Accounting errors and a projected surge in year-end claims approvals that never materialized were responsible for leading the Department of Veterans Affairs to think it needed an additional $2.9 billion to cover benefits at the end of fiscal 2024, the VA’s top watchdog agency has found.

The predicted shortfall, which veterans feared would cancel or delay their monthly disability checks, was covered by funding approved by Congress but also infuriated lawmakers who learned later that the money was never used and, in fact, VA benefits accounts ended the year with $2.2 billion in savings.

At the request of Congress, the VA Office of Inspector General investigated the issues, which occurred under the Biden administration. In a report released Thursday, the watchdog agency faulted the VA for not including the funds saved from previous years in its calculations and for believing there would be a spike in claims at the end of the fiscal year.

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According to the IG, the Veterans Benefits Administration, under the direction of then Under Secretary of Benefits Joshua Jacobs, “continued to emphasize the risk to veterans in its communications to Congress, even though the data increasingly suggested there might actually be less need for supplemental funding as time went on.”

“VBA officials ultimately justified the supplemental funding request as a precautionary measure to avoid potential payment delays to veterans. Although VBA acted with the intent to prioritize veterans’ benefits, the OIG found that improvements in financial oversight, reporting accuracy, and communication processes would have provided greater clarity and may have obviated the need for the supplemental funding request,” the IG wrote in its report.

In July, the VA told Congress that it faced a $12 billion shortfall in its health care budget and a potential $3 billion deficit in its benefits budget as a result of increased services and claims from the PACT Act, the legislation that expanded health care and benefits to millions of veterans exposed to environmental pollutants during their military service.

At the time, VA Secretary Denis McDonough said the funds were needed to cover claims and pensions, training services and education benefits.

“I kept telling Congress during the course of the year that we believed we had the funding we needed, but if we needed more, we’d come back and ask,” McDonough said during a press conference on July 23, 2024.

But in a memo to Congress in November, VA officials later suggested the funding shortfalls were not as large as previously expected and that the VA would use the extra funding to cover the start of 2025.

“While the supplemental funding was not immediately utilized, it was critical that we had this funding on hand — because if we had even been $1 short on Sept. 20, we could not certify our payment files and more than 7 million veterans and survivors would have had delays in their disability compensation, pension and education benefits on Oct. 1,” the memo said.

The disclosure prompted House Veteran Affairs Committee Chairman Mike Bost, R-Ill., and Rep. John Carter, R-Texas, chairman of the House Appropriations Committee’s VA subcommittee, to write McDonough in protest and call for an investigation.

After the release of the IG report Thursday, Bost said VA officials under former President Joe Biden, who include McDonough and Jacobs, “spread fear among veterans and their families that their benefits were in jeopardy.”

“It appears that senior Biden VA officials repeatedly misled Congress on the reality of the situation. This is incredibly concerning given that President Biden urged Congress to provide billions of taxpayer dollars to account for something that never even existed,” Bost wrote in a statement.

To prevent such problems from happening again, the VA OIG recommended that the VA improve its management controls of benefits accounts, develop procedures for including all available budgetary resources in calculating projections, and make improvements to its monthly fiscal reviews.

In response, Acting Under Secretary for Benefits Michael Frueh, who has served in the VA’s benefits office for nearly a decade, said the department concurred with the recommendations and asked for clarification of the some of the language in the report, especially regarding the wording on the potential shortfalls, which he argued did exist.

“For readjustment benefits, there was still a significant risk, and for compensation and pension it would be fair to say there was a decreased risk; however, the potential risk was not eliminated,” Frueh wrote.

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