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Federal Real Property: GSA Needs to Strengthen Oversight of Its Delegated Leasing Program

GAO-19-405 Published: Jun 03, 2019. Publicly Released: Jun 03, 2019.
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Fast Facts

Usually, the General Services Administration buys or leases the real estate that federal agencies use for offices, labs, etc. However, GSA delegates some of its leasing authority to agencies. GSA is supposed to ensure that those leases' rental values and rates are fair and reasonable.

Our recommendations address several issues we found:

GSA could better identify and correct errors that we found in its database

GSA doesn't know if agencies are managing their leases in a cost-effective way

GSA doesn't systematically review delegated lease documents, so it can't be sure that delegated leases meet requirements

 

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The front of the General Services Administration headquarters

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Highlights

What GAO Found

The General Services Administration (GSA) has taken steps to reform its delegated leasing program, but data reliability issues remain. For example, GSA created GSA's Real Estate Exchange (G-REX) to centralize delegated lease requests and approvals, but GAO found G-REX had incorrect information on lease rental values and rates—reporting rates 12 times higher than they actually were. Moreover, GAO found that GSA was not annually reconciling data between G-REX and the government-wide real property database, per GSA's own procedures. GSA officials said that their past efforts to fully reconcile the data were unsuccessful but acknowledged there may be ways to compare the data to improve the reliability of both datasets. Until GSA clarifies what it can do to partially reconcile the data sets, it is not obtaining the intended benefits of this data validation exercise.

GSA does not know if agencies have the ability to manage their delegated leasing activities because it does not regularly assess their policies and procedures, or their performance in meeting GSA's management goals, such as avoiding extensions. GSA procedures state that GSA will consider the agency's organizational structure and ability to meet certain GSA performance measures prior to granting requests for delegated leasing authority. Moreover, federal internal control standards call for agencies to design control activities to better manage the program. However, GSA officials said that GSA relies on the agencies to oversee their own delegated leases. Nevertheless, GAO found instances of inadequate policies and procedures at one agency in managing its delegated leasing activities. Further, all 4 agencies had delegated leases that were in holdover status (occupying a space beyond the expiration of the lease term), which violates program requirements. Because GSA does not regularly assess agencies' procedures or performance, it cannot ensure that agencies are effectively managing their delegated leasing activities.

GSA cannot ensure that the leases agencies execute under delegated authority meet program requirements and are within the authority granted because it lacks key procedures to do so. GAO found that GSA had only reviewed 1 percent of the post lease award documents agencies had submitted, and in some cases, agencies had not submitted required documentation. GSA officials said the agencies are responsible for ensuring that documents are submitted and requirements are met. However, a risk-based assessment of a selection of delegated leases' post award documents can provide assurances that agencies comply with existing regulations and prevent potential fraud, waste, and abuse. Because GSA did not have a process to systematically review these documents, GSA is unable to ensure that delegated leases meet requirements and that agencies are positioned to prevent fraud, waste, or abuse.

Why GAO Did This Study

As the federal government's landlord, GSA is authorized to lease property to accommodate federal agencies. It can also delegate this authority to other agencies, though GSA is still responsible for overseeing the delegated leasing program. However, prior audits found problems with delegated leasing, including excessive rental rates and insufficient documentation to support that the government received a fair and reasonable price for the lease.

GAO was asked to review GSA's delegated leasing program. This report examines: 1) GSA's efforts to reform its delegated leasing program; 2) the extent to which GSA assesses agencies' policies, procedures, and performance in managing their delegated leasing activities; and 3) the extent to which GSA ensures delegated leases meet requirements. GAO reviewed federal statutes and regulations, and GSA's guidance and data on delegated leases. To illustrate how GSA approves and oversees delegated leases, GAO judgmentally reviewed 17 delegated leases selected to include lease contract value, type of lease, and agencies with high number of delegated leases. GAO interviewed officials from GSA and the four agencies associated with GAO's selected delegated leases.

Recommendations

GAO recommends that GSA (1) reconcile its databases; (2) regularly assess agency procedures for managing delegated leasing, (3) track agency performance, and (4) develop a review process for post lease award documents. GSA agreed with the recommendations.

Recommendations for Executive Action

Agency Affected Recommendation Status
General Services Administration The Administrator of GSA should take steps to reconcile G-REX and the Federal Real Property Profile to the extent practical. (Recommendation 1)
Closed – Implemented
A lack of reliable data to support decision-making is one of the main reasons that federal real property remains on GAO's High-Risk List. In a 2019 report, GAO reported that, in spite of the General Services Administration's (GSA) efforts to reform its delegated leasing program, data quality issues remained. Furthermore, these data quality issues affected GSA's ability to monitor its delegated leasing program. For example, while GSA took steps to improve GSA's Real Estate Exchange (G-REX) system, it did not reconcile the Federal Real Property Profile (FRPP) and G-REX data, pursuant to its own procedure. Specifically, the 2014 Bulletin states that GSA will perform an annual reconciliation of data between FRPP and G-REX. GSA officials described the annual reconciliation as an oversight procedure that would help ensure that GSA has an accurate listing of delegated leases. According to GSA officials, they tried to fully reconcile the two databases in 2014 but were unable to do so. GSA officials later reported that, even though the 2014 Bulletin still called for the annual reconciliation of data in G-REX and FRPP, they believed fully reconciling the two datasets would have little, if any, value, and had no intentions to do so. The Standards for Internal Control in the Federal Government state that improving the reliability of data could help agencies better manage programs. GAO recognized the challenges posed by attempting to fully reconcile G-REX and FRPP. However, the 2014 Bulletin did not explicitly state GSA would perform a full reconciliation. GSA could partially reconcile G-REX and FRPP by doing some cross-data comparison. For example, had GSA cross-verified G-REX and FRPP data, even on a case-by-case basis, it could have potentially caught and addressed the data quality issues GAO found in G-REX earlier. Therefore, GAO recommended that GSA take steps to reconcile G-REX and FRPP to the extent practical. In 2021, GAO confirmed that GSA had issued Standard Operating Procedures for annually reconciling the data within G-REX and FRPP. Specifically, the procedures outlined steps to identify discrepancies between the inventory of delegated lease requests in the G-REX application and an agency's inventory of delegated leases reported to the FRPP database, on an annual basis. As a result of these procedures, GSA will be in a better position to improve the reliability-thereby the usefulness-of both databases and monitor its delegated leasing program.
General Services Administration The Administrator of GSA should develop a process for assessing at regular intervals, such as annually, agencies' policies and procedures for managing their delegated leasing activities. (Recommendation 2)
Closed – Implemented
As the main leasing agent for the federal government, the General Services Administration (GSA) is authorized to acquire lease property to accommodate federal agencies. GSA may delegate its leasing authority to other agencies if GSA determines it is in the government's best interest. However, when GSA delegates its leasing authority to other agencies, GSA is still responsible for overseeing the overall delegated leasing program. When not properly managed, delegated leases run the risk of not being cost effective for the federal government. In a 2019 report, GAO reported that GSA did not know if agencies had the ability to manage their delegated leasing activities because it did not regularly assess their policies and procedures. Specifically, GSA had not designed control activities that would allow it to determine the adequacy of requesting agencies' policies and procedures for their delegated leasing activities. Instead, GSA assessed agencies' activities on an ad hoc basis because they expect agencies to have the capacity to manage their delegated leases until evidence suggested otherwise, according to GSA officials. GAO found that not all 17 of its judgmentally selected agencies had sufficient policies and procedures to manage their own delegated leases. GSA's 2014 Bulletin states that GSA will review the adequacy of the requesting agency's organizational structure and staffing proposed for the delegation; and whether the requesting agency has complied with all applicable laws, executive orders, regulations, OMB Circulars, and reporting requirements under previously authorized delegated leases. According to federal standards for internal control, management should design control activities to achieve objectives and respond to risks. If GSA had designed control activities to regularly review each agency's policies and procedures for managing its delegated leases, GSA officials could have known earlier that an agency lacked the ability to manage its delegated leases and possibly delayed granting additional delegations of leasing authority until the agency had demonstrated their ability to manage its delegated leasing activities. GSA officials said assessing an agency's policies and procedures to manage delegated leasing activities when reviewing the agency's individual application for a delegation of leasing authority is not practical. However, GSA could assess agencies' policies and procedures for managing delegated leasing activities at regular intervals, such as annually or biennially. By not following its own procedures set out in the 2014 Bulletin, or regularly assessing agencies' ability to manage their own delegated leasing activities, GSA cannot ensure that it is providing this authority to agencies that can manage it effectively. Therefore, GAO recommended that GSA should develop a process for assessing at regular intervals, such as annually, agencies' policies and procedures for managing their delegated leasing activities. In December 2019, GSA issued a new annual checklist to agencies with delegated leasing authority that assesses their policies and procedures for managing their delegated leasing activities. For example, agencies are required to represent and self-certify annually to GSA using the certification of organizational compliance checklist in order to be eligible for a delegation of lease acquisition authority. These periodic reviews will better position GSA to assess the ability of agencies to manage their delegated leasing activities and help GSA ensure that it is providing this authority to agencies that can manage it effectively and efficiently.
General Services Administration The Administrator of GSA should develop a process that would allow GSA to track agencies' progress in meeting GSA management goals, such as cost effective lease rates, and avoiding holdovers. (Recommendation 3)
Closed – Implemented
An overreliance on costly leases is one of the reasons why managing federal real property has been a high-risk issue since 2003. Specifically, lease extensions and expired leases in holdover or standstill status are inefficient and costly for the federal government. As the main leasing agent for the federal government, the General Services Administration (GSA) is authorized to acquire lease property to accommodate federal agencies. GSA may delegate its leasing authority to other agencies if GSA determines it is in the government's best interest. However, agencies are responsible for compliance with all applicable requirements when using delegated leasing authority, including GSA's 2014 FMR Bulletin C-2 (the 2014 Bulletin) which provides usage and reporting requirements for delegations of leasing authority. In a 2019 report, GAO reported that GSA does not track agencies' performance toward meeting GSA's management goals, which is inconsistent with the 2014 Bulletin and GSA policy. GSA's three key management goals for tracking the success of the delegated leasing program are delegated leases should (1) have lease rates that are at or below private sector rates over half the time, (2) not extend into holdover status, and (3) not be extended unless necessary to avoid a holdover. GSA officials said that GSA does not track the performance of agencies with delegated leasing authority against these three management goals because it is primarily the agencies' responsibility to ensure they meet them. However, the four agencies with delegated leases that GAO reviewed did not always meet GSA's three goals. For example, according to GAO's analysis of agency data, all four selected agencies have expired delegated leases where the agency either has a standstill agreement with the landlord, or is simply in holdover status. Absent procedures to regularly track agencies' performance in meeting key management goals, GSA cannot ensure that agencies can sufficiently manage their leases or secure cost-effective rates, which is consistent with delegated leasing requirements and GSA policy. Therefore, GAO recommended that GSA should develop a process that would allow GSA to track agencies' progress in meeting GSA management goals, such as cost effective lease rates, and avoiding holdovers. In 2021, GAO confirmed that GSA issued a leasing alert to agencies with delegated leases requiring that they report annually on their progress in meeting GSA management goals related to achieving market rates and avoiding holdovers. By using a leasing alert to regularly tracking the performance of agencies with delegated leasing authority, GSA is better positioned to ensure cost effectiveness and limit the use of extensions, holdovers, and standstill agreements.
General Services Administration The Administrator of GSA should develop a systematic, risk-based process for monitoring a selection of submitted post award documents. (Recommendation 4)
Closed – Implemented
The General Services Administration (GSA) may delegate its leasing authority to other agencies if GSA determines it is in the government's best interest. However, when GSA delegates its leasing authority to other agencies, GSA is still responsible for overseeing the overall delegated leasing program. In addition, GSA acts as a guarantor for the leases in the event of a default by an agency. In a 2019 report, GAO reported that GSA could not ensure that leases agencies executed under delegated authority met program requirements and were within the authority granted because it lacked key procedures to do so. For example, as of November 2018, GSA had only reviewed 1 percent of the post-lease award documents agencies had submitted, and in some cases, agencies had not submitted required documentation. According to GSA officials, they had not developed a system for reviewing post award documents because GSA views it as primarily the responsibility of the agency with the delegated authority to ensure they comply with post award requirements. Further, according to GSA officials, GSA's primary role in the lease delegation process is to review and approve requests for delegated leasing authority. However, GSA's reliance on agencies to comply with all requirements absent any mechanism to ensure post award accountability could allow agencies to lease space outside of the delegated authority granted to them. GAO has previously identified risk-based assessment and mitigation as leading practices for providing assurances to managers that they are complying with existing legislation, regulations, and standards and effectively preventing, detecting, and responding to potential fraud, waste, and abuse. Without a systematic process for reviewing post award documentation, GSA cannot verify that leases were executed within the parameters of the granted delegated leasing authority and in accordance with program requirements. Therefore, GAO recommended that GSA should develop a systematic, risk-based process for monitoring a selection of submitted post award documents. In March 2020, GSA established a Standard Operating Procedure that outlined steps, that will be taken annually, to select and review a sample of documents required to be submitted post-award for all delegated leases. Specifically, the guidance developed a risk-based process for monitoring a selection of post-award lease documents based on lease value and size, and procurement complexity. By establishing a systematic process for monitoring a selection of submitted post award documents, GSA will be able to better identify and promptly resolve issues and ensure compliance with existing legislation, regulations, and standards. In addition, GSA will be better able to ensure that delegated leases comply with the terms of the delegation and that the program is free from fraud, waste, and abuse.

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Acquisition plansCompliance oversightData errorsData qualityInternal controlsLease agreementsPerformance measurementPerformance plansPolicies and proceduresReal propertyRental ratesFederal propertyProgram management