The FBF, administered by GSA, is a quasi-revolving fund financed by rents received from other agencies and authorized and established by the Public Buildings Act Amendments of 1972. Instead of GSA receiving direct appropriations, the FBF operates as the primary means of financing the operating and capital costs associated with federal space, but GSA sometimes receives supplemental appropriations to meet repair or new construction needs. The FBF is financed by income from rental charges assessed to tenant agencies occupying GSA-owned and -leased space that approximate commercial rates for comparable space and services. GSA appraises its inventory on a 5-year cycle—approximately 20 percent of its owned inventory annually— and charges rent based on rates for comparable assets in the private sector. GSA charges its tenants in space leased from the private sector rates equal to the cost of the lease plus either a 7 percent (for cancelable assignments) or 5 percent (for noncancelable assignments) administrative fee to cover its management costs. During fiscal year 2011, GSA deposited about $9 billion into the fund. GSA’s lease payments have increased over the last decade as leased space has grown to comprise more than half of GSA’s current total portfolio. Starting in 2008, GSA has leased more space than it owns; at the end of fiscal year 2011, leased square footage exceeded owned, 193 million to 182 million (51 percent). Congress exercises control over the FBF through the appropriations process that sets annual limits—called obligational authority—on how much of the fund can be obligated for various activities. GSA, as an executive branch agency, requests obligational authority from Congress as part of the annual President’s Budget Request. In annual appropriations legislation, Congress provides obligational authority to GSA to incur obligations and make expenditures from the FBF in five categories of activities: 1. Rental of Space – funds leases of privately owned space or buildings for federal agencies. 2. Repairs and Alterations – funds repairs and alterations of existing buildings as well as associated design and construction services. 3. Construction and Acquisition of Facilities – funds the construction or purchase of facilities and major extensions to existing buildings. 4. Building Operations and Maintenance – funds services for government-owned and -leased facilities, including cleaning, utilities and fuel, maintenance, miscellaneous services (such as moving), evaluation of new materials and equipment, and field and general management and administration. 5. Installment Acquisition Payments – funds debt incurred as the result of building acquisition and lease purchase arrangements. Revenue from GSA’s owned facility inventory is the main source of the FBF’s operating income used to fund repair and alteration, new construction activities, and operations and maintenance. GSA’s portfolio of properties leased from the private sector is designed to be revenue neutral in disbursing all the funds it collects from federal agencies occupying the space to pay the cost of the underlying leases. Building repairs and alterations as well as construction and acquisition projects that are expected to cost more than the prospectus-level threshold must be submitted to certain congressional committees for authorization and funding.OMB approval, provides Congress with a prospectus for each repair and alteration project estimated to exceed the prospectus-level threshold. The prospectus includes information on the size, cost, location, and other features of the proposed work; a justification for proceeding with the work; and an economic analysis of the alternatives to the requested repairs and alterations. The FBF’s balance has increased significantly in recent years, growing from $56 million at the beginning of fiscal year 2007 to $2.2 billion by the beginning of fiscal year 2012. The increased balance has primarily resulted from the growing difference between the resources deposited into the FBF and use of these funds as determined through the budgeting and appropriations process. Specifically, the total available balance is a function of the resources deposited into the fund, the amount of obligational authority requested by GSA as part of the President’s Budget Request, and the actual obligational authority provided by Congress.Beginning in fiscal year 2007, the total resources deposited into the FBF have exceeded the obligational authority provided by Congress. (See table 1.) According to OMB staff, a portion of the growth in the FBF’s balance is attributable to inaccuracy in GSA’s estimation of its rental revenues. The result of these budgetary and appropriations actions has been the near quadrupling of the fund balance in the last 2 years. In using authority to direct the expenditure of public funds and establish priorities among federal programs, Congress decides whether to fund a particular program or activity, and if so, sets the level of that funding. In the case of the FBF, Congress has provided in the last 2 fiscal years less obligational authority to GSA than was requested in the President’s Budget Request. For example, in fiscal year 2012 Congress provided about 16 percent less than the President’s Budget Request. In addition, in both 2011 and 2012 Congress provided less obligational authority than funds deposited into the FBF. According to OMB staff and GSA officials, Congress provided less obligational authority than requested to balance competing priorities among government programs and meet spending caps. OMB staff and GSA officials stated that the funds collected by the FBF might sufficiently support GSA’s projects for its assets. For example, OMB staff stated that if GSA were able to spend all of the funds collected by the FBF each year, these funds would generally be sufficient to fund GSA’s identified repairs and alterations projects and a modest new construction program. GSA officials noted that when Congress provides less obligational authority than requested, repairs and alterations and new construction projects are the most affected because available funds must first be used to pay leasing, operations and maintenance, and debt costs. GSA officials also stated that the authorization to obligate and spend the balance of funds in the FBF, which it anticipates will double to $4.5 billion by the end of fiscal year 2013, would enhance the agency’s ability to manage its real property portfolio by ensuring that operations and maintenance are sufficiently funded and that capital investments, such as repairs and alterations and new construction projects, can continue to be made. However, OMB staff stressed that the current FBF balance is not available for obligation and that in order to make additional obligations from the fund, congressional action would be needed. While the appropriations process has resulted in less obligational authority for GSA than was sought in the President’s Budget Request, the agency has not always communicated through its annual budget request to Congress its interest in reducing the fund’s balance by increasing spending. Rather, since 2008, GSA has consistently requested obligational authority less than the total resources available in the fund. Also since 2008, GSA has only twice requested an amount of obligational authority that would reduce the existing fund balance, meaning that it requested more obligational authority than funds deposited for that year. Specifically, GSA requested to reduce the existing FBF balance by about 30 percent in 2011 and 13 percent in 2012. GSA officials stated that in preparing their budget requests they work with OMB to discuss their needs in relation to competing priorities from other executive branch agencies. According to GSA officials, budget requests for FBF obligational authority reflect efforts to balance GSA’s needs with those of other federal agencies within the overall budget framework. While budgeting and appropriations decisions have contributed to a significant increase in the FBF balance the last 2 years, various factors have limited the fund’s income from GSA’s real property operations. These factors include an imbalance between revenue and costs, decreased revenue from underperforming assets, and a reliance on leasing. GSA’s owned assets generate most of the resources used for capital improvements. From 2006 through 2011, the financial performance of these assets has stagnated despite GSA’s increasing the amount of rentable square feet in its owned portfolio from 174 million to 182 million square feet. As measured by funds from operations—meaning revenue less costs excluding depreciation—GSA generated approximately $1.6 billion from its owned assets in 2006 and a nearly identical amount in 2011, though the annual amount varied during this time period. When taking the effects of inflation into account, we found that the real value of the funds from operations generated by GSA’s owned assets and measured in 2006 dollars has decreased by 9 percent over this time. (See fig. 1.) Funds from operations generated by GSA’s owned assets have been affected by declining revenue and rising costs. Revenue. Since 2006, revenue growth has not kept pace with inflation. Specifically, the revenue from GSA’s owned portfolio adjusted for inflation has decreased by 2 percent. GSA officials said that revenue generated by its owned assets is highly dependent upon the fair annual rent appraisal of the asset which, in turn, is based on the value of rental charges at comparable private sector properties. GSA officials noted that from 2006 to 2011, increased commercial office vacancies contributed to soft rental markets and minimal growth in rental rates. According to these officials, changes in revenue primarily reflect the downward pressure on GSA’s rental rates caused by market conditions. Costs. Since 2006, costs associated with operating, maintaining, and repairing GSA’s owned facilities have risen faster than inflation. GSA’s annual operating costs, representing the direct costs of operating its facilities (including utilities, janitorial services, and routine maintenance) have risen by about 6 percent total in constant dollars from 2006 to 2011, though year to year these costs are volatile and can vary significantly. GSA officials stated that reasons for the increase in operating costs include general inflation in utilities, maintenance, and administrative costs. Furthermore, GSA estimates that construction costs have increased since 2005.