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Is The VA Committing Fraud? Official Says No, Blames ‘Improper Accounting’

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Jonah Bennett Contributor

Is the Department of Veterans Affairs committing fraud? A senior official on Tuesday denied the claim and stated that entering in false data to achieve a high small business scorecard rating is more an issue of improper accounting.

A hearing at the House Veterans’ Affairs Subcommittee on Oversight and Investigations on Tuesday continued to explore allegations that the VA blatantly ignores federal contracting laws in procuring medical supplies, working off testimony from whistleblower and deputy assistant secretary for acquisition and logistics Jan R. Frye.

Last month, Frye blew the acquisition scandal wide open with a letter to VA Secretary Robert McDonald stating that employees regularly used purchase cards, rather than federally mandated contracts, to acquire billions of dollars of medical equipment. He finally decided to make the scandal a public affair after he attempted to rewrite internal controls last year to prevent purchase cards from spiraling out of control. Veterans Health Administration (VHA) rejected his efforts.

“Using a convoluted ruse, we buy products off a “shopping list” while throwing Federal acquisition laws to the wind,” Frye testified.

“Our illegal behavior allows us to avoid set asides, intentionally fencing these purchases from small businesses,” Frye added. “In these acts, exceeding $1 billion annually, we are in violation of Federal procurement law, as well as the Small Business and the Veterans First Acts.”

Every year, VHA purchases more than $1 billion dollars worth of medical or surgical products. These purchases are supposed to take place via contracts, according to federal regulatory laws. Not using contracts deprives veteran-owned small businesses of much-needed revenue. By law, the Small Business Act mandates for 23 percent of federal contracting dollars to be allocated to small businesses.

Of that total, 3 percent should be directed to “Service-Disabled Veteran-Owned Small Businesses,” said A. John Shoraka, an associate administrator for Government Contracting Business Development at the U.S. Small Business Administration.

Frye came across the deception in 2014 and immediately tried to persuade VA leadership to fix the problem, only to be ignored time and again. Failure to use contracts resulted in lower spending totals, which officials then entered into the Federal Procurement Data System (FPDS). This in turn allowed VA to score an “A” on the Small Business Procurement Scorecard for the last several years. Frye stated that not only was the data false, but that officials knew it was incorrect.

“I’m not prepared to say this is an issue of fraud. This is an issue of improper accounting,” Thomas J. Leney, executive director of the Office of Small and Disadvantaged Business Utilization at the VA, said in response to accusations of fraud.

“But you went around the law!” Rep. Mike Coffman, chairman of the Subcommittee on Oversight and Investigations, shot back.

Frye emphasized that illegally skirting contract regulations only serves to “put veterans at risk.”

“If we buy products not on contract, terms and conditions aren’t included in that purchase. We’re hurting veterans with efficacy and safety issues, but we’re also hurting veterans because every dollar we waste is a dollar we can’t spend on the veterans of America who so richly deserve it.”

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