This is the accessible text file for GAO report number GAO-06-1050 
entitled 'Interior's Land Appraisal Services: Actions Needed to Improve 
Compliance with Appraisal Standards, Increase Efficiency, and Broaden 
Oversight' which was released on September 29, 2006.

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GAO Highlights:

Highlights of GAO-06-1050, a report to the Subcommittee on Interior, 
Environment, and Related Agencies, Committee on Appropriations, House 
of Representatives.

Why GAO Did This Study:

To remedy decades of problems with its land appraisals, the Department 
of the Interior (Interior) in 2003 removed the land appraisal function 
from its land management agencies and consolidated them into the 
Appraisal Services Directorate (ASD). However, Congress and ASDís 
clients have expressed concern that ASDís appraisal services have 
become less efficient and effective than what previously existed. GAO 
was asked to assess (1) ASDís policies and procedures in ensuring 
compliance with appraisal standards, (2) ASDís ability to meet its 
customersí needs, and (3) the extent to which there are land appraisals 
under Interior for which ASD does not have oversight responsibility. To 
answer these objectives, we reviewed agency guidance, analyzed 
appraisal data, and used independent expert appraisers to assess 
compliance with standards.

What GAO Found:

Although the quality of appraisals has improved since ASDís inception, 
Interiorís appraisal policies and procedures do not fully ensure 
compliance with recognized appraisal standards. ASD appraisers perform 
appraisals and/or review appraisals performed by co-workers or 
contractors. Of 324 appraisals we evaluatedórepresenting 50 percent 
(nearly $3.2 billion) of the total value of the land appraised since 
ASDís inceptionó192 appraisals appeared to be in compliance with 
recognized appraisal standards. The remaining 132, however, did not 
meet standards primarily because (1) ASD appraisers appeared to not 
apply specialized skills needed to perform or review the appraisals of 
lands involving minerals, timber, and water rights; and (2) ASD review 
appraisers performed cursory reviews of appraisals and approved them 
without considering property characteristics that can increase the 
landsí value, such as the presence of roads. ASD also lacked 
standardized appraisal review procedures, which can provide greater 
assurance in the consistency of appraisal reviews, as well as assurance 
that appraisals meet recognized appraisal standards. Furthermore, ASD 
has not developed a mechanism, such as a compliance inspection program, 
for ensuring that its appraisals meet standards. Other federal agencies 
doing appraisals have developed compliance systems and used them 
successfully.

ASDís relationships with its client agencies are hampered by 
inefficient operations. ASD does not have a system for ensuring that it 
meets realistic time frames for appraisal delivery. This often occurs 
because ASD has no process for (1) establishing realistic, agreed-upon 
deadlines for completing appraisals; (2) balancing appraisal requests 
with other appraisal priorities; and (3) clarifying roles for obtaining 
information needed to complete appraisals. In addition, some ASD 
business practices impede efficient appraisal delivery, add costs, and 
result in organizational inefficiencies. For instance, ASD performs 
appraisals for lands that yield little revenue to the government when 
compared to the cost of doing the appraisal. Also, ASD has not found 
enough contract appraisers with federal experience to assist their 
workload and have, on occasion, had to use appraisers that were not in 
close proximity to the land being appraised, which increased appraisal 
costs.

When ASD was formed, it was not assigned responsibility for appraisals 
of land acquired under Interiorís grant-in-aid programs, even though 
the grant-in-aid land acquisition budget in fiscal year 2005 
represented 60 percent of Interiorís $240 million total for land 
acquisition. Under Interiorís grant-in-aid programs, many nonfederal 
entities receiving federal grant-in-aid funds from Interiorís Fish and 
Wildlife Service and National Park Service are not required to obtain 
ASD review of appraisals for land acquisitions. Instead, appraisal and 
review responsibilities typically remain with the grant recipient, such 
as a state agency. However, there are indications that appraisal 
mistakes are occurring, and some Interior grant expenditures for land 
acquisitions may be based on appraisals that do not meet standards.

What GAO Recommends:

We are making a number of recommendations to strengthen ASD appraisal 
services, such as establishing a compliance inspection program, taking 
steps to increase timeliness, and clarifying ASDís oversight of grant-
in-aid appraisals. 

In commenting on the draft report, Interior generally agreed with our 
findings and recommendations.

[hyperlink: http://www.gao.gov/cgi-bin/getrpt?GAO-06-1050.]

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Robin M. Nazzaro at (202) 
512-3841 or nazzaror@gao.gov.

[End of section.]

Contents:

Letter: 

Results in Brief: 
Background: 
Interiorís Appraisal Policies and Procedures Do Not Fully Ensure 
Compliance with Recognized Appraisal Standards: 
ASDís Client Relationships Are Hampered by Inefficient Operations: 
Interior Lacks Oversight of Appraisals under Some of Its Grant-in-Aid 
Programs:     
Conclusions: 
Recommendations: 
Agency Comments and Our Evaluation: 

Appendix I  Scope and Methodology: 
Appendix II  Comments from the Department of the Interior: 
Appendix III GAO Contact and Staff Acknowledgments: 

Tables:
Table 1: Land Appraisals (November 2003 through February 21, 2006) That 
Did Not Appear to Meet Standards, Compared with Total Appraisals 
Reviewed:            
Table 2: Independent Federal Review Requirements for Interiorís Grant-
in-Aid Programs: 

Figures: 
Figure 1: Examples of Past Reports Issued between 1987 and 2003, and 
Problems Found with Interior Agenciesí Land Acquisition, Exchange, and 
Appraisal Programs: 
Figure 2: Appraisal Checklist from the Uniform Appraisal Standards for 
Federal Land Acquisitions: 

Abbreviations:
ARRTS: Appraisal Request and Review Tracking System: 
ASD: Appraisal Services Directorate: 
BLM: Bureau of Land Management: 
FWS: Fish and Wildlife Service: 
NPS: National Park Service: 
USDA: U.S. Department of Agriculture: 

September 28, 2006:

The Honorable Charles H. Taylor:
Chairman:
The Honorable Norm D. Dicks:
Ranking Minority Member:
Subcommittee on Interior, Environment, and Related Agencies: 
Committee on Appropriations:
House of Representatives:

The Department of the Interior (Interior) has appraised more than 6.5 
million acres of land typically for purchase, sale, or exchange from 
November 2003 through May 2006, totaling more than $7 billion, for such 
purposes as providing recreational opportunities for the public, 
conserving critical wildlife habitat, and opening land to the 
development of energy and mineral resources. Before entering into these 
land transactions, Interior generally determines the market value of 
land using an appraisal.[Footnote 1] Prior to November 2003, appraisals 
for land transactions Interior's Bureau of Land Management (BLM), the 
Bureau of Reclamation (Reclamation), the Fish and Wildlife Service 
(FWS), and the National Park Service (NPS) were conducted by staffs 
reporting to realty managers in each of these management agencies. 
However, since 1987, our reports, in addition to others issued by 
Interior's Inspector General and the Appraisal Foundation,[Footnote 2] 
found that procedures used by BLM, FWS, and NPS did not comply with 
recognized appraisal standards.[Footnote 3] In one case, Interior's 
Inspector General reported that for a BLM land exchange, department 
officials negotiated away a substantial interest in potentially 
valuable resources and improperly valued other federal and state lands. 
According to the U.S. Office of Special Counsel, the BLM's own internal 
estimates showed that the federal government stood to lose between $97 
and $117 million on this exchange. In a different report on this 
exchange,[Footnote 4] the Appraisal Foundation concluded that 
appraisers at BLM lacked the institutional independence necessary to 
conduct objective appraisals and faced heavy pressure from their realty 
managers to conduct appraisals that would expedite land transactions. 
Interior's Inspector General's reports have reached similar conclusions 
about appraiser independence, and GAO reports have highlighted multiple 
cases of land transactions using misvalued land.

These findings brought considerable change in the way many Interior 
appraisals are carried out. After the Appraisal Foundation report on 
BLM's appraisal procedures was issued, officials in Interior formed a 
working group to determine whether problems similar to those found in 
BLM existed in the other land management agencies. The group concluded 
that a lack of appraiser independence and inconsistent application of 
appraisal standards were problematic within all four land management 
agencies. The group also concluded that past efforts to remedy 
appraisal problems, which typically included refining or augmenting 
program guidance, had proven ineffective because revised guidance did 
not address issues of appraiser independence. As a result, in November 
2003, Interior removed appraisers from the realty offices in each of 
the agencies and consolidated them in a new office, the Appraisal 
Services Directorate (ASD), reporting to the National Business Center. 
Interior primarily took this action to insulate appraisers from 
institutional pressure, having them report to, and receive performance 
evaluations from, other appraisers, rather than realty specialists 
responsible for completing land transactions within their respective 
land management agencies. ASD's appraisers have a dual responsibility: 
performing appraisals as well as reviewing appraisals performed by co- 
workers and contractors. In implementing the consolidation, Interior 
directed that the efficiency of appraisal delivery, including 
timeliness and costs, was not to be negatively affected.

In addition to consolidating most appraisal services, Interior also 
shifted administrative functions associated with appraisals-- 
previously conducted by each of the land management agencies realty 
offices--to other units within Interior. Contracting for land 
appraisals was one such function. Since ASD's inception, it has 
performed about 500 appraisals in-house per year and contracted more 
than 1,200 appraisals per year. Upon receipt of a contractor's 
completed appraisal, ASD reviews it for compliance with recognized 
appraisal standards. In this regard, choosing qualified contract 
appraisers is critical if ASD is to help ensure that appraisals meet 
federal standards, and that the federal government makes sound 
financial management decisions for land transactions. Given the 
significant reliance on contractors to conduct the appraisals, Interior 
officials decided to consolidate the functions for (1) awarding 
appraisal contracts, (2) paying the contract appraisers, and (3) 
billing the land management agency clients for the completed 
appraisals. These functions were placed within Interior's National 
Business Center--a fee-for-service organization--which has experience 
in financial management, acquisition services, procurement, and human 
resource operations.

Land management agencies also conduct land transactions through various 
grant-in-aid programs that are administered by offices other than their 
realty offices. Appraisals of these transactions are usually arranged 
by the nonfederal grant recipient, such as state or local governments. 
Interior's Inspector General has identified long-standing problems with 
appraisals conducted by non-federal partners, although not specifically 
with the grant-in-aid programs, including pressure on review appraisers 
to approve substandard appraisals. For example, between 1992 and 2001, 
eight Interior Inspector General's reports documented significant 
problems with appraisals conducted by non-federal partners, including 
incorrect valuations based on questionable property dimensions, flawed 
assumptions about the highest and best use[Footnote 5] of the land, and 
inaccurate comparable sales analyses. Specifically, in a 1992 
report,[Footnote 6] Interior's Inspector General found that there was 
little assurance that fair market values were accurately estimated 
because the bureaus did not follow established standards regarding the 
appraisal process. More recently, a September 2005 Inspector General 
report[Footnote 7] found that these problems still remain with 
appraisals conducted by Interior's non-federal partners.

Since ASD's inception, new problems have emerged. With the 
consolidation of appraisers from BLM, Reclamation, FWS, and NPS, each 
of which had unique appraisal procedures, realty managers have 
expressed concern about the possible inconsistency of appraisal 
quality. In addition, one realty specialist from NPS asserted that 
appraisal time frames have doubled from pre-ASD days. ASD officials, in 
response, claimed that realty specialists have unrealistic expectations 
regarding time frames, in part because the time frames they were used 
to under the previous system--when realty specialists had undue 
influence over the process--were inappropriately short. ASD officials 
also explained that time frames have been affected by new business 
practices--resulting from the consolidation of appraisal services-- 
over which they have no control. These disagreements have continued 
since ASD's inception.

In this context, you requested that we determine (1) the extent to 
which Interior's appraisal policies and procedures ensure compliance 
with recognized appraisal standards for appraisals conducted within 
ASD; (2) what, if anything, affects ASD's working relationships with 
its client agencies and its overall efficiency in providing appraisal 
services; and (3) the extent to which there are land appraisals under 
Interior for which ASD does not have responsibility.

To determine if Interior's appraisal policies and procedures are 
sufficient to ensure compliance with recognized appraisal standards, we 
retained appraisal experts to evaluate 324 of the 2,905 appraisals 
completed from ASD's inception through February 21, 2006, consisting of 
appraisals for land transactions involving land exchanges; land valued 
over $10 million; National Wildlife Refuge revenue-sharing; NPS 
acquisitions; and lands having minerals, timber, or water rights. These 
appraisals collectively represented 50 percent (nearly $3.2 billion) of 
the total value of the land appraised from ASD's inception through 
February 21, 2006. To determine what, if anything, affects the working 
relationships between ASD and its client agencies (and what affects 
ASD's overall efficiency in providing appraisal services), we assessed 
agreements between ASD and its client agencies that dictate the terms 
of ASD's service. We also analyzed timeliness data from Interior's 
Appraisal Request and Review Tracking System (ARRTS) and cost data from 
Interior's National Business Center. We also conducted structured 
interviews with ASD officials and interviewed realty specialists in the 
agencies ASD serves. To determine the extent to which there are land 
appraisals under Interior that ASD does not have the responsibility for 
overseeing, we identified Interior's grant-in-aid programs and 
appraisal requirements for each.

We assessed the reliability of the data provided by Interior and 
determined that these data were sufficiently reliable for the purposes 
of this report. A more detailed description of our scope and 
methodology is presented in appendix I. Our work was conducted in 
accordance with generally accepted government auditing standards, 
including an assessment of internal controls, from December 2005 
through August 2006.



Results in Brief:

Interior's appraisal policies and procedures do not fully ensure ASD's 
compliance with recognized appraisal standards, although consolidation 
has greatly improved the independence and objectivity of appraisals. 
ASD appraisers have the responsibility of either performing appraisals 
or reviewing those performed by co-workers or contractors. Of the 324 
appraisals our appraisal experts reviewed, 192, or about 60 percent of 
these, appeared to be in compliance with recognized appraisal 
standards. For the remaining 132, or 40 percent, however, ASD performed 
and/or approved appraisals that did not meet standards. For these 
appraisals, the federal government has limited assurance that the land 
it appraised for purchase, sale, or exchange, reflected market value. 
In 42 of these 132 appraisals, the property being appraised had unique 
characteristics, such as minerals, timber, or water rights, which 
require specialty appraisal skills. However, appraisers and reviewers 
either lacked or did not apply specialty skills needed to estimate the 
value for the unique characteristics--despite Interior's requirement 
that appraisers and reviewers have the knowledge necessary to perform 
and review appraisals, and apply proper skills in accordance with 
appraisal standards. In addition, in 90 of the 132 cases which did not 
require specialty skills, ASD review appraisers conducted cursory 
reviews of appraisals performed by co-workers or contractors. As a 
result, they approved appraised values that did not reflect key 
property characteristics, such as the presence of roads allowing access 
to properties, which can substantially increase a property's value. 
Information pertaining to these characteristics was included in the 
appraisal reports reviewed by ASD review appraisers. Appraisal review 
oversights were commonplace, however, because ASD has not developed 
standardized appraisal review procedures, which can provide greater 
assurance that appraisal reviews are consistent and that appraisals 
meet recognized standards. Consequently, review appraisers have 
discretion in deciding which appraisals should receive thorough or 
cursory reviews. Furthermore, ASD has not developed a mechanism, such 
as a compliance inspection program, for ensuring that the appraisals it 
approves meet recognized appraisal standards. Such a mechanism is used 
by other federal appraisal agencies, such as the Forest Service; this 
mechanism, among other things, helps to prevent (1) appraisals being 
performed by staff without proper skills and (2) cursory appraisal 
reviews.

ASD's working relationships with its client agencies and its efficiency 
in conducting appraisal services are hampered by inefficient 
operations. Specific examples include the following:

≤  ASD does not have a system to ensure that it meets realistic time 
frames for appraisal delivery. Timely appraisal delivery is critical to 
the success of the agencies' land acquisition and management goals-- 
agreements on land transactions between agencies and private landowners 
can fall apart if appraisals are not completed on a timely basis. 
Although customer-service agreements between ASD and its client 
agencies call for timely appraisal delivery, ASD does not have a 
process for establishing realistic or helpful deadlines for completing 
appraisals. Our analysis found that 2,520 (or 71 percent) of the 3,500 
completed appraisals in ASD's database missed their client-agency-set 
deadlines, with an average delay of about 4 months. In addition, 
because ASD has not developed a system of prioritizing each agency's 
respective appraisal requests or of responding to changing priorities 
to address emergency appraisal needs, ASD does not coordinate appraisal 
requests with client agencies' other appraisal priorities, which adds 
to appraisal delays. Finally, unclear roles and responsibilities for 
obtaining information needed to complete appraisals--such as property 
descriptions, land deeds, title information, and sales histories-- 
negatively impacts timely appraisal delivery. Without clearly defined 
roles and responsibilities for obtaining information, appraisals are 
often delayed--sometimes several months before being initiated.

≤  Likewise, several ASD business practices impede service delivery, 
add costs, and result in organizational inefficiencies. First, the 
contracting and billing functions add costs and time to appraisal 
delivery. Since Interior centralized contracting for appraisals in the 
National Business Center, contracts that, in the past, had been awarded 
within a few business days under each of the land management agencies' 
processes, now take on average about 10 days to be awarded, with many 
taking significantly more time. Second, ASD has not found enough 
contract appraisers with government experience to assist them in their 
substantial workload. Relying on contract appraisers without this 
experience can end up being costly and time consuming; therefore, ASD 
relies on a handful of reliable contractors who often are not located 
in close proximity to the land being appraised and, therefore, charge 
high fees to cover travel expenses. Finally, ASD appraises lands that 
yield little revenues in comparison to the costs of performing the 
appraisals. With the inception of ASD, land management agencies 
required some of these appraisals to be performed by ASD appraisers, 
which can cost the federal government several thousand dollars per 
appraisal, according to an ASD regional appraiser, because ASD requires 
appraisers to visit the remotely located sites. Many of these private 
rights-of-way, however, only yield $500 per year.

When ASD was formed, it was not assigned responsibility for appraisals 
of land acquired under Interior's grant-in-aid programs. The total land 
acquisition budget for these programs was nearly $140 million in fiscal 
year 2005, or 60 percent of Interior's $240 million appropriated land 
acquisition budget. While ASD was formed as an independent organization 
to ensure that appraisals meet federal standards, in eight of the nine 
FWS-and NPS-administered grant-in-aid programs we reviewed, nonfederal 
entities receiving grant-in-aid funds are not required to submit 
appraisals for ASD review. Instead, appraisal review responsibilities 
within grant-in-aid programs are largely the responsibility of the 
state and local grant recipients. However, grant managers for the only 
grant program we reviewed that requires ASD review told us that they 
recognize the value of obtaining an independent "check" to ensure that 
they do not offer more or less than market value. Despite inconsistent 
requirements for ASD review of grant-in-aid appraisals, Interior has no 
clear policy on why some grant-in-aid programs require federal review 
of land appraisals while others do not. Secretarial Order 3258, issued 
in December 2004, outlines ASD's role in reviewing appraisals for 
nonfederal parties. However, several ASD regional appraisers told us 
that the order does not define "nonfederal parties" and, therefore, it 
is not clear whether the order applies to grant recipients under the 
grant-in-aid programs. Further, two ASD regional appraisers stated that 
official clarification on whether Secretarial Order 3258 applies to 
grant recipients would be helpful.

We are making a number of recommendations designed to help resolve the 
compliance problems that persist, such as ensuring that ASD has (1) 
appraisers with specialized skills needed for some appraisals, (2) 
consistent appraisal review procedures, and (3) a periodic monitoring 
system for appraisals with a higher likelihood of noncompliance. We are 
also making recommendations to improve the accountability and 
efficiency issues that need to be addressed in order to build on the 
progress that ASD has made to date, including criteria for ensuring 
timely delivery of appraisals and the removal of some business 
practices that have added time and costs to appraisal delivery. 
Finally, we are also recommending that Interior clarify the terms of 
ASD's appraisal oversight in the review of grant-in-aid appraisals.

In commenting on a draft of this report, the Department of the Interior 
generally agreed with our findings and recommendations. It said that it 
welcomed the reports' intent to improve the overall Departmental 
appraisal process and services provided through ASD and that ASD will 
continue to strive to provide high quality valuations services. It also 
said that the recommendations, once implemented, will further 
strengthen how Interior performs real property appraisals and that it 
is dedicated to addressing the recommendations promptly. Interior also 
offered several suggestions for updating information in the report and 
for technical clarifications; we have incorporated these suggestions, 
as appropriate.

Background:

Interior's four land management agencies--BLM, FWS, NPS, and 
Reclamation--collectively manage nearly 450 million acres of parks, 
wilderness, forests, range, and other land. These land holdings 
comprise nearly one-fifth of the total area of the United States. 
Buying, exchanging, or leasing land is an integral part of these 
agencies' land management functions to, for example, better consolidate 
existing holdings or acquire land deemed important for public purposes. 
For several decades, these land transactions have generated 
considerable debate over how to balance, on federally managed lands, 
resource utilization (such as timber sales and minerals extraction) 
with resource protection and recreational use. Regardless of the 
decisions made about which lands to acquire or divest and for what 
purposes, however, Interior generally requires acquisitions to be based 
on market value.

Objective land appraisals are at the heart of establishing market 
value. Without objective appraisals, estimates of land values can be 
subjected to the machinations of buyers and sellers, each of whom may 
have a vested interest in deviating from market value in order to 
obtain a more favorable "price" or complete a transaction more quickly. 
In creating ASD, the Secretary of Interior required all of Interior's 
real estate appraisals to conform to the Uniform Appraisal Standards 
for Federal Land Acquisitions or the Uniform Standards of Professional 
Appraisal Practice--the two nationally recognized appraisal standards-
-which, when followed, help an appraiser to develop an objective and 
credible market-value estimate.

These appraisal standards require appraisers to identify a property's 
highest and best use. A property's highest and best use can be 
influenced by the presence of resources, such as minerals or timber 
(which typically indicates income-generating potential), as well as 
functioning structures, such as grain silos. It can also be influenced 
by legal restrictions, such as limitations to water rights, lack of 
property access, or easements that restrict types of development and 
could impact the property's value. Taking these characteristics into 
consideration, one approach appraisers use is to compare, to the 
subject property, other properties with similar characteristics that 
have recently been sold in the same (or similar) markets within a 
reasonable time period. Appraisers use these comparable sales to 
estimate the subject property's market value. Before appraisals are 
approved for agency use, however, they are reviewed by a review 
appraiser. Upon obtaining an opinion of market value from an appraiser, 
Interior staff generally cannot deviate from it when completing a land 
purchase, sale, or exchange with a nonfederal entity.

Since 1987, numerous audits and reviews have noted problems with 
Interior's ability to conduct appraisals that adhere to standards. For 
example, a 1998 Interior Inspector General's report on Nevada land 
exchanges involving BLM concluded that the federal government lost 
$18.2 million in three land exchanges because appraisers ignored 
relevant information and incorrectly identified the highest and best 
use of the property. The Inspector General concluded that these losses 
also occurred because the federal review of the appraisals--which is 
the final compliance check--were cursory and failed to comply with 
recognized appraisal standards, despite the fact that all relevant 
information was included in the appraisal reports to reach a correct 
conclusion of value.[Footnote 8] The October 2002 Appraisal Foundation 
report we cited earlier found the problems at BLM to be even more 
systemic: that appraisers lacked institutional independence, which 
manifested itself in inconsistent application of appraisal standards 
and resulted in a failure to assure objective and independent market- 
value opinions. Figure 1 provides examples of past reports issued 
between 1987 and 2003, and problems found with Interior agencies' land 
acquisition, exchange, and appraisal programs.

Figure 1: Examples of Past Reports Issued between 1987 and 2003, and 
Problems Found with Interior Agencies' Land Acquisition, Exchange, and 
Appraisal Programs:

[See pdf for image].

Source: GAO.

Upon establishing ASD, Interior officials created a formal appraisal- 
request process that relies exclusively on the ARRTS web-based 
application and automated database. ARRTS allows land-management agency 
realty specialists to electronically request an appraisal, specify its 
priority (low, routine, high, or emergency), and set a requested 
completion date. In addition, realty specialists can include, with the 
appraisal request, pertinent information necessary for the appraisal, 
including aerial maps, land title information, and legal descriptions. 
Upon receipt of a request, the relevant ASD regional appraiser assigns 
the appraisal project to an ASD appraiser, who will either undertake 
the appraisal or give it to a contractor, depending on the ASD 
appraiser's workload, the appraisal complexity, and other factors. When 
appraisals are contracted, ASD appraisers prepare statements of work 
and solicit bids from at least three certified appraisers. ASD 
appraisers send the bids they receive to the National Business Center's 
contracting office at Fort Huachuca, Arizona, (referred to hereafter as 
the "Southwest Branch") for the contract award phase. Upon completion 
of the appraisal, whether conducted in-house or by contract, an ASD 
review appraiser reviews the appraisal for compliance with applicable 
appraisal standards. Once the appraisal is deemed to meet the appraisal 
standards by the ASD review appraiser, the appraisal is then approved 
for agency use and sent to the requesting realty office.

At the time ASD was formed, officials in Interior's Office of Policy 
Analysis decided that associated administrative aspects of the 
appraisal function should be located, along with ASD, in the National 
Business Center. Thus, the appraisal contract management function was 
removed from the land management agencies and centralized at Interior's 
National Business Center's Southwest Branch. In addition, the National 
Business Center's Office of Budget and Finance inherited the 
responsibility for processing payment for contract appraisers. This 
office receives contractor invoices from The Southwest Branch and pays 
contractors out of the National Business Center's Working Capital Fund 
and, subsequently, seeks reimbursement from the land management 
agencies that requested the appraisals. According to officials in this 
office, to ensure that the land management agencies have the funds to 
reimburse Office of Budget and Finance, the agencies must obligate 
funds for the appraisal work prior to award of the contract.

In creating ASD, Interior concluded that a new independent function was 
needed; past efforts to remedy appraisal problems, which typically 
included refining or augmenting program guidance, did not address the 
independence issue and had therefore proved ineffective. However, 
Interior officials focused exclusively on appraisal problems within the 
realty divisions of the land management agencies, so appraisals for 
some land transactions remained with the land management agencies. For 
example, responsibility for appraisals of grant-in-aid acquisitions, 
which include giving federal funds to nonfederal agencies for acquiring 
critical wildlife habitat, remained within the land management 
agencies. Unless requested by the land management agencies, appraisals 
for acquisitions under the grant-in-aid programs are not reviewed by 
ASD.

Interior's Appraisal Policies and Procedures Do Not Fully Ensure 
Compliance with Recognized Appraisal Standards:

Interior's appraisal policies and procedures do not fully ensure that 
appraisals performed and reviewed by ASD appraisers comply with 
requirements set forth in the Uniform Standards of Professional 
Appraisal Practices and the Uniform Appraisal Standards for Federal 
Land Acquisitions, the two nationally recognized appraisal standards. 
While consolidating appraisal services into ASD has vastly improved the 
independence of appraisers and the objectivity of their products, some 
other problems identified in prior audits still remain, particularly 
with high-value appraisals and other complex appraisals completed by 
ASD.

ASD's appraisers have a dual responsibility: both to perform 
appraisals, and to review appraisals performed by co-workers and 
contractors. We evaluated, with the use of appraisal experts, 324 of 
the 2,905 appraisals completed under ASD from its inception in November 
2003 through February 21, 2006. We selected these 324 appraisals 
because they have characteristics similar to appraisals that did not 
meet the appraisal standards of previous audits. In addition, many of 
these appraisals are for complex properties and, in many instances, 
more difficult to appraise. In evaluating these appraisals, our 
appraisal experts found that 192 of the 324 appraisals, or about 60 
percent, appeared to be in compliance with recognized appraisal 
standards. In addition, our appraisal experts--who were familiar with 
appraisals produced by the Interior agencies prior to ASD's inception-
-stated that ASD's appraisals are a vast improvement over past 
appraisals. Our experts also believed that ASD's management has made 
improvements in normalizing appraisal practices for appraisers from 
four different agencies with four different land management objectives 
and land acquisition goals. Accordingly, these improvements appear to 
have prevented some appraisals with compliance problems from being 
used, such as in the following examples:

*  ASD reviewed an appraisal requested by FWS for 101 acres, including 
five mining claims, near St. George, Utah. The property was originally 
appraised for about $2 million by a contract appraiser. Upon review, 
ASD rejected the appraisal because the contract appraiser did not show 
that the buyers would have sufficient water rights to use the property 
for mining. ASD's review found that there were not sufficient water 
rights to support mineral production. Instead, ASD found that the 
highest and best use should be residential development, which resulted 
in an appraised value of $910,000--or over $1 million less than what 
the original appraisal identified. The property owner agreed to ASD's 
revised appraisal, according to the ASD Regional Appraiser.

*  ASD reviewed an appraisal requested by BLM in Natrona County, 
Wyoming, which involved placing a conservation easement and a public 
fishing easement on 335 acres. The easements were originally valued by 
a contract appraiser at about $1.7 million, but ASD found that the 
appraiser included mineral interests that were not owned by the private 
landowner, such as sand and gravel, in the estimated value. As a result 
of ASD's findings, the contract appraiser changed her opinion of value 
to $1.16 million, which was over $500,000 less than what the original 
appraisal had identified.

For the remaining 132 appraisals, or 40 percent of those our appraisal 
experts evaluated, however, ASD appraisers performed and/or reviewed 
and approved appraisals that did not meet recognized appraisal 
standards. According to ASD, a 40 percent noncompliance rate is well 
within industry norms for appraisal audits. Further, noncompliance with 
recognized appraisal standards does not necessarily mean that appraised 
value is incorrect, but it limits assurance that land the federal 
government appraised for purchase, exchange, or sale, reflected market 
value. Appraisals not meeting standards included 60 land exchanges and 
sales, 29 easements, 8 NPS acquisitions, and 28 revenue-sharing 
appraisals, which total slightly more than $1 billion in appraised 
value. Table 1 shows, by appraisal type, the total number of appraisals 
our appraisal experts reviewed (for the period November 2003 through 
June 2006) and the number, percentage, and total-dollar land value 
determined by the appraisals that did not appear to meet standards.

Table 1: Land Appraisals (November 2003 to June 2006) That Did Not 
Appear to Meet Standards, Compared with Total Appraisals Reviewed:

Appraisal type: Land exchanges and sales: Total: 147: Number and 
percentage of appraisals not meeting standards, and value of land 
covered by these appraisals; Number: 60; Percentage: 41%; Land value 
(in dollars):$943.6 million.

Appraisal type: Easements: Total: 63; Number and percentage of 
appraisals not meeting standards, and value of land covered by these 
appraisals; Number: 29; Percentage: 46; Land value (in dollars): 22.3 
million.

Appraisal type: NPS acquisitions; Total: 47; Number and percentage of 
appraisals not meeting standards, and value of land covered by these 
appraisals; Number: 8; Percentage: 17; Land value (in dollars): 13.3 
million.

Appraisal type: Revenue-sharing: Total: 44; Number and percentage of 
appraisals not meeting standards, and value of land covered by these 
appraisals; Number: 28; Percentage: 64; Land value (in dollars): 7.2 
million.

Appraisal type: Other [A]: Total: 23; Number and percentage of 
appraisals not meeting standards, and value of land covered by these 
appraisals; Number: 7; Percentage: 30; Land value (in dollars): 62.3 
million.

Appraisal type: Total: Total: 324; Number and percentage of appraisals 
not meeting standards, and value of land covered by these appraisals; 
Number: 132; Percentage: 41%; Land Value (in dollars): $1.05 billion[B].

Source: GAO analysis of ARRTS appraisal data.

Note a: Other appraisals include acquisitions for BLM and Reclamation, 
as well as NPS permits.

Note b: Not all of the $1.05 billion was necessarily at risk. To 
determine what portion of this amount was at risk of being incorrectly 
valued would necessitate that the land be re-appraised.

[End of table].

The Uniform Standards of Professional Appraisal Practices require an 
appraiser to have sufficient knowledge and experience to complete an 
appraisal assignment competently. For 42 of the 132 appraisals that did 
not appear to meet standards (a total of nearly $119 million in 
appraised value), appraisers who performed appraisals and reviewed the 
appraisals did not have or apply specialized skills, such as those 
needed to assess the value of minerals, timber, or water rights present 
on the property--all factors that typically impact land values. As a 
result, while performing or reviewing the appraisals, the appraisers 
did not consider how the presence of these key characteristics affected 
the properties' values:

*  In February 2004, ASD appraised a BLM parcel of land, as well as a 
parcel of private land, for potential exchange; the land exchange 
totaled 841 acres. Because the land contained substantial amounts of 
timber, its value should have been considered by the appraiser in 
performing or reviewing the appraisal. However, we found that proper 
timber valuations were not used in the appraisal. Therefore, ASD's 
conclusion that the properties being exchanged totaled about $2.3 
million is not supported by the appraiser's analysis and is potentially 
incorrect.

*  Between March 2005 and May 2005, ASD appraised two privately owned 
land parcels, totaling 154 acres, for potential exchange with BLM. The 
ASD appraiser assumed that water was available on each parcel, which 
can significantly increase the lands' value. However, the appraisal 
report did not resolve whether water was available on the property. 
Consequently, ASD's conclusion that the parcels' combined appraised 
value of nearly $1 million may not be supported. The private landowner 
did not accept the terms of the exchange because he believed the 
appraisal value was too low, especially in an appreciating real estate 
market, according to the ASD review appraiser for this land transaction.

If the appraisal assignment cannot be performed competently, the 
Uniform Standards of Professional Appraisal Practice also requires the 
appraiser to add to the appraisal report a description of his/her lack 
of knowledge and/or experience, as well as the steps taken to correctly 
complete the assignment. In reviewing these appraisal reports, our 
experts also found that the reports did not disclose the appraiser's 
lack of specialized experience or the steps to address the needs of the 
assignment, as required by the standards.

When ASD was formed, officials within Interior's Office of Policy 
Analysis decided to transfer into ASD all appraisers whose primary role 
was to perform appraisals consistent with recognized appraisal 
standards. In so doing, the officials decided that it was not necessary 
to transfer appraisers with some specialized skills, such as staff with 
minerals assessment expertise, into ASD. As a result, most ASD 
appraisers have only general appraisal skills. Interior officials 
believe that this offered a greater degree of flexibility in assigning 
appraisers to a wide variety of cases. However, the Uniform Appraisal 
Standards for Federal Land Acquisitions state that appraisers must have 
specialized training and experience to properly understand and apply 
the proper methodologies for estimating the market value of properties 
with minerals. A BLM geologist, who is licensed to perform minerals 
assessments, told us that without certified minerals appraisers, ASD 
cannot conduct adequate appraisals or reviews of minerals reports. He 
emphasized that mineral properties are complex, and that a specialist 
is needed to ensure proper valuations of those properties. He also said 
that an appraiser unfamiliar with minerals and their properties may 
have difficulty understanding some of the technical data used in 
determining their values.

In addition to requirements that appraisers have the proper training 
for appraisals needing specialized skills, the Uniform Appraisal 
Standards for Federal Land Acquisitions also require that, when 
reviewing appraisals, a review appraiser must determine whether the 
appraisal's opinions of value are adequately supported. Despite this 
requirement, our appraisal experts found that for 90 of the 132 
appraisals that did not meet standards--totaling about $930 million in 
appraised value--the review appraisers approved appraisals without 
using adequate analysis to support the conclusion of value. For 
example, ASD review appraisers conducted cursory reviews of these 
appraisals and, as a result, approved appraised values that did not 
reflect key property characteristics, such as the presence of roads 
allowing access to properties, which can substantially increase a 
land's value. According to the experts we employed to review these 
appraisals, sufficient information pertaining to these characteristics 
were, in most cases, included in the appraisal reports that ASD 
appraisers reviewed. This information should have triggered concerns 
about the adequacy of the appraisers' estimates of land values:

*  In September 2004, ASD appraised about 10,100 acres outside Dillon, 
Montana, for placement of two conservation easements by FWS. Our 
appraisal experts found that the ASD reviewer accepted insufficient 
analysis of comparable sales in the appraisal report. For example, the 
easements on the sales chosen by the appraiser appeared not to be 
comparable to the subject property, according to the appraisal experts 
we retained, but the ASD reviewer overlooked these shortcomings and 
approved the appraisal of $6.8 million for both easements. FWS acquired 
one easement for $2.9 million, and is close to acquiring the second, 
for $3.9 million, which will likely happen later in 2006.

*  Between December 2005 and January 2006, ASD appraised multiple 
parcels totaling 64 acres near Roosevelt, Utah, for placement of an 
easement by Reclamation to install a pipeline. Our appraisal experts 
found that the ASD reviewer accepted the appraisal despite the fact 
that the appraiser overlooked the presence of utility and access 
easements--which may impact the land's value. Although this information 
was available in the appraisal report, the ASD reviewer did not require 
corrections to the appraisal and approved the appraised easement value 
of $41,700 to be used by Reclamation to purchase the easement. 
Reclamation acquired the easement in June 2006.

*  In June 2005, ASD appraised 100 acres for sale by BLM in Douglas 
County, Nevada. Our appraisal experts found that the appraiser's 
analysis of market conditions did not comply with standards, but the 
ASD reviewer accepted the appraiser's report anyway. For example, 
information in the appraisal report showed that lands with similar 
characteristics (comparables) had increased in value about 5 percent 
per month, over the previous year. However, the appraiser did not 
account for appreciation between the date of appraisal and the dates 
that the comparables sold--a period of about 1 year. Also, the ASD 
reviewer approved the appraisal without requiring this information to 
be reconciled. The appraiser estimated the parcel's value to be $10 
million, but it sold for $16.1 million several months later.

ASD does not have a system for ensuring that its appraisal reviews are 
performed consistently. As a result, ASD review appraisers exercise 
significant discretion in how they perform appraisal reviews--sometime 
producing results that deviate from recognized appraisal standards. 
ASD's review appraisers are primarily those that performed appraisal 
reviews under each of their respective land management agencies within 
Interior. Several ASD regional appraisers, who were previously 
appraisers in the Interior agencies, told us that the quality of 
appraisal reviews differs dramatically between review appraisers from 
each of the different agencies. Several Regional Appraisers also said 
that the review appraisers seem to follow the procedures that they had 
when they were within their individual agency. However, each of the 
agencies had its own appraisal review procedures.

One procedure that would aid the review process and add consistency, 
would be to require that reviewers use checklists, when appropriate, in 
conducting their appraisal reviews. The use of checklists are 
recommended by the Uniform Appraisal Standards for Federal Land 
Acquisitions because they typically remind appraisers to consider, 
among other things, key physical and legal characteristics that can 
affect a property's use and value. For instance, our appraisal experts 
found that checklists not only remind reviewers that the appraisers 
considered key appraisal characteristics, but they can also help 
improve the quality and completeness of appraisals. For example, 
appraisers had used checklists for 97 of the 324 appraisals our 
appraisal experts reviewed. For the appraisals that had checklists, 
nearly 80 percent met standards. Figure 2 shows an appraisal checklist 
recommended by the Uniform Appraisal Standards for Federal Land 
Acquisitions.

Figure 2: Appraisal Checklist from the Uniform Appraisal Standards for 
Federal Land Acquisitions:

[See pdf for image].

Source: ASD.

[End of figure].

Overall, as evidenced by the information presented in this section of 
our report, ASD lacks a management control program to ensure that 
appraisers conduct appraisals and reviews in accordance with applicable 
standards. Internal control standards for the federal government 
indicate that management should ensure that skill needs are continually 
assessed, and that the organization is able to obtain a workforce that 
has the required skills that match those necessary to achieve 
organizational goals. In addition, internal controls should generally 
be designed to assure that ongoing monitoring occurs in the course of 
normal operations, including regular management and supervisory 
activities, comparisons, reconciliations, and other actions taken in 
the performance of duties.

The Forest Service's appraisal office faced similar management control 
challenges several years ago, but in response to a 2002 U.S. Department 
of Agriculture (USDA) Inspector General's report--which found that the 
Forest Service's appraisers often relied on inaccurate information when 
estimating lands' values--it established a compliance inspection 
program. In this program, the Chief Appraiser of the Forest Service 
annually assesses appraisals for compliance with the Uniform Standards 
of Professional Appraisal Practices, the Uniform Appraisal Standards 
for Federal Land Acquisitions, and the Forest Service's appraisal 
procedures. To do this, the Chief Appraiser, a regional appraiser, and 
two senior review appraisers, visit each region at least once every 3 
years and review a sample of appraisal reports that have a higher 
probability of not meeting appraisal standards. As part of the 
inspection, the team determines whether appraisal staff and contract 
appraisers have the proper knowledge, experience, and training for the 
appraisals they perform.

Since 2002, the Forest Service's compliance inspection program has 
successfully identified appraisals that did not meet standards, 
rescinded them, and taken steps to ensure that such problems do not 
occur in the future. For example, in July 2005, a Forest Service review 
appraiser approved an appraisal for an access easement near the Cibola 
National Forest in New Mexico, but did not require the contract 
appraiser to produce a complete appraisal. In valuing easements, 
appraisers are to use a method known as a "before and after appraisal," 
which is an appraisal of a property's value before and after the 
easement--thus setting the price of the easement equal to the 
difference. However, the contract appraiser did not complete the 
"after" appraisal; instead, he simply deducted 90 percent of the 
property's value where the access road was to be placed. According to 
the evaluation performed by the compliance inspection team in September 
2005, the 90-percent figure was not supported by market data. As a 
result, the compliance inspection team rescinded the appraisal and 
determined that it could not be used as the basis for making an offer 
of compensation to the landowner.

The Forest Service's compliance inspection program has also served as a 
valuable tool in identifying appraisal-staff training needs and 
ensuring that staff have the proper skills to perform appraisals of 
complicated land transactions. Specifically, while performing a 
compliance inspection at the Forest Service's Pacific Northwest Region, 
the Chief Appraiser and team found that two senior review appraisers 
approved appraisals with technical deficiencies. As a result, the Chief 
Appraiser required these two senior review appraisers to take appraisal 
review courses offered by one of the Appraisal Foundation's sponsoring 
organizations.

Finally, we found problems with ASD's Pacific Region's appraisal 
document retention practices. Appraisal documents must be retained to 
verify--if challenged--that appraisers and review appraisers are 
independent and, thus, qualified to approve an appraised value for 
Interior's use in land transactions. Specifically, the Uniform 
Standards of Professional Appraisal Practice requires an appraiser to 
retain appraisals and related documents for at least 5 years after 
preparation or at least 2 years after the final disposition of any 
judicial proceeding, whichever period expires last. Moreover, ASD's 
Appraisal Policy Manual requires ASD to maintain their appraisal 
documents for at least 7 years after preparation. However, in addition 
to the 324 appraisals our appraisal experts evaluated, appraisers in 
ASD's Pacific Region could not locate nearly two-thirds, or 96 of the 
150 appraisal reports, we requested for evaluation of compliance with 
recognized appraisal standards--each of which was well within the 
document retention time frames set by ASD and the Uniform Standards of 
Professional Appraisal Practices. The regional appraiser stated that 
the 96 appraisal reports were lost when appraisers were moved from the 
land management agency workspaces into ASD workspaces. Because our 
appraisal experts were unable to evaluate these 96 appraisals, we 
cannot verify whether they met recognized appraisal standards.

ASD's Client Relationships Are Hampered by Inefficient Operations:

Although ASD is a service organization, its service delivery and client 
relationships are hampered by operational inefficiencies. For instance, 
ASD does not have a system for establishing realistic time frames for 
client appraisal requests for which it can be held accountable. 
Specifically, it lacks (1) a process for ensuring that appraisal 
services are delivered within negotiated time frames, (2) a system for 
prioritizing on-going projects and incorporating new appraisal 
requests, and (3) clearly defined roles delineating information- 
collection responsibilities between it and its client agencies. In 
addition, ASD's operations are hampered by delays in appraisal 
contracting and billing practices, difficulty in finding qualified 
contract appraisers, and costly appraisals for low-value land. 
Collectively, these conditions contribute to delays in meeting client 
needs, which negatively affects ASD's clients' ability to complete land 
transactions, as well as adding unnecessary costs to the appraisal 
process.

ASD Does Not Have a System to Ensure that Realistic Time Frames for 
Appraisals Are Met:

ASD does not have a system for ensuring that it meets realistic time 
frames for client appraisal needs. Specifically, ASD's accountability 
to its clients for providing timely appraisal service is impaired by 
the lack of (1) negotiated time frames for appraisal delivery, (2) a 
system for prioritizing on-going projects and incorporating new 
appraisal requests, and (3) clear responsibilities for ASD appraisers 
and land management realty specialists in obtaining critical appraisal 
information. Timely delivery of appraisals, by ASD to its client 
agencies, is critical to the success of Interior's land management 
agencies in carrying out their land acquisition objectives. Lengthy 
delays in appraisal delivery can cause land management agencies to lose 
land deals and associated funding; they also have a marked effect on 
landowners' trust in the land management agency and the land 
transaction process. This trust, according to agency realty 
specialists, is critical for the successful purchase of privately held 
land. If landowners perceive that trust has been violated, they may 
turn to the private sector to sell their land. Furthermore, the 
efficiency of the appraisal delivery process was an important 
consideration when Interior decided to consolidate appraisal services 
into ASD in 2003--in a September 2003 letter defending the 
consolidation effort, Interior's Assistant Secretary for Policy, 
Management, and Budget assured the House Committee on Appropriations' 
Subcommittee on Interior and Related Agencies that, over time, the 
efficiency of appraisal services would be improved as a result of 
consolidation.

ASD Does Not Negotiate Appraisal Delivery Time Frames with Clients:

In setting up ASD and forging its working relationships with the land 
management agencies it serves, Interior required both ASD and its 
client agencies to sign agreements--called Service Level Agreements-- 
which define parameters for appraisal (i.e., service) delivery, 
including time frames for the completion of appraisals and appraisal 
reviews. However, these agreements are limited in their effectiveness 
because time frames--specifically, appraisal delivery dates--are 
arbitrarily set by the clients, and ASD is not held accountable for 
meeting them. For instance, although the agreements call for appraisal 
delivery on the basis of agreed-upon time frames, which are meant to 
reflect both the needs of the client agencies and the appraisal 
workload of ASD, we found that ASD and the client agencies do not have 
a method for negotiating and agreeing on such time frames. Instead, 
client realty specialists enter a requested completion date for an 
appraisal into ARRTS. ASD appraisers, upon receipt of a request, 
estimate a projected completion date for the appraisal, which they 
enter into ARRTS. However, the dates entered by the client realty 
specialist and the ASD appraiser often differ and are not reconciled. 
Realty specialists from all four land management agencies that ASD 
serves told us that ASD appraisers regularly set appraisal completion 
dates that are weeks or months later than the original requested date, 
often without notifying the requesting realty specialist. 

Furthermore, realty specialists do not routinely access ARRTS to 
identify project completion dates entered by ASD appraisers so as to 
take follow-up actions to reconcile any differences. Of the 728 
appraisal products that clients requested from October 2005 through May 
2006, more than 40 percent had a projected completion date later than 
the requested completion date,[Footnote 9] with an average difference 
of more than 60 days. On the other hand, ASD appraisers told us that 
realty specialists often request unreasonably short time frames, so 
they have to set projected completion dates later than the original 
request. According to these appraisers, appraisals take at least 60 to 
90 days to be completed, and many complex appraisals take much longer. 
However, since October 2004, realty specialists have set requested 
delivery dates of less than 60 days for 515 appraisals. For example, 
according to ASD, between August 18, 2006 and August 31, 2006, ASD 
received six ARRTS appraisal requests with requested due dates that 
were within six days of the request. One of these was for a relatively 
complex appraisal and another was received with a requested delivery 
date for the day after the request. ASD acknowledges that it along with 
its client bureaus need to develop mutually realistic expectations for 
appraisal delivery timeframes.

ASD policy requires ASD appraisers to keep realty specialists updated 
when unforeseen problems might affect timely delivery of an appraisal. 
Realty specialists with each of the land management agencies, however, 
told us that ASD appraisers are not keeping them informed of appraisal 
progress--particularly when unforeseen impediments to appraisal 
delivery occur, such as delays in obtaining contract appraisers. These 
officials described many specific cases where delays during the 
appraisal process went unreported until they requested that ASD provide 
a progress update. The delays often affected project completion by 
weeks or months and, according to land management agency realty 
officials, may have contributed to the loss of some land acquisitions 
and exchanges, as in the following examples:

*  A FWS realty specialist submitted an appraisal request in August 
2003 for the potential acquisition of 893 acres in Tallahatchie 
National Wildlife Refuge in north-central Mississippi. ASD received an 
initial contract appraisal in November 2003, but did not begin the 
review until February 2004. When that appraisal was rejected, ASD 
ordered another appraisal, which was delivered in October of 2004, and 
subsequently rejected. An ASD appraiser then completed the appraisal in-
house in April 2005--20 months after the appraisal request and 12 
months after the requested completion date. The landowner rejected the 
appraised amount offered and informed FWS that she thought it had lost 
interest in acquiring the land, since so much time had elapsed since 
the appraisal was requested.

*  An NPS realty specialist submitted an appraisal request in November 
2004 for the purpose of acquiring 8 acres in the Indiana Dunes National 
Lakeshore in northern Indiana. NPS requested ASD to provide a status 
update on January 31, 2005, on the appraisal request after not having 
received an update since December 15, 2004. ASD did not respond to NPS 
until March 2, 2005, after being informed by the realty official that 
(1) the land owner was unhappy, (2) believed that ASD had been 
"stonewalling and lying" to him all along, and (3) was threatening to 
call his congressman. In response to NPS, ASD officials said that the 
appraisal request "fell through the cracks" and that the appraiser 
would start the work on it immediately. At that time, the contract 
appraiser had not begun the appraisal. An appraisal contract was 
awarded in April 2005 and completed on October 20, 2005, almost a full 
year after the initial appraisal request. According to the NPS realty 
specialist assigned to the case, the landowner was angered by the 
lengthy delay in getting him the offer and thus declined to sell the 
property to NPS.

*  In May 2004, a FWS realty specialist requested the appraisal of a 
40- acre parcel in Upper Ouachita National Wildlife Refuge in 
Louisiana. ASD later informed FWS that it did not immediately act upon 
the request because the request was overlooked and, as a result, it was 
scheduled to be awarded in February 2005. The realty specialist 
requested a status update in June 2005; however, at that time, ASD 
informed FWS that it was unsure if the contract had yet been awarded. 
In September 2005, a contractor appraisal was rejected for agency use. 
In January 2006, an ASD appraiser took over the project as an in-house 
appraisal assignment. The completed in-house appraisal was finally 
approved on February 16, 2006--21 months after the initial request. 
Because of the substantial delay, the landowner rejected the offer to 
purchase his land.

According to realty specialists in the land management agencies and 
officials at nonprofit partners, they need reliable estimates of 
appraisal delivery time frames to plan the use of land acquisition 
funds. The officials said that without knowledge of when appraisals 
will be obtained, and without a say in setting delivery dates, 
agencies' ability to request and use acquisition funds is compromised. 
For instance, NPS-Midwest realty specialists told us they were unable 
to use more than $800,000 from their land acquisition budget for fiscal 
year 2005 because of land deals that were not finalized. These 
officials stated that, had certain appraisals been completed by the 
requested completion date, it is likely that at least a portion of this 
money would have been spent on the acquisitions. In addition, without 
accurate knowledge of the expected date for appraisal completion, 
realty specialists told us they cannot keep willing buyers or sellers 
up-to-date on project status; also, they may unintentionally provide 
these parties with inaccurate estimates of appraisal completion, thus 
harming the relationship between the government and the willing buyers 
and sellers.

According to realty specialists in the land management agencies and 
officials at nonprofit partners, appraisal delays also strain 
Interior's relationship with nonprofit conservation partners. These 
partners play a critical role in initiating and facilitating many land 
transactions between landholders and Interior's land management 
agencies. Nonprofit conservation partners leverage resources to 
purchase land from private sources, later to be sold to the government 
when funds are available. However, some partners have been negatively 
affected by unpredictable and oft-delayed appraisals. According to 
officials at two nonprofit partners with whom we spoke, their ability 
to secure land deals--much like the land management agencies--depends 
on landowners trusting their operations. They said that when an 
appraisal is significantly delayed, the nonprofit's funds are locked up 
in deals that are on hold while awaiting the completion of the 
appraisal. The officials said that if the appraisal results were 
delivered in a timelier fashion, they would know sooner whether the 
land owner will accept it and, if not, they could free up their funds 
sooner to assist land management agencies with other conservation 
projects.

ASD Does Not Have a System for Prioritizing On-Going Projects and 
Incorporating New Appraisal Requests:

ASD also does not have a system for prioritizing on-going projects and 
incorporating new appraisal requests from its clients so as to adjust 
its workload when client needs change. As a result, ASD has no 
assurance that the most immediate appraisal needs of its client land 
management agencies are being met. The ARRTS database allows the 
requesting realty specialist to assign a priority label to each 
appraisal request (e.g., emergency, high priority, routine, or low 
priority). However, ARRTS does not allow ASD managers to determine the 
relative priority of new appraisal requests compared to those already 
in the system, nor does it provide a mechanism for reestablishing 
priorities. Further, ASD has no procedures for weighing each of its 
client agencies' respective appraisal request priorities. Realty 
specialists and ASD appraisers told us that, as a result, routine 
appraisals often get labeled as high priority--a practice that one ASD 
appraiser dubbed "priority inflation." For appraisal products requested 
in fiscal year 2005, for example, over 40 percent were labeled as 
"emergency" or "high" priority. Consequently, there is little meaning 
to current priorities labeled in ARRTS for the appraisal requests, and 
there is a risk that some high-priority appraisal projects are not 
performed as rapidly as necessary.

On April 20, 2005, a FWS realty specialist asked ASD to perform a "high 
priority" appraisal for a 2.4-acre parcel of land in Washington County, 
Nebraska; the requested completion date was June 6, 2005. In late June, 
the realty specialist requested that ASD provide a status update, and 
was told that the appraisal contract had not yet been awarded. 
Furthermore, the reality specialist was told that ASD had placed a 
completion date of January 20, 2006, into ARRTS. The FWS Regional 
Realty Chief expressed concern in an October 5, 2005, e-mail to the ASD 
official concerning (1) the arbitrariness of the completion date set by 
ASD, (2) ASD's delay in requesting additional information from the 
realty specialists prior to beginning the appraisal project, and (3) 
ASD's lack of communication with FWS on the revised delivery date and 
need for additional information. In response to these concerns, the ASD-
Midwest Regional Appraiser said that a backlog of appraisal requests 
contributed to the delay in initiating the project. ASD completed this 
appraisal on December 20, 2005--1 month ahead of its estimated 
completion date but nearly 7 months later than the date that it was 
initially requested. According to the FWS realty specialist, the 
landowner turned down the offer and accepted a 24-percent higher offer 
from a private buyer.

ASD and the land management realty staffs generally do not collaborate 
in prioritizing appraisal needs. Instead, the prioritization of each 
appraisal request is determined on an ad hoc basis by ASD's appraisers. 
According to land management agency realty specialists, ASD officials 
seem to ignore the priorities and dates placed on the appraisal request 
by the realty specialists and, instead, revise the priority and 
completion dates arbitrarily. Some realty specialists said that they 
have resorted to calling their ASD regional appraiser to request that 
an appraisal is given high priority, but this approach has had little 
success. ASD regional appraisers acknowledged that their appraisal 
staff cannot always address these high-priority requests because they 
already have a heavy workload of such requests.

Since the use of the ARRTS system has not been effective in 
establishing appraisal priorities, some officials have taken other 
measures to address this issue. For example, since the formation of 
ASD, the Midwest Region's regional appraiser meets with FWS realty 
managers within the region on a monthly basis to discuss pending 
appraisals, as well as upcoming appraisal requests. These discussions 
direct changes in appraisal project priority and facilitate status 
updates of ongoing appraisal projects. According to one FWS regional 
realty official, these meetings are extremely helpful for planning 
purposes. For example, when appraisals need to be done quickly, these 
meetings provide a venue to discuss how the timelines of other projects 
might be affected by the higher-priority project. The ASD-Midwest 
Regional Appraiser told us that she meets similarly with NPS realty 
officials on a monthly basis.

Similarly, the ASD Southwest Region's lead appraiser in Nevada told us 
that he provides a status update on outstanding appraisal projects to 
his client realty specialists on a monthly basis. According to him, 
this status update is a great help for successfully prioritizing 
appraisal projects between the land management agencies and encourages 
communication between ASD and the realty specialists it serves. The 
appraiser also told us that rearranging appraisal priorities through 
this process is quite common. For instance, at the Stillwater National 
Wildlife Refuge in northern Nevada, the FWS is actively interested in 
purchasing water rights. Therefore, when land with water rights becomes 
available, appraisals of these lands are moved to a higher-priority 
status over other appraisals.

Although the consolidation of appraisal services into ASD only applied 
to Interior agencies, we discussed appraisal services with USDA's 
Forest Service to ascertain whether the Forest Service had implemented 
processes that would assist ASD in implementing its program. With 
regard to prioritization of appraisal requests, the appraisal services 
staff of the Forest Service has had success using quarterly meetings 
and teleconferences to: coordinate time frames for appraisal requests 
and completion dates, prioritize new requests, and update the status of 
appraisals in progress. In addition, the Forest Service appraisal 
services staff supplies monthly or quarterly status updates to its 
clients, line officers, and realty specialists. The Forest Service's 
Chief Appraiser said that this system works well, and there are few 
problems or complaints about appraisal prioritization or the timeliness 
of appraisal delivery. While this may be successful for the Forest 
Service, ASD faces additional challenges because it has four equally 
important clients with potentially conflicting priorities.

ASD Lacks Clearly Defined Roles Delineating Information-Collection 
Responsibilities between It and Its Client Agencies:

ASD has not defined the responsibilities for ASD appraisers and realty 
specialists involved in the appraisal process, particularly with 
respect to specifying who has responsibility to gather the information 
needed to complete an appraisal. Significant "up-front" information, 
including such data as maps, property descriptions, aerial photographs, 
land deeds, title information, and sales histories are needed before 
conducting an appraisal. The Service Level Agreements between ASD and 
the client agencies state that the client agency is responsible for 
providing "clear, specific information on project needs for appraisal 
services," primarily through ARRTS, but also by other means (as 
necessary). However, there is no definition of what this "specific 
information" should entail. Further, these agreements do not specify 
how much should be provided and by whom. According to FWS realty 
officials, this creates considerable confusion because information 
needs can vary quite significantly, depending on the complexity of the 
appraisal. Additionally, FWS stated that ASD requires the best 
information available, but does not define what this entails.

Realty specialists and ASD appraisers with whom we spoke disagreed over 
who should have responsibility for obtaining and providing appraisal 
information. Part of this disagreement stems from the different 
responsibilities that existed among the agencies' realty specialists 
and appraisers prior to the formation of ASD. For instance, one FWS 
realty specialist stated that, prior to the formation of ASD, 
appraisers were responsible for much of the information-gathering; the 
information obtained and provided by realty specialists was minimal. On 
the other hand, appraisers formerly with BLM told us that, before the 
formation of ASD, realty specialists routinely acquired most of the 
information before giving it to appraisers. The lack of clarity in the 
Service Level Agreements with regard to who is to gather the needed 
information for the appraisal has led to delays in starting and 
completing appraisals. For example:

*  A FWS realty specialist submitted a request to ASD on November 22, 
200, for an appraisal of an approximately 1,000-acre tract in the 
Trinity River National Wildlife Refuge near Liberty, Texas. However, 
the FWS official did not provide sufficient information for the ASD 
appraiser to prepare the scope of work needed to request a cost 
estimate from contract appraisers. The ASD appraiser notified the 
requesting FWS realty specialist on December 9, 2005, that, to do the 
request for a cost estimate, he needed a map of the property boundary, 
a legal description of the land to be appraised, land title 
information, aerial photographs, and topographic maps for use in 
assessing the land's timber inventory. The FWS realty specialist 
provided the ASD appraiser the title information, information on an 
easement on the property, and an aerial photo, on March 8, 2006. The 
ASD appraiser replied to the FWS realty specialist on March 21, 2006, 
outlining what information remained outstanding. The realty specialist 
did not reply to ASD's request and, as a result, ASD cancelled the 
appraisal request.

*  A FWS realty specialist submitted a high-priority request to ASD on 
May 19, 2006, for the preparation of a statement of work. The statement 
of work would be used by a nonprofit partner to solicit contractor bids 
for the appraisal of a 405-acre tract in Balcones Canyonlands National 
Wildlife Refuge near Austin, Texas. However, the FWS realty specialist 
did not provide sufficient information for the ASD appraiser to prepare 
a statement of work for the contractor bidding. The ASD appraiser 
notified the requesting realty specialist on June 6, 2006, that he 
needed land title information, details of an access easement on the 
property, a legal description of the land to be appraised, and 
information on improvements to the land. As of the issuance of this 
report, the ASD appraiser had not received the requested information.

Realty specialists from the land management agencies informed us that 
ASD appraisers often require the "perfect package" of material before 
they will begin work on a project and that, in some cases, the 
correspondence requesting and providing information can go back-and- 
forth for weeks. ASD appraisers, on the other hand, told us that, 
depending on the specific circumstances involved, certain information 
is absolutely necessary before appraisers can begin an appraisal. For 
instance, in the case where an appraisal will be contracted out, ASD 
appraisers said they require a full package of information--including 
maps, property descriptions, aerial photographs, land deeds, title 
information, and sales histories--before a statement of work can be 
correctly developed for bid solicitations. Some ASD appraisers 
commented that realty specialists should receive training on the 
appraisal process and information requirements, so that they can better 
understand the challenges faced by the appraisers.

Certain Business Practices Impede the Efficiency of ASD's Appraisal 
Delivery, Resulting in Delays and Costs:

Certain business practices affect the efficiency of ASD's appraisal 
delivery. Specifically, ASD is hampered by delays in appraisal 
contracting and billing practices, difficulty in finding contract 
appraisers with government experience, and costly appraisals for low- 
value land. As a result, ASD's operations are more time-consuming and 
costly than necessary.

Contract and Billing Functions Add Inefficiencies to ASD Operations:

Both the contract and the billing functions result in additional costs 
and contribute to appraisal delays. ASD currently contracts out 
approximately 70 percent of its appraisal requests, which requires the 
services of the National Business Center's Southwest Branch (for 
awarding contracts) and the Office of Budget and Finance (for paying 
contractors). In fiscal year 2006, data provided by National Business 
Center budget officials showed that the contracting and billing 
functions incurred approximately $350,000 in expenses to ASD 
operations, or about 3 percent of ASD's budget. While the costs of 
these services were borne by the land management agencies prior to 
ASD's inception, the agencies did not have data identifying these 
costs. Further, ASD appraisers believe the contract and billing 
functions would be more efficient if they were handled within the land 
management agencies. They also said that implementing the 
responsibility for receiving bids and awarding contracts at the 
Southwest Branch, as well as paying contractors through the Office of 
Budget and Finance, has resulted in considerable delays in the 
appraisal process and significant frustration from both the client- 
agency realty specialists and ASD appraisers.[Footnote 10] 
Specifically, we found the following:

*  Longer turn-around time for contract award: According to officials 
at the Southwest Branch, awarding contracts after the proposals have 
been received should take, on average, about 3 to 5 business days. On 
the basis of data provided by ASD regional appraisers, however, we 
determined that it has taken an average of about 10 business days to 
award contracts--and fewer than one-third of the contracts have been 
awarded in 5 days or less since the Southwest Branch assumed this 
responsibility.[Footnote 11] According to officials at the Southwest 
Branch, these delays largely resulted from significant turnover of 
staff with contracting experience and the inexperience of remaining 
staff.

*  Cancellation of expedited contracting practices: Prior to the 
formation of ASD, agency contracting officers regularly employed 
"indefinite delivery/indefinite quantity" contracts and "blanket-
purchase agreements," which are designed to expedite the contracting 
process by establishing multi-year agreements with private appraisers 
who become pre-approved for appraisal work conducted within the time 
frame of their agreements. These contracting practices expedite the 
process and can save time and resources. Southwest Branch officials, 
however, canceled more than 100 pre-existing indefinite 
delivery/indefinite quantity contracts and blanket-purchase agreements 
when they assumed the contracting function. National Business Center 
officials at the Southwest Branch told us that they cancelled these 
contracts and agreements because the procurement systems of each of the 
agencies were not compatible with the Southwest Branch's procurement 
system, and it became easier to cancel them as opposed to redoing them 
to make them compatible. The National Business Center told us that 
these contracts were canceled because of a lack of justification to 
continue their use.

*  Appraisal contracts awarded based on "lowest bid" rather than "best 
value": ASD appraisers recommend contract appraisers based on "best 
value to the government" considerations, but Southwest Branch officials 
routinely award contracts using "lowest bid" criteria. Under the "best 
value" consideration, bids are evaluated on a range of criteria in 
addition to price--including past performance, quality of appraisals, 
familiarity with the area the land is located in, and the type of land 
to be appraised. According to ASD regional appraisers, National 
Business Center officials informed them in 2004 that the Southwest 
Branch would evaluate contract proposals based on "best value" 
considerations.[Footnote 12] Officials at the Southwest Branch told us 
that they do not usually do this because ASD appraisers do not 
correctly solicit proposals for "best value" consideration. ASD 
officials, on the other hand, said they have not received any 
information from Southwest Branch officials on how to "correctly" 
solicit.[Footnote 13] As a result, according to officials at the 
Southwest Branch, in the first year of operation, all contracts were 
awarded based on lowest price because the solicitation from ASD--when 
sent out to the contractors--did not properly specify that the contract 
would be awarded based on "best value" considerations. This decision 
can have major ramifications for the timeliness and cost of an 
appraisal. For instance, in one case the lowest bid was $200 less than 
the second lowest bid, and the ASD appraiser recommended the contractor 
with the slightly higher bid--based on past experience with ASD and 
familiarity with the land and property type. However, officials at the 
Southwest Branch awarded the contract to the low-bid contractor. The 
delivered appraisal was deemed unacceptable for agency use due to 
insufficient comparable sales data. After a 7 month delay, the 
appraisal was successfully completed.

*  Inefficient contractor billing and reimbursement functions: The 
process currently used to bill client agencies for contract appraisal 
services has caused confusion and frustration within the land 
management agencies. According to ASD officials and realty officials 
with each of the land management agencies, problems included (1) being 
billed in one lump sum at the end of the fiscal year, (2) the inability 
to track reimbursement requests back to contractor invoices, and (3) 
double- billing for some contracts. These officials complained about 
the burdensome and arduous process of reconciling the reimbursement 
billing with the contractor invoices--a necessity to ensure that funds 
were not inappropriately spent. In addition, there have been problems 
with the land management agencies obligating sufficient funds to allow 
for reimbursement payments to go to the National Business Center in a 
timely manner. Realty officials with FWS, NPS, and BLM also stated that 
it would be more efficient if their agencies handled the billing 
directly. For example, if billing for contract appraisals came directly 
from the land management agencies, there would be no need to obligate 
funds for reimbursement or tracking of appraisal costs, and linking 
such costs to specific appraisals would be done within internal systems.

Over the past 6 months, in response to concerns over the contracting 
and billing functions outlined above, ASD and the National Business 
Center undertook a comprehensive reengineering of the contract 
appraisal and billing processes. Under this reengineered plan, the 
contracting function would be moved to GovWorks in its Herndon, 
Virginia office.[Footnote 14] The invoicing and billing function would 
be transferred to GovWorks' electronic invoicing system. The 
reengineered plan is intended to address all relevant issues that have 
been brought to the attention of ASD and the National Business Center 
over the period in which the National Business Center has been 
supporting ASD's operations, including the use of "indefinite delivery/ 
indefinite quantity" contracts, the use of "best value" contract award 
criteria, and the series of issues surrounding contractor payment and 
agency reimbursement. According to officials with the National Business 
Center, a July 2006 meeting with ASD officials resulted in an agreement 
to move the contracting function to GovWorks beginning October 1, 2006. 
Under the reengineered plan, each contract service provided by GovWorks 
will be assessed up to a 4-percent fee depending on the cost of the 
contract. Although these officials offered assurances that moving the 
contracting function to GovWorks will address concerns about the 
timeliness of awarding appraisal contracts, contractor payments, and 
agency reimbursements, we cannot assess the effectiveness of a future 
change.

Regardless of whether the change in the contracting function will be 
successful, however, ASD appraisers generally believe that this 
function would be more efficient if it were handled within the land 
management agencies. Many of the ASD regional appraisers, along with 
realty specialists within the land management agencies, told us that 
placing the contracting function within the land management agencies, 
as it was previously done, would not threaten the integrity of the 
appraisal process. These officials also believe that having the 
contracting function in each of the agencies would facilitate closer 
contact and better communication between ASD appraisers and the 
contracting officers, likely resulting in less confusion and easier 
status updates. ASD officials also said that, currently, staff at the 
the Southwest Branch contracting office have little incentive to 
provide services in a timely manner because ASD has no choice but to 
use its services. Of note, this would not change under the current plan 
to relocate the appraisal contracting function to Colorado or Virginia. 
According to agency realty specialists, contracting officers within the 
agencies regularly awarded contracts in a much timelier manner than the 
Southwest Branch. These officials said that this was due, in part, to 
the ease by which they could communicate the need for expedited awards 
and changing priorities with the contracting function located in-house. 
Also, because they were part of the same organization and had a stake 
in its land acquisition goals, the contracting officers had an 
incentive to be responsive to realty specialists' appraisal contract 
needs.

ASD Faces Challenges Finding Contract Appraisers with Federal 
Government Appraisal Experience:

ASD faces difficulty obtaining contract appraisers with federal 
government appraisal experience, which contributes to delayed and 
costly appraisals. According to ASD's Deputy Chief Appraiser and ASD 
regional appraisers, each of ASD's regions have experienced problems, 
to varying degrees, in obtaining contract appraisers with federal 
experience. ASD has a workforce of 68 appraisers nationwide and it 
receives about 1,800 appraisal requests for appraisal products per year 
from its clients. To address its workload demands, which include both 
conducting and reviewing appraisals, ASD uses private contractors for 
many of its appraisals. During fiscal year 2005, ASD contracted out 
about 70 percent of the appraisal requests to private contract 
appraisers. However, ASD headquarters and regional officials told us 
that many private contract appraisers are unwilling to do business with 
the federal government because their appraisals must meet standards 
that are higher than what they are accustomed to. Additionally, they 
face unique circumstances that make it more challenging to conduct the 
appraisals. For example, most private appraisers are most familiar with 
appraising commercial or residential properties, but the locations of 
lands to be appraised for Interior agencies are often in remote, rural 
areas--making it more difficult to access, as well as identify, 
comparable land sales. One ASD regional appraiser stated that her 
office has attempted to find contract appraisers with federal 
experience, but it has had extreme difficulty finding contractors who 
can perform appraisals in accordance with government standards. This 
regional appraiser also stated that her office must sometimes use 
appraisers who do not have prior work experience with the government 
and with whom ASD has no previous working relationship. As one ASD 
Regional appraiser stated, each land transaction is important, and if a 
contractor fails to deliver an acceptable appraisal, ASD will 
experience significant delays in completing the appraisal.

ASD takes substantial risks when it has to use contract appraisers 
without prior experience doing appraisals for Interior. We found the 
following examples:

≤  A BLM realty specialist submitted a request for a high-priority 
appraisal on July 12, 2005, for 3,800 acres near Kremmling, Colorado. 
The Southwest Branch awarded the appraisal contract on August 12, 2005, 
in the amount of $13,500 to an appraiser who, according to ASD 
officials, had little experience working with ASD or the land 
management agencies. The contract had an appraisal completion date on 
or before October 14, 2005. After granting the contractor two 
extensions, ASD received the draft appraisal from the contractor on 
January 13, 2006, but, upon review, ASD found it to have a number of 
serious flaws, including problems with the appraiser's highest and best 
use determination and property rights analysis. As a result, the ASD 
reviewer determined that the appraisal needed substantial revision, and 
on March 14, 2006, sought clarification and corrections from the 
contract appraiser. Three days later, on March 17, the contractor 
notified ASD that he would be withdrawing from the project. ASD decided 
to complete the appraisal in-house and, on March 24, 2006, assigned one 
of its appraisers to perform the remaining work. As of the issuance of 
this report, the staff appraiser was still working to complete the 
appraisal.

≤  A NPS realty specialist submitted a high-priority appraisal request 
on June 10, 2005, for 119 acres in Chickamauga and Chattanooga National 
Military Park near Chattanooga, Tennessee. The Southwest Branch awarded 
the appraisal contract to an appraiser with no prior federal land 
appraisal experience on October 25, 2005. ASD received a draft 
appraisal on November 5, 2005. ASD rejected this appraisal on the basis 
that it was a "nonsupported appraisal report of technical 
incompetence." ASD subsequently assigned the appraisal to an in-house 
appraiser on April 14, 2006. As of the issuance of this report, the 
appraisal has yet to be completed--more than 15 months after it was 
initially requested.

≤  A FWS realty specialist submitted an appraisal request in August 
2003 for 33 acres in Panther Swamp National Wildlife Refuge in west-
central Mississippi. After receiving the contract appraisal in November 
2003, the ASD reviewer worked with the contract appraiser to try to 
clear up problems with the appraisal, but the appraisal was ultimately 
rejected in August 2004. A second contract appraisal was ordered, 
received in February 2005, and subsequently rejected in May 2005. A 
third appraisal was then ordered, received, and ultimately approved in 
April 2006, 32 months after the initial appraisal request.

Complicating contractor selection, many contract appraisers are not 
located in close proximity to the lands needing appraisal. As a result, 
realty officials and ASD regional appraisers said that contractors 
(many of which are not located in the same state where the property is 
located) include the cost of traveling to work locations in their 
estimate. According to an experienced realty specialist familiar with 
these types of contracts, appraisals performed by out-of-state 
contractors often cost more than $10,000, compared to less than $1,000 
per appraisal when local appraisers might sometimes be used. ASD 
officials, in response, said that the more costly appraisals may be due 
to the fact that the appraisals did not meet standards, which 
necessitated additional work--though they did concede that travel costs 
are higher when local appraisers are not used. ASD also commented that 
appraiser fees are also based on business requirements including such 
things as direct and indirect costs, the complexity of the appraisal 
problem, the time required to develop and report a credible value 
opinion, and other issues. ASD's Chief Appraiser and Deputy Chief 
Appraiser are aware of the difficulties in finding contract appraisers 
and has taken steps to help remedy the problem. These steps include 
meeting with appraisal organizations, such as the American Society of 
Farm Managers and Rural Appraisers,[Footnote 15] to see how ASD can 
work with the organization to increase the number of contract 
appraisers willing to contract with the government. In addition, one 
ASD regional appraiser hosted an open house and training/information 
sessions with local appraisers who expressed interest in doing business 
with the government, in hopes that his region can find a wider range of 
private appraisers capable of meeting federal appraisal standards. The 
ASD Deputy Chief Appraiser told us that he hopes to expand the use of 
these types of interactions with private appraisal contractors. He 
believes that if private contract appraisers better-understand the 
policies and requirements of ASD, and about how ASD functions, they 
will be more willing to offer their services.

ASD Appraises Lands That Yield Little Revenues in Comparison to the 
Costs of Performing the Appraisals:

ASD performs appraisals for lands that yield little revenue to the 
government when compared to the costs of doing the appraisal. For 
example, ASD appraisers routinely perform appraisals to calculate rent 
payments for private uses of public lands. These include short-term 
uses requiring a permit, and leases for oil and gas production 
infrastructure, water wells, and storage tanks, among other things. 
Appraisals for these uses are expensive to conduct and, for the most 
part, bring in very low rental revenues to ASD. From June 2005 through 
May 2006, appraisers completed 270 of these appraisals. More than half 
of these appraisals estimated land rents to be less than $1,000 per 
year. In some cases, when ASD performed an appraisal, the appraisal 
cost more than the revenue received by the agency for the land-- 
especially when the appraiser visited the site. For example, an 
appraisal completed in May 2006 for the use of four access roads to a 
reservoir and water pumping station cost approximately $17,000 for the 
appraiser's time and travel. The appraised value was $13,777 for a 10- 
year lease of these rights. In other cases, less costly alternatives 
exist. ASD appraisers can, in some instances, undertake less time- 
consuming and less costly appraisals by appraising multiple parcels at 
once. These appraisals are less time-consuming and less costly than a 
full appraisal--often, they do not require the appraiser to visit the 
site--but each appraisal must still go through the ARRTS process and 
associated paperwork.

Land management agencies' policies for some rights-of-way require 
appraisals for some of these transactions to be performed by ASD, while 
in other cases the agencies can use an administrative formula--in lieu 
of an appraisal--developed and designed for the purpose of simplifying 
the calculation.[Footnote 16] The formula uses market analysis of real 
estate transactions and helps determine rental payments for non- 
communications land uses, such as water wells and reservoirs, and oil 
well pads. BLM had implemented guidance allowing its offices to use 
similar rental schedules for communications uses (e.g., cell phone 
towers) and linear rights-of-way (e.g., power lines) that are formula- 
based for determining land values in lieu of a full land 
appraisal.[Footnote 17] BLM's Idaho State office recently developed a 
formula, to be used in lieu of appraisals, for land valuations expected 
to be under $10,000. According to BLM officials, the formulas yield 
quicker valuation results at less cost compared to the results and 
costs of performing a full appraisal. The formulas are used by BLM, so 
ASD appraisers do not have to be involved. According to ASD officials, 
the expanded use of formulas for low-value land transactions would 
avoid the cost and time associated with using ASD appraisers to conduct 
appraisals for these transactions.[Footnote 18]

Interior Lacks Oversight of Appraisals under Some of Its Grant-in-Aid 
Programs:

Interior lacks independent oversight of appraisals for land 
acquisitions under some of its grant-in-aid programs--specifically, 
those administered by FWS and NPS--because when ASD was formed, it was 
not assigned responsibility for appraisals of land acquired under these 
programs. Interior's grant-in-aid programs, for example, provide 
nonfederal agencies, such as state and local governments, with federal 
funds to acquire land--typically for the purposes of conserving 
critical wildlife habitat. As ASD was being formed, Interior officials 
did not place appraisals for these transactions under ASD's purview 
because grant-in-aid programs were separate from agencies' realty 
functions. Instead, this authority remained with the land management 
agencies, where the nonfederal grant recipient is responsible for 
obtaining an appraisal, which may or may not be reviewed by the grantor 
agency. In fiscal year 2005, Interior expended over $240 million in 
appropriated funds for land acquisitions by nonfederal agencies, of 
which nearly $140 million (or about 60 percent) was under nine FWS and 
NPS grant-in-aid programs. However, eight of the nine grant-in-aid 
programs, representing nearly $135 million of the approximately $140 
million, do not require independent federal review of grant recipients' 
appraisals.[Footnote 19] As we reported earlier, it was the lack of 
required independent review for land management agencies' appraisals 
that led to the creation of ASD. Table 2 shows the nine grant-in-aid 
programs we reviewed and, of these, which programs require independent 
federal appraisal review.

Table 2: Independent Federal Review Requirements for Interior's Grant- 
in-Aid Programs:

Grant-in-aid program: FWS Cooperative Endangered Species Conservation 
Fund Grants - Habitat Conservation Plan Land Acquisition; Requirement 
for federal review: No.

Grant-in-aid program: FWS Cooperative Endangered Species Conservation 
Fund Grants - Recovery Land Acquisition Grants; Requirement for federal 
review: No.

Grant-in-aid program: FWS Landowner Incentive Program; Requirement for 
federal review: No.

Grant-in-aid program: FWS North American Wetlands Conservation Act - 
Standard Grants; Requirement for federal review: No.

Grant-in-aid program: FWS North American Wetlands Conservation Act - 
Small Grants; Requirement for federal review: No.

Grant-in-aid program: FWS State Wildlife Grants Program; Requirement 
for federal review: No.

Grant-in-aid program: NPS American Battlefield Protection Program; 
Requirement for federal review: Yes.

Grant-in-aid program: NPS Land and Water Conservation Fund State 
Assistance Program; Requirement for federal review: No.

Grant-in-aid program: NPS Shenandoah Valley Battlefields Foundation; 
Requirement for federal review: No.

Source: GAO analysis of FWS and NPS grant-in-aid policies.

[End of table]

The requirement for federal review for the NPS American Battlefield 
Protection program identified in table 2 is found in the guidance 
provided by NPS to the grant applicant. This guidance requires grant 
recipients to have land appraisals reviewed by the federal government. 
The grant manager responsible for administering this program said that 
he requires federal review because he recognizes the value of obtaining 
an independent "check" to ensure that they do not offer more or less 
than market value.

While there is no requirement for federal review for the other eight 
programs, grant managers for some of these programs occasionally seek 
ASD's assistance on an ad hoc basis. For example, at three of seven FWS 
regions, federal assistance officials, who administer several FWS grant-
in-aid programs listed above, seek ASD appraisal reviews for some or 
all of their appraisals. In FWS' Northeast Region, for instance, the 
Division of Federal Assistance uses ASD's appraisal review service for 
all of their acquisitions. The FWS federal assistance officials in the 
Great Lakes-Big Rivers Region seek ASD assistance for appraisal reviews 
of lands valued over $1 million. Additionally, federal assistance 
officials in FWS' Pacific Region state that they request that ASD 
review appraisals on a case-by-case basis, typically when a state- 
agency-grant recipient does not have an in-house review appraiser, or 
if the appraisal is complex or of a high dollar value. In the other 
four FWS regions, however, ASD is not involved in the review of 
appraisals for grant-in-aid acquisitions.

Grant officials for some of these programs told us that ASD's 
inconsistent involvement is due to the working relationships, between 
grant and realty divisions, that existed prior to ASD's formation. 
According to FWS officials in the Great Lakes-Big Rivers and Pacific 
regions, prior to the formation of ASD, grant office and realty offices 
shared the costs of review appraisers. Following the transition to ASD, 
the Division of Federal Assistance grants offices in both regions 
continued to request assistance for some appraisal reviews. 
Furthermore, the NPS official who administers the Shenandoah Valley 
Battlefields Foundation grant program said that he asked NPS realty- 
division review appraisers to review appraisals for his program prior 
to ASD's formation, and he continued that policy after those review 
appraisers transferred to ASD. On the other hand, in FWS' Southwest 
Region, a grant official said there was no such relationship in the 
past between the realty office and the Federal Assistance Grants Office.

Federal review of appraisals provides some assurance that appraisals 
meet recognized standards to include independence, and that federal 
funds are being spent appropriately. The following examples illustrate 
the importance of federal review:

≤  In 2004, Travis County, Texas, received nearly $6.5 million in FWS 
grant funds from the Endangered Species Conservation-Habitat 
Conservation Plan Land Acquisition program to purchase about 320 acres, 
which included habitat for the golden-cheeked warbler--an endangered 
bird. Under Texas state law, land designated as habitat preserve or 
endangered species habitat is to be appraised as if these designations 
were not in place, although some land uses--such as building roads or 
structures--may be prohibited on lands bearing these 
designations.[Footnote 20] Recognized appraisal standards require 
appraisers to consider the impact of land-use regulations on the 
utility and value of the land being appraised. The FWS Regional 
Director stated that he would accept the appraisal for Travis County if 
it followed state law. An ASD regional appraiser familiar with this 
case told us that he would not have approved this appraisal (if he was 
asked to review it) because it ignored a key legal characteristic, 
which would have substantially reduced the appraised value of the 
property.

≤  In 2005, the Minnesota Department of Natural Resources received 
federal funds through the Federal Assistance State Wildlife grant 
program to acquire a 441-acre property in Minnesota--valued at about 
$1.3 million. ASD was asked by the FWS grant office to review the 
appraisal, and upon its review found numerous technical errors. The ASD 
review appraiser concluded that the contract appraiser significantly 
overvalued the land because the appraiser, along with committing other 
technical errors, used five comparable sales with a different highest 
and best use as a basis for his value conclusions. Specifically, ASD 
found that all five comparables sales were maximally profitable as 
farmland; however, the property being appraised could not be used as 
farmland and, as a result, its highest and best use is recreation-- 
primarily waterfowl hunting. In that region of Minnesota, since 
farmlands averaged over $2,000 per acre and recreational land generally 
averaged half that amount, the appraiser's estimate was too high. 
According to a federal assistance grant program official, the Minnesota 
Department of Natural Resources is having the property re-appraised.

ASD review could also help ensure that appraisals conducted by grant- 
in-aid recipients accurately estimate lands' values. For example, under 
the Land and Water Conservation Fund State Assistance Program, NPS 
performs periodic program reviews of the state's Land and Water 
Conservation Fund programs, which includes appraisals for land 
acquisitions funded, in part, by Land and Water Conservation Fund State 
Assistance grants. In 2005, as part of its periodic review, NPS asked 
ASD's northwest office to help review a sample of appraisals prepared 
for the Oregon Parks and Recreation Department under NPS's Land and 
Water Conservation Fund partnership program. ASD found deficiencies in 
each of the six appraisals it reviewed, including failures to (1) 
accurately identify the subject property, (2) explain the valuation 
approach, and (3) provide adequate sales histories. These deficiencies 
should have prompted the Oregon Parks and Recreation Department's 
review appraiser to ask the contract appraiser for additional 
information to support the value conclusions. An ASD senior appraiser 
familiar with these appraisals told us that the appraisal review in 
each case was clearly inadequate.

In addition, the official who administers grants under NPS's Shenandoah 
Valley Battlefields Foundation grant program uses ASD for independent 
federal review of all appraisals to ensure compliance with recognized 
standards. An ASD regional appraiser stated that his reviews of 
Shenandoah Valley Battlefields Foundation's appraisals, like reviews of 
other appraisals, have uncovered minor technical and factual flaws that 
were easily corrected, as well as major report weaknesses that resulted 
in ASD's rejection of appraisals.

Some grant officials believe that a federal review is not necessary to 
ensure independence and that their policies, which require grant 
recipients to use a state-licensed appraiser and reviewer appraiser, 
are sufficient for assuring that market value is attained for the land 
transactions. However, an ASD regional appraiser told us that state 
certifications are not high enough and provide little assurance of 
adequate appraisal knowledge. One ASD regional appraiser said that, 
because the appraisal community is small in some regions, contract 
appraisers and reviewers hired by grant recipients often find 
themselves reviewing each others' work. He believes this is a potential 
threat to appraisal objectivity because, in order to continue receiving 
requests for appraisal assistance, appraisers have an incentive to 
approve each others' appraisals.

Interior has no clear policy on why some grant-in-aid programs require 
federal review of land appraisals while others do not. Secretarial 
Order 3258, issued in December 2004, outlines, among other things, 
ASD's role in reviewing appraisals prepared for nonfederal parties. 
This order directs ASD to review appraisals if, among other things, the 
nonfederal party consults with ASD on the scope of work and selection 
of contract appraiser prior to initiation of the appraisal. According 
to senior ASD officials, this requirement helps ensure that appraisals 
will meet appraisal standards. A regional appraiser told us, however, 
that the order does not define nonfederal parties and, therefore, it is 
not clear whether the order applies to grant recipients under the grant-
in-aid programs. Furthermore, the order does not apply unless a 
nonfederal party consults with ASD. Two ASD regional appraisers with 
whom we spoke stated that official clarification on whether the order 
applies to grant recipients would be helpful. Moreover, since ASD is 
reviewing some appraisals under the grant programs, the officials are 
unsure whether doing so is consistent with the order.

Conclusions:

Consolidating, into ASD, the appraisal functions that had previously 
been under the agencies' realty offices, appears to have been effective 
in remedying prior concerns about appraiser independence. With ASD now 
having these responsibilities, it needs to ensure that it is capable of 
upholding the public trust, assigned to it by law, in representing the 
federal taxpayer when appraising land for purchase, sale, and exchange. 
While ASD has made great strides in ensuring this, there is wide 
variation in appraisal quality for billions of dollars of potential 
land transactions. Although many appraisals did not meet standards, it 
is uncertain whether the market value determinations would have changed 
as a result of re-doing the appraisals. However, given the reasons for 
the appraisals not meeting standards, many of the examples show that 
the outcome may have changed--which could have affected the amount that 
the federal government paid for a particular land transaction. A 
critical factor contributing to these appraisal quality differences is 
that existing federal representation in critical land transactions is 
often delegated to individuals who may not have (or may not apply) the 
necessary specialized appraisal skills; these delegations are approved 
by individuals who have considerable discretion in deciding how 
thoroughly appraisals should be reviewed. Without a standard set of 
appraisal characteristics and considerations evaluated in each 
appraisal review--such as detailed descriptions of comparable sales, 
justification for valuation procedures, and documentation of legal and 
physical characteristics--appraisals that did not meet standards have 
been approved for government use. Moreover, based on the compliance 
problems we found with high value and complex appraisals, caused in 
large part by these concerns, ASD lacks an oversight mechanism to 
guarantee that the federal government is represented as fervently as 
the private parties that have a vested interest in transacting land at 
a more favorable price than that dictated by market value.

ASD must also make sure that, in the process of devoting attention to 
improving the quality of appraisals, it does not stymie its clients' 
abilities to complete critical land acquisitions or divestitures. 
Delays in delivery of appraisals can have substantial negative 
consequences on the ability of the land management agencies to carry 
out agency land acquisition objectives, and some land deals have been 
scuttled as a result. In addition, realty specialists with whom we 
spoke consistently warned of the potential for greater problems in the 
future if frustration with dealing with what is seen, by landowners, as 
inefficient government bureaucracy, worsens. While trying to fix the 
systemic and egregious problems that threatened appraisal integrity in 
the past, the centralization of the appraisal function has 
unintentionally caused inefficiencies in other processes that aid 
appraisal services. First, accountability for predictable and timely 
appraisal delivery has not been given proper attention. For instance, 
without a requirement for ASD to deliver appraisals in a timely or 
predictable manner, appraisers rarely negotiate appraisal time frames 
with client realty specialists, seek critical information from clients, 
or prioritize appraisal requests, which have led to lengthy delays in 
appraisal delivery. Lengthy delays can cause land management agencies 
to lose land acquisition opportunities and lose appropriated 
acquisition dollars. Second, some highly visible ASD business practices 
have unintentionally impacted appraisal delivery. The contracting 
function, for example, represents an additional cost to ASD, and adds 
substantial time to appraisal delivery compared to when the function 
was within the client agencies. While Interior has recognized the 
inefficiencies caused by having the contracting function in the 
National Business Center's Southwest Branch location, it hopes to 
remedy this by relocating the function to GovWorks in its Virginia 
office. It is too soon to tell whether this change will make the 
processes more efficient. However, if such efficiencies do not result 
from this change, Interior may wish to consider other alternatives, 
which could include relocating these functions back into the land 
management agencies.

While Interior gave much attention to ensuring independence and 
objectivity of appraisals, it kept appraisals for a majority of its 
land acquisition dollars outside of ASD's purview--thus allowing these 
appraisals to be subject to the same pressures that affected Interior's 
appraisers prior to the formation of ASD. Despite significant efforts 
to reform Interior's appraisal services, the majority of Interior's 
land acquisition dollars are tied to programs not requiring any federal 
review of appraisals. Consequently, the government has limited 
assurance that land valuations are accurate in real estate transactions 
with private parties valued at hundreds of millions of dollars each 
year.

Recommendations:

To ensure that land transactions are based on appraised values that 
adhere to recognized appraisal standards, the Secretary of the Interior 
should take the following steps:

≤  Ensure that ASD assigns appraisals requiring specialized skills--
such as minerals, timber, and water competencies--to appraisers and 
review appraisers with these skills.

≤  Establish and implement standardized review procedures for ASD's 
review appraisers, such as the use of appraisal checklists from the 
Uniform Appraisal Standards for Federal Land Acquisitions.

≤  Establish and implement a compliance inspection program, focusing 
particularly on appraisals with a higher likelihood of noncompliance.

To establish a better accountability framework for ASD to help meet 
clients' appraisal needs, we recommend that the Secretary of the 
Interior--in collaboration with ASD and the land management agencies it 
serves--take the following actions:

≤  Require ASD appraisers and land management agency realty specialists 
requesting work to negotiate and reach agreement on completion dates 
for appraisal requests, and hold ASD accountable for meeting these 
dates.

≤  Develop a system to prioritize appraisal requests that allows higher 
priority and more time-sensitive land transactions to be appraised in a 
timely fashion.

≤  Clarify, in the Service Level Agreements, who has responsibility for 
obtaining and providing appraisal information needed in order to 
complete an appraisal and review.

To help ensure greater efficiency of operations, we recommend that the 
Secretary of the Interior direct ASD to develop formulas reflecting 
market value for partial acquisitions that yield little revenue to the 
federal government--which are allowed by recognized appraisal standards.

To ensure that Interior's grant-in-aid land transactions currently 
conducted outside ASD's purview conform to recognized standards, we 
recommend that the Secretary of Interior direct the head of ASD, in 
collaboration with grant-in-aid program officials, to clarify the terms 
of ASD's involvement in the review of grant recipients' appraisals.

Agency Comments and Our Evaluation:

We provided the Department of the Interior with a draft of this report 
for review and comment. Its written comments are provided in appendix 
II. Interior generally agreed with our findings and recommendations and 
welcomes the reports' intent to improve the overall appraisal process 
and services provided through ASD and said that ASD will continue to 
strive to provide high quality valuations services. It also said that 
the recommendations further strengthen how it performs real property 
appraisals and that it is dedicated to addressing the recommendations 
promptly. With regard to our recommendations to ensure that ASD assigns 
appraisal workload requiring specialized skills to appraisers with such 
skills, establish and implement standardized review procedures, and 
establish and implement a compliance inspection program, Interior said 
that it was taking or planning several actions. On the issue of 
assigning appraisers with specialized appraiser skills, it said that 
ASD, in cooperation with the DOI University, is developing appraisal- 
specific training that will be first offered in January and February 
2007 and will be training sessions in appraisal review, which are 
required by the American Society Farm Managers and Rural Appraisers for 
their appraisal-review designations. It said that ASD has also 
established the Office of Minerals Evaluation in Denver, headed by a 
minerals expert, which is being staffed to meet the minerals valuation 
needs of ASD. Also, it said that it has begun better lines of 
communication with the client bureaus for expertise in such things as 
water rights. In addition, it said that as staff retire, it is 
replacing them with individuals who have greater levels of expertise. 
With respect to standardizing review procedures and implementing a 
compliance inspection program, it said that ASD has drafted and 
circulated an outline of such a program with the charge of finalizing a 
review process to be implemented during fiscal year 2007. It said that 
its intent is to use the compliance review process as a management tool 
to identify appropriate staffing levels and allocations, identify and 
target training needs, and assign accountability at the appraiser and 
reviewer levels.

Interior provided the following in response to our recommendations to 
(1) establish a better accountability framework for ASD to help meet 
client's appraisal needs by requiring ASD appraisers and land 
management agency realty specialists to reach agreement on appraisal 
completion dates, (2) develop a system to prioritize appraisal 
requests, and (3) clarify responsibility for obtaining and providing 
appraisal information. It said that ASD will be reinforcing the need 
for timely response to requests and that adherence will be monitored 
through the compliance review process. Also, accountability will be 
reinforced. It said that while ARRTS has an automatic notification 
feature if the requested completion date and projected completion date 
differ, the notification does not get generated if information in not 
entered in a timely manner into ARRTS. It also said that ASD recognizes 
that prioritization is a requisite to timely service to its clients. In 
this regard, it said that ASD has recognized the process used by the 
Midwest Region's Regional Appraiser's meetings with FWS realty managers 
as a best practice and has instituted this concept with all its client 
bureaus. Furthermore, Interior has established the National Appraisal 
Coordination Team comprised of ASD management and client bureau 
management, which meets quarterly to discuss prioritization issues. 
Interior also said that ASD will work with the bureaus to clarify the 
instructions found in ARRTS and in the Service Level Agreements for 
gathering and providing appraisal information.

We are encouraged by the actions Interior has outlined above for 
addressing the deficiencies noted in the report. With regard to the 
issue of assigning appraisers with specialized skills to perform 
appraisals requiring such skills, the training programs and staffing 
initiatives are steps in the right direction. However, some of these 
initiatives will take time before the staff have developed the skills 
needed to ensure that these specific appraisals in question meet 
appraisal standards. Providing the training, in and of itself, is no 
guarantee that the proper skills are used. Accordingly, we are also 
encouraged that the compliance inspection program being developed will 
involve processes to assess these efforts. However, as with any 
compliance program, the assessments occur after the fact with the 
intent of identifying actions to prevent future occurrences. Thus, 
until such time as the compliance program is in place, Interior should 
closely monitor the appraisals currently underway to assess compliance 
with appraisal standards, giving specific attention to the types of 
appraisals identified in our report. The steps outlined to address the 
timeliness of appraisal delivery are also positive. The key to their 
successes, particularly with regard to prioritizing appraisals, appear 
to be centered on the frequency with which meetings occur between ASD 
and the clients. Interior said that ASD has instituted the concept of 
meetings with all of its clients. It is not clear from these comments, 
however, the frequency with which these meetings will take place and 
what processes ASD and the clients will employ, such as negotiating 
timeframes for each appraisal request, to ensure that the correct 
priorities are placed on the lands needing appraisals and the 
appraisals already underway.

On our recommendation to develop formulas reflecting market value for 
partial acquisitions that yield little revenue to the federal 
government, Interior agreed that a more efficient process for these low 
value products must be developed. It identified several possible 
solutions, such as mass appraisal techniques, computer assisted mass 
appraisals, or automated valuation models, that it will research and 
subsequently implement if deemed appropriate, which should result in 
both efficiency and cost savings in the long term. As this effort 
progresses, it said that it regulatory changes may be required to 
eliminate firm requirements that bureaus charge fair market value for 
these minor land uses. These too are positive steps. However, the 
Department in its comments does not outline the timeframes in which 
these actions will occur. As the report points out, the costs of doing 
these appraisals are greater than the revenues generated. Thus, 
valuable resources performing these appraisals could be used elsewhere 
on higher priority needs. Accordingly, it is our view that Interior 
should identify a specific timeframe for taking the actions it plans.

Lastly, Interior agreed with our recommendation to clarify the terms of 
ASD's involvement in the review of grant recipients' appraisals. It 
said that it will evaluate procedural and resource implications of 
ASD's involvement in the many grant-in-aid programs and clarify the 
terms of ASD's involvement. These actions are also positive, but as 
mentioned above, Interior did not outline the timeframe for initiating 
and completing these actions.

Interior provided other comments for updating information in the report 
or for providing technical clarifications that we have incorporated, as 
appropriate.

Copies of this report will be sent to the Secretary of the Interior and 
other interested parties. We will also make copies available to others 
upon request. In addition, this report will be available at no charge 
on the GAO Web site at www.gao.gov.

If you have any questions about this report or need additional 
information, please contact me at (202) 512-3841 or nazzaror@gao.gov. 
Contact points for our Office of Congressional Relations and Public 
Affairs can be found on the last page of this report. Key contributors 
to this report can be found in appendix III.

Signed by: 

Robin M. Nazzaro:
Director, Natural Resources:
and Environment:

Appendix I: Scope and Methodology:

To determine the extent to which the Department of the Interior's 
(Interior) appraisal policies and procedures ensure compliance with 
recognized standards for appraisals, we examined current federal laws, 
regulations, and guidance regarding land appraisal requirements for 
Interior, as well as guidance for the Appraisal Services Directorate 
(ASD), the Bureau of Land Management (BLM), the Bureau of Reclamation 
(Reclamation), the Fish and Wildlife Service (FWS), and the National 
Park Service (NPS). We also evaluated 324 of the 2,905 appraisals 
completed from November 2003 through February 21, 2006 that, based on 
past audit reports and our experts' opinions, have a higher probability 
of noncompliance. These consisted of appraisals for land transactions 
involving land exchanges; land valued over $10 million; National 
Wildlife Refuge revenue-sharing; NPS acquisitions; and easements. These 
appraisals collectively represented 50 percent (nearly $3.2 billion) of 
the total value of the land appraised since ASD's inception through 
February 21, 2006. We identified these appraisals using ASD's appraisal 
database, the Appraisal Request and Review Tracking System (ARRTS). We 
identified 563 appraisals that met the criteria listed above. Ninety- 
six could not be obtained because appraisers in the Pacific Region 
could not locate them. Additionally, 143 appraisals from the 563 were 
not evaluated by our experts because the appraised dollar value was low 
and, after further consideration, the type of appraisals was not one 
identified in prior audits as having a higher probability of 
noncompliance. After testing the data for reasonableness and 
interviewing the administrator of ARRTS, we determined that the data 
from ARRTS was sufficiently reliable for our purposes. To evaluate 
these appraisals, we contacted the Appraisal Foundation--an 
independent, nonprofit educational organization dedicated to the 
advancement of professional valuation and authorized by Congress to 
establish, improve, and promote professional appraisal standards--to 
retain appraisal experts to assist in our evaluation. 

We retained four nationally recognized appraisal experts recommended by 
the Appraisal Foundation: Don Dorchester, Ron Hendricks, Henri LeMoyne, 
and John Widdoss. These appraisal experts evaluated the 324 appraisals, 
which included the associated ASD appraisal review, for compliance with 
appraisal requirements outlined in the two nationally recognized 
appraisal standards: Uniform Standards of Professional Appraisal 
Practices and Uniform Appraisal Standards for Federal Land 
Acquisitions. While we aimed to evaluate the entire population of 
appraisals having a higher likelihood of noncompliance, appraisers in 
ASD's Pacific Region could not locate nearly two-thirds of the 150 
appraisal reports we requested. The Regional Appraiser stated that the 
96 appraisal reports were lost when appraisers were moved from the land 
management agency workspaces into ASD workspaces. Because we were 
unable to evaluate 96 appraisals we requested from ASD's Pacific 
Region, we could not evaluate whether they met recognized appraisal 
standards.

To determine what, if anything, affects ASD's working relationships 
with its client agencies and its overall efficiency in providing 
appraisal services, we examined the guidance governing relationships 
between ASD and the National Business Center, and the client agencies 
in Interior: BLM, FWS, NPS, and Reclamation. This guidance includes 
federal laws and regulations, Interior regulations, agency and bureau 
policy manuals, and interagency agreements. We used ARRTS to analyze 
ASD's timeliness with completing appraisals and appraisal reviews. To 
assess ASD's working relationships with its client agencies, we 
conducted structured interviews with ASD's seven regional appraisers, 
who served as points-of-contact for communication between ASD and its 
client agencies. We also interviewed officials from ASD's client 
agencies regarding current appraisal procedures and the effect of these 
on the timeliness of appraisal delivery. To evaluate the overall 
efficiency of appraisal services, we identified ASD's billing and 
contracting procedures. In so doing, we talked to National Business 
Center officials in Washington, D.C.; Denver, Colorado; and Fort 
Huachuca, Arizona, to identify the services they provide ASD, the cost 
of these services, and the effect of these services, if any, on the 
timeliness of the appraisal process. We also spoke with officials from 
non-government agencies involved in Interior land acquisitions in 
California, Colorado, and New Mexico.

To determine the extent to which there are land appraisals under 
Interior that ASD does not have the responsibility of overseeing, we 
interviewed ASD officials and grant officials from FWS and NPS. Through 
these interviews, and through ARRTS, we identified nine grant programs 
that we found to have land acquisition activities. For these nine grant 
programs, we obtained appraisal requirements through documents such as 
policy manuals, agency regulations, and the guidance provided to grant 
recipients. We also interviewed officials that manage these grant 
programs. To obtain funding levels for land acquisitions conducted by 
the grant programs in fiscal year 2005, we reviewed budget documents 
and/or received budget information from grant officials.

Our work was conducted in accordance with generally accepted government 
auditing standards, including an assessment of internal controls, 
between December 2005 and August 2006.

Appendix II: Comments from the Department of the Interior:

TAKE PRIDE:

[See PDF for image]

[End of figure].

United States Department of the Interior: OFFICE OF THE ASSISTANT 
SECRETARY: POLICY, MANAGEMENT AND BUDGET: 
Washington, DC 20240:
SEP 22 2006:

Ms. Robin M. Nazzaro:

Director, Natural Resources and Environment: Government Accountability 
Office:
441 G Street, N.W.:
Washington, D.C. 20548:

Dear Ms. Nazzaro:

Thank you for the opportunity to review and comment on the Government 
Accountability Office (GAO) draft report "Interior's Land Appraisal 
Services: Actions Needed to Improve Compliance with Appraisal 
Standards" (GAO-06-1050).

The Department of the Interior (DOI) generally agrees with the GAO's 
findings and recommendations and welcomes the reports' intent to 
improve the overall Departmental appraisal process and services it 
provides through the DOI National Business Center Appraisal Services 
Directorate (ASD). In the fewer than three years since the ASD was 
formed, significant improvements in the way the Department of the 
Interior performs real property appraisals have been implemented. The 
most significant change was the realignment of the appraisal function, 
and appraisers, from the Bureau of Land Management (BLM), Bureau of 
Reclamation (Reclamation), National Park Service (NPS), and the Fish 
and Wildlife Service (FWS) into the National Business Center (NBC).

Other significant ASD accomplishments since November 2003 are as 
follows:

1. Requiring adherence to national appraisal standards.

2. Formulation of a professional appraisal organization within DOI.

3. Evaluation of skill levels and revised hiring and training practices 
to develop a cadre of professional appraisers to address specific, and 
complex, appraisal problems.

4. Deployment of a Department-wide tracking system that tracks 
appraisal requests, links to other systems to record time spent and 
costs, and enables workload planning.

5. Consolidation of appraisal staff under professional appraisal 
management, which has, for the first time in the Department of 
Interior's history, created career paths for appraisers.

6. In accordance with Secretarial order, established the independence 
of the appraisal process.

ASD achieved these advances in collaboration with Interior bureaus and 
offices an effective and efficient manner. ASD will continue to strive 
to improve our professionalism and provide the high quality valuations 
services.

The recommendations once implemented will further strengthen how the 
DOI performs real property appraisals. The Department is dedicated to 
addressing the GAO's recommendations promptly.

Recommendation 1:

To ensure that land transactions are based on appraised values that 
adhere to recognized appraisal standards, the Secretary of the Interior 
should take the following steps:

a. Ensure that ASD assigns appraisal workload requiring specialized 
appraisal skills, such as minerals, timber, and water competencies, to 
appraisers and review appraisers with these skills.

b. Establish and implement standardized review and procedures for ASD's 
review appraisers, such as the use of appraisal checklists from the 
Uniform Appraisal Standards for Federal Land Acquisitions.

c. Establish and implement a compliance inspection program, focusing 
particularly on appraisals with a higher likelihood of noncompliance.

DOI Response to Recommendation 1:

The Department agrees with this recommendation. Since the 
recommendation is comprised of three parts, each part is restated and 
responded to individually below.

Response to 1.a - Ensure that ASD assigns appraisal workload requiring 
specialized appraisal skills, such as minerals, timber, and water 
competencies, to appraisers and review appraisers with these skills.

ASD agrees that valuation assignments, both appraisals and reviews, 
should be completed by qualified appraisers and reviewers. The ASD 
appraisal staff; at the present time, is largely made up of the 
appraisers who were hired and trained by the bureaus. Within the limits 
of our resources, we are developing our staff to implement this 
recommendation. ASD is developing an appraisal-specific training track 
in cooperation with DOI University. The first offerings will be in 
January and February of 2007 and will be training sessions in Appraisal 
Review (four courses, with examinations, which are required by the 
American Society Farm Managers and Rural Appraisers (ASFMRA) for their 
appraisal-review designation-RPRA). Other courses will also be offered 
through DOI University for the staff including ASFMRA's A-34, Advanced 
Resource Appraisal, Natural Resource Appraisal seminar, and Minerals 
Appraisal seminar.

ASD (in conjunction with Office of Appraisal Services) has established 
the Office of Minerals Evaluation in Denver. This office is headed by a 
minerals expert and is being staffed to meet the minerals valuation 
needs of the ASD and OAS. While this is being largely funded by the 
OAS, to participate fully places an additional strain on ASD's 
resources. We have begun better lines of communication with the Client 
Bureaus for expertise in such things as water rights (where we have 
begun a working relationship with BLM water rights experts). One of our 
newer employees, Martin Wild, PhD, ARA, RPRA is a registered forester. 
Other staff appraisers who have similar expertise include Mark Davis, 
RPRA, Gerald Stoebig, MM, and Arlen Jacoby to name three - all of whom 
have been ASD employees since the consolidation.

ASD has been told by the Secretary to be a "professional" provider of 
valuation services to its clients. In order to meet that goal, the 
overall professionalism of its staff must be continually enhanced. One 
method to do this is through increased quantity and improved quality of 
training, which is being implemented throughout the organization.

Another way is to provide the vehicles for the staff appraisers to 
associate with other professionals on an ongoing basis. ASD has 
actively supported professional membership and advancement to 
designations by nationally recognized organizations.

A third way is to replace retirees or transfers with individuals who 
have greater levels of expertise. All of ASD's new appraiser hires over 
the last 18-months hold a professional designation - an ARA, MAI, or 
RPRA. These individuals have brought a fresh, and much broader, 
prospective to market valuations in the Department. Since the formation 
of ASD, there have been no fewer than three appraisers who have earned 
their Real Property Review Appraiser (RPRA) designation; two who have 
earned the ARA designation; and one who has earned the MAI designation. 
The proportion of designated appraisers in the ASD has increased since 
it was formed. In one region, Rocky Mountain, there has been a 150% 
increase in the number of appraisers holding the ARA, MAI, or RPRA 
designations. All of this increase has come from developing ASD's on- 
board staff.

Since its inception, ASD has, and will continue to, reinforce the 
requirement for adherence to standards in its appraisal and review 
processes.

Response to 1.b and 1.c.

Establish and implement standardized review procedures for ASD's review 
appraisers, such as the use of appraisal checklists from the Uniform 
Appraisal Standards for Federal Land Acquisitions (UASFLA).

and,

Establish and implement a compliance inspection program focusing 
particularly on appraisals with a higher likelihood of noncompliance.

ASD agrees with these recommendations. Having hired a Deputy Chief 
Appraiser for Compliance and Policy in February 2006, ASD took the 
initial steps toward implementing a formal Compliance Review program. A 
draft outline of a Compliance Review program was circulated in mid-May 
2006; a Compliance Review Team was appointed in June 2006 with the 
charge of finalizing a review process to be implemented during FY 2007; 
the review procedures are nearly finalized; and two pilot reviews are 
scheduled for October 2007. The pilot reviews will serve to train the 
review team and to test the procedures and practices that are proposed. 
The department's compliance review program will be fully implemented 
during FY 2007.

Findings of the compliance reviews will be provided to senior 
management, including Regional Appraisers on a region-by-region basis. 
It is the intent to use the compliance review process as a continuous 
improvement effort; a quality control tool; and as a management tool to 
identify appropriate staffing levels and allocations, identify and 
target training needs, and to assign accountability at the appraiser 
and reviewer levels.

A critical component of the compliance process is to establish 
consistency between and among the regions. Through its first review 
cycle, the compliance review program will be identifying best practices 
and ASD will then implement them throughout the ASD system. Such things 
as appraisal format, appraisal review format, and the forms used in the 
review process will be standardized and as appropriate, automated. The 
ASD Deputy Chief Appraiser for Compliance and Policy is developing an 
electronic version of Appendix A of UASFLA (Appraisal Report 
Documentation Checklist) to be used by all ASD review appraisers. ASD 
firmly believes, however, that the use of a checklist in the review and 
compliance process only performs part of the total function. A 
checklist only ensures that required components are present in an 
appraisal and/or review; it cannot ensure that the components are 
adequate, meet required standards, or support a credible value opinion. 
ASD will ensure that the standard process that is implemented does 
these things.

Recommendation 2:

To establish a better accountability framework for ASD to help meet 
client's appraisal needs, we recommend that the Secretary of the 
Interior ---in collaboration with the Appraisal Services Directorate 
and the land management agencies it serves ---take the following 
actions:

a. Require ASD appraisers and land management agency realty specialists 
requesting work to negotiate and reach agreement on completion dates 
for appraisal requests, and hold ASD accountable for meeting this date.

b. Develop a system to prioritize appraisal requests that allows higher 
priority and more time sensitive land transactions to be appraised in a 
timely fashion.

c. Clarify, in the Service Level Agreements, who has responsibility for 
obtaining and providing appraisal information needed in order to 
complete an appraisal and review.

DOI Response to Recommendation 2:

The Department agrees with this recommendation. Since the 
recommendation is comprised of three parts, each part is restated and 
responded to individually below.

Response to 2.a. - Require ASD appraisers and land management agency 
realty specialists requesting work to negotiate and reach agreement on 
completion dates for appraisal requests, and hold ASD accountable for 
meeting this date.

ASD agrees with the inclusion of the above as a recommended action. The 
inconsistency in establishing realistic completion dates for appraisal 
services leads to frustration on the part of both the client bureaus 
and the ASD appraisers and reviewers. The Appraisal Request and Review 
Tracking System (ARRTS) has an automatic notification feature if the 
requested completion date (entered by client) and the projected 
completion date (entered by ASD) do not agree. An email notification is 
sent to the submitter and the approver that includes the following 
language, "The projected completion date for the project is xx/xx/xxxx 
vs. the original requested completion date of xx/xx/xxxx." Upon review, 
there is room for improvement in the structure of the notification. For 
example, the generation of the report depends upon timely entry of the 
information by the engaging appraiser. If this is not done, no one 
receives the notification. ASD will be reinforcing the need for timely 
response to requests; adherence will be monitored through the 
compliance review process; and accountability, as previously indicated, 
will also be reinforced.

However, an appraisal, like many other types of projects, is subject to 
unforeseen circumstances. For appraisers, the key is to produce a 
credible appraisal (or review of an appraisal) by performing a scope of 
work suitable for the assignment. This is a Uniform Standards of 
Professional Appraisal Practices (USPAP) requirement. According to the 
USPAP SCOPE OF WORK Rule: "An appraiser must not allow assignment 
conditions to limit the scope of work to such a degree that the 
assignment results are not credible in the context of the intended use. 
"This rule also recognizes that the scope of work actually performed 
may differ from the scope of work initially planned: "Determining the 
scope of work is an ongoing process in an assignment. Information or 
conditions discovered during the course of an assignment might cause 
the appraiser to reconsider the scope of work "

An illustration of this is provided by USPAP Advisory Opinion 29 (AO- 
29):

An appraiser has agreed to complete an assignment in the next two days. 
While conducting research, the appraiser discovers that the primary 
data source for the assignment, a regional computer database, is off- 
line and will not be available for three days. What is the appropriate 
course of action?

The textbook answer to this situation is:

If an appraiser is unable to perform research that the appraiser's 
peers would conduct and intended users would expect, the appraiser must 
modify the assignment to allow time for the research to be conducted, 
or withdraw from the assignment.

ASD appraisers and review-appraisers do not have the option of 
withdrawing from the assignment. Nor do they, as professionals working 
under specific standards, have the option of finishing it with an 
inadequate scope. We must allow for adequate scopes of work to meet 
professional standards.

Incomplete appraisal requests play a significant role in the timeliness 
of an appraisal's delivery. For example, it is not uncommon for the 
realty specialists to request an appraisal before the critical elements 
to be considered in the analysis are discovered. In such cases, 
property boundaries are not clear when the request is submitted or 
Title Reports are either not included or not reviewed by the Realty 
staff sufficiently to identify elements such as water rights or 
easements which may ultimately impact the transaction's closing or its 
valuation. It is impossible for ASD to determine proper delivery dates 
before the real estate is clearly identified. Historically, the burden 
to identify these concerns was placed upon the appraiser. However, the 
appraiser is not the negotiator of the transaction and there could be a 
disconnect between the property valued and that which was negotiated 
for acquisition. This may call for additional attention to properly 
training realty staff to know exactly what they are acquiring for the 
USA may still be necessary. There has been success in this area. For 
example, the Forest Service encountered this same problem as they 
improved their appraisal delivery system. They are successful now 
because realty staff has been trained and the appraisal staff no longer 
accepts incomplete requests. We believe it is critical to the process 
that realty staff clearly identify the real estate before requesting an 
appraisal. (See further comment on this critical issue below.):

Response to 2.b. - Develop a system to prioritize appraisal requests 
that allows higher priority and more time sensitive land transactions 
to be appraised in a timely fashion.

ASD recognizes that prioritization is a requisite to timely service to 
its clients. It generally operates on a "first come, first served" 
basis. This works well when the number of clients is limited and the 
ASD staff is located relatively close to the client bureau. However, 
this is not as easy in ASD regions where there are numerous clients in 
several different cities.

The draft report makes mention of the Midwest Region's Regional 
Appraiser's meetings with FWS realty managers. This has been recognized 
by ASD as a "best practice" and, in April of 2006, ASD instituted the 
concept with all client bureaus. The concept has been modified to fit 
the needs of the regions where the client bureaus are located some 
distance from the ASD regional office, and where the bureaus themselves 
are dispersed in their organization - operating sometimes out of 
numerous field offices. In some cases monthly or quarterly telephonic 
conferences are held. In other regions the office leads and supervisors 
keep in close contact with their numerous clients by telephone and 
email. A major outcome of these discussions is the priority appraisal 
needs of the organization. Based on the discussion between the bureaus 
and ASD, the work is better prioritized. We believe it important that 
there be regular contact between appraisers and realty personnel is 
held. At least one region has reported, however, that they have seen 
some progress as a result of the monthly meetings.

ASD management has also begun quarterly meetings between ASD at the 
management level and the major client bureaus at the management level. 
Called the National Appraisal Coordination Team, the group held its 
organizational meeting in June and will reconvene in September. Future 
agenda items will include the need for coordinated prioritization of 
assignments at the regional level.

Response to 2.c. - Clarify, in the Service Level Agreements, who has 
responsibility for obtaining and providing appraisal information needed 
in order to complete an appraisal and review.

The documents and information required to assemble a request for an 
appraisal includes the information required for a prudent purchaser 
i.e., the client bureau manager, to make a well informed purchase 
decision (or for a prudent seller to make a well informed disposal 
decision.) The typical information required to even begin the award 
process for an appraisal assignment (whether to staff appraisers or 
contract appraisers) includes such information as: maps, including 
aerial photographs, a boundary map, topographic map; a full legal 
description; title to the property (including precise information as to 
ownership); improvements on the property to be valued; interests to be 
valued (water rights, minerals, timber (including timber contracts, if 
any), less than a fee interest, grazing leases or permits, etc.); any 
reservations proposed by the landowner; presence of hazardous 
substances; permission to enter the property; basic property 
information including directions to the property, physical and legal 
access (improved vs. trail), and any background information that may be 
helpful. For example, is it being facilitated by a third party, are 
there any controversies, etc. It is also important to know the intended 
users of the appraisal report. Most, if not all, of this information is 
required to make an informed purchase about long term management of the 
property, and decisions about disposition of the property. It is 
required to assemble a request for appraisal services.

Based on the recommendation, ASD will work with the bureaus to clarify 
the instructions found in ARRTS (which contains relatively specific 
requirements for data submission) and in the Service Level Agreements. 
We have been informed that the US Forest Service specifically requires 
that all requests for appraisals be accompanied by the information 
outlined in the previous paragraph. The USFS also indicated to us that 
if the information was not included, the request was returned to the 
requester as incomplete. ASD will work with the bureaus to develop 
standards for the submission of information needed for an appraisal.

Recommendation 3:

To help ensure greater efficiency of operations, we recommend the 
Secretary of the Interior direct ASD to develop formulas reflecting 
market value for partial acquisitions that yield little revenue to the 
federal government --which are allowed by recognized appraisal 
standards.

DOI Response to Recommendation 3:

The Department agrees with this recommendation.

A more efficient process for these "low value/return" products must be 
developed. There are several possible solutions, including the use of 
Mass Appraisal techniques. "CAMA", or Computer Assisted Mass 
Appraisals, have been used in the property assessment community for 
years. While they may not be directly adaptable to the needs of DOI, 
the basic premises and fundamentals of CAMA should be explored. 
Automated Valuation Models ("AVM") may have some applicability and the 
use of limited-scope appraisals may also be part of a practical 
solution. Researching these alternatives and subsequently implementing 
them if it is determined to be appropriate should result in both 
efficiency and cost savings in the long term. As the effort progresses, 
regulatory changes may be required to eliminate firm requirements that 
bureaus charge "fair market value" for these minor land uses. When used 
in regulations, the term "fair market value" is generally perceived to 
mandate an appraisal. Language similar to that in BLM's rights-of-way 
regulations at 43CFR2806.50 would allow greater flexibility and 
efficiency while still assuring fair return to the government for these 
land uses. As we have noted elsewhere, OMB Circular A-25 does not 
require appraisals for agencies to set user fees or charges for use of 
government property.

Enclosure:

Recommendation 4:

To ensure that Interior's grant-in-aid land transactions currently 
conducted outside ASD's purview conform to recognized standards, we 
recommend that the Secretary of Interior direct the head of Appraisal 
Services Directorate, in collaboration with grant-in-aid program 
officials, clarify the terms of ASD's involvement in the review of 
grant recipients' appraisals.

DOI Response to Recommendation 4:

The Department agrees with this recommendation.

ASD, as was correctly pointed out in the draft report, is occasionally 
asked to participate in the oversight of some grants-in-aid appraisals 
through the provision of review services. In some instances, the ASD 
and the grant recipient have begun active communications and 
coordination of the entire appraisal process.

The Department will evaluate procedural and resource implications of 
ASD involvement in the many grant-in-aid programs and will clarify the 
terms of ASD's involvement.

In summary, Interior concurs with the concerns and recommendations 
expressed in the report. ASD, over the three years since its formation, 
has identified several of the weaknesses and concerns identified in the 
report and has taken corrective actions, some of which are in their 
implementation phase. The recommendations contained in the draft 
report, in our view, reinforce the actions that have been taken to date 
as well as those that are being implemented.

We appreciate the examination and GAO's interest in DOI's efforts to 
resolve long standing appraisal concerns within the Department. Thank 
you for the opportunity to work with your team during its review of 
Interior's Land Appraisal Services. If you have any questions, please 
contact Dean Martin, Audit Liaison Officer, National Business Center, 
303-969-5195.

Please refer to the enclosure for additional technical comments 
provided for your consideration.

Sincerely,

Signed by:
R. Thomas Weimer:
Assistant Secretary:

Appendix III: GAO Contact and Staff Acknowledgments:

Contact: Robin Nazzaro (202) 512-3841:

Staff Acknowledgments: Individuals making key contributions to this 
report included Nathan Anderson, Phillip Farah, Richard Johnson, Roy 
Judy, Paul Kinney, Michael Krafve, Jay Smale, and Arvin Wu.

FOOTNOTES

[1] Market value is the amount in cash, or on terms reasonably 
equivalent to cash, for which in all probability the property would 
have sold on the effective date of the appraisal, after a reasonable 
exposure time on the open competitive market, from a willing and 
reasonably knowledgeable seller to a willing and reasonably 
knowledgeable buyer, with neither acting under any compulsion to buy or 
sell, giving due consideration to all available economic uses of the 
property at the time of the appraisal. 

[2] The Appraisal Foundation, a nonprofit educational organization 
dedicated to the advancement of professional valuation, was established 
in 1987 and authorized by Congress as the source of appraisal standards 
and appraiser qualifications. 

[3] In general, two sets of standards apply to appraisals of federal 
land: (1) the Uniform Standards of Professional Appraisal Practice, 
developed in 1986-1987 and annually updated by the Appraisal Standards 
Board of The Appraisal Foundation; and (2) the Uniform Appraisal 
Standards for Federal Land Acquisitions, revised in 2000 by the 
Interagency Land Acquisition Conference, a voluntary organization 
composed of representatives of federal agencies that acquire land. 
Established in 1968, this organization is chaired through the 
Department of Justice. 

[4] The Appraisal Foundation: Evaluation of the Appraisal Organization 
of the Department of Interior Bureau of Land Management, Washington, 
D.C., October 9, 2002. 

[5] "Highest and best use" is defined as the land's use that is 
physically possible, legally permissible, financially feasible, and 
maximally profitable.

[6] Interior's Office of Inspector General, Land Acquisitions Conducted 
with the Assistance of Nonprofit Organizations, Report No. 92-I-833, 
Washington, D.C., May 1992.

[7] Interior's Office of Inspector General, Managing Land Acquisitions 
Involving Non-Federal Partnerships, Department of the Interior, Report 
No. W-IN-MOA-0085-2004, Washington, D.C., September 2005.

[8] Interior, Office of Inspector General. Audit Report: Follow up of 
Nevada Land Exchange Activities, Bureau of Land Management, Report No. 
98-I-689, Washington, D.C., September 1998. 

[9] Similar data for fiscal year 2005 is not available due to a 
limitation in the ARRTS data system at that time. 

[10] Officials at the Southwest Branch did not supply comprehensive 
data in this regard, despite our request. 

[11] The Uniform Appraisal Standards for Federal Land Acquisitions 
states that it is "important to obtain the contract services of the 
best qualified appraisers available within the agencies' rules 
governing the contracting process. While price is certainly a 
consideration, more important factors are general appraisal experience, 
education, professional reputation, experience in conducting appraisals 
for federal land acquisitions under these standardsÖand demonstrated 
competency."

[12] Under "best value" considerations, agencies take into account 
other factors in addition to price in awarding a contract, including 
the quality of the services offered and the bidder's prior performance

[13] GovWorks is a fee-for-service organization that delivers 
regulation-compliant contract administration and support. It joined 
Interior's National Business Center in October 2005.

[14] The American Society of Farm Managers and Rural Appraisers is 
dedicated to maintaining a professional group of farm managers, rural 
appraisers, and review appraisers. 

[15] The Uniform Appraisal Standards for Federal Land Acquisitions 
allows for low land valuations to be completed through an alternative 
method of valuation, such as an administrative formula. 

[16] FWS and NPS do not use similar schedules because they have so few 
cases of such land use by private entities, according to officials with 
these agencies. Instead, they rely solely on appraisals conducted by 
ASD. Reclamation's land management policies currently call for full 
land appraisals to be used to calculate lease payments. 

[17] While federal regulations generally require a person acquiring 
land with federal assistance to have an appraisal review process, many 
acquisitions under grant-in-aid programs qualify for exceptions to the 
regulations. 

[18] UASFLA D-6, see also USPAP Standard Rule 1-3(a).

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