Report to the Chairman, Subcommittee

on National Security, Veterans Affairs,

and International Relations, Committee

on Government Reform,

House of Representatives

United States General Accounting Office

GAO

June 2002 STATE

DEPARTMENT

Sale of Unneeded

Overseas Property

Has Increased, but

Further Improvements

Are Necessary

GAO-02-590
Page i GAO-02-590 Unneeded Overseas Real Property

Letter 1

Results in Brief 2

Background 3

State Department Has Taken Steps to Identify Unneeded

Properties but Needs to Improve Inventory Database Accuracy 5

Real Estate Sales Have Grown, but a Significant Number of

Properties Is Still Unsold 8

State Department Has Not Yet Sold Most Properties Recommended

by the Advisory Board 10

Conclusions 14

Recommendation for Executive Action 15

Agency Comments and Our Evaluation 15

Scope and Methodology 16

Appendix I Disputed Properties Reviewed by the Real Property

Advisory Board 18

Appendix II Comments from the Department of State 20

GAO Comments 26

Appendix III GAO Contact and Staff Acknowledgments 27

GAO Contact 27

Staff Acknowledgments 27

Tables

Table 1: Reasons That 19 Property Sales Have Been Delayed 13

Table 2: Analysis of the Properties Submitted to the Real Property

Advisory Board from April 1997 through December 2000 14

Figures

Figure 1: Sales Proceeds from Properties Sold, Fiscal Years 1992

through 2001 9

Figure 2: Real Property Advisory Board Recommendations for 41

Properties as of November 15, 2001 12

Contents
Page ii GAO-02-590 Unneeded Overseas Real Property

Abbreviations

IG Office of the Inspector General

OBO Bureau of Overseas Buildings Operations
Page 1 GAO-02-590 Unneeded Overseas Real Property

June 11, 2002

The Honorable Christopher Shays

Chairman, Subcommittee on National Security,

 Veterans Affairs, and International Relations

Committee on Government Reform

House of Representatives

Dear Mr. Chairman:

The U.S. government owns about 3,500 properties overseas at more than

220 locations, including embassy and consular office buildings, housing,

and land. The Department of State is responsible for acquiring, managing,

and disposing of these properties. In 1996, we reported that the State

Department did not have an effective process for identifying and selling

unneeded1

 overseas real estate, and that decisions concerning the sale of

some properties had been delayed for years because of parochial conflicts

among the parties involved.2

 As a result, the State Department was

retaining millions of dollars of unneeded real estate. To address this

problem, we recommended that the State Department establish an

independent panel to decide which properties should be sold. The

Congress, noting our recommendation, directed the secretary of state to

create an advisory board on real property management. In April 1997, the

State Department created the Real Property Advisory Board to review

disputed properties and make recommendations to the under secretary of

state for management.3

In response to your request that we assess the State Department’s

processes for, and performance in, identifying and selling unneeded

overseas real estate, this report discusses (1) steps taken by the State

Department to improve its process for identifying unneeded properties, (2)

 1

We use the term “unneeded” property to encompass the terms “excess, underutilized, and

obsolete” property used by the State Department.

2

U.S. General Accounting Office, Overseas Real Estate: Millions of Dollars Could Be

Generated by Selling Unneeded Real Estate, GAO/NSIAD-96-36 (Washington, D.C.: Apr. 23,

1996) and State Department: Millions of Dollars Could Be Generated by Selling Unneeded

Overseas Real Estate, GAO/T-NSIAD-96-195 (Washington, D.C.: June 27, 1996).

3

Before September 2001, the advisory board sales recommendations were referred to the

assistant secretary of state for administration for approval.

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-02-590 Unneeded Overseas Real Property

its performance in selling unneeded properties, and (3) whether it has

implemented the Real Property Advisory Board’s recommendations to sell

disputed properties. In addition, during the course of our work we

identified legislation4

 that affects the department’s ability to sell residences

purchased for agricultural attachés. We are reporting separately to you on

this matter.

We reviewed the sales status of properties that the State Department, its

Office of the Inspector General (IG), and our office had previously

identified as excess, underutilized, or obsolete. We also analyzed the

department’s worldwide inventory and property files, focusing on 35

overseas posts that had vacant properties, high-value properties, or one or

more properties that had been identified for potential sale. We also

interviewed key State Department officials and a member of the Real

Property Advisory Board.

The State Department has taken steps to implement a more systematic

process for identifying unneeded properties by (1) requesting posts to

annually identify excess, underutilized, and obsolete property and (2)

requesting its own staff and IG officials to place greater emphasis on

identifying such property when they visit posts. These steps have resulted

in department officials’ placing greater emphasis on identifying unneeded

property. However, the department’s property inventory database contains

inaccuracies, which may cause some potentially unneeded properties not

to be identified. This has been a long-standing problem. For example, a

parking lot in Paris, purchased in 1948 and currently valued at up to $10

million, was not included in the inventory until after a 1998 IG visit

highlighted its omission.

The State Department has significantly increased its sales of unneeded

properties in the last 5 years. From 1997 through 2001, it sold 104 overseas

properties for over $404 million,5

 almost triple the proceeds compared

with the previous 5-year period. However, the department still has a large

number of unneeded properties that have not yet been sold. To expedite

sales, the State Department has recently initiated several actions, such as

using “business case” sales analyses aimed at ensuring that decisions are

based on sound economic and financial factors, increasing the use of

 4

Section 738 of the Agriculture Appropriations Act for fiscal year 2001 (P.L. 106-387).

5

In fiscal year 2001 dollars.

Results in Brief
Page 3 GAO-02-590 Unneeded Overseas Real Property

commercial real estate marketing services, and attempting to more

aggressively resolve property disputes.

The State Department has not effectively implemented recommendations

made by the Real Property Advisory Board to sell unneeded property.

State has disposed of only 7 properties6

 (for about $21 million) of the 26

recommended for sale by the board. Sales of the remaining 19 properties,

valued at about $70 million, have been delayed pending (1) resolution of

disputes with the host governments that are restricting property sales, (2)

acquisition of suitable replacement properties, or (3) actions by post and

headquarters officials to initiate the sales process. Because of these

delays, the board has reexamined the status of each property multiple

times, causing some board members to become frustrated. Department

officials said they have begun a concerted effort to resolve impediments

and expedite the sale of these properties as the Congress intended.

We are recommending that the secretary of state take action to improve

the accuracy of the real property inventory. The State Department, in a

letter commenting on a draft of this report, responded that it believes the

report is a fair and accurate representation of the department’s efforts to

dispose of unneeded real property overseas. The department added that it

is in total agreement with our recommendation and has already taken

action to implement it. A reprint of the department’s letter is contained in

appendix II.

The Foreign Buildings Act of 1926, as amended, authorizes the secretary of

state to sell, exchange, or lease any property acquired abroad that is used

for diplomatic and consular establishments in foreign countries.7

 The law

authorizes the secretary to use the sales proceeds to acquire and maintain

other property overseas. It also requires the secretary to report such

transactions to the Congress with the department’s annual budget

estimates. The secretary of state delegated the secretary’s authority under

the law to the Bureau of Overseas Buildings Operations (OBO).8

 Thus,

 6

The State Department sold 5 properties and terminated the long-term lease of 2 other

properties.

7

22 U.S.C. section 300, as amended.

8

In May 2001, the name of the Office of Foreign Buildings Operations was changed to the

Bureau of Overseas Buildings Operations.

Background
Page 4 GAO-02-590 Unneeded Overseas Real Property

OBO is responsible for establishing and overseeing policies and

procedures for the department’s real estate properties.

In 1996, we reported that the State Department did not have a systematic

process for identifying unneeded properties and disposing of them. At that

time, the department identified potentially unneeded properties through a

variety of ad hoc and uncoordinated actions that we believed did not

constitute an organized and effective system for identifying such

properties. We also reported that decisions about the sale of unneeded

overseas real estate properties had been delayed for years because of

disputes between OBO and the regional bureaus and embassies.9

 To speed

these decisions by providing a final, authoritative forum for the disputing

parties to argue their positions, we recommended that the State

Department establish an independent panel to review disputed properties

and decide which ones should be sold.

In September 1996, the Congress directed the secretary of state to

establish an advisory board on real property management to (1) review

information about properties proposed for sale and (2) compile a list of

properties recommended for sale to be approved by the under secretary of

state for management.10 The Congress also directed the State Department

to transmit this list to the appropriate congressional committees and to

“proceed with the immediate sale of [properties] on the approved list” as

soon as market conditions were appropriate.

In response to the congressional direction, in April 1997, the assistant

secretary of state for administration created the Real Property Advisory

Board to review and make recommendations about the sale of disputed

properties. The advisory board’s charter authorizes a seven-member panel

appointed by the under secretary of state for management11 consisting of

three real estate professionals from outside the State Department and four

high-ranking department officials. The board is authorized to (1) review

information on properties proposed for sale by the State Department, the

State IG, our office, or any other federal agency and (2) compile a list of

properties recommended for sale to be approved by the under secretary of

 9

GAO/NSIAD-96-36 and GAO/T-NSIAD-96-195.

10H.R. (Conf.) 104-863, 104th Cong., 2nd Sess., accompanying H.R. 3610, the Omnibus

Consolidated Appropriations Act for fiscal year 1997.

11Until its charter was amended in September 2001, the assistant secretary of state for

administration appointed the board’s members.
Page 5 GAO-02-590 Unneeded Overseas Real Property

state for management.12 The charter directs the advisory board to meet at

least once each fiscal year and to proceed “as far as possible” by

consensus in deciding which properties to recommend for sale.

A 1999 State IG’s report found that the State Department had substantially

complied with the Congress’s intent (and our 1996 recommendation) in

drafting the advisory board’s charter and reporting the board’s actions to

the Congress.13 The report also found that the advisory board had

functioned in a manner consistent with its charter, and that its

recommendations were based on sufficient and balanced information.

Since 1996, OBO has taken steps to implement a more systematic process

for identifying unneeded properties, which has resulted in post and OBO

officials’ placing greater emphasis on identifying properties that could be

sold. Steps reflecting this emphasis include an annual request to posts

asking them to identify government-owned properties that should be

considered for disposal and increased efforts by OBO and IG officials to

identify such properties when they visit posts. However, the department’s

ability to monitor property use and identify potentially unneeded

properties is hampered by weaknesses in its property inventory system.

In response to our 1996 report, OBO began asking posts during an annual

property inventory to identify properties that should be considered for

disposal. OBO has included this request as part of State’s annual chiefs of

mission certification that posts are in compliance with the Foreign Affairs

Manual in regards to the management of real property. This process has

helped the State Department to more systematically identify unneeded

property. For example, in 2001, OBO cabled all posts for this purpose in

July and sent follow-up cables to unresponsive posts in August. OBO’s

initial cable requested that posts report all government-owned real

property that should be considered for disposal, including properties for

which posts had disposal processes under way. Posts were instructed to

 12Until its charter was amended in September 2001, the advisory board submitted this list to

the assistant secretary of state for administration for approval. This provision was

inconsistent with the House conference report, which called for the list to be submitted to

the under secretary of state for management for approval.

13Department of State, Office of the Inspector General, Audit of the Real Property

Advisory Board, Memorandum Report 99-PP-006 (Washington, D.C.: Feb. 1999).

State Department Has

Taken Steps to

Identify Unneeded

Properties but Needs

to Improve Inventory

Database Accuracy

Annual Certification

Process Identifies

Potentially Unneeded

Properties
Page 6 GAO-02-590 Unneeded Overseas Real Property

include excess office space, excess and oversized/overstandard housing,

vacant or underutilized lots, properties used infrequently or for purposes

such as unofficial business, and any other properties that could be

considered appropriate for disposal. OBO officials explained that the

effectiveness of this identification effort depended on posts’ responding

fully and promptly. In 2001, almost all posts complied. As a result of this

process, the department identified 130 potentially unneeded properties.

In addition to the annual post certification process, the director of OBO

has instructed bureau officials to emphasize identification of unneeded

property. For example, OBO officers have been instructed to pay more

attention to identifying potentially disposable property during post visits

to oversee and resolve real estate issues. OBO officials said this increased

emphasis has helped posts and OBO to continually focus on the need to

dispose of unneeded property.

The State Department’s IG reviews property use issues as part of its

regular inspections. In addition, in February 1998, the under secretary for

management asked the IG to specifically include identification of excess,

underutilized, and obsolete properties as part of the IG’s inspections and

audits at overseas posts and to provide periodic summaries on these data

collection efforts. This work was aimed at identifying potentially excess,

underutilized, and obsolete properties on the basis of existing criteria and

was not a substantive review of the reasons why posts should or should

not retain these properties. It ended in June 2001 by mutual consent

between the IG and the under secretary for management, but the IG still

reviews property status and use as part of its post inspections. The IG’s

final report stated that the office found 21 excess, 160 underutilized, and

51 obsolete properties during this 3-year review.14 The State Department

agreed to sell 72 of these properties.

The IG stated that these reviews were useful and productive. It added that

chiefs of mission and other senior officials were interested in this work,

and, as a result, the IG noted increased emphasis on real property

management. An IG official said they would only start a similar effort

again if it is requested by the under secretary. According to this official,

 14Letter to the under secretary for management entitled, Final Report on the Review of

Excess, Underutilized, and Obsolete Real Property Overseas (01-FMA-L-059, June 13,

2001).

Actions by OBO and

State’s IG to Identify

Unneeded Properties
Page 7 GAO-02-590 Unneeded Overseas Real Property

OBO’s new director has taken a more aggressive approach to identifying

and selling unneeded property, which reduces the need for any additional

IG effort at this time.

The State Department’s worldwide real property inventory contains many

errors and omissions. To better monitor property use and identify

potentially unneeded properties, accurate inventory data are needed.

Accurate real property data are also needed for the worldwide inventory

that the General Services Administration keeps at the Congress’s request.

OBO, however, has had difficulty getting posts to ensure that data in its

inventory database are accurate, which is a long-standing problem. We

observed problems involving properties sold but not removed from the

inventory, properties acquired but not added to the inventory, and errors

in cost and other descriptive information. For example,

• In June 2001, the inventory still listed an office building and the consul

general’s residence in Alexandria, Egypt, which were sold in 1997 and 1998

(for more than $5 million).

• Acquisition cost was overstated by about $300 million for three properties

in Bamako, Mali, and by nearly $132 million for one property in Yaounde,

Cameroon, due to data input errors, according to OBO.

Inaccurate inventory information can result in unneeded properties not

being identified for potential sale. For example, a parking lot in Paris

purchased in 1948 was not included in the inventory until an IG visit in

1998 highlighted the lot’s absence from the inventory.15 The property is

currently being marketed and is valued at up to $10 million.

We also found that the number of properties listed in the inventory does

not accurately reflect the number of properties the State Department

manages because, according to OBO, posts have inconsistently assigned

property identification numbers. Posts sometimes assigned separate

numbers to land and associated buildings. For example, the embassy in

Paris is listed as three separate properties—the land and two buildings.

The buildings were acquired separately but are now connected. The three

properties comprise one compound. At other times, posts assigned one

 15U.S. General Accounting Office, State Department: Decision to Retain Embassy Parking

Lot in Paris, France, Should Be Revisited, GAO-01-477 (Washington, D.C.: Apr. 13, 2001).

Process to Identify

Unneeded Property Is

Constrained by Inaccurate

Inventory Data
Page 8 GAO-02-590 Unneeded Overseas Real Property

number to multiple properties—for example, in Brasilia, four separate lots

were given one property identification number.

Along with its other efforts, OBO is attempting to improve the accuracy,

and therefore the reliability, of the State Department’s worldwide overseas

property inventory data. According to OBO officials, since individual posts

are responsible for entering their own data, correcting inaccuracies

requires that they routinely check and update data in their property

inventories. To help posts keep accurate inventory data, OBO has

provided 238 posts with computer software for recording their property

inventories, along with a user manual that gives step-by-step instructions.

However, according to OBO, 185 posts have installed or are in the process

of installing the software, leaving 53 posts that are not using it—thereby

negatively affecting the consistency and accuracy of inventory data. In

November 2001, OBO reported that about 20 posts had not corrected

known errors or omissions in their property inventories. Because of such

errors and omissions, some OBO staff said they do not rely on the property

inventory for their work and instead keep their own property inventory

information.

The State Department’s performance in selling unneeded property has

significantly improved in the last 5 years. Property sales proceeds were

more than 3 times greater than for the previous 5-year period. However,

despite this progress, the department still has a large number of potentially

unneeded properties that remain unsold. In 2001, the State Department

began several initiatives intended to expedite the sale of unneeded

properties, including (1) using “business case” analyses to ensure that

financial and economic factors were included in the property sales

decision process, (2) emphasizing the use of commercial real estate

marketing services, and (3) more aggressively focusing on resolving

property disputes.

The State Department sold 104 properties for more than $404 million from

fiscal years 1997 through 2001.16 This is a threefold increase in proceeds

compared with the 65 properties the department sold for more than $133

million from fiscal years 1992 through 1996 (see fig. 1).

 16Sales figures are stated in fiscal year 2001 dollars.

Real Estate Sales

Have Grown, but a

Significant Number of

Properties Is Still

Unsold
Page 9 GAO-02-590 Unneeded Overseas Real Property

Figure 1: Sales Proceeds from Properties Sold, Fiscal Years 1992 through 2001

a

Sales figures are stated in fiscal year 2001 dollars.

Source: GAO analysis of State Department data.

Large-value sales from fiscal years 1997 through 2001 included a

compound in Seoul, South Korea (almost $99 million in installment

payments), and the former chancery in Singapore for nearly $60 million.

As of September 30, 2001, the State Department reported that 92

properties were potentially available for sale. These properties have an

estimated value of more than $180 million. Many of these properties have

been identified for potential sale for years, including 35 that date back to

1997.

In 2001, the new OBO director introduced “business case” sales analysis to

the process of determining whether a property should be sold. This new

framework considers economic and financial factors, along with

diplomatic and security issues and post concerns. According to OBO

officials, the State Department’s former property sales decision-making

process generally did not fully consider economic and financial factors.

OBO officials said the new framework has helped OBO in its effort to gain

agency consensus regarding property sales and is already producing

results. OBO officials also stated that the director has made business caseRecent Initiatives to

Expedite Property Sales
Page 10 GAO-02-590 Unneeded Overseas Real Property

based decisions to sell properties in at least six posts, including Paris

where he has directed the post to sell a parking lot and an office building.

Another initiative designed to expedite property sales is OBO’s award of

indefinite quantity contracts17 to several international real estate brokerage

firms for real estate marketing services. OBO officials believe these

contracts will speed overseas property sales, give OBO greater control

over the sales process, and relieve the administrative burden that property

sales place on posts. Under these contracts, the brokerage firms will do

tasks formerly performed by the posts, including advertising properties,

identifying prospective buyers, receiving bids, and conducting

negotiations. However, the brokers cannot conclude sales without the

State Department’s approval. As of March 2002, OBO was using these

contracts to market 20 properties at 10 posts, including 5 properties OBO

has been trying to sell for several years. OBO stated that it has not been

able to fully evaluate the effectiveness of these contracts since the

program has just started.

Furthermore, to reduce the department’s inventory of unneeded

properties, the new OBO director has focused on resolving disputes with

host countries and posts that have delayed the sale of valuable properties.

For example, OBO intends to sell a high-value Bangkok residential

compound that has been under consideration since the early 1990s but

delayed due to post objections. The Asian financial crisis in 1997

temporarily halted this debate, according to OBO officials, but OBO is now

pushing to sell the property. OBO officials added that the director has also

addressed disputed properties at five more posts.

The State Department has not yet sold 19 of 26 properties recommended

for sale by the Real Property Advisory Board and approved by department

management. Since its inception in 1997, the advisory board has reviewed

41 disputed properties and recommended that 27 be sold (department

management approved the sale of 26 of these properties). As of April 2002,

the State Department had disposed of 7 (including 2 for which it

terminated the long-term lease) of the 26 properties for about $21 million.

Sales of the remaining 19 properties, valued at about $70 million, have

been delayed by host country restrictions (12 properties), the need to find

 17Indefinite quantity contracts do not state the specific quantity of products or services

being delivered but establish minimum and maximum limits on the amount that can be

ordered at one time and on total quantity. This type of contract provides flexibility in both

quantity and time of delivery.

State Department Has

Not Yet Sold Most

Properties

Recommended by the

Advisory Board
Page 11 GAO-02-590 Unneeded Overseas Real Property

replacement properties (4 properties), and post objections (3 properties).

OBO officials acknowledged that the department has moved slowly to

resolve some of these impediments. As a result, the advisory board has

reviewed the status of most properties multiple times over several years.

Our analysis of department records shows that of the 41 disputed

properties reviewed since 1997, the advisory board recommended selling

27 (26 were approved for sale by State Department management) and

retaining 9. The board planned to revisit the cases of 4 properties at a later

date and ended its review of 1 property in Manila after concluding that the

issue at hand was largely political and diplomatic. The advisory board

reached these decisions and compiled its list of recommended sales by

consensus. Our analysis of department records and discussion with a

board member showed that in reaching these decisions, the advisory

board’s consideration of economic analyses was balanced by

consideration of political and diplomatic factors, such as representational

concerns and the historic value of the properties.18 Figure 2 summarizes

the board’s recommendations for all 41 properties through its midNovember 2001 meeting.

 18Our analysis also showed that OBO and the regional bureaus and posts were provided

with an opportunity to argue their cases before the advisory board. About a week before

board meetings, OBO provided board members with briefing books that included economic

analyses for the properties under review along with descriptions and photographs of the

properties, their current use, acquisition cost, anticipated sales prices, and summaries of

the disputes. OBO provided the relevant pages of these briefing books to the executive

directors of the affected regional bureaus. These directors, in some cases, submitted

written statements to the advisory board expressing bureau or post views on the properties

and also gave short presentations to the board about their arguments for retaining the

properties.

Board Has Recommended

Selling Most Disputed

Properties
Page 12 GAO-02-590 Unneeded Overseas Real Property

Figure 2: Real Property Advisory Board Recommendations for 41 Properties as of

November 15, 2001

a

The board ended its review of one property without making a recommendation after concluding that

the matter was a political decision involving negotiations with the host country.

b

State Department management approved for sale 26 of the 27 properties.

Source: GAO analysis of State Department records.

The assistant secretary of state for administration or under secretary of

state for management reviewed and approved 26 of the board’s 27 sales

recommendations. Our analysis of department records shows that the

State Department has disposed of 7 of these 26 properties for $20.6

million. According to OBO, the estimated value of the 19 unsold properties

is about $70 million. In addition, the State Department has decided to sell

the property in Manila that the board had considered but on which it had

declined to make a recommendation. Table 1 summarizes the factors that

have delayed the sale of these properties. Appendix I provides additional

information about the disposition and status of all 41 properties reviewed

by the advisory board.

State Has Disposed of 7 of

26 Properties Approved for

Sale
Page 13 GAO-02-590 Unneeded Overseas Real Property

Table 1: Reasons That 19 Property Sales Have Been Delayed

Post (country) Property Comments

Athens

(Greece)

Hamilton residence Post has not acted to sell property.

Brasilia

(Brazil)

12 residential lots Sales delayed since 1996 by Social

Security tax dispute with host government.

In April 2002, the U.S. and Brazilian

governments began discussions to resolve

the dispute.

Damascus

(Syria)

American school The State Department plans to sell this

property when the school relocates. In the

interim, it will charge the school rent. It was

several years before a decision to sell was

made due to changing post and

department plans concerning use of the

property as a site to construct new

facilities.

London

(United Kingdom)

4 residences The State Department plans to sell these

properties as soon as it can buy or lease

residences that meet department size and

cost guidelines.

Rabat

(Morocco)

New office building

(“orange grove”) site

The State Department plans to sell this

property after it resolves possible host

government restrictions. It was several

years before a final decision to sell was

made due to changing post and

department plans concerning use of

property as a site to construct new

facilities.

Source: GAO analysis of State Department records.

Because property sales were delayed, the advisory board reviewed the

status of most properties submitted in 1997 through 2000 multiple times

over several years.19 Our analysis of department records shows that, on

average, the board reviewed 34 properties 4 times over 3.1 years. In

addition, as of the board’s last meeting in November 2001, 17 of the

properties had been sold, retained for use, or otherwise discharged by the

board. The board had reviewed each of the remaining 17 properties

(awaiting sale) an average of almost 6 times over 4.4 years. Table 2 shows

the results of our analysis.

 19This analysis excludes 7 properties submitted to the advisory board at its November 2001

meeting because we do not know yet whether the advisory board’s sales recommendations

will be implemented before its next meeting.

Advisory Board Has

Reviewed Most Properties

Multiple Times
Page 14 GAO-02-590 Unneeded Overseas Real Property

Table 2: Analysis of the Properties Submitted to the Real Property Advisory Board

from April 1997 through December 2000

Status of property as of the

advisory board’s meeting on

Nov. 15, 2001

Number of

properties

Average number

of times reviewed

Average length of

time properties

were before the

board (in years)

No longer under reviewa 17 2.8 1.8

Still under review/Awaiting sale 17 5.7 4.4

All properties reviewedb 34 4.3 3.1

a

Properties no longer under review are those that were reported sold, retained for future use, or

discharged for some other reason as of the advisory board’s meeting on November 15, 2001.

b

Excludes 7 properties first submitted for advisory board review at the board’s meeting on November

15, 2001.

Source: GAO analysis of State Department records.

OBO officials predict that the State Department will implement advisory

board recommendations more quickly in the future. According to these

officials, recent actions to expedite property sales, such as contracting for

real estate appraisal and marketing services, will reduce delays in

implementing the advisory board’s recommendations by making approved

property sales less susceptible to post appeals and inaction. Moreover,

OBO believes that its enhanced standing within the department will

reduce delays by giving OBO a greater voice in intradepartmental

discussions to counterbalance post appeals. In 2001, OBO was upgraded

from an office reporting to the assistant secretary of state for

administration to a bureau reporting to the under secretary of state for

management. OBO officials also said the advisory board’s support for

OBO’s position on most properties was a positive factor in helping to

reduce post resistance to proposed sales.

OBO has implemented a number of initiatives to improve the identification

of unneeded properties. Accurate property inventory data would help OBO

and the posts to further identify such properties. However, inventory data

are currently inaccurate and therefore unreliable, and post cooperation in

correcting these errors and omissions has been inconsistent. While OBO

has taken action to expedite property sales, difficulties reaching

consensus within the State Department on sales of individual properties

continue to cause delays. Furthermore, the State Department has not fully

implemented most of the Real Property Advisory Board’s

recommendations, and properties valued at about $70 million have not

been sold. Additional property sales could be delayed unless the

OBO Officials Expect

Improvements in Sales of

Recommended Properties

Conclusions
Page 15 GAO-02-590 Unneeded Overseas Real Property

department takes action to ensure that approved sales recommendations

are implemented as the Congress intended—as soon as market conditions

are appropriate and any issues with the host country are resolved.

To improve the State Department’s ability to identify properties that may

be available for sale, we recommend that the secretary of state take action

to improve the accuracy of the real property inventory. Ensuring that all

posts install and use the new automated property inventory software

would be a key step.

In written comments on a draft of this report, the State Department stated

that it is in total agreement with our recommendation and is taking steps

to implement it. The department added that it believes this report is a fair

and accurate representation of its ongoing efforts to dispose of unneeded

real property overseas, and that the report recognizes the progress and the

many improvements that have been made and continue to be made. The

department also stated that the cooperative effort between the legislative

and executive branches on this review can serve as a model for future

work.

In a draft of this report, we had recommended that the secretary of state

direct the department to proceed with property sales as soon as market

conditions are appropriate to ensure that disputed overseas real estate

properties are sold as expeditiously as possible. The department

responded that it believed the recommendation is unnecessary due to the

enhanced position of the OBO Bureau and the proactive approach and

involvement of its director in property disposal issues. It added that it

appreciated the intent of the recommendation, that the secretary use his

office as necessary and appropriate to expedite disposal of unneeded

property, and that this option is always available should it become

necessary. On the basis of these comments, we deleted this

recommendation from the report. However, as the department noted in its

comments, instances may arise when involvement by the secretary does

become necessary, specifically to emphasize resolution of issues caused

by host country restrictions on property sales that require diplomatic

negotiations, such as the case with the 12 properties in Brasilia. It is

therefore important that the director of OBO keep the under secretary for

management informed on the status of all properties being considered for

sale to avoid the type of lengthy delays experienced in the past.

Recommendation for

Executive Action

Agency Comments

and Our Evaluation
Page 16 GAO-02-590 Unneeded Overseas Real Property

To determine if the State Department has taken steps to improve its

process for identifying unneeded properties that are potentially available

for disposal, we interviewed OBO’s director and other OBO officials

concerning OBO policies and processes for identifying unneeded property

and determining when properties should be sold. We reviewed documents

relating to OBO’s identification of unneeded property potentially available

for disposal, including the State Department’s quarterly reports to the

Congress describing properties potentially available for disposal during

that quarter. We also examined OBO’s policies and processes for entering

information into its real property worldwide database and issues affecting

quality control over this information, and we reviewed the department’s

worldwide property inventory as part of our effort to assess the accuracy

of the property database. In addition, we reviewed sections of the Foreign

Affairs Manual applicable to property management overseas and

documents prepared by State Department officials in response to our

questions about their processes for identifying unneeded property.

To assess the Department of State’s performance in selling unneeded

properties, we analyzed quarterly reports to the Congress identifying

property sales since 1997 and properties that are still available for

disposal. We also reviewed OBO policies and processes, focusing on

actions OBO has taken to overcome constraints that have delayed sales,

such as disputes with posts and host government restrictions. We also

interviewed officials at OBO’s Real Estate and Property Management and

Area Management offices to identify the status of properties being

considered for sale and to understand how they deal with the posts

concerning individual property sales. In addition, we reviewed the

department’s long-range overseas buildings plan to identify property the

department plans to sell through fiscal year 2007.

To determine whether the State Department has implemented the Real

Property Advisory Board’s recommendations, we analyzed the House

conference report that directed the department to establish the board, our

prior and State IG reports, and applicable department policies and

guidance in the Foreign Affairs Manual and Foreign Affairs Handbook.

We analyzed records prepared by State Department officials in response to

our questions about the advisory board, minutes of the board’s eight

meetings, and the board’s original and modified charters. We also

interviewed a member of the advisory board and State Department

officials involved in reviewing the properties included in our evaluation. In

addition, we analyzed the minutes of the advisory board’s meetings and

other records to determine the number of properties submitted to the

board for review from 1997 through 2001, the board’s recommendations

Scope and

Methodology
Page 17 GAO-02-590 Unneeded Overseas Real Property

for these properties (sell, retain, revisit, or other), and the current status of

these properties (sold, retained, or awaiting sale). For properties

submitted to the advisory board from 1997 through 2000, we analyzed

these records to determine the number of times and the length of time the

board reviewed each of these properties. This analysis excluded seven

properties submitted to the advisory board at its mid-November 2001

meeting because we do not know yet whether State will implement the

board’s sales recommendations before its next meeting.

We conducted our review from June 2001 through April 2002 in

accordance with generally accepted government auditing standards.

As agreed with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days after its

date. At that time, we will send copies of this report to interested

congressional committees and the secretary of state. We also will make

copies available to others upon request. In addition, this report will be

available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me

at (202) 512-4128 or at fordj@gao.gov. Contacts and staff

acknowledgments are listed in appendix III.

Sincerely yours,

Jess T. Ford

Director, International Affairs and Trade
Appendix I: Disputed Properties Reviewed by

the Real Property Advisory Board

Page 18 GAO-02-590 Unneeded Overseas Real Property

Post

(country) Property description

Board’s

recommendation Management decisiona

Property status as of March 2002

Alexandria

(Egypt)

Consul general’s

residence

Sell Approved Sold in 1998 for $2.1 million.

Adams residence Sell Approved Sold in 2000 for $1.05 million.

Hamilton residence Sell Approved Post has not acted to sell property.

Knox residence Retain N/AbRetain until post finds a secure

residence for defense attaché.

Athens

(Greece)

Sherman residence Sell Approved Sold in 2000 for $4.7 million.

Brasilia

(Brazil)

12 vacant residential lots Sell Approved Sales delayed by tax dispute with

host government. Negotiations

started recently to resolve the

dispute.

Budapest

(Hungary)

Marine security guard

quarters

Retain N/AbIG reports property no longer

underutilized.

Curacao

(Netherlands

Antilles)

Vacant lot Retain N/AbRetained to provide security buffer.

Dakar

(Senegal)

Site bought to build

ambassador’s residence

Sell Disapproved Retained for recreational use.

Damascus

(Syria)

American school Sell Approved The State Department plans to sell

the property when the school

relocates. In the interim, the

department will charge the school

rent.

Doha

(Qatar)

Ambassador’s residence

and office building sites

Sell Approved Board recommended selling

properties after post occupied new

embassy (which occurred in

October 2001). The State

Department has terminated these

long-term leases effective April 23,

2002.

Hamilton

(Bermuda)

Consul general’s

residence

Sell Approved Sold in 1999 for $12.5 million.

Islamabad

(Pakistan)

Vacant lot Retain N/Ab Retained to provide security buffer.

Kaduna

(Nigeria)

Warehouse, residence,

and recreation center

Sell Approved Sold in 1998 for $239,082.

Kathmandu

(Nepal)

Brahma cottage Retain N/AbRetained as site for new office

building after security concerns

made embassy site unsuitable.

4 residences Sell Approved State plans to sell when it can buy

or lease suitable replacements.

London

(United

Kingdom) 3 residences Revisit N/Ab

State is negotiating the disposition

of these properties with tenant

agencies.

Manila

(Philippines)

Ambassador’s summer

residence (Baguio)

No recommendation N/AbBoard concluded the decision was

political/diplomatic. State has

decided to sell the property.

Appendix I: Disputed Properties Reviewed by

the Real Property Advisory Board
Appendix I: Disputed Properties Reviewed by

the Real Property Advisory Board

Page 19 GAO-02-590 Unneeded Overseas Real Property

Post

(country) Property description

Board’s

recommendation Management decisiona

Property status as of March 2002

Naples (Italy) Consul general’s

residence and consular

office building

Retain N/Ab

Relocation not cost-effective.

Port of Spain

(Trinidad)

Vacant lot Retain N/AbRetained for parking.

Prague

(Czech

Republic)

Ambassador’s residence Revisit Retain Property was retained on the basis

of guidance from the president.

Praia

(Cape Verde)

Site to build an

ambassador’s residence

Retain N/AbProperty retained for recreational

use.

Rabat

(Morocco)

New office building

(“orange grove”) site

Sell Approved Board recommended selling the

property unless State’s 2002 longrange facilities plan authorized

constructing a new office building in

Rabat. State now plans to sell the

property contingent on resolving

potential host government

restrictions.

Zanzibar

(Tanzania)

Former consul general’s

residence

Retain N/AbProperty retained for recreational

use.

a

Before September 2001, the advisory board sales recommendations were referred to the assistant

secretary of state for administration for approval. Since then, they have been referred to the under

secretary for management.

b

Not applicable—no management decision necessary in these cases.

Source: GAO analysis of State Department records.
Appendix II: Comments from the Department

of State

Page 20 GAO-02-590 Unneeded Overseas Real Property

Appendix II: Comments from the Department

of State

Note: GAO comments

supplementing those in

the report text appear at

the end of this appendix.
Appendix II: Comments from the Department

of State

Page 21 GAO-02-590 Unneeded Overseas Real Property
Appendix II: Comments from the Department

of State

Page 22 GAO-02-590 Unneeded Overseas Real Property
Appendix II: Comments from the Department

of State

Page 23 GAO-02-590 Unneeded Overseas Real Property

See comment 1.
Appendix II: Comments from the Department

of State

Page 24 GAO-02-590 Unneeded Overseas Real Property

See comment 2.
Appendix II: Comments from the Department

of State

Page 25 GAO-02-590 Unneeded Overseas Real Property
Appendix II: Comments from the Department

of State

Page 26 GAO-02-590 Unneeded Overseas Real Property

The following are GAO’s comments on the Department of State’s letter

dated May 15, 2002.

1. We deleted this example from the final report.

2. The State Department’s property inventory records from March 1998,1

did not include the parking lot and listed the ambassador’s residence

as 3.01 acres, not 3.4 acres. Subsequent inventory records from 1999

and 2001 listed the parking lot at 0.4 acres and also continued to list

the ambassador’s residence as 3.01 acres.

 1

This was prior to the Office of the Inspector General’s visit.

GAO Comments
Appendix III: GAO Contact and Staff

Acknowledgments

Page 27 GAO-02-590 Unneeded Overseas Real Property

John Brummet (202) 512-5260

In addition to the contact named above, Janey Cohen, Ed Kennedy, Jesus

Martinez, Michael Rohrback, and Richard Seldin made key contributions

to this report.

Appendix III: GAO Contact and Staff

Acknowledgments

GAO Contact

Staff

Acknowledgments

(320060)
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