Homeless Veterans: VA Should Improve Reporting on the Benefits Provided by Leases of Unneeded Property
Highlights
What GAO Found
The Department of Veterans Affairs (VA) can manage unneeded property under its various real property authorities, but only one of these—enhanced use leases (EUL)—is used to provide homeless veteran housing. VA's EUL program leases unneeded properties to public or private sector entities if they agree to develop the property into supportive housing for homeless veterans and their families. Because homeless veterans are a Department priority, VA prefers EULs for disposing of unneeded property.
According to GAO's assessment, VA has designed internal control activities and policies for monitoring the operations of EUL projects and collecting data on their financial effects that are consistent with relevant principles in the Standards for Internal Control in the Federal Government . For example, VA has established internal control activities for assuring the reliability and accuracy of its data, such as by requiring that multiple parties analyze data for errors and unusual trends.
In 2015, VA reported the EUL program had a $48 million financial effect on VA's budget, resulting from items such as revenue payment and cost avoidance (see fig.). VA also reported $49 million in broader societal benefits from the enhanced services it is able to provide to veterans as a result of these EULs, such as homeless veteran housing. However, this latter estimate is not fully transparent because these broader benefits, which are important to veterans and society in general, do not affect VA's budget and VA does not explain that enhanced services costs are not accounted for, such as costs incurred by other agencies to provide services. In VA's 2017 Consideration Report , VA reported its financial benefits for its EULs two different ways. First, VA separately reported the $48 million of budget effects and the $49.1 million in enhanced services in an overall summary. Second, in summaries of each EUL project, VA combined the budget effect along with the the broader societal benefits from enhanced services. VA guidance does not explain how to transparently and consistently report enhanced services. The standards for internal control require agencies to ensure their data faithfully represents what they purport to represent and communicate quality information. While enhanced services are important to veterans and society in general, VA's reporting of the benefits can be misleading to congressional decision makers and the public as it does not transparently and consistently describe the financial effect of VA's EUL program.
VA's Reported Direct Financial Benefits for its 59 Enhanced Use Leases, Fiscal Year 2015
|
Revenue |
Cost Avoidance |
Cost Savings |
Project and Program Expenses |
Total Budget Effect |
|
$1.5 million |
$55.9 million |
$10 million |
$19.4 million |
$48 million |
|
Revenue payments to VA such as rental income. |
Amount VA would have to pay to maintain a facility and/or deliver services in the absence of an EUL. |
Savings on VA purchases, such as office space or parking space. |
New expenses associated with the EUL such as maintenance incurred by VA during the operation of an EUL. |
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GAO analysis of Department of Veterans Affairs data | GAO-17-636
Why GAO Did This Study
Federal real property is on GAO's high risk list partly because some agencies, like VA, have large amounts of underutilized or vacant space. In an effort to develop some of these unneeded properties, VA has worked with private partners to convert its unneeded space into supportive housing for veterans and other purposes using EULs.
Congress included a provision in statute for GAO to review VA's EUL program. This report examines: 1) VA's authorities for managing unneeded property and providing homeless veteran housing; 2) VA's internal control design for monitoring EULs and collecting accurate data; and 3) VA's estimates of the financial effect of EULs.
To conduct this work, GAO reviewed federal laws and VA guidance, and analyzed VA models for determining an EUL's financial effect for two lease types: supportive housing and improved VA operations, since these two lease types had the greatest number of EULs. GAO reviewed two EULs from each lease type, selected based on the dollar amount of net benefits. GAO compared VA's design of the EUL program's internal control activities to federal standards and interviewed VA officials. Testing the effectiveness of VA's internal controls was not within GAO's scope.
Recommendations
VA should amend its guidance to specify how to consistently report its EUL enhanced services benefits and to explain the limitations of this estimate. VA concurred.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Veterans Affairs | 1. To ensure that the financial benefits of EULs that the Department of Veterans' Affairs reports in its annual Consideration Report on the EUL program are transparent and reliable, the Secretary should revise its <i>Enhanced-Use Leasing Post Transaction Handbook (Handbook 7454)</i> and specify that VA will: (1) Report consistently the enhanced services benefits from its EULs separately from other financial benefits that directly affect VA's budget, and (2) Include an explanation in its reporting on estimated EUL enhanced services that its estimates may not adequately capture all benefits of the EUL project and that certain costs associated with providing such benefits that are incurred by parties outside VA are not included in the analysis. |
In 2017, GAO reported that VA's reporting of the benefits of enhanced use lease (EUL) projects in its budget was not transparent. VA uses EULs to lease unneeded properties to public or private sector entities if they agree to develop the property into housing for homeless veterans and their families. When reporting on individual EULs in the Consideration Report accompanying its 2017 budget submission, VA combined the benefits from enhanced services-those that provide value to veterans, VA employees, and possibly broader society but that do not affect VA's budget-with net benefits that do affect VA's budget. In addition, VA's calculation of the monetary value of enhanced services had limitations. For example, supportive housing EULs provide shelter and care that might not otherwise have been available to veterans. The monetary value that VA assigns to that enhanced benefit is a rough estimation that may not account for all benefits accrued through housing previously homeless veterans. At the same time, the provision of enhanced services also entails costs not accounted for in the Consideration Report, such as costs incurred by other government agencies like HUD, and costs incurred by the private sector lessee of the EUL. Combining these benefits for the results of individual EULs may not provide congressional decision-makers and the American public a clear understanding of the effect of this program. For example, GAO found examples of individual EULs for which the total financial effect on VA's budget would be substantially reduced if VA reported only its revenue, cost avoidance, cost savings, and VA expenses-all of which are items that affect VA's budget-separately from enhanced services. At the time of the report, VA's EUL guidance (Handbook 7454) did not contain any specific guidance on whether VA should report enhanced services as part of the total financial effects or separately for each of the EULs. In its presentation of the entire EUL portfolio, VA reported enhanced services separately from the other elements that effect VA's budget, but in the presentation of each individual EUL, VA did not make this separation. However, VA officials said that OMB had stated that enhanced services should be reported separately from the items that affect VA's budget for the summary page of its Consideration Report, which VA does. To promote transparency, federal internal control standards require agencies to ensure their data faithfully represents what they purport to represent and communicate quality information. Thus, GAO recommended that VA revise Handbook 7454 and specify that VA will: (1) report consistently the enhanced services benefits from its EULs separately from other financial benefits that directly affect VA's budget, and (2) include an explanation in its reporting on estimated EUL's enhanced services that its estimates may not adequately capture all benefits of the EUL project and that certain costs associated with providing such benefits that are incurred by parties outside VA are not included in the analysis. In March 2024, VA provided GAO documentation showing that it had replaced Handbook 7454 with Directive 7415, and this directive states that VA's annual Consideration Report shall (1) consistently show the enhanced services benefits from EULs separately from the financial benefits that directly affect VA's budget, and (2) include an explanation regarding estimated EUL enhanced services that estimates may not adequately capture all benefits of the EUL project and that certain costs associated with providing such benefits that are incurred by parties outside VA are not included in the analysis. In addition, GAO confirmed that the Consideration Report accompanying VA's fiscal year 2025 budget submission complied with this guidance. With consistent and transparent reporting, congressional decision-makers and the American public are better positioned to understand the financial effect of VA's EUL program.
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