Interior's Land Appraisal Services
Actions Needed to Improve Compliance with Appraisal Standards, Increase Efficiency, and Broaden Oversight
Gao ID: GAO-06-1050 September 28, 2006
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 ASD's clients have expressed concern that ASD's appraisal services have become less efficient and effective than what previously existed. GAO was asked to assess (1) ASD's policies and procedures in ensuring compliance with appraisal standards, (2) ASD's ability to meet its customers' 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.
Although the quality of appraisals has improved since ASD's inception, Interior's 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 evaluated--representing 50 percent (nearly $3.2 billion) of the total value of the land appraised since ASD's inception--192 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 lands' 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. ASD's 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 Interior's grant-in-aid programs, even though the grant-in-aid land acquisition budget in fiscal year 2005 represented 60 percent of Interior's $240 million total for land acquisition. Under Interior's grant-in-aid programs, many nonfederal entities receiving federal grant-in-aid funds from Interior's 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.
Recommendations
Our 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.
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GAO-06-1050, Interior's Land Appraisal Services: Actions Needed to Improve Compliance with Appraisal Standards, Increase Efficiency, and Broaden Oversight
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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 ASD‘s
clients have expressed concern that ASD‘s appraisal services have
become less efficient and effective than what previously existed. GAO
was asked to assess (1) ASD‘s policies and procedures in ensuring
compliance with appraisal standards, (2) ASD‘s ability to meet its
customers‘ 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 ASD‘s inception,
Interior‘s 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 evaluated”representing 50 percent
(nearly $3.2 billion) of the total value of the land appraised since
ASD‘s inception”192 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
lands‘ 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.
ASD‘s 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 Interior‘s grant-in-aid programs, even though
the grant-in-aid land acquisition budget in fiscal year 2005
represented 60 percent of Interior‘s $240 million total for land
acquisition. Under Interior‘s grant-in-aid programs, many nonfederal
entities receiving federal grant-in-aid funds from Interior‘s 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 ASD‘s 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:
Interior‘s Appraisal Policies and Procedures Do Not Fully Ensure
Compliance with Recognized Appraisal Standards:
ASD‘s 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 Interior‘s Grant-
in-Aid Programs:
Figures:
Figure 1: Examples of Past Reports Issued between 1987 and 2003, and
Problems Found with Interior Agencies‘ 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:
² 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.
² 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:
² 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.
² 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.
² 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:
² 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.
² 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:
² Ensure that ASD assigns appraisals requiring specialized skills--
such as minerals, timber, and water competencies--to appraisers and
review appraisers with these skills.
² 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.
² 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:
² 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.
² Develop a system to prioritize appraisal requests that allows higher
priority and more time-sensitive land transactions to be appraised in a
timely fashion.
² 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 standards—and 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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