“INSPECTOR GENERAL FINDING 1. The blanket award of Critical Skill Incentives to 357 VA executives was inconsistent with VA policy. INSPECTOR GENERAL FINDING 2. VA’s internal controls were ineffective in preventing improper awards”
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Executive Summary
“On September 13, 2023, VA Secretary Denis R. McDonough was alerted by the Assistant Secretary for Management and Chief Financial Officer (CFO) Jon Rychalski that the Office of Management had detected unusual payment activity relating to senior executives. The preliminary data provided to Secretary McDonough by Mr. Rychalski indicated that VA had paid 367 senior executives more than $19.7 million over two pay periods in September with another 21 remaining to be processed (about 75 percent of VA’s entire senior executive staff).Mr. Rychalski identified these payments as critical skill incentives (CSIs).
CSIs are a type of recruitment and retention incentive pay newly authorized for VA by Congress under the PACT Act, which dramatically expanded access to VA health care and benefits formillions of veterans exposed to toxic substances.
In anticipation of a significant increase in new healthcare enrollments and benefits claims, the PACT Act included CSIs as a tool to enhance VA’s ability to meet the projected staffing requirements. CSIs are available to an employee who “possesses a high-demand skill or skill that is at a shortage” at a rate up to 25 percent of basic pay. VA’s first CSIs were approved in March 2023 for human resources specialists to support increased hiring.
In the days following the CFO’s disclosure to the Secretary on September 13, more data were gathered to confirm details regarding the CSIs and determine next steps. On September 22, 2023,VA provided a statement to members of Congress, veteran service organizations, and others indicating that the Veterans Health Administration (VHA) and Veterans Benefits Administration(VBA) had awarded CSIs to nearly all of their respective senior executives. This statement reported that the CSIs included payments reportedly totaling $9.7 million to 170 senior assigned to headquarters functions at the VA central office (VACO).
VA also indicated that these payments to senior executives would be canceled because VA had made a “policy error” and “was overly broad in the way [it] implemented and executed this authority.”VA did not cancel the approximately 200 CSI awards made to “field executives”—that is, senior executives based outside of headquarters, including regional office and district directors in VBA,as well as medical center directors and Veterans Integrated Service Network (VISN) directors inVHA. That same day, Secretary McDonough also notified VA Inspector General Michael Missal of the cancellations and requested that the VA Office of Inspector General (OIG) review the facts and circumstances surrounding the issuance of the CSIs.
During the investigation, OIG staff also received information through interviews and document reviews regarding the subsequent cancellation and announced recoupment of these payments, and this feedback is briefly summarized in this report. Because the recoupment is ongoing and its impact is not fully realized, an in-depth examination was outside the scope of this investigation.” executives assigned to headquarters functions at the VA central office (VACO).
VA also indicated that these payments to senior executives would be canceled because VA had made a“policy error” and “was overly broad in the way [it] implemented and executed this authority. ”VA did not cancel the approximately 200 CSI awards made to “field executives”—that is, senior executives based outside of headquarters, including regional office and district directors in VBA,as well as medical center directors and Veterans Integrated Service Network (VISN) directors inVHA.
That same day, Secretary McDonough also notified VA Inspector General Michael Missal of the cancellations and requested that the VA Office of Inspector General (OIG) review the facts and circumstances surrounding the issuance of the CSIs.
A few days later, the chairmen and ranking members of the House and Senate Committees on Veterans’ Affairs responded to VA’s statement. They stated that using “incentives . . . to boost pay of senior executives at VA rather than bolster staffing for critical shortage positions requiring highly skilled individuals” was “contrary to congressional intent.” They also supported the Secretary’s request for the OIG to conduct a full review.
The OIG initiated its oversight work on September 28, 2023, to examine VA’s compliance with law and policy in the issuance of CSIs to VACO senior executives at VHA and VBA. The investigation also included determining the rationale for the CSI payments and the chronology of decisions by the individuals accountable for implementing the incentives that VA subsequently determined were improper. During the investigation, OIG staff also received information through interviews and document reviews regarding the subsequent cancellation and announced recoupment of these payments, and this feedback is briefly summarized in this report. Because the recoupment is ongoing and its impact is not fully realized, an in-depth examination was outside the scope of this investigation.”
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