WASHINGTON (AP) — Two senior Veterans Affairs officials in Philadelphia acted improperly when subordinates were charged money to attend a work-related party featuring psychic readings, resulting in personal profits for the spouse of one official, according to an audit released Thursday.

The report by the Department of Veterans Affairs inspector general adds to a growing list of mismanagement in the Philadelphia regional office. It was released in response to a Freedom of Information Act request by The Associated Press.

Employees reported that Lucy Filipov, the assistant director in Philadelphia, hosted a party last June where employees were charged $30 or more to attend, specifically for the purpose of having their fortunes told or receiving psychic readings of their deceased loved ones, the report said.

The IG reported that money was collected at the party and that Filipov gave it to the wife of Gary Hodge, director of the office's pension management center, for the readings.

The IG said Filipov misused her position and that Hodge failed to report his wife's financial gain on disclosure forms. It referred the matter to the Justice Department, which declined to take criminal action in favor of administrative discipline by the VA.

In comments included in the report, Filipov said she considered the party a gathering of friends, a private function rather than one involving subordinates. Hodge said his wife's business was separate from his work and didn't know what his wife's income was.

The VA did not dispute the IG's findings and said it was ordering fresh ethics training for Filipov and Hodge as it reviews possible disciplinary action. They also were told that their activity "will not be condoned or tolerated," wrote Willie Clark, the eastern area director for the Veterans Benefit Administration.

Federal ethics rules bar employees from using their public office for the private gain of themselves or friends, family or close acquaintances.

Rep. Jeff Miller, chairman of the House Veterans Affairs committee, called the findings "yet another example of Philadelphia VA regional office officials exhibiting horrible judgment." He called on VA Secretary Robert McDonald to punish the officials, accusing the department of repeatedly "defending the dysfunctional civil-service status quo than actually reforming itself." Miller's committee said it will hold a hearing in light of the audit; a date has not yet been set.

Rep. Ryan Costello, R-Pa., a member of that panel, said the report reaffirmed the need for a "culture change" at the VA.

The IG report said Filipov "misused her position for the private gain of a subordinate and his spouse, misused her title to endorse the private enterprise, and invited subordinates to her home to take part in psychic readings." It said she had "a less-than-arm's length relationship with subordinates whom she characterized as friends."

"As a senior leader, she is held to a higher standard," the report said.

The IG said Hodge's wife deposited the money she received for the readings into a joint bank account, which the couple used to pay for a vacation last year.

The IG investigation found that many of the employees "were generally not enamored of the psychic experience." One employee said she didn't believe in mediums but paid $30 "out of curiosity," while another described the payment as a "donation."

The Philadelphia office has been under close scrutiny following last month's IG report documenting widespread problems such as neglected mail, untimely responses to more than 31,000 veterans inquiries and manipulation of dates to make old claims look new. Linda Halliday, the assistant inspector general, said her office had never before seen "such a dysfunctional and toxic environment" and suggested the problems there might be an indicator of a wider VA problem.

The VA temporarily reassigned Hodge pending an internal review after the initial IG report.

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