Federal Personal Property: GSA and VA Have Opportunities to Improve the Exchange Sale Process
Released: 2018-11-16T00:00:00

Letter

Background

Personal property refers to a wide variety of property that may include commonly used items such as computers, office equipment and furniture, and vehicles, as well as more specialized property specific to agencies such as medical equipment for VA and medical helicopters for the Army. See figure 1.

The personal property exchange/sale authority allows agencies to replenish property that is not excess or surplus and that is still needed to meet the agency’s continuing mission. Agencies must meet several requirements, including:

The property exchanged or sold is similar to the property acquired.

Agencies can meet the similarity requirement in one of several ways. First, the property acquired is identical to the property replaced. Second, the acquired property and the replaced property fall within a single federal supply group of property. Third, both the acquired and the replaced property constitute parts or containers for similar parts. Fourth, the acquired and the replaced property are designed or constructed for the same purpose. For instance, ambulances and station wagons adapted for use as ambulances would be considered similar.

The property exchanged or sold was not acquired for the principal purpose of later exchanging or selling it using the authority. For example, an agency cannot purchase a costly piece of equipment for the sole reason that it will deliver a higher value when sold using the authority.

Proceeds from the sale can only be put toward the purchase of replacement property and cannot be spent on services. In other words, an agency can use proceeds from the sale of a vehicle to purchase a new vehicle, but it cannot use proceeds to hire a mechanic to repair an existing vehicle.

In addition, GSA regulations, except as otherwise authorized by law, require that proceeds from sales be available during the same fiscal year the property was sold or the following fiscal year for replacement property. For an item sold in fiscal year 2018, an agency has the rest of fiscal year 2018 as well as fiscal year 2019 to purchase a replacement item. If agencies do not spend these funds by the end of fiscal year 2019, monies are to be deposited in the U.S. Treasury. Finally, agencies are prohibited from using the authority to replace certain types of property (i.e., hand tools and clothing). However, agencies may request a waiver from GSA to sell these prohibited items or to extend the time frame to purchase replacement property.

Agencies may choose between two transaction methods to replace property—the exchange (trade-in) or sale method, but must determine which method provides the greater return to the government, including administrative and overhead expenses. A typical exchange occurs when the original manufacturer delivers a replacement item to the agency and removes the item being replaced. The manufacturer applies a trade-in credit (an allowance) for the purchase of a replacement item. If the sale method is used, the agency receives the sale proceeds for the sale of the non-excess items (needed to meet mission requirements) and applies those proceeds to the purchase of the replacement personal property. See figure 2.

In conducting a sale, agencies are to follow a process similar to the disposal process for excess property. When an agency disposes of excess property, it makes the item available to other federal agencies and state agencies by posting it in GSAXcess—GSA’s website for reporting, searching, and selecting excess property. The disposal process generally consists of four sequential stages in which personal property may be transferred to another agency or eligible recipient, donated, sold, or abandoned or destroyed.

Similarly, agencies may use GSAXcess to facilitate the replacement of property under the exchange/sale authority. However, unlike the disposal process for excess property that may be offered at no cost, if another federal agency or state agency needs the property, the agency is to pay no more than the fair market value for the item or a negotiated fixed price, respectively. Otherwise, the property may be listed for sale to the general public at approved sales centers, such as GSA AuctionsSM, or through other approved methods, such as live auctions or Internet sales. After the sale closes, the agency receives the proceeds to apply toward the purchase of a similar item.

Agencies are required to submit a summary report to GSA at the end of each fiscal year on the type, the quantity, the exchange allowances or sale proceeds, and the original acquisition cost of items for both exchange and sale transactions. Agencies that made no transactions during a fiscal year must submit a report stating that they made no transactions. Ultimately, agencies decide whether to use the exchange/sale authority to replace property in their inventory. In managing property, federal law requires agencies to maintain adequate inventory controls and accountability systems as well as assess the extent to which the agency’s mission depends on the property.

A Few Agencies Carried Out Most Transactions, Which Involved Selling Billions of Dollars in Property

GSA Reported About 60 Percent of Proceeds across the Federal Government

According to GSA’s annual summary data, 27 agencies reported using the exchange/sale authority and received a total of about $3.1 billion in exchange allowances or sale proceeds from fiscal year 2013 through fiscal year 2017. While many agencies used the authority, a few agencies, particularly GSA, together accounted for about 90 percent of all allowances and proceeds. Specifically, 5 of 27 agencies reported nearly all exchange allowances and sale proceeds. GSA accounted for about $1.9 billion of about $3.1 billion (or about 60 percent) of reported allowances and proceeds across the federal government. Four other agencies—the Departments of Homeland Security, Agriculture, Defense, and the Interior—accounted for about $934 million (or about 30 percent) of the total. The other 22 agencies using the authority reported about $332 million (or about 11 percent) in exchange allowances or sales proceeds over the 5-year period. See figure 3. Finally, agencies reported using the sale method more than the exchange method. Sales by agencies accounted for about $2.9 billion (or about 91 percent), while use of the exchange method accounted for about $275 million (or about 9 percent) of total transactions reported, primarily due to GSA’s and DOD’s reporting more use of the sale method over the exchange method.

While some agencies reported hundreds of millions of dollars in exchange allowances and sale proceeds, the data show that 10 federal agencies— including the Department of Labor, Office of Personnel Management, and the Social Security Administration—reported relatively few transactions, which totaled less than $100,000 in exchange allowances and sales proceeds.

GSA OGP officials consider the agency-reported data to provide a representative picture of the overall exchange/sale transactions occurring across the federal government. GSA OGP officials rely on the agencies to ensure the accuracy and completeness of the exchange/sale information. According to GSA OGP officials, because GSA does not have authority to compel the agencies to report or address quality issues, it does not look at record level data from the agency to determine the data’s accuracy and does not have a way of verifying if exchange data are accurate and complete. Nonetheless, GSA officials said they take steps to ensure the data are reliable and complete. For example, GSA OGP officials said they review the data for any obvious inaccuracies and follow up with the reporting agency to correct the inaccuracy. In addition, according to GSA OGP officials, they report the sales portion of most agencies’ exchange/sale transactions for any sales that were conducted by GSA and ask agencies to verify the data before finalizing it in the summary report.

Agencies Reported Selling High-Value Items, Primarily Vehicles

While agencies exchanged and sold a wide variety of items, GSA’s annual summary data show that high-value items, primarily vehicles, accounted for the vast majority of allowances and proceeds from fiscal year 2013 through fiscal year 2017. Specifically, vehicle sales across the federal government accounted for about $2.6 billion of $3.1 billion (or about 84 percent) in total proceeds, of which GSA’s Fleet program accounted for about 71 percent of that total. According to GSA Fleet program officials, the authority allows GSA to continuously update its fleet of over 214,000 vehicles while keeping lease payments low for its 75 customer agencies. The program sells an average of about 36,000 vehicles each year, bringing in about $370 million in sales proceeds annually. In fiscal year 2017, the program received almost $300 million in proceeds from vehicle sales and spent about $776 million acquiring new vehicles. Three agencies—the Departments of Agriculture, Homeland Security, and the Interior—each reported over $100 million in proceeds from vehicle sales.

In addition to vehicles, agencies reported exchanging and selling other types of high-value items. For example, DOD reported using the authority to sell or exchange helicopters. According to the Army Aviation Program Executive Office, the Army continues to divest and plans to replace up to 800 Black Hawk helicopters from 2014 to 2025, each having an average value of about $1.5 million. See figure 4. DOD reported about $150 million in exchange allowances and sale proceeds by using the authority to replenish aircraft, and as of January 2018 Army Aviation had purchased five Black Hawk helicopters. Other DOD agencies—the Naval Air Systems Command and the Air Force Life Cycle Management Center—are using the authority for exchanging aircraft engines and parts containing rare earth metals under a reclamation and propulsion material exchange program.

In addition to high-value items, agencies reported selling a wide variety of other items, including missiles, office equipment, lumber, and packing supplies. One of our selected agencies, VA, predominately used the authority to exchange medical equipment. See figure 4. However, we did not find data for VA to be sufficiently reliable to report separately. Based on our interviews with VA medical centers we found that reported data did not reflect actual exchange/sale transactions, which we discuss later in this report. However, we have included VA data in the reported $332 million for “Other federal agencies” in figure 3.

Selected Agencies Expressed Confusion About How to Use the Authority or Monitor Exchange/Sale Activities

VA Did Not Understand How to Use the Exchange/Sale Authority

GSA regulations for the personal property exchange/sale authority set forth several conditions for using the authority, including that the property exchanged or sold is not excess or surplus and that agencies report information on their exchange/sale transactions to GSA on an annual basis. Federal internal control standards state that management should externally communicate the necessary quality information to achieve the entity’s objectives.

However, the agencies in our review had different levels of understanding about the authority, which affected their experiences for how they used the authority and outcomes. For example, VA officials said they misunderstood key aspects of the exchange/sale authority, resulting in inefficiencies and data inaccuracies, as described below:

Process for selling property: Officials from all three selected VA medical centers said they did not understand the sequence of events in selling property using the sale method, a situation that led to VA’s using a potentially less economical method to acquire new equipment. For example, officials at two selected VA medical centers told us that they believed that they had to sell their medical equipment prior to acquiring replacement equipment. Officials at one medical center said this sequence of events makes it difficult to use the sales method of the exchange/sale authority because VA medical centers must have medical equipment, such as x-ray machines, readily available and fully operational for veterans at all times. However, GSA OGP officials stated that replacement property can be purchased prior to the sale of property. In addition, officials at a VA medical center reported they had limited storage, making it difficult to buy replacement equipment and store it until VA can sell the equipment. As a result, a VA medical center official stated that they instead used the exchange method because it provided a seamless replacement of equipment to prevent any break in availability of medical equipment. While the exchange method is a viable approach, in this case, the sales method could have delivered a higher monetary return. In addition, by using the sale method, VA could potentially have replaced equipment more efficiently than replacing the full cost of the item with the agency’s appropriation. A VA headquarters official was also unclear about how to use the proceeds from sales. This official was unclear whether the sales proceeds could be used from any type of medical equipment in a particular supply category, such as a scalpel, toward the replacement of another item in that same classification, such as a wheelchair, or whether the items had to be identical or serve a similar purpose.

Data Reporting: Officials at two selected VA medical centers did not clearly understand the annual summary data reporting process. These officials stated that they found GSA’s reporting template confusing because it provides minimal direction to the user and does not clearly define some data-reporting elements. The template includes a space for reporting “exchanged/sold;” however, officials at one medical center were unaware that “sold” referred specifically to exchange/sale transactions only and not to other transactions referred to as sales, such as surplus property sales; according to medical center officials, this medical center reported about 1,000 misclassified sales in GSA’s annual summary data.

Exchange/sale versus disposal: According to VA officials, they or others involved in personal property management did not fully understand the distinction between the process for acquiring replacement property under the exchange/sale authority and the process for declaring property as excess. Officials within all three selected VA medical centers misunderstood the difference between the two processes, possibly because both processes use GSAXcess to sell property under the exchange/sale authority or to report property as excess for disposal. As a result, one VA medical center mistakenly reported excess disposals as exchange/sale in the GSA OGP annual summary data. In addition, two facilities disposed of some still needed property instead of conducting sales under the exchange/sale authority. A VA headquarters official acknowledged that property managers in charge of implementing the exchange/sale authority at medical centers may be confusing these two processes or may be unaware that the exchange/sale authority exists.

Similarly, officials from the Air Force and Navy said they or others involved in personal property management did not always understand the difference between these two processes. An Air Force official stated that DOD’s policies do not clearly distinguish the exchange/sale process from the disposal process and do not consistently define terms, such as “excess” and “non-excess” property, that align with GSA’s regulations. In retrospect, Air Force officials stated that they disposed of property that could have been replaced through the exchange/sale authority. Generally, disposal results in (a) sales proceeds being returned to the U.S. Treasury rather than retained by the agency and (b) services possibly having to use their appropriation for replacement property, rather than working directly with the vendor to obtain a replacement at a reduced cost. We have previously reported on DOD’s disposing of $855 million in excess items for which they will likely have a continuing need.

Conversely, based on our interviews and review of their policies, records, and transaction data, two program offices within the Army and GSA— Army Aviation and GSA Fleet—appeared to understand how to use the exchange/sale process. We found that these offices may have a greater level of understanding for a few key reasons:

Narrow scope: Both programs are designed around replacing one type of item—helicopters for helicopters or vehicles for vehicles. When items are not so directly interchangeable, determining whether or not an item sold and replaced or exchanged are “similar” can be challenging. Because the Army Aviation and the GSA Fleet programs focus on one type of item, the determination of what constitutes similar property under the GSA regulation is not a challenge.

Established programs with frequent sales: The Army Aviation and the GSA Fleet programs have sold hundreds of aircraft and tens of thousands of vehicles over the past several years. They have invested resources into developing an exchange/sale process. Conversely, programs that may sell or exchange an item or two a year—even very expensive items, such as medical equipment—may not have the same opportunities to develop processes and guidance through repeated sales or exchanges.

High-value items: Similarly, both the Army Aviation and the GSA Fleet programs sell high-value items. Thus, investing resources in an exchange/sale process makes sense, as programs benefit from the sales and have a process to guide and track these high-value items. For an agency like VA, which disposes of some low-value items, there may not be the same motivation to develop a standard process. GSA OGP officials emphasized that high-value items, such as helicopters and vehicles, are best suited for using the exchange/sale authority.

GSA Has Not Clarified Aspects of Using Exchange/Sale Authority for Agencies

GSA OGP officials stated that they recognize some agencies, such as VA, may experience confusion using the authority, that the regulations are misunderstood by agencies, and that aspects of the authority need to be clarified. According to these officials, GSA attempted to amend the regulations in 2015 to address key areas of confusion, including: restricting the definition of similar to ensure that items replaced are clearly similar. GSA wanted to change the federal supply category criteria to make agencies replace items at the more specific four digit level rather than the broader two digit level. As an illustration, this change would help clarify the confusion VA reported about whether a scalpel and a wheel chair qualify as similar items. clarifying the process for selling property; specifically, clarifying that agencies can purchase replacement property prior to the sale of property that no longer adequately performs its task.

However, GSA OGP officials stated that they did not complete the rulemaking process in order to give the incoming administration an opportunity to review and approve any revisions.

Since the change in administration, GSA officials said they have been focused on evaluating the continued need and relevance of all of their regulations as part of the administration’s plan to conduct regulatory reviews. Nonetheless, GSA OGP officials said they plan to address these areas of confusion by amending the regulations. Specifically, they plan to clarify the definition of similar property and the difference between excess and non-excess property, among other changes. However, officials estimate the rulemaking will likely not be finalized for at least 2 years. As a result, the extent to which the rulemaking process will result in clarifying language is unknown.

Although GSA anticipates initiating a rulemaking to amend regulations, which could make the definition of “similar” more restrictive, GSA OGP officials told us that clarifying the issues agencies found confusing would not necessarily require a rulemaking. They highlighted other actions they are taking to promote the use of the authority, inform agencies of the requirements, and train agencies on using the authority. For example, they conduct outreach by making presentations at national conferences (i.e., FedFleet), meet with representatives from the National Property Management Association, and hold small group discussions with program managers specializing in certain high-value items, such as aircraft. GSA’s presentations aim to educate agencies on what the authority is, the conditions and requirements of the authority, and when to use the authority. According to GSA OGP officials, as a result of their outreach, they have seen immense growth in exchange/sale transactions among the aviation community.

GSA has also issued bulletins to help dispel misunderstandings related to using the exchange/sale authority. For example, GSA issued a bulletin in 2010 to federal agencies to remind them to submit annual reports on exchange/sale transactions. This bulletin contained information on the reporting requirements, frequently asked questions, and points of contact for agencies to reach out to with additional questions. In summer 2018, GSA OGP officials drafted a new bulletin to further address financial aspects of the exchange/sale authority and expect to issue it in December 2018. This bulletin details why agencies should use the authority and directs agencies to develop policies for using the authority and to consult with the Chief Financial Officer of the agency to obtain more information. According to these officials, an additional bulletin would take 3 to 4 months to develop and issue.

However, neither GSA’s outreach nor its draft bulletin addresses existing confusion regarding the sales process or data reporting, or distinguishes the exchange/sale process from the disposal process. For example, GSA’s outreach, such as the FedFleet presentation, generally describes the authority and discusses provisions of using the authority but does not address issues agency officials told us they found confusing. The presentation tells agencies that they can sell property under the authority but does not go into the mechanics of how to sell property. By making presentations like these to address areas agencies found confusing, GSA would have an opportunity to help clarify these issues and encourage agencies to use the authority more.

Moreover, GSA OGP officials told us that they believe that a lack of knowledge of the authority is a reason why some agencies do not use it more. As we reported earlier, 10 of the 27 federal agencies that reported transactions had few exchange/sale transactions over the past 5 years. According to a VA official, if VA medical centers better understood how to use the authority, they could see a significant increase in use throughout the agency. Furthermore, if GSA provided clearer information on using the authority, the 10 agencies that we found that used the authority infrequently may increase their use.

Additionally, GSA’s draft bulletin on financial issues does not address the logistical issues agencies found confusing, such as how to sell property using the exchange/sale authority. The bulletin addresses accounting procedures agencies should follow when conducting transactions but does not describe how agencies are to conduct these transactions. Until GSA takes action to address confusion, agencies may continue to misunderstand and not use the exchange/sale authority. If agencies continue to misunderstand aspects of the exchange/sale authority, they may not take full advantage of the authority, thereby missing opportunities to be more effective stewards of government property and replenish property more efficiently.

GSA and VA Did Not Monitor Exchange/Sale Activities

Agencies are responsible for managing their own personal property, including monitoring their exchange/sale activities. Federal internal control standards call on managers to establish and operate monitoring activities to monitor the internal control system and evaluate the results. Monitoring involves regular management and supervisory activities, comparisons, reconciliations, and other routine actions.

We found that the Army monitored its exchange/sale activities, as outlined in its policies. The Army’s policy delegated responsibility to the Army’s Deputy Chief of Staff (Logistics) to monitor and approve Army programs seeking to use the authority. Our review of Army’s policy found that multiple Army offices monitor financial, logistical, legal, and procurement functional areas as they reviewed and communicated on the eligibility of exchange/sale transactions. The policy also allows program and inventory managers to use the authority for high-value items, requires contracting officers and attorneys to review the transactions, and uses a management checklist for transactions. Consistent with policy, the Army’s Deputy Chief of Staff, in conjunction with offices within DOD, reviewed and approved requests from Army Aviation to use the exchange/sale authority to sell Black Hawk helicopters and apply proceeds to replacement helicopters. The Army official said that the office continues to monitor exchange/sale transactions in collaboration with the Army Aviation program to manage the exchange and sale of their personal property that includes Black Hawk helicopters.

Unlike the Army, GSA OAS did not monitor its internal exchange/sale activities. In 2009, GSA’s internal policy established a position responsible for ensuring compliance with government-wide, personal property requirements. However, GSA officials stated that the position was never staffed and later subsumed into GSA OAS when the office was established in 2011 to manage personal property, including exchange/sale activities, within the agency. Since that time, GSA OAS officials said that they have not monitored these activities because senior management did not prioritize personal property, including exchange/sale transactions. For example, management did not clarify GSA OAS’s responsibilities nor did it define the scope of its authority for monitoring exchange/sale activities. As a result, GSA OAS officials said they have not been involved with any exchange/sale activities within the agency, and besides GSA Fleet, they do not know the extent to which other internal offices are using (or should be using) the authority.

According to GSA OAS officials, they have recently focused on an effort to rebuild an internal personal-property management program that will take several years to develop given the current staff of two. As part of this effort, GSA OAS revised the policy for internal personal property management in 2018 and is drafting a standard operating procedure that is expected to provide additional clarification for monitoring and conducting exchange/sale activities within GSA. According to GSA officials: the 2018 policy provides relevant updates and more details that distinguish between (a) the exchange/sale authority for the exchange and sale of non-excess, non-surplus personal property and (b) the disposal authority with a focus on the disposal of excess personal property. the draft standard operating procedure is to provide procedures for all internal GSA offices to follow when using the authority. This standard operating procedure establishes a position to, among other things, help internal offices conduct and report exchange/sale transactions. GSA OAS officials referred to this procedure as a work-in-progress and were uncertain when it would be finalized.

However, GSA OAS officials said that they do not know whether this policy revision will allow them to monitor exchange/sale activities for two reasons. First, GSA OAS is unclear about the scope of its authority, such as whether the GSA Fleet program falls under its exchange/sale purview. GSA Fleet program officials said that they are not opposed to having GSA OAS monitor their program in the future. Second, this procedure will not be formally approved or coordinated throughout GSA, a situation that means there may not be consensus among all GSA offices as to GSA OAS’s responsibilities and scope of authority. As a result, the revision of the policy and completion of the procedure may not be enough to ensure compliance with exchange/sale requirements. In the absence of clear responsibilities and scope of its authority, GSA OAS may not be able to monitor exchange/sale activities or provide clear information and direction to other offices within GSA.

Similar to GSA, VA conducted limited monitoring of its exchange/sale activities. VA policy states that the Deputy Assistant Secretary for Acquisition and Logistics has the departmental-wide responsibility for personal property inventory management, utilization, and disposition as well as to monitor VA logistics programs and policies. Within VA’s Veterans Health Administration (VHA), the Office of Procurement and Logistics assigns logistics officers at VHA Regional Offices with monitoring responsibilities of medical centers to ensure compliance with VA and VHA policies. However, we found that the three VHA Regional Offices conducted limited monitoring of 23 medical centers under their purview. According to the officials we contacted, they conducted a cursory review of end-of-year data from medical centers before the data were submitted through VHA to GSA for the annual summary report.

According to officials at one Regional Office, they did not focus on monitoring exchange/sale transactions beyond a cursory review to see that property fell within the medical or laboratory equipment supply categories. As previously mentioned, we found that reported data did not reflect actual exchange/sale transactions. Specifically, we found that none of the sale transactions reported in 2016 as exchange/sale transactions by a selected medical center in this region was correct. Instead, these transactions were sales of surplus property.

According to officials at another Regional Office, they have no reason to review exchange/sale transactions in a more robust manner because end-of-year reporting presented no problems in the past that would warrant a more standardized approach. However, for the one selected medical center in this region, we found several errors in reporting end-of-year data from 2013 through 2017. Specifically, we found that nearly all reported exchanges were actually sales of surplus property, a reported exchange in 2017 was actually a transfer to another medical center, and despite reporting no transactions in 2016, we identified an exchange valued at $500,000.

According to officials from a third Regional Office, they monitored various aspects of VA’s personal property program—inventories and disposals, but not exchange/sale transactions. During our review, we found that one selected medical center under their purview reported about 1,000 sale transactions to GSA, but none was correct. Instead of sales of needed (non-excess, non-surplus) property, they were actually sales of surplus property. Regional officials are aware of this error and have added four new questions about exchange/sale transactions to the checklist used for their annual quality-control reviews. They said they do not know whether other Regional Offices perform similar reviews.

An official in VA’s Office of Acquisition and Logistics acknowledged that these findings are likely not uncommon because the office has not developed or communicated the management activities necessary for Regional Offices to consistently monitor medical centers’ exchange/sale transactions. The lack of communication on monitoring procedures was corroborated by two Regional Offices. An official with the Office of Acquisition and Logistics explained that the office promulgates policy and that VHA’s Office of Procurement and Logistics helps ensure policy is followed, but the absence of monitoring stems, in part, from these two offices’ not collaborating or communicating the activities Regional Offices are to conduct. VHA Regional Offices monitor medical centers through annual quality-control reviews, but the reviews did not have an exchange/sale component. Furthermore, VA internally reviews a small sample of the VHA’s annual quality-control reviews each year. From a Regional Office perspective, officials told us they prioritized other activities, such as monitoring inventories or disposal of equipment, over exchange/sale activities. The VA office has also not communicated with VA medical centers on how to effectively use the authority to support their medical equipment replacement needs or the benefits associated with the authority. For example, the VA office has not provided specific guidance beyond issuing personal property policies for how to conduct and monitor exchange/sale transactions.

VA officials are taking steps to improve communication to those involved in exchange/sale transactions throughout the agency—those monitoring transactions and those initiating transactions. For example, officials within the Office of Acquisition and Logistics stated that they plan to clarify the use of the exchange/sale authority within the agency’s policies for personal property disposal. This clarification will be in the form of a notice (an incremental policy change) or as part of a planned rewrite of personal property policies. However, it is uncertain whether the information will have a level of detail to be useful for medical centers to understand the requirements for using the exchange/sale authority or will delineate how the exchange/sale process differs from the disposal process. Adding to this is the uncertainty about the time frame for finalizing and communicating such information to medical centers. Furthermore, VA officials said the policy changes alone will not be sufficient and assistance from VHA will be necessary to ensure Regional Offices understand their monitoring roles and responsibilities. A VHA official acknowledged the need to work with Regional Offices to augment the annual quality-control review checklists with an exchange/sale component, but it is unclear if and when such an update will take place. Until VA and VHA work together to develop a detailed policy for monitoring and establish time frames with milestones for communicating information, they cannot be assured that 172 medical centers and 18 Regional Offices understand the exchange/sale authority, how to use it, and how to monitor end-of-year reporting data.

Conclusions

By using the exchange/sale authority, agencies have an opportunity to be good stewards of government property by efficiently replacing needed property, including high-value items, that serves critical and continuing requirements to meet agency missions. However, unfamiliarity with the exchange/sale authority and confusion surrounding the authority may lead to decisions that may not be in the government’s best interest. Although GSA OGP officials acknowledge the need to amend the regulations to address areas that require rulemaking, delay in taking action to address areas of confusion that currently exist but do not require rulemaking will continue to lead to misinterpretation or misunderstanding about the authority. Moreover, until GSA specifies GSA OAS’s responsibilities and defines the scope of its authority, it will continue a long-term pattern of not monitoring GSA’s exchange/sale activities. Finally, until VA develops and communicates the necessary information to help Regional Offices and medical centers with their exchange/sale responsibilities, it will not have an assurance that all VA medical centers are reporting transactions accurately or effectively using the exchange/sale authority.

Recommendations for Executive Action

We are making the following two recommendations to GSA and one recommendation to VA.

The GSA’s Associate Administrator for the Office of Government-wide Policy should take action to address specific areas of federal agency confusion with the exchange/sale authority, areas such as the process for selling property, reporting data, and distinguishing the exchange/sale process from the disposal process. Such actions could include issuing bulletins or conducting expanded outreach and, as necessary, issuing regulations. (Recommendation 1)

The Administrator of General Services should take steps to improve agency-wide monitoring of exchange/sale activities within GSA by specifying the Office of Administrative Services’ responsibilities and by defining the scope of its authority. (Recommendation 2)

The VA’s Deputy Assistant Secretary of Acquisition and Logistics, in collaboration with VHA’s Office of Procurement and Logistics, should revise VA’s policy to include details on the exchange/sale authority, particularly those related to monitoring by Regional Offices and use of the authority for medical centers, and establish time frames with milestones for communicating such information. (Recommendation 3)

Agency Comments

We provided a draft of this report to GSA, DOD, and VA for comment. All three agencies agreed with the findings. GSA and VA also agreed with the recommendations for their agencies. DOD provided a technical comment to the report in an email; we incorporated the technical suggestion.

GSA agreed with our recommendations and stated that it has already begun to increase understanding and appropriate use of the exchange/sale authority within GSA and across the federal government. GSA is finalizing a plan to address the recommendations. GSA’s written response is reprinted in appendix II.

VA agreed with our recommendation to revise its policy to include details on the exchange/sale authority. VA stated that the Office of Acquisition and Logistics, in conjunction with the VHA Procurement and Logistics Office, has produced two draft memorandums to amend policy related to the exchange/sale authority as well as the utilization and disposal of personal property. The agency plans to promulgate the new policy by December 2018. VA’s written response is reprinted in appendix III.

We are sending copies of this report to the appropriate congressional committees, the Administrator of General Services, the Secretary of Defense, and the Secretary of Veterans Affairs. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.

If you or your staffs have any questions about this report, please contact me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) describe what is known about personal property exchange/sale transactions, as reported by federal agencies from fiscal years 2013 through 2017, and (2) examine selected agencies’ experiences using the personal property exchange/sale authority and monitoring such activities. To address both objectives, we reviewed applicable federal statutes and regulations pertaining to personal property management and the exchange/sale authority, our prior work, and reports by federal agencies’ offices of inspectors general on personal property management issues. To understand General Services Administration’s (GSA) role and responsibilities for personal property management in support of exchange/sale activities across the federal government, we reviewed GSA’s personal property management structure, policies, bulletins, briefings, and training materials.

To describe what is known about the personal property exchange/sale transactions, we analyzed annual exchange/sale summary data, as reported to GSA’s Office of Government-wide Policy (GSA OGP) from federal agencies from fiscal year 2013 through fiscal year 2017. These data identify the agency involved in the transactions, the transaction method, and the type and value of the property. These data are the only federal government-wide data available on exchange/sale transactions. Accordingly, we analyzed these summary data to characterize transactions over a 5-year time frame, by agency, by type of transaction (exchange or sale), by type of personal property using personal property categories, and by amount of exchange allowances and sale proceeds.

We assessed the reliability of these data from a government-wide perspective and for selected agencies.

From a government-wide perspective, we reviewed GSA’s electronic template provided to federal agencies for reporting data, viewed a training video used to help agencies report data to GSA, and reviewed the users’ guide and other materials related to GSA’s personal property reporting tool. In addition, we interviewed GSA OGP officials regarding their data processes—such as data collection, submission, reconciliation, verification, and compilation of annual exchange/sale summary reports—to understand the steps GSA OGP takes to determine the accuracy, consistency, and completeness of data. We did not independently verify all the exchange and sales data that was provided to us because of the large quantity of detailed data associated with each agency and because some of the data were not within the scope of our selected agencies and personal property categories. However, we determined that GSA’s government-wide summary data was sufficiently reliable for our purposes of describing the agencies that use the authority, the general types of property they acquire, and the relative order of magnitude of exchange allowances and sales proceeds. For sales conducted through GSA sales centers, GSA reports summary information on behalf of most agencies. GSA officials told us all exchange transactions are self-reported by agencies. GSA does not ensure the accuracy of this information beyond a review for obvious errors. However, because sales account for about 91 percent of the dollar value of all transactions, we believe that the total value of transactions across the federal government is sufficiently reliable for our purposes of describing exchange/sale activity.

To assess the reliability of GSA and other selected agencies’ summary data, we compared annual exchange/sale summary data collected by GSA OGP with detailed GSAAuctionsSM sales data associated with the exchange/sale authority collected by GSA’s Office of Personal Property Management. We looked to see if aggregated sales totals matched, identified similarities and gaps, and observed individual agency and government-wide trends for using the exchange/sale authority. We found data reported by GSA’s Office of Fleet Management (GSA Fleet) and the Army’s Program Executive Office for Aviation (Army Aviation) to be reliable. However, we found reliability issues with data reported by the Department of Veterans Affairs (VA). As a result of our interviews with selected facilities, we found that some reported sale and exchange data from VA did not represent actual exchange/sale transactions. Accordingly, we determined that VA data were not reliable to analyze independently. We did include these data in the total for the federal government given that they accounted for about 1 percent of that total.

To examine selected agencies’ experiences using the exchange/sale authority and monitoring such activities, we selected three agencies— GSA, the Department of the Army within the Department of Defense (DOD), and the VA—based on various characteristics, such as the values of the agencies’ exchange allowances and sale proceeds; the quantity of items exchanged and sold; and selected three different types of personal property categories—vehicles, aircraft, and medical equipment—for which the exchange/sale authority was used over the 5-year time period.

GSA: We selected GSA because it reported a high-value of exchange/sale transactions. Within GSA, two offices have key roles in the internal use of the exchange/sale authority. First, through GSA Fleet, GSA manages the government-wide motor-pool program (the largest user of the exchange/sale authority) that acquires vehicles and then leases them to other federal agencies. Second, GSA’s Office of Administrative Services (GSA OAS) is the office responsible for performing personal-property management functions, such as developing policy and procedures, internal to the agency.

Army: We selected the Army because it reported a relatively low- number of high-value items. In particular, Army Aviation accounted for the majority of high-value aviation-related exchange/sale transactions within DOD. During the course of our review, we also attended a joint GSA-DOD presentation focused on major end items that brought together GSA, Army, Navy, and Air Force officials to discuss their experiences using the exchange/sale authority.

VA: We selected VA because it reported a high-number of low-value items sold or exchanged. For in-depth interviews, we selected three medical centers (Long Beach, California; Cincinnati, Ohio; and Portland, Oregon) that reported using the authority for the acquisition of medical equipment and the three Veterans Integrated Service Networks (Regional Offices) responsible for monitoring these medical centers. See table 1 below.

At all of these agencies, we reviewed exchange/sale transactions to understand agencies’ experiences in using the authority, personal property policies and program, financial documents applicable to exchange/sales, and applicable Standards for Internal Control in the Federal Government and GSA’s regulations. We also reviewed relevant sections of Principles of Federal Appropriations Law to understand decisions on using the exchange/sale authority for acquiring personal property. In addition, we examined agencies’ monitoring of exchange/sale transactions in the context of internal control standards.

We interviewed officials from each of our selected agencies responsible for using exchange/sale authority and implementing processes to manage and monitor personal property. We interviewed GSA Fleet officials and visited Army Aviation officials in Huntsville, Alabama. During these interviews, GSA and Army Aviation officials walked through materials and explained their exchange/sale processes by using actual sample transactional information. We examined personal property documentation associated with personal property that had been either been exchanged or sold.

For VA, we selected 3 of 172 VA medical centers to understand how these medical centers implemented their personal property exchange/sale processes and procedures. We selected one site based on its high number of exchange/sale transactions of medical equipment and its close geographic proximity to one of our field offices. The other two sites were chosen based on a high and low number of exchange/sale transactions of medical equipment. At the VA locations, we interviewed medical center officials responsible for supply chain management as well as Regional Office officials responsible for oversight of those selected medical centers and the exchange/sale management activities. During these interviews, we discussed selected agency officials’ understanding and use of the exchange/sale authority, reviewed data and documentation, addressed what officials did to implement processes for their exchange/sale programs, identified challenges, and took photographs at one location of selected personal property that was exchanged or sold. Information we obtained from the three selected agencies is not generalizable to all federal agencies but provides illustrative examples in how agencies have used the authority.

We conducted this performance audit from August 2017 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on the audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Appendix II: Comments from the General Services Administration

Appendix III: Comments from the Department of Veterans Affairs

Appendix IV: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the individual named above, the following individuals made important contributions to this report: Nancy Lueke (Assistant Director); Steve Martinez (Analyst-in-Charge); Aisha Cabrer; SaraAnn Moessbauer; Malika Rice; Amy Rosewarne; Jerry Sandau; Travis Schwartz; and Crystal Wesco.