of Real-Property Asset Management
OCTOBER 2005 - Recent
scandals have led the federal government to focus on full
accountability for both public- and private-sector business
processes. The last two years have seen a convergence of requirements
and regulations related to disclosure controls and procedures.
full accounting for assets and their use is now focusing
on fixed assets such as real property. Organizations are
understanding the role that real-property holdings play
in fiscal responsibility and the full cost of implementing
organizational missions. That challenge has spawned a requirement
for improved real-property asset management to demonstrate
a uniformly high level of performance across all sectors
in the integration of financial and mission-performance
objectives. This new emphasis on real property is understandable
because, for most organizations, real-property assets represent
their second-largest investment, exceeded only by personnel
of the Sarbanes-Oxley Act of 2002 (SOA) address audits,
financial reporting and disclosure, conflicts of interest,
and corporate governance. Disclosure controls and procedures
must be developed and applied to public companies’
transactions as well as their assets—financial assets
as well as fixed assets such as real property.
Circular A-123 on management accountability and control
is essentially SOA’s counterpart for the federal government.
OMB A-123 requires managers of federal agencies to create
policies and procedures regarding: program results; use
of resources to support agency missions; safeguards from
waste, fraud, and mismanagement; and collection and maintenance
of reliable and timely data for decision making.
Defense Base Realignment and Closure Act (BRAC), enacted
in 1990, is a congressionally mandated requirement to collect,
analyze, and report on facilities that support the Department
of Defense’s operational missions. The Secretary of
Defense estimates that as much as 25% of the department’s
real-property inventory may exceed mission requirements.
Order 13327 on Federal Real Property Asset Management (EO
13327), signed on February 4, 2004, requires Executive Branch
agencies to prioritize actions to improve operational and
financial management of their real property, including the
cost and time required to dispose of surplus holdings. As
part of the President’s Management Agenda, EO 13327
is indicative of a fundamental rethinking of real-property
asset management as it affects funding for essential services.
Accounting Standards Board (GASB) Statement 34 establishes
financial reporting standards for state and local governments
that receive federal grants. Governments must report all
capital assets, including infrastructure assets, in their
government-wide statement of net assets, and report depreciation
expense in their statement of activities.
government’s emphasis on greater accountability regarding
assets and program costs is not limited to these initiatives.
For example, Congressman Tom Davis (R-VA), the chairman
of the House Committee on Government Reform, wants to reintroduce
real-property asset management in 2005 legislation. It would
codify and establish the current administration policy as
the new paradigm for doing business in government.
is building. Financial executives in both private-sector
and governmental organizations would be well advised to
strengthen their understanding of real-property asset management.
By examining business and mission requirements, creating
auditable cost- and investment-management strategies, and
optimizing facilities and infrastructure portfolios, any
organization can realize sustainable success in real-property
asset management. Most organizations that undertake such
analysis see gains in the following areas:
Real-property operations, in reduced and fully auditable
use optimization, in reduced vacancy rates and improved
fulfillment lead time;
Portfolio management, in managed value, auditable benefits,
and costs; and
Demography, in better balance, reduced churn, and lower
benefits, in turn, enable companies to make better-informed
decisions related to their business and mission strategies.
Sharing optimized data across functional business areas
ensures that the disclosure of financial data is complete,
verifiable, and authenticated. Taken together, those benefits
are what will be required for any business organization
in the future.
Summerell is vice president of corporate development
for Vista Technology Services (www.vistatsi.com),
based in Herndon, Va.