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Gregg Zoroya, USA TODAY
12:28 a.m. EDT July 14, 2014

The federal department responsible for caring for America's veterans, already mired in scandal over delays in health care, continues struggling with another major responsibility: paying compensation to those wounded or injured or who grew ill from service in uniform.

While the VA managed last year to reduce a huge backlog in veteran claims for money, it was at the expense of appeals to those decision which are rapidly mounting, according to testimony slated for Monday by the VA Office of Inspector General.

The written testimony provided by the House Veterans' Affairs Committee in advance of a congressional hearing outlines several sloppy or improper steps taken by the Department of Veterans Affairs in processing compensation claims. They include potentially inflated success rate in reducing a controversial backlog and over-paying veterans by hundreds of millions of dollars.

"These are challenging times for the VA," says Linda Halliday, an assistant inspector general who authored the written testimony.

In response, the VA released the written testimony that will also be delivered at Monday's hearing by Allison Hickey, undersecretary for benefits who says the VA enjoyed "tremendous success" cutting into a backlog of delayed compensation claims.

Compensation for injuries or wounds incurred during military service is one of the most costly programs within the VA, expected to be $73 billion paid out to veterans this year alone.The money accounts for about half the VA's budget.

That portion of the VA that provides medical care to veterans is under investigation by the inspector general and Justice Department lawyers for systemic delays in care and fabricating false wait times to improve treatment performance numbers.

The scandal led to the resignation of the Secretary Eric Shinseki in late May.

Because of a new generation of veterans flowing out of the Iraq and Afghanistan wars along with greater access to compensation benefits provided to veterans suffering post-traumatic stress disorder or illnesses related to Agent Orange, the backlog of total compensation requests soared to more than 850,000 early last year.

Hickey says that compensation requests pending longer than 125 days — considered the cut-off for cases deemed to be backlogged — have been cut by 55% in last 16 months to 275,000 cases. She said her processors completed nearly 1.2 million compensation requests last year.

And the VA is announcing today that it has just finished processing a million claims for fiscal 2014 and should complete a record of more than 1.3 million this year.

But according to the Halliday testimony, both the rate of success in drawing down the backlog and the accuracy of the work have been over-stated.

The inspector general's office found problems in the VA's highly touted program aimed at quickly providing benefits to veterans who had been waiting longer than two years. The idea was for processors to rapidly decide on a compensation rate for the veterans to speed payments and then those rates could be adjusted later after a final review was completed.

But investigators said the program didn't work very well. Some 7,800 of these older cases moved into the program were subtracted from the reported VA backlog of pending cases even though processors were still working on them.

In fact, most of those cases, 6,860 of them, were still being processed as of January of this year when investigators reviewed the program, the inspector general's office says.

"Some veterans may never have received a final rating decision if not for our review," says Halliday's written testimony to be delivered Monday.

In addition, processors were working so fast that they made errors, largely of over-payment, in one out of three cases, Halliday says. "Generally, these errors occurred because (processors) felt pressured to complete these claims," she says.

Hickey says in her remarks that a review of the process has been launched in response to the inspector general findings.

VA press secretary Drew Brookie issued a statement Saturday saying the department has "more work to do to achieve our goal ... Too many veterans still wait too long to get the benefits they have earned."

Other mistakes or sloppiness cited by Haliday include:

— The VA failed to follow up with veterans granted temporary 100% disability pending improvement of their physical health. Investigators estimate this has resulted in $85 million overpaid since 2012 and could mean another $370 million wasted in the next five years,

— Other VA processing responsibilities have suffered because of so much emphasis on reducing the compensation backlog. The number of pending appeals of compensation judgments has increased 18% since 2011 to nearly 270,000.

— Federal law prohibits reservists and National Guard troops from receiving drill pay and VA compensation at the same time. But the VA has failed to check on this, resulting in $50-$100 million in overpaid compensation annually.

Halliday cites an assortment of other problems including thousands of pieces of undelivered mail languishing at an Indianapolis VA processing center.

At a VA benefits office in Philadelphia, investigators are sifting through allegations that staff shredded or hid mail related to compensation claims or failed to respond to 32,000 requests about claims from veterans.

In Baltimore, a VA processor was discovered storing 8,000 pieces of unprocessed claims-related mail, Social Security data and other documents in his office, along with 80 pending claims.

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