State has authority to acquire, manage, and dispose of real property abroad. Specifically, the Foreign Buildings Act (Act) of 1926, as amended, authorizes the Secretary of State to acquire by purchase, construction, exchange, or lease sites and buildings in foreign cities for use by diplomatic and consular establishments of the United States. The Act allows State to alter, repair, furnish, and dispose of these properties, and to provide residential and office space and necessary related facilities to federal agencies abroad. It also authorizes the Secretary to apply disposal proceeds toward real property needs or to deposit proceeds into the Foreign Service Buildings Fund and use the proceeds for authorized purposes. OBO manages State’s real property abroad to support U.S. government presence at embassies and consulates, which are also known as missions or posts. This office is responsible for managing U.S. government-owned and government-leased real property, which includes land, structures, and buildings such as embassies, warehouses, offices, and residences. OBO coordinates directly with officials at posts tasked with managing the post’s real property. Posts are responsible for implementing OBO policies related to the management, acquisition, disposal, and reporting of real property, outlined in State’s FAM. Table 1 below provides an overview of OBO’s and the posts’ roles and responsibilities for real property management. In 2004, the administration added managing federal real property to the President’s Management Agenda and the President issued an executive order directing executive agencies to submit real property information annually for inclusion in a single, comprehensive database, which is now known as the Federal Real Property Profile (FRPP) that provides an annual report on the government’s real property holdings. State is currently undertaking a multiyear, multibillion-dollar capital- security construction program to replace 214 of its facilities abroad due to security concerns. State is taking these steps due to continuing threats and incidences such as the terrorist bombings in 1998 of embassies in Dar es Salaam, Tanzania, and Nairobi, Kenya, that killed more than 220 people and injured 4,000 others. The program incorporates the requirements of the Secure Embassy Counterterrorism Act of 1999 and instructs State to replace facilities at vulnerable posts and to require that all new diplomatic facilities be sufficiently sized to ensure that all U.S. government personnel at the post work onsite. Construction projects are prioritized by State’s annual risk matrix that ranks facilities based on their vulnerability across a wide range of security threats. In 2004, to aid in the construction of new embassies, a related program, the Capital Security Cost Sharing (CSCS) program was authorized, which required agencies with personnel overseas to provide funding for the construction of new, secure, and safe diplomatic facilities for U.S. government personnel overseas. State expects funding of $2.2 billion per year over a 5 year period through fiscal year 2018 to carry out new construction projects. Our analysis of State’s real property portfolio indicated that the overall inventory has increased. State reported its leased properties, which make up approximately 75 percent of the inventory, increased from approximately 12,000 to 14,000 between 2008 and 2013. However, comparing the total number of owned properties between years can be misleading because State’s method of counting these properties has been evolving over the past several years. OBO officials explained that in response to changes in OMB’s and FRPP’s reporting guidance, they have made efforts to count properties more precisely. For example, OBO has focused on separately capturing structural assets previously recorded as part of another building asset, such as perimeter walls, guard booths, and other ancillary structures. As a result of this effort, State recorded approximately 650 additional structural assets in its fiscal year 2012 FRPP report and approximately 900 more structures the following year in its fiscal year 2013 FRPP report, according to OBO officials. Additionally, OBO officials told us that former Department of Defense (DOD) properties in Iraq and Afghanistan were transferred to State; the largest of these transfers occurred in 2012 when State assumed responsibility from DOD for approximately 400 properties in Iraq. State reported additional changes in its real property portfolio, which are described below. Acquisitions: State reported spending more than $600 million to acquire nearly 300 properties from fiscal year 2008 through 2013 (see fig.1). State uses two sources of funding to acquire real property. It acquires land for building new embassy compounds (NEC) with funding from the CSCS program. It acquires residences, offices, and other functional facilities with proceeds from the disposal of unneeded property. In fiscal years 2008 through 2013, State reported spending approximately $400 million of these disposal proceeds to acquire approximately 230 properties. Disposals: From fiscal years 2008 through 2013, State reported selling approximately 170 properties. In doing so, it received approximately $695 million in proceeds (see fig.1). According to State, property vacated when personnel move into newly constructed facilities is the largest source of property that can be disposed of. When State completes construction of a NEC, personnel previously working in different facilities at multiple locations are then collocated into the same NEC, a move that provides State an opportunity to dispose of its former facilities. Further information on State’s acquisitions and disposals from fiscal year 2008 through 2013, can be found in figures 1 and 2 below. Leases: The majority of State’s leased properties are residences. State reported spending approximately $500 million on leases in 2013 and projects a potential increase to approximately $550 million by 2016 as growing populations in urban centers around the world push rental costs higher and the U.S. government’s overseas presence increases. OBO provides guidance to posts for disposing of unneeded properties as the post prepares to move into a NEC. In Belgrade, OBO is working with the post to sell an old embassy that is no longer needed following the completion of Belgrade’s NEC. Post officials told us that relocating to the NEC in April 2013 allowed them to market their old embassy and terminate multiple leases. In London, State sold its existing embassy building in August 2013 to fund the construction of a NEC. State is leasing the existing building until construction of the NEC is completed, which is expected in 2017. NEC construction has also provided State the opportunity to sell residential properties that are not located near the new embassies under construction. For example, according to post officials in London, transitioning to the NEC in London allowed State to make cost effective changes in its residential property portfolio by selling valuable older properties near the current embassy and purchasing newer lower cost residences near the NEC. State reports these types of real property transactions to Congress quarterly. Also, as required, State submits annual reports to Congress listing surplus overseas properties that have been identified for sale. For example, our analysis found that State listed 39 properties that it identified for disposal in its fiscal year 2013 annual report to Congress. Some properties identified as unneeded in State’s fiscal year 2013 FRPP report were not included in the 2013 annual report to Congress, such as a former embassy in Tashkent, Uzbekistan; land in New Delhi, India, and Manila, Philippines; and various properties in Beijing, China. According to OBO officials, the annual reports to Congress do not include unneeded properties they expect to retain or have determined they cannot sell for various reasons, such as host government restrictions related to diplomatic or political differences. For example, according to a State IG report, after State refused to pay what it considered an illegal tax to support the Brazilian social security system in 1996, the government of Brazil blocked the disposal of all U.S. diplomatic properties in the country. OBO officials told us that they do not report unneeded properties that cannot be sold because the Congressional reporting requirement is to list surplus properties that have been identified for sale. State’s officials said that they consider many factors in managing their real property portfolio, specifically in terms of identifying and disposing of unneeded property, as well as in purchasing and leasing property. The officials also described challenges associated with each of those aspects of managing the real property portfolio. State collects data on costs associated with properties identified for disposal to track costs, but we found that posts did not use the required code to track these costs consistently. As a result, this raises questions about the extent to which posts worldwide are using the code as State intends, and the extent to which State is receiving accurate and comprehensive cost information about its properties. We requested to review 202 files from fiscal year 2008 through 2013 on acquisitions, disposals, and leases, but were only provided 90 files since, according to State officials, the files were not centrally located and too time consuming to find and provide within the time frame of our review. State was able to provide most of the “core” documents agreed to, although some of the documentation was missing for the 90 files provided. For example, State provided all 36 of the requested lease files, but some documentation that FAM and OMB directs State to retain, and that State agreed to provide, was missing for 30 of the 36 lease files provided. OBO officials told us that they work with posts to identify and dispose of unneeded properties primarily using factors outlined in FAM, along with other strategies. FAM lists 18 factors that OBO and posts might consider when identifying and disposing of property (see table 2), such as whether (1) the property has excessive operating costs, (2) State used the property only irregularly, or (3) the property is uneconomical to retain. Officials at two of the four posts we visited told us that they were aware of and use the guidelines to identify unneeded property. Officials at a third post that owned property was unaware of the guidelines, but told us they used excessive maintenance costs to identify properties for disposal. Excessive maintenance cost is one of the 18 listed factors in FAM.