VA Says Questionable Spending Was 'Improper Accounting,' Not Fraud

Department of Veterans Affairs

A senior Veterans Affairs Department official denied allegations on Tuesday that the agency committed fraud by making billions of dollars in purchases outside the federal rules or by making it appear to Congress like it was meeting its veteran-owned small business contracting mission.

Thomas J. Leney, executive director of the VA's Office of Small and Disadvantaged Business Utilization, conceded that the agency spent more than $3 billion in purchases outside the normal contracting process, but insisted that in most cases the buys were made to meet the needs of veteran patients.

He was responding to questioning from Rep. Mike Coffman, R-Colorado, who described the agency's purchases, failure to follow acquisition law and fudging the numbers on small business contracts as fraud.

"I am not prepared to say that this is an issue of fraud," Leney replied. "This is an issue of improper accounting."

"But you went around the law," Coffman said.

Lawmakers from the Small Business Committee's oversight panel joined the discussion because it is alleged the billions spent outside federal contracting laws meant loss of contracts that should have gone to veteran-owned and service disabled veteran-owned small businesses.

Leney told Congress that there is no way to know if or how veteran-owned small business might have been affected by the outside spending.

That view was essentially backed by John Shoraka, an associate administrator for government contracting with the Small Business Administration.

Shoraka said the SBA depends on data provided by the VA and has no way to determine what effect any agency spending outside the Federal Acquisition Rules had on veteran-owned small business.

The investigation into VA's unauthorized spending and alleged manipulated data on small business contracting goals comes on the heels of a series of scandals that has plagued the department in recent years. These include the deaths of veterans awaiting care, wait times on disability claims, questionable bonuses of senior officials, conferences at which employees accepted gifts from vendors and budget-busting cost overruns and delays on hospital construction.

The latest controversy emerged as part of a 35-page laundry list of allegations to VA Secretary Bob McDonald by one of the department's own employees, Jon Frye, deputy assistant secretary for acquisition and logistics.

Frye, who has received whistleblower status since he appeared before Congress last month, was again before lawmakers on Tuesday, where he once more insisted the VA has a leadership problem and refuses to own up to its mistakes and hold people accountable.

"Like substance abusers before the journey to recovery, we will not be cured until we admit we have a disease," he said.

Leney said VA has acknowledged it has problems and has been working to address them.

"No one is here trying to say we don't have a problem," he said. "The challenge is a medical center director has to follow many, many, many laws."

Every medical center director has included in his or her performance plan certain goals regarding small business contracts, Leney said.

"But I would be remiss if I tried to tell you that is the No. 1 priority for a medical center director, nor as a small business advocate within VA would I say it should be," he said. "Their priority is to make sure their patients are safe and well cared for."

But lawmakers made it clear that they would not be satisfied by his contention that most of the unauthorized purchases were likely made in good faith with the best interest of the veteran in mind.

Rep. Mike Bost, R-Illinois, said everyone in Congress wants the VA's focus to be on the veteran. "But that still doesn't make law suggestion. It's still law," he said.

Rep. Nydia Velázquez, D-New York, agreed.

"Mr. Leney, if Mr. Frye's allegations prove true, the VA will have deprived small business of billions ... in contracting dollars," she said. "So the issue here is not that you didn't account properly, the issue is that you didn't follow the law."

She added, "At some point, once this investigation is concluded, [others] will determine whether or not there was fraud, because you resist to call it what it is."

-- Bryant Jordan can be reached at bryant.jordan@military.com.

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