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November 30, 2005:
The Honorable Lane Evans:
Ranking Democratic Member:
Committee on Veterans' Affairs:
House of Representatives:
Subject: Purpose Statute Violation: Veterans Affairs Improperly Funded
Certain Cost Comparison Studies with VHA Appropriations:
Dear Mr. Evans:
The Department of Veterans Affairs (VA) provides health care to about
4.7 million veterans primarily through its medical facilities--which
include hospitals, nursing homes, outpatient clinics, and other health
care facilities--and by contracting for care with other healthcare
providers. To lower costs, increase access, and improve the quality of
care provided to eligible veterans, VA evaluates the efficiency of its
medical facilities, which includes performing studies to determine
whether increased savings and efficiencies can be obtained from
outsourcing certain segments of its operations. We have previously
reported[Footnote 1] that VA would benefit from examining certain
aspects of its operations, including its medical and laundry
facilities, to determine if operational efficiencies could be achieved
through consolidations, competitive sourcing, or both.
While VA has the authority to conduct cost comparison studies and, when
beneficial, to enter into contracts with commercial providers, VA may
only finance cost comparison studies with funds that are legally
available for this purpose. Under a provision in Title 38 of the U.S.
Code,[Footnote 2] VA is prohibited by law from using any one of its
Veterans Health Administration (VHA) appropriations for medical care,
medical and prosthetic research, and medical administration and
miscellaneous operating expenses--which fund VHA's operations--to
conduct cost comparison studies unless the Congress specifically makes
these appropriations available to conduct such studies. The Title 38
cost comparison funding prohibition also provides that no employee
compensated from these VHA appropriations may carry out any activity in
connection with such studies unless the Congress makes these
appropriations specifically available for that purpose.
In light of this, you asked us in April 2004 whether the limitations
imposed by the Title 38 cost comparison funding prohibition applied
solely to those studies conducted pursuant to the Office of Management
and Budget (OMB) Circular No. A-76, Performance of Commercial
Activities, which provides policies and procedures for determining
whether commercial activities should be performed in-house using
government resources or under contract with private contractor
resources. If not, the request further asked whether the prohibition
applied to such studies conducted as part of VA's Capital Asset
Realignment for Enhanced Services[Footnote 3] (CARES) process. In our
October 2004 legal opinion,[Footnote 4] we concluded that the Title 38
cost comparison funding prohibition was not limited to standard A-76
cost comparison studies in particular, or A-76 studies in general, and
that the prohibition applies to CARES cost comparison studies. We
further concluded that if VA had in fact obligated the VHA
appropriations for the unavailable purpose of conducting cost
comparison studies, then it would have violated the purpose statute.
However, we noted in the opinion that we had not simultaneously
undertaken an audit to determine if VHA had used these appropriations
for this purpose.
After we issued our October 2004 legal opinion, you requested and we
agreed with your office to evaluate VA's use of the VHA medical
appropriations during fiscal years 2001 through 2004 to determine if VA
had violated the Title 38 cost comparison funding prohibition and,
consequently, the purpose statute, which requires that funds be used
only for the purposes for which they were appropriated[Footnote 5]. In
this report, we also address VA's legal views on whether the Title 38
cost comparison funding prohibition applies to the specific cost
comparison studies in the areas we reviewed. Finally, for any such
areas that we found to violate the Title 38 cost comparison funding
prohibition and the purpose statute based on our work, you asked that
we consider whether VA would be required to report a violation of the
Antideficiency Act (31 U.S.C. § 1341). The Antideficiency Act prohibits
an agency from incurring an obligation in advance or in excess of
appropriations and requires agencies to report violations to the
Congress and the President (with a copy to the Comptroller
General[Footnote 6]).
We met with VA headquarters officials and obtained information and
documentation regarding cost comparison studies performed as part of
CARES and other cost comparison studies performed during fiscal years
2001 to 2004. The information and documentation VA provided in response
to our audit inquiry, however, were limited because VA does not
maintain comprehensive, centralized data on the number and type of
activities related to cost comparison studies conducted in the past or
currently underway. Because of this, we limited the scope of our
evaluation to determine whether VA improperly used VHA medical care
appropriations in the three areas in which VA reported that cost
comparison activities were performed: (1) VA's CARES process, (2) VA's
evaluation of its medical center laundry facilities, and (3) the 1,626
cost comparison studies referenced in VA's fiscal year 2002 Performance
and Accountability Report (PAR). Based on these efforts, with the
exception of how much VA spent on cost comparison studies, we concluded
the information we obtained is reliable for addressing our reporting
objectives. We conducted our work from February 2005 to October 2005 in
accordance with U.S. generally accepted government auditing standards.
Enclosure I contains further details on our scope and methodology. We
requested comments on a draft of this report from the Secretary of
Veterans Affairs or his designee. We received written comments from the
Secretary of Veterans Affairs, which are presented and evaluated in the
body of this report, and reprinted in enclosure II.
Results in Brief:
VA employees compensated from the VHA medical care appropriation
accounts performed activities in support of cost comparison studies in
connection with the CARES process, VA's evaluation of its medical
center laundry facilities, and for some of the 1,626 studies referenced
in VA's fiscal year 2002 PAR. Because the Congress did not specifically
make VHA's medical care appropriations available for cost comparison
studies, VA violated the Title 38 cost comparison funding prohibition
and, consequently, the purpose statute. Although funds were
specifically appropriated for performing such cost comparison studies
for fiscal years 1983 through 2000, no similar specific appropriations
were made available in subsequent fiscal years. For fiscal years 2001
to 2004, VA requested from the Congress but did not receive specific
appropriations--ranging from $16 million to $50 million--to conduct
cost comparisons studies.[Footnote 7] To successfully continue its
competitive sourcing activities while complying with the Title 38 cost
comparison funding prohibition, VA could have used other available VA
appropriations to fund these activities, such as those for major
projects construction, minor projects construction, or departmental
administration.
According to VA, the cost comparison activities we reviewed were not
subject to the Title 38 cost comparison funding prohibition because VA
interprets the prohibition as applying only to "formal" (i.e.,
standard) A-76 studies. This is the same position VA asserted to GAO in
2004[Footnote 8] in response to our inquiry related to our October 2004
legal opinion. We continue to disagree with VA's interpretation. In our
October 2004 legal opinion, we concluded that the Title 38 cost
comparison funding prohibition applies to any VA studies comparing the
costs of commercial services and products provided by private
contractors with those provided by VA personnel whether or not they are
"formal" studies under OMB Circular No. A-76. According to VA's fiscal
year 2003 PAR, it halted the bulk of its competitive sourcing studies
in August 2003 because the VA General Counsel had concluded that the
Title 38 cost comparison funding prohibition prevents VA from
conducting cost comparisons studies using the VHA medical
appropriations unless the Congress provides specific funding for that
purpose.[Footnote 9] According to VA, it is seeking legislative relief
so that it can restart its planned competitive sourcing program.
VA can correct its purpose statute violations through account
adjustment by deobligating the amounts that were improperly charged to
the VHA medical appropriations and charging these amounts to otherwise
available appropriation accounts. This requires that VA know the amount
of VHA medical appropriations used in connection with cost comparison
studies. However, VA did not track the time and expense associated with
performing cost comparison studies in-house and was thus unable to
provide us with a reliable estimate of this amount. Therefore, we were
unable to determine whether VA would have sufficient budget authority
available in other appropriations to correct the amount of each purpose
statute violation. As such, we were also unable to determine if VA
could avoid violations of the Antideficiency Act by making account
adjustments. Nonetheless, based on documentation provided by VA, the
amount of time and effort spent in support of cost comparison studies
likely was substantial. For example, according to VA's Draft National
CARES Plan, issued on August 4, 2003, hundreds of staff across VA
devoted a great deal of time and energy to the CARES implementation
process, which lasted 14 months.
We are making four recommendations dealing with VA's compliance with
the Title 38 cost comparison funding prohibition. In commenting on a
draft of this report, VA disagreed with our conclusions and did not
concur with our recommendations. VA said it continues to disagree with
our interpretation that the Title 38 cost comparison funding
prohibition applies to all cost comparison studies, whether or not they
are A-76 studies. We stand by our interpretation and our conclusion
that VA violated the purpose statute. In addition, VA's disagreement
with our conclusions is not a sound basis for rejecting our
recommendations. Implementing the recommendations included in this
report would improve VA's funds control capability, provide a mechanism
to track costs associated with performing cost comparison studies, and
assist in making a determination of future funding needs for such
studies.
Background:
The long-standing policy of the federal government has been to rely on
the private sector for needed commercial services. To ensure that the
American people receive maximum value for their tax dollars, commercial
activities should be subjected to the forces of competition. Since
1966, OMB has issued various versions of OMB Circular No. A-76,
Performance of Commercial Activities, which provides policies and
procedures for determining whether commercial activities should be
performed in-house using government resources or under contract with
private contractors. In accordance with OMB Circular No. A-76 and,
since 1998, the Federal Activities Inventory Reform Act of 1998 (FAIR
Act), agencies have been required to identify all activities performed
by government personnel as either commercial or inherently
governmental.[Footnote 10]
For those activities identified as commercial, agencies are required to
determine, through cost comparison studies, whether it is more cost-
effective for the government or the private sector to perform these
activities. The versions of OMB Circular No. A-76 that would have
governed the cost comparison studies reviewed by this audit are those
OMB issued in 1999 and 2003, whereas the 1979 version was in effect
when the Title 38 cost comparison funding prohibition was
enacted.[Footnote 11] Streamlined cost comparisons were first added to
OMB Circular No. A-76 in the 1983 version. A streamlined A-76 cost
comparison study is a modified version of a standard cost comparison
study that reduces the administrative activities required to complete
the study and as a result generally lowers the study's costs. A
streamlined study can only be performed if it meets the criteria set
out for its use in OMB Circular No. A-76.[Footnote 12]
In August 2001, President Bush established the President's Management
Agenda (PMA), which included five governmentwide initiatives intended
to improve performance and management in the federal government. One of
the initiatives involves competitive sourcing--or using the competitive
process to determine whether the government or a private sector
contractor should perform a particular commercial activity. Although
the requirements of OMB Circular No. A-76 have been in place for
decades, the PMA competitive sourcing initiative places additional
pressure on agencies to use the private sector to perform activities
that are considered commercial activities and, thus, not inherently
governmental.[Footnote 13] For example, in 2001, in response to the new
competitive sourcing initiative, OMB issued directives stating that
during the 2-year period of fiscal years 2002 and 2003, agencies should
undertake public-private competitions or conversions of at least 15
percent of personnel associated with commercial activities.[Footnote
14] These directives stated that the President's long-term goal was to
open at least one-half of the federal positions that are not inherently
governmental to competition with the private sector.
To implement the PMA competitive sourcing initiative and achieve VA's
goal of having a systematic, timely, and cost-effective competitive
sourcing process, VA issued Directive 7100, "Competitive Sourcing," on
August 5, 2002. VA used Directive 7100 to implement a three-tiered
process for competitive sourcing which, according to VA, was approved
by OMB.[Footnote 15]
The Tier 1 process is only available for situations involving 10 or
fewer full time equivalent employee (FTE) positions, as a "cost-benefit
analysis"--intended to determine whether VA derives the "best value"
from conducting an activity in-house or contracting it out.[Footnote
16] Directive 7100 requires documentation supporting this decision
regarding what was considered and evaluated, the effects on the quality
of service to be provided, and any cost savings.
The Tier 2 process was created for activities involving 11 or more FTEs
that are "commercial exempt," which Directive 7100 defines as
commercial activities that are exempt from the provisions of OMB
Circular No. A-76 by the Congress, executive order, or OMB guidance.
For commercial exempt activities under Tier 2, there is no upper limit
on the number of FTEs. VA Directive 7100 describes the Tier 2 process
as a "cost-benefit analysis" that is intended to provide a "streamlined
A-76-like" process that would result in a level of analysis that is
more detailed than a Tier 1 analysis but less detailed than a Tier 3
analysis. Many of the same forms and processes required in the Tier 2
analysis are also required under the streamlined and standard OMB
Circular No. A-76 processes.[Footnote 17]
The Tier 3 analysis reflects VA's implementation of OMB Circular No. A-
76 for commercial activities involving 11 or more FTEs that do not meet
Directive 7100's definition of "commercial exempt." Under Tier 3, VA
decides to retain or outsource a commercial activity after conducting a
study as prescribed by OMB Circular No. A-76, including its associated
attachments or supplements. For commercial activities involving 11 to
65 FTEs, a streamlined A-76 study may be conducted if it meets the
requirements set out in OMB Circular No. A-76. However, for commercial
activities involving 66 or more FTEs, Tier 3 requires that VA perform a
standard cost comparison study, including all the formal steps involved
such as the formal solicitation process.[Footnote 18]
Title 38, Cost Comparison Funding Prohibition: We have identified five
conditions that must be met for VA employees' participation in
activities connected to cost comparison studies to violate the Title 38
cost comparison funding prohibition. First, VA must have conducted a
study.[Footnote 19] Second, the subject of the study must involve the
provision of commercial or industrial products or services. This means
in general that the service or good could be provided by the private
sector. Third, the study must involve the comparison of the costs of
providing the product or service. Fourth, the cost comparison must be
between VA in-house and private contractor performance. Thus, for
example, the prohibition would not apply if the alternative source were
a federal, state, or local government agency. Fifth, the activity in
connection with the study must have been paid out of one of the VHA
appropriation accounts when there was no specific appropriation made
for this purpose. This would include any activities done in
anticipation of or that further the study, including administrative
support activities, when performed by employees compensated from the
VHA appropriation accounts. The prohibition would not apply if the
activities were paid for with funds from other VA appropriation
accounts, such as the accounts appropriating funds for major projects
construction, minor projects construction, or departmental
administration.[Footnote 20]
Purpose Statute: When VA violates the Title 38 cost comparison funding
prohibition, it also violates the purpose statute, which states that
appropriations can only be used for the purposes for which they were
made. The VHA appropriations were not available for cost comparison
studies or to pay employees for activities connected to any such
studies. Even activities the agency is otherwise authorized to perform
violate the purpose statute if their expenses are charged to the wrong
appropriation account.
Antideficiency Act: Section 1341(a) of Title 31 of the U.S. Code,
together with other provisions, is commonly referred to as the
Antideficiency Act. The Antideficiency Act prohibits U.S. officers and
employees from obligating or expending an amount in advance or in
excess of appropriations available for the given purpose. If an
appropriation is not available for a given purpose and any amount of
funds from that appropriation is used for the prohibited purpose, then
the obligation or expenditure is a violation of the purpose statute and
an agency must "cure" the purpose statute violation to avoid an
Antideficiency Act violation. Agencies "cure" violations by
deobligating those amounts charged to the wrong appropriation and
obligating the amounts to an appropriation available for that
purpose.[Footnote 21] An agency may be unable to "cure" the purpose
statute violation if it either (1) lacked any appropriation available
for the object charged or (2) lacked sufficient budget authority in an
otherwise available appropriation.[Footnote 22]
If an agency is not able to "cure" the purpose statute violation, then
it violates the Antideficiency Act. This would require the agency to
report the Antideficiency Act violation to the President and the
Congress and provide a copy of the report to the Comptroller General on
the same day.[Footnote 23] In addition to the reporting requirement,
violations of the Antideficiency Act can result in imposition of
penalties on agency officials responsible for the actions that resulted
in the violation.[Footnote 24]
VA Improperly Funded Cost Comparison Studies Using VHA Medical
Appropriations:
As noted before, we have previously reported that VA would benefit from
examining certain aspects of its operations to determine if operational
efficiencies could be achieved through consolidations, competitive
sourcing, or both.[Footnote 25] However, in performing these activities
during fiscal years 2001 to 2004, VA improperly used funds from the VHA
medical appropriation accounts in connection with cost comparison
studies performed related to the CARES process, its evaluation of the
medical laundry facilities, and the studies referenced in VA's fiscal
year 2002 PAR. Such usage violated the Title 38 cost comparison funding
prohibition and, consequently, the purpose statute. Specifically, VA
employees compensated from the medical care appropriation performed
activities in support of cost comparison studies--which is prohibited
under the Title 38 cost comparison funding prohibition because the
Congress did not specifically make the funds available for that
purpose.
In-house Cost Comparison Activities Performed in Connection with CARES
Violated the Purpose Statute:
Although VA's initial work related to CARES was contracted out and
funded by non-VHA appropriations that were available for the purpose of
implementing CARES, later CARES-related cost comparison activities
relied primarily upon VA in-house support. This work was carried out by
VA personnel whose salaries and expenses are paid from VHA medical care
appropriations. In doing so, VA violated the Title 38 cost comparison
funding prohibition and, thus, the purpose statute. Because VA did not
track the time or expense associated with the in-house support provided
by VA staff, we were unable to determine the extent to which VHA
appropriations were used in support of CARES-related cost comparison
studies.
In October 2000, VA initiated CARES. Through CARES, VA compared the
sizes, locations, and available health care services of VA's existing
medical facilities to projected demand for health care services through
fiscal year 2022. Simply put, the CARES process involves: (1) analyzing
veterans' health care needs--referred to as market analysis, (2)
developing options to address those needs, (3) evaluating each option,
and (4) implementation. However, before CARES decisions are
implemented, VA undergoes an extensive process for vetting these
decisions. This includes the review of CARES decisions by a 16-member
independent CARES commission as well as congressional oversight.
In fiscal year 2001, VA contracted out the initial CARES work, which
was funded through a non-VHA appropriation, for a total contract cost
of $3.6 million. This included contractor support for developing the
criteria, methodology, and tools used in evaluating various
restructuring options and piloting the process at 1 of VA's 21
networks. VA completed the pilot phase of the CARES process in February
2002. To coordinate and carry out the CARES process for the remaining
20 VA networks, VA used in-house personnel, rather than contractor
staff. Specifically, VA divided its CARES initiatives by markets--
focusing on areas where major gaps in healthcare services existed, such
as primary care, specialty care, and mental health care. The process
used standardized methods, such as a forecasting model and a
computerized market template created by a contractor, that allowed
different cost alternatives to be analyzed--including decisions on
whether to renovate, lease, build, or contract out for
service.[Footnote 26] As part of this process, VA staff, whose salaries
and expenses are paid through the VHA medical care appropriations,
completed the market plan templates, which included comparing the cost
of contracting out services or performing those services in-house. The
conduct of this component of the market plan analysis is a study that
violated the Title 38 cost comparison funding prohibition and, thus,
the purpose statute.
VA could not provide an estimate of the personnel costs involved in the
cost comparison portion of the CARES process because VA does not track
time spent by jobs or tasks. Further, the market plan templates are an
integral part of the CARES process, and we could not discern from the
documentation provided the time and effort devoted to performing these
tasks. However, according to VA's Draft National CARES Plan, issued on
August 4, 2003, hundreds of staff across VA devoted a great deal of
time and energy to the CARES implementation process, which lasted 14
months. Further, given that the pilot study for one VA network totaled
$3.6 million, the time and effort involved in implementing the CARES
process at the remaining 20 VA networks is likely to have been
substantial. It is important to note, however, that only a portion of
the $3.6 million spent on the pilot was associated with performing cost
comparison studies.
Laundry Facility Outsourcing Studies Violated the Purpose Statute:
During fiscal years 2002 and 2003, personnel from VA's Central Office
and medical centers, whose salaries and expenses were paid out of the
VHA medical care appropriations, performed cost comparison studies of
VA's medical center laundries to determine if the work at the
facilities should be retained in-house or contracted out to the private
sector. In doing so, VA violated the Title 38 cost comparison funding
prohibition, and consequently, the purpose statute. Again, because VA
does not track the time or expense associated with performing cost
comparison studies, we were unable to determine the extent to which VHA
funds were used in support of the laundry studies.
In fiscal year 2002, VA began to evaluate selected laundry facilities
on a pilot basis to determine whether to outsource laundry facilities
to the private sector or to retain them in-house. During fiscal year
2003, to meet the administration's goals for competitive sourcing as
required by the President's Management Agenda, VA extended the laundry
study to all remaining laundry facilities.[Footnote 27] To carry out
these studies, VA formed the Laundry Advisory Work Group comprised of
field, VA Central Office, and departmental members. The advisory group
issued additional guidance under Directive 7100, which provided
guidance for VA's new three-tiered process for outsourcing commercial
activities, such as those conducted at the laundry facilities. The
laundry studies involved developing in-house estimates calculating the
costs of operating the facilities, including equipment and personnel,
and comparing them to the costs of consolidating certain facilities or
contracting the laundry workload to a private sector contractor in
order to determine the most cost-efficient alternatives. The cost
comparison process was structured and standardized under the new Tier 2
process developed by VA using forms and schedules that resemble the
processes defined in OMB Circular No. A-76, Performance of Commercial
Activities.
After completing cost comparison studies for 18 of the laundry
facilities, in August 2003, these evaluations were terminated by order
of the VA Deputy Secretary in response to a legal opinion provided by
VA's Office of General Counsel. Specifically, the VA Deputy Secretary
ordered staff at the Central Office and at the Veterans Integrated
Service Networks (VISNs) to terminate any competitive sourcing studies
funded from any of the three VHA medical care appropriations mentioned
above until specific funds had been appropriated for these studies,
consistent with the Title 38 cost comparison funding
prohibition.[Footnote 28]
For 6 of the 18 completed laundry facilities studies, VA estimated the
time and money spent in conducting the studies was $14,725.[Footnote
29] However, VA did not have a methodology to develop these estimates
and provided limited documentation to support these estimates;
therefore, we have no reasonable assurance of the accuracy of these
estimates. In addition, as mentioned before, we could not verify any
amounts because VA does not track time spent by jobs or tasks.
Competitive Sourcing Activities Conducted to Meet Requirements of the
President's Management Agenda Violated the Purpose Statute:
In its fiscal year 2002 PAR, VA takes credit for performing 1,626 cost
comparison studies related to 4,061 FTE positions. VA provided
documentation for 1,352 of these studies.[Footnote 30] According to VA
officials, the remaining studies were in connection with the VA's
benefits programs, which are not funded through the VHA medical
appropriations. Based on the documentation provided for the medical
care-related cost comparison studies, we determined that at least 16
studies violated the Title 38 cost comparison funding prohibition and,
thus, the purpose statute. Specifically, VA employees, whose salaries
and expenses were paid through the VHA medical care appropriations,
performed work in connection with these 16 studies. However, for the
remaining 1,336 VA studies, the documentation VA provided was not
sufficiently detailed to allow us to determine whether cost comparison
studies were actually performed and, therefore, subject to the Title 38
cost comparison funding prohibition.
The documentation provided for the 1,352 VA cost comparison studies
cited in the fiscal year 2002 PAR included the following information:
(1) description of the facility, (2) study completion date, (3)
description of services being evaluated, (4) contract cost, (5) in-
house costs, (6) savings, (7) number of FTEs evaluated, and (8) the
type of study performed--Tier 1 or Tier 2. According to VA's
documentation, VA classified 16 of the 1,352 studies as Tier 2 studies.
As discussed previously, Tier 2 studies--as defined by VA--involve the
same analyses, processes, and forms required under the streamlined and
standard OMB Circular No. A-76 processes.
According to VA officials, employees whose salaries and benefits were
paid through the VHA medical care appropriations performed work in
support of the 16 Tier 2 cost comparison studies. As a result, because
appropriations were not made specifically available for this purpose,
VA violated the Title 38 cost comparison funding prohibition and,
consequently, the purpose statute. As was the case for the studies
discussed previously, VA was unable to determine costs involved in
performing this analysis because it does not track this type of
information.
According to VA officials, most of the studies cited in the fiscal year
2002 PAR were Tier 1 equivalents or A-76 direct conversions, which they
assert do not constitute cost comparison studies. Under a direct
conversion, which until 2003 was expressly allowed by OMB Circular No.
A-76, an agency could decide to contract out a commercial function
without performing a standard or streamlined cost comparison study so
long as the contracting officer had made a determination that the
potential contractors would provide the given service at the required
level of quality for a fair price and applicable contracting procedures
were followed. Based on the documentation provided, we could not verify
VA's assertion that these were direct conversions and that they did not
involve studies comparing costs that would be subject to the Title 38
cost comparison funding prohibition.
VA Asserts Limited Application of Title 38 Cost Comparison Funding
Prohibition:
According to VA, the cost comparison activities we reviewed did not
violate the Title 38 cost comparison funding prohibition. VA interprets
this funding prohibition as applying only to "formal" studies, which it
has interpreted as meaning only the standard (i.e., not streamlined)
studies conducted in accordance with OMB Circular No. A-76, Performance
of Commercial Activities. We disagree with VA's interpretation of the
Title 38 cost comparison funding prohibition, as discussed in our legal
opinion, and instead interpret the law to apply to any VA studies
comparing the costs of commercial services and products provided by
private contractors with those provided by VA, whether or not they are
"formal" studies under OMB Circular No. A-76.
In a June 8, 2005, letter from VA's Deputy General Counsel, VA asserts
that the Title 38 cost comparison funding prohibition applies only to
"formal" (i.e., standard) OMB Circular No. A-76 cost comparison studies
and not to other competitive sourcing activities because those were the
studies the Congress addressed by enacting the provision in 1981. The
streamlined A-76 studies did not exist in 1981 when the provision was
enacted. In the June 2005 letter, VA's Deputy General Counsel argued
that the words used by the Congress in 1981 must be interpreted
consistent with the common and ordinary meaning contemporaneous with
the date of the statute's enactment.[Footnote 31] VA also argues that
application of the prohibition to other than standard A-76 studies
would conflict with statutory authority for it to make sourcing
decisions and provide cost-effective medical care. Further, VA argues
that the legislative history of the provision reflects the Congress'
intent only to curb standard A-76 studies such as the many underway in
1981. Therefore, according to VA, its Tier 1 and 2 processes and its A-
76 streamlined studies would not be subject to the Title 38 cost
comparison funding prohibition. As a result of applying VA's
interpretation of the law, most (but not all) of VA's competitive
sourcing activities would fall outside of the Title 38 cost comparison
funding prohibition.
We disagree with VA's argument. In October 2004, we concluded that the
Title 38 cost comparison funding prohibition was not limited to
standard A-76 cost comparison studies in particular, or A-76 studies in
general, and that the prohibition applies to CARES cost comparison
studies. We said that the VA cost comparison funding prohibition
addresses any study, A-76 or otherwise, as clearly reflected in the
legislative history related to the provision's enactment. We agree with
VA that, absent an indication to the contrary, we should interpret
words in the statute to have their common, ordinary, and contemporary
meaning. At the crux of our disagreement with VA is the meaning of the
word "study." According to a well-recognized dictionary[Footnote 32] of
the sort that might have been available to the Congress in 1981, a
"study" is defined broadly as a careful examination or analysis of a
phenomenon, development, or question, or the publication of a report of
such an examination or analysis. The other important word in the
language of the prohibition is the word "any," which modified the word
"study." In our October 2004 legal opinion, we construed "any" to mean
"every" and "all." We found no evidence in the legislative history that
the Congress intended the words "any" and "study" in their common,
ordinary, and contemporary usage to mean only a "formal" (i.e.,
standard) A-76 study. Further, application of the prohibition to all
studies would not prevent VA from carrying out its competitive sourcing
activities, provided it receives sufficient appropriations.
According to VA, its efforts to satisfy PMA competitive sourcing
requirements are stymied by the Title 38 cost comparison funding
prohibition. In its fiscal year 2003 PAR, VA reported that the bulk of
VA's competitive sourcing studies were halted in August 2003 because
the VA General Counsel had issued a legal opinion stating that the
Title 38 cost comparison funding prohibition prevents VA from
conducting cost comparisons studies using the VHA medical
appropriations unless the Congress provides specific funding for that
purpose. In August 2003, the VA General Counsel confirmed his April
2003 legal opinion that the Title 38 cost comparison funding
prohibition applied to Tier 1, 2, and 3 studies and to all A-76
studies, but he subsequently modified his legal analysis and conclusion
in a January 2004 legal opinion. In the January 2004 legal opinion, the
VA General Counsel asserted that the Title 38 cost comparison funding
prohibition applies only to "formal" A-76 studies. The fiscal year 2004
PAR, which was published on November 15, 2004, does not indicate
whether the more recent legal opinion has influenced VA's competitive
sourcing activities.
Although funds were specifically appropriated for performing such cost
comparison studies for fiscal years 1983 through 2000, no similar
specific appropriations were made available in subsequent fiscal
years.[Footnote 33] As previously noted, for fiscal years 2001 to 2004,
VA requested but did not receive from the Congress specific
appropriations--ranging from $16 million to $50 million--to conduct
cost comparison studies. According to VA, it is seeking legislative
relief so that it can restart its planned competitive sourcing program.
However, VA would also be authorized to fund these activities with
other available appropriations, such as its major projects construction
or minor projects construction appropriations.
VA May Have to Report Antideficiency Act Violations:
We were unable to determine if VA would be required to report
Antideficiency Act violations because it was unclear whether VA could
correct its purpose statute violations through account adjustment. VA
can correct its purpose statute violations through account adjustment
by deobligating the amounts that were improperly charged to the VHA
medical care appropriations and charging these amounts to otherwise
available appropriation accounts. VA's SF-133s, Report on Budget
Execution and Budgetary Resources, show available budget authority
(unobligated balances) in the major projects construction and minor
projects construction accounts from prior fiscal years. However,
because these reports do not itemize the available amounts in these
accounts for each prior fiscal year, we cannot determine the amount, if
any, of budget authority that remains available for each fiscal year
from 2001 to 2004. To make account adjustments, VA must know the amount
of VHA medical care appropriations used in connection with performing
cost comparison studies. However, VA does not track the in-house cost
associated with performing cost comparison studies and was unable to
provide us with a reliable estimate of this amount. Therefore, we were
unable to determine whether VA would have sufficient budget authority
available in other appropriations accounts to correct the amount of
each purpose statute violation. As such, we were also unable to
determine if VA could avoid violations of the Antideficiency Act.
Although VA estimated that the time and money spent conducting the
laundry facility studies for 6 of the 18 completed laundry facility
sites was $14,725, VA provided no detailed documentation to support
these estimates and, therefore, we have no reasonable assurance of
their accuracy. Moreover, VA was unable to provide us with any
estimate, no matter how rough, of the time its VA employees spent on
activities in connection with the cost comparison studies cited in the
fiscal year 2002 PAR or the CARES process. As discussed previously,
this amount is likely to be substantial given the amount VA spent
contracting out similar activities. Nonetheless, we were unable to
determine whether VA would have sufficient budget authority to cover
all obligations incurred after adjusting its accounts by deobligating
the amounts that were improperly charged to the VHA medical care
appropriations and correctly charging these amounts to other available
appropriations accounts or through any possible transfer of funds from
another account. As such, we were also unable to determine if VA would
be required to report an Antideficiency Act violation for any specific
activity.
The fact that VA did not track the time and expense associated with
using in-house personnel to conduct the cost comparison studies in the
areas we evaluated is not surprising given VA's narrow interpretation
of the Title 38 cost comparison funding prohibition. However, as
discussed previously, under our interpretation of the law, it would be
critical to track the in-house time and expense spent on cost
comparison studies so that these costs could be funded using available
appropriations--and not through VHA medical appropriations. This is a
critical funds control measure that would help VA comply with the Title
38 cost comparison funding prohibition. Similarly, if VA receives--as
it has in the past--a specific appropriation authorizing use of a
specific amount from its VHA medical appropriations for the purpose of
conducting cost comparison studies, VA would be required to track all
costs, both in-house and contract costs, associated with conducting
these studies to ensure that it did not exceed its funding limit for
this specific purpose.[Footnote 34]
This is part of a bigger problem at VA. VA lacks reliable cost
accounting information needed to manage its operations and budget
effectively. In our recent testimony before the House Committee on
Government Reform dealing with cost accounting at federal agencies, we
pointed out differences in leadership and capabilities in generating
reliable cost data for decision making.[Footnote 35] Related to our
testimony, the Committee pointed out that in June 2005, the Congress
had provided $1.5 billion in emergency funding for VA's health care
programs for fiscal year 2005. In testifying before the House Committee
on Veterans' Affairs, VA's Secretary attributed the shortfall to
inaccurate data and outdated assumptions. The Committee noted that
timely, accurate cost accounting data are integral to effective
budgeting.
The Statement of Federal Financial Accounting Standard (SFFAS) No. 4,
Managerial Cost Accounting Standards and Concepts, provides that each
reporting entity should accumulate and report the costs of its
activities on a regular basis for management information purposes. VA
was unable to provide us with accurate estimates or other cost data
because it did not track costs associated with the various projects.
SFFAS No. 4 also states that alternatively the entity can use
appropriate "cost finding" techniques, such as analytical or sampling
methods to accumulate costs.
Conclusion:
VA violated the Title 38 cost comparison funding prohibition and, thus,
the purpose statute. As VA implements the CARES process and attempts to
achieve its President's Management Agenda competitive sourcing goals,
VA must use the appropriations the Congress has provided to fund these
activities, such as through specific appropriations made to the VHA
accounts or through other available appropriations, such as the major
projects construction or minor projects construction appropriation
accounts. Going forward, VA has a responsibility to (1) avoid using its
VHA medical appropriations to fund cost comparison activities, (2) cure
prior purpose statute violations, and (3) report all violations of the
Antideficiency Act.
Recommendations for Executive Action:
To avoid future noncompliance with the Title 38 cost comparison funding
prohibition, we recommend that the Secretary of Veterans Affairs
establish a process to:
* identify all planned cost comparison studies and activities--whether
stand-alone or as an integral part of a larger effort,
* estimate the amount of resources required to perform such cost
comparison studies and activities,
* fund such activities using only appropriations available to fund such
activities, and:
* implement a mechanism to track all costs associated with conducting
such studies--including in-house and contract costs.
Agency Comments and Our Evaluation:
In responding to a draft of this report, VA disagreed with our
conclusions and did not concur with our recommendations. VA stated that
it strongly disagrees with our interpretation that the Title 38 cost
comparison funding prohibition applies to all cost comparison studies,
whether or not they are A-76 studies. VA stated that we have ignored
the prohibition's legislative history and the rest of Title 38 of the
U.S. Code. In support of its view, VA stated that "Congress clearly did
not intend to preclude all manner of cost analysis necessary for the
day-to-day administration of our health-care system and, to the
contrary," has directed or permitted VA to contract for care in
circumstances covered by other Title 38 authorities, such as sections
1703, 1706(a), and 8153.[Footnote 36] VA also stated that a standard A-
76 study is the type of study that the Congress intended to prohibit
under the Title 38 cost comparison funding prohibition because "there
is no indication whatsoever in the extensive legislative history that
the Congress meant to foreclose other cost analyses of the sort [the]
draft report calls unauthorized."
VA mischaracterized our views on VA's authority to conduct cost
comparison studies. We agree with VA that in enacting the Title 38 cost
comparison funding prohibition, the Congress did not preclude all cost
comparison studies. As we stated at the beginning of our report, the
Congress prohibited VA from using particular appropriations--the VHA
appropriations for medical care, medical and prosthetic research, and
medical administration and miscellaneous operating expenses--to pay for
cost comparison studies. As we have stated previously in this report
and in our October 2004 legal opinion, in enacting the prohibition, the
Congress intended to restrict only the use of VHA appropriations to
fund these activities, not VA's authority to conduct cost comparison
studies. Other VA appropriations remain available for cost comparison
studies, such as the major projects construction and minor projects
construction appropriations. Thus, it is the use of the VHA
appropriations to conduct cost comparison studies that is unauthorized,
not the studies themselves. Therefore, the Title 38 cost comparison
funding prohibition does not conflict with the other provisions of
Title 38, such as sections 1703, 1706, and 8153 of Title 38, which VA
cited in its comments. Furthermore, even if the Title 38 cost
comparison funding prohibition was construed to conflict with VA's
authorities and duties set out in Title 38, as VA argues, the Congress
specifically stated that the prohibition was to apply
"[n]otwithstanding any other provisions of this title or any other
law."[Footnote 37] Thus, the funding prohibition would take precedence
over the other Title 38 authorities that VA cited in its comments.
Contrary to VA's assertions, there is clear evidence that the Congress
intended the prohibition on VHA funding of "any study comparing the
costs" to apply to any cost comparison studies, not solely the A-76
related studies. For example, the joint explanatory statement published
in the October 1, 1981, Congressional Record states that the
prohibition applies to "activities under Office of Management and
Budget Circular A-76 or otherwise (emphasis added) in connection with
the contracting-out (and studies of the feasibility of such
contracting) of functions carried out by VA employees."[Footnote 38]
The legislative history also shows that the primary objective of the
Congress was to prevent the diversion of VHA appropriations from the
delivery of quality medical care to the conduct of cost comparison
studies, and not the preclusion of the many A-76 studies in progress at
the time. However, as we stated in our October 2004 legal opinion and
this report, it is not necessary to resort to the legislative history
because, in applying the plain meaning rule for statutory
interpretation, the clear and unambiguous words in the Title 38 cost
comparison funding prohibition must be interpreted according to their
common, ordinary, and contemporary meaning.
VA's disagreement with our conclusions is not a sound basis for
rejecting our recommendations. Implementing the recommendations
included in this report would ensure VA uses only available funding to
perform cost comparison studies and avoid future purpose statute
violations. VA's funds control would be improved by having a mechanism
in place to track the number of studies and costs associated with
performing these cost comparison studies. Further, VA should be able to
track and ensure compliance with any specific appropriations that the
Congress may make for cost comparison studies, as VA has recently
requested. Finally, tracking the cost of these studies provides a tool
for determining future funding needs for this purpose. VA's comments
are reprinted in enclosure II of this report.
We are sending copies of this report to the Secretary of Veterans
Affairs, interested congressional committees, and other interested
parties. We will make copies of the report available to others upon
request. In addition, the report will be available at no charge on
GAO's Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please
contact me at (202) 512-6906 or williamsm1@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major contributions
to this report are listed in enclosure III.
Sincerely yours,
Signed by:
McCoy Williams:
Director, Financial Management and Assurance:
Enclosures:
Enclosure I: Scope and Methodology:
To achieve our objectives and determine whether the Department of
Veterans Affairs (VA) violated the purpose statute by using funds from
the Veterans Health Administration (VHA) medical care, medical and
prosthetic research, or medical administration and miscellaneous
operating expenses appropriation accounts during fiscal years 2001
through 2004 to fund cost comparison studies, we reviewed pertinent
sections of the law and GAO’s October 2004 legal opinion. We also
reviewed the pertinent appropriations from fiscal years 2001 to 2004 to
determine if funds had been provided in these medical accounts to
perform cost comparison studies.
To determine the process and steps involved in performing cost
comparisons, we reviewed applicable guidance included in the Office of
Management and Budget (OMB) Circular No. A-76, Performance of
Commercial Activities; VA policies and procedures on outsourcing such
as VA Directive 7100; and pertinent sections of the Capital Asset
Realignment for Enhanced Services (CARES) Guidebook. We also compared
guidance included in OMB Circular No. A-76 to outsourcing guidance
included in VA Directive 7100 to analyze any similarities.
To determine what cost comparison activities had been conducted by VA,
we met with VA headquarter officials and discussed areas in which VA
performed cost comparisons as part of the CARES process or other areas
such as VA laundry services from fiscal years 2001 to 2004. We reviewed
CARES contracts to determine if cost comparison studies were performed
and if VHA medical appropriations were used to fund these contracts. We
also reviewed VA’s Performance and Accountability Reports (PAR) from
fiscal years 2001 to 2004 to determine what additional cost comparison
studies had been performed as part of making progress toward the
competitive sourcing goals of the President’s Management Agenda.
We conducted structured interviews with key VA personnel involved in
the laundry facilities studies, the CARES process, and the 1,626 cost
comparison studies reported in the fiscal year 2002 PAR to determine
the time and expenses incurred by VHA personnel while performing cost
comparison activities. However, we were unable to obtain or verify VA
information about the number of staff and expenses involved in
performing these activities because VA does not have a payroll or other
system in place to track these costs. We conducted our review from
February 2005 to October 2005 in accordance with U.S. generally
accepted government auditing standards.
The Department of Veterans Affairs provided written comments on a draft
of this report. These comments are presented and evaluated in the body
of this report and are reprinted in enclosure II.
[End of section]
Enclosure II: Comments from the Department of Veterans Affairs:
THE SECRETARY OF VETERANS AFFAIRS:
WASHINGTON:
November 4, 2005:
Mr. McCoy Williams:
Director:
Financial Management and Assurance:
U. S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Williams:
The Department of Veterans Affairs (VA) has reviewed the Government
Accountability Office's (GAO) draft report, PURPOSE STATUTE VIOLATION:
Veterans Affairs Improperly Funded Certain cost Comparison Studies with
VHA Appropriations (GAO-06-124R) and disagrees with your conclusions
and does not concur with your recommendations.
As the draft report acknowledges, VA strongly disagrees with the
interpretation of 38 U.S.C. § 8110(a)(5) that GAO's report rests upon -
an interpretation that makes sense only if one ignores its legislative
history and the rest of title 38. However, it is to this history and
context one must turn in order to understand what Congress intended by
the words "study comparing the cost" in the statute.
Congress clearly did not intend to preclude all manner of cost analysis
necessary for the day-to-day administration of our health-care system
and, to the contrary, has directed me in 38 U.S.C. §1706(a) to
establish and manage our programs in a manner promoting cost-effective
care delivery. That requires us to frequently take our costs, and costs
of obtaining health resources from others, into account to ensure
veterans derive maximum value from our health-care budget.
By enacting what is now 38 U.S.C. §8110(a)(5), Congress in 1981 was
addressing a very particular concern of the day - that VA appeared
poised to conduct multiple A-76 competitions and, by so doing, divert
many millions of dollars of funding away from direct care. These
standard A-76 studies are the "stud[ies] comparing the costs . . ."
that Congress had in mind, and there is no indication whatsoever in the
extensive legislative history that Congress meant to foreclose other
cost analyses of the sort your draft report calls unauthorized. We have
previously advised GAO that to responsibly exercise both our resource-
sharing responsibilities under section 8153 and our authority to
purchase fee-basis care under section 1703 of title 38, we necessarily
must consider certain of our operating costs in comparison to others'.
Absent very persuasive legislative evidence, we should not and will not
presume Congress, having exhorted us to employ these and other
authorities in the most cost-effective manner feasible, meant to
broadly impair our ability to make sound business judgments in our day-
to-day health-care operations.
VA appreciates the opportunity to comment on your draft report.
Sincerely yours,
Signed by:
R. James Nicholson:
[End of section]
FOOTNOTES
[1] GAO, Veterans' Affairs: Progress and Challenges in Transforming
Health Care, GAO/T-HEHS-99-109 (Washington, D.C.: Apr. 15, 1999); and
GAO, VA Laundry Service: Consolidations and Competitive Sourcing Could
Save Millions, GAO-01-61 (Washington, D.C.: Nov. 30, 2000).
[2] The permanent law, which was enacted in fiscal year 1982 and is now
codified at 38 U.S.C. § 8110(a)(5), states: "Notwithstanding any other
provision of this title or of any other law, funds appropriated for the
Department under the appropriation accounts for medical care, medical
and prosthetic research, and medical administration and miscellaneous
operating expenses may not be used for, and no employee compensated
from such funds may carry out any activity in connection with, the
conduct of any study comparing the cost of the provision by private
contractors with the cost of the provision by the Department of
commercial or industrial products and services for the Veterans Health
Administration unless such funds have been specifically appropriated
for that purpose."
[3] CARES is a nationwide effort designed to assist in systematically
assessing VA's medical facilities' capacity, services, and capital
infrastructure to better align services with future VA needs. As part
of the CARES assessment, VA researched and compared the costs and
benefits of alternative sources, including private contractors, of
providing different medical services and products to veterans.
[4] B-302973, Oct. 6, 2004.
[5] The purpose statute is codified at 31 U.S.C. § 1301(a).
[6] 31 U.S.C. § 1351.
[7] For this purpose, the administration requested $16 million in its
budget request for fiscal year 2001, $25 million in its supplemental
budget request for fiscal year 2003, and $50 million in its amendment
to its budget request for fiscal year 2004. See, respectively, Budget
of the United States Government--Appendix, Fiscal Year 2001, at 1; and
Budget of the United States Government--Fiscal Year 2003 Appropriation
Law Change and Fiscal Year 2004 Budget Amendment, at 4-5. Congress did
not accept these requests, as reflected in the fiscal years 2001, 2003,
and 2004 appropriations for VA. See, respectively, Pub. L. No. 106-377,
114 Stat. 1441A-3, 1441-A-5-6 (Oct. 27, 2000); Pub. L. No. 108-7, div.
K, 117 Stat. 475, 477-78 (Feb. 20, 2003); and Pub. L. No. 108-199, div.
G, 118 Stat. 363, 365-66 (Jan. 23, 2004).
[8] See Letter from Tim S. McClain, General Counsel, VA, to GAO, June
15, 2004.
[9] The VA General Counsel subsequently modified his opinion.
[10] OMB Circular No. A-76 was updated in 1999, in part, to reflect
changes generated by the Federal Activities Inventory Reform (FAIR) Act
of 1998, Pub. L. No. 105-270, 112 Stat. 2382 (Oct. 19, 1998)(31 U.S.C.
§ 501 note), which added the FAIR Act's requirements to the policy
expressed in the circular.
[11] OMB Circular No. A-76, § 4(b) (1999).
[12] OMB Circular No. A-76, Revised Supplemental Handbook at part II,
Ch. 5(1999); and OMB Circular No. A-76, Att.B, at pp (A)(5), (c)
(2003).
[13] Under the FAIR Act and OMB Circular No. A-76, an activity
qualifies as inherently governmental if its performance is so closely
related to the public interest that it should only be done by federal
government employees, such as activities involving significant
discretion, value judgments, decision making, and interpretation of
laws.
[14] See OMB, Performance Goals and Management Initiatives for the FY
2002 Budget, M-01-15 (Mar. 9, 2001); and OMB, Implementation of the
President's Management Agenda and Presentation of the FY 2003 Budget
Request, M-02-02 (Oct. 30, 2001).
[15] Letter from John H. Thompson, Deputy General Counsel, VA, to GAO,
June 8, 2005; see also Letter from VA to OMB, Dec. 19, 2002.
[16] See Directive 7100, App. A., ¶ 2.a.(1).
[17] See VA Directive 7100, ¶ 5(f), App. A, ¶ 2.a.(2). This
understanding of Tier 2 is consistent with Directive 7100 and the legal
opinion issued by the VA General Counsel, at ¶ 3, on April 28, 2003,
which states that "Tier 2 applies to activities of 11 or more FTEs
classified as commercial exempt on the FAIR Act inventory (in essence
VHA activities)." However, this understanding differs from the later
characterization from the VA General Counsel's office provided to GAO,
which states that Tier 2 is a streamlined A-76-like process available
for "commercial activities of 11 or more FTE." Letter from John H.
Thompson, Deputy General Counsel, VA, to GAO, June 8, 2005.
[18] See VA Directive 7100, App. A, ¶ 2.a.(3). This understanding of
Tier 3 is consistent with Directive 7100 and the legal opinion issued
by the VA General Counsel, at ¶ 3, on April 28, 2003 ("Tier 3,
applicable to commercial competitive activities over 11 FTE
equivalents, requires a full A-76 study.") However, it differs from the
later characterization from the VA General Counsel's office provided to
GAO, which states that Tier 3 constitutes only standard A-76 studies.
Letter from John H. Thompson, Deputy General Counsel, VA, to GAO, June
8, 2005.
[19] See discussion and GAO's interpretation of "study" in the section
entitled VA Asserts Limited Application of Title 38 Cost Comparison
Funding Prohibition.
[20] For example, the major projects construction appropriation is
available, in part, for advance planning activities funded through the
advance planning fund (e.g., needs assessments related to potential
capital investments, other capital asset management related activities,
and investment strategy studies) and planning and design activities
funded through the design funds and CARES funds. It is also available
for any of the purposes set out in 38 U.S.C. § 8110, among other
provisions. See, e.g., Pub. L. No. 108-199, div. G, 118 Stat. 363, 367
(Jan. 23, 2004).
[21] An agency could also "cure" purpose statute violations by
transferring the amount from the wrong appropriation account to an
available appropriation account, provided the agency has statutory
authority for the transfer. 31 U.S.C. § 1352.
[22] See 63 Comp. Gen. 422, June 22, 1984.
[23] See 31 U.S.C. § 1351. See also OMB Circular No. A-11, Preparation,
Submission, and Execution of the Budget, § 145.
[24] See 31 U.S.C. §§ 1349, 1350.
[25] GAO, Veterans' Affairs: Progress and Challenges in Transforming
Health Care, GAO/T-HEHS-99-109 (Washington, D.C.: Apr. 15, 1999); and
GAO, VA Laundry Service: Consolidations and Competitive Sourcing Could
Save Millions, GAO-01-61 (Washington, D.C.: Nov. 30, 2000). These
reports did not discuss funding issues; VA had been receiving funding
to perform cost comparison studies.
[26] VA awarded two contracts to help develop a tool for forecasting
data to be used in Phase II of CARES and to help develop the project
costs for the VISN (Veterans Integrated Service Network) centers, which
were funded out of the major projects construction appropriation
account.
[27] Prior to the fiscal year 2002 and 2003 laundry studies, VA had
already contracted out a number of its laundry facilities. We did not
evaluate the use of VHA funds in connection with any cost comparison
analyses performed related to these facilities.
[28] The VA General Counsel subsequently modified his opinion.
[29] VA estimated that $11,225 was spent in performing the cost
comparison studies related to the medical laundry facilities located in
one of VAs VISNs. This VISN study included the Huntington, W. Va;
Louisville, Ky; Mountain Home, Tenn; and Nashville, Tenn., laundry
facilities. For two additional facilities located in Sioux Falls, S.
Dak., and Fargo, N. Dak., the agency estimated a total of $3,500.
However, VA did not use a reliable methodology to estimate these
amounts. Instead, the estimate of $11,225 was calculated based on the
pay scale of the staff involved in the project, and individuals'
recollection of how much time was allocated (in percentage) to working
on this project.
[30] Documentation consisted of a schedule where information on cost
comparison studies was gathered as a result of a data call to the VA
networks in an effort to obtain information for the President's
Management Agenda. We did not the audit the cost comparison studies
included in this schedule.
[31] The VA Deputy General Counsel cited Bedroc Limited, LLC v. United
States, 541 U.S. 176, 184 (2004), as support, but did not point to any
specific words in the Title 38 cost comparison funding prohibition.
[32] Webster's Third New International Dictionary of the English
Language unabridged (Springfield, Mass.: 1965).
[33] In fiscal year 2000, the VHA medical care appropriation included a
specific appropriation--not to exceed $8,000,000--for cost comparison
studies as referred to in 38 U.S.C. § 8110(a)(5). Pub. L. No. 106-74,
113 Stat. 1047, 1049-50 (Oct. 20, 1999).
[34] See GAO's Policy and Procedures Manual for Guidance of Federal
Agencies, Title VII, Fiscal Guidance, § 2.3.B., at 7.2-6-7 (May 1993).
[35] GAO, Managerial Cost Accounting Practices: Departments of Labor
and Veterans Affairs, GAO-05-1031T (Washington, D.C.: Sept. 21, 2005).
[36] Section 1706(a) of Title 38 charges the VA Secretary with
designing, establishing, and managing the provision of medical care "to
promote cost-effective delivery of health care services in the most
clinically appropriate setting." 38 U.S.C. § 1706(a). Sections 1703 and
8153 of Title 38 grant the VA Secretary authority to contract for
services when necessary to fulfill VA's responsibility under section
1706(a).
[37] 38 U.S.C. § 8110(a)(5).
[38] This can be found in the Joint Explanatory Statement, Oct. 1, 1981
(127 Cong. Rec. S22,704 at 22,713).