This is the accessible text file for GAO report number GAO-02-590 
entitled "State Department: Sale of Unneeded Overseas Property Has 
Increased, but Further Improvements Are Necessary," which was released 
on July 11, 2002.



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United States General Accounting Office:



GAO: Report to the Chairman, Subcommittee on National Security, 
Veterans 

Affairs, and International Relations, Committee on Government 

Reform,House of Representatives:



June 2002:



State Department: Sale of Unneeded Overseas Property Has Increased, but 

Further Improvements Are Necessary:



GAO-02-590:



Contents:



Letter:



Results in Brief:



Background:



State Department Has Taken Steps to Identify Unneeded Properties but 
Needs to Improve Inventory Database Accuracy:



Real Estate Sales Have Grown, but a Significant Number of Properties Is 

Still Unsold:



State Department Has Not Yet Sold Most Properties Recommended by the 
Advisory 

Board:



Conclusions:



Recommendation for Executive Action:



Agency Comments and Our Evaluation:



Scope and Methodology:



Appendix I: Disputed Properties Reviewed by the Real Property Advisory 

Board:											:



Appendix II: Comments from the Department of State:



GAO Comments:



Appendix III: GAO Contact and Staff Acknowledgments:								



GAO Contact:



Staff Acknowledgments:



Tables:



Table 1: Reasons That 19 Property Sales Have Been Delayed:



Table 2: Analysis of the Properties Submitted to the Real Property 

Advisory Board from April 1997 through December 2000:



Figures:



Figure 1: Sales Proceeds from Properties Sold, Fiscal Years 1992 

through 2001:



Figure 2: Real Property Advisory Board Recommendations for 41 

Properties as of November 15, 2001:



Abbreviations:



IG: Office of the Inspector General 



OBO: Bureau of Overseas Buildings Operations:



United States General Accounting Office:



Letter:



June 11, 2002:



The Honorable Christopher Shays Chairman, Subcommittee on National 

Security, Veterans Affairs, and International Relations Committee on 

Government Reform House of Representatives:



Dear Mr. Chairman:



The U.S. government owns about 3,500 properties overseas at more than 

220 locations, including embassy and consular office buildings, 

housing, and land. The Department of State is responsible for 

acquiring, managing, and disposing of these properties. In 1996, we 

reported that the State Department did not have an effective process 

for identifying and selling unneeded [Footnote 1] overseas real estate, 

and that decisions concerning the sale of some properties had been 

delayed for years because of parochial conflicts among the parties 

involved. [Footnote 2] As a result, the State Department was retaining 

millions of dollars of unneeded real estate. To address this problem, 

we recommended that the State Department establish an independent panel 

to decide which properties should be sold. The Congress, noting our 

recommendation, directed the secretary of state to create an advisory 

board on real property management. In April 1997, the State Department 

created the Real Property Advisory Board to review disputed properties 

and make recommendations to the under secretary of state for 

management. [Footnote 3]



In response to your request that we assess the State Department’s 

processes for, and performance in, identifying and selling unneeded 

overseas real estate, this report discusses (1) steps taken by the 

State Department to improve its process for identifying unneeded 

properties, (2) its performance in selling unneeded properties, and (3) 

whether it has implemented the Real Property Advisory Board’s 

recommendations to sell disputed properties. In addition, during the 

course of our work we identified legislation [Footnote 4] that affects 

the department’s ability to sell residences purchased for agricultural 

attachés. We are reporting separately to you on this matter.



We reviewed the sales status of properties that the State Department, 

its Office of the Inspector General (IG), and our office had previously 

identified as excess, underutilized, or obsolete. We also analyzed the 

department’s worldwide inventory and property files, focusing on 35 

overseas posts that had vacant properties, high-value properties, or 

one or more properties that had been identified for potential sale. We 

also interviewed key State Department officials and a member of the 

Real Property Advisory Board.



Results in Brief:



The State Department has taken steps to implement a more systematic 

process for identifying unneeded properties by (1) requesting posts to 

annually identify excess, underutilized, and obsolete property and (2) 

requesting its own staff and IG officials to place greater emphasis on 

identifying such property when they visit posts. These steps have 

resulted in department officials’ placing greater emphasis on 

identifying unneeded property. However, the department’s property 

inventory database contains inaccuracies, which may cause some 

potentially unneeded properties not to be identified. This has been a 

long-standing problem. For example, a parking lot in Paris, purchased 

in 1948 and currently valued at up to $10 million, was not included in 

the inventory until after a 1998 IG visit highlighted its omission.



The State Department has significantly increased its sales of unneeded 

properties in the last 5 years. From 1997 through 2001, it sold 104 

overseas properties for over $404 million, [Footnote 5] almost triple 

the proceeds compared with the previous 5-year period. However, the 

department still has a large number of unneeded properties that have 

not yet been sold. To expedite sales, the State Department has recently 

initiated several actions, such as using “business case” sales analyses 

aimed at ensuring that decisions are based on sound economic and 

financial factors, increasing the use of commercial real estate 

marketing services, and attempting to more aggressively resolve 

property disputes.



The State Department has not effectively implemented recommendations 

made by the Real Property Advisory Board to sell unneeded property. 

State has disposed of only 7 properties [Footnote 6] (for about $21 

million) of the 26 recommended for sale by the board. Sales of the 

remaining 19 properties, valued at about $70 million, have been delayed 

pending (1) resolution of disputes with the host governments that are 

restricting property sales, (2) acquisition of suitable replacement 

properties, or (3) actions by post and headquarters officials to 

initiate the sales process. Because of these delays, the board has 

reexamined the status of each property multiple times, causing some 

board members to become frustrated. Department officials said they have 

begun a concerted effort to resolve impediments and expedite the sale 

of these properties as the Congress intended.



We are recommending that the secretary of state take action to improve 

the accuracy of the real property inventory. The State Department, in a 

letter commenting on a draft of this report, responded that it believes 

the report is a fair and accurate representation of the department’s 

efforts to dispose of unneeded real property overseas. The department 

added that it is in total agreement with our recommendation and has 

already taken action to implement it. A reprint of the department’s 

letter is contained in appendix II.



Background:



The Foreign Buildings Act of 1926, as amended, authorizes the secretary 

of state to sell, exchange, or lease any property acquired abroad that 

is used for diplomatic and consular establishments in foreign 

countries. [Footnote 7] The law authorizes the secretary to use the 

sales proceeds to acquire and maintain other property overseas. It also 

requires the secretary to report such transactions to the Congress with 

the department’s annual budget estimates. The secretary of state 

delegated the secretary’s authority under the law to the Bureau of 

Overseas Buildings Operations (OBO). [Footnote 8] Thus, OBO is 

responsible for establishing and overseeing policies and procedures for 

the department’s real estate properties.



In 1996, we reported that the State Department did not have a 

systematic process for identifying unneeded properties and disposing of 

them. At that time, the department identified potentially unneeded 

properties through a variety of ad hoc and uncoordinated actions that 

we believed did not constitute an organized and effective system for 

identifying such properties. We also reported that decisions about the 

sale of unneeded overseas real estate properties had been delayed for 

years because of disputes between OBO and the regional bureaus and 

embassies. [Footnote 9] To speed these decisions by providing a final, 

authoritative forum for the disputing parties to argue their positions, 

we recommended that the State Department establish an independent panel 

to review disputed properties and decide which ones should be sold.



In September 1996, the Congress directed the secretary of state to 

establish an advisory board on real property management to (1) review 

information about properties proposed for sale and (2) compile a list 

of properties recommended for sale to be approved by the under 

secretary of state for management. [Footnote 10] The Congress also 

directed the State Department to transmit this list to the appropriate 

congressional committees and to “proceed with the immediate sale of 

[properties] on the approved list” as soon as market conditions were 

appropriate.



In response to the congressional direction, in April 1997, the 

assistant secretary of state for administration created the Real 

Property Advisory Board to review and make recommendations about the 

sale of disputed properties. The advisory board’s charter authorizes a 

seven-member panel appointed by the under secretary of state for 

management [Footnote 11] consisting of three real estate professionals 

from outside the State Department and four high-ranking department 

officials. The board is authorized to (1) review information on 

properties proposed for sale by the State Department, the State IG, our 

office, or any other federal agency and (2) compile a list of 

properties recommended for sale to be approved by the under secretary 

of state for management. [Footnote 12] The charter directs the 

advisory board to meet at least once each fiscal year and to proceed 

“as far as possible” by consensus in deciding which properties to 

recommend for sale.



A 1999 State IG’s report found that the State Department had 

substantially complied with the Congress’s intent (and our 1996 

recommendation) in drafting the advisory board’s charter and reporting 

the board’s actions to the Congress. [Footnote 13] The report also 

found that the advisory board had functioned in a manner consistent 

with its charter, and that its recommendations were based on sufficient 

and balanced information.



State Department Has Taken Steps to Identify Unneeded Properties but 

Needs to Improve Inventory Database Accuracy:



Since 1996, OBO has taken steps to implement a more systematic process 

for identifying unneeded properties, which has resulted in post and OBO 

officials’ placing greater emphasis on identifying properties that 

could be sold. Steps reflecting this emphasis include an annual request 

to posts asking them to identify government-owned properties that 

should be considered for disposal and increased efforts by OBO and IG 

officials to identify such properties when they visit posts. However, 

the department’s ability to monitor property use and identify 

potentially unneeded properties is hampered by weaknesses in its 

property inventory system.



Annual Certification Process Identifies Potentially Unneeded 

Properties:



In response to our 1996 report, OBO began asking posts during an annual 

property inventory to identify properties that should be considered for 

disposal. OBO has included this request as part of State’s annual 

chiefs of mission certification that posts are in compliance with the 

Foreign Affairs Manual in regards to the management of real property. 

This process has helped the State Department to more systematically 

identify unneeded property. For example, in 2001, OBO cabled all posts 

for this purpose in July and sent follow-up cables to unresponsive 

posts in August. OBO’s initial cable requested that posts report all 

government-owned real property that should be considered for disposal, 

including properties for which posts had disposal processes under way. 

Posts were instructed to include excess office space, excess and 

oversized/overstandard housing, vacant or underutilized lots, 

properties used infrequently or for purposes such as unofficial 

business, and any other properties that could be considered appropriate 

for disposal. OBO officials explained that the effectiveness of this 

identification effort depended on posts’ responding fully and promptly. 

In 2001, almost all posts complied. As a result of this process, the 

department identified 130 potentially unneeded properties.



Actions by OBO and State’s IG to Identify Unneeded Properties:



In addition to the annual post certification process, the director of 

OBO has instructed bureau officials to emphasize identification of 

unneeded property. For example, OBO officers have been instructed to 

pay more attention to identifying potentially disposable property 

during post visits to oversee and resolve real estate issues. OBO 

officials said this increased emphasis has helped posts and OBO to 

continually focus on the need to dispose of unneeded property.



The State Department’s IG reviews property use issues as part of its 

regular inspections. In addition, in February 1998, the under secretary 

for management asked the IG to specifically include identification of 

excess, underutilized, and obsolete properties as part of the IG’s 

inspections and audits at overseas posts and to provide periodic 

summaries on these data collection efforts. This work was aimed at 

identifying potentially excess, underutilized, and obsolete properties 

on the basis of existing criteria and was not a substantive review of 

the reasons why posts should or should not retain these properties. It 

ended in June 2001 by mutual consent between the IG and the under 

secretary for management, but the IG still reviews property status and 

use as part of its post inspections. The IG’s final report stated that 

the office found 21 excess, 160 underutilized, and 51 obsolete 

properties during this 3-year review. [Footnote 14] The State 

Department agreed to sell 72 of these properties.



The IG stated that these reviews were useful and productive. It added 

that chiefs of mission and other senior officials were interested in 

this work, and, as a result, the IG noted increased emphasis on real 

property management. An IG official said they would only start a 

similar effort again if it is requested by the under secretary. 

According to this official, OBO’s new director has taken a more 

aggressive approach to identifying and selling unneeded property, which 

reduces the need for any additional IG effort at this time.



Process to Identify Unneeded Property Is Constrained by Inaccurate 

Inventory Data:



The State Department’s worldwide real property inventory contains many 

errors and omissions. To better monitor property use and identify 

potentially unneeded properties, accurate inventory data are needed. 

Accurate real property data are also needed for the worldwide inventory 

that the General Services Administration keeps at the Congress’s 

request.



OBO, however, has had difficulty getting posts to ensure that data in 

its inventory database are accurate, which is a long-standing problem. 

We observed problems involving properties sold but not removed from the 

inventory, properties acquired but not added to the inventory, and 

errors in cost and other descriptive information. For example,



* In June 2001, the inventory still listed an office building and the 

consul general’s residence in Alexandria, Egypt, which were sold in 

1997 and 1998 (for more than $5 million).



* Acquisition cost was overstated by about $300 million for three 

properties in Bamako, Mali, and by nearly $132 million for one property 

in Yaounde, Cameroon, due to data input errors, according to OBO.



Inaccurate inventory information can result in unneeded properties not 

being identified for potential sale. For example, a parking lot in 

Paris purchased in 1948 was not included in the inventory until an IG 

visit in 1998 highlighted the lot’s absence from the inventory. 

[Footnote 15] The property is currently being marketed and is valued 

at up to $10 million.



We also found that the number of properties listed in the inventory 

does not accurately reflect the number of properties the State 

Department manages because, according to OBO, posts have inconsistently 

assigned property identification numbers. Posts sometimes assigned 

separate numbers to land and associated buildings. For example, the 

embassy in Paris is listed as three separate properties--the land and 

two buildings. The buildings were acquired separately but are now 

connected. The three properties comprise one compound. At other times, 

posts assigned one number to multiple properties--for example, in 

Brasilia, four separate lots were given one property identification 

number.



Along with its other efforts, OBO is attempting to improve the 

accuracy, and therefore the reliability, of the State Department’s 

worldwide overseas property inventory data. According to OBO officials, 

since individual posts are responsible for entering their own data, 

correcting inaccuracies requires that they routinely check and update 

data in their property inventories. To help posts keep accurate 

inventory data, OBO has provided 238 posts with computer software for 

recording their property inventories, along with a user manual that 

gives step-by-step instructions. However, according to OBO, 185 posts 

have installed or are in the process of installing the software, 

leaving 53 posts that are not using it--thereby negatively affecting 

the consistency and accuracy of inventory data. In November 2001, OBO 

reported that about 20 posts had not corrected known errors or 

omissions in their property inventories. Because of such errors and 

omissions, some OBO staff said they do not rely on the property 

inventory for their work and instead keep their own property inventory 

information.



Real Estate Sales Have Grown, but a Significant Number of Properties Is 

Still Unsold:



The State Department’s performance in selling unneeded property has 

significantly improved in the last 5 years. Property sales proceeds 

were more than 3 times greater than for the previous 5-year period. 

However, despite this progress, the department still has a large number 

of potentially unneeded properties that remain unsold. In 2001, the 

State Department began several initiatives intended to expedite the 

sale of unneeded properties, including (1) using “business case” 

analyses to ensure that financial and economic factors were included in 

the property sales decision process, (2) emphasizing the use of 

commercial real estate marketing services, and (3) more aggressively 

focusing on resolving property disputes.



The State Department sold 104 properties for more than $404 million 

from fiscal years 1997 through 2001. [Footnote 16] This is a threefold 

increase in proceeds compared with the 65 properties the department 

sold for more than $133 million from fiscal years 1992 through 1996 

(see fig. 1).



Figure 1: Sales Proceeds from Properties Sold, Fiscal Years 1992 

through 2001:



[See PDF for image]



[A] Sales figures are stated in fiscal year 2001 dollars.



Source: GAO analysis of State Department data.



[End of Figure]



Large-value sales from fiscal years 1997 through 2001 included a 

compound in Seoul, South Korea (almost $99 million in installment 

payments), and the former chancery in Singapore for nearly $60 million.



As of September 30, 2001, the State Department reported that 92 

properties were potentially available for sale. These properties have 

an estimated value of more than $180 million. Many of these properties 

have been identified for potential sale for years, including 35 that 

date back to 1997.



Recent Initiatives to Expedite Property Sales:



In 2001, the new OBO director introduced “business case” sales analysis 

to the process of determining whether a property should be sold. This 

new framework considers economic and financial factors, along with 

diplomatic and security issues and post concerns. According to OBO 

officials, the State Department’s former property sales decision-making 

process generally did not fully consider economic and financial 

factors. OBO officials said the new framework has helped OBO in its 

effort to gain agency consensus regarding property sales and is already 

producing results. OBO officials also stated that the director has made 

business case- based decisions to sell properties in at least six 

posts, including Paris where he has directed the post to sell a parking 

lot and an office building.



Another initiative designed to expedite property sales is OBO’s award 

of indefinite quantity contracts [Footnote 17] to several 

international real estate brokerage firms for real estate marketing 

services. OBO officials believe these contracts will speed overseas 

property sales, give OBO greater control over the sales process, and 

relieve the administrative burden that property sales place on posts. 

Under these contracts, the brokerage firms will do tasks formerly 

performed by the posts, including advertising properties, identifying 

prospective buyers, receiving bids, and conducting negotiations. 

However, the brokers cannot conclude sales without the State 

Department’s approval. As of March 2002, OBO was using these contracts 

to market 20 properties at 10 posts, including 5 properties OBO has 

been trying to sell for several years. OBO stated that it has not been 

able to fully evaluate the effectiveness of these contracts since the 

program has just started.



Furthermore, to reduce the department’s inventory of unneeded 

properties, the new OBO director has focused on resolving disputes with 

host countries and posts that have delayed the sale of valuable 

properties. For example, OBO intends to sell a high-value Bangkok 

residential compound that has been under consideration since the early 

1990s but delayed due to post objections. The Asian financial crisis in 

1997 temporarily halted this debate, according to OBO officials, but 

OBO is now pushing to sell the property. OBO officials added that the 

director has also addressed disputed properties at five more posts.



State Department Has Not Yet Sold Most Properties Recommended by the 

Advisory Board:



The State Department has not yet sold 19 of 26 properties recommended 

for sale by the Real Property Advisory Board and approved by department 

management. Since its inception in 1997, the advisory board has 

reviewed 41 disputed properties and recommended that 27 be sold 

(department management approved the sale of 26 of these properties). As 

of April 2002, the State Department had disposed of 7 (including 2 for 

which it terminated the long-term lease) of the 26 properties for about 

$21 million. Sales of the remaining 19 properties, valued at about $70 

million, have been delayed by host country restrictions (12 

properties), the need to find replacement properties (4 properties), 

and post objections (3 properties). OBO officials acknowledged that the 

department has moved slowly to resolve some of these impediments. As a 

result, the advisory board has reviewed the status of most properties 

multiple times over several years.



Board Has Recommended Selling Most Disputed Properties:



Our analysis of department records shows that of the 41 disputed 

properties reviewed since 1997, the advisory board recommended selling 

27 (26 were approved for sale by State Department management) and 

retaining 9. The board planned to revisit the cases of 4 properties at 

a later date and ended its review of 1 property in Manila after 

concluding that the issue at hand was largely political and diplomatic. 

The advisory board reached these decisions and compiled its list of 

recommended sales by consensus. Our analysis of department records and 

discussion with a board member showed that in reaching these decisions, 

the advisory board’s consideration of economic analyses was balanced by 

consideration of political and diplomatic factors, such as 

representational concerns and the historic value of the properties. 

[Footnote 18] Figure 2 summarizes the board’s recommendations for all 

41 properties through its mid-November 2001 meeting.



Figure 2: Real Property Advisory Board Recommendations for 41 

Properties as of November 15, 2001:



[See PDF for image]



[A] The board ended its review of one property without making a 

recommendation after concluding that the matter was a political 

decision involving negotiations with the host country.



[B] State Department management approved for sale 26 of the 27 

properties.



Source: GAO analysis of State Department records.



[End of Figure]



State Has Disposed of 7 of 26 Properties Approved for Sale:



The assistant secretary of state for administration or under secretary 

of state for management reviewed and approved 26 of the board’s 27 

sales recommendations. Our analysis of department records shows that 

the State Department has disposed of 7 of these 26 properties for $20.6 

million. According to OBO, the estimated value of the 19 unsold 

properties is about $70 million. In addition, the State Department has 

decided to sell the property in Manila that the board had considered 

but on which it had declined to make a recommendation. Table 1 

summarizes the factors that have delayed the sale of these properties. 

Appendix I provides additional information about the disposition and 

status of all 41 properties reviewed by the advisory board.



Table 1. Reasons That 19 Property Sales Have Been Delayed:



Post (country): Athens; (Greece); Property: Hamilton residence; 

Comments: Post has not acted to sell property.



Post (country): Brasilia; (Brazil); Property: 12 residential lots; 

Comments: Sales delayed since 1996 by Social Security tax dispute with 

host government. In April 2002, the U.S. and Brazilian governments 

began discussions to resolve the dispute.



Post (country): Damascus; (Syria); Property: American school; Comments: 

The State Department plans to sell this property when the school 

relocates. In the interim, it will charge the school rent. It was 

several years before a decision to sell was made due to changing post 

and department plans concerning use of the property as a site to 

construct new facilities.



Post (country): London; (United Kingdom); Property: 4 residences; 

Comments: The State Department plans to sell these properties as soon 

as it can buy or lease residences that meet department size and cost 

guidelines.



Post (country): Rabat; (Morocco); Property: New office building 

(“orange grove”) site; Comments: The State Department plans to sell 

this property after it resolves possible host government restrictions. 

It was several years before a final decision to sell was made due to 

changing post and department plans concerning use of property as a site 

to construct new facilities.



Source: GAO analysis of State Department records.



[End of table]



Advisory Board Has Reviewed Most Properties Multiple Times:



Because property sales were delayed, the advisory board reviewed the 

status of most properties submitted in 1997 through 2000 multiple times 

over several years. [Footnote 19] Our analysis of department records 

shows that, on average, the board reviewed 34 properties 4 times over 

3.1 years. In addition, as of the board’s last meeting in November 

2001, 17 of the properties had been sold, retained for use, or 

otherwise discharged by the board. The board had reviewed each of the 

remaining 17 properties (awaiting sale) an average of almost 6 times 

over 4.4 years. Table 2 shows the results of our analysis.



Table 2. Analysis of the Properties Submitted to the Real Property 

Advisory Board from April 1997 through December 2000:



Status of property as of the advisory board’s meeting on Nov. 15, 2001: 

No longer under review[A]; Number of properties: 17; Average number of 

times reviewed: 2.8; Average length of time properties were before the 

board (in years): 1.8.



Status of property as of the advisory board’s meeting on Nov. 15, 2001: 

Still under review/Awaiting sale; Number of properties: 17; Average 

number of times reviewed: 5.7; Average length of time properties were 

before the board (in years): 4.4.



Status of property as of the advisory board’s meeting on Nov. 15, 2001: 

All properties reviewed[B]; Number of properties: 34; Average number of 

times reviewed: 4.3; Average length of time properties were before the 

board (in years): 3.1.



[A] Properties no longer under review are those that were reported 

sold, retained for future use, or discharged for some other reason as 

of the advisory board’s meeting on November 15, 2001.



[B] Excludes 7 properties first submitted for advisory board review at 

the board’s meeting on November 15, 2001.



Source: GAO analysis of State Department records.



[End of table]



OBO Officials Expect Improvements in Sales of Recommended Properties:



OBO officials predict that the State Department will implement advisory 

board recommendations more quickly in the future. According to these 

officials, recent actions to expedite property sales, such as 

contracting for real estate appraisal and marketing services, will 

reduce delays in implementing the advisory board’s recommendations by 

making approved property sales less susceptible to post appeals and 

inaction. Moreover, OBO believes that its enhanced standing within the 

department will reduce delays by giving OBO a greater voice in 

intradepartmental discussions to counterbalance post appeals. In 2001, 

OBO was upgraded from an office reporting to the assistant secretary of 

state for administration to a bureau reporting to the under secretary 

of state for management. OBO officials also said the advisory board’s 

support for OBO’s position on most properties was a positive factor in 

helping to reduce post resistance to proposed sales.



Conclusions:



OBO has implemented a number of initiatives to improve the 

identification of unneeded properties. Accurate property inventory data 

would help OBO and the posts to further identify such properties. 

However, inventory data are currently inaccurate and therefore 

unreliable, and post cooperation in correcting these errors and 

omissions has been inconsistent. While OBO has taken action to expedite 

property sales, difficulties reaching consensus within the State 

Department on sales of individual properties continue to cause delays. 

Furthermore, the State Department has not fully implemented most of the 

Real Property Advisory Board’s recommendations, and properties valued 

at about $70 million have not been sold. Additional property sales 

could be delayed unless the department takes action to ensure that 

approved sales recommendations are implemented as the Congress 

intended--as soon as market conditions are appropriate and any issues 

with the host country are resolved.



Recommendation for Executive Action:



To improve the State Department’s ability to identify properties that 

may be available for sale, we recommend that the secretary of state 

take action to improve the accuracy of the real property inventory. 

Ensuring that all posts install and use the new automated property 

inventory software would be a key step.



Agency Comments and Our Evaluation:



In written comments on a draft of this report, the State Department 

stated that it is in total agreement with our recommendation and is 

taking steps to implement it. The department added that it believes 

this report is a fair and accurate representation of its ongoing 

efforts to dispose of unneeded real property overseas, and that the 

report recognizes the progress and the many improvements that have been 

made and continue to be made. The department also stated that the 

cooperative effort between the legislative and executive branches on 

this review can serve as a model for future work.



In a draft of this report, we had recommended that the secretary of 

state direct the department to proceed with property sales as soon as 

market conditions are appropriate to ensure that disputed overseas real 

estate properties are sold as expeditiously as possible. The department 

responded that it believed the recommendation is unnecessary due to the 

enhanced position of the OBO Bureau and the proactive approach and 

involvement of its director in property disposal issues. It added that 

it appreciated the intent of the recommendation, that the secretary use 

his office as necessary and appropriate to expedite disposal of 

unneeded property, and that this option is always available should it 

become necessary. On the basis of these comments, we deleted this 

recommendation from the report. However, as the department noted in its 

comments, instances may arise when involvement by the secretary does 

become necessary, specifically to emphasize resolution of issues caused 

by host country restrictions on property sales that require diplomatic 

negotiations, such as the case with the 12 properties in Brasilia. It 

is therefore important that the director of OBO keep the under 

secretary for management informed on the status of all properties being 

considered for sale to avoid the type of lengthy delays experienced in 

the past.



Scope and Methodology:



To determine if the State Department has taken steps to improve its 

process for identifying unneeded properties that are potentially 

available for disposal, we interviewed OBO’s director and other OBO 

officials concerning OBO policies and processes for identifying 

unneeded property and determining when properties should be sold. We 

reviewed documents relating to OBO’s identification of unneeded 

property potentially available for disposal, including the State 

Department’s quarterly reports to the Congress describing properties 

potentially available for disposal during that quarter. We also 

examined OBO’s policies and processes for entering information into its 

real property worldwide database and issues affecting quality control 

over this information, and we reviewed the department’s worldwide 

property inventory as part of our effort to assess the accuracy of the 

property database. In addition, we reviewed sections of the Foreign 

Affairs Manual applicable to property management overseas and documents 

prepared by State Department officials in response to our questions 

about their processes for identifying unneeded property.



To assess the Department of State’s performance in selling unneeded 

properties, we analyzed quarterly reports to the Congress identifying 

property sales since 1997 and properties that are still available for 

disposal. We also reviewed OBO policies and processes, focusing on 

actions OBO has taken to overcome constraints that have delayed sales, 

such as disputes with posts and host government restrictions. We also 

interviewed officials at OBO’s Real Estate and Property Management and 

Area Management offices to identify the status of properties being 

considered for sale and to understand how they deal with the posts 

concerning individual property sales. In addition, we reviewed the 

department’s long- range overseas buildings plan to identify property 

the department plans to sell through fiscal year 2007.



To determine whether the State Department has implemented the Real 

Property Advisory Board’s recommendations, we analyzed the House 

conference report that directed the department to establish the board, 

our prior and State IG reports, and applicable department policies and 

guidance in the Foreign Affairs Manual and Foreign Affairs Handbook . 

We analyzed records prepared by State Department officials in response 

to our questions about the advisory board, minutes of the board’s eight 

meetings, and the board’s original and modified charters. We also 

interviewed a member of the advisory board and State Department 

officials involved in reviewing the properties included in our 

evaluation. In addition, we analyzed the minutes of the advisory 

board’s meetings and other records to determine the number of 

properties submitted to the board for review from 1997 through 2001, 

the board’s recommendations for these properties (sell, retain, 

revisit, or other), and the current status of these properties (sold, 

retained, or awaiting sale). For properties submitted to the advisory 

board from 1997 through 2000, we analyzed these records to determine 

the number of times and the length of time the board reviewed each of 

these properties. This analysis excluded seven properties submitted to 

the advisory board at its mid-November 2001 meeting because we do not 

know yet whether State will implement the board’s sales recommendations 

before its next meeting.



We conducted our review from June 2001 through April 2002 in accordance 

with generally accepted government auditing standards.



As agreed with your office, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days 

after its date. At that time, we will send copies of this report to 

interested congressional committees and the secretary of state. We also 

will make copies available to others upon request. In addition, this 

report will be available at no charge on the GAO Web site at http:// 

www .ga o.gov.



If you or your staff have any questions about this report, please 

contact me at (202) 512-4128 or at fordj@gao.gov . Contacts and staff 

acknowledgments are listed in appendix III.



Sincerely yours,



Jess T. Ford Director, International Affairs and Trade:



Signed by Jess T. Ford.



[End of section]



Appendix I: Disputed Properties Reviewed by the Real Property Advisory 

Board:



Post (country): Alexandria (Egypt); Property description: Consul 

general’s residence; Board’s recommendation: Sell; Management 

decision[A]: Approved; Property status as of March 2002: Sold in 1998 

for $2.1 million.



Post (country): Athens (Greece); Property description: Adams residence; 

Board’s recommendation: Sell; Management decision[A]: Approved; 

Property status as of March 2002: Sold in 2000 for $1.05 million.



Property description: Post (country) : Hamilton residence; Board’s 

recommendation: Post (country) : Sell; Management decision[A]: Post 

(country) : Approved; Property status as of March 2002: Post (country): 

Post has not acted to sell property.



Property description: Post (country) : Knox residence; Board’s 

recommendation: Post (country) : Retain; Management decision[A]: Post 

(country) : N/A[B]; Property status as of March 2002: Post (country): 

Retain until post finds a secure residence for defense attaché.



Property description: Post (country) : Sherman residence; Board’s 

recommendation: Post (country) : Sell; Management decision[A]: Post 

(country) : Approved; Property status as of March 2002: Post (country): 

Sold in 2000 for $4.7 million.



Post (country): Brasilia (Brazil); Property description: 12 vacant 

residential lots; Board’s recommendation: Sell; Management 

decision[A]: Approved; Property status as of March 2002: Sales delayed 

by tax dispute with host government. Negotiations started recently to 

resolve the dispute.



Post (country): Budapest (Hungary); Property description: Marine 

security guard quarters; Board’s recommendation: Retain; Management 

decision[A]: N/A[B]; Property status as of March 2002: IG reports 

property no longer underutilized.



Post (country): Curacao (Netherlands Antilles); Property description: 

Vacant lot; Board’s recommendation: Retain; Management decision[A]: N/

A[B]; Property status as of March 2002: Retained to provide security 

buffer.



Post (country): Dakar (Senegal); Property description: Site bought to 

build ambassador’s residence; Board’s recommendation: Sell; Management 

decision[A]: Disapproved; Property status as of March 2002: Retained 

for recreational use.



Post (country): Damascus (Syria); Property description: American 

school; Board’s recommendation: Sell; Management decision[A]: 

Approved; Property status as of March 2002: The State Department plans 

to sell the property when the school relocates. In the interim, the 

department will charge the school rent.



Post (country): Doha; (Qatar); Property description: Ambassador’s 

residence and office building sites; Board’s recommendation: Sell; 

Management decision[A]: Approved; Property status as of March 2002: 

Board recommended selling properties after post occupied new embassy 

(which occurred in October 2001). The State Department has terminated 

these long-term leases effective April 23, 2002.



Post (country): Hamilton (Bermuda); Property description: Consul 

general’s residence; Board’s recommendation: Sell; Management 

decision[A]: Approved; Property status as of March 2002: Sold in 1999 

for $12.5 million.



Post (country): Islamabad (Pakistan); Property description: Vacant lot; 

Board’s recommendation: Retain; Management decision[A]: N/A[B]; 

Property status as of March 2002: Retained to provide security buffer.



Post (country): Kaduna (Nigeria); Property description: Warehouse, 

residence, and recreation center; Board’s recommendation: Sell; 

Management decision[A]: Approved; Property status as of March 2002: 

Sold in 1998 for $239,082.



Post (country): Kathmandu (Nepal); Property description: Brahma 

cottage; Board’s recommendation: Retain; Management decision[A]: N/

A[B]; Property status as of March 2002: Retained as site for new office 

building after security concerns made embassy site unsuitable.



Post (country): London (United Kingdom); Property description: 4 

residences; Board’s recommendation: Sell; Management decision[A]: 

Approved; Property status as of March 2002: State plans to sell when it 

can buy or lease suitable replacements.



Property description: Post (country) : 3 residences; Board’s 

recommendation: Post (country) : Revisit; Management decision[A]: Post 

(country) : N/A[B]; Property status as of March 2002: Post (country) : 

State is negotiating the disposition of these properties with tenant 

agencies.



Post (country): Manila (Philippines); Property description: 

Ambassador’s summer residence (Baguio); Board’s recommendation: No 

recommendation; Management decision[A]: N/A[B]; Property status as of 

March 2002: Board concluded the decision was political/diplomatic. 

State has decided to sell the property.



Post (country): Naples (Italy); Property description: Consul general’s 

residence and consular office building; Board’s recommendation: Retain; 

Management decision[A]: N/A[B]; Property status as of March 2002: 

Relocation not cost-effective.



Post (country): Port of Spain (Trinidad); Property description: Vacant 

lot; Board’s recommendation: Retain; Management decision[A]: N/A[B]; 

Property status as of March 2002: Retained for parking.



Post (country): Prague (Czech Republic); Property description: 

Ambassador’s residence; Board’s recommendation: Revisit; Management 

decision[A]: Retain; Property status as of March 2002: Property was 

retained on the basis of guidance from the president.



Post (country): Praia; (Cape Verde); Property description: Site to 

build an ambassador’s residence; Board’s recommendation: Retain; 

Management decision[A]: N/A[B]; Property status as of March 2002: 

Property retained for recreational use.



Post (country): Rabat (Morocco); Property description: New office 

building (“orange grove”) site; Board’s recommendation: Sell; 

Management decision[A]: Approved; Property status as of March 2002: 

Board recommended selling the property unless State’s 2002 long-range 

facilities plan authorized constructing a new office building in Rabat. 

State now plans to sell the property contingent on resolving potential 

host government restrictions.



Post (country): Zanzibar (Tanzania); Property description: Former 

consul general’s residence; Board’s recommendation: Retain; Management 

decision[A]: N/A[B]; Property status as of March 2002: Property 

retained for recreational use.



[A] Before September 2001, the advisory board sales recommendations 

were referred to the assistant secretary of state for administration 

for approval. Since then, they have been referred to the under 

secretary for management.



[B] Not applicable--no management decision necessary in these cases.



Source: GAO analysis of State Department records.



[End of Table]



[End of section]



Appendix II: Comments from the Department of State:



Note: GAO comments supplementing those in the report text appear at the 

end of this appendix.



United States Department of State Washington, D.C. 20520:



MAY 15 2002:



Dear Ms. Westin:



We appreciate the opportunity to review your draft report, “STATE 

DEPARTMENT: Sale of Unneeded Property Has Increased but Further 

Improvements are Necessary,” GAO-02-590, GAO Job Code 320060.



The enclosed Department of State comments are provided for 

incorporation with this letter as an appendix to the final report.



If you have any questions concerning this response, please contact 

Isaias Alba, Branch Chief, Office of Resource Management, Bureau of 

Overseas Buildings Operations, at (703)875-5748:



Sincerely,



Christopher B. Burnham Assistant Secretary and Chief Financial 

Officer:



Signed by Christopher B. Burnham.



Enclosure:



As stated.



cc: GAO/IAT - John Brummet State/OIG - Mr. Berman State/OBO - Mr. 

Isaias Alba:



Ms. Susan S. Westin, Managing Director, International Affairs and 

Trade, U.S. General Accounting Office.



Department of State Comments on GAO Draft Report STATE DEPARTMENT: Sale 

of Unneeded Property Has Increased but Further Improvements Are 

Necessary (GAO-02-590, GAO Job Code 320060):



Introduction:



The Department of State appreciates the opportunity to review and 

comment on the GAO Draft Report, “STATE DEPARTMENT: Sale of Unneeded 

Property Has Increased but Further Improvements Are Necessary.” We 

believe the report is a fair and accurate representation of our ongoing 

efforts to dispose of unneeded real property overseas, consistent with 

economic, financial, and political environments in host countries. It 

is a positive report, one that recognizes the progress and the many 

improvements that have been made and that continue to be made. We 

therefore believe the report’s title is misleading. A more accurate 

title would be: “STATE DEPARTMENT: Sale of Unneeded Property Has 

Increased and Further Improvements Are Underway.”:



Progress:



New measures and initiatives have been introduced and staff has been 

augmented with real estate professionals, resulting in much progress 

being made in identifying and disposing of unneeded property since 

GAO’s previous work on this topic in 1996. More recently, the enhanced 

status of the Bureau of Overseas Buildings Operations (OBO) within the 

Department, the active participation of the OBO Director and Chief 

Operating Officer in real property disposal issues, the use of business 

case discipline in the decision making process, and the expanded use of 

prestigious international real estate firms, promise to further advance 

the Department’s efforts in the future. The GAO report properly cites 

all of these measures and initiatives as responsible for recent and 

anticipated progress.



A Cooperative Effort:



Throughout the course of the GAO review, OBO has been forthcoming in 

providing information, access to all of its real property records, and 

making its staff available to answer questions and provide briefings. 

The GAO staff has:



been professional in its endeavor and has been receptive to our 

opinions and explanations. The cooperative effort between the 

legislative and executive branches throughout this review on behalf of 

the American taxpayer can serve as a model for future work. The 

openness and cooperative spirit of both branches has resulted in a 

report that we believe will benefit all parties concerned..



Recommendations:



The report contains two recommendations for executive action.



1. “To improve State’s ability to identify properties that may be 

available for sale, GAO recommends that the Secretary of State take 

action to improve the accuracy of the real property inventory. Ensuring 

that all posts install and use the new automated property inventory 

software would be a key step.”:



We are in total agreement with this recommendation and have already 

taken this action. On April 1, 2002, the Department sent an ALDAC (a 

worldwide cable to all diplomatic and consular posts) reminding posts 

and Chiefs of Mission of their responsibilities in maintaining accurate 

real estate records. The cable goes on to state that the Post 
Administrative 

Software Suite (PASS) Real Property Application (RPA) is the 
Department’s 

standard real estate management software. The RPA module of PASS was 

designed to support post’s property management, lease management and 

housing assignment programs. A copy of the cable (02 State 60774) is 

attached.



The second recommendation:



2. “To ensure that disputed overseas real estate properties are sold as 

expeditiously as possible, GAO recommends that the Secretary of State 

direct the department to proceed with sales as soon as market 

conditions are appropriate. GAO recognizes that this may require the 

Secretary to emphasize resolution of issues caused by host country 

restrictions on property sales.”



While we believe this recommendation is unnecessary, we appreciate the 

intent of the GAO -- that the Secretary use his office as necessary and 

as appropriate to expedite disposal of unneeded property. We believe 

that the enhanced position of the Bureau of Overseas Buildings 

Operations and the proactive approach and involvement of the OBO 

Director/Chief Operating Officer in property disposal issues will 

preclude the need to engage the Secretary of State. That option is 

always there, however, should it ever become necessary.



Other Comments:



We also have comments and updates on specific passages in the draft 

report.



The report states on page 6 that the real property inventory contains 

many errors and omissions. We would point out that there are nearly 

15,000 property records, keyed in by hundreds of employees of varying 

skills and abilities at hundreds of posts worldwide. Mistakes will be 

made, and the challenge is to identify the errors and correct them as 

soon as possible. The full implementation of PASS, with its more 

frequent submissions to Washington and compliance with the April 1, 

2002 ALDAC, will go a long way toward meeting this challenge.



Regarding the inaccuracies discovered with the Alexandria, Egypt 

property records (page 6 of the draft report), it appears that the 

cause was a data conversion glitch when the post changed over to the 

new PASS system and submitted the data to the headquarters system. Post 

has been asked to resubmit the corrected data.



Regarding the apparent missing property record (R31036) of a residence 

in Lusaka (also page 6),we have determined that the property is, in 
fact, 

in the Real Property Application Inventory. The property is listed 
under 

a different identification number (R98550) but the same address 

(1192 Lunzua Road). It appears that the property ID number cited by the 

GAO was the number used by the Department’s Office of the Inspector 

General when it performed its property review of Lusaka in 1998. 
Internal 

documents used by the Real Estate Division carried the incorrect 
property 

number onto other documents, including the quarterly reports cited by 
the 

GAO. The quarterly reports will be corrected to reflect the RPA 
inventory.



Regarding the obviously overstated acquisition costs of properties in 

Bamako and Yaounde (also on page 6), we have requested posts to make 

the appropriate corrections. The properties in Bamako are AID 

properties and we have asked AID to provide the relevant title and deed 

documentation.



Regarding the discussion of the Paris parking lot (also on page 6), we 

would point out that the parcel was not recorded separately in the real 

property inventory in 1998 when the Office of the Inspector General 

conducted its review because it was originally purchased as an integral 

part of the ambassador’s residential site. It was never intended to be 

a separate parcel. The .9-acre parcel was correctly included in the 

3.9-acre parcel of land associated with the ambassador’s residence 

(property ID X5005). Subsequently, in 1999, we separated the .9-acre 

parcel and assigned it its own property ID number (X6000). At that time 

we also subtracted its .9-acre area from the 3.9- acre area associated 

with the ambassador’s residence. The ambassador’s residence site is now 

listed in RPA as 3.01 acres.



Finally, we would like to correct a possible misunderstanding regarding 

the assignment of property numbers to land and associated buildings. 

Regarding the paragraph that states that the number of properties 

listed in the inventory does not accurately reflect the number of 

properties the State Department manages, we submit the following: There 

are land records entered separately in RPA from building records to 

represent purchased sites separate from constructed buildings. A 

separate land record has been entered in RPA to represent compounds 

with several buildings. The separate land record facilitates 

“associating” all of the buildings on the compound with a single piece 

of land. This is the correct way to enter these properties.



We would also like to provide an update for page 12 regarding Table 1 

and the property in Doha. The Ministry of Foreign Affairs accepted our 

request to terminate the lease on April 23, 2002.



Conclusion:



The Department and OBO again wish to express gratitude for the 

professional, cooperative, and mutually respectful conduct by GAO staff 

in the course of this review, and the opportunity to review and comment 

on the draft report. We would welcome the opportunity to meet with GAO 

staff to further clarify these comments or answer any questions.



Attachment:



State ALDAC cable 02 State 60744 of April 1, 2002:



The following are GAO’s comments on the Department of State’s letter 

dated May 15, 2002.



GAO Comments:



1. We deleted this example from the final report.



2. The State Department’s property inventory records from March 1998, 

[Footnote 20] did not include the parking lot and listed the 

ambassador’s residence as 3.01 acres, not 3.4 acres. Subsequent 

inventory records from 1999 and 2001 listed the parking lot at 0.4 

acres and also continued to list the ambassador’s residence as 3.01 

acres.



[End of section]



Appendix III: GAO Contact and Staff Acknowledgements:



GAO Contact:



John Brummet (202) 512-5260:



Staff Acknowledgments:



In addition to the contact named above, Janey Cohen, Ed Kennedy, Jesus 

Martinez, Michael Rohrback, and Richard Seldin made key contributions 

to this report.



[End of Section]



FOOTNOTES



[1] We use the term “unneeded” property to encompass the terms “excess, 

underutilized, and obsolete” property used by the State Department.



[2] U.S. General Accounting Office, Overseas Real Estate: Millions of 

Dollars Could Be Generated by Selling Unneeded Real Estate, GAO/

NSIAD-96-36 (Washington, D.C.: Apr. 23, 1996) and State Department: 

Millions of Dollars Could Be Generated by Selling Unneeded Overseas 

Real Estate, GAO/T-NSIAD-96-195 (Washington, D.C.: June 27, 1996).



[3] Before September 2001, the advisory board sales recommendations 

were referred to the assistant secretary of state for administration 

for approval.



[4] Section 738 of the Agriculture Appropriations Act for fiscal year 

2001 (P.L. 106-387).



[5] In fiscal year 2001 dollars.



[6] The State Department sold 5 properties and terminated the long-term 

lease of 2 other properties.



[7] 22 U.S.C. section 300, as amended.



[8] In May 2001, the name of the Office of Foreign Buildings Operations 

was changed to the Bureau of Overseas Buildings Operations.



[9] GAO/NSIAD-96-36 and GAO/T-NSIAD-96-195.



[10] H.R. (Conf.) 104-863, 104th Cong., 2nd Sess., accompanying 

H.R. 3610, the Omnibus Consolidated Appropriations Act for fiscal year 

1997.



[11] Until its charter was amended in September 2001, the assistant 

secretary of state for administration appointed the board’s members.



[12] Until its charter was amended in September 2001, the advisory 

board submitted this list to the assistant secretary of state for 

administration for approval. This provision was inconsistent with the 

House conference report, which called for the list to be submitted to 

the under secretary of state for management for approval.



[13] Department of State, Office of the Inspector General, Audit of 

the Real Property Advisory Board, Memorandum Report 99-PP-006 

(Washington, D.C.: Feb. 1999).



[14] Letter to the under secretary for management entitled, Final 

Report on the Review of Excess, Underutilized, and Obsolete Real 

Property Overseas (01-FMA-L-059, June 13, 2001).



[15] U.S. General Accounting Office, State Department: Decision to 

Retain Embassy Parking Lot in Paris, France, Should Be Revisited, 

GAO-01-477 (Washington, D.C.: Apr. 13, 2001).



[16] Sales figures are stated in fiscal year 2001 dollars.



[17] Indefinite quantity contracts do not state the specific 

quantity of products or services being delivered but establish minimum 

and maximum limits on the amount that can be ordered at one time and on 

total quantity. This type of contract provides flexibility in both 

quantity and time of delivery.



[18] Our analysis also showed that OBO and the regional bureaus and 

posts were provided with an opportunity to argue their cases before the 

advisory board. About a week before board meetings, OBO provided board 

members with briefing books that included economic analyses for the 

properties under review along with descriptions and photographs of the 

properties, their current use, acquisition cost, anticipated sales 

prices, and summaries of the disputes. OBO provided the relevant pages 

of these briefing books to the executive directors of the affected 

regional bureaus. These directors, in some cases, submitted written 

statements to the advisory board expressing bureau or post views on the 

properties and also gave short presentations to the board about their 

arguments for retaining the properties.



[19] This analysis excludes 7 properties submitted to the advisory 

board at its November 2001 meeting because we do not know yet whether 

the advisory board’s sales recommendations will be implemented before 

its next meeting.



[20] This was prior to the Office of the Inspector General’s visit.



[End of Section]



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