NASA
Enhanced Use Leasing Program Needs Additional Controls
Gao ID: GAO-07-306R March 1, 2007
In 2003, the National Aeronautics and Space Administration (NASA) was authorized to demonstrate enhanced use leasing (EUL) at two centers, allowing the agency to retain the proceeds from leasing out underutilized real property and to accept in-kind consideration in lieu of cash for rent. NASA selected Ames Research Center and Kennedy Space Center for the demonstration program. The agency had requested that Congress extend this authority to additional NASA centers during formulation of the NASA Authorization Act of 2005. NASA's request was not granted. Instead, Section 710 of the NASA Authorization Act of 2005 (Public Law 109-155) directed GAO to review NASA's EUL program. We examined (1) the financial impact of the EUL authority on NASA and whether EUL revenue and other financial benefits would have been realized without the authority, (2) NASA's use of the authority and whether the arrangements made under the authority would have been made in the absence of the authority, and (3) what controls are in place to ensure accountability and transparency and to protect the government. The act also directed GAO to report back to the Congress by December 30, 2006. We presented our preliminary findings to Congress in December 2006. Because of Congress's interest in how NASA is implementing its EUL authority, we are enclosing the full briefing that supported that December presentation with this report, along with a summary of our findings and conclusions.
Although EUL authority provides NASA with increased flexibility in managing its real property, it also increases the need for effective controls and monitoring to ensure that the government's interests are protected. Without measures of effectiveness, criteria for determining best economic value, and adequate accounting controls and processes, it will be difficult for NASA to ensure that EUL is the best option for each instance in which EUL is used and that the purpose of the law providing NASA with EUL authority is met. In addition, when EUL funds and their use are not transparent within the agency's budget, congressional decision makers face a knowledge gap relative to monitoring NASA's EUL activities. Improved transparency would provide the Congress with a more complete basis for assessing NASA's wants and needs. If the EUL program is to be expanded, NASA needs to develop an agency wide policy that ensures accountability, protects the government, and provides transparency regarding the agency's EUL activities.
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.
Director:
Team:
Phone:
GAO-07-306R, NASA: Enhanced Use Leasing Program Needs Additional Controls
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March 1, 2007:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Ted Stevens:
Co-Chairman:
Committee on Commerce, Science, and Transportation:
United States Senate:
The Honorable Bart Gordon:
Chairman:
The Honorable Ralph M. Hall:
Ranking Member:
Committee on Science and Technology:
House of Representatives:
Subject: NASA: Enhanced Use Leasing Program Needs Additional Controls:
In 2003, the National Aeronautics and Space Administration (NASA) was
authorized to demonstrate enhanced use leasing (EUL) at two centers,
allowing the agency to retain the proceeds from leasing out
underutilized real property and to accept in-kind consideration in lieu
of cash for rent. NASA selected Ames Research Center and Kennedy Space
Center for the demonstration program. The agency had requested that
Congress extend this authority to additional NASA centers during
formulation of the NASA Authorization Act of 2005.
NASA's request was not granted. Instead, Section 710 of the NASA
Authorization Act of 2005 (Public Law 109-155) directed GAO to review
NASA's EUL program. We examined (1) the financial impact of the EUL
authority on NASA and whether EUL revenue and other financial benefits
would have been realized without the authority, (2) NASA's use of the
authority and whether the arrangements made under the authority would
have been made in the absence of the authority, and (3) what controls
are in place to ensure accountability and transparency and to protect
the government. The act also directed GAO to report back to the
Congress by December 30, 2006.
We presented our preliminary findings to your staff in December 2006.
Because of your committees' interest in how NASA is implementing its
EUL authority, we are enclosing the full briefing that supported that
December presentation with this report (see encl. II), along with a
summary of our findings and conclusions. To ensure that NASA's EUL
program is transparent and protects the interests of the government, we
are recommending that before considering further expansion of the
program, NASA develop an agency wide EUL policy, based upon sound
business practices and lessons learned from the demonstration centers,
that establishes minimum standards for controls and processes, such as
best economic value criteria, measures of effectiveness, and specific
accounting controls. In written comments, NASA concurred with our
recommendation and stated that the agency has begun taking the steps
necessary to develop an agency wide EUL policy and to adopt mechanisms
to keep the Congress fully informed of its activities under EUL
authority (see encl. I).
Background:
Because of long-standing problems with excess and underutilized
property, deteriorating assets, unreliable real property data, and
costly facilities challenges, GAO designated federal real property as a
high-risk area in January 2003. We have reported that many federal real
property assets--including facilities and land worth hundreds of
billions of dollars--are in an alarming state of deterioration, and
agencies have estimated restoration and repair needs to be in the tens
of billions of dollars.[Footnote 1]
Like many federal agencies, NASA faces considerable challenges
addressing facilities needs with limited funds. As the ninth largest
federal government property holder, NASA owns more than 100,000 acres
of real estate, as well as over 3,000 buildings and 3,000 other
structures totaling over 44 million square feet. However, the agency
has large and growing capital repair needs. NASA's property database
shows over $1.8 billion of deferred maintenance for the agency's
facilities. In addition, over 10 percent of the agency's facilities are
underutilized or not utilized at all. According to NASA's 2004 Real
Property Management Plan, critical attention to maintenance and
recapitalization is required to ensure NASA's ability to safely and
effectively achieve its vision and mission.
We have reported that in an era of limited resources and growing
mission needs, many agencies have turned to approaches other than full
up-front appropriated funding to finance real property acquisitions and
improvements.[Footnote 2] EUL authority--which allows agencies to
accept cash and/or in-kind consideration for real property leases and
to retain the proceeds--is one of these alternative approaches.
We have also reported that although third-party financing arrangements,
such as EUL, can make it easier for agencies to manage within a given
amount of budget authority, they also increase the need for effective
implementation and monitoring by agencies to ensure that the
government's interests are protected.[Footnote 3] We found that many
partnership arrangements, such as EUL, included specific attributes
that did not require agencies to reflect the full, up-front costs in
the budget. For example, in one case, under its EUL authority, the
Veterans Administration (VA) leased out land to a developer with a 35-
year no-cost enhanced use lease. The developer built a facility on the
property to provide housing for single homeless individuals. The
developer agreed to give veterans referred by VA priority placement for
at least 50 percent occupancy of the property. Although the
improvements may be surrendered to VA at the end of the lease term, the
transaction was completely invisible in VA's budget because it did not
involve cash consideration.
The Comptroller General has also testified that public-private
partnerships can be a viable option for redeveloping obsolete federal
property if they provide the best economic value for the government,
compared with other options, such as federal financing through
appropriations or sale of the property.[Footnote 4] He also testified
that full transparency with regard to the government's real property
activities and an effective system to measure results are needed.
Results in Brief:
Since beginning the EUL demonstration, NASA has realized about $1.3
million in EUL-related financial benefits--$972,546 of lease revenue
and over $350,000 of in-kind consideration--most of which would not
have been realized by NASA without EUL authority.[Footnote 5] Under its
existing authorities, the agency would have been required to remit
lease revenue in excess of costs to the U.S. Treasury and would not
have been allowed to accept in-kind consideration exceeding costs for
rent, except to a limited extent for historic property. Of the lease
revenue collected, NASA spent about $480,000--all at Ames Research
Center--on maintenance and improvement of real property assets.
NASA is using EUL authority to develop underutilized real property at
Ames and Kennedy for use by others. Ames and Kennedy have entered into
EUL agreements for underutilized office space, unique research and
development facilities, and land. In addition, both centers plan to use
EUL authority to incorporate research parks (for Kennedy, an
"exploration park") into their plans for expansion of their
capabilities to support the NASA mission. According to agency
officials, while NASA would have leased some of its underutilized
property under existing authorities, the ability to collect rent as
well as in-kind consideration under NASA's EUL authority provided the
agency with increased incentive and flexibility to develop
underutilized real property.
While each demonstration center has mechanisms to ensure that EUL
agreements provide benefit, beyond rent, to NASA and fair market
consideration is received for all property, we found that the agency
does not have adequate controls in place to ensure accountability and
transparency and to protect the government. For example, the agency has
not established measures of effectiveness or criteria for determining
whether EUL represents the best economic value to the government.
Further, the agency has no accounting system for tracking and reporting
the value of in-kind consideration, and in some instances, we could not
trace financial data to source documents and other financial data was
not readily available. Finally, NASA's implementation of EUL could
lessen budget transparency. For example, NASA's EUL authority allows
the agency to accept in-kind consideration in the form of services or
construction that is not recognized in the agency's budget. In
addition, EUL cash revenue is not readily apparent within the agency's
reimbursable budget line. And even though this cash revenue is reported
to the Congress in NASA's annual EUL report, the budget does not fully
inform the Congress regarding NASA's use of its EUL authority.
Conclusion:
Although EUL authority provides NASA with increased flexibility in
managing its real property, it also increases the need for effective
controls and monitoring to ensure that the government's interests are
protected. Without measures of effectiveness, criteria for determining
best economic value, and adequate accounting controls and processes, it
will be difficult for NASA to ensure that EUL is the best option for
each instance in which EUL is used and that the purpose of the law
providing NASA with EUL authority is met. In addition, when EUL funds
and their use are not transparent within the agency's budget,
congressional decision makers face a knowledge gap relative to
monitoring NASA's EUL activities. Improved transparency would provide
the Congress with a more complete basis for assessing NASA's wants and
needs. If the EUL program is to be expanded, NASA needs to develop an
agency wide policy that ensures accountability, protects the
government, and provides transparency regarding the agency's EUL
activities.
Recommendation for Executive Action:
Before NASA considers requesting that the Congress extend EUL authority
to additional centers, we recommend that the NASA Administrator develop
an agency wide EUL policy, based upon sound business practices and
lessons learned from the demonstration centers, that establishes
controls and processes to ensure accountability and protect the
government's interests, including:
* criteria for determining that EUL represents the best economic value
for the government, compared with other options, such as federal
financing through appropriations or sale of the property;
* measures of effectiveness for the EUL program, such as reductions in
the square footage of underutilized property and in the dollar amount
of deferred maintenance; and:
* accounting controls and processes to ensure accountability, such as
an:
- accounting system for tracking the value of in-kind consideration and
an:
- audit trail and documentation to readily support financial
transactions.
In addition, if NASA receives expanded EUL authority, the agency also
needs to adopt mechanisms to keep the Congress fully informed of the
agency's activity under EUL authority, including:
* identifying and quantifying the value of in-kind consideration
arrangements and expenditures of EUL revenue in its annual EUL reports
to the Congress, and:
* reporting the availability and use of EUL funds in the agency's
operating plans.
Agency Comments and Our Evaluation:
In written comments on a draft of this report (see encl. I), NASA
concurred with our recommendation.
Scope and Methodology:
To determine the financial impact of EUL authority on NASA, we obtained
and analyzed pertinent EUL records and quantified financial impact in
terms of cash and in-kind consideration. To ascertain whether these
benefits would have been realized in the absence of the authority, we
obtained and analyzed copies of all of NASA's pre-existing real
property authorities, and determined whether they could have provided
NASA with the revenue and financial benefits realized with EUL
authority. To clarify our understanding, we conducted interviews with
cognizant and responsible NASA officials at NASA Headquarters, Ames
Research Center, and Kennedy Space Center.
To evaluate the use of the program, we reviewed leasing agreements and
visually inspected selected leased properties at both demonstration
centers. We reviewed the centers' future plans for the program and
discussed NASA's use and plans for the program with cognizant and
responsible NASA officials at both centers and NASA Headquarters. To
ascertain whether existing arrangements would have been made in the
absence of the program, we examined the existing EUL agreements in
light of NASA's pre-existing real property authorities, discussed
NASA's pre-EUL authority development plans, and identified instances
when NASA originally planned to develop property, currently being
developed under EUL authority, with other real property authorities. We
also interviewed responsible NASA officials to determine whether NASA
would have made the current arrangements and plans without the EUL
authority.
To assess the controls NASA has in place to ensure accountability and
transparency and to protect the government, we judgmentally sampled EUL
leasing agreements and discussed the selected lease arrangements with
cognizant and responsible NASA officials. We obtained each center's
records of the financial transactions associated with the selected
leasing agreements, and we attempted to reconcile these records with
the leases and support agreements. We also had extensive discussions
with cognizant and responsible NASA officials regarding in-kind
consideration transactions, fair market value, value beyond rent to
NASA, criteria for determining the best economic value to the
government, accounting for EUL in NASA's budget, and measures of
effectiveness.
To accomplish our work, we visited NASA Headquarters, Washington, D.C;
Ames Research Center, California; and Kennedy Space Center, Florida. We
conducted our work from July 2006 through December 2006 in accordance
with generally accepted government auditing standards.
We will send copies of the report to NASA's Administrator and
interested congressional committees. We will also make copies available
to others upon request. In addition, the report will be available at no
charge on GAO's Web site at http://www.gao.gov.
Should you or your staff have any questions on matters discussed in
this report, please contact me at (202) 512-4841 or lia@gao.gov.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. Principal
contributors to this report were Jim Morrison, Assistant Director;
Sylvia Schatz; Erin Schoening; Robert Swierczek; and John Warren.
Signed by:
Allen Li:
Director:
Acquisition and Sourcing Management:
Enclosures:
120620:
Enclosure I: Comments from the National Aeronautics and Space
Administration:
National Aeronautics and Space Administration:
Office of the Administrator:
Washington, DC 20546-0001:
February 20, 2007:
Mr. Allen Li:
Director:
Acquisition and Sourcing Management:
United States Government Accountability Office:
Washington, DC 20548:
Dear Mr. Li:
NASA has reviewed the Government Accountability Office (GAO) draft
report entitled "NASA: Enhanced Use Leasing (EUL) Program Needs
Additional Controls" (GAO-07-306R).
In the draft report, GAO recommends that the Administrator take the
following action:
Recommendation: Before NASA considers requesting that the Congress
extend EUL authority to additional Centers, we recommend that the NASA
Administrator develop an Agency-wide EUL policy, based upon sound
business practices and lessons learned from the demonstration Centers,
that establishes controls and processes to ensure accountability and
protect the Government's interests, including:
* criteria for determining that EUL represents the best economic value
for the Government, compared with other options, such as Federal
financing through appropriations or sale of the property;
* measures of effectiveness for the EUL program, such as reductions in
the square footage of underutilized property and in the dollar amount
of deferred maintenance;
* accounting controls and processes to ensure accountability, such as
an:
- accounting system for tracking the value of in-kind consideration;
- audit trail and documentation to readily support financial
transactions.
In addition, if NASA receives expanded EUL authority, the Agency also
needs to adopt mechanisms to keep the Congress fully informed of the
Agency's activity under EUL authority, including:
* identifying and quantifying the value of in-kind consideration
arrangements and expenditures of EUL revenue in its annual EUL reports
to the Congress;
* reporting the availability and use of EUL funds in the Agency's
operating plans.
Concur-:
NASA concurs with the recommendation. NASA has begun taking the steps
necessary to develop an Agency-wide EUL policy and to adopt the
mechanisms to keep the Congress fully informed of its activities under
EUL authority.
The schedule for development of this policy will include meetings with
the resource managers from the Centers, as well as the representatives
from the Agency's Office of the Chief Financial Officer, the General
Counsel, the Center Chief Counsel's offices, and the property managers
from the two demonstration Centers (the Ames Research Center and the
Kennedy Space Center). Since these two Centers have experience in
developing EUL leases, they would be the primary participants. The
following schedule applies:
* Headquarters/Center workshop for Agency-wide EUL guidance February
2007
* Initial draft for review by Centers February 2007:
* Finalize and disseminate Agency-wide EUL guidance March 2007:
Thank you for the opportunity to respond to this draft report.
Signed by:
Shana Dale:
Deputy Administrator:
[End of section]
Enclosure II: Briefing:
Why GAO Did This Study:
In 2003, the National Aeronautics and Space Administration (NASA) was
authorized to employ enhanced use leasing (EUL) at two demonstration
centers, allowing the agency to retain the proceeds from leasing out
underutilized real property and to accept in-kind consideration in lieu
of cash for rent. NASA selected Ames Research Center and Kennedy Space
Center for the demonstration program. The agency has requested that the
Congress extend this authority to at least six NASA centers.
Section 710 of the NASA Authorization Act of 2005 (Public Law 109-155)
directed GAO to review NASA‘s EUL program. We examined (1) the
financial impact of the EUL authority on NASA and whether EUL revenue
and other financial benefits would have been realized without the
authority, (2) NASA‘s use of the authority and whether the arrangements
made under the authority would have been made in the absence of the
authority, and (3) what controls are in place to ensure accountability
and transparency and to protect the government. The act also directed
GAO to report back to the Congress by December 30, 2006.
Summary:
Since beginning the EUL demonstration, NASA has realized about $1.3
million in EUL-related financial benefits”$972,546 of lease revenue and
over $350,000 of in-kind consideration”most of which would not have
been realized by NASA without EUL authority. Under its existing
authorities, the agency would have been required to remit lease revenue
in excess of costs to the U.S. Treasury and would not have been allowed
to accept in-kind consideration exceeding costs for rent, except to a
limited extent for historic property. Of the lease revenue collected,
NASA spent about $480,000”all at Ames Research Center”on maintenance
and improvement of real property assets. In addition to the $1.3
million, NASA collected $1.2 million”that could have been collected
without EUL authority”that agency officials told us offset, to some
extent, the agency‘s costs for common services such as security.
NASA is using EUL authority to develop underutilized real property at
Ames and Kennedy for use by others. Ames and Kennedy have entered into
EUL agreements for underutilized office space, unique research and
development facilities, and land, and both centers plan to use EUL
agreements to develop research parks. According to agency officials,
while NASA would have conducted some development under existing
authorities, EUL authority provided the agency with increased incentive
and flexibility to develop underutilized real property.
While each demonstration center has mechanisms to ensure that EUL
agreements provide benefit, beyond rent, to NASA and fair market
consideration is received for all property, we found that the agency
does not have adequate controls in place to ensure accountability and
transparency and to protect the government. For example, the agency has
not established measures of effectiveness or criteria for determining
whether EUL represents the best economic value to the government. In
terms of financial accountability, we found weaknesses that hamper
accountability and transparency. For example, the agency has no
accounting system for tracking and reporting the value of in-kind
consideration, and in some instances, we could not trace financial data
to source documents and financial data were not readily available.
Finally, NASA‘s implementation of EUL could lessen budget transparency.
For example, NASA‘s EUL authority allows the agency to accept in-kind
consideration in the form of services or construction that is not
recognized in the budget. In addition, EUL cash revenue is not readily
apparent within the agency‘s reimbursable budget line.
Briefing Structure:
Background: page 2;
Findings:
NASA Has Realized about $1.3 Million in EUL Benefits: page 3;
NASA Uses EUL to Develop Underutilized Property: page 4;
NASA's EUL Program Needs Additional Controls: page 6;
Appendix:
Scope, Methodology, and Contributors: page 7.
Background:
Real Property is a High-Risk Area:
Because of long-standing problems with excess and underutilized
property, deteriorating facilities, unreliable real property data, and
costly space challenges, GAO designated federal real property as a high-
risk area in January 2003. We have reported that many federal real
property assets”including facilities and land worth hundreds of
billions of dollars”are in an alarming state of deterioration, and
agencies have estimated restoration and repair needs to be in the tens
of billions of dollars.
Like many federal agencies, NASA faces considerable challenges
addressing facilities needs with limited funds. As the ninth largest
federal government property holder, NASA owns more than 100,000 acres
of real estate, as well as over 3,000 buildings and 3,000 other
structures totaling over 44 million square feet. However, the agency
has large and growing capital repair needs. NASA‘s property database
shows over $1.8 billion of deferred maintenance for the agency‘s
facilities. In addition, over 10 percent of the agency‘s facilities are
underutilized or not utilized at all. According to NASA‘s 2004 Real
Property Management Plan, critical attention to maintenance and
recapitalization is required to ensure NASA‘s ability to safely and
effectively achieve its vision and mission.
Alternative Financing Has Been Used by Other Agencies:
We have reported that in an era of limited resources and growing
mission needs, many agencies have turned to approaches other than full
up-front appropriated funding to finance capital. EUL authority”which
allows agencies to accept cash and/or in-kind consideration for real
property leases and to retain the proceeds”is one of these alternative
approaches.
In December 2004, we reported that although third-party financing
arrangements, such as EUL, can make it easier for agencies to manage
within a given amount of budget authority, they also increase the need
for effective implementation and monitoring by agencies to ensure that
the government‘s interests are protected. We reported that many
partnership arrangements, such as EUL, were structured to include
specific attributes that did not require agencies to reflect the full,
up-front costs in the budget. For example, in one case, the Veterans
Administration (VA) outleased land to a developer with a 35-year no-
cost enhanced use lease. The developer built a facility on the property
to provide housing for single homeless individuals. The developer
agreed to give veterans referred by VA priority placement for at least
50 percent occupancy of the property. Although the improvements may be
surrendered to VA at the end of the lease term, the transaction was
completely invisible in VA‘s budget because it did not involve cash
consideration.
Related GAO Reports:
GAO, Defense Infrastructure: Greater Management Emphasis Needed to
Increase the Services‘ Use of Expanded Leasing Authority, GAO-02-475
(Washington, D.C.: June 6, 2002).
Statement of David M. Walker, before the Senate Committee on
Governmental Affairs, Federal Real Property: Actions Needed to Address
Long-standing and Complex Problems, GAO-04-119T (Washington, D.C.: Oct.
1, 2003).
GAO, Budget Issues: Alternative Approaches to Finance Federal Capital,
GAO-03-1011 (Washington, D.C.: Aug. 21, 2003).
GAO, Capital Financing: Partnerships and Energy Savings Performance
Contracts Raise Budgeting and Monitoring Concerns, GAO-05-55
(Washington, D.C.: Dec. 16, 2004).
Statement of David M. Walker, before the Senate Committee on Homeland
Security and Governmental Affairs, Subcommittee on Federal Financial
Management, Government Information, and International Security, Budget
Process: Better Transparency, Controls, Triggers, and Default
Mechanisms Would Help to Address Our Large and Growing Long-term Fiscal
Challenge, GAO-06-761T (Washington, D.C.: May 25, 2006).
Findings: NASA's EUL Authority:
NASA‘s EUL authority”granted by the Congress in 2003”affords the agency
the opportunity to lease out underutilized real property in exchange
for cash and/or in-kind consideration, such as improvement of NASA‘s
facilities or the provision of services to NASA. Further, NASA can
deposit funds not used to cover lease costs in a no-year capital
account to be available for maintenance, capital revitalization, and
improvement of the real property, albeit only at the demonstration
centers. Unlike other agencies with EUL authority, however, NASA is not
authorized to lease back the property during the term of the lease.
NASA is required by the enabling law to submit an annual report by
January 31 of each year regarding the status of the EUL demonstration.
Thus far, these annual reports have included descriptions of the status
of the demonstration and planned activities, as well as tables listing
enhanced use lease agreements and showing annual rent and common
service charges for each lease.
NASA Has Realized about $1.3 Million in EUL Benefits:
NASA has realized about $1.3 million in EUL-related financial benefits
since beginning the EUL demonstration”most of which would not have been
realized by NASA without EUL authority. However, without EUL authority,
some of these financial benefits could have accrued to the federal
government.
* Under its existing real property authorities, NASA would have been
required to return lease proceeds in excess of costs to the general
fund of the U.S. Treasury and could not have accepted in-kind
consideration exceeding costs for rent, except to a limited extent for
historic property under the National Historic Preservation Act (NHPA).
* The agency collected $972,546 of gross lease revenue. Of this amount,
$58,792 for general and administrative expenses would have been
retained by NASA, leaving $913,754 net rent that NASA would have been
required to return to the U.S. Treasury, without specific authority
allowing the agency to retain the funds. For example, under NHPA, NASA
could have retained $416,029 net rent for 2 years, but the funds had to
be used in conjunction with preserving historic property. With EUL
authority, NASA can retain the entire $913,754 net rent indefinitely
and can expend the funds on any properties at the demonstration centers.
* Ames realized in-kind consideration worth over $350,000 for tenant
improvements and animal husbandry services, according to agency
officials, that could not have been accepted without EUL authority.
Of the amount collected, NASA spent about $480,000”all at Ames”on
maintenance and improvement of real property assets.
In addition to the $1.3 million, NASA collected $1.2 million”that could
have been collected without EUL”that agency officials told us offset,
to some extent, the agency‘s costs for common services such as security
and fire protection.
EUL Financial Benefits by Fiscal year:
Ames: Cash;
FY 2004: $59,866;
FY 2005: $318,190;
FY 2006: $531,356;
Totals: $909,412.
Ames: In-kind;
FY 2004: $94,967;
FY 2005: $108,000;
FY 2006: $149,029;
Totals: $351,996.
Kennedy: Cash;
FY 2004: $3,000;
FY 2005: $29,512;
FY 2006: $30,622;
Totals: $63,134.
Kennedy: In-Kind;
FY 2004: 0;
FY 2005: 0;
FY 2006: 0;
Totals: 0.
Total;
FY 2004: $157,833;
FY 2005: $455,702;
FY 2006: $711,007;
Totals: $1,324,542.
Source: NASA data, GAO analysis.
Note: Because of financial management weaknesses identified during our
limited review of NASA‘s data, we were unable to confirm the accuracy
of the amounts presented in this table. Also, amounts for fiscal year
2006 include estimates for September 2006.
[End of Table]
Key elements of Other NASA REal Property Authorities:
Concession Authority
This authorizes agreements for outreach and visitor centers. The
concessionaire is allowed to charge admission fees and to make a profit
commensurate with the capital invested and the obligations assumed.
Space Act”Lease Authority These leases cannot exceed 5 years and
require Treasury to receive fair value in money. But all amounts
exceeding cost must be returned to the Treasury. These leases must
include a termination-for-convenience clause.
Space Act”Other Transactions
There is no term limit on other transaction leases. NASA can obtain
either monetary or in-kind consideration. However, unlike with EUL
authority, the agency cannot retain consideration exceeding costs.
National Historic Preservation Act
NASA can lease historic property to ensure its preservation. Historic
property can be leased for less than fair market value if the tenant
assumes responsibility for maintaining and preserving the property.
Cash consideration may be retained by NASA for up to 2 fiscal years to
defray costs associated with the property.
NASA Uses EUL to Develop Underutilized Property:
NASA is currently using EUL authority to maintain and develop
underutilized real property at Ames and Kennedy.
* Ames has entered into over 50 EUL agreements, leasing out
underutilized office space and unique research and development
facilities. Much of the space is located in the historic portion of
the old Moffett Field Naval Base.
* Kennedy has entered into 8 EUL agreements for ground leases for press
sites and telecommunication equipment.
* Both centers plan to use EUL agreements, in conjunction with private
financing, to develop research parks.
NASA would have developed some of the properties leased out under EUL
using other authorities.
* Ames‘ research park, according to Ames officials, was first approved
for development with existing authorities during the Clinton
administration.
* Ames‘ renovation of historic property could have been done using
NHPA. For example, Ames used NHPA to lease a historic building to a
university.
* Kennedy, before receiving EUL authority, leased out press sites and
worked with the Spaceport Florida Authority to build a laboratory
facility as the ’magnet facility“ for the Kennedy research park under
the Space Act.
Kennedy, according to agency officials, may use EUL authority to
develop improved visitor centers. The agency, however, has used
concessions agreements to build and maintain visitor centers, including
the new Saturn V concession.
Figure: SATURN V Concession at Kennedy Space Center:
[See PDF for image]
Source: GAO.
[End of figure]
EUL authority provided NASA with increased incentive and flexibility to
develop underutilized real property.
* Retaining revenue exceeding costs and maintaining no-year capital
accounts motivate the agency to invest the time necessary to establish
the arrangement.
- NASA implemented an aggressive plan at Ames to vacate NASA employees
from one historic building to lease the space to EUL tenants and
increase the EUL revenue stream. According to agency officials, a
second objective of vacating the employees was to consolidate them
within Ames‘ fenced area to improve security and efficiency.
- NASA used EUL funds to improve the historic building, making it more
attractive to potential EUL tenants.
* Accepting in-kind consideration in lieu of cash for payment provides
flexibility in negotiating agreements. For example,
- Accepting building improvements in lieu of cash rent allowed NASA to
negotiate some agreements. In these instances, NASA gets an improved
building and the tenant gets tailored space at the same cost.
- Accepting services in lieu of cash rent allowed NASA to receive
needed services and to retain ownership of a unique asset”the Animal
Care Facility”with no cash outlay.
Centers' Implementation Models Differ:
Ames Research Center
* Ames is acting as its own master developer.
* Ames property is in a fully developed, desirable high- rent
area”Silicon Valley.
* Ames is required by an environmental impact study to include on-site
housing to mitigate traffic.
* Ames‘ planned development is a campus-like addition, with common
areas and recreation facilities, to the existing historic district of
Moffett Field.
Kennedy Space Center
* Kennedy property is low- value, unimproved swampy land.
* Kennedy is using an acquisition-like approach, including a request
for proposal, to select a research park developer.
* According to agency officials, Kennedy plans to use a similar
approach for future developments, such as the visitor center.
Elements of Accountability and Transparency:
NASA‘s financial management requirements stipulate that recorded
transactions be adequately documented so they may be traced from
original documents to financial statements, that a clear audit trail be
established, and that accounting and financial management data be
recorded and reported in the same manner throughout NASA, using uniform
definitions. These internal controls protect the agency against fraud,
waste, and abuse; ensure the accuracy and reliability of accounting and
operational data; and ensure compliance with federal laws and
regulations.
In October 2003, the Comptroller General testified that public-private
partnerships can be a viable option for redeveloping obsolete federal
property if they provide the best economic value for the government,
compared with other options, such as federal financing through
appropriations or sale of the property. He also testified that full
transparency with regard to the government‘s real property activities
and an effective system to measure results are needed.
NASA's EUL Program Needs Additional Controls:
Each center has mechanisms to ensure that EUL agreements provide
benefit, beyond rent, to NASA and fair market value consideration is
received for all property. For example,
* Ames and Kennedy review potential EUL agreements to ensure that they
support NASA‘s mission.
* The demonstration centers use a combination of property appraisals
and rent surveys to determine fair market value.
However, NASA has not established adequate controls to ensure
accountability and protect the government. For example,
* NASA has not adopted measures of effectiveness or criteria for
determining best economic value to the government, according to agency
officials.
* We found financial management weaknesses that hamper accountability.
- The agency has no accounting system for tracking and reporting the
value of in-kind consideration.
- In some instances, we could not trace financial data to source
documents and financial data were not readily available.
NASA‘s implementation of EUL could lessen budget transparency. For
example,
* In-kind consideration agreements are not recognized in the budget.
* The collection and use of EUL revenue are not readily apparent within
the agency‘s reimbursable budget line.
* NASA has previously proposed controls that could mitigate budget
transparency concerns, including a $25 million annual limitation on EUL
income and prohibitions on the use of EUL for the purpose of
construction of NASA-owned facilities.
Appendix:
Scope and Methodology:
To determine the financial impact of EUL authority on NASA, we obtained
and analyzed pertinent EUL records and quantified financial impact in
terms of cash and in-kind consideration. To ascertain whether these
benefits would have been realized in the absence of the authority, we
obtained and analyzed copies of all of NASA‘s pre-existing real
property authorities, and determined whether they could have provided
NASA with the revenue and financial benefits realized with EUL
authority. To clarify our understanding, we conducted interviews with
cognizant and responsible NASA officials at NASA Headquarters, Ames
Research Center, and Kennedy Space Center.
To evaluate the use of the program, we reviewed leasing agreements and
visually inspected selected leased properties at both demonstration
centers. We reviewed the centers‘ future plans for the program and
discussed NASA‘s use and plans for the program with cognizant and
responsible NASA officials at both centers and NASA Headquarters. To
ascertain whether existing arrangements would have been made in the
absence of the program, we examined the existing EUL agreements in
light of NASA‘s pre-existing real property authorities, discussed
NASA‘s pre-EUL authority development plans, and identified instances
when NASA originally planned to develop property, currently being
developed under EUL authority, with other real property authorities. We
also interviewed responsible NASA officials to determine whether NASA
would have made the current arrangements and plans without the EUL
authority.
To assess the controls NASA has in place to ensure accountability and
transparency and to protect the government, we judgmentally sampled EUL
leasing agreements and discussed the selected lease arrangements with
cognizant and responsible NASA officials. We obtained each center‘s
records of the financial transactions associated with the selected
leasing agreements, and we attempted to reconcile these records with
the leases and support agreements. We also had extensive discussions
with cognizant and responsible NASA officials regarding in-kind
consideration transactions, fair market value, value beyond rent to
NASA, criteria for determining the best economic value to the
government, accounting for EUL in NASA‘s budget, and measures of
effectiveness.
To accomplish our work, we visited NASA Headquarters, Washington, D.C.;
Ames Research Center, Moffett Field, California; and Kennedy Space
Center, Florida.
Contributors:
If you have any questions concerning this briefing, please call Allen
Li at (202) 512-4841. Other key contributors to this report were Jim
Morrison, Assistant Director; Sylvia Schatz; Erin Schoening; Robert
Swierczek; and John Warren.
[End of section]
FOOTNOTES
[1] Statement of David M. Walker, before the Senate Committee on
Governmental Affairs, Federal Real Property: Actions Needed to Address
Long-standing and Complex Problems, GAO-04-119T (Washington, D.C.: Oct.
1, 2003).
[2] GAO, Budget Issues: Alternative Approaches to Finance Federal
Capital, GAO-03-1011 (Washington, D.C.: Aug. 21, 2003).
[3] GAO, Capital Financing: Partnerships and Energy Savings Performance
Contracts Raise Budgeting and Monitoring Concerns, GAO-05-55
(Washington, D.C.: Dec. 16, 2004).
[4] GAO-04-119T.
[5] In addition to the $1.3 million, NASA collected $1.2 million--that
could have been collected without EUL authority--that agency officials
told us offset, to some extent, the agency's costs for common services
such as security.
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