United States Government Accountability Office

GAO Report to the Chairman, Committee on 

Energy and Commerce, House of 

Representatives 

FEDERAL REAL 

PROPERTY 

NIH Has Improved Its 

Leasing Process, but 

Needs to Provide 

Congress with 

Information on Some 

Leases 

September 2006 

 

GAO-06-918 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 2006

FEDERAL REAL PROPERTY 

NIH Has Improved Its Leasing Process, 

but Needs to Provide Congress with 

Information on Some Leases 

Highlights of GAO-06-918, a report to the 

Chairman, Committee on Energy and 

Commerce, House of Representatives 

The National Institutes of Health

(NIH) is the nation’s primary 

medical and behavioral research 

agency. NIH’s need for leased 

space has more than doubled since 

1996 to about 3.9 million square

feet in 2005. In 1996, General 

Services Administration delegated 

leasing authority to NIH that

includes performing budget scoring 

and prospectus analysis. In light of 

NIH’s increased use of leased 

space, GAO was asked to address 

two issues: (1) Is NIH complying

with budget scorekeeping

guidelines and Office of

Management and Budget’s (OMB) 

requirements for implementing the 

guidelines to determine if a lease

should be classified as operating or 

capital and ensure that no

violations of the Antideficiency Act 

occur because of improper budget 

scorekeeping? and (2) Is NIH 

complying with the congressional

prospectus process for both leases

and alterations to leased buildings? 

To address these issues we 

interviewed leasing and financial 

officials, reviewed laws and 

reviewed budget scoring and 

prospectus analysis of 59 leases. 

What GAO Recommends

GAO recommends that the Director 

of NIH, using GSA as the proper 

channel, report to the appropriate 

congressional committees five 

previous NIH prospectus-level 

leases that did not follow the 

congressional prospectus process.

In commenting on our report NIH

concurred with our 

recommendation. 

NIH has implemented a formal leasing process that, if carried out effectively, 

should comply with budget scorekeeping guidelines and OMB’s 

requirements for classifying operating and capital leases. This process

should ensure that no Antideficiency Act violations occur due to leasing. 

The agency’s new leasing process addresses previous problems with 

inconsistent and informal implementation of the guidelines and 

requirements by properly identifying operating and capital leases and 

properly recording lease obligations for budget scoring purposes. In 

October 2005, the U. S. Department of Health and Human Services expressed 

the belief that the potential $565 million in unrecorded obligations from 50 

active multiyear NIH leases were not Antideficiency Act violations. We

agree that no Antideficiency Act violations exist because the GSA delegation 

of leasing authority included specific authority that directed NIH to obligate

funds for multiyear leases, one year at a time, and that such actions were 

exempt from the Antideficiency Act. GSA is also modifying its guidance for 

delegated leasing authority, which would make it clear that agencies with 

delegated leasing authority can score operating leases in the same manner as

GSA. The scoring process for capital leases would remain unchanged. 

As part of its leasing process, NIH has also established decision points for 

identifying any leases for which a prospectus should be submitted through 

GSA for congressional approval, under the Public Buildings Act of 1959, as 

amended. This process involves submitting leases and alterations to leased

buildings for approval whose costs exceed a legislatively established 

threshold. In addition, NIH has designated the Office of Acquisitions, Office 

of Resource Facilities to review prospectus-level alterations to leased 

buildings to ensure that the contracting for alterations to leased buildings 

does not exceed the prospectus threshold for alterations to leased buildings.

However, NIH has taken no action to address five prospectus-level leases

that were not submitted to the appropriate congressional committees in past 

years. While there is no penalty provided in law for not submitting a 

prospectus, failure to do so hinders the ability of the appropriate 

congressional committees to fulfill their oversight responsibilities for all 

prospectus-level leases. 

www.gao.gov/cgi-bin/getrpt?GAO-06-918.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Mark Goldstein 

at (202) 512-2834. 
Contents 

Letter 1

Results in Brief 3

Background 5

NIH Has Improved Its Lease Scoring Process and Believes that Its 

Unrecorded Obligations for Operating Leases Do Not Violate the 

Antideficiency Act 6 

NIH Corrected Weaknesses in Implementation of Prospectus 

Guidance, but Some Past Prospectus-level Leases Remain 

Unreported 10

Conclusions 12

Recommendation for Executive Action 12 

Agency Comments 13 

Appendix I Comments from the Department of Health and 

Human Services 14 

Appendix II GAO Contact and Staff Acknowledgments 16 

Abbreviations 

GSA General Services Administration 

HHS U.S. Department of Health and Human Services 

LeMOP Leasing Management and Oversight Program 

NIH National Institutes of Health 

OBSF Office of Business Systems and Finance 

OMB Office of Management and Budget 

ORF Office of Resource Facilities 

ORFDO Office of Research Facilities Development and 

Operations 

Property Act Federal Property and Administrative Services Act of 

1949, as amended 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

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Page i GAO-06-918 Federal Real Property
United States Government Accountability Office

Washington, DC 20548 

September 8, 2006 

The Honorable Joe Barton 

Chairman 

Committee on Energy and Commerce 

House of Representatives 

Dear Mr. Chairman: 

The National Institutes of Health (NIH), a part of the U.S. Department of 

Health and Human Services (HHS), is the nation’s primary medical and 

behavioral research agency. Composed of 27 institutes and centers, NIH 

provides leadership and financial support to programs designed to protect 

and improve the nation’s health by conducting research in such areas as 

the causes, diagnosis, prevention, and cure of human diseases; the 

biological effects of environmental contaminants; and the understanding 

of mental, addictive, and physical disorders. At the end of September 2005, 

the agency owned or leased more than 17 million square feet of space for 

research, administration, and other needs. Since 1996, NIH’s leased space 

has more than doubled—from about 1.4 million square feet in 1996 to 

about 3.9 million square feet in 2005.

In September 1996, the General Services Administration (GSA) delegated 

authority to HHS to issue leases for a term of up to 20 years and to 

perform all functions related to leasing, such as obtaining space in 

accordance with all applicable laws and regulations, budget scorekeeping1

guidelines, and the Office of Management and Budget’s (OMB) 

requirements for implementing the guidelines for leases. Simply put, 

 1

Budget scorekeeping, of which lease scoring is a part, is the process of estimating the 

budgetary effects of pending and enacted legislation and comparing these effects with 

limits set in the budget resolution or legislation. Scorekeeping tracks such data as budget 

authority, receipts, outlays, the surplus or deficit, and the public debt limit. Scorekeeping

guidelines for leases require that an agency first determine if a lease is an operating or 

capital lease; OMB requirements describe how to calculate the budget authority that is 

required to cover the government’s legal obligations and how outlays are to be recorded in

agency budgets. In addition, OMB interprets the scorekeeping guidelines to determine the 

cost that should be recognized and recorded as an obligation at the time an agency signs a

contract or enters into a lease. The scorekeepers are the House and Senate Budget 

Committees, the Congressional Budget Office, and OMB. The budget scorekeepers 

determine the rules, and OMB issues guidance to the agencies on implementing them. 

Page 1 GAO-06-918 Federal Real Property
budget scorekeeping ensures that agencies comply with budgetary laws. 

There are obligational requirements2

 that are meant to ensure compliance 

with fiscal statutes such as the Antideficiency Act.3

 The budget 

scorekeeping rules for leases are consistent with the obligational 

requirements. Thus, failure to comply with budget scorekeeping guidelines

could cause an Antideficiency Act violation. In addition to transferring this 

scorekeeping responsibility to HHS, GSA’s delegation provided that, for 

each lease whose cost exceeds a legislatively established threshold, the 

agency would work through GSA to secure an approved prospectus4

 from 

the appropriate congressional committees, under the Public Buildings Act 

of 1959, as amended.5

 In December 1996, HHS redelegated its authority to

its four lease-holding agencies, which included NIH. Currently, NIH has 59 

active leases issued under its delegated leasing authority with a total value 

of about $1.3 billion. 

Because of NIH’s increased use of leased space, you asked us to review 

certain parts of the agency’s leasing process. In response, we addressed 

the following issues: 

• Is NIH complying with budget scorekeeping guidelines and OMB’s 

requirements for implementing the guidelines to determine if a lease 

should be classified as operating or capital6

 and ensure that no violations 

of the Antideficiency Act occur because of improper budget scorekeeping

of leases? 

 2

31 U.S.C. § 1501. 

3

The Antideficiency Act prohibits an officer or employee of the United States from making

expenditures or incurring obligations before appropriations become available, unless

otherwise authorized by law. 31 U.S.C. § 1341. 

4

A prospectus is a justification for a proposed construction, lease, or alteration project 

(which includes an alteration to a leased building). A prospectus for a proposed lease is

submitted when the cost exceeds a legislatively established threshold, which is $2.41

million for fiscal year 2006, and includes information on the project’s size, cost, location, 

and other features. For alterations to leased buildings, the prospectus threshold is one half 

the prospectus threshold for a lease. An agency with delegated leasing authority analyzes 

each lease to determine whether it needs a prospectus. GSA then prepares a prospectus in 

consultation with the agency and submits the prospectus to the appropriate House and 

Senate authorizing committees. 

5

40 U.S.C. § 3307. 

6

An operating lease is a lease that meets the six criteria listed in the scorekeeping 

guidelines in OMB Circular A-11 appendix A. A capital lease is any lease other than a lease 

purchase that does not meet all six criteria. 

Page 2 GAO-06-918 Federal Real Property
• Is NIH complying with the congressional prospectus process for both 

leases and alterations to leased buildings? 

To address NIH’s compliance with budget scorekeeping guidelines and 

OMB’s requirements, we reviewed (1) the laws and regulations relating to 

leases; (2) budget scorekeeping guidelines and OMB’s implementing 

requirements; (3) the Antideficiency Act; (4) NIH’s inventory of leased 

properties, its revised budget scoring of the 58 leases7

 under its delegated 

authority in 2003, and its leasing guidance; and (5) HHS’s views on the 

Antideficiency Act. In addition, we interviewed HHS’s Deputy Assistant 

Secretary from the Office for Facilities Management and Policy; NIH’s 

Director of the Office of Acquisitions; NIH’s Acting Chief of the Budget 

Branch from the Office of Business and Systems Finance, who performed 

the revised budget scoring; other relevant NIH leasing and financial 

officials; and GSA officials. We also wrote to OMB concerning agencies 

that are considered self-insuring under budget scoring guidelines. 

To address NIH’s compliance with the congressional prospectus process, 

we (1) reviewed the laws and regulations relating to leases; (2) GSA’s 

prospectus guidance and delegation of authority to lease; (3) NIH’s 

inventory of leased properties, its revised prospectus analysis of the 58

leases under its delegated authority in 2003, and its leasing guidance. In 

addition, we interviewed HHS’s Deputy Assistant Secretary from the Office 

for Facilities Management and Policy; NIH’s Director of the Office of 

Acquisitions; NIH’s Acting Chief of the Budget Branch from the Office of 

Business and Systems Finance, who performed the revised prospectus 

analysis; other relevant NIH leasing and financial officials; and GSA 

officials. GSA informed us that no alterations to leased buildings were 

submitted for prospectus approval between fiscal years 1996 and 2005. For

the purposes of our review, the information we gathered was sufficiently 

reliable. We conducted our work between July 2005 and August 2006 in

accordance with generally accepted government auditing standards. 

NIH has developed a formal leasing process that, if implemented 

effectively, should comply with budget scorekeeping guidelines and OMB’s 

requirements for classifying operating and capital leases. NIH’s process 

Results in Brief 

 7

One of the 59 leases was issued in January 2006, this report discusses the remaining 58 

leases that were in NIH’s 2003 review of all its leases; therefore, we refer to only 58 leases 

in this report. In addition, NIH has 16 active leases that were contracted for through GSA. 

Page 3 GAO-06-918 Federal Real Property
should also ensure that no Antideficiency Act violations occur due to 

leasing. NIH was prompted to formalize its leasing process after it 

reviewed all its leases in 2003 and discovered problems with its budget 

scoring and prospectus analysis. The agency’s new multistep leasing 

process, which was developed in 2003 and updated in 2005, now addresses 

previous problems with inconsistent and informal implementation of the 

guidelines and requirements by properly identifying operating and capital 

leases, so the lease obligations may be properly recorded for budget 

scoring purposes. Furthermore, to address the improper classification of 

eight operating leases identified in its 2003 review, NIH reclassified or 

renegotiated leases to make them comply with the budget scoring rules. In 

October 2005, HHS expressed its belief that the potential $565 million in 

unrecorded obligations from 50 active multiyear NIH leases identified in 

the 2003 review were not considered to be Antideficiency Act violations. 

We agree that no Antideficiency Act violations exist. According to a GSA 

official, GSA is modifying its guidance for delegated leasing authority, 

which would make it clear that agencies with delegated leasing authority 

can score operating leases in the same manner as GSA. The scoring 

process for capital leases would remain unchanged. 

As part of its leasing process, NIH has also established decision points for 

identifying any leases for which a prospectus should be submitted for 

congressional approval under the Public Buildings Act of 1959, as 

amended. In addition, NIH’s Office of Acquisitions, Office of Resource 

Facilities (ORF) is now responsible for ensuring that the contracting for 

alterations to leased buildings does not exceed the prospectus threshold 

for alterations to leased buildings. To enforce this threshold, a warranted 

real estate contracting officer from the Office of Acquisitions begins 

reviewing an alteration to a leased building project as early as the concept 

stage. However, there is an unresolved issue involving some prior NIH 

prospectus-level leases. Five leases from past years were not submitted to 

the appropriate congressional committees for review and approval, as 

provided for in the Public Buildings Act of 1959, as amended. While there 

is no penalty provided in law for not submitting a prospectus, failure to do

so hinders the ability of the appropriate congressional committees to fulfill 

their oversight responsibilities for all prospectus-level leases. We are 

recommending that the Director of NIH, using GSA as the proper channel, 

report to the appropriate congressional committees the five previous NIH 

prospectus-level leases that did not follow the congressional prospectus 

process. We provided a draft of this report to NIH, HHS and GSA. HHS, 

responding for NIH and itself, concurred with our findings and 

recommendation and provided some technical comments, which we have 

incorporated where appropriate. HHS stated that, as a matter of policy, it

Page 4 GAO-06-918 Federal Real Property
does not object to voluntarily complying with the GSA prospectus 

requirements for the five leases dealt with in our draft report. GSA 

informed us orally that it had no comments. 

In 1996, GSA began a program called “Can’t Beat GSA Leasing” that 

offered federal agencies the choice of (1) using GSA as their leasing agent,

(2) assuming responsibility for their own leasing, or (3) using a 

combination of both options. The program was an outgrowth of GSA’s 

commitment to streamline its leasing operations, respond to the 

government’s changing needs, and address recommendations from client 

agencies. GSA delegated leasing authority to HHS in September 1996, and

HHS redelegated this authority to NIH, one of its four lease-holding 

agencies, in December 1996. GSA’s original delegation consisted of six 

conditions, which included the requirements that federal agencies acquire 

and utilize leased space in accordance with all applicable laws and 

regulations8

 and —prior to finalizing lease contracts and alterations to 

leased buildings that exceed a legislatively established threshold—work 

through GSA to secure an approved prospectus from the appropriate 

congressional committees. Since 1997, NIH has elected to rely on GSA for 

some of its leasing needs, but it has issued a majority of its leases on its 

own. 

Background 

 8

The conditions included, but were not limited to, the Competition in Contracting Act, 

Executive Order 12072, Executive Order 13006, Davis Bacon Act, the GSA Acquisition 

Regulations, and GSA Federal Property Management Regulations (FPMR). When the 

delegation was issued to NIH in 1996, the FPMR stated that delegated leasing authority

shall be exercised in accordance with the Budget Enforcement Act of 1990 and OMB 

Bulletin 91-02, Part B (41 C.F.R. § 101.18.104-1). In 2003, GSA revised its regulations to 

provide that all agencies are required to follow the budget scorekeeping guidelines and 

OMB’s requirements for leases, capital leases, and lease purchases identified in appendixes 

A and B of OMB Circular A-11. (41 C.F.R. § 102-73.130). 

Page 5 GAO-06-918 Federal Real Property
In response to past problems identified in a 2003 internal review of its 

leases, NIH developed a formal leasing process in 2003 that includes 

decision points for budget scoring. The process was updated in 2005, and

if implemented effectively, it should ensure that NIH leasing complies with 

OMB’s scorekeeping guidelines for classifying leases. This new process 

should also ensure that no violations of the Antideficiency Act occur due 

to improper scorekeeping. 

The executive and legislative branches formulated the budget

scorekeeping rules in connection with the Budget Enforcement Act of 

1990. The purpose of these rules is to ensure that scorekeepers adhere to 

scorekeeping conventions and specific legal requirements when they

measure the effects of legislation. They are also used by OMB for 

determining amounts to be recognized in the budget when an agency signs

a contract or enters into a lease. The rules are reviewed annually by the 

scorekeepers and revised, as necessary, to achieve their purpose.9

According to scorekeeping guidelines, a lease is classified as either 

operating or capital, based on six criteria.10 If a lease meets all six criteria, 

then it qualifies as an operating lease; otherwise, it must be treated as a 

capital lease for purposes of budget scoring. For operating leases for 

agencies other than GSA, budget authority is required for the estimated 

total payment that is expected to arise under the full term of the contract 

or, if the contract includes a cancellation clause, for an amount sufficient 

to cover the lease payments for the first fiscal year plus an amount 

sufficient to cover the costs associated with cancellation. For GSA 

NIH Has Improved Its 

Lease Scoring Process

and Believes that Its 

Unrecorded 

Obligations for 

Operating Leases Do 

Not Violate the 

Antideficiency Act 

 9

We previously reported that the budget scorekeeping rules favor leasing and that one 

option for scorekeeping would be to recognize that many operating leases are used for 

long-term needs and should be treated on the same basis as purchases. This would entail 

scoring up front the present value of lease payments covering the same time period used to 

analyze ownership options. Applying the principle of up-front full recognition of long-term

costs to all options for satisfying long-term space needs—purchases, lease purchases, or

operating leases—is more likely to result in selecting a more cost-effective alternative than

using the current scoring rules. GAO, Budget Scoring: Budget Scoring Affects Some Lease

Terms but Full Extent Is Uncertain, GAO-01-929 (Washington D.C.: Aug. 31, 2001). 

10The six criteria are (1) ownership of the asset remains with the lessor during the term of

the lease and is not transferred to the government at or shortly after the end of the lease 

term; (2) the lease does not contain a bargain-price purchase option; (3) the lease term 

does not exceed 75 percent of the estimated economic life of the asset; (4) the asset is a 

general purpose asset, it is not for a special purpose of the government, and it is not built to 

unique specifications of the government lessee; (5) there is a private sector market for the 

asset; and (6) the present value of the minimum lease payments over the life of the lease 

does not exceed 90 percent of the fair market value of the asset at the beginning of the 

lease term. 

Page 6 GAO-06-918 Federal Real Property
operating leases, only the budget authority needed to cover the annual

lease payment is required.

11 For a capital lease, budget authority is 

required for the net present value of the total cost of the lease and 

property taxes (but not for imputed interest costs and identifiable annual 

operating expenses). 

In 2003, NIH’s Assistant Director for the Chief Financial Officer and 

Central Services asked the Acting Director of the Office of Research 

Facilities Development and Operations (ORFDO) to certify that all leases 

were operating leases for the purposes of the annual NIH financial 

statements, according to an NIH official. To address this request, the 

ORFDO Acting Director conducted an internal risk assessment. This 

resulted in a review of all NIH’s leases, which identified problems with 

implementing budget scorekeeping guidelines and OMB requirements, as 

well as identifying prospectus leases. More specifically, this review 

identified eight leases that had been improperly classified as operating 

leases instead of capital leases and potential unrecorded obligations from 

50 active multiyear operating leases that totaled $565 million, as of 

September 30, 2005. According to the Director of the Office of

Acquisitions, NIH’s lease scoring process had been inconsistent and 

informal from 1996 to 2003, which may explain the improper lease 

classifications and unrecorded obligations identified in the 2003 review. 

Due to staff changes at the agency in past years, we were not able to 

determine why the budget scoring process was inconsistent and informal 

from 1996 to 2003. 

In 2003, NIH attempted to address its problems in complying with 

scorekeeping guidelines by developing the Leasing Management and 

Oversight Program (LeMOP), a new multistep leasing process that 

includes budget scoring. LeMOP is a means for NIH to exercise stronger 

oversight in the leasing process than it had done previously. The process 

consists of a business case12 that goes through the following five critical 

decision points: 

 11According to scorekeeping guidelines, for funds that are self-insuring under existing 

authority, only the amount of budget authority needed to cover the annual lease payment is

required to be scored. In November 2005, OMB clarified its requirements by stating that the

only funds that are considered self-insuring are certain revolving funds in GSA. 

12The business case consists of the need for the lease action, the reason it cannot be met 

within current space, the Space Justification Document, and a general estimate of the range 

of life-cycle costs. 

Page 7 GAO-06-918 Federal Real Property
1. Initial approval that there is a justifiable need, 

2. Approval of a general strategy on how the need will be met, 

3. Approval of a detailed strategy for meeting the need, 

4. Signing of the lease and obligation of the funds, and 

5. Documentation that the agency has reviewed the action and the space 

requirement is being met.

As part of the third decision point, the Office of Business Systems and 

Finance (OBSF) uses the budget scoring process for leases that it 

developed during NIH’s 2003 review to conduct an independent test of the 

planned lease contract against OMB’s budget scorekeeping requirements. 

The test is based on estimates of the lease rate, the lease term, and other 

factors. As part of the fourth decision point, OBSF tests the final lease 

price against OMB scoring requirements to determine if the proposal 

conforms to applicable rules for budget scoring. In effect, the process 

establishes a specific requirement that ensures that NIH leases undergo 

budget scoring. 

In addition to implementing LeMOP, NIH corrected its improper 

classification of the eight operating leases identified in the 2003 review. 

Two of these leases were reclassified as capital leases, and the remaining 

six were renegotiated by eliminating the option-to-renew clauses from the 

lease so that they could properly qualify as operating leases. By deleting

the option-to-renew clauses, NIH reduced the terms of the leases, which 

impacted budget scoring. This allowed the leases to meet the scoring 

criteria for an operating lease—that the present value of the minimum 

lease payments over the life of the lease not exceed 90 percent of the fair 

market value of the asset at the beginning of the lease term. Leases 

exceeding this 90 percent level are to be identified as capital leases. 

As a final measure in response to the 2003 review, NIH sought HHS’s 

advice on whether it had $565 million in unrecorded obligations that 

violated the Antideficiency Act. The unrecorded obligations occurred 

because NIH scored its operating leases without cancellation clauses 

similar to GSA—that is, it scored only the budget authority that was 

Page 8 GAO-06-918 Federal Real Property
needed to cover the annual lease payment.13 This was done instead of 

following scorekeeping guidance for an operating lease for agencies other 

than GSA—that is, budget authority is required for the estimated total 

payment expected to arise under the full term of the contract or, if the 

contract includes a cancellation clause, for an amount sufficient to cover

the lease payments for the first year plus an amount sufficient to cover the 

costs associated with the cancellation clause. 

NIH asked HHS whether it thought that the $565 million in unrecorded 

obligations was an Antideficiency Act violation. This act states that an 

officer or employee of the United States is prohibited from making 

expenditures or incurring obligations in advance of available 

appropriations unless otherwise authorized by law. HHS stated that it did 

not believe the potential $565 million in unrecorded obligations from 

scoring operating leases to be Antideficiency Act violations. 

We concluded that no Antideficiency Act violation exists. Under the 

Federal Property and Administrative Services Act of 1949, as amended 

(Property Act), GSA is authorized to enter into a lease agreement for a 

term of up to 20 years to accommodate the federal government.14 In 

addition, GSA is authorized under the Property Act to delegate to the head 

of another federal agency most of its authorities, which includes leasing 

authority.15 When GSA delegated its leasing authority to the Secretary of 

HHS, who then redelegated this authority to NIH, the GSA leasing 

delegation signed by the Administrator specifically stated, “I hereby 

delegate authority to the heads of all federal agencies to perform all 

functions related to the leasing of general purpose space for a term of up 

to 20 years regardless of geographic location.” 

GSA has specific statutory authority to obligate funds in advance of 

available appropriations. This authority provides that, when entering into 

 13As previously noted, GSA is considered by OMB to be self-insuring and, as such, is

required to score only the amount of budget authority needed to cover annual lease 

payments for an operating lease. 

1440 U.S.C. § 585. 

1540 U.S.C. § 121 provides that the GSA Administrator may delegate authority under the act

except for the (1) authority to prescribe regulations on matters of policy applying to 

executive agencies, (2) the authority to transfer functions and reallocated amounts from 

one component of GSA to another under certain situations; and (3) other authority for 

which delegation is prohibited under the act. The Property Act does not prohibit the

delegation of leasing authority. 

Page 9 GAO-06-918 Federal Real Property
multiyear leases, “the obligation of the amount for a lease is limited to the 

current fiscal year for which payments are due without regard to the 

Antideficiency Act.”16 Accordingly, GSA is directed by law to obligate 

funds for multiyear leases one year at a time, and it is exempt from the 

general prohibition in the Antideficiency Act against obligating the 

government in advance of appropriations for GSA leases. Since GSA 

delegated all of its leasing authorities through HHS to NIH, the provision in

the Property Act relating to the obligation of multiyear leases also applies

to NIH. This delegation authorizes NIH to enter into multiyear leases 

without recording the entire amount of the lease in the first year. 

Therefore, the fact that NIH entered into multiyear leases without having

an appropriation for the entire amount of each lease did not constitute a 

violation of the Antideficiency Act. 

GSA is drafting a modification to its guidance for delegated leasing 

authority which, according to a GSA official, will clarify that agencies with 

delegated leasing authority can score operating leases in the same manner 

as GSA does. GSA and agencies with delegated leasing authority are 

expected to continue to score capital leases according to OMB’s 

requirements. 

As part of its leasing process, NIH has established decision points for 

identifying leases whose costs exceed a legislatively established threshold 

and for which a prospectus should be submitted for congressional review 

and approval prior to finalizing contracts. In addition, all alterations to 

leased buildings are reviewed by an NIH leasing official. These changes 

should ensure that NIH identifies leases that need to be submitted for 

review. However, five prior leases that should have been submitted for 

review still remain unreported. 

The Public Buildings Act of 1959, as amended, provides for GSA to submit 

a prospectus for review by the appropriate Senate and House authorizing 

committees when the cost of a proposed construction, lease, or alteration

project exceeds the legislatively established dollar threshold for leases or 

alterations to leased buildings, which is indexed and revised each year. 

For an agency with delegated leasing authority, GSA, working in 

consultation with the agency, prepares a prospectus for any lease 

involving a net annual rental—excluding services and utilities—in excess 

NIH Corrected 

Weaknesses in 

Implementation of 

Prospectus Guidance, 

but Some Past 

Prospectus-level 

Leases Remain

Unreported 

 1640 U.S.C. § 585. 

Page 10 GAO-06-918 Federal Real Property
of the prospectus threshold. For alterations to leased buildings, the 

prospectus threshold is one-half of the lease prospectus threshold. After 

the prospectus is prepared, GSA submits it for approval to the appropriate 

congressional committees. 

To address previous problems with inconsistent and informal 

implementation of prospectus guidance, NIH has incorporated into its 

leasing process several decision points for identifying any leases for which 

a congressionally approved prospectus should be submitted. As part of the 

third decision point of LeMOP—approval of a detailed strategy for 

meeting the need—OBSF will use the prospectus analysis formula, which 

it developed during NIH’s 2003 review of all leases, to conduct an 

independent test of the planned lease contract against the annual 

prospectus threshold. NIH plans to have GSA issue any lease that exceeds 

the prospectus limit, with NIH providing the appropriate information and 

support. As part of the fourth decision point—signing of the lease and 

obligation of the funds, OBSF will test the final lease price against 

prospectus thresholds to determine if the proposal conforms to applicable 

rules for the prospectus process. This prevents the agency from issuing a 

prospectus-level lease without a congressionally approved prospectus, 

even though the lease was initially identified as nonprospectus as part of 

the third decision point. 

Furthermore, according to NIH’s Office of Acquisitions, ORF, it is now 

responsible for ensuring that the contracting for alterations to leased 

buildings does not exceed that prospectus threshold. To prevent any delay 

in the process, reviews of an alteration project in a leased building begin 

as early as the concept stage to determine whether a prospectus is 

required. The Office of Acquisitions also takes into account all other 

approved alterations to the leased building for the given year to ensure 

that the total cost of all alterations to that leased building does not exceed 

the prospectus threshold. 

As part of the 2003 review of all its leases, NIH identified five leases that 

had not been sent to the appropriate congressional committees for 

approval, under the Public Buildings Act of 1959, as amended.17 GSA is to 

provide a lease prospectus to the appropriate congressional committees 

 17GSA informed us that several prospectus level leases were submitted to the appropriate 

committees and were approved and issued by GSA for NIH space between 1996 and 2005. 

NIH’s 2003 review of all leases did not include reviewing alterations to leased buildings. 

Page 11 GAO-06-918 Federal Real Property
for approval prior to signing a lease. This process involves agencies with 

delegated leasing authority, which must identify prospectus level leases to

GSA for submission. According to the Director of the Office of

Acquisitions, NIH had not established a formal prospectus analysis for 

leases or alterations to leased buildings from 1996 to 2003. As a result, NIH 

did not notify GSA of the five prior prospectus-level leases that should 

have been submitted to the committees. While there is no legal penalty for 

not following the congressional prospectus process, failure to do so 

hinders the ability of the appropriate congressional committees to fulfill 

their oversight responsibilities for all prospectus-level leases. Although 

these five leases have been in effect for several years, GSA officials told us 

that it would still be appropriate for NIH to work with GSA to notify the 

committees of their existence. The officials noted, for example, a past 

instance where GSA reported, after the fact, a prospectus level lease that 

was issued without approval of the appropriate committees. NIH officials 

stated that they want to clear up any unresolved issues concerning their 

prospectus and budget scoring problems. 

NIH has taken actions to formalize its processes of lease scoring and 

prospectus analysis by developing and implementing LeMOP, its new 

leasing process. The specific decision points in this process should 

address the problems NIH had with consistently complying with OMB’s 

scorekeeping guidelines and the congressional prospectus process. 

Because only one lease has been issued under the new process, it is too 

early to assess the effectiveness of NIH’s implementation of LeMOP. 

An issue remains with five prior leases that were not submitted to the 

appropriate congressional committees for review under the Public 

Buildings Act of 1959, as amended. Although these leases have been in 

effect for several years, it is nonetheless important that information on 

them be submitted to the appropriate committees in order to maintain 

NIH’s accountability to Congress in this area and allow the committees to 

exercise their oversight responsibilities. NIH has expressed its desire to 

resolve any remaining issues concerning its prospectus and budget scoring 

processes. 

We are recommending that the Director of NIH, using GSA as the proper 

channel, report to the appropriate congressional committees the five 

previous NIH prospectus-level leases that did not follow the congressional 

prospectus process. 

Conclusions 

Recommendation for 

Executive Action 

Page 12 GAO-06-918 Federal Real Property
We provided a draft of this report to NIH, HHS and GSA for comment. In 

response, HHS provided written comments for itself and NIH. HHS 

concurred with our findings and recommendation and offered some 

technical comments that we have incorporated in this report. HHS stated 

that, as a matter of policy, it does not object to voluntarily complying with 

the GSA prospectus requirements for the five leases dealt with in the draft 

report. A letter from HHS commenting on our report is included as 

appendix I. GSA informed us orally that they had no comments. 

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

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

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

appropriate congressional committees, the Director of the National 

Institutes of Health, the Secretary of Health and Human Services, the 

Administrator of the General Services Administration and the Director of 

the Office of Management and Budget. We will make copies available to

others upon request. In addition, this report will be available at no cost on 

the GAO Web site at http://www.gao.gov. 

If you have any questions about this report, please contact me at (202) 512-

2834 or goldsteinm@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix II. 

Sincerely yours, 

Mark L. Goldstein 

Director, Physical Infrastructure Issues 

Agency Comments 

Page 13 GAO-06-918 Federal Real Property
Appendix I 

Comments from the Department of Health and Appendix I: Comments from the Department Human Services

of Health and Human Services 

Page 14 GAO-06-918 Federal Real Property
Appendix I 

Comments from the Department of Health and 

Human Services

Page 15 GAO-06-918 Federal Real Property
Appendix II: GAO Contact and Staff 

Acknowledgments 

Mark L. Goldstein (202) 512-2834 or goldsteinm@gao.gov

In addition to those named above, John Finedore, Tom Keightley, Susan 

Michal-Smith, Chris Bonham and Tamera Dorland made key contributions 

to this report. 

Page 16 GAO-06-918 Federal Real Property

GAO Contact 

Staff 

Acknowledgments 

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