State Department: Need to Improve Maintenance Management of Overseas Property

Published by the Government Accountability Office on 1990-09-24.

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


                        CTnit4   States   General   Acrountirig   Office
                        Report to the Chairman, Legislation
  GiO                   and National Security Subcomnittee,
                        Committee on Governxnent Operations,
                        House of Representatives

  September    1990
                        Need to Irnprove
                        Management of
                        Overseas Property

                                                                           ...,-   ._.   .
” ‘.GA0/NSIAD-90-216                                                        ”
National Security and
International  Affairs Division


September 24,199O

The Honorable John Conyers
Chairman, Legislation and National
  Security Subcommittee
Committee on Government Operations
House of Representatives

Dear Mr. Chairman:

As you requested, we examined the State Department’s practices for managing maintenance
of its buildings and facilities at overseas posts. This report addresses how State determines
its maintenance needs, discusses barriers to implementing a good maintenance management
system, and provides our recommendations for improvement.

As arranged with your office, unless you publicly announce its contents earlier, we plan no
further distribution of this report until 30 days from its issue date. At that time, we will send
copies to the Secretary of State, appropriate congressional committees, and the Director,
Office of Management and Budget. Copies will also be made available to others upon request.

This report was prepared under the direction of Joseph E. Kelley, Director, Security and
International Relations Issues, who may be reached on (202) 275-4128. Other major
contributors to this report are listed in appendix I.

Sincerely yours,

Frank C. Conahan
Assistant Comptroller General
                          Executive Summary

                          accountability and internal controls over maintenance funds in some
                          instances resulted in the unauthorized or improper use of funds. For
                          example, about $220,000 was diverted for improper purposes in San-
                          tiago, Chile.

                          FEXI recently initiated several projects designed to improve maintenance
                          operations, including centralizing maintenance operations, establishing
                          two regional maintenance assistance centers to provide technical, hands-
                          on assistance to the posts, and establishing a maintenance program espe-
                          cially for newly constructed buildings.

Principal Findings

                              Neither FBO nor the overseas posts have detailed and complete informa-
Costs to Maintain and         tion on the maintenance cost and condition of individual buildings and
Repair Overseas               properties because the posts have not systematically collected such
Facilities Not Fully          data. None of the 14 posts GAO visited had conducted annual surveys to
                              systematically identify problems requiring maintenance or repairs.
                              Because of its inability t () obtain complete and accurate information on
                              post facility conditions and repair needs, FBO contracted with two engi-
                              neering firms to survey the conditions of buildings and properties of
                              overseas posts to develop a data base to project State’s maintenance
                              repair requirements. The contractors began surveying posts in 1988 and
                              by the end of 1989 had completed surveys of 50 posts. They identified
                              $71 million in maint.enance repair projects at these posts. FBO plans to
                              finish surveying all of it,s overseas posts by 1994 or 1995. FBO projects as
                              much as $450 million in costs to remedy the backlog of maintenance and

Some Properties Require       A number of U.S.-owned properties require extensive maintenance,
Extensive Repairs and         repairs, and rehabilit,ation. For example, FBO has estimated that major
                              repairs to the Ambassador’s residence in Tokyo and the consulate office
Rehabilitation                in Rio de Janeiro would cost about $18.5 million. Several other examples
                              of major repair and rehabilitation projects have been identified by the
                              contractors surveying post facility conditions.

                              Among the factors (;.I() identified as reasons for the poor condition of
                              U.S. property were ( 1) the age of the buildings, (2) neglect or deferral of

                              Page 3                        GAO/NSIAD90-216 State Department OverseasProperty
                           Executive Summary

                           In response to material internal control weaknesses identified in its 1988
State Department           and 1989 Federal Managers Financial Integrity Act reports, FBOhas
Initiatives                taken several steps to improve overseas real property management,

                   l initiating efforts to identify maintenance and repair requirements at all
                     overseas posts,
                   . establishing two centers to provide additional maintenance assistance to
                     overseas posts, and
                   . initiating an overall maintenance system and hiring facility managers
                     for all newly constructed office buildings.

                           GAO believes that these positive actions will improve maintenance opera-
                           tions. However, standardized and systematic maintenance management
                           practices, as called for in FBO'S handbook, and better accountability of
                           maintenance resources would help to ensure that State’s resources are
                           not being misused.

                           GAO recommends that the Secretary of State strengthen maintenance
Recommendations            management of its facilities and buildings abroad by taking the fol-
                           lowing actions:

                       . Incorporate the key elements of the Buildings Maintenance Handbook
                         into the Foreign Affairs Manual to require overseas posts to systemati-
                         cally identify needs and standardize maintenance operations. Include in
                         the manual a requirement for annual assessments of building conditions
                         and training to ensure that the surveys are effectively completed.
                       l Expedite the development of a property maintenance reporting system
                         to identify and track expenditures on all U.S.-owned and long-term
                         leased properties and on FBO-funded special maintenance and improve-
                         ment projects.

                           As requested, GAOdid not obtain official agency comments. However,
Agency Comments            GAO discussed the information in this report with State Department offi-
                           cials and incorporated their comments in the report where appropriate.

                           Page 5                        GAO/NSlAD90216 State Department OverseasProperty

FBO       Office of Foreign Building Operations
GAO       General Accounting Office
REMS      Real Estate Information Management System

Page7                      GAO/NSlAB90-216 State Department OverseasProperty
                                           Chapter 1

                                           The administrative section at each post is responsible for routine and
Posts Responsible for                      preventive maintenance. There are two basic categories of maintenance
Maintenance                                funding for overseas facilities: (1) preventive and routine maintenance
                                           and (2) special projects for minor improvements and repairs. Routine
                                           and preventive maintenance involves such work as painting, changing
                                           filters, and servicing equipment. According to FBO officials, the level of
                                           routine and preventive maintenance funding for each post is usually
                                           based on the past year’s funding with adjustments for inflation. Costs
                                           vary considerably by post. For example, Mexico City, Mexico, spent over
                                           $900,000 on maintenance in 1988, whereas Santiago, Chile, spent about

                                           Special projects for minor improvements are approved by FBO but mar-
                                           aged by the posts. These projects are sometimes contracted out locally,
                                           while others are completed by the embassy maintenance staff. Funding
                                           for special projects is based on needs, which are identified by a variety
                                           of means, including FE?0visits, post observations, and fire and safety
                                           inspections. Projects may be designed to enhance post operations, recon-
                                           figure space, upgrade systems, or react to emergency situations such as
                                           fires and natural disasters. Funding for special projects is in addition to
                                           that provided for routine and preventive maintenance.

                                           Maintenance funding has increased from about $55 million in fiscal year
Maintenance Funding                        1988 to about $67 million in fiscal year 1990. Beginning in fiscal year
                                           1989, funds were allocated for the development of the two FBO regional
                                           maintenance assistance centers which have accounted for maintenance
                                           funding increases. The centers provide technical assistance to overseas
                                           posts and conduct actual maintenance and repair activities when post
                                           support is not available. (See table 1.1.)

Table 1.1: State Department
Maintenance Appropriations (Fiscal Years   Dollars in Millions
1988-90)                                                                                             Fiscal year
                                           Account activity                                   1900           1989        1990
                                           Routine and preventive maintenance                  446            40 8        42 0
                                           spkal pro)ects and minor Improvements               100            104         110
                                           Faclllty maintenance awstance centers                              86          140
                                           Total                                             $54.6          $59.0        $67.0

                                           Page 9                            GAO/NSIAD90-216 State Department OverseasProperty
Chapter 2

Building Conditions and Costs to Repair Them
Are Not F’ully Known

                       FEKIdoes not have complete information  on the condition of its buildings
                       overseas and their support systems and does not know the overall costs
                       to maintain, repair, and renovate them. Overseas posts have not system-
                       atically conducted and documented annual surveys on the conditions of
                       buildings and properties, and the FE0 headquarters’ capability to per-
                       form such surveys is limited.

                       In 1988, FEJOcontracted with two engineering firms to develop a baseline
                       of information about facility conditions, document needed post repairs,
                       and estimate the size of the maintenance backlog at its 250 overseas
                       posts. As of December 1989,50 posts had been surveyed, and $71 mil-
                       lion in rehabilitation and repair needs had been identified at those posts.
                       Although the surveys are not expected to be completed until 1994 or
                        1995, FBO has estimated that costs for repairing facilities and eliminating
                       the backlog could be as much as $450 million.

                       According to guidance outlined in FBO’S Buildings Maintenance Hand-
Posts Have Not         book, maintenance personnel at each overseas post should conduct an
Conducted Annual       -
                       annual survey to document the condition of each building and identify
Inspections            building and system deficiencies that require special project funding for
                       repairs. The handbook also recommends that posts use the surveys to
                       develop annual plans for maintenance work. FBO believes that these
                       surveys would also enable posts to increase work force productivity and
                       improve maintenance resource management.

                       None of the 14 overseas posts we visited had conducted and documented
                       the recommended annual surveys. FEWand post officials cited the fol-
                       lowing reasons that surveys were not done:

                   . FBO’S handbook is a guide, and the surveys are not required under State
                   l Maintenance employees who work on the facilities are aware of their
                     conditions but are not recording deficiencies formally and on an annual
                   . The level of expertise among maintenance staff is insufficient to con-
                     duct surveys in many countries.

                       At the posts we visited, maintenance programs were often managed on
                       an ad hoc, reactive basis. As a result, post officials have no assurances
                       that all deficiencies are being identified and reported, or that the life
                       expectancy of buildings and their systems is being maximized.

                       Page 11                        GAO/NSIAD-96.216State Department OverseasProperty
                                  Chapter 2
                                  Building Conditions and Casts to Repair
                                  Them Are Not Fully Known

                                  were not allowed into secure areas unless they were escorted by cleared

Engineer Surv reys Identify       FBO’S contractors estimated that about $71 million would be needed to
$71 Million in Needed             complete repair and rehabilitation projects at the 50 posts they had sur-
                                  veyed as of December 1989. The nature of the projects ranges from
Repairs                           replacing entire systems such as plumbing or roofs, due to obsolescence,
                                  to painting, repairing sidewalks, and caulking windows. The contractors
                                  estimated costs for the following projects, among others:

                              .   $28 million to make living conditions more acceptable at the consulate
                                  and housing apartments in Frankfurt, West Germany. Wiring in some
                                  apartments was considered a potential safety hazard, the kitchens were
                                  antiquated and had poor quality tiles and floors, and the bathrooms had
                                  old plumbing.
                                  $15 million to replace the air-conditioning system, ceilings, floors, and
                                  pipes in some of the office buildings in New Delhi, India.
                                  about $5 million to replace and rehabilitate the air-conditioning,
                                  plumbing, and electrical systems and the general physical condition of
                                  buildings in Kinshasa, Zaire.
                                  $2 million to replace and repair windows, install a fire alarm system,
                                  repair the interior and exterior walls of the chancery, and remodel the
                                  kitchens and bathrooms in the housing apartments in Brasilia, Brazil.

                                  -Based on our review of 14 overseas posts, the recently completed
Factors Contributing               surveys, and information obtained from FBO officials in Washington, we
to the Maintenance                 identified several factors that have contributed to the maintenance and
and Repair Backlog                 repair backlog and the deteriorated conditions of some overseas facili-
                                   ties. The factors include the increasing age of facilities and their support
                                   systems, post neglect and deferred maintenance, and limited mainte-
                                   nance skills of maintenance personnel at some posts. In addition, as dis-
                                   cussed in chapter 3, we believe that the posts’ failure to ensure that
                                   maintenance management principles are systematically being followed,
                                   as prescribed in FBO’S handbook, has also contributed to the maintenance
                                   and repair backlog.

U.S. Real Property Is             According to FBO, the estimated average age of U.S. facilities is 23 years.
Aging                             Many of the renovation maintenance, and repair projects identified in
                                  the contractors’ surveys were for replacing building support systems,
                                  such as plumbing, roofing, and electrical and air-conditioning systems,

                                   Page 13                            GAO/NSIAD-90216 State Department OverseasProperty
                 Building cOnditions and Costs to Repair
                 Them Are Not Fully Known

                 sufficient numbers of technically qualified maintenance staff. Con-
                 versely, officials in Cairo and Kinshasa told us that their maintenance
                 operations were hampered because they did not have skilled local
                 national workers. Engineering contractors also reported instances of
                 inadequate or marginal maintenance capabilities. For example, the con-
                 tractor’s report on Kinshasa noted that “facilities are in below average
                 condition” partly due to “the low quality of materials and

                 FBO does not have reliable information   on maintenance backlog costs and
Conclusions      rehabilitation needs of its overseas buildings and properties. Overseas
                 posts are not presently required to conduct annual property condition
                 inspections, even though such inspections would provide the informa-
                 tion FBOneeds to estimate the backlog accurately. Although contractors
                 are now surveying the posts to obtain a baseline of information, FBO will
                 not be able to maintain a current data base on facility conditions and
                 repair requirements until posts-with     FXI’S assistance-develop a capa-
                 bility to make their own annual assessments.

                 We recommend that the Secretary of State revise the Foreign Affairs
Recommendation   Manual to make annual building condition assessments a requirement
                 and direct FEKIto provide training and assistance to posts to ensure that
                 annual surveys are effectively completed.

                  Page 15
                                        Chapter 3
                                        Post Maintenance Management Practices and
                                        FBO Oversight NeedImprovement

Table 3.1: Key Maintenance Principles
                                        Maintenance element          Element description
                                        Inventory of assets and      Detarled rnformatron about assets that must be maintarned,
                                        annual conditron survey      rncludrng documented reparr needs
                                        Maintenance tasks            Wntten statement of tasks that describes the maintenance
                                                                     work to be done
                                        Work standards               Frequency of maintenance (such as preventrve
                                                                     marntenance) and methods for accomplrshing the work, for
                                                                     example, required labor and equipment.
                                        Work program and budget      Annual work plan that links marntenance needs to the
                                                                     frnancral resources needed to accomplish the reparrs and
                                                                     manage maintenance operatrons
                                        Work schedule                A plan that rdentrfres and pnontizes tasks based on the work
                                                                     program and budget.
                                        Work orders                  Specrfrc job authorizatron and record of work accomplished,
                                                                     includrng actual labor and matenal costs
                                        Reports                      Reports or specral analyses that compare planned versus
                                                                     actual accomplrshments and costs Used to evaluate
                                                                     marntenance operatrons

                                        The first step in setting up a good maintenance program is knowing pre-
                                        cisely what needs to be maintained. Without an inventory of equipment,
                                        systems facilities, and identified maintenance needs, a logical plan for
                                        managing maintenance is not possible.

                                        Work load inventories, maintenance tasks, and work standards enable a
                                        manager to plan and organize a post’s maintenance more effectively.
                                        Together, these elements provide a manager with the information neces-
                                        sary to determine maintenance needs and match them to the resources
                                        required to accomplish the work.

                                        Annual work programs and budgets are used to identify planned main-
                                        tenance tasks and the required labor and financial resources needed to
                                        provide maintenance,. In this way, the posts’ maintenance budgets are
                                        linked to actual maintenance needs.

                                        Maintenance work schedules ensure that (1) the work load is spread
                                        evenly throughout the year, (2) seasonal work is undertaken at the
                                        appropriate time of the year, (3) maintenance jobs are accomplished in
                                        order of priority, and (4) equipment and supplies are available when
                                        needed. Work orders are used to authorize and control specific mainte-
                                        nance jobs and record work accomplished. Work orders can also be used
                                        to record the actual labor and material costs.

                                        Page 17                            GAO/NSIAD-96216 State Department OverseasProperty
                             Chapter 3
                             Post Maintenance Management Practices and
                             FBO Oversight NeedImprovement

                           . After a recent FBOfire and safety inspection of U.S.-owned apartment
                             buildings in Brasilia, the inspectors recommended that three fire escapes
                             be constructed on each building to allow the American occupants to
                             escape in case of a fire. The apartment buildings have exits only on the
                             ground floors. The proposed projects submitted to Fno/Washington for
                             fiscal year 1989 funding, however, showed that the post listed reloca-
                             tion of the chancery building cafeteria to the recreation clubhouse
                             located next to the chancery as a higher priority than the fire escapes.

                             Contractor surveys also noted that in some instances repairing swim-
                             ming pool pumps received the same or higher priority as repairing a roof
                             or providing a fire escape.

FBO’s Oversight Needs to     FBO has exercised insufficient oversight of overseas maintenance activi-
Be Strengthened              ties. Although FBO has provided guidance to posts on the proper execu-
                             tion of sound maintenance programs and has designed an information
                             management system to help posts’ manage properties, it does not cur-
                             rently have information on how posts maintenance resources are actu-
                             ally being used. The Real Estate Information Management System
                             (REMS), which FRO designed as a post management tool, is not fully
                             serving its purpose because of inaccurate and outdated information. FBO
                             has not been inspecting overseas posts regularly and has not held posts
                             accountable for how they use maintenance resources. Our review of FBO
                             t.rip reports for 1987-89 and interviews with post officials suggest that
                             FIIOneeds to provide posts with more assistance in developing their
                             maintenance managemcxnt programs.

REMS Not Effectively          NEMS was designed to support all property management, planning, and
                              operations at the post level. It consists of four subsystems: (1) an inven-
Used                          tory system to report and store management information about land and
                              buildings, such as information on property acquisitions, property dis-
                              posal, and leases and terminations; (2) a work order system to support
                              planning, accomplishing, and reporting on work, such as preventive and
                              routine maintenance, performed at posts; (3) a system to manage
                              building improvement and repair projects for the purpose of planning
                              projects, requesting funds, and monitoring project completion status;
                              and (4) a property accounting system to accumulate property costs and
                              report such costs by building and federal agency. REMS has been installed
                              at 24 of the larger posts, which accounts for roughly 40 percent of
                              State’s U.S. government-owned properties.

                              Page 19                           GAO/NSIAB9@216State Department OverseasProperty
                                Chapter 3
                                Post Maintenance Management Practices and
                                FEWOversight Need Improvement

FBO Infrequently Deals          FBO’Sofficials told us that their goal is to visit each overseas post at
With Systematic                 least once a year to review maintenance operations and provide mainte-
                                nance assistance. According to FBO’S records, personnel from FBO’S
Maintenance Management          Facility Maintenance Division visited 86 of 250 posts during a 2-year
Issues During Field Trips       period from 1988 through 1989. Officials from FBO’S Area Management
                                Division, mainly foreign service officers, visited about 80 percent of all
                                posts during a 3-year period from 1987 through 1989. Our review of
                                selected trip reports filed for these trips shows that systematic mainte-
                                nance management was infrequently discussed. When maintenance
                                issues were discussed, they usually dealt with technical areas associated
                                with individual maintenance problems, such as repairing generators or
                                upgrading electrical systems.

                                Several post officials expressed interest in having more frequent visits
                                by FBo maintenance staff. For example, officials in Cairo said FBO had
                                not inspected maintenance management at their post within the past
                                4 to 5 years. Officials in Santiago and Brasilia also indicated interest in
                                receiving more direct, assistance from FBO maintenance personnel.

                                FBo officials said that they have increased their capability to assist over-
                                seas posts by establishing the Washington Maintenance Assistance
                                Center and the European Maintenance Assistance Center, which will
                                provide assistance throughout the world. As of January 1990, the Wash-
                                ington Center had 35 of its authorized staff of 55 assigned, and the
                                European Center had 2 of its authorized level of 42 positions filled.

                                At eight of the nine countries we visited, posts could not provide
Need for Greater                detailed cost data by building or by project. Posts were not tracking
Accountability of               maintenance expenditures on individual buildings and facilities and, as
Maintenance                     noted earlier, were not providing information on FRO-funded special
                                maintenance projects. Because of poor internal controls and inadequate
Resources                       accountability, maintenance funds were in some instances misused or
                                used without authorization. We identified the following examples of
                                recent inadequate accountability or misuse of funds:

                            l In Kinshasa, the post budget officer could not provide purchase orders
                              or other support for $129,000 worth of project work.
                            . In Bangkok, FBO officials found that the post inappropriately used main-
                              tenance funds to construct a temporary warehouse.
                            l In Manila, the State IG found that funds were improperly used, without
                              FBO’S knowledge or approval, to construct two unauthorized buildings at
                              a cost of almost $93,000.

                                Page 21                           GAO/NSIALXW216State Department OverseasProperty
                      Chapter 3
                      Post Maintenance Management Practices and
                      ET30Oversight Need Improvement

                      routine maintenance funds and special project maintenance expendi-
                      tures to ensure better accountability over all maintenance funds.

                      We recommend that the Secretary of State take the following actions to
Recommendations       improve maintenance operations and increase accountability of mainte-
                      nance resources:

                  l   Incorporate key elements of FBO’SBuildings Maintenance Handbook into
                      the Foreign Affairs Manual to require overseas posts to identify their
                      maintenance needs and standardize post maintenance operations.
                  l   Expedite development of a property reporting system that identifies
                      expenditures for routine maintenance and individual special mainte-
                      nance projects on all U.S.-owned and long-term leased properties.

                      Page 23                           GAO/NSIALb!W216State Department OverseasProperty
Page 26   GAO/NSIAMJO-216State Department OverseasProperty
Page 27   GAO/NSlAD-W-216State Department OverseasProperty
.----..-,..           _--.._,_.,._- ..--_.. .,   ,.-..                                                                .,   . .,, -

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Related GAO Products

              Foreign Buildings: Funding Practices in the Acquisition and Maintenance
              of Overseas Property (B-146782, Sept. 30, 1963).

              Foreign Buildings: Improvements Needed in Overseas Property Manage-
              ment (B-146782, Sept. 30, 1969).

              Real Property: Some Progress Made in Improving Management (ID-24,
              Mar. 28, 1974).

              Real Property: Continuing Problems (1~~8-16, July 12, 1978).

              Much More Can Be Done by the State Department to Improve Overseas
              Real Estate Management (GAO/NSIAD-86-101, Apr. 18, 1986).

              State Department: Management of Overseas Real Property Needs
              Improvement (GAO/NSIAD-89-116, May 13, 1989).

(462578)      Page 28                      GAO/NSIAIMO-216State Depaament OverseasProperty
Page 26   GAO/NSIALh96-216State Department OverseasProperty
Appendix I

Major Contributors to This Report

                        Jess T. Ford, Assistant Director
National Security and   Joseph H. Murray, Assistant Director
International Affairs   Doyle L. Reedy, Senior Evaluator
                        John F. Gallant, Senior Evaluator
Division, Washington,

                        Willie E. Bailey, Senior Evaluator
European Office         Kirk R. Boyer, Evaluator

                        Raymond M. Ridgeway, Senior Evaluator
Far East Office         Kristi Karls, Evaluator

                        Page 24                        GAO/NSlALHB-216State Department OverseasProperty
                Chapter 3
                Post Maintenance Management Practices and
                PBOOven&h1 Need Impruvement

              . In Santiago, Chile, an internal investigation revealed that an estimated
                $120,000 was missing from the routine maintenance account or had
                been misused, and another $100,000 from other accounts was improp-
                erly used to pay for inflated rent costs.

                In addition, State IG officials told us that as of July 1990, they were
                investigating six criminal cases involving misuse of post maintenance

                FBO officials acknowledge that they cannot track costs on a property-by-
                property basis. They indicated that development of an individual prop-
                erty accounting system needed to strengthen internal controls will not
                be feasible until the State Department completes its new financial man-
                agement system sometime in 1991. We believe that the lack of a system
                to identify the value and costs of maintaining individual buildings and
                building systems hampers FE& ability to plan for future acquisition,
                disposal, rehabilitation, and maintenance needs.

                None of the overseas posts we visited were following all of the mainte-
Conclusions     nance management practices as outlined in ~~0’s Buildings Maintenance
                Handbook. Maintenance and repair requirements were not being system-
                atically identified, priorities were not always being followed, and infor-
                mation on individual building costs and maintenance expenditures is not
                adequate to ensure accountability and control over their maintenance
                funds. In some cases, lack of accountability and an absence of internal
                control have resulted in unauthorized or improper uses of maintenance
                funds. As a result, FBO cannot be assured that necessary maintenance is
                being done at all its overseas facilities, and without adequate informa-
                tion on post maintenance operations, FE0 does not know if its mainte-
                nance program is being effectively and efficiently carried out.

                 FBOhas recently taken several steps to improve maintenance operations,
                 including hiring contractors to identify the condition of all U.S. and long-
                 term leased properties, expanding technical assistance to overseas posts
                 through the establishment of two regional maintenance assistance cen-
                 ters, and establishing a facility manager’s program for all newly con-
                 structed office buildings. We believe that these initiatives will improve
                 maintenance operations at overseas posts. However, we also believe that
                 posts need to take a systematic approach to managing maintenance by
                 following generally accepted maintenance management practices. These
                 practices include having an information system to identify individual
                 property conditions and repair costs and an accounting system to track

                 Page 22                           GAO/NSIALWO-216State Department OverseasProperty
Chapter 3
Post Maintenance Management Practices and
FBO Oversight Need Improvement

Although 8 of the 14 posts we visited were using REMS, none was using
the system effectively because data in the system was inaccurate,
incomplete, and outdated. For example, the quality of information about
building and facilities was lessened because important data such as
building dimensions and date of acquisition were inaccurate or left out.
As another example, in Vienna our analysis of 278 work orders, listed as
outstanding in June 1989, showed that 117, or 42 percent, had already
been completed. In Cairo, a similar analysis of 144 outstanding work
orders for May 1989 showed that 48, or 33 percent, had already been
completed. By not maintaining up-to-date work orders, post officials
cannot document that effective and efficient preventive maintenance is

Similarly, at the posts we visited, the REMS property accounting systems
were not effectively used. Posts were not tracking maintenance expendi-
tures on individual projects and were not providing information on spe-
cial maintenance project expenditures, even though FBOrequired posts
to do so as part of the conditions of accepting the money. Because posts
have not tracked expenditures by project, FBO cannot be assured that
special maintenance project funds have been spent for intended

In 1988 and 1989 FIIO requested that each post report on the status of
special maintenance and minor repair projects. FBO inserted the fol-
lowing paragraph into each cable sent to posts approving project

“Posts should cable 1hv Irqrcted start and end dates to FBO for special projects.
Post is also directed to inform FBO by cable the date the project(s) is/are actually
completed and inform E’HOthe amount of funding actually expended on the pro-
.jrct(s). This information is n~essary for the orderly maintenance of FRO’s world-
wide project files.”

 We sampled 32 special and minor improvement projects, each costing
 over $50,000, that FRO funded during 1988 and 1989. These costs repre-
 sented about 10 percent of the $20 million funded for the 2-year period.
 We found that none of the posts responded to FBO’S reporting require-
 ment. FRO officials told us they did not follow up with posts to find out
 why they had not provided the requested information.

 Page 20                           GAO/NSIAL-W-216State Department OverseasPropwty
                          Post Maintenance Management Practices and
                          FBO Oversight Need Improvement

                          Reports and analyses are developed to show planned versus actual
                          accomplishments, use of resources, and costs for each maintenance func-
                          tion. With this information as a base, post managers can objectively
                          evaluate the efficiency and effectiveness of their maintenance

                          None of the posts we visited were following all of the maintenance man-
Posts Lack                agement principles that are part of a recommended maintenance man-
Standardized              agement system. None had conducted annual surveys to systematically
Maintenance               identify maintenance and repair requirements, and none had developed
                          annual work plans linking identified needs to the financial resources
Management Systems        necessary for accomplishing repairs and managing maintenance opera-
                          tions. Four posts did not have documented preventive maintenance pro-
                          grams, and work order systems at eight posts were incomplete and

                          At the posts we visited, maintenance deficiencies were not being identi-
                          fied in a systematic way; rather, problems such as caulking windows or
                          repairing driveways were brought to the attention of embassy officials
                          by local national maintenance personnel who carry out the day-to-day
                          maintenance operations. Embassy officials believed that maintenance of
                          buildings and property was being adequately handled. However, a pre-
                          liminary report by the engineering contractors showed that 30 percent
                          of maintenance and repair deficiencies were for miscellaneous, including
                          some routine types of maintenance.

                          Priority maintenance needs relating to safety had not been met at two
Safety Considerations     posts we visited. In some instances the posts funded or requested
Did Not Always            funding for work that appeared to be less urgent than other needs iden-
Appear to Be a            tified by FBO.
Priority at SomePosts .   In Guadalajara, Mexico, the consulate office building-a long-term
                          leased property-has     a fire safety problem that had been identified by
                          FBO’S fire and safety inspectors during a 1986 inspection. Employees
                          cannot escape from some areas in the building in the event of a fire. The
                          only way out for most occupants, including the Consul General, is
                          through the windows, which are covered over with concrete latticework.
                          The Consul General was provided with a sledge hammer to break
                          through the concrete barrier in the event of an emergency. Instead of
                          funding a fire escape, the post spent $45,000 to build a roof to cover the
                          consulate parking lot.

                          Page 18                            GAO/NSIADSO-216State Department OverseasProperty
Chapter 3

Post Maintenance Management Practices and
FBO Oversight Need Improvement

                    Standard maintenance management practices, as outlined in F'BO'SBuild-
                    ings Maintenance Handbook, were not being followed at the posts we
                    visited. Key management principles such as identifying priority mainte-
                    nance needs and planning, budgeting, scheduling, and reporting of main-
                    tenance requirements were not always a part of the post’s maintenance
                    management system. Instead, most maintenance at posts was being done
                    as problems appeared. Maintenance officials have relied on post mainte-
                    nance personnel, who are primarily local nationals, to bring mainte-
                    nance deficiencies to the attention of post managers. As noted in chapter
                    2, the maintenance skills and knowledge of these personnel were some-
                    times limited.

                    FBO has exercised insufficient oversight of overseas maintenance activi-
                    ties. Although FBOhas provided guidance to posts and designed an infor-
                    mation system for posts’ use, FBO does not have information on how
                    maintenance resources are being used. Because posts were not tracking
                    costs on individual buildings or special projects, accountability over
                    maintenance funds provided by FBO was inadequate. In addition, a lack
                    of accountability and an absence of internal controls has resulted in
                    instances of unauthorized or improper use of funds.

                    From our review of FBO’S Buildings Maintenance Handbook and our dis-
Key Elements of a   cussions with government and private sector maintenance experts, we
Maintenance         identified seven important elements that should be part of a fully opera-
                    tional maintenance management system (see table 3.1).
Management System

                    Page 16                          GAO/NSIAD-90216 State Department OverseasPropert>
                           Chapter 2
                           Building Conditions and Costs to Repair
                           Them Are Not Fully Known

                           which were cited by FROand its contractors as old and approaching the
                           end of their useful life.

Maintenance Has Been       Some overseas buildings are in poor condition because maintenance has
                           been neglected or deferred. In some instances, planned rehabilitation
Deferred and Neglected     and repair work will cost more because routine maintenance was not
                           done. For example, embassy maintenance officials in Tokyo, Japan, told
                           us that the Ambassador’s residence will require renovations and repairs
                           partly because post maintenance personnel were provided limited access
                           to the residence.

                           The previously cited example of the consulate general building in Rio de
                           Janeiro was described in a 1988 report as a “building which had suf-
                           fered from a lack of maintenance probably dating from its change to
                           consular status in 1972.” Deferring needed maintenance can result in
                           increasing the cost of repairs and shorten the useful life of buildings and
                           their support systems.

                           In some of the engineering reports, the FBOsurvey contractors also iden-
                           tified neglected maintenance as a contributing cause for poor facility
                           conditions. Reports on Casablanca, Morocco, and Lubumbashi, Zaire,
                           were cited for neglected maintenance in various buildings. Buenos Aires,
                           Argentina; Kinshasa, Zaire; and Nairobi, Kenya, were cited as not having
                           good preventive maintenance systems.

                            In addition, preventive maintenance at some overseas posts was not
                            completed as scheduled because security regulations require that
                            cleared U.S. personnel escort maintenance workers to certain areas. For
                            example, officials in Vienna told us that preventive maintenance at the
                            chancery had to be postponed because local maintenance personnel were
                            not cleared to work in secured areas.

                            The extent of maintenance problems due to deferral or neglect is
                            unknown. FBOand overseas posts need to address the problems of
                            deferred and neglected maintenance to maximize the useful life of over-
                            seas facilities.

Maintenance Capabilities    Another contributing factor to the poor condition of facilities is the level
Vary                        of maintenance expertise of personnel and contractors at overseas posts.
                            Maintenance expertise varied considerably at the posts we visited. For
                            example, senior officials in Vienna and Tokyo believed their posts had

                            Page 14                              GAO/NSlAD96-216 State Department OverseasProperty
                         Chapter 2
                         Building Conditions and Costa to Repair
                         Them Are Not FuUy Knnwn

FBO Has Initiated an     In 1988, FBO contracted with two private engineering firms to survey
Effort to Determine      overseas posts and identify State’s worldwide maintenance backlog of
                         repair requirements. The surveys are intended to develop a baseline of
Conditions and           data for use in planning, programming, budgeting, and funding facility
Requirements             maintenance and repairs. As of December 1989,50 post surveys had
                         been completed. FRO estimates that the surveys of all posts will be com-
                         pleted by 1994 or 1995 at a total estimated cost of about $5 million to
                         $6 million.

                         Based on our review and the results of the completed contractor
Maintenance, Repair,     surveys, a number of overseas buildings and building systems are in a
and Rehabilitation       deteriorated condition and will require significant funding to rehabili-
Problems                 tate them.

                         We identified the following examples of rehabilitation           and repairs
                         needed for some buildings and the estimated costs:

                       . FBO officials estimated the cost to rehabilitate and repair the U.S.
                         Ambassador’s residence in Tokyo to be as much as $10 million. The cost
                         includes repairing necessary design and security systems and air condi-
                         tioning systems, replacing windows, rewiring electrical lines, replacing
                         plumbing, installing insulation, and painting the inside of the residence.
                         According to post officials, many of these repairs and the resulting costs
                         could possibly have been avoided if routine and preventive maintenance
                         had been done.
                       . A contractor estimated that it would cost $8.5 million to completely
                         rehabilitate the consulate office building in Rio de Janeiro. The rehabili-
                         tation work needed includes replacing the heating and ventilation
                         system and electrical and plumbing systems, removing asbestos, and
                         installing a fire alarm system. Indecision about whether to maintain a
                          LJ.S.presence in Rio led FHO officials to postpone major repairs for sev-
                         eral years. FRO recently indicated that in the contractor’s estimation
                         some of the rehabilitation work is unnecessary and that the consulate
                         building can be partially renovated at a cost of $1.4 million to $2 million
                         over the next 3 years. According to the FBO, a portion of the repair cost
                         could have been avoided if routine and preventive maintenance repairs
                         had been done.
                       . The chancery elevator systems in Mexico City require repairs that may
                         cost over $400,000. Post officials said that inadequate preventive main-
                         tenance had contributed to the high rehabilitation costs of these sys-
                         tems. Maintenance was not done because security regulations limited
                          access to the elevator controls. Local national maintenance personnel

                         Page 12                              GAO/‘NSIAD-W-216State Department OverseasProperty
                        Chapter 1

                        At the request of the Chairman, Legislation and National Security Sub-
Objectives, Scope,and   committee, House Committee on Government Operations, we evaluated
Methodology             State Department’s management of maintenance of its overseas build-
                        ings and properties. We assessed the nature and extent of maintenance
                        problems, the adequacy of State’s maintenance management operations,
                        and State’s efforts to correct the problems.

                        We visited 14 posts in nine countries: Vienna, Austria; Alexandria and
                        Cairo, Egypt; Kinshasa, Zaire; Brasilia and Rio de Janeiro, Brazil;
                        Santiago, Chile; Mexico City and Guadalajara, Mexico; Quito, Ecuador;
                        New Delhi and Madras, India; and Tokyo and Osaka, Japan. We chose
                        these posts because they represent both small and large post sizes, pro-
                        vide broad geographical coverage, and include developed and third-
                        world countries.

                        To evaluate the adequacy of the posts’ maintenance activities, we com-
                        pared their activities to the guidelines in FBO’S Buildings Maintenance
                        Handbook and to the elements characteristic of a good maintenance
                        management system. To further identify these elements, we contacted
                        maintenance experts at the Corps of Engineers, the Army’s Construction
                        Engineering Research Laboratory, the General Services Administration,
                        the Department of the Interior, the Advisory Council on Historic Preser-
                        vation, the Xerox Corporation, IBM, the National Academy of Sciences,
                        and the College of Arc*hitecture at the Georgia Institute of Technology.

                         At all posts we visited, we obtained information on how work was
                         planned, organized, directed, and reviewed. We reviewed pertinent
                         records and documents, observed maintenance operations, and inter-
                         viewed appropriate post personnel. We documented how post personnel
                         identified and assigned priorities for maintenance work, prepared work
                         orders, and scheduled maintenance activities. To identify State’s policies
                         and procedures on maintenance operations, we reviewed maintenance
                         guidelines and direct ivcs at FRO headquarters in Washington, D.C.

                         We conducted our review from February 1988 to December 1989 in
                         accordance with generally accepted government auditing standards.

                         Page 10                       GAO/NSIAD96-216 State Department OverseasProperty
Chapter 1


                    Since 1963, we have issued a number of reports that identified problems
                    with the State Department’s management of overseas real property.’
                    Some of the problems included the lack of qualified personnel and the
                    lack of information on the full costs of operating and maintaining indi-
                    vidual buildings. Long-standing problems with maintenance of overseas
                    buildings and properties were also identified as significant weaknesses
                    in State’s 1988 and 1989 Federal Managers’ Financial Integrity Act

                    Under the Foreign Service Buildings Act of 1926, the State Department
Foreign Buildings   is responsible for overseas real property operations. The Department
Operations Office   has delegated that responsibility to its Office of Foreign Buildings Oper-
Responsible for     ations (FBO), which manages U.S. foreign service property abroad. FBO
                    acquires, constructs, sells, maintains, and operates billions of dollars
OverseasProperty    worth of U.S.-owned and leased properties at over 250 posts abroad. FBO
                    is currently authorized a staff of 298 personnel at its Washington head-
                    quarters. According to FBO, as of December 1989, it was managing
                    7,500 properties, including 2,100 government-owned and 5,400 leased
                    buildings worth an estimated $10 billion.

                    FBO establishes policies and develops guidance to assist posts in man-
                    aging their maintenance operations. FBO also approves posts’ annual
                    allotments for routine maintenance and funds for special maintenance
                    and minor improvement projects.

                    In 1987, FBO centralized maintenance responsibility within its Facilities
                    Maintenance Division, which is staffed with engineers, architects,
                    facility managers, maintenance specialists, and support personnel, The
                    Division has embarked on several major initiatives, including publica-
                    tion of the Buildings Maintenance Handbook, which provides guidelines
                    on maintenance management. The Division is establishing, but has not
                    yet completely staffed, two maintenance assistance centers to provide
                    maintenance inspections of overseas properties and hands-on technical
                    assistance to overseas posts. In addition, FBO has recently initiated an
                    overall maintenance program that includes a staffing plan, an inventory
                    of initial spare parts, and a computerized preventive maintenance
                    package for each newly constructed office building.

                    ‘Seea list of relatedGAO productsat the end of this report

                    Page 8                                 GAO/NSIAD90-216 State Department OverseasProperty

Executive Summary                                                                                  2
Chapter 1                                                                                          8
Introduction           Foreign Buildings Operations Office Responsible for                         8
                            Overseas Property
                       Posts Responsible for Maintenance                                           9
                       Maintenance Funding                                                         9
                       Objectives, Scope, and Methodology                                         10

Chapter 2                                                                                         11
Building Conditions    Posts Have Not Conducted Annual Inspections                                11
                       Maintenance, Repair, and Rehabilitation Problems                           12
and Costs to Repair    Factors Contributing to the Maintenance and Repair                         13
Them Are Not Fully         Backlog
Known                  Conclusions                                                                15
                       Recommendation                                                             15

Chapter 3                                                                                         16
Post Maintenance       Key Elements of a Maintenance Management System
                       Posts Lack Standardized Maint,enance Management
Management Practices       Systems
and FBO Oversight      Safety Considerations Did Not Always Appear to Be a                        18
Need Improvem&t            Priority at Some Posts
                       Xeed for Greater Accountability of Maintenance                             21
                       Conclusions                                                                22
                       Recommendations                                                            23

Appendix               Appendix I: Major Contributors to This Report                              24

Related GAO Products                                                                              28

Tables                 Table 1.1: State Department Maintenance Appropriations
                           (Fiscal Years 1988-90)
                       Table 3.1: Key Maintenance Principles

                       Page 6                       GAO/NSIAD90-216 State Department OverseasProperty
                     Executive Summary

                     maintenance, and (3) low skill levels of maintenance workers at some
                     overseas posts. In addition, GAO believes that the posts’ failure to imple-
                     ment systematic and standardized maintenance practices, as prescribed
                     in FBO’SBuildings Maintenance Handbook, is also a contributing factor.

                     Although FBO'S Buildings Maintenance Handbook outlines key mainte-
Posts Are Not        nance management principles for posts to follow, posts GAO visited were
Systematically       not following its guidelines and as a result were not systematically man-
Managing             aging maintenance. They were not identifying priority maintenance
                     needs or planning, budgeting, scheduling, and reporting on maintenance
Maintenance          requirements as part of a comprehensive post maintenance management
                     system. Post maintenance was being done on an ad hoc, reactive basis
                     by personnel whose capabilities and skills varied considerably and were
                     sometimes limited. Key management tools such as property inventories,
                     work order systems, and cost obligation and expenditure reports were
                     either unreliable or missing at most posts. In addition, although 8 of the
                     14 posts GAO visited were using FBO'S real estate information manage-
                     ment system, none was using the system effectively because data in the
                     system was inaccurate, incomplete, and outdated. For example, over
                     one-third of outstanding work orders were inaccurately reported in the
                     Vienna and Cairo systems.

                     FBO has exercised insufficient oversight of overseas maintenance activi-
Need to Improve      ties. Accountability and internal controls over maintenance funds were
Accountability for   inadequate at many of the posts GAO visited. Most of the posts do not
Maintenance          separately account for funds FENIprovides for special projects and minor
                     repairs. Funds were used improperly or for unauthorized purposes at
Resources            some posts. The State Department Office of Inspector General is cur-
                     rently investigating six criminal cases related to misuse of maintenance
                     funds at posts.

                     FBO is not holding posts accountable for how maintenance money is
                     being spent. GAO sampled 32 special repair and minor improvement
                     projects that FEWfunded in 1988 and 1989. Although FBOhas a require-
                     ment for posts to report on how the project money was being spent,
                     none of the posts responsible for the projects reported to FBOon the
                     dates that projects began, when the projects were completed, or how
                     much money was actually spent.

                     Page 4                         GAO/NSIAD.90-216State Department OverseasProperty
Executive Summaxy

                   The Department of State is responsible for managing approximately
Purpose            7,500 properties overseas, of which 2,100 are government-owned and
                   have an estimated value of $10 billion. Over the years, GAO has issued
                   several reports on State’s management of such properties and has iden-
                   tified several problems, including inadequate information on property
                   conditions, inadequate accounting of funds and resources, and inade-
                   quate oversight by State’s Office of Foreign Buildings Operations (FBO).

                   At the request of the Chairman, Legislation and National Security Sub-
                   committee, House Committee on Government Operations, GAO reviewed
                   the State Department’s maintenance management of its overseas proper-
                   ties, including FBO'S methods for determining maintenance needs, ade-
                   quacy of overseas post maintenance practices, and efforts to improve

                   FBO is responsible for acquiring, constructing, selling, operating, and
Background         maintaining State’s properties at over 250 posts abroad. FBO establishes
                   policies, standards, and procedures and provides technical assistance to
                   posts. Overseas posts are responsible for providing routine maintenance,
                   repairs and minor improvements. Post properties include embassies and
                   consulate office buildings, residences, warehouses, garages, and con-
                   struction sites. In fiscal year 1990, State received $67 million for mainte-
                   nance and maintenance assistance at its overseas posts.

                   FKI does not have complete information on the condition of its overseas
Results in Brief   buildings and properties, the costs to maintain them, or the costs to
                   repair and rehabilitate them. A number of buildings and properties are
                   in various stages of disrepair, and some will require major rehabilita-
                   tion Although actual costs are unknown, preliminary FBO estimates indi-
                   cate the cost to eliminate the backlog of maintenance and repairs at
                   overseas posts could be as much as $450 million.

                   Many posts are not following the practices outlined in FBO'S Buildings
                   Maintenance Handbook. None of the 14 posts GAO visited had managed
                   maintenance operations in a systematic manner, conducted annual prop-
                   erty condition surveys, or developed annual work plans linking posts’
                   resource needs to annual budgets. Several had not established clear
                   maintenance priorities or formal preventive maintenance programs.

                   As a result of insufficient oversight, FBO does not know how mainte-
                   nance resources are being used at overseas posts. E’IW’Sinadequate

                   Page 2                         GAO/NSIAD-90.2lli State Department OverseasProperty