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 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.