Report 2002-120 Summary - June 2003

California Veterans Board: Without a Clear Understanding of the Extent of Its Authority, the Board Has Not Created Sufficient Policies Nor Provided Effective Oversight to the Department of Veterans Affairs

HIGHLIGHTS

Our review of the California Veterans Board (board) revealed that:

Although the department has implemented eight of the 14 recommendations that were reviewed from our previous audits, it has not given sufficient attention to a key recommendation regarding the long-term viability of the Cal-Vet program.

RESULTS IN BRIEF

Established in 1921, the Department of Veterans Affairs (department) provides the State's veterans with low-cost home and farm loans, assistance in obtaining veterans' benefits, and various levels of care at three residential facilities. To set policy for the department and to offer veterans a forum to appeal department decisions denying services, the Legislature established the California Veterans Board (board) in 1946. State statutes give it broad policy-making authority over the department. Nonetheless, the board of seven volunteers has established itself as an ineffective policy-maker, unable to strengthen weaknesses in the department's administration of veterans' programs that the Bureau of State Audits (bureau) has reported over the past three years. As an example of the board's inability to effect strong policy, only half of its 32 policies provide direction for departmental operations. Further, although the bureau and other oversight agencies have identified a number of problems within the department, the board has no clearly defined policies to guide and monitor the department's corrective actions. The board also has not used the services of the inspector general for veterans affairs (inspector general) to review the department's operations in areas where board policy could improve the department's delivery of services to veterans.

Despite the board's important responsibilities for making policy and ruling on veterans' appeals of services that the department has denied, the board does not have an independent counsel to minimize the legal risks of its actions in these two areas. Instead, the board depends on the department's legal staff for advice on laws governing veterans' care—laws that the board must carefully consider when deciding on policy that affects the services delivered to veterans. The department's legal staff are likely well versed in these laws. However, because the board's policies govern the department, it is inappropriate for the department's legal staff to advise the board on policies under consideration. Further, the board's rulings on veterans' appeals should be based on independent and fair considerations of the department's actions and the veterans' rights to services. Currently, the board must rely on the department's legal staff for advice on appeals and to preside over appeal hearings—practices that introduce questions of fairness and impartiality on appeal decisions. In addition, the lack of independent legal counsel has delayed the board's current policy revisions. Because the board has not adopted a policy demonstrating the need and desire to have independent legal counsel, it has been unable to obtain these services.

The board's current appeal process also needs improvement. An informal process loosely guides board members through appeal reviews and offers little assurance that veterans' appeals are handled consistently and appropriately. Further, the board does not have a clear understanding of the type of appeal procedures it should follow, which could result in the board conducting a more formal hearing on an appeal than is warranted or not giving veterans an adequate degree of protection.

Another hindrance to the board's effectiveness is that over the past several years, it has rarely comprised the seven members authorized by the Military and Veterans Code. Five board members must have expertise in a particular area required by law. Without these expert members, the board might be limited in its understanding of departmental issues and veterans' appeals. Additionally, its reduced membership could prevent the board from meeting the quorum of four required by board policy to conduct business.

Contributing to the board's deficiencies as a policy-making and oversight body is the fact that members receive no formal training regarding the laws and regulations controlling veterans' affairs; board policies, duties, and authority, including how to conduct appeals; departmental operations; state laws regarding open meetings; and state laws regarding the privacy of medical information. Insufficient training may have caused the board to violate state open-meeting laws and possibly resulted in two instances of the board discussing veterans' confidential medical records in public board sessions.

The board's weak policy-making deprives a problem-prone department of needed assistance in improving on weaknesses documented in reviews by the bureau and other oversight agencies. Our follow-up on recommendations we made to the department in two recent audits revealed that the department has implemented eight of the 14 recommendations we could reasonably expect the board to address. However, it has not given sufficient attention to a key recommendation regarding the long-term viability of the Cal-Vet program, the department's loan program that helps veterans purchase farms or homes. As mentioned in our previous audits, unless there is a change in federal tax laws, fewer and fewer veterans will benefit from the Cal-Vet program because federal tax restrictions have limited eligibility for loans backed by the bonds that supply the majority of the program's funding. We also estimated that the number of veterans eligible for these loans would shrink by 90 percent by 2010. Despite two previous unsuccessful efforts, the department is attempting to change federal tax laws to make more veterans eligible for funds for the Cal-Vet program. However, the department has not performed sufficient contingency planning for the potential reduction in the Cal-Vet program's funding should its efforts to change federal tax laws fail again. In response to our inquiries, the department created a high-level funding plan that summarized the options it might consider given the declining number of eligible veterans for the Cal-Vet program. However, the plan does not contain enough detail to sufficiently prepare the department for the potential loss of its largest funding source for the Cal-Vet program.

RECOMMENDATIONS

The board should make the following changes to ensure that it is an effective policy-maker as envisioned by the Legislature:

To improve its ability to independently make decisions on policies and appeals, and to reduce the legal risk created by its present practices, the board should establish a policy to obtain the services of an independent counsel to assist with its policy-making and appeal responsibilities. To consistently and fairly review veterans' appeals of services that the department has denied, the board should create a policy establishing formal written procedures for conducting appeals.

To ensure that every veteran's appeal is heard in the proper forum, the board should acquire the expertise to determine the appropriate type of hearing for each appeal. In addition, to avoid the appearance of bias in its appeal decisions, the board should discontinue relying on the department's attorneys for legal assistance and having the department's chief counsel preside over formal hearings.

To assist the governor in promptly appointing members to fill both current and future board vacancies, the board should consider proactively identifying possible board members when vacancies occur.

To enable board members to perform their policy-making and oversight functions effectively, the board should provide training to its members on the laws and regulations controlling veterans' affairs; board policies, duties, and authority, including how to conduct appeals; departmental operations; state laws regarding open meetings; and state laws regarding the privacy of medical information.

To ensure effective and efficient operations, the department should continue to address the recommendations of our prior audits, especially the recommendations regarding the long-term viability of the Cal-Vet program.

AGENCY COMMENTS

The board agrees with our recommendations and provided the actions that it plans to take. The department disagrees with our recommendation that the board obtain independent legal counsel, but generally concurs with the status we provide of the department's actions to implement certain recommendations from two of our previous audits.