State Department
Sale of Unneeded Overseas Property Has Increased, but Further Improvements Are Necessary Gao ID: GAO-02-590 June 11, 2002The U.S. government owns about 3,500 properties overseas at more than 220 locations, including embassy and consular office buildings, housing, and land. The Department of State is responsible for acquiring, managing, and disposing of these properties. In 1996, GAO reported that the State Department did not have an effective process for identifying and selling unneeded overseas real estate, and that decisions concerning the sale of some properties had been delayed for years because of parochial conflicts among the parties involved. The State Department has taken steps to implement a more systematic process for identifying unneeded properties by (1) requesting posts to annually identify excess, underutilized, and obsolete property and (2) requesting its own staff and Inspector General officials to place greater emphasis on identifying such property when they visit posts. The State Department has significantly increased its sales of unneeded properties in the last 5 years. From 1997 through 2001, it sold 104 overseas properties for over $404 million, almost triple the proceeds compared with the previous 5 year period. However, the department still has a large number of unneeded properties that have not yet been sold. The State Department has not effectively implemented recommendations made by the Real Property Advisory Board to sell unneeded property. State has disposed of only 7 properties of the 26 recommended for sale by the board.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-02-590, State Department: Sale of Unneeded Overseas Property Has Increased, but Further Improvements Are Necessary
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United States General Accounting Office:
GAO: Report to the Chairman, Subcommittee on National Security,
Veterans
Affairs, and International Relations, Committee on Government
Reform,House of Representatives:
June 2002:
State Department: Sale of Unneeded Overseas Property Has Increased, but
Further Improvements Are Necessary:
GAO-02-590:
Contents:
Letter:
Results in Brief:
Background:
State Department Has Taken Steps to Identify Unneeded Properties but
Needs to Improve Inventory Database Accuracy:
Real Estate Sales Have Grown, but a Significant Number of Properties Is
Still Unsold:
State Department Has Not Yet Sold Most Properties Recommended by the
Advisory
Board:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Scope and Methodology:
Appendix I: Disputed Properties Reviewed by the Real Property Advisory
Board: :
Appendix II: Comments from the Department of State:
GAO Comments:
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Staff Acknowledgments:
Tables:
Table 1: Reasons That 19 Property Sales Have Been Delayed:
Table 2: Analysis of the Properties Submitted to the Real Property
Advisory Board from April 1997 through December 2000:
Figures:
Figure 1: Sales Proceeds from Properties Sold, Fiscal Years 1992
through 2001:
Figure 2: Real Property Advisory Board Recommendations for 41
Properties as of November 15, 2001:
Abbreviations:
IG: Office of the Inspector General
OBO: Bureau of Overseas Buildings Operations:
United States General Accounting Office:
Letter:
June 11, 2002:
The Honorable Christopher Shays Chairman, Subcommittee on National
Security, Veterans Affairs, and International Relations Committee on
Government Reform House of Representatives:
Dear Mr. Chairman:
The U.S. government owns about 3,500 properties overseas at more than
220 locations, including embassy and consular office buildings,
housing, and land. The Department of State is responsible for
acquiring, managing, and disposing of these properties. In 1996, we
reported that the State Department did not have an effective process
for identifying and selling unneeded [Footnote 1] overseas real estate,
and that decisions concerning the sale of some properties had been
delayed for years because of parochial conflicts among the parties
involved. [Footnote 2] As a result, the State Department was retaining
millions of dollars of unneeded real estate. To address this problem,
we recommended that the State Department establish an independent panel
to decide which properties should be sold. The Congress, noting our
recommendation, directed the secretary of state to create an advisory
board on real property management. In April 1997, the State Department
created the Real Property Advisory Board to review disputed properties
and make recommendations to the under secretary of state for
management. [Footnote 3]
In response to your request that we assess the State Department‘s
processes for, and performance in, identifying and selling unneeded
overseas real estate, this report discusses (1) steps taken by the
State Department to improve its process for identifying unneeded
properties, (2) its performance in selling unneeded properties, and (3)
whether it has implemented the Real Property Advisory Board‘s
recommendations to sell disputed properties. In addition, during the
course of our work we identified legislation [Footnote 4] that affects
the department‘s ability to sell residences purchased for agricultural
attachés. We are reporting separately to you on this matter.
We reviewed the sales status of properties that the State Department,
its Office of the Inspector General (IG), and our office had previously
identified as excess, underutilized, or obsolete. We also analyzed the
department‘s worldwide inventory and property files, focusing on 35
overseas posts that had vacant properties, high-value properties, or
one or more properties that had been identified for potential sale. We
also interviewed key State Department officials and a member of the
Real Property Advisory Board.
Results in Brief:
The State Department has taken steps to implement a more systematic
process for identifying unneeded properties by (1) requesting posts to
annually identify excess, underutilized, and obsolete property and (2)
requesting its own staff and IG officials to place greater emphasis on
identifying such property when they visit posts. These steps have
resulted in department officials‘ placing greater emphasis on
identifying unneeded property. However, the department‘s property
inventory database contains inaccuracies, which may cause some
potentially unneeded properties not to be identified. This has been a
long-standing problem. For example, a parking lot in Paris, purchased
in 1948 and currently valued at up to $10 million, was not included in
the inventory until after a 1998 IG visit highlighted its omission.
The State Department has significantly increased its sales of unneeded
properties in the last 5 years. From 1997 through 2001, it sold 104
overseas properties for over $404 million, [Footnote 5] almost triple
the proceeds compared with the previous 5-year period. However, the
department still has a large number of unneeded properties that have
not yet been sold. To expedite sales, the State Department has recently
initiated several actions, such as using ’business case“ sales analyses
aimed at ensuring that decisions are based on sound economic and
financial factors, increasing the use of commercial real estate
marketing services, and attempting to more aggressively resolve
property disputes.
The State Department has not effectively implemented recommendations
made by the Real Property Advisory Board to sell unneeded property.
State has disposed of only 7 properties [Footnote 6] (for about $21
million) of the 26 recommended for sale by the board. Sales of the
remaining 19 properties, valued at about $70 million, have been delayed
pending (1) resolution of disputes with the host governments that are
restricting property sales, (2) acquisition of suitable replacement
properties, or (3) actions by post and headquarters officials to
initiate the sales process. Because of these delays, the board has
reexamined the status of each property multiple times, causing some
board members to become frustrated. Department officials said they have
begun a concerted effort to resolve impediments and expedite the sale
of these properties as the Congress intended.
We are recommending that the secretary of state take action to improve
the accuracy of the real property inventory. The State Department, in a
letter commenting on a draft of this report, responded that it believes
the report is a fair and accurate representation of the department‘s
efforts to dispose of unneeded real property overseas. The department
added that it is in total agreement with our recommendation and has
already taken action to implement it. A reprint of the department‘s
letter is contained in appendix II.
Background:
The Foreign Buildings Act of 1926, as amended, authorizes the secretary
of state to sell, exchange, or lease any property acquired abroad that
is used for diplomatic and consular establishments in foreign
countries. [Footnote 7] The law authorizes the secretary to use the
sales proceeds to acquire and maintain other property overseas. It also
requires the secretary to report such transactions to the Congress with
the department‘s annual budget estimates. The secretary of state
delegated the secretary‘s authority under the law to the Bureau of
Overseas Buildings Operations (OBO). [Footnote 8] Thus, OBO is
responsible for establishing and overseeing policies and procedures for
the department‘s real estate properties.
In 1996, we reported that the State Department did not have a
systematic process for identifying unneeded properties and disposing of
them. At that time, the department identified potentially unneeded
properties through a variety of ad hoc and uncoordinated actions that
we believed did not constitute an organized and effective system for
identifying such properties. We also reported that decisions about the
sale of unneeded overseas real estate properties had been delayed for
years because of disputes between OBO and the regional bureaus and
embassies. [Footnote 9] To speed these decisions by providing a final,
authoritative forum for the disputing parties to argue their positions,
we recommended that the State Department establish an independent panel
to review disputed properties and decide which ones should be sold.
In September 1996, the Congress directed the secretary of state to
establish an advisory board on real property management to (1) review
information about properties proposed for sale and (2) compile a list
of properties recommended for sale to be approved by the under
secretary of state for management. [Footnote 10] The Congress also
directed the State Department to transmit this list to the appropriate
congressional committees and to ’proceed with the immediate sale of
[properties] on the approved list“ as soon as market conditions were
appropriate.
In response to the congressional direction, in April 1997, the
assistant secretary of state for administration created the Real
Property Advisory Board to review and make recommendations about the
sale of disputed properties. The advisory board‘s charter authorizes a
seven-member panel appointed by the under secretary of state for
management [Footnote 11] consisting of three real estate professionals
from outside the State Department and four high-ranking department
officials. The board is authorized to (1) review information on
properties proposed for sale by the State Department, the State IG, our
office, or any other federal agency and (2) compile a list of
properties recommended for sale to be approved by the under secretary
of state for management. [Footnote 12] The charter directs the
advisory board to meet at least once each fiscal year and to proceed
’as far as possible“ by consensus in deciding which properties to
recommend for sale.
A 1999 State IG‘s report found that the State Department had
substantially complied with the Congress‘s intent (and our 1996
recommendation) in drafting the advisory board‘s charter and reporting
the board‘s actions to the Congress. [Footnote 13] The report also
found that the advisory board had functioned in a manner consistent
with its charter, and that its recommendations were based on sufficient
and balanced information.
State Department Has Taken Steps to Identify Unneeded Properties but
Needs to Improve Inventory Database Accuracy:
Since 1996, OBO has taken steps to implement a more systematic process
for identifying unneeded properties, which has resulted in post and OBO
officials‘ placing greater emphasis on identifying properties that
could be sold. Steps reflecting this emphasis include an annual request
to posts asking them to identify government-owned properties that
should be considered for disposal and increased efforts by OBO and IG
officials to identify such properties when they visit posts. However,
the department‘s ability to monitor property use and identify
potentially unneeded properties is hampered by weaknesses in its
property inventory system.
Annual Certification Process Identifies Potentially Unneeded
Properties:
In response to our 1996 report, OBO began asking posts during an annual
property inventory to identify properties that should be considered for
disposal. OBO has included this request as part of State‘s annual
chiefs of mission certification that posts are in compliance with the
Foreign Affairs Manual in regards to the management of real property.
This process has helped the State Department to more systematically
identify unneeded property. For example, in 2001, OBO cabled all posts
for this purpose in July and sent follow-up cables to unresponsive
posts in August. OBO‘s initial cable requested that posts report all
government-owned real property that should be considered for disposal,
including properties for which posts had disposal processes under way.
Posts were instructed to include excess office space, excess and
oversized/overstandard housing, vacant or underutilized lots,
properties used infrequently or for purposes such as unofficial
business, and any other properties that could be considered appropriate
for disposal. OBO officials explained that the effectiveness of this
identification effort depended on posts‘ responding fully and promptly.
In 2001, almost all posts complied. As a result of this process, the
department identified 130 potentially unneeded properties.
Actions by OBO and State‘s IG to Identify Unneeded Properties:
In addition to the annual post certification process, the director of
OBO has instructed bureau officials to emphasize identification of
unneeded property. For example, OBO officers have been instructed to
pay more attention to identifying potentially disposable property
during post visits to oversee and resolve real estate issues. OBO
officials said this increased emphasis has helped posts and OBO to
continually focus on the need to dispose of unneeded property.
The State Department‘s IG reviews property use issues as part of its
regular inspections. In addition, in February 1998, the under secretary
for management asked the IG to specifically include identification of
excess, underutilized, and obsolete properties as part of the IG‘s
inspections and audits at overseas posts and to provide periodic
summaries on these data collection efforts. This work was aimed at
identifying potentially excess, underutilized, and obsolete properties
on the basis of existing criteria and was not a substantive review of
the reasons why posts should or should not retain these properties. It
ended in June 2001 by mutual consent between the IG and the under
secretary for management, but the IG still reviews property status and
use as part of its post inspections. The IG‘s final report stated that
the office found 21 excess, 160 underutilized, and 51 obsolete
properties during this 3-year review. [Footnote 14] The State
Department agreed to sell 72 of these properties.
The IG stated that these reviews were useful and productive. It added
that chiefs of mission and other senior officials were interested in
this work, and, as a result, the IG noted increased emphasis on real
property management. An IG official said they would only start a
similar effort again if it is requested by the under secretary.
According to this official, OBO‘s new director has taken a more
aggressive approach to identifying and selling unneeded property, which
reduces the need for any additional IG effort at this time.
Process to Identify Unneeded Property Is Constrained by Inaccurate
Inventory Data:
The State Department‘s worldwide real property inventory contains many
errors and omissions. To better monitor property use and identify
potentially unneeded properties, accurate inventory data are needed.
Accurate real property data are also needed for the worldwide inventory
that the General Services Administration keeps at the Congress‘s
request.
OBO, however, has had difficulty getting posts to ensure that data in
its inventory database are accurate, which is a long-standing problem.
We observed problems involving properties sold but not removed from the
inventory, properties acquired but not added to the inventory, and
errors in cost and other descriptive information. For example,
* In June 2001, the inventory still listed an office building and the
consul general‘s residence in Alexandria, Egypt, which were sold in
1997 and 1998 (for more than $5 million).
* Acquisition cost was overstated by about $300 million for three
properties in Bamako, Mali, and by nearly $132 million for one property
in Yaounde, Cameroon, due to data input errors, according to OBO.
Inaccurate inventory information can result in unneeded properties not
being identified for potential sale. For example, a parking lot in
Paris purchased in 1948 was not included in the inventory until an IG
visit in 1998 highlighted the lot‘s absence from the inventory.
[Footnote 15] The property is currently being marketed and is valued
at up to $10 million.
We also found that the number of properties listed in the inventory
does not accurately reflect the number of properties the State
Department manages because, according to OBO, posts have inconsistently
assigned property identification numbers. Posts sometimes assigned
separate numbers to land and associated buildings. For example, the
embassy in Paris is listed as three separate properties--the land and
two buildings. The buildings were acquired separately but are now
connected. The three properties comprise one compound. At other times,
posts assigned one number to multiple properties--for example, in
Brasilia, four separate lots were given one property identification
number.
Along with its other efforts, OBO is attempting to improve the
accuracy, and therefore the reliability, of the State Department‘s
worldwide overseas property inventory data. According to OBO officials,
since individual posts are responsible for entering their own data,
correcting inaccuracies requires that they routinely check and update
data in their property inventories. To help posts keep accurate
inventory data, OBO has provided 238 posts with computer software for
recording their property inventories, along with a user manual that
gives step-by-step instructions. However, according to OBO, 185 posts
have installed or are in the process of installing the software,
leaving 53 posts that are not using it--thereby negatively affecting
the consistency and accuracy of inventory data. In November 2001, OBO
reported that about 20 posts had not corrected known errors or
omissions in their property inventories. Because of such errors and
omissions, some OBO staff said they do not rely on the property
inventory for their work and instead keep their own property inventory
information.
Real Estate Sales Have Grown, but a Significant Number of Properties Is
Still Unsold:
The State Department‘s performance in selling unneeded property has
significantly improved in the last 5 years. Property sales proceeds
were more than 3 times greater than for the previous 5-year period.
However, despite this progress, the department still has a large number
of potentially unneeded properties that remain unsold. In 2001, the
State Department began several initiatives intended to expedite the
sale of unneeded properties, including (1) using ’business case“
analyses to ensure that financial and economic factors were included in
the property sales decision process, (2) emphasizing the use of
commercial real estate marketing services, and (3) more aggressively
focusing on resolving property disputes.
The State Department sold 104 properties for more than $404 million
from fiscal years 1997 through 2001. [Footnote 16] This is a threefold
increase in proceeds compared with the 65 properties the department
sold for more than $133 million from fiscal years 1992 through 1996
(see fig. 1).
Figure 1: Sales Proceeds from Properties Sold, Fiscal Years 1992
through 2001:
[See PDF for image]
[A] Sales figures are stated in fiscal year 2001 dollars.
Source: GAO analysis of State Department data.
[End of Figure]
Large-value sales from fiscal years 1997 through 2001 included a
compound in Seoul, South Korea (almost $99 million in installment
payments), and the former chancery in Singapore for nearly $60 million.
As of September 30, 2001, the State Department reported that 92
properties were potentially available for sale. These properties have
an estimated value of more than $180 million. Many of these properties
have been identified for potential sale for years, including 35 that
date back to 1997.
Recent Initiatives to Expedite Property Sales:
In 2001, the new OBO director introduced ’business case“ sales analysis
to the process of determining whether a property should be sold. This
new framework considers economic and financial factors, along with
diplomatic and security issues and post concerns. According to OBO
officials, the State Department‘s former property sales decision-making
process generally did not fully consider economic and financial
factors. OBO officials said the new framework has helped OBO in its
effort to gain agency consensus regarding property sales and is already
producing results. OBO officials also stated that the director has made
business case- based decisions to sell properties in at least six
posts, including Paris where he has directed the post to sell a parking
lot and an office building.
Another initiative designed to expedite property sales is OBO‘s award
of indefinite quantity contracts [Footnote 17] to several
international real estate brokerage firms for real estate marketing
services. OBO officials believe these contracts will speed overseas
property sales, give OBO greater control over the sales process, and
relieve the administrative burden that property sales place on posts.
Under these contracts, the brokerage firms will do tasks formerly
performed by the posts, including advertising properties, identifying
prospective buyers, receiving bids, and conducting negotiations.
However, the brokers cannot conclude sales without the State
Department‘s approval. As of March 2002, OBO was using these contracts
to market 20 properties at 10 posts, including 5 properties OBO has
been trying to sell for several years. OBO stated that it has not been
able to fully evaluate the effectiveness of these contracts since the
program has just started.
Furthermore, to reduce the department‘s inventory of unneeded
properties, the new OBO director has focused on resolving disputes with
host countries and posts that have delayed the sale of valuable
properties. For example, OBO intends to sell a high-value Bangkok
residential compound that has been under consideration since the early
1990s but delayed due to post objections. The Asian financial crisis in
1997 temporarily halted this debate, according to OBO officials, but
OBO is now pushing to sell the property. OBO officials added that the
director has also addressed disputed properties at five more posts.
State Department Has Not Yet Sold Most Properties Recommended by the
Advisory Board:
The State Department has not yet sold 19 of 26 properties recommended
for sale by the Real Property Advisory Board and approved by department
management. Since its inception in 1997, the advisory board has
reviewed 41 disputed properties and recommended that 27 be sold
(department management approved the sale of 26 of these properties). As
of April 2002, the State Department had disposed of 7 (including 2 for
which it terminated the long-term lease) of the 26 properties for about
$21 million. Sales of the remaining 19 properties, valued at about $70
million, have been delayed by host country restrictions (12
properties), the need to find replacement properties (4 properties),
and post objections (3 properties). OBO officials acknowledged that the
department has moved slowly to resolve some of these impediments. As a
result, the advisory board has reviewed the status of most properties
multiple times over several years.
Board Has Recommended Selling Most Disputed Properties:
Our analysis of department records shows that of the 41 disputed
properties reviewed since 1997, the advisory board recommended selling
27 (26 were approved for sale by State Department management) and
retaining 9. The board planned to revisit the cases of 4 properties at
a later date and ended its review of 1 property in Manila after
concluding that the issue at hand was largely political and diplomatic.
The advisory board reached these decisions and compiled its list of
recommended sales by consensus. Our analysis of department records and
discussion with a board member showed that in reaching these decisions,
the advisory board‘s consideration of economic analyses was balanced by
consideration of political and diplomatic factors, such as
representational concerns and the historic value of the properties.
[Footnote 18] Figure 2 summarizes the board‘s recommendations for all
41 properties through its mid-November 2001 meeting.
Figure 2: Real Property Advisory Board Recommendations for 41
Properties as of November 15, 2001:
[See PDF for image]
[A] The board ended its review of one property without making a
recommendation after concluding that the matter was a political
decision involving negotiations with the host country.
[B] State Department management approved for sale 26 of the 27
properties.
Source: GAO analysis of State Department records.
[End of Figure]
State Has Disposed of 7 of 26 Properties Approved for Sale:
The assistant secretary of state for administration or under secretary
of state for management reviewed and approved 26 of the board‘s 27
sales recommendations. Our analysis of department records shows that
the State Department has disposed of 7 of these 26 properties for $20.6
million. According to OBO, the estimated value of the 19 unsold
properties is about $70 million. In addition, the State Department has
decided to sell the property in Manila that the board had considered
but on which it had declined to make a recommendation. Table 1
summarizes the factors that have delayed the sale of these properties.
Appendix I provides additional information about the disposition and
status of all 41 properties reviewed by the advisory board.
Table 1. Reasons That 19 Property Sales Have Been Delayed:
Post (country): Athens; (Greece); Property: Hamilton residence;
Comments: Post has not acted to sell property.
Post (country): Brasilia; (Brazil); Property: 12 residential lots;
Comments: Sales delayed since 1996 by Social Security tax dispute with
host government. In April 2002, the U.S. and Brazilian governments
began discussions to resolve the dispute.
Post (country): Damascus; (Syria); Property: American school; Comments:
The State Department plans to sell this property when the school
relocates. In the interim, it will charge the school rent. It was
several years before a decision to sell was made due to changing post
and department plans concerning use of the property as a site to
construct new facilities.
Post (country): London; (United Kingdom); Property: 4 residences;
Comments: The State Department plans to sell these properties as soon
as it can buy or lease residences that meet department size and cost
guidelines.
Post (country): Rabat; (Morocco); Property: New office building
(’orange grove“) site; Comments: The State Department plans to sell
this property after it resolves possible host government restrictions.
It was several years before a final decision to sell was made due to
changing post and department plans concerning use of property as a site
to construct new facilities.
Source: GAO analysis of State Department records.
[End of table]
Advisory Board Has Reviewed Most Properties Multiple Times:
Because property sales were delayed, the advisory board reviewed the
status of most properties submitted in 1997 through 2000 multiple times
over several years. [Footnote 19] Our analysis of department records
shows that, on average, the board reviewed 34 properties 4 times over
3.1 years. In addition, as of the board‘s last meeting in November
2001, 17 of the properties had been sold, retained for use, or
otherwise discharged by the board. The board had reviewed each of the
remaining 17 properties (awaiting sale) an average of almost 6 times
over 4.4 years. Table 2 shows the results of our analysis.
Table 2. Analysis of the Properties Submitted to the Real Property
Advisory Board from April 1997 through December 2000:
Status of property as of the advisory board‘s meeting on Nov. 15, 2001:
No longer under review[A]; Number of properties: 17; Average number of
times reviewed: 2.8; Average length of time properties were before the
board (in years): 1.8.
Status of property as of the advisory board‘s meeting on Nov. 15, 2001:
Still under review/Awaiting sale; Number of properties: 17; Average
number of times reviewed: 5.7; Average length of time properties were
before the board (in years): 4.4.
Status of property as of the advisory board‘s meeting on Nov. 15, 2001:
All properties reviewed[B]; Number of properties: 34; Average number of
times reviewed: 4.3; Average length of time properties were before the
board (in years): 3.1.
[A] Properties no longer under review are those that were reported
sold, retained for future use, or discharged for some other reason as
of the advisory board‘s meeting on November 15, 2001.
[B] Excludes 7 properties first submitted for advisory board review at
the board‘s meeting on November 15, 2001.
Source: GAO analysis of State Department records.
[End of table]
OBO Officials Expect Improvements in Sales of Recommended Properties:
OBO officials predict that the State Department will implement advisory
board recommendations more quickly in the future. According to these
officials, recent actions to expedite property sales, such as
contracting for real estate appraisal and marketing services, will
reduce delays in implementing the advisory board‘s recommendations by
making approved property sales less susceptible to post appeals and
inaction. Moreover, OBO believes that its enhanced standing within the
department will reduce delays by giving OBO a greater voice in
intradepartmental discussions to counterbalance post appeals. In 2001,
OBO was upgraded from an office reporting to the assistant secretary of
state for administration to a bureau reporting to the under secretary
of state for management. OBO officials also said the advisory board‘s
support for OBO‘s position on most properties was a positive factor in
helping to reduce post resistance to proposed sales.
Conclusions:
OBO has implemented a number of initiatives to improve the
identification of unneeded properties. Accurate property inventory data
would help OBO and the posts to further identify such properties.
However, inventory data are currently inaccurate and therefore
unreliable, and post cooperation in correcting these errors and
omissions has been inconsistent. While OBO has taken action to expedite
property sales, difficulties reaching consensus within the State
Department on sales of individual properties continue to cause delays.
Furthermore, the State Department has not fully implemented most of the
Real Property Advisory Board‘s recommendations, and properties valued
at about $70 million have not been sold. Additional property sales
could be delayed unless the department takes action to ensure that
approved sales recommendations are implemented as the Congress
intended--as soon as market conditions are appropriate and any issues
with the host country are resolved.
Recommendation for Executive Action:
To improve the State Department‘s ability to identify properties that
may be available for sale, we recommend that the secretary of state
take action to improve the accuracy of the real property inventory.
Ensuring that all posts install and use the new automated property
inventory software would be a key step.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, the State Department
stated that it is in total agreement with our recommendation and is
taking steps to implement it. The department added that it believes
this report is a fair and accurate representation of its ongoing
efforts to dispose of unneeded real property overseas, and that the
report recognizes the progress and the many improvements that have been
made and continue to be made. The department also stated that the
cooperative effort between the legislative and executive branches on
this review can serve as a model for future work.
In a draft of this report, we had recommended that the secretary of
state direct the department to proceed with property sales as soon as
market conditions are appropriate to ensure that disputed overseas real
estate properties are sold as expeditiously as possible. The department
responded that it believed the recommendation is unnecessary due to the
enhanced position of the OBO Bureau and the proactive approach and
involvement of its director in property disposal issues. It added that
it appreciated the intent of the recommendation, that the secretary use
his office as necessary and appropriate to expedite disposal of
unneeded property, and that this option is always available should it
become necessary. On the basis of these comments, we deleted this
recommendation from the report. However, as the department noted in its
comments, instances may arise when involvement by the secretary does
become necessary, specifically to emphasize resolution of issues caused
by host country restrictions on property sales that require diplomatic
negotiations, such as the case with the 12 properties in Brasilia. It
is therefore important that the director of OBO keep the under
secretary for management informed on the status of all properties being
considered for sale to avoid the type of lengthy delays experienced in
the past.
Scope and Methodology:
To determine if the State Department has taken steps to improve its
process for identifying unneeded properties that are potentially
available for disposal, we interviewed OBO‘s director and other OBO
officials concerning OBO policies and processes for identifying
unneeded property and determining when properties should be sold. We
reviewed documents relating to OBO‘s identification of unneeded
property potentially available for disposal, including the State
Department‘s quarterly reports to the Congress describing properties
potentially available for disposal during that quarter. We also
examined OBO‘s policies and processes for entering information into its
real property worldwide database and issues affecting quality control
over this information, and we reviewed the department‘s worldwide
property inventory as part of our effort to assess the accuracy of the
property database. In addition, we reviewed sections of the Foreign
Affairs Manual applicable to property management overseas and documents
prepared by State Department officials in response to our questions
about their processes for identifying unneeded property.
To assess the Department of State‘s performance in selling unneeded
properties, we analyzed quarterly reports to the Congress identifying
property sales since 1997 and properties that are still available for
disposal. We also reviewed OBO policies and processes, focusing on
actions OBO has taken to overcome constraints that have delayed sales,
such as disputes with posts and host government restrictions. We also
interviewed officials at OBO‘s Real Estate and Property Management and
Area Management offices to identify the status of properties being
considered for sale and to understand how they deal with the posts
concerning individual property sales. In addition, we reviewed the
department‘s long- range overseas buildings plan to identify property
the department plans to sell through fiscal year 2007.
To determine whether the State Department has implemented the Real
Property Advisory Board‘s recommendations, we analyzed the House
conference report that directed the department to establish the board,
our prior and State IG reports, and applicable department policies and
guidance in the Foreign Affairs Manual and Foreign Affairs Handbook .
We analyzed records prepared by State Department officials in response
to our questions about the advisory board, minutes of the board‘s eight
meetings, and the board‘s original and modified charters. We also
interviewed a member of the advisory board and State Department
officials involved in reviewing the properties included in our
evaluation. In addition, we analyzed the minutes of the advisory
board‘s meetings and other records to determine the number of
properties submitted to the board for review from 1997 through 2001,
the board‘s recommendations for these properties (sell, retain,
revisit, or other), and the current status of these properties (sold,
retained, or awaiting sale). For properties submitted to the advisory
board from 1997 through 2000, we analyzed these records to determine
the number of times and the length of time the board reviewed each of
these properties. This analysis excluded seven properties submitted to
the advisory board at its mid-November 2001 meeting because we do not
know yet whether State will implement the board‘s sales recommendations
before its next meeting.
We conducted our review from June 2001 through April 2002 in accordance
with generally accepted government auditing standards.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after its date. At that time, we will send copies of this report to
interested congressional committees and the secretary of state. We also
will make copies available to others upon request. In addition, this
report will be available at no charge on the GAO Web site at http://
www .ga o.gov.
If you or your staff have any questions about this report, please
contact me at (202) 512-4128 or at fordj@gao.gov . Contacts and staff
acknowledgments are listed in appendix III.
Sincerely yours,
Jess T. Ford Director, International Affairs and Trade:
Signed by Jess T. Ford.
[End of section]
Appendix I: Disputed Properties Reviewed by the Real Property Advisory
Board:
Post (country): Alexandria (Egypt); Property description: Consul
general‘s residence; Board‘s recommendation: Sell; Management
decision[A]: Approved; Property status as of March 2002: Sold in 1998
for $2.1 million.
Post (country): Athens (Greece); Property description: Adams residence;
Board‘s recommendation: Sell; Management decision[A]: Approved;
Property status as of March 2002: Sold in 2000 for $1.05 million.
Property description: Post (country) : Hamilton residence; Board‘s
recommendation: Post (country) : Sell; Management decision[A]: Post
(country) : Approved; Property status as of March 2002: Post (country):
Post has not acted to sell property.
Property description: Post (country) : Knox residence; Board‘s
recommendation: Post (country) : Retain; Management decision[A]: Post
(country) : N/A[B]; Property status as of March 2002: Post (country):
Retain until post finds a secure residence for defense attaché.
Property description: Post (country) : Sherman residence; Board‘s
recommendation: Post (country) : Sell; Management decision[A]: Post
(country) : Approved; Property status as of March 2002: Post (country):
Sold in 2000 for $4.7 million.
Post (country): Brasilia (Brazil); Property description: 12 vacant
residential lots; Board‘s recommendation: Sell; Management
decision[A]: Approved; Property status as of March 2002: Sales delayed
by tax dispute with host government. Negotiations started recently to
resolve the dispute.
Post (country): Budapest (Hungary); Property description: Marine
security guard quarters; Board‘s recommendation: Retain; Management
decision[A]: N/A[B]; Property status as of March 2002: IG reports
property no longer underutilized.
Post (country): Curacao (Netherlands Antilles); Property description:
Vacant lot; Board‘s recommendation: Retain; Management decision[A]: N/
A[B]; Property status as of March 2002: Retained to provide security
buffer.
Post (country): Dakar (Senegal); Property description: Site bought to
build ambassador‘s residence; Board‘s recommendation: Sell; Management
decision[A]: Disapproved; Property status as of March 2002: Retained
for recreational use.
Post (country): Damascus (Syria); Property description: American
school; Board‘s recommendation: Sell; Management decision[A]:
Approved; Property status as of March 2002: The State Department plans
to sell the property when the school relocates. In the interim, the
department will charge the school rent.
Post (country): Doha; (Qatar); Property description: Ambassador‘s
residence and office building sites; Board‘s recommendation: Sell;
Management decision[A]: Approved; Property status as of March 2002:
Board recommended selling properties after post occupied new embassy
(which occurred in October 2001). The State Department has terminated
these long-term leases effective April 23, 2002.
Post (country): Hamilton (Bermuda); Property description: Consul
general‘s residence; Board‘s recommendation: Sell; Management
decision[A]: Approved; Property status as of March 2002: Sold in 1999
for $12.5 million.
Post (country): Islamabad (Pakistan); Property description: Vacant lot;
Board‘s recommendation: Retain; Management decision[A]: N/A[B];
Property status as of March 2002: Retained to provide security buffer.
Post (country): Kaduna (Nigeria); Property description: Warehouse,
residence, and recreation center; Board‘s recommendation: Sell;
Management decision[A]: Approved; Property status as of March 2002:
Sold in 1998 for $239,082.
Post (country): Kathmandu (Nepal); Property description: Brahma
cottage; Board‘s recommendation: Retain; Management decision[A]: N/
A[B]; Property status as of March 2002: Retained as site for new office
building after security concerns made embassy site unsuitable.
Post (country): London (United Kingdom); Property description: 4
residences; Board‘s recommendation: Sell; Management decision[A]:
Approved; Property status as of March 2002: State plans to sell when it
can buy or lease suitable replacements.
Property description: Post (country) : 3 residences; Board‘s
recommendation: Post (country) : Revisit; Management decision[A]: Post
(country) : N/A[B]; Property status as of March 2002: Post (country) :
State is negotiating the disposition of these properties with tenant
agencies.
Post (country): Manila (Philippines); Property description:
Ambassador‘s summer residence (Baguio); Board‘s recommendation: No
recommendation; Management decision[A]: N/A[B]; Property status as of
March 2002: Board concluded the decision was political/diplomatic.
State has decided to sell the property.
Post (country): Naples (Italy); Property description: Consul general‘s
residence and consular office building; Board‘s recommendation: Retain;
Management decision[A]: N/A[B]; Property status as of March 2002:
Relocation not cost-effective.
Post (country): Port of Spain (Trinidad); Property description: Vacant
lot; Board‘s recommendation: Retain; Management decision[A]: N/A[B];
Property status as of March 2002: Retained for parking.
Post (country): Prague (Czech Republic); Property description:
Ambassador‘s residence; Board‘s recommendation: Revisit; Management
decision[A]: Retain; Property status as of March 2002: Property was
retained on the basis of guidance from the president.
Post (country): Praia; (Cape Verde); Property description: Site to
build an ambassador‘s residence; Board‘s recommendation: Retain;
Management decision[A]: N/A[B]; Property status as of March 2002:
Property retained for recreational use.
Post (country): Rabat (Morocco); Property description: New office
building (’orange grove“) site; Board‘s recommendation: Sell;
Management decision[A]: Approved; Property status as of March 2002:
Board recommended selling the property unless State‘s 2002 long-range
facilities plan authorized constructing a new office building in Rabat.
State now plans to sell the property contingent on resolving potential
host government restrictions.
Post (country): Zanzibar (Tanzania); Property description: Former
consul general‘s residence; Board‘s recommendation: Retain; Management
decision[A]: N/A[B]; Property status as of March 2002: Property
retained for recreational use.
[A] Before September 2001, the advisory board sales recommendations
were referred to the assistant secretary of state for administration
for approval. Since then, they have been referred to the under
secretary for management.
[B] Not applicable--no management decision necessary in these cases.
Source: GAO analysis of State Department records.
[End of Table]
[End of section]
Appendix II: Comments from the Department of State:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
United States Department of State Washington, D.C. 20520:
MAY 15 2002:
Dear Ms. Westin:
We appreciate the opportunity to review your draft report, ’STATE
DEPARTMENT: Sale of Unneeded Property Has Increased but Further
Improvements are Necessary,“ GAO-02-590, GAO Job Code 320060.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact
Isaias Alba, Branch Chief, Office of Resource Management, Bureau of
Overseas Buildings Operations, at (703)875-5748:
Sincerely,
Christopher B. Burnham Assistant Secretary and Chief Financial
Officer:
Signed by Christopher B. Burnham.
Enclosure:
As stated.
cc: GAO/IAT - John Brummet State/OIG - Mr. Berman State/OBO - Mr.
Isaias Alba:
Ms. Susan S. Westin, Managing Director, International Affairs and
Trade, U.S. General Accounting Office.
Department of State Comments on GAO Draft Report STATE DEPARTMENT: Sale
of Unneeded Property Has Increased but Further Improvements Are
Necessary (GAO-02-590, GAO Job Code 320060):
Introduction:
The Department of State appreciates the opportunity to review and
comment on the GAO Draft Report, ’STATE DEPARTMENT: Sale of Unneeded
Property Has Increased but Further Improvements Are Necessary.“ We
believe the report is a fair and accurate representation of our ongoing
efforts to dispose of unneeded real property overseas, consistent with
economic, financial, and political environments in host countries. It
is a positive report, one that recognizes the progress and the many
improvements that have been made and that continue to be made. We
therefore believe the report‘s title is misleading. A more accurate
title would be: ’STATE DEPARTMENT: Sale of Unneeded Property Has
Increased and Further Improvements Are Underway.“:
Progress:
New measures and initiatives have been introduced and staff has been
augmented with real estate professionals, resulting in much progress
being made in identifying and disposing of unneeded property since
GAO‘s previous work on this topic in 1996. More recently, the enhanced
status of the Bureau of Overseas Buildings Operations (OBO) within the
Department, the active participation of the OBO Director and Chief
Operating Officer in real property disposal issues, the use of business
case discipline in the decision making process, and the expanded use of
prestigious international real estate firms, promise to further advance
the Department‘s efforts in the future. The GAO report properly cites
all of these measures and initiatives as responsible for recent and
anticipated progress.
A Cooperative Effort:
Throughout the course of the GAO review, OBO has been forthcoming in
providing information, access to all of its real property records, and
making its staff available to answer questions and provide briefings.
The GAO staff has:
been professional in its endeavor and has been receptive to our
opinions and explanations. The cooperative effort between the
legislative and executive branches throughout this review on behalf of
the American taxpayer can serve as a model for future work. The
openness and cooperative spirit of both branches has resulted in a
report that we believe will benefit all parties concerned..
Recommendations:
The report contains two recommendations for executive action.
1. ’To improve State‘s ability to identify properties that may be
available for sale, GAO recommends that the Secretary of State take
action to improve the accuracy of the real property inventory. Ensuring
that all posts install and use the new automated property inventory
software would be a key step.“:
We are in total agreement with this recommendation and have already
taken this action. On April 1, 2002, the Department sent an ALDAC (a
worldwide cable to all diplomatic and consular posts) reminding posts
and Chiefs of Mission of their responsibilities in maintaining accurate
real estate records. The cable goes on to state that the Post
Administrative
Software Suite (PASS) Real Property Application (RPA) is the
Department‘s
standard real estate management software. The RPA module of PASS was
designed to support post‘s property management, lease management and
housing assignment programs. A copy of the cable (02 State 60774) is
attached.
The second recommendation:
2. ’To ensure that disputed overseas real estate properties are sold as
expeditiously as possible, GAO recommends that the Secretary of State
direct the department to proceed with sales as soon as market
conditions are appropriate. GAO recognizes that this may require the
Secretary to emphasize resolution of issues caused by host country
restrictions on property sales.“
While we believe this recommendation is unnecessary, we appreciate the
intent of the GAO -- that the Secretary use his office as necessary and
as appropriate to expedite disposal of unneeded property. We believe
that the enhanced position of the Bureau of Overseas Buildings
Operations and the proactive approach and involvement of the OBO
Director/Chief Operating Officer in property disposal issues will
preclude the need to engage the Secretary of State. That option is
always there, however, should it ever become necessary.
Other Comments:
We also have comments and updates on specific passages in the draft
report.
The report states on page 6 that the real property inventory contains
many errors and omissions. We would point out that there are nearly
15,000 property records, keyed in by hundreds of employees of varying
skills and abilities at hundreds of posts worldwide. Mistakes will be
made, and the challenge is to identify the errors and correct them as
soon as possible. The full implementation of PASS, with its more
frequent submissions to Washington and compliance with the April 1,
2002 ALDAC, will go a long way toward meeting this challenge.
Regarding the inaccuracies discovered with the Alexandria, Egypt
property records (page 6 of the draft report), it appears that the
cause was a data conversion glitch when the post changed over to the
new PASS system and submitted the data to the headquarters system. Post
has been asked to resubmit the corrected data.
Regarding the apparent missing property record (R31036) of a residence
in Lusaka (also page 6),we have determined that the property is, in
fact,
in the Real Property Application Inventory. The property is listed
under
a different identification number (R98550) but the same address
(1192 Lunzua Road). It appears that the property ID number cited by the
GAO was the number used by the Department‘s Office of the Inspector
General when it performed its property review of Lusaka in 1998.
Internal
documents used by the Real Estate Division carried the incorrect
property
number onto other documents, including the quarterly reports cited by
the
GAO. The quarterly reports will be corrected to reflect the RPA
inventory.
Regarding the obviously overstated acquisition costs of properties in
Bamako and Yaounde (also on page 6), we have requested posts to make
the appropriate corrections. The properties in Bamako are AID
properties and we have asked AID to provide the relevant title and deed
documentation.
Regarding the discussion of the Paris parking lot (also on page 6), we
would point out that the parcel was not recorded separately in the real
property inventory in 1998 when the Office of the Inspector General
conducted its review because it was originally purchased as an integral
part of the ambassador‘s residential site. It was never intended to be
a separate parcel. The .9-acre parcel was correctly included in the
3.9-acre parcel of land associated with the ambassador‘s residence
(property ID X5005). Subsequently, in 1999, we separated the .9-acre
parcel and assigned it its own property ID number (X6000). At that time
we also subtracted its .9-acre area from the 3.9- acre area associated
with the ambassador‘s residence. The ambassador‘s residence site is now
listed in RPA as 3.01 acres.
Finally, we would like to correct a possible misunderstanding regarding
the assignment of property numbers to land and associated buildings.
Regarding the paragraph that states that the number of properties
listed in the inventory does not accurately reflect the number of
properties the State Department manages, we submit the following: There
are land records entered separately in RPA from building records to
represent purchased sites separate from constructed buildings. A
separate land record has been entered in RPA to represent compounds
with several buildings. The separate land record facilitates
’associating“ all of the buildings on the compound with a single piece
of land. This is the correct way to enter these properties.
We would also like to provide an update for page 12 regarding Table 1
and the property in Doha. The Ministry of Foreign Affairs accepted our
request to terminate the lease on April 23, 2002.
Conclusion:
The Department and OBO again wish to express gratitude for the
professional, cooperative, and mutually respectful conduct by GAO staff
in the course of this review, and the opportunity to review and comment
on the draft report. We would welcome the opportunity to meet with GAO
staff to further clarify these comments or answer any questions.
Attachment:
State ALDAC cable 02 State 60744 of April 1, 2002:
The following are GAO‘s comments on the Department of State‘s letter
dated May 15, 2002.
GAO Comments:
1. We deleted this example from the final report.
2. The State Department‘s property inventory records from March 1998,
[Footnote 20] did not include the parking lot and listed the
ambassador‘s residence as 3.01 acres, not 3.4 acres. Subsequent
inventory records from 1999 and 2001 listed the parking lot at 0.4
acres and also continued to list the ambassador‘s residence as 3.01
acres.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgements:
GAO Contact:
John Brummet (202) 512-5260:
Staff Acknowledgments:
In addition to the contact named above, Janey Cohen, Ed Kennedy, Jesus
Martinez, Michael Rohrback, and Richard Seldin made key contributions
to this report.
[End of Section]
FOOTNOTES
[1] We use the term ’unneeded“ property to encompass the terms ’excess,
underutilized, and obsolete“ property used by the State Department.
[2] U.S. General Accounting Office, Overseas Real Estate: Millions of
Dollars Could Be Generated by Selling Unneeded Real Estate, GAO/
NSIAD-96-36 (Washington, D.C.: Apr. 23, 1996) and State Department:
Millions of Dollars Could Be Generated by Selling Unneeded Overseas
Real Estate, GAO/T-NSIAD-96-195 (Washington, D.C.: June 27, 1996).
[3] Before September 2001, the advisory board sales recommendations
were referred to the assistant secretary of state for administration
for approval.
[4] Section 738 of the Agriculture Appropriations Act for fiscal year
2001 (P.L. 106-387).
[5] In fiscal year 2001 dollars.
[6] The State Department sold 5 properties and terminated the long-term
lease of 2 other properties.
[7] 22 U.S.C. section 300, as amended.
[8] In May 2001, the name of the Office of Foreign Buildings Operations
was changed to the Bureau of Overseas Buildings Operations.
[9] GAO/NSIAD-96-36 and GAO/T-NSIAD-96-195.
[10] H.R. (Conf.) 104-863, 104th Cong., 2nd Sess., accompanying
H.R. 3610, the Omnibus Consolidated Appropriations Act for fiscal year
1997.
[11] Until its charter was amended in September 2001, the assistant
secretary of state for administration appointed the board‘s members.
[12] Until its charter was amended in September 2001, the advisory
board submitted this list to the assistant secretary of state for
administration for approval. This provision was inconsistent with the
House conference report, which called for the list to be submitted to
the under secretary of state for management for approval.
[13] Department of State, Office of the Inspector General, Audit of
the Real Property Advisory Board, Memorandum Report 99-PP-006
(Washington, D.C.: Feb. 1999).
[14] Letter to the under secretary for management entitled, Final
Report on the Review of Excess, Underutilized, and Obsolete Real
Property Overseas (01-FMA-L-059, June 13, 2001).
[15] U.S. General Accounting Office, State Department: Decision to
Retain Embassy Parking Lot in Paris, France, Should Be Revisited,
GAO-01-477 (Washington, D.C.: Apr. 13, 2001).
[16] Sales figures are stated in fiscal year 2001 dollars.
[17] Indefinite quantity contracts do not state the specific
quantity of products or services being delivered but establish minimum
and maximum limits on the amount that can be ordered at one time and on
total quantity. This type of contract provides flexibility in both
quantity and time of delivery.
[18] Our analysis also showed that OBO and the regional bureaus and
posts were provided with an opportunity to argue their cases before the
advisory board. About a week before board meetings, OBO provided board
members with briefing books that included economic analyses for the
properties under review along with descriptions and photographs of the
properties, their current use, acquisition cost, anticipated sales
prices, and summaries of the disputes. OBO provided the relevant pages
of these briefing books to the executive directors of the affected
regional bureaus. These directors, in some cases, submitted written
statements to the advisory board expressing bureau or post views on the
properties and also gave short presentations to the board about their
arguments for retaining the properties.
[19] This analysis excludes 7 properties submitted to the advisory
board at its November 2001 meeting because we do not know yet whether
the advisory board‘s sales recommendations will be implemented before
its next meeting.
[20] This was prior to the Office of the Inspector General‘s visit.
[End of Section]
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