Summary

The federal government has enormous amounts of capital assets and helps fund state and local projects. Much of these federally owned and financed items are deteriorating, and the government is faced with the prospect of either repairing or rehabilitating them or risking a staggering replacement burden in the future. Industry, most states, and municipalities follow a capital budgeting procedure, but the federal government does not. A study was conducted of capital investment data and the planning and budgeting experiences of numerous public and private organizations.

GAO concluded that a policy-level approach to capital investment must be added to the federal government's decisionmaking process, and sound, up-to-date information is needed to support that approach. Government agencies need to closely monitor the implementation of capital investment programs, audit their results, and check the condition of operating facilities and equipment. GAO found that deteriorating public capital assets are partly the result of state and local neglect. Federally owned assets appear to be in better condition than state and local assets, but they too suffer from obsolescence and deterioration. The Postal Service had the most desirable planning, budgeting, and control features that could be readily adopted by other federal agencies. Many factors have contributed to the problems of capital investment in the federal government: (1) managers' views; (2) congressional authorization and budgetary procedures; (3) limited resources available for capital; and (4) too little monitoring or oversight of ongoing and completed capital projects. Short-term strategies are implemented in capital investment areas, increased costs of federal capital programs are passed on to states without recognition, and no effective national capital improvement plan exists. Consequently, the federal government's ability to stop the decline of physical capital is severely limited. Uncontrollable outlays have reduced the funds available for physical capital investments.