DISTRICT OF

COLUMBIA

Management Issues

Concerning Two

District Leases

United States General Accounting Office

GAO Report to the Chairman, Subcommittee

on the District of Columbia

Committee on Appropriations

House of Representatives

May 2000

GAO/GGD-00-87

United States General Accounting Office General Government Division

Washington, D.C. 20548

Page 1 GAO/GGD-00-87 D.C. Lease Management

B-284655

May 2, 2000

The Honorable Ernest J. Istook, Jr.

Chairman, Subcommittee on the District of Columbia

Committee on Appropriations

House of Representatives

Dear Mr. Chairman:

This report responds to your concerns regarding alleged waste and

mismanagement in the District of Columbia (the District) government’s

leasing practices. Your request focused on millions of dollars spent on two

leases, one for two buildings to be used as homeless shelters that have

been vacant since 1992 and the other a reportedly underutilized multiuse

facility initially used as a drug treatment clinic. As agreed with the

Subcommittee, the objectives of our work on the two leases were to

determine (1) whether the person or persons who approved the leases

were authorized to do so; (2) the current status of the properties, leases,

costs, and utilization; and (3) the steps the District has taken or is taking to

ensure that leased properties, in general, are effectively managed and

utilized. Our work was limited by the age of the leases and the

documentation available in the contract files.

Authorized individuals approved both leases. The District is currently

trying to purchase the two buildings used as a homeless shelter for the

tentative purpose, after renovation, of providing transitional housing for

women and families. The multiuse facility is currently fully utilized. The

District has spent millions for the homeless shelter and the multiuse

facility while they were vacant or underutilized. While these two cases do

not provide a sufficient basis for drawing overall conclusions about the

District’s past or current property management practices, major legislative

reforms have been enacted by the federal government and most recently

passed by the Council of the District of Columbia affecting the District’s

property management system

We determined that authorized individuals approved both leases. The then

Mayor of the District signed the lease for the homeless shelters. Although

District officials were unable to provide us with a signed copy of the lease

for the multiple use facility, we concluded that it was also a properly

authorized lease. In that case, the Director, Department of Administrative

Results in Brief
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Services (DAS), also an authorized leasing official, signed an

acknowledgment form, which is an integral part of the lease.

The homeless shelter buildings have been vacant since January 1992 and

are currently boarded up. The District has spent over $2 million in rent

while the space has been vacant and is liable for over $1 million to restore

the two buildings. The Department of Human Services (DHS) decided to

cease using the buildings as homeless shelters because neglect of

maintenance of the buildings had rendered them unfit as shelters. This

neglect of maintenance apparently resulted from disagreement over

whether the problems were maintenance related or structural in nature.

Reportedly because of the difficulty of finding property owners willing to

lease properties for use as homeless shelters, the District agreed to a lease

that required the District to provide all maintenance except for those items

that were considered structural defects, which were the lessor’s

responsibility. The District had spent $3.4 million in rent from December

19, 1986, through fiscal year 1999, including about $2.3 million since the

buildings have been vacant. The lease calls for at least another $1.9 million,

in current dollars, in rent over the 6 years remaining on the lease. Further,

the terms of the lease require the District at the termination of the lease to

restore the buildings to the condition they were in at the beginning of the

lease term. The District is thus responsible for renovation costs to bring

the buildings back to their 1986 condition. Since it has been estimated that

the costs to restore the buildings would exceed $1 million, District

property management officials have concluded that it is advantageous to

purchase the properties. They have negotiated an agreement with the

owner, and are awaiting approval by city officials.

The multiuse facility is currently utilized by three District agencies,

although half of the rented space remained vacant for more than 3 years.

We visited the facility in February 2000 to verify its utilization. From

August 1990 until the spring of 1994, according to a District official, the

second floor of the building was vacant because the District had agreed to

lease the whole building, even though DHS had informed them of its

reduced program funding for the drug treatment facility. We were not able

to determine from the files whether there were other periods of

underutilization. From August 1990 through fiscal year 1999, about $11.9

million was paid in rent for the space. For the remaining 10 years of the

lease, at least another $13 million, in current dollars, is to be spent in

additional rent for this space.

The District has taken some steps, and plans to take additional ones, to

help it to more effectively manage and monitor its real property holdings.
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For example, it has established an Office of Property Management

(DC/OPM) to provide more centralized control over the District’s real

property holdings, and is acquiring new information systems to provide it

with improved management support tools. Further, DC/OPM is acquiring

the ability to do property utilization studies internally and plans to contract

for condition assessments and utilization studies of District facilities.

In addition, Congress has passed legislation that requires the District to

take additional steps, such as developing a comprehensive plan for the

management of real property assets, to further strengthen its real property

operations. On April 5, 2000, the Council of the District of Columbia

passed an emergency and permanent version of the Omnibus Government

Real Property Asset Management Reform Act of 2000 to improve

management of real property assets, including, for example, fully

centralizing asset management authority.

The District leased properties for homeless shelters because of the

enactment of the District of Columbia Right to Overnight Shelter Initiative

of 1984, D.C. Law 5-146, which gave every homeless person in the District

the right to overnight shelter. After the enactment of this law, the number

of homeless families assisted by the District increased about three-fold

from fiscal year 1984 through fiscal year 1990. 1

One of the primary reasons for leasing properties for apartment-style

homeless shelters was that District officials believed that this would be a

better and less costly solution to the growing homelessness problem than

its then ongoing practice of renting hotel rooms.2

On December 19, 1986,

the District entered into a 20-year lease, with a beginning monthly rent of

$16,308.33, for the apartment properties located at 1480 Girard Street, NW,

and 2809 15th Street, NW, for use as homeless family shelters. The lease for

the two apartment buildings called for housing 23 families. Combined, the

two buildings were to have eight 2-bedroom apartment units, eight 3-

bedroom units, seven 4-bedroom units, and two offices—one in each

1

The provision guaranteeing overnight shelter was rescinded with the enactment of the District of

Columbia Emergency Overnight Shelter Amendment Act of 1990, D.C. Law 8-197, effective March 6,

1991.

2

At the time when the District considered leasing properties for homeless shelters, each hotel room

cost about $48.50 per day, while the apartment rooms were estimated to cost about $8.00 per day. In

addition, the apartments were intended to provide family-like living conditions for the homeless.

Background
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building.3The terms of the lease included an option for the District to

purchase the premises at specific times during the lease.4

The lease for the drug treatment clinic took effect on May 10, 1989, for a

20-year term beginning on August 1, 1990, with an option for an additional

period of up to 10 years. Lease payments commenced on August 1, 1990,

when first floor modifications were completed, at a monthly rate of

$89,913. An addendum to the lease agreement required the District to pay

as rent 100 percent of the increase in annual real estate taxes above those

imposed for the first year. The lease runs through July 2010.

The Council of the District of Columbia’s Government Operations

Committee conducted an investigative hearing on this lease on March 7,

1997. The hearing identified such issues as the high cost of the lease, DHS’

paying for space it did not need, and inadequate documentation of the

leasing process. The Chairman of the Committee said she wrote to the then

Mayor recommending the lease be terminated. No further action on these

matters is indicated in the file.

To obtain the relevant information about the acquisition of the three leased

properties, we reviewed the contract files and District law, and we

interviewed DC/OPM officials. We focused on the pertinent characteristics

of the leases—lease term, rental rate, lease provisions, who signed the

lease, whether the signer was appropriately authorized, and other

historical information on the administration of the lease. While a key issue

was whether problems experienced with the homeless shelter facilities

were structural or not, the information in the lease files was not sufficient

for us to determine the nature of the problems and, therefore, whether the

District or the lessor would have been responsible for their correction.

To determine the payments made since the inception of the contracts, we

reviewed payment records and interviewed officials in DC/OPM and the

Office of Finance and Resource Management (OFRM).

3

In March 1988, the use of apartment-style units was mandated by D.C. Law 7-86, the Emergency

Shelter Services for Family Reform Act of 1987, enacted on March 11, 1988. At the time the lease was

executed, the law allowed for the use of hotel or motel rooms rather than apartments if (1) unforeseen

circumstances left no alternative and (2) the placement was for no longer than 15 calendar days.

4

The District was permitted to exercise this option during the last month of the 5th, 10th, and 15thyears

following the lease commencement date and during the final month of the lease. The price the District

would pay to purchase the buildings was stipulated as the amount equal to 96 percent of the fair

market value of the premises at that time as determined by an appraisal of the premises.

Scope and

Methodology
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To determine the current status of the properties and their use, we

interviewed DC/OPM and DHS officials. We also contacted the District’s

Office of the Inspector General to determine whether it had done any work

relating to the leases being reviewed. We toured the multiuse facility, but

viewed the apartment properties only from the outside because the

buildings were boarded up and vacant. We did not review the current

proposal to buy the building since it is an ongoing procurement action.

To identify the steps the District has taken or is taking to ensure that real

property holdings are effectively managed and utilized, we interviewed

officials in DC/OPM and reviewed their action plan to deal with these

issues. We also reviewed recent legislative actions taken by Congress and

the District Council relating to the imposition of real property management

requirements on the District government.

We did not attempt to determine whether the leasing procedures that were

in effect at the time the leases were awarded were followed. The leases in

question were both awarded over 10 years ago, and the files contain

minimal documentation of the leasing process. The current administration

was not involved in these efforts and has little knowledge regarding the

history of these lease acquisitions. Concerning the multiuse facility, we did

not evaluate issues previously reviewed by a Committee of the Council of

the District of Columbia concerning the cost of the lease, how it was

obtained, DHS’ paying for space it did not need, and the inadequacy of the

documentation of the leasing process, because these issues were outside

the scope of our work.

We did our work between July 1999 and February 2000 at the District

government headquarters in Washington, D.C., and at DC/OPM, OFRM, and

DHS. Our work was done in accordance with generally accepted

government auditing standards. We requested comments on a draft of this

report from the Chairman of the District of Columbia Financial

Responsibility and Management Assistance Authority (the Authority), the

Mayor of the District of Columbia, and the Chairman of the Council of the

District of Columbia. Their comments are discussed at the end of this

letter.
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We determined that authorized individuals approved both leases. In

December 1986, the then Mayor of the District signed a 20-year lease for

the two apartment buildings planned for use as temporary shelters for

homeless families. He was authorized by the D.C. Code to sign contracts

on behalf of the District.5

The lease had also been approved by the

Assistant Corporation Counsel and the Office of the Deputy Mayor for

Financial Management as required on the lease form. For the multiuse

facility, neither District officials nor the lessor was able to provide us with

a signed copy of the lease. However, the lease was reviewed and approved

by the Assistant Corporation Counsel and the Deputy Mayor for Financial

Management as required on the lease form. In addition, the Director, DAS,

who had contracting authority at the time, had signed a form on May 10

1989, witnessed by a Notary Public, acknowledging that he had entered

into the lease on behalf of the District. Regardless of whether the lease

was actually signed, we determined that it was an appropriately approved

lease because the acknowledgement form is an integral part of the lease.

Both homeless shelter buildings are deteriorated and vacant, and the

District has spent millions to rent them and the lease calls for additional

millions. According to District officials, the District has negotiated with the

lessor to buy the buildings, and the proposal is awaiting review and

approval by appropriate District officials. The multiuse facility is currently

fully utilized.

These two buildings have been vacant since January 1992; due to the

neglect of maintenance, the buildings deteriorated to the point where they

were unfit for use as shelters according to a memorandum in the contract

file. The District is still making the monthly lease payments but is trying to

buy the buildings.

Reportedly, because of the difficulty of finding landowners willing to lease

properties to the District for use as homeless shelters, the District agreed

to a lease for these properties in which it deleted several standard

provisions and replaced them with ones that put additional responsibility

on the District. For example, one of the provisions the District agreed to

was to make all repairs necessary to keep the premises in good order and

repair, except for the lessor’s obligations to make structural repairs to the

building walls and foundations. The District’s responsibility for repairs

include, but is not limited to, painting the building inside and out at least

5

District of Columbia Code 1981, section 1-336, leasing authority. This section of the D.C. Code

authorized the Mayor to enter into lease agreements. D.C. law 11-259, section 301, dated April 12, 1997,

substituted the Director of the Office of Contracting and Procurement for the Mayor of the District of

Columbia.

Both Leases Were

Approved by

Authorized District

Officials

Current Status of the

Family Homeless

Shelters and the

Multiuse Facility

Family Homeless Shelters

Are Vacant and

Deteriorated
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once every 3 years; promptly repairing all doors, glass, and leaks; and

paying for maintenance of paved walks and the parking lot, including

keeping paving free of potholes.

This provision apparently resulted in disagreement over whether needed

repairs were maintenance related or structural in nature, which

contributed to the deterioration of the properties. We could not determine

from the file whether the problems were structural or maintenance related.

The contract file contained numerous internal District memorandums and

letters from the lessor, beginning in 1987 and continuing through 1991,

documenting the deteriorating condition of these two buildings throughout

the period they were in use. Documents in the contract file dated June

1987 noted that shortly after occupancy the basements at both buildings

were flooded, the subflooring was badly deteriorated, the tile on the lowerlevel apartment floors was buckled, the exit doors at 2809 15th Street did

not close properly, and inferior materials were used in the building

renovations. Other documents indicated that maintenance problems

continued throughout the occupancy period, without evidence of

management attention.

Documents in the contract file showed that in June, September, and

October 1987, and in June 1988, the lessor took steps to fix some of the

problems. For example, the lessor installed sump pumps in both buildings,

repaired floors in several apartments, did electrical work, and built a

concrete apron to prevent lower-level flooding. The lessor also hired an

architectural firm and an engineering firm that had experience in water

runoff management and, under their guidance, did exterior corrective

work. In addition, the lessor repaired items, such as a ceiling in one

apartment and the front doors to both buildings, that he claimed were the

District’s responsibility under the terms of the lease since they were not

structural problems.

In June 1987, the lessor informed the District that, as a goodwill gesture,

he had made repairs, but noted that, in the future, he would no longer

make such repairs, which were the responsibility of the District. The lessor

stated that unless the District had a qualified repair crew to make

continuous repairs, the properties would eventually become uninhabitable.

He also noted that the District’s on-site manager, a social worker, was

helpless without a repair system for support.

An official in the Office of Facilities Management within DHS informed us

that, at the time, the District did not have much experience in running a
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homeless program and did not consider the need for a full-time

maintenance staff for the homeless shelters.

From December 19, 1986, through the end of fiscal year 1999, the District

paid $3.4 million in rent for the homeless shelter buildings, including about

$2.3 million since January 1992, when the buildings became vacant. Over

the remaining 6-year term of the lease, we estimate the District would have

to pay, in current dollars, at least $1.9 million more in additional rent.

Further, another provision of the lease states that the District must

surrender the premises at the end of term or other termination of the lease

in as good condition as they were at the beginning of the term, except for

reasonable use and damage by the elements. According to a District

official, the costs to restore the buildings were estimated to be more than

$1 million.

According to documents in the contract files, beginning in April 1992, the

District started exploring legal options to terminate the lease for these two

buildings. For example, the DHS Attorney-Advisor noted the following

legal options, among others, in an April 1992 memorandum to the

Corporation Counsel:

• eminent domain, in which the District could seize property for any public

or quasi-public use;

• fraud, in which a party to the negotiations perpetrated a fraud by making

misrepresentations or false promises during negotiations; and

• equitable estoppel, in which an officer or agent of a municipality

irregularly or defectively exercises power granted to him and executes a

contract not in the best interests of the municipality.

The memorandum noted that, if the District initiated a condemnation

proceeding to secure the leased property, the owners could challenge the

proceeding as an attempt to circumvent the provisions of the lease, and

then seek damages for expenses incurred and the loss of benefits of the

lease. If a complaint were initiated against the lessors for fraud, the

memorandum noted, the District might find it difficult to prove intent to

defraud.

In commenting on the April 1992 DHS memorandum in August 1994, the

Deputy Corporation Counsel indicated that the District could notify the

lessor of the alleged structural defects and request repair within a

reasonable time. The Deputy Corporation Counsel further stated that, if

the lessor did not repair the structural problems after such notice, the

District could argue that this constituted a breach of the lease, and thereby

Vacant Family Homeless

Shelters Could Cost the

District Additional Millions

District’s Efforts to Dispose of

the Family Homeless Shelters
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terminate the lease. Alternatively, he said the District could argue that the

landlord’s continued failure to correct structural problems resulted in the

District’s being constructively evicted from the building, and that this

could be the basis for the District’s refusing to pay additional rent. Neither

the DHS Attorney-Advisor memorandum nor the Corporation Counsel

memorandum indicated what the structural problems were.

The Corporation Counsel’s memorandum also noted that, with regard to

the assertions that the properties were deficient at the beginning of the

lease, the issuance of the certificates of occupancy weigh against the

District. We could not find any documentation in the contract files

indicating that any legal proceedings were ever undertaken against the

lessor.

A May 1995 memorandum from DAS to the owner presented two options

regarding the property, namely, an early termination of the lease or

contracting with the owner to complete necessary repairs to the property.

There was no response to this solicitation in the contract files, and there

were no more memorandums or letters addressing this issue in the files.

A District official told us that the Office of Property Management has

negotiated an offer to buy the buildings outright from the owner.6 This

offer is currently under review by the District’s Chief Financial Officer

(CFO). As part of its review, the CFO is to determine whether funds are

available to buy the buildings. To acquire the buildings, the District would

also need the approval of the City Council. Assuming the District gets the

necessary approval to purchase the buildings, a District official estimated

the purchase could be finalized by spring of 2000.

DC/OPM officials said they believed that it would be more advantageous to

purchase the properties than to continue to pay the monthly rent to the

landlord as well as renovation costs to bring the buildings back to their

original condition. After purchase, there is a tentative plan to restore the

buildings and use them for transitional housing for women and families.

The multiuse facility is currently fully utilized, although half of the rented

space initially remained vacant for several years. Payments have been

made on a monthly basis to the owner of the building since August 1990.

Initially, DHS requested the entire building, but changed its request to the

6

As part of a District contract to provide general real estate services, such as negotiating leases and

locating properties, a real estate management firm assisted the District in getting the respective parties

together and negotiating the terms of the proposal presented to the owner.

Multiuse Facility Is

Currently Fully Utilized
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first-floor space because of reduced program funding. However, DAS

rented the entire building and said that DHS would have to pay for both

floors of the building because, according to an October 1990 internal

memorandum, DHS had verbally agreed to find another DHS tenant for the

second floor. Modifications to the second floor started in the summer of

1993. The lessor provided an amount for the basic modification.7In the

spring of 1994, more than 3-1⁄2 years after the lease began, the 2nd floor

modifications were completed, and the space was occupied by the

District’s Addiction, Prevention, and Recovery Administration (APRA).

Since the modifications to the second floor cost more than the allowance,

the additional cost was paid by APRA. The District has paid the rent for the

entire building since the commencement of the lease.

When we visited the clinic in September 1999, the building had two fulltime tenants:

• APRA ,which is part of the Department of Health, and

• the Woodridge Clinic, which is part of the Public Benefit Corporation.

At that time, a job training program called A Real Chance, which is part of

DHS, was in the process of moving out of the building, and the Family

Services Administration Administrative Offices, also part of DHS, had not

yet moved in. The latter group moved into the building in December 1999.

We visited the building again in February 2000 and verified that the

building was fully utilized.

The building contains a total of 59,942 square feet. The breakdown of

space is as follows: 14,506 square feet are assigned to Family Services

Administration Administrative Offices, 37,309 square feet are assigned to

APRA, and 8,127 square feet are assigned to the Woodridge Clinic. The

space in the building includes a number of meeting rooms that a District

official said are used by the tenant agencies to support their programs. He

informed us that even though the meeting rooms are not constantly in use

and may not be utilized to full capacity when they are used, they

nevertheless are an integral part of the drug treatment program. He said he

considered the building to be fully utilized.

Through fiscal year 1999, the District had paid a total of $11.9 million for

the space. We estimate that over the remainder of the 20-year term of this

lease, which expires in July 2010, the District would pay, in current dollars,

approximately $13 million more in rent.

7

There was a lessor’s allowance for the modifications to the second floor. It was the same amount as

the allowance for the first floor.
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The District and Congress have implemented plans to help the District

improve its property management. The Council of the District of Columbia

has passed legislation that would require the District to take additional

steps that should further strengthen its management of real property

assets.

The District has taken some steps, and plans to take additional steps, to

help it more effectively manage and monitor its real property holdings

through the addressing of operational problems.

The District established the DC/OPM in October 1998 to provide more

centralized control over its real property holdings. DC/OPM serves as the

District’s facility manager and also handles its real property acquisition.

DC/OPM is in the process of acquiring new information systems that are

intended to provide it with the management support tools needed to

establish visibility and gain control over the District’s owned and leased

real property inventory. DC/OPM has also hired a contractor to do a due

diligence review of all active leases, to ensure that only correct

information is loaded into the new lease management system. Further,

DC/OPM is acquiring the ability to do property utilization studies internally

and plans to contract for condition assessments and utilization studies of

District facilities.

In addition, the fiscal year 2000 District of Columbia Appropriations Act

required the District to take several actions, including submitting a

comprehensive plan for the management of the District’s real property

assets as well as quarterly reports with details about all its real estate

leases.8

This act requires that, beginning 60 days after its enactment, the District

cannot use funds appropriated under the act to enter into a lease for real

property, purchase real property, or manage real property unless the

following conditions are met:

• the Mayor and the D.C. Council certify that existing real property is not

suitable for the purposes intended;

• surplus property is made available for sale or lease as determined by the

Mayor, unless members of the Council override the Mayor’s determination;

• the Mayor and D.C. Council implement a program to do a periodic survey

of all District property to determine whether it is surplus to the District’s

needs; and

8 P.L. 106-113, 113 STAT. 1524-1526 (Nov. 29, 1999).

Actions Taken or

Planned to Address

Property Management

Weaknesses

The District’s Efforts to

Improve Real Property

Management

Congress’ Efforts to

Improve the District’s Real

Property Management
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• the Mayor and D.C. Council, within 60 days of the enactment date of the

act, submit a comprehensive plan for the management of District real

property assets and begin implementing the plan.

According to a DC/OPM official, the District submitted the required

comprehensive plan to Congress on January 31, 2000.

Further, this act provides that, if the District enacts legislation to reform

the practices and procedures with regard to entering into real property

leases and the disposition of surplus real property, the legislation enacted

by the District will supersede the requirement noted immediately above.

In addition, the act requires the District to prepare a quarterly report,

covering all property leased by the District, that includes

• the location of the property;

• the names of the owners of record;

• the names of the lessors;

• the rate of payment and period of time covered by the lease;

• the extent to which the property is or is not occupied by the District as of

the end of the reporting period; and

• if the property is not occupied by the District as of the end of the reporting

period, the plan for occupying and utilizing the property, or efforts by the

District to terminate or renegotiate the lease.

According to a DC/OPM official, the District delivered the initial report on

January 31, 2000.

The Council of the District of Columbia has proposed legislation to reform,

consolidate, and amend District laws related to the procurement, leasing,

management, and disposition of real property assets owned or leased by

the District and to repeal certain redundant or unnecessary laws relating to

real property.

Among other things, the legislation proposes the following:

• The Chief Management Officer shall be the exclusive authority for all

procurement, leasing, and disposition of real property assets, as well as

exercising contracting and management authority with regard to real

property assets.

Council of the District of

Columbia’s Proposal to

Improve Real Property

Management
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• Within 18 months after the effective date of the legislation, the Director,

DC/OPM, shall submit to the Mayor a detailed inventory of owned or

leased real property assets. The inventory shall be maintained in a

centralized automated database.

• After submission of the initial inventory, the Director, DC/OPM, shall

submit to the Mayor, no later than 90 days prior to the expiration of each

fiscal year, an annual update of the inventory.

• The Mayor shall submit to the Council, for information purposes, a copy of

the initial inventory and each annual update.

• Within 18 months after the effective date of the legislation, all real property

assets owned or leased by the District shall be classified or reclassified, as

appropriate, within one of the following categories: (1) fully utilized, (2)

underutilized, or (3) surplus.

• Within 18 months after the effective date of the legislation, and at least

every 3 years thereafter, each real property asset shall be audited to verify

the inventory of real property assets and determine the appropriate

classification of each asset.

An emergency and permanent version of the Omnibus Government Real

Property Asset Management Reform Act of 2000 was passed by the Council

on April 5, 2000, and as of April 5, was awaiting approval by the Mayor and

the Authority.

On March 28, 2000, we received written comments from the Executive

Director of the Authority (see app. I). The Authority raised some specific

issues about the lease of the two buildings for homeless shelters and

general issues about the overall leasing practices.

Concerning the homeless shelter lease, the authority said that, because of

the District’s incomplete and unclear records, the report does not contain

sufficient information to properly analyze the District’s initial

decisionmaking process. We agree the District’s files did not contain

sufficient records to fully recreate the initial decisionmaking process, but

we were able to answer the more limited objectives of this report.

The Authority also raised several questions about the District’s current

plans to purchase the two homeless shelters that were not answered by

the report. The questions included what options were considered, why the

District chose to purchase the property and what the terms of the

negotiation are, how the fair market value of the property would be arrived

at, and how the property will be used after it is purchased. Further, the

Authority concluded that because the District had not ascertained the cost

Agency Comments and

Our Evaluation
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of repairs to the property, it could not have evaluated the variables of the

available options. We believe that the Authority raises important questions

concerning the current procurement activity, but we could not address

them for this report because they involve an ongoing procurement.

However, based on new information recently provide by the District, we

included the District’s estimate of the renovation costs of the two buildings

and the District’s tentative plan for restoration and use of the buildings.

Concerning the District’s overall leasing practices, the Authority concluded

that the District needs to continually monitor its owned and leased

properties and utilization of space, and that DC/OPM needs to be given the

tools needed to thoroughly analyze property before it is leased, purchased,

or sold. The Authority said that it is clear from the report that the District

(1) needs to improve its recordkeeping for leases, (2) should complete

substantial due diligence before entering property obligations, (3) must

ascertain and provide for the long-term budgetary impact of leases, and (4)

should arrange to occupy the entire leased space before it signs the lease.

Although our work on the two leases does not provide a sufficient basis for

drawing such overall conclusions from the District’s current leasing

practices, we agree in principle with these observations and note that

Congress, the Council of District of Columbia, and DC/OPM have all taken

recent actions to improve the District’s real property management.

On April 6, 2000, we received written comments from the Chairman of the

Council of the District of Columbia (see app. II). The Chairman did not

express an opinion on the report, but did advise us that the Council had

taken action on the Omnibus Government Real Property Asset

Management Reform Act of 2000, which will take effect upon approval by

the Mayor and the Authority. This information has been included in the

report. The Chairman also provided comments from the Chair of the

Council’s Government Operations Committee that provided information on

a Committee investigation of the lease for the multiuse property. This

information has been incorporated into the report where appropriate.

On April 6, 2000, DC/OPM’s Deputy Director for Portfolio Management,

responding for the Mayor, provided oral comments on the draft report. He

told us that District basically agreed with the contents of the report, but

had no knowledge of the accuracy of the information concerning DHS. He

also provided some additional information that has been included in the

report where appropriate.

We are sending copies of this report to Senator Kay Bailey Hutchison,

Senator Richard J. Durbin, and Senator George V. Voinovich and to
B-284655

Page 15 GAO/GGD-00-87 D.C. Lease Management

Representative Tom Davis, Representative Eleanor Holmes Norton, and

Representative James P. Moran in their capacities as Chair or Ranking

Minority Member of Senate and House Subcommittees with jurisdiction

over District of Columbia matters. We are also sending copies to the

Honorable Anthony A. Williams, Mayor, District of Columbia; Ms. Alice

Rivlin, Chair, District of Columbia Financial Responsibility and

Management Assistance Authority; Mr. Charles C. Maddox, Esq., Inspector

General, District of Columbia; and other interested parties. Copies will also

be made available to others upon request.

If you have any questions about this report, please call me or Ron King on

(202) 512-8387. Key contributors to this assignment were Tom Keightley

and Michael Yacura.

Sincerely yours,

JayEtta Hecker

Associate Director, Government

Business Operations Issues
Appendix I

Comments From the D.C. Financial

Management and Assistance Authority

Page 16 GAO/GGD-00-87 D.C. Lease Management
Appendix I

Comments From the D.C. Financial Management and Assistance Authority

Page 17 GAO/GGD-00-87 D.C. Lease Management
Appendix I

Comments From the D.C. Financial Management and Assistance Authority

Page 18 GAO/GGD-00-87 D.C. Lease Management
Appendix I

Comments From the D.C. Financial Management and Assistance Authority

Page 19 GAO/GGD-00-87 D.C. Lease Management
Appendix II

Comments From the D.C. Council

Page 20 GAO/GGD-00-87 D.C. Lease Management
Appendix II

Comments From the D.C. Council

Page 21 GAO/GGD-00-87 D.C. Lease Management
Page 22 GAO/GGD-00-87 D.C. Lease Management
Page 23 GAO/GGD-00-87 D.C. Lease Management
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