Our prior work highlights some of the challenges VA faces in formulating its budget: obtaining sufficient data for useful budget projections, making accurate calculations, and making realistic assumptions. Our 2006 report on VA’s overall health care budget found that VA underestimated the cost of serving veterans returning from military operations in Afghanistan and Iraq, in part because estimates for fiscal year 2005 were based on data that largely predated the Iraq conflict. In fiscal year 2006, according to VA, the agency again underestimated the cost of serving these veterans because it did not have sufficient data due to challenges obtaining data needed to identify these veterans from the Department of Defense (DOD). According to VA officials, the agency subsequently began receiving the DOD data needed to identify these veterans on a monthly basis rather than quarterly. We also reported challenges VA faces in making accurate calculations during budget formulation. VA made computation errors when estimating the effect of its proposed fiscal year 2006 nursing home policy, and this also contributed to requests for supplemental funding. We found that VA underestimated workload—that is, the amount of care VA provides—and the costs of providing care in all three of its nursing home settings. VA officials said that the errors resulted from calculations being made in haste during the OMB appeal process, and that a more standardized approach to long-term care calculations could provide stronger quality assurance to help prevent future mistakes. In 2006, we recommended that VA strengthen its internal controls to better ensure the accuracy of calculations it uses in preparing budget requests. VA agreed with and implemented this recommendation for its fiscal year 2009 budget justification by having an independent actuarial firm validate the savings estimates from proposals to increase fees for certain types of health care coverage. Our 2006 report on VA’s overall health care budget also illustrated that VA faces challenges making realistic assumptions about the budgetary impact of its proposed policies. VA made unrealistic assumptions about how quickly the department would realize savings from proposed changes in its nursing home policy. We reported the President’s requests for additional funding for VA’s medical programs for fiscal years 2005 and 2006 were in part due to these unrealistic assumptions. We recommended that VA improve its budget formulation processes by explaining in its budget justifications the relationship between the implementation of proposed policy changes and the expected timing of cost savings to be achieved. VA agreed and acted on this recommendation in its fiscal year 2009 budget justification. In January 2009, we found that VA’s spending estimate in its fiscal year 2009 budget justification for noninstitutional long-term care services appeared unreliable, in part because this spending estimate was based on a workload projection that appeared to be unrealistically high in relation to recent VA experience. VA projected that its workload for noninstitutional long-term care would increase 38 percent from fiscal year 2008 to fiscal year 2009. VA made this projection even though from fiscal year 2006 to fiscal year 2007—the most recent year for which workload data are available—actual workload for these services decreased about 5 percent. In its fiscal year 2009 budget justification, VA did not provide information regarding its plans for how it would increase noninstitutional workload 38 percent from fiscal year 2008 to fiscal year 2009. We recommended that VA use workload projections in future budget justifications that are consistent with VA’s recent experience with noninstitutional long-term care spending or report the rationale for using alternative projections. In its March 23, 2009, letter to GAO, VA stated it concurs with this recommendation and will implement our recommendation in future budget submissions. In January 2009, we also reported that VA may have underestimated its nursing home spending and noninstitutional long-term care spending for fiscal year 2009 because it used a cost assumption that appeared unrealistically low, given recent VA experience and economic forecasts of health care cost increases. For example, VA based its nursing home spending estimate on an assumption that the cost of providing a day of nursing home care would increase 2.5 percent from fiscal year 2008 to fiscal year 2009. However, from fiscal year 2006 to fiscal year 2007—the most recent year for which actual cost data are available—these costs increased approximately 5.5 percent. VA’s 2.5 percent cost-increase estimate is also less than the 3.8 percent inflation rate for medical services that OMB provided in guidance to VA to help with its budget estimates. We recommended that in future budget justifications, VA use cost assumptions for estimating both nursing home and noninstitutional long- term care spending that are consistent with VA’s recent experience or report the rationale for alternative cost assumptions. In its March 23, 2009, letter to GAO, VA stated it concurs with our recommendations and will implement these recommendations in future budget submissions. Consideration of any proposal to change the availability of the appropriations VA receives for health care should take into account the current structure of the federal budget, the congressional budget process—including budget enforcement—and the nature of the nation’s fiscal challenge. The impact of any change on congressional flexibility and oversight also should be considered. In the federal budget, spending is divided into two main categories: (1) direct spending, or spending that flows directly from authorizing legislation—this spending is often referred to as “mandatory spending”— and (2) discretionary spending, defined as spending that is provided in appropriations acts. It is in the annual appropriations process that the Congress considers, debates, and makes decisions about the competing claims for federal resources. Citizens look to the federal government for action in a wide range of areas. Congress is confronted every year with claims that have merit but which in total exceed the amount the Congress believes appropriate to spend. It is not an easy process—but it is an important exercise of its Constitutional power of the purse. Special treatment for spending in one area—either through separate spending caps or guaranteed minimums or exemption from budget enforcement rules—may serve to protect that area from competition with other areas for finite resources. The allocation of funds across federal activities is not the only thing Congress determines as part of the annual appropriations process. It also specifies the purposes for which funds may be used and the length of time for which funds are available. Further, annually enacted appropriations have long been a basic means of exerting and enforcing congressional policy. The review of agency funding requests often provides the context for the conduct of oversight. For example, in the annual review of the VA health care budget, increasing costs may prompt discussion about causes and possible responses—and lead to changes in the programs or in funding levels. VA health care offers illustrations of and insights into growing health care costs. This takes on special significance since—as we and others have reported—the nation’s long-term fiscal challenge is driven largely by the rapid growth in health care costs. Both the Congress and the agencies have expressed frustration with the budget and appropriations process. Some members of Congress have said the process is too lengthy. The public often finds the debate confusing. Agencies find it burdensome and time consuming. And the frequent need for continuing resolutions (CR) has been a source of frustration both in the Congress and in agencies. Although there is frustration with the current process, changes should be considered carefully. The current process is, in part, the cumulative result of many changes made to address previous problems. This argues for spending time both defining what the problem(s) to be solved are and analyzing the impact of any proposed change(s). In considering issues surrounding the possibility of providing advance appropriations for VA health care—or any other program—it is important to recognize that not all funds provided through the existing appropriations process expire at the end of a single fiscal year. Congress routinely provides multi-year appropriations for accounts or projects within accounts when it deems it makes sense to do so. Multi-year funds are funds provided in one year that are available for obligation beyond the end of that fiscal year. So, for example, multi-year funds provided in the fiscal year 2010 appropriations act would be available in fiscal year 2010 and remain available for some specified number of future years. Unobligated balances from such multi-year funds may be carried over by the agency into the next fiscal year—regardless of whether the agency is operating under a continuing resolution or a new appropriations act. For example, in fiscal year 2009 about $3 billion of approximately $41 billion for VA health care programs was made available for two years. Congress also provides agencies—including VA—some authority to move funds between appropriations accounts. This transfer authority provides flexibility to respond to changing circumstances. Advance appropriations are different from multi-year appropriations. Whereas multi-year appropriations are available in the year in which they are provided, advance appropriations represent budget authority that becomes available one or more fiscal years after the fiscal year covered by the appropriations act in which they are provided. So, for example, advance appropriations provided in the fiscal year 2010 appropriations act would consist of funds that would first be available for obligation in fiscal year 2011 or later. In considering the proposal to provide advance appropriations, one issue is the impact on congressional flexibility and its ability to consider competing demands for limited federal funds. Although appropriations are made on an annual cycle, both the President and the Congress look beyond a single year in setting spending targets. The current administration’s budget presents spending totals for ten fiscal years. The concurrent Budget Resolution—which represents Congress’s overall fiscal plan—includes discretionary spending totals for the budget year and each of the four future years. The provision of advance appropriations would “use up” discretionary budget authority for the next year. In doing so it limits Congress’s flexibility to respond to changing priorities and needs and reduces the amount available for other purposes in the next year. Another issue would be how and when the limits on such advance appropriations would be set. Currently the concurrent Budget Resolution both caps the total amount that can be provided through advance appropriations and identifies the agencies or programs which may be provided such funding. It does not specify how the total should be allocated among those agencies.