Federal Real Property:
Government's Fiscal Exposure from Repair and Maintenance Backlogs Is Unclear
GAO-09-10: Published: Oct 16, 2008. Publicly Released: Nov 17, 2008.
In 2003, GAO designated federal real property as a high-risk area. In 2007, GAO reported that real-property-holding agencies and the administration had made progress toward managing their real property, but underlying problems, such as backlogs in repair and maintenance, still existed and six agencies reported having over $1 billion in repair and maintenance backlogs. Owning real property creates a fiscal exposure for the government from the expectation that agencies will incur future maintenance and operations costs. GAO was asked to (1) describe how six agencies estimate their repair and maintenance backlogs, (2) determine how these agencies manage their backlogs and the expected future changes in these backlogs, and (3) identify how backlogs have affected operations at some sites. GAO reviewed agency documents, interviewed officials, and visited two sites at each of the six agencies.
The six agencies that GAO reviewed all periodically assess the condition of their assets to identify needed repairs and maintenance but then use different methods to define and estimate their repair and maintenance backlogs. As a result, the agencies' estimates are not comparable. Three of the six agencies--the Departments of Energy (DOE), the Interior (DOI), and the National Aeronautics and Space Administration (NASA)--defined their backlogs as work that was identified to correct deficiencies. A fourth agency, the Department of Veterans Affairs (VA), also defined its backlog as work identified to correct deficiencies, but VA's backlog included only work on systems, such as mechanical and plumbing systems, found to be in poor or critical condition. The General Services Administration (GSA) and the Department of Defense (DOD) both did not track a backlog. Instead, GSA calculated its reinvestment liability--the cost of repairs and maintenance needed now and in the next 10 years. DOD assigned a quality rating to each facility which was based on the ratio of repair costs to the asset's value. The backlog estimates do not necessarily reflect the costs the agencies expect to incur to repair and maintain assets essential to their missions or to avert risks to their missions. For example, these estimates could understate an agency's backlog because they are based on industry-standard costs, or could overstate an agency's backlog because they include inactive assets that are not essential to the agency's mission or may be demolished. The six agencies GAO reviewed generally manage their backlogs as part of their overall real property management and expect the size of their future backlogs to increase. Agencies focus on maintaining and repairing real property assets that are critical to their missions and have processes to prioritize maintenance and repair items based on the effects those items may have on their missions, regardless of whether the items are considered part of the backlogs. For example, VA officials told us that their first priority is to perform maintenance and repairs at places that directly affect patient care, such as operating rooms. Agencies are using strategies such as demolishing assets that are no longer needed to reduce their overall backlogs. However, agency officials generally expect their backlogs to increase as the federal portfolio of real property continues to age and construction costs increase. At the six agencies GAO reviewed, officials have managed their facility repairs and maintenance to minimize the impact of their backlogs on their operations. Officials said that postponing repairs and maintenance generally leads to higher operating and maintenance costs and short-term inconveniences, but they have managed the risks so that the agencies can continue to accomplish their missions. For example, maintenance costs increase when a roof that is due for replacement is repeatedly patched rather than replaced. While several officials said their maintenance staffs have been able to limit the impact of backlogs on operations, they cautioned that there is a real potential for an incident to adversely affect an agency's mission. At one site GAO visited, a multimillion-dollar piece of equipment could have been damaged by a leak from an air conditioning system if it had not been covered with a tarp.
Recommendation for Executive Action
Status: Closed - Implemented
Comments: In 2008, we reviewed six agencies and found processes in place for the agencies to periodically assess the condition of their assets--processes that the agencies also generally used to identify repair and maintenance backlogs for their assets. However, the agencies differed in how they conducted these condition assessments and how they define and estimate their repair and maintenance backlogs. This variation is not unexpected because, according to Office of Management and Budget (OMB) officials, the Federal Real Property Profile (FRPP)--the inventory system for the federal real property portfolio created by the Federal Real Property Council (FRPC) and overseen by OMB--was purposefully vague in defining repair needs so agencies could use their existing data collection and reporting processes. Thus, the information is not comparable across agencies. Also, the information can neither be totaled to obtain a government-wide estimate nor used to understand the government's potential fiscal exposure associated with its real property repair and maintenance backlogs. To provide a realistic estimate of the government's fiscal exposure resulting from repair and maintenance backlogs, we recommended that OMB, in conjunction with FRPC and in consultation with the Financial Accounting Standards Advisory Board (FASAB), explore the potential for developing a uniform reporting requirement in the FRPP that would capture the government's fiscal exposure related to real property repair and maintenance. Subsequently, in 2011, FASAB, as supported by OMB and in coordination with other federal agencies, amended existing standards for financial reporting of deferred repairs and maintenance to establish uniformity across reporting agencies. In the process of amending these standards, OMB considered whether to establish similar definitions of deferred repair and maintenance pertaining to data that agencies provide to the FRPP. While OMB does not plan to change FRPP reporting requirements related to agencies' repair and maintenance needs, the standardization of financial reporting of deferred repairs and maintenance provides decision makers with improved information on the government's fiscal exposure from repairing and maintaining its real property that better positions them to address future costs.
Recommendation: To provide a realistic estimate of the government's fiscal exposure resulting from repair and maintenance backlogs and minimize the potential for duplicative reporting requirements, the Deputy Director for Management, Office of Management and Budget, in conjunction with the Federal Real Property Council (FRPC) and in consultation with Federal Accounting Standards Advisory Board (FASAB), should explore the potential for developing a uniform reporting requirement in the FRPP that would capture the government's fiscal exposure related to real property repair and maintenance. Such a reporting requirement should include a standardized definition of repair and maintenance costs related to all assets that agencies determine to be important to their mission and therefore capture the government's fiscal exposure related to its real property assets.
Agency Affected: Executive Office of the President: Office of Management and Budget