Federal Real Property:

Progress Made in Reducing Unneeded Property, but VA Needs Better Information to Make Further Reductions

GAO-08-939: Published: Sep 10, 2008. Publicly Released: Sep 10, 2008.

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The Department of Veterans Affairs (VA) operates one of the largest healthcare-related real estate portfolios in the nation. However, many VA facilities are older and no longer well suited to providing care, leaving VA with millions of square feet of property it does not use to capacity (underutilized) or at all (vacant). VA has various legal authorities that allow it to dispose of such property. GAO was asked to identify (1) VA's progress in reducing underutilized or vacant property and how much VA spends operating the underutilized or vacant property it retains; (2) VA's use of its various legal authorities to reduce underutilized and vacant property and the extent to which VA tracks how these authorities contribute to reductions; and (3) the challenges VA faces in minimizing underutilized and vacant space and the strategies VA is using to address these challenges. To accomplish these objectives, GAO reviewed VA property data, and visited eight VA locations based on space utilization, use of authorities, and other factors. GAO also interviewed officials from various VA offices and stakeholders.

VA has made significant progress in cutting underutilized space in its buildings from 15.4 million square feet in fiscal year 2005 to 5.6 million square feet in fiscal year 2007, and although the number of vacant buildings decreased, the amount of vacant space remained relatively unchanged at approximately 7.5 million square feet. GAO estimated VA spent $175 million in fiscal year 2007 operating underutilized and vacant space at its medical facilities, where 98 percent of such space exists. 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. VA's use of various legal authorities such as enhanced-use leases and sharing agreements likely contributed to the overall reduction of underutilized space, but VA does not track the effect of these authorities. Their use provides VA with revenue and services. Revenue comes from such diverse sources as rent for space and money paid for using buildings as film sets, among other things. For example, at Fort Howard, Maryland, in 2006, VA entered into a new enhanced-use lease with a developer to build a retirement community where veterans are given priority for occupancy. However, the lack of building-level information about the extent to which these authorities reduce underutilized or vacant space or provide benefits such as revenue or services means that VA cannot track, monitor, or evaluate their impact or determine which authorities have the greatest effect from year to year. VA faces several challenges to minimizing underutilized and vacant space and is using strategies at some facilities to mitigate them. One challenge is location: VA officials reported difficulty finding entities interested in using underutilized or vacant property in areas with low property values. Another challenge is cost: many of VA's underutilized or vacant buildings are in poor condition and require an estimated $3 billion in repairs before they can be fully utilized. Finally, competing stakeholder interests and legal and budgetary limitations can further impede VA's efforts. To mitigate these challenges, individual VA locations have used strategies such as improving communication with veterans groups and other external stakeholders, obtaining support from internal stakeholders, and entering into public-private partnerships.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In our September 2008 report we estimated that VA spent about $481,000 each day on maintaining underutilized and vacant property. We also found that VA had not developed its own estimate and therefore did not know how much it was spending on maintaining underutilized and vacant property; money that could be better spent providing healthcare services to veterans. To provide VA with an accurate picture of what it spends annually to maintain these unneeded properties, and a benchmark from which to which to work in decreasing these costs, we recommended that VA develop an annual cost estimate. In response to the recommendation, VA has taken several actions. First, it analyzed over 5 years worth of data to determine the operating cost of buildings per square foot. It then evaluated specific vacant buildings to determine maintenance costs because VA believes that operating underutilized buildings is significantly different than operating vacant buildings. Finally, using this data, VA can calculate annual maintenance costs at the system wide as well as at the building level. VA now has a benchmark from which to work in decreasing the costs of maintaining vacant and underutilized property.

    Recommendation: To provide VA with an accurate picture of what it spends annually on maintaining underutilized and vacant property and a benchmark from which to work in decreasing these costs, the Secretary of Veterans Affairs should develop an annual cost estimate for how much it spends on underutilized and vacant property, so that the estimate is comprehensive, accurate, well-documented, and credible.

    Agency Affected: Department of Veterans Affairs

  2. Status: Closed - Implemented

    Comments: In September 2008, we found that the Department of Veterans Affairs (VA) did not collect or maintain comparable building-level data by fiscal year on building characteristics such as utilization, condition, and age, and therefore was unable to determine trends related to the reductions in underutilized and vacant space at the building level. We further reported that this information could help VA conduct analysis to prioritize assets based on their importance to mission and to identify assets for disposal. We therefore recommended that VA collect and maintain building-level data by fiscal year in order to correlate characteristics associated with underutilized and vacant buildings and identify unneeded assets. In response to our recommendation, in Fiscal Year 2009, VA implemented use of the "Business Intelligence Tool" a database that allows VA to collect building-level data by fiscal year for each of its properties. The implementation of this new database allows VA to track comparable building-level data by fiscal year on several building characteristics, including information on a building's condition, historical status, age, and utilization measure. As a result of this action, VA is able to complete detailed trend analysis of its vacant and underutilized properties to identify unneeded assets and to track reductions in underutilized and vacant space at the building level.

    Recommendation: To provide VA with a better understanding of the overall effect of various efforts on its underutilized and vacant property and to identify properties for disposal, the Secretary of Veterans affairs should collect and maintain building-level data by fiscal year in order to correlate characteristics associated with underutilized and vacant buildings, which may help to identify unneeded assets.

    Agency Affected: Department of Veterans Affairs

  3. Status: Closed - Implemented

    Comments: In September 2008, we found that the Department of Veteran Affairs did not track the extent to which its use of legal authorities, such as its authority to enter into Enhanced Use Lease (EUL) agreements, contributed to reductions in underutilized or vacant space. As a result, the cumulative effect of VA's use of these authorities was largely unknown. We therefore recommended that VA track, monitor, and evaluate square footage reductions and financial and non-financial benefits of new agreements as of fiscal year 2008. In fiscal year 2009, VA implemented use of the Business Intelligence Too which is a database that allows VA to collect several building-level data by fiscal year, including data related to existing EUL or other types of agreements. Further, the database also allows VA to track revenue associated with existing agreements, shared square footage, estimated costs to the government, and estimated cost avoidance to the government. According to VA officials, as a result of collecting this additional information, VA is able to measure monetary and other benefits resulting from the use of VA's legal authorities and the overall effect of its efforts to reduce underutilized and vacant property.

    Recommendation: To provide VA with a better understanding of the overall effect of various efforts on its underutilized and vacant property and to identify properties for disposal, the Secretary of Veterans affairs should track, monitor, and evaluate square footage reductions and financial and nonfinancial benefits when recording new agreements as of fiscal year 2008.

    Agency Affected: Department of Veterans Affairs

 

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