In support of the President’s annual budget request for VA health care services, which includes a request for advance appropriations, VA develops a budget estimate of the resources needed to provide such services for 2 fiscal years. Typically, VHA starts to develop a health care budget estimate approximately 10 months before the President submits the budget request to Congress in February. This is approximately 18 months before the start of the fiscal year to which the request relates and about 30 months prior to the start of the fiscal year to which the advance appropriations request relates. VA’s health care budget estimate includes estimates of the total cost of providing health care services as well as costs associated with management, administration, and maintenance of facilities. VA develops most of its budget estimate for health care services using the Enrollee Health Care Projection Model. VA uses other methods to estimate needed resources for long-term care, other services, and health-care-related initiatives proposed by the Secretary of Veterans Affairs or the President. After determining the amount of VA’s appropriations, Congress provides VA resources for health care through three accounts: Medical Services, which funds health care services provided to eligible veterans and beneficiaries in VA’s medical centers, outpatient clinic facilities, contract hospitals, state homes, and outpatient programs on a fee basis; Medical Facilities, which funds the operation and maintenance of the VA health care system’s capital infrastructure, including costs associated with NRM and non-NRM activities, such as utilities, facility repair, laundry services, and grounds keeping; and Medical Support and Compliance, which funds the management and administration of the VA health care system, including financial management, human resources, and logistics. VA allocates most of its health care resources for these three accounts through VERA—a national, formula-driven system—at the beginning of each fiscal year and allocates additional resources throughout the year. VA allocates about 80 percent of the health care appropriations to its 21 health care networks through VERA. VA uses methods other than VERA to allocate the remaining resources to networks and medical centers for such programs as prosthetics, homeless grants, and state nursing homes. VA may also use methods other than VERA to allocate any additional resources it may receive from Congress during the year. The networks in turn allocate resources received through VERA and other methods to their respective medical facilities, as part of their role in overseeing all medical facilities within their networks. In addition to amounts allocated to networks and medical facilities at the beginning of the fiscal year, VA also sets aside resources from each of VA’s three health care appropriations accounts—in what is known as a national reserve—so that resources are available for contingencies that may arise during the year. In general, VA allocates resources from the national reserve to match network spending needs for each appropriations account. Within each appropriations account, VA also has flexibility as to how the resources are used. For example, within the Medical Services account, VA has the authority to use resources for outpatient services instead of hospital services, should the demand for hospital services be lower than expected and demand for outpatient services be higher. In a similar manner, VA has the authority to use resources in the Medical Facilities account for NRM instead of non-NRM activities—such as utilities—should spending for those activities be less than estimated. In June 2012, we reported that VA’s NRM spending has consistently exceeded the estimates reported in VA’s budget justifications from fiscal years 2006 to 2011. This pattern continued in fiscal year 2012 when VA spent about $1.5 billion for NRM, which was $622 million more than estimated. (See fig. 1.) To help inform its budget estimates for NRM, VA collects information on facility repair and maintenance needs as part of an ongoing process to evaluate the condition of its medical facilities. VA conducts facility condition assessments (FCA) at each of its medical facilities at least once every 3 years. VA uses contractors to conduct FCAs, and these contractors are responsible for inspecting all major systems (e.g., structural, mechanical, plumbing, and others) and assigning each a grade of A (for a system in like-new condition) through F (for a system in critical condition that requires immediate attention). As part of this assessment, the contractors use an industry cost database to estimate the correction costs for each system graded D or F. According to VA officials, the agency’s reported NRM backlog represents the total cost of correcting these FCA-identified deficiencies. Our analysis of data for fiscal years 2006 through 2012 found that in each of these years VA had higher than estimated resources available in its Medical Facilities account, which VA used to increase NRM spending by about $4.9 billion. These resources derived from two sources: (1) lower than estimated non-NRM spending, which made more resources available for NRM, and (2) higher than estimated budget resources, which included annual appropriations, supplemental appropriations, reimbursements, transfers, and unobligated balances. As figure 2 shows, after fiscal year 2008, lower than estimated spending on non- NRM activities accounted for most of VA’s spending on NRM that exceeded VA’s budget estimates. Lower than estimated non-NRM spending. VA spent fewer resources from the Medical Facilities account on non-NRM activities than it estimated, which allowed the agency to spend over $2.5 billion more on NRM than it originally estimated in fiscal years 2009 through 2012. When we asked why VA spent more on NRM projects than estimated, VA officials said one reason was that the agency spent less than it estimated on non-NRM activities and that the most practical use of these unspent resources was to increase spending on NRM because of the large backlog of FCA-identified deficiencies. VA officials further explained that VA spent less for non-NRM activities than anticipated because of a decrease in the demand for utilities and other weather-dependent non- NRM activities because of mild weather patterns during the last four winters. However, lower spending on these weather-dependent activities only accounted for $460 million—18 percent—of the resources eventually used for NRM. The remaining 82 percent eventually used for NRM came from resources originally intended to be used for various other activities, including administrative functions and rent. VA has consistently overestimated spending for these non-NRM activities, and if the agency continues to determine estimates for such activities in the same way, its future budget estimates of spending for non-NRM may not be reliable. Higher than estimated budget resources. VA had more budget resources available in its Medical Facilities account than the agency estimated it would have, and this allowed VA to spend over $2.3 billion more on NRM than it originally estimated. When we asked why VA spent more on NRM projects than estimated, VA officials said that in addition to spending less on non-NRM activities the agency also received higher annual appropriations than requested and unanticipated supplemental appropriations from Congress. For example, in fiscal year 2009 VA received $300 million more than it requested in annual appropriations as well as $1 billion in supplemental appropriations included in the American Recovery and Reinvestment Act of 2009 (Recovery Act). VA also received $550 million in supplemental appropriations as part of the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007.appropriations were specifically for NRM. In addition to higher annual appropriations and supplemental appropriations, we also found that VA used other budget resources to increase NRM spending. The budget resources included transfers from VA’s other appropriations accounts, reimbursements for services provided under service agreements with the Department of Defense, and unobligated balances carried over from prior fiscal years. While, according to VA officials, the agency did not track the use of specific resources used to increase NRM spending, data provided by VA suggests that more than $1.8 billion from higher than requested appropriations and about $762 million from other budget resources were available for this spending in fiscal years 2006 through 2012. VA used VERA to perform an initial allocation of resources for NRM at the beginning of each fiscal year for fiscal years 2006 through 2012, allocating a total of about $4.6 billion over this time frame. In addition, for fiscal years 2009 through 2012, VA allocated $2.9 billion in total for NRM from higher than requested appropriations and its reserve account. Figure 3 shows the nearly $7.5 billion allocated for NRM using VERA and other methods, which included network estimated costs to maintain medical facilities in good working condition—that is for sustainment—and costs to address the NRM backlog of FCA-identified deficiencies for fiscal years 2006 through 2012. Over the course of allocating about $4.6 billion for NRM using VERA between fiscal years 2006 and 2012, VA changed VERA’s NRM allocation formula from one being based primarily on patient workload in the networks to one that primarily considers both sustainment of buildings and the NRM backlog in each network. Prior to fiscal year 2009, VA used VERA to allocate nearly $1.5 billion of NRM resources on the basis of patient workload and adjusting the cost of construction. Under this formula, networks that treated the largest number of patients received the most resources for NRM, according to VA officials. Beginning in fiscal year 2009, VA used VERA to allocate resources for NRM primarily based on each network’s estimated cost for sustainment and the cost for addressing the NRM backlog. VA used VERA to allocate about $2.6 billion from fiscal year 2009 through 2012—which according to VA officials resulted in more resources being allocated to networks with a higher proportion of more expensive building space.