Veterans Affairs VA HospitalThe Inspector General of the Department of Veterans Affairs released a report Thursday concluding the VA may have overpaid more than $3 million for property on Brownsboro Road in Louisville to construct a new VA Hospital, as the VA’s Office of Acquisition, Logistics, and Construction (OALC) did not follow proper appraisal reviews and misrepresented information provided to a House committee.

The VA Office of Inspector General conducted a review of the appraisals for the property from February to June of this year, at the request of U.S. Rep. John Yarmuth, due to concerns that the VA may have paid an excessive amount for the property. The initial appraisal by OALC in December of 2010 valued the 36.23 acres at 4906 Brownsboro Road as being worth $9.85 million while their second appraisal in February of 2012 valued the land at more than $12.9 million — a difference of just over $3 million. In July of 2012, the land was purchased at the latter price.

The Inspector General found that OALC did not obtain a required review appraisal for determining the appropriateness of the two appraisals prior to purchasing the land, only doing so nearly two years after its purchase — which was deemed “useless” and “a waste of taxpayers’ money.”

Because OALC did not obtain this review prior to its purchase, the report stated the VA “lacks assurance the purchase price paid was reasonable, and VA may have overpaid more than $3 million for this property.”

The Inspector General report added that OLAC presented false information to the House Veterans’ Affairs Committee when they inquired about the appropriateness of the purchase price.

“Furthermore, OALC misrepresented information provided in a letter to the HVAC regarding the 31 percent increase in the property’s market value over the 14-month span, December 2010 to February 2012,” reads the report. “OALC stated the increase was based on a revised highest and best-use of the property. Specifically, OALC stated that the property was revised from residential to mixed-use development. This was contrary to our findings, as both appraisals state that the highest and best use of the property would be for mixed-use development.”

The report recommends the VA establish formal policies and procedures regarding review appraisals and ensure its dissemination; establish an internal review board to enforce compliance with federal laws governing land purchases; and determine the appropriate administrative actions to take for noncompliance with regulations.

Congressman Yarmuth’s office sent IL the following statement on the report:

“I called for this investigation out of concern that the VA paid too much for the new hospital property. This report makes clear that the appraisal process was severely flawed, costing taxpayers millions of dollars. Since securing funding for this project, my goal has been to make sure that our community has input in the process, that taxpayer dollars are being spent responsibly, and that a new state-of-the-art hospital is built without delay. I’m meeting with the Inspector General’s office next week, and will continue to press VA officials to ensure that the failures laid out in this report are fully addressed and that all regulations are followed going forward. We cannot afford to see another dollar or moment wasted when it comes to providing our veterans with the care they need and deserve.”

Eric Gunderson, the president of Grow Smart Louisville — a local organization that has criticized the transparency and soundness of the VA hospital site selection process — told IL that the report vindicates their concerns and should be a wake-up call for local officials.

“Hopefully this report sheds light on this project for all those who believed the VA did, and has been doing, their due diligence for local veterans,” said Gunderson. “I hope our local leaders will finally start looking into all the issues surrounding this site selection and asking the questions they should have been asking from the beginning. Surely no one believes this is the ONLY mistake the VA made in choosing the Brownsboro Road location.”

***** UPDATE 7:15 p.m. *****

Asked if the report will affect the VA hospital construction at the current site, or if the government would take any action to retrieve the amount that may have been overpaid, Yarmuth spokesman Christopher Schuler answered that “According to our conversations with the IG’s office, this report will not prevent the project from moving forward. As for your second question, it is my understanding that a contract was signed so the price is final. I’d defer to VA for final word on both though.”

The VA put out a statement tonight saying that they agreed with the IG’s recommendations, but took issue with several aspects of the report. They also said that the project will continue to move forward.

“While VA agrees with the recommendations in the OIG report and had revised the previous practice and obtained a review appraisal by a state-licensed appraiser before the OIG inquiry, VA disagrees with several statements and omissions in the report,” read the VA statement. “Since VA revised its review appraisal policy in 2012, VA has been obtaining review appraisals conducted by state-licensed appraisers for all land acquisitions as opposed to only those that involved a dispute of value… Since closing, VA has been working through design for the replacement VAMC as well as performing site specific environmental analyses. VA welcomes the partnership established with the United States Army Corps of Engineers which will serve as the construction manager once the project moves into the active construction phase.”

*This story will be updated.