Since the 1940s, VA has provided vocational rehabilitation assistance to veterans with service-connected disabilities to help them find meaningful work and achieve maximum independence in daily living. In 1980, the Congress enacted the Veterans’ Rehabilitation and Education Amendments, which changed the focus of VA’s vocational rehabilitation program from providing primarily training aimed at improving the employability of disabled veterans to helping them find and maintain suitable jobs. VA estimates that in fiscal year 2004 it spent more than $670 million on its VR&E program to serve about 73,000 participants. This amount represents about 2 percent of VA’s $37 billion budget for nonmedical benefits, most of which involves cash compensation for service connected disabilities. VR&E services include vocational counseling, evaluation, and training that can include payment for tuition and other expenses for education, as well as job placement assistance. Interested veterans generally apply for VR&E services after they have applied and qualified for disability compensation based on a rating of their service-connected disability. This disability rating—ranging from 0 to 100 percent in 10 percent increments—entitles veterans to monthly cash payments based on their average loss in earning capacity resulting from a service-connected injury or combination of injuries. To be entitled to VR&E services, veterans with disabilities generally must have a 20 percent disability rating and an employment handicap as determined by a vocational rehabilitation counselor. Although cash compensation is not available to servicemembers until after they separate from the military, they can receive VR&E services prior to separation under certain circumstances. To make these services available prior to discharge, VA expedites the determination of eligibility for VR&E by granting a preliminary rating, known as a memorandum rating. We generally agree with the Task Force’s key findings, which broadly address three areas of VR&E’s operations. (See table 1.) First, the Task Force found that VR&E has not been a priority in terms of returning veterans with service-connected disabilities to the workforce. Between 1984 and 1998, we issued three reports all of which found that the VR&E program had not emphasized its mandate to find jobs for disabled veterans. In 1992, we found that over 90 percent of eligible veterans went directly into education programs, while less than 3 percent went into the employment services phase. We also found that VA placed few veterans in suitable jobs. We reported in 1996 that VA rehabilitated less than 10 percent of veterans found eligible for vocational rehabilitation services and recommended switching the focus to obtaining suitable employment for disabled veterans. VA program officials told us that staff focused on providing training services because, among other reasons, the staff was not prepared to provide employment services because it lacked adequate training and expertise in job placement. Years later, the Task Force similarly reported that top VR&E management had not demonstrated a commitment to providing employment services and lacked the staffing and skill resources at the regional offices to provide these services. The Task Force also found that VR&E has a limited capacity to manage its growing workload. The Task Force had concerns about, among other things, VR&E’s organizational, program, and fiscal accountability; workforce and workload management; information and systems technology; and performance measures. In our report on the Task Force, we stated that, although we have not specifically reviewed VR&E’s capacity to manage its workload, we agree that many of the VR&E management systems identified by the Task Force as needing improvement are fundamental to the proper functioning of federal programs, regardless of workload. In addition, the Task Force found that the VR&E system must be redesigned for the 21st century employment environment. The Task Force reported that the VR&E program does not reflect the dynamic nature of the economic environment and constant changes in the labor market. The report suggested that, as a result, only about 10 percent of veterans participating in the VR&E program had obtained employment. We agree with the Task Force finding that the VR&E system needs to be modernized. Our high risk report emphasized that outmoded criteria used to establish eligibility need to be updated. The Task Force made 105 recommendations, which we grouped into six categories. (See table 2.) The first category of recommendations was directed at streamlining VR&E program eligibility and entitlement for veterans in most critical need, including (1) servicemembers who have been medically discharged or are pending medical discharge; (2) veterans with a combined service-connected disability rating of 50 percent or greater; and (3) veterans receiving compensation for the loss, or loss of the use, of a limb. In our report, we commented that, among other things, VA’s outmoded disability criteria raise questions about the validity of its disability decisions because medical conditions alone are generally poor predictors of work incapacity. For example, advances in prosthetics and technology for workplace accommodations can enhance work capacity by compensating for impairments. As a result, the Task Force recommendation to focus on severity of disability rather than on employability may not ensure that veterans with the most severe employment handicaps receive priority services from VR&E. Second, the Task Force sought to replace the current VR&E process with a 5-track employment-driven service delivery system. The five tracks include rapid access employment for veterans with skills, self-employment, re- employment at a job held before military service, traditional vocational rehabilitation services and, when employment is not a viable option, independent living services. We commented that the 5-track process could help VR&E focus on employment while permitting the agency to assist veterans less likely to obtain gainful employment on their own. We added, however, that the new system would require a cultural shift from the program’s current emphasis on long-term education to more rapid employment. We also observed that, as long as the education benefits available under VR&E provide more financial assistance than those available through other VA educational benefits programs, eligible veterans will have strong incentives to continue to use VR&E to pursue their education goals. Third, the Task Force recommended that VR&E expand counseling benefits to provide VR&E services to servicemembers before they are discharged and to veterans who have already transitioned out of the military. We agreed that providing vocational and employment counseling prior to military discharge is essential to enable disabled servicemembers to access VR&E services as quickly as possible after they are discharged. In prior reports, we highlighted the importance of early intervention efforts to promote and facilitate return to the workplace. In 1996, for example, we reported research findings that rehabilitation offered as close as possible to the onset of disabling impairments has the greatest likelihood of success. In addition, receptiveness to participate in rehabilitation and job placement activities can decline after extended absence from work. Fourth, the Task Force made several recommendations directed at redesigning the VR&E central office to provide greater oversight of regional office operations and to increase staff and skill sets to reflect the new focus on employment. We agreed that program accountability could be enhanced through more central office oversight. We pointed out that, over the past 3 years, VA Inspector General reports had identified VR&E programs at regional offices that did not adhere to policies and procedures and sometimes circumvented accountability mechanisms, such as those for managing and monitoring veterans’ cases and those requiring the development of sound plans prior to approving purchases for those veterans seeking self-employment. Fifth, the Task Force recommended that VR&E improve the capacity of its information technology systems. Many of the Task Force’s recommendations in this area are consistent with GAO’s governmentwide work reporting that agencies need to strengthen strategic planning and investment management in information technology. In addition, we recognized that VR&E would benefit from a more systematic analysis of current information technology systems before making further investment in its current systems. Finally, the Task Force recommended that VR&E strengthen coordination within VA between VR&E and the Veterans Health Administration, and between VR&E and the Departments of Defense (DOD) and Labor. Improving coordination with agencies that have a role in assisting disabled veterans make the transition to civilian employment should help these agencies more efficiently use federal resources to enhance the employment prospects of disabled veterans. While VR&E responds to the Task Force recommendations, it faces immediate challenges associated with providing vocational rehabilitation and employment services to injured servicemembers returning from Afghanistan and Iraq. As we reported in January 2005, VR&E is challenged by the need to provide services on an early intervention basis; that is, expedited assistance provided on a high priority basis. VR&E also lacks the information technology systems needed to manage the provision of services to these servicemembers and to veterans. In addition, VR&E is only now beginning to use results-based criteria for measuring its success in assisting veterans achieve sustained employment. VR&E faces significant challenges in expediting services to disabled servicemembers. An inherent challenge is that individual differences and uncertainties in the recovery process make it difficult to determine when a seriously injured service member will be able to consider VR&E services. Additionally, as we reported in our January 2005 report, given that VA is conducting outreach to servicemembers whose discharge from military service is not yet certain, VA is challenged by DOD’s concerns that VA’s outreach about benefits, including early intervention with VR&E services, could adversely affect the military’s retention goals. Finally, VA is currently challenged by a lack of access to DOD data that would, at a minimum, allow the agency to readily identify and locate all seriously injured servicemembers. VA officials we interviewed both in the regional offices and at central office reported that this information would provide them with a more reliable way to identify and monitor the progress of those servicemembers with serious injuries. However, DOD officials cited privacy concerns about the type of information VA had requested. Our January 2005 report found that VR&E could enhance employment outcomes for disabled servicemembers, especially if services could be provided early in the recovery process.