After determining the amount of VA’s appropriations, Congress provides  VA resources for health care through three accounts:
Medical Services, which funds health care services provided to  eligible veterans and beneficiaries in VA’s medical centers, outpatient  clinic facilities, contract hospitals, state homes, and outpatient  programs on a fee basis;
Medical Facilities, which funds the operation and maintenance of the  VA health care system’s capital infrastructure, including costs  associated with NRM and non-NRM activities, such as utilities,  facility repair, laundry services, and grounds keeping; and
Medical Support and Compliance, which funds the management  and administration of the VA health care system, including financial  management, human resources, and logistics. VA allocates about 80 percent of the health care appropriations to its   21 health care networks through VERA. In June 2012, we reported that VA’s NRM spending has consistently  exceeded the estimates reported in VA’s budget justifications from fiscal  years 2006 to 2011. Availability of Higher Than Estimated Resources Accounted for NRM Spending That Exceeded Budget Estimates

Our analysis of data for fiscal years 2006 through 2012 found that in each  of these years VA had higher than estimated resources available in its  Medical Facilities account, which VA used to increase NRM spending by  about $4.9 billion. These resources derived from two sources: (1) lower  than estimated non-NRM spending, which made more resources  available for NRM, and (2) higher than estimated budget resources, which  included annual appropriations, supplemental appropriations,  reimbursements, transfers, and unobligated balances. As figure   2 shows, after fiscal year 2008, lower than estimated spending on non- NRM activities accounted for most of VA’s spending on NRM that  exceeded VA’s budget estimates. VA spent fewer resources  from the Medical Facilities account on non-NRM activities than it  estimated, which allowed the agency to spend over $2.5 billion more on  NRM than it originally estimated in fiscal years 2009 through 2012. Higher than estimated budget resources. For example, in fiscal year 2009 VA  received $300 million more than it requested in annual appropriations as  well as $1 billion in supplemental appropriations included in the American  Recovery and Reinvestment Act of 2009 (Recovery Act). VA Used VERA to Allocate Most NRM Resources at the Start of a Fiscal Year and Network Requests to Allocate Additional NRM Resources Later

VA used VERA to perform an initial allocation of resources for NRM at the  beginning of each fiscal year for fiscal years 2006 through 2012,  allocating a total of about $4.6 billion over this time frame. In addition, for  fiscal years 2009 through 2012, VA allocated $2.9 billion in total for NRM  from higher than requested appropriations and its reserve account. In anticipation of the availability of such resources, networks  typically identify in advance projects that can be implemented if additional  funds become available, according to VA officials. Officials explained  further that the networks do this to better address the NRM backlog. VA Relied on Networks to Prioritize NRM Spending before Centralizing Prioritization Recently for More Costly Projects, and Spending Was Generally Consistent with Priorities

VA relied on its networks to prioritize all NRM spending until centralizing  this process for more costly projects in fiscal year 2012. NRM projects VA  funded were generally consistent with VA priorities. VA Relied on Networks to Prioritize NRM Spending before Centralizing This Process for More Costly Projects in Fiscal Year 2012

For fiscal years 2006 through 2011, VA relied on its networks to prioritize  projects for NRM spending. Specifically, VA headquarters assumed  responsibility for prioritizing these NRM projects as part of VA’s newly  established Strategic Capital Investment Planning process, known as  SCIP. Under SCIP, VA  prioritizes NRM projects based on the extent to which they meet the  following six criteria:   For fiscal year 2012, the  1.  improve the safety and security of VA facilities by mitigating potential  damage to buildings facing the risk of damage from natural disaster,  improving compliance with safety and security laws and regulations,  and ensuring that VA can provide service in the wake of a  catastrophic event;  2.  address selected key major initiatives and supporting initiatives  identified in VA’s strategic plan;3.  address existing deficiencies in its facilities that negatively affect the  delivery of services and benefits to veterans;  4.  reduce the time and distance a veteran has to travel to receive  services and benefits, increase the number of veterans utilizing VA’s  services, and improve the services provided;  5.  right-size VA’s inventory by building new space, converting  underutilized space, or reducing excess space; and  6.  ensure cost-effectiveness and the reduction of operating costs for new  capital investments. Further, our work shows that spending for  administrative functions, utilities, and rent accounted for most of the lower  than estimated non-NRM spending in recent years. However, VA does not have reasonable assurance that  spending on NRM will be consistent with criteria included in SCIP. Our  work shows that while networks remain responsible for prioritizing below- threshold NRM projects, VA has not provided its networks with written  policies for prioritizing these less costly NRM projects. Recommendations for Executive Action

We recommend the Secretary of Veterans Affairs take the following  actions:  to improve the reliability of information presented in VA’s  congressional budget justifications that support the President’s budget  request for VA health care, determine why recent justifications have  overestimated spending for non-NRM activities and incorporate the  results to improve future budget estimates for such activities; and  to provide reasonable assurance that VA’s networks prioritize NRM  spending consistent with VA’s overall NRM priorities, establish written  policies for its networks for applying SCIP criteria when prioritizing the  funding of NRM projects that are below the threshold for inclusion in  VA’s centralized prioritization process.
Why GAO Did This Study

VA operates about 1,000 medical facilities--such as hospitals and outpatient clinics--that provide services to more than 6 million patients annually. The operation and maintenance of its facilities, including NRM, is funded from VA's Medical Facilities appropriations account, one of three accounts through which Congress provides resources for VA health care services.
In prior work, GAO found that VA's spending on NRM has consistently exceeded its estimates. GAO recommended that VA ensure that its NRM estimates fully account for this long-standing pattern, and VA agreed to implement this recommendation. GAO was asked to conduct additional work on NRM spending. In this report, GAO examines, for fiscal years 2006 through 2012, (1) what accounted for the pattern of NRM spending exceeding VA's budget estimates; (2) VA's allocation of resources for NRM to its health care networks; and (3) VA's process for prioritizing NRM spending and the extent to which NRM spending was consistent with these priorities. GAO reviewed VA's budget justifications and VA data and interviewed officials from headquarters and selected networks.

What GAO Found

During fiscal years 2006 through 2012, the Department of Veterans Affairs (VA) had higher than estimated resources available for facility maintenance and improvement--referred to as non-recurring maintenance (NRM); these resources accounted for the $4.9 billion in VA's NRM spending that exceeded budget estimates. The additional resources came from two sources. First, VA spent less than it estimated on non-NRM, facility-related activities such as administrative functions, utilities, and rent, which allowed VA to spend over $2.5 billion more than originally estimated. Lower spending for administrative functions, utilities, and rent accounted for most of the resources estimated but not spent on non-NRM activities. Given that VA has consistently overestimated the costs of such activities in recent years, VA's budget estimates for its non-NRM activities may not be reliable. Second, more than $2.3 billion of the higher than estimated spending on NRM can be attributed to VA having higher than estimated budget resources available. In some years VA received higher appropriations from Congress than requested and supplemental appropriations for NRM--such as those included in the American Recovery and Reinvestment Act of 2009. The additional budget resources VA used for NRM also included transfers of funds from the agency's appropriations account that funds health care services.
VA allocated about $7.5 billion in resources for NRM to its 21 health care networks from fiscal year 2006 through fiscal year 2012. VA allocated about $4.6 billion of these resources at the beginning of each fiscal year through the Veterans Equitable Resource Allocation--its national, formula-driven system. In addition, VA allocated $2.9 billion during this period from higher than requested annual appropriations and its national reserve account, which is maintained to address contingencies that may develop each fiscal year. In anticipation of such resources, networks typically identify projects that can be implemented if additional funds become available. VA officials told us that they do this to better address the backlog of identified building deficiencies most recently estimated to cost over $9 billion.
To prioritize NRM spending more centrally, VA established a new process for projects above a minimum threshold, and from fiscal years 2006 through 2012 spending on NRM was generally consistent with VA priorities. Prior to fiscal year 2012, VA provided oral guidance to networks for prioritizing NRM spending and relied on its 21 health care networks to prioritize NRM projects to maintain medical facilities in good working condition and address deficiencies. Beginning in fiscal year 2012, as part of VA's Strategic Capital Investment Planning (SCIP) process, VA headquarters assumed responsibility for prioritizing more costly NRM projects using a set of weighted criteria. For fiscal year 2012, the threshold for NRM projects to be included in this centralized process was $1 million, while networks remain responsible for prioritizing "below-threshold" NRM projects. NRM spending during fiscal years 2006 through 2012 was generally consistent with VA priorities: at least 85 percent of the projects funded in each year were identified by networks as priorities. However, VA has not provided written policies for networks on how to apply SCIP criteria to below-threshold projects, which represented over 40 percent of VA's fiscal year 2012 NRM spending. Without such written policies, VA does not have reasonable assurance that network spending for below-threshold NRM projects will be consistent with SCIP criteria.

What GAO Recommends

GAO recommends that VA determine why it has overestimated spending for non-NRM and use the results to improve future, non-NRM budget estimates. GAO also recommends that VA provide networks with written guidance for prioritizing below-threshold NRM projects. VA concurred with GAO's recommendations.