Veterans:

Department of Veterans Affairs' Lack of Timely and Accurate Information on Unexpended Balances Limits Effective Management and Congressional Oversight

GAO-07-410R: Published: May 16, 2007. Publicly Released: May 16, 2007.

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The Department of Veterans Affairs (VA) holds about 5 percent of the real property owned by the federal government in terms of building floor area, including such facilities as hospitals and office buildings. VA's responsibility for managing its real property includes the construction of its facilities and cemeteries. Because these construction projects can span several years, VA is authorized to carry forward fund balances from year to year in its construction accounts. VA is responsible for keeping track of and managing these balances to ensure that any unexpended balances that remain after construction projects are completed are redirected to other construction project needs within the agency. VA's budgets for new construction exist in two accounts--Major Construction and Minor Construction--which are funded as separate line items within the appropriation. For purposes of this report, we refer to the Major and Minor Construction accounts as VA's construction accounts. Construction projects undertaken to replace existing facility components are funded through the Non-Recurring Maintenance (NRM) portion of the Medical Facilities budget account. For purposes of this report, we refer to the NRM as VA's facility account. Under the Comptroller General's authority to conduct evaluations on his own initiative, and as part of a continued effort to assist Congress in overseeing real property management issues, we examined VA's management of unexpended construction balances. Specifically, we addressed the following question: To what extent does VA have readily available information about unexpended balances in its construction and facility accounts to effectively manage these funds?

VA did not have readily available information in its construction and facility accounts about unexpended balances that were no longer needed and could have been redirected to other needs. Two issues hindered VA officials from identifying these unexpended balances in a timely manner. First, VA's systems lacked readily available information to track projects and provide timely and accurate information to VA management. Second, VA lacked effective policies and procedures for identifying unexpended balances when construction projects are completed and the funds designated for those projects are no longer needed. As a result of these two issues, unexpended balances on completed construction project accounts have been allowed to accumulate. We identified about $11 million in unexpended balances from completed construction projects during our review. Furthermore, the Veterans Health Administration (VHA) lacks tools to monitor financial project information in its facility account projects at its Washington, D. C., headquarters. Although there were no unobligated construction balances from completed projects in VHA's facility accounts, there was a related issue concerning its practice of obligating most facility funds in the last month of the fiscal year, which poses a risk. Our past work has shown that year-end spending can place government programs at risk for waste. GAO reported in September 2006 that VA did not include the status of the facility account funds in the three quarterly reports that VA had provided. Our review found that VA's two subsequent reports on the financial status of VHA--for the fourth quarter of fiscal year 2006 and the first quarter of fiscal year 2007--reported the status of NRM funds. However, in these reports, VA did not explain (1) its practice of holding the majority of NRM funds from OMB's quarterly apportionment until the end of the fiscal year and (2) its use of the $69 million difference between planned and actual NRM funds for fiscal year 2006.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In 2007, GAO found that VA lacks effective policies and procedures designed to identify completed construction projects that have funds remaining in its Veterans Health Administration (VHA) and National Cemetery Administration (NCA) Major and Minor Projects. VA receives funding for major and minor construction projects as separate line items within its appropriation. Unexpended balances are common in construction projects and authorized transfers between VA project accounts take place. The approximately $11 million in unexpended balances that we found during our review were no longer needed for the projects they were originally designated for. Also, in some cases the projects had been completed for several years. GAO recommended that VA establish policies and procedures to periodically identify completed projects for close-out and redirect the unexpended balances in a timely manner to other construction needs within VA. In response, VA updated existing policies and procedures for general ledger and maintenance of funding allotments. For example, prior to the GAO audit, VHA's Capital Asset Management and Planning Service (CAMPS) had established a course of action to compare the project tracking database to the financial database to ensure unexpended balances were not left on closed projects. However, this practice was done annually and will now be completed quarterly. Additionally, the VHA Minor Construction Handbook was updated and NCA now monitors project status and identifies completed projects for closeout and removal of unexpended balances per a directive dated July 28, 2009. As a result, VA now is better positioned to manage unexpended balances in its construction accounts to ensure effective management of these funds at VHA and NCA.

    Recommendation: To help strengthen VA's ability to track and manage unexpended balances and report the status of facility account funds to Congress, the the Secretary of Veterans Affairs should establish policies and procedures to periodically identify completed projects for close-out and redirect the unexpended balances in a timely manner to other construction project needs within VA.

    Agency Affected: Department of Veterans Affairs

  2. Status: Closed - Implemented

    Comments: In 2007, GAO found that VA's systems lacked readily available and accurate information to track and provide the financial status of construction projects to VA management for its Veterans Health Administration (VHA) and National Cemetery Administration (NCA) projects. For example, it took several months for VA to provide GAO with corrected financial information on VHA and NCA construction projects. VA receives funding for major and minor construction projects as separate line items within its appropriation. The information in VA's Financial Management System (FMS) for both VHA and NCA minor construction projects showed math errors, lacked project status, and had negative balances. Additionally, VA lacked effective policies and procedures designed to identify completed construction projects. Consequently, VA did not have readily available information in its construction accounts about unexpended balances that were no longer needed and could have been redirected to other needs. GAO recommended that VA establish policies and procedures to update and keep current the project financial management system that will notify VA management when payments have exceeded project funding. Since 2009, VA has updated policies and procedures such as training manuals to address errors in the existing financial management system while awaiting a planned replacement system that has not yet been procured. As a result, VA now is better positioned to manage unexpended balances in its construction accounts to ensure effective management of these funds at VHA and NCA.

    Recommendation: To help strengthen VA's ability to track and manage unexpended balances and report the status of facility account funds to Congress, the the Secretary of Veterans Affairs should establish policies and procedures to update and keep current the project financial management system that will notify VA management when payments have exceeded project funding.

    Agency Affected: Department of Veterans Affairs

  3. Status: Closed - Implemented

    Comments: In 2007, GAO reported that VA's systems lacked readily available and accurate information to track and provide the status of construction projects to VA management for its Veterans Health Administration (VHA) and National Cemetery Administration (NCA) projects. For example, it took several months for VA to provide GAO with corrected information on VHA and NCA construction projects. VA receives funding for major and minor construction projects as separate line items within its appropriation. NCA's minor construction information system consisted of text reports that were not compiled. Both VHA and NCA have an electronic project information system to track the status of major projects. However, these information systems did not contain readily available data, as both VHA and NCA relied on contacting project management personnel to update the project status. Additionally, VA lacked effective policies and procedures designed to identify completed construction projects. Consequently, VA did not have readily available information in its construction accounts about unexpended balances that were no longer needed and could have been redirected to other needs. GAO recommended that VA establish policies and procedures to update and keep the project information systems current. In response, as of October 2010 VA has updated project information systems and guidance for both VHA and NCA Minor and Major Projects. As a result, VA now is better positioned to manage unexpended balances in its construction accounts to ensure effective management of these funds at VHA and NCA.

    Recommendation: To help strengthen VA's ability to track and manage unexpended balances and report the status of facility account funds to Congress, the the Secretary of Veterans Affairs should establish policies and procedures to update and keep the project information systems current.

    Agency Affected: Department of Veterans Affairs

  4. Status: Closed - Not Implemented

    Comments: VA has not implemented this recommendation.

    Recommendation: To help strengthen VA's ability to track and manage unexpended balances and report the status of facility account funds to Congress, the the Secretary of Veterans Affairs should establish policies and procedures to explain (1) VA's rationale for holding the majority of NRM funds from OMB's quarterly apportionment until the end of the fiscal year and (2) how VA used the variance between planned and actual NRM in the quarterly report on the financial status of the Veterans Health Administration to the Committees on Appropriations of both Houses of Congress.

    Agency Affected: Department of Veterans Affairs

 

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