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April 11, 2018

FAA’s Management and Oversight Are Inadequate To Secure Timely and Cost-Efficient Agency-Leased Offices and Warehouses

Self-Initiated
Project ID: 
ZA2018040
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What We Looked At
Since 2003, the Government Accountability Office (GAO) has identified Federal real property management as a high-risk area. In fiscal year 2017, the Federal Aviation Administration’s (FAA) independently acquired lease portfolio represented $104 million in annual rent, with office and warehouses comprising about three-quarters of that total. FAA’s office and warehouse leases represent a total potential value of $1.4 billion. Given GAO’s persistent high-risk designation of Federal property management and the sustained Governmentwide focus on reform in this area, as well as the magnitude of taxpayer dollars involved, our audit objective was to assess FAA’s management and oversight of its office and warehouse leases.
 
What We Found
FAA’s management and oversight are inadequate to secure timely and cost-effective Agency-leased offices and warehouses. In particular, FAA has not maintained accurate data on its leases or established effective policies and procedures to help ensure its office and warehouse leases are cost-effective. For example, 26 of the 50 leases in our sample contained data errors in FAA’s property management database, which it uses to oversee, manage, and report on its leases. FAA also lacks an effective strategic planning process for identifying and achieving improved lease efficiency through efforts such as consolidations, relocations, and rightsizing of space. Finally, FAA has not established sufficient controls to reconcile and validate the accuracy of all lease payments. These weaknesses have not only led to many questionable lease decisions but also create serious obstacles to achieving the Agency’s space utilization standard. By not using its leased space as efficiently as possible, FAA has missed cost savings opportunities. Overall, we project a total of $37.6 million in funds that could have been put to better use due to various weaknesses in the Agency’s management and oversight of FAA-leased offices and warehouses.
 
Our Recommendations
FAA concurred with our 12 recommendations to improve FAA’s management and oversight of its office and warehouse leases. Based on FAA’s response, we consider all 12 recommendations resolved and open pending completion of planned actions.

Recommendations

Open

Closed

Closed on 03.29.2019
No. 1 to FAA

Revise and document a standardized data entry and validation process for the Service Areas to follow to help ensure consistent and accurate REMS data entry.

Closed on 12.12.2019
$14,572,294
No. 2 to FAA

Develop, document, and implement a new lease approval process that will allow for more timely decisions and for improved coordination with Service Area staff on the status of the decisions made during this process. Implementing this recommendation could potentially put $14.6 million in funds to better use due to missed rent reduction opportunities, which timely and coordinated lease efficiency opportunity decisions could have potentially prevented.

Closed on 04.25.2019
No. 3 to FAA

Improve and document methods used to share and communicate Headquarters lease policies, guidance, and initiatives to all real estate staff members in the Service Areas.

Closed on 10.22.2020
No. 4 to FAA

Revise and document lease policy and templates to clarify that the indefinite holdover clause should only be used in office and warehouse leases where mission-critical safety equipment or functions are housed, and document a process to verify this policy is followed.

Closed on 06.07.2019
No. 5 to FAA

Revise, document, and implement a procedure to require and verify that for any office or warehouse lease whose firm-term portion is greater than one year, an analysis showing use of a firm-term lease is advantageous to the Agency is documented in the lease file.

Closed on 06.07.2019
No. 6 to FAA

Revise and document the real estate strategic planning process so that it: (1) provides for annual updates and (2) increase Service Area involvement and awareness.

Closed on 06.07.2019
No. 7 to FAA

Develop and implement a method for increasing the likelihood that LOBs provide the necessary funding to implement agreed upon lease efficiency opportunities.

Closed on 01.31.2019
$111,138
No. 8 to FAA

Develop, document, and implement controls to (1) reconcile and validate the accuracy of lease payments that are made during the term of the lease and (2) verify that any lease payment made has an active and valid lease associated with it. Implementing this recommendation could potentially put $111,138 in funds to better use for uncollected interest on erroneous lease payments.

Closed on 05.01.2019
$9,964
No. 9 to FAA

Take appropriate action to address the $9,964 in improper payments identified in this report.

Closed on 04.16.2019
No. 10 to FAA

Provide additional guidance and/or training to FAA staff to reinforce existing policy regarding: (1) the proper coding of payments captured under each of the various lease-related object class codes in the Agency's accounting system, Delphi; and (2) the requirement for approving officials to ensure the accuracy of accounting codes.

Closed on 06.07.2019
No. 11 to FAA

Develop, document, and implement a process to ensure that for any new or succeeding office space lease that does not meet the utilization standard, a justification is developed and documented in the lease file as to why the application of the Agency's space utilization standard is not cost effective.

Closed on 05.10.2019
$22,939,569
No. 12 to FAA

Revise, document, and implement an internal control process to regularly track and assess the utilization rate for all office space leases in the Agency's current portfolio using data that is updated for accuracy on a regular basis. Implementing this recommendation could potentially put $22.9 million in funds to better use by preventing FAA from paying rent on unneeded space in excess of its utilization standard.