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In Brief: Smithsonian Needs to Finalize Its Cost-Benefit Analysis to Inform Real Estate Decisions, No.A-13-12, Issued July 3, 2014

Why We Did This Audit

The Smithsonian houses its staff in buildings that it either owns or leases.

The objectives of this audit were to evaluate the Smithsonian’s short- and long-term plans for managing its leased office portfolio, and also to assess management’s strategies for identifying opportunities to reduce costs relating to leased office space.

Background

The Smithsonian has 15 office leases in 5 locations, totaling 642,705 square feet, with an annual lease cost of approximately $29 million.

The Smithsonian, like other federal entities, continues to lease rather than purchase office space, partly due to the Office of Management and Budget’s (OMB) budget scoring procedures. These procedures, set forth in OMB Circular A-11, appear to favor leasing instead of purchasing because many entities fail to develop a cost benefit analysis.

What We Found

We found that the Smithsonian has developed and implemented short- and long-term plans to reduce leased office space, as well as long-term plans to synchronize the expiration dates of Washington, D.C. area office leases in anticipation of purchasing office space in 2021. Management has employed some effective strategies for identifying opportunities to reduce its leased space costs. By monitoring Smithsonian’s use of leased office spaces, the Division successfully consolidated some spaces to reduce costs where possible. However, management had not finalized a cost-benefit analysis to support its plans to purchase a building.

What We Recommended

To present a more informed position to stakeholders regarding the purchase or lease of office space, we recommended that management: continue to refine and complete a cost-benefit analysis for use in the decision making process and include this analysis in the Smithsonian’s federal budget proposal.

Management concurred with our finding and recommendation and plans to complete its cost-benefit analysis by or before September 30, 2015. We will continue to monitor management’s progress towards completion of this recommendation.




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