Financial Controls and Payments Related to VA-Affiliated Nonprofit Corporations: Northern California Institute for Research and Education

The VA Office of Inspector General (OIG) evaluated the merits of a May 2018 complaint alleging the former executive director of the Northern California Institute for Research and Education, a VA-affiliated nonprofit corporation, spent about $740,000 on a project that was not reviewed by its board of directors. The OIG also examined whether San Francisco VA Medical Center (VAMC) officials had adequate controls and sufficient oversight of VA payments made to the nonprofit corporation. The audit team found the board was aware of project costs to expand or relocate some or all of the San Francisco VAMC research and clinical activities. As a result, the OIG did not substantiate the allegation. However, the nonprofit’s board did not ensure its activities and expenditures complied with restrictions in federal law and Veterans Health Administration policy that limited its purpose to supporting VA-approved research and education. Spending funds on the relocation of the San Francisco VAMC, including clinical services, went beyond facilitating research and education. The medical center made an estimated $11.7 million in improper payments to the nonprofit from January 2014 through April 2018 due to lack of required documentation. The OIG found the medical center’s internal controls and oversight of payments to the nonprofit did not meet requirements. As a result, medical center leaders had no assurance invoice amounts were valid or accurate. Continued lack of compliance with VA internal controls puts taxpayer funds at risk. The OIG recommended the San Francisco VA Healthcare System director establish procedures to ensure Research and Development Budget Office employees review invoices to confirm services were performed or goods were received before approving payment, and establish procedures to make certain the Research and Development Budget Office supervisor periodically reviews invoices authorized for payment by subordinates as required by VA policies.