Audit of VHA and VBA Controls Over the Toxic Exposures Fund

The VA Office of Inspector General (OIG) conducted this audit to determine whether VHA and VBA had effective controls in place to ensure proper use of the Cost of War Toxic Exposures Fund, established under the PACT Act.

From fiscal years (FY) 2022 through 2025, VHA and VBA spent about $51.7 billion from the fund to deliver health care and benefits to veterans exposed to environmental hazards during military service. Congress appropriated an additional $52.7 billion for FY 2026. The OIG analyzed financial transactions from October 2024 through September 2025, reviewed applicable policies and regulations, and interviewed VA officials. Because VHA and VBA developed different approaches to managing allocations from the fund, the OIG assessed different aspects of the two administrations’ processes.

The team found that VHA developed methodologies for estimating, tracking, and reconciling fund expenditures in collaboration with the Office of Management and Budget. However, VHA could strengthen monitoring of expenditure transfers. During the audit, several miscoded transactions—totaling about $371,000—were identified and corrected.

Meanwhile, VBA only developed an estimation and tracking methodology, which did not support reconciliation of costs to actual PACT Act–related workload. System limitations and leadership turnover contributed to delays in developing procedures and documenting roles and responsibilities.

During the audit, VA realigned financial supervision functions under the assistant secretary for management, who also serves as chief financial officer. While the effects of this reorganization remain to be seen, the OIG’s findings can help strengthen stewardship of taxpayer money.

The OIG issued four recommendations to improve internal controls and ensure expenditures align with statutory authority. As a result of the report, VA has updated the Toxic Exposures Fund financial policy to add standard operating procedures for budget execution. VA leaders also committed to working with VBA to develop a feasible reconciliation process.