2. The increased balance has primarily  resulted from the growing difference between the resources deposited  into the FBF and use of these funds as determined through the budgeting  and appropriations process. According to OMB staff and GSA officials,  Congress provided less obligational authority than requested to balance  competing priorities among government programs and meet spending  caps. For example,  OMB staff stated that if GSA were able to spend all of the funds collected  by the FBF each year, these funds would generally be sufficient to fund  GSA’s identified repairs and alterations projects and a modest new  construction program. GSA officials also stated that the authorization to obligate and spend the  balance of funds in the FBF, which it anticipates will double to $4.5 billion  by the end of fiscal year 2013, would enhance the agency’s ability to  manage its real property portfolio by ensuring that operations and  maintenance are sufficiently funded and that capital investments, such as  repairs and alterations and new construction projects, can continue to be  made. Factors Affecting FBF

While budgeting and appropriations decisions have contributed to a  significant increase in the FBF balance the last 2 years, various factors  have limited the fund’s income from GSA’s real property operations. As measured by funds from operations—meaning revenue  less costs excluding depreciation—GSA generated approximately $1.6  billion from its owned assets in 2006 and a nearly identical amount in  2011, though the annual amount varied during this time period. Specifically, the revenue from GSA’s owned portfolio  adjusted for inflation has decreased by 2 percent. Costs. While the FBF as a whole has generated positive funds from operations,  portions of GSA’s inventory operate at a loss. 2.) Even with these losses in its leased portfolio, GSA continues to rely  extensively on leasing to meet its tenants’ increasing demand for office  space. GSA is taking steps to manage its financial resources more effectively by  reducing the size of its overall real estate portfolio, both in terms of the  number of assets and the amount of square feet it manages. GSA Has Identified Billions in Repair Liability, but Decreased Funding May Increase Future Resource Demand from the FBF

		Condition of GSA’s Assets

GSA measures its investment needs for maintaining and improving the  condition of its owned facilities through its maintenance and repair  liability, which identifies the estimated aggregated cost of future  maintenance and repairs across its portfolio. The National Research Council estimates that each $1 in  deferred maintenance results in a long-term capital liability of $4 to $5,  and that “an accumulation of deferred investments over the long term  may be significantly greater than the short-term savings that public-sector  decision makers were initially seeking.”

	GSA Could Better Conform Some of Its Capital Planning to Leading Practices

Making informed capital investment decisions requires full information  about an agency’s current and long-term needs, alternative courses of  action, and how potential projects compare amongst each other. In addition, the  agency’s lack of a comprehensive long-term capital plan could limit its  ability to provide perspective on how funding for requested projects aligns  with its long-term investment strategy. Having such a plan would enable  GSA and Congress to better evaluate the full range of real property  priorities for using funds in the FBF both over the next 5 years and  annually and, should fiscal constraints so dictate, identify which might  take precedence over others. Recommendations for Executive Action

To enhance transparency, allow for more informed decision making  related to GSA’s real property priorities, and make a stronger case for  using funds in the FBF to meet capital investment needs, we recommend  that the Administrator of GSA take the following two actions:
Document in its annual budget request to OMB how GSA uses its  prioritization criteria to generate its annual and 5-year lists of  prioritized projects to ensure that Congress understands the rationale  behind prioritized project lists and that GSA is maximizing return on  FBF investments. GSA agreed with our findings and recommendations. Appendix I: Objectives, Scope, and Methodology

This report focuses on (1) the factors that have affected the resources  available in the Federal Buildings Fund (FBF); (2) the General Services  Administration’s (GSA) potential maintenance and repair liability for its  owned assets and the implications for the fund; and (3) the information  GSA considers when evaluating capital investment proposals and how its  practices compare to leading practices for making capital investment  decisions. In  addition, we reviewed GSA’s congressional budget requests to obtain  information on the amounts of obligational authority requested by GSA  compared to the amounts provided by Congress and the amount  available in the fund from fiscal year 2006 through fiscal year 2012. Comparison to Leading Capital Practices

To assess how GSA’s use of Information to make capital investment  decisions conforms with leading practices, we identified leading practices  for using information to make capital investment decisions from GAO’s   We also drew  Executive Guide and OMB’s Capital Programming Guide.from the National Research Council’s research in this area. To assess GSA’s project  prioritization and long-term capital planning, we interviewed GSA program  and budget officials and documentation that GSA provided in these areas  such as its 5-year prioritized project list from fiscal year 2011 to fiscal year  2015.
Why GAO Did This Study

GSA serves as the primary steward of the federal governments civilian real property portfolio of nearly 10,000 assets. Since 1972, GSA has funded its real property acquisition, operation, maintenance, and disposal through the rent it collects from tenant agencies that is deposited into the FBF. GAO has previously reported, however, that the FBF has faced difficulty providing sufficient resources to support GSAs mission.
GAO was asked to examine (1) the factors affecting the resources in the FBF, (2) GSAs potential repair liability and the implications for the FBF, and (3) the information GSA considers when evaluating capital investments and how these practices compare to leading practices for prioritizing capital investments. GAO reviewed legislation and GSA documents and compared leading practices on making capital investment decisions from OMB and GAO capital planning guidance to GSA practices. GAO also analyzed budget and financial data from fiscal years 2006 through 2012, facility condition data from fiscal year 2011, and interviewed GSA officials and OMB staff.

What GAO Found

The Federal Buildings Funds (FBF) balance has increased from $56 million in fiscal year 2007 to $2.2 billion in fiscal year 2012 primarily due to the growing difference between the resources provided to the FBF and the General Services Administrations (GSA) use of these funds as determined through the budgeting and appropriations process. In the last 2 years, Congress has provided fewer resources than requested by the executive branch and generated by the FBF. Office of Management and Budget (OMB) staff and GSA officials stated that if GSA were able to spend all of the funds collected by the FBF each year, these funds would generally be sufficient to fund GSAs needs. However, GSA, through the annual Presidents Budget Request, has sought less obligational authority than the balance available in the fund. While the FBFs balance has increased, various factors have limited the funds income. Funds from operationsrevenue less costs excluding depreciationthat contribute to FBF income have declined from 2006 to 2011 when adjusted for inflation. Revenues have declined while costs have outstripped inflation over this time period. In addition, portions of GSAs inventory operate at a loss. For example, about 30 percent of GSAs owned assets lost money in 2011, while GSAs total leased portfolio lost about $75 million. Despite the losses in its leased portfolio, GSA continues to rely extensively on leasing. GSA is taking steps to reduce the size of its overall real estate portfolio.
GSA has identified $4.6 billion in maintenance and repairs expected from 2012 to 2021 and anticipates that nearly a quarter of this amount is needed immediately. However, funding for maintenance and repairs has declined since 2006. GSA officials noted that reduced funding for capital reinvestments could result in deferred maintenance and repairs, and increase the cost and extent of such work in the future. These concerns are consistent with the National Research Councils findings that each $1 in deferred maintenance and repair work results in a long-term capital liability of $4 to $5.
GSAs use of information to make capital investment decisions conforms to some leading practices from GAO and OMB guidance, but GSA lacks a transparent process for prioritizing projects and a comprehensive long-term capital plan that fully aligns with leading practices. GSA keeps a baseline of information on its assets and needsas leading practices suggestthrough various tools and databases. GSAs process and guidance for evaluating capital investment alternatives substantially meet leading practices as its project planning process explores alternatives to meeting investment needs. GSAs process for prioritizing capital investments partially meets leading practices, but its project prioritization transparency could be improved by laying out in its annual budget submission how it uses its criteria to determine which projects get selected for funding over others. In addition, an improved comprehensive long-term capital plan could further GSAs ability to make informed choices about long-term investment decisions. Both OMB and GAO guidance emphasize the importance of developing a long-term capital plan to guide the implementation of organizational goals. Having such a plan would enable GSA and Congress to better evaluate a range of priorities over the next 5 years. In short, more transparency through a comprehensive long-term capital plan would allow for more informed decision making by GSA and Congress among competing priorities.

What GAO Recommends

GAO recommends that GSA (1) document in its budget submission how it prioritizes capital investments and (2) develop and annually submit a 5-year long-term capital plan to OMB and Congress. GSA agreed with our recommendations. Technical comments from GSA and OMB were incorporated as appropriate.