NASA: Enhanced Use Leasing Program Needs Additional Controls
(01-MAR-07, GAO-07-306R).
In 2003, the National Aeronautics and Space Administration (NASA)
was authorized to demonstrate enhanced use leasing (EUL) at two
centers, allowing the agency to retain the proceeds from leasing
out underutilized real property and to accept in-kind
consideration in lieu of cash for rent. NASA selected Ames
Research Center and Kennedy Space Center for the demonstration
program. The agency had requested that Congress extend this
authority to additional NASA centers during formulation of the
NASA Authorization Act of 2005. NASA's request was not granted.
Instead, Section 710 of the NASA Authorization Act of 2005
(Public Law 109-155) directed GAO to review NASA's EUL program.
We examined (1) the financial impact of the EUL authority on NASA
and whether EUL revenue and other financial benefits would have
been realized without the authority, (2) NASA's use of the
authority and whether the arrangements made under the authority
would have been made in the absence of the authority, and (3)
what controls are in place to ensure accountability and
transparency and to protect the government. The act also directed
GAO to report back to the Congress by December 30, 2006. We
presented our preliminary findings to Congress in December 2006.
Because of Congress's interest in how NASA is implementing its
EUL authority, we are enclosing the full briefing that supported
that December presentation with this report, along with a summary
of our findings and conclusions.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-306R
ACCNO: A66384
TITLE: NASA: Enhanced Use Leasing Program Needs Additional
Controls
DATE: 03/01/2007
SUBJECT: Accountability
Assets
Facility repairs
Federal facilities
Federal property
Internal controls
Lessons learned
Program evaluation
Real estate leases
Real property
Research and development facilities
Transparency
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO Product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
******************************************************************
GAO-07-306R
March 1, 2007
The Honorable Daniel K. Inouye
Chairman
The Honorable Ted Stevens
Co-Chairman
Committee on Commerce, Science, and Transportation
United States Senate
The Honorable Bart Gordon
Chairman
The Honorable Ralph M. Hall
Ranking Member
Committee on Science and Technology
House of Representatives
Subject: NASA: Enhanced Use Leasing Program Needs Additional Controls
In 2003, the National Aeronautics and Space Administration (NASA) was
authorized to demonstrate enhanced use leasing (EUL) at two centers,
allowing the agency to retain the proceeds from leasing out underutilized
real property and to accept in-kind consideration in lieu of cash for
rent. NASA selected Ames Research Center and Kennedy Space Center for the
demonstration program. The agency had requested that Congress extend this
authority to additional NASA centers during formulation of the NASA
Authorization Act of 2005.
NASA's request was not granted. Instead, Section 710 of the NASA
Authorization Act of 2005 (Public Law 109-155) directed GAO to review
NASA's EUL program. We examined (1) the financial impact of the EUL
authority on NASA and whether EUL revenue and other financial benefits
would have been realized without the authority, (2) NASA's use of the
authority and whether the arrangements made under the authority would have
been made in the absence of the authority, and (3) what controls are in
place to ensure accountability and transparency and to protect the
government. The act also directed GAO to report back to the Congress by
December 30, 2006.
We presented our preliminary findings to your staff in December 2006.
Because of your committees' interest in how NASA is implementing its EUL
authority, we are enclosing the full briefing that supported that December
presentation with this report (see encl. II), along with a summary of our
findings and conclusions. To ensure that NASA's EUL program is transparent
and protects the interests of the government, we are recommending that
before considering further expansion of the program, NASA develop an
agency wide EUL policy, based upon sound business practices and lessons
learned from the demonstration centers, that establishes minimum standards
for controls and processes, such as best economic value criteria, measures
of effectiveness, and specific accounting controls. In written comments,
NASA concurred with our recommendation and stated that the agency has
begun taking the steps necessary to develop an agency wide EUL policy and
to adopt mechanisms to keep the Congress fully informed of its activities
under EUL authority (see encl. I).
Background
Because of long-standing problems with excess and underutilized property,
deteriorating assets, unreliable real property data, and costly facilities
challenges, GAO designated federal real property as a high-risk area in
January 2003. We have reported that many federal real property
assets--including facilities and land worth hundreds of billions of
dollars--are in an alarming state of deterioration, and agencies have
estimated restoration and repair needs to be in the tens of billions of
dollars.^1
Like many federal agencies, NASA faces considerable challenges addressing
facilities needs with limited funds. As the ninth largest federal
government property holder, NASA owns more than 100,000 acres of real
estate, as well as over 3,000 buildings and 3,000 other structures
totaling over 44 million square feet. However, the agency has large and
growing capital repair needs. NASA's property database shows over $1.8
billion of deferred maintenance for the agency's facilities. In addition,
over 10 percent of the agency's facilities are underutilized or not
utilized at all. According to NASA's 2004 Real Property Management Plan,
critical attention to maintenance and recapitalization is required to
ensure NASA's ability to safely and effectively achieve its vision and
mission.
We have reported that in an era of limited resources and growing mission
needs, many agencies have turned to approaches other than full up-front
appropriated funding to finance real property acquisitions and
improvements.^2 EUL authority--which allows agencies to accept cash and/or
in-kind consideration for real property leases and to retain the
proceeds--is one of these alternative approaches.
We have also reported that although third-party financing arrangements,
such as EUL, can make it easier for agencies to manage within a given
amount of budget authority, they also increase the need for effective
implementation and monitoring by agencies to ensure that the government's
interests are protected.^3 We found that many partnership arrangements,
such as EUL, included specific attributes that did not require agencies to
reflect the full, up-front costs in the budget. For example, in one case,
under its EUL authority, the Veterans Administration (VA) leased out land
to a developer with a 35-year no-cost enhanced use lease. The developer
built a facility on the property to provide housing for single homeless
individuals. The developer agreed to give veterans referred by VA priority
placement for at least 50 percent occupancy of the property. Although the
improvements may be surrendered to VA at the end of the lease term, the
transaction was completely invisible in VA's budget because it did not
involve cash consideration.
^1Statement of David M. Walker, before the Senate Committee on
Governmental Affairs, Federal Real Property: Actions Needed to Address
Long-standing and Complex Problems, [1]GAO-04-119T (Washington, D.C.: Oct.
1, 2003).
^2GAO, Budget Issues: Alternative Approaches to Finance Federal Capital,
[2]GAO-03-1011 (Washington, D.C.: Aug. 21, 2003).
^3GAO, Capital Financing: Partnerships and Energy Savings Performance
Contracts Raise Budgeting and Monitoring Concerns, [3]GAO-05-55
(Washington, D.C.: Dec. 16, 2004).
The Comptroller General has also testified that public-private
partnerships can be a viable option for redeveloping obsolete federal
property if they provide the best economic value for the government,
compared with other options, such as federal financing through
appropriations or sale of the property.^4 He also testified that full
transparency with regard to the government's real property activities and
an effective system to measure results are needed.
Results in Brief
Since beginning the EUL demonstration, NASA has realized about $1.3
million in EUL-related financial benefits--$972,546 of lease revenue and
over $350,000 of in-kind consideration--most of which would not have been
realized by NASA without EUL authority.^5 Under its existing authorities,
the agency would have been required to remit lease revenue in excess of
costs to the U.S. Treasury and would not have been allowed to accept
in-kind consideration exceeding costs for rent, except to a limited extent
for historic property. Of the lease revenue collected, NASA spent about
$480,000--all at Ames Research Center--on maintenance and improvement of
real property assets.
NASA is using EUL authority to develop underutilized real property at Ames
and Kennedy for use by others. Ames and Kennedy have entered into EUL
agreements for underutilized office space, unique research and development
facilities, and land. In addition, both centers plan to use EUL authority
to incorporate research parks (for Kennedy, an "exploration park") into
their plans for expansion of their capabilities to support the NASA
mission. According to agency officials, while NASA would have leased some
of its underutilized property under existing authorities, the ability to
collect rent as well as in-kind consideration under NASA's EUL authority
provided the agency with increased incentive and flexibility to develop
underutilized real property.
While each demonstration center has mechanisms to ensure that EUL
agreements provide benefit, beyond rent, to NASA and fair market
consideration is received for all property, we found that the agency does
not have adequate controls in place to ensure accountability and
transparency and to protect the government. For example, the agency has
not established measures of effectiveness or criteria for determining
whether EUL represents the best economic value to the government. Further,
the agency has no accounting system for tracking and reporting the value
of in-kind consideration, and in some instances, we could not trace
financial data to source documents and other financial data was not
readily available. Finally, NASA's implementation of EUL could lessen
budget transparency. For example, NASA's EUL authority allows the agency
to accept in-kind consideration in the form of services or construction
that is not recognized in the agency's budget. In addition, EUL cash
revenue is not readily apparent within the agency's reimbursable budget
line. And even though this cash revenue is reported to the Congress in
NASA's annual EUL report, the budget does not fully inform the Congress
regarding NASA's use of its EUL authority.
^4 [4]GAO-04-119T .
^5In addition to the $1.3 million, NASA collected $1.2 million--that could
have been collected without EUL authority--that agency officials told us
offset, to some extent, the agency's costs for common services such as
security.
Conclusion
Although EUL authority provides NASA with increased flexibility in
managing its real property, it also increases the need for effective
controls and monitoring to ensure that the government's interests are
protected. Without measures of effectiveness, criteria for determining
best economic value, and adequate accounting controls and processes, it
will be difficult for NASA to ensure that EUL is the best option for each
instance in which EUL is used and that the purpose of the law providing
NASA with EUL authority is met. In addition, when EUL funds and their use
are not transparent within the agency's budget, congressional decision
makers face a knowledge gap relative to monitoring NASA's EUL activities.
Improved transparency would provide the Congress with a more complete
basis for assessing NASA's wants and needs. If the EUL program is to be
expanded, NASA needs to develop an agency wide policy that ensures
accountability, protects the government, and provides transparency
regarding the agency's EUL activities.
Recommendation for Executive Action
Before NASA considers requesting that the Congress extend EUL authority to
additional centers, we recommend that the NASA Administrator develop an
agency wide EUL policy, based upon sound business practices and lessons
learned from the demonstration centers, that establishes controls and
processes to ensure accountability and protect the government's interests,
including
o criteria for determining that EUL represents the best economic
value for the government, compared with other options, such as
federal financing through appropriations or sale of the property;
o measures of effectiveness for the EUL program, such as
reductions in the square footage of underutilized property and in
the dollar amount of deferred maintenance; and
o accounting controls and processes to ensure accountability, such
as an
o accounting system for tracking the value of in-kind
consideration and an
o audit trail and documentation to readily support
financial transactions.
In addition, if NASA receives expanded EUL authority, the agency also
needs to adopt mechanisms to keep the Congress fully informed of the
agency's activity under EUL authority, including
o identifying and quantifying the value of in-kind consideration
arrangements and expenditures of EUL revenue in its annual EUL
reports to the Congress, and
o reporting the availability and use of EUL funds in the agency's
operating plans.
Agency Comments and Our Evaluation
In written comments on a draft of this report (see encl. I), NASA
concurred with our recommendation.
Scope and Methodology
To determine the financial impact of EUL authority on NASA, we obtained
and analyzed pertinent EUL records and quantified financial impact in
terms of cash and in-kind consideration. To ascertain whether these
benefits would have been realized in the absence of the authority, we
obtained and analyzed copies of all of NASA's pre-existing real property
authorities, and determined whether they could have provided NASA with the
revenue and financial benefits realized with EUL authority. To clarify our
understanding, we conducted interviews with cognizant and responsible NASA
officials at NASA Headquarters, Ames Research Center, and Kennedy Space
Center.
To evaluate the use of the program, we reviewed leasing agreements and
visually inspected selected leased properties at both demonstration
centers. We reviewed the centers' future plans for the program and
discussed NASA's use and plans for the program with cognizant and
responsible NASA officials at both centers and NASA Headquarters. To
ascertain whether existing arrangements would have been made in the
absence of the program, we examined the existing EUL agreements in light
of NASA's pre-existing real property authorities, discussed NASA's pre-EUL
authority development plans, and identified instances when NASA originally
planned to develop property, currently being developed under EUL
authority, with other real property authorities. We also interviewed
responsible NASA officials to determine whether NASA would have made the
current arrangements and plans without the EUL authority.
To assess the controls NASA has in place to ensure accountability and
transparency and to protect the government, we judgmentally sampled EUL
leasing agreements and discussed the selected lease arrangements with
cognizant and responsible NASA officials. We obtained each center's
records of the financial transactions associated with the selected leasing
agreements, and we attempted to reconcile these records with the leases
and support agreements. We also had extensive discussions with cognizant
and responsible NASA officials regarding in-kind consideration
transactions, fair market value, value beyond rent to NASA, criteria for
determining the best economic value to the government, accounting for EUL
in NASA's budget, and measures of effectiveness.
To accomplish our work, we visited NASA Headquarters, Washington, D.C.;
Ames Research Center, California; and Kennedy Space Center, Florida. We
conducted our work from July 2006 through December 2006 in accordance with
generally accepted government auditing standards.
We will send copies of the report to NASA's Administrator and interested
congressional committees. We will also make copies available to others
upon request. In addition, the report will be available at no charge on
GAO's Web site at http://www.gao.gov.
Should you or your staff have any questions on matters discussed in this
report, please contact me at (202) 512-4841 or [email protected]. Contact points
for our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. Principal contributors to this report
were Jim Morrison, Assistant Director; Sylvia Schatz; Erin Schoening;
Robert Swierczek; and John Warren.
Allen Li
Director
Acquisition and Sourcing Management
Enclosures
120620
Enclosure I: Comments from the National Aeronautics and Space
Administration
Enclosure II: Briefing for Congressional Staff
NASA�s Enhanced Use Leasing Demonstration Program
Since beginning the EUL demonstration, NASA has realized about $1.3
million in EUL-related financial benefits--$972,546 of lease revenue and
over $350,000 of in-kind consideration--most of which would not have been
realized by NASA without EUL authority. Under its existing authorities,
the agency would have been required to remit lease revenue in excess of
costs to the U.S. Treasury and would not have been allowed to accept
in-kind consideration exceeding costs for rent, except to a limited extent
for historic property. Of the lease revenue collected, NASA spent about
$480,000--all at Ames Research Center--on maintenance and improvement of
real property assets. In addition to the $1.3 million, NASA collected $1.2
million--that could have been collected without EUL authority--that agency
officials told us offset, to some extent, the agency's costs for common
services such as security.
NASA is using EUL authority to develop underutilized real property at Ames
and Kennedy for use by others. Ames and Kennedy have entered into EUL
agreements for underutilized office space, unique research and development
facilities, and land, and both centers plan to use EUL agreements to
develop research parks. According to agency officials, while NASA would
have conducted some development under existing authorities, EUL authority
provided the agency with increased incentive and flexibility to develop
underutilized real property.
While each demonstration center has mechanisms to ensure that EUL
agreements provide benefit, beyond rent, to NASA and fair market
consideration is received for all property, we found that the agency does
not have adequate controls in place to ensure accountability and
transparency and to protect the government. For example, the agency has
not established measures of effectiveness or criteria for determining
whether EUL represents the best economic value to the government. In terms
of financial accountability, we found weaknesses that hamper
accountability and transparency. For example, the agency has no accounting
system for tracking and reporting the value of in-kind consideration, and
in some instances, we could not trace financial data to source documents
and financial data were not readily available. Finally, NASA's
implementation of EUL could lessen budget transparency. For example,
NASA's EUL authority allows the agency to accept in-kind consideration in
the form of services or construction that is not recognized in the budget.
In addition, EUL cash revenue is not readily apparent within the agency's
reimbursable budget line.
Briefing Structure
Background page 2
Findings
NASA Has Realized about $1.3 Million in EUL Benefits page 3
NASA Uses EUL to Develop Underutilized Property page 4
NASA's EUL Program Needs Additional Controls page 6
Appendix
Scope, Methodology, and Contributors page 7
Why GAO Did This Study
In 2003, the National Aeronautics and Space Administration (NASA) was
authorized to employ enhanced use leasing (EUL) at two demonstration
centers, allowing the agency to retain the proceeds from leasing out
underutilized real property and to accept in-kind consideration in lieu of
cash for rent. NASA selected Ames Research Center and Kennedy Space Center
for the demonstration program. The agency has requested that the Congress
extend this authority to at least six NASA centers.
Section 710 of the NASA Authorization Act of 2005 (Public Law 109-155)
directed GAO to review NASA's EUL program. We examined (1) the financial
impact of the EUL authority on NASA and whether EUL revenue and other
financial benefits would have been realized without the authority, (2)
NASA's use of the authority and whether the arrangements made under the
authority would have been made in the absence of the authority, and (3)
what controls are in place to ensure accountability and transparency and
to protect the government. The act also directed GAO to report back to the
Congress by December 30, 2006.
Related GAO Reports
Real Property is a High-Risk Area
Because of long-standing problems with excess and underutilized property,
deteriorating facilities, unreliable real property data, and costly space
challenges, GAO designated federal real property as a high-risk area in
January 2003. We have reported that many federal real property
assets--including facilities and land worth hundreds of billions of
dollars--are in an alarming state of deterioration, and agencies have
estimated restoration and repair needs to be in the tens of billions of
dollars.
Like many federal agencies, NASA faces considerable challenges addressing
facilities needs with limited funds. As the ninth largest federal
government property holder, NASA owns more than 100,000 acres of real
estate, as well as over 3,000 buildings and 3,000 other structures
totaling over 44 million square feet. However, the agency has large and
growing capital repair needs. NASA's property database shows over $1.8
billion of deferred maintenance for the agency's facilities. In addition,
over 10 percent of the agency's facilities are underutilized or not
utilized at all. According to NASA's 2004 Real Property Management Plan,
critical attention to maintenance and recapitalization is required to
ensure NASA's ability to safely and effectively achieve its vision and
mission.
Alternative Financing Has Been Used by Other Agencies
We have reported that in an era of limited resources and growing mission
needs, many agencies have turned to approaches other than full up-front
appropriated funding to finance capital. EUL authority--which allows
agencies to accept cash and/or in-kind consideration for real property
leases and to retain the proceeds--is one of these alternative approaches.
In December 2004, we reported that although third-party financing
arrangements, such as EUL, can make it easier for agencies to manage
within a given amount of budget authority, they also increase the need for
effective implementation and monitoring by agencies to ensure that the
government's interests are protected. We reported that many partnership
arrangements, such as EUL, were structured to include specific attributes
that did not require agencies to reflect the full, up-front costs in the
budget. For example, in one case, the Veterans Administration (VA)
outleased land to a developer with a 35-year no-cost enhanced use lease.
The developer built a facility on the property to provide housing for
single homeless individuals. The developer agreed to give veterans
referred by VA priority placement for at least 50 percent occupancy of the
property. Although the improvements may be surrendered to VA at the end of
the lease term, the transaction was completely invisible in VA's budget
because it did not involve cash consideration.
Related GAO Reports
GAO, Defense Infrastructure: Greater Management Emphasis Needed to
Increase the Services' Use of Expanded Leasing Authority, GAO-02-475
(Washington, D.C.: June 6, 2002).
Statement of David M. Walker, before the Senate Committee on Governmental
Affairs, Federal Real Property: Actions Needed to Address Long-standing
and Complex Problems, GAO-04-119T (Washington, D.C.: Oct. 1, 2003).
GAO, Budget Issues: Alternative Approaches to Finance Federal Capital,
GAO-03-1011 (Washington, D.C.: Aug. 21, 2003).
GAO, Capital Financing: Partnerships and Energy Savings Performance
Contracts Raise Budgeting and Monitoring Concerns, GAO-05-55 (Washington,
D.C.: Dec. 16, 2004).
Statement of David M. Walker, before the Senate Committee on Homeland
Security and Governmental Affairs, Subcommittee on Federal Financial
Management, Government Information, and International Security, Budget
Process: Better Transparency, Controls, Triggers, and Default Mechanisms
Would Help to Address Our Large and Growing Long-term Fiscal Challenge,
GAO-06-761T (Washington, D.C.: May 25, 2006).
Source: NASA data, GAO analysis.
Note: Because of financial management weaknesses identified during our
limited review of NASA's data, we were unable to confirm the accuracy of
the amounts presented in this table. Also, amounts for fiscal year 2006
include estimates for September 2006.
Findings
NASA Has Realized about $1.3 Million in EUL Benefits
NASA has realized about $1.3 million in EUL-related financial benefits
since beginning the EUL demonstration--most of which would not have been
realized by NASA without EUL authority. However, without EUL
authority,some of these financial benefits could have accrued to the
federal government.
o Under its existing real property authorities, NASA would have
been required to return lease proceeds in excess of costs to the
general fund of the U.S. Treasury and could not have accepted
in-kind consideration exceeding costs for rent, except to a
limited extent for historic property under the National Historic
Preservation Act (NHPA).
o The agency collected $972,546 of gross lease revenue. Of this
amount, $58,792 for general and administrative expenses would have
been retained by NASA, leaving $913,754 net rent that NASA would
have been required to return to the U.S. Treasury, without
specific authority allowing the agency to retain the funds. For
example, under NHPA, NASA could have retained $416,029 net rent
for 2 years, but the funds had to be used in conjunction with
preserving historic property. With EUL authority, NASA can retain
the entire $913,754 net rent indefinitely and can expend the funds
on any properties at the demonstration centers.
o Ames realized in-kind consideration worth over $350,000 for
tenant improvements and animal husbandry services, according to
agency officials, that could not have been accepted without EUL
authority.
Of the amount collected, NASA spent about $480,000--all at Ames--on
maintenance and improvement of real property assets.
In addition to the $1.3 million, NASA collected $1.2 million--that could
have been collected without EUL--that agency officials told us offset, to
some extent, the agency's costs for common services such as security and
fire protection.
NASA�s EUL Authority
NASA's EUL authority--granted by the Congress in 2003--affords the agency
the opportunity to lease out underutilized real property in exchange for
cash and/or in-kind consideration, such as improvement of NASA's
facilities or the provision of services to NASA. Further, NASA can deposit
funds not used to cover lease costs in a no-year capital account to be
available for maintenance, capital revitalization, and improvement of the
real property, albeit only at the demonstration centers. Unlike other
agencies with EUL authority, however, NASA is not authorized to lease back
the property during the term of the lease.
NASA is required by the enabling law to submit an annual report by January
31 of each year regarding the status of the EUL demonstration. Thus far,
these annual reports have included descriptions of the status of the
demonstration and planned activities, as well as tables listing enhanced
use lease agreements and showing annual rent and common service charges
for each lease.
NASA Uses EUL to Develop Underutilized Property
NASA is currently using EUL authority to maintain and develop
underutilized real property at Ames and Kennedy.
o Ames has entered into over 50 EUL agreements, leasing out
underutilized office space and unique research and development
facilities. Much of the space is located in the historic portion
of the old Moffett Field Naval Base.
o Kennedy has entered into 8 EUL agreements for ground leases for
press sites and telecommunication equipment.
o Both centers plan to use EUL agreements, in conjunction with
private financing, to develop research parks.
NASA would have developed some of the properties leased out under EUL
using other authorities.
o Ames' research park, according to Ames officials, was first
approved for development with existing authorities during the
Clinton administration.
o Ames' renovation of historic property could have been done using
NHPA. For example, Ames used NHPA to lease a historic building to
a university.
o Kennedy, before receiving EUL authority, leased out press sites
and worked with the Spaceport Florida Authority to build a
laboratory facility as the "magnet facility" for the Kennedy
research park under the Space Act.
o Kennedy, according to agency officials, may use EUL authority to
develop improved visitor centers. The agency, however, has used
concessions agreements to build and maintain visitor centers,
including the new Saturn V concession.
SATURN V Concession at Kennedy Space Center
Source: GAO
EUL authority provided NASA with increased incentive and flexibility to
develop underutilized real property.
o Retaining revenue exceeding costs and maintaining no-year
capital accounts motivate the agency to invest the time necessary
to establish the arrangement.
o NASA implemented an aggressive plan at Ames to
vacate NASA employees from one historic building to
lease the space to EUL tenants and increase the EUL
revenue stream. According to agency officials, a
second objective of vacating the employees was to
consolidate them within Ames' fenced area to improve
security and efficiency.
o NASA used EUL funds to improve the historic
building, making it more attractive to potential EUL
tenants.
o Accepting in-kind consideration in lieu of cash for payment
provides flexibility in negotiating agreements. For example,
o Accepting building improvements in lieu of cash
rent allowed NASA to negotiate some agreements. In
these instances, NASA gets an improved building and
the tenant gets tailored space at the same cost.
o Accepting services in lieu of cash rent allowed
NASA to receive needed services and to retain
ownership of a unique asset--the Animal Care
Facility--with no cash outlay.
Key Elements of Other NASA Real Property Authorities
Concession Authority
This authorizes agreements for outreach and visitor centers. The
concessionaire is allowed to charg admission fees and to make with the
capital invested and the obligations assumed.
Space Act--Lease Authority These leases cannot exceed 5 years and require
Treasury to receivir value in money. But all amounts exceeding cost must
be returned to the Treasury. These leases must include a
termination-for-convenience clause.
Space Act--Other Transactions
There is no term limit on other transaction leases. NASA can obtain either
monetary or in-kind consideration. However, unlike with EUL authority, the
agency cannot retain consideration exceeding costs.
National Historic Preservation Act
NASA can lease historic property to ensure its preservation. Historic
property can be leased for less than fair market value if the tenant
assumes responsibility for maintaining and preserving the property. Cash
consideration may be retained by NASA for up to 2 fiscal years to defray
costs associated with the property.
Centers' Implementation Models Differ
Ames Research Center
o Ames is acting as its own master developer.
o Ames property is in a fully developed, desirable high- rent
area--Silicon Valley.
o Ames is required by an environmental impact study to include
on-site housing to mitigate traffic.
o Ames' planned development is a campus-like addition, with common
areas and recreation facilities, to the existing historic district
of Moffett Field.
Kennedy Space Center
o Kennedy property is low- value, unimproved swampy land.
o Kennedy is using an acquisition-like approach, including a
request for proposal, to select a research park developer.
o According to agency officials, Kennedy plans to use a similar
approach for future developments, such as the visitor center.
NASA�s EUL Program Needs Additional Controls
Each center has mechanisms to ensure that EUL agreements provide benefit,
beyond rent, to NASA and fair market value consideration is received for
all property. For example,
o Ames and Kennedy review potential EUL agreements to ensure that
they support NASA's mission.
o The demonstration centers use a combination of property
appraisals and rent surveys to determine fair market value.
However, NASA has not established adequate controls to ensure
accountability and protect the government. For example,
o NASA has not adopted measures of effectiveness or criteria for
determining best economic value to the government, according to
agency officials.
o We found financial management weaknesses that hamper
accountability.
o The agency has no accounting system for tracking
and reporting the value of in-kind consideration.
o In some instances, we could not trace financial
data to source documents and financial data were not
readily available.
NASA's implementation of EUL could lessen budget transparency. For
example,
o In-kind consideration agreements are not recognized in the
budget.
o The collection and use of EUL revenue are not readily apparent
within the agency's reimbursable budget line.
o NASA has previously proposed controls that could mitigate budget
transparency concerns, including a $25 million annual limitation
on EUL income and prohibitions on the use of EUL for the purpose
of construction of NASA-owned facilities.
Elements of Accountability and Transparency
NASA's financial management requirements stipulate that recorded
transactions be adequately documented so they may be traced from original
documents to financial statements, that a clear audit trail be
established, and that accounting and financial management data be recorded
and reported in the same manner throughout NASA, using uniform
definitions. These internal controls protect the agency against fraud,
waste, and abuse; ensure the accuracy and reliability of accounting and
operational data; and ensure compliance with federal laws and regulations.
In October 2003, the Comptroller General testified that public-private
partnerships can be a viable option for redeveloping obsolete federal
property if they provide the best economic value for the government,
compared with other options, such as federal financing through
appropriations or sale of the property. He also testified that full
transparency with regard to the government's real property activities and
an effective system to measure results are needed.
Appendix
Scope and Methodology
To determine the financial impact of EUL authority on NASA, we obtainedand
analyzed pertinent EUL records and quantified financial impact in terms of
cash and in-kind consideration. To ascertain whether these benefits would
have been realized in the absence of the authority, we obtained and
analyzed copies of all of NASA's pre-existing real property authorities,
and determinedwhether they could have provided NASA with the revenue and
financial benefits realized with EUL authority. To clarify our
understanding, we conducted interviews with cognizant and responsible NASA
officials at NASA Headquarters, Ames Research Center, and Kennedy Space
Center.
To evaluate the use of the program, we reviewed leasing agreements and
visually inspected selected leased properties at both demonstration
centers. We reviewed the centers' future plans for the program and
discussed NASA's use and plans for the program with cognizant and
responsible NASA officials at both centers and NASA Headquarters. To
ascertain whether existing arrangements would have been made in the
absence of the program, we examined the existing EUL agreements in light
of NASA's pre-existing real property authorities, discussed NASA's pre-EUL
authority development plans, and identified instances when NASA originally
planned to develop property, currently being developed under EUL
authority, with other real property authorities. We also interviewed
responsible NASA officials to determine whether NASA would have made the
current arrangements and plans without the EUL authority.
To assess the controls NASA has in place to ensure accountability and
transparency and to protect the government, we judgmentally sampled EUL
leasing agreements and discussed the selected lease arrangements with
cognizant and responsible NASA officials. We obtained each center's
records of the financial transactions associated with the selected leasing
agreements, and we attempted to reconcile these records with the leases
and support agreements. We also had extensive discussions with cognizant
and responsible NASA officials regarding in-kind consideration
transactions, fair market value, value beyond rent to NASA, criteria for
determining the best economic value to the government, accounting for EUL
in NASA's budget, and measures of effectiveness.
To accomplish our work, we visited NASA Headquarters, Washington, D.C.;
Ames Research Center, Moffett Field, California; and Kennedy Space Center,
Florida.
Contributors
If you have any questions concerning this briefing, please call Allen Li
at (202) 512-4841. Other key contributors to this report were Jim
Morrison, Assistant Director; Sylvia Schatz; Erin Schoening; Robert
Swierczek; and John Warren.
GAO's Mission
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting its
constitutional responsibilities and to help improve the performance and
accountability of the federal government for the American people. GAO
examines the use of public funds; evaluates federal programs and policies;
and provides analyses, recommendations, and other assistance to help
Congress make informed oversight, policy, and funding decisions. GAO's
commitment to good government is reflected in its core values of
accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony
The fastest and easiest way to obtain copies of GAO documents at no cost
is through GAO's Web site ( www.gao.gov ). Each weekday, GAO posts
newly released reports, testimony, and correspondence on its Web site. To
have GAO e-mail you a list of newly posted products every afternoon, go to
www.gao.gov and select "Subscribe to Updates."
Order by Mail or Phone
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent of
Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
copies mailed to a single address are discounted 25 percent. Orders should
be sent to:
U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
D.C. 20548
To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061
To Report Fraud, Waste, and Abuse in Federal Programs
Contact:
Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: [email protected]
Automated answering system: (800) 424-5454 or (202) 512-7470
Congressional Relations
Gloria Jarmon, Managing Director, [email protected] (202) 512-4400 U.S.
Government Accountability Office, 441 G Street NW, Room 7125 Washington,
D.C. 20548
Public Affairs
Paul Anderson, Managing Director, [email protected] (202) 512-4800
U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, D.C. 20548
References
Visible links
1. http://www.gao.gov/cgi-bin/getrpt?GAO-04-119T
2. http://www.gao.gov/cgi-bin/getrpt?GAO-03-1011
3. http://www.gao.gov/cgi-bin/getrpt?GAO-05-55
4. http://www.gao.gov/cgi-bin/getrpt?GAO-04-119T
*** End of document. ***