Veterans' Health Care: Improvements Needed to Ensure That Budget Estimates Are Reliable and That Spending for Facility Maintenance Is Consistent with Priorities
Published: 2013-02-22T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.
section_title: What GAO Recommends
paragraphs: 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.

section_title: Letter
paragraphs: The Department of Veterans Affairs (VA) is one of the nation’s largest  health care systems. VA operates more than 150 hospitals, 130 nursing  homes, and 800 outpatient clinics providing health care services to more  than 6 million patients in fiscal year 2012. Many of the buildings in   which VA’s medical facilities are housed, however, were built more than  50 years ago and may not be suitable for providing accessible, high- quality, and cost-effective health care in the 21st century. One way in  which VA addresses these building deficiencies and modernizes its  medical facilities is by performing various maintenance and improvement  projects—referred to as non-recurring maintenance (NRM). NRM  projects include remodeling space used to deliver mental health or other  clinical services; replacing roofing, windows, and doors; upgrading  heating, ventilation, and air conditioning systems; and repaving roads and  parking lots. VA spent about $1.5 billion on NRM in fiscal year 2012 and  estimates the cost of addressing all existing building deficiencies—known  as the NRM backlog—to be over $9 billion.
While the amount of funding VA receives for its health care services— which includes resources for NRM—is determined by Congress in the  annual appropriations process, VA has flexibility as to how the agency  allocates its resources. In preparation for the appropriations process, VA  develops estimates of the resources needed to provide health care  services to veterans. These estimates are subsequently used to help  inform the President’s budget request to Congress for VA health care   In particular, VA’s estimates for NRM help inform the  appropriations.
President’s request for VA’s Medical Facilities appropriations account— one of three appropriations accounts used for VA health care services. At  the beginning of each fiscal year, VA performs an initial allocation of most  of its health care appropriations to its 21 health care networks. During the  course of a fiscal year, however, VA and its networks have the flexibility  to increase or decrease the amounts available for a specific program or  activity, such as NRM, within applicable authority.
In recent years, we have highlighted VA’s higher than estimated spending  on NRM, and the agency’s budget estimates. In June 2011 we reported  that VA’s spending for NRM exceeded its budget estimates for fiscal  years 2006 through 2010. Similarly, in June 2012, we reported that this  pattern for NRM spending continued in fiscal year 2011 and, according to  VA officials, was the result of VA medical facilities spending more on  NRM using resources that were originally intended for other, non-NRM  activities funded from the Medical Facilities account, such as utilities and  janitorial services. Furthermore, in fiscal year 2012, VA’s spending on  NRM again exceeded its estimates. In our June 2012 report, we  recommended that VA ensure that its NRM estimates fully account for the  long-standing pattern of medical facilities spending more on NRM than  VA estimated. VA agreed with our recommendation, noting that future  annual estimates of resources needed for NRM will be consistent with  policy decisions and will account for past spending levels on NRM.
In light of our previous findings, you asked us to further review VA’s  spending for NRM. In this report we examine, 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.
To examine the factors that accounted for the pattern of NRM spending  exceeding VA’s budget estimates in fiscal years 2006 through 2012, we  reviewed and analyzed data related to VA’s Medical Facilities  appropriations account. In particular, we compared estimated and actual  amounts for VA’s spending for NRM and non-NRM activities, and  estimated and actual amounts for annual appropriations and other budget  resources. We also reviewed VA’s congressional budget justifications for  fiscal years 2006 through 2012. We interviewed knowledgeable officials  from VA’s Veterans Health Administration’s (VHA) Office of Finance and  Office of Capital Asset Management Engineering and Support. We also  interviewed officials from 2 of VA’s 21 health care networks—Network 4  (Pittsburgh, Pennsylvania) and Network 16 (Jackson, Mississippi) to  inquire about networks’ effect on VA’s NRM spending. We selected these  networks because they were among the networks whose spending on  NRM exceeded their initial allocation the most in fiscal years 2006  through 2012. While our selection allowed us to obtain additional insight  into how networks manage spending related to estimates, the information  is not representative of VA’s 21 networks. As part of these interviews, we  explored with VA officials why VA’s NRM spending exceeded the  agency’s estimates based on experience in their networks regarding initial  allocations for NRM and the amounts spent for NRM during the fiscal  year.
To determine how, for fiscal years 2006 through 2012, VA allocated NRM  resources to its 21 networks, we analyzed detailed NRM allocation data.  We also reviewed relevant documentation, including manuals for VA’s  Veterans Equitable Resource Allocation (VERA), congressional budget  justifications, and applicable laws and regulations.  We interviewed  knowledgeable officials from VHA’s Office of Finance and Office of  Capital Asset Management Service to inquire about VA’s allocation of  resources to networks for NRM.
VERA is a national, formula-driven system used by VA to allocate most of its health care  appropriations to its 21 health care networks.
To examine VA’s process for prioritizing NRM spending for fiscal years  2006 through 2012, we reviewed VA’s policies for its NRM program,  including VHA Directive 1002.1, Non-Recurring Maintenance Program  and VA Handbook 0011, Strategic Capital Investment Planning Process,  and other related documentation. We also interviewed knowledgeable  officials from VHA’s Office of Finance and Office of Capital Asset  Management Engineering and Support and from our two selected health  care networks to inquire about VA’s process for prioritizing NRM projects  and request relevant documentation. We assessed to what extent VA  established formal written policies documenting its guidance for  prioritizing NRM spending.NRM projects were consistent with VA’s NRM priorities, we analyzed data  on planned and funded NRM projects for fiscal years 2006 through 2012.  We interviewed officials from our two selected networks to corroborate  information we received from VA headquarters officials and to inquire  about VA’s NRM priorities and spending at the network level. We also  reviewed documentation related to VA’s current process for monitoring  NRM spending and interviewed knowledgeable officials from VHA’s Office  of Capital Asset Management Engineering and Support.
To determine the extent to which funded  To assess the reliability of VA’s estimated and actual spending for its  Medical Facilities appropriations account, we verified the consistency of  the data we received from VA with amounts contained in VA’s  congressional budget justifications for fiscal years 2006 through 2012. To  assess the reliability of VA’s allocation of NRM resources, we verified the  consistency of the data with information and amounts reported in the  VERA manuals for fiscal years 2006 through 2012 and applicable laws.  We discussed these data as well as the data on planned and funded  NRM projects with VA officials. We also relied on our prior work to  compare data and check for internal consistency. We found the data  reliable for the purposes of this report.
We conducted this performance audit from July 2012 through February  2013 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: In support of the President’s annual budget request for VA health care  services, which includes a request for advance appropriations, VA  develops a budget estimate of the resources needed to provide such  services for 2 fiscal years. Typically, VHA starts to develop a health care  budget estimate approximately 10 months before the President submits  the budget request to Congress in February. This is approximately   18 months before the start of the fiscal year to which the request relates  and about 30 months prior to the start of the fiscal year to which the  advance appropriations request relates. VA’s health care budget estimate  includes estimates of the total cost of providing health care services as  well as costs associated with management, administration, and  maintenance of facilities. VA develops most of its budget estimate for  health care services using the Enrollee Health Care Projection Model.  VA uses other methods to estimate needed resources for long-term care,  other services, and health-care-related initiatives proposed by the  Secretary of Veterans Affairs or the President.
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 most of its health care resources for these three accounts  through VERA—a national, formula-driven system—at the beginning of  each fiscal year and allocates additional resources throughout the year.  VA allocates about 80 percent of the health care appropriations to its   21 health care networks through VERA. VA uses methods other than  VERA to allocate the remaining resources to networks and medical  centers for such programs as prosthetics, homeless grants, and state  nursing homes. VA may also use methods other than VERA to allocate  any additional resources it may receive from Congress during the year.  The networks in turn allocate resources received through VERA and other  methods to their respective medical facilities, as part of their role in  overseeing all medical facilities within their networks. In addition to  amounts allocated to networks and medical facilities at the beginning of  the fiscal year, VA also sets aside resources from each of VA’s three  health care appropriations accounts—in what is known as a national  reserve—so that resources are available for contingencies that may arise  during the year. In general, VA allocates resources from the national  reserve to match network spending needs for each appropriations  account.
Within each appropriations account, VA also has flexibility as to how the  resources are used. For example, within the Medical Services account,  VA has the authority to use resources for outpatient services instead of  hospital services, should the demand for hospital services be lower than  expected and demand for outpatient services be higher. In a similar  manner, VA has the authority to use resources in the Medical Facilities  account for NRM instead of non-NRM activities—such as utilities—should  spending for those activities be less than estimated.
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. This pattern continued in fiscal year 2012 when VA  spent about $1.5 billion for NRM, which was $622 million more than  estimated. (See fig. 1.)
To help inform its budget estimates for NRM, VA collects information on  facility repair and maintenance needs as part of an ongoing process to  evaluate the condition of its medical facilities. VA conducts facility  condition assessments (FCA) at each of its medical facilities at least   once every 3 years. VA uses contractors to conduct FCAs, and these  contractors are responsible for inspecting all major systems   (e.g., structural, mechanical, plumbing, and others) and assigning each a  grade of A (for a system in like-new condition) through F (for a system in  critical condition that requires immediate attention). As part of this  assessment, the contractors use an industry cost database to estimate  the correction costs for each system graded D or F. According to VA  officials, the agency’s reported NRM backlog represents the total cost of  correcting these FCA-identified deficiencies.
section_title: Availability of Higher Than Estimated Resources Accounted for NRM Spending That Exceeded Budget Estimates
paragraphs: 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.
Lower than estimated non-NRM spending. 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. When  we asked why VA spent more on NRM projects than estimated, VA  officials said one reason was that the agency spent less than it estimated  on non-NRM activities and that the most practical use of these unspent  resources was to increase spending on NRM because of the large  backlog of FCA-identified deficiencies. VA officials further explained that  VA spent less for non-NRM activities than anticipated because of a  decrease in the demand for utilities and other weather-dependent non- NRM activities because of mild weather patterns during the last four  winters. However, lower spending on these weather-dependent activities  only accounted for $460 million—18 percent—of the resources eventually  used for NRM. The remaining 82 percent eventually used for NRM came  from resources originally intended to be used for various other activities,  including administrative functions and rent. VA has consistently  overestimated spending for these non-NRM activities, and if the agency  continues to determine estimates for such activities in the same way, its  future budget estimates of spending for non-NRM may not be reliable.
Higher than estimated budget resources. VA had more budget resources  available in its Medical Facilities account than the agency estimated it  would have, and this allowed VA to spend over $2.3 billion more on NRM  than it originally estimated. When we asked why VA spent more on NRM  projects than estimated, VA officials said that in addition to spending less  on non-NRM activities the agency also received higher annual  appropriations than requested and unanticipated supplemental  appropriations from Congress. 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 also  received $550 million in supplemental appropriations as part of the U.S.  Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq  Accountability Appropriations Act, 2007.appropriations were specifically for NRM.
In addition to higher annual appropriations and supplemental  appropriations, we also found that VA used other budget resources to  increase NRM spending. The budget resources included transfers from  VA’s other appropriations accounts, reimbursements for services  provided under service agreements with the Department of Defense, and  unobligated balances carried over from prior fiscal years. While,  according to VA officials, the agency did not track the use of specific  resources used to increase NRM spending, data provided by VA  suggests that more than $1.8 billion from higher than requested  appropriations and about $762 million from other budget resources were  available for this spending in fiscal years 2006 through 2012.
section_title: VA Used VERA to Allocate Most NRM Resources at the Start of a Fiscal Year and Network Requests to Allocate Additional NRM Resources Later
paragraphs: 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. Figure  3 shows the nearly $7.5 billion allocated for NRM using VERA and other  methods, which included network estimated costs to maintain medical  facilities in good working condition—that is for sustainment—and costs to  address the NRM backlog of FCA-identified deficiencies for fiscal years  2006 through 2012.
Over the course of allocating about $4.6 billion for NRM using VERA  between fiscal years 2006 and 2012, VA changed VERA’s NRM  allocation formula from one being based primarily on patient workload in  the networks to one that primarily considers both sustainment of buildings  and the NRM backlog in each network. Prior to fiscal year 2009, VA used  VERA to allocate nearly $1.5 billion of NRM resources on the basis of  patient workload and adjusting the cost of construction. Under this  formula, networks that treated the largest number of patients received the  most resources for NRM, according to VA officials. Beginning in fiscal  year 2009, VA used VERA to allocate resources for NRM primarily based  on each network’s estimated cost for sustainment and the cost for  addressing the NRM backlog. VA used VERA to allocate about   $2.6 billion from fiscal year 2009 through 2012—which according to VA  officials resulted in more resources being allocated to networks with a  higher proportion of more expensive building space. In addition, since  fiscal year 2009, VA has also used VERA to allocate about $512 million to  NRM projects that improve access or provide accommodations for  specific health care services, such as research, women’s health, and  mental health, and certain other NRM projects.
In fiscal years 2009 and 2010, VA allocated more than $1.4 billion of  higher than requested Medical Facilities appropriations using methods  other than VERA. Over the course of both fiscal years, VA allocated   $1 billion of supplemental appropriations included in the Recovery Act  mostly on the basis of each network’s estimated cost of addressing FCA- identified deficiencies, according to VA officials. In both fiscal years,  Congress also provided higher appropriations in the Medical Facilities  account than the President requested, in part, to fund additional NRM  projects. In providing these higher appropriations for NRM, Congress  required VA to allocate a specific amount using methods other than  VERA. In fiscal year 2009, VA allocated $300 million based on each  network’s estimated cost of addressing the NRM backlog of FCA- identified deficiencies. the basis of networks’ estimated sustainment costs and their cost to  address the NRM backlog.
See Pub. L. No. 110-329, div. E, tit. II, 122 Stat. 3574, 3705 (2008). the backlog of FCA-identified deficiencies.Medical Facilities appropriations in the reserve that are not used for non- NRM purposes are available for NRM. The Under Secretary for Health  determines whether funds in the reserve are available and recommends  allocations of those funds to the Secretary of Veterans Affairs, who  approves the allocations. VA officials explained that the allocation of  funds from the reserve for NRM were typically based on sustainment  costs as well as the cost of addressing FCA-identified deficiencies and  other VA NRM priorities, such as VA’s energy investment “Green”  initiatives. These allocations are also subject to the networks’ ability to  award the projects and obligate the additional funds prior to their  expiration. 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.
section_title: VA Relied on Networks to Prioritize NRM Spending before Centralizing Prioritization Recently for More Costly Projects, and Spending Was Generally Consistent with Priorities
paragraphs: 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.
subsections: section_title: VA Relied on Networks to Prioritize NRM Spending before Centralizing This Process for More Costly Projects in Fiscal Year 2012
paragraphs: For fiscal years 2006 through 2011, VA relied on its networks to prioritize  projects for NRM spending. Each fiscal year, networks provided VA  headquarters with a list of prioritized NRM projects, known as NRM  operating plans. According to officials from headquarters and the two  selected networks, NRM operating plans represented all of the NRM  projects that a network plans to fund and carry out in a given year. VA  officials told us that to prioritize NRM projects during this period, the  networks used oral guidance communicated to the networks during  management meetings with VA headquarters that encouraged the  networks to prioritize projects addressing critical FCA-identified  deficiencies and sustainment.
Beginning in fiscal year 2012, VA changed its process for prioritizing more  costly NRM projects. 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. Through SCIP, VA headquarters evaluates these more costly NRM  projects and other types of capital investment projects using a set of  weighted criteria in order to develop a list of prioritized projects to guide  the agency’s capital planning decisions.threshold for including NRM projects in this centralized prioritization  process was $1 million. VA used this process to identify 190 projects as  the agency’s highest NRM priorities for fiscal year 2012. 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.
While VA uses SCIP to prioritize more costly NRM projects, the networks  remain responsible for prioritizing all other or “below-threshold” NRM  projects. However, VA has not provided its networks with written policies  on how to prioritize these projects. According to a VA official, in fiscal   year 2012, below-threshold projects accounted for over $625 million or   42 percent of VA’s NRM spending. According to officials, instead of  providing written guidance, VA officials have orally encouraged the  networks to apply the same criteria included in SCIP when prioritizing  below-threshold NRM projects.
VA’s lack of written policies for prioritizing below-threshold NRM projects   which specify that  is inconsistent with federal internal control standards,agency policies should be documented and that all documentation should  be properly managed and maintained. Without written policies that clearly  document VA’s guidance to networks for prioritizing these less costly  NRM projects, there is an increased risk that networks may not apply, or  may inconsistently apply, the criteria included in SCIP.
section_title: Funded NRM Projects Were Generally Consistent with VA Priorities
paragraphs: Our review of VA data shows that for fiscal years 2006 through 2011 the  majority of the NRM projects that were funded by the networks were  projects that the networks had prioritized in their operating plans.  Specifically, in each year during this period, at least 85 percent of the  NRM projects the networks funded were listed in the networks’ operating  plans. For example, of the 2,905 NRM projects that networks funded in  fiscal year 2011, over 2,400 projects (85 percent) were listed on the  operating plans. When asked about funded projects that were not listed  on networks’ operating plans, VA officials told us that networks may fund  NRM projects in response to emerging needs during the course of the  year.
For fiscal year 2012, our analysis of VA data also shows that NRM  projects funded that year were generally consistent with projects  prioritized using SCIP and those prioritized by the networks in their  operating plans. Specifically, in fiscal year 2012, 189 NRM projects that  were prioritized through the SCIP process received funding. Moreover, as  figure 4 shows, of the 1,909 NRM projects that were funded by the  networks outside of the SCIP process in fiscal year 2012, 1,668   (87 percent) were listed on the networks’ 2012 operating plans. This  consistency notwithstanding, because VA has not provided its networks  with written policies for prioritizing below-threshold projects, the agency  faces an ongoing risk that NRM projects could be funded in a manner  inconsistent with the SCIP criteria.
Officials at VA headquarters have taken several steps in recent years to  better monitor NRM spending to ensure that funded projects were  consistent with the agency’s priorities. In fiscal years 2009 and 2010, in  compliance with congressional requirements, VA tracked and reported  spending on NRM projects that used funding provided through the  Recovery Act. Recognizing the value of such monitoring, VA  headquarters officials decided to expand efforts tracking NRM spending  by project on a monthly basis. Since fiscal year 2011, VA has used what it  calls its capital assets database to manage and monitor NRM spending  on a monthly basis. As part of these efforts, VA has instructed its project  managers to update the information on each project on a monthly basis  and review tracking reports to ensure that spending for each project is  within its estimated cost. VA officials told us that there are new efforts  under way to improve the data reliability of the capital assets database  and to incorporate its tracking reports into the SCIP process.
section_title: Conclusions
paragraphs: Our work shows that VA has consistently spent more on NRM than  estimated because of the availability of higher than estimated resources  in its Medical Facilities account. These additional resources derived from  lower than estimated spending for non-NRM activities and higher than  requested appropriations. 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. Thus, given the  underestimates for these activities, VA’s future budget estimates for non- NRM activities in its budget justification may not be reliable if the agency  continues to determine its estimates in the same way.
VA has taken important steps in establishing a centralized process for  prioritizing more costly NRM projects through SCIP, and during the period  we reviewed, VA’s funded NRM projects were generally consistent with  agency priorities. 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. Spending on these  projects is not insignificant: in fiscal year 2012, spending on projects  below the threshold was over $625 million or 42 percent of VA’s spending  on NRM. Without written policies that clearly document VA’s guidance to  networks for prioritizing below-threshold NRM projects, VA faces a  continued risk that its networks may not apply, or may inconsistently  apply, the criteria included in SCIP when funding these projects.
section_title: Recommendations for Executive Action
paragraphs: 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.
section_title: Agency Comments
paragraphs: We provided a draft of this report to the Secretary of Veterans Affairs for  comment. In the agency’s comments—reprinted in appendix I—VA  concurred with both of our recommendations. In concurring with our first  recommendation regarding improvements needed in its estimates for  non-NRM activities, VA noted that the budget formulation process has  been modified to include a better synchronization of events that play a  significant role in the overestimated spending for non-NRM activities. VA  stated that this modification has been incorporated in the fiscal year 2014  President’s budget. In concurring with our second recommendation  regarding written guidance on the application of SCIP criteria to  prioritization of below-threshold NRM projects, VA noted that the NRM  handbook and related guidance will be updated to direct facilities and  networks to apply SCIP criteria when prioritizing below-threshold NRM  projects. In addition, networks’ Capital Asset Managers, who are  responsible for monitoring and evaluating each network’s NRM program,  will be required to review below-threshold NRM projects included in a  network’s operating plan. VHA’s Office of Capital Asset Management  Engineering and Support will also review networks’ operating plans to  ensure compliance.
We are sending copies of this report to the Secretary of Veterans Affairs  and appropriate congressional committees. In addition, the report will be  available at no charge on the GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or williamsonr@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs are on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix II.
section_title: Appendix I: Comments from the Department of Veterans Affairs
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, James C. Musselwhite,   Assistant Director; Krister Friday; Aaron Holling; Lisa Motley; and   Said Sariolghalam made key contributions to this report.
section_title: Related GAO Products
paragraphs: Veterans’ Health Care Budget: Better Labeling of Services and More  Detailed Information Could Improve the Congressional Budget  Justification. GAO-12-908. Washington, D.C.: September 18, 2012.
Veterans’ Health Care Budget: Transparency and Reliability of Some  Estimates Supporting President’s Request Could Be Improved.   GAO-12-689. Washington, D.C.: June 11, 2012.
VA Health Care: Estimates of Available Resources Compared with Actual  Amounts. GAO-12-383R. Washington, D.C.: March 20, 2012.
Veterans Affairs: Issues Related to Real Property Realignment and  Future Health Care Costs. GAO-11-877T. Washington, D.C.: July 27,  2011.
Veterans’ Health Care Budget: Changes Were Made in Developing   the President’s Budget Request for Fiscal Years 2012 and 2013.   GAO-11-622. Washington, D.C.: June 14, 2011.
VA Health Care: Need for More Transparency in New Resource  Allocation Process and for Written Policies on Monitoring Resources.  GAO-11-426. Washington, D.C.: April 29, 2011.
VA Real Property: Realignment Progressing, but Greater Transparency  about Future Priorities Is Needed. GAO-11-521T. Washington, D.C.:   April 5, 2011.
VA Real Property: Realignment Progressing, but Greater Transparency  about Future Priorities Is Needed. GAO-11-197. Washington, D.C.:  January 31, 2011.
Veterans’ Health Care: VA Uses a Projection Model to Develop Most of  Its Budget Estimate to Inform President’s Budget Request. GAO-11-205.  Washington, D.C.: January 28, 2011.
VA Health Care: Overview of VA’s Capital Asset Management.   GAO-09-686T. Washington, D.C.: June 9, 2009.
VA Health Care: Challenges in Budget Formulation and Issues  Surrounding the Proposal for Advance Appropriations. GAO-09-664T.  Washington, D.C.: April 29, 2009.
VA Health Care: Challenges in Budget Formulation and Execution.   GAO-09-459T. Washington, D.C.: March 12, 2009.
VA Health Care: Long-Term Care Strategic Planning and Budgeting Need  Improvement. GAO-09-145. Washington, D.C.: January 23, 2009.
VA Health Care: VA Should Better Monitor Implementation and Impact of  Capital Asset Alignment Decisions. GAO-07-408. Washington, D.C.:  March 21, 2007.
VA Health Care: Budget Formulation and Reporting on Budget Execution  Need Improvement. GAO-06-958. Washington, D.C.: September 20,  2006.
VA Health Care: Preliminary Findings on the Department of Veterans  Affairs Health Care Budget Formulation for Fiscal Years 2005 and 2006.  GAO-06-430R. Washington, D.C.: February 6, 2006.