Audit of VBA's Compensation and Pension Benefit Payments to Incarcerated Veterans

We conducted this audit to determine whether the Veterans Benefits Administration (VBA) was adjusting compensation and pension (C&P) benefits payments timely for veterans incarcerated in Federal, state, and local penal institutions. Federal law requires VBA to reduce C&P benefits for veterans incarcerated for more than 60 days in a Federal, state, or local penal institution. VA Regional Office (VARO) and Pension Management Center (PMC) staff did not consistently take action to adjust C&P benefits for veterans incarcerated in Federal penal institutions. Specifically, based on Federal incarceration data ranging from May 2008 through June 2015, VBA did not adjust veterans’ C&P benefits, as required, in an estimated 1,300 of 2,500 cases (53 percent), which resulted in improper payments totaling approximately $59.9 million. Without improvements, we estimated VBA could make additional improper benefits payments totaling about $41.8 million for Federal incarceration cases from fiscal year (FY) 2016 through FY 2020. VARO and PMC staff also did not take consistent and timely action to adjust C&P benefits for veterans incarcerated in state and local penal institutions. Based on incarceration notifications received from March 2013 to August 2014—the most current data available at the time of our audit—VBA did not effectively adjust veterans’ C&P benefits in an estimated 3,800 of 21,600 state and local incarceration cases (18 percent), which resulted in significant delays and improper payments totaling approximately $44.2 million. Without improvements, we estimated VBA could make additional improper benefits payments totaling about $162 million for state and local incarceration cases from FY 2016 through FY 2020. In total, we estimated improper benefit payments of about $307.9 million. In general, VBA did not place priority on processing incarceration adjustments because VBA did not consider these non rating claims to be part of the disability claims backlog. Both VBA Central Office and VARO staff consistently reported that incarceration adjustments were not a high priority. We recommended the Acting Under Secretary for Benefits increase the priority of VBA’s incarceration adjustment workload. The Acting Under Secretary for Benefits concurred with our recommendations. Management’s planned actions were responsive and we will follow up as required.