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Testimony: 

Before the Subcommittee on Health, Committee on Veterans' Affairs, 
House of Representatives: 

United States Government Accountability Office:
GAO: 

For Release on Delivery: 
Expected at 10:00 a.m. EDT:
Tuesday, June 9, 2009: 

VA Health Care: 

Overview of VA's Capital Asset Management: 

Statement of Mark L. Goldstein, Director: 
Physical Infrastructure: 

GAO-09-686T: 

GAO Highlights: 

Highlights of GAO-09-686T, a report to Subcommittee on Health, 
Committee on Veterans' Affairs, House of Representatives. 

Why GAO Did This Study: 

Through its Veterans Health Administration (VHA), the Department of 
Veterans Affairs (VA) operates one of the largest integrated health 
care systems in the country. In 1999, GAO reported that better 
management of VAs large inventory of aged capital assets could result 
in savings that could be used to enhance health care services for 
veterans. In response, VA initiated a process known as Capital Asset 
Realignment for Enhanced Services (CARES). Through CARES, VA sought to 
determine the future resources needed to provide health care to our 
nations veterans. 

This testimony describes (1) how CARES contributes to VHAs capital 
planning process, (2) the extent to which VA has implemented CARES 
decisions, and (3) the types of legal authorities that VA has to manage 
its real property and the extent to which VA has used these 
authorities. The testimony is based on GAOs body of work on VAs 
management of its capital assets, including GAOs 2007 report on VAs 
implementation of CARES (GAO-07-408). 

What GAO Found: 

The CARES process provides VA with a blueprint that drives VHAs 
capital planning efforts. As part of the CARES process, VA adapted a 
model to estimate demand for health care services and to determine the 
capacity of its current infrastructure to meet this demand. VA 
continues to use this model in its capital planning process. The CARES 
process resulted in capital alignment decisions intended to address 
gaps in services or infrastructure. These decisions serve as the 
foundation for VAs capital planning process. According to VA 
officials, all capital projects must be based on demand projections 
that use the planning model developed through CARES. 

VA has started implementing some CARES decisions, but does not 
centrally track their implementation or monitor the impact of their 
implementation on its mission. VA is in varying stages (e.g., planning 
or construction) of implementing 34 of the major capital projects that 
were identified in the CARES process and has completed 8 projects. Our 
past work found that, while VA had over 100 performance measures to 
monitor other agency programs and activities, these measures either did 
not directly link to the CARES goals or VA did not use them to 
centrally monitor the implementation and impact of CARES decisions. 
Without this information, VA could not readily assess the 
implementation status of CARES decisions, determine the impact of such 
decisions, or be held accountable for achieving the intended results of 
CARES. VA has recently created the CARES Implementation Working Group, 
which has identified performance measures for CARES and will monitor 
the implementation and impact of CARES decisions in the future. 

VA has a variety of legal authorities available, such as enhanced-use 
leases, sharing agreements, and others, to help it manage real 
property. However, legal restrictions and administrative- and budget-
related disincentives associated with implementing some authorities 
affect VAs ability to dispose and reuse property in some locations. 
For example, legal restrictions limit VAs ability to dispose of and 
reuse property in West Los Angeles and Sepulveda. Despite these 
challenges, VA has used these legal authorities to help reduce 
underutilized space (i.e., space not used to full capacity). In 2008, 
we reported that VA reduced underutilized space in its buildings by 
approximately 64 percent from 15.4 million square feet in fiscal year 
2005 to 5.6 million square feet in fiscal year 2007. While VAs use of 
various legal authorities likely contributed to VAs overall reduction 
of underutilized space since fiscal year 2005, VA does not track the 
overall effect of using these authorities on space reductions. Not 
having such information precludes VA from knowing what effect these 
authorities are having on reducing underutilized or vacant space or 
knowing which types of authorities have the greatest effect. According 
to VA officials, VA will institute a system in 2009 that will track 
square footage reductions at the building level. 

What GAO Recommends: 

GAO is not making recommendations in this testimony, but has previously 
made a number of recommendations regarding VAs capital asset 
management. VA is at various stages of implementing those 
recommendations. 

View [hyperlink, http://www.gao.gov/products/GAO-09-686T] or key 
components. For more information, contact Mark L. Goldstein at (202) 
512-2834 or goldsteinm@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

We appreciate the opportunity to testify on the Department of Veterans 
Affairs' (VA) management of its capital assets. As you know, VA 
operates one of the largest health care systems in the country. VA, 
through its Veterans Health Administration (VHA), provided health care 
to almost 5.5 million veterans in 2008.[Footnote 1] To support its 
mission, VA has a large inventory of real property--including over 150 
medical centers and over 900 outpatient and ambulatory care clinics. 
However, many of VA's facilities were built more than 50 years ago and 
are not well suited to providing accessible, high-quality, cost- 
effective health care in the 21st century. In 1999, we reported that 
with better management of its large, aged capital assets, VA could 
significantly reduce the funding used to operate and maintain 
underused, unneeded, or inefficient properties.[Footnote 2] We further 
noted that the savings could be used to enhance health care services 
for veterans. Thus, we recommended that VA develop market-based plans 
for realigning its capital assets. In response, VA initiated a process 
known as Capital Asset Realignment for Enhanced Services (CARES)--a 
comprehensive, long-range assessment of its health care system's 
capital asset requirements. The CARES process included nine distinct 
steps and required the time and expertise of many VA officials at the 
departmental and network levels.[Footnote 3] (See table 1.) 

Table 1: Steps of the CARES Process: 

Step 1: 
VA officials at the departmental and network level develop market areas 
and submarkets as the planning units for analyzing veterans' needs. 

Step 2: 
VA officials at the departmental level conduct market analyses of 
veterans' health care needs using standardized forecasts of enrollment 
and service needs and actuarial data. 

Step 3: 
VA officials at the departmental level identify planning initiatives 
that addressed apparent gaps between supply and demand in resources for 
each market area. 

Step 4: 
VA officials at the Network level consider different alignment 
alternatives and develop specific plans for individual markets that 
addressed all the planning initiatives identified by VA officials at 
the departmental level. 

Step 5: 
The Under Secretary of Health uses the market plans to prepare a Draft 
National CARES Plan (DNCP) and recommendations. 

Step 6: 
The Secretary of Veterans Affairs appoints a commission composed of non-
VA executives to make recommendations to the Secretary to accept, 
present alternatives to, or reject the recommendations contained in the 
DNCP. 

Step 7: 
The Secretary of Veterans Affairs decides whether to accept, reject, or 
modify the commission's recommendations concerning the DNCP. 

Step 8: 
Network officials implement the Secretary's decisions. 

Step 9: 
VA officials at the departmental level refine and incorporate CARES 
planning initiatives into the annual strategic planning cycle. 

Source: VA. 

[End of table] 

According to VA, the CARES process was a onetime major initiative. 
However, its lasting result was to provide a set of tools and processes 
that allow VA to continually determine the future resources needed to 
provide health care to our nation's veterans. In May 2004, the 
Secretary stated that implementing CARES decisions will require an 
additional investment of approximately $1 billion per year for at least 
the next 5 years, with substantial infrastructure investments then 
continuing for the indefinite future, to modernize VA's aging 
infrastructure. Although CARES will require substantial investment, the 
Secretary noted that not proceeding with CARES would require funding to 
maintain or renovate obsolete facilities and would leave VA with 
numerous redundant, outmoded, or poorly located facilities. The 
Secretary further stated that through the CARES process, VA had 
developed more complete information about the demand for VA health care 
and a more comprehensive assessment of its capital assets than it had 
ever done before. The Secretary noted that this information, along with 
the experience gained through conducting CARES, positioned VA to 
continue to expand the accuracy and scope of its planning efforts. 

In my statement today, I will discuss (1) how CARES contributes to 
VHA's capital planning process, (2) the extent to which VA has 
implemented CARES decisions, and (3) the types of legal authorities 
that VA has to manage its real property and the extent to which VA has 
used its authorities to reduce underutilized and vacant property. My 
comments are based on our extensive body of work on VA's management of 
its capital assets, including recent reviews of VA's implementation of 
CARES and management of real property, as well as updated information 
from VA officials.[Footnote 4] 

Background: 

Over the past decade, VA's system of health care for veterans has 
undergone a dramatic transformation, shifting from predominantly 
hospital-based care to primary reliance on outpatient care. As VA 
increased its emphasis on outpatient care rather than inpatient care, 
it was left with an increasingly obsolete infrastructure, including 
many hospitals built or acquired more than 50 years ago in locations 
that are sometimes far from where veterans live. 

To address its obsolete infrastructure, VA initiated its CARES process-
-the first comprehensive, long-range assessment of its health care 
system's capital asset requirements since 1981. CARES was designed to 
assess the appropriate function, size, and location of VA facilities in 
light of expected demand for VA inpatient and outpatient health care 
services through fiscal year 2022. Through CARES, VA sought to enhance 
outpatient and inpatient care, as well as special programs, such as 
spinal cord injury, through the appropriate sizing, upgrading, and 
locating of VA facilities. Table 2 lists key milestones of the CARES 
process. 

Table 2: Key CARES Milestones: 

Date: February 2002; 
Milestone: VA announced the results of a pilot CARES study; 
Description: The pilot study assessed current and future use of health 
care assets in the three markets of Network 12, which includes parts of 
five states: Illinois, Indiana, Michigan, Minnesota, and Wisconsin. It 
resulted in decisions to realign health care services and renovate or 
dispose of several buildings consistent with VA's mission and community 
zoning issues. 

Date: August 2003; 
Milestone: VA Under Secretary for Health presented the DNCP; 
Description: The Under Secretary's DNCP included recommendations about 
health care services and capital assets in VA's remaining 74 markets. 
These recommendations reflected input from managers of VA's health care 
networks. 

Date: February 2004; 
Milestone: An independent CARES Commission issued recommendations; 
Description: An independent 16-member commission appointed by the 
Secretary of Veterans Affairs issued recommendations to the Secretary 
based on its review of the DNCP and related documents and information 
obtained through public hearings, site visits, public meetings, written 
comments from veterans and other stakeholders, and consultations with 
experts. 

Date: May 2004; 
Milestone: VA Secretary announces the CARES decisions; 
Description: The Secretary based his decisions on a review of the CARES 
Commission's recommendations. 

Date: January 2005; 
Milestone: CARES follow-up studies; 
Description: VA awarded a contract for additional studies at 18 VA 
facilities. These studies included evaluating outstanding health care 
issues, developing capital plans, and determining the best use for 
unneeded VA property consistent with VA's mission and community zoning 
issues. 

Date: May 2008; 
Milestone: CARES follow-up studies; 
Description: All 18 studies are completed. 

Source: GAO analysis of VA data. 

[End of table] 

We have previously reported that a range of capital asset alignment 
alternatives were considered throughout the CARES process, which 
adheres to capital planning best practices.[Footnote 5] Moreover, there 
was relatively consistent agreement among the DNCP prepared by VA, the 
CARES Commission appointed by the VA Secretary to make alignment 
recommendations, and the Secretary as to which were the best 
alternatives to pursue. Although the Secretary tended to agree with the 
CARES Commission's recommendations, the extent to which he agreed 
varied by alignment alternative. In particular, the Secretary always 
agreed with the commission's recommendations to build new facilities, 
enter into enhanced use leases, and collaborate with the Department of 
Defense and universities, but was less likely to agree with the CARES 
Commission's recommendations to contract out or close facilities. The 
decisions that emerged from the CARES process will result in an overall 
expansion of VA's capital assets. According to VA officials, rather 
than show that VA should downsize its capital asset portfolio, the 
CARES process revealed service gaps and needed infrastructure 
improvements. We also reported that a number of factors shaped and in 
some cases limited the range of alternatives VA considered during the 
CARES process. These factors included competing stakeholder interests; 
facility condition and location; veterans' access to facilities; 
established relationships between VA and health care partners, such as 
DOD and university medical affiliates; and legal restrictions. 

The challenge of misaligned infrastructure is not unique to VA. We 
identified federal real property management as a high-risk area in 
January 2003 because of the nationwide importance of this issue for all 
federal agencies. We did this to highlight the need for broad-based 
transformation in this area, which, if well implemented, will better 
position federal agencies to achieve mission effectiveness and reduce 
operating costs. But VA and other agencies face common challenges, such 
as competing stakeholder interests in real property decisions. In VA's 
case, this involves achieving consensus among such stakeholders as 
veterans service organizations, affiliated medical schools, employee 
unions, and communities. We have previously reported that competing 
interests from local, state, and political stakeholders have often 
impeded federal agencies' ability to make real property management 
decisions. As a result of competing stakeholder interests, decisions 
about real property often do not reflect the most cost-effective or 
efficient alternative that is in the interest of the agency or the 
government as a whole but instead reflect other priorities. In 
particular, this situation often arises when the federal government 
attempts to consolidate facilities or otherwise dispose of unneeded 
assets.[Footnote 6] 

CARES Process and Modeling Tools Drive VHA's Capital Planning Efforts: 

Through the CARES process, VA gained the tools and information needed 
to plan capital investments. As part of the CARES process, VA modified 
an actuarial model that it used to project VA budgetary needs. 
According to VA, the modifications enabled the model to produce 20-year 
forecasts of the demand for services and provided for more accurate 
assessments of veterans' reliance on VA services, capacity gaps, and 
market penetration rates.[Footnote 7] The information provided by the 
model allowed VA to identify service needs and infrastructure gaps, in 
part by comparing the expected location of veterans and demand for 
services in years 2012 through 2022 with the current location and 
capacity of VA health care services within each network. In addition to 
modifying the model, VA conducted facility condition assessments on all 
of its real property holdings as part of the CARES process. These 
assessments provided VA information about the condition of its 
facilities, including their infrastructure needs. VA continues to use 
the tools developed through CARES as part of its capital planning 
process. For example, VA conducts facility condition assessments for 
each real property holding every 3 years on a rotating basis. In 
addition, VA uses the modified actuarial model to update its workload 
projections each year, which are used to inform the annual capital 
budget process. 

The CARES process serves as the foundation for VHA's capital planning 
efforts. The first step in VHA's capital budget process is for networks 
to submit conceptual papers that identify capital projects that will 
address service or infrastructure gaps identified in the CARES process. 
[Footnote 8] The Capital Investment Panel, which consists of 
representatives from each VA administration and staff offices, reviews, 
scores, and ranks these papers. The Capital Investment Panel also 
identifies the proposals that will be sent forward for additional 
analysis and review, and may ultimately be included as part of VA's 
budget request. According to VA officials, all capital projects must be 
based on the CARES planning model to advance through VHA's capital 
planning process. On the basis of CARES-identified infrastructure needs 
and service gaps, VA identified more than 100 major capital projects in 
37 states, the District of Columbia, and Puerto Rico.[Footnote 9] In 
addition to these projects, the CARES planning model identified service 
needs and infrastructure gaps at other locations throughout the VA 
system. The model is updated annually to reflect new information. 

VHA's 5-year Capital Plan outlines CARES implementation and identifies 
priority projects that will improve the environment of care at VA 
medical facilities and ensure more effective operations by redirecting 
resources from the maintenance of vacant and underutilized buildings to 
investments in veterans' health care. In VA's fiscal year 2010 budget 
submission, VA requested about $1.1 billion to fund 12 VHA major 
construction projects and about $507 million for VHA minor construction 
projects. 

Some CARES Decisions Implemented, but Additional Information Needed to 
Fully Assess Status and Impact of Decisions: 

VA has begun implementing some CARES decisions. Specifically, VA is 
currently in varying stages (e.g., planning or construction) of 
implementing 34 of the major capital projects that were identified in 
the CARES process. Eight major capital CARES projects are complete. 

Although VA is moving forward with the implementation of some CARES 
decisions, we previously reported that a number of VA officials and 
stakeholders, including representatives from veteran service 
organizations and local community groups, view the implementation 
process as too lengthy and lacking transparency.[Footnote 10] For 
instance, stakeholders in Big Spring, Texas, noted that it took almost 
2 years for the Secretary to decide whether to close the facility. 
During this period, there was a great deal of uncertainty about the 
future of the facility. As a result, there were problems in attracting 
and retaining staff at the facility, according to network and local VA 
officials. We also previously reported that a number of stakeholders we 
spoke with indicated that the implementation of CARES decisions has 
been influenced by competing stakeholders' interests--thereby 
undermining the process.[Footnote 11] In its February 2004 report, the 
CARES Commission also noted that stakeholder and community pressure can 
act as a barrier to change, by pressuring VA to maintain specific 
services or facilities. 

In 2007, we reported that VA does not use, or in some cases does not 
have, performance measures to assess its progress in implementing CARES 
or whether CARES is achieving the intended results. Performance 
measures allow an agency to track its progress in achieving intended 
results. Performance measures can also help inform management decision 
making by, for example, indicating a need to redirect resources or 
shift priorities. In addition, performance measures can be used by 
stakeholders, such as veterans' service organizations or local 
communities, to hold agencies accountable for results. Although VA has 
over 100 performance measures to monitor other agency programs and 
activities, these measures either do not directly link to the CARES 
goals or VA does not use them to centrally monitor the implementation 
and impact of CARES decisions.[Footnote 12] We also reported that VA 
lacked critical data, including data on the cost of and timelines for 
implementing CARES projects and the potential savings that can be 
generated by realigning resources. 

Given the importance of the CARES process, we previously recommended 
that VA develop performance measures for CARES. Such measures would 
allow VA officials to monitor the implementation and impact of CARES 
decisions as well as allow stakeholders to hold VA accountable for 
results. In responding to our recommendation, VA created the CARES 
Implementation Monitoring Working Group. This working group has 
identified performance measures for CARES and the group will monitor 
the implementation and impact of CARES decisions. 

VA Has A Variety of Legal Authorities to Manage Real Property, But Does 
Not Track How Using Them Contributes to the Reduction in Underutilized 
Property: 

VA has a variety of legal authorities available to help it manage real 
property. These authorities include enhanced-use leases (EUL), sharing 
agreements, and outleases. (See table 2 for descriptions of these 
authorities.) VA uses these authorities to help reduce underutilized 
and vacant property. For example, in 2005, in Lakeside (Chicago), 
Illinois, VA reduced its underutilized property at the medical center 
by nearly 600,000 square feet by using its EUL authority with 
Northwestern Memorial Hospital. VA also uses these authorities to 
generate financial benefits. For example, the VA Greater Los Angeles 
Healthcare System enters into a number of sharing agreements with the 
film industry. VA officials told us that these agreements are typically 
temporary arrangements--sometimes lasting a few days--during which film 
production companies use VA facilities to shoot television or movie 
scenes. According to VA officials, these agreements generate roughly $1 
million to $2 million a year. 

Table 3: Major Types of Authorities Available to VA: 

Authority: Enhanced-use leases (EUL); 38 U.S.C.  8161-8169; 
Definition: VA leases underutilized or vacant property to a public or 
private entity for up to 75 years if the agreement enhances the use of 
the property or results in an improvement of services to veterans in 
the network in which the property is located. The EUL shall be for fair 
consideration, and lease payments may be monetary or be made for in- 
kind consideration, such as construction, repair, or remodeling of 
department facilities; providing office, storage, or other usable 
space; or for services, programs, or facilities that enhance services 
to veterans; 
Proceeds: Proceeds generated from the EUL are used to pay for expenses 
incurred by VA in connection with the EUL and can be used for any 
expense incurred in the development of future EULs. Any remaining funds 
are to be deposited in the VA Medical Care Collections Fund. At the 
discretion of the VA Secretary, proceeds also may be deposited into 
construction major project and construction minor project accounts to 
be used for construction, alterations, and improvements of any medical 
facility. 

Authority: Sharing agreements; 38 U.S.C.  8151-8153; 
Definition: VA may enter into sharing agreements to provide the use of 
VHA space (including parking, recreational facilities, and vacant land) 
for the benefit of veterans or nonveterans in exchange for payment or 
services if VA's resources would not be used to their maximum effective 
capacity and would not adversely affect the care of veterans. Sharing 
agreements do not convey an interest in real property and can be 
entered into for up to 20 years, with the initial term not to exceed 5 
years; 
Proceeds: Proceeds generated from sharing agreements are to be credited 
to the applicable department medical appropriation of the facility that 
furnished the space. 

Authority: Outlease; 38 U.S.C.  8122; 38 U.S.C.  2412; 
Definition: VA's outlease-related authorities include the following: 
Outlease: VA may lease real property to public or private interests 
outside of VA for up to 3 years, or up to 10 years for a National 
Cemetery Administration (NCA) property. Lease payments may be made for 
maintenance, protection, or restoration of the property as part of the 
consideration of the lease; License: Gives a nonfederal party 
permission to enter upon and do a specific act or series of acts upon 
the land without possessing or acquiring any estate therein. A license 
can be revoked at any time; Permit: Gives another federal agency 
permission to enter upon and do a specific act or series of acts upon 
the land without possessing or acquiring any estate therein. The permit 
can be revoked at any time; 
Proceeds: Proceeds generated from outleases of VHA space, minus 
expenses for maintenance, operation, and repair of buildings leased for 
building quarters, are deposited into the Department of the Treasury as 
miscellaneous receipts. Proceeds generated from outleases of NCA 
property are to be deposited into the NCA Facilities Operation Fund and 
are available for costs incurred by NCA for operations and maintenance 
of NCA property. Proceeds generated from licenses and permits are 
deposited into the Department of the Treasury. 

Source: GAO. 

[End of table] 

However, legal restrictions associated with implementing some 
authorities affect VA's ability to dispose of and reuse property in 
some locations. For example, legal restrictions limit VA's ability to 
dispose of and reuse property in West Los Angeles and North Hills 
(Sepulveda) California. The Cranston Act of 1988 precluded VA from 
taking any action to dispose of 109 of 388 acres in the West Los 
Angeles medical center and 46 acres of the Sepulveda ambulatory care 
center.[Footnote 13] In 1991, when EUL authority was provided to VA, VA 
was prohibited from entering into any EUL relating to the 109 acres at 
West Los Angeles unless the lease was specifically authorized by law or 
for a childcare center.[Footnote 14] The Consolidated Appropriations 
Act of 2008 expanded the EUL restrictions to include the entire West 
Los Angeles medical center.[Footnote 15] The Consolidated 
Appropriations Act of 2008 also prohibits VA from declaring as excess 
or otherwise taking action to exchange, trade, auction, transfer, or 
otherwise dispose of any portion of the 388 acres within the VA West 
Los Angeles medical center. 

Budgetary and administrative disincentives associated with some of VA's 
available authorities may also limit VA's ability to use these 
authorities to reduce its inventory of underutilized and vacant 
property. For example: 

* VA cannot retain revenue that it obtains from outleases, revocable 
licenses, or permits; such receipts must be deposited in the Department 
of the Treasury.[Footnote 16] VA has said that, except for EUL 
disposals, restrictions on retaining proceeds from disposal of 
properties are a disincentive for VA to dispose of property.[Footnote 
17] 

* In 2004, VA was authorized until 2011 to transfer real property under 
its jurisdiction or control and to retain the proceeds from the 
transfer in a capital asset fund for property transfer costs, including 
demolition, environmental remediation, and maintenance and repair 
costs.[Footnote 18] In our previous work, we reported several 
administrative and oversight challenges with using capital asset funds. 
[Footnote 19] Moreover, VA officials told us that this authority has 
significant limitations on the use of any funds generated by disposal. 
For example, VA officials we spoke with reported that the capital asset 
fund is too cumbersome to be used, and VA does not have immediate 
access to the funds because they have to be reappropriated before VA 
can use them. 

* The maximum term for an outlease, according to VHA law, is 3 years; 
according to VA officials, this time limit can discourage potential 
lessees from investing in the property. 

* Implementing an EUL agreement can take a long time. According to VA 
officials, EULs are a relatively new tool, and every EUL is unique and 
involves a learning process. In addition, VA officials commented that 
the EUL process can be complicated. According to VA officials, the 
average time it takes to implement an EUL can range generally from 9 
months to 2 years. The officials noted that land due diligence 
requirements (such as environmental and historic reviews), public 
hearings, congressional notification, lease drafting, negotiation, and 
other phases contribute to the length of the overall process. VA has 
taken actions to reduce the time it takes to implement an EUL 
agreement, but despite changes to streamline the EUL process, some 
officials stated that it is still time consuming and cumbersome. 

* VA can dispose of underutilized and vacant property under the 
McKinney-Vento Act to other federal agencies and programs for the 
homeless.[Footnote 20] However, VA officials stated that disposing of 
property under the McKinney-Vento Act also can be time-consuming and 
cumbersome.[Footnote 21] According to VA officials, the process can 
average 2 years. Under this law, all properties that the Department of 
Housing and Urban Development deems suitable for use by the homeless go 
through a 60-day holding period, during which the property is 
ineligible for disposal for any other purpose. Interested 
representatives of the homeless submit to the Department of Health and 
Human Services (HHS) a written notice of their intent to apply for a 
property for homeless use during the 60-day holding period. After 
applicants have given notice of their intent to apply, they have up to 
90 days to submit their application to HHS, and HHS has the discretion 
to extend the time frame if necessary. Once HHS has received an 
application, it has 25 days to review, accept, or decline the 
application. Furthermore, according to VA officials, VA may not receive 
compensation from agreements entered into under the McKinney-Vento Act. 

Despite these challenges, VA has used these legal authorities to help 
reduce its inventory of unneeded space. In 2008, we reported that VA 
reduced underutilized space (i.e., space not used to full capacity) in 
its buildings by approximately 64 percent from 15.4 million square feet 
in fiscal year 2005 to 5.6 million square feet in fiscal year 2007. 
[Footnote 22] Although the number of vacant buildings decreased over 
the period, the amount of vacant space remained relatively unchanged at 
7.5 million square feet. We estimated VA spent $175 million in fiscal 
year 2007 operating underutilized or vacant space at its medical 
facilities.[Footnote 23] 

While VA's use of various legal authorities, such as EULs and sharing 
agreements, likely contributed to VA's overall reduction of 
underutilized space since fiscal year 2005, VA does not track the 
overall effect of using these authorities on its space reductions. 
Without such information, VA does not know what effect these 
authorities are having on its effort to reduce underutilized or vacant 
space or which types of authorities have the greatest effect. We 
concluded that further reductions in underutilized and vacant space 
will largely depend on VA developing a better understanding of why 
changes occurred and what impact these agreements had. Therefore, we 
recommended in our 2008 report that VA track, monitor, and evaluate 
square footage reductions and financial and nonfinancial benefits 
resulting from new agreements at the building level by fiscal year in 
order to better understand the usefulness of these authorities and 
their overall effect on VA's inventory of underutilized and vacant 
property from year to year.[Footnote 24] The officials said that 
tracking financial benefits will require a real property cost 
accounting system which VA is in the process of developing. According 
to VA officials, VA will institute a system in June 2009 that will 
track square footage reductions at the building level, but the system 
will not track financial benefits at this level. 

Mr. Chairman, this concludes my prepared statement. I would be pleased 
to respond to questions from you or other Members of the Subcommittee. 

GAO Contact and Staff Acknowledgments: 

For further information on this statement, please contact Mark L. 
Goldstein at (202) 512-2834 or goldsteinm@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this statement. Individuals making key 
contributions to this testimony were Nikki Clowers, Hazel Gumbs, Edward 
Laughlin, Susan Michal-Smith, and John W. Shumann. 

[End of section] 

Footnotes: 

[1] VHA is primarily responsible for VA's health care delivery to the 
veterans enrolled for VA health care services and operates the majority 
of VA's capital assets. 

[2] GAO, VA Health Care: Capital Asset Planning and Budgeting Need 
Improvement, [hyperlink, http://www.gao.gov/products/GAO/T-HEHS-99-83] 
(Washington, D.C.: Mar. 10, 1999). 

[3] VA's health care delivery system is divided into 21 health care 
delivery networks. For example, one network serves veterans in Alabama, 
Georgia, and South Carolina. 

[4] GAO, VA Health Care: Capital Asset Planning and Budgeting Need 
Improvement, [hyperlink, http://www.gao.gov/products/T-HEHS-99-83] 
(Washington, D.C.: Mar. 10, 1999); GAO, VA Health Care: VA Should 
Better Monitor Implementation and Impact of Capital Asset Alignment 
Decisions, [hyperlink, http://www.gao.gov/products/GAO-07-408] 
(Washington, D.C.: Mar. 21, 2007); GAO, VA Health Care: Additional 
Efforts to Better Assess Joint Ventures Needed, [hyperlink, 
http://www.gao.gov/products/GAO-08-399] (Washington, D.C.: Mar. 28, 
2008); and GAO, Federal Real Property: Progress Made in Reducing 
Unneeded Property, but VA Needs Better Information to Make Further 
Reductions, [hyperlink, http://www.gao.gov/products/GAO-08-939] 
(Washington, D.C.: Sept. 10, 2008). These performance audits and our 
updated work were conducted in accordance with generally accepted 
government auditing standards. 

[5] [hyperlink, http://www.gao.gov/products/GAO-07-408]. 

[6] GAO, High-Risk Series: Federal Real Property, [hyperlink, 
http://www.gao.gov/products/GAO-03-122] (Washington, D.C.: January 
2003) and GAO, Federal Real Property: Progress Made Toward Addressing 
Problems, but Underlying Obstacles Continue to Hamper Reform, 
[hyperlink, http://www.gao.gov/products/GAO-07-349] (Washington, D.C.: 
April 2007). 

[7] We did not evaluate the reliability of the model or its 
projections. 

[8] CARES conceptual papers are created at the network level and 
provide a detailed description of the project, the problem the project 
will address, and other relevant information. 

[9] The term "major capital project" refers to a project for the 
construction, alteration, or acquisition of a medical facility 
involving a total expenditure of more than $10 million. (See 38 U.S.C. 
8104.) In contrast, a "minor capital project" refers to the 
construction, alteration, or acquisition of a medical facility 
involving a total expenditure of $10 million or less. 

[10] [hyperlink, http://www.gao.gov/products/GAO-07-408]. 

[11] [hyperlink, http://www.gao.gov/products/GAO-07-408]. 

[12] Officials from the Office of Asset Enterprise Management told us 
that they had information on the status of CARES projects that were 
included in the 5-year capital plan, but that they did not track the 
status of all CARES decisions. 

[13] P.L. No. 100-322, Section 421(b)(2), 102 Stat. 487, 553 (1988). 

[14] 38 U.S.C.  8162(c). 

[15] P.L. No. 110-161, Section 224(a), 121 Stat. 1844, 2272 (2007). 

[16] 38 U.S.C.  8122. 

[17] 38 U.S.C.  8164. 

[18] 38 U.S.C.  8118. 

[19] GAO, Capital Financing: Potential Benefits of Capital Acquisition 
Funds Can Be Achieved through Simpler Means, [hyperlink, 
http://www.gao.gov/products/GAO-05-249] (Washington, D.C.: Apr. 8, 
2005). 

[20] VA properties that are leased to another party under an EUL are 
not considered to be unutilized or underutilized for purposes of the 
McKinney-Vento Act (see 38 U.S.C.  8162). 

[21] We have reported elsewhere on this process. See GAO, Federal Real 
Property: Most Public Benefit Conveyances Used as Intended, but 
Opportunities Exist to Enhance Federal Oversight, [hyperlink, 
http://www.gao.gov/products/GAO-06-511] (Washington, D.C.: June 21, 
2006). 

[22] See [hyperlink, http://www.gao.gov/products/GAO-08-939]. The 
underutilized square footage numbers that we report are different from 
those that VA reports. Our analysis only included underutilized square 
feet, whereas when VA measures its rate of utilization, it adds 
together underutilized square feet and overutilized square feet 
(additional square feet needed at a facility). 

[23] GAO developed this estimate because VA does not track the cost of 
operating underutilized and vacant building space at the building level 
and has not developed a reliable method for doing so. 

[24] [hyperlink, http://www.gao.gov/products/GAO-08-939]. 

[End of section] 

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