VA to review more previously awarded bonuses after improperly doling out $11M to execs

The Veterans Affairs Department is giving another look to the special bonuses it awarded to groups of employees under authority it won in 2022 after its watchdog rebuked the agency’s handling of the awards.

VA improperly gave out $10.8 million of the “critical skill incentives,” or CSIs, to 182 Senior Executive Service employees, the inspector general found in confirming an issue the department itself flagged and took steps to remediate in September. After the IG highlighted a series of management missteps and poor processes, VA leadership said it has expanded the universe of CSIs it will review for potential mistakes. The department has so far awarded around 40,000 bonuses under the new program. 

The issue came about after President Biden signed the PACT Act into law in 2022, which newly offered VA health care and benefits to millions of veterans exposed to toxic burn pits during their service. To meet the new demand, the law contained provisions to ease the recruiting and retention of employees. That included the CSIs for employees or applicants with “high-demand” or understaffed skills. 

VA unveiled last fall that the Veterans Health Administration and Veteran Benefits Administration had provided the awards, worth up to 25% of an employee’s base pay, to nearly all of their senior executives. In culling back the bonuses, VA said it had made a “policy error” and was “overly broad” in using its new authority. Secretary Denis McDonough asked the IG to launch a probe into the matter. 

The watchdog found the inclusion of SES employees at VA’s headquarters in Washington was an “improper and overzealous application” of the PACT Act’s provisions. VA failed to consider the specific retention needs of individual positions in issuing the CSIs, the auditors said, which was inconsistent with policy. The IG specifically cited decisions made by VA Undersecretary for Health Shereef Elnahal and Undersecretary for Benefits Joshua Jacobs that enabled the bonuses, calling the process a breakdown in leadership and established controls. VA’s Office of General Counsel should have raised more questions, the IG said, and its financial management team missed opportunities for additional review. 

The IG credited McDonough for questioning the bonuses early in the process and noted Elnahal’s team never provided the secretary’s office with information on the headquarters payouts. VA said Elnahal attempted to make the secretary aware of the headquarters bonuses, but that never occurred due to “timing, miscommunication, and inadvertence.”

Rep. Mike Bost, R-Ill., rejected that excuse, saying the payments were deliberate and promising additional oversight. 

“The over $10 million dollars in overpayments to VA central office employees were not some type of administrative mistake,” Bost said. “That’s a serious problem for the second largest agency in the federal government, and we’re going to get to the bottom of it come hell or high water.”

Sen. Jerry Moran, R-Kan., the top Republican on the Senate VA Committee, praised McDonough for quickly addressing the issue, but suggested some of the issues raised by the IG are ongoing. 

“The critical skills incentive payments that were included in the PACT Act were meant to improve recruitment for difficult-to-fill positions across VA, not to increase the salaries of senior executives,” Moran said. “The poor decisions demonstrated in this report reflect many of the systemic issues we continue to see across VHA and VBA.” 

VA agreed to all of the IG’s recommendations, saying it would issue more guidance on using CSIs to require more justification to support their use and other steps address the shortfalls identified in the report. VA will review the bonuses provided to executives in the field as well as to non-executive groups of employees to ensure they were properly awarded. The IG noted the revocation of the bonuses to headquarters executives damaged morale and, in some cases, created financial hardships for employees. 

Some VA leaders could still face punishments, as McDonough has agreed to determine whether “any disciplinary or non-disciplinary actions are appropriate.” He will also launch an ethics review of the CSI process to remove any conflicts of interest and clarify the roles and responsibilities of those who review the bonuses before they go out. 

“VA appreciates and acknowledges the OIG draft reports’ findings that better documentation and stronger governance should have been applied to the implementation of these important new incentive authorities,” McDonough said. 

The special incentives included in the PACT Act have made a positive impact on VA’s workforce. McDonough noted last month the department’s “quit rates” are at historic lows, while retention is up. He said VA has “some data to suggest” the CSI and other authorities have worked as intended. VHA hired 61,000 employees in fiscal 2023 and grew its workforce by 7%, with efforts so successful it is now looking to shrink its rolls by 10,000 employees.