FINDINGS 1. Effect of requirement for reimbursement (a) On utilization.-Maximum utilization of excess personal property is not being achieved under existing policies. In the three GSA regions visited by the study group (New York, Atlanta, and San Francisco), we found a sufficient number of specific cases where utilization was prevented because of the requirement for reimbursement to indicate a general problem. (See exhibit B, attached, for examples.) In almost all of the cases, the property which was not utilized was subsequently donated for education or public health purposes. In addition we found cases where agencies who had no funds available accepted excess property in poor condition because it was free while the same kind of property in good condition, but for which reimbursement was required, was donated. In each case the property was owned by a DOD working capital fund and, therefore, not available under any of the GSA exceptions to the reimbursement policy. The total effect of the requirement for reimbursement on utilization is not reflected by the cases mentioned in the preceding paragraph or by the examples shown in attachment B. Those cases are the ones where an agency needed the property and asked that GSA intervene with DOD to see if the requirement for reimbursement could be waived. As a general practice, agencies who needed excess property but had no funds to pay fair value made no attempt to secure it if the catalog indicated that it was reimbursable. We cannot est mate the extent to which utilization would be increased under free transfer policy. Estimates from agency people with whom we discussed the problem ranged from 20 to 100 percent. (b) On paperwork.-A strange result of the various exceptions provided in GSA regulations which authorize free transfers is the increase in paperwork. We found many cases where an agency office would send several separate orders, all under $500, each specifying delivery to a different subordinate office in order to obtain excess property free. In a few instances this meant that as many as 25 separate orders were written, processed through the GSA regional office and the agency that had the excess property. One order specifying 25 delivery points would have done the job had it not been for the desire to obtain the property free under.one of the exceptions. Another instance of increase in paperwork is the correspondence which results when an agency asks GSA to intervene for them to see if special circumstances warrant a waiver of the reimbursement requirement in specific instances. Since such cases may take months to resolve and several exchanges of corre spondence, GSA may also have to ask the holding agency to extend the holding period and this involves additional paperwork. (c) On condition codes.-The transfer of excess property at fair value has required the establishment of a complicated system of condition coding since the fair value of property must be based on its condition. The code developed by GSA is set forth in GSA Regulation I-III-303.03b. (See exhibit A.) There are 16 different codes and each of them are applied as a result of subjective judgment. Uniformity of application has been impossible because judgment varies and the shades of difference between codes are very slight. Differences of opinion frequently occur between the buyer and seller of excess property because the condition code determines the price. The condition frequently looks better to the seller than to the buyer. In addition to the natural differences which will occur because judgments differ, is the effect of reimbursement on condition coding. GSA's regulation says "where doubt arises as to which fair value code applies to an item, preference should be given to that fair value code which will facilitate and encourage maximum utilization." Which means that it is all right to downgrade an item so it can be transferred free. Since condition coding is personal judgment the codes at a particular installation may reflect the owner's desire for high reimbursement, while at another the codes may reflect the owner's desire to get rid of the property as fast as possible. Add to these differences the fact that military standards of performance are different from those of civil agencies and the complexity and variability of the system is apparent. When a customer examines an excess list he does not put great reliance on the condition code unless he's had previous experience with the coder. The fair value code has led to a complicated system of condition coding which is subject to many inconsistencies and very difficult to administer. 2. The pauper's oath None of the exceptions under which excess property can be obtained free is subject to such wide variation in interpretation as the so-called pauper's oath. Some agencies interpret it strictly and will not certify that no funds are available as long as there is money available in their property appropriation. Others prohibit the use of the pauper's oath in the field without prior headquarter's approval. Most agencies, however, interpret the pauper's oath loosely. One agency said it used the pauper's oath to obtain excess property free unless the item was specifically mentioned in their appropriation request. Many used rubber stamp certifications. GSA accepts all pauper's oath certifications without question and does not look behind the certification for evidence of validity. 3. Hoarding of supplies The study group examined thousands of individual transfer documents to see whether property was being acquired in excessive quantities. It found no evidence of hoarding. As a matter of interest, most transfers of excess property are for small amounts and are widely dispersed among the thousands of small field organizations. In the whole Government for the 12-month period ending March 31, 1959, there were only 179 transfers of excess property which amounted to $50,000 or more at acquisition cost. Inventory controls and supply discipline in most agencies are such as to prevent large unneeded quantities of excess property being transferred. The experience of the immediate postwar years will not be repeated. CONCLUSIONS (a) Present policies and procedures relating to reimbursement for excess personal property do not facilitate and promote maximum utilization. (b) The fair value code has led to a complicated system of describing the condition of excess property (condition coding) which is very difficult to administer and subject to many inconsistencies. (c) The "pauper's oath" under which Federal agencies can obtain excess personal property (other than DOD working capital fund property) without payment of fair value is not interpreted uniformly or carefully monitored. (d) The donable property program has created a general feeling among Government property management people that the present system is unfair because it requires Federal agencies to pay for excess property while that same property is available to non-Federal agencies at no cost. Recommendations Utilization of excess personal property within the Federal Government is falling considerably short of its potential. With substantially greater quantities of excess personal property predicted to become available in the next several years, it is necessary to eliminate the obstacles to maximum utilization and at the same time retain sufficient control by the Bureau to avoid undue augmentation of appropriations. This can be done by abandoning the concept that fair value be paid for excess personal property and by integrating excess personal property utilization programs into the budget process. To provide a more favorable climate for the utilization of excess personal property and to improve the Bureau's position with respect to the effect of excess property utilization on agency programs and budgets, I propose the following plan of action: (a) Eliminate reimbursement for excess personal property, including working capital fund excess property, except for those agencies presently named in GSA Regulation 1-III-303.03a.2, and other public enterprise funds. (b) Send a letter from the Director to the Secretary of Defense which requests the Department of Defense to make working capital fund excess property available for transfer without reimbursement. (c) Revise budget procedures to require agencies to include excess personal property utilization plans in backup materials for their annual budget requests. This would include (1) the amount of excess personal property acquired in the past year and estimates of the amounts to be acquired in the current year and the budget year, and (2) the estimated amount by which agency personal property requirements for the budget year can be reduced by the acquisition of excess property in lieu of new procurement. (d) Include agency excess and surplus personal property utilization and disposal programs and plans as a regular item in the annual budget reviews conducted by the Bureau of the Budget. (e) Issue a memorandum to all agency heads outlining the new approach and requesting their support for the program. Exhibit A GSA Reg. 1-III-303.01 (12-27-55) SECTION 303.00 TRANSFERS OF EXCESS PROPERTY 303.01 Agencies Eligible.-Transfers of excess personal property may be made among Federal agencies, and to the Senate, the House of Representatives, the Architect of the Capitol and any activities under his direction, mixedownership Government corporations (as defined in the Government Corporetion Control Act), the municipal government of the District of Columbia, or a non-Federal agency when the functions of a Federal agency authorized to procure for it is transferred to the Administration. 303.02 Information of Availability.—Information regarding the availability of excess property may be obtained through the following: a. Direct exchange of information between agencies pursuant to subsections 301.05 and 303.06 of this Part; b. The examination of reports of excess property available in Administration regional offices; c. Personal contact with the Administration; and d. Review of lists of selected items circularized by the Administration. 303.03 Fair Value-Reimbursement.— a. Excess personal property shall be transferred with reimbursement at fair value or without reimbursement (the costs specified in subsection 305.01b of this Part will be chargeable to the transferee agency) as provided below: 1. Reimbursement shall not be required, under the circumstances specified in subparagraph 4 of this subsection, in any case where the property transferred was acquired by the use of funds either not appropriated from the general fund of the Treasury or appropriated therefrom.but by law reimbursable from assessment, tax, or other revenue or receipts, unless, in either case, payment of fair value is requested. This applies, without limitation, to property in working capital funds. 2. Reimbursement shall be required when either the transferor or the transferee agency (or the organizational unit affected) is subject to the Government Corporation Control Act (59 Stat. 597; 31 U.S.C. 841), is a mixed-ownership Government corporation, is the municipal government of the District of Columbia, or is a non-Federal agency when the function of a Federal agency authorized to procure for it is transferred to the Administration. 3. Reimbursement shall be required in all other cases except as specified in subparagraph 4 below or unless otherwise directed by the Administration. 4. Reimbursement for fair value shall not be required for the transfer of excess personal property under the following circumstances: (a) Transfers to the Administration for redistribution, to the extent not precluded by subsection 303.04 below. (b) Transfers to other agencies of the Government, when approved by the Administration, for the purpose of replacing and upgrading of equipment, provided: (1) The property being replaced is older, of poorer quality or or less efficient for use; (2) The property being replaced meets current replacement standards, if such have been established by the Administration for such items; (3) The property being replaced will, promptly after replacement, be determined to be excess and processed in accordance with section 302.00 of this Part or transferred to other agencies in accordance with subsection 303.06 below; and (4) The acquiring agency certifies on its purchase order substantially as follows: This property is being acquired pursuant to GSA Reg. 1-III-303.03a.4(b) and does not include items for which replacement has been specifically denied by the Congress. (c) Transfers to the Administration for the furnishing and equipment of buildings, offices, or other installations where the Administration is authorized to provide such furnishings and equipment. (d) Transfers, at one time, from one location, of property having a fair value, determined, pursuant to paragraph b below, to be not in excess of $100. (e) Subject to approval of the Administration, transfers of property which involve unusual and substantial costs to the transferee agency for dismantling, removing, handling, or transporting such property. (f) Transfers of property where the Administration approves such transfers and determines in each case that it is clearly in the best interest of the Government, and the requisitioning agency certifies on its purchase order substantially as follows: (1) That the agency has a need for the property to carry on an approved program, and acquisition of the property will not result in an inventory level in excess of that permitted under GSA Reg. 1-II-403.02. (2) That procurement of the property cannot be financed from available funds; and (3) That acquisition of the property is not contrary to any specific limitation or other specific action of the Congress. (g) Transfers which may be made without reimbursement or transfer of funds in accordance with specific law enacted subsequent to June 21, 1944. (h) Transfers to an executive agency of excess property which the holding agency previously acquired from the transferee agency without reimbursement, provided the transferee agency certifies on its requisition or purchase order as follows: The property covered by this document was acquired from this agency by the holding agency without reimbursement, and is being reacquired pursuant to GSA Reg. 1-III-303.03a4 (h). b. Unless directed otherwise by this Administration, fair value of excess personal property under this Part shall be determined by the holding agency by using the following formula which the Administrator has determined will promote utilization and which takes into consideration the other costs which transferee agencies will incur : A B Fair Value Code D Explanation Unused personal property, ready for use in a condition identical with new items Personal property which has been used and requires no reconditioning or repair; and N-2 New-Good. E-1 Used-Reconditioned-Excellent. 0-1 Used-Usable Without Repairs-Excellent. Personal property requiring minor repairs, to put into usable condition, whether N-3 New-Fair. Used-Reconditioned-Good. 0-2 Used-Usable Without Repairs-Good. Personal property requiring major repairs, conversion, or rehabilitation, and all other c. In determining fair value pursuant to the formula in paragraph b. of this subsection, where doubt arises as to which fair value code applies to an item, preference should be given to that fair value code which will facilitate and encourage maximum utilization by other Federal agencies. Where application of the above formula will not achieve the intended purpose because of special circumstances or the peculiar nature of the property, the holding agency may use other criteria for arriving at fair value if approved or directed by this Administration. Where circumstances warrant, and the agencies concerned agree thereto, fair value prices higher than those arrived at by use of the formula specified in paragraph b. of this subsection may be used. d. Disagreement between agencies as to the fair value shall be referred for final determination to the General Services Administration Regional Director for the region in which the property is located, or his designated representative. Exhibit B EXAMPLES OF CASES WHERE EXCESS PROPERTY WAS NOT UTILIZED BECAUSE OF THE REQUIREMENT FOR REIMBURSEMENT 1. Eisenhower jackets, Atlanta General Depot Three hundred new wool Eisenhower-type field jackets were available for transfer at the Atlanta General Depot as nonreported excess property. The U.S. Federal Correctional Institution, Tallahassee, Fla., needed all of the jackets but because funds were not available obtained only 37 which could be transferred without reimbursement The correctional institution eventually filled their requirements from a supply of used jackets in need of repair available at the Memphis General Depot. In the meantime the remaining 263 new jackets at Atlanta General Depot were donated to the State of Georgia. In this case Federal Government needs were filled by using a product in poor condition while the same product in new condition was donated. |