Federal Buildings Fund:
Improved Transparency and Long-term Plan Needed to Clarify Capital Funding Priorities
GAO-12-646: Published: Jul 12, 2012. Publicly Released: Aug 2, 2012.
What GAO Found
The Federal Buildings Funds (FBF) balance has increased from $56 million in fiscal year 2007 to $2.2 billion in fiscal year 2012 primarily due to the growing difference between the resources provided to the FBF and the General Services Administrations (GSA) use of these funds as determined through the budgeting and appropriations process. In the last 2 years, Congress has provided fewer resources than requested by the executive branch and generated by the FBF. Office of Management and Budget (OMB) staff and GSA officials stated that if GSA were able to spend all of the funds collected by the FBF each year, these funds would generally be sufficient to fund GSAs needs. However, GSA, through the annual Presidents Budget Request, has sought less obligational authority than the balance available in the fund. While the FBFs balance has increased, various factors have limited the funds income. Funds from operationsrevenue less costs excluding depreciationthat contribute to FBF income have declined from 2006 to 2011 when adjusted for inflation. Revenues have declined while costs have outstripped inflation over this time period. In addition, portions of GSAs inventory operate at a loss. For example, about 30 percent of GSAs owned assets lost money in 2011, while GSAs total leased portfolio lost about $75 million. Despite the losses in its leased portfolio, GSA continues to rely extensively on leasing. GSA is taking steps to reduce the size of its overall real estate portfolio.
GSA has identified $4.6 billion in maintenance and repairs expected from 2012 to 2021 and anticipates that nearly a quarter of this amount is needed immediately. However, funding for maintenance and repairs has declined since 2006. GSA officials noted that reduced funding for capital reinvestments could result in deferred maintenance and repairs, and increase the cost and extent of such work in the future. These concerns are consistent with the National Research Councils findings that each $1 in deferred maintenance and repair work results in a long-term capital liability of $4 to $5.
GSAs use of information to make capital investment decisions conforms to some leading practices from GAO and OMB guidance, but GSA lacks a transparent process for prioritizing projects and a comprehensive long-term capital plan that fully aligns with leading practices. GSA keeps a baseline of information on its assets and needsas leading practices suggestthrough various tools and databases. GSAs process and guidance for evaluating capital investment alternatives substantially meet leading practices as its project planning process explores alternatives to meeting investment needs. GSAs process for prioritizing capital investments partially meets leading practices, but its project prioritization transparency could be improved by laying out in its annual budget submission how it uses its criteria to determine which projects get selected for funding over others. In addition, an improved comprehensive long-term capital plan could further GSAs ability to make informed choices about long-term investment decisions. Both OMB and GAO guidance emphasize the importance of developing a long-term capital plan to guide the implementation of organizational goals. Having such a plan would enable GSA and Congress to better evaluate a range of priorities over the next 5 years. In short, more transparency through a comprehensive long-term capital plan would allow for more informed decision making by GSA and Congress among competing priorities.
Why GAO Did This Study
GSA serves as the primary steward of the federal governments civilian real property portfolio of nearly 10,000 assets. Since 1972, GSA has funded its real property acquisition, operation, maintenance, and disposal through the rent it collects from tenant agencies that is deposited into the FBF. GAO has previously reported, however, that the FBF has faced difficulty providing sufficient resources to support GSAs mission.
GAO was asked to examine (1) the factors affecting the resources in the FBF, (2) GSAs potential repair liability and the implications for the FBF, and (3) the information GSA considers when evaluating capital investments and how these practices compare to leading practices for prioritizing capital investments. GAO reviewed legislation and GSA documents and compared leading practices on making capital investment decisions from OMB and GAO capital planning guidance to GSA practices. GAO also analyzed budget and financial data from fiscal years 2006 through 2012, facility condition data from fiscal year 2011, and interviewed GSA officials and OMB staff.
What GAO Recommends
GAO recommends that GSA (1) document in its budget submission how it prioritizes capital investments and (2) develop and annually submit a 5-year long-term capital plan to OMB and Congress. GSA agreed with our recommendations. Technical comments from GSA and OMB were incorporated as appropriate.
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Recommendations for Executive Action
Status: Closed - Implemented
Comments: In 2012, GAO reported that GSA's process for prioritizing capital investment projects partially met leading practices, but its transparency could be improved. Specifically, GSA's project prioritization process did not fully incorporate elements of leading practices such as promoting transparency in ranking projects, evaluating projects as a single portfolio, considering a long-term capital plan when ranking projects, and considering risk. GAO found GSA's project prioritization process lacked transparency in that we were unable to determine how GSA used its criteria to prioritize major projects amongst each other, how or whether criteria are weighted in any way, and why certain projects are ultimately selected over others. Also, GSA's project prioritization criteria lacked explicit consideration of risk. A senior GSA official told GAO that risk is considered throughout the project development process, if not the prioritization process, but GAO found that GSA did not document how risk is considered, if at all, during prioritization. Without having risk as an explicit criterion in its prioritization criteria, GSA cannot ensure that projects that are inherently risky are ranked to reflect this. Therefore, GAO recommended that GSA document in its budget submission how it prioritizes capital investments. In 2016, GAO confirmed that GSA developed a corrective action plan that included developing prioritized criteria to rate project proposals, using a decision-making software tool to assist in project selection, and providing OMB with documentation related to the criteria. In particular, GSA developed prioritization criteria and used the decision-making software tool in building a prioritized list of repair and alteration projects that it first included in its fiscal year 2014 budget request to OMB. GSA included a 5-year capital project plan in its 2016 and 2017 budget requests to OMB and Congress. For both years, GSA also provided OMB the criteria upon which capital projects were prioritized, and according to GSA officials, the agency's use of its decision-making software tool has been part of its budget conversations with OMB. As a result of these actions, GSA has provided greater insight into how it prioritizes its capital projects which better enables Congress to understand the rationale behind prioritized project lists and that GSA is maximizing return on FBF investments. With more information on how GSA prioritizes its capital investment projects, GSA is in a better position to ensure that decision makers within the executive branch and Congress understand why the projects proposed by GSA merit selection when measured against competing priorities, both within and outside of GSA's portfolio.
Recommendation: To enhance transparency, allow for more informed decision making related to GSA's real property priorities, and make a stronger case for using funds in the FBF to meet capital investment needs, the Administrator of GSA should document in its annual budget request to OMB how GSA uses its prioritization criteria to generate its annual and 5-year lists of prioritized projects to ensure that Congress understands the rationale behind prioritized project lists and that GSA is maximizing return on FBF investments.
Agency Affected: General Services Administration
Status: Closed - Implemented
Comments: In 2012, GAO reported that GSA's long-term capital plan minimally conforms to leading practices, which could limit GSA's ability to make fully informed choices about long-term investment decisions. Both GAO and OMB guidance emphasize the importance of developing a long-term capital investment plan to guide the implementation of organizational goals and objectives and to help decision makers establish priorities over time. GAO found that GSA had developed a 5-year prioritized list of projects; however, this plan lacked information similar to what might be found in a comprehensive long-term capital plan. GSA's 5-year plan also did not lay out GSA's baseline of needs and where there might be gaps in what GSA's real property portfolio provides. In addition, the 5-year plan did not consider alternative courses of action, the implications of varying budget levels and revenue forecasts, or include a risk management summary that includes an analysis of alternative ways of meeting program objectives should disruptions occur. As a result, GSA lacked a comprehensive analysis of options over a 5-year period given funding variability and how long-term investment decisions affect them. In discussing challenges related to long-term capital planning, GSA officials said that fluctuating levels of annual obligational authority creates uncertainty that affects their ability to implement long-term plans, requiring adjustments to both the long-term plan and annual budget requests. While GSA does face uncertainty regarding the needs of its customers and its annual level of obligational authority, leading long-term capital planning practices suggest that there is still value to establishing organizational priorities over time and considering alternatives to meeting organizational goals given funding constraints and uncertainties about agency needs. Therefore, GAO recommended that GSA develop and publish a comprehensive 5-year capital plan and include a summary of it annually in its budget request to OMB and Congress. In 2016, GAO confirmed that GSA developed a corrective action plan that included developing prioritized criteria to rate project proposals, using a decision-making software tool to assist in project selection, and providing OMB with documentation related to the criteria. In particular, GSA developed prioritization criteria and used the decision-making software tool in building a prioritized list of repair and alteration projects that it first included in its fiscal year 2014 budget request to OMB and Congress. GSA plans to expand its use of the prioritization criteria and decision-making software tool to develop 5-year capital project plans in the future, but currently develops a 5-year plan without the aid of this tool and criteria. GSA included a 5-year capital project plan in its 2016 and 2017 budget requests to OMB and Congress and will work with OMB to update its 5-year capital plan in 2018. With such plans GSA and Congress are better able to evaluate the full range of real property priorities for using funds in the Federal Building Fund both over the next 5 years and annually and, should fiscal constraints so dictate, identify which might take precedence over others.
Recommendation: To enhance transparency, allow for more informed decision making related to GSA's real property priorities, and make a stronger case for using funds in the FBF to meet capital investment needs, the Administrator of GSA should develop and publish a comprehensive 5-year capital plan and include a summary of it annually in its budget request to OMB and Congress to help ensure that long-term goals are fully considered when making decisions and to document how GSA would spend needed FBF funds.
Agency Affected: General Services Administration