Overseas Real Property:

State Department Needs to Improve Guidance and Records Management

GAO-14-769: Published: Sep 25, 2014. Publicly Released: Sep 25, 2014.

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David J. Wise
(202) 512-2834
wised@gao.gov

 

Michael J. Courts
(202) 512-8980
courtsm@gao.gov

 

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What GAO Found

GAO's analysis of the overseas real property portfolio of the Department of State (State) indicates that the overall inventory has increased in recent years. State reported that its leased properties, which make up about 75 percent of its inventory, increased from approximately 12,000 to 14,000 between 2008 and 2013. State's numbers of federally owned properties increased, but comparing the total number of owned properties from year to year can be misleading because State's method of counting these properties has been evolving over the past several years. Specifically, according to State officials, they have been revising their method for counting properties to produce more precise counts and to meet reporting guidance from the Office of Management and Budget (OMB), among others. For example, State began counting separately structural assets previously included as part of another building's assets, such as guard booths or perimeter walls, and consequently reported approximately 650 additional structural assets in fiscal year 2012 than in 2011, and approximately 900 more structures in 2013.

State officials told GAO that they consider many factors in managing real property; however, GAO found State's available data and documentation on management decisions were limited. State officials said that they work with overseas posts to identify and dispose of unneeded properties, primarily using factors in State's Foreign Affairs Manual ( FAM ) guidance. Such factors include identifying properties deemed obsolete or with excessive maintenance costs. State collects data on costs associated with unneeded properties identified for disposal, relying on posts to charge all such costs to a specific accounting code. The four posts GAO visited did not use this code consistently. For example, officials at one post charged some disposal costs to a routine maintenance account. Officials at the other posts with properties for sale used the code to charge all related disposal costs. GAO also found that other posts with unneeded properties identified for disposal in fiscal year 2013 had not charged expenses to this account. The guidance provided in the FAM for using this code does not detail the types of costs that can be charged. This omission raises questions about the extent to which posts use the code as State intends and the extent to which State receives accurate and comprehensive cost information about its unneeded properties. State, without accurate data on unneeded property, may not have the information it needs to make a decision about property offers when attempting to maximize revenue for property sales. Also, posts may not have sufficient funding for routine property maintenance if they use funds designated for this type of maintenance on unneeded property. GAO requested to review 202 files between fiscal year 2008 through 2013 on acquisitions (72), disposals (94), and leases (36), but was provided 90, as State told GAO that these files were not centrally located and too time consuming to find and provide during the time frame of our review. State provided most of what it considers “core” documents for the acquisition and disposal files, but these documents do not constitute all of the documentation listed in the FAM and OMB guidance. In addition, although State provided all 36 of the requested lease files, some documentation that State agreed to provide was missing for 30 of the 36 files. Without the missing files and documentation, it is unclear how efficiently and effectively State is managing its overseas real property.

Why GAO Did This Study

The Department of State (State) holds or leases about 70-million square feet of real estate in about 275 posts worldwide and has the authority to construct, acquire, manage, and dispose of real property abroad.

GAO was asked to review State's management of overseas real property. This report examines: (1) what is known about State's overseas real property inventory, and (2) what factors State considers in managing its overseas real property portfolio and to what extent it documents its decision-making process pertaining to real property.

GAO requested 202 files for all acquisitions, disposals, and major leases pertaining to State's management of its real property abroad for the period from 2008-2013. In addition, GAO interviewed State officials in headquarters and at four posts abroad, selected because they had (1) ongoing or recently completed embassy construction or renovation projects without property disposals, (2) properties reported as identified for disposal for multiple years without being disposed, and (3) both owned and leased properties. The results of the four case studies cannot be generalized for the purpose of this review.

What GAO Recommends

GAO recommends that the Secretary of State (1) clarify accounting code guidance for tracking expenses related to disposal of unneeded properties, and (2) take steps to collect and retain documents related to real property purchases, disposals, and leases in accordance with the FAM and OMB's guidance. State concurred with GAO's recommendations.

For more information, contact David J. Wise 202-512-2834 wised@gao.gov or Michael J. Courts at 202-512-8980 or courtsm@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Department of State holds or leases about 70-million square feet of real estate in about 275 posts worldwide and has the authority to construct, acquire, manage, and dispose of real property abroad. In 2014, GAO reported that State collects data on costs associated with unneeded properties identified for disposal, relying on posts to charge all such costs to a specific accounting code. The four posts GAO visited did not use this code consistently. For example, officials at one post charged some disposal costs to a routine maintenance account. Officials at the other posts with properties for sale used the code to charge all related disposal costs. GAO also found that other posts with unneeded properties identified for disposal in fiscal year 2013 had not charged expenses to this account. The guidance provided in State's Foreign Affairs Manual for using this code does not describe in detail the types of costs that can be charged to this account. This omission raises questions about the extent to which posts use the code as State intends and the extent to which State receives accurate and comprehensive cost information about its unneeded properties. Therefore, GAO recommended that State clarify accounting code guidance provided to posts related to the disposal of unneeded properties. In 2016, GAO confirmed that State has made revisions to both the decommissioning handbook and the decommissioning training that State provide to its Foreign Service Officers at individual posts to help clarify the appropriate accounting code that should be used for the disposal of excess properties. The revisions require Foreign Service Officers at individual posts to develop a detailed decommissioning plan which includes a line item breakdown of all associated disposal costs. This decommissioning plan at individual posts is then transmitted to State's Overseas Building Operations (OBO), which manages real property abroad, and OBO reimburses posts for these expenses. Presently, only a single accounting code is used for disposal-related expenses in State's accounting system. If needed, State can generate a report that tracks these expenses in detail. As a result, State has the ability to accurately track expenses for properties marked for disposal and collect more comprehensive real property data, which will enable State to make fully informed decisions when attempting to maximize revenue for property sales.

    Recommendation: To improve State's management of real property overseas and enhance State's accountability and ability to track real-property management decisions, the Secretary of State should clarify accounting-code guidance to the posts for tracking expenses related to disposal of unneeded properties.

    Agency Affected: Department of State

  2. Status: Closed - Implemented

    Comments: The Department of State (State) holds or leases about 70-million square feet of real estate in about 275 posts worldwide and has the authority to construct, acquire, manage, and dispose of real property abroad. In 2014, GAO reported that it requested to review 72 files between fiscal year 2008 through 2013 on acquisitions, but was provided 34, as State told GAO that these files were not centrally located and too time consuming to find and provide during the time frame of GAO's review. State provided most of what it considers core documents for acquisitions, but these documents did not constitute all of the documentation listed in State's Foreign Affairs Manual (FAM) and Office of Management and Budget (OMB) guidance, which directs State to retain these documents. For example, GAO found instances of acquisition files missing deeds, which were core documents State agreed to provide. Without the missing files and documentation, it is unclear whether State is consistently following its internal FAM and external OMB guidance, and how State officials made real property decisions. Therefore, GAO recommended that State take steps to ensure that documents related to real property acquisitions are prepared and retained in accordance with FAM and OMB guidance. In 2016, GAO confirmed that State developed and implemented a core document checklist to ensure that all documents related to real property acquisitions are collected and retained in accordance with FAM and OMB guidance. The checklist is designed to ensure that a complete set of transaction documents is maintained per the guidance. During the archiving process, State officials are to use the checklist to review each acquisition file for completeness, and confirm that all documents requiring endorsements have been signed by all parties. Once the archival processing of the documents is complete, the file is to be stored at State's official records repository for future reference. As an additional internal control mechanism, State also ensures that the inventory of documents provided during the year coincides with transactions cited on end of year transaction reports. As a result, State is in a better position to ensure that its real property acquisitions are in accordance with FAM and OMB guidance, and make an informed decision about such acquisitions.

    Recommendation: To improve State's management of real property overseas and enhance State's accountability and ability to track real-property management decisions, the Secretary of State should take steps to ensure that documents related to real property acquisitions are prepared and retained in accordance with FAM and OMB guidance.

    Agency Affected: Department of State

  3. Status: Closed - Implemented

    Comments: The Department of State (State) holds or leases about 70-million square feet of real estate in about 275 posts worldwide and has the authority to construct, acquire, manage, and dispose of real property abroad. In 2014, GAO reported that it requested to review 94 files between fiscal year 2008 through 2013 on disposals, but was provided 20 as State told GAO that these files were not centrally located and too time consuming to find and provide during the time frame of GAO's review. State provided most of what it considers core documents for disposals, but these documents did not constitute all of the documentation listed in State's Foreign Affairs Manual (FAM) and Office of Management and Budget (OMB) guidance, which directs State to retain. For example, GAO found instances of disposal files missing deposit slips, which were core documents State agreed to provide. Without the missing files and documentation, it is unclear whether State is consistently following its internal FAM and external OMB guidance, and how State officials made real property decisions. Therefore, GAO recommended that State take steps to ensure that documents related to real property disposals are prepared and retained in accordance with FAM and OMB guidance. In 2016, GAO confirmed that State developed and implemented a core document checklist to ensure that all documents related to real property disposals are collected and retained in accordance with FAM and OMB guidance. The checklist is designed to ensure that a complete set of transaction documents is maintained per the guidance. During the archiving process, State officials are to use the checklist to review each disposal file for completeness, and confirm that all documents requiring endorsements have been signed by all parties. Once the archival processing of the documents is complete, the file is to be stored State's official records repository for future reference. As an additional internal control mechanism, State also ensures that the inventory of documents provided during the year coincides with transactions cited on end of year transaction reports. As a result, State is in a better position to ensure that its real property disposals are in accordance with FAM and OMB guidance, and make an informed decision about such disposals.

    Recommendation: To improve State's management of real property overseas and enhance State's accountability and ability to track real-property management decisions, the Secretary of State should take steps to ensure that documents related to real property disposals are prepared and retained in accordance with FAM and OMB guidance.

    Agency Affected: Department of State

  4. Status: Closed - Implemented

    Comments: In 2014, we reported that the State Department (State) could not provide all the required documentation for 30 of the 36 requested lease files from 2008 to 2013 as required in their internal Foreign Affairs Manual (FAM) and by the Office of Management and Budget (OMB) guidance. We recommended that State take steps to ensure documents related to real property leasing are prepared and retained in accordance with FAM and OMB guidance. In 2016, GAO confirmed that State had developed core document checklists to accompany each lease to allow for archiving. The core document checklist will serve as a check-and-balance system to ensure that a complete set of transactional documents is provided, per FAM and OMB guidance. During the archival process, State reviews each document for completeness, and confirms that all documents requiring endorsements have been signed off by all parties. Once the archival processing of the documents is complete, the document set is stored in OBO's official records repository for future reference. As an additional internal control mechanism, State also checks that the inventory of documents provided during the year coincides with transactions cited on end of the year transaction reports. This step will allow State to ensure it is making cost-effective decisions about real property leases, and provide greater transparency on how State made real property leasing decisions. This accomplishment directly relates to GAO's high risk area focusing on the management of real property, including the federal government's overreliance on leased property.

    Recommendation: To improve State's management of real property overseas and enhance State's accountability and ability to track real-property management decisions, the Secretary of State should take steps to ensure that documents related to real property leases are prepared and retained in accordance with FAM and OMB guidance.

    Agency Affected: Department of State

 

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