FBO has responsibility for managing about 11,000 leased properties and 3,000 U.S.-owned properties valued about $12 billion. These properties, at over 260 locations worldwide, include embassies and consulates, office buildings, detached houses and multi-unit residential buildings, warehouses and garages, and undeveloped land. FBO’s responsibilities include (1) overseeing the acquisition, design, construction, sales, operations, and maintenance of properties and (2) establishing policies and procedures for overseas posts to follow in managing real property programs. Since the early 1960s, we have reported serious deficiencies in FBO’s management of overseas real property. Beginning in 1990, as part of our special effort to review and report on federal programs considered high-risk, we identified the management of overseas real property as being at substantial risk for waste, fraud, abuse, and mismanagement. Our December 1992 report on overseas real property identified the chronic and long-standing management weaknesses that had affected overseas real property programs, including insufficient maintenance, lax oversight of overseas operations, inadequate information systems, and poor planning. These weaknesses resulted in deteriorating facilities and a significant backlog of maintenance and repair requirements. Management weaknesses also directly contributed to construction delays and cost overruns, oversized and unauthorized housing, poor decisions, and questionable expenditures. In our 1992 report, we noted that the State Department had recognized the significance and urgency of the problems and had planned or initiated a number of engineering, staffing, and management process actions designed to address past problems. Progress has been made in addressing the long-standing problem of inadequate maintenance and rehabilitation of overseas facilities. In early 1993, we sent a questionnaire to the State Department’s overseas embassies addressing several management issues. Almost all of the 80 embassies responding to the questionnaire said that they had received services or review visits from FBO and/or one of the regional maintenance assistance centers, and the majority of the respondents were generally or very satisfied with the services received. In September 1993, the State Department’s Inspector General reported that FBO had made progress in addressing weaknesses in its repair and maintenance of overseas property. Progress cited by the Inspector General included a new group of skilled maintenance professionals in the State Department responsible for overseeing post maintenance and repair operations, a systematic global facility review program to assess the condition of U.S.-owned and long-term leased facilities, a 5-year plan for major rehabilitations, a comprehensive maintenance plan for newly constructed buildings, and additional funding for maintenance programs. Other initiatives have included the facilities evaluation and assistance program. This program augments the global review program and typically consists of a maintenance audit of post facilities using a standard evaluation checklist and assistance in developing more effective maintenance programs. In December 1993, the Office of Management and Budget (OMB) determined that FBO had made sufficient headway in improving maintenance management to warrant removing rehabilitation and maintenance of overseas property from its list of areas at highest risk to fraud, waste, and abuse. We agree with this decision since our work also indicates substantial progress by FBO in the maintenance and rehabilitation area. However, we have also identified continuing problems requiring corrective action. These problems include the questionable and/or inappropriate use of routine maintenance funds by overseas posts and the failure of some posts to either conduct or complete annual surveys documenting the condition of government-owned and long-term leased facilities. As part of its overall management responsibilities, FBO provides funds to each overseas post to pay for routine maintenance and repair of its real property. In fiscal year 1994, approximately $27 million was provided to the posts. Authorized uses of the funds include painting and other services/materials of a recurring or minor nature, the purchase of bulk supplies such as lumber and nails, and projects that would otherwise qualify as special maintenance or minor improvement projects. The policies and procedures allowing the use of routine maintenance funds for special and minor improvement projects were identified in an April 1993 cable to all posts, giving post management the latitude to execute small special maintenance and improvement projects as required. However, to ensure that posts use most of these funds for routine maintenance, no special maintenance or minor improvement project using routine maintenance funds may exceed $10,000 and no more than a total of 5 percent of a post’s annual routine maintenance funds may be used for special projects in a given year. Although FBO has issued guidance to the posts on the proper uses of routine maintenance funds, our review of posts’ financial records shows that inappropriate and/or questionable uses of funds have occurred frequently. These have included the use of routine maintenance funds for (1) special and minor improvement projects costing more than $10,000 and (2) special and minor improvement projects totaling more than 5 percent of the post’s annual routine maintenance budget. In some cases, posts used routine maintenance funds for nonmaintenance and repair purposes. Reasons for the misuse of funds include the failure of posts to follow FBO guidance, some ambiguities in the guidance and related State regulations, and FBO’s failure to hold posts sufficiently accountable for improperly using funds. Examples of using routine maintenance funds for special projects costing greater than $10,000 included the repair and resurfacing of a tennis court at the ambassador’s residence in Santo Domingo; construction of storage lockers and hard covering over a swimming pool, and new windows in London; and extension of a tubular mailing system, facade renovation, installation of a suspended ceiling, and grounds preparation for a volleyball court in Vienna. Routine maintenance funds were used for nonmaintenance purposes to purchase furniture for the posts in Santo Domingo and Nassau; to purchase and install communications equipment, pay for security escort services, purchase plants for the ambassador’s dining area in the chancery, and purchase flag pole stands, mirrors, and a chandelier in London; to purchase a new clock for the chancery in Vienna; and to purchase garden lighting systems and track lighting in Kuala Lumpur. According to FBO officials, such expenditures should have been charged to salaries and expenses appropriations or to other FBO accounts, such as the furniture, furnishings, and equipment program. The post in Kuala Lumpur obligated over $10,000 in routine maintenance funds for renovating offices in the chancery 1 day before the end of fiscal year 1994. That obligation (1) represented a potential misuse of routine maintenance funds and (2) appeared to represent an effort to fully obligate remaining funds (year-end buying) instead of returning them to FBO. In some cases, expenditures were questionable because State and FBO policy guidance is unclear. For example, routine maintenance funds have been used for numerous gardening-related activities at the ambassador’s residence and other properties in London, totaling over $10,000 in fiscal year 1994. Items purchased included rose bushes, shrubs, seeds, compost, and flower pots. We believe these uses are questionable because, according to State’s Foreign Affairs Manual (FAM), grounds care for residences occupied by the ambassador or chief of mission should be charged to salaries and expenses appropriations. However, embassy officials in London identified what they considered to be potentially conflicting guidance in another part of the FAM, which defines routine maintenance and repair as activities done for the continuing upkeep of buildings and grounds. FBO officials said that State’s guidance concerning which appropriations should be used for gardening expenses is unclear. Our analysis and discussions with post officials indicates that State’s guidance is also unclear in other areas, including the appropriateness of using routine maintenance funds for such things as the replacement of carpets. The misuse of routine maintenance funds is not a new problem. Beginning in 1990, FBO’s financial audits determined that several overseas posts had not used routine maintenance and repair funds for intended purposes. Similarly, the September 1993 State Inspector General report on maintenance and repair programs noted that all eight of the posts included in that assessment had used routine maintenance funds for improper and/or questionable purposes. According to the FBO and Inspector General assessments, posts improperly used routine maintenance and repair funds on projects that should have been funded as special projects or minor improvements or from the salaries and expenses appropriation. The Inspector General also found that posts used funds for questionable activities in part due to inadequate State guidance. One of the key FBO requirements for a successful ongoing maintenance program is the annual facility condition survey. According to FBO’s Facility Maintenance Handbook, the overseas posts should survey all government-owned and long-term leased facilities annually for structural, electrical, and mechanical deficiencies. According to FBO, the surveys are necessary for determining required maintenance and repair work at a post and for allowing management decisions on budget priorities. The failure of overseas posts to properly conduct annual surveys has historically been a problem in the Department’s maintenance system. In our 1990 report on maintenance management, we reported that none of the 14 posts included in that review had conducted annual property condition surveys. In our 1993 report on administrative issues affecting overseas embassies, we found improvements, but also noted that about 30 percent of the embassies responding to our questionnaire acknowledged that they had not conducted annual condition surveys. Recently, we found that there are still some weaknesses in the system for surveying the condition of overseas property. For example, the post in Nassau examined the condition of its property to support the fiscal year 1994 budget. However, the survey did not cover all government-owned properties or use an inspection checklist as recommended by FBO in its Facility Maintenance Guide. Embassy officials in Vienna said that a survey was not done to support the fiscal year 1995 budget because they were unaware of the FBO requirement. However, at the time of our visit, we were told that a survey was underway to support the fiscal year 1996 budget process. We also found that the post in Port Moresby had not conducted annual facility condition surveys or prepared annual inspection summaries.