**AUDIT OF VA'S**
**EXCESS EQUIPMENT**
**PROGRAM**
***VA can enhance the financial benefits,controls, and reporting associated with its excess equipment program.***
**Report No. 7D2-E06-018**
**Date: February 12, 1997**
**Office of Inspector General**
**Washington DC  20420**

**Memorandum to the Deputy Assistant Secretary**
**for Acquisition and Materiel Management(90)**
**Audit of VA's Excess Equipment Program**
1.  The purpose of the audit was to assessthe efficiency and effectiveness of the Department of VeteransAffairs (VA) disposal of excess and surplus personal property.The audit was completed at the request of management of the Officeof Acquisition and Materiel Management. We focused on assessingprogram operations in the following key areas: (1) accuracy ofreporting, (2) adequacy of controls over the receipt and dispositionof funds from the sale of VA personal property, and (3) overalllevel of compliance with policies and procedures.
2.  Personal property (equipment, supplies,etc.) controlled by the VA is subject to periodic review to determineif it is excess to needs. Procedures have been published whichare intended to promote the maximum use of serviceable propertywhich is identified as excess and to minimize the amount of newprocurement. Reporting requirements have also been developed toprovide employees and managers with information on the amountof property determined to be excess and its disposition. Onceproperty is identified as excess to the needs of the program towhich it was assigned, it is inspected to determine its conditionand, if not in serviceable condition, could be sold as scrap,processed as salvage, or abandoned/destroyed. If found to be inserviceable condition and not needed by another service/activitywithin the facility or for trade-in, it is offered to other VAfacilities, other Federal agencies and, ultimately, for donationto local governments and institutions or it is sold.
3.  For Fiscal Year (FY) 1995 VA reportedto the General Services Administration (GSA) that personal propertyoriginally costing $82 millionhad been determined to be excess to program needs and had beentransferred directly to other federal agencies, scrapped, abandoned,destroyed, or sold. VA also reported that personal property originallycosting a total of$49 million had been traded-in or sold pending replacement withlike items. Proceeds from the sale of this property in FY 1995by VA totaled less than $6 million with an additional $4.5 millionin sales by GSA and $3.4 million in trade-in allowances.
4.  The audit found that much of the effortwhich facilities direct towards their excess equipment programsis focused on clearing away the clutter of worn-out equipmentand on documenting these actions to comply with VA and FederalProperty Management Regulations (FPMR) inventory accountabilityrequirements. This focus has resulted in less effort directedtoward accurate reporting of program activity to VA Central Office(VACO) or to the maximization of receipts derived from sale ofexcess property. We concluded that the program can be more effectivelymanaged to enhance its financial benefits, controls, and reporting.Specifically, we found that this can be accomplished by: (1) assuringthat facilities take available opportunities to retain revenuesfrom the sale or exchange of unneeded equipment, (2) strengtheningcontrols over the receipt and disposition of funds from the saleof personal property, and (3) establishing a more accurate reportingsystem that reflects the results of property disposal activities.
5.  Our audit found that VA facilitiesneed to take advantage of available opportunities to retain themajority of revenue received from the sale or exchange of unneededequipment which could increase funds available to support theirprogram operations. We concluded, and program management agreed,that the proceeds from the sale of surplus and unneeded personalproperty should be retained by VA with the exception of the saleof serviceable equipment which is not being replaced with equipmentof a similar kind, and which was not purchased through the VASupply Fund or through a contract administered by the VA NationalAcquisition Center (NAC). Our audit found that during FY 1995approximately $5 million was transferred to the U.S. Treasuryfrom VA property sales that should have been retained by the Department.
6.  We also found that a lack of effectivecontrol over the receipt and disposition of proceeds from thesale of surplus and sale/exchange property has resulted in theinconsistent handling of proceeds by VA facilities. We identifieda total of six different accounts in which funds were depositedaccording to local interpretations of what was appropriate. Althougha majority of facilities routinely used a Treasury miscellaneousreceipts account, others used VA accounts including those establishedfor medical care, supply activities, and recycling. This, combinedwith an accounting/reporting system, which we found does not provideinformation on the expected proceeds from the sale (or fair marketvalue) of surplus property,  prevents an effective means to ensurethat all receipts are accounted for or that the ultimate dispositionof the funds is appropriate.
7.  Although we determined that the twoprimary excess equipment program reports: (1) *Utilization andDisposal of Excess and Surplus Property,* and (2) *PropertyDisposed of Pursuant to Exchange/Sale Authority* were not accurate,we could not find where these reports were used to support procurement,resource allocation, or other significant decisions by VA or GSAmanagers. As a result, we concluded that they should be replacedwith a single report that could provide program management withuseful information on property disposal activities. We believethe new reporting system should: (1) be compiled with a minimumof manual intervention, (2) address the value of property beingexcessed/scrapped/exchanged rather than original acquisition cost,(3) relate proceeds to the value of the property which was disposed,and (4) specify the disposition of all proceeds.
8.  The implementation of the recommendationscontained in this report will result in more effective managementof VA's excess equipment program with increased resources becomingavailable to VA facilities to support program operations. Althoughwe estimate the current level of these resources to be approximately$5 million annually, we believe this could increase substantiallywhen facilities become fully aware of the opportunities availablefor retaining the receipts from property sales that are discussedin this report. The Deputy Assistant Secretary for Acquisitionand Materiel Management indicated agreement with the report recommendationsand provided appropriate implementation actions. The Deputy AssistantSecretary also agreed with the dollar impact figure discussedin the report. We consider the report resolved and will followup on planned actions until they are completed.
         For the Assistant Inspector General forAuditing
       [Signed]
           Mr. Stephen L. Gaskell
       Director, Central Office OperationsDivision
**TABLE OF CONTENTS**
 Page
**Memorandum to the Deputy Assistant Secretary**
**for Acquisition and Materiel Management (90)**  i
**RESULTS AND RECOMMENDATIONS**
1. Opportunities Are Available For VA to Retain theMajority of Revenues
 Received From the Sale or Exchange of Unneeded Equipment. 1
 Conclusion  3
 Recommendation  1  3
2. Controls Over the Receipt and Disposition of FundsFrom
 the Sale of Personal Property Need Strengthening. 5
 Conclusion  6
 Recommendation  2  6
3. The Department Needs More Accurate Reporting ofthe
 Results of its Property Disposal Activities  9
 Conclusion  10
 Recommendation  3  11
**APPENDICES**
**I** OBJECTIVES, SCOPE, AND METHODOLOGY  13
**II** BACKGROUND  15
**III** FISCAL YEAR 1995 EXCESS EQUIPMENT STATISTICS - BY FACILITY 19
**IV** RESULTS OF SURVEY QUESTIONNAIRE  31
**V** MONETARY BENEFITS IN ACCORDANCE WITH IG ACT AMENDMENTS 35
**VI** DEPUTY ASSISTANT SECRETARY FOR ACQUISITION AND 
 MATERIEL MANAGEMENT COMMENTS  37
**VII** FINAL REPORT DISTRIBUTION  41
**RESULTS AND RECOMMENDATIONS**
**1. **Opportunities Are Available For VA toRetain the Majority of Revenues Received From the Sale or Exchangeof Unneeded Equipment****
Our audit found that VA facilities should take advantage of availableopportunities to retain the majority of revenue received fromthe sale or exchange of unneeded equipment which could increasefunds available to support their program operations. With fewexceptions, VA facilities return to the U.S. Treasury the revenuesthey generate from the sale of excess equipment. This occurs becausefacilities do not have a clear understanding of how sale proceedsmay be retained by the Department. Since there is a general beliefthat revenue from property sales should be returned to the U.S.Treasury, facilities have had little incentive to try to maximizerevenues from these sale activities because they would not directlybenefit the Department's mission accomplishment. We found thatthe primary focus of property disposal efforts were on riddingthe facility of clutter, rather than maximizing proceeds fromsales which would require additional efforts to advertise, locate,and negotiate with potential buyers.
Based on our discussions with program management and the FederalProperty Management Regulations (FPMR), Public Law, VA policy,and VA General Counsel (GC) opinions, VA may properly retain proceedsfrom the sale of the majority of equipment and other personalproperty whether it is found to be excess, surplus, unneeded,or worn-out. The only time VA should deposit proceeds to Treasuryare if the property: (1) was not sold as scrap/salvage, (2) wasnot purchased through the Supply Fund, (3) was not purchased througha national contract negotiated by the VA National AcquisitionCenter, (4) has not already been replaced with equipment withinthe same supply category, or (5) will not be replaced with equipmentwithin the same supply category before the end of the followingFiscal Year (FY).
Appropriate retention of sale proceeds could provide facilitieswith additional funds that could be used to help support programoperations. In FY 1995, facility direct sales of excess, unneeded,and worn-out equipment generated approximately $5 million in revenuewhich could have been retained by VA, but instead was depositedto non-VA miscellaneous receipts accounts with the U.S. Treasury.
**VA Has Authority to Retain the Majority of Proceeds From Saleof Property**
VA has the authority to retain the majority of proceeds from thesale of equipment and other personal property whether it is foundto be excess, surplus, unneeded, or worn-out. However, our auditfound that facilities are not taking advantage of this authoritybecause they do not have a clear understanding of how sale proceedscan be retained. As a result, they do not keep revenues that theycould retain from property sales but instead return the fundsto the U.S. Treasury. (*Details of the results of our surveyquestionnaire concerning disposition of funds is in Appendix IVon page 33.*)
As discussed in the following narrative, our audit found thatVA can retain the proceeds from the sale or exchange of unneededproperty involving the following types of disposition methodscovered by FPMR, Public Law, and VA policy: (1) sale/exchange,(2) recycling, (3) scrap/salvage, and (4) sale of serviceableequipment not being replaced. 
Sale/Exchange:  The FPMR distinguishes betweenthe sale of excess/surplus/unneeded personal property and thesale of property which is to be, or has been, replaced. Proceedsfrom the sale of property under this authority can be creditedto VA and used to support VA activities. The property being replacedmust be within the same Federal Supply Classification Group asthe replacement property. Our audit found that VA facilities believethat sale/exchange authority is specific to each facility; however,it is applicable to the Department as a whole. Therefore, if anyfacility excesses equipment of the same category which anotherfacility has, is, or will be buying, the authority to retain/applythe proceeds from the sale exists.
Recycling:  Public Law 103-329 authorizes VAto receive and use funds resulting from the sale of materialsrecovered through recycling or waste prevention programs. Thesefunds are available for obligation until expended (e.g., no-yearfunds). The authority for this program is new and has not beenfully recognized and implemented by facilities.
Scrap/Salvage:  Salvage is defined by the FPMRas property having greater value than its basic material contentbut has no reasonable prospect of use. Scrap is defined as propertywhich has no value except for its basic material content. Forpurposes of sale/disposal, the terms are, in practice, used asa single combined term. Although VA facilities have historicallytreated proceeds from the sale of scrap/salvage no differentlythan proceeds from the sale of working equipment, our review ofthe statute authorizing retention of recycling revenue (P.L. 103-329),the implementing Executive Order (E.O. 12873) and initial VA guidance(Office of Financial Policy Bulletin 95GA1-1) leads us to concludethat scrap/salvage revenue should be considered part of the recyclingand waste management program and thus retained by facilities.
Sale of Serviceable Equipment Not Being Replaced:  InJuly 1993, the GC published an advisory opinion regarding thedeposit of receipts from the sale of VA personal property intothe Supply Fund. The opinion was prompted by an April 1993, letterfrom the Deputy Assistant Secretary for Acquisition and MaterielManagement putting forth that office's contention that funds fromthe sale of VA personal property should be deposited to VA's SupplyFund. The GC concluded that proceeds from the sale of excess orsurplus property purchased from Supply Fund sources includingcontracts administered by the VA's NAC were properly creditableto the Supply Fund. Following the GC advisory opinion, in September1993, VA's Director, Materiel Management Service proposed to GSAthat VA deposit proceeds from the sale of VA's excess propertyinto the Supply Fund. GSA responded in November 1993, and January1994, that it would defer to VA to make a decision on the properdisposition of proceeds from sale and that GSA had notified itsregional offices that VA had determined that it would retain theproceeds from the sale of excess/unneeded medical equipment purchasedthrough the Supply Fund.  VA needs to assure that appropriateguidance is provided to facilities that highlight these propertydisposition methods which can generate revenue that can be retainedby the Department.
**Retention of Revenue From Property Sales Would Provide AddedFinancial Support to Facility Program Operations**
Appropriate retention of proceeds from property sales would providefacilities with additional funds that could be used to help supportprogram operations. In FY 1995, facility direct sales of excess,unneeded, and worn-out equipment generated approximately $5 millionin revenue which should have been retained by VA, but insteadwere deposited to non-VA miscellaneous receipts accounts withthe U.S. Treasury.  We believe that once facilities realize thatthe majority of these proceeds may be retained, they will havean incentive to maximize revenues from these sales activitieswhich would increase revenues to the Department and help supportprogram operations.
**Conclusion**
Proceeds from the sale or exchange of unneeded equipment should,with few exceptions, be retained by the Department. VA facilitiesneed to be provided with appropriate guidance on how to effectivelyhandle property dispositions that will assure that revenues fromthese actions are retained by the Department to the maximum extentpossible.
**Recommendation 1**
We recommend that the Deputy Assistant Secretary for Acquisitionand Materiel Management take action to ensure that guidance isprovided to facilities so that proceeds from the sale or exchangeof unneeded equipment are retained for use by the Department tothe maximum extent possible.
**Deputy Assistant Secretary for Acquisition and MaterielManagement Comments**
We agree with Recommendation 1 that the revenue from propertysales should be retained by VA as a budget enhancement and thatapproximately $5.0 million dollars was generated in FY 1995, themajority of which was returned to the Treasury Department.
In order to furnish facilities procedures and instructions forprocessing revenues into VA accounts, a request was forwardedto the Deputy Assistant Secretary for Financial Policy (047G)in July 1996. The procedures have now been developed and are beingreviewed by Central Office program officials, as well as selectedVA medical centers. When the procedures have been finalized, theywill be publicized nationwide. 
(See Appendix VI on pages 37-39 for the full text of the DeputyAssistant Secretary's comments.)
**Office of Inspector General Comments**
The Deputy Assistant Secretary's comments and implementation actionsare acceptable and responsive to the recommendation. We considerthe issue resolved and will follow up on planned actions untilthey are completed.
**2. **Controls Over the Receipt and Dispositionof Funds From the Sale of Personal Property Need Strengthening****
VA's current accounting/reporting system does not require facilitiesto estimate the fair market value of property that is to be sold.Although VA has issued financial policies regarding the capitalizationof property and how to derive the "book value" of suchproperty, it does not require facilities to estimate the expectedreceipts from property that is to be sold. Absent this information,there is no effective way to measure the appropriateness of thesales price or even whether all of the sales proceeds were depositedto the proper VA or Treasury accounts. Further, subsequent toreceipt of whatever proceeds are derived from these sales, theproceeds themselves are not handled consistently among VA facilities.Although proceeds are most frequently deposited to a Treasuryaccount for miscellaneous receipts, several other accounts andfunds are used depending on local interpretations of VA policiesand traditional practices which have evolved at each facility.
**VA's Accounting/Reporting System For Surplus Property Thatis to be Sold Does Not Provide Information on Expected Proceeds**
In July 1996, VA's excess equipment program management requestedthe financial policy staff to provide a "step by step descriptionof the fiscal transactions field activities should follow whenprocessing the proceeds from the sale of excess and exchange/saleproperty." The request was prompted "as a result ofnumerous inquiries from field activities." In response, afinancial bulletin was issued on "VA Capitalization Policy"which addresses accounting policy for VA property, plant, andequipment.
Our review of the financial policy described within the bulletinshowed that it focused on the proper classification of all propertyas either "real or personal" and requires that all propertywith an acquisition cost of $5,000 or more, or an expected usefullife of 2 years or more, be recorded in facility accounting recordsso that depreciation expenses can be accumulated. Our review alsoshowed that the only requirement that "fair market value"be determined is for recording assets which are acquired as theresult of trade-in or exchanges. Our review of excess equipmentrecords for the facilities included in the audit confirmed thatno estimate of fair market value is made for property which issold. We believe that this information would be helpful to theDepartment in measuring the appropriateness of the actual salesprice and whether all sales proceeds were credited to the properaccounts.
**Disposition of Proceeds Generated From the Sale of VA Propertyis Not Consistent and Does Not Allow Total Proceeds to be Identified**
Our review found that the proceeds from the sale of surplus andsale/exchange property conducted by VA were deposited directlyinto one of six accounts: (1) General Fund Receipts/Treasury (363220), (2) Proceeds of Sale, Personal Property (36X3845), (3)Budget Clearing Account (36F3875), (4) Recycling Revenue (36X0160X2),(5) Supply Fund (36F4537), and (6) Medical Care (36_0160). Themajority of facilities we surveyed (66 percent) primarily usethe General Fund Receipts/Treasury account. However, the otherfacilities (34 percent) primarily use either the Medical Care,the Supply Fund, or the Recycling Program accounts. (*Detailsof the results of our survey questionnaire concerning dispositionof funds is in Appendix IV on page 33*.)
Deposits of proceeds from the sale of surplus or sale/exchangeproperty are made to each of these accounts according to localinterpretations of account descriptions by each facility. Ourreview found that these local interpretations vary considerably,resulting in the inability of VA to identify total proceeds fromthe sale of surplus property. This is compounded by the use ofthese accounts for other receipts, revenues, etc., making theverification of total sales as reported in recurring excess equipmentprogram reports not feasible. 
**Conclusion**
The inconsistent handling of property sale proceeds by VA facilities,combined with an accounting/reporting system which does not provideinformation on the expected sale proceeds prevents an effectivemeans to ensure that all receipts are accounted for or that theultimate disposition of the funds is appropriate.
**Recommendation 2**
We recommend that the Deputy Assistant Secretary for Acquisitionand Materiel Management take action to assure that controls arestrengthened over the receipt and disposition of funds from thesale of VA personal property by:
 a.  Ensuring that sale proceeds are handled in a consistentmanner.
b.  Requiring facility property managers to estimatethe "fair market value" of excess equipment that isto be sold or exchanged.
**Deputy Assistant Secretary for Acquisition and MaterielManagement Comments**
The procedures for the processing of revenues have been developedand are being reviewed prior to release to the field. As partof the instructions, a revenue source code has been establishedfor tracking proceeds. This should satisfy the requirements asoutlined in Recommendation 2, paragraph a. The Deputy AssistantSecretary also agreed that facility property managers will berequired to establish the "fair market value" of excessproperty that is to be sold or exchanged as outlined in Recommendation2, paragraph b.
(See Appendix VI on pages 37-39 for the full text of the DeputyAssistant Secretary's comments.)
**Office of Inspector General Comments**
The Deputy Assistant Secretary's comments and implementation actionsare acceptable and responsive to the recommendations. We considerthe issues resolved and will follow up on planned actions untilthey are completed.
**3. **The Department Needs More Accurate Reportingof the Results of its Property Disposal Activities****
VA's reporting mechanism for property disposal activities is the*Utilization and Disposal of Excess and Surplus Property*report and the companion report of*Property Disposed of Pursuantto Exchange/Sale Authority*. Both of these reports are compiledand published annually and submitted to GSA. For FY 1995, VA reportedto GSA that personal property originally costing $82million had been determined to be excess to program needs andhad been transferred directly to other federal agencies, scrapped,abandoned, destroyed, or sold. VA also reported that personalproperty originally costing a total of$49 million had been traded-in or sold pending replacement withlike items. (*Details on FY 1995 excess equipment statisticsby facility is in Appendix III on pages 19-29.*)
Our examination of the supporting recordsat VACO for these reports disclosed that both were essentiallyestimates and could not be verified. Although both are initiallycompiled from data reported by facilities, they are then adjustedto eliminate apparent errors and mistakes which are identifiedby program managers in VACO. These adjustments are based on judgmentand at best are supported by a notation of a phone conversationwith staff at the facility, but are frequently undocumented. Thereasonableness of the data reported to GSA was examined duringour visits to field facilities and our survey questionnaire to37 additional facilities. We found that the data for noneof the facilities were reported completely accurately. (*Detailsof the results of our survey questionnaire is in Appendix IV onpages 31-34.*)
We believe that the inaccuracy of the reports is the result ofthe data being reported having little meaning or usefulness. Localand national program staff were unable to provide a clear reasonas to the benefits of the data, other than meeting a reportingrequirement of GSA. When we approached GSA as to their need forand uses for this data, we were told they did not use it. To thecontrary, GSA compiles its own data (acquired directly from formssubmitted by VA facilities to GSA regional offices through theyear) for use in its annual report to Congress which bears littleresemblance to VA supplied data. For example, GSA's FY 1994 reportto Congress showed that VA had excessed $23.8 million in personalproperty while VA's own annual report showed a total of $110 millionwas excessed (GSA's FY 1995 report was unavailable at the timeof our audit).
**Examples of Significant Inaccuracies and Disparities in CurrentVA Excess Property Reports**
None of the VA facilities which we visited or included in oursurvey confirmed the excess/surplus property information whichwas reported in VA's annual report to GSA. The table on the followingpage presents a sampling of the extent of differences we identifiedbetween facility data and that reported to GSA in VA's consolidatedannual report.**Facility****Acquisition Costs of Excessed Property Per Audit Survey****Acquisition Costs of Excessed Property Per VA Annual Report to GSA****Difference****Proceeds Per Audit Survey****Proceeds Per Annual Report to GSA****Difference**Amarillo$409,583$1,770,630($1,361,047)$806$4,143($3,337)Atlanta$2,606,696$585,875$2,020,821$19,063$0$19,063Bay Pines$79,564$916,471($836,907)$6,503$51,353($44,850)Birmingham$1,614,401$ 2,644,230($1,029,829)$6,271$4,107$2,164Hines$593,860$6,053,055($5,459,195)$3,137$25,767($22,630)Indianapolis$2,594,222$643,015$1,951,207$39,276$10,889$28,387Little Rock$5,968,790$2,905,062$3,063,728$20,550$17,364$3,186Richmond$1,068,226$433,468$634,759$10,569$40,319($29,750)

Although the above examples show large discrepancies between thedata reported in VA's FY 1995 annual report to GSA and the datafor the same period which was reported to us directly by facilities,we were unable to identify any negative consequence because thisdata was not being used. However, with improved accuracy of reportingwe believe that this data could provide useful information onproperty disposal activities that could be used for enhanced managementoversight and reporting. (*Details of reporting discrepanciesfor all facilities surveyed is in Appendix IV on page 32.*)
**New Reporting System Could Provide Useful Management Information**
VACO program managers recognize that a new reporting system isneeded for the VA excess/surplus equipment program. Action isbeing taken to develop a new system which is intended to improvethe accuracy of overall reporting. Our review of an outline ofthe proposed new reporting system showed it to be comprehensive,but we believe that some enhancements could be made to strengthencontrols over the receipt and distribution of proceeds resultingfrom sales and sales/exchanges of personal property. These enhancementsinclude: (1) reducing manual intervention to a minimum, (2) includingthe estimated market value of property being excessed/scrapped/exchangedin addition to or even in lieu of the original acquisition cost,(3) relating proceeds to the value of the property which was disposed,and (4) specifying the disposition of all proceeds.
**Conclusion**
The current reporting system for VA's excess equipment programis inaccurate and cumbersome and should be replaced with a singlereport that could provide program management with more usefuland accurate information on property disposal activities.
**Recommendation 3**
We recommend that the Deputy Assistant Secretary for Acquisitionand Materiel Management take action to include the enhancementswe identified in the new reporting system.
**Deputy Assistant Secretary for Acquisition and MaterielManagement Comments**
At the time of this audit, the requirement for submission of annualreports to GSA for excess and exchange/sale activity was stillvalid. However, we have received an interim notice prior to aformal FPMR amendment from GSA eliminating the requirement effectivefor FY 96. A revised VA reporting system will address the issueshighlighted in the report. Specifically, (1) manual interventionwill be reduced to a minimum, (2) estimates of fair market valueof property to be disposed will be recorded in addition to theoriginal acquisition cost, and (3) the inclusion of a revenuesource code will allow for the tracking of proceeds.
(See Appendix VI on pages 37-39 for the full text of the DeputyAssistant Secretary's comments.)
**Office of Inspector General Comments**
The Deputy Assistant Secretary's comments and implementation actionsare acceptable and responsive to the recommendation. We considerthe issue resolved and will follow up on planned actions untilthey are completed.
**OBJECTIVES, SCOPE, AND METHODOLOGY**
**Objectives**
The audit was conducted to evaluate the effectiveness and efficiencyof the Department's disposal of excess and surplus personal property.Specific emphasis was placed on: (1) the adequacy of controlsover the receipt and disposition of funds from the sale of property,(2) the accuracy of reporting, and (3) compliance with policiesand procedures governing the disposal of property. The reviewwas requested by the Office of Acquisition and Materiel Management.
**Scope and Methodology**
To accomplish the audit objectives, we interviewed program officialsat the national and local levels to obtain their views and acquirean overall understanding of the policies and procedures affectingthe disposal of excess and surplus VA equipment. We obtained andreviewed written publications and directives issued by VA andGSA to identify appropriate audit tests and questions which wouldneed to be addressed. Two facility sites (Miami and Cincinnati)were selected to be visited based on a review of FY 1995 reportsshowing that the level of excess equipment activity at each weresufficient to provide us with a reasonably fair basis to forminitial conclusions. Following these two visits, we developeda detailed survey questionnaire which we sent to 37 VA facilitiesrepresenting a broad cross section of excess equipment activity.The audit was performed in accordance with generally acceptedgovernment auditing standards.
**BACKGROUND**
Federal Property Management Regulations (FPMR 101-43) prescribethe policies governing the utilization and disposal of excesspersonal property (including equipment) which is under the controlof the VA. VA implements these policies in the form of its owndirectives and guidelines. Included within these policies arethe definitions of the terms used throughout the process. Forour audit, the most important of these terms include: (1) personalproperty, (2) excess personal property, (3) salvage, (4) scrap,and (5) surplus personal property. Following are brief definitionsof each of these terms:
(1) Personal Property - any property, except realproperty, records of the Federal government, and naval vesselsof the following categories: battleships, cruisers, aircraft carriers,destroyers and submarines.
(2) Excess Personal Property - any personal propertyunder the control of any Federal agency which is not requiredfor its needs and the discharge of its responsibilities, as determinedby the head thereof.
(3) Salvage - personal property having value greaterthan its basic material content but which is in such conditionthat is has no reasonable prospect of use for any purpose as aunit (either by the holding or other Federal agency), and itsrepair or rehabilitation for use as a unit is clearly impracticable.Repairs or rehabilitation estimated to cost in excess of 65 percentof acquisition cost would be considered "clearly impracticable"for purposes of this definition.
(4) Scrap - personal property that has no value exceptfor its basic material content.
(5) Surplus Personal Property - any excess personalproperty not required for the needs and the discharge of the responsibilitiesof all Federal agencies, as determined by the Administrator ofGeneral Services.
The primary objective of FPMR policies governing the utilizationof excess personal property is to ensure, to the extent practicable,that such property is considered the first source of supply. EachVA facility is responsible for making excess personal propertyavailable to other VA facilities and other Federal agencies. Internalcontrols are required to ensure an adequate system of propertyaccountability, and reporting requirements are intended to informpotential users of excess property of its availability. 
**Identification of Excess Personal Property**
VA directives require an annual "housecleaning" to identifyitems which may be excess to program requirements. In practice,most VA facilities conduct an ongoing "housecleaning"wherein each employee is responsible for identifying unused orunneeded equipment and supplies within his/her work area. Particularlyin medical centers, where space is at a premium and unused equipmentcan quickly become "clutter" and a potential risk toaccreditation by the Joint Commission on the Accreditation ofHealthcare Organizations, unused equipment is routinely reportedto the supply activity (Materiel Management Service) via a standardized,multipurpose VA form (*Request, Turn-in, and Receipt for Propertyor Services*). Usually, the employee responsible for submittingthe form is the service chief or other designated official inwhose custody the equipment was originally entrusted.
**Inspection and Classification of Excess Personal Property**
When the *Turn-In* form is received in Materiel ManagementService, the property is inspected to determine its conditionand classified into one of three categories: (1) scrap/salvage,(2) exchange/sale, or (3) excess. Although Materiel ManagementService is to ensure that all required information is enteredon the form including acquisition date and cost, controls numbers,etc., frequently the equipment being excessed is so old that thisinformation is not readily available.
**Processing Scrap/Salvage**
Over half of the equipment/property which is excessed by VA isscrap and/or of salvage value only. When this determination ismade, the most economical method of disposing of the propertyis used. Frequently, this involves the use of "small lotsales" where like/similar items are stored until a sufficientquantity is acquired to entice a scrap/salvage dealer to purchasethe property and remove them from the facility. 
**Exchange/Sale**
When equipment is "Turned-In" as a result of its beingreplaced by similar equipment, the turn-in process involves aneffort by Materiel Management Service to obtain a trade-in allowanceor the sale of the equipment.
**Excess Equipment Usable by Other VA Activities/Programs**
On receipt of the paperwork, inspection of the property, and codingappropriate input into the accounting records, Materiel ManagementService is responsible for determining if the equipment can beused by another activity/service within the facility. If not requiredby another service within the facility, efforts are made to determineif another VA facility can make use of it. This is done both throughinformal contacts (e.g., word of mouth) or via VA's electronicmessaging system known as FORUM.
**Excess Equipment Usable by Other Federal Agencies**
If otherwise serviceable excess equipment is not used by anotherVA facility, it is offered to other Federal agencies via reportingto GSA via an SF-120 (Report of Excess Personal Property) or anelectronic format (REPADE). When the excess equipment is not usedby another Federal agency, it is re-classified as *surplus*property and made available for donation to non-federal/non profitorganizations or is offered for sale.
**Disposal of Surplus Personal Property**
Surplus personal property is by definition excess property thatis not required for use by any Federal agency. Once classifiedas surplus it is available for donation to non-profit/non-federalentities (e.g., states, schools, charities, etc.,) or, alternately,for sale to a successful private bidder.
**Exceptions**
While the great majority of VA excess equipment is processed underthe above procedures, certain equipment, because of its natureor specific legislation/regulatory requirements are handled somewhatdifferently. For example, hazardous materials, weapons, and vehicleseach have specific excessing procedures which apply to them. Inaddition, some activities such as precious metal recovery aretreated somewhat differently.
**Conduct of Sales**
The Secretary of Veterans Affairs has delegated to the heads ofVA contracting activities the authority to determine whether VAor GSA will sell agency owned property. VA policy is for VA toconduct the sale when it is in the best interest of VA. Thresholdshave been established to determine when a specific "reviewingauthority" must approve a sale for competitive and negotiatedbid sales. 
In practice, each VA facility has a Materiel Management Serviceemployee who is responsible for organizing, advertising, and conductingsales including the method to be used. In most instances, thisinvolves the use of small lot sales where, periodically, similaritems are grouped (used TVs, used medical equipment, communications,pagers, furniture, etc.) and offered to local scrap/salvage dealersvia an advertised competitive bidding process. When determinedlocally that attempting to sell excess property would not be inVA's best interest (e.g. difficulty in locating a potential buyer),GSA is contacted and requested to conduct the sale.
**Receipt and Disposition of Proceeds**
Proceeds from the sale of excess/unneeded VA personal propertyresult from the following circumstances: (1) sale/trade-in/exchange,(2) recycling, (3) scrap/salvage, and (4) sale of serviceableequipment which is not being replaced. In addition to the proceedsfrom each of these methods being treated differently, the dispositionalso is affected by the means/method of original acquisition andwho conducts the sale. 
**Sale/Exchange**
The FPMR distinguishes between the sale of excess/surplus/unneededpersonal property and the sale of property which is to be, orhas been, replaced. Proceeds from the sale of property replacedunder this authority can be credited to VA and used to supportVA activities. The property being replaced must be within thesame Federal Supply Classification Group as the replacement property(e.g., Group 65 is all medical, dental, and veterinary equipmentand supplies, Group 66 is Laboratory equipment, and Group 74 isoffice machines).
**Recycling**
Public Law 103-329 authorizes VA to receive and use funds resultingfrom the sale of materials recovered through recycling or wasteprevention programs. These funds are available for obligationuntil expended (e.g., no-year funds). The authority for this programis new and is currently being recognized and implemented by facilities.
**Scrap/Salvage**
Salvage is defined by the FPMR as property having greater valuethan its basic material content but has no reasonable prospectof use. Scrap is defined as property which has no value exceptfor its basic material content. For purposes of sale/disposal,the terms are, in practice, used as a single combined term. Proceedsfrom the sale of scrap/salvage are treated the same as proceedsfrom the sale of serviceable equipment (i.e., usually depositedto Treasury's miscellaneous receipts account). Although VA facilitieshave historically treated proceeds from the sale of scrap/salvageno differently than proceeds from the sale of working equipment,our review of the statute authorizing retention of recycling revenue(P.L. 103-329), the implementing Executive Order (E.O. 12873)and initial VA guidance (Office of Financial Policy Bulletin 95GA1-1)leads us to conclude that scrap/salvage revenue should be consideredpart of the recycling and waste management program and thus retainedby facilities.
**Sale of Serviceable Equipment Not Being Replaced**
In July 1993, the VA General Counsel (GC) published an advisoryopinion regarding the deposit of receipts from the sale of VApersonal property into the Supply Fund. The opinion was promptedby an April 1993 letter from the Deputy Assistant Secretary forAcquisition and Materiel Management putting forth that office'scontention that funds from the sale of VA personal property shouldbe deposited to VA's Supply Fund. The GC concluded that proceedsfrom the sale of excess or surplus property purchased from non-SupplyFund sources were not properly creditable to the Supply Fund.In September 1993, VA's Director, Materiel Management Serviceproposed to GSA that VA deposit proceeds from the sale of VA'sexcess property into the Supply Fund. GSA responded in November1993, and January 1994 that it would defer to VA to make a decisionon the proper disposition of proceeds from sale and that GSA hadnotified its regional offices that VA had determined that it wouldretain the proceeds from sale of excess/unneeded medical equipmentpurchased through the Supply Fund.
**FISCAL YEAR 1995 EXCESS EQUIPMENT STATISTICS - BYFACILITY**
The primary sources of statistics describing VA's excess equipmentactivities are two annual reports compiled by the Office of theAssociate Deputy Assistant Secretary for Program Management andOperations and submitted to GSA's Property Management Division.The *Report of Utilization and Disposal of Excess and SurplusProperty* and the *Report of Property Disposed of Pursuantto Exchange/Sale Authority* are prescribed by FPMR 101-43.47and 101-46.305 respectively. Data for the reports are input tothe VA's LOG system by facilities as transactions occur (sales,exchanges, transfers, etc.) where they are stored until a consolidatedreport is generated.
When the data is reviewed to compile the annual reports, obviouserrors and omissions are identified by the Excess Equipment ProgramOffice staff (i.e., Special Assistant for Excess Property) andcorrected. Although facilities are usually contacted to verifythe questioned data, documentation of these contacts is not alwayscompleted, and even when documented, it is frequently in the formof a notation of a telephone call. As a result, our success atverifying the data in the annual reports was limited. For example,the supporting documentation, which is maintained within the programoffice, did not precisely reconcile with the totals shown in thetwo reports (see below). In addition, our on-site audit work attwo facilities and the responses of the 37 facilities includedin our survey questionnaire also disclosed discrepancies in thedata contained in the annual reports. Nevertheless, these dataare the only that exist and, as such provide the only facilityspecific overview of program activity. We have therefore includedthese data for  information purposes and to show the variationsin program activity levels (including property sales and exchanges)which exist among facilities. (*Details on Fiscal Year 1995excess and surplus property transactions reported to GSA is onpages 20 - 24, and details on Fiscal Year 1995 excess propertytransactions under FPMR sale/exchange authority is on pages 25- 29*.) 
**Fiscal Year 1995 Excess and Surplus Property TransactionsReported To GSA****Station  Number****Facility Name****Total Excess Reported****Transferred To other Federal Agencies****Scrapped****Abandoned Destroyed****Sold by VA****Proceeds from Non Scrap Sales****Proceeds from Scrap Sales**307Buffalo$409,339 $0 $243,145 $0 $77,679 $4,204 $0 309Newark$43,180 $0 $43,180 $0 $0 $0 $0 311Pittsburgh$13,301 $13,301 316Atlanta$17,616 $0 $17,616 317St Petersburg $162,288 $162,288 319Columbia$181,216 $27,828 322Montgomery$205,000 $16,516 $65 323Jackson$0 $26,392 $76 325Cleveland $0 327Louisville$90,609 $162,962 $64,088 331St. Louis$0 $159,691 $1,230 333Des Moines$22,734 $19,874 $39,570 $175 $100 344Los Angeles$22,335 $22,335 346Seattle$91,196 $43,895 $35,316 349Waco$82,245 377San Diego$0 $98,265 $195 402Togus $161,406 $41,038 $800 405White River$237,897 $62,630 $240,275 $815 $861 436Fort Harrison$379,151 $133,241 $38,824 $101 437Fargo $301,069 $167,051 $61,197 $321,055 $2,649 $137 438Sioux Falls$332,100 $195,947 $15,156 $2,227 442Cheyenne$0 452Wichita$289,006 $1,269 $249,657 $700 $750 460Wilmington$3,214 $2,802 $239 $13 500Albany$130,276 $21,625 $21,910 $5,000 $501,458 $12,630 $2,729 502Alexandria$1,286,864 $39,475 $973,756 $2,610 503Altoona$34,870 $8,163 $22,275 $248 $54 504Amarillo$1,770,630 $1,319 $15 $11,550 $3,274 $869 508Atlanta$585,875 $153,269 509Augusta$512,341 $507,434 $1,500 $310,110 $1,062 $1,043 512Baltimore$493,172 $145,234 513Batavia$0 $109,484 $1,201 514Bath$62,183 $62,183 $53,703 $1,217 515Battle Creek$2,102,806 $1,172,178 $69,756 $59 $2,198 516Bay Pines$916,471 $642,738 $820,052 $48,716 $2,637 517Beckley$298,016 $12,648 $263,827 518Bedford$118,217 $118,217 $521 519Big Spring$149,972 $138,972 $91,736 $75 $800 520Biloxi$514,562 $28,124 $44,667 $1,020 $106 521Birmingham$2,644,230 $353,069 $4,107 522Bonham$198,398 $84,655 $2,849 
**Fiscal Year 1995 Excess and Surplus Property TransactionsReported To GSA****Station  Number****Facility Name****Total Excess Reported****Transferred To other Federal Agencies****Scrapped****Abandoned Destroyed****Sold by VA****Proceeds from Non Scrap Sales****Proceeds from Scrap Sales**525Brockton/West Roxbury$2,138,874 $2,138,874 526Bronx$979,147 $865,322 $113,037 $100,749 $676 $1,193 527Brooklyn$363,808 $344,287 $19,521 528Buffalo$810,326 $400,000 $388,528 $0 $453,384 $11,199 529Butler$66,362 $29,163 $34,505 $219 $632 531Boise$50,000 $50,000 $28,000 $923 $424 532Canandaigua$21,249 $21,249 $85,866 $2,499 533Castle Point$138,784 $20,263 $15,065 $2,521 $1,652 534Charleston$603,839 $186,970 $520,000 $4,016 $315 538Chillicothe$235,284 $235,284 $49,096 $1,131 539Cincinnati$852,552 $119,040 $17,186 $350,063 $671,272 $6,346 $172 540Clarksburg$90,703 $4,400 $87,303 541Cleveland$502,856 $375 $502,481 $4,161 542Coatesville$68,749 $20 $10,682 $257 543Columbia, MO$238,597 $36,443 $167,862 $34,292 $68,405 $1,735 $1,674 544Columbia, SC$122,104 $27,766 $94,338 $245,636 $68,525 $592 546Miami$600,597 $46,089 $10,000 $12,000 $40,000 $14,924 $5,372 548West Palm Beach$599,069 549Dallas$290,304 $243,641 $2,005 550Danville$861,349 $157,644 $696,019 $7,589 $1,165 552Dayton$497,517 $41,233 $268,624 $5,727 $356,962 $400 553Detroit$534,052 $152,176 $381,876 $105,935 $582 $346 554Denver$708,441 $573,918 $127,523 $50 555Des Moines$107,174 $29,335 $113,424 $2,034 $200 556North Chicago$526,442 $526,442 557Dublin $273,903 $144,266 $7,894 $55,581 $83 $534 561East Orange$71,871 $71,871 $630 562Erie$53,808 $4,787 $4,000 $455 564Fayetteville, AR$105,754 $91,938 $1,961 565Fayetteville, NC$26,441 $1,500 $337,694 $11,816 567Ft. Lyon$148,694 $106,512 $4,776 568Ft.  Meade$151,949 $16,045 $89,690 $25,972 $24,268 $77 $2,817 569Ft. Wayne$386,981 $49,488 $286,486 $3,119 570Fresno$269,828 $107,576 $125,487 $36,765 $247,892 $673 $335 573Gainesville$538,577 $19,747 $207,567 $5,550 $90 574Grand Island$315 $315 $13,595 $113 575Grand Junction$28,706 $28,706 $61,522 $686 $95 578Hines$6,053,055 $3,832,596 $2,220,459 $991,578 $18,000 $7,767 579Hot Springs$988,651 $3,000 $948,978 $948,978 $2,998 580Houston$405,099 $45,156 $161,062 $507 581Huntington$95,460 $60,296 $22,526 $4,950 $202 
**Fiscal Year 1995 Excess and Surplus Property TransactionsReported To GSA****Station  Number****Facility Name****Total Excess Reported****Transferred To other Federal Agencies****Scrapped****Abandoned Destroyed****Sold by VA****Proceeds from Non Scrap Sales****Proceeds from Scrap Sales**583Indianapolis$643,015 $8,579 $7,998 $540,516 $10,889 584Iowa City$143,350 $18,028 $125,322 $9,590 585Iron Mountain$165,805 $81,273 $95,333 $1,742 $39 586Jackson$391,003 $66,822 $99,895 $568,845 $5,040 $36 589Kansas City$448,722 $316,190 $147,770 $5,575 $880 590Hampton$493,759 $493,759 $895 591Kerrville$177,931 $1,565 $12,430 $123,453 $4,698 $811 592Knoxville$155,516 $10,372 $133,373 $15,830 $156 $3,527 593Las Vegas $168,694 $12,913 $225 594Lake City$149,824 $76,863 $13,509 $855 595Lebanon$302,386 $176,871 $84,251 $182,626 $723 596Lexington$108,534 $26,676 $38,506 $2,144 597Lincoln$0 598Little Rock$2,905,062 $1,026,283 $2,905,062 $17,364 599Livermore$80,382 $10,555 $50,437 $2,048 600Long Beach$1,435,540 $251,072 $1,184,468 $19,778 $20,500 $2,315 603Louisville$457,625 $29,205 $7,238 $376,286 $8,095 $1,220 604Lyons$0 605Loma Linda$819,458 $819,458 $6,225 607Madison$1,534,427 $917,177 $147,532 $275,125 $1,266 $1,037 608Manchester$108,937 $63,073 $10,397 $35,467 $169,749 $5,571 610Marion, IN$78,610 $26,506 $49,104 $2,180 611Marlin$17,636 $10,661 $200 612No. Ca. Health Care $0 613Martinsburg$705,430 $99,238 $37,180 $332,277 $2,062 $450 614Memphis$730,602 $666,332 $3,016 617Miles City$113,308 $35,305 $18,418 $658,700 $443 618Minneapolis$596,190 $108,412 $336,778 $10,038 $1,401 619Montgomery$106,416 $8,445 $6,878 $320 $42 621Mountain Home$178,617 $41,575 $114 622Murfreesboro$1,066,262 $381,899 $272,564 $12,083 $2,360 626Nashville$605,670 $59,607 $479,543 $164,715 $1,300 627Newington$15,524 $15,524 $33,224 $4,465 629New Orleans$104,119 $1,041,194 $5,679 630New York$93,973 631Northampton$117,789 $96,269 $306 632Northport$26,329 635Oklahoma City636Omaha$349,581 $349,581 $5,047 640Palo Alto$41,868 $16,485 $25,383 $300 641Perry Point$753,335 $753,335 $2,250 
**Fiscal Year 1995 Excess and Surplus Property TransactionsReported To GSA****Station  Number****Facility Name****Total Excess Reported****Transferred To other Federal Agencies****Scrapped****Abandoned Destroyed****Sold by VA****Proceeds from Non Scrap Sales****Proceeds from Scrap Sales**642Philadelphia$264,502 $264,502 644Phoenix$415,510 $390,800 $16,302 645Pittsburgh Highland$800,349 $372,951 $380 646Pittsburgh University$693,097 $229,656 647Poplar Bluff$99,931 $6,862 649Prescott$7,925 $7,925 $57,474 $2,307 $1,368 650Providence$288,165 $4,250 $288,165 $7,044 652Richmond$433,468 $433,468 $2,415 $37,904 653Roseburg$9,179 $280 $8,899 $752 654Reno$290,561 $6,031 $1,320 $129,572 $1,323 655Saginaw$76,738 $33,989 $751 $561 656St. Cloud$154,848 $134,743 $8,434 $1,358 657St. Louis$37,273 $37,273 $720,710 $11,089 $387 658Salem$313,159 $23,422 $137,774 $137,361 $1,074 $81 659Salisbury$22,000 $22,000 $836 660Salt Lake City$1,532,681 $868,616 $519,264 $1,457,297 $2,342 $720 662San Francisco$1,609,993 $1,556,296 $2,154 663Seattle$334,311 $53,965 $1,460 $1,572 664San Diego$891,596 $244,672 $226,108 $460,107 $705 665Sepulveda$1,600,803 $525,000 $34,654 $2,228 667Shreveport$105,384 $74,346 $17,232 $10,000 $109,675 $7,645 $75 668Spokane$7,505 $5,383 $2,122 $1,695 670Syracuse$9,233 $2,826 $18,659 $532 $81 671San Antonio$600,641 $0 $353,276 $63,500 $750 $4,595 672San Juan$2,198,482 $43 $640 $640 673Tampa$627,440 $1,000 $449,004 $41,244 $3,036 674Temple$331,734 676Tomah$411,715 $125,572 677Topeka$140,476 $10,195 678Tucson$133,248 $133,248 $24,358 679Tuscaloosa$475,290 $475,290 $156,323 $103 680Tuskegee$1,140,746 $1,083,061 $57,685 $521 $279 685Waco$554,933 687Walla Walla$79,630 $1,522 688Washington$2,155,299 $1,995,529 $5,325 689West Haven$112,019 $1,932 $110,087 691West Los Angeles$1,619,186 $1,619,186 $4,391 692White City$187 $371 693Wilkes Barre$378,686 $167,358 $182,385 $32,117 $2,940 $1,200 695Milwaukee$390,731 $105,403 $1,139 742Income Match  Program$1,050 $1,050 
**Fiscal Year 1995 Excess and Surplus Property TransactionsReported To GSA****Station  Number****Facility Name****Total Excess Reported****Transferred To other Federal Agencies****Scrapped****Abandoned Destroyed****Sold by VA****Proceeds from Non Scrap Sales****Proceeds from Scrap Sales**757Columbus$514,362 $93,771 $339,213 $66,801 $15,385 788Atlanta$32,249 803Bath$0 $685 $26 805Calverton$0 806Camp Butler$17,321 $9,549 $7,772 809Danville$4,619 $2,049 $2,570 810Dayton$60,048 $60,048 814Keokuk$1,460 $1,460 818Massachusettes$2,318 $2,318 825Alexandria$191 $191 $6 833Camp Nelson$7,838 $7,838 838Corinth$9,691 $9,691 852Jefferson Barracks859Marietta$9,814 860Memphis$28,640 $28,640 866Natchez$5,704 $5,704 $285 $20 883Zachery Taylor$0 $11,380 $2,638 888Fort Logan$2,810 $200 $68 892Fort Rosecrans$25,999 $1,983 $177,701 895Golden Gate$241,210 $176,210 898Los Angeles$10,456 $10,456 901Riverside$3,537,822 $91,927 $3,445,895 905Sitka908Fort Mitchell$5,590 $330 909Fort Custer$64,813 $935 910Ft. Richardson911Florida$63,019 $63,019 $160 Totals$78,857,963 $8,519,578 $37,847,445 $2,847,760 $23,459,836 $548,846 $191,962 totals per annual report$82,149,971 $9,533,318 $39,592,468 $3,456,035 $26,966,662 $508,437 $123,075 

**Fiscal Year 1995 Excess Property Transactions UnderFPMR Sale/Exchange Authority****Station Number****Facility Name****Original Cost of Property Exchanged****Value Received in Exchange****Original Cost of Property Sold****Value Received in Exchange**307Buffalo309Newark311Pittsburgh316Atlanta317St Petersburg319Columbia$181,236 $36 322Montgomery323Jackson325Cleveland$14,270 $2,525 327Louisville331St. Louis$1,075 $100 333Des Moines$21,590 $171 344Los Angeles346Seattle349Waco377San Diego402Togus$36,986 $5,250 405White River$346,303 $94,106 $1,635 $56 436Fort Harrison437Fargo$166,493 $14,500 $9,938 $3,711 438Sioux Falls$207,598 $30,810 442Cheyenne452Wichita$225,076 $3,704 460Wilmington500Albany$1,060,473 $78,900 $44,960 $1,124 502Alexandria$450,846 $42,961 $149,407 $3,542 503Altoona$1,237,991 $84,875 $1,572 $10 504Amarillo$114,119 $64,229 $28,213 $106 508Atlanta$1,738,147 $130,500 $2,204,720 $27,046 509Augusta$298,181 $10,000 $504,872 $16,467 512Baltimore513Batavia$57,779 $4,653 514Bath$31,822 $4,112 $270,644 $12,130 515Battle Creek$174,799 $6,917 $69,417 $24 516Bay Pines$566,520 $11,738 517Beckley$65,245 $19,505 $90,654 $1,218 518Bedford$205,329 $8,001 519Big Spring$298,887 $3,283 520Biloxi$882,138 $2,835 $202,259 $227 521Birmingham$205,000 $3,487 522Bonham$64,897 $6,401 525Brockton/West Roxbury
**Fiscal Year 1995 Excess Property Transactions UnderFPMR Sale/Exchange Authority****Station Number****Facility Name****Original Cost of Property Exchanged****Value Received in Exchange****Original Cost of Property Sold****Value Received in Exchange**526Bronx$413,725 $127,717 527Brooklyn$21,500 $1,500 528Buffalo$186,678 $7,759 $834,653 $22,919 529Butler$149,285 $2,572 531Boise532Canandaigua$6,720 $600 $16,269 $236 533Castle Point534Charleston538Chillicothe$23,411 $5,000 539Cincinnati$427,069 $42,400 $293,903 $1,279 540Clarksburg$213,074 $5,720 $74,360 $80 541Cleveland$146,618 $6,100 542Coatesville$19,538 $220 543Columbia, MO$1,060,049 $172,532 $66,629 $9,170 544Columbia, SC$245,636 $68,525 $886,439 $9,200 546Miami548West Palm Beach$5,329 $3,105 549Dallas550Danville552Dayton$16,877 $900 553Detroit$285,082 $63,951 554Denver$79,300 $10,550 555Des Moines$828,233 $18,925 $70,807 $2,677 556North Chicago557Dublin $425,681 $79,531 $67,140 $5,179 561East Orange$12,000 $300 562Erie$140,124 $12,577 $6,896 $5,750 564Fayetteville, AR$163,050 $1,138 565Fayetteville, NC$318,827 $19,272 $342,231 $15,756 567Ft. Lyon568Ft.  Meade569Ft. Wayne$33,660 $19,598 $71,400 $8,529 570Fresno$87,128 $28,911 $313,957 $503 573Gainesville$179,524 $22,870 $510,585 $15,083 574Grand Island$1,800 $600 575Grand Junction$6,412 $1,000 $77,260 $5,454 578Hines579Hot Springs580Houston$244,037 $2,913 581Huntington$891,480 $22,710 $5,727 $65 583Indianapolis$2,273,690 $128,144 $722,778 $19,033 584Iowa City$282,034 $127,996 
**Fiscal Year 1995 Excess Property Transactions UnderFPMR Sale/Exchange Authority****Station Number****Facility Name****Original Cost of Property Exchanged****Value Received in Exchange****Original Cost of Property Sold****Value Received in Exchange**585Iron Mountain$2,485 $1,500 586Jackson$49,317 $17,796 $75,722 $1,195 589Kansas City$17,424 $463 $36,263 $1,211 590Hampton$55,584 $8,260 $407,680 $3,684 591Kerrville$4,500 $100 592Knoxville$7,367 $500 $123,095 $10,713 593Las Vegas 594Lake City$320,480 $52,941 $125,776 $13,318 595Lebanon$32,258 $2,275 596Lexington$240,768 $130,225 $608,245 $4,071 597Lincoln598Little Rock$1,476,217 $71,142 $544,692 $574 599Livermore$24,470 $700 $15,005 $659 600Long Beach603Louisville$166,236 $28,216 $795,877 $5,556 604Lyons605Loma Linda607Madison608Manchester$44,390 $17,345 610Marion, IN$127,702 $1,001 $354,447 $10,030 611Marlin$55,886 $7,000 612No. Ca. Health Care 613Martinsburg614Memphis$1,421,820 $170,900 617Miles City$11,083 $1,000 618Minneapolis619Montgomery621Mountain Home$1,039,791 $65,470 $611,038 $12,106 622Murfreesboro$183,851 $31,717 $239,979 $2,925 626Nashville$13,651 $9,706 $63,968 $2,511 627Newington$82,307 $500 629New Orleans630New York$685,846 $3,230 631Northampton$950,427 $3,400 632Northport$149,771 $32,704 635Oklahoma City$137,520 $34,926 $57,635 $34,926 636Omaha$1,542,526 $19,522 $159,281 $7,261 640Palo Alto$7,822 $33 641Perry Point642Philadelphia644Phoenix$1,179,822 $71,434 645Pittsburgh Highland$131,651 $3,850 
**Fiscal Year 1995 Excess Property Transactions UnderFPMR Sale/Exchange Authority****Station Number****Facility Name****Original Cost of Property Exchanged****Value Received in Exchange****Original Cost of Property Sold****Value Received in Exchange**646Pittsburgh University647Poplar Bluff649Prescott650Providence$107,232 $5,815 652Richmond653Roseburg$148,500 $3,300 $71,363 $563 654Reno$37,539 $12,329 $7,650 $668 655Saginaw$7,896 $850 $33,989 $751 656St. Cloud$41,187 $3,100 657St. Louis$268,074 $29,417 $308,824 $9,010 658Salem$1,611,876 $46,000 $24,720 $142 659Salisbury$347,525 $4,073 660Salt Lake City662San Francisco663Seattle$85,116 $29,240 $264,359 $12,279 664San Diego665Sepulveda$7,985 $400 $404,598 $837 667Shreveport$1,265,144 $189,190 $80,288 $5,999 668Spokane670Syracuse$16,956 $2,500 $18,659 $502 671San Antonio$189,039 $139,425 $1,453,837 $107,362 672San Juan673Tampa$610,691 $48,103 674Temple$172,887 $1,530 676Tomah677Topeka$218,701 $5,252 678Tucson$24,358 $23 679Tuscaloosa$75,400 $11,874 680Tuskegee$111,198 $72,084 $72,810 $664 685Waco687Walla Walla$18,353 $352 688Washington689West Haven$32,291 $1 691West Los Angeles692White City$27,630 $894 693Wilkes Barre$603,783 $32,800 $36,475 $2,336 695Milwaukee$824,580 $10,000 $14,186 $12,316 742Income Match Program757Columbus788Atlanta803Bath$16,515 $1,153 805Calverton$13,079 $1,850 
**Fiscal Year 1995 Excess Property Transactions UnderFPMR Sale/Exchange Authority****Station Number****Facility Name****Original Cost of Property Exchanged****Value Received in Exchange****Original Cost of Property Sold****Value Received in Exchange**806Camp Butler809Danville810Dayton814Keokuk818Massachusettes825Alexandria833Camp Nelson838Corinth852Jefferson Brrcks$65,077 $7,000 $23,300 $1,551 859Marietta860Memphis866Natchez883Zachery Taylor888Fort Logan892Fort Rosecrans895Golden Gate898Los Angeles901Riverside905Sitka908Fort Mitchell909Fort Custer$41,027 $10,464 910Ft. Richardson911Florida$63,019 $159 Totals$28,717,273 $4,216,433 $19,885,494 $758,449 totals per annual report$33,235,251 $3,386,483 $15,814,079 $673,901 

**RESULTS OF SURVEY QUESTIONNAIRE**
As a result of visits to two sites (Miami and Cincinnati), weconcluded that VA facilities were likely to vary significantlyin their locally implemented policies and procedures regardingthe handling of proceeds from the sale of excess equipment. Wealso concluded that facilities were probably inaccurately reportingprogram activity. We developed and sent a survey questionnaireto an additional 37 facilities which were selected based on thelevel of excess equipment activity that they reported for FY 1995.The criteria used was judgmental and was based on the requirementthat the facility chosen had reported that it was among the mostactive in at least one category (e.g., total property excessed,transferred, scrapped, sold, exchanged, etc.).
The objectives of the questionnaire were to: (1) gain an understandingof the processes employed by facilities to implement excess propertypolicies and to identify significant differences among facilitiesin their operations, (2) verify the information  reported in theFY 1995 Annual Report of Utilization and Disposal of Excess andSurplus Personal Property submitted to GSA, and (3) determinewhere/how facilities disposed of the proceeds received from thesale of VA personal property. 
The following summarizes our principal questions and the responsesprovided by the surveyed facilities:
**Record Keeping**
We asked facilities to list all personal property excessed/surplusedduring FY 1995 to include the original turn-in date, requestingoffice, property description and condition, acquisition value,final disposition, date of final disposition, and if sold theamount (proceeds) received and where the funds were deposited.Some facilities were unable to provide the information requested.Eleven (30 percent) were unable to provide all of the requestedspecifics regarding turn-in dates, requesting office, condition,and/or disposition and seven (19 percent) were unable to providespecifics regarding proceeds and/or the disposition of proceeds.
**Reporting Accuracy**
We asked all facilities to provide summary data for FY 1995 showingthe total acquisition cost of property excessed and total proceeds.These data were compared with what was reported to GSA in theannual report compiled by the VACO program office for the sameperiod. The chart on the following page shows the significantreporting variations which were found:
Reporting Differences Identified for Acquisition Costsand Proceeds Derived From Excess Property Sales for FY 1995FacilityAcquisition Costs per SurveyAcquisition Costs per Annual Report to GSADifferenceProceeds per SurveyProceedsper GSA ReportDifferenceSan Diego$0 $0 $0 $0 $195 ($195)Albany$637,479 $130,276 $507,203 $17,325 $15,359 $1,966 Altoona$21,915 $34,870 ($12,955)$548 $302 $246 Amarillo$409,583 $1,770,630 ($1,361,047)$806 $4,143 ($3,337)Atlanta$2,606,696 $585,875 $2,020,822 $19,063 $0 $19,063 Bay Pines$79,564 $916,471 ($836,907)$6,503 $51,353 ($44,850)Birmingham$1,614,401 $2,644,230 ($1,029,829)$6,271 $4,107 $2,164 Brockton/W. Roxbury$2,690,851 $2,138,874 $551,977 $100 $0 $100 Buffalo(1) $2,262,031 $1,219,665 $1,042,366 $17,021 $16,604 $417 Columbia, SC$195,394 $122,104 $73,290 $2,914 $69,117 ($66,203)Hines$593,860 $6,053,055 ($5,459,195)$3,137 $25,767 ($22,630)Hot Springs$770,651 $988,651 ($218,000)$3,095 $2,998 $97 Houston$936,088 $405,099 $530,989 $7,978 $507 $7,471 Indianapolis$2,594,222 $643,015 $1,951,207 $39,276 $10,889 $28,387 Little Rock$5,968,790 $2,905,062 $3,063,728 $20,550 $17,364 $3,186 Long Beach$1,054,190 $1,435,540 ($381,350)$19,730 $22,815 ($3,085)Madison$258,325 $1,534,427 ($1,276,102)$1,811 $2,303 ($492)Memphis$2,296,220 $730,602 $1,565,618 $0 $3,016 ($3,016)Minneapolis$979,244 $596,190 $383,054 $755 $1,401 ($646)Mountain Home$10,851 $178,617 ($167,766)$0 $114 ($114)Murfreesboro(2) $777,843 $1,671,932 ($894,089)$14,608 $15,743 ($1,135)New Orleans$247,303 $104,119 $143,184 $6,195 $5,679 $516 Oklahoma City$682,213 $0 $682,213 $14,600 $0 $14,600 Phoenix$95,889 $415,510 ($319,621)$16,302 $16,302 $0 Richmond$1,068,227 $433,468 $634,759 $10,569 $40,319 ($29,750)Salem$2,085,301 $313,159 $1,772,142 $1,996 $1,155 $841 Salt Lake City$3,222,524 $1,532,681 $1,689,843 $2,539 $3,062 ($523)Seattle(3) $0 $334,311 ($334,311)$0 $3,032 ($3,032)San Diego$1,776,021 $891,596 $884,425 $20,537 $705 $19,832 Sepulveda$2,159,471 $1,600,803 $558,668 $1,830 $2,228 ($398)Shreveport$195,561 $105,384 $90,177 $8,165 $7,720 $445 Spokane$185,261 $7,505 $177,756 $1,518 $1,695 ($177)Syracuse$751,705 $9,233 $742,472 $71 $613 ($542)San Antonio$508,305 $600,641 ($92,336)$4,372 $5,345 ($973)Tampa$988,310 $627,440 $360,870 $13,991 $44,280 ($30,289)Milwaukee $0 $390,731 ($390,731)$0 $1,139 ($1,139) Riverside$115,310 $3,537,822 ($3,422,512)$872 $0 $872 Totals$40,839,599 $37,609,588 $3,230,011 $285,048 $397,371 ($112,323)
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 (1) The survey data submitted by VAMC Buffalo includedthe Buffalo Regional Office, Batavia, and the Rochester OutpatientClinic. The data was not separated by station. We included allof the information that was submitted to GSA.
 (2) VAMC Murfreesboro and Nashville acquisitioncosts and proceeds could not be separated. It could not be determinedwhich items were turned in by which station. Because of this theNashville annual reports were included.
 (3) VAMC Seattle acquisition cost and proceeds couldnot be determined. The cost of property excessed in FY 1995 andFY 1996 were combined. No sale proceeds were indicated.
**Disposition of  Proceeds**
We asked facilities to identify where they deposited funds derivedfrom the sale of their excess/surplus equipment and other personalproperty. In response, 32 of the 37 facilities included in oursurvey informed us that during FY 1995 they had sales of surplusequipment and/or scrap totaling $285,047 of which the dispositionof $2,127 was not specified in the facilities responses. The followingchart shows which appropriation accounts were used to depositsale proceeds:**Account Number****Surplus Equipment****Scrap**36 3220$     128,447$     57,79536X384519,12599336_016022,6208,24036X0160X218,933036F45378,1424,40536F387514,2200Total Deposits specified$211,487$     71,433$282,920Total Deposits not specified.       1,949       178$2,127**Total Proceeds****$   213,436****$     71,611****$285,047**

Of the 32 facilities which responded to our inquiry as havingdeposited sales proceeds, 21 (66 percent) primarily used the GeneralFund Receipts/Treasury account (36 3220).
**Use of Sale/Exchange Authority**
We asked facilities to list all personal property which was soldor exchanged during FY 1995 under the authority contained in FPMR101-46 including the original turn-in date, requesting office,property description and condition, acquisition value, final disposition,date of final disposition, and if sold the amount (proceeds) receivedand where the funds were deposited. Ten facilities reported thatthey did not use the authority during FY 1995.
**Procedures Used in Identifying, Processing, and Disposingof Excess Property**
To determine the extent facilities use tools and techniques whichare available and intended to make the identification and dispositionof excess property more efficient, we asked each to describe localprocedures and to what extent electronic tools such as  REPADE,FEDS-SCREEN, and FORUM are used. 
Most stations use FORUM to advertise excess property to otherVA facilities. However, very few use REPADE or FEDS-SCREEN.  Ofthe 37 stations in our survey 27 used FORUM, 6 used REPADE, 6used FEDS-SCREEN, 3 did not use any of the 3 systems (5 stationsdid not indicate what systems they had, if any). Reasons givenfor not using REPADE and/or FEDS-SCREEN included the difficultyand slowness in accessing the systems, the need to purchase softwareand a modem, the need to dedicate a telephone line, and the factthat a computer is needed to access these systems. One facilityreported that they had developed their own system and anotherreported that although they initially go "on line" withREPADE and FEDS-SCREEN, GSA asked them to continue their manualreporting.
**MONETARY BENEFITS IN ACCORDANCE WITH IG ACT AMENDMENTS**
REPORT TITLE: Audit ofVA's Excess Equipment Program
Project Number: 6D2-172**Recommendation**
**Number****Category/Explanation of Benefits****Better Use of Funds****Questioned Costs**1Ensure that proceeds from the sale or exchange of unneeded equipment are retained for use by the Department to the maximum extent possible.$5 millionTotal$5 million

**MEMORANDUM FROM THE DEPUTY ASSISTANTSECRETARY FOR ACQUISITION AND MATERIEL MANAGEMENT****Department of**
**Veterans Affairs****Memorandum**Date:    December 24, 1996
From:  Deputy Assistant Secretary for Acquisition and Materiel Management (90)
Subj:      Draft Report of Audit of VA's Excess Equipment Program (Your Memo dated
            November 26, 1996)
To:       Assistant Inspector General for Auditing (52)
1. This office has reviewed the draft report of the Audit of VA's Excess Equipment Program, and we offer the following comments:
a.  Memorandum to the Deputy Assistant Secretary for Acquisition and Materiel Management (DAS for A&MM):
(1) Stated in paragraph 2:  "If property is not in serviceable condition, then it is sold as scrap", is not entirely accurate since the property could be processed as salvage or abandoned/destroyed.
(2) Stated in paragraph 3:  Process of $14.5 million dollars appear overstated.  The approximate total, as reflected on the Annual Reports to GSA, was $5.0 million dollars.
b.  Opportunities are available for VA to retain the majority of revenues received from the sale or exchange of unneeded equipment.
(1) Although Public Law 103-329, Executive Order 12873, authorizing VA retention and usage of funds resulting from the sale of materials recovered through recycling of scrap/salvage is relatively new, several media methods are being utilized for recognition and implementation of the program.  These include publication of newsletters to field activities and VISN Directors, periodic national conference calls, and dissemination via the national e-mail system.
(2) We agree with Recommendation 1 that the revenue from property sales should be retained by VA as a budget enhancement and that approximately
$5.0 million dollars was generated in FY 95, the majority of which was returned to the Treasury Department.
VA FORM 2105
MAR 1989
**MEMORANDUM FROM THE DEPUTY ASSISTANTSECRETARY FOR ACQUISITION AND MATERIEL MANAGEMENT**2.
Assistant Inspector General for Auditing (52)
  (3)  In order to furnish facilities procedures and instructions for processing revenues into VA accounts, a request was forwarded to the Deputy Assistant Secretary for Financial Policy (047G) in July 1996.  The procedures have now been developed and are being reviewed by Central Office program officials, as well a selected VA medical centers.  When the procedures have been finalized, they will be publicized nationwide.
 c.  Controls over the receipt and disposition of funds from the sale of personal property need strengthening.
  (1) As stated in paragraph 3 above, the procedures for the processing of revenues have been developed and are being reviewed prior to release to the field.  As part of the instructions, a revenue source code has been established for tracking proceeds.  This should satisfy the requirements as outlined in Recommendation 2, paragraph 2., "ensuring that sale proceeds are handled in a consistent manner."
  (2) We do not agree with Recommendation 2b. that the DAS for A&MM establish a "fair market value" for excess equipment that is to be sold or exchanged.  This is a function that should remain decentralized.  Several factors affect the equipments fair market value such as age, obsolescence, and usage.
 d.  The Department needs more accurate reporting of the results of its property disposal activities.
  (1) At the time of this audit, the requirement for submission of annual reports to GSA for excess and exchange/sale activity was valid.  However, we have received an interim notice prior to a formal FPMR amendment from GSA eliminating the requirement effective FY  96.  Therefore, in our opinion, no action is necessary for Recommendation 3.
*[Signed]*
Gary J. Krump
VA FORM 2105
MAR 1989
**MEMORANDUM FROM THE DEPUTY ASSISTANTSECRETARY FOR ACQUISITION AND MATERIEL MANAGEMENT****Department of**
**Veterans Affairs****Memorandum**Date:    January 24, 1997
From:  Deputy Assistant Secretary for Acquisition and Materiel Management  (90)
Subj:      Draft Report of Audit of VA's Excess Equipment Program (My memo dated
             December 24, 1996)
To:       Assistant Inspector General for Auditing (52)
1. Per telephone conversation between Kathy Jackman, (92A) and Greg Gibson (52CO) the following changes were agreed on:
 a.  Your report will be amended to reflect the additional alternative of processing unserviceable excess equipment as salvage or abandoning/destroying it as suggested in my previous memo.
 b.  Paragraph 3 of the report will be amended to more clearly explain that the term "total Proceeds" includes proceeds from VA sales as well as from GSA sales and the reported value of trade-in allowances as suggested in the previous memo.
 c.  Recommendation 2b of the report will reflect our intention that facility property managers and staff will establish the "fair market value" of excess property and not the DAS/OA&MM.  The wording agreed on is as follows:  *"Requiring facility property managers to estimate the "fair market vale" of excess equipment that is to be sold or exchanged."*
 d.  Finally, the last paragraph of the previous memo should be amended to read as follows:  *"A revised VA reporting system will address the issues highlighted in the report.  Specifically; (1) manual intervention will be reduced to a minimum, (2) estimates of fair market value of property to be disposed will be recorded in addition to the original acquisition cost, and (3) the inclusion of a revenue source code will allow for the tracking of proceeds*."
The revenue source code "SF20" will be added to the Financial Management System tables.  This will denote Supply Fund proceeds; most other proceeds go into Fund 3220 - Treasury Department.
4.  Should additional information be required please contact Ms. Jackman, 273-6088.
Gary J. Krump
VA FORM 2105
MAR 1989
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