VA provides health care services to more than 5 million patients annually. This care includes mental health services to veterans in inpatient and outpatient settings in a variety of VA health care facilities including medical centers, CBOCs, and Vet Centers. Mental health services are provided for a range of conditions such as depression, PTSD, and substance abuse disorders. Resources for these and other health care services are allocated by VA headquarters through a general resource allocation system—the Veterans Equitable Resource Allocation (VERA) system—to its 21 health care networks. Although the VERA system is used to allocate funds, it does not designate funds for specific purposes or prescribe how those funds are to be used. In November 2004, the Secretary of VA approved the mental health strategic plan. This mental health strategic plan contained recommended initiatives for improving VA mental health services by addressing a range of issues, including, for example, improving awareness about mental illness and filling gaps in access to mental health services. Some of the service gaps identified were in treating veterans with serious mental illness, female veterans, and veterans returning from combat in Iraq and Afghanistan. Within VA, the Office of Mental Health Services (OMHS) is responsible for coordinating with the networks and medical centers on the overall implementation of the mental health strategic plan. This includes formulating strategies for allocating funds to medical centers and certain offices for plan initiatives. Such strategies include, for example, the use of RFPs to decide how the mental health strategic plan funds are to be allocated to medical centers. VA headquarters allocated $88 million of the $100 million that VA officials said would be used for mental health strategic plan initiatives in fiscal year 2005 by using several approaches. About $53 million was allocated directly to medical centers and certain offices and $35 million was allocated through its general resource allocation system to its health care networks, according to VA officials. The remaining $12 million of the $100 million was not allocated by any approach, headquarters officials said, because there was not enough time during the fiscal year to allocate the funds. Officials we interviewed at 7 medical centers in 4 networks reported using allocated funds to provide new mental health services and to provide more of existing services. However, some medical center officials reported that they did not use all allocated funds for plan initiatives by the end of the fiscal year, due in part to the length of time it took to hire new staff. VA headquarters allocated about $53 million directly to medical centers and certain offices based on proposals submitted for funding and other approaches targeted to specific initiatives related to the mental health strategic plan in fiscal year 2005. VA headquarters developed and solicited submissions from networks for specific initiatives to be carried out at their individual medical centers through requests for proposals (RFPs). VA made resources available through these RFPs and other targeted approaches to medical centers for plan initiatives to support a range of specific mental health services based, in part, on the priorities of VA leadership and legislation for programs related to PTSD, substance abuse, and other mental health areas, according to VA headquarters officials. Nearly $20 million of the $53 million allocated by using RFPs and other targeted approaches was for mental health services related to legislation, according to VA officials. Most of the approximately $53 million allocated—about $48 million—went to VA medical centers. PTSD services and OEF/OIF veterans’ mental health care received an allocation of about $18 million, with Compensated Work Therapy (CWT) receiving the second highest total—nearly $10 million. Other initiatives receiving funding included substance abuse services, mental health services in nursing homes, domiciliary expansion, and psychosocial rehabilitation for veterans with serious mental illness. VA headquarters issued five RFPs from October 2004 to January 2005 that described the specific types of services for which mental health strategic plan funding was available. Review panels headed by mental health experts within VA reviewed the proposals, ranked them, and provided their rankings to VA’s leadership. Once funding decisions were made, VA allocated funding directly to the medical centers for the mental health strategic plan initiatives. VA also used other funding approaches targeted to specific initiatives. For example, headquarters officials allocated funding to medical centers to expand mental health services at CBOCs that had fewer mental health visits than a standard VA identified for this purpose. VA also used other targeted funding approaches to determine which medical centers would receive some of the funds for PTSD, OIF and OEF veterans’, and substance abuse services. In addition, VA targeted funds to mental health initiatives in Polytrauma Centers—centers within certain VA medical centers that provide specialized treatment for veterans of OIF and OEF who have complex rehabilitation needs. VA headquarters officials said that allocations made for initiatives in fiscal year 2005 through RFPs and other approaches targeted to specific initiatives would be made for a total of 2 to 3 fiscal years. These officials said they anticipated that medical centers would hire permanent staff whose positions would need to be funded for more than 1 year. The expectation of VA leadership was that after funds allocated through these approaches were no longer available, medical centers would continue to support these programs using their general operating funds received through VA’s general resource allocation system. VA allocated $35 million for mental health strategic plan initiatives in fiscal year 2005 through its general resources allocation system to its health care networks, according to VA headquarters officials. The decision to allocate these resources to VA’s networks for mental health strategic plan initiatives was retrospective and VA did not notify networks and medical centers of this decision. Although VA headquarters made fiscal year 2005 general resource allocations to the networks in December 2004, the decision that $35 million of the funds allocated at that time were for mental health strategic plan initiatives was not finalized until April 2005, several months after the general allocation had been made. VA headquarters officials said that they made the decision to allocate $35 million from the general resource allocation system because these resources would be more rapidly allocated than if they had been allocated through RFPs. However, other VA headquarters officials told us that the decision was also made, in part, because VA did not have sufficient unallocated funds remaining after the December 2004 general allocation to fund $100 million for mental health strategic plan initiatives through RFPs and other targeted approaches. VA headquarters officials, as well as network and medical center officials, indicated that there was no guidance to the networks and medical centers instructing them to use specific amounts from their general fiscal year allocation for mental health strategic plan initiatives. Network and medical center officials we spoke with were unaware that any specific portion of their general allocation was to be used for mental health strategic plan initiatives. Several VA medical center officials noted, however, that some of the funds in their general allocation were used to support their mental health programs generally, as part of their routine operations. However, because network and medical center officials we interviewed did not know that funds had been allocated for mental health strategic plan initiatives through VA’s general resource allocation system, nor did VA headquarters notify networks and medical centers throughout VA of this retroactive allocation, it is likely that some of these funds were not used for plan initiatives. VA did not allocate the approximately $12 million remaining of the $100 million planned for mental health strategic plan initiatives in fiscal year 2005 because, according to VA headquarters officials, there was not enough time during the fiscal year to allocate the funds through the RFP process or other approaches targeted to specific initiatives. Officials said that when resources were allocated later in the fiscal year through an RFP rather than at the beginning, the amount allocated was only a portion of the annualized cost. The full annualized cost could be supported in the next fiscal year. For example, if a project with an annual cost of $4 million was allocated mid way through the fiscal year, only half the annual cost was allocated at that time—-$2 million. The expectation was that the full $4 million would be available for the project over 12 months in the next fiscal year. The $12 million that VA did not allocate for fiscal year 2005 was intended for certain mental health strategic plan initiatives based on an allocation plan developed by VA for the $65 million it planned to allocate through RFPs and other approaches. VA headquarters officials said that funds not allocated for mental health strategic plan initiatives were allocated for other health care purposes. Officials we interviewed from seven medical centers in four networks reported using funds allocated to them for mental health strategic plan initiatives through RFPs and other targeted approaches, but they said that some of these funds were not used for plan initiatives in fiscal year 2005. Officials said they used funds allocated to provide new mental health services and to provide more of existing services included in plan initiatives. For example, two medical centers used funds to increase the number of mental health providers available at CBOCs. One of those medical centers also implemented a new 6-week PTSD day treatment program in which veterans live in the community but come to the medical center daily for counseling, group therapy, and other services. Officials at some medical centers reported that they were not able to use all of their fiscal year 2005 funding for plan initiatives by the end of the year as planned and cited several reasons that contributed to this situation. The length of time it takes to recruit new staff in general and the special problems of hiring specialized staff, such as psychiatrists, were cited. In some cases the need to locate or renovate space for programs contributed to delays in using mental health strategic plan funds, according to medical center officials. Medical centers varied in how they treated fiscal year 2005 funds that were allocated by VA for mental health strategic plan initiatives but not used for those initiatives. Some reported that they carried over the funds for use in the next fiscal year. Officials at some medical centers reported that they used these funds for other health care purposes. For example, officials at one medical center said they used funds that they did not spend on mental health strategic plan initiatives to support other mental health programs. VA headquarters officials advised participants from networks and medical centers in a weekly conference call in August 2005 that if they were unable to hire staff for initiatives in fiscal year 2005, they should use the funds allocated only for mental health services.