A Performance Audit
An Audit Report on Selected Texas State Veterans Homes Contract Functions at the General Land Office and Veterans’ Land Board
The General Land Office and Veterans’ Land Board (Agency) has established monitoring processes for its contracts with the operators that manage its nine Texas State Veterans Homes (Veterans Homes). The Agency’s monitoring activities were designed to help ensure that its operators provide services in accordance with the health and safety requirements of its contracts. However, the Agency did not consistently document when contract monitoring activities were performed, including whether the operator took corrective actions when that monitoring identified performance and noncompliance issues.
From September 2019 through January 2021, the Agency paid $114.6 million for management and operations services for its nine Veterans Homes. The Agency accurately processed payments for its Veterans Homes contracts with operators. However, it did not consistently ensure that its operators’ invoices received all required approvals prior to payment. For two of its Veterans Homes, the Agency extended by five years the contracts for the emergency purchases of management and operations services, instead of competitively re-procuring new contracts. The emergency purchases were procured in December 2014, with the contracts initially set to expire on September 30, 2017. However, the Agency amended the contracts for the emergency purchases three times; as a result, those contracts are set to expire on August 31, 2022.
The Agency Monitors the Contract Compliance and Performance of Its Veterans Homes’ Operators; However, It Should Improve How the Veterans Homes Program Documents Its Contract Monitoring Activities
The Agency’s contract oversight processes were designed to help ensure that the services its operators provide to its nine Veterans Homes are delivered in accordance with the health and safety requirements of its contracts.
However, the Agency’s Veterans Homes program did not consistently document certain contract monitoring activities of the operators that manage its Veterans Homes. Auditors reviewed samples of the Veterans Homes program’s records for contract monitoring activities conducted from September 2019 through January 2021 for two of the nine Veterans Homes - the Frank M. Tejeda (Floresville) Veterans Home and the Alfredo Gonzalez (McAllen) Veterans Home. While those records showed that the Veterans Homes program performed monthly reviews and approvals of census reports as required, this monitoring was inconsistent with the other contract monitoring activities. The Veterans Homes program asserted that performance and noncompliance issues identified in its contract monitoring tool are discussed with its operators on a quarterly basis; however, it does not maintain documentation of those meetings.
The Agency Had Adequate Payment Processes, But It Should Ensure That Purchase Orders and Invoices Are Consistently Reviewed and Approved Prior to Payment
The Agency’s payment process had adequate controls that ensured that its monthly payments to the operators of its Veterans Homes were:
- Accurate, reasonable, and supported.
- Compliant with not-to-exceed contract limitations.
- Identified and corrected duplicate payments when they occurred due to double billings.
From September 1, 2019 through January 31, 2021, the Agency paid the operators of its nine Veterans Homes a total of $114.6 million. Auditors tested a sample of those payments and determined that while the Agency verified the accuracy of operators’ billings amounts, it should improve its controls to ensure that appropriate management personnel consistently reviews and approves all documentation supporting the billing invoices.
The Veterans Homes Program Processed Payments for Pharmacy Services as Required; However, It Should Ensure That the Pharmacy Database Uses Reliable Information for Approving and Denying Transactions for Payment
The Veterans Homes program’s payment processes had adequate controls to verify the appropriateness and accuracy of its payments for pharmacy services. From September 2019 through January 2021, the Agency paid $5.6 million for the pharmacy services provided to its nine Veterans Homes.
Additionally, the Veterans Homes program’s pharmacy database was programmed to enforce the payment approval and payment denial requirements described in its pharmacy services contract for the medications that may be prescribed to the residents of the Veterans Homes. However, the effectiveness of that design is dependent on the reliability of the medication list that the pharmacy database uses to match medications billed to the Veterans Homes program to the payment requirements for medications defined in the pharmacy database. The Veterans Homes program currently relies on a medication list from its pharmacy services provider.
By relying on a medication list from its pharmacy services provider instead of an independent data source, there is an increased risk that the medication list may be unreliable, which could result in the pharmacy database improperly approving or denying a medication for payment.
The Agency Extended Its Contracts for Emergency Purchases Rather Than Procuring New Contracts, and It Did Not Comply With Certain Procurement Requirements
For each of the two contracts for emergency purchases tested, the Agency amended the contract term three times to extend the emergency purchases instead of competitively procuring new contracts. The Agency made the original emergency purchases to replace an operator for the Big Spring and McAllen Veterans Homes.
Those emergency purchases had original contract terms of approximately three years (from December 2014 through September 2017). As a result of the three amendments, the expiration date for the two emergency purchases tested was extended five years to August 31, 2022.
The Agency could not provide documentation showing that it performed certain required procurement activities that help provide transparency to emergency purchase awards. Specifically:
- The Agency did not develop a solicitation for its emergency purchases of management and operation services needed for the Big Spring and McAllen Veterans Homes.
- The Agency could not provide completed nondisclosure agreements and nepotism disclosure forms for staff involved with the procurement of emergency purchases.
- The Agency did not obtain a Historically Underutilized Business (HUB) subcontracting plan during the procurement process for the emergency purchases.
The Agency did not post its contracts for the two emergency purchases to its website as required until January 2021.
The Agency performed certain required procurement and contract formation requirements for its pharmacy services contract. However, the Agency should strengthen its processes to ensure that it obtains all required disclosures and affirmations.
The Agency’s contract formation processes helped to ensure that the contracts for the emergency purchases and pharmacy services tested received the required Agency management reviews and approvals prior to execution. Those processes included legal counsel reviews before contract execution, and the final approval and execution of each contract by the deputy land commissioner/chief clerk. In addition, the Agency mostly complied with requirements for reporting vendor performance for those contracts to the Comptroller’s Office at least once a year as required. However, the Agency did not consistently obtain approval from the members of the Veterans’ Land Board (Board), or ensure the Board received required contract management training. The Agency also did not report the contracts and certain contract amendments to the Legislative Budget Board within required time frames.
The Office and Board Should Enhance Its Security Controls Over Selected Information Systems That Support Its Veterans Homes Program
The Agency adopted adequate information security policies, procedures, and standards designed to protect the privacy and confidentiality of data managed by its Veterans Homes program. However, it should strengthen security controls over certain automated systems used to manage the following:
- Veterans’ health records that each operator of a Veterans Home is required to maintain.
- Access to records involving the Veterans Homes program, including protected health information.
Graphics, Media, Supporting documents