Additional and Dissenting Views and Estimates

We have reviewed the Department of Veterans Affairs (VA) Budget Submissions for the last four fiscal years and are greatly concerned with the impact that claimed, but unrealized management efficiencies may have on veterans’ health care funding.  While we have joined our Democratic Colleagues on the Committee in their request to augment the Administration’s budget proposal by an additional $3.4 billion, we would like to take this opportunity to express our continued reservations about the legitimacy of claims of savings created by alleged management efficiencies claimed for this and prior years.  We explain below why an additional $3.7551 billion is required to correct this unfounded offset to veterans’ health care, a claim based on VA’s unsubstantiated claims of finding and implementing management efficiencies. 

From 2003-2006 VA escalated its claims and projections of savings by implementing management efficiencies.  The total offset to veterans’ health care during this four-year period was $4.345 billion.  As these savings have not been proven, and as significant evidence exists to refute the magnitude of savings claimed, the funds should be restored and no further offsets due to management efficiencies should be permitted until the detailed evidence and methodology is provided. 

The current Democratic views and estimates disallows only the proposed Fiscal Year (FY) 2006 increase to claimed VA management efficiencies of $590 million and leaves in place for FY06 a baseline of approximately $1.2 billion in previously claimed efficiency savings.  As many of the assumptions underlying this baseline savings estimate were never realized, we recommend disallowing claimed management efficiencies until proof of savings is demonstrated.  After FY03, each subsequent year projects a new “efficiency” amount added to a baseline savings estimate created the prior year.

FY 2003      $  316.4 million                (FY 2003/book #2, page 2-136)

FY 2004      $  950.0 million                (FY 2004/book #2, page 2-164)

FY 2005      $1.2900 billion                 (FY 2005/book #2, page 2F-14)

FY 2006      $1.7891 billion                 (FY 2006/book #2, page 8-14)

Examining the FY04 savings claim of almost one billion dollars as an example, we find that this amount of savings was based on competitive sourcing, procurement reform and employee productivity.  While savings due to competitive sourcing are difficult to prove in the long-term, the basis for the claimed savings in FY04 never transpired because outsourcing has not occurred in VA since the VA General Counsel determined in April 2003 that VHA could not engage in competitive sourcing absent specific authorization from Congress.

Additionally in FY04, the VA Inspector General (IG) and Government Accountability Office published reports detailing problems with procurement, contracting and accountability in several different areas – they reflect serious management problems, not management efficiencies.  An independent audit by Deloitte & Touche for FY04 found repeat material weaknesses and problems with operational oversight at VA that had not been corrected from the previous year.  Additionally, the well publicized failure by VA to deploy the CoreFLS automated system resulted in $249 million in government obligations.  The IG faulted both VA management and senior leadership in its August 11, 2004, report regarding the CoreFLS failure.  From the evidence now available, the proven management problems may outweigh the proven management efficiencies. 

In good conscience, we cannot allow illusory management efficiency claims to be deducted from veterans’ health care based on “efficiencies” of the type listed above. It is incumbent on all Federal employees to be efficient managers, to always seek ways to become more effective.  We all know that there are “gives and takes” in this process but we have little evidence of gains by VA to compare with the strong indications of management failure chronicled above.  We should deduct only those efficiencies that are well-grounded and that are not offset by management errors, fraud, waste or abuse.  VA has not proven its net efficiency claims.   We therefore request that the Budget Committee disallow all VA claims of savings based on management efficiencies from FY 2003-2006 and fully restore the missing $4.3451 billion.  When and if VA is able to detail legitimate management savings, then and only then should we consider such savings for purposes of developing the budget resolution.

Ted Strickland                                             Bob Filner

Corrine Brown                                             Darlene Hooley

Michael Michaud                                          Tom Udall