Overseas Real Estate:

Millions of Dollars Could Be Generated by Selling Unneeded Real Estate

NSIAD-96-36: Published: Apr 23, 1996. Publicly Released: Apr 23, 1996.

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Benjamin F. Nelson
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GAO reviewed the Department of State's excess or underused overseas real estate, focusing on: (1) property that potentially could be sold to provide funds for other real estate needs; (2) State's problems in determining which properties to sell; and (3) how State uses proceeds from real estate sales.

GAO found that: (1) from 1990 to 1995, State sold $133 million in real estate, which was a small part of its total excess or underused property; (2) State does not have a standard process for identifying and selling excess or underused real estate; (3) in practice, excess or underused property is not identified or sold without the assistance of an embassy; (4) the use of the funds from property sales is the only incentive that the embassies have to identify and sell excess or underused real estate; (5) State does not ensure that the profits from the sale of property go to its most urgent real estate needs worldwide; and (6) the proceeds from the sale of property are generally allowed to be used by the corresponding embassy.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The 104th Congress: (1) reduced State's appropriation by $12 million assuming the sale of the Bermuda residence; and (2) directed State to establish the real estate advisory board.

    Matter: Because the Department of State has not indicated support for the recommendations intended to better identify and dispose of excess property, and account for sales proceeds, Congress may wish to direct State to take action to implement them.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In April 1997, State established a real property advisory panel consisting of 7 members (4 State officials and 3 real estate professionals from outside State) to review properties for potential sale and make recommendations to the Assistant Secretary for Administration.

    Recommendation: The Secretary of State should establish an independent panel to make recommendations regarding the sale of excess real estate to reduce the current inventory of property. In establishing this panel, the Secretary should consider appointing representatives from the Office of the Inspector General and the Bureau of Finance and Management Policy as well as private-sector representatives with overseas real estate experience.

    Agency Affected: Department of State

  2. Status: Closed - Implemented

    Comments: Excess property reviews are being performed as part of the State Inspector General's inspection process of all missions. The Department of State believes that no additional action is warranted.

    Recommendation: To provide a routine process for expeditiously resolving disagreements between the Office of Foreign Buildings Operations (FBO) and the embassies, the Secretary of State should require FBO and the embassies to report annually to the Under Secretary for Management on all properties identified as excess where FBO and the embassies have not agreed on whether to retain or sell such properties. As part of the process, the Secretary should require the embassies to certify annually that they have: (1) reviewed their property holdings to identify properties that are excess to embassy requirements, not being fully utilized, or uneconomical to retain; and (2) reported any excess property to FBO.

    Agency Affected: Department of State

  3. Status: Closed - Not Implemented

    Comments: The agency reports that it is difficult to forecast sales proceeds. Further, if anticipated receipts are used to offset budget requests and are not realized, this could lead to funding shortfalls.

    Recommendation: The Secretary of State should include estimated receipts from real estate sales in the annual congressional budget request.

    Agency Affected: Department of State

  4. Status: Closed - Implemented

    Comments: Beginning with the FY1997 budget submission, the agency reported its worldwide requirements, priorities, and more formation on use of proceeds. However, with few exceptions, there is no correlation between purchases and the list of high-priority needs.

    Recommendation: The Secretary of State should establish a formal process for approving and documenting the use of sales proceeds and require that their use for other than justified replacement property be weighed against critically analyzed worldwide requirements.

    Agency Affected: Department of State

  5. Status: Closed - Implemented

    Comments: Per OMB instruction, State established a separate account within the Security and Maintenance of U.S. Missions appropriation account to control and account for sales proceeds. The effective date is October 1, 1997.

    Recommendation: The Secretary of State should improve the internal financial controls to better document and account for the receipts and expenditures of sales proceeds and provide a sound basis for reporting to the Congress on the receipt and use of sales proceeds. Creating a separate account for sales proceeds should be the first step.

    Agency Affected: Department of State


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