Enhanced use leasing of federal property works well for some agencies

As the Obama administration continues its efforts to dispose of unneeded federal properties, agencies can save money through “enhanced use leases” but only if cost reporting procedures are improved, the Government Accountability Office determined.

A study of four agencies’ offerings of enhanced leases -- which can facilitate mission-related activities while bringing in cash or in-kind payments -- found that the guidance provided by the Office of Management and Budget “does not specify what costs agencies should include in their EUL evaluations, resulting in variance among agencies,” GAO said.

The report, dated Dec. 19, 2012, but released on Friday, was requested by Sen. Tom Carper, D-Del., newly named chairman of the Homeland Security and Governmental Affairs Committee.

Enhanced use leases allow private or nonprofit groups to take out long-term leases on agency-owned properties for conversion to such projects as power plants, housing and health care facilities, office space and parking facilities. They have been deployed successfully by the State, Agriculture and Veterans Affairs departments and by NASA, though not all the costs to agencies are sufficiently factored into evaluations, GAO said.

Veterans Affairs and State, for example, do not consistently attribute related costs of consultants who administer the leases, and VA does not attribute various administrative costs that offset the leases’ benefits, the report said. “Without fully accounting for all [enhanced use lease] costs, agencies may overstate the net benefits of their [lease] programs."

Examples of enhanced leasing include State’s Hotel de Tallyrand in Paris; NASA’s Ames Research Center at Moffett Field in California’s Silicon Valley; Veterans Affairs leasing of a Vancouver, Wash., building to the Vancouver Housing Authority; and Agriculture’s leasing out of greenhouse space at the Beltsville, Md., Agriculture Research Center. The Beltsville arrangement “has allowed the agency to advance its mission of developing more efficient crops because the lessee conducts research at the [enhanced use lease] site directly linked to this goal,” GAO noted. Veterans Affairs, as an in-kind payment, received priority placement for veterans for all programs and services offered in the community-health building.

One reason for the imprecise cost reporting is that Veterans Affairs and the Congressional Budget Office disagree on the extent to which VA should account for the budget impacts for enhanced use leases that could include long-term government commitments, the auditors found. “VA has made multi-year commitments with certain [enhanced use leases] without fully reporting them in its budget,” the report said.

GAO recommended that OMB work with the four agencies to arrive at consistent reporting of costs. All the agencies responded to a draft of the report by saying they accept the recommendation.

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