The Veterans Health Administration (VHA) misappropriated more than $90 million intended for medical support and compliance programs in order to build an automated claims processing system, according to an Inspector General report released this week.

Going off a tip received through the IG's Hotline Division, investigators discovered $92.5 million in misappropriated funding, $73.8 million of which had already been spent on VHA's Health Care Claims Processing System (HCPS).

Report: Review of Alleged Misuse of VA Funds

The system, which processes claims from non-VA health care providers, qualifies as IT spending and should have been paid through the Office of Information and Technology. Medical support and compliance funding can only be used for specific expenses, namely: medical, hospital, nursing home, domiciliary, construction, supply and research activities.

The IG found the issue began when a former deputy chief business officer failed to get funding for HCPS in the IT budget. To get the project rolling, $21.3 million was taken from the medical support and compliance funding.

The current deputy CBO continued the practice, illegally appropriating an additional $71.2 million.

"By using MS&C appropriations, VHA avoided competing with other VA projects for IT systems appropriations," the report states. "As a result, the CBO violated appropriations law when they obligated $92.5 million of MS&C appropriations so the Financial Service Center could develop HCPS."

The IG recommended stronger oversight from interim Under Secretary for Health Carolyn Clancy and that the full amount be returned to the correct account. Clancy agreed with the IG's recommendations and committed to having the funds restored by the end of fiscal 2015.

Aaron Boyd is an awarding-winning journalist currently serving as editor of Federal Times — a Washington, D.C. institution covering federal workforce and contracting for more than 50 years — and Fifth Domain — a news and information hub focused on cybersecurity and cyberwar from a civilian, military and international perspective.

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