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GUIDANCE
Toolsets / Real Estate Guidance/Real Estate Asset Management

Real Estate Guidance Click on the icon to download Microsoft Word version of this document.

 

1. Applicability

This document provides general guidance in administrative and general asset management areas. This document is intended to provide guidance only.

2.Background

There are certain real estate related asset management principles that are imposed on all agencies and/or have been adopted by the FAA. This asset management guidance section will generally contain information that relates to more than one type of procurement (i.e., land and space or space and utilities, etc.)

3.Guidelines

4.Electronic Fund Transfer

The Government is to make all payments through the use of EFT (P.L. 104-134).

l General

The requirement for Electronic Fund Transfer (EFT) applies to all Federal payments for real property and utility transactions. This requirement takes effect immediately.

However, if the contractor (vendor) certifies in writing to the real estate contracting officer that the contractor does not have an account with a financial institution or an authorized payment agent, payment may be made by other than EFT (most commonly by check). If the contractor does not have a method for EFT the section "Payee/Company Information" on the Vendor/Miscellaneous Payment Information Form must still be completed. The FAA will use the TIN (or SSN) information for purposes of collecting and reporting on any delinquent amounts arising out of such person’s relationship with the Government. As written, the EFT clause requires that only the successful offeror complete the form. This requires the RECO to request the completed form immediately prior to award. In areas with sufficient competition the RECO may elect to make EFT an award factor. The completed form should be filed with the appropriate accounting office and a copy retained with the contract file for the life of the contract and included in the close-out file.

The real estate clause "Electronic Funds Transfer Payment" has been written to provide for the most common EFT, which is through an Automated Clearing House (ACH). However, the Federal Reserve Wire Transfer System (often referred to as Fed Wire) can also be used, at the Government’s option. If the Federal Reserve Wire Transfer System is used, slightly different information will be required from the contractor. The information needed for the Fed Wire System is:

1. The contract number to which this notice applies.

2. The contractor’s name and remittance address, as stated in the contract and account number at the contractor’s financial agent.

3. The signature, title, and telephone number of the contractor official authorized to provide this information.

4. Name, address, telegraphic abbreviation, and the 9-digit Routing Transit Number for the contractor’s financial agent.

l Change of EFT information by the contractor.

If the EFT information changes after submission of correct EFT information, the Government will begin using the changed EFT information no later than the 30th day after its receipt. However, the contractor may request that no further payments be made until the changed EFT information is implemented by the payment office. The contractor is required to designate a single financial agent capable of receiving and processing the electronic funds transfer using the EFT method.

l Liability for uncompleted or erroneous transfers.

(1) If an uncompleted or erroneous transfer occurs because the Government failed to use the contractor-provided EFT information in the correct manner, the Government remains responsible for (i) making a correct payment, (ii) paying any prompt payment penalty that may be due, and (iii) recovering any erroneously directed funds.

(2) If an uncompleted or erroneous transfer occurs because contractor-provided EFT information was incorrect at the time of Government release of the EFT payment transaction instruction to the Federal Reserve System and: (i) If the funds are no longer under the control of the payment office, the Government is deemed to have made payment and the contractor is responsible for recovery of any erroneously directed funds; or (ii) If the funds remain under the control of the payment office, the Government retains the right to either make payment by mail or suspend the payment in accordance with the clause titled "Electronic Funds Transfer Payment".

l EFT and prompt payment (If a prompt payment clause has been used).

(1) A payment shall be deemed to have been made in a timely manner in accordance with the standard clause "Interest For Late Payment" if, in the EFT payment transaction instruction given to the Federal Reserve System, the date specified for settlement of the payment is on or before the prompt payment due date, provided the specified payment date is a valid date under the rules of the Federal Reserve System.

(2) When payment cannot be made by EFT because of incorrect EFT information provided by the contractor, no interest penalty is due after the date of the uncompleted or erroneous payment transaction, until correct information is provided. The Government is required to provide notice of the defective EFT because of incorrect EFT information provided by the contractor. This notice to the contractor should be provided within approximately 7 days. Failure to issue this notice to the contractor in a timely manner may be considered withholding of payment arbitrarily by the Government.

l EFT and assignment of claims.

If the contractor assigns the proceeds of this contract as provided for in the clause "Assignment of Claims", the assignee shall provide the assignee’s EFT information required by the clause "Electronic Funds Transfer Payment". In all respects, the requirements of this clause shall apply to the assignee as if it were the contractor. EFT information, which shows the ultimate recipient of the transfer to be other than the contractor, without a proper assignment of claims acceptable to the Government, is not acceptable.

l Temporary suspension of payments.

If the contractor does not wish to receive payment by EFT methods for one or more payments, the contractor may be directed to submit a direct request to the designated payment office to refrain from requiring EFT information or using the EFT payment method. The decision to grant the request is solely that of the Government.

l Change of EFT information by the financial agent.

The contractor has agreed that the contractor’s financial agent may notify the Government of a change to the routing transit number, contractor account number, or account type. The Government will use the changed data to effect a EFT change in a timely manner. The agent’s notice of changed EFT data is considered notification of incorrect EFT information and no further payments should be made until the changed EFT information is implemented by the payment office.

 

5.Capitalization

Capitalization is not to be confused with accountability. In general, capitalization is the method of treating an asset as it relates to an agreed upon set of accounting principals. Accountability is keeping track or being aware of assets or items determined important because of their use, value, or significance. Capitalization and accountability of assets will overlap but should not be considered synonymous.

The threshold policy for capitalization of assets, other than land, is $25,000 and a useful life of at least two years. Land purchases will be capitalized at any cost. Land only leases, that do not provide a bargain purchase option and do not result in FAA ownership during the term of the lease, are not capitalized.

The FAA is required to capitalize certain improvements in both owned and leased space (See FAA Order 2700.31, Chapter 8). Also, the FAA is required to make a determination as to whether leases (including real property leases) are capital or operating leases and insure they are reflected correctly in the appropriate database. Documentation relating to capital improvements and determinations of capital versus operating leases is to be retained in the appropriate lease file. Documentation, as a minimum, should consist of the form "Evaluation of Real Property Lease to determine Accounting Treatment". Specific information and guidance relating to capitalization and capital leases is contained in FAA Order 2700.31. Any conflicts in capitalization guidance will use FAA Order 2700.31 as the final authority.

 

Typically, the determination of whether a lease will be a capital lease is accomplished well in advance of site acquisition because of the possible budget score-keeping (OMB Circular A-11) that may be required. Consultation with the regional accounting organization regarding OMB Circular A-11 requirements should be done prior to any commitment on the part of the FAA. (See FAA Order 2700.31)

  • Fair Market Value For Capitalization - In determining if a lease is a capital lease you are required to establish a fair value or fair market value (FMV) for the area under lease. The Department of Transportation, with concurrence from FAA, has established a hierarchy valuation policy for assets (including real property) that lack supporting FMV documentation (FAA Order 2700.31, Chap 8). The hierarchy is as follows:
    1. Actual/historical cost or latest acquisition cost
    2. "Accepted" cost valuation (unsupported value recorded in agency systems)
    3. Estimated cost - in using estimated cost, an industry/FAA accepted method of estimating cost should be used; i.e., appraisal, market survey, cost to replace (Means, Marshal and Swift, etc.), etc.
  • Estimated Useful Life For Capitalization:

In determining whether a lease is operating or a capital lease you will need to know the estimated useful life of a particular asset. The FAA has made a determination for the following types of assets:

    • 40 yrs. Offices and Warehouse buildings (including commercial, governmental, air traffic control towers and enroute air traffic control centers) and residential properties.
    • 20 yrs. Mobile Homes
    • 15 yrs. Other Structures (i.e., Roads, Sidewalks, Parking Lots, etc.)
    • 10 yrs. Capital improvements, Facility Modifications, Leasehold Improvements (or expiration of lease, whichever comes first).

When a lease is considered capital because FAA will during or at the end of the lease term take title to the property or the lease contains a bargain purchase option, the asset is amortized over the estimated useful life of the asset, not the lease term.

When a lease is considered capital because the 75 percent of the estimated useful life or 90 percent of fair value criteria is met, the asset is amortized over the term of the lease.

Leasehold improvements are amortized over:

    • The remaining term of the lease OR
    • The useful life of the asset (the improvement), which ever is less.

All capital leases and capitalized improvements will need to be reported to your local accounting organization.

 

6. Real Property Physical Inventories and Records  (Added 12/1999)

The purpose of this section is to provide guidance and outline responsibilities for conducting real property inventories and for updating real property records to reflect the inventory results.

 Authority

 Conducting physical inventories is necessary to achieve appropriate accountability and control over the FAA’s real property assets.  The physical inventory establishes a direct relationship between actual and recorded assets and ensures that asset transactions have been properly recorded in the real property records database.

 

The Federal Property and Administrative Services Act of 1949 (40 U.S.C. 4836) requires maintenance of adequate inventory controls and accountability systems for property.  In addition, property is to be inventoried continuously to determine if assets have been excessed or disposed of.  Federal Accounting Standards Advisory Board (FASAB) Statement of Federal Financial Accounting Standards (SFFAS) #3 and Office of Management and Budget (OMB) Circular No. A-123 – Management Accountability and Control of Federal Government Assets also address the need for management controls that ensure the accuracy of financial reporting related to property, plant and equipment.

 Standard

A physical inventory of 20% of a region’s/center’s capitalized assets should be conducted annually. Capitalized assets include all land, regardless of cost, and buildings and other structures with an acquisition cost greater than or equal to $25,000 and an estimated useful life of 2 years or more. This will result in a 100% inventory of the FAA’s capitalized assets every 5 years.

Responsibilities

The FAA organizations/personnel involved in the annual physical inventory effort should include:

Real Estate Policy Branch (ASU-140) at Headquarters initiates the annual physical inventory and assigns a national real property inventory coordinator.

National Real Property Inventory Coordinators coordinates the overall physical inventory, issues detailed instructions to the regions/centers, supports the regional/center real property inventory coordinators and reports on the final results.

Regional/Center Logistics Division appoints a regional/center real property inventory coordinator.

Regional/Center Real Property Inventory Coordinators coordinate the physical inventory effort in their region/center, distribute inventory asset listings, follow up on results and adjust the real property records database to reflect the results.

Real Estate Specialists verify owned land assets in their region/center.

Regional Airways Facilities (AF) designates a regional real property inventory team member.

Regional AF Team Member identifies AF contacts to Regional Real Property Inventory Coordinator, makes initial contact and follows up on issues related to getting the job done.  The AF team member would not be responsible for distributing and receiving listings or following up on individual data items.  This would be the responsibility of the Regional/Center Real Property Inventory Coordinator

System Management Office (SMO) Representatives in the regions distribute inventory asset listings and detailed instructions to Airways Facilities (AF) personnel (inventory takers) that will physically observe the sites to be inventoried.

AF Inventory Takers in the regions physically observe the inventory sites and record observations on the inventory data collection sheets (although not required the AF Property Custodian or his/her alternate may be the best choice for this role).

Facility Management Staff at the centers physically observe the inventory sites and record observations on the inventory data collection sheets.

Regional/Center Accounting Offices update the accounting records to reflect inventory results

Procedures

The annual inventory should be comprised of the following 4 key procedures.

1.      Conducting a physical inventory of 20% of a region’s/center/s real property assets

2.      Conducting an internal verification of the inventory results

3.      Updating the real property records database and accounting records to reflect the inventory results

4.      Consolidating and reporting on the results and initiating corrective action where necessary to address opportunities identified as a result of the inventory

The first three procedures are the responsibility of the regions/centers, lead by the Real Estate organization in each region/center.  The fourth process is the responsibility of the Real Estate Policy Branch in Headquarters (ASU-140).  Each of these key procedures is described in detail, in order of occurrence, below.  

1.      Real Estate Policy Branch (ASU-140) issues a memorandum to the regions/centers in October requesting the start of the annual physical inventory for the current fiscal year and designates a staff member as the national real property inventory coordinator for the year.  

2.      National Real Property Inventory Coordinator issues detailed inventory taking instructions revised to reflect findings from the previous inventory and current priorities.  The instructions are distributed with the memorandum.

3.      Regional/Center Logistics in each region/center designates a member of the Real Estate staff as the real property inventory coordinator for the year.

4.      Regional/Center Real Property Inventory Coordinator in each region/center generates from the real property records database a list of assets to be inventoried during the current fiscal year.  For any site included on the list, all assets associated with that site will be included (i.e., whole sites will be inventoried).  A copy of the list is forwarded to the designated national real property inventory coordinator at headquarters.

5.      Regional AF Team Member identifies AF contacts in the regional office and in the field and makes initial contact to advise the process.

6.      Regional/Center Real Property Inventory Coordinator distributes a copy of the asset listing with the detailed inventory taking instructions to the appropriate real estate specialists in the regional/center office.

7.      Real Estate Specialists follow the instructions and determine if the land is still owned, and if it is, if it is still in use.  The real estate specialist also indicates on the listing any corrections to the information for each asset.  The real estate specialist also adds to the listing any owned land assets they are aware of that are not on the listing.

8.      Regional/Center Real Property Inventory Coordinator distributes copies of the asset listings to the appropriate System Management Offices (SMOs) in the regions or Facilities Management Staff at the centers, with the detailed inventory taking instructions.

9.      System Management Office Representative in the region, in coordination with or through the AF team member, distributes the asset listings (with the detailed inventory taking instructions) to the Airways Facilities (AF) personnel (inventory takers) who will actually conduct the physical inventory.

10.  AF Inventory Takers for each site in the region (facilities management staff at the centers), follow the instructions and determine if the listed land, buildings and other structures still exist, and if they do, if they are in use.  If the AF inventory taker/facilities management staff determine that an asset status needs to be changed to excess, because it is no longer in use or that an asset should be deleted because it has been removed or sold, then the name of a contact person that could provide the appropriate paperwork should be listed in the comments column.  The AF inventory taker/facilities management staff also indicate on the listing any corrections to the information for each asset.  The AF inventory taker/facilities management staff also look to see if there are any buildings or other structures on the site with an estimated cost in excess of $25,000, that are not on the inventory listing, or if there are land assets not listed.  If assets are identified they are added to the bottom of the list with as much information known about the asset as possible (e.g., size, cost, installation date, Job Order Number (JON), contact person knowledgeable of the asset).

11.  AF Inventory Takers forward the completed inventory listings through the SMOs to the regional/center real property inventory coordinators.  The facilities management staff at the centers forward the completed inventory listings directly to the real property coordinator.

12.  Regional/Center Real Property Inventory Coordinator reviews the returned listings for completeness, obvious errors and/or omissions, and follows up on assets marked for excess, deletion or addition to obtain the appropriate documentation to support these actions, and corrects the inventory listings as appropriate.  Examples of errors needing follow-up are identified in paragraph 13.

13.  Regional/Center Real Property Inventory Coordinator selects a sample of 10% of the inventoried facilities in each region/center to be verified and arranges for an independent verification of the inventory results at those sites.  The independent verifier could be a member of the regional office logistics staff, an SMO staff member, a contractor or anyone not directly involved in asset verification during the actual inventory taking.  At least one remote site requiring travel should be included in the sample.

If key errors are found at an independently verified site within an SMO’s span of control, then one or two additional inventoried sites within that SMO’s span of control are to be verified.  If more key errors are found, then all inventoried sites within that SMO’s span of control are to be verified.

Key errors would comprise the marking of assets incorrectly (e.g., marking existing assets for deletion, marking removed or sold assets as verified, marking in-use assets for excess).  The failure to revise an ATI code, facility code or square footage/acreage for a building or land would not constitute a key error.  However, these findings would be conveyed to personnel involved in an effort to minimize such errors in the future.

14.  Regional/Center Real Property Coordinator then updates the real property records system to:  

·        change the date of last inventory;

·        record corrections to asset information;

·        delete assets that have been found to no longer exist;

·        change the status of assets no longer in use to excess; and

·        add assets found on inventory.

  The regional/Center real property inventory coordinator forwards to the accounting office the documentation necessary to support adjustments to the accounting records.

The regional/Center real property inventory coordinator also forwards on a monthly basis a copy of the completed inventory listings to the national coordinator at headquarters.

1.      Regional/Center Accounting Office adjusts the real property accounting records.

2.      National Real Property Inventory Coordinator at headquarters:

·        reviews and summarizes the results of the physical inventory;

·        identifies opportunities to improve the inventory taking process;  

·        identifies opportunities to improve asset management practices; and

·        issues a report to ASU management and the regional/center administrators, commenting on the apparent strength of current management and control processes and recommending changes if deemed appropriate.