VBA provides benefits to about 2.7 million veterans and about 579,000 surviving spouses, children, and parents. Some of these benefits and services include disability compensation and pension, education, loan guaranty, and insurance. VBA employs about 5,000 examiners, and they represent about 40 percent of the agency's entire workforce. Most examiners are located at 57 regional offices and are responsible for reviewing and processing veterans' disability claims. Typically, they begin service at GS-5 or GS-7, grades that have starting salaries for 2003 of about $23,400 to $29,000. Examiners can be promoted to GS-10. Between 1998 and 2001, VBA hired about 2,000 new examiners (see figure 1). According to VBA officials, this was the first time VBA had the authority to hire significant numbers of examiners. These examiners were hired in anticipation of a large number of future retirements. For example, in 2000, VBA was expecting the retirement of 1,100 experienced examiners in the next 5 years. In addition, the hiring of these new examiners coincided with a growth in the backlog of claims awaiting decisions. Between 1998 and 2001, the backlog increased by 74 percent from about 241,000 to about 420,000. VBA has since implemented an initiative to reduce this backlog. According to VBA, it takes 2 to 3 years for a newly hired examiner to become fully productive. After being hired, new examiners receive a combination of formal training in a central location and on-the-job training in one of VBA's regional offices. Once on the job, these workers perform a variety of critical tasks, including compiling medical evidence, assessing the extent of the disability, determining the level of benefit, handling payment, and considering appeals. Workforce planning is a key component to maintaining a workforce that can carry out the tasks critical to an agency's mission. Strategic workforce planning focuses on developing and implementing long-term strategies-- clearly linked to an agency's mission and programmatic goals--for acquiring, developing, and retaining employees. Collecting data on attrition rates and the reasons for attrition are one part of conducting workforce planning. Other types of data that can be used in workforce planning include size and composition of the workforce, skills inventory, projected retirement rates and eligibility, and feedback from exit interviews. This data can be analyzed to identify gaps between an agency's current and future workforce needs, which can in turn become the basis for developing strategies to build a workforce that accommodates future needs. In fiscal year 2000, the attrition rate for new examiners at VBA was about 15 percent, more than twice as high as the 6 percent rate for all employees who left that year. About 15 percent of the new examiners hired in fiscal year 2000 left the agency within 1 year of being hired. VBA calculates attrition by counting employees who leave the agency and comparing that number to either total employees or a sub-group of total employees. The methods VBA uses to calculate attrition are consistent with those used by OPM and other federal agencies. Attrition rates for new VBA examiners were generally higher than those for all VBA examiners and other employees. As shown in table 1, in fiscal years 2000 and 2001, overall attrition rates for VBA examiners and other VBA employees ranged from about 4 percent to about 6 percent. However, among all new examiners hired in fiscal year 2000, about 15 percent left the agency within 12 months, as shown in figure 2. These attrition rates reflect all types of attrition--including resignation, retirement, and termination. However, for new hires, attrition consists predominantly of resignations. According to human capital experts, in general, new employees tend to leave at higher rates than all other employees. This has been the experience for federal agencies historically and, according to our analysis of OPM's data, is generally the case governmentwide. Attrition rates for all federal employees, both new hires and senior staff, were about 7 percent in fiscal year 2000. However, for all new federal employees--those hired in fiscal year 1998, 1999, and 2000--as many as 17 percent left within 12 months of being hired. VBA officials acknowledge that, in certain regional offices, attrition has been high for newly hired examiners. For example, VBA found attrition rates of 38 percent to 49 percent for new examiners hired over a 3-year period at four regional offices--Baltimore (38 percent), Chicago (39 percent), Newark (41 percent), New York (49 percent). By contrast, some offices--such as Phoenix, Arizona; Louisville, Kentucky; Huntington, West Virginia; and Wichita, Kansas--experienced no attrition among new examiners hired during this period. The two basic methods VBA uses to calculate attrition are consistent with methods used by OPM and other federal agencies. Both methods, the "annual calculation" and the "cohort calculation," compare employees who leave the agency to either total employees or a sub-group of total employees. They provide different ways of looking at attrition trends. The annual calculation indicates broad attrition patterns from year to year. In contrast, the cohort calculation tracks attrition over a period of time for a specific group, and the timeframe and group can vary to suit the needs of the analysis. Using this method, VBA reported attrition rates similar to those found by GAO. The following are the two methods VBA uses: Annual calculation. This method calculates attrition by dividing all employees who left in a given year by an average of employees working at the agency at the beginning of the year and at the end of the year. These attrition rates represent employees at all federal agencies except VA. Cohort calculation. This method calculates attrition by tracking a specified group or "cohort" of employees. The cohort can be defined as all those hired (new hires only) during a specific timeframe. These new hires are tracked for selected intervals (3 months, 6 months, etc.). This method can be adapted by defining the cohort differently (for example, to track attrition among a subgroup of new hires) and by using different timeframes for the tracking (e.g., 12 months, 18 months, etc.). This calculation differs from the annual calculation in that it does not take an average of the total workforce. VBA used this method to determine the attrition rate of certain newly hired examiners for a presentation in 2001 and for additional, more comprehensive calculations in 2002. VBA plans to use this method to calculate attrition rate for new examiners at least annually starting in 2003. According to OPM officials, the annual method is a generally accepted method used to calculate attrition by federal agencies. OPM officials also recognized the value of the cohort method for calculations that require specific time frames or groups of employees, and added that tracking the attrition of new employees is an important practice. OPM does not mandate the use of a particular method for the calculation of attrition, but officials stated that any method used should be clearly explained. While VBA has descriptive data on how employees separate from the agency (whether through resignation, termination, retirement, or transfer), it does not have adequate analytic data on the reasons why employees, particularly new employees, leave the agency. VBA collects some data on the reasons for attrition in exit interviews. However, these data are not systematically collected in a consistent manner and not compiled or analyzed. Furthermore, VBA has not performed the types of analysis on its data that would help the agency determine whether it can reduce its attrition rate. VBA is taking steps to ensure that attrition data will be available to guide its workforce planning. While VBA systematically collects descriptive data on how employees leave the agency, the data on the reasons employees leave is not systematically collected or analyzed. As at other federal agencies, when employees leave VBA, a standard federal "Form 52" is filled out. This form records whether the employee is leaving due to a resignation, termination, retirement, or transfer. Because this information appears on the form in discrete fields, VBA human resources staff can easily enter it into the agency's computer system to aggregate information on the types of separations. The Form 52 also includes a blank space for narrative comments on the reasons for leaving. This space is primarily intended to be used in the case of resignation and its use is optional on the part of the employee. However, according to VBA officials, this area is frequently left blank. When this area is filled out, it is up to a human resources employee to decide how to label an employee's reason for leaving in the computer system. Several "quit codes" exist to help in this labeling process. For example, reasons for leaving can be coded as relating to pay and benefits, supervisory relationship, opportunity for advancement, or personal reasons, including family responsibilities, illness, or household relocation. All forms are sent to one of four human resource centers to be entered into the agency's computer system. Human resources employees in these centers are instructed to code the reasons for leaving to the best of their ability. However, these staff members cannot clarify reasons when the information is blank or ambiguous because they do not have access to either the separated employee or the regional human resources staff who actually processed the employee's separation. Therefore, VBA officials do not consider the Form 52 to be a complete or reliable source of information on the reasons employees resign from VBA. While VBA conducts exit interviews to collect information on the reasons employees resign, it does not have a standard process for these interviews, nor are they conducted consistently for all separating employees, according to VBA officials. Exit interviews with separating employees are conducted at regional offices. However, no standard process exists for such interviews, according to the results of an internal VA assessment. VBA officials state that the downsizing of human resources staff in regional offices is at least partly responsible for the inconsistency with which exit interviews are conducted. In addition, the data from the interviews that are conducted are not forwarded to national headquarters to be aggregated and analyzed. Despite VBA's inconsistent use of exit interviews, VA policy recognizes the importance of exit interviews for determining the reasons an employee leaves. Some offices and staff members within VBA have made special efforts to compile or collect information on the reasons examiners leave the agency by producing special studies or reports. These include the following: High-Performing Young Promotable Employees (HYPE). In September 2002, a group of employees, representing six regional offices, prepared a report based on 72 exit interviews conducted at seven regional offices. The exit interviews had been conducted over 3 fiscal years: 1999, 2000, and 2001. Loss of New Hires in Veterans Service Centers. At the request of the head of VBA, the newly organized Office of Performance Analysis and Integrity (OPAI) issued a report in September 2002 that examined new hire attrition rates for regional offices individually. The report also looked at reasons for leaving, based on interviews with the directors of two regional offices. Review of attrition data at certain regional offices. At least two regional offices have investigated the reasons for attrition on their own initiative. For example, in October 2002, senior management at the Newark regional office compiled information on the attrition of examiners over a 3-year period and the reasons given for why these examiners left. This study was prompted by concern about high attrition rates at the Newark office. Portland did a similar review in September 2001. These special efforts had several common findings. For example, three reported that inadequate opportunity for training was one of the reasons examiners left VBA. Two reported workload as a reason for leaving. Two also identified instances in which examiners resigned as a result of pending termination for poor performance or conduct. Reports associated with these efforts touched on other reasons for resignation, including inadequate opportunity for full utilization of skills, insufficient pay, and various personal reasons. The other source of information on reasons examiners left VBA was anecdotal information provided by regional and other senior human resources officials. For example, senior human resources officials stated that reasons for leaving included factors such as inadequate work space and computer equipment as well as insufficient pay. In addition, these officials reported that some newly hired examiners left when they discovered that the job tasks were not what they had expected. According to a VBA official, certain regional offices are aware of the types of employers with whom they are competing. For example, some regional offices report losing employees to a range of employers in both the public sector, including other federal agencies (such as SSA and DOL), and the private sector, including firms in the information technology sector. VBA has begun to address some of the findings from these special studies or reports. For example, the HYPE report included several recommendations. The report recommended that the agency develop a comprehensive strategic plan that addresses attrition and retention; the report also recommended that the agency improve and centralize its exit interview process. Both of these recommendations are in the process of being implemented at VBA. In addition, according to a VBA official, certain regional offices have taken steps to offer job candidates opportunities to observe the work place before being hired. This effort was undertaken partly in response to information about employees' expectations of their duties and work environment. VBA has not performed the types of analysis on its data that would help the agency determine whether it could reduce attrition or identify the extent to which an attrition problem may exist. To better understand its own attrition, an agency can take advantage of a range of analyses. These include the following: Comparisons. To understand the degree to which its attrition is a problem, an agency can compare its own attrition to the attrition of other federal agencies, especially to the attrition of agencies with employees who do similar work. While one of VBA's special reports did some broad comparisons of VBA's attrition to the attrition at other federal agencies, VBA has not compared, as we have done, the attrition of newly hired examiners to the attrition of employees in other parts of the federal government with comparable job series. Attrition modeling. To understand the degree to which attrition is a problem, an agency can estimate the attrition rates it expects in the future, providing a baseline against which to measure the actual attrition it experiences. This allows officials to determine if attrition rates are higher or lower than expected. While VBA has projected retirement rates for planning purposes, according to VBA officials, there was no formal or informal process to estimate the expected attrition rates of the examiners who joined the agency since 1998. In 2002, VA projected future attrition trends for examiners in a restructuring plan submitted to the Office of Management and Budget, and officials expect to compare these projections to actual attrition rates for examiners in the future. Cost analysis. To understand the degree to which attrition is a problem, an agency can estimate the cost of recruiting and training new employees who leave and their replacements. While VBA's human resources office conducted a partial estimate of attrition costs in 2001, this estimate did not include all associated costs (including one of the most important and potentially expensive, the investment lost when a trained employee leaves). Labor market analysis. To understand the degree to which its attrition is a problem, an agency can evaluate labor market conditions in locations where it operates. Such an evaluation can provide context for understanding if an attrition rate is higher than might be expected in those locations. Using general labor market data, VBA has identified several locations where it faces significant competition from other employers, both public and private. This information could be used to better understand its attrition rate in those locations in the future. However, this information is not based on the actual employment plans of separating employees, and VBA does not routinely collect or document this information. According to a VBA official, collecting data on where VBA's separating employees find employment after VBA would be useful for developing a more accurate understanding of the employers with whom VBA is competing. VBA is taking steps to ensure that attrition data will be available to guide workforce planning. First, VBA intends to develop a workforce plan, following a workforce policy approved by VA in January 2003. In a related document, VA stated its expectation that, in the current economy, attrition among examiners may stabilize. Continued monitoring of attrition rates and improved data on reasons for attrition would allow VBA to test that assumption. Second, VBA has recently designated an official to head strategic planning efforts. While these efforts will include human capital issues, and according to VBA officials, will address attrition, VBA's human resources office is expected to assume primary responsibility for human capital issues and to coordinate with the strategic planning office. Obtaining better attrition data and conducting adequate analysis of attrition and the reasons for attrition could help VBA target future recruitment efforts and minimize attrition. For example, VA's new automated exit survey, which VA officials expect to be available in spring 2003, has the potential to aid VBA in its attrition data gathering and analysis. Separating employees will be able to answer a series of questions about the reasons they decided to leave the agency. The survey will provide confidentiality for the employee, potentially allowing for more accurate responses. It will also facilitate electronic analysis that could be broken down by type of job and region. VBA's ability to effectively serve veterans hinges on maintaining a sufficient workforce through effective workforce planning. While attrition data are just one part of workforce planning, the data are important because they can be used to anticipate the number of employees and the types of skills that need to be replaced. The agency currently lacks useful information on the reasons new employees leave and adequate analysis of its staff attrition. In addition, some offices experience much higher or lower rates. Continuing monitoring of attrition data by region may point to regions that need special attention. Sustained attention to both the reasons for attrition and attrition rates, particularly for new employees, is needed so VBA can conduct effective workforce planning. Understanding the reasons for attrition could help the agency minimize the investment in training lost when a new employee leaves. Furthermore, the new workforce planning efforts under way at VBA offer an opportunity to improve data collection on the reasons for attrition and attrition rates. For future contacts regarding this statement, please call Cynthia A. Bascetta at (202) 512-7101. Others who made key contributions to this statement are Irene Chu, Ronald Ito, Grant Mallie, Christopher Morehouse, Corinna Nicolaou, and Gregory Wilmoth.

Summary:
By the year 2006, the Veterans Benefits Administration (VBA) projects it will lose a significant portion of its mission-critical workforce to retirement. Since fiscal year 1998, VBA has hired over 2,000 new employees to begin to fill this expected gap. GAO was asked to review, with particular attention for new employees, (1) the attrition rate at VBA and the soundness of its methods for calculating attrition and (2) whether VBA has adequate data to effectively analyze the reasons for attrition. To answer these questions, we obtained and analyzed attrition data from VBA's Office of Human Resources, calculated attrition rates for VBA and other federal agencies using a government-wide database on federal employment, and interviewed VBA officials about their efforts to measure attrition and determine why new employees leave. About 15 percent of new examiners hired in fiscal year 2000 left VBA within 12 months of their hiring date, more than double the 6 percent rate of all VBA employees who left in fiscal year 2000. In general, new hire attrition tends to exceed the rate for all other employees, and VBA's 15 percent rate is similar to the attrition rate for all new federal employees hired between fiscal years 1998 and 2000, when as many as 17 percent left within 12 months of being hired. VBA does not have adequate data on the reasons why employees, particularly new employees, choose to leave the agency. VBA has descriptive data on how employees leave the agency (whether through resignation, retirement, or transfer), but VBA does not have comprehensive data on the reasons employees resign. While VBA collects some data on the reasons for attrition in exit interviews, these data are limited because exit interviews are not conducted consistently, and the data from these interviews are not compiled and analyzed. Without such data, VBA cannot determine ways to address the reasons employees are leaving. Furthermore, VBA has not performed analysis to determine whether it can reduce its staff attrition. Improved collection and analysis of attrition data, including data on the reasons for attrition, could help the agency minimize the lost investment in training, particularly when new employees resign. A forthcoming report will explore options for improving VBA's collection and analysis of attrition data.