Report: VA uses faulty methods for savings calculations

The Veterans Affairs Department made unsubstantiated savings assumptions over the past few budget cycles, and has been unable to show that the estimated savings actually were achieved, congressional auditors concluded in a new report.

VA lacked a sound method for estimating savings that would be achieved from more efficient health care management, according to the Government Accountability Office report (GAO-06-359R) released Thursday.

Instead, the agency arrived at its annual savings estimates by calculating the difference between its budgetary needs and the amount the administration was willing to request, the auditors found.

The projected savings were then counted as available funds for budgeting purposes in fiscal 2003 through fiscal 2006.

GAO also was unable to substantiate VA's calculations of actual savings from management efficiencies realized during that time. The auditors cited problems with methodology and documentation.

VA officials took issue with GAO's description of the agency's process for calculating savings. "I disagree with the report's characterization that management efficiencies savings were assumed simply to 'fill the budget gap,' " Deputy Secretary Gordon Mansfield wrote in a response to the report.

But the auditors gave little weight to the agency's defense, replying, "VA officials uniformly described VA's process for determining its management efficiency savings goals in this manner, and it did not provide us any other explanation . . . Accordingly, we continue to believe this characterization is appropriate."

"It is distressing that VA's health care budget over the past three years has been built like a house of cards," said Sen. Daniel Akaka, D-Hawaii, ranking member of the Senate Veterans' Affairs Committee. "Budgets must be built on solid facts -- without that, we will continue to have the shortfalls which jeopardize patient care."

Akaka and Rep. Lane Evans, D-Ill., ranking member of the House Veterans' Affairs Committee, requested the report.

According to the GAO, VA submitted budget documents to Congress for fiscal 2003 and 2004 that assumed a total of $950 million in health care management efficiency savings. For those two years, the most recent for which data was available, the agency ultimately claimed $1.3 billion in savings, according to the report.

But investigators took issue with the reported figures. Inconsistent data tracking blended together different categories of savings, and neither GAO nor VA officials were able to unravel the sources of data, said Diane Handley, assistant director of GAO's Office of Financial Management and Assurance.

Further, reported efficiency savings in some cases resulted from workforce reductions, hiring delays and overtime reduction, measures that GAO said do not qualify as efficiency gains "consistent with VA's objective of providing the same or higher quality and quantity of service at a lower cost."

"This report confirms the concerns I have been raising regarding reliance on gimmicks and invisible savings to fund the VA health care system," Akaka said in a statement.

Last summer, the VA experienced an unanticipated budget shortfall that was widely attributed to planning and budgeting failures. GAO is currently investigating that incident and is expected to release its report in about a month, according to Akaka's staff.