Auditors detail flaws in VA budget process

Veterans Affairs Department officials were aware of possible budget problems months before they alerted Congress last year, and made mistakes in the department's budget formulation that contributed to the need for substantial revisions in 2005 and 2006, auditors have concluded.

The Government Accountability Office reviewed VA's budget development and execution for fiscal 2005 and 2006 (GAO-06-958), after a summer 2005 incident when the department was unexpectedly forced to seek a supplemental appropriation of $975 million to carry it for the remainder of the year and a budget amendment of nearly $2 billion for fiscal 2006.

Investigators found several problems in how agency officials formulated budget requests to Congress, including failure to accurately forecast the department's workload, unrealistic assumptions about savings that could be achieved from policy changes and calculation errors.

GAO confirmed VA's claim that part of the forecasting problem stemmed from using workload data from 2003, before American forces were heavily engaged in the Middle East. For its fiscal 2006 budget formulation the agency sought additional data from the Defense Department, but had trouble obtaining it, auditors found.

VA had counted on savings from changes to policies on which veterans could use the agency's nursing facilities and for how long, among other things, to bring expenditures into line with the funds that would be available in 2005. But officials were overly optimistic in how quickly those changes could be implemented, which contributed to the shortfall.

Auditors also took the agency to task for not reporting to Congress promptly on the problems once they surfaced and not fully meeting the reporting requirements that legislators have imposed since the incident.

The report recounts how VA formed a budgetary challenges working group in early fiscal 2005 to monitor what was expected to be a tough budget. Legislators learned of the problems in April, when officials reported their plan to shift funds from equipment and one-time maintenance needs to cover patient care.

At a June hearing, VA Secretary James Nicholson told overseers that reprogramming the funds would not be sufficient to meet the agency's costs and additional funding would be required.

"When health care for veterans is at stake, the administration must not use budget gimmicks to pretend that its fiscal house is in order," said Sen. Daniel Akaka, D-Hawaii, ranking member of the Veterans' Affairs Committee. "VA must be much more forthcoming and provide a better picture of VA's finances to Congress."

GAO found that the agency has not been fully meeting a statutory requirement, inserted in VA's fiscal 2006 appropriations act, to report quarterly to Congress on a series of budget indicators. Specifically, the agency has been late in submitting its reports and has failed to include data on the average wait time for new patients to obtain an appointment, a measure that could serve as an early sign of further problems.

GAO recommended that VA address its budget formulation problems and include the full measure of required data to Congress; the agency generally concurred with the recommendations.