NASA:

Enhanced Use Leasing Program Needs Additional Controls

GAO-07-306R: Published: Mar 1, 2007. Publicly Released: Mar 1, 2007.

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In 2003, the National Aeronautics and Space Administration (NASA) was authorized to demonstrate enhanced use leasing (EUL) at two centers, allowing the agency to retain the proceeds from leasing out underutilized real property and to accept in-kind consideration in lieu of cash for rent. NASA selected Ames Research Center and Kennedy Space Center for the demonstration program. The agency had requested that Congress extend this authority to additional NASA centers during formulation of the NASA Authorization Act of 2005. NASA's request was not granted. Instead, Section 710 of the NASA Authorization Act of 2005 (Public Law 109-155) directed GAO to review NASA's EUL program. We examined (1) the financial impact of the EUL authority on NASA and whether EUL revenue and other financial benefits would have been realized without the authority, (2) NASA's use of the authority and whether the arrangements made under the authority would have been made in the absence of the authority, and (3) what controls are in place to ensure accountability and transparency and to protect the government. The act also directed GAO to report back to the Congress by December 30, 2006. We presented our preliminary findings to Congress in December 2006. Because of Congress's interest in how NASA is implementing its EUL authority, we are enclosing the full briefing that supported that December presentation with this report, along with a summary of our findings and conclusions.

Although EUL authority provides NASA with increased flexibility in managing its real property, it also increases the need for effective controls and monitoring to ensure that the government's interests are protected. Without measures of effectiveness, criteria for determining best economic value, and adequate accounting controls and processes, it will be difficult for NASA to ensure that EUL is the best option for each instance in which EUL is used and that the purpose of the law providing NASA with EUL authority is met. In addition, when EUL funds and their use are not transparent within the agency's budget, congressional decision makers face a knowledge gap relative to monitoring NASA's EUL activities. Improved transparency would provide the Congress with a more complete basis for assessing NASA's wants and needs. If the EUL program is to be expanded, NASA needs to develop an agency wide policy that ensures accountability, protects the government, and provides transparency regarding the agency's EUL activities.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: Before NASA considers requesting that the Congress extend EUL authority to additional centers, the NASA Administrator should develop an agency wide EUL policy, based upon sound business practices and lessons learned from the demonstration centers, that establishes controls and processes to ensure accountability and protect the government's interests, including (1) criteria for determining that EUL represents the best economic value for the government, compared with other options, such as federal financing through appropriations or sale of the property; (2) measures of effectiveness for the EUL program, such as reductions in the square footage of underutilized property and in the dollar amount of deferred maintenance; and (3) accounting controls and processes to ensure accountability, such as an accounting system for tracking the value of in-kind consideration and an audit trail and documentation to readily support financial transactions.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: NASA concurred with our recommendation. In July 2007, in response to our recommendation, NASA issued an interim agency-wide policy that includes criteria for determining that EUL represents the best economic value for the government. For example, the policy requires that the business case for each EUL lease support the lease as the best economic value to the government and compare the use of EUL to other methods for managing the property, including status quo/underutilized, upgrade of the facility by modification or repair for NASA use, standby/mothball the facility, abandon the facility, and demolition of the facility. The policy also includes measures of effectiveness for the EUL program, including the amount of revenue received, the number of underutilized buildings leased under EUL, and the amount of revenue spent on facilities repair as a percent of the funds spent on repair of facilities at the NASA center. In May 2008, NASA issued a financial policy on EUL that provides for the value of in-kind consideration to be recorded and tracked within the agency's accounting system and stipulates that data--both for revenue and use of proceeds--shall be traceable to source documents recorded in the agency accounting system.

    Recommendation: If NASA receives expanded EUL authority, the agency should adopt mechanisms to keep the Congress fully informed of the agency's activity under EUL authority, including (1) identifying and quantifying the value of in-kind consideration arrangements and expenditures of EUL revenue in its annual EUL reports to the Congress, and (2)reporting the availability and use of EUL funds in the agency's operating plans.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: NASA concurred with our recommendation. In July 2007, in response to our recommendation, NASA issued an interim agency-wide policy that includes processes for identifying and quantifying the value of in-kind consideration under EUL authority and expenditures of EUL revenue in NASA's annual EUL reports to Congress. The policy requires that the centers maintain accurate records and report financial information, including cash rent received for each lease and expenditures from EUL rent received, to NASA Headquarters on a quarterly basis. In addition, the centers are to report annually (1) the value of in-kind consideration for each lease received in the preceding calendar year and (2) expenditures to cover the full costs to NASA in connection with each lease. The policy provides that the latter two items, plus cash consideration received in the preceding year and expenditures from the capital account, be included in NASA's annual EUL report to the Congress. The interim policy also includes processes for reporting the availability and use of EUL funds in the agency's operating plans. The policy provides that as a part of the yearly budget process, the NASA centers are to provide NASA Headquarters with their projection of EUL revenue and a proposed plan for spending the EUL revenue. The policy states that realistic forecasting of anticipated revenues and expenditures is critical in the submission of the agency's operating plan, which is the agency's plan for the execution phase of the budget process.

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