	Background

State has authority to acquire, manage, and dispose of real property  abroad. State’s Overseas Real Property Inventory Has Increased, but Data Do not Allow for Comparisons across Years

Our analysis of State’s real property portfolio indicated that the overall  inventory has increased. State reported its leased properties, which make  up approximately 75 percent of the inventory, increased from  approximately 12,000 to 14,000 between 2008 and 2013. However,  comparing the total number of owned properties between years can be  misleading because State’s method of counting these properties has  been evolving over the past several years. For example, OBO has  focused on separately capturing structural assets previously recorded as  part of another building asset, such as perimeter walls, guard booths, and  other ancillary structures. State Officials Said That They Consider Many Factors in Managing Their Overseas Real Property, but Data and Documentation Are Limited

State’s officials said that they consider many factors in managing their  real property portfolio, specifically in terms of identifying and disposing of  unneeded property, as well as in purchasing and leasing property. As a result, this raises questions about the extent to which  posts worldwide are using the code as State intends, and the extent to  which State is receiving accurate and comprehensive cost information  about its properties. We requested to review 202 files from fiscal year  2008 through 2013 on acquisitions, disposals, and leases, but were only  provided 90 files since, according to State officials, the files were not  centrally located and too time consuming to find and provide within the  time frame of our review. For example, State provided all 36 of the  requested lease files, but some documentation that FAM and OMB  directs State to retain, and that State agreed to provide, was missing for  30 of the 36 lease files provided. We found that the four posts we visited did not use this code consistently. State’s Foreign Affairs Handbook instructs posts to use the code to record  costs related to the disposal of unneeded real property, but does not  describe in detail the types of costs that can be charged to this account. Specifically, the Foreign Affairs Handbook includes the following  information on this accounting code: “7541 Real Estate-Program Costs:  Costs in support of the acquisition and disposal of State real property.”  OBO officials told us costs for unneeded properties that should be  charged to this code include disposal costs for government-owned  buildings, such as guard, maintenance, utility, and other building  operating costs of vacant/unneeded property until sold. Although State  relies on this account to monitor costs associated with disposal of  unneeded properties, on our site visits we found that officials at one post  did not know they could use this account for costs related to properties  identified for disposal, such as utility bills and condominium fees while  marketing the property. We found posts in other countries with unneeded properties  identified for disposal in fiscal year 2013 had not charged expenses to  this account during that fiscal year such as posts in Jamaica, Ukraine,  Tunisia, and Namibia. For example, State may not have the information it needs to  make a decision to accept or decline an offer for a property when  attempting to maximize revenue for a property disposal. In addition, posts  may not have sufficient funding for routine property maintenance because  they are using their designated routine maintenance funds on unneeded  properties, which could reduce the amount of funding they have available  for maintenance of other properties. Without the  missing files and documentation, it is unclear how efficiently and  effectively State is managing its overseas real property. Clarify accounting-code guidance to the posts for tracking expenses  related to disposal of unneeded properties. 2. Take steps to ensure that documents related to real property  disposals are prepared and retained in accordance with FAM and  OMB guidance. In written comments, reproduced in appendix II,  State concurred with the report’s recommendations. To determine what factors State considers in managing its real property  portfolio and the extent to which it documents its decision-making  process, we reviewed sections of the Foreign Affairs Manual (FAM)  applicable to property management overseas and documents prepared by  State officials in response to our questions. To evaluate the  completeness of these files we compared State’s documentation of real  property disposals, acquisitions, and leases to the documentation directives  listed in FAM and relevant Office of Management and Budget (OMB)  Circulars. We selected these posts  because they had (1) ongoing or recently completed embassy  construction or renovation projects without disposing of properties, (2)  properties reported as identified for disposal for multiple years without  being disposed of, and (3) a mix of owned and leased properties. The results of the case  studies provide insight into State’s management and decision-making  practices but cannot be generalized for the purposes of this review.
Why GAO Did This Study

The Department of State (State) holds or leases about 70-million square feet of real estate in about 275 posts worldwide and has the authority to construct, acquire, manage, and dispose of real property abroad.
GAO was asked to review State's management of overseas real property. This report examines: (1) what is known about State's overseas real property inventory, and (2) what factors State considers in managing its overseas real property portfolio and to what extent it documents its decision-making process pertaining to real property.
GAO requested 202 files for all acquisitions, disposals, and major leases pertaining to State's management of its real property abroad for the period from 2008-2013. In addition, GAO interviewed State officials in headquarters and at four posts abroad, selected because they had (1) ongoing or recently completed embassy construction or renovation projects without property disposals, (2) properties reported as identified for disposal for multiple years without being disposed, and (3) both owned and leased properties. The results of the four case studies cannot be generalized for the purpose of this review.

What GAO Found

GAO's analysis of the overseas real property portfolio of the Department of State (State) indicates that the overall inventory has increased in recent years. State reported that its leased properties, which make up about 75 percent of its inventory, increased from approximately 12,000 to 14,000 between 2008 and 2013. State's numbers of federally owned properties increased, but comparing the total number of owned properties from year to year can be misleading because State's method of counting these properties has been evolving over the past several years. Specifically, according to State officials, they have been revising their method for counting properties to produce more precise counts and to meet reporting guidance from the Office of Management and Budget (OMB), among others. For example, State began counting separately structural assets previously included as part of another building's assets, such as guard booths or perimeter walls, and consequently reported approximately 650 additional structural assets in fiscal year 2012 than in 2011, and approximately 900 more structures in 2013.
State officials told GAO that they consider many factors in managing real property; however, GAO found State's available data and documentation on management decisions were limited. State officials said that they work with overseas posts to identify and dispose of unneeded properties, primarily using factors in State's Foreign Affairs Manual ( FAM ) guidance. Such factors include identifying properties deemed obsolete or with excessive maintenance costs. State collects data on costs associated with unneeded properties identified for disposal, relying on posts to charge all such costs to a specific accounting code. The four posts GAO visited did not use this code consistently. For example, officials at one post charged some disposal costs to a routine maintenance account. Officials at the other posts with properties for sale used the code to charge all related disposal costs. GAO also found that other posts with unneeded properties identified for disposal in fiscal year 2013 had not charged expenses to this account. The guidance provided in the FAM for using this code does not detail the types of costs that can be charged. This omission raises questions about the extent to which posts use the code as State intends and the extent to which State receives accurate and comprehensive cost information about its unneeded properties. State, without accurate data on unneeded property, may not have the information it needs to make a decision about property offers when attempting to maximize revenue for property sales. Also, posts may not have sufficient funding for routine property maintenance if they use funds designated for this type of maintenance on unneeded property. GAO requested to review 202 files between fiscal year 2008 through 2013 on acquisitions (72), disposals (94), and leases (36), but was provided 90, as State told GAO that these files were not centrally located and too time consuming to find and provide during the time frame of our review. State provided most of what it considers “core” documents for the acquisition and disposal files, but these documents do not constitute all of the documentation listed in the FAM and OMB guidance. In addition, although State provided all 36 of the requested lease files, some documentation that State agreed to provide was missing for 30 of the 36 files. Without the missing files and documentation, it is unclear how efficiently and effectively State is managing its overseas real property.

What GAO Recommends

GAO recommends that the Secretary of State (1) clarify accounting code guidance for tracking expenses related to disposal of unneeded properties, and (2) take steps to collect and retain documents related to real property purchases, disposals, and leases in accordance with the FAM and OMB's guidance. State concurred with GAO's recommendations.