Department of Veterans Affairs

Recommendations and Actions

DVA03: Eliminate Legislative Budget Constraints to Promote Management Effectiveness

Background

Legislative budget constraints severely obstruct the Department of Veterans Affairs' (VA) ability to reengineer its processes for meeting the service needs of veterans. Under the current budget formulation process, VA must develop a comprehensive budget proposal for funds to support vital programs and operations almost two years before it begins to carry them out.

By the time the funds are appropriated, many elements of the once- integrated plan have been acted upon individually and are sectioned off from one another in the budget. Due to the time lags, front-line VA managers also have little flexibility with which to respond to the rapidly changing service environment.

While those in authority (both up and down the chain of command and across the executive and legislative branches) express a willingness to respond to a manager's requests for a change or waiver, the actual use of such a mechanism is logistically impracticable except in the most extreme cases. Because the process does not work well, VA managers can neither respond to emerging opportunities effectively, nor efficiently allocate their resources to meet veterans' needs.

Focusing on performance outputs rather than resource inputs, allowing managers to do the job they are paid to do, and holding managers accountable are fundamental to reinventing government.

The driving force behind establishing budgetary constraints is the need to ensure that VA addresses the concerns of its clients, and controlling the "inputs" to programs has been the historical approach to accomplishing this objective. This approach is particularly attractive when the existence of appropriate "output" measures is questionable. The unfortunate result of this approach, however, is that the aggregate weight of the constraints stifles management and precludes attaining the very objective that the constraints were designed to accomplish.

The dialogue surrounding enactment of the Government Performance and Results Act of 1993 indicates that it is time to stop focusing primarily on the resources going into programs and how they are used, and instead focus on what the programs are doing--the results. Providing managers with the flexibility to perform cost-effectively has little to do with a reduction in accountability, because VA annually prepares both a financial report that is audited by its inspector general and an overall departmental report.(1) Second, it must be recognized that the work environment of the 1990s has been transformed by information technology. Experience with the private sector has provided many lessons about where decisions must be made to respond effectively to the changing needs of customers and market mechanisms.

The range of distortions created by legislative constraints is very broad and often subtle. For example, in the fiscal year 1993 appropriation to the VA medical care account, Congress enacted the following restriction: "...of the sum appropriated, $9,440,000,000 is available only for expenses in the personnel compensation and benefits object classification."(2) If a hospital director cannot attract a surgical specialist, for example, to join the hospital staff, the need could go unmet because this language precludes the director from buying the needed service from another hospital. In a further example, VA's own internal attempts to marshal the funds necessary to implement a comprehensive information infrastructure have been frustrated by not being able to use funds offered for the purpose by the program managers (who would benefit from such a coordinated effort), because of constraints on the expenditures. Other specific examples of restrictions and regulations designed to control resource use include:

--- Travel limitations. Under Public Law 102-484, the Department of Defense (DOD) will transfer $75 million to VA to fund a job training program for recently discharged veterans. DOD's transfer will fund both program and administrative costs, with the administrative costs to include employee travel. It is unclear at this time, however, whether VA can increase its travel to cover Public Law 102-484 associated costs. In other words, despite the fact that VA may receive funding for new work assigned by Congress (and additional travel dollars), it may not be able to exceed the mandated threshold for travel in order to perform the new mission without additional approvals.

--- Employment limitations. As the projected workload of the Medical Care Cost Recovery (MCCR) Program increases, additional staff may be necessary to carry out the collections from third party health insurers. Ceilings on employment, however, may result in VA not meeting the full potential of this program. In fiscal year 1993, projected net MCCR returns to the Treasury will total almost $400 million after deduction of collection costs of about 20 cents on the dollar. Reducing MCCR staffing will have a negative impact by increasing the federal deficit.

--- Resource transfer restrictions. As the Veterans Benefits Administration (VBA) faces an increasing adjudication backlog, veterans continue to wait for long periods to receive benefits. Limitations on reprogramming from nonpayroll items to hire temporary personnel restrict VA from placing resources where they are needed most. Again, legislative constraints have a detrimental, rather than beneficial, impact on program implementation.

--- Other spending restrictions. VA's fiscal years 1990, 1991, and 1992 appropriations allowed VA to obligate only 35 percent of its non-recurring maintenance (NRM) and equipment procurement dollars in the first 10 months of the fiscal year. While this defers budget outlays, it places an incredible limitation on program officials who need the resources to serve veterans' needs, and on contracting officials who must ensure compliance with the time frames in the Competition in Contracting Act. The degree of impact to which this unnatural process has affected VA's numerous construction-related problems is unclear, but it is likely an important factor.(3) The fiscal year 1993 appropriation recognizes some of these problems and extended expenditure authority into the next year. However, the revised approach has the potential for becoming an accounting quagmire when trying to identify and maintain the accounts for contract modifications.

Construction concerns are further exacerbated by the fact that VA's traditional methods of acquiring medical care space have been through the major construction and minor construction appropriation accounts, as well as through the leasing line item within the medical care appropriation. This division of real estate acquisition funds has forced some decisions prematurely. By having either transfer authority or a single real estate acquisition appropriation, VA believes that it could respond effectively and efficiently to the changing demands for managed care and potential eligibility changes.

VA has demonstrated on a pilot basis that it can make useful decisions to impact favorably upon veteran health care and service delivery, because VA can unilaterally authorize small pilots. What the VA cannot do, however, is change legislatively imposed constraints that preclude the timely and effective management of public funds. For example:

--- The VA Medical Center in Baltimore, Maryland, established a program that promised to provide a 12 to 15 percent productivity increase. Unfortunately, the pilot project received only a portion of the needed resources, and funds could not be reallocated to enable the project to be completed as planned.(4)

--- The Veterans Health Administration established a pilot program involving five of its (then) 172 medical centers for which it identified and approved the waiver of 177 constraints on operations following a rigorous committee review of their utility. VA was even able to give some latitude on legislative constraints to the small set of five medical facilities because some legislative constraints apply to the department overall and are not suballocated. Measurable, material improvements in the cost-effectiveness of operations resulted.(5)

This initiative, together with another National Performance Review (NPR) initiative in this report--Issue "DVA08: Decentralize Decisionmaking Authority to Promote Management Effectiveness"--would provide VA with a much-needed flexibility to enhance the effectiveness and quality of veteran health care and benefit service delivery. A question remains regarding how the issue of efficiency of operations will be addressed. VA has proposed to implement a new performance management and resource allocation system to respond to this need, which is addressed in Issue "DVA09: Establish a Comprehensive Resource Allocation Program."

It is clear, however, that greater authority to managers in the field must go hand-in-hand with improvements in the way VA allocates funds annually to its facilities. That is, greater flexibility in the field is contingent upon being able to hold field managers accountable for providing cost-effective and high-quality medical care to veterans and their families. This safeguard is needed to assure a universal commitment to improved health care and benefit service delivery.

Action

Eliminate travel, training, and personnel restrictions (including floors and ceilings) in the Department of Veterans Affairs budget and authorizing legislation, and give flexibility to field managers to (a) transfer funds between programs and object classes, and (b) obtain multi-year funding when requested.

Implementation of this recommendation will enable VA managers to respond to the changing needs of customers and market mechanisms, when implemented in coordination with the other NPR initiatives identified above. In general, the budget would be prepared as it has in the past, and VA would be given transfer authority with respect to travel, training, and personnel stipulations. Transfer authority would also be given for programmatic funds subject to some programmatic restrictions, at which point formal authorization would be required (e.g., if variance in the amount authorized exceeded some percentage of the current budget or a specified dollar amount, whichever is smaller). VA accountability of what actually occurred would be contained in the department's annual finance report, its annual report, and in the succeeding year's budget formulation. Appropriate accountability is essential to providing flexibility of this type.

Implications

Statutory transfer authority would be required to implement this recommendation in fiscal year 1994, and this would preclude the necessity to address individual constraints within authorizing legislation. In succeeding years, it would be preferable to eliminate the constraints from authorizing legislation entirely or provide transfer authority.

Fiscal Impact

It is not possible to determine the costs and benefits associated with the effect of removing individual legislative constraints. It is suggested that concerns about gathering these net savings or costs from this initiative be offset by the recognition that this is one of several NPR recommendations that, taken together, will put into place an overall program for identifying how the performance of VA operational entities compare to each other and where resources might be used more cost-effectively.

Endnotes

1. U.S. Department of Veterans Affairs, Financial Statements, Fiscal Year 1992 (Washington, D.C., March 31, 1993); see also U.S. Department of Veterans Affairs, FY 1992 Annual Report of the Secretary of Veterans Affairs (Washington, D.C., undated).

2. Department of Veterans Affairs, Department of Housing and Urban Development, and Independent Agencies Appropriations Act of 1993, P.L. 102-389.

3. See U.S. General Accounting Office, VA Health Care: Actions Needed to Control Major Construction Costs, GAO/HRD 93-75 (Washington, D.C.: U.S. General Accounting Office, February 1993).

4. See U.S. Department of Veterans Affairs, Project to Increase the Efficiency and Effectiveness of Physicians and Nurses (Washington, D.C., June 10, 1992).

5. See U.S. Department of Veterans Affairs, Management Efficiency Program: Freeing Managers to Manage (Washington, D.C., July 1991).

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