United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Federal Financial Management, 

Government Information, Federal Services, International 

Security, Committee on Homeland Security and Governmental

Affairs, U.S. Senate 

FEDERAL REAL 

PROPERTY 

An Update on High-Risk 

Issues 

Statement of Mark L. Goldstein, Director 

Physical Infrastructure 

For Release on Delivery

Expected at 10:00 a.m. EDT 

Thursday, May 24, 2007

 

GAO-07-895T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

May 24, 2007

FEDERAL REAL PROPERTY 

An Update on High-Risk Issues 

Highlights of GAO-07-895T, a testimony 

before the Subcommittee on Federal 

Financial Management, Government 

Information, Federal Services, and 

International Security, Committee on 

Homeland Security and Governmental

Affairs 

The administration and real property-holding agencies have made progress

toward strategically managing federal real property and addressing longstanding problems. In response to the President’s Management Agenda real 

property initiative and a related executive order, agencies have, among other 

things, established asset management plans; standardized data reporting; 

and adopted performance measures. Also, the administration has created a 

Federal Real Property Council (FRPC) and plans to work with Congress to 

provide agencies with tools to better manage real property. 

These are positive steps, but underlying problems still exist. For example, 

the Departments of Energy (Energy) and Homeland Security (DHS) and the 

National Aeronautics and Space Administration (NASA) reported that over 

10 percent of their facilities are excess or underutilized. Also, Energy, 

NASA, the General Services Administration (GSA), and the Departments of 

the Interior (Interior), State (State), and Veterans Affairs (VA) reported 

repair and maintenance backlogs for buildings and structures that total over

$16 billion. The Department of Defense (DOD) reported a $57 billion 

restoration and modernization backlog. Also, Energy, Interior, GSA, State, 

and VA reported an increased reliance on leasing to meet space needs. While 

agencies have made progress in collecting and reporting standardized real

property data, data reliability is still a challenge at DOD and other agencies, 

and agencies lack a standard framework for data validation. Finally, 

agencies reported using risk-based approaches to prioritize security needs, 

which GAO has suggested, but some cited obstacles such as a lack of 

resources for security enhancements. 

In past high-risk updates, GAO called for a transformation strategy to 

address the long-standing problems in this area. While the administration’s 

approach is generally consistent with what GAO envisioned, certain areas 

warrant further attention. Specifically, problems are exacerbated by 

underlying obstacles that include competing stakeholder interests, legal and 

budgetary limitations, and the need for improved capital planning. For 

example, agencies cited local interests as barriers to disposing of excess 

property, and agencies’ limited ability to pursue ownership leads them to 

lease property that may be more cost-effective to own over time. 

Examples of Excess Federal Facilities 

In January 2003, GAO designated 

federal real property as a high-risk 

area due to long-standing problems

with excess and underutilized

property, deteriorating facilities, 

unreliable real property data, and 

costly space challenges. Federal 

agencies were also facing many

challenges protecting their 

facilities due to the threat of 

terrorism. 

This testimony is based largely on

GAO’s April 2007 report on real

property high-risk issues (GAO-07-

349). The objectives of that report 

were to determine (1) what

progress the administration and 

major real property-holding

agencies had made in strategically 

managing real property and

addressing long-standing problems 

and (2) what problems and

obstacles, if any, remained to be

addressed.

What GAO Recommends

GAO recommended in April 2007

that OMB, in conjunction with the 

Federal Real Property Council, (1) 

develop a framework to better 

ensure the validity and usefulness 

of key agency data; (2) develop an

action plan for addressing key 

problems, including reliance on

leasing, security challenges, and 

the effect of competing stakeholder 

interests; and (3) create a clearer

link between agencies’ efforts 

under the real property initiative

and broader capital planning

requirements. OMB agreed with

the report and concurred with its

recommendations. 

www.gao.gov/cgi-bin/getrpt?GAO-07-895T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Mark L. 

Goldstein at (202) 512-2834 or 

goldsteinm@gao.gov. 
Real Property High Risk

Mr. Chairman and Members of the Committee: 

We welcome the opportunity to testify on the actions that are needed to 

address the long-standing problems that led to our designation of federal 

real property as a high-risk area. As you know, at the start of each new 

Congress since 1999, we have issued a special series of reports, entitled 

the Performance and Accountability Series: Major Management 

Challenges and Program Risks. In January 2003, we designated federal 

real property a high-risk area as part of this series, and we issued updates 

on this area in January 2005 and January 2007.1

 My testimony is based 

largely on a recent report on federal real property high-risk issues,2

 and 

other GAO reports and testimonies on real property issues. My testimony 

focuses on the progress made by the administration and major real 

property-holding agencies3

 to strategically manage real property and 

address long-standing problems, and what problems and obstacles, if any,

remain to be addressed. I will also provide an update of the President’s 

Management Agenda (PMA) executive branch management scorecard 

results for the real property initiative for the second quarter of fiscal year 

2007. 

Summary 

The administration and major real property-holding agencies have made

progress toward strategically managing federal real property and 

addressing some long-standing problems. In response to the PMA real 

property initiative and a related executive order, agencies covered under 

the executive order have, among other things, designated senior real 

 1

GAO, High-Risk Series: Federal Real Property, GAO-03-122 (Washington, D.C.; Jan. 2003);

the report on real property is a companion to GAO’s 2003 high-risk update, GAO, High-Risk 

Series: An Update, GAO-03-119 (Washington, D.C.: Jan. 2003); GAO, High-Risk Series: An

Update, GAO-05-207 (Washington, D.C.; Jan. 2005), and High-Risk Series: An Update, 

GAO-07-310 (Washington, D.C.: Jan. 2007).

2

GAO, Federal Real Property: Progress Made Toward Addressing Problems, but 

Underlying Obstacles Continue to Hamper Reform, GAO-07-349 (Washington, D.C.: Apr.

13, 2007). 

3

For the purpose of this review, we are focusing on eight of the largest real propertyholding agencies (these agencies are the Departments of Defense (DOD), Energy (Energy), 

Homeland Security (DHS), the Interior (Interior), State (State); and Veterans Affairs (VA); 

the General Services Administration (GSA); the National Aeronautics and Space 

Administration (NASA). Also included is the United States Postal Service (USPS), which is 

an independent establishment in the executive branch and is among the largest property 

holders in terms of owned and leased space. 

Page 1 GAO-07-895T
Real Property High Risk

property officers, established asset management plans, standardized real

property data reporting, and adopted various performance measures to 

track progress. The administration has also established a Federal Real 

Property Council (FRPC) that supports reform efforts. In addition, the 

administration intends to work with Congress to provide agencies with 

asset management tools to more effectively manage real property. For 

example, VA, NASA, DOD, Energy, Interior, and USPS have limited 

authorities that allow the agency to enter into enhanced-use lease (EUL) 

agreements. Each agency has been provided its own statutory authority, 

and the authority varies from agency to agency. These agencies are also 

authorized to retain proceeds from the lease and to use them for items 

specified by law, such as improvement of their real property assets. 

Additionally, certain agencies such as GSA and VA have been authorized 

to retain the proceeds from disposal of their real property and to use these 

proceeds for their real property needs. 

Although progress toward strategically managing real property and 

addressing some long-standing problems has been made, these problems 

largely persist and the underlying obstacles remain. For example, Energy,

DHS and NASA reported that over 10 percent of their facilities are excess 

or underutilized. In addition, Energy, NASA, GSA, Interior, State, and VA 

reported repair and maintenance backlogs that total over $16 billion. DOD 

reported a backlog of more than $57 billion, which includes the cost of 

restoring and modernizing obsolete buildings. Furthermore, Energy, 

Interior, GSA, State, and VA reported an increased reliance on operating 

leases—an approach which we have reported is often more costly for longterm space needs. While agencies have made progress in collecting and 

reporting standardized real property data, data reliability is still a 

challenge at some of the agencies, and agencies lack a standard 

framework for data validation. Finally, all of the major real propertyholding agencies reported using risk-based approaches to prioritize 

security needs, as we have suggested, but cited a lack of resources for 

security enhancements as an ongoing problem. 

In our past high-risk reports, we called for a transformation strategy to 

address the long-standing problems in this area. The administration’s 

approach is generally consistent with what we envisioned, but certain 

areas warrant further attention. More specifically, underlying obstacles, 

such as competing stakeholder interests, legal and budgetary limitations, 

and a need for improved capital planning, persist. For example, some 

agencies cited local interests, such as historic preservation advocates or 

various advocacy groups that want to keep the federal government in their 

community, as barriers to disposing of excess property. Furthermore, 

Page 2 GAO-07-895T
Real Property High Risk

agencies’ limited ability to pursue ownership often leads them to lease 

property that may be more cost-effective over time for them to own. 

Finally, long-term capital planning efforts to improve the efficiency of 

government operations continue to be a challenge, and these efforts are 

not clearly linked with the real property initiative. The federal government 

has generally not planned or budgeted for capital assets, such as real 

property, over the long term. In our April 2007 report,4

 we made 

recommendations aimed at (1) ensuring the validity of agency data, (2) 

focusing reform efforts to better address the leasing problem and security

challenges, (3) and addressing obstacles that include competing 

stakeholder interests and the need for improved capital planning. OMB 

agreed with the report and concurred with its recommendations. VA, 

Energy, DHS, GSA, and NASA generally agreed with the report. State, 

DOD, Interior, and USPS did not state whether they agreed or disagreed 

with the report and its recommendations. 

Pursuant to Executive Order 13327, the administration has taken several 

key actions to strategically manage real property. FRPC was established in 

2004, which subsequently created interagency committees to work toward 

developing and implementing a strategy to accomplish the executive

order. FRPC developed a sample asset management plan and published 

Guidance for Improved Asset Management in December 2004. In addition,

FRPC established asset management principles that form the basis for the 

strategic objectives and goals in the agencies’ asset management programs 

and also worked with GSA to develop and enhance an inventory system 

known as the Federal Real Property Profile (FRPP). FRPP was designed to

meet the executive order’s requirement for a single database that includes

all real property under the control of executive branch agencies. The 

FRPC, with the assistance of the GSA Office of Government-wide Policy,

developed 23 mandatory data elements, which include four performance 

measures. The four performance measures are utilization, condition 

index, mission dependency, and annual operating and maintenance costs. 

In addition, a performance assessment tool has been developed, which is 

to be used by agencies to analyze the inventory’s performance 

measurement data in order to identify properties for disposal or 

rehabilitation. In June 2006, FRPC added a data element for disposition 

that included six major types of disposition, including sale, demolition, or 

public benefit conveyance. Finally, to assist agencies in their data 

The Administration 

and Major Real 

Property-Holding 

Agencies Have Taken 

Actions to 

Strategically Manage 

Real Property and 

Address Some Longstanding Problems 

 4

GAO-07-349. 

Page 3 GAO-07-895T
Real Property High Risk

submissions for the FRPP database, FRPC provided standards and 

definitions for the data elements and performance measures through 

guidance issued on December 22, 2004, and a data dictionary issued by 

GSA in October 2005. The first governmentwide reporting of inventory 

data for FRPP took place in December 2005, and selected data were 

included in the fiscal year 2005 FRPP published by GSA, on behalf of 

FRPC, in June 2006. Data on the four performance measures were not 

included in the FRPP report. 

Agencies Have Met 

Scorecard Standards to 

Varying Degrees 

Adding real property asset management to the PMA has increased its 

visibility as a key management challenge and focused greater attention on 

real property issues across the government. OMB has identified goals 

related to the four performance measures in the inventory for agencies to 

achieve in right-sizing their real property portfolios and it is the 

administration’s goal to reduce the size of the federal real property 

inventory by 5 percent, or $15 billion, by disposing of unneeded assets by 

2015. In October 2006, the administration reported that $3.5 billion in 

unneeded federal real property had been disposed of since 2004. 

Page 4 GAO-07-895T
Real Property High Risk

Figure 1: PMA Executive Branch Management Scorecard Standards for the Real 

Property Initiative 

To achieve these goals and gauge an agency’s success in accurately 

accounting for, maintaining, and managing its real property assets so as to 

efficiently meet its goals and objectives, the administration established the 

real property scorecard in the third quarter of fiscal year 2004. The

scorecard consists of 13 standards that agencies must meet to achieve 

green status, which is the highest status. These 13 standards include 8

standards needed to achieve yellow status, plus 5 additional standards. An 

agency reaches “green” or “yellow” status if it meets all of the standards 

for success listed in the corresponding column in figure 1 and red if it has 

any of the shortcomings listed in the “red” column. 

Page 5 GAO-07-895T
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OMB evaluates agencies quarterly on progress and agencies then have an 

opportunity to update OMB on their status towards achieving green. 

According to PMA real property scorecards, for the second quarter of 

fiscal year 2007, the Department of Labor is the only real property-holding 

agency included in the real property initiative that failed to meet the 

standards for yellow status as shown in figure 2. All of the other agencies, 

have, at a minimum, met the standards for yellow status. 

Figure 2: PMA Executive Branch Management Scorecard Results for the Real Property Initiative 

Among the 15 agencies under the real property initiative, 5 agencies—GSA 

NASA, Energy, State, and VA—have achieved green status. According to 

OMB, the agencies achieving green status have established 3-year 

timelines for meeting the goals identified in their asset management plans; 

provided evidence that they are implementing their asset management 

plans; used real property inventory information and performance 

measures in decision making; and managed their real property in 

Page 6 GAO-07-895T
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accordance with their strategic plan, asset management plan, and 

performance measures. Once an agency has achieved green status, OMB 

continues to monitor its progress and results through PMA using 

deliverables identified in its 3-year timeline and quarterly scorecards. Each

quarter, OMB also provides formal feedback to agencies through the 

scorecard process, along with informal feedback, and clarifies

expectations. Yellow status agencies still have various standards to meet 

before achieving green. 

In addition to addressing their real property initiative requirements, some

agencies have taken steps toward addressing some of their long-standing

problems, including excess and underutilized property and deteriorating 

facilities. Some agencies are implementing various tools to prioritize 

reinvestment and disposal decisions on the basis of agency needs, 

utilization, and costs. For example, GSA officials reported that GSA’s 

Portfolio Restructuring Strategy sets priorities for disposal and 

reinvestment based on agency missions and anticipated future need for 

holdings. In addition, GSA developed a methodology to analyze its leased 

inventory in fiscal year 2005. This approach values leases over their life, 

not just at the point of award; considers financial performance and the 

impact of market rental rates on current and future leasing actions; and 

categorizes leases by their risk and value. 

Additionally, some agencies are taking steps to make the condition of core 

assets a priority and address maintenance backlog challenges. For 

example, Energy officials reported establishing budget targets to align 

maintenance funding with industry standards as well as programs to 

reduce the maintenance backlogs associated with specific programs. In 

addition, Interior officials reported that the department has conducted 

condition assessments for 72,233 assets as of fourth quarter fiscal year 

2006. 

Agency Actions Intended 

to Address Some Longstanding Problems 

Further Efforts Made to 

Strategically Manage and 

Address Problems 

As mentioned previously, Executive Order 13327 requires that OMB, along 

with landholding agencies, develop legislative initiatives to improve 

federal real property management and establish accountability for 

implementing effective and efficient real property management practices.

Some individual agencies have obtained legislative authority in recent 

years to use certain real property management tools, but no 

Page 7 GAO-07-895T
Real Property High Risk

comprehensive legislation has been enacted. Some agencies have received

special real property management authorities, such as the authority to 

enter into EUL agreements.5

 These agencies are also authorized to retain

the proceeds of the lease and to use them for items specified by law, such

as improvement of their real property assets. DOD, Energy, Interior, 

NASA, USPS, and VA are authorized to enter into EUL agreements and 

have authority to retain proceeds from the lease. These authorities vary 

from agency to agency, and in some cases, these authorities are limited. 

For example, NASA is authorized to enter into EUL agreements at two of 

its centers,6

 and VA’s authority to enter into EUL agreements expires in 

2011.

7

 In addition, VA was authorized in 2004 to transfer real property 

under its jurisdiction or control and to retain the proceeds from the 

transfer in a capital asset fund for property transfer costs, including 

demolition, environmental remediation, and maintenance and repair 

costs.8

 VA officials noted that although VA is authorized to transfer real 

property under its jurisdiction or control and to retain the proceeds from 

such transfers, this authority has significant limitations on the use of any 

funds generated by any disposal under this authority. Additionally, GSA 

was given the authority to retain proceeds from disposal of its real 

property and to use the proceeds for its real property needs. Agencies with 

enhanced authorities believe that these authorities have greatly improved 

their ability to manage their real property portfolios and operate in a more 

businesslike manner. 

Overall, the administration’s efforts to raise the level of attention to real 

property as a key management challenge and to establish guidelines for 

improvement are noteworthy. The administrative tools, including asset 

management plans, inventories, and performance measures, were not in 

place to strategically manage real property before we updated our highrisk list in January 2005. The actions taken by major real property-holding 

agencies and the administration to establish such tools are clearly positive 

 5

This authority allows the agency to lease real property under its control or custody to

public and private entities and to accept as payment under the lease either cash or other 

consideration, such as construction, maintenance, restoration, and repair of facilities, or 

services that are of benefit to the agency. 

6

42 U.S.C. § 2459j. 

7

38 U.S.C. § 8169. 

8

In 2004, VA was authorized to transfer real property under its control or custody that is not

part of an EUL for fair market value and to deposit the proceeds in VA’s Capital Asset 

Fund. 38 U.S.C. § 8118. 

Page 8 GAO-07-895T
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steps. However, these administrative tools and the real property initiative 

have not been fully implemented, and it is too early to determine if they

will have a lasting impact. Implementation of these tools has the potential

to produce results such as reductions in excess property, reduced 

maintenance and repair backlogs, less reliance on leasing, and an 

inventory that is shown to be reliable and valid. 

Although clear progress has been made toward strategically managing 

federal real property and addressing some long-standing problems, real 

property remains a high–risk area because the problems persist and 

obstacles remain. Agencies continue to face long-standing problems in the 

federal real property area, including excess and underutilized property, 

deteriorating facilities and maintenance and repair backlogs, reliance on 

costly leasing, and unreliable real property data. Federal agencies also 

continue to face many challenges securing real property. These problems 

are still pervasive at many of the major real property-holding agencies, 

despite agencies’ individual attempts to address them. 

Long-standing 

Problems in Real 

Property Largely 

Persist and Obstacles 

Remain 

The Federal Government 

Continues to Hold Many 

Unneeded Assets 

Although the changes being made to strategically manage real property are 

positive and some realignment has taken place, the size of agencies’ real 

property portfolios remains generally outmoded. As we have reported, this

trend largely reflects a business model and the technological and 

transportation environment of the 1950s.9

 Many of these assets and 

organizational structures are no longer needed; others are not effectively 

aligned with, or responsive to, agencies’ changing missions. While some 

major real property-holding agencies have had some success in attempting

to realign their infrastructures in accordance with their changing missions, 

others still maintain a significant amount of excess and underutilized 

property.10 For example, officials with Energy, DHS, and NASA—which are 

three of the largest real property-holding agencies—reported that over 10

 9

GAO, 21st Century Challenges: Reexamining the Base of the Federal Government, 

GAO-05-352T (Washington, D.C.: Feb. 16, 2005). 

10GSA Management Regulations define not utilized property as an entire property or 

portion of a property that is not occupied or used for current program purposes of the

accountable agency or property that is occupied in caretaker status only. According to a 

GSA official, property that is not utilized is generally considered vacant. The regulations 

also define underutilized property as an entire property or portion of a property that is used 

only at irregular periods or intermittently by the accountable agency or property that is 

being used for the agency’s current program purposes that can be satisfied with only a 

portion of the property. (41 C.F.R. 102-75.45 and 41 C.F.R. 102-75.50). 

Page 9 GAO-07-895T
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percent of the facilities in their inventories were excess or underutilized. 

The magnitude of the problem with underutilized or excess federal real

property continues to put the government at risk for lost dollars and 

missed opportunities. Table 1 describes the status of excess and 

underutilized real property challenges at the nine major real propertyholding agencies. 

Table 1: Status of Excess Property Challenges at the Major Real Property-Holding Agencies 

Agency Status

DOD DOD officials indicated that because its real property holdings are so extensive and DOD has just begun collecting

detailed excess facility information, the department has not fully completed its reporting of all excess property. 

Energy Energy officials reported that approximately 16 percent of Energy’s real property inventory has been identified as 

excess or underutilized. 

DHS According to DHS officials, for the 2006 FRPP submission, the percentage of underutilized real property is 9.7 percent. 

Interior In December 2006, Interior reported in the FRPP during fiscal year 2006 that 1,181 assets of 185,527 were disposed, or

less than 1 percent of the inventory. Officials reported that Interior is working to address its excess and underutilized

facilities, citing two major initiatives undertaken at Interior; (1) Bureau of Land Management (BLM), the Space 

Management Program and (2) Service First, to better meet space needs and priorities.a 

GSA According to GSA officials, 258 buildings, with 13.8 million rentable square feet (RSF), have been reported as excess 

property. Additionally, 21 buildings, with 0.7 million RSF, are pending disposal or demolition. 

NASA NASA officials reported that over 10 percent of all assets are underutilized or not utilized at all. 

State According to State officials, the department’s properties showed a high level of utilization in 2005. Only about 1.5 

percent of the portfolio was reported as underutilized. State has identified 65 properties (less than 0.4 percent of the 

overseas portfolio for government-owned assets) for potential disposal. 

USPS According to USPS officials, 1 percent of its inventory of 8,807 owned properties is considered excess or underutilized. 

Fewer than 50 properties are considered excess.b 

VA According to VA officials, VA has moved from 98 percent utilized space in fiscal year 2005 to 100 percent in fiscal year

2006. In fiscal year 2006, VA disposed of 77 buildings, including 6 buildings via sales, 19 buildings via demolition, and 

52 buildings via EUL. 

Source: GAO analysis of agencies’ data. 

a

The Space Management Program is a top management initiative to review space requirements and

reduce space allocations across the department. Started in 2003 and managed by the Office of 

Acquisition and Property Management, the program is designed to strengthen management decision 

making at all levels throughout the life cycle (acquisition through disposition) of owned, leased and

GSA-provided space. The Service First Initiative is a cross-agency partnership between BLM and the 

Department of Agriculture’s U.S. Forest Service. It was established several years ago with three 

broad goals to improve customer service, increase operational efficiency, and enhance land 

stewardship. 

b

As part of our ongoing work, we are reviewing USPS infrastructure realignment plans. 

Page 10 GAO-07-895T
Addressing the needs of aging and deteriorating federal facilities remains a 

problem for major real property-holding agencies. According to recent 

estimates, tens of billions of dollars will be needed to repair or restore 

these assets so that they are fully functional. Furthermore, much of the 

federal portfolio was constructed over 50 years ago, and these assets are 

reaching the end of their useful lives. Energy, NASA, GSA, Interior, State, 

and VA reported repair and maintenance backlogs for buildings and 

structures that total over $16 billion. In addition, DOD reported a $57 

billion restoration and modernization backlog.11 We found that there was 

variation in how agencies reported data on their backlog. Some agencies 

reported deferred maintenance figures consistent with the definition used 

for data on deferred maintenance included in their financial statements.12

Others provided data that included major renovation or restoration needs. 

More specifically, 

Major Real PropertyHolding Agencies Still 

Have Multibillion-Dollar 

Repair and Restoration 

Backlogs 

• For DOD, facilities restoration and modernization requirements total over 

$57 billion. Officials noted that the backlog does not reflect the impact of

2005 Base Realignment and Closures (BRAC) or related strategic rebasing 

decisions that will be implemented over the next several years. 

• For Energy, the backlog in fiscal year 2005 for a portfolio valued at $85.2 

billion was $3.6 billion. 

• For Interior, officials reported an estimated maintenance backlog of over 

$3 billion for buildings and other structures.13

 11To determine whether agencies still have repair and restoration backlogs, we asked each 

agency to provide updated estimates of their backlogs, which we defined as needs in 

facilities for which major upkeep, repair, and maintenance have not been funded and the

repair and maintenance on these assets has been postponed. 

12Deferred maintenance is defined by the Statement of Federal Financial Accounting

Standards No. 6, which includes the accounting standards for deferred maintenance, as

maintenance that was not performed when it should have been or scheduled maintenance 

that was delayed or postponed. Maintenance is the act of keeping fixed assets in acceptable

condition, including preventative maintenance, normal repairs, and other activities needed 

to preserve the assets, so that they can continue to provide acceptable services and achieve 

their expected life. Maintenance excludes activities aimed at expanding the capacity of 

assets or otherwise upgrading them to serve needs different from those originally intended. 

13It is important to note that the National Park Service, which has responsibility for trails

and recreation sites in addition to buildings and other structures, has previously reported 

an estimated $5 billion maintenance backlog. The estimated $3 billion maintenance backlog

reported here does not include roads, bridges, trails, irrigation, dams or other water 

structures.

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• GSA’s current maintenance backlog is estimated at $6.6 billion. 

• For State, the maintenance backlog is estimated at $132 million, which 

includes all of the deferred/unfunded maintenance and repair needs for 

prior fiscal years. 

• For NASA, the restoration and repair backlog is estimated at over $2.05 

billion as of the end of fiscal year 2006. 

• For VA, the maintenance backlog for facilities with major repair needs is

estimated at $5 billion, and according to VA officials, VA must address this 

aged infrastructure while patient loads are changing. 

Many of the major real property-holding agencies continue to rely on 

leased space to meet new space needs. As a general rule, building 

ownership options through construction or purchase are often the least 

expensive ways to meet agencies’ long-term requirements. Lease 

purchases—under which payments are spread out over time and 

ownership of the asset is eventually transferred to the government— are 

often more expensive than purchase or construction but are generally less 

costly than using ordinary operating leases to meet long-term space 

needs.14 For example, we testified in October 2005 that for the Patent and

Trademark Office’s long-term requirements in northern Virginia, the cost 

of an operating lease was estimated to be $48 million more than 

construction and $38 million more than lease purchase. However, over the 

last decade we have reported that GSA—as the central leasing agent for 

most agencies— relies heavily on operating leases to meet new long-term 

needs because it lacks funds to pursue ownership. 

Operating leases have become an attractive option, in part because they

generally “look cheaper” in any given year, even though they are often 

more costly over time. Under current budget scorekeeping rules,15 the 

Despite Long-Term Cost, 

Several Agencies Reported 

That Reliance on Leasing 

to Meet New Space Needs 

Is Increasing 

 14According to VA officials, VA does not enter into lease-purchase agreements. 

15The extent to which capital costs are reflected in the budget depends on how they are 

“scored.” The Congressional Budget Office (CBO) and OMB separately “score” or track 

budget authority, receipts, outlays, and the surplus or deficit estimated to results as 

legislation is considered and enacted. CBO develops estimates of the budgetary impact of 

bills reported by the different congressional committees. OMB also uses the scorekeeping

guidelines to determine how much budget authority must be obligated for individual 

agency transactions. 

Page 12 GAO-07-895T
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budget generally should record the full cost of the government’s 

commitment. Operating leases were intended for short-term needs and 

thus, under the scorekeeping rules, for self-insuring entities, only the 

amount needed to cover the first year lease payments plus cancellation 

costs needs to be recorded. However, the rules have been stretched to 

allow budget authority for some long-term needs being met with operating 

leases to be spread out over the term of the lease, thereby disguising the 

fact that over time, leasing will cost more than ownership. Resolving this

problem has been difficult; however, change is needed because the current

practice of relying on costly leasing to meet long-term space needs result 

in excessive costs to taxpayers and does not reflect a sensible or 

economically rational approach to capital asset management, when 

ownership would be more cost effective. 

Five of the nine largest real property-holding agencies—Energy, Interior, 

GSA, State, and VA—reported an increased reliance on operating leases to 

meet new space needs over the past 5 years. According to DHS officials, 

per review of GSA’s fiscal year 2005 and 2006 lease acquisition data for 

DHS, there has been no significant increase in GSA acquired leased space

for DHS. In addition, officials from NASA and USPS reported that their 

agency’s use of operating leases has remained at about the same level over 

the past 5 years. 

We did not analyze whether the leasing activity at these agencies, either in

the aggregate or for individual leases, resulted in longer-term costs than if 

these agencies had pursued ownership. For short-term needs, leasing 

likely makes economic sense for the government in many cases. However, 

our past work has shown that, generally speaking, for long-term space 

needs, leasing is often more costly over time than direct ownership of 

these assets. 

Page 13 GAO-07-895T
While the administration and agencies have made progress in collecting 

standardized data elements16 needed to strategically manage real property, 

the long-term benefits of the new real property inventory have not yet 

been realized, and this effort is still in the early stages. The federal 

government has made progress in revamping its governmentwide real 

property inventory since our 2003 high-risk designation. The first 

governmentwide reporting of inventory data for FRPP took place in 

December 2005, and GSA published the data on behalf of FRPC, in June 

2006. According to the 2005 FRPP report, the goals of the centralized 

database are to improve decision making with accurate and reliable data, 

provide the ability to benchmark federal real property assets, and 

consolidate governmentwide real property data collection into one system. 

According to FRPC, these improvements in real property and agency 

performance data will result in reduced operating costs, improved asset 

utilization, recovered asset values, and improved facility conditions, 

among others. 

It is important to note that real property data contained in the financial 

statements of the U.S. government have also been problematic. The CFO 

Act, as expanded by the Government Management Reform Act, requires 

the annual preparation and audit of individual financial statements for the 

federal government’s 24 major agencies. The Department of the Treasury 

is also required to compile consolidated financial statements for the U.S. 

government annually, which we audit. In March 2007, we reported that—

for the tenth consecutive year—certain material weaknesses17 in internal 

controls and in selected accounting and financial reporting practices 

resulted in conditions that continued to prevent us from being able to 

provide the Congress and the American people with an opinion as to 

whether the consolidated financial statements of the U.S. government 

were fairly stated in conformity with U.S. generally accepted accounting 

principles. Further, we also reported that the federal government did not 

maintain effective internal control over financial reporting (including 

Governmentwide Real 

Property Data Inventory Is 

in Early Stages, and Data 

Reliability Is Still a 

Problem at the Agency 

Level 

 16As previously mentioned in this report, GSA, working under the leadership of FRPC, 

collaborated with numerous agencies to develop 23 mandatory data elements, which 

include four performance measures.

17A material weakness is a condition that precludes the entity’s internal control from

providing reasonable assurance that misstatements, losses, or noncompliance material in

relation to the financial statements or to stewardship information would be prevented or 

detected on a timely basis. 

Page 14 GAO-07-895T Real Property High Risk
Real Property High Risk

safeguarding assets) and compliance with significant laws and regulations 

as of September 30, 2006.18

While agencies have made significant progress in collecting the data 

elements from their real property inventory databases for the FRPP, data 

reliability is still a problem at some of the major real property-holding 

agencies and agencies lack a standard framework for assessing the validity 

of data used to populate the FRPP. Quality governmentwide and agencyspecific data are critical for addressing the wide range of problems facing 

the government in the real property area, including excess and unneeded

property, deterioration, and security concerns. Despite the progress made 

by the administration and individual agencies in recent years, decision 

makers historically have not had access to complete, accurate, and timely 

data on what real property assets the government owns; their value; 

whether the assets are being used efficiently; and what overall costs are 

involved in preserving, protecting, and investing in them. Also, real 

property-holding agencies have not been able to easily identify excess or 

unneeded properties at other agencies that may suit their needs. For 

example, in April 2006, the DOD Inspector General (IG) reported 

weaknesses in the control environment and control activities that led to 

deficiencies in the areas of human capital assets, knowledge management, 

and compliance with policies and procedures related to real property 

management. As a result, the military departments’ real property 

databases were inaccurate, jeopardizing internal control over transactions

reported in the financial statements.19

Compounding these issues is the difficulty each agency has in validating 

its real property inventory data that are submitted to FRPP. Validation of 

individual agencies’ data is important because the data are used to 

populate the FRPP. Because a reliable FRPP is needed to advance the 

administration’s real property initiative, ensuring the validity of data that

agencies provide is critical. In general, we found that agencies’ efforts to 

validate the data for the FRPP are at the very early stages of development.

For example, according to Interior officials, the department had designed

Individual Agencies 

Continue to Struggle with 

Data Reliability Issues 

 18GAO, Fiscal Year 2006 U.S. Government Financial Statements: Sustained Improvement 

in Federal Financial Management Is Crucial to Addressing Our Nation’s Accountability 

and Fiscal Stewardship Challenges, GAO-07-607T (Washington, D.C.: Mar. 20, 2007).

19DOD, Office of Inspector General, Internal Controls Related to Department of Defense 

Real Property, D2006-072 (Arlington, VA: Apr. 6, 2006). 

Page 15 GAO-07-895T
Real Property High Risk

and was to begin implementing a program of validating, monitoring, and 

improving the quality of data reported into FRPP in the last quarter of 

fiscal year 2006. 

Furthermore, according to OMB staff, there is no comprehensive review or 

validation of data once agencies submit their real property profile data to

OMB. OMB staff reported that both OMB and GSA review agency data 

submissions for variances from the prior reporting period. However, 

agencies are required to validate their data prior to submission to the GSAmanaged database. OMB staff reported that some agencies, as part of the 

PMA initiative, have provided OMB with plans for ensuring the quality of

their inventory and performance data. OMB staff reported that OMB has 

not, to date, requested these plans of all agencies. OMB staff reported that

agencies provide OMB with information that includes the frequency of

data updates and any methods used for data validation. In addition, 

according to OMB staff, OMB relies on the quality assurance and quality 

control processes performed by individual agencies. Also, OMB staff noted 

that they rely on agency IGs, agency financial statements, and our reviews 

to establish the validity of the data. Furthermore, OMB staff indicated that 

a one-size-fits-all approach to data validation would be difficult to 

implement. Nonetheless, a general framework for data validation that 

could guide agencies in this area would be helpful, as agencies continue 

their efforts to populate the FRPP with data from their existing data 

systems. A framework for FRPP data validation approaches could be used 

in conjunction with the more ad hoc validation efforts OMB mentioned to, 

at a minimum, suggest standards for frequency of validation, validation 

methods, error tolerance, and reporting on reliability. Such a framework 

would promote a more comprehensive approach to FRPP data validation.

In our recent report, we recommended that OMB, in conjunction with the 

FRPC, develop a framework that agencies can use to better ensure the 

validity and usefulness of key real property data in the FRPP.

Page 16 GAO-07-895T
The threat of terrorism has increased the emphasis on physical security 

for federal real property assets. All of the nine agencies reported using 

risk-based approaches to some degree to prioritize facility security needs,

as we have suggested;20 but some agencies cited challenges, including a 

lack of resources for security enhancements and issues associated with 

securing leased space. For example, DHS officials reported that the 

department is working to further develop a risk management approach 

that balances security requirements and the acquisition of real property 

and leverages limited resources for all its components. In many instances, 

available real property requires security enhancements before government 

agencies can occupy the space. Officials reported that these security 

upgrades require funding that is beyond the cost of acquiring the property, 

and, therefore, their acquisition is largely dependent on the availability of 

sufficient resources. 

While some agencies have indicated that they have made progress in using 

risk-based approaches, some officials told us that they still face 

considerable challenges in balancing their security needs and other real 

property management needs with their limited resources. According to 

GSA officials, obtaining funding for security countermeasures, both 

security fixtures and equipment, is a challenge, not only within GSA, but 

for GSA’s tenant agencies as well. In addition, Interior and NASA officials 

reported that their agencies face budget and resource constraints in 

securing real property. Interior officials further noted that despite these 

limitations, incremental progress is made each year in security. 

Given their competing priorities and limited security resources, some of 

the major real property-holding agencies face considerable challenges in

balancing their security and real property management needs. We have 

reported that agencies could benefit from specific performance 

measurement guidance and standards for facility protection to help them

address the challenges they face and help ensure that their physical 

Physical Security Is Still a 

Problem for Major Real 

Property-Holding Agencies 

 20In GAO, Homeland Security: Further Action Needed to Coordinate Agencies’ Facility

Protection Efforts and Promote Key Practices, GAO-05-49 (Washington, D.C.: Nov. 30, 

2004) we identified several key practices in facility protection, which included using risk 

management to allocate resources; leveraging security technology; coordinating protection 

efforts and sharing information; realigning real property assets to an agency’s mission, 

thereby reducing vulnerabilities; strategically managing human capital; and measuring 

program performance and testing security initiatives.

Page 17 GAO-07-895T Real Property High Risk
Real Property High Risk

security efforts are achieving the desired results.21 Without a means of 

comparing the effectiveness of security measures across facilities, 

particularly program outcomes, the U.S. government is open to the risk of 

either spending more money for less effective physical security measures 

or investing in the wrong areas. Furthermore, performance measurement 

helps ensure accountability, since it enables decision makers to isolate 

certain activities that are hindering an agency’s ability to achieve its 

strategic goals. Performance measurement can also be used to prioritize 

security needs and justify investment decisions so that an agency can 

maximize available resources. 

Despite the magnitude of the security problem, we noted that this area is

largely unaddressed in the real property initiative. Without formally 

addressing security, there is a risk that this challenge could continue to 

impede progress in other areas. The security problem has an impact on the 

other problems that have been discussed. For example, to the extent that 

funding will be needed for a sustained investment in security, the funding 

available for repair and restoration, preparing excess property for 

disposal, and improving real property data systems may be further 

constrained. Furthermore, security requires significant staff time and other 

human capital resources and thus real property managers may have less 

time to manage other problems. 

In past high-risk reports, we called for a transformation strategy to address 

long-standing real property problems. While the administration’s current 

approach is generally consistent with what we envisioned and the 

administration’s central focus on real property management is a positive 

step, certain areas warrant further attention. Specifically, problems are 

exacerbated by underlying obstacles that include competing stakeholder 

interests and legal and budgetary limitations. For example, some agencies 

cited local interests as barriers to disposing of excess property. In 

addition, agencies’ limited ability to pursue ownership often leads them to 

lease property that they could more cost-effectively own over time. 

Another obstacle—the need for improved long-term capital planning—

remains despite OMB efforts to enhance related guidance. 

Underlying Obstacles 

Hamper Agency Real 

Property Reform Efforts 

Governmentwide 

 21GAO, Homeland Security: Guidance and Standards Are Needed for Measuring 

Effectiveness of Agencies’ Facility Protection Efforts, GAO-06-612 (Washington, D.C.: May 

31, 2006). 

Page 18 GAO-07-895T
Real Property High Risk

Some major real property-holding agencies reported that competing local,

state, and political interests often impede their ability to make real 

property management decisions, such as decisions about disposing of 

unneeded property and acquiring real property. For example, VA officials 

reported that disposal is often not an option for most properties because 

of political stakeholders and constituencies, including historic building 

advocates or local communities that want to maintain their relationship 

with VA. In addition, VA officials said that attaining the funding to follow 

through on Capital Asset Realignment for Enhanced Services (CARES) 

decisions is a challenge because of competing priorities. Also, Interior 

officials reported that the department faces significant challenges in 

balancing the needs and concerns of local and state governments, 

historical preservation offices, political interests, and others, particularly 

when coupled with budget constraints. Other agencies cited similar 

challenges related to competing stakeholder interests. If the interests of 

competing stakeholders are not appropriately addressed early in the 

planning stage, they can adversely affect the cost, schedule and scope of a

project. 

Despite its significance, the obstacle of competing stakeholder interests 

has gone unaddressed in the real property initiative. It is important to note 

that there is precedent for lessening the impact of competing stakeholder 

interests. BRAC decisions, by design, are intended to be removed from the 

political process, and Congress approves BRAC decisions as a whole. 

OMB staff said they recognize the significance of the obstacle and told us

that FRPC would begin to address the issue after the inventory is 

established and other reforms are initiated. Without addressing this issue, 

however, less than optimal decisions that are not based on what is best for 

the government as a whole may continue. 

As discussed earlier, budgetary limitations that hinder agencies’ ability to

fund ownership leads agencies to rely on costly leased space to meet new 

space needs. Furthermore, the administrative complexity and costs of 

disposing of federal property continue to hamper some agencies’ efforts to 

address their excess and underutilized real property problems. Federal 

agencies are required by law to assess and pay for any environmental 

cleanup that may be needed before disposing of a property—a process 

that may require years of study and result in significant costs. As valuable 

as these legal requirements are, their administrative complexity and the

associated costs of complying with them create disincentives to the 

disposal of excess property. For example, we reported that VA, like all 

federal agencies, must comply with federal laws and regulations governing 

property disposal that are intended, for example, to protect subsequent 

Several Agencies Cited 

Competing Stakeholder 

Interests as Impeding Real 

Property Management Decision 

Making 

Legal and Budgetary 

Limitations Continue to 

Hamper Agencies’ Disposal 

Efforts 

Page 19 GAO-07-895T
Real Property High Risk

users of the property from environmental hazards and to preserve 

historically significant sites.22 We have reported that some VA managers 

have retained excess property because the administrative complexity and 

costs of complying with these requirements were disincentives to 

disposal.23 Additionally, some agencies reported that the costs of cleanup 

and demolition sometimes exceed the costs of continuing to maintain a 

property that has been shut down. In such cases, in the short run, it can be

more beneficial economically to retain the asset in a shut-down status. 

Given that agencies are required to fund the costs of preparing property 

for disposal, the inability to retain any of the proceeds acts as an 

additional disincentive. It seems reasonable to allow agencies to retain 

enough of the proceeds to recoup the costs of disposal, and it may make 

sense to permit agencies to retain additional proceeds for reinvestment in 

real property where a need exists.24 However, in considering whether to 

allow federal agencies to retain proceeds from real property transactions, 

it is important for Congress to ensure that it maintains appropriate control 

and oversight over these funds, including the ability to redistribute the 

funds to accommodate changing needs. In our recent report, we 

recommended that OMB, in conjunction with the FRPC, develop an action

plan for how the FRPC will address key problems, including the continued 

reliance on costly leasing in cases where ownership is more cost effective 

over the long term, the challenges of securing real property assets, and 

reducing the effect of competing stakeholder interests on businesslike 

outcomes in real property decisions.

Over the years, we have reported that prudent capital planning can help 

agencies to make the most of limited resources, and failure to make timely 

and effective capital acquisitions can result in acquisitions that cost more 

than anticipated, fall behind schedule, and fail to meet mission needs and 

goals. In addition, Congress and OMB have acknowledged the need to

improve federal decision making regarding capital investment. A number 

of laws enacted in the 1990s placed increased emphasis on improving 

capital decision-making practices and OMB’s Capital Programming 

Need for Improved Capital 

Planning Still Exists 

 22GAO, VA Health Care: Key Challenges to Aligning Capital Assets and Enhancing 

Veterans’ Care, GAO-05-429 (Washington, D.C.: Aug. 5, 2005). 

23GAO-05-429. 

24GSA has determined, and OMB has concurred, that GSA was provided permanent 

authority to retain proceeds from the sale or disposition of real property in its annual 

appropriation for fiscal year 2005. 

Page 20 GAO-07-895T
Real Property High Risk

Guide and its revisions to Circular A-11 have attempted to address the 

government’s shortcomings in this area. 

Our prior work assessing agencies’ implementation of the planning phase 

principles in OMB’s Capital Programming Guide and our Executive 

Guide25 found that some agencies’ practices did not fully conform to the 

OMB principles, and agencies’ implementation of capital planning 

principles was mixed.26 Specifically, while agencies’ capital planning 

processes generally linked to their strategic goals and objectives and most 

of the agencies we reviewed had formal processes for ranking and 

selecting proposed capital investments, the agencies have had limited 

success with using agencywide asset inventory systems and data on asset 

condition to identify performance gaps. In addition, we found that none of 

the agencies had developed a comprehensive, agencywide, long-term 

capital investment plan. The agency capital investment plan is intended to

explain the background for capital decisions and should include a baseline 

assessment of agency needs that examines existing assets and identifies 

gaps and help define an agency’s long-term investment decisions. In 

January 2004, we recommended that OMB begin to require that agencies 

submit long-term capital plans to OMB. Since that report was issued, VA—

which was one of our initial case study agencies—issued its first 5-year 

capital plan. However, the results of follow-up work in this area showed 

that although OMB now encourages such plans, it does not collect them, 

and the agencies that were included in our follow-up review do not have

agency wide long-term capital investment plans.27 OMB agreed that there 

are benefits from OMB review of agency long-term capital plans, but that

these plans should be shared with OMB on an as-needed basis depending 

on the specific issue being addressed and the need to view supporting 

materials. 

 25GAO, Executive Guide: Leading Practices in Capital Decision-Making, 

GAO/AIMD-99-32 (Washington, D.C.: December 1998). 

26GAO, Agency Implementation of Capital Planning Principles Is Mixed, GAO-04-138 

(Washington, D.C.: Jan. 16, 2004). 

27GAO, Three Agencies’ Implementation of Capital Planning Principles Is Mixed, 

GAO-07-274 (Washington, D.C.: Feb. 23, 2007). This review covers the Offices of Science

and Environmental Management within Energy and U.S. Customs and Border Protection

within DHS. 

Page 21 GAO-07-895T
Real Property High Risk

Shortcomings in the capital planning and decision-making area have clear 

implications for the administration’s real property initiative. Real property 

is one of the major types of capital assets that agencies acquire. Other 

capital assets include information technology, major equipment, and 

intellectual property. OMB staff said that agency asset management plans 

are supposed to align with the capital plans but that OMB does not assess 

whether the plans are in alignment. We found that guidance for the asset 

management plans does not discuss how these plans should be linked with

agencies’ broader capital planning efforts outlined in the Capital 

Programming Guide. In fact, OMB’s asset management plan sample, 

referred to as the “shelf document,” which agencies use to develop the

asset management plans, makes no reference to the guide. Without a clear

linkage or crosswalk between the guidance for the two documents, there 

is less assurance that agencies will link them. Furthermore, there could be 

uncertainty with regard to how real property goals specified in the asset 

management plans relate to longer term capital plans. 

The executive order on real property management and the addition of real 

property to the PMA have provided a good foundation for strategically 

managing federal real property and addressing long-standing problems. 

These efforts directly address the concerns we raised in past high-risk 

reports about the lack of a governmentwide focus on real property 

management problems and generally constitute what we envisioned as a 

transformation strategy for this area. However, these efforts are in the 

early stages of implementation, and the problems that led to the high-risk 

designation—excess property, repair backlogs, data issues, reliance on

costly leasing, and security challenges—still exist. As a result, this area 

remains high risk until agencies show significant results in eliminating the 

problems by, for example, reducing inventories of excess facilities and 

making headway in addressing the repair backlog. Furthermore, the 

current efforts lack an overall framework for helping agencies ensure the 

validity of real property data in FRPP and do not adequately address the 

costliness of long-term leases and security challenges. While the 

administration has taken several steps to overcome some obstacles in the 

real property area, the obstacle posed by competing stakeholder interests 

has gone largely unaddressed, and the linkage between the real property 

initiative and broader agency capital planning efforts is not clear. Focusing

on these additional areas could help ensure that the problems and 

obstacles are addressed.

Federal Real Property 

Reform Efforts Still in 

Early Stages 

Page 22 GAO-07-895T
Real Property High Risk

We made three recommendations to OMB’s Deputy Director for 

Management in our April 2007 report on real property high risk issues.28

OMB agreed with the report and concurred with its recommendations.29

We recommended that the Deputy Director, in conjunction with FRPC, 

develop a framework that agencies can use to better ensure the validity 

and usefulness of key real property data in the FRPP. At a minimum, the 

framework would suggest standards for frequency of validation methods, 

error tolerance, and reporting on reliability. OMB agreed with our 

recommendation and reported that it will work with the FRPC to take 

steps to establish and implement a framework. For our second 

recommendation to develop an action plan for how the FRPC will address 

key problems, OMB said that the FRPC is currently drafting a strategic 

plan for addressing long-standing issues such as the continued reliance on

costly leasing in cases where ownership is more cost effective over the

long-term, the challenge of securing real property assets, and reducing the 

effect of competing stakeholder interests on businesslike outcomes in real 

property decisions. OMB agreed that it is important to build upon the 

substantial progress that has been realized by both the FRPC and the 

federal real property community in addressing the identified areas for 

improvement. OMB said that it will share the strategic plan with us once it

is in place and will discuss strategies for ensuring successful 

implementation. For our third recommendation to establish a clearer link 

or crosswalk between agencies’ efforts under the real property initiative 

and broader capital planning guidance, OMB stated that as agencies 

update their asset management plans and incorporate updated guidance 

on capital planning, progressive improvement in this area will be realized. 

Mr. Chairman, this concludes my prepared statement. I would be happy to

respond to any questions you or other Members of the Committee may 

have at this time. 

 28GAO-07-349. 

29VA, Energy, DHS, GSA, and NASA generally agreed with the report. State, DOD, Interior, 

and USPS did not state whether they agreed or disagreed with the report and its 

recommendations. 

Page 23 GAO-07-895T
For further information on this testimony, please contact Mark Goldstein 

on (202) 512-2834 or at goldsteinm@gao.gov. Key contributions to this 

testimony were made by Anne Izod, Susan Michal-Smith, and David 

Sausville. 

Page 24 GAO-07-895T Real Property High Risk

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