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INCREASES Mandatory:

1. Annualization of 4 new 1966 positions. 2. Increased pay costs.

10,*) Subtotal, mandatory increases..

17. Program: 1. Miscellaneous increases.

2,50 EXPLANATION OF CHANGES Increase

This request consists of $1,690 for travel and $830 for increased communistions costs.

JUSTIFICATION BY ACTIVITY
Surplus property utilization

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GENERAL STATEMENT

FUNCTIONS The Federal Property and Administrative Services Act of 1949. (Publie Law 152, 81st Cong.), as amended, assigned to the Secretary the following mur responsibilities in the disposal of Federal surplus properties :

1. The determination of mirplus Frueral personal priverty needed for edu 4. onal or public health purputs, including research, and the alua!ion of the

property to State agencies for surplus property for distribution to eligible donees. By delegation from the Assistant Secretary for Civil Defense, Department of the Army, a similar responsibility was assigned with respect to surplus personal property needed for civil defense purposes.

2. The determination of need for surplus Federal real property for educational and public health purposes, including research, and the conveyance of such property assigned by GSA to the Department in response to the Department's finding and recommendation.

3. Administration of the terms and conditions of donations and conveyances. 4. The promulgation of regulations governing the operation of the program.

ACTIVITIES

Personal property

Personal property determined to be surplus to the needs of Federal agencies is generally inspected by representatives of the Department or authorized representatives of State agencies for surplus property working under the general supervision of the Department. Items determined suitable for health, educational, or civil defense purposes are listed, and these lists are sent to appropriate State agencies for review. Based on requests for property by State agencies, the surplus property egional repre tatives allocate available property to the State agencies within their region, and to other States through the appropriate regional office. Property allocated is generally sent, or taken to State agency warehouses for further distribution to eligible recipients, such as school systems, vocational schools, colleges, hospitals, etc. In some instances, property is picked up or shipped directly to eligible recipients through arrangements made by the State agencies. Workload accomplishments and plans

A. Screening utilization, and allocation.-In fiscal year 1964 personal property having an acquisition cost of $418,100,000 was allocated to State agencies. In fiscal year 1965 the amount of personal property and its acquisition cost increased to $433,700,000. In fiscal year 1965 this volume of property required the preparation of 76,600 separate lists of property. These in turn generated 82,500 applications, or requests for property which were received and processed by regional offices. Regional representatives made 85,400 allocations of property to State agencies during the year.

One aspect of the program has been requiring an increasing amount of attention since it has a significant effect on the amount and types of personal property made available to and utilized by the recipients. This is the need to develop new ways and methods for health and education institutions to use the ever-increasing surplus scientific and electronic properties, and to secure more adequate screening of these properties. At the present time much of this property and appreciable amounts of other less sophisticated property are being sold for relatively little cash return simply because practical uses have not been developed and disseminated to recipients and those screening it have not been trained to recognize those properties that have health or educational uses. Part-time attention by our field staff to this problem has given good results. We plan to continue this effort and hope to cope during 1967 fiscal year with the increasing workload.

Assuming no less time is devoted to this problem in 1967 than in 1966 fiscal year, and there is no major change in the character of personal property which becomes available, we should be able to allocate during fiscal year 1967 property having an acquisition cost of $450 million.

B. Compliance activity.-Single items of surplus personal property having an acquisition cost of $2,500 or more are always donated with certain restrictions placed on their utilization. The period of these restrictions runs from 2 years for motor vehicles to 10 years for aircraft. To assure that these restrictions are being adhered to, the Department has responsibility for making periodic compliance inspections. Since there are additional items in this category allocated each year, the number of such inspections and necessary reports increases every year. During fiscal year 1965, 234 compliance cases were processed.

Through our compliance program moneys are recovered from recipients on sales of unneeded property and deposited in the U.S. Treasury. In fiscal year 1965 the amount deposited was $315,317. A comparable amount can be anticipated for fiscal years 1966 and 1967.

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Real property

When advised by the General Services Administration, or a Federal holds ageney, that real and related personal property is surplus to Federal nerla "? regional representatives endeavor to make physical inspections of the pro to determine health or education utilization potential, and the condition of 1:_ provements, utilities, etc. Notices of availability are circularized to all jutro tially interested parties; applications are reviewed and evaluated to deterr.l.eligibility of the organzation and program, continuing need, and suitability : the facility for the proposed use. Recommendations of need for the property are then made to the General Services Administration, or the holding agener, arri assignment of the property to the Department, for its conveyance to the trar feree, is requested.

Conveyances are made at a price based on appraised fair market value to which is applied a public benefit allowance discount. This discount ranges from 40 to 100 percent of the sale price, depending upon the program for which the property is to be used. Annual credits against this discount are earned through use of the property for the purpose for which it was conveyed.

Conveyance of lands with or without improvements (onsite converans*** are made by quitclaim deed and conveyances of improvements for removal from the site (off-site conveyances) are made by agreements of sale. Deeds contain conditions requiring use of the onsite property for a maximum of 20 years far the purpose for which it is conveyed. They prohibit sale or encumbrance in any way during this period without prior consent of the Government. Of ir property is subject to 5-year restrictions. Transferees may, with consent of itGovernment, remove all restrictions, by paying in cash the unearned bulance *** the public benefit allowance discount. Workload arcomplishments and plans

A. Transfers.-In fiscal year 1964 real property with an acquisition (ont of $%5,400,000 was transferred to eligible recipients. In fiscal year 1963 real prius erty transfers had an acquisition cost of $40,200,000. Because of the number 1 major military establishments being phased out there is every reason to eras the number, and dollar amount of real property transfers will increase tot proximately $18 million in fiscal year 1966, and possibly to $55 million in fi.! year 1967. To make the best utilization to meet health, educational, and other eligible community needs, there must be careful and coordinated disposal plaan ning for each of these major military facilities. Their importance to the earmunities in which they are located is such that planning for their distan requires many more hours of time than other kinds of real property. With the additional staff authorized for fiscal year 1966 we expect our real properir transfers to be approximately $18 million (an increase of 20 percent over tima! year 1945) and in fiscal year 1967 to be approximately $.55 million.

B. Compliance, utilization, and serricing.--In addition to determining nasis and evaluating proposed program for using real property, the Department is also responsible for subsequent servicing and compliance enforcement throughout :).. period of restrictions imposed in each case. Inasmuch as the real propri: 1.com gram began in 1949, utilization survey and compliance workload on projwr:F baring 20 years of restrictions continue to mount and will not begin to level off until 1968, the year within which the first 20-year restrictive period will begin to expire.

At the case of fiscal year 1965, our on-site workload increased a net 3 cases, from 819 to 942. The off-site case workload was 65

Physical surveys by our regional staffs are required to carry out our 01.' Lt tion and compliance responsibilities. Subsequent to conreyance, many a :: are required in connection with servicing real property cases. These rulle frum granting consent to the interim leasing of a portion of property, to the cotababa fe revestment of title in the l'nited States. In between are such actions are staning easements, authorizing removal of buildings no longer needed, review. i. ation, and approval of revisions to use programs, consent to partial or eu!!..*** abrogation of deed restrictions, consent to partial sales, and other thintters inherent in real estate transactions. Physical ntilization survern are they'll nou! for each on-site case at least once every 3 years. However, the majes cases are surveyed each year. In fiscal year 1965, 460 such surrej rrr completed.

Many properties now being conveyed have higher fair market values in relation to their acquisition costs. This is because many of the properties were acquired by the Government some years ago and are now surrounded by new and valuable developments. Consequently, the ratio of fair value to acquisition cost since the beginning of the program has continued to increase. These increased values require that more time, care, and effort must be put into the evaluation of every proposed program for property usage to be certain that the best interests of the Nation will be served.

From a fiscal standpoint, it is significant to note that during fiscal year 1965, a total of $868,004 was deposited in the U.S. Treasury as a result of our real property activities. Standards and reviews

It is the responsibility of the Department to establish minimum standards of operations for State agencies for surplus property. During fiscal year 1964, new minimum standards were developed which necessitated a complete rewriting of all State agency plans of operations. The new minimum standards have resulted in upgrading the operation of many State agencies. During fiscal year 1965 new plans of operation were reviewed and approved for all 53 State agencies.

During fiscal year 1965 we started an intensified program to accelerate the processing of audits and reviews of State agency operations and to expedite settlement of deficiencies or violations. These cases are now being processed through the central office within 3 weeks after receipt from the field. Regional representatives work with State agencies to secure any corrective action which may be necessary. Whenever these actions are not secured in reasonable time by the field, the case is referred to the central office for further action. Frequently such action involves meetings with officials of the State, investigations, and contacts with the executive departments of State and the Federal Government. Cash collections

In carrying out the responsibilities of the surplus property program funds are derived from many activities, such as sales of excess properties, transfers, abrogation of restrictions, various compliance actions such as leasing easements, etc., and reimbursement of out-of-pocket expenses incurred in connection with real property conveyances. As as result of these total program activities, $1,183,321 was collected in fiscal year 1965.

In this connection, it is significant to note that during the period 1950 through 1965, $12,950,749 has been collected from the operation of this program and placed in the U.S. Treasury. The total funds appropriated by the Congress during this same period for administration of the program was $8,683,250, or 67 percent of the cumulative amount received from program operations. Miscellaneous increases

In fiscal year 1965 GSA reported the generation of Federal excess personal property having an acquisition cost of $3,456 million ; 29.5 percent of this was reused by Federal agencies, 2 percent donated to Department of Defense serviceeducational activities, and 12.6 percent was allocated to this Department for health, educational, and civil defense donation. The balance was disposed of primarily by public sale. Much of this latter property could have been used in the Department's donation program resulting in greater national benefits. Last year, we instituted a program of review and evaluation of screening activities at the many points where property became surplus. To do this job effectively without increased staffing, will require additional travel and communications between our regional offices and the generating installations. Consequently, we have asked for an increase of $1,690 in travel and $830 in communications. Annualization of four positions, 1966 budget

Seven thousand dollars is requested to annualize the two professional and two clerical positions approved in the 1966 budget. The budget contained sufficient funds to pay only three-fourths of the salaries, as it was not expected the incumbents would be employed until after the first quarter.

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