oversight

Deferred Maintenance: Reporting Requirements and Identified Issues

Published by the Government Accountability Office on 1997-05-23.

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

      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Accounting and Information
      Management Division


      B277045

      May 23, 1997

      The Honorable Ted Stevens
      Chairman
      Committee on Appropriations
      United States Senate
                                                                          .
      Subject: Deferred mce:            Reuw .       .
                                                  R-med                        u
      Dear Mr. Chairman:

      Deferred maintenanceon government-ownedassets has long been a concern.
      For example, a report by the U. S. Advisory Commission on Intergovernmental
      Relations’noted that maintenanceof existing mfmstructure often does not
      receive adequateattention, especiallyin times of tight budgets, and that deferred
      maintenance can result in poor quality public facilities, reduced public safety,
      higher subsequentrepair costs, and poor service to the public. Concurrently,
      questions have been raised about the validity of federal agencies’estimates of
      deferred maintenanceamounts which are occasionally made in various reports.
      Thus, accurate reporting of deferred maintenance is important to allow informed
      decision-making as well as adequateconsideration of managerial and financing
      initiatives.
      Becauseyour office indicated interest in deferred maintenance on federally
      owned assets,we agreedto look at federal reporting requirements and General
      Accounting OffIce (GAO) and Inspector General (IG) reports discus&ng deferred
      maintenance. This letter provides summary data on (1) new reporting
      requirements on this issue, (2) agenciesthat own large amounts of property,




                    ce Public Works: A New Fed-e                 Investment
                         U. S. Advisory Commission on Intergovernmental Relations,
       SR-16,November 1993.
                                             GAO/A&ID-97-103RDeferred Maintenance
B277046
plant, and equipment (PP&zE)~as an indicator of where deferred maintenance
could exist, (3) maintenanceissues identified in prior GAO and agency IG
reports, and (4) observations on the need for improved reporting. Enclosures to
this letter offer additional detail on PP&E and prior reports.

ACCWNT’iNG SIXNDARDS FOR DVANC;E;
Historically, federal agenciesroutinely have not been required to report on
deferred maintenance. However, new federal accounting standards developed by
the Federal Accounting StandardsAdvisory Board (FASAB)3and issued
November 30, 1996,require the reporting of deferred maintenance in agency
financial statementsbeginning with those for iiscal year 1998.’ Although earlier
implementation is encouragedin the standard, to date no agency has done so.

The required reporting of deferred maintenance is one outgrowth of the Chief
Financial Officers (CFO) Act of 1990 and its subsequent expansion through the
Government ManagementReform Act of 1994. These acts established a solid
framework for improving iinancial management and accountability for federal
resources and will result in audited financial statements for the government’s 24
major departments and agencies,which comprise over 99 percent of the
government’snet outlays. When agencies begin to include deferred maintenance
in their flnanciaI statements in compliance with the new accounting standard, the
annual audits of agency financial statements required by these acts will ensure
that whatever is reported is subjected to independent scrutiny. This audit
scrutiny will help addresslongstanding concerns about the validity of agency-
reported deferred maintenance amounts.


2PP&Eare tangible assetsthat (1) have an estimated useful life of 2 years or
more, (2) are not intended for sale in the ordinary course of business, and (3) are
intended to be used or available for use by the entity.
 3FASABwas establishedin 1990by the Comptroller General, the Secretary of the
 Treasury, and the Director of the Office of Management and Budget (OMB) to
 develop and recommend accounting principles for the federal government. The
 nine-memberboard is comprised of representatives from GAO, Treasury, OMB,
 the CongressionalBudget Office, the Department of Defense (DOD), the
 Department of Energy, and three representatives from the private sector.
 ‘The standard for deferred maintenance is contained in Statement of Federal
 Financial Accounting Standards No. 6, Accounting for Property, Plant, and
 Equipment.
 2                                     GAO/AIMD-97-103RDeferred Maintenance
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The standard defmes deferred maintenanceas maintenance that was not
performed when it should have been or was scheduled and which, therefore, is
put off or delayed for a future period. Maintenance,described as the act of
keeping fixed assetsin acceptable condition, includes preventive maintenance,
normal repairs, replacement of parts and structural components, and other
activities needed to preserve the asset so that it continues to provide acceptable
seivices and achievesits expected life. The standard provides that acceptable
services and condition may vary both among entities and among sites within the
same entity. It is management’sresponsibility to determine what level of service
and condition is acceptable.
The standard requires that a line item for “deferred maintenance amounts” shall
be presented on the statement of net cost?with a footnote. Although no dollar
amounts for deferred maintenance will be reported on the statement of net cost
itself, the footnote must include estimates of the dollar amount of deferred
maintenance based on methods described below.
Generally, disclosure in a footnote requires the same.level of audit coverage of
the deferred maintenance information as it would receive were it in the
statement of net cost itself. Audit coverageis important becauseit is the
mechanism through which an independent party assessesthe accuracy of the
reported deferred maintenance information. As will be discussed below, the
accuracy of agency deferred maintenancereporting has been questioned by GAO
and IG reports in the past.
The standard provides that amounts disclosed for deferred maintenance may be
measured using either condition assessmentsurveys or lifecycle cost forecasts.
At a minimum, agenciesare required to present the following information for all
PP&E:

(1)    identification of each major class of asset (such as buildings and
       structures, furniture and fixtures, equipment, vehicles, and land) for which
       maintenance has been deferred, and
(2)    the method of measuring the dollar amount of deferred maintenance for
       each major class of PP&E.


?lYhestatement of net costs is one of several financial statements. It is designed
to report the gross and net costs of providing government goods, services, and
benefits and will help in assessingthe cost of service efforts and
accomplishments.
3                                       GAO/AIMD97-103RDeferred Maintenance
R-277046
If the condition assessmentsurvey method of measuring deferred maintenance is
used, the agencymust present, for each major class of PP&E, a description of
the requirements for acceptableoperating condition, any change in the condition
requirements, and a condition assessmentwith a range estimate of the dollar
amount of maintenanceneededto return it to its acceptable operating condition.
If the total lifwcle cost method is used, the agency must report (1) the original
date of the maintenanceforecast and an explanation of any changes to the
forecast; (2) the prior year balance of the cumulative deferred mkntenance
amount; (3) the dollar amount of maintenancethat was defined by the
professionals who designed,built, or manage the PP$E as required maintenance
for the reporting period; (4) the dollar amount of maintenance actually performed
in the period; (6) the difference between the forecast and actual maintenance;
(6) any adjustmentsto the scheduledamounts deemed necessary by the
managersof the PP8& and (7) the ending cumulative balance of deferred
maintenance for the reporting period for each major class of asset experiencing
deferred maintenance.
Agencies may also elect to categorizedeferred maintenance into critical and
noncritical amounts of maintenanceneeded to return each n@or class of asset to
its acceptable operating condition. If this is done, the agency is to include its
definition of these categories.
Implementation of the accounting standard for deferred maintenance will be
most important for agencieswith the greatest amount of existing PP&E and
those spending the most for the acquisition of physical assets controlled and
owned by the federal government. Based on amounts of PP&E reported either
in agency financial statementsor to the Department of the Treasury for fiscal
year 1996, 11 federal agenciesare responsible for about 99 percent of federal
PP&E DOD controls by far the greatest amount-almost 80 percent of total
PP&E reported by federal agencies. Other agencieswith large amounts of
reported PP&E include the National Aeronautics and Space Admin&Wion
 (NASA), the TennesseeValley Authority (TVA), and the Department of
Transportation.

DOD not only holds the most PPW, it is also spending the most annually.
Looking at a byear time &ante average-reported actual fiscal year 1994,1996,
and 1996 spendingand the estimated outlays for fiscal ye- 1997 and 199S-DOD
will spend slightly over two thirds of all federal outlays for the acqui@tion of
physical assets. A distant second are the Departments of Agriculture and
Transportation, which together will spend about 10 percent of total federal


 4                                     GAO/AMID-97-103RDeferred Maintenance
B-277046
outlays for physical assetsfor that byear period. Enclosure I presents details of
agency PP&E and outlays for physical assets.


With regard to budget reporting, for many years OMB reported outlays for
“repair, maintenance, and operation of physical assets”in a special arMysis part
of the budget. Becausethis type of reporting was discontinued after the 1989
budget, there is no governmentwideestimate of how much is spent each year on
the maintenance of physical assets.

Beginning with the 1961budget, an Analysis of Investment, Operating, and Other
Budget Expenditures6was included in the President’s budget document. Its
primary objective was to show spending on physical assets yielding benefits over
a longer period than the fiscal year in which the expenditure occurred. No
attempt was made to indicate the amount of depreciation or obsolescence on
existing physical assetsof the federal government.
The 1961 analysis disblnguishedbetween federal expenditures for (1) additions to
federal assets,(2) developmentalspending for grants for nonfederal physical
assets,research and development,and education and training, and (3) current
operating expenses. One category of current operating expenses was entitled
“Repair, maintenance, and operation of physical assets (excMing special
services).” ‘Ihis category was divided into civil and national defense categories,
with civil providing information on public lands and other physical assets. While
this categorization did not addressdeferred maintenance, it did at least report
the amount of operating and maintenance expenditures each year.

Separatereporting of the amount spent on repair, maintenance, and operation of
assets was continued when OMB established the character clas&fication’
reporting for expenditures in 1967. Included were the maintenance and
operation of the following general-purposepublic facilities: Atomic Energy


?‘his analysh later became known as Special Analysis D.
‘Character classi&ation is used to report investment activities separately from
non-investment in the President’sbudget submission. Data are classified as
investment by agencieswhen they finance activities yielding benefits largely in
the future such as physical assets,research and development, and education and
training. Character classifkation also distinguishes between grants to state and
local governments and direct federal programs.

6                                      GAO&MD-97-103R Deferred Maintenance
B-277046
Commission facilities; military structures, equipment, and facilities; flood control
reservoirs; power facilities; public lands, national forests, etc.

The separatereporting of operating and maintenance expenditures was
discontinued beginning with the 1990budget. Becausethis type of reporting was
discontinued, there is no governmentwide estimate of how much is spent each
year on the maintenanceof capital assets.


Deferred maintenancereports issued by GAO and the IGs over the past 4 years
generally addresstwo topics-general backlogs of maintenance with resulting
asset deterioration and the questionable validity of agency-reported measuresof
maintenancebacklogs and/or deferred maintenance. For example, GAO reports
on the National Park Service confirm that conditions are deteriorating but also
that the Park Service does not have adequate financial and program data and
controls to know the nature or extent of resource problems or the effectiveness
of measurestaken to deal with the problems.
A number of reports have questioned the validity of agency estimates of deferred
maintenanceand maintenancebacklogs. GAO has reported that DOD’s changes
in its definition of backlogs have led to large decreasesin its “unfunded
requirements;“6moreover, funds provided for maintenance were sometimes used
for other purposes. More recently, GAO has noted that the services have
expressedconcern about the adequacyof funding to maintain and repair all of
their facilities and have reported growing maintenance and repair backlogs.
However, the services also have many buildings that are excess to their needs
which could be demolished to avoid millions of dollars in recurring maintenance
costs. The validity of deferred maintenance estimates is not solely a DOD
problem-other agenciesalso cannot adequately support their claimed
maintenancebacklogs. At the request of the Chairman and Ranking Member of
 the ReadinessSubcommittee,Senate Armed Services Committee, GAO has
 started a new study evaluating the methodologies and criteria used by the
 Servicesto determine the need for repair and maintenance of their facilities.

Enclosure II summarizesrecent GAO and IG reports on the 11 agenciesreporting
the largest amounts of PP&E.



        ace      . Cone- Over j&e a&l&y. of&pot               Rs .
 m        (GAO/NSIAD9@194BR,
                           July 24,vlsso).
 6                                       GAO/AlMD-97-103RDeferred Maintenance
B-277046
     OBQQ$VATIONS

Improving the validity of information available to congressional and executive
branch decisionmakers on maintenance,including deferred maintenance, can
help improve the allocation of federal resources and, ultimately, the condition of
federal assets. It is also important, however, that agency estimates be validated
through independent audits before they are relied upon in making budget
decisions. Thus, the requirement to report deferred maintenance in financial
statements required by the CFO Act and the subsequentaudit of the reported
amounts wiIl go a long way toward improving the information available to
decisionmakers. In developing, reporting, and using this new information, other
factors also need to be considered, including whether each physical asset is still
needed in WfUing agency missions. This is particularly important when an
agency is downsizing.
               SCOPE,AND mODOl&X

To prepare                                                           .
      . . this document,. we reviewed OMB Circular A-11 s
S_ubrmsslon                       and federal accounting standards for PP&E.
We reviewed the amounts of PP&E as reported in fiscal year 1996 agency
financial statements or to the Department of the ‘lkeasury by agencies for
financial reporting purposes. We obtained actual agency outlays for physical
assets for fiscal years 1994through 1996and estimates for fiscal years 1997 and
1998 from OMBs databaseused for preparing the President’s annual budget
submission. OMB’s data are prepared as part of the annual executive budget
formulation process; none of the data are audited. We also reviewed prior GAO
and agency IG reports issued during the past 4 years that dealt with deferred
maintenance and had discussions with GAO and IG staff familiar with those
reports.
As agreed with your office, unless you publicly announce the contents of this
letter earlier, we plan no further distribution until 30 days from the date of this
letter. At that time, we will send copies to the Ranking Member of the Senate
Appropriations Committee. Copies will also be made available to others upon
request.
Please contact me at (202) 612-9673if you or your staff have any questions
concerning this letter. Christine Ronham,Ass&ant Director, and Robert Sexton,




                                         GAOkIMD-97-103RDeferred Maintenance
E277046
Carolyn Yocom, and Claudia Dickey, Senior Evaluators, were m@or contributors
to this letter.

Sincerely yours,




Paul L. Posner
Director, Budget Issues




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a                                    GAOMMD-Q7-103RDeferred Maintenance ‘-I
ENCLOSURE I                                                              ENCLOSURE I
                AGENCY PP&E AND OUTLAYS FOR PHYSICAL ASSETS

One way to determine which agencies might have deferred maintenance is to look at the
amount of property, plant, and equipment (PP&E) controlled by agencies and/or those
agencies that have large annual outlays for physical asset acquisition. We looked at the
PP&E amounts reported either in fiscal year 1996 agency financial statements or to the
Department of the Treasury for financial reporting purposes to gain an assessment of the
relative size of current levels of physical assets. Since DOD’s fiscal year 1996 financial
statement is not yet issued, a large percentage of the total reported amount for PP&E is
unaudited. Additionally, IG audit reports for several agencies indicated that the reported
PP&E balances were not reliable. However, the reported amounts, even though largely
unaudited and/or not completely reliable, are an indication of the general amount of
PP&E held by agencies. We also analyzed agency budget outlays for physical assets for
fiscal years 1994 through 1996 as well as estimated outlays for fiscal years 1997 and 1998
to assess current levels of spending for the acquisition of new assets or modifications of
existing ones. Ten of the 11 agencies with the greatest amount of reported PP&E were
also among the 11 agencies with average annual outlays of greater than $1 billion for
physical assets.

Federal agencies report in their financial statements and to the Department of the
Treasury the amount of PP&E they control. These amounts include only PP&E owned by
the federal government, not assets owned by other entities, such as state or local
governments, that may have been financed by federal grants. Table I.1 presents the
amount of PP&E reported for fiscal year 1996. Eleven agencies, each with more than
$7 billion in reported PP&E, account for almost 99 percent of all reported PP&E. As can
be readily seen in the table, DOD is by far the largest individual holder of PP&E in the
federal government with about 80 percent of the reported government total. The agencies
with the next largest stock of PP&E-the Tennessee Valley Authority (TVA), the National
Aeronautics and Space Administration (NASA), and the Department of Transportation-
each hold about 3 percent of the total stock. The Department of the Interior does not
report most of its land as PP&E but instead reports it in a separate report.




                                            g   GAO/AIMD-97-103R Deferred Maintenance
ENCLOSURE I                                                                    ENCLOSURE I
Table 1.1: Renorted Proper@. Plant, and EouiDment bv Federal Agencv. Fiscal Year 1996
           Agencv Financial Statements

(Dollars in billions)”
                                                             Percent
                                                             of total
 Agency                                  Total   PP&E         PP&E
 Department of Defenseb                            $762                 79.9
 Tennessee Valley Authority                          30                  3.2
 National Aeronautics and Space
 Administration                                      26                  2.8
 Department of Transportation                        24                  2.6
  Department of Energy                                  22               2.3
  U.S. Postal Service                                   18               1.9
  Department of the Interior                            18               1.8
  General Services Administration                       12               1.3
  Department of Veteran’s Affairs                       11               1.2
  Department of Agriculture’                             9                .9
  Department of State’                                   7                .8
  All other agenciesc                                   14               1.4
    Totald                                         $954             100.0

“this information was not independentIy verified by GAO.

bThe DOD total is the total of individual component financial statements.

‘The source for the data for these agencies was data reported to the Department of the
Treasury, not agency financial statements.

’ Total does not add due to rounding.


Another way to identify those agencies with a potential for having deferred maintenance
is to determine which agencies spend the most annually on physical asset acquisition.

                                            16 GAO/AIMD-97-103R Deferred Maintenance
ENCLOSURE I                                                               ENCLOSURE I

Table I.2 lists the federal agencies that will spend an average of over $1 billion annually
from 1994 through 1998. Eleven of these agencies account for 96 percent of total federal
outlays for physical assets over this time period. As is true in measures of the stock of
PP&E, DOD dominates. It is the largest spender with about 71 percent of all federal
outlays for physical assets. Other agencies with large outlays for physical assets are the
departments of Agriculture, Transportation, and Energy, as well as the Postal Service and
GSA.




                                            11 GAO/AIMD-97-103R Deferred Maintenance
   ENCLOSURE I                                                              ENCLOSURE I
Table 1.2: Federal Outlavs for Phvsical Assets, Fiscal Years 1994 Through 1998

  dollars in billions)
  bgency                     1994     1995      1996     1997     1998      B-year     Percent
                                                          est.    est.    average
  3epartment of Defense       $66.9   $61.0     $55.2    $51.3    $48.5      $56.6         70.7
  Department of                 6.3      5.1      4.5      4.3      4.2          4.9        6.1
  \griculture
  Department of                 3.1      3.4      3.4      2.7      2.9          3.1        3.9
  Ikansportation
  Department of Energy          2.9      1.9      2.5      2.0      1.8          2.2        2.8
  United States Postal          1.0      1.4      2.1      3.5      2.6          2.1        2.7
  Service
  General Services              1.7      1.8      2.3      2.6      2.2          2.1         2.7
  Administration
  Environmental Protection      1.3      1.3      1.3       1.4     1.6          1.4         1.7
  Agency
  National Aeronautics and
  Space Administration          1.6      1.4      1.0       1.0      .9          1.2         1.5
  Department of the             1.2      1.3      1.2       1.2      .9          1.2         1.4
  Interior
  Tennessee Valley               .7      2.0       1.3       .8      .7          1.1         1.4
  Authority
  Department of Veterans        1.0       .7       1.3      1.2      .9          1.0         1.3
  Affairs
  All Other Agencies            2.3      2.5      3.6       3.8     3.7          3.2         4.c
  Total outlays for          $89.9     $83.9    $79.7    $75.8    $71.0      $80.1          100
  physical assets

Source: OMB budget data.




                                               12 GAO/AIMD-97-103R Deferred Maintenance
ENCLOSURE II                                                                  ENCLOSUREII
             GAO AND IG REPORTS COVERING DEFERRED MAINTENANCE

Reports are summarized below by agency for the 11 agencies reporting to have the largest
amount of PP&E.

DEPARTMENT OF DEFENSE

GAO Reports

-   Defense Infrastructure: Demolition Of Unneeded Buildings Can Help Avoid Operating
    Costs (GAO/NSLAD-97-125,May 13, 1997) addresses DOD’s excess aging facilities and
    notes that DOD does not have enough funding to maintain and repair all facilities.
    GAO discusses demolition as an option for eliminating old, excess buildings that are
    costly to maintain and notes that it is one way to achieve further infrastructure
    reductions and millions of dollars in savings by avoiding recurring maintenance and
    repair costs. GAO recommended that the Secretary of Defense direct the services to
    use consistent and common criteria for developing accurate and reliable trend data on
    infrastructure to include replacement value, costs associated with their current
    infrastructure, and possible reduction options, including information on deferring
    facility maintenance and demolishing excess facilities. Furthermore, DOD should use
    the trend data as a starting point in formulating an overall strategic plan for facilities
    infrastructure and require the services to demolish excess infrastructure to the
    maximum extent feasible when facilities are being replaced by new construction.

-    Federal Power: Outages Reduce the Reliabilitv of Hvdroelectric Power Plants in the
     Southeast (GAO/T-RCED-96-180, July 25, 1996) states that federal hydroelectric power
     plants in the Southeast have experienced significant outages that degrade the
     reliability of the U. S. Army Corps of Engineers’ (Corps) hydroelectric system. The
     ability of these plants to generate electricity declined from about 95 percent in 1987 to
     87 percent in 1995-a trend that is paralleled in the Corps’ hydroelectric power plants
     nationwide. According to Corps officials, power outages occur because the plants are
     aging and when outages occur, repairs are generally reactive and short-term. The
     Corps’ budgeting process requires extensive justifications that can take a year or
     longer to complete, making it difficult to make extensive repairs and rehabilitations
    *when they become essential. Also, the Corps’ budget has declined in real terms by
     about 18 percent over the last 10 years-from about $3.8 billion to $3.1 billion, while
     capital investment needs to maintain and repair the power plants are expected to
     increase by about $1 billion.

-   Denot Maintenance: Some Funds Intended for Maintenance Are Used for Other
    Purposes (GAO/NSIAD-95-124, July 6, 1995) reports that although the services received
    more funds than requested for depot maintenance, the services did not always use

                                               I3 GAO/AIMD-97-103R Deferred Maintenance
ENCLOSURE II                                                                ENCLOSURE II
    these funds for that purpose. Also, GAO reported that depot maintenance backlogs at
    the time the services submit their budget requests to the Congress tend to decrease
    during the year of budget execution. The decreases resulted from the services’
    reducing the requirements for items requiring depot maintenance, not because more
    depot maintenance was performed. According to service officials, the depot
    maintenance backlogs are manageable, represent an acceptable minimal level of risk,
    and have not yet adversely affected equipment operational readiness rates.

IG Reports

DOD IG reports on the results of the financial audits done as a result of the CFO Act
found that the processes used to collect, classify, and value fixed asset data did not
produce reliable and auditable financial data. Further, significant internal control
weaknesses exist relating to reporting PP&E financial information. These weaknesses
affected all aspects of the PP&E transaction cycle. Until DOD, in concert with the
Defense Finance and Accounting Service, overhauls its financial management systems and
controls, IG officials believe the accuracy and reliability of stated PP&E will remain
unauditable.

DEPARTMENT OF ENERGY

GAO Reports

GAO has not reported on deferred maintenance issues at the Department of Energy
(DOE) in the past 4 years.

IG Reports

Discussions with IG officials at DOE indicated that no work has been done on deferred or
insufficient maintenance of DOE facilities.

DEPARTMENT OF THE INTERIOR

GAO Reports

-   National Parks: Difficult Choices Need To Be Made About the Future of the Parks
    (GAO/RCED-95238, August 30, 1995) reports that there is concern about the health of
    national parks for both visitor services and resource management. GAO states that at
    parks it visited visitor services are deteriorating, services have been cut back, and the
    condition of many trails, campgrounds, and other facilities was declining. GAO reports
    a Park Service estimate that since 1988 the backlog of deferred maintenance has more
    than doubled to more than $4 billion. For testimony related to this report, see

                                              14 GAO/AIMD-97-103R Deferred Maintenance
ENCLOSURE II                                                               ENCLOSURE II       -
    National Park Service: Difficult Choices Need to Be Made on the Future of the Parks
    (GAO/T-RCED-95124, March 7, 1995).

-   National Park Service: Better Management and Broader Restructuring Efforts Are
    Needed (GAO/T-RCED-95-101, February 9, 1995) states that the Park Service does not
    have adequate financial and program data and controls to (1) know the nature or
    extent of resource problems, (2) ascertain the effectiveness of measures taken to deal
    with the problems, or (3) determine which activities and programs would benefit the
    most from the limited funds available.

-   National Parks: Information on the Condition of Civil War Monuments at Selected
    Sites (GAO/RCED-95-80FS, February 1, 1995) reviews the overall condition and cost
    estimates for repairing 11 of 20 sites with Civil War battlefield park sites. Park
    Service cost estimates for repairing individual monuments ranged from $500 to over $1
    million.

-   Denartment of the Interior: Transfer of the Presidio From the Armv to the National
    Park Service (GAO-RCED-94-61, October 26, 1993) discusses the Park Service’s
    deferred maintenance and reconstruction backlog in light of the proposed uses of the
    Presidio Army Post for inclusion as part of the Golden Gate National Recreation Area.
    Since the costs of the Presidio’s rehabilitation could increase the Park Service’s
    deferred maintenance and reconstruction backlog, GAO recommends close oversight
    by the Department of the Interior and the Congress. For testimony related to this
    product, see Denartment of the Interior: Transfer of the Presidio From the Armv to the
    National Park Service (GAO/T-RCED-94-64, October 26, 1993).

-   Federal Land: Little Progress Made in Improving Oversight of Concessioners (GAO/T-
    RCED-93-42, May 27, 1993) reports that Park Service and Forest Service estimates for
    the cost of deferred maintenance in the national parks and forest is nearly $3 billion.
    GAO reported that improved management of consessioners on federal land would help
    ensure that the government is fairly compensated for the use of its land, the visiting
    public is provided with healthy and safe services, and the nations’s recreation
    resources are adequately protected for future generations.

IG Renorts

-   The Overview of the Bureau of Land Management Combined Comparative Financial
    Statements for Fiscal Years 1995 and 1996 (Report No. 97-I-319, January 16, 1997)
    contains a Bureau of Land Management (BLM) estimate of $275 million for its
    maintenance backlog as of September 30, 1996-a decrease of more than $19 million
    from the previous year. BLM management also stated its belief that increased
    maintenance would benefit public land improvements. However, on the whole, BLM

                                             I5 GAO/AIMD-97-103R Deferred Maintenance
ENCLOSURE II                                                                     ENCLOSURE II
        management believes its assets are maintained in a state that permits the use and
        management of the public lands.

-       Maintenance of Detention Facilities (Report No. 94-I-1131,August 22, 1994) stated that
        neither the Bureau of Indian Affairs nor Indian tribes maintained detention facilities in
        a safe and sanitary condition. Deficiencies existed because of the lack of regular or
        preventive maintenance programs and because no personnel were assigned
        responsibility for ensuring that maintenance problems were corrected.

-       Maintenance of Wildlife Refuges (Report No. 93-I-1477,August 27, 1993) stated that the
        U.S. Fish and Wildlife Service did not maintain the 27 wildlife refuges in a manner that
        would enhance and protect the wildlife habitat and provide for public safety. The
        report cited an increasing maintenance backlog.

-       Maintenance Activities, Bureau of Land Management (Report No. 94-I-1067, August 19,
        1994) concludes that BLM had progressed in its efforts to improve its facilities
        maintenance program but also that the program was negatively effected because funds
        appropriated for needed maintenance work were used to pay costs associated with
        other BLM programs and subactivities. It also noted that BLM lacked adequate
        procedures to ensure that needed maintenance work was identified and prioritized,
        resulting in deferred maintenance.

DEPARTMENT OF STATE

GAO Reoorts

-       State Denartment: Additional Actions Needed to Improve Overseas Real Proner&
        Management (GAO/N%&95-128, May 15, 1995) reports that progress has been made
        in addressing the long-standing problem of inadequate maintenance and rehabilitation
        of overseas facilities. Nevertheless, GAO also noted that some significant problems
        still exist that, if allowed to continue, could impede long-term efforts to improve real
        property management. For example, GAO found questionable and/or inappropriate
        use of routine maintenance funds at every overseas post included in the review, such
        as the use of routine maintenance funds for nonmaintenance purposes.

    -   In GAO’s High Risk Series, An Overview (GAO/HR-951, February 1995) cites the State
        Department’s actions to correct problems with its management of overseas property.
        Actions taken by the State Department included establishing priorities for construction
        projects based on specific criteria, better evaluating contractors’ performance, hiring
        additional qualified staff, surveying the maintenance conditions of posts, streamlining
        and updating housing standards, and improving information systems.


                                                   16 GAO/AIMD-97-103R Deferred Maintenance
ENCLOSURE II                                                                 ENCLOSURE II
IG Reports

The IG’s Semiannual Report to the Congress. October 1. 1992 - March 31. 1993 and
Semiannual Report to the Congress. April 1. 1993 - September 30, 1993 cited past IG
reports which noted that repair and maintenance of overseas real property was a major
management problem of the State Department. Noting that the maintenance and repair of
over 2,200 owned or leased facilities had been identified as a material weakness since
1988, the IG conducted an audit to assess State’s progress in addressing its backlog of
repairs and management of maintenance and repair operations. Major IG
recommendations that State (1) develop a system to identify, monitor, and request budget
funds on the basis of its worldwide backlog of maintenance and repair and (2) develop a
process to allocate routine maintenance funds based on need. State Department
management agreed to take corrective action, but those actions are not yet complete.

DEPARTMENT OF TRANSPORTATION

GAO Reports

GAO reports on deferred maintenance of transportation resources primarily address
highway and railroad modes of transportation. While the federal government generally
does not own those assets, it does provide some funds to maintain them. However, their
maintenance is generally not a federal responsibility. GAO reports that the type,
timeliness, and quality of highway maintenance greatly affects the performance of
pavement and the Department of Transportation (DOT) states that an additional $16
billion in spending is needed annually just to maintain-not improve-the condition of the
nation’s highways. Other GAO reports cite deficiencies in bridges and also note that
Amtrak and the Federal Railroad Administration estimate that about $2 billion would be
needed for maintenance and repair over the next 3 to 5 years to preserve the ability to
operate the Northeast Corridor at existing service levels.

    Related GAO Products

-    Transportation Financing: Challenges in Meeting Long-Term Funding Needs for FAA,
     Amtrak. and the Nation’s Hinhwavs (GAO/T-RCED-97-151, May 7, 1997) reports DOT’s
    *estimate that $16 billion in additional spending is needed annually just to maintain-not
     improve-the condition of the nation’s highways. DOT also states that postponing such
     spending can increase costs. For example, DOT estimated that deferring $1 in
     highway resurfacing for just 2 years can require spending $4 in highway reconstruction
     costs to repair the damage. Amtrak’s capital investment needs are also great and
     include both the replacement and modernization of current physical assets. With
     regard to the maintenance of existing capabilities, GAO reports that the Federal
     Railroad Administration and Amtrak estimated that $2 billion would be needed over

                                              I7 GAO/AIMD-97-103R Deferred Maintenance
ENCLOSURE II                                                                  ENCLOSURE II
      the next 3 to 5 years to recapitalize the south end of the Northeast Corridor to
      preserve its ability to operate in the near-term at existing service levels.

-     Highwav Infrastructure: Qualitv Imnrovements Would Safeguard Billions of Dollars
      Alreadv Invested (GAORCED-94-198, September 19, 1994) reports that federal, state,
      and local governments will need to invest about $50 billion annually in constant
      dollars through the year 2011 to maintain the condition and level of performance of
      the nation’s highway infrastructure-a figure which substantially exceeds the $26
      billion spent in 1991 for construction and capital repairs for highways built with
      federal assistance. GAO found that approximately 60 percent or less of the nation’s
      principal highways are considered to be in good condition and the states GAO visited
      during this review had backlogs of maintenance projects, mainly because of resource
      shortages. Four of the six states contacted by GAO said they would not use funds
      under the Intermodal Surface Transportation Efficiency Act of 1991 for maintenance,
      in part because doing so would reduce the funds available for capital projects. The
      Federal Highway Administration (FHWA) estimates that the 1991 cost to eliminate the
      backlog of deficiencies in highway pavement was $212 billion. Approximately 42
      percent of the backlog is the cost of maintaining the pavement; the remaining 58
      percent is the cost of adding capacity to provide the level of service that would meet
      minimum condition standards. Furthermore, FHWA estimates that the cost of
      eliminating the backlog of existing bridge deficiencies is $78 billion.

IG Renorts

During discussions, IG officials at DOT indicated that their office has done minimal work
on deferred or insufficient maintenance at DOT. The IG’s Semiannual Renort to the
Congress: October 1. 1995 - March 31. 1996 cites two reports that addressed the Federal
Transit Administration’s funding criteria for L&year mid-life rehabilitation and Z-year
replacement for rail cars.’ The IG reported that billions of federal dollars are used to
support inefficient operating, maintenance, rehabilitation, and replacement rail car
policies. The IG stated that periodic replacement of components instead of mid-life car
rehabilitation, over a 35year extended car life, could achieve efficiencies of between $1.4
billion to $3.3 billion in the industry. In addition, maintenance policies did not maximize
cars available during peak service. The IG estimates that if car use were maximized
during peak service, spare car requirements could be reduced by about 1,017 cars, saving
up to $1.5 billion over the next 5 years.




    ’ See DOT IG report numbers R4-FI’-6-027 and R4-FI’-6-011.
                                                13 GAO/AIMD-97-103R Deferred Maintenance
ENCLOSURE II                                                                ENCLOSURE II       -
GENERAL SERVICES ADMINISTRATION

GAO Reoorts

-   Federal Real Pronertv: Kev Acauisition and Management Obstacles (GAO/T-GGD-93-42,
    July 27, 1993) cites five key obstacles that inhibit the government’s ability to acquire
    and manage real property in a more cost-effective, business-like manner. Four of the
    obstacles generally address issues broader than deferred maintenance: GSA’s
    monopoly in providing office space, a lack of strategic focus and information for
    capital spending decisions, funding shortfalls, and budget scorekeeping issues. The
    other obstacle is GSA’s poor asset management practices. In particular, GAO states
    that there is no governmentwide strategic leadership to oversee real estate holdings or
    promote a life-cycle approach to asset management, nor is there any ability to identify
    and dispose of real property assets that are no longer needed or cost-effective to
    retain. GAO also notes that more than half of GSA’s office buildings are over 40 years
    old, some require extensive repairs and/or renovations, and several are on the national
    register of historic places.

IG Reuorts

IG reports from 1993 to 1996 show some reporting of maintenance issues at GSA. For
example, the IG’s Semiannual Renort to the Congress. April 1. 1996 - Sentember 30. 1996
cited past work on maintenance control center operations that identified opportunities for
improvement in the management of maintenance and repair data. It also cited a review
that found that repair and alteration projects in one region could be more
comprehensively planned and databases of work items more accurately maintained.

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

GAO Renorts

GAO has not reported on deferred maintenance issues at NASA in the past 4 years.

IG Renorts

-   Facilities Onerations and Maintenance-Kennedv &ace Center (m-96-003, November
    30, 1995) stated that no major problems were found with the facilities maintenance
    program at the Kennedy Space Center (KSC). The report further noted that KSC
    budgets for maintenance based on an industry-recommended range for annual
    maintenance cost which may not be relevant to KSC. It recommends the KSC budget
    based on an assessment of its own needs rather than the industry range.


                                             lg   GAO/AIMD-97-103R Deferred Maintenance
ENCLOSURE II                                                               ENCLOSURE II
TENNESSEE VALLEY AUTHORITY

GAO Reoorts

-     Tennessee Vallev Author&v: Financial Problems Raise Questions About Long-Term
      Viabilitv (GAO/AIMD/RCED-95-134, August 17, 1995) cited that WA officials
      acknowledged that the performance of TVA’s coal-fired and hydroelectric power plants
      had severely deteriorated because of age and reduced capital expenditures for
      improvements and maintenance. Subsequently, a modernization program was initiated
      and performance has improved. Despite the improvements, TVA projected that from
      1995 to 2020, it will need to spend more than $6 billion (constant 1994 dollars) to
      improve its coal-fired and hydropower units.

IG Renorts

A review of IG semiannual reports from 1993 to 1996, as well as discussions with the TVA
IG office, indicate that no work has been done on deferred maintenance issues at TVA.

UNITED STATES DEPARTMENT OF AGRICULTURE

GAO Reports

GAO has not reported on deferred maintenance at USDA in the past 4 years.

IG Reports

A review of USDA IG reports indicates that one report discusses maintenance ( Forest
Service Maintenance of Develoued Recreation Sites (80-099-0136SF,October 14, 1994)).
This report states that the Forest Service needs to more effectively account for resources
used to maintain and reconstruct developed recreation sites. The report also states that
staff did not consistently use the proper accounting codes to charge recreation
maintenance expenditures.

    UNITED STATES POSTAL SERVICE

    GAO Renorts

    GAO has not reported on deferred maintenance at the U. S. Postal Service (USPS) in the
    past 4 years.




                                               26 GAO/AlMD-97-103R Deferred Maintenance
ENCLOSURE II                                                             ENCLOSURE II     -

IG Renorts

A review of IG semiannual reports from 1993 to 1996 indicates that no work has been
done on deferred maintenance issues at USPS.

DEPARTMENT OF VETERANS AFFAIRS

GAO Renorts

GAO has not reported on deferred maintenance at the Department of Veterans Affairs
(VA) in the past 4 years.

IG Reports

Discussions with IG officials at VA indicated that no work has been done on deferred or
insufficient maintenance of VA facilities.




(935233)


                                           21 GAO/AIMD-97-103R Deferred Maintenance
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