Agencies Attributed Benefits of EULs to Their EUL Programs, but Did Not Always Do the Same with All Costs

		Agencies Cited Various EUL Benefits

Agency officials told us that EULs provide a variety of benefits to the  government in addition to better utilization of underutilized federal  property. The commonly cited benefits include enhanced mission  activities, cash rent revenue, and value received through in-kind  consideration. All four agencies we reviewed reported cash benefits from EULs. Agencies’ Experiences in Using EULs Provide Illustrative Examples about EUL Use

Based on recent agency experiences, EULs may be a viable option for  redeveloping underutilized federal real property when disposal is not  possible or desirable, but agencies raised issues pertaining to EULs that  affect their use or budgetary treatment. First, NASA has reported that the  limitation on its authority to accept in-kind consideration has limited its  ability to encourage use of EULs and investments in underutilized NASA  property. In particular, according to the NASA officials,  prospective lessees are reluctant to make capital improvements that will  have to be conveyed to the government at the end of the lease without  receiving other compensation, such as a reduction in cash rent. Budget Impacts of EULs

VA officials said that assessing and recognizing the budget impacts of  EULs is complicated and maybe interpreted differently by agencies with  EUL authority. In particular, VA EULs can include long-term commitments  that are recognized in the federal budget in different ways. VA’s leaseback costs are nearly $16 million annually (see table 3), but VA  and CBO disagree on the extent to which VA should account for the  budget impacts for EULs that could include long-term government  commitments. For example,  the average VA EUL earned about $25,000 in cash revenue last year— financial benefits that could be outweighed by consultant, termination,  and leaseback costs, which agencies have not consistently attributed to  their EUL programs. Recommendation

To promote transparency about EULs, improve decision-making  regarding EULs, and ensure more accurate accounting of EUL net  benefits, we recommend that OMB work with VA, NASA, State, and  USDA, and any other agencies with EUL authority, to ensure that  agencies consistently attribute all costs associated with EULs (such as  consulting, termination, and leaseback costs) to their EUL programs, as  appropriate. Appendix I: Objectives, Scope, and Methodology

Our objectives were to determine:  (1) To what extent do agencies attribute the full benefits and costs of their  EULs in their assessments of their EUL programs? (2) What have been the experiences of agencies in using their EUL  authority? To address these both of these objectives we reviewed prior GAO reports  on enhanced use leasing and capital financing, and contacted the Office  of Management and Budget (OMB), Congressional Budget Office (CBO)  and 11 agencies: (1) Veterans Affairs (VA), (2) National Aeronautics and  Space Administration (NASA), (3) Department of State (State), (4)  Department of Agriculture (USDA), (5) General Services Administration  (GSA), (6) Department of Energy (Energy), (7) Department of Interior  (Interior), (8) Department of Justice (DOJ), (9) United States Postal  Service (USPS), (10) St. Lawrence Seaway Development Corporation  (SLSDC), and (11) Tennessee Valley Authority (TVA) based on size or  evidence of EUL authority. We continue to  believe that VA should report all EUL costs as part of its EUL program  specifically, including consultant costs.
Why GAO Did This Study

The federal government owns underutilized properties that are costly to operate, yet challenges exist to closing and disposing of them. To obtain value from these properties, some agencies have used EULs, which are generally long-term agreements to lease property from the federal government in exchange for cash or non-cash consideration. However, agencies also incur costs for EUL programs. We have previously reported that agencies should include all costs associated with programs activities when assessing their values. This report addresses (1) the extent to which agencies attribute the full benefits and costs of their EULs in their assessments of their EUL programs and (2) the experiences of agencies in using their EUL authority.
GAO reviewed property data and documents from the largest civilian including four agencies that use federal real property agencies EULsVA, NASA, the Department of State, and the Department of Agricultureand applicable laws, and regulations and guidance. GAO visited nine sites where agencies were using EULs.

What GAO Found

Agency officials told us that enhanced use leases (EUL) help them utilize their underutilized property better; commonly cited benefits include enhanced mission activities, cash rent revenue, and value received through in-kind consideration. However, some agencies we reviewed do not include all costs associated with their EULs when they assess the performance of their EUL programs. Guidance from the Office of Management and Budget (OMB) does not specify what costs agencies should include in their EUL evaluations, resulting in variance among agencies. For example, the Department of Veterans Affairs (VA) and the Department of State do not consistently attribute EUL-related costs of consultant staff who administer the leases, and VA does not attribute various administrative costs that offset EUL benefits. Without fully accounting for all EUL costs, agencies may overstate the net benefits of their EUL programs.
Based on recent agency experiences, EULs may be a viable option for redeveloping underutilized federal real property when disposal is not possible or desirable, but two agencies raised issues pertaining to EUL use that affect their use or budgetary treatment. First, National Aeronautics and Space Administration (NASA) officials said that the limit on its authority to receive in-kind consideration as part of its EUL program has limited its ability to encourage the use of EULs for underutilized NASA property. Specifically, NASA officials said prospective lessees are reluctant to make costly capital improvements to a property that will have to be returned to the government at the end of the lease without other compensation, such as a reduction in cash rent. Second, VA and CBO disagree on the extent to which VA should account for the budget impacts for EULs that could include long-term government commitments. VA has made multi-year commitments with certain EULs without fully reporting them in its budget. Assessing and recognizing the budget impacts of EULs is complicated and may be interpreted differently by agencies with EUL authority. In particular, VA EULs can include long-term commitments that are recognized in the federal budget in different ways.

What GAO Recommends

To promote transparency about EULs, improve decision-making regarding EULs and ensure more accurate accounting of EUL benefits, GAO recommends that OMB coordinate with affected agencies to ensure that agencies consistently attribute all relevant costs associated with EULs to their EUL programs. Agencies generally agreed with our findings and recommendation.