit of Veterans Benefits Administration’s Loan Guaranty Program Risk Management

The Office of Inspector General (OIG) conducted a review to evaluate the effectiveness of risk management within the Veterans Benefits Administration’s (VBA) Loan Guaranty (LGY) Program. The objectives of the review were to determine if to determine if LGY Service adequately identified, analyzed, and reduced risks that could prevent the effective achievement of the LGY Program’s mission to assist veterans in purchasing and retaining homes. LGY Service needed to improve the risk assessment controls relating to risk identification, risk analysis, and risk management. LGY Service did not perform comprehensive risk assessments because VBA had not established policies and procedures requiring LGY Service to perform a comprehensive risk assessment. Instead, LGY Service relied upon a complement of external and internal risk analysis reviews that were not coordinated or sufficiently comprehensive to fully identify and manage all potentially significant risks. In addition, LGY Service needed to improve the monitoring of a control implemented to mitigate the risk of losses on the sale of foreclosed properties that VA acquires from lenders. Because LGY Service was not monitoring and adjusting the net value percentage (NVP), which LGY Service based on costs that were 9 years old, the control had become ineffective. Without a comprehensive approach to risk management, threats to LGY Service’s ability to achieve the program goals and objectives have the potential to go undetected until significant problems arise. OIG made two recommendations to improve the management of LGY Service program risk to provide a systematic, organized, and structured analysis of operations by performing sustained comprehensive assessments of the risks that could limit VBA’s ability to improve veterans’ purchase and retention of homes. The Under Secretary for Benefits concurred with the report’s conclusion and recommendations. We consider the planned actions provided by the Under Secretary acceptable and will follow up on their implementation.