FACILITY PLANNING

FINDINGS

• Projections from program review's casefile sample suggest more the 60 percent of the agencies have been in the same leased facility more than five years. Approximately 20 percent have been located in the same space for 10 or more years.
• Responsibility for evaluating whether leasing is the best way to meet a space need is not clearly defined.
• Currently, there is no formal process to produce a feasibility study for leases.
• Agency proposals for leasing may move forward without formal consideration of alternatives.
• Examination of DPW's responsibilities regarding initial processing of space requests suggest duplication of effort. DPW's Process Management unit acts primarily as a medium through which the client agency conveys information to the Office of Policy and Management (OPM).
• The guidelines used by state agencies in forecasting and calculating space necessary to fulfill their missions are outdated.
• Lease expiration notices are not sent in accordance to DPW's policy and procedures manual.
• There is no written policy as to how much time agencies have to respond to DPW's expiration notice.
• There is lack of consistent documentation and poor tracking in DPW's Process Management unit for initial handling of space requests.

RECOMMENDATIONS

1. OPM must analyze FACCAP lease requests to determine if buying or constructing a facility would be an economical alternative to leasing. Whenever necessary, OPM may order a feasibility study be completed by DPW. The findings of OPM's analysis shall be included in FACCAP along with the number of years the specific space need has been met through leasing.

2. OPM shall assume all responsibilities for initially processing requests for space including the dispatching of advance expiration notices. OPM shall establish and monitor turn around times for notices.

3. State agencies should deal directly with OPM in requesting space. Once OPM has granted its approval, the request should be forwarded to DPW to continue the space acquisition process.

4. DPW must evaluate the state's space standards guidelines and update the space standards manual by January 1, 2003.

LEASING PROCESS

FINDINGS

• Neither the relevant statutes or manual have established turnaround times for any of the leasing steps.
• DPW has never promulgated regulations specifying how it will carry out their responsibilities in the leasing process.
• DPW's leasing manual, last issued in 1986, is outdated and refers to staff functions for positions no longer filled.
• Documentation of the leasing process is too inconsistent to allow management to monitor the progress of leases.
• Closer supervision of the leasing agents is needed to ensure that leases are processed in a timely manner.
• OPM's second review of proposals that fall within pre-authorized levels is duplicative.
• The State Properties Review Board has assisted DPW staff in obtaining better negotiations and performing basic functions.
• The longest of amount time (5.2 months) of the lease process is spent in the actual drafting and signing of the lease.
• Additional requests for information and clarification are frequently extensive.
• The need for formal communication between DPW's leasing unit and the attorney general's office is high.
• Current leasing staff have absorbed responsibilities previously conducted by a lease compliance officer.
• Leasing agents spend a substantial amount of time attempting to resolve lease compliance items such as repairs, carpeting, painting, and parking.
• Lease management received low rating in the program review survey of client agencies.
• A substantial number of DPW's leases are on holdover status.
• DPW invitations to bid do not generate many proposals.
• Client agency actions may give existing landlords a stronger bargaining stance and limit competition.

RECOMMENDATIONS

5. DPW must update its leasing manual to accurately reflect the agency's current policies and procedures. DPW should develop specific time standards for the various procedural steps within each phase of the lease process and promulgate regulations accordingly.

6. DPW must redesign and integrate the current lease tracking instruments into a system that includes lease status reporting for all property agents and measures adherence to standards established for all critical points in the process. A monthly management report should be prepared to compare processing times to the standards. The report shall include documented explanations for all transactions not meeting the standards and what action is planned to get transactions back on schedule.

7. OPM's approval at the lease proposal stage should only be for proposals exceeding preauthorized levels.

8. DPW shall conduct a formal training needs assessment of all leasing and property agents including but not limited to their ability to conduct negotiations and evaluate alternatives. Training shall be provided as needed.

9. DPW and the Attorney General's Office must finalize standardized lease language by March 31, 2002.

10. DPW shall hire a director for its space acquisition function who will assume a quality control position. A formal quality control system shall be established to provide a review of all real estate transactions before they are sent outside the unit.

11. The lease management function shall be strengthen and removed from current leasing agents and instead a position be created to deal with these issues. The lease compliance officer will have primary responsibility for:

_ Handling lease management issues raised by client agencies;

_ Conducting an annual inspection of leased property for conformance with terms of the lease; and

_ Providing an annual statewide compliance report based on their inspections to leasing agents, the State Properties Review Board (SPRB), OPM, and the attorney general's office.

12. DPW shall develop tools to flag potential lease renewals and establish a system to monitor the number of month to month leases that includes the length of time and reason a lease has been in holdover status.

13. DPW must annually remind client agencies through written notice or other formal means that existing state law prohibits disclosure of state real estate needs or interests with outside parties.

14. DPW should increase client agency awareness that even casual routine communications with owners can weaken the state's negotiating power.

15. DPW should formalize its initiative of allowing real estate representatives the opportunity to conduct presentations to the leasing unit.

PROPERTY DISPOSITION AND ACQUISITION

FINDINGS

• The disposition process is complex and time-consuming.
• Better and earlier identification of surplus property is needed to assist in the state's planning and strategizing of how to best dispose unused property and may provide municipalities advance notice of possible availability.
• Property sales to municipalities are slow.
• Statutory timeframes for dispositions are not realistic.
• DPW's property acquisition and disposal manual is outdated.
• There is little to no documentation evident in DPW casefiles regarding negotiations for acquisitions.
• There is no reference to the use or disclosure of appraisals mentioned in DPW's statutes.
• DPW does not have a formal process for the selection of appraisers or inclusion of new appraisers.

RECOMMENDATIONS

16. The state shall develop standards and criteria for defining surplus and marginal use property and improve its long range planning.

17. The existing statutory deadlines shall be eliminated and be replaced with realistic and reasonable guidelines developed by OPM. The guidelines should be established no later than September 1, 2002.

18. DPW, in conjunction with OPM, shall establish a monitoring system to track the disposition process from beginning to end. Information from this system should be included in DPW's annual report to the SPRB and the legislature.

19. DPW must update its property acquisition and disposition manual to reflect the department current policies and procedures. Regulations shall be promulgated as needed.

20. DPW shall develop a standardized format for documenting any negotiations with property owners. In addition, the documentation should include an analysis of purchase alternatives and reasons why the subject property was chosen.

21. The DPW statutes shall be amended to reflect policy regarding the use and disclosure of appraisals for DPW real estate transactions.

22. The State Properties Review Board shall be granted authority to request, at its discretion, additional appraisals to assist in its review process.

23. DPW shall adopt a formal process for the selection and inclusion of new appraisers to be used in its real estate transactions.

DPW ORGANIZATIONAL STRUCTURE AND OTHER ISSUES

FINDINGS

• DPW's current organizational structure as it relates to space acquisition and disposition is disjointed.
• A number of reporting inaccuracies were found in a series of DPW annual reports.
• There is no review mechanism in place to prevent deviations from the State Properties Review Board's final decisions.

RECOMMENDATIONS

24. All DPW responsibilities relating to leased facilities and property acquisition must be organized into one separate dedicated unit.

25. DPW must establish better information tracking and take steps to improve its quality control with a goal of zero errors in the statutorily required reports.

26. The State Properties Review Board should be empowered to sign all leases prior to their final execution. SPRB shall review each lease for compliance with its decisions. All leases differing materially from the terms of SPRB decisions must be reported to the State Auditors Office for further investigation. Parties involved in transactions determined to be out of compliance should be held accountable and subjected to strict penalty and disciplinary action.

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