Federal Personal Property: GSA and VA Have Opportunities to Improve the Exchange Sale Process

According to the U.S. Treasury, the government owns about $1.3 trillion in “personal property” such as computers, furniture, and vehicles. Federal law authorizes agencies to exchange or sell personal property and retain the allowances or proceeds for replacing similar needed property. These are called “exchange/sale” transactions. GSA is responsible for issuing exchange/sale regulations and guiding agencies on the use of the authority.

GAO was asked to review agencies' use of the exchange/sale authority. This report (1) describes what is known about personal property exchange/sale transactions from fiscal year 2013 through fiscal year 2017 and (2) examines selected agencies' experiences using the exchange/sale authority and monitoring such activities. GAO analyzed multi-year data compiled by GSA OGP and found the data to be sufficiently reliable. GAO selected three agencies—GSA, the Army, and VA—based on the type, quantity, and value of personal property exchanged and sold; reviewed agencies' personal property policies; examined agencies' monitoring of exchange/sale activities; and interviewed their officials about personal property management.

According to data compiled by the General Services Administration's Office of Government-wide Policy (GSA OGP), 27 agencies executed exchange/sale transactions, governed by statute and GSA regulations, to exchange (trade-in) or sell personal property from fiscal year 2013 through fiscal year 2017. The 27 agencies reported transactions totaling about $3.1 billion. Vehicle sales accounted for $2.6 billion (about 84 percent) of that total.

GAO found that GSA officials who procure vehicles for federal agencies and Army officials who purchase helicopters appeared to understand the exchange/sale process and used it frequently. However, Department of Veterans Affairs (VA) officials expressed confusion about key aspects of the authority. For example, officials were unclear about how to sell property; this lack of clarity led to missed opportunities to use sale proceeds for replacing property. GSA OGP officials who guide agencies on the use of the authority acknowledged that the exchange/sale regulations can be confusing but GSA's plan to amend them is at least 2 years away. Because GSA does not plan to address this confusion in the near term through other means such as bulletins or outreach, agencies' misunderstanding of the authority could lead to additional missed opportunities to be effective stewards of government funds.

Regarding monitoring of exchange and sale activities, GAO found that the Army monitored activities consistent with its policy. However, GSA and VA performed limited monitoring because:

GSA had not clarified its responsibilities or defined the scope of its authority for monitoring internal GSA exchanges and sales, and

VA did not have a detailed policy for monitoring and had not communicated information about monitoring to pertinent employees.

Until GSA clarifies its responsibilities and the scope of its authority and VA revises its policy with pertinent details and communicates this information to staff members, neither agency will be positioned to sufficiently monitor exchange/sale activities.

GAO is recommending that GSA OGP address agency confusion about the exchange/sale authority and that GSA clarify its responsibilities and the scope of its authority. GAO is also recommending VA revise its policy to address monitoring and communicate the revision to staff. Both agencies agreed with the recommendations.

The federal government owns and manages more than a trillion dollars of  “personal property”—government property other than real property— ranging from vehicles and aircraft to specialized medical equipment and  scientific devices. In fiscal year 2017, federal agencies reported  approximately $1.3 trillion in personal property assets. Over time,  agencies’ personal property may no longer adequately perform the task  for which it was used. Federal law authorizes agencies to exchange  (trade-in) or sell such property still needed to meet their missions and  apply the exchange allowance or sale proceeds in whole or in partial  payment to acquire similar replacement property. Such transactions are  known as personal property “exchange/sale” transactions. These  transactions facilitate the replacement of property by allowing agencies to  offset the cost of new property, resulting in savings to taxpayers. Without  this authority, agencies may have to charge the full purchase price of new  property to their appropriations, while depositing the proceeds from the  disposition of their worn property in the U.S. Treasury.

Because exchange/sale transactions provide agencies with an  opportunity to save costs, it is important that agencies using the authority  establish policies, processes, and procedures with effective controls to  help ensure they meet applicable requirements and are good stewards of  government resources. The General Services Administration (GSA) has  issued regulations that describe the terms, conditions, and reporting  requirements for using such exchanges or sales, but agencies are to  carry out the authority and adhere to legal requirements after assessing  their own needs and making decisions about whether to use the authority.

You asked us to review agencies’ use of the personal property  exchange/sale authority. This report: describes what is known about personal property exchange/sale  transactions, as reported by federal agencies from fiscal years 2013  through 2017 and examines selected agencies’ experiences using the personal property  exchange/sale authority and monitoring such activities.

To address both objectives, we reviewed applicable federal statutes and  regulations pertaining to personal property management and the  exchange/sale authority; our prior work; and reports by federal agencies’  offices of inspectors general on personal property management issues.  To describe what is known about personal property exchange/sale  transactions, we analyzed annual exchange/sale summary data, as  reported to GSA’s Office of Government-wide Policy (GSA OGP) by  federal agencies from fiscal year 2013 through fiscal year 2017. These  data—which are the only federal government-wide data available on  exchange/sale transactions—identify the agency involved in the  transactions, the transaction method, and the type and value of the  property. To assess the reliability of these data, we reviewed GSA’s  electronic template provided to federal agencies for reporting data and  the user guide and other materials related to GSA’s personal property  reporting tool. We interviewed GSA officials about the process for  collecting, submitting, reconciling, verifying, and compiling annual  government-wide, exchange/sale summary reports. To assess the  reliability of selected agencies’ data, we interviewed officials from these  agencies (see below) about the exchange/sale data they reported to GSA  and reconciled documentation on transactions with data reported to GSA  to identify any discrepancies. We determined that the data were  sufficiently reliable to describe the agencies that use the authority and the  general types of property they acquire, but determined that data from the  Department of Veterans Affairs (VA) were unreliable.

To examine selected agencies’ experiences using the personal property  exchange/sale authority and monitoring such activities, we selected three  agencies—GSA, Army, and VA—based on various characteristics, such  as type, quantity, and value of personal property reported as exchanged  and sold in GSA’s summary data.

GSA: We selected GSA because it reported a high-value of  exchange/sale transactions. Within GSA, two offices have key roles in  the internal use of the exchange/sale authority. First, the Office of  Fleet Management (GSA Fleet) uses the authority to manage the  government-wide motor-pool program that acquires vehicles and then  leases them to other federal agencies. Second, the Office of  Administrative Services (GSA OAS) is the office responsible for  performing personal-property management functions, such as  developing policy and procedures, internal to the agency.

Army: We selected the Army within the Department of Defense (DOD)  because it reported a relatively low-number of high-value items, such  as aircraft. In particular, the Army Program Executive Office for  Aviation (Army Aviation) accounted for the majority of high-value  aviation-related exchange/sale transactions within DOD. Beyond the  three selected agencies, we heard from other agencies when we  attended a joint GSA-DOD presentation focused on aviation that  brought together GSA, Army, Navy, and Air Force officials to discuss  their experiences using the exchange/sale authority.

We also reviewed applicable federal internal control standards, agencies’  personal property policies and programs to understand agencies’ use of  the authority and monitoring of exchange/sale activities, and conducted  interviews with selected offices within these agencies to understand their  experiences in using the authority. Information we obtained from these  three agencies is not generalizable to all federal agencies but provides  illustrative examples in how agencies have used this authority. See  appendix I for more details on our scope and methodology.

We conducted this performance audit from August 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Personal property refers to a wide variety of property that may include  commonly used items such as computers, office equipment and furniture,  and vehicles, as well as more specialized property specific to agencies  such as medical equipment for VA and medical helicopters for the Army.  See figure 1.

The personal property exchange/sale authority allows agencies to  replenish property that is not excess or surplus and that is still needed to  meet the agency’s continuing mission. Agencies must meet several  requirements, including:

The property exchanged or sold is similar to the property acquired.

Agencies can meet the similarity requirement in one of several ways.  First, the property acquired is identical to the property replaced.  Second, the acquired property and the replaced property fall within a  single federal supply group of property. Third, both the acquired and  the replaced property constitute parts or containers for similar parts.  Fourth, the acquired and the replaced property are designed or  constructed for the same purpose. For instance, ambulances and  station wagons adapted for use as ambulances would be considered  similar.

The property exchanged or sold was not acquired for the principal  purpose of later exchanging or selling it using the authority. For  example, an agency cannot purchase a costly piece of equipment for  the sole reason that it will deliver a higher value when sold using the  authority.

Proceeds from the sale can only be put toward the purchase of  replacement property and cannot be spent on services. In other  words, an agency can use proceeds from the sale of a vehicle to  purchase a new vehicle, but it cannot use proceeds to hire a  mechanic to repair an existing vehicle.

In addition, GSA regulations, except as otherwise authorized by law,  require that proceeds from sales be available during the same fiscal year  the property was sold or the following fiscal year for replacement  property. For an item sold in fiscal year 2018, an agency has the rest of  fiscal year 2018 as well as fiscal year 2019 to purchase a replacement  item. If agencies do not spend these funds by the end of fiscal year 2019,  monies are to be deposited in the U.S. Treasury. Finally, agencies are  prohibited from using the authority to replace certain types of property  (i.e., hand tools and clothing). However, agencies may request a waiver from GSA to sell these prohibited items or to extend the time frame to  purchase replacement property.

Agencies may choose between two transaction methods to replace  property—the exchange (trade-in) or sale method, but must determine  which method provides the greater return to the government, including  administrative and overhead expenses. A typical exchange occurs when  the original manufacturer delivers a replacement item to the agency and  removes the item being replaced. The manufacturer applies a trade-in  credit (an allowance) for the purchase of a replacement item. If the sale  method is used, the agency receives the sale proceeds for the sale of the  non-excess items (needed to meet mission requirements) and applies  those proceeds to the purchase of the replacement personal property.  See figure 2.

In conducting a sale, agencies are to follow a process similar to the  disposal process for excess property. When an agency disposes of  excess property, it makes the item available to other federal agencies and  state agencies by posting it in GSAXcess—GSA’s website for reporting,  searching, and selecting excess property. The disposal process generally  consists of four sequential stages in which personal property may be  transferred to another agency or eligible recipient, donated, sold, or  abandoned or destroyed.

Similarly, agencies may use GSAXcess to facilitate the replacement of  property under the exchange/sale authority. However, unlike the disposal  process for excess property that may be offered at no cost, if another  federal agency or state agency needs the property, the agency is to pay  no more than the fair market value for the item or a negotiated fixed price,  respectively. Otherwise, the property may be listed for sale to the general  public at approved sales centers, such as GSA AuctionsSM, or through  other approved methods, such as live auctions or Internet sales. After the  sale closes, the agency receives the proceeds to apply toward the  purchase of a similar item.

Agencies are required to submit a summary report to GSA at the end of  each fiscal year on the type, the quantity, the exchange allowances or  sale proceeds, and the original acquisition cost of items for both  exchange and sale transactions. Agencies that made no transactions  during a fiscal year must submit a report stating that they made no  transactions. Ultimately, agencies decide whether to use the  exchange/sale authority to replace property in their inventory. In  managing property, federal law requires agencies to maintain adequate  inventory controls and accountability systems as well as assess the  extent to which the agency’s mission depends on the property.

A Few Agencies Carried Out Most Transactions, Which Involved Selling Billions of Dollars in Property

GSA Reported About 60 Percent of Proceeds across the Federal Government

According to GSA’s annual summary data, 27 agencies reported using  the exchange/sale authority and received a total of about $3.1 billion in  exchange allowances or sale proceeds from fiscal year 2013 through  fiscal year 2017. While many agencies used the authority, a few  agencies, particularly GSA, together accounted for about 90 percent of all  allowances and proceeds. Specifically, 5 of 27 agencies reported nearly  all exchange allowances and sale proceeds. GSA accounted for about  $1.9 billion of about $3.1 billion (or about 60 percent) of reported  allowances and proceeds across the federal government. Four other  agencies—the Departments of Homeland Security, Agriculture, Defense,  and the Interior—accounted for about $934 million (or about 30 percent)  of the total. The other 22 agencies using the authority reported about  $332 million (or about 11 percent) in exchange allowances or sales  proceeds over the 5-year period. See figure 3. Finally, agencies  reported using the sale method more than the exchange method. Sales  by agencies accounted for about $2.9 billion (or about 91 percent), while  use of the exchange method accounted for about $275 million (or about 9  percent) of total transactions reported, primarily due to GSA’s and DOD’s  reporting more use of the sale method over the exchange method.

While some agencies reported hundreds of millions of dollars in exchange  allowances and sale proceeds, the data show that 10 federal agencies— including the Department of Labor, Office of Personnel Management, and  the Social Security Administration—reported relatively few transactions,  which totaled less than $100,000 in exchange allowances and sales  proceeds.

GSA OGP officials consider the agency-reported data to provide a  representative picture of the overall exchange/sale transactions occurring  across the federal government. GSA OGP officials rely on the agencies to  ensure the accuracy and completeness of the exchange/sale information.  According to GSA OGP officials, because GSA does not have authority to  compel the agencies to report or address quality issues, it does not look  at record level data from the agency to determine the data’s accuracy and  does not have a way of verifying if exchange data are accurate and  complete. Nonetheless, GSA officials said they take steps to ensure the  data are reliable and complete. For example, GSA OGP officials said they  review the data for any obvious inaccuracies and follow up with the  reporting agency to correct the inaccuracy. In addition, according to GSA  OGP officials, they report the sales portion of most agencies’  exchange/sale transactions for any sales that were conducted by GSA  and ask agencies to verify the data before finalizing it in the summary  report.

Agencies Reported Selling High-Value Items, Primarily Vehicles

While agencies exchanged and sold a wide variety of items, GSA’s  annual summary data show that high-value items, primarily vehicles,  accounted for the vast majority of allowances and proceeds from fiscal  year 2013 through fiscal year 2017. Specifically, vehicle sales across the  federal government accounted for about $2.6 billion of $3.1 billion (or  about 84 percent) in total proceeds, of which GSA’s Fleet program  accounted for about 71 percent of that total. According to GSA Fleet  program officials, the authority allows GSA to continuously update its fleet  of over 214,000 vehicles while keeping lease payments low for its 75  customer agencies. The program sells an average of about 36,000  vehicles each year, bringing in about $370 million in sales proceeds  annually. In fiscal year 2017, the program received almost $300 million in  proceeds from vehicle sales and spent about $776 million acquiring new  vehicles. Three agencies—the Departments of Agriculture, Homeland  Security, and the Interior—each reported over $100 million in proceeds  from vehicle sales.

In addition to vehicles, agencies reported exchanging and selling other  types of high-value items. For example, DOD reported using the authority  to sell or exchange helicopters. According to the Army Aviation Program  Executive Office, the Army continues to divest and plans to replace up to  800 Black Hawk helicopters from 2014 to 2025, each having an average  value of about $1.5 million. See figure 4. DOD reported about $150  million in exchange allowances and sale proceeds by using the authority  to replenish aircraft, and as of January 2018 Army Aviation had  purchased five Black Hawk helicopters. Other DOD agencies—the  Naval Air Systems Command and the Air Force Life Cycle Management  Center—are using the authority for exchanging aircraft engines and parts  containing rare earth metals under a reclamation and propulsion material  exchange program.

In addition to high-value items, agencies reported selling a wide variety of  other items, including missiles, office equipment, lumber, and packing  supplies. One of our selected agencies, VA, predominately used the  authority to exchange medical equipment. See figure 4. However, we did  not find data for VA to be sufficiently reliable to report separately. Based  on our interviews with VA medical centers we found that reported data did  not reflect actual exchange/sale transactions, which we discuss later in  this report. However, we have included VA data in the reported $332  million for “Other federal agencies” in figure 3.

Selected Agencies Expressed Confusion About How to Use the Authority or Monitor Exchange/Sale Activities

VA Did Not Understand How to Use the Exchange/Sale Authority

GSA regulations for the personal property exchange/sale authority set  forth several conditions for using the authority, including that the property  exchanged or sold is not excess or surplus and that agencies report  information on their exchange/sale transactions to GSA on an annual  basis. Federal internal control standards state that management should  externally communicate the necessary quality information to achieve the  entity’s objectives.

However, the agencies in our review had different levels of understanding  about the authority, which affected their experiences for how they used  the authority and outcomes. For example, VA officials said they  misunderstood key aspects of the exchange/sale authority, resulting in  inefficiencies and data inaccuracies, as described below:

Process for selling property: Officials from all three selected VA  medical centers said they did not understand the sequence of events  in selling property using the sale method, a situation that led to VA’s  using a potentially less economical method to acquire new equipment.  For example, officials at two selected VA medical centers told us that  they believed that they had to sell their medical equipment prior to  acquiring replacement equipment. Officials at one medical center said  this sequence of events makes it difficult to use the sales method of  the exchange/sale authority because VA medical centers must have  medical equipment, such as x-ray machines, readily available and  fully operational for veterans at all times. However, GSA OGP officials  stated that replacement property can be purchased prior to the sale of  property. In addition, officials at a VA medical center reported they  had limited storage, making it difficult to buy replacement equipment  and store it until VA can sell the equipment. As a result, a VA medical  center official stated that they instead used the exchange method  because it provided a seamless replacement of equipment to prevent  any break in availability of medical equipment. While the exchange  method is a viable approach, in this case, the sales method could  have delivered a higher monetary return. In addition, by using the sale  method, VA could potentially have replaced equipment more  efficiently than replacing the full cost of the item with the agency’s  appropriation. A VA headquarters official was also unclear about how  to use the proceeds from sales. This official was unclear whether the  sales proceeds could be used from any type of medical equipment in  a particular supply category, such as a scalpel, toward the  replacement of another item in that same classification, such as a  wheelchair, or whether the items had to be identical or serve a similar  purpose.

Data Reporting: Officials at two selected VA medical centers did not  clearly understand the annual summary data reporting process. These  officials stated that they found GSA’s reporting template confusing  because it provides minimal direction to the user and does not clearly  define some data-reporting elements. The template includes a space  for reporting “exchanged/sold;” however, officials at one medical  center were unaware that “sold” referred specifically to exchange/sale  transactions only and not to other transactions referred to as sales,  such as surplus property sales; according to medical center officials,  this medical center reported about 1,000 misclassified sales in GSA’s  annual summary data.

Exchange/sale versus disposal: According to VA officials, they or  others involved in personal property management did not fully  understand the distinction between the process for acquiring  replacement property under the exchange/sale authority and the  process for declaring property as excess. Officials within all three  selected VA medical centers misunderstood the difference between  the two processes, possibly because both processes use GSAXcess  to sell property under the exchange/sale authority or to report property  as excess for disposal. As a result, one VA medical center mistakenly  reported excess disposals as exchange/sale in the GSA OGP annual  summary data. In addition, two facilities disposed of some still needed  property instead of conducting sales under the exchange/sale  authority. A VA headquarters official acknowledged that property  managers in charge of implementing the exchange/sale authority at  medical centers may be confusing these two processes or may be  unaware that the exchange/sale authority exists.

Similarly, officials from the Air Force and Navy said they or others  involved in personal property management did not always understand the  difference between these two processes. An Air Force official stated  that DOD’s policies do not clearly distinguish the exchange/sale process  from the disposal process and do not consistently define terms, such as  “excess” and “non-excess” property, that align with GSA’s regulations. In  retrospect, Air Force officials stated that they disposed of property that  could have been replaced through the exchange/sale authority.  Generally, disposal results in (a) sales proceeds being returned to the  U.S. Treasury rather than retained by the agency and (b) services  possibly having to use their appropriation for replacement property, rather  than working directly with the vendor to obtain a replacement at a  reduced cost. We have previously reported on DOD’s disposing of $855  million in excess items for which they will likely have a continuing need.

Conversely, based on our interviews and review of their policies, records,  and transaction data, two program offices within the Army and GSA— Army Aviation and GSA Fleet—appeared to understand how to use the  exchange/sale process. We found that these offices may have a greater  level of understanding for a few key reasons:

Narrow scope: Both programs are designed around replacing one  type of item—helicopters for helicopters or vehicles for vehicles.  When items are not so directly interchangeable, determining whether  or not an item sold and replaced or exchanged are “similar” can be  challenging. Because the Army Aviation and the GSA Fleet  programs focus on one type of item, the determination of what  constitutes similar property under the GSA regulation is not a  challenge.

Established programs with frequent sales: The Army Aviation and  the GSA Fleet programs have sold hundreds of aircraft and tens of  thousands of vehicles over the past several years. They have  invested resources into developing an exchange/sale process.  Conversely, programs that may sell or exchange an item or two a  year—even very expensive items, such as medical equipment—may  not have the same opportunities to develop processes and guidance  through repeated sales or exchanges.

High-value items: Similarly, both the Army Aviation and the GSA  Fleet programs sell high-value items. Thus, investing resources in an  exchange/sale process makes sense, as programs benefit from the  sales and have a process to guide and track these high-value items.  For an agency like VA, which disposes of some low-value items, there  may not be the same motivation to develop a standard process. GSA  OGP officials emphasized that high-value items, such as helicopters  and vehicles, are best suited for using the exchange/sale authority.

GSA Has Not Clarified Aspects of Using Exchange/Sale Authority for Agencies

GSA OGP officials stated that they recognize some agencies, such as  VA, may experience confusion using the authority, that the regulations  are misunderstood by agencies, and that aspects of the authority need to  be clarified. According to these officials, GSA attempted to amend the  regulations in 2015 to address key areas of confusion, including:  restricting the definition of similar to ensure that items replaced are  clearly similar. GSA wanted to change the federal supply category  criteria to make agencies replace items at the more specific four digit  level rather than the broader two digit level. As an illustration, this  change would help clarify the confusion VA reported about whether a  scalpel and a wheel chair qualify as similar items.  clarifying the process for selling property; specifically, clarifying that  agencies can purchase replacement property prior to the sale of  property that no longer adequately performs its task.

However, GSA OGP officials stated that they did not complete the  rulemaking process in order to give the incoming administration an  opportunity to review and approve any revisions.

Since the change in administration, GSA officials said they have been  focused on evaluating the continued need and relevance of all of their  regulations as part of the administration’s plan to conduct regulatory  reviews. Nonetheless, GSA OGP officials said they plan to address  these areas of confusion by amending the regulations. Specifically, they  plan to clarify the definition of similar property and the difference between  excess and non-excess property, among other changes. However,  officials estimate the rulemaking will likely not be finalized for at least 2  years. As a result, the extent to which the rulemaking process will result in  clarifying language is unknown.

Although GSA anticipates initiating a rulemaking to amend regulations,  which could make the definition of “similar” more restrictive, GSA OGP  officials told us that clarifying the issues agencies found confusing would  not necessarily require a rulemaking. They highlighted other actions they  are taking to promote the use of the authority, inform agencies of the  requirements, and train agencies on using the authority. For example,  they conduct outreach by making presentations at national conferences  (i.e., FedFleet), meet with representatives from the National Property  Management Association, and hold small group discussions with  program managers specializing in certain high-value items, such as  aircraft. GSA’s presentations aim to educate agencies on what the  authority is, the conditions and requirements of the authority, and when to  use the authority. According to GSA OGP officials, as a result of their  outreach, they have seen immense growth in exchange/sale transactions  among the aviation community.

GSA has also issued bulletins to help dispel misunderstandings related to  using the exchange/sale authority. For example, GSA issued a bulletin  in 2010 to federal agencies to remind them to submit annual reports on  exchange/sale transactions. This bulletin contained information on the  reporting requirements, frequently asked questions, and points of contact  for agencies to reach out to with additional questions. In summer 2018,  GSA OGP officials drafted a new bulletin to further address financial  aspects of the exchange/sale authority and expect to issue it in December  2018. This bulletin details why agencies should use the authority and  directs agencies to develop policies for using the authority and to consult  with the Chief Financial Officer of the agency to obtain more information.  According to these officials, an additional bulletin would take 3 to 4  months to develop and issue.

However, neither GSA’s outreach nor its draft bulletin addresses existing  confusion regarding the sales process or data reporting, or distinguishes  the exchange/sale process from the disposal process. For example,  GSA’s outreach, such as the FedFleet presentation, generally describes  the authority and discusses provisions of using the authority but does not  address issues agency officials told us they found confusing. The  presentation tells agencies that they can sell property under the authority  but does not go into the mechanics of how to sell property. By making  presentations like these to address areas agencies found confusing, GSA  would have an opportunity to help clarify these issues and encourage  agencies to use the authority more.

Moreover, GSA OGP officials told us that they believe that a lack of  knowledge of the authority is a reason why some agencies do not use it  more. As we reported earlier, 10 of the 27 federal agencies that reported  transactions had few exchange/sale transactions over the past 5 years.  According to a VA official, if VA medical centers better understood how to  use the authority, they could see a significant increase in use throughout  the agency. Furthermore, if GSA provided clearer information on using  the authority, the 10 agencies that we found that used the authority  infrequently may increase their use.

Additionally, GSA’s draft bulletin on financial issues does not address the  logistical issues agencies found confusing, such as how to sell property  using the exchange/sale authority. The bulletin addresses accounting  procedures agencies should follow when conducting transactions but  does not describe how agencies are to conduct these transactions. Until GSA takes action to address confusion, agencies may continue to  misunderstand and not use the exchange/sale authority. If agencies  continue to misunderstand aspects of the exchange/sale authority, they  may not take full advantage of the authority, thereby missing opportunities  to be more effective stewards of government property and replenish  property more efficiently.

GSA and VA Did Not Monitor Exchange/Sale Activities

Agencies are responsible for managing their own personal property,  including monitoring their exchange/sale activities. Federal internal  control standards call on managers to establish and operate monitoring  activities to monitor the internal control system and evaluate the results.  Monitoring involves regular management and supervisory activities,  comparisons, reconciliations, and other routine actions.

We found that the Army monitored its exchange/sale activities, as  outlined in its policies. The Army’s policy delegated responsibility to the  Army’s Deputy Chief of Staff (Logistics) to monitor and approve Army  programs seeking to use the authority. Our review of Army’s policy  found that multiple Army offices monitor financial, logistical, legal, and  procurement functional areas as they reviewed and communicated on the  eligibility of exchange/sale transactions. The policy also allows program  and inventory managers to use the authority for high-value items, requires  contracting officers and attorneys to review the transactions, and uses a  management checklist for transactions. Consistent with policy, the Army’s  Deputy Chief of Staff, in conjunction with offices within DOD, reviewed  and approved requests from Army Aviation to use the exchange/sale  authority to sell Black Hawk helicopters and apply proceeds to  replacement helicopters. The Army official said that the office continues to  monitor exchange/sale transactions in collaboration with the Army  Aviation program to manage the exchange and sale of their personal  property that includes Black Hawk helicopters.

Unlike the Army, GSA OAS did not monitor its internal exchange/sale  activities. In 2009, GSA’s internal policy established a position  responsible for ensuring compliance with government-wide, personal  property requirements. However, GSA officials stated that the position  was never staffed and later subsumed into GSA OAS when the office was  established in 2011 to manage personal property, including  exchange/sale activities, within the agency. Since that time, GSA OAS  officials said that they have not monitored these activities because senior  management did not prioritize personal property, including exchange/sale  transactions. For example, management did not clarify GSA OAS’s  responsibilities nor did it define the scope of its authority for monitoring  exchange/sale activities. As a result, GSA OAS officials said they have  not been involved with any exchange/sale activities within the agency,  and besides GSA Fleet, they do not know the extent to which other  internal offices are using (or should be using) the authority.

According to GSA OAS officials, they have recently focused on an effort  to rebuild an internal personal-property management program that will  take several years to develop given the current staff of two. As part of this  effort, GSA OAS revised the policy for internal personal property  management in 2018 and is drafting a standard operating procedure that  is expected to provide additional clarification for monitoring and  conducting exchange/sale activities within GSA. According to GSA  officials:  the 2018 policy provides relevant updates and more details that  distinguish between (a) the exchange/sale authority for the exchange  and sale of non-excess, non-surplus personal property and (b) the  disposal authority with a focus on the disposal of excess personal  property.  the draft standard operating procedure is to provide procedures for all  internal GSA offices to follow when using the authority. This standard  operating procedure establishes a position to, among other things,  help internal offices conduct and report exchange/sale transactions.  GSA OAS officials referred to this procedure as a work-in-progress  and were uncertain when it would be finalized.

However, GSA OAS officials said that they do not know whether this  policy revision will allow them to monitor exchange/sale activities for two  reasons. First, GSA OAS is unclear about the scope of its authority, such  as whether the GSA Fleet program falls under its exchange/sale purview.  GSA Fleet program officials said that they are not opposed to having GSA  OAS monitor their program in the future. Second, this procedure will not  be formally approved or coordinated throughout GSA, a situation that  means there may not be consensus among all GSA offices as to GSA  OAS’s responsibilities and scope of authority. As a result, the revision of  the policy and completion of the procedure may not be enough to ensure  compliance with exchange/sale requirements. In the absence of clear  responsibilities and scope of its authority, GSA OAS may not be able to  monitor exchange/sale activities or provide clear information and direction  to other offices within GSA.

Similar to GSA, VA conducted limited monitoring of its exchange/sale  activities. VA policy states that the Deputy Assistant Secretary for  Acquisition and Logistics has the departmental-wide responsibility for  personal property inventory management, utilization, and disposition as  well as to monitor VA logistics programs and policies. Within VA’s  Veterans Health Administration (VHA), the Office of Procurement and  Logistics assigns logistics officers at VHA Regional Offices with  monitoring responsibilities of medical centers to ensure compliance with  VA and VHA policies. However, we found that the three VHA Regional  Offices conducted limited monitoring of 23 medical centers under their  purview. According to the officials we contacted, they conducted a  cursory review of end-of-year data from medical centers before the data  were submitted through VHA to GSA for the annual summary report.

According to officials at one Regional Office, they did not focus on  monitoring exchange/sale transactions beyond a cursory review to  see that property fell within the medical or laboratory equipment  supply categories. As previously mentioned, we found that reported  data did not reflect actual exchange/sale transactions. Specifically, we  found that none of the sale transactions reported in 2016 as  exchange/sale transactions by a selected medical center in this region  was correct. Instead, these transactions were sales of surplus  property.

According to officials at another Regional Office, they have no reason  to review exchange/sale transactions in a more robust manner  because end-of-year reporting presented no problems in the past that  would warrant a more standardized approach. However, for the one  selected medical center in this region, we found several errors in  reporting end-of-year data from 2013 through 2017. Specifically, we  found that nearly all reported exchanges were actually sales of  surplus property, a reported exchange in 2017 was actually a transfer  to another medical center, and despite reporting no transactions in  2016, we identified an exchange valued at $500,000.

According to officials from a third Regional Office, they monitored  various aspects of VA’s personal property program—inventories and  disposals, but not exchange/sale transactions. During our review, we  found that one selected medical center under their purview reported  about 1,000 sale transactions to GSA, but none was correct. Instead  of sales of needed (non-excess, non-surplus) property, they were  actually sales of surplus property. Regional officials are aware of this  error and have added four new questions about exchange/sale  transactions to the checklist used for their annual quality-control  reviews. They said they do not know whether other Regional Offices  perform similar reviews.

An official in VA’s Office of Acquisition and Logistics acknowledged that  these findings are likely not uncommon because the office has not  developed or communicated the management activities necessary for  Regional Offices to consistently monitor medical centers’ exchange/sale  transactions. The lack of communication on monitoring procedures was  corroborated by two Regional Offices. An official with the Office of  Acquisition and Logistics explained that the office promulgates policy and  that VHA’s Office of Procurement and Logistics helps ensure policy is  followed, but the absence of monitoring stems, in part, from these two  offices’ not collaborating or communicating the activities Regional Offices  are to conduct. VHA Regional Offices monitor medical centers through  annual quality-control reviews, but the reviews did not have an  exchange/sale component. Furthermore, VA internally reviews a small  sample of the VHA’s annual quality-control reviews each year. From a  Regional Office perspective, officials told us they prioritized other  activities, such as monitoring inventories or disposal of equipment, over  exchange/sale activities. The VA office has also not communicated with  VA medical centers on how to effectively use the authority to support their  medical equipment replacement needs or the benefits associated with the  authority. For example, the VA office has not provided specific guidance  beyond issuing personal property policies for how to conduct and monitor  exchange/sale transactions.

VA officials are taking steps to improve communication to those involved  in exchange/sale transactions throughout the agency—those monitoring  transactions and those initiating transactions. For example, officials within  the Office of Acquisition and Logistics stated that they plan to clarify the  use of the exchange/sale authority within the agency’s policies for  personal property disposal. This clarification will be in the form of a  notice (an incremental policy change) or as part of a planned rewrite of  personal property policies. However, it is uncertain whether the  information will have a level of detail to be useful for medical centers to  understand the requirements for using the exchange/sale authority or will  delineate how the exchange/sale process differs from the disposal  process. Adding to this is the uncertainty about the time frame for  finalizing and communicating such information to medical centers.  Furthermore, VA officials said the policy changes alone will not be  sufficient and assistance from VHA will be necessary to ensure Regional  Offices understand their monitoring roles and responsibilities. A VHA  official acknowledged the need to work with Regional Offices to augment  the annual quality-control review checklists with an exchange/sale  component, but it is unclear if and when such an update will take place. Until VA and VHA work together to develop a detailed policy for  monitoring and establish time frames with milestones for communicating  information, they cannot be assured that 172 medical centers and 18  Regional Offices understand the exchange/sale authority, how to use it,  and how to monitor end-of-year reporting data.

By using the exchange/sale authority, agencies have an opportunity to be  good stewards of government property by efficiently replacing needed  property, including high-value items, that serves critical and continuing  requirements to meet agency missions. However, unfamiliarity with the  exchange/sale authority and confusion surrounding the authority may  lead to decisions that may not be in the government’s best interest.  Although GSA OGP officials acknowledge the need to amend the  regulations to address areas that require rulemaking, delay in taking  action to address areas of confusion that currently exist but do not require  rulemaking will continue to lead to misinterpretation or misunderstanding  about the authority. Moreover, until GSA specifies GSA OAS’s  responsibilities and defines the scope of its authority, it will continue a  long-term pattern of not monitoring GSA’s exchange/sale activities.  Finally, until VA develops and communicates the necessary information to  help Regional Offices and medical centers with their exchange/sale  responsibilities, it will not have an assurance that all VA medical centers  are reporting transactions accurately or effectively using the  exchange/sale authority.

We are making the following two recommendations to GSA and one  recommendation to VA.

The GSA’s Associate Administrator for the Office of Government-wide  Policy should take action to address specific areas of federal agency  confusion with the exchange/sale authority, areas such as the process  for selling property, reporting data, and distinguishing the  exchange/sale process from the disposal process. Such actions could  include issuing bulletins or conducting expanded outreach and, as  necessary, issuing regulations. (Recommendation 1)

The Administrator of General Services should take steps to improve  agency-wide monitoring of exchange/sale activities within GSA by  specifying the Office of Administrative Services’ responsibilities and  by defining the scope of its authority. (Recommendation 2)

The VA’s Deputy Assistant Secretary of Acquisition and Logistics, in  collaboration with VHA’s Office of Procurement and Logistics, should  revise VA’s policy to include details on the exchange/sale authority,  particularly those related to monitoring by Regional Offices and use of  the authority for medical centers, and establish time frames with  milestones for communicating such information. (Recommendation 3)

We provided a draft of this report to GSA, DOD, and VA for comment. All  three agencies agreed with the findings. GSA and VA also agreed with  the recommendations for their agencies. DOD provided a technical  comment to the report in an email; we incorporated the technical  suggestion.

GSA agreed with our recommendations and stated that it has already  begun to increase understanding and appropriate use of the  exchange/sale authority within GSA and across the federal government.  GSA is finalizing a plan to address the recommendations. GSA’s written  response is reprinted in appendix II.

VA agreed with our recommendation to revise its policy to include details  on the exchange/sale authority. VA stated that the Office of Acquisition  and Logistics, in conjunction with the VHA Procurement and Logistics  Office, has produced two draft memorandums to amend policy related to  the exchange/sale authority as well as the utilization and disposal of  personal property. The agency plans to promulgate the new policy by  December 2018. VA’s written response is reprinted in appendix III.

We are sending copies of this report to the appropriate congressional  committees, the Administrator of General Services, the Secretary of  Defense, and the Secretary of Veterans Affairs. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.

If you or your staffs have any questions about this report, please contact  me at (202) 512-2834 or rectanusl@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) describe what is known about personal  property exchange/sale transactions, as reported by federal agencies  from fiscal years 2013 through 2017, and (2) examine selected agencies’  experiences using the personal property exchange/sale authority and  monitoring such activities. To address both objectives, we reviewed  applicable federal statutes and regulations pertaining to personal property  management and the exchange/sale authority, our prior work, and  reports by federal agencies’ offices of inspectors general on personal  property management issues. To understand General Services  Administration’s (GSA) role and responsibilities for personal property  management in support of exchange/sale activities across the federal  government, we reviewed GSA’s personal property management  structure, policies, bulletins, briefings, and training materials.

To describe what is known about the personal property exchange/sale  transactions, we analyzed annual exchange/sale summary data, as  reported to GSA’s Office of Government-wide Policy (GSA OGP) from  federal agencies from fiscal year 2013 through fiscal year 2017. These  data identify the agency involved in the transactions, the transaction  method, and the type and value of the property. These data are the only  federal government-wide data available on exchange/sale transactions.  Accordingly, we analyzed these summary data to characterize  transactions over a 5-year time frame, by agency, by type of transaction  (exchange or sale), by type of personal property using personal property  categories, and by amount of exchange allowances and sale proceeds.

We assessed the reliability of these data from a government-wide  perspective and for selected agencies.

From a government-wide perspective, we reviewed GSA’s electronic  template provided to federal agencies for reporting data, viewed a  training video used to help agencies report data to GSA, and reviewed  the users’ guide and other materials related to GSA’s personal  property reporting tool. In addition, we interviewed GSA OGP officials  regarding their data processes—such as data collection, submission,  reconciliation, verification, and compilation of annual exchange/sale  summary reports—to understand the steps GSA OGP takes to  determine the accuracy, consistency, and completeness of data. We  did not independently verify all the exchange and sales data that was  provided to us because of the large quantity of detailed data  associated with each agency and because some of the data were not  within the scope of our selected agencies and personal property  categories. However, we determined that GSA’s government-wide  summary data was sufficiently reliable for our purposes of describing  the agencies that use the authority, the general types of property they  acquire, and the relative order of magnitude of exchange allowances  and sales proceeds. For sales conducted through GSA sales centers,  GSA reports summary information on behalf of most agencies. GSA  officials told us all exchange transactions are self-reported by  agencies. GSA does not ensure the accuracy of this information  beyond a review for obvious errors. However, because sales account  for about 91 percent of the dollar value of all transactions, we believe  that the total value of transactions across the federal government is  sufficiently reliable for our purposes of describing exchange/sale  activity.

To assess the reliability of GSA and other selected agencies’  summary data, we compared annual exchange/sale summary data  collected by GSA OGP with detailed GSAAuctionsSM sales data  associated with the exchange/sale authority collected by GSA’s Office  of Personal Property Management. We looked to see if aggregated  sales totals matched, identified similarities and gaps, and observed  individual agency and government-wide trends for using the  exchange/sale authority. We found data reported by GSA’s Office of  Fleet Management (GSA Fleet) and the Army’s Program Executive  Office for Aviation (Army Aviation) to be reliable. However, we found  reliability issues with data reported by the Department of Veterans  Affairs (VA). As a result of our interviews with selected facilities, we  found that some reported sale and exchange data from VA did not  represent actual exchange/sale transactions. Accordingly, we  determined that VA data were not reliable to analyze independently.  We did include these data in the total for the federal government given  that they accounted for about 1 percent of that total.

To examine selected agencies’ experiences using the exchange/sale  authority and monitoring such activities, we selected three agencies— GSA, the Department of the Army within the Department of Defense  (DOD), and the VA—based on various characteristics, such as the values  of the agencies’ exchange allowances and sale proceeds; the quantity of  items exchanged and sold; and selected three different types of personal  property categories—vehicles, aircraft, and medical equipment—for which  the exchange/sale authority was used over the 5-year time period.

GSA: We selected GSA because it reported a high-value of  exchange/sale transactions. Within GSA, two offices have key roles in  the internal use of the exchange/sale authority. First, through GSA  Fleet, GSA manages the government-wide motor-pool program (the  largest user of the exchange/sale authority) that acquires vehicles and  then leases them to other federal agencies. Second, GSA’s Office of  Administrative Services (GSA OAS) is the office responsible for  performing personal-property management functions, such as  developing policy and procedures, internal to the agency.

Army: We selected the Army because it reported a relatively low- number of high-value items. In particular, Army Aviation accounted for  the majority of high-value aviation-related exchange/sale transactions  within DOD. During the course of our review, we also attended a joint  GSA-DOD presentation focused on major end items that brought  together GSA, Army, Navy, and Air Force officials to discuss their  experiences using the exchange/sale authority.

VA: We selected VA because it reported a high-number of low-value  items sold or exchanged. For in-depth interviews, we selected three  medical centers (Long Beach, California; Cincinnati, Ohio; and  Portland, Oregon) that reported using the authority for the acquisition  of medical equipment and the three Veterans Integrated Service  Networks (Regional Offices) responsible for monitoring these medical  centers. See table 1 below.

At all of these agencies, we reviewed exchange/sale transactions to  understand agencies’ experiences in using the authority, personal  property policies and program, financial documents applicable to  exchange/sales, and applicable Standards for Internal Control in the  Federal Government and GSA’s regulations. We also reviewed relevant  sections of Principles of Federal Appropriations Law to understand  decisions on using the exchange/sale authority for acquiring personal  property. In addition, we examined agencies’ monitoring of  exchange/sale transactions in the context of internal control standards.

We interviewed officials from each of our selected agencies responsible  for using exchange/sale authority and implementing processes to manage  and monitor personal property. We interviewed GSA Fleet officials and  visited Army Aviation officials in Huntsville, Alabama. During these  interviews, GSA and Army Aviation officials walked through materials and  explained their exchange/sale processes by using actual sample  transactional information. We examined personal property documentation  associated with personal property that had been either been exchanged  or sold.

For VA, we selected 3 of 172 VA medical centers to understand how  these medical centers implemented their personal property  exchange/sale processes and procedures. We selected one site based  on its high number of exchange/sale transactions of medical equipment  and its close geographic proximity to one of our field offices. The other  two sites were chosen based on a high and low number of exchange/sale  transactions of medical equipment. At the VA locations, we interviewed  medical center officials responsible for supply chain management as well  as Regional Office officials responsible for oversight of those selected  medical centers and the exchange/sale management activities. During  these interviews, we discussed selected agency officials’ understanding  and use of the exchange/sale authority, reviewed data and  documentation, addressed what officials did to implement processes for  their exchange/sale programs, identified challenges, and took  photographs at one location of selected personal property that was  exchanged or sold. Information we obtained from the three selected  agencies is not generalizable to all federal agencies but provides  illustrative examples in how agencies have used the authority.

We conducted this performance audit from August 2017 to November  2018 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on the audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Appendix II: Comments from the General Services Administration

Appendix III: Comments from the Department of Veterans Affairs

Appendix IV: GAO Contact and Staff Acknowledgments

In addition to the individual named above, the following individuals made  important contributions to this report: Nancy Lueke (Assistant Director);  Steve Martinez (Analyst-in-Charge); Aisha Cabrer; SaraAnn Moessbauer;  Malika Rice; Amy Rosewarne; Jerry Sandau; Travis Schwartz; and  Crystal Wesco.

The federal government owns $1 trillion in personal property, such as furniture and vehicles. Agencies can sell these items and use the proceeds to buy similar items. The General Services Administration makes the rules for these federal agency transactions, buys and sells vehicles for other agencies to use, and carries out its own transactions.

We found that GSA officials who buy vehicles and Army officials who buy helicopters did this often and understood the rules. VA officials, however, did not. We recommended that GSA clarify the rules for selling property so that agencies have opportunities to be better stewards of personal property.