Inspector General: VA knew it owed disabled vets $190 million ... and did nothing about it

Don’t ask, don’t pay? The Veterans Administration collected home loan fees from disabled veterans for years without informing them that those fees could be refunded. A new Inspector General report calculates that the VA may owe those vets nearly $200 million, that senior management knew it, and that they furthermore never bothered to pay it back. Their excuse? The vets never asked for refunds:

More than 50,000 disabled veterans could be owed as much as $190 million in refunds from the Department of Veterans Affairs for home loan fees they were wrongly charged or no longer owe, an investigation has found.

Senior leaders knew about the problem for years but didn’t ensure veterans received what they are due, the investigation by the VA inspector general found. …

VA loan managers, who knew about outstanding debts to veterans since at least 2014, told investigators that they had been focused on other priorities, including processing high volumes of applications.

At least it’s not a health-care story, and no one died. That’s a step up for the VA. Otherwise, this looks like the same classic bureaucratic Catch-22 for which this agency has become notorious. They didn’t take actions on refunds to disabled vets because they never asked for them, and they didn’t ask for them because the VA never told them they were eligible for them. That’s neat work.

The Washington Post reports that the inspector general’s office wasn’t impressed by it, nor of their post-exposure rationalizations:

The watchdog report also said the Veterans Benefits Administration knew since 2014 that tens of thousands of veterans may have been wrongfully charged the funding fee.

“OIG finds it troubling that senior VBA management was aware that thousands of veterans were potentially owed more than $150 million yet did not take adequate actions to ensure refunds were issued,” the report says.

One has to wonder whether these unpaid funds played any role in bonuses for VA executives. Recall that the wait-list scandal that did cost some veterans their lives was incentivized by a bonus structure based in part on access but didn’t include any real controls on how that data was collected. Having this much illicit cash in the kitty without any plans to return it should raise suspicions about the motives for that recalcitrance.

The OIG report doesn’t address motive, but the executive summary makes the failure’s “disturbing” nature rather plain:

In October 2014, St. Paul, Minnesota, RLC management provided Loan Guaranty Service management with an analysis indicating that approximately 48,000 veterans may be due funding fee refunds totaling approximately $151 million.3 The analysis also estimated it would take four to eight staff one year to refund the inappropriate charges they identified. In May 2016, the former director of Loan Guaranty Service documented a need to address the issue of inappropriate funding fee charges and acknowledged over $150 million in refunds may be due. 4 Disturbingly, as of January 2019, Loan Guaranty Service management had not taken action to issue refunds to these exempt veterans.

Five years after being warned of the problem — a warning that came right in the middle of the exposure of the VA wait-list scandal — the VA still had done nothing to deal with the issue. “Troubling” is one adjective that applies. “Suspicious” should be another, and one that Congress should apply to take this up directly.