Veterans' Disability Benefits: Improved Transparency Needed to	 
Facilitate Oversight of VBA's Compensation and Pension Staffing  
Levels (03-NOV-05, GAO-06-225T).				 
                                                                 
The Chairman, Subcommittee on Disability Assistance and Memorial 
Affairs, House Committee on Veterans' Affairs, asked GAO to	 
submit a statement for the record highlighting findings from an  
examination of the Veterans Benefit Administration's (VBA) fiscal
year 2005 budget justification. In that review, we assessed (1)  
VBA's determination and justification of claims processing	 
staffing levels, and the role of productivity in such		 
determinations, and (2) VBA's projections of future claims	 
workload and complexity.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-225T					        
    ACCNO:   A40957						        
  TITLE:     Veterans' Disability Benefits: Improved Transparency     
Needed to Facilitate Oversight of VBA's Compensation and Pension 
Staffing Levels 						 
     DATE:   11/03/2005 
  SUBJECT:   Budgeting						 
	     Claims processing					 
	     Labor force					 
	     Pension claims					 
	     Performance measures				 
	     Personnel management				 
	     Productivity in government 			 
	     Projections					 
	     Staff utilization					 
	     Veterans benefits					 
	     Veterans disability compensation			 
	     Veterans pensions					 
	     Work measurement					 
	     Transparency					 

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GAO-06-225T

United States Government Accountability Office

GAO 	Testimony Before the Subcommittee on Disability

Assistance and Memorial Affairs, Committee on Veterans' Affairs, House of
Representatives

For Release on Delivery Expected at 2:00 p.m. EST Thursday, November 3,
2005

VETERANS' DISABILITY BENEFITS

 Improved Transparency Needed to Facilitate Oversight of VBA's Compensation and
                            Pension Staffing Levels

Statement for the Record by Cynthia A. Bascetta, Director, Education, Workforce
and Income Security

GAO-06-225T

November 3, 2005

VETERANS' DISABILITY BENEFITS

Improved Transparency Needed to Facilitate Oversight of VBA's Compensation and
Pension Staffing Levels

                                 What GAO Found

We reported in November 2004 that VBA's fiscal year 2005 budget
justification for disability compensation and pension staffing could have
been more transparent. VBA inadequately explained how it planned to deal
with a growing workload and meet its performance goals despite a lower
staffing level. We recommended that to make its budget justification more
transparent and useful for congressional oversight, VBA provide the
Congress with the following types of information:

o 	Explanation of the expected impact of specific initiatives and changes
in incoming claims and workload. While the fiscal year 2005 justification
identified a number of factors that could affect VBA's staffing
requirements, VBA did not clearly explain how each of these initiatives
and projections affected its funding request for fewer employees.

o 	Claims processing productivity, including VBA plans to improve
productivity. The fiscal year 2005 budget justification inadequately
explained how VBA would achieve productivity improvements needed to
improve claims processing performance with larger workloads and fewer
staff.

o 	Explanation of how claims complexity is expected to change and the
impact of these changes on productivity and requested staffing levels. VBA
stated that claims complexity is increasing, but did not project increases
in disabilities per claim or explain how complexity changes would affect
productivity.

In responding to our report, VBA agreed to work to include this
information in its future budget justifications for compensation and
pension staffing and identified more specific steps that it plans to take
in its fiscal year 2007 and 2008 budget cycles. We have observed that, in
contrast to last year, the fiscal year 2006 justification contains
performance goals that VBA believes are more achievable and it addresses
how it will achieve these goals within higher resource levels, due to
additional funding from the Congress.

VBA Compensation and Pension FTEs, Fiscal Years 1998-2006

                 United States Government Accountability Office

Dear Mr. Chairman and Members of the Subcommittee:

I am pleased to have the opportunity to comment on Veterans Benefits
Administration (VBA) requests for funding to administer its disability
compensation and pension programs, in particular funding for claims
processing staffing levels. The Congress relies on VBA's annual budget
justification as the agency's statement of how it plans to spend the funds
it requested and for conducting its oversight of VBA. Therefore, it is
important that VBA provide the Congress with a reliable and transparent
analysis to support its funding requests.

As the Chairman requested, my statement is based on our November 2004
report on VBA's fiscal year 2005 staffing request and presents key
findings and recommendations from that report.1 To update information in
the report, we reviewed VBA's fiscal year 2006 budget submission and
obtained final fiscal year 2005 data on VBA's compensation and pension
claims workload. We did not perform independent verification of VA's data
for this statement, but are currently assessing the reliability of VBA's
workload data. We conducted our review in October 2005, in accordance with
generally accepted government auditing standards.

In summary, we reported in November 2004 that VBA's fiscal year 2005
budget justification for disability compensation and pension staffing
could have been more transparent. VBA inadequately explained how it
planned to deal with a growing workload and meet its performance goals
despite a lower full-time equivalent (FTE) staff level. We recommended
that to make its budget justification more transparent and useful for
congressional oversight, VBA provide the Congress with the following types
of information:

o 	Explanation of the expected impact of specific initiatives and changes
in incoming claims workload. While the fiscal year 2005 justification
identified a number of factors that could affect VBA's staffing
requirements, VBA did not clearly explain how each of these initiatives
and projections affected its funding request for fewer employees.

o 	Claims processing productivity, including VBA plans to improve
productivity. The fiscal year 2005 budget justification inadequately

1GAO, Veterans' Benefits: More Transparency Needed to Improve Oversight of
VBA's Compensation and Pension Staffing Levels, GAO-05-47 (Washington,
D.C.: Nov. 15, 2004).

explained how VBA would achieve productivity improvements needed to
improve claims processing performance with larger workloads and fewer
staff.

o 	Explanation of how claims complexity is expected to change and the
impact of these changes on productivity and requested staffing levels. VBA
stated that claims complexity is increasing, but did not project increases
in disabilities per claim or explain how complexity changes would affect
productivity.

In responding to our report, the Department of Veterans Affairs (VA)
agreed to work with the Office of Management and Budget and congressional
appropriating and authorizing committees to ensure that appropriate
supporting information is included in its future budget justifications for
compensation and pension staffing. VBA also identified more specific steps
that it plans to take in response to our recommendation, in the fiscal
year 2007 and 2008 budget cycles. Meanwhile, we have observed that VBA's
fiscal year 2006 budget justification addressed how VBA would use higher
resource levels, due to additional funding from the Congress, to meet what
it believes are more achievable performance goals. For example, VBA eased
its fiscal year 2005 goal for average days to complete rating-related
claims from 100 to 145 days.2

When a veteran submits a claim for disability benefits to a VBA regional
office, Veterans Service Center staff process the claim in accordance with
VBA regulations, policies, procedures, and guidance. A Veterans Service
Representative (VSR) in a pre-determination team develops the claim; that
is, assists the claimant in obtaining sufficient evidence to decide the
claim. The claim then goes to a rating team, where a Rating Veterans
Service Representative (also known as a Rating Specialist) makes a
decision on the claim, based on the available evidence and VBA's criteria
for benefit entitlement. VSRs also perform a number of other duties,
including establishing claims files, authorizing payments to beneficiaries
and generating notification letters to claimants, conducting in-person and
telephone contacts with veterans and other claimants, and assisting in the
processing of appeals of claims decisions.

2Rating-related decisions are primarily decisions on original claims for
compensation and pension benefits and reopened claims. For example,
veterans may file reopened claims if they believe their service-connected
conditions have worsened.

  Background

VBA's administrative costs, including personnel costs, are funded through
VA's General Operating Expenses account. VBA, as part of VA's annual
budget justification, asks for specific amounts for each of its programs,
including compensation and pension programs. Funding is requested to
support an estimated FTE employment level.3 In fiscal year 2004, VBA spent
about $926 million to administer its compensation and pension programs,
including support for about 9,100 FTEs.

From fiscal year 1998 through 2003, VBA's compensation and pension
staffing levels increased by about 38 percent, from 6,770 to 9,352 FTEs,
as shown in figure 1. Staffing levels increased because VBA hired hundreds
of new Rating Specialists and VSRs in anticipation of a large number of
future retirements. Also, these additional staff helped VBA respond to a
sharp drop in the production of rating-related claims decisions in fiscal
year 2001, with these decisions increasing from 481,000 to 827,000 in
fiscal year 2003. After relatively small declines in the FTE level in
fiscal years 2004 and 2005, VBA estimated that its fiscal year 2006 budget
request would support 9,087 FTEs.

3Full-time equivalent employment is the basic measure of levels of
employment used in the budget. It is the total number of hours worked
divided by the total number of compensable hours in a fiscal year. For
example, in fiscal year 2003 an FTE represented 2,088 hours (8 hours per
day for 261 days).

Figure 1: VBA Compensation and Pension FTEs, Fiscal Years 1998-2006

In fiscal year 2005, VBA's 57 regional offices received about 788,000
ratingrelated claims from veterans and their families for disability
benefits. This included about 211,000 original claims for compensation of
serviceconnected disabilities (injuries or diseases incurred or aggravated
while on active military duty) and about 439,000 reopened compensation
claims.4 In addition, about 85,000 original and reopened claims were filed
for pensions for wartime veterans who have low incomes and are permanently
and totally disabled for reasons not service-connected and for their
survivors.5 In addition, VBA received about 28,000 original claims for
dependency and indemnity compensation by deceased veterans' spouses,
children, and parents and to survivors of service members who died on
active duty. VBA's rating-related claims received increased by about
17,000 from fiscal year 2004 to fiscal year 2005, continuing a trend

4For example, a reopened compensation claim could be filed by a veteran
seeking an increase in disability rating based on the worsening of a
service-connected disability or by a veteran seeking compensation for a
previously unclaimed disability.

5Veterans aged 65 or older do not have to be permanently and totally
disabled to become eligible for pension benefits, as long as they meet the
other requirements for income and military service. VBA also pays pensions
to surviving spouses and unmarried children of deceased wartime veterans.

  VBA's Budget Justifications Could More Clearly Explain the Basis for Its
  Compensation and Pension Staffing Estimates

that has seen an increase of more than 200,000 claims (about one-third)
since fiscal year 2000.

VBA officials stated that productivity improvements, workload changes, and
attrition of experienced claims processing staff are considered throughout
the annual budget process. However, VBA's fiscal year 2005 budget
justification did not clearly explain how these factors affected its
request. Early in this process, the Compensation and Pension Service makes
a budget request that is reviewed by VBA's Office of Resource Management,
under the direction of VBA's Chief Financial Officer, and becomes part of
VBA's total request. VBA's request eventually becomes part of VA's overall
budget request, which is submitted to the Office of Management and Budget
(OMB) for review.6

VBA's fiscal year 2005 budget justification identified a number of
initiatives and projections that could affect its staffing levels. For
example, implementing specialized claims processing teams in VBA's
regional offices and consolidating pension maintenance work at three
regional offices could affect staffing levels. Also, VBA projected it
would receive more disability compensation claims than in previous years,
based on such factors as the enactment of concurrent receipt legislation
in 2003-which allows military retirees with service-connected disabilities
rated at 50 percent or higher to receive both VA disability compensation
and military retirement pay. VBA estimated that it would receive about
65,000 claims due to this legislation. VBA officials said that this
estimate was included in their negotiations with OMB. Further, VBA noted
that it expects many experienced claims processing staff to leave VBA over
the next several years.

Despite identifying these factors in its 2005 budget justification, VBA
did not specify how such initiatives and projections would affect the
number of employees it needed to meet its claims processing performance
goals. For example, VBA projected that in fiscal year 2005, the number of
original and reopened compensation claims receipts would increase by about
15 and 10 percent, respectively, from its fiscal year 2004 estimates, and
that original and reopened pension receipts would decrease by about 2
percent. However, VBA did not specifically identify how these anticipated
workload trends had affected its requested staffing levels or its expected

6Under OMB guidance (Circular A-11), agency FTE employment estimates
should consider productivity improvements and workload assumptions.

improvements in productivity. VBA's reduced staffing request was
consistent with OMB guidance to agencies to assume increased productivity
in their budget requests-for example, to do the same amount of work with
fewer employees. However, the budget justification does not describe how
its FTE staffing requirements are linked to the specific initiatives and
projections that could affect these needs. We recommended that VBA provide
the Congress with an explanation of the expected impact of specific
initiatives and changes in incoming claims workload on requested staffing
levels. VBA concurred, stating that, beginning with the fiscal year 2007
budget cycle, VBA will provide detailed analyses of instituted or planned
initiatives and process changes, and their anticipated impact on
productivity.

Also, VBA's fiscal year 2005 budget justification provided no specific
information on its compensation and pension claims processing productivity
or on its planned improvements in productivity. VBA expressed confidence
that it could improve productivity enough to meet its claims processing
goals for fiscal year 2005 with fewer employees, despite a projected
increase in the workload of compensation claims. However, the budget
justification included no measurement of productivity nor did it identify
how it planned to achieve the needed productivity improvements. We
recommended that VBA provide the Congress with additional information on
claims processing productivity, including how it plans to improve
productivity. VBA concurred, stating that it would investigate ways to
incorporate more information on productivity in the formulation of its
fiscal year 2007 budget justification.

Further, VBA did not project the complexity of its rating-related claims
in its fiscal year 2005 budget submission and did not explain the impact
of complexity on productivity and requested staffing levels. VBA has noted
that disability compensation claims have become more complex because
veterans are claiming more service-connected disabilities per claim, and
VBA must make a decision whether each disability is service-connected.
Meanwhile, the Congress and VA have established presumptions of
compensation and pension eligibility that can make some claims less
complex. For example, the Congress and VA have identified several types of
disabilities (such as type II diabetes) as service-connected based on the
presumption that veterans who served in Vietnam were exposed to Agent
Orange. Claims based on these disabilities can be simpler to decide
because less evidence is needed to prove service connection. VBA did not
specifically explain the impact of claims complexity on productivity and
staff requirements. Further, VBA's discussion of complexity in its fiscal
year 2006 budget justification was limited to a statement that complexity
is

increasing. We recommended that VBA prepare an explanation of how claims
complexity is expected to change and the impact of these changes on
productivity and requested staffing levels. VBA concurred, stating that
modifications were being made to its information systems that would enable
VBA to use data from its Rating Board Automation 2000 system to measure
complexity in terms of numbers of issues adjudicated. VBA anticipates
having sufficient baseline data by the end of calendar 2005 to support its
fiscal year 2008 budget projections.

VBA's fiscal year 2006 budget justification proposed to fund more FTEs
than it originally proposed for fiscal year 2005 and set more achievable
performance goals. Specifically, VBA estimated that it would have 7,703
direct compensation and pension FTEs in fiscal year 2005, primarily for
the processing of compensation and pension claims.7 This was 290 FTEs more
than VBA originally requested. VBA requested the same direct FTE level for
fiscal year 2006. This increased staffing level was funded through a
transfer of $119 million from VA's Medical Services account, as authorized
by the Congress. At the same time, VBA adjusted key fiscal year 2005
performance goals to make them less ambitious. For example, the new goal
for average days to complete a rating-related decision was 145 days, up
from 100 days. Also, VBA's new timeliness goal for pending rating-related
compensation claims was an average of 119 days, up from 96 days. While VBA
met neither goal, it came closer to the revised goals.8 Also, VBA provided
information on claims decision productivity, in terms of rating-related
claims decided per direct FTE.

Concluding 	We concluded in our November 2004 report that it was difficult
to determine whether VBA's confidence that it could meet its key fiscal
year

Observations 	2005 claims processing goals was well-founded because its
budget justification lacked sufficient information to make such an
assessment. VBA agreed, recognizing that it had not provided the Congress
with the information needed to determine whether it could meet its
compensation and pension claims processing performance goals despite
increasing workload and a lower staffing level. VBA has adjusted its
performance goals to make them more achievable, in particular its goals to
provide

7VBA's budget justification also included requests for funding of
management direction and support and information technology FTEs.

8VBA completed rating-related decisions in an average of 167 days in
fiscal year 2005, and its end of fiscal year rating-related compensation
inventory's average age was 122 days.

more timely claims decisions to veterans and their families. Meanwhile,
the Congress provided additional funding to support a higher staffing
level. VBA has identified steps it plans to take to provide additional
information in support of its annual budget requests. It is important to
do so to make its budget requests more transparent and more useful for
congressional budgetary decisionmaking and oversight.

GAO Contact and For further information, please contact Cynthia A.
Bascetta at (202) 5127215. Also contributing to this statement were
Cristina Chaplain, IreneAcknowledgments Chu, Martin Scire, and Greg
Whitney.

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