"The frequent and large dollar amount awards given to employees were unusual and often absurd," the report stated.

The reports also called the payments "not fiscally responsible."

Four high-level employees received about $60,000, $73,000, $58,000, and $59,000, respectively, according to the report, without sufficient justification. Another employee received a $4,500 performance award within the first 90 days of her employment from a manager who said that she did not even remember her.

The annual average award per employee was about $2,500 for both years, according to the report. About 4,700 awards and bonuses were issued in 2007, and about 5,000 in 2008.

The inspector general said one recently retired official, Jennifer S. Duncan, improperly approved numerous bonuses and "acted as if she was given a blank checkbook to write unlimited monetary awards."

During the two years in question, Duncan received over $60,000 in bonuses, according to the report.

In addition, the report concluded that the Office of Information and Technology managers were fiscally irresponsible when authorizing nearly $140,000 in improper academic degree funding, some of which went to Duncan's family and friends. The inspector general recommended the money be repaid.

The VA said it is pursuing a thorough review of the situation and it "does not condone misconduct by its employees and will take the appropriate corrective actions for those who violate VA policy," according to a statement provided to CNN.

Duncan could not be reached for comment.

Lawmakers in Washington have taken notice.

"I am extremely troubled by the Inspector General's findings," said Richard Burr, R-NC, the ranking Republican on the Senate Veterans' Affairs Committee. "I believe Congress should use its oversight authority to further investigate these matters," he said in an e-mail to CNN.

President Obama has told Congress it is a priority to reduce the number of backlogged claims at the VA, where claims are coming in at a faster rate than they can be processed.