oversight

Review of the General Services Administration Operation of Heating Plants

Published by the Government Accountability Office on 1971-12-22.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                               COMPTROLLER      GENERAL     OF   T
                                              WASHINGTON.    D.C.




        B-174701


        Dear   Mr.   Kunzig:
                                                                                    llllIlHllllllIllllllllllllllll
                                                                                          LM095469



  I              Our review     of the General         Services     Administration         (GSA)       ’ ’
. ..I   operation.     of heating      plants     in the Washington,          D.C.,   area
        shGwed that       the rate charged          for steam sold did not include
        factors     for denreciation          and repair      and improvement        costs    for
        the heating       plants.      The unrecovered          costs  for fiscal      year
        1970 totaled        about $259,000--$136,000             for sales       to quasi-
        official      agencies     and other      organizations       and $123,000        for
        sales     to certain      Federal     agencies.

                 The GSA Special      Services      Branch operates         the Central,
        West , and Virginia       heating      plants     in the Washington        metro-
        politan      area.    GSA is    authorized      to  furnish     steam   from     these
        plants     to Federal    buildings       and to other       specified     buildings,
        such as those of the American               Red Cross,      the Corcoran       Gallery
        of Art,      the Federal    Reserve System,         and the Smithsonian            In-
        stitution.

              The cost of steam operations,                          exclusive   of administrative
        expenses,  depreciation,      and repair                     and improvement    costs     of
        the steam  plants,     was $6.1 million                      for fiscal   year 1970.

                The three heating       plants   distributed       4,189,666      thousand
        pounds (Y-lbs)         of steam in fiscal        year 1970 to GSA-managed
        Federal     buildings,      to non-GSA-managed        Federal   buildings,      and
        to buildings        occupied   by quasi-official        agencies     and other
        organizations.

        SALES TO QUASI-OFFICIAL               AGENCIES
        AND OTHER ORGANIZATIONS

                GSA sold 501,278 M-lbs         to quasi-official      agencies     and
        other    organizations.       The billing     rate was $1.55 for each
        !I- lbs , and the total      sales  were about $780,000.          The billing
        rate included        the cost of labor,     materials,     supplies,    and a
        surcharge      to cover administrative        expenses.     The rate did not
        include     an amount for depreciation          and repair    and improvement
        costs.
               The Office       of Management      and Budget Circular         A-25 states
        that    a reasonable      charge   (user charge)        should be made to each
        recipient      for a Government       service     received     above and beyond
        that    accruing    to the public      at large.        Agencies    are required
        to report      annually    on services      provided.

      y%i&Kl
                                       50TH   ANNIVERSARY            1921-   1971
--   3-174701



           Reports    concerning steam sales     to quasi-official                  agencies
     and other    organizations  on user charges     for fiscal               years     1968,
     1969, and 1970, submitted      by GSA to the Office         of          Management
     and Budget in accordance      with Circular    A-25,     state           that:

              “Steam furnished    various non-Governmental       activities
              at actual   cost to the Government,    exclusive      of de-
              preciation,   major repairs  and interest,      plus admin-
              istrative   expense .”

           According   to GSA accounting  records,  the acquisition                         cost
     of the plant    and equipment  at the three heating  plants                         as of
     June 30, 1969, was as follows:

                  Central  heating     plant                 $ 4,320,633
                  West heating     plant                       7,530,447
                  Virginia   heating     plant                10,815,OOO

                       Total                                 $22,666,080             ,

            According      to the latest    Federal    Power Commission      report
     on depreciation         rates used by electric       utility   companies,
     steam plant      buildings    and equipment      are depreciated     at an
     average    annual rate of 2.63 percent.             By using   a rate of
     2.5 percent,      we computed,      on the basis     of the June 30, 1969,
     cost of the GSA plants         in service,     the depreciation      cost for
     fiscal   year 1970 to be $566,652,          or 13.5 cents for each M-lbs
     of steam.

              The repair   and improvement costs   at the           three      heating
     plants     for fiscal   year 1970 were as follows:

                  Central  heating     plant                 $207,879
                  West heating     plant                        56,300
                  Virginia   heating     plant                308,631

                       Total                                 $572,810

     We computed the       repair     and improvement       costs   for     fiscal        year
     1970 to be 13.7       cents    for each M-lbs.
            Section    22c of Title   40, United        States     Code, states      that
     rates     to be paid for steam furnished           to the Corcoran        Gallery
     of Art,     the Pan American Union, the American               Red Cross build-
     ings,     and such other non-Federal        public     buildings     “as are or
     hereafter      may be authorized     to receive       steam” shall      be deter-
     mined by the Administrator         of General        Services.      Sections      22,
     22a, and 22b provide       that  rates    for steam furnished           to the

                                                 2
mr- Bee-174701



   Corcoran      Gallery   of Art,      the Federal  Reserve  System,   the Pan
   American      Union,  and the       American  Red Cross shall   be at rates
   not less      than cost.

          Section       483a of 31 U.S.C.          states    that any work or utility
   performed        or furnished         by any Federal      agency to or for any
   person      (including        groups,    associations,       organizations,        partner-
   ships,    or businesses)            except   those engaged in the transaction
   of official         business      of the Government,         shall    be self-sustaining
   and the fee charged              shall   be fair     and equitable       taking    into
   consideration          direct     and indirect       cost to the Government.

           The billing     rate for steam sold during         fiscal     year 1970
   should,     according     to our computations,       have included       an addi-
   tional     13.5 cents and 13.7 cents for each M-lbs               to recover      de-
   preciation       and repair    and improvement      costs,   respectively.
   Therefore      an increase     of 27.2 cents    in the reimbursable          rate
   for each M-lbs        of steam would have been necessary            and would
   have resulted       in additional     revenue of about $136,000            on the
   sale of steam to quasi-official            agencies     and other     organiza-
   tions.

    Recommendation     to the       Administrator
    of General   Services

            We recommend that GSA’s billing     rates     for steam sales     to
    quasi-official      agencies  and other organizations       be revised    to
    include      an amount for depreciation  and repair       and improvement
    costs.

    SALES TO FEDERAL AGENCIES

             GSA also sold 453,356 M-lbs            of steam to Federal        agencies
    responsible       for operating      and maintaining        the buildings       which
    they occupy,        such as the Department         of the Treasury        which
    operates     the Treasury      Building,      the Bureau of Engraving           and
    Printing     Building,    and other      related    buildings.       Revenues from
    these sales       amounted to about $703,000            in fiscal    year 1970.

          For reimbursable     services           furnished   by GSA to agencies
    for the operation      of buildings           and related   activities,    the          law
    (40 U.S.C.   490) provides       that       the reimbursements         be:

           “at rates      to be determined     by the Administrator        on
           the basis      of estimated     or actual   costs    (including
           accrued     leave,    and maintenance,    repair,      and, where
           applicable,       depreciation    of equipment)   .‘I


                                                3
w- B-574701


        GSA used the billing  rate of $1.55 for each M-lbs in fis-
  cal year 1970 for steam sold to the Federal agencies.     We esti-
  mated that GSA would have received additional   revenue of about
  $123,000 in fiscal   year 1970 on the sale of 453,356 M-lbs of
  Lteam to these Federal agencies if the billing   rate had been
  increased by 27.2 cents for each M-lbs to cover depreciation
  and repair  and improvement costs.
  Recommendation to the Administrator
  of General Services
        We recommend that GSA include in the billing     rate an
  amount for depreciation     and repair and improvement costs for
  steam sold to Federal agencies responsible      for operating  and
  maintaining   the buildings   they occupy.


        Copies of this report   are being sent to the House and            ,_
  Senate Committees on Government Operations       and House and       .\* '-"-;
  Senate Committees on Appropriations;     the Subcommittee on         -        _
  Treasury,   Postal Service,  and General Government, Senate
  Committee on Appropriations;    and the Director,    Office of       <'-'IA
  Management and Budget.
                                      Sincerely   yours,


                                         (Ii.zTk-vv~~
                                      Director, Civil Division
  The Honorable Robert L. Kunzig
  Administrator,   General Services
    Administration