Report: Agencies making little progress in tracking real property

Two years after President Bush issued an executive order on reforming management of real property, federal agencies have made little progress in accounting for their holdings or ensuring they are aligned with needs and missions, according to congressional auditors.

In testimony prepared for a hearing held Monday (GAO-06-248T), Mark L. Goldstein, director of physical infrastructure issues at the Government Accountability Office, said that real property management continues to be a "high-risk area" for agencies.

"The government's vast and diverse portfolio of real property reflects an infrastructure based on the business model and technological environment of the 1950s," GAO auditors found. They reported that many government real property assets do not mesh with agencies' changing missions, and are therefore unnecessary.

Furthermore, upkeep and operating costs for empty buildings cost the government billions of dollars annually, while ownership of the buildings ties up financial resources that could be better utilized elsewhere, the auditors concluded. They cited data from GAO's 2003 report on the topic that found the Defense Department was spending an estimated $3 billion to $4 billion annually on maintenance for unneeded buildings.

Federal real property has come under close scrutiny only recently, with GAO noting it as a high-risk concern in January 2003. In February 2004, President Bush issued his executive order, which required agencies to develop inventories of their property assets and establish stronger management practices. The administration also added a Real Property Asset Management Initiative category to its quarterly management score card.

The Office of Management and Budget released its December 2005 score card last week, and Deputy Director for Management Clay Johnson noted at a press event that agencies had completed "what we think is the first systematic inventory ever" of federal real property, identifying $9 billion in assets that "we probably won't ever need" for disposal.

So far only the General Services Administration has achieved the coveted "green" ranking for real property management, while three of the fifteen agencies graded in that category remain at red, the lowest ranking on the traffic-light scale.

GAO auditors found that agencies lack many of the tools required to get a handle on their property holdings. "Current structures and processes may not be adequate to fully address the problems," the report stated.

"With the exception of DoD, federal departments have never had requirements to do this type of work before," said Ray Summerell, vice president for corporate development with VISTA, a contractor that has worked with Defense on base realignments and other property management issues. "So typically, they don't have good processes, good visibility into their asset holdings, or good reporting, in place."

More importantly, Summerell said, real property management has been unfunded, so managers have to find resources out of operating budgets to set up systems.

Another obstacle to eliminating unused buildings is that agencies typically see few incentives to address the problem, said Sen. Tom Coburn, R-Okla., chairman of the Senate Homeland Security and Governmental Affairs Subcommittee on Federal Financial Management, Government Information, and International Security, on Monday. "The statutory hoops an agency must jump through in order to get rid of property make it almost impossible to dump a property," Coburn said. An agency can only sell a building after offering it at below market rates to non-profit groups and state and local governments, he said, and in most cases the proceeds of such a sale must be turned over to the Treasury Department.

Summerell said agencies should focus not on the building's value, but on savings that come from avoiding upkeep costs. "If you're a large agency, and have 20 to 30 million square feet of space nationwide, if you can get 1 percent out of it, that's big money," he said.