VA Changed Estimates Supporting the Request, but Factors That Account for Most of the Changes Were Not Transparent

		Request Increased $165 Million, Reflecting an Increase in Initiatives and a Decrease in Both Ongoing Services and Available Resources

The President’s fiscal year 2013 budget request for VA health care  services was $165 million more than the advance appropriations request  for the same year. This decline in anticipated  resources was partially offset by the $110 million decrease in expected  obligations, which resulted in the net increase in the President’s request  of $165 million. Three factors accounted for most of the changes in the estimates that  supported the President’s fiscal year 2013 budget request when  compared to the earlier, advance appropriations request; however, VA, in  its budget justification, was not transparent about two of the factors. The  three factors that accounted for the $2 billion increase in the initiatives  estimate and the $2.1 billion decrease in the ongoing health care services  estimate were: (1) a new approach in reporting the estimate for initiatives,  (2) updated assumptions and data to estimate ongoing health care  services, and (3) additional funding needed for initiatives. VA used a new  reporting approach for initiatives that combined both funding for initiatives  and funding for certain ongoing health care services in its initiatives  estimate, which increased VA’s initiatives estimate and decreased VA’s  ongoing services estimate. Nevertheless, by  not stating in its budget justification that it made this change, VA has not  made it transparent that the estimate for initiatives is greater and the  estimate for ongoing services is less than they would have been using  VA’s past reporting approach. However, in its fiscal year 2013 budget  justification, VA did not make it clear that part of the additional increase in  its initiatives estimate occurred because VA’s earlier estimate in support  of the advance appropriations request did not include funding for all the  initiatives the agency intended to continue. However, VA  did not state that some initiatives for which estimates were included in the  fiscal years 2013 and 2014 advance appropriations requests would  require additional funding if the initiatives were to be continued. The lack of transparency regarding the  factors that changed VA’s estimates for ongoing health care services and  initiatives results in unclear information for congressional deliberation. Past Issues in VA’s Estimates for NRM and Operational Improvements Remain

Our analysis of the estimates supporting the President’s fiscal year 2013  budget request found that VA’s supporting estimates (1) do not address  historical discrepancies between estimated and actual NRM spending  and (2) lack analytical support for expected savings from some  operational improvements. Regarding NRM, VA’s fiscal year 2013 estimate does not appear to  correct for the long-standing pattern of VA’s NRM spending exceeding its  estimates and was based on a policy decision. More recently, we found  that in fiscal year 2011 VA spent about $2 billion for NRM, which was  $867 million more than estimated (see fig. According to VA officials,  NRM spending has exceeded estimates of needed funding in recent  years because VA medical facilities have spent more funds on NRM  projects that were originally expected to be spent on other activities— such as utilities, grounds maintenance, and janitorial services. This  spending is consistent with VA’s authority to increase or decrease the  amounts VA allocates from the Medical Facilities account for NRM and  with congressional committee report language. When we asked VA  officials if the fiscal year 2013 estimate addressed the historical  discrepancies between amounts estimated and actual spending, VA  officials said that all information was considered in developing the  estimate. However, VA officials noted that the amount requested was a  policy decision and did not specifically say whether these discrepancies  were addressed. Regarding operational improvements, VA estimated savings for fiscal  year 2013 using the same methodologies it used in the past, some of  which we recently reported lacked analytical support or were flawed. We also recommended that VA develop a sound methodology  for estimating savings from its operational improvements. VA’s most recent NRM estimates  do not appear to correct for the long-standing pattern where VA’s NRM  spending exceeds VA’s NRM estimates. Until  these issues are addressed, VA’s estimates of NRM and operational  improvements are of limited use for decision makers. Recommendations for Executive Action

To improve the transparency and reliability of information presented in  VA’s congressional budget justifications that support the President’s  budget request for VA health care, we recommend the Secretary of VA  take the following three actions:
State in future budget justifications whether the estimates for  initiatives include funding for ongoing health care services. State in future budget justifications whether the estimates for  initiatives in support of the advance appropriations request reflect all  the funding that may be required if all initiatives are to be continued. Department of Veterans Affairs: Issues Related to Real Property  Realignment and Future Health Care Costs.
Why GAO Did This Study

The Veterans Health Care Budget Reform and Transparency Act of 2009 requires GAO to report on the Presidents annual budget request to Congress for VA health care services. GAOs previous work found that VAs NRM spending exceeded its estimates in recent years and that some of VAs estimates of savings from operational improvements lacked analytical support or were flawed.
Building on GAOs past work and the Presidents most recent request for VA health care, this report examines (1) key changes to the fiscal year 2013 budget request compared to the 2013 advance appropriations request, and certain aspects of the fiscal year 2014 advance appropriation request and supporting estimates; and (2) whether the issues GAO identified regarding NRM and operational improvements continue in the estimates for the most recent request. GAO reviewed the Presidents budget request, VAs budget justification, and VA data. GAO interviewed VA officials and staff from the Office of Management and Budget.

What GAO Found

The Presidents fiscal year 2013 budget request for the Department of Veterans Affairs (VA) health care services was $165 million more than the earlier advance appropriations request for the same year. This request reflected a $2 billion increase for initiatives and a $2.1 billion decrease for ongoing health care services, for a net decrease of $110 million in expected obligations. This decrease partially offset a decline in anticipated resources available to VA of $275 million, resulting in the net increase in the Presidents request of $165 million. Two of the three factors that accounted for most of these changes were not transparent. First, VA used a new reporting approach for initiatives that combined both funding for initiatives and for certain ongoing health care services in its initiatives estimate. Previously, VA had reported only funding it identified for initiatives during that year. This new reporting approach resulted in an increase in VAs initiatives estimate and a commensurate decrease in VAs ongoing services estimate. VA officials told GAO that this change was made to be more transparent about the total funding needed for initiatives. However, because VA did not disclose this change in its budget justification, VA has not made it transparent that its initiatives estimate is greater and its ongoing health care services estimate is lower than they would have been using VAs past approach. Second, VA included additional funding in its initiatives estimate, in part, to fund initiatives that were not identified in the fiscal year 2013 advance appropriations request. VA also did not make transparent in its budget justifications that some initiatives identified in its fiscal years 2013 and 2014 advance appropriations requests may require additional funding if the initiatives are continued. The lack of transparency regarding VAs estimates for initiatives and ongoing health care services results in unclear information for congressional deliberation.
The issues GAO previously identified related to NRM (non-recurring maintenance), such as renovations and other improvements of VA medical facilities, and operational improvements remain. VAs fiscal year 2013 estimate for NRM$710 milliondoes not appear to correct for the long-standing pattern where VAs NRM spending exceeds VAs NRM estimates. For example, in fiscal year 2011 VA spent about $2 billion for NRM, which was $867 million more than estimated. According to VA officials, this pattern has occurred because VA medical facilities have spent more funds on NRM projects that were originally expected to be spent on other activitiessuch as utilities, grounds maintenance, and janitorial serviceswhich is consistent with VAs authority to allocate its appropriations. When GAO asked if the fiscal year 2013 estimate addressed the historical discrepancies between estimated and actual NRM spending, VA officials said that all information was considered in developing the estimate. However, they noted that the final estimate was a policy decision and did not say specifically whether these discrepancies were addressed. Regarding operational improvements, VA estimated savings for fiscal year 2013 using the same methodologies it used in the past, some of which GAO previously found lacked analytical support or were flawed. GAO previously recommended that VA develop a sound methodology for estimating savings from its operational improvements, which according to officials, VA is addressing for future estimates. Until these issues are addressed, VAs estimates of NRM and operational improvements may not be reliable and are of limited use for decision makers.

What GAO Recommends

GAO recommends that VA state in its budget justification whether the estimates for initiatives include funding for ongoing services and whether its advance appropriations request reflects funding that may be required if initiatives are continued. GAO also recommends that VAs NRM estimates fully account for the long-standing pattern of medical facilities spending more on NRM than originally expected. VA concurred except for the recommendation on advance appropriations, which GAO believes is needed to improve transparency.