Veterans' Benefits: More Transparency Needed to Improve Oversight of VBA's Compensation and Pension Staffing Levels
Released: 2004-11-15T00:00:00

Letter

Background

When a veteran submits a claim for disability benefits to a VBA regional office, Veterans Service Center staff process the claim in accordance with VBA regulations, policies, procedures, and guidance. A Veterans Service Representative (VSR) in a Pre-Determination Team develops the claim; that is, assists the claimant in obtaining sufficient evidence to decide the claim. The claim then goes to a Rating Team, where a Rating Veterans Service Representative (also known as a Rating Specialist) makes a decision on the claim, based on the available evidence and VBA’s criteria for benefit entitlement. VSRs also perform a number of other duties, including establishing claims files, authorizing payments to beneficiaries and generating notification letters to claimants, conducting in-person and telephone contacts with veterans and other claimants, and assisting in the processing of appeals of claims decisions.

VBA’s administrative costs, including personnel costs, are funded through VA’s General Operating Expenses account. VBA, as part of VA’s annual budget justification, asks for specific amounts for each of its programs, including compensation and pension programs. Funding is requested to support an estimated full-time equivalent (FTE) employment level. In fiscal year 2003, VBA spent about $878 million to administer its compensation and pension programs. This funding included support for about 9,350 FTEs.

From fiscal year 1998 through 2003, staffing levels for VBA’s compensation and pension programs increased significantly, particularly for staff who process compensation and pension claims at VBA’s 57 regional offices, as shown in figure 1 below. In fiscal year 1998, VBA had 6,770 compensation and pension FTEs; by fiscal year 2003, employment had increased by about 38 percent to 9,352 FTEs. Compensation and pension FTE levels rose by about 900 in fiscal years 2001 and 2002. Staffing levels increased because VBA hired hundreds of new rating specialists and VSRs in anticipation of a large number of future retirements. Also, these additional staff helped VBA respond to a sharp drop in the production of rating- related claims decisions in fiscal year 2001. In fiscal year 2002, these decisions rose from about 481,000 to about 797,000, and to about 827,000 in fiscal year 2003.

In fiscal year 2003, VBA’s 57 regional offices received about 735,000 rating- related claims from veterans and their families for disability benefits. This included about 167,000 original claims for compensation of service- connected disabilities (injuries or diseases incurred or aggravated while on active military duty) and about 434,000 reopened compensation claims. In addition, about 90,000 original and reopened claims were filed for pensions for wartime veterans who have low incomes and are permanently and totally disabled for reasons not service-connected and for their survivors. In addition, VBA received about 28,000 original claims for dependency and indemnity compensation by deceased veterans’ spouses, children, and parents and to survivors of service members who died on active duty.

VBA’s Budget Justification Did Not Clearly Explain the Basis for Its Fiscal Year 2005 Compensation and Pension Staffing Estimates

VBA officials stated that productivity improvements, workload changes, and attrition of experienced claims processing staff are considered throughout the annual budget process. However, VBA’s budget justification did not clearly explain how these factors affected its request. Early in this process, the Compensation and Pension Service makes a budget request that is reviewed by VBA’s Office of Resource Management, under the direction of VBA’s Chief Financial Officer and becomes part of VBA’s total request. VBA’s request eventually becomes part of VA’s overall budget request, which is submitted to the Office of Management and Budget (OMB) for review.

VBA’s fiscal year 2005 budget justification identified a number of initiatives and projections that could affect its staffing levels. For example, implementing specialized claims processing teams in VBA’s regional offices and consolidating pension maintenance work at three regional offices could affect staffing levels. Also, VBA projected it would receive more disability compensation claims than in previous years, based on such factors as the enactment of concurrent receipt legislation in 2003. Specifically, the fiscal year 2005 budget justification stated that VBA expected to receive about 65,000 claims because of the enactment of legislation that allows military retirees with service-connected disabilities rated at 50 percent or higher to receive both VA disability compensation and military retirement pay. VBA officials said that this estimate was included in their negotiations with OMB. Further, VBA noted that it expects many experienced claims processing staff to leave VBA over the next several years.

Despite identifying these factors in its 2005 budget justification, VBA does not specify how such initiatives and projections will affect the number of employees it needs to meet its claims processing performance goals. For example, VBA projected that in fiscal year 2005, the number of original and reopened compensation claims receipts would increase by about 15 and 10 percent respectively from its fiscal year 2004 estimates, and that original and reopened pension receipts would decrease by about 2 percent. However, VBA did not specifically identify how these anticipated workload trends had affected its requested staffing levels or its expected improvements in productivity. VBA’s reduced staffing request was consistent with OMB guidance to agencies to assume increased productivity in their budget requests—for example, to do the same amount of work with fewer employees. However, the budget justification does not describe how its FTE staffing requirements are linked to the specific initiatives and projections that could affect these needs.

Also, VBA’s fiscal 2005 budget justification provides no specific information on its compensation and pension claims processing productivity or on its planned improvements in productivity. VBA expressed confidence that it can improve productivity enough to meet its claims processing goals for fiscal year 2005 with fewer employees, despite a projected increase in the workload of compensation claims. To achieve expected improvements in timeliness and accuracy with fewer employees, while receiving more claims for disability compensation, VBA’s claims processing operations will need to become more productive. However, the budget justification included no measurement of productivity, nor did it identify how it planned to achieve the needed productivity improvements.

Finally, VBA’s fiscal year 2005 budget justification does not explicitly show the impact of budget decisions to shift funding away from initiatives that could improve productivity; such decisions were based on VBA’s emphasis on meeting the Secretary’s 100-day timeliness goal for deciding rating- related claims. According to VBA officials, in fiscal years 2002 and 2003, nonpayroll funds were shifted to help fund increased FTE employment levels in VBA regional office Veterans Service Centers, which are responsible for processing compensation and pension claims. This was done to increase the number of rating-related claims being decided and to meet the Secretary’s fiscal year 2003 goals for improving timeliness and reducing the backlog of undecided claims. For example, VBA used nonpayroll funds to help support about 300 more FTEs than it had originally requested for fiscal year 2002, and about 400 more FTEs than it had originally requested for fiscal year 2003. Specifically, in fiscal year 2002, VBA requested funding for 7,351 compensation and pension FTEs but reported that it actually used 7,663, and in fiscal year 2003, VBA originally requested funding for 7,532 FTEs but reported that it actually used 7,936. According to VBA officials, nonpayroll funds were shifted to help pay increased payroll costs associated with this higher FTE level. In addition, the fiscal year 2003 budget request assumed a 2003 pay raise of 2.6 percent, but the actual pay raise was 3.1 percent. VBA’s fiscal year 2004 and 2005 budgets reflect continued efforts to support as many FTEs as possible through reductions in nonpayroll funding to continue to support improvements in claims processing timeliness.

VBA officials identified training and information technology initiatives that have been delayed because of these cuts in nonpayroll funds. These include delays in developing new Training and Performance Support Systems (TPSS) modules and in updating existing TPSS modules to reflect changes in laws, regulations, and procedures. According to its fiscal year 2005 budget justification, VBA is relying on TPSS to improve productivity by helping new claims processing employees develop needed proficiency more quickly and by helping experienced employees maintain their proficiency. Delays in the progress of TPSS implementation could affect VBA’s productivity, because existing modules may not be as useful as revised modules could be, and advanced modules may continue to be unavailable. VBA requested about $2.6 million for TPSS implementation in fiscal year 2005, including funding to update some existing modules. However, VBA did not explain the impact of delays in developing new training modules and updating existing modules.

Another delayed initiative that could improve productivity is Virtual VA. This initiative involves the scanning of paper records into electronic claims folders. VBA expects efficiency and timeliness to improve when Virtual VA is fully implemented, in part because electronic claims folders could be transferred among regional offices more quickly. VBA has implemented Virtual VA at its three Pension Maintenance Centers. However, VBA requested fiscal year 2005 funding only to maintain the existing Virtual VA program and anticipates that funding will not be available to expand the program beyond the Pension Maintenance Centers. VBA’s justification stated that full implementation of Virtual VA would help improve claim processing and identified the need for additional staff to convert existing paper claims files to electronic format, such as for document preparation and scanning. However, VBA did not request these additional staffing resources and did not explain why. The budget justification stated that VBA expected no improvements in performance because of implementation of Virtual VA at regional offices in fiscal year 2005, but it did not identify how much productivity would be forgone because of VBA’s decision to delay Virtual VA implementation.

The Congress relies on the budget justification as VBA’s statement of how it plans to spend the funds it requested. The House and Senate Appropriations Committees have noted that VA’s budget justification represents the agency’s budget plan. VA’s authorizing committees also rely on VBA’s budget justification in conducting their oversight. In February 2004, both the Senate and House Veterans’ Affairs Committees held hearings on VA’s fiscal year 2005 budget request. Each committee then recommended funding levels to its respective Budget Committee. The Appropriations Committees also conduct oversight of VA through the annual budget process. Congressional oversight could be enhanced if VBA’s budget justifications were more transparent.

VBA Projected Claims Workload Is Based on Historical Trends and Other Factors but VBA Did Not Project Claims Complexity

VBA estimated the number of rating-related claims it would receive in fiscal year 2005 based on historical trends and judgments about the likely impacts of various factors on receipts, but it did not project claims complexity, such as average disabilities per claim. For example, VBA expected an increase in the number of claims received based on the enactment of legislation allowing some military retirees to receive both military retirement pay and VA disability compensation. Also, VBA officials stated that they factored in the return of veterans from operations in Iraq and Afghanistan, but they were unclear as to how many claims VBA expected to receive from these veterans.

Previous VBA projections have been mixed in their accuracy. For fiscal years 2000 through 2004, VBA’s projections of rating-related claims receipts varied from an underprojection of about 11 percent to an overprojection of about 19 percent, as shown in table 1.

In its fiscal year 2004 budget justification, VBA projected that it would receive an average of about 57,300 rating-related claims per month. For its fiscal year 2005 budget justification, VBA revised its fiscal year 2004 projection to an average of about 63,900 receipts, based on actual receipts for October and November 2003. VBA’s revised projection underprojected by only about 0.5 percent; actual fiscal year 2004 receipts averaged about 64,300 per month.

VBA is working to improve its ability to project its rating claims workload by more accurately estimating the number of such claims it will receive. In June 2000, VBA received the first version of a model for forecasting original and reopened compensation claims receipts, developed under contract by the Institute for Defense Analyses. This model factored into its projections the changing size and demographics of the veteran population. Specifically, the model used historical claim submission data and projections of the veteran population to project VBA’s future workload. Although the model was updated in June 2002, its usefulness is limited by several factors. For example, it projects only original and reopened compensation claims and relies on outdated veteran population data. According to a VBA official, VBA’s workload projections for its budget justifications were not based on this model, but the results of the model were used to check VBA’s projections. An expanded model with more recent information is scheduled to be delivered in December 2004. The expanded model will project workload for more types of claims, including all rating-related claims, and will be updated to reflect the 2000 Census.

VBA did not project the complexity of its rating-related claims in its fiscal year 2005 budget submission and did not explain the impact of complexity on productivity and requested staffing levels. VBA has noted that disability compensation claims have become more complex because veterans are claiming more service-connected disabilities per claim, and VBA must make a decision whether each disability is service-connected. Meanwhile, the Congress and VA have established presumptions of compensation and pension eligibility that can make some claims less complex. For example, the Congress and VA have identified several types of disabilities (such as type II diabetes) as service-connected based on the presumption that veterans who served in Vietnam were exposed to Agent Orange. Claims based on these disabilities can be simpler to decide because less evidence is needed to prove service connection. VBA did not specifically explain the impact of claims complexity on productivity and staff requirements.

VBA provided some data on average number of disabilities for completed compensation claims in its fiscal year 2005 budget justification. However, these data were based on incomplete information. The average number of disabilities per claim was based on calendar years 1998 through 2001 data on completed claims from VBA’s software application for preparing rating decisions, Rating Board Automation (RBA). According to a VBA official, the RBA data were incomplete because data on many rating decisions were not transmitted to VBA’s central database for analysis. For example, according to a VBA official, employees who were working from home did not always upload rating information from computer disks into RBA and send the data to VBA’s central database. Also, because making corrections to a rating once it had been entered into the central database was cumbersome, corrections were not always made to the incorrect information that had been entered in the database. VBA began implementing a new rating decision preparation package (RBA 2000) in October 2000. While VBA officials stated that RBA 2000 provides more complete data on rating decisions, it cannot provide data by the end product code, which VBA uses to identify types of claims (for example, original and reopened compensation claims). VBA officials suggested that, in the future, it could measure issues per claim through its new claims development software application, MAP-D. VBA is not planning to provide information on disabilities per claim in its fiscal year 2006 budget justification.

Conclusions

It is difficult to determine whether VBA’s confidence that it can meet its key fiscal year 2005 claims processing goals is well founded because its budget justification lacks sufficient information to make such an assessment. VBA set ambitious goals for providing veterans and their families with more timely decisions. At the same time, VBA expects the volume of incoming rating-related claims to increase and to lose experienced claims processing staff to attrition. Nonetheless, VBA requested a reduction in claims processing staff in fiscal year 2005, on top of a decrease in fiscal year 2004. VBA’s budget justification does not clearly explain how its estimated staffing requirements will be affected by its proposed initiatives to improve efficiency and accuracy, projected increases in compensation claims, and staff attrition.

To achieve its goals in the face of increasing workloads and decreased staffing, VBA will have to rely on productivity improvements. However, its budget justification does not provide information on VBA’s claims processing productivity or how much VBA expects to improve productivity. Consequently, it is difficult to determine if VBA can achieve the productivity improvements it needs or determine how these improvements will be achieved. While VBA’s budget assumes improved productivity, the agency has made budget decisions to delay initiatives that could help improve productivity, in order to protect funding for claims processing staff to help meet its top short-term priority—improving timeliness. Its budget justification could have provided more information on the impacts of decisions to delay these initiatives. Further, VBA’s budget justification did not clearly explain the effects on productivity of claims complexity, such as changes in the average number of disabilities per claim. Consequently, the effect of complexity on VBA’s workload and staffing requirements is unclear. A more transparent budget justification would better inform the Congress’ oversight of VBA, by making it easier to evaluate whether the agency’s administrative budget requests adequately reflect the resources, particularly staff, needed to achieve expected performance.

Recommendation

To assist the Congress in its oversight of VBA’s compensation and pension claims processing operations, we recommend that the Secretary of Veterans Affairs direct the Under Secretary for Benefits to prepare the following information and work with the Committees on Veterans’ Affairs and the Appropriations Subcommittees on Veterans Affairs, Housing and Urban Development, and Independent Agencies on how best to make it available for their use: explanation of the expected impact of specific initiatives and changes in incoming claims workload on requested staffing levels; information on claims processing productivity, including how VBA plans to improve productivity; and explanation of how claims complexity is expected to change and the impact of these changes on productivity and requested staffing levels.

Agency Comments and Our Response

In its written comments on a draft of this report (see app. II), VA concurred with our recommendation. VA noted that VBA will work closely with VA's Office of Budget, OMB, and congressional authorizing and appropriating committees and subcommittees to ensure that appropriate supporting information is included in its future budget justifications.

We will send copies of this report to the Secretary of Veterans Affairs, appropriate congressional committees, and other interested parties. The report will also be available at GAO’s Web site at http://www.gao.gov.

If you or your staff have any questions regarding this report, please call me at (202) 512-7215 or Irene Chu, Assistant Director, at (202) 512-7102. In addition to those named, Amy Buck, Denise Fantone, Martin Scire, Greg Whitney, and Gregory Wilmoth made key contributions to this report.

Appendix I: Scope and Methodology

To assess how the Veterans Benefits Administration (VBA) determined and justified its staffing requests, we focused on VBA’s fiscal year 2005 budget justification to the Congress: specifically, its requests for discretionary administrative funding for VBA’s compensation and pension programs. We also reviewed VBA’s budget justifications for fiscal years 2000 through 2004 to identify funding and staffing trends and obtain background information on specific management initiatives and workload trends. We reviewed Office of Management and Budget guidance to agencies on how to prepare their fiscal year 2005 budget requests. In particular, we reviewed guidance on information to be included in budget requests, estimating staffing levels, and the budget formulation process. In addition, we interviewed VBA officials to identify the role of productivity and workload factors in VBA’s internal budget process and to discuss the fiscal year 2005 request. Specifically, we interviewed VBA officials responsible for compensation and pension programs, resource management, and field operations. In some instances, we relied on testimonial evidence from our interviews, along with written responses to detailed questions.

To review VBA’s fiscal year 2005 receipts projections, we interviewed Compensation and Pension Service officials responsible for these estimates. We obtained records showing the workload data used to estimate receipts for fiscal years 2004 and 2005 as well as the adjustments VBA made to historical trends in developing its estimates. To assess the accuracy of receipts estimates for fiscal years 2000 through 2004, we reviewed VBA’s budget justifications for those fiscal years. For fiscal years 2000 through 2003 we compared initial estimates of rating-related claims for each fiscal year with actual VBA-wide receipts reported in VBA’s budget justifications. We focused on rating-related claims because they represent the types of claims VBA uses to develop key performance measures, such as timeliness (average days to complete rating-related claims). For fiscal year 2004, we compared VBA’s estimate in its budget justification with VBA’s Distribution of Operational Resources (DOOR) report of receipts for the fiscal year.

In addition, we reviewed documentation of the Institute for Defense Analyses (IDA) receipt estimation model and discussed the model with IDA and Compensation and Pension Service officials. Because VBA did not use this model to develop the compensation claims receipt estimates in its fiscal year 2004 and 2005 budget justifications, we did not conduct a detailed analysis of the model. In our discussions, IDA officials identified improvements in its model, such as projecting receipts for additional types of claims and using updated population data.

We assessed the reliability of end product data in VBA’s Benefits Delivery Network (BDN). The end product code is a key data element because it identifies the type of claim. VBA’s DOOR reports aggregate workload data from the BDN by end product. We reviewed 1997 and 1998 Department of Veterans Affairs (VA) Inspector General reports that identified significant control deficiencies in BDN, leading to questionable reliability of workload and timeliness data. We reviewed VBA’s system for identifying potentially erroneous end product transactions that might lead to inaccurate workload data. VBA adopted this system in response to the Inspector General’s findings. We interviewed the VBA official responsible for sampling transactions to identify questionable end product instances— where a regional office may have improperly taken credit for completing a claim or for completing a claim in less time than was actually required. For example, this sample is designed to identify when a regional office has taken credit for more than one decision on the same claim, leading to overcounting of decision production. We also reviewed sample data from fiscal year 1999 through the second quarter of 2004.

We also reviewed how VBA’s Systematic Technical Accuracy Review (STAR) program identifies questionable and erroneous end product codes. If a STAR reviewer determines that the end product code for a randomly sampled claim file is questionable or erroneous, the claim will be removed from the STAR sample and be replaced by another claim with the same end product code. For example, if a claim is identified as completed in BDN but no decision has been made on the claim, the claim is removed from the STAR sample. We interviewed a VBA official responsible for STAR and reviewed data on claims removed from the STAR sample in fiscal year 2003 and the first half of fiscal year 2004.

We determined that VBA’s end product data are sufficiently reliable for the purposes of this report, which focuses on VBA-wide data. For example, VBA’s sampling shows a decline in questionable end product codes from the second quarter of fiscal year 2003 to the second quarter of fiscal year 2004, from about 5.2 percent to 2.8 percent. However, we are aware that BDN is an aging information system. In its October 2001 report, VA’s Claims Processing Task Force noted this and recommended that VBA maintain BDN until the replacement VETSNET system is fully implemented. However, VBA officials stated that VBA was not planning to make significant investments in maintaining BDN because it will be replaced.

We interviewed VBA officials about the reliability of its Rating Board Automation (RBA) system as a source of data on average disabilities per claim. These officials noted that many rating decisions were not included in the RBA data used in VBA’s fiscal year 2005 budget justification. On the basis of this, we determined that the data on average disabilities per compensation claim in VBA’s budget justification were not reliable, and we do not use the data in our report. Finally, we did not assess the reliability of the full-time equivalent data VA reported in its budget submissions.

Appendix II: Comments from the Secretary of Veterans Affairs