Audit of Veterans Health Administration's Undelivered Orders

The audit objective was to determine if VHA had effective controls for ensuring undelivered order balances represented valid obligations. As of December 31, 2008, VHA had about 83,000 undelivered orders valued at approximately $6.5 billion. This audit examined whether Veterans Health Administration (VHA) had large invalid undelivered order balances and what improvements VHA could make to ensure the timely de-obligation and better use of funds. Internal controls to identify invalid undelivered orders need improvement. We estimate that approximately $276 million over the next 5 years could be put to better use if invalid orders are identified in a timely manner and funds de-obligated. In addition, Fiscal Service staff did not conduct follow-up on centrally funded construction orders because they are administered and managed by the Office of Acquisition, Logistics, and Construction (OAL&C). They did not believe it was their responsibility to follow-up on these orders. We identified approximately 200 centrally funded construction orders totaling approximately $838 million that could not receive adequate monthly follow-up actions. We recommended that the Acting Under Secretary for Health establish procedures to ensure proper follow-up and reconciliation of undelivered orders and ensure that all undelivered orders have end dates to allow for follow-up and reconciliation. The Acting Under Secretary for Health agreed with our findings and recommendations and plans to complete all corrective actions by March 2010. We consider these planned actions acceptable, and will follow up on their implementation.