In 1943, Public Law 78-16 authorized the vocational rehabilitation program to provide training to veterans with service-connected disabilities. Between 1943 and 1980, program features and criteria underwent several legislative changes. In 1980, the Congress enacted the Veterans’ Rehabilitation and Education Amendments (P.L. 96-466), which changed the program’s purpose to providing eligible veterans with services and assistance necessary to enable them to obtain and maintain suitable employment. The vocational rehabilitation process has five phases. In the first phase, VA receives the veteran’s application, establishes eligibility, and schedules a meeting with the veteran. In phase two, a counselor determines if the veteran has an employment handicap and, if so, the counselor and the veteran jointly develop a rehabilitation plan. The veteran then moves into training or education (phase three), if needed, and on to employment services (phase four) if training or education is not needed or after it is completed. During phase four, VA, state agencies, the Department of Labor, and private employment agencies help the veteran find a job. In phase five, the veteran is classified as rehabilitated once he or she finds a suitable job and holds it for at least 60 days. Veterans are eligible for program services if they have a 20-percent or higher service-connected disability and they have been determined by VA to have an employment handicap. The law defines an employment handicap as an impairment of a veteran’s ability to prepare for, obtain, or retain employment consistent with his or her abilities, aptitudes, and interests. Veterans with a 10-percent service-connected disability also may be eligible if they have a serious employment handicap. The eligibility period generally extends for 12 years, beginning on the date of the veteran’s discharge. Veterans found eligible for services can receive up to 48 months of benefits during the 12-year period. While in the program, most veterans receive services and equipment that may be required for beginning employment. For instance, veterans generally receive diagnosis and evaluation, as well as counseling and guidance, and some receive such aids as prostheses, eyeglasses, and educational supplies. They may also receive educational and vocational training; special rehabilitative services, such as tutorial assistance and interpreter services; a subsistence allowance; and employment assistance. Similar to the 1980 amendments, which affect the VA program, the Rehabilitation Act of 1973, as amended, authorized the Department of Education to provide eligible people (usually nonveterans) with services and assistance to enable them to obtain and maintain suitable employment. Education provides federal funds to help people with disabilities become employed, more independent, and better integrated into the community. The federal funds are chiefly passed to state vocational rehabilitation agencies that directly provide services and assistance to eligible people. The federal share of funding for these services is generally about 80 percent; the states pay the balance. In fiscal year 1995, about $2 billion in federal funds went to the state program, and about 1.3 million people received program services. The state vocational rehabilitation process, like the VA program process, comprises five phases, and state vocational rehabilitation clients who obtain and maintain a suitable job for at least 60 days are also classified as rehabilitated. However, in the state vocational program, suitable employment may not always involve wages or salary and may include, for example, working as an unpaid homemaker or family worker. To be eligible for the program, people must have a disability that is a substantial impediment to employment. However, when states are unable to serve all eligible applicants, priority is given to serving individuals with the most severe disabilities. The state vocational rehabilitation program offers a wide range of services to help its clients achieve their vocational goals. Examples of specific rehabilitation services include diagnosis and evaluation, counseling and guidance, vocational and educational training, physical restoration, adjustment training, on-the-job training, and employment assistance. If needed, services such as transportation to enable the individual to arrive at appointments for rehabilitation services or to get to work and income maintenance to cover additional costs incurred while the individual is receiving specific rehabilitation services are also provided. The 1980 Veterans’ Rehabilitation and Education Amendments made a significant change in VA’s vocational rehabilitation program by requiring VA to assist veterans in obtaining and maintaining suitable employment. This change expanded the scope of vocational rehabilitation beyond just training and marked a fundamental change in the focus and purpose of the program. However, despite previous GAO recommendations that VA fully implement this amendment and VA’s agreement to emphasize employment services, few veterans in the vocational rehabilitation program obtain jobs. Instead, VA staff continue to focus on providing training services because, among other reasons, they lack adequate training and expertise in job placement. In addition, our analysis of national program data revealed that the percentage of veterans in the program with serious employment handicaps has been steadily declining over the last 5 years. Our discussions with program officials also revealed that VA does not have readily available cost data associated with rehabilitating veterans. We found, on the basis of our review of select case files, that VA typically spends about $20,000 to rehabilitate each veteran. In our 1992 report, we noted that approximately 202,000 veterans were found eligible for vocational rehabilitation program services between October 1983 and February 1991. About 62 percent dropped out of the program before ever receiving a rehabilitation plan, and an additional 9 percent dropped out after receiving a plan. VA rehabilitated 5 percent of the eligible veterans, while the remaining veterans (24 percent) continued to receive program services. From October 1991 to September 1995, 201,000 veterans applied to the vocational rehabilitation program. VA classified approximately 74,000 (37 percent) veterans eligible. Of these veterans, 21 percent dropped out before receiving a plan, and another 20 percent dropped out or temporarily suspended their program after receiving a plan. VA rehabilitated 8 percent of the eligible veterans, and the remaining veterans (51 percent) were still receiving program services at the time of our analysis. VA officials told us that the vocational rehabilitation program has not been effective in placing veterans in suitable jobs. The primary reason for the low percentage of rehabilitations is the lack of focus on employment services, according to VA officials. The director of VA’s vocational rehabilitation program also acknowledged that the program’s rehabilitation rate needs to be improved and has established a program goal of doubling the number of successful rehabilitations over the next 2 years. Our analysis of current program participants showed that almost half of those veterans who were rehabilitated obtained employment in the professional, technical, and managerial occupations—fields such as engineering, accounting, and management. In addition, we found that the average starting salary of these veterans was about $18,000 a year. Moreover, veterans who were rehabilitated spent an average of 30 months in the program, while those who dropped out spent 22 months in the program. VA’s vocational rehabilitation program is primarily focused on sending veterans to training rather than on finding them suitable employment, according to VA officials. In 1992, VA issued guidance that emphasized the importance of finding suitable jobs for veterans and suggested that field offices begin employment planning as soon as a veteran’s eligibility for the program services was established. However, regional officials told us that staff do not generally begin exploring employment options until near the end of a veteran’s training. In 1992, we reported that 92 percent of veterans who received a plan between October 1983 and February 1991 went from the evaluation and planning phase directly into training programs, while only 3 percent went into the employment services phase. The remaining 5 percent went into a program designed to help them live independently or were placed in a controlled work environment. These figures remained virtually unchanged for the period we examined. For example, from October 1991 to September 1995, 92 percent of veterans who received a plan went from the evaluation and planning phase into training programs, while 4 percent went directly into the employment services phase. The remaining 4 percent entered an independent living program or were placed in extended evaluation, as shown in figure 1. Moreover, our analysis of national program data on current program participants showed that the vast majority of veterans in training were enrolled in higher education programs. For example, about 91 percent of such veterans were enrolled in a university or college. The remaining 9 percent were enrolled in vocational/technical schools or participated in other types of training programs, such as apprenticeships and on-the-job training. VA regional officials offered several reasons why staff continue to emphasize training over employment services. First, VA officials told us that it is difficult for staff to begin exploring employment options early because veterans entering the program expect to be able to attend college. Veterans acquire this expectation, according to VA officials, because the program is often marketed as an education program and not a jobs-oriented program. This image of the program as education oriented was also evident among some VA management. For instance, the director at one regional office we visited described the vocational rehabilitation program as the “best education program in VA.” A second reason for emphasizing training over employment, according to VA officials, is that program staff generally lack adequate training and expertise in job placement activities. At one office, for example, a counseling psychologist told us that program staff are not equipped to find veterans jobs because they lack employer contacts and detailed information on local labor markets. In fact, counseling psychologists at the regional offices we visited described the employment services phase as “the weakest part of the program.” Third, VA officials told us that large caseloads make it difficult for program staff to spend time exploring employment options with veterans. As one counseling psychologist responsible for managing over 300 cases said, “with such a large caseload it’s just easier to place veterans in college for 4 years than it is to find them a job.” According to VA’s Vocational Rehabilitation Service’s Chief of Program Operations, the optimal caseload per staff person is about 125. In recent years, there has been a shift in the type of disabled veteran participating in VA’s vocational rehabilitation program. For example, during the period 1991 to 1995, the percentage of program participants classified by VA as having a serious employment handicap declined from 40 percent to 29 percent, as shown in figure 2. During the same period, the percentage of program participants with disabilities rated at 50 percent or higher declined from 26 percent to 17 percent. Meanwhile, the percentage of program participants with disabilities rated at 10 and 20 percent increased from 34 percent to 42 percent. Figure 3 shows the changes in program participants’ characteristics for the period 1991 to 1995. In addition, our analysis of national program data provided demographic information on current program participants. For example, over 90 percent of the veterans who applied for program services were male, and the median age was 44 years. Also, at the time of their application, over 90 percent of the veterans had completed high school; of these, almost 25 percent had also completed 1 or more years of college. VA headquarters and regional agency officials did not know the costs associated with providing rehabilitation services to individual veterans. VA officials told us that, although cost information is located in individual veterans’ case files, it is not compiled or analyzed. Our review of 59 rehabilitated case files at four regional offices showed that VA spent, on average, about $20,000 to rehabilitate each veteran. The exact cost associated with rehabilitating veterans depends on the type and duration of services provided. Our analysis also showed that, generally, over half of the total cost of rehabilitation services consisted of subsistence allowances. Following are specific examples of costs associated with rehabilitating some clients. VA spent about $23,000 to rehabilitate a veteran who had a 10-percent disability for lower back strain. While in the program, the veteran obtained a BS degree in education and eventually obtained a job as an elementary school teacher earning $25,000 a year. VA spent over $20,000 to rehabilitate a veteran who had a 20-percent disability for lower back strain. The veteran, who was attending college under the Montgomery G.I. Bill and working part time before entering the program, obtained a bachelor’s degree in sociology and, ultimately, a position as an advocate for the elderly, earning less than $20,000 a year. Our review of 43 program dropout case files—“discontinued” case files—showed that VA spent, on average, about $10,000 each on veterans who did not complete the program. Following are specific examples of costs associated with veterans who did not complete the program. VA spent over $46,000 on tuition and subsistence to rehabilitate a veteran who had a 10-percent disability. The veteran dropped out of college after 4 years because of medical treatment for depression and marginal academic progress. VA spent over $6,000 on a 20-percent-disabled veteran who dropped out of the program after about a year. The veteran stopped attending college classes because of unsatisfactory academic progress. The state vocational rehabilitation program places over one-third of its clients in employment. Our analysis of 1993 national program data, the most current data available, showed that state agencies provide a mix of services to meet their clients’ rehabilitation needs. Our analysis also showed that most clients in the state program had severe disabilities. Furthermore, the state program spends, on average, about $3,000 on each rehabilitated client. From October 1991 through June 1995, about 2.6 million individuals were found eligible for state vocational rehabilitation program services. About 10 percent of these individuals dropped out of the state program before a rehabilitation plan could be initiated, and an additional 22 percent dropped out after a plan was initiated. The state agencies rehabilitated 37 percent of the eligible individuals, and the remaining individuals (31 percent) were still receiving program services at the time of our analysis. Clients in the state program are considered successfully rehabilitated even if they achieve outcomes other than employment that provides a wage or salary. For example, in fiscal year 1993, clients who obtained unpaid work or attained homemaker status composed about 9 percent of all rehabilitations. However, the majority of clients rehabilitated under the state program obtained such salaried positions as janitor, baker, office clerk, or cashier. On average, a person rehabilitated under the state program typically earned a starting salary of about $10,000 a year. Moreover, clients who were rehabilitated spent on average 17 months in the program, and clients who dropped out of the program after receiving a plan and at least one rehabilitative service spent 23 months. The state vocational rehabilitation program provides a wide range of services designed to help people with disabilities prepare for and engage in gainful employment to the extent of their capabilities. In fiscal year 1993, the state agencies provided evaluation and counseling services to almost all program participants. Additional services provided included restoration (33 percent of participants); transportation (33 percent); job finding services, such as resume preparation and interview coaching (31 percent); and college/university (12 percent), business/vocational training (12 percent), and on-the job training (6 percent). Our analysis of 1993 national program data showed that people with severe disabilities make up the majority of clients in the state vocational rehabilitation program. For example, people with severe disabilities composed 73 percent of the state program’s total client population. Our analysis of national data also provided demographic information on the clients who applied to the program. For example, almost 60 percent of the clients who applied for program services were male, and the median age was 34 years. In addition, at the time of their application, 43 percent of the clients had not completed high school, while 17 percent had completed 1 or more years of college. Our analysis of national program data showed that in fiscal year 1993, the state vocational rehabilitation agencies spent, on average, about $3,000 on each client who was rehabilitated. State agency staff spent funds providing or arranging services on behalf of clients, including assessment, training, medical services, transportation, and personal assistance. These costs exclude costs incurred for program administration and for salaries of counselors and other staff, and the state vocational program does not provide clients money for basic living expenses. Following are examples of costs associated with rehabilitating clients, which we obtained from our review of case files of 41 rehabilitated clients at four regional offices. In one case, the state program spent about $4,000 to rehabilitate an illiterate client suffering from mild retardation. The client was severely disabled and had not completed high school. The client was provided adjustment training and obtained a job working 3 hours a week as a stock person at a hardware store making $4.50 an hour. In a second case, the state program spent about $6,000 to rehabilitate a client with a learning disability and chronic back pain. The client was severely disabled but had graduated from high school. The client was provided clerical training and obtained a job working full time as a food service attendant making $4.50 an hour. The national data also showed that the state program spent, on average, about $2,000 on each client who did not complete the program after receiving a plan. Following are examples of costs associated with clients who did not complete the program, which we obtained from our review of 40 discontinued case files. In one case, the state program spent about $4,500 on a client who dropped out because she became pregnant. The client was deaf and classified as severely disabled. She had problems communicating and had not completed high school. The client’s rehabilitation goal involved pursuing an associate’s degree and obtaining a job as an office clerk. In a second case, the state program spent about $3,500 on a client who dropped out because he lacked the motivation to continue in the program. The client, who suffered from epilepsy and moderate retardation and was classified as severely disabled, was provided work adjustment training. In response to prior GAO and VA reports that recommended that VA emphasize finding jobs for veterans, VA has begun to reengineer its vocational rehabilitation program. The overall objective of VA’s reengineering effort is to increase the number of veterans who obtain suitable employment through improvements in program management. Under new program leadership, VA’s Vocational Rehabilitation and Counseling Service established a design team in 1995 to restructure the program by focusing on finding veterans suitable employment, making use of automation, and identifying factors that detract from program efficiency. VA consulted with state and private-sector vocational rehabilitation officials, veterans’ service organizations, the Department of Labor, and private contractors to help it identify needed program improvements. VA’s design team has identified several key initiatives aimed at improving program effectiveness. For example, VA plans to emphasize employment by exploring job options with veterans before sending them to training. VA also plans to develop marketing strategies that emphasize employment services. This initiative may involve revising existing pamphlets and brochures and developing informational videos. Further, VA plans to assess and develop program staff skills to ensure that staff have the necessary expertise to provide employment services. VA is also piloting an automated data management system designed to capture key information on program participants, such as the cost of providing rehabilitation services. VA officials told us that this information would be helpful in targeting ways to make the program more cost effective. VA also plans to conduct nationwide telephone surveys to determine why veterans drop out of the program. Officials told us that knowing this information will help them better identify problems veterans encounter with program services and develop plans that enhance veterans’ chances of successfully completing the program. VA is in the early stages of its reengineering effort and has not implemented any of the design team’s initiatives. The Chairman of VA’s design team told us that VA plans to begin implementing these initiatives nationwide by the end of fiscal year 1997. Despite a legislative mandate enacted 16 years ago requiring VA to help program participants obtain suitable jobs and prior GAO reports documenting VA’s limited success, VA’s vocational rehabilitation program continues to rehabilitate few disabled veterans. Currently, new program leadership recognizes the need to refocus the program toward the goal of employment and has taken steps to improve the program’s effectiveness. However, the concerns addressed in this letter are long standing, and VA’s reengineering efforts have not been completed. The success of VA’s efforts will depend on which initiatives VA adopts and how they are implemented. We received comments from the Department of Education and VA on a draft of this report. Education agreed with our findings and offered some technical suggestions, which we incorporated where appropriate. VA said it generally agreed with our findings and that its current reengineering initiative will successfully address all of the concerns we raised. However, VA cited a number of concerns with the information contained in the draft. For example, VA took issue with our finding that 8 percent of eligible veterans are rehabilitated. Instead, VA claims that 32 percent are rehabilitated and that this rate compares favorably with the 37-percent rehabilitation found in the state program. We disagree. VA based their rehabilitation percentage on the number of veterans who left the program (about 19,000)—a combination of veterans who dropped out or interrupted their program of services, as well as those who were rehabilitated—as opposed to the total number of eligible veterans (about 74,000). VA’s approach inflates the VA rehabilitation rate. Using VA’s approach, the state program would have an even higher rehabilitation rate—more than 60 percent. The fact remains, however, that of the 74,000 veterans found eligible for program services, 6,000 successfully completed the program. VA also took exception with our discussion of its lack of focus on employment services. VA contends it has consistently focused on the necessity of providing meaningful employment services, a goal that is outlined in policy directives and reinforced with comprehensive staff training. Our report acknowledges that VA issued guidance in 1992 that emphasized employment services. However, VA staff that administered and implemented the program in the four locations we visited told us that they do not emphasize employment until near the end of a veteran’s training. Furthermore, the Chairman of VA’s design team, an individual charged with evaluating and restructuring the program, told us that the primary reason for the program’s low rehabilitation rate is VA’s lack of focus on employment services. Regarding VA’s claim it provides comprehensive staff training, the Program Operations Chief told us that other than a week-long seminar on employment services presented about 2 to 3 years ago, VA headquarters has not sponsored staff training in employment assistance. Further, as already reported, staff in the regional offices that we visited told us they are not adequately trained in job placement activities. VA also took issue with our discussion of its lack of knowledge of the costs associated with providing rehabilitation services to individual veterans. VA claims that it has this information and can retrieve it at any time, although doing so is a laborious process. However, we saw no evidence that VA officials knew the costs associated with providing rehabilitation services. Neither the Chief of Program Operations nor officials located in the four regional offices that we visited could provide us with the costs associated with rehabilitating a veteran. Instead, we were always directed to the case files and, in some regional offices, to the finance section to obtain this information. VA also expressed concern that our random sample of program participant cases was not representative of the veterans that VA serves. VA asserted that “a more appropriate sample could readily come up with examples of veterans with more profound disabilities who are earning handsome salaries as a result of their participation in VA’s vocational rehabilitation program.” As we have pointed out, the results of our sample of 102 individual veteran case files are neither representative nor generalizable to all program participants. Our purpose in sampling program participants was to furnish examples of costs associated with providing rehabilitation services, not to demonstrate the severity of disabilities represented in the program or the average salaries of program participants. We addressed the issues of disability severity and salary using VA’s national database and discussed them in other sections of the report. VA’s comments in their entirety appear as appendix II. As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from the date of this letter. At that time, we will send copies to the Secretary of Veterans Affairs and other interested parties. This work was performed under the direction of Irene Chu, Assistant Director, Veterans’ Affairs and Military Health Care Issues. If you or your staff have any questions, please contact Ms. Chu or me on (202) 512-7101. Other major contributors to this report are listed in appendix III. We designed our study to collect national information on the characteristics of VA and state vocational rehabilitation clients, the services they received, and the outcomes they achieved. We also obtained information on the costs associated with providing rehabilitation services to clients in each program. In doing our work, we examined VA and Department of Education databases. We also interviewed VA and Education officials at the national and regional levels during site visits at VA and state vocational rehabilitation facilities in four judgmentally selected locations. We examined VA and Education vocational rehabilitation databases to obtain national information on the percentage of clients rehabilitated, client characteristics, and services provided. However, we did not verify the information included in the databases. To determine the percentage of veterans rehabilitated, we analyzed VA’s Chapter 31 Target System database for the period October 1991 through September 1995. We also compiled information on client characteristics of and services provided to veterans currently participating in the program. We define current participants as veterans who were not rehabilitated or discontinued prior to the beginning of fiscal year 1995 and were in one of the program’s five phases on February 7, 1996. For the state vocational rehabilitation program, we analyzed data from two Education databases. To address the percentage of the clients rehabilitated, we reviewed Education’s Quarterly Cumulative Caseload Reports for October 1991 through June 1995. This report provides aggregate data on the cases handled by state rehabilitation agencies. To obtain information on demographic characteristics and services provided, we analyzed Education’s Case Service Reports. The Case Service Reports contain information collected from the state agencies at the end of each fiscal year on the characteristics of each client whose case was closed that year, as well as on the general types of services that each client received and his or her employment status in the week of case closure. At any particular time, Education may be waiting for original or corrected data from one or more states for 1 or more years. At the time we began our study, the most recent full year for which largely complete data were available was fiscal year 1993. We conducted site visits at VA regional offices and state vocational rehabilitation agencies at four locations from January 1996 through March 1996. We visited VA and state vocational rehabilitation facilities in Milwaukee, Wisconsin; New Orleans, Louisiana; Roanoke, Virginia; and Portland, Oregon. We selected the sites judgmentally to include VA and state agencies that (1) were located in different regions, (2) were varied in staff size and workload, and (3) had ongoing initiatives to improve their vocational rehabilitation program. During these site visits, we interviewed vocational rehabilitation officials on various aspects of the program operations, reviewed selected case files, and discussed the specific cases with program specialists. At each VA regional office and state agency visited, we randomly selected and reviewed 9 to 12 case files of program participants who had been rehabilitated or had dropped out of the program between January 1 and June 30, 1995. Because the total number of rehabilitated cases available at VA’s field office in Portland, Oregon, was relatively small, we reviewed all 30 cases. We reviewed a total of 183 vocational rehabilitation cases: 102 at VA’s regional offices and 81 at the state agencies. These cases did not compose a representative sample of each site’s rehabilitation or dropout cases; thus, our results cannot be generalized. From case file reviews and discussions with program specialists, we obtained detailed information on client characteristics; services provided; and, when applicable, the type of employment obtained and starting salary. Also from the case files, we determined the costs associated with providing rehabilitation services to program participants, such as how much was spent for basic education and vocational training, readjustment training, physical restoration, and other support services. Irene Chu, Assistant Director, (202) 512-7101 Jaqueline Hill Arroyo, Evaluator-in-Charge, (202) 512-6753 Julian Klazkin, Senior Attorney Steve Morris, Evaluator Michael O’Dell, Senior Social Science Analyst Jeffrey Pounds, Evaluator Pamela Scott, Communications Analyst Joan Vogel, Senior Evaluator (Computer Science) The first copy of each GAO report and testimony is free. Additional copies are $2 each. 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Summary: Pursuant to a congressional request, GAO reviewed the Department of Veterans Affairs' (VA) vocational rehabilitation program, focusing on: (1) the percentage of rehabilitated veterans; (2) the services provided; (3) the characteristics of clients served; (4) the cost of rehabilitation; and (5) VA efforts to improve program effectiveness. GAO found that: (1) despite the 1980 legislation requiring VA to focus its rehabilitation program on finding disabled veterans suitable employment and subsequent GAO reports recommending that VA implement this legislation, VA continues to place few veterans in jobs; (2) VA officials told GAO that the percentage of veterans classified as rehabilitated is low because the program does not focus on providing employment services; (3) instead, VA continues primarily to send veterans to training, particularly to higher education programs; (4) GAO's analysis of national program data showed that the characteristics of program participants are changing and that VA does not have readily available cost data associated with providing rehabilitation services to individual veterans; (5) GAO's review of over 100 case files, however, showed that VA spent, on average, about $20,000 on each veteran who gained employment and about $10,000 on each veteran who dropped out of the program; (6) generally, over half of the total costs of rehabilitation services consisted of payments to assist veterans in covering their basic living expenses; (7) with regard to Education's state vocational rehabilitation program, GAO's analysis of national program data showed that over the last 5 years (1991-1995) state agencies rehabilitated 37 percent of the approximately 2.6 million individuals eligible for vocational rehabilitation program services, while about 31 percent continued to receive program services; (8) the state agencies provide a wide range of rehabilitative services, from physical restoration and transportation to college education and on-the-job training; (9) in addition, a majority of the program participants had severe disabilities; (10) moreover, national program data showed that state vocational rehabilitation agencies spent, on average, about $3,000 on each client who achieved employment and about $2,000 on each client who dropped out of the program; (11) the state program does not provide funds to cover client living expenses; (12) in response to prior GAO and VA findings and recommendations, VA recently established a design team to identify ways of improving program effectiveness; (13) the team's overall objective is to increase the number of veterans who obtain suitable employment through improvements in program management; (14) the team is also looking at ways to improve staff skills in job finding and placement activities; and (15) VA hopes to begin implementing program changes in fiscal year 1997.