Agency gains from enhanced use leases are unclear

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Federal agencies could see financial benefits through the use of enhanced use leases for excess or unutilized buildings, but only if they adequately account for all costs and benefits of the leases, says the Government Accountability Office.

In a report (.pdf) dated Dec. 19 but not posted until Jan. 18, GAO says existing guidance from the Office of Management and Budget is not sufficient to monitor EULs because it "does not specify what costs agencies should include in their EUL evaluations, resulting in variance."

An enhanced use lease is a method for funding construction or renovation of a federal property by allowing private developers to pay for leases through in-kind services. The General Services Administration is considering this type of agreement for its Federal Triangle South efforts.

The report says agencies have successfully used EULs but not all of the costs of these leases are being properly evaluated so the true value of EULs isn't clear.

It notes that some EULs do very well, such as a State Department lease in Istanbul for $20.6 million and a NASA EUL worth $147.7 million, but says most have modest gains "where the costs could more easily outweigh the benefits."

It says the average Veterans Affairs Deparment EUL earned roughly $25,000 in 2011 but that this revenue could be negated by consultation, termination and leaseback costs, "which agencies have not consistently attributed to their EUL programs" and can make their value overestimated.

The report says some EULs have secondary benefits that should also be included in their estimation. An Agriculture Department EUL has helped the agency develop better crops because the lessee conducts research with Agriculture as part of the EUL. For some VA agreements, benefits such as priority housing placements for veterans can be part of the agreement.

The report suggests OMB should develop a consistent method of reporting EUL costs. All agencies noted in the report agree with the recommendations.

For more:
- read the report, GAO-13-14 (.pdf)

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