United States Government Accountability Office

Washington, DC 20548 

May 16, 2007 

Congressional Committees 

Subject: Department of Veterans Affairs’ Lack of Timely and Accurate Information 

on Unexpended Balances Limits Effective Management and Congressional Oversight 

The Department of Veterans Affairs (VA) holds about 5 percent of the real property 

owned by the federal government in terms of building floor area, including such 

facilities as hospitals and office buildings. VA’s responsibility for managing its real 

property includes the construction of its facilities and cemeteries. Because these 

construction projects can span several years, VA is authorized to carry forward fund 

balances from year to year in its construction accounts. VA is responsible for 

keeping track of and managing these balances to ensure that any unexpended 

balances that remain after construction projects are completed are redirected to 

other construction project needs within the agency.1

 

VA’s budgets for new construction exist in two accounts—Major Construction and 

Minor Construction—which are funded as separate line items within the 

appropriation.2

 For purposes of this report, we refer to the Major and Minor 

Construction accounts as VA’s construction accounts. Construction projects 

undertaken to replace existing facility components are funded through the NonRecurring Maintenance (NRM) portion of the Medical Facilities budget account. For 

purposes of this report, we refer to the NRM as VA’s facility account. 

Under the Comptroller General’s authority to conduct evaluations on his own 

initiative, and as part of a continued effort to assist Congress in overseeing real 

property management issues, we examined VA’s management of unexpended 

construction balances.3

 Specifically, we addressed the following question: To what 

extent does VA have readily available information about unexpended balances in its 

construction and facility accounts to effectively manage these funds? 

 1

Unexpended balances are the cumulative total of past fiscal years’ unobligated and obligated-but-notyet-outlayed balances. 

2

At the time of our review, major construction projects were those estimated to cost more than $7

million, while minor construction projects were those estimated to cost $7 million or less. See P.L. 

109-114, 119 STAT. 2386-2387; 38 USC 8104(a)(3)(A). 

3

GAO, High-Risk Series: Federal Real Property, GAO-03-122 (Washington, D. C.: January 2003); HighRisk Series: An Update, GAO-07-310 (Washington, D. C.: January 2007). 

 GAO-07-410R Veterans Affairs 
To do this work, we reviewed the President’s fiscal years 2006 and 2007 budgets, VA’s 

fiscal year 2007 congressional budget justification, previous years’ appropriations 

laws, conference reports, committee reports, VA Inspector General (IG) reports, and 

previous GAO reports. We reviewed Office of Management and Budget (OMB) 

guidance for budget preparation, Circular A-11. We limited our review to VA 

construction and facility budgets. We reviewed project financial information, project 

management information, and facility financial information provided by two of VA’s 

agency entities—the Veterans Health Administration (VHA) and the National 

Cemetery Administration (NCA). We interviewed VA Washington, D. C., headquarters 

officials in budget, finance, and construction management. Working with these 

officials, we obtained budget authority and obligated and unexpended balances for 

each project, identified and verified all financial information gathered, and verified 

shortcomings we identified in gathering this information. We determined that the 

information was adequate for our purposes. We conducted our review from February 

2006 to April 2007 in accordance with generally accepted government auditing 

standards.

Results in Brief

VA did not have readily available information in its construction and facility accounts 

about unexpended balances that were no longer needed and could have been 

redirected to other needs. Two issues hindered VA officials from identifying these 

unexpended balances in a timely manner. First, VA’s systems lacked readily available 

information to track projects and provide timely and accurate information to VA

management. For example, it took several months for VA to provide us with 

corrected information on VHA and NCA construction projects. Second, VA lacked 

effective policies and procedures for identifying unexpended balances when 

construction projects are completed and the funds designated for those projects are 

no longer needed. For example, instead of identifying construction projects as they 

are completed, VA identified projects for closure on an ad hoc basis. As a result of 

these two issues, unexpended balances on completed construction project accounts 

have been allowed to accumulate. We identified about $11 million in unexpended 

balances from completed construction projects during our review. Although these 

unexpended balances were small compared to VA’s fiscal year 2007 congressional 

budget submission of $597 million for its construction accounts, the inability to track 

these funds leaves VA vulnerable to larger balances accumulating and not being 

redirected in a timely manner to other construction project needs within the agency. 

Furthermore, VHA lacks tools to monitor financial project information in its facility 

account projects at its Washington, D. C., headquarters. 

Although there were no unobligated construction balances from completed projects 

in VHA’s facility accounts, there was a related issue concerning its practice of

obligating most facility funds in the last month of the fiscal year, which poses a risk. 

For example, in September 2006, VA obligated about $248 million—almost 60 percent 

of its approximately $424 million facility budget—even though OMB apportions 

VHA’s Medical Facilities appropriation (which contains facility funding) quarterly. 

Our past work has shown that year-end spending can place government programs at 

Page 2 GAO-07-410R Veterans Affairs
risk for waste. Additionally, the fiscal year 2006 appropriations act required VA to 

submit a quarterly report on the financial status of VHA to the Committees on 

Appropriations of both Houses of Congress, and the accompanying Conference 

Report specified that the quarterly report include the status of the facility account 

funds.4

 GAO reported in September 2006 that VA did not include the status of the 

facility account funds in the three quarterly reports that VA had provided. Our review 

found that VA’s two subsequent reports on the financial status of VHA—for the fourth 

quarter of fiscal year 2006 and the first quarter of fiscal year 2007—reported the 

status of NRM funds. However, in these reports, VA did not explain (1) its practice of 

holding the majority of NRM funds from OMB’s quarterly apportionment until the end 

of the fiscal year and (2) its use of the $69 million difference between planned and 

actual NRM funds for fiscal year 2006. We are making recommendations to VA aimed 

at strengthening its ability to manage and track unexpended balances and reporting 

the status of facility account funds to Congress. VA agreed with our 

recommendations related to tracking and managing unexpended balances that could 

be redirected but disagreed with our recommendation to be more transparent with 

regard to reporting NRM funds in its quarterly reports to the Committees on 

Appropriations of both Houses of Congress. 

 

Background 

VA receives funding for major and minor construction projects as separate line items 

within its appropriation. Funds for projects considered to be major construction 

must be specifically authorized by law before they are appropriated.5

 Typically, 

major and minor construction project funds that are not NRM are appropriated as 

“no-year” money (that is, the funding is available until expended without time 

constraints). As shown in table 1, for fiscal year 2007, VA requested $399 million for 

major construction projects and $198 million for minor construction projects.6

 As 

also shown in table 1, in VA’s fiscal year 2007 congressional budget submission, two 

entities were responsible for almost 90 percent of the funds requested for VA’s 

construction accounts—VHA ($457 million) and NCA ($78 million). 

 4

Section 222 of P.L. No. 109-114; H. R. Rep. No. 109-305, at 50 (2005) (Conf. Rep.). 

5

38 USC 8104(a) (2).

6

Department of Veterans Affairs FY 2007 Budget Submission, “Construction and 5 Year Capital 

Plan,” Volume 3 of 4, 1-1, Office of Management and Budget, Budget of the United States Government, 

Fiscal Year 2007 (Washington, D. C., Feb. 6, 2006), 980 - 981. 

Page 3 GAO-07-410R Veterans Affairs
Table 1: VA’s Fiscal Year 2007 Construction Request by Organization 

Dollars in millions

Agency Major construction aMinor construction aTotal request 

Veterans Health $307 $150 $457 

Administration 

National 

Cemetery

Administration

53 25 78 

Veterans Benefits

Administration 

0 14 14 

Staff Offices 38 9 47 

Total b$399 $198 $597 

Source: GAO analysis of VA fiscal ye 07 congressional budget s ission. 

nstruction projects are gr an $7 million; minor c projects, $7 mil

less. 

ation Medical 

ilable to be obligated only in 

e fiscal year it is appropriated. VA requested almost $514 million for its NRM, 

of

ility

l

s collectively

otaling approximately $1 billion dollars—$966 million in the Major Construction 

uction and Facility Funds 

ive management of these funds at 

HA and NCA. Furthermore, different VA systems contained conflicting information 

and errors. VA headquarters officials in Washington, D. C., took several months to 

 

ar 20 ubm

a Major co eater th onstruction lion or

b Non-Recurring Maintenance is identified within VA’s Veterans Health Administr

Facilities Land and Structures budget and not included in this total. 

The funds VA receives for Medical Facilities, which includes NRM construction

projects, are primarily annual (1-year) funding that is ava 7 th

which is about 99 percent of the nearly $519 million Land and Structures portion

VHA’s Medical Facilities congressional budget submission.

8

 According to VHA 

headquarters officials, NRM projects are those undertaken to replace existing fac

components, whereas major and minor projects are generally new work. Past NRM

projects include replacements of a power plant, roofs, and elevators. 

In the President’s budget for fiscal year 2007, it was estimated that at the end of fisca

year 2006 its construction accounts would contain unexpended balance

t

account and $61 million in the Minor Construction account. VA informed us that the 

facility account did not have any unobligated balances as of September 2006, the end 

of the fiscal year. 

VA Lacks Readily Available, Accurate Data on Unexpended Balances Needed 

to Manage Constr

VA did not have readily available information about unexpended balances in its 

construction and facility accounts to ensure effect

V

7

P.L. 109-114, 119 STAT. 2385. 

8

Department of Veterans Affairs FY 2007 Budget Submission. “Medical Programs,” Volume 1 of 4, 5-

13, Office of Management and Budget, Budget of the United States Government, Fiscal Year 2007 

(Washington, D. C., Feb. 6, 2006), 961. 

Page 4 GAO-07-410R Veterans Affairs
provide us with information we requested on major and minor construction proje

Specifically, in response to our request in May 2006, it took VHA almost 2 months to 

identify 64 major projects that could be closed and almost 5 months to identify minor 

project funds that could be reallocated.9

 In response to our request in June 2006, it 

took NCA almost 3 months to identify 21 major projects that could be closed and 

minor project funds that could be reallocated. 

We found that VA’s systems lacked readily available and accurate information to 

track projects and provide to VA management for the following types of project 

accounts we reviewed. 

cts.

.

rovided construction data for those projects that had been 

generated by (1) its Financial Management System (FMS), which listed 1,466 

ls

tive

l

• s

roject that were entered in headquarters. According to these officials, a 

list of projects was not normally compiled and, thus, was unavailable. 

ms. Of

 

• VHA Minor Projects. VHA provided documents—generated from different

systems—that contained conflicting information and mathematical errors

Specifically, VHA p

projects with about $256 million in unobligated funds, and (2) its Project 

Tracking Report (PTR), which listed 701 projects. VHA headquarters officia

in Washington, D. C., told us FMS listed more projects than PTR because it did

not delete projects that are closed out. We also found almost $1 million in 

math errors in the FMS document, along with some projects showing nega

balances. VHA headquarters officials confirmed the mathematical errors and 

stated that the negative balances reflected interest payments on invoices that 

had not been paid promptly. VA officials explained that to comply with the

prompt payment requirements, interest charges are paid automatically by an 

electronic payment system, which takes the funds from an account other than

the project account.10 Because the system did not notify VA management that 

the interest charges had been paid, the project had a negative balance. As a

result of our review, VHA made several corrections to its project and financia

data. 

NCA Minor Projects. NCA headquarters officials in Washington, D. C., told u

that its project management information system consisted of text reports on 

each p

Nevertheless, NCA provided data in a spreadsheet that showed contradictory 

financial and project information. Specifically, NCA identified 172 line items 

for minor projects, with projects separated into several line items. Of these, 

there was no information on project status for about 105 project line ite

the almost 67 remaining project line items that contained status information, 

about 44 line items for projects where construction had been completed had 

unexpended balances totaling about $1.5 million. However, NCA data noted 

that reallocations from about 29 project lines, amounting to about $0.9 million, 

had been made. After we requested clarification, NCA headquarters officials 

9

We could not obtain a definitive number of completed minor construction projects from the data 

provided by VHA and NCA. 

105 CFR §1315.10. 

Page 5 GAO-07-410R Veterans Affairs
provided another spreadsheet that listed 97 projects that were no longer 

separated into several line items. Of these, we found about 29 projects with 

unexpended balances totaling about $1.1 million that were identified as having 

construction completed and one project with no project information and 

almost $141,000 in unexpended balances. However, NCA data identified a

24 projects as having reallocations totaling about $0.9 million. Additionally, 

we received an FMS report that showed math errors, lacked project status, 

and had negative balances, similar to the FMS report on VHA’s minor proj

VHA and NCA Major Projects. Both VHA and NCA have an electronic projec

information system to track the status of major projects. However, these 

information systems did not contain readily available data, as both VHA and 

bout

ects.

• t

NCA relied on contacting project management personnel to update the project 

A relat te

projec

design cts that have funds remaining in 

HA’s and NCA’s Major and Minor Construction accounts. We found in past work 

s

ies some

ts that

along with about $2.1

illion of unexpended balances from minor projects. Also, as a result of our review, 

,

le

in

 

status before providing these data to us. 

ed issue compounds these problems with the lack of readily available, accura

t information in VA’s systems. VA lacks effective policies and procedures 

ed to identify completed construction proje

V

that clear, consistent, and enforceable policies and procedures can help ensure the 

best value when acquiring goods and services. 11 However, VHA and NCA lack 

effective policies and procedures related to how completed projects with 

unexpended balances are to be identified, despite the fact that unexpended balance

are common in construction projects and authorized transfers between VA project 

accounts take place. For example, according to VHA headquarters officials in 

Washington, D. C., when active projects need additional funds, VHA identif

completed projects and redirects any unexpended balances to the active projects. 

NCA also periodically identifies completed projects and transfers any unexpended 

balances to other construction projects. For example, in January 2006, NCA 

reallocated about $6.2 million from 13 completed projects. 

As a result of our review, VA reallocated about $11 million in unexpended balances

from completed construction projects. Specifically, from the 64 major projec

VHA found could be closed, it reallocated about $3.8 million,

m

NCA reallocated about $4.2 million from its 21 major projects and about $0.9 million

from unexpended balances for minor projects. While these amounts are small given

the size of VA’s FY 2007 construction budget request of $597 million, VA Washington

D. C., headquarters officials acknowledged that the approximately $11 million in 

unexpended balances that we found were no longer needed for the projects they 

were originally designated for. Also, in some cases the projects had been completed 

for several years. For example, one VHA construction project with a balance of 

almost $100,000 was completed in 1995 but not closed out. Without readily availab

information on completed construction projects with unexpended balances, funds

11GAO, Transportation Security Administration: High-Level Attention Needed to Strengthen 

Acquisition Function, GAO-04-544 (Washington, D. C.: May 2004). 

Page 6 GAO-07-410R Veterans Affairs
these project accounts can accumulate and not be redirected in a timely manner to 

other construction project needs within the agency. 

VHA Non-Recurring Maintenance Construction Projects

We also found during our review that VHA lacks tools to monitor project financial 

formation at its headquarters in Washington, D. C., on NRM construction projects 

hat function as VHA’s 

egional construction oversight offices. VHA headquarters officials do not have 

s use

udget of about $424 million for NRM

ork. Although the funds for NRM within the Medical Facilities account are 

al

o

VA

ire

in

for the 21 Veterans Integrated Service Networks (VISN) t

r

readily available financial information on individual NRM projects, as they have 

access only to FMS summary information. Specifically, VHA headquarters officials 

do not have access to the financial information system that VISN regional office

to track the status of individual NRM projects. 

Furthermore, VHA did not obligate the bulk of NRM funds until September, the last 

month of the fiscal year. For example, in September 2006, VHA obligated almost 60 

percent (about $248 million) of the total NRM b

w

apportioned quarterly by OMB, VHA headquarters officials told us that VHA’s region

officials hold onto the NRM funds in case there are other needs or expenses that 

require funding. VHA headquarters officials also believe that retaining these funds 

and deferring NRM work until the end of the fiscal year gives them flexibility t

address any unforeseen needs or shortfalls that may arise within VHA’s overall 

budget.12 However, these officials also noted that the funds cannot be transferred

from the VHA Medical Facilities account into other VHA medical accounts without 

congressional notification.13 The practice of year-end spending is discouraged in

guidance14 and VA has also published guidance stating that expenditure planning

“should be consistent with the activity’s obligation plan and should reflect the need

for an even and orderly flow of procurements.”15 Our previous work has shown that

when budget execution is not monitored effectively, fiscal year-end spending can be 

wasteful, as agencies sometimes attempt to spend funds that would otherwise exp

and no longer be available for new obligations after the fiscal year ends.16 Therefore,

when the bulk of the NRM funds are not used for unforeseen needs or shortfalls, 

 12GAO, VA Health Care: Budget Formulation and Reporting on Budget Execution Need Improvement,

GAO-06-958 (Washington, D. C.: September 2006).; Department of Veterans Affairs Office of Inspector 

General, Report of Audit: Congressional Concerns over Veterans Health Administration’s Budget 

Execution, Report No. 06-01414-160 (Washington, D. C., June 30, 2006).

s, VA Acquisition 

egulations, Part 807, Acquisition Planning: §807.172.5. 

VA, Office of Acquisition & Material Management, Policies & Regulations, VA Acquisition 

GAO, Year-End Spending: Reforms Underway But Better Reporting and Oversight Needed, 

13Section 216 of P.L. No. 109-114; H.R. Rep. No. 109-305, at 49 (2005) (Conf. Rep.). 

14VA Office of Acquisition & Material Management, Policies & Regulation

R

15

Regulations, Part 807, Acquisition Planning: §807.102.4. 

16

GAO/AIMD-98-185 (Washington, D. C.: July 31, 1998). 

Page 7 GAO-07-410R Veterans Affairs
there is a risk of wasteful year-end spending when the funds, which were apportioned

quarterly, are finally used for the NRM work in the last month of the fiscal year. 

This practice has been brought to the attention of VA management and Congress

rough recent GAO and VA Inspector General reports.17 Furthermore, the fiscal year 

two subsequent reports on the financial status of VHA—one for 

e fourth quarter of fiscal year 2006 and one for the first quarter of fiscal year 2007—

s

or

mount of unexpended balances that could be redirected to support

ther agency priorities is small compared to the size of VA’s construction and 

t

n

ected

g

VA’s ability to efficiently and effectively use all available resources at its disposal. 

Furthermore, congressional oversight of VA has been hindered by VHA’s lack of 

ransparency when reporting on the status of NRM funds in the congressional

 

th

2006 appropriations act required VA to submit a quarterly report on the financial 

status of VHA to the Committees on Appropriations of both Houses of Congress, and 

the accompanying Conference Report specified that the quarterly report should 

include the status of NRM funds.18 GAO reported in September 2006 that VA did not 

include a status of NRM funds in the three quarterly reports that VA provided for

fiscal year 2006.19

 

We found that VA’s

th

reported the balance of NRM funds. In the fiscal year 2006 fourth quarter report, VA

provided an end-of-year summary of obligations and collections that showed the 

actual spending had been 14 percent (almost $69 million) less than planned. In our 

discussions concerning the use of fiscal year 2006 funds, VA officials said the NRM

funds were to be used for other unforeseen needs or shortfalls but did not provide u

with detailed information on their use for such purposes. Furthermore, we found 

that in its financial reports, VA did not explain (1) its practice of holding the majority 

of NRM funds from OMB’s quarterly apportionment until the end of the fiscal year

(2) the unforeseen needs or shortfalls for which it used the variance between planned

and actual NRM spending. VA’s lack of reporting NRM status has hindered 

congressional oversight of these funds. 

Conclusions 

Although the a

o

facilities budget, the sums we found point to larger concerns. Without updated and

current project information, VA did not have readily available information abou

unexpended balances in its construction and facility accounts to ensure effective 

management of these funds at VHA and NCA. Additionally, because VA lacks 

effective policies and procedures designed to identify completed construction

projects with funds remaining in VHA’s and NCA’s Major and Minor Constructio

accounts, much greater amounts could potentially accumulate and not be redir

in a timely manner to other construction project needs within the agency, hinderin

t

quarterly reports that VA provided for fiscal years 2006 and 2007. 

17GAO-06-958; Department of Veterans Affairs Office of Inspector General, Report No. 06-01414-160. 

18Section 222 of P.L. No. 109-114; H. R. Rep. No. 109-305, at 50 (2005) (Conf. Rep.). 

19GAO-06-958. 

Page 8 GAO-07-410R Veterans Affairs
Recommendations for Executive Action 

To help strengthen VA’s ability to track and manage unexpended balances and repo

the status of facility account funds to Congress, we are making four 

recommendations to the Secretary of Veterans Affairs. Specifically, we recomm

that the Secretary establish policies and procedures to 

rt

end

update and keep the project information systems current, 

that will notify 

periodically identify completed projects for close-out and redirect the 

ion project needs

within VA, and 

• rom OMB’s 

quarterly apportionment until the end of the fiscal year and (2) how VA used the 

e financial

ons

of Congress.

We

wri

specific points VA raised. VA concurred with our first, second, and third 

ecommendations—which relate to keeping the electronic project information 

system current, periodically identifying 

ompleted projects for close-out, and redirecting unexpended balances in a timely 

t it is

.0037

ndations that

nt until the 

l

NRM in the quarterly report on the financial status of the Veterans Health 

•

• update and keep current the project financial management system

VA management when payments have exceeded project funding, 

•

unexpended balances in a timely manner to other construct

explain (1) VA’s rationale for holding the majority of NRM funds f

variance between planned and actual NRM in the quarterly report on th

status of the Veterans Heath Administration to the Committees on Appropriati

of both Houses

Agency Comments and Our Evaluation 

provided a draft of this report to VA for review and comment. VA provided 

tten comments, which are reprinted in enclosure I together with our responses to

r

system and electronic financial information

c

manner to other construction project needs within VA. Additionally, VA said tha

updating existing procedures to improve fund recovery from unexpended balances. 

VA further stated that the $11 million in unexpended balances represents

percent of the available budgetary resources, and while this does not excuse the

handling of these individual projects, VA believes it does not point to a 

mismanagement of the program. We did not include a discussion on the materiality

of the unexpended balances in the report—nor did we use the phrase 

"mismanagement of the program" in the report—as we are discussing VA’s inability to

track these project funds, which leaves VA vulnerable to larger balances 

accumulating and not being redirected in a timely manner to other construction

project needs within the agency. VA agreed to work on those recomme

relate to construction projects. 

However, VA disagreed with our fourth recommendation to explain (1) its rationale 

for holding the majority of NRM funds from OMB’s quarterly apportionme

end of the fiscal year and (2) how it used the variance between planned and actua

Page 9 GAO-07-410R Veterans Affairs
Administration to the Committees on Appropriations of both Houses of Congress. 

We agree with VA (1) that agencies do have some flexibility to manage funds within 

pportionment classifications and (2) that VA makes decisions on where to reallocate

s

f NRM

,

to

ny question, please contact me at (202) 512-2834 or 

oldsteinm@gao.gov. Contact points for our Office of Congressional Relations and 

o

,

a

resources to address current issues and needs. Although VA's spending for NRM 

differs from the apportionment OMB sets for the Medical Facilities account as a 

whole, we did not recommend—for the reasons VA cited—an even spending of fund

throughout the year. However, we did not find transparent explanations o

funds in the VA quarterly reports to Congress provided for our review. For example

regarding the OMB apportionments, it would be helpful for Congress to know the 

reasons for the year-end spending of NRM funds. Furthermore, we found that VA is 

not offering transparent explanations of the variances between actual and planned

NRM spending as part of the quarterly report. For example, the explanation VA 

provided was given in a footnote in the last two reports we reviewed (fourth quarter 

of fiscal year 2006 and first quarter of fiscal year 2007) and states that NRM is 

included in the Medical Facilities total and is shown as a non-add item on this table 

(of financial data). As a result, we continue to make this recommendation because

VA’s lack of transparency in reporting NRM status has hindered congressional 

oversight of these funds. 

We are sending copies of this report to interested congressional committees, the 

Secretary of VA, and the Director of OMB. We will also make copies available

others on request. In addition, the report will be available at no charge on the GAO 

Web site at http://www.gao.gov. 

If you or your staffs have a

g

Office of Public Affairs may be found on the last page of this report. GAO staff wh

made key contributions to this report include David Sausville (Assistant Director)

Lindsay Bach, and George Depaoli. 

Mark L. Goldstein

Director, Physical Infrastructure Issues 

Page 10 GAO-07-410R Veterans Affairs
List of Congressional Committees

The Honorable Tim Johnson 

Chairman 

The Honorable Kay Bailey Hutchison 

Ranking Minority Member 

Subcommittee on Military Construction and Veterans’ Affairs 

Committee on Appropriations 

United States Senate 

The Honorable Daniel K. Akaka 

Chairman 

The Honorable Larry E. Craig 

Ranking Minority Member 

Committee on Veterans’ Affairs 

United States Senate 

The Honorable Susan M. Collins 

Ranking Minority Member 

Senate Committee on Homeland Security and Governmental Affairs 

United States Senate 

The Honorable Chet Edwards 

Chairman 

The Honorable Roger F. Wicker 

Ranking Minority Member 

Subcommittee on Military Construction, Veterans’ Affairs, and Related Agencies 

Committee on Appropriations 

House of Representatives 

The Honorable Bob Filner 

Chairman 

Committee on Veterans’ Affairs 

House of Representatives 

The Honorable Michael Michaud

Chairman 

The Honorable Jeff Miller 

Ranking Minority Member 

Subcommittee on Health 

Committee on Veterans’ Affairs 

House of Representatives 

Page 11 GAO-07-410R Veterans Affairs
List of Congressional Committees (cont’d.)

The Honorable Henry A. Waxman 

Chairman 

The Honorable Tom Davis 

Ranking Minority Member 

Committee on Oversight and Government Reform 

House of Representatives 

Page 12 GAO-07-410R Veterans Affairs
Enclosure I 

Comments from Veterans Affairs 

Note: GAO 

comments 

supplementing 

those in the 

report text

appear at the

end of this

enclosure. 

See comment 1. 

See comment 2.

Page 13 GAO-07-410R Veterans Affairs
Enclosure I (cont’d.) 

Page 14 GAO-07-410R Veterans Affairs
Enclosure I (cont’d.) 

Page 15 GAO-07-410R Veterans Affairs
Enclosure I (cont’d.) 

See comment 1.

Page 16 GAO-07-410R Veterans Affairs
Enclosure I (cont’d.)

See comment 3.

See comment 4.

Page 17 GAO-07-410R Veterans Affairs
Enclosure I (cont’d.)

See comment 5.

Page 18 GAO-07-410R Veterans Affairs
Enclosure I (cont’d.)

Page 19 GAO-07-410R Veterans Affairs
The following are GAO’s comments on the Department of Veterans Affairs (VA) letter 

dated April 16, 2007. 

GAO Comments 

1. We agree with VA that agencies do have some flexibility to manage funds 

within apportionment classifications—VA makes decisions on where to 

reallocate resources to address current issues and needs. However, we do not 

find transparency in the quarterly reports to Congress provided for our review 

because VA did not explain (1) its practice of holding the majority of nonrecurring maintenance (NRM) funds from OMB’s quarterly apportionment 

until the end of the fiscal year and (2) the unforeseen needs or shortfalls for 

which it used the variance between planned and actual NRM spending. For 

example the explanatory footnote given in the last two reports (fourth quarter 

of fiscal year 2006 and first quarter of fiscal year 2007) states that NRM is 

included in the Medical Facilities total and is shown as a non-add item on this 

table. Although VA's spending for NRM differs from the apportionment OMB 

sets for the Medical Facilities account as a whole, we did not recommend—for 

the reasons VA cited—an even spending of funds throughout the year. 

Additionally, our report did not find that VA has exceeded OMB’s 

apportionment and, in response to VA’s comments, we have removed the word 

"deviated." However, because VA’s lack of transparency in reporting NRM 

status has hindered congressional oversight of these funds, we continue to 

make this recommendation. 

2. VA reiterated our discussion that unexpended balances were small compared 

to VA’s fiscal year 2007 congressional budget submission of $597 million for its 

construction accounts by describing them as insignificant on a percentage 

basis when measured against the total funding VA has received for Major and 

Minor Construction projects over the past 3 years. However, VA further stated 

that the $11 million in unexpended balances represents .0037 percent of the 

available budgetary resources, and while this does not excuse the handling of 

these individual projects, VA believes it does not point to a mismanagement of 

the program. We did not include a discussion on materiality of the 

unexpended balances in the report—nor did we use the phrase 

"mismanagement of the program" in the report—as we are discussing VA’s 

inability to track these project funds, which leaves VA vulnerable to larger 

balances accumulating and not being redirected in a timely manner to other 

construction project needs within the agency 

3. In providing more details on its belief that information on unexpended 

balances is readily available from its financial system, VA’s comments do not 

address our central concern related to unexpended balances—that is, while it 

is true that VA’s financial systems provide information about unexpended 

balances, they do not identify unexpended balances that are no longer needed 

Page 20 GAO-07-410R Veterans Affairs
and can be directed to other needs. Having such information would allow VA 

to better ensure effective management of these funds and not allow them to 

accumulate. For each project balance, VA had to manually determine whether 

the funds were no longer needed, demonstrating our point that VA is unable to 

make this determination in a systematic manner. 

4. VA agreed with our report that FMS listed all projects, open and closed. VA 

further stated that the closed reports were waiting to be archived. However, 

VA did not provide evidence that any projects had been archived or that it had 

any guidelines or procedures for archiving projects. 

5. VA said that the conclusions should show that policies and procedures are in 

place to identify completed projects and that VA was not hindered in its ability 

to efficiently and effectively use all available resources. As discussed in 

comment 2, our findings focus on the fact that VA does not know when 

unexpended funds are available for other purposes. We clarified the report to 

recognize that policies and procedures exist but have not been effective in 

identifying unexpended balances that could be redirected. 

(543184) 

Page 21 GAO-07-410R Veterans Affairs
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