oversight

Observations on the Department of Veterans Affairs' Fiscal Year 2000 Performance Plan

Published by the Government Accountability Office on 1999-07-20.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

United States General Accounting Office                                                                  Health, Education, and
Washington, D.C. 20548                                                                                  Human Services Division




                 B-282879

                 July 20, 1999

                 The Honorable Dick Armey
                 Majority Leader
                 House of Representatives

                 The Honorable Dan Burton
                 Chairman, Committee on Government Reform
                 House of Representatives

                 The Honorable Fred Thompson
                 Chairman, Committee on Governmental Affairs
                 United States Senate

                 Subject: Observations on the Department of Veterans Affairs’ Fiscal Year 2000 Performance
                 Plan

                 As you requested, we have reviewed and evaluated the fiscal year 2000 performance plans for
                 the 24 Chief Financial Officers (CFO) Act agencies that were submitted to Congress as
                 required by the Government Performance and Results Act of 1993 (Results Act). Enclosure I
                 to this letter provides our observations on the fiscal year 2000 performance plan for the
                 Department of Veterans Affairs (VA). Enclosure II lists management challenges we and VA’s
                 Inspector General identified that the agency faces and the applicable goals and measures in
                 the fiscal year 2000 annual performance plan.

                 Our objectives were to (1) assess the usefulness of the agency’s plan for decisionmaking and
                 (2) identify the degree of improvement the agency’s fiscal year 2000 performance plan
                 represents over the fiscal year 1999 plan. Our observations were generally based on the
                 requirements of the Results Act, guidance to agencies from the Office of Management and
                 Budget (OMB) for developing the plan (OMB Circular A-11, Part 2), our previous reports and
                 knowledge of VA’s operations and programs, and our observations on VA’s fiscal year 1999
                 performance plan. Our summary report on the CFO Act agencies’ fiscal year 2000 plans
                                                                                             1
                 contains a complete discussion of our objectives, scope, and methodology.


                 1
                  Managing for Results: Opportunities for Continued Improvements in Agencies’ Performance Plans (GAO/GGD/AIMD-99-215,
                 July 20, 1999).




                 Page 1                                                  GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
B-282879


As agreed, unless you announce the contents of this letter earlier, we plan no further
distribution until 30 days from the date of the letter. If you have any questions regarding this
correspondence, please contact me on (202) 512-7101. Key contributors to this assignment
were Shelia Drake, Ira Spears, Gregory Whitney, and Paul Wright.




Stephen P. Backhus
Director, Veterans’ Affairs and
  Military Health Care Issues

Enclosures - 2




Page 2                                        GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure I

Observations of the Department of
Veterans Affairs' Performance Plan
for Fiscal Year 2000
The Department of Veterans Affairs’ (VA) fiscal year 2000 annual performance plan
provides a general picture of intended performance across VA, a generally complete
discussion of strategies and resources that VA will use to achieve its goals, and limited
confidence that VA’s performance information will be credible. The plan (1) presents
performance goals and measures, along with baseline and trend data, that cover all of VA’s
major programs, except that there are no results-oriented goals for fiscal year 2000 for three
programs; (2) explicitly links specific strategies and initiatives to each of VA’s key
performance goals and also summarizes these strategies and initiatives for each major
program; and (3) discusses performance information weaknesses that will not be corrected
until future years.

Figure 1 highlights the plan’s major strengths and key weaknesses as VA seeks to make
additional improvements to its plan for programs operated by the Veterans Health
Administration (VHA), Veterans Benefits Administration (VBA), and National Cemetery
Administration (NCA).
.
Figure 1: Major Strengths and Key Weaknesses of VA’s Fiscal Year 2000 Performance Plan


 Major Strengths
 • Contains quantified fiscal year 2000 performance goals and measures for all of VA’s
 major programs and the program activities in VA’s budget request.
 • Explicitly links strategies, crosscutting activities, mission-critical management
 problems, and data sources to each of VA’s key performance goals.
 • Provides an indepth discussion of performance data reliability problems and VA’s
 initiatives for addressing these problems.

 Key Weaknesses
 • Contains process-oriented, but no results-oriented, performance goals for fiscal year
 2000 for VBA’s compensation, pension, and insurance programs. For these programs,
 the plan defines some interim outcome goals and measures, without target performance
 levels, that will be used as the basis for developing results-oriented goals and measures.
 • Discusses data verification and validation procedures for some, but not all, key
 performance goals and measures.



VA’s fiscal year 2000 performance plan represents moderate improvement in addressing
weaknesses that we identified in its fiscal year 1999 performance plan. For example, the
fiscal year 1999 plan included no results-oriented performance goals or measures for VBA’s



Page 3                                       GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations of the Department of Veterans Affairs' Performance Plan for Fiscal Year 2000




compensation, pension, or insurance programs. By contrast, while the fiscal year 2000 plan
still does not include results-oriented goals for these three programs, it does provide interim
outcome performance goals and measures, although the target level of performance to be
achieved for the coming year is not defined. For instance, to ensure that veterans are
compensated for their loss in earning capacity due to service-connected disabilities, the plan
includes an interim goal that would measure the percentage of veterans receiving
compensation whose total income exceeds that of like-circumstanced non-veterans. However,
the plan does not provide a performance target level for fiscal year 2000.

Another area of improvement is the discussion of crosscutting activities of other federal
agencies, state and local governments, and the private sector. While the fiscal year 1999 plan
basically was limited to a listing of other entities with crosscutting interests, the fiscal year
2000 plan briefly describes an extensive array of crosscutting activities and explicitly
associates applicable crosscutting activities with each key performance goal. It also provides
details on how VA and other agencies with similar or related responsibilities are cooperating.
For example, VA’s vocational rehabilitation program has a goal of placing more disabled
veterans in jobs. Toward this end, VA and the Department of Labor have established a
cooperative training program designed to increase the efficiency and effectiveness of staff
from both agencies in preparing disabled veterans for the job market.

In another area of improvement, the fiscal year 1999 plan did not provide plans and time
frames for completing the conversion of VA’s computer systems to avoid Year 2000
computer problems. By contrast, the fiscal year 2000 plan states that VA is on target to have
all computer system conversions completed and tested by March 1999 and that VA had
already renovated 99.7 percent of its mission-critical computer software applications,
including all payment-related applications and those supporting health care.

Also, compared with last year’s plan, the fiscal year 2000 plan provides an in-depth
discussion of VA’s actions to begin addressing weaknesses in data systems and performance
information. For example, at the request of the Under Secretary for Health, VHA held a Data
Validation Summit in December 1998 to develop strategies for eliminating problems that
contribute to data validity deficiencies, such as a lack of standard definitions, decentralized
approaches to data collection and implementation of automated systems, local modification
of systems, lack of knowledge or understanding about systems, and difficulty in coordinating
more than 140 VHA databases.




Page 4                                                GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations of the Department of Veterans Affairs' Performance Plan for Fiscal Year 2000




VA’s Performance Plan Provides a General Picture of Intended
Performance Across VA
VA’s fiscal year 2000 performance plan provides a general picture of intended performance
across the agency. The plan presents performance goals and measures that cover all of VA’s
10 major programs in VHA, VBA, and NCA and the program activities in VA’s budget
request. Also, for each key performance goal, the plan provides baseline and trend data for
comparison of actual and anticipated performance. For example, with fiscal year 1997 as the
baseline, VHA has a performance goal of increasing the number of unique patients treated in
the health care system by 16 percent by fiscal year 2000. VHA’s strategic goal is to increase
this percentage by 20 percent by fiscal year 2002.

Some performance goals directly address or incorporate strategies designed to help resolve
mission-critical management problems. In addition, VA’s plan includes a discussion of the
current status of resolution of each problem and the expected completion date for some
problems. For example, VA’s plan identifies long processing times for compensation and
pension claims as a mission-critical management problem, and VA has established a
performance goal to reduce the time required to process these claims to an average of 95 days
for fiscal year 2000. However, VA has not set performance goals for resolving all mission-
critical management problems. For example, VA’s annual performance plan does not include
performance goals or measures for correcting the material weaknesses identified in the VA
Inspector General’s (IG) audit of VA’s fiscal year 1998 financial statements or goals for
achieving unqualified opinions on subsequent financial statements. The plan does state that
plans are in place to resolve all issues and obtain an unqualified audit opinion for fiscal year
1999.

By major program, the plan lists and briefly describes an extensive array of crosscutting
activities that VA is conducting in cooperation with other federal agencies, state and local
governments, and the private sector. Furthermore, the plan explicitly associates applicable
crosscutting activities with each key performance goal and provides details on how VA and
other agencies with similar or related responsibilities are cooperating. For example, VA’s
vocational rehabilitation program has a goal of placing more disabled veterans in jobs.
Toward this end, VA and the Department of Labor have established a cooperative training
program designed to increase the efficiency and effectiveness of staff from both agencies in
preparing disabled veterans for the job market. In another instance, to help meet the goal of
improving timeliness in processing disability compensation claims, VA is working with the
Department of Defense (DOD) to reduce the time required to obtain military medical records
and military service verification from DOD. To do this, VA and DOD are creating a local
area network that will allow VA to obtain such information electronically.




Page 5                                                GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations of the Department of Veterans Affairs' Performance Plan for Fiscal Year 2000




VA’s plan contains goals that are complementary and mutually reinforcing of each other. For
instance, VHA’s primary health care strategy is composed of three complementary, mutually
reinforcing performance goals, to be achieved by fiscal year 2002, referred to as the 30-20-10
strategy. With fiscal year 1997 as the baseline, VHA has separate goals that focus on (1)
reducing cost per patient by 30 percent, (2) increasing the number of patients served by 20
percent, and (3) increasing to 10 percent the portion of the medical care budget derived from
alternative revenue sources. VHA’s ability to fund the costs associated with serving 20
percent more patients than in the past will depend in large part on VHA’s success in meeting
its goals to decrease cost per patient and increase revenues from alternative sources.

VA’s fiscal year 2000 performance plan represents moderate improvement in addressing
weaknesses that we identified in its fiscal year 1999 performance plan as it relates to
providing a picture of intended performance across VA. For example, while the fiscal year
1999 plan included no results-oriented performance goals or measures for VBA’s
compensation, pension, or insurance programs, the fiscal year 2000 plan provides interim—
although unquantified—outcome performance goals and measures. For instance, to ensure
that veterans are compensated for their loss in earning capacity as a result of service-
connected disabilities, the plan includes an interim goal that focuses on the percentage of
veterans receiving compensation whose total income exceeds that of like-circumstanced
nonveterans. However, this interim goal is not yet quantified. According to the plan, the
interim goals and measures for the compensation, pension, and insurance programs will help
VA, in consultation with its stakeholders, to fully develop results-oriented performance goals
and measures for these programs.

Unlike the fiscal year 1999 plan, the fiscal year 2000 plan explicitly links crosscutting
activities of other federal and state agencies to VA’s key goals and performance measures. In
some instances, the plan provides details on how VA is coordinating crosscutting activities
and how such coordination will enhance VA’s ability to meet its goals. For example, VA’s
vocational rehabilitation program has a goal of placing more disabled veterans in jobs.
Toward this end, VA and the Department of Labor have established a cooperative training
program designed to increase the efficiency and effectiveness of staff from both agencies in
preparing disabled veterans for the job market. In another instance, to help meet the goal of
improving timeliness in processing disability compensation claims, VA is working with DOD
to reduce the time required to obtain military medical records and military service
verification from DOD. To do this, VA and DOD are creating a local area network that will
allow VA to obtain such information electronically.




Page 6                                                GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations of the Department of Veterans Affairs' Performance Plan for Fiscal Year 2000




VA’s Performance Plan Provides a General Discussion of the
Strategies and Resources VA Will Use to Achieve Its Goals
VA’s fiscal year 2000 performance plan provides a general discussion of strategies and
resources the agency will use to achieve performance goals. In doing so, the plan explicitly
links specific strategies and initiatives to each of VA’s key performance goals and also
summarizes these strategies and initiatives for each major program. For example, a key fiscal
year 2000 performance goal for VBA’s Housing program is to improve the extent to which
VA helps veterans avoid foreclosures when they are delinquent in making payments on
guaranteed home loans. To do this, according to the plan, VBA will implement a new
foreclosure management system that will automate routine administrative tasks, thereby
enabling VBA staff to spend more time helping veterans avoid foreclosure. The system also
will provide the staff with better information on available alternatives to foreclosure.

However, in some instances, the plan’s discussion of strategies does not clearly explain how
the goal will be achieved. For example, one of VHA’s goals is to increase to 10 percent the
portion of medical care funding that comes from alternative sources such as third-party
insurers and Medicare. While the plan discusses a proposal that would allow VA to bill
Medicare for medical costs incurred to treat Medicare-eligible veterans, the plan does not
discuss strategies for improving VA’s ability to recover medical care costs from third-party
insurers.

The plan discusses external factors that may have an impact on VA’s ability to achieve
certain performance goals; however, the plan provides little or no discussion of how VA
plans to mitigate the effects of these factors. For example, the plan includes a fiscal year 2000
performance goal to increase to 77 percent the proportion of veterans served by a burial
option in a national or state veterans’ cemetery within a reasonable distance (75 miles) of
their residence. The plan states that part of VA’s strategy for ensuring that it meets the burial
needs of veterans is to establish and expand state veterans’ cemeteries to complement VA’s
system of national cemeteries. NCA administers the State Cemetery Grants Program, which
provides grants to states of up to 100 percent of the cost of establishing, expanding, or
improving state cemeteries in areas where NCA has no plans to operate and maintain a
national cemetery. However, before a state cemetery can be established, the state must enact
its own legislation to commit funding to a project that will serve a clearly defined population,
and state funds are required for ongoing maintenance. VA does not discuss how it will
encourage states to take needed actions or how it will meet its goal if states do not enact such
legislation.




Page 7                                                GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations of the Department of Veterans Affairs' Performance Plan for Fiscal Year 2000




Regarding the use of human capital, VA has fiscal year 2000 performance goals to increase
compensation claims processing accuracy to 81 percent and to reduce claims processing time
to an average of 95 days. In discussing means and strategies related to accuracy and
timeliness, VA’s performance plan acknowledges that VBA will need to hire and train
additional employees to replace a sizeable portion of the compensation and pension claims
processing workforce who will become eligible for retirement within 5 years. To train these
new employees, as well as existing employees, VBA is developing training packages using
instructional systems development methodology and will measure training effectiveness
through performance-based testing, which is intended to lead to certification of employees.

VA’s fiscal year 2000 performance plan represents moderate improvement in addressing
weaknesses that we identified in its fiscal year 1999 performance plan as it relates to
providing a specific discussion of strategies and resources that VA will use to achieve
performance goals. For example, we stated in our report on VA’s fiscal year 1999 plan that
VA’s budget structure does not facilitate making clear linkages between performance goals
and program activities. While the same difficulty continues to exist, the fiscal year 2000 plan,
in contrast with last year’s plan, provides the requested fiscal year 2000 funding amounts and
the associated staffing levels for 9 of its 10 programs. The remaining program, Medical
Education, is basically funded through the Medical Care account, for which funding and
staffing levels are provided. In its plan, VA states it is working with the Office of
Management and Budget to develop a budget account restructuring proposal, but any such
proposal would require congressional approval before implementation.

The fiscal year 1999 plan did not provide plans and time frames for completing the
conversion of VA’s computer systems to avoid Year 2000 computer problems. The fiscal
year 2000 plan states that VA is on target to have all computer system conversions completed
and tested by March 1999 and that VA had already renovated 99.7 percent of its mission-
critical computer software applications, including all payment-related applications and those
supporting health care.

VA’s Performance Plan Provides Limited Confidence That VA
Performance Information Will Be Credible
From an overall perspective, the plan provides limited confidence that VA’s performance
information will be credible for measuring fiscal year 2000 performance; however, the plan
does provide some confidence that the credibility of performance information will improve in
future years. VA’s plan acknowledges the existence of significant data limitations and
discusses actions aimed toward correcting these deficiencies. For example, at the request of
the Under Secretary for Health, VHA held a Data Validation Summit in December 1998. The




Page 8                                                GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations of the Department of Veterans Affairs' Performance Plan for Fiscal Year 2000




purpose of the summit was to develop strategies for eliminating problems contributing to data
validity deficiencies, such as a lack of standard definitions, decentralized approaches to data
collection and implementation of automated systems, local modification of systems, lack of
knowledge or understanding about systems, and difficulty in coordinating more than 140
VHA databases.

Although it does not do so for all individual performance goals, the plan discusses VA’s
efforts to verify and validate performance information. For example, to audit the validity,
reliability, and integrity of performance measures, VA’s IG met with VA managers and staff
to determine the most critical data elements for examination. From this collaboration, 36 data
elements were identified as essential for reporting on VA’s performance measures, and 11 of
these 36 were judged as the most critical on the basis of importance to VA’s operational
mission and susceptibility to manipulation or erroneous reporting in VHA, VBA, and NCA.
For example, among the 11 are (1) average days for VBA to complete original compensation
claims, (2) number of unique patients served by VHA, and (3) percentage of veteran
population served by the existence of a burial option within a reasonable distance of their
residence. The audit of the 11 data elements is being done in phases, but all will be completed
during fiscal year 1999. Upon completion, the IG will meet with VA officials to determine
whether the remaining 25 data elements are still considered critical and warrant further
audits.

The plan’s discussion of specific performance goals identifies actions to compensate for
unavailable or low-quality data for some goals. The plan also includes a discussion of
verification and validity issues that identifies opportunities and strategies for addressing low-
quality data. For example, the IG found in its audit of VBA performance measures on
timeliness of claims processing that timeliness data were unreliable because inaccurate data
had been entered in the system, and these data reflected shorter than actual processing times.
The IG concluded that VBA can improve the reliability and integrity of its timeliness
performance measures by improved management review and oversight. VBA responded to
the IG’s findings by, for example, reviewing recent transactions to determine whether the
system was being manipulated or errors were going undetected, communicating specific
guidance to field offices listing unacceptable practices, and initiating reviews in field offices.
On a continuing basis, VBA periodically requests data extracts from the Data Processing
Centers to identify any field offices that appear to be manipulating data, and VBA’s
Compensation and Pension Service decided to reinstitute the practice of on-site field office
surveys.

In addition, according to the plan, VA is taking steps to validate measurement systems;
develop processes for staff and independent consultants to examine methodologies; have
models reviewed by expert panels; and obtain independent evaluations from nationally



Page 9                                                GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations of the Department of Veterans Affairs' Performance Plan for Fiscal Year 2000




recognized experts to review methods of data collection, statistical analysis, and reporting.
The plan states that external reviews are essential in order to help depoliticize issues related
to data validity and reliability. Also, the plan states that initiating a data verification policy
will increase the level of confidence that there is a high level of data validity and reliability
and help to ensure that there is a lack of evidence for systematic bias.

VA’s fiscal year 2000 performance plan represents moderate improvement in addressing
weaknesses that we identified in its fiscal year 1999 performance plan as it relates to
inspiring confidence that performance information will be credible. For example, VA’s fiscal
year 2000 plan explicitly identifies for each key performance goal the data sources VA will
use to measure performance. However, while the plan clearly explains how VA will verify
and validate data reliability for some performance goals, it does not do so for others. For
example, to measure VHA’s success in increasing the number of patients in the health care
system, VA will use data from the Veterans Equitable Resource Allocation Patient Database.
The plan states that internal controls are in place to ensure that Social Security numbers are
not duplicated and records are valid. Also, the IG will report during the current fiscal year on
the IG’s assessment of the reliability and validity of data on patients treated. By contrast, to
measure VBA’s success in assisting veterans to avoid foreclosure when they become
delinquent in making payments on guaranteed home loans, VA will use data from the Loan
Service and Claims System and the Distribution of Operational Resources, but the plan
provides no discussion of how data from these systems are verified and validated.

In September 1998, we reported on VA’s information security weaknesses. These
weaknesses make VA vulnerable to the inadvertent or deliberate misuse, fraudulent use, or
destruction of data. As a result, financial and other management information, including cost
information, produced for and provided to VA program managers and congressional
decisionmakers, could be inaccurate. VA’s fiscal year 1999 plan did not address this issue.
By contrast, the fiscal year 2000 plan identifies computer security as a mission-critical
management problem and lists the recommendations made by GAO and the IG regarding
computer security. However, the plan does not include action plans or a time line for
addressing the computer security issue. The performance plan states VA will prepare by the
end of fiscal year 1999 a milestone chart with a targeted correction plan.

In addition, from an overall perspective, VA does not yet have all of the information sources
and the capacity needed—through its accounting and information systems—to generate
reliable data to support its performance plan and to produce credible performance reports. In
March 1999, the IG gave VA a qualified opinion on its fiscal year 1998 financial statements
due in part to material weaknesses in accounting in the Housing Credit Assistance program.
A similar concern was reported on VA’s fiscal year 1997 financial statements. The auditors
were unable to satisfy themselves as to the recorded balances in this program’s accounts



Page 10                                               GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations of the Department of Veterans Affairs' Performance Plan for Fiscal Year 2000




because accounting procedures were not being consistently followed or internal controls were
not operating effectively. VBA staff is in the process of correcting a number of weaknesses in
the financial reporting process, and VA’s fiscal year 2000 plan identifies as a mission-critical
management problem the need to have an unqualified opinion for VA’s fiscal year 1999
financial statements. However, the plan does not include performance goals or measures for
achieving this objective.

The IG’s qualified opinion on the fiscal year 1998 financial statements also resulted in part
from material weaknesses in VA-wide information system security controls, which had been
identified as a concern in the audit of VA’s fiscal year 1997 financial statements. While VA’s
fiscal year 1999 plan did not address information system security problems, VA’s fiscal year
2000 plan identifies this issue as a mission-critical management problem and lists
recommendations made by GAO and the IG regarding this issue. However, as mentioned, the
plan does not include action plans or a time line for addressing the information systems
security issue. The plan states only that VA will prepare a milestone chart with a targeted
correction plan by the end of fiscal year 1999.

In its Federal Managers Financial Integrity Act report for fiscal year 1998, VA reported loan
guaranty financial modernization, loan service and claims, and loan sale program
management as material weaknesses. VA’s performance plan identifies each of these issues
as a mission-critical management problem. According to the plan, to resolve the loan service
and claims issue, VA is implementing an automated loan servicing system that is scheduled
to be completed in fiscal year 2000. Also, the plan describes actions to correct the loan sale
program management problem by the end of fiscal year 1999. In addressing loan guaranty
financial modernization, the plan describes intended corrective actions but does not provide a
target completion date.

According to VA’s fiscal year 1998 audit report, cost accounting systems were not in place
during the fiscal year to accumulate activity-level cost data. Thus, VA cannot accumulate and
report the full cost of its programs, activities, and outputs on a regular and consistent basis, as
required by federal financial accounting standards. The plan states VBA will implement a
cost accounting system for administrative activities in late fiscal year 1999. In fiscal year
2000, according to the plan, VHA will implement a new cost allocation system, and NCA
will implement an activity-based cost accounting/management system.




Page 11                                               GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations of the Department of Veterans Affairs' Performance Plan for Fiscal Year 2000




Other Observations on VA’s Implementation of Performance-
Based Management
On the basis of information discussed in the fiscal year 2000 plan, VA has made progress in
instilling performance-based management into its daily operations. In the past, the
performance of VHA executives was evaluated on the basis of a wide variety of inconsistent
standards that were difficult to measure. As a result, over 2 years ago, VHA initiated a
performance contract system whereby the Under Secretary for Health negotiates performance
agreements with all senior executives in VHA. These performance agreements focus on about
15 quantifiable performance targets. In addition, executives are held accountable for
achieving goals pertaining to workforce diversity, labor-management partnerships, and staff
education and training. Plans are under way to extend the performance contract approach
throughout VHA.

At the beginning of fiscal year 1999, VBA began implementing the “balanced scorecard”
approach as a tool to measure performance and ensure that VBA keeps proper focus on its
strategic vision. For each of VBA’s programs, the balanced scorecard uses five performance
measures: accuracy, speed, customer satisfaction, cost, and employee development and
satisfaction. This combination of measures creates a picture of service delivery and
demonstrates how VBA is translating its strategic objectives into action.

Also, VA has developed Internet-based tools for executives, managers, and analysts to use in
assessing program performance information throughout the fiscal year. These tools provide
easy access to critical performance data and are available to VA employees around the
country.

Agency Comments
VA commented on a draft summary of our assessment of its fiscal year 2000 performance
plan. VA found our assessment, on the whole, to be fair and accurate and stated that our
observations will be helpful in identifying enhancements to its future plans. However, VA
concluded that we apparently expected the plan to provide a greater level of detail than VA
believed was required. This comment related particularly to the performance plan’s treatment
of management problems.

In our summary, we stated that VA’s plan did not include performance goals for resolving all
the management problems identified in VA’s plan as mission-critical or for resolving other
issues previously identified as management challenges by us and/or VA’s IG. In its
comments, VA stated its view that the purpose of the performance plan is to report on key




Page 12                                               GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure I
Observations of the Department of Veterans Affairs' Performance Plan for Fiscal Year 2000




performance measures representing VA’s highest priorities for its major programs. Moreover,
VA stated that it is not necessary to include performance goals for each mission-critical
management problem in addition to program performance goals.

While we agree that the plan’s primary focus should be the key performance measures for
VA’s highest priorities for its major programs, the plan should also describe the actions being
taken to address management problems, particularly those that are mission critical, as
suggested by Office of Management and Budget (OMB) Circular A-11.1 This circular also
recommends that plans include performance goals for management problems that could
potentially impede achievement of program goals. As mentioned, VA’s plan does not include
performance goals for all mission-critical management problems and other management
challenges.

VA also provided technical comments and suggestions, which we have incorporated where
appropriate.




1
 OMB encourages agencies to describe the actions being taken to address management problems. OMB, Preparation and
Submission of Budget Estimates, OMB Circular A-11 (Washington, D.C.: OMB/Executive Office of the President, 1998), section
220.11(e), p. 314. OMB Circular A-11 states: “Performance goals for management problems should be included in the annual plan,
particularly for problems whose resolution is mission-critical, or which could potentially impede achievement of program goals.
Often, such performance goals will be expressed as milestone events for specific remedial steps.” (Section 220.9(e), p. 311.)




Page 13                                                     GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure II

Management Challenges


GAO and VA’s IG have identified numerous management challenges VA will face in the future.
VA faces challenges in its efforts to restructure its health care system--for example, the need
to align its health care infrastructure with the needs of VA health care users. In the
nonmedical benefits area, a major challenge for VA is to improve the efficiency and accuracy
of processing veterans’ claims for compensation. VA also faces challenges in improving the
management of its information and financial systems, and in improving the accuracy and
reliability of its management data. Table II.1 below summarizes the management challenges
identified by us and VA’s IG, and identifies any applicable performance goals and measures in
VA’s fiscal year 2000 performance plan.

Table II.1 Management Challenges in VA’s Fiscal Year 2000 Performance Plan
GAO identified management challenge                          Applicable references in the fiscal year 2000
                                                             annual performance plan
VA’s health care infrastructure does not meet its            None. While the plan acknowledges the continued
current and future needs. Specifically:                      need to shift resources toward outpatient care, it
                                                             does not directly provide goals or measures for
                                                             reconfiguring its infrastructure to meet its needs.

• VA’s facilities are deteriorating, inappropriately         • None, however, one of VA’s general goals is to
configured, or no longer needed because of their age         reduce costs, which will be achieved in part by
and VA's shift from providing specialized inpatient          minimizing hospital use and converting inpatient
services to providing primary care in an outpatient          services to outpatient services, when possible, and
setting.                                                     increasing the proportion of resources devoted to
                                                             direct patient care. The associated performance
                                                             goal is to reduce the average cost per patient by 18
                                                             percent between FY 1997 and FY 2000.

• Unneeded vacant space creates a financial drain on         • There is no goal or measure for eliminating vacant
VA and maintaining unproductive assets siphons               space and unproductive assets. However, the
valuable resources away from providing direct medical        general goal calls for the “right sizing” of facilities.
services.                                                    VA plans to implement that goal by consolidating
                                                             and realigning services and facilities where there are
                                                             costly redundancy and opportunities to achieve
                                                             economies of scale, or when service or workload
                                                             measures fall below minimum levels, to ensure cost
                                                             effectiveness and clinical quality. However, the plan
                                                             does not describe quantifiable goals or performance
                                                             measures for these activities.
VA lacks adequate information to ensure that veterans        None
have access to needed health care services.
Specifically, VA lacks accurate, reliable, and consistent
information for measuring the extent to which:

• Veterans receive equitable access to care across the       • None. However, the plan contains two related
country.                                                     performance goals addressing expanding access.
                                                             Performance measures include (1) the number of
                                                             unique patients treated in the healthcare system will
                                                             increase by 16 percent between FY 1997 and FY
                                                             2000, and (2) the number of Community-Based
                                                             Outpatient Clinics (CBOCs) will increase to 622 by




Page 14                                                GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure II
Management Challenges




GAO identified management challenge                            Applicable references in the fiscal year 2000
                                                               annual performance plan
                                                               FY 2000 will be expanded. (Fewer than 300
                                                               existed in FY 1997.) The plan also lists as a
                                                               mission-critical management problem the disparities
                                                               in clinical and administrative staffing levels in VA
                                                               facilities. VA is addressing the disparities by using
                                                               its Veterans Equitable Resource Allocation (VERA)
                                                               model, by which VA is to allocate funding to local
                                                               facilities based on workload (e.g. patients treated),
                                                               rather than the traditional incremental increases to
                                                               prior year allocations.

• All veterans enrolled in VA’s health care system are         • None. However, the plan includes performance
receiving the care they need.                                  goals addressing customer satisfaction, prevention,
                                                               and coordination of care: Performance indicators
                                                               include the following: First, the percentage of
                                                               patients rating VA healthcare as very good or
                                                               excellent will increase to 83 percent by FY 2000. (2)
                                                               to improve the overall health care of veterans, VA’s
                                                               scores on the chronic disease and prevention
                                                               indices will increase to 93 and 89 percent,
                                                               respectively, by fiscal year 2000; and (3) to improve
                                                               clinicians’ accountability for coordinating and
                                                               providing veterans’ health care needs, the
                                                               percentage of patients who know there is one
                                                               provider or team in charge of their care will increase
                                                               to 89 percent by FY 2000.

• VA is maintaining its capacity to care for special           • None. However, the plan contains several goals
populations, such as veterans with spinal cord injuries,       related to special populations. For example, the
amputations, or traumatic brain injuries, or who are           plan has a goal for increasing the number of
blind.                                                         community-based beds for homeless veterans to
                                                               4,673 in FY 2000.
(The IG also identified resource allocation in the VA’s
health care system as a management challenge. The
IG will continue to monitor VHA’s progress in improving
the balance of distribution of staffing and other
resources.)
VA lacks outcome measures and data to assess the               None. While the plan does not explicitly address the
impact of managed care initiatives. Specifically, VA           impact of managed care initiatives, the plan lists
does not know how its rapid move toward managed                health care quality management as a mission-critical
care is affecting the health status of veterans because        management problem.
measures of the effects of its service delivery changes
on patient outcomes have not been established.

VA needs to overcome difficulties in managing its non-
health-care benefit programs. Specifically:

• VA cannot adequately ensure that its veterans                • None. However, the plan includes an interim
disability compensation benefits are appropriately and         outcome goal of offsetting the average loss of
equitably distributed because its disability rating            earning capacity due to service-connected disability.
schedule does not accurately reflect veterans’
economic losses resulting from their disabilities.




Page 15                                                  GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure II
Management Challenges




GAO identified management challenge                            Applicable references in the fiscal year 2000
                                                               annual performance plan

• Claims processing in the compensation and pension            • The plan contains performance goals to reduce
programs continues to be slow.                                 processing time for rating-related compensation and
                                                               pension (C&P) claims and appeals resolution to an
                                                               average of 95 days and 545 days, respectively, by
                                                               fiscal year 2000. Timeliness is listed as a mission-
                                                               critical management problem, and the plan lists
                                                               several proposed actions including adding staff to
                                                               the claims processing operation, providing better
                                                               staff training, and predischarge examinations and
                                                               information exchange between VA and DOD.

• The vocational rehabilitation program has yielded            • The plan includes a performance goal that, by FY
limited results in finding jobs for veterans.                  2000, at least 50 percent of veterans who exit the
                                                               program will be rehabilitated.

• VA has inadequate control and accountability over            • None. The plan does not include goals that
the direct loan and loan sales activities within VA’s          address the direct loan program. However, the plan
Housing Credit Assistance program.                             identifies loan sales as a mission- critical
                                                               management problem and discusses actions to
                                                               improve accounting for the loan sales and loans sold
                                                               program. The target completion date for correcting
                                                               this problem is FY 1999.



(The IG also identified as management challenges (1)
the timeliness of C&P claims processing, and (2) debts
from defaults on home loan guaranties and direct home
loans. In March 1999, the IG gave VA a qualified
opinion on its fiscal year 1998 financial statements due,
in part, to material weaknesses in accounting in the
loan guaranty program.)
VA needs to manage its information systems more
effectively. Specifically:

• VA has made progress in addressing Year 2000                 • None. However, the plan identifies it as a mission-
challenges, but still has some issues to address.              critical management problem and discusses the
                                                               status of efforts to correct this problem.

• VA lacks adequate control and oversight of access to         • None. However, the plan identifies computer
its computer systems.                                          security as a mission-critical management problem
                                                               and indicates that, by the end of fiscal year 1999,
                                                               VA will prepare a milestone chart with a targeted
                                                               correction plan for this issue.

• VA has not yet clearly linked its process for selecting,     • None. However, the plan describes the
controlling, and evaluating information technology             mechanism VA established, in fiscal year 1997, for
investments to any specific performance measures in            making information technology investment decisions
its annual performance plan.                                   that support departmental goals and objectives--the
                                                               VA Capital Investment Board.




Page 16                                                  GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure II
Management Challenges




GAO identified management challenge                            Applicable references in the fiscal year 2000
                                                               annual performance plan
(The IG also identified the Year 2000 computer
problem and computer security as management
challenges.)


Inspector General’s areas of concern                           Applicable references in the fiscal year 2000
                                                               annual performance plan
Health care quality management is one of the most
serious and potentially volatile challenges facing VA.
Specifically, the IG is concerned about the following:

The potential for serious errors to increase as VA             None. The plan acknowledges that ambulatory care
moves into the more rapid pace of patient care in the          settings are more fast-paced, which increases the
ambulatory care setting.                                       potential for serious errors. As a result, the plan
                                                               states that the health care quality management
                                                               program must be modified.

The caliber of leaders who are able to manage a “full          None.
service” VA operation and processes for monitoring
and tracking quality of care in the 22 Veterans
Integrated Service Networks (VISNs). VHA’s inability to
determine the role, staffing, and interactive
relationships within VHA of the Office of Medical
Inspector.
Debt prevention and collection practices are deficient         None. However, the plan identifies debt
for compensation and pension payments, education               management as a mission-critical management
payments, and medical care cost recovery (MCCR).               problem.
The IG recommends that:

• Delinquent MCCR debts be referred to VBA for                 • The plan states that in FY 1999 VA implemented
collection.                                                    the practice of referring medical care debts that are
                                                               delinquent beyond 90 days to VA’s Debt
                                                               Management Center, which will collect debts by
                                                               offsetting payments to VA beneficiaries.

• VBA and VHA increase collaboration in the Income             • None.
Verification Match program.

• VBA improve the quality and uniformity of its debt           • None.
waiver decisions.
The timeliness and quality of medical examinations             None. However, the plan discusses various
conducted for the purposes of deciding C&P claims              initiatives now underway to improve both timeliness
need to be improved. Untimely or poor-quality                  and quality of examinations. In discussing the
examinations lead to repeat examinations, resulting in         strategy for reducing claims processing time, the
remands of appealed cases and significant processing           plan states that VA is implementing the Automated
delays.                                                        Medical Information Exchange (AMIE) II system that
                                                               will allow VBA’s regional claim processors to receive
                                                               clinical and treatment records electronically from
                                                               VHA. Staff of the Board of Veterans Appeals will
                                                               expedite answers to medical questions in appealed
                                                               cases by getting direct input from VHA, rather than




Page 17                                                  GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure II
Management Challenges




Inspector General’s areas of concern                             Applicable references in the fiscal year 2000
                                                                 annual performance plan
                                                                 remanding cases and asking regional staff to obtain
                                                                 and forward such information to the Board. VA’s
                                                                 budget submission states that pilot testing of private
                                                                 contractor medical examinations began in May 1998
                                                                 in eight VBA regional offices. The plan also
                                                                 describes its continuing work with the Department of
                                                                 Defense to conduct predischarge physical
                                                                 examinations, which will allow VA to develop claims
                                                                 and prepare ratings, if appropriate, for service
                                                                 members prior to discharge. VA estimates that
                                                                 approximately 25 percent of all original claims will be
                                                                 completed prior to a service member’s separation
                                                                 from active duty.
VA is not effectively managing its Federal Employees’            None. However, the plan identifies this challenge as
Compensation Act (FECA) program.                                 a mission-critical management problem.

A pilot effort by the IG and VHA found VA employees              None. However, the plan describes various actions
who were fraudulently receiving workers’ compensation            taken in fiscal year 1998 to correct this problem.
benefits under FECA, and private health providers who
aided and abetted them.

VA could reduce future workers’ compensation                     None. However, the plan states that VA plans to
payments by returning current claimants to work if they          sponsor a National Federal Workers’ Compensation
are no longer disabled.                                          Conference in August 1999 that will provide VA’s
                                                                 compensation claims managers additional training in
                                                                 risk management, injury prevention, and return-to-
                                                                 work programs.
VA needs to develop and implement a more effective               None. However, the plan identifies debt
method to identify inappropriate benefit payments.               management as a mission-critical management
Specifically:                                                    problem.

• VA needs to offset disability compensation payments            • None.
from active military reservists’ training and drill pay, but
this has not occurred since at least FY 1993.

• VA needs to implement a more effective method to               • None. The plan’s discussion of debt management
identify deceased and incarcerated beneficiaries and to          mentions only C&P overpayments.
terminate their C&P benefits in a timely manner.

VA has numerous automated data collection systems                None. However, the plan notes that with over 5,000
that are needed to support Results Act objectives. IG            major databases, VA is faced with a formidable
has found erroneous data in many of these systems,               challenge to verify and validate data. VA will
including those involved in the following programs:              continue to work with the IG to communicate the
                                                                 importance of internal controls and monitor ongoing
                                                                 efforts to improve data reliability, validity, and
                                                                 integrity. The plan mentions several ongoing and
                                                                 future actions to audit data and improve internal
                                                                 controls over data. Among the 11 most critical data
                                                                 elements chosen for the first round of IG
                                                                 performance auditing are:

• Medical care                                                   • VHA’s data on the number of unique patients,




Page 18                                                    GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Enclosure II
Management Challenges




Inspector General’s areas of concern         Applicable references in the fiscal year 2000
                                             annual performance plan
                                             prevention index, chronic disease care index, bed
                                             days, and addiction severity index.

• Compensation and pension                   • VBA’s data on the average days to complete
                                             original compensation claims, original disability
                                             pension claims, and reopened compensation claims.

• Education                                  • No education data were identified among the top
                                             11 most critical data elements.




(105775)




Page 19                                GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Page 20   GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Page 21   GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan
Page 22   GAO/HEHS-99-138R VA’s Fiscal Year 2000 Performance Plan