Veteran Affairs Secretary Robert A. McDonald speaks to reporters outside VA Headquarters in Washington, Feb. 24, 2015.

Veteran Affairs Secretary Robert A. McDonald speaks to reporters outside VA Headquarters in Washington, Feb. 24, 2015. Pablo Martinez Monsivais/AP

Whistleblower Says VA Spent More Than $6 Billion Unlawfully

Secretary McDonald, who apparently sat on a memo about the problem, says the whistleblower should fix it himself.

The Veterans Affairs Department unlawfully spent billions of dollars on procuring medical devices and supplies in recent years, according to a high-ranking whistleblower, leaving the department vulnerable to waste and putting veterans in harm’s way.

Jan Frye, VA’s deputy assistant secretary in the Office of Acquisitions and Logistics, first brought the allegations to light within VA in March with a 35-page memorandum to Secretary Bob McDonald. After not hearing back in the seven weeks since he sent the letter, Frye went public during a congressional hearing Thursday.

Lawmakers on the House Veterans’ Affairs Subcommittee on Oversight and Investigations expressed outrage that VA officials were going against federal laws by buying supplies on government purchase cards without first entering into contracts. Without contracts, Frye testified, the government is left with little recourse if veterans are harmed by purchased products or services. Additionally, by declining to enter into federally mandated contracts, officials removed levels of review to authorize spending and ensure proper execution and ratification of orders. VA officials also wasted money by purchasing goods “off the shelf” rather than through a competitive process.

Federal law requires any purchase of more than $3,000 paid for on a VA card to be made under an existing contract. VA routinely ignored that threshold, Frye said, spending, for example, billions of dollars on prosthetics purchased on the open market. Linda Halliday, from the VA’s inspector general’s office, added VA acquisitions employees split up purchases so each card would be charged less than $3,000, though total purchases far exceeded that amount.

VA maintains more than 25,000 purchase cards in total, with 23,000 employee cardholders.

Edward Murray, VA’s acting assistant secretary for management and interim chief financial officer, appeared ambushed by the report at the hearing, and told committee members he first heard of Frye’s letter Thursday morning. He was repeatedly unable to answer panelists’ questions, causing frustration among the lawmakers. He added, however, VA has implemented the IG’s recommendations to create better controls of the purchasing officers warranted to spend more than $3,000. Frye applauded that progress, but noted it only solved half the problem, as even those authorized to spend more than the contract-requiring threshold were breaking the rules.

(See also: VA to Congress: It’s Still Too Hard to Fire Bad Employees)

Murray said he had faith McDonald was trying to change the culture of the department, while lawmakers said they wanted to hear from the secretary directly.

McDonald told Government Executive at an event in Washington Thursday he was aware of the problems within the department’s acquisition system. He characterized Frye’s memo as “just showing what he needs to improve, so I’m excited about him improving that.”

The secretary acknowledged that waste within the department’s procurement was a long-standing problem, but declined to take ownership of it.

“It has been, it has been,” he said of the ongoing nature of the issue. “But it’s Jan’s responsibility to fix it,” he said, adding that the department has “a lot of work to do.”

Frye told Government Executive after the hearing he respects McDonald greatly, but he found his comments disconcerting.

“After sitting here and doing nothing for years, I’m going to fix it this afternoon,” Frye said sarcastically.

Frye, himself a disabled veteran, said he hates the spotlight and did not want to become a whistleblower, but felt compelled to do it out of respect to the veterans. He added that since he has brought the issue to light, he has been “scorned” by the agency and become a “persona non grata.”

The subcommittee’s ranking member, Rep. Beto O’Rourke, D-Texas, said VA’s lack of procurement oversight and whistleblower retaliation represented the latest in a “litany of unaccountability.” Murray told the committee two employees had been fired for their involvement in purchase card misuse, but could not point to other examples of discipline.

Full committee Chairman Rep. Jeff Miller, R-Fla., said his patience with VA has expired.

“I hope VA is embarrassed, ashamed,” Miller said. “I’m tired of hearing the same thing over and over and over again. Nothing is changing regardless of what leadership is telling this committee. Nothing is changing.”

Frye said he was confident VA was unlawfully spending at least $5 billion annually on procurement, based on its yearly purchases of medical devices and services, as well as pharmaceuticals. The practice is still ongoing, Frye added, and a full accounting of the abuse cannot be fully known until a more thorough report is conducted. He and the IG’s Halliday both said they could not point to a specific example of veterans being harmed by the illegal purchasing, but subcommittee Chairman Rep. Mike Coffman, R-Colo., said he had evidence VA bought contaminated drugs and tissue on the open market.

A VA spokeswoman told The Washington Post, which first reported Frye’s memo, that “legal uncertainties” have arisen since the recent growth in government-sponsored care provided outside the department.

Frye also tackled the issue of accountability in his memo. He said senior department leaders that “debased” laws, “willfully violated” public trust and oversaw “gross mismanagement” should be held responsible.

“How can we hold front-line subordinates accountable if senior leaders are not held accountable for dereliction or malfeasance?” Frye asked the secretary in his memo. He also wrote that he has worked in purchase card offices in three other federal organizations, and “I can assure you malfeasance such as this would never have been tolerated in those agencies.”

He added senior VA leaders have intentionally misled members of Congress, or tried to hide the full truth.

“In short, obfuscation’s our game,” Frye testified on Thursday.

Kellie Lunney contributed to this report. 

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