Assistant Inspector General Linda Halliday, second from left, Undersecretary for Veterans Benefits Allison Hickey, middle, Deputy Undersecretary for field operations Diana Rubens, second from right, testify before Congress in 2014 (Chip Somodevilla/Getty Images)

Senior executives at the Department of Veterans Affairs manipulated the hiring system to coerce two managers to accept job transfers against their will — then stepped into the vacant positions themselves, keeping their pay while reducing their responsibilities.

The executives also gamed VA’s moving-expense system for a total of $400,000 in what a new report by the agency’s watchdog described as questionable reimbursements, with taxpayers paying $300,000 for one of them to relocate 140 miles, from Washington to Philadelphia, Pa.

Diana Rubens and Kimberly Graves “inappropriately used their positions of authority for personal and financial benefit when they participated personally and substantially in creating opportunities for their own transfers to positions they were interested in filling,” the report released this week by Deputy Inspector General Linda Halliday said.

Rubens and Graves kept their salaries of $181,497 and $173,949, respectively, even though the new positions they took as directors of the Philadelphia and St. Paul, Minn. regional offices had way less responsibility, overseeing a fraction of the employees at lower pay levels. Rubens had been deputy undersecretary for field operations.

The inspector general’s office has referred the cases to the U.S. Attorney’s Office for the District of Columbia for possible criminal prosecution. But the report released this week implicates their bosses, too, criticizing Undersecretary for Veterans Benefits Allison Hickey and two of her deputies for encouraging the scheme. Investigators recommended that the agency take disciplinary action against Hickey, who has defended Rubens amid congressional scrutiny of her moving expenses.

The job changes are the most striking examples of what investigators described as a pattern of unjustified moving incentives and transfers by senior executives to increase their salaries or keep them after their responsibilities were reduced. The reassignments were designed to circumvent a pay freeze at the Veterans Benefits Administration, the report found.

Between salary increases and relocation expenses, the VBA spent $1.8 million to reassign 23 senior executives from fiscal 2013 to fiscal 2015, investigators found. In all but two cases, the new jobs came with pay raises, despite a White House-imposed freeze on senior executives’ pay — and a widely-publicized ban on bonuses stemming from a backlog of outstanding claims for disability benefits.

“While we do not question the need to reassign some staff to manage a national network of [regional offices], we concluded that VBA inappropriately utilized [the relocation] program for the benefit of its senior executive workforce,” the report concluded.

VA officials said in response that they will conduct a 30-day review of all incentive and relocation procedures.

“In addition, VA will consider all the evidence presented by the [inspector general,] collect any additional evidence necessary, and take appropriate accountability actions,” spokeswoman Victoria Dillon said in a statement.

She did not make any of the senior executives named in the report available for comment. E-mails to Hickey, Rubens and Graves went unreturned.

The House’s leading critic of the agency called watchdog’s findings more proof of VA’s “corrosive culture” and said the managers responsible “must be held accountable.”

“It is clear from this report that Under Secretary Hickey and others in VA leadership knew they could use fear, intimidation, and timely relocation incentives to coerce subordinates to relocate to jobs they didn’t apply for at the taxpayers’ expense,” Veterans’ Affairs Committee Chairman Rep. Jeff Miller, R-Fla., said in a statement.

“It is clear that from day one VA officials were using the relocation expenses program to enrich themselves…The actions of the individuals uncovered by this report are a discredit to VA employees and veterans.”

Asked if the reassignments were used to get around pay freezes and bans on bonuses, Danny Pummill, principal deputy undersecretary for benefits at VBA, told investigators: “I would say that’s probably true,” according to the report.

It stops short of recommending punishment for specific executives who benefited from the transfers, but recommended that VA attorneys consider whether any of the moving expenses can be recouped.

While the inspector general concluded that Ruben’s and Graves’ moving expenses were allowable, the report said such expenses are supposed to be reserved for hard-to-fill vacancies. This was hardly the case here, since the women made it clear they would had family in St. Paul and Philadelphia and wanted to return there.

And for some of the other transfers, the vacancies were not even announced before the relocation incentive was offered. “We determined that an agency cannot make a determination whether a position is difficult to fill if the agency does not actively search for or consider applicants for the position,” the report said.

Rubens and Graves “inappropriately coerced” two managers  “to leave positions they were not interested in leaving” to create positions for them, investigators wrote. They also determined that the assistant deputy under secretary for field operations, inappropriately helped Graves create the vacancy in St. Paul by pressuring the regional manager in the job to leave.

That official “indicated to him that there was no clean or easy way to say no to the reassignment since his name had been raised to the VA secretary,” investigators wrote.