The Transformational Fund has been marinating for five years and is ready to supplement the agency’s IT spending.
The Veterans Affairs Department is asking Congress for fewer dollars to spend on IT systems in 2022 but plans to supplement that request from a fund that has been filling up over the last five years.
The VA 2022 budget request asks for $4.84 billion for IT systems, down 0.7% from the $4.88 billion enacted in 2021. However, VA officials plan to use at least $670 million from the Recurring Expenses Transformational Fund to supplement IT spending, bringing the total projected spending for 2022 to $5.5 billion, up from $4.9 billion in 2021.
The Transformational Fund was created in the 2016 appropriations bill as a working capital fund, with unused discretionary dollars funneled into the account to be used at a future date on IT systems and related infrastructure. VA has been filling that fund for the last five years, unable to touch it, by law, until fiscal 2022. [This fund was created before passage of the Modernizing Government Technology Act, which established avenues for similar working capital funds to be set up across government.]
The budget documents do not state how much has been deposited into the Transformational Fund. However, during a hearing before the House Veterans Affairs’ Subcommittee on Technology Modernization, VA Chief Financial Officer Jon Rychalski told lawmakers the agency transfers $500 million to $1 billion annually into the fund, trending more toward the higher end of that range.
The money deposited in the fund “mostly comes from contracts that were awarded that came in under cost, in some cases money that was not obligated on contracts,” he said, adding that the Veterans Health Administration has been the biggest contributor.
The VA budget documents break down the $670 million into three pots:
- $477.5 million for the Infrastructure Readiness Program, which upgrades IT infrastructure at VA medical centers ahead of deployments of the new electronic health record system.
- $122.9 million for enhancements to the Financial Management Business Transformation program.
- $69.6 million for modernization and sustainment of human resources systems.
While the 2022 budget request includes $670 million from the Transformational Fund for IT programs, Rychalski said the agency might spend even more from that fund in the coming year.
“It is possible we will have additional flexibility in this account to invest even more,” he told Congress.
The budget request also includes another $150 million from the fund for “minor construction projects,” bringing the total to at least $820 million.
“We sort of have a fence around what we can use it for,” Larry Davis, VA executive director for IT budget and finance, said during the hearing.
Primarily, the funds are meant to target IT infrastructure and related needs around health care delivery, Davis said, adding the department is looking at all potential legal uses for the fund going forward.
Lawmakers were skeptical of how the funding will be used, particularly in future years.
“I am concerned that modernization of IT assets and the critical upgrade of VA’s financial system are not included in the base budget request,” Technology Modernization Subcommittee Chair Frank Mrvan, D-Ind., said during the hearing. “The Transformational Fund is an excellent supplement, but funding levels fluctuate on a yearly basis.”
Mrvan, citing multiple Government Accountability Office reports of poor IT program management and multiple large, ongoing IT projects, was wary of authorizing appropriations that do not explicitly budget for these programs.
Subcommittee Ranking Member Matt Rosendale, R-Mont., also pushed for more specifics on how the fund will be used.
“There are about five pages of general discussion about the types of things this money may buy, but there is little to no detail about what equipment is being bought, how much is being bought, where it will be used and for what specific purpose it’s needed,” he said. “I need a lot more information about the Transformational Fund to be convinced it will be a reliable, productive funding source rather than an opaque, uncertain slush fund.”