United States General Accounting Office

GAO Testimony

Before the Subcommittee on Public Buildings and

Economic Development, Committee on Transportation

and Infrastructure, House of Representatives

For Release

on Delivery

Expected at

10:30 a.m. EST

Wednesday, March 25, 1998

Kennedy Center

Preventing Audit

Duplication

and Developing Facility

Management Capability

Statement of Bernard L. Ungar

Director, Government Business Operations Issues

General Government Division

GAO/T-GGD-98-86

Statement 

Kennedy Center: Preventing Audit

Duplication and Developing Facility

Management Capability

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss two audit reports we have issued

within the last year on the operations of the John F. Kennedy Center for

the Performing Arts. In August 1997, we issued a report addressing the

need to prevent duplication of audit efforts involving the Kennedy Center’s

appropriated funds.1

 Today, we are issuing a report addressing the

Kennedy Center’s efforts to define and implement a facility management

organization.2

 My statement summarizes the two issues discussed in these

reports—preventing audit duplication and developing facility management

capability.

Preventing Audit

Duplication

In August 1997, we issued our initial report in response to a provision

contained in Public Law 103-279.3

 In 1994, Public Law 103-279, which

authorized Kennedy Center (Center) appropriations, provided that we

audit, not less than once every 3 years, the expenditures of funds

appropriated for the Kennedy Center and that our audit include testing for

compliance with the act’s limitation4

 on the use of any of those

appropriated funds for performing arts functions.

Since its inception, the Center has annually contracted with a public

accounting firm to audit its financial statements and provide a report on

whether those statements present fairly the financial position of the

Center. As part of the audit, tests of the Center’s compliance with certain

provisions of laws, regulations, contracts, and grants are made to identify

instances of noncompliance that could have a direct and material effect on

the financial statement amounts. As we did the work necessary to plan our

own audit, the information and documentation that we obtained from the

Center and from the Center’s auditor demonstrated that our audit, if done,

would have duplicated those portions of the auditor’s work involving

• testing of internal controls,

• sampling of expenditures, and

1

Kennedy Center: Audit Duplication Can Be Prevented (GAO/GGD-97-161, Aug. 19, 1997).

2

Kennedy Center: Information on Facility Management Capability (GAO/GGD-98-56, Mar. 25, 1998).

3

Section 5(d) of the John F. Kennedy Center Act Amendments of 1994, Public Law 103-279, 108 Stat.

1409, 1415-1416 (1994), which amended section 6 of the John F. Kennedy Center Act, 20 U.S.C. 76l.

4

Section 12(c) of the John F. Kennedy Center Act Amendments of 1994, Public Law 103-279, 108 Stat.

1409, 1416 (1994), 20 U.S.C. 76r.

Page 1 GAO/T-GGD-98-86
Statement 

Kennedy Center: Preventing Audit

Duplication and Developing Facility

Management Capability

• testing for compliance with the limitation on the use of the appropriated

funds.

Further, the auditor planned and executed the audit under the

Government Auditing Standards, which govern our audit work as well.

In our August 1997 report, we concluded that efficient use of our audit

resources would be best achieved by the Center’s continued contracting

for a single, annual audit of its financial statements and that this annual

audit should include both the use of appropriated funds and compliance

with the limitation on the use of those funds. We recommended that

Congress delete the requirement that we audit the funds appropriated to

the Center, and we also stated that Congress may wish to consider

imposing a statutory requirement that the Center continue to contract for

annual financial statement audits and communicate the results to

Congress.

Regarding compliance with the limitation on the use of appropriated

funds, we suggested that Center managers include a requirement in future

financial statement audit engagement letters that the auditor include in its

report (1) information about the specific tests for compliance with the

limitation on the use of funds that it had undertaken and (2) the results of

those tests. Center officials agreed and included, in their fiscal year 1997

audit engagement letter, a contractual requirement that the results of the

funds limitation compliance tests be reflected in the auditor’s report5

 to

the Center’s Board of Trustees. The audit report for fiscal year 1997

included a Report of Independent Public Accountants on Compliance and

Internal Controls that described the compliance testing performed by the

auditor to determine any direct and material effect of the compliance with

the limitation on the Center’s financial statement amounts. Further, the

results of the auditor’s tests were reflected in the November 25, 1997,

auditor’s opinion,6

 which stated that the financial statements of the Center

for the period audited present fairly, in all material respects, the financial

position of the Center.

5

The John F. Kennedy Center for the Performing Arts and the National Symphony Orchestra, OMB

Circular A-133 Supplemental Financial Report As of Sept. 28, 1997 Together with Auditors’ Report,

Nov. 25, 1997.

6

The John F. Kennedy Center for the Performing Arts Financial Statements As of Sept. 28, 1997, and

Sept. 29, 1996 Together With Auditors’ Report, Nov. 25, 1997.

Page 2 GAO/T-GGD-98-86
Statement 

Kennedy Center: Preventing Audit

Duplication and Developing Facility

Management Capability

Developing Facility

Management

Capability

Today, we issued our report on the Kennedy Center’s progress in defining

and implementing a facility management organization since enactment, in

1994, of Public Law 103-279. In addition to authorizing appropriations for

the Center, Public Law 103-279 transferred complete operating

responsibility for the Center, previously divided between the National

Park Service and the Center’s Board of Trustees, to the Board. In

response, the Center managers began the process of creating a facility

management organization to operate the facility.

In a February 1993 report,7

 we noted that while the Center did not then

have individuals on staff with certain professional and technical skills that

would be associated with managing capital projects, there appeared to be

no reason that—given sufficient time and funding—the Center could not

acquire the necessary management capability. Other reports, ours and one

by a consultant retained by the Center, pointed out the need for an

organizational structure that would clearly define and assign roles and

responsibilities related to facility operations.

The Center has developed its facility management organization under the

premise that the organization would include a small in-house staff

supported by contractor technical staff. Accordingly, the Center

established about 55 in-house facility management staff positions,

including 6 managerial positions. These managerial positions have

responsibility for specified areas and include the Vice President for

Facilities; the Directors of Contracting, Facilities, Security, and Auxiliary

Services; and the Project Executive. With the exception of the Vice

President for Facilities, these positions use contractors to support

operations. While the six positions function within a single, formal,

facilities management organizational structure, several committees bring

together facility managers; managers of other functions, such as

performance production; and staff to coordinate facility operations with

performing arts schedules and to resolve various facility issues and

problems.

To provide facility-related operating information to managers, the Center

staff has developed a series of reports for use in tracking and managing

appropriated funds usage. In addition, the Center has purchased and is

implementing four modules of a computer-integrated facility management

system. Three modules assist in managing the Center’s inventory of assets

and Center maintenance functions, including preventive maintenance,

demand maintenance, and scheduled maintenance projects. The fourth

7

Kennedy Center: Information on the Capital Improvement Program (GAO/GGD-93-46, Feb. 9, 1993).

Page 3 GAO/T-GGD-98-86
Statement 

Kennedy Center: Preventing Audit

Duplication and Developing Facility

Management Capability

module is a database in which data from all other modules are to be

maintained. In addition, the Center is in the process of evaluating and

implementing computerized scheduling software for use in preparing a

comprehensive facility utilization schedule/calendar. Center officials told

us that they expect these systems to become operational during the next

few months.

Mr. Chairman that concludes my statement. At this time I will be pleased

to respond to any questions the Subcommittee might have.

(240297) Page 4 GAO/T-GGD-98-86
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