U.S. Department of State Fiscal Year 2020 Agency Financial Report

H eritage A ssets The condition of the Department’s heritage assets is based on professional conservation standards. The Department performs periodic condition surveys to ensure heritage assets are documented and preserved for future generations. Once these objects are conserved, regular follow-up inspections and periodic maintenance treatments are essential for their preservation. The categories of condition are Poor, Good, and Excellent. CONDITION OF HERITAGE ASSETS As of September 30, 2020 Category Number of Assets Condition Diplomatic Reception Rooms Collection 1,825 Good to Excellent Art Bank Program 2,660 Poor to Excellent Art in Embassies Program 1,269 Good to Excellent Cultural Heritage Collection 19,025 Good to Excellent Library Rare & Special Book Collection 1,371 Poor to Good Secretary of State’s Register of Culturally Significant Property 36 Poor to Excellent National Museum of American Diplomacy 6,216 Good to Excellent Blair House 2,599 Good to Excellent International Boundary and Water Commission 140 Poor to Good D eferred M aintenance and R epairs Deferred Maintenance and Repairs (DM&R) are maintenance and repairs that were not performed when they should have been, that were scheduled and not performed, or that were delayed for a future period. Maintenance and repairs are activities directed towards keeping Property, Plant, and Equipment (PP&E) in acceptable operating condition. These activities include preventive maintenance, normal repairs, replacement of parts and structural components, and other activities needed to preserve the asset so that it can deliver acceptable performance and achieve its expected life. Maintenance and repairs exclude activities aimed at expanding the capacity of an asset or otherwise upgrading it to serve needs different from, or significantly greater, than those originally intended. The Department occupies more than 8,500 Government-owned or long-term leased real properties at more than 270 overseas locations, numerous domestic locations, and at the IBWC. Deferred Maintenance and Repairs Policy – Measuring, Ranking and Prioritizing The Department annually conducts the Federal Real Property Portfolio (FRPP) submission to GSA. Leveraging this data, OBO changed the methodology for calculating DM&R in 2020. In prior fiscal years, OBO calculated DM&R using an industry-based formula adjusted for building type, age, and geographic location to determine how much maintenance and repair funding to be allocated to each facility. The difference between the calculated allocation and actual funding was deemed to be DM&R. This methodology relied on input from global facility managers through a manual data call process. With the absence of a 100 percent response rate and only factoring in the responses received, the calculation of ending DM&R estimates were significantly lower in prior fiscal years. The new methodology for calculating DM&R is based on the Facility Condition Index (FCI). This methodology accounts for all facilities globally without the reliance on a response through a manual data call process, allowing for a more complete DM&R estimate. FCI is the ratio of repair needs to the replacement value of a facility as calculated by: Repair need is defined as the non-recurring costs that reflect the amount necessary to ensure that a constructed asset is restored to a condition substantially equivalent to the originally intended and designed capacity, efficiency, or capability. In accordance with the FRPP definition of repair need, the Department uses repair needs identified by overseas facilities managers. Since this process does not identity repair need costs for all 8,500+ properties, the Department also uses parametric modeling to supplement these results. Based on the ages and expected useful life of individual systems and documented FCI results, the FCI parametric model uses deterioration curves to reflect how systems deteriorate over time. Replacement value is defined as the cost to design, acquire, and construct an asset to replace an existing asset of the same functionality, size, and in the same location using current costs, building codes and standards. Neither the current condition of the asset nor the future need for the asset is a factor in the replacement value estimate. The Department uses construction “unit rates” determined by its Office of Cost Management 2020 A gency F inanci al R eport U ni ted S tates D epartment of S tate | 111 REQUIRED SUPPLEMENTARY INFORMATION | FINANCIAL SECTION