Chairwoman Kiggans Delivers Opening Remarks at Oversight Hearing on VA Revolving Funds

Hearing

"Good afternoon.

The subcommittee will come to order.

Thank you all for being here today for this oversight hearing on revolving funds at the Department of Veterans Affairs.

A revolving fund is essentially a business run by a federal agency under authority granted by Congress.

The revolving fund contains enterprises that provide services and collect fees.

Instead of the typical model where Congress provides appropriations to pay federal employees to perform tasks, the revolving fund is supposed to be self-supporting.

A fund can recoup its costs and even make a profit, which goes into its reserves.

That is supposed to be competitive and economical, but in practice it tends to be less transparent.

V.A. has two large revolving funds—the Franchise Fund and the Supply Fund—and many other smaller funds.

The enterprises in the Franchise Fund provide accounting, payments, debt collection, human resources, I.T., law enforcement training, and other services.

The enterprises in the Supply Fund are distribution centers and contracting offices that sell products like hearing aids, medical equipment, and burial flags and put in place contracts that other offices can order against.

The revolving funds are big business for V.A., and they seem to be steadily expanding.

Each fund took in revenue of about $1.8 billion last year. But they don’t disclose key information.

V.A. publishes the Franchise Fund’s annual report, but the Supply Fund’s financial statements are not public.

These documents don’t include basic facts, like how much individual enterprises made or lost, or how much a fund drew from its reserves.

The Committee discovered the Supply Fund ran a $37 million loss last year, but the financial statements characterized it as a profit.

I hope you can see why I am concerned. This is not transparency.

It has also been a struggle to get information on V.A.’s agreement with the Department of Homeland Security/ICE to process payments to local health care providers who treat detained illegal immigrants.

But after several months of Chairman Bost asking questions, V.A. did provide the agreement last week.

Now that we have been able to read it, several things have become clear.

V.A. has been processing the medical claims for illegal immigrants for ICE since 2002.

ICE pays V.A. for the health care claims as well as fees to cover V.A.’s administrative costs and a profit.

The agreement actually covers a half-dozen different services related to processing the claims.

V.A. collected at least $124 million from ICE in 2023 through their agreement.

And the V.A. officials who run the Franchise Fund consider these profits very important.

These revolving funds have been steadily adding and expanding business lines over the year, growing their revenues and their payrolls. There is clearly an incentive to grow the funds.

But they don’t always turn a profit. We discovered that several enterprises within the Franchise Fund have suffered losses in recent years, and the Supply Fund as a whole took a loss last year. The Canteen Fund had to be bailed out for $140 million during the pandemic.

Congress would not know any of that if not for this hearing.

Revolving funds may be an effective way to provide services, but they also seem to be a blind spot.

Like any other business, they can be mismanaged or suffer downturns. We always need to know how they are performing.

We need to ensure that V.A. is not creating new enterprises for the sake of empire-building, but signing these agreements carefully.

I appreciate our witnesses joining us today to answer these important questions.

With that, I now recognize Ranking Member Mrvan for his opening comments."

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