Federal Real Property:
Authorities and Actions Regarding Enhanced Use Leases and Sale of Unneeded Real Property
GAO-09-283R: Published: Feb 17, 2009. Publicly Released: Mar 19, 2009.
Many federal agencies hold real property that they do not need, including property that is underutilized or excess. Such properties present significant potential risks to federal agencies because they are costly to maintain and could be put to more cost-beneficial uses or sold to generate revenue for the government. We first designated federal real property management as a high-risk area in January 2003 due to long-standing problems with underutilized and excess property, among other things. After our high-risk designation, President George W. Bush added real property management to the President's Management Agenda and directed that the Federal Real Property Profile (FRPP) be established as a comprehensive database of real property under the control and custody of executive branch agencies, with agencies required to report on their real property assets each year. The President also established a goal of disposing of $15 billion in unneeded real property assets by 2015 to encourage agencies to right-size their portfolios by eliminating unneeded property. Some federal agencies have been granted authorities to enter into enhanced use leases (EUL)--typically long-term agreements with public and private entities for the use of federal property, resulting in cash and/or in-kind consideration for the agency--or to retain the proceeds from the sale of real property. Given the large number of unneeded properties being held by the federal government, Congress asked that we review how agencies are using their disposal authorities. Therefore, we addressed (1) what authorities the 10 largest real property holding agencies have to enter into EULs and retain proceeds from the sale of real property; (2) the extent to which agencies with authority to retain proceeds sold real property and how they have used the proceeds; and (3) the relationship, if any, between agencies having the authority to enter into EULs or retain sales proceeds and the amount of real property that they retained or sold.
The 10 largest real property holding agencies have different authorities regarding EULs and retention of proceeds from the sale of real property. As of the end of fiscal year 2008, six agencies had both the authority to enter into EULs and sell and retain the proceeds from the sale of real property (Department Of Defense (DOD), General Services Administration (GSA), Department of State (State), United States Department of Agriculture's (USDA) Forest Service, United States Postal Services (USPS), and Veterans Affairs (VA); two agencies had EUL authority but no authority to retain proceeds from the sale of real property Department of Energy (DOE) and National Aeronautics and Space Administration (NASA); and three agencies had no authority either to enter into EULs or retain proceeds from the sale of real property (USDA, excluding the Forest Service; Department of the Interior (DOI); and Department of Justice (DOJ)). Authorities are agency-specific and include different provisions. For example, while VA is authorized to enter into EULs for "underutilized" or "unutilized" real property, DOD is authorized to enter into EULs only for "nonexcess" real property. In addition, while DOD, GSA, and VA have the authority to retain proceeds from the sale of real property, DOD (in some cases), GSA, and VA are required to follow several steps before possibly selling the property, including offering it to other federal agencies, eligible organizations that will use the property to assist the homeless, and other public benefit purposes. However, the Forest Service, State, and USPS sell real property and retain the proceeds without following these additional steps. Moreover, four agencies have the authority to retain proceeds from the sale of real property and use them without further congressional action (DOD in certain cases, the Forest Service, State, and USPS) while further congressional action is required before two agencies (VA for nonEUL property and GSA) may use the proceeds. The six agencies with authority to retain proceeds reported selling property to varying extents and using proceeds primarily to help manage their real property portfolios. Governmentwide data reported to the FRPP were not sufficiently reliable to quantify the extent to which these agencies sold real property. As a result, we were unable to use the FRPP to analyze the number of sales of real property by agencies with the authority to retain proceeds. However, the six agencies we contacted that have authority to retain proceeds from the sale of real property provided data on their net proceeds from the sale of real property during fiscal years 2006 and 2007, which ranged from $21 million to $541 million per agency. While some properties sold for tens of thousands of dollars, others sold for over $200 million. Agencies generally reported using the sales proceeds to manage their real property portfolios, such as rental of space, building operations, new construction and acquisition, maintenance, and repairs and operations.