VA Health Care:

Resource Allocation Methodology Has Had Little Impact on Medical Centers' Budgets

HRD-89-93: Published: Aug 18, 1989. Publicly Released: Aug 18, 1989.

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Pursuant to a congressional request, GAO examined the Resource Allocation Methodology (RAM) that the Department of Veterans Affairs (VA) used in its financial management process, focusing on how: (1) VA used RAM to adjust medical centers' budgets; (2) the adjustments compared to total dollars budgeted to the centers; and (3) regional directors could help medical centers cope with developing financial needs during the course of a year.

GAO found that: (1) VA used RAM to transfer funds through its budget formulation process from less efficient medical centers to more efficient centers; (2) VA placed a cap on the amount of each medical center's budget that it could reduce or increase, to protect centers from large shifts in their budgets, undue impacts from unreliable data, or technical problems; (3) VA also used RAM gains to finance such initiatives as modernization of existing facilities; (4) in 1989, VA used RAM to adjust 164 medical centers' budgets; (5) VA deducted $47.4 million from 83 less efficient centers and allocated it to 81 more efficient centers; (6) the reductions ranged from $15,500 to $2.6 million, while the gains ranged from $21,900 to $1.9 million; (7) the regional directors had the authority to adjust centers' budgets during the year through reserves set aside at the start of the year, supplemental appropriations received during the year, or transfers of funds among centers; and (8) medical center directors frequently requested budget adjustments to meet various operational needs.

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