Objectives, Scope, and Methodology

Our first objective was to verify, to the extent practical, the amounts GSA attributed to the individual reasons for overestimation of the FBF rental revenue projections for fiscal years 1996, 1997, and 1998. To do this, we developed an understanding of the rental revenue estimation process that PBS used. On the basis of our knowledge of the estimation system and the proposed or actual corrective actions to the system, we determined whether the corrective actions appeared to address GSA’s identified reasons for the overestimation and other identified weaknesses. Our third objective was to determine the budgetary impact of the overestimation on projects and programs in the FBF. In January 1997, PBS informed Congress that it expected its total overestimation of rental revenue for fiscal years 1996 and 1997 to be $847 million. As shown in table 2, PBS identified seven reasons for the overestimation and linked specific dollar amounts to each reason. PBS could not provide documentation showing how it developed the $86 million attributed to the reason that the original fiscal year 1995 rent revenue estimate was higher than actual fiscal year 1995 revenues. These weaknesses included the following: lack of documented policy and procedures for the estimating process; unclear lines of responsibility and accountability for revenue estimates below the level of the PBS Commissioner; lack of supporting documentation necessary to verify forecast information and assumptions; and use of national averages, rather than project-specific data, to forecast occupancy schedules and rental rates. If effectively implemented, these actions should help improve future revenue estimates. The intent of the reserve was to ensure that available obligational authority would not be used until revenue was available to cover those obligations. OMB and PBS officials have stated that the actions taken through the fiscal year 1998 budget will eliminate the impact of the rent estimating problem on the FBF. In addition, in discussing the impact of the fiscal year 1998 budget decision, a GSA official, in responding to a question during an April 24, 1997, congressional hearing, stated “Absent direct appropriations and with the requirement to earmark $680 million in FY 98 Federal Building Fund budget authority to prior year capital projects, GSA will operate below prudent funding levels for building operations and repair and alterations for FY 98.”
It is not clear how many, if any, of the proposed new construction or modernization projects would have been included in the President’s budget or funded by Congress in fiscal year 1998 had it not been for the overestimation problem. The actions taken by PBS to establish an obligational reserve to prevent the overobligation of the FBF revenue did not delay 10 of the 11 new construction projects included in the reserve. In addition, deferred maintenance could result in increased future cost.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the General Services Administration's (GSA) actions in responding to and managing the recent funding problems experienced by its Federal Buildings Fund (FBF), focusing on: (1) verifying, to the extent practical, the amounts GSA attributed to each reason for overstimation of the FBF rental revenue projections for fiscal years 1996, 1997, and 1998; (2) whether the Public Buildings Service's corrective actions appeared to address GSA's identified reasons for the overestimation; and (3) budgetary impact of the overestimation on projects and programs in the FBF.

What GAO Found

GAO noted that: (1) GSA informed Congress that it expected the total overestimation of rental revenue for fiscal years 1996 and 1997 to be $847 million; (2) GAO verified, to the extent practical given available support, six of GSA's identified seven reasons for the overestimation and the linkage of specific dollar amounts of the overestimation to each of the six reasons; (3) GSA was unable to provide documentation showing how it developed the $86 million it attributed to the remaining reason--the fiscal year (FY) 1995 rent revenue estimate being higher than actual revenues; (4) GAO and others identified several weaknesses in GSA's rental revenue estimation process, such as the lack of documented policy and procedures for the rental revenue estimation process and the lack of supporting documentation necessary to verify forecast information and assumptions; (5) GSA has taken or plans to take corrective actions that, if effectively implemented, should help improve future rental revenue estimates; (6) for FY 1997, GSA took action to prevent the overobligation of FBF revenue by creating a reserve to ensure that obligational authority totalling $680.5 million would not be used until revenue was available to cover those obligations; (7) this action had the potential to affect the projects and programs from which obligational authority was withheld; (8) recent statements by GSA and Office of Management and Budget officials indicated that the impact of the rent estimating problem on the FBF will be resolved by actions taken through the FY 1998 budget; (9) although the $680.5 million appropriated in FY 1998 replenishes the $680.5 million to prior projects, GAO does not believe it necessarily mitigates the effects of not funding GSA's proposed FY 1998 program of new construction and modernization work; (10) GSA has stated that the overestimation problem contributed to a reduction in funding for building operations and basic building repair and alteration; and (11) this reduction could also result in changes in future costs for the same reasons previously mentioned as well as increased repair costs due to more extensive deterioration over time.