Kennedy Center: More Information on Project Status and Budgets Needed to Understand the Impact of Future Funding Decisions
Published: 2004-09-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since fiscal year 1995, the John F. Kennedy Center for the Performing Arts (Center) has been responsible and received federal funding for implementing capital improvement projects and operations and maintenance activities. The Kennedy Center's Comprehensive Building Plan identifies capital projects needed to renovate the Center and bring it into compliance with current life safety and accessibility codes. The Kennedy Center currently is planning to construct, with private funds, two new buildings to open in 2013 on a new plaza to be built adjacent to the existing facility. The Kennedy Center expects federal funding to operate and maintain these buildings. GAO was asked to examine (1) how much the Center has received in federal appropriations for capital projects, (2) the status of the Comprehensive Building Plan and updates, and (3) the potential impact of the Center's plaza project on the need for future operations and maintenance funding.
section_title: What GAO Found
paragraphs: For fiscal years 1995 through 2004, the Kennedy Center received approximately $152 million in federal appropriations for capital projects identified in its Comprehensive Building Plan. According to its fiscal year 2002 Comprehensive Building Plan, the Kennedy Center will need an additional $57 million in federal appropriations from fiscal year 2005 through fiscal year 2008 to complete its planned capital projects. The Kennedy Center has completed many of the capital projects identified in the Comprehensive Building Plan and has many more ongoing. However, we do not expect the Center to be able to complete all of the capital projects identified in the plan by fiscal year 2008. This is in part because the Kennedy Center reprioritized the sequence of its planned projects to minimize disruptions to its patrons. Several of the projects that will likely not be completed include components, such as the installation of sprinklers, that are important in meeting the Kennedy Center's goal of bringing the facility into compliance with current life safety codes. However, the Comprehensive Building Plan does not discuss changes to its prioritization of projects or the impact of those changes on completing its planned renovations. In addition, the updates to the plan do not include information on the status of projects identified in earlier plans or provide budget information for individual projects. As a result, the Comprehensive Building Plan is of limited use for understanding the Kennedy Center's progress in completing its planned renovations. Operations and maintenance costs for the plaza project, including two new buildings, could range from $6 million to $11 million annually, in current dollars, based on data from a survey of museum facility management practices and Kennedy Center data. The Kennedy Center expects to request additional annual federal appropriations for these costs. However, because the project is currently in the early planning phase, the operations and maintenance estimate could change as designs are finalized. In fiscal year 2004, the Center received about $16 million for the operations and maintenance costs of the existing facility.

section_title: Letter
paragraphs: The John F. Kennedy Center for the Performing Arts (Center) opened in  1971 in Washington, D.C., as both a national cultural arts center and a  memorial to the 35th President. The Kennedy Center, open every day of the  year, is visited by nearly 5 million people annually. By 1990, the Kennedy  Center suffered from severe deterioration and a backlog of capital repairs.  Responsibility for managing the Kennedy Center was shared between the  National Park Service and the Kennedy Center itself. Officials from both  agencies acknowledged that the Center had reached a seriously  deteriorated state due to the lack of a clear mandate as to which agency  was responsible for identifying and completing capital repairs and  alterations.
In 1994, Congress transferred responsibility for the management of the  Kennedy Center facility from the National Park Service to the Kennedy  Center. At that time, Congress also required the Kennedy Center to  develop, and annually update, a comprehensive building needs plan. In  response, the Kennedy Center developed a Comprehensive Building Plan in  1995 that included an assessment of the facility and identified the capital  projects it believed were necessary to restore the Center to the standards  of a presidential memorial and bring it into compliance with current life  safety and accessibility codes. The Kennedy Center has been gradually  renovating the Center since 1995. Among other improvements, the Center  has renovated its two largest theaters, replaced the roof, installed a new  fire alarm system and improved its building systems, such as its heating  and air-conditioning and plumbing systems.
The Kennedy Center is also working with the U.S. Department of  Transportation and organizations within the District of Columbia to  develop a new public plaza adjacent to the current facility, improving road  and pedestrian access. The plaza project includes two new buildings  located on the plaza to provide additional office, classroom, and rehearsal  space and house permanent and rotating exhibits on the history of  performing arts. These buildings will be constructed with private  donations, but the Center expects to fund the operations and maintenance  (O&M) of the buildings with federal appropriations.
To assist the subcommittee in its oversight role and in making future  funding decisions related to the Center and plaza building project, our  report discusses (1) how much the Kennedy Center has received in federal  appropriations for capital improvement projects for fiscal years 1995  through 2004, (2) the status of the Comprehensive Building Plan and its  updates, and (3) the potential impact of the Kennedy Center’s proposed  plaza project on the need for future federal funds to pay for the cost of  operating and maintaining the new buildings and plaza.
To determine the amount of federal appropriations the Kennedy Center  requested and received for capital improvement projects for fiscal years  1995 through 2004, we reviewed the Kennedy Center’s Comprehensive  Building Plan and its updates; its budget justifications and audited financial  statements; and federal authorization and appropriation laws. To determine  the status of the Kennedy Center’s Comprehensive Building Plan and its  updates we toured the Kennedy Center facility; obtained a status of the  projects, including costs, from Kennedy Center officials and its financial  system; and discussed the projects with Kennedy Center officials. To  determine the potential impact of the Center’s proposed plaza project on  the need for future federal funds, we calculated the potential O&M costs  based on museum survey data of facility management practices and the  Kennedy Center’s projected O&M rates. We discussed with Kennedy Center  officials how these rates were determined, and we verified with the agency  that conducted the survey that the museum rates provided were accurate.  We researched building industry sources for estimates of O&M rates and  determined that the Kennedy Center’s projected rates were reasonable  given the currently available information. We also determined that project  status and cost data were sufficiently reliable for the purpose of our review.  We conducted our work from January 2004 through July 2004 in  accordance with generally accepted government auditing standards (see  app. I for more information on our scope and methodology).
subsections: section_title: Background
paragraphs: The Kennedy Center opened in 1971 and is located on 17 acres along the  Potomac River in Washington, D.C. The Center houses four major theaters  and several smaller theaters, five public halls or galleries, educational  facilities, rehearsal spaces, offices, and meeting rooms in about 1.1 million  square feet of space. The Kennedy Center also has a recently expanded  parking garage. The Center is open 365 days a year, and nearly 5 million  people visit it annually to attend performances or tour the facility.
In 1972, the National Park Service, within the Department of Interior,  assumed responsibility for services related to the nonperforming arts  functions of the Kennedy Center facility, whereas the Kennedy Center  Board of Trustees (Board) retained responsibility for all performing arts  activities. Under this dual management, the Kennedy Center facility  suffered from severe deterioration and a backlog of capital repairs in part  because responsibility for identifying and completing capital repairs and  improvements at the Center was unclear. As a result, legislation was  enacted in 1990 that directed the National Park Service and the Board to  enter into a cooperative agreement setting forth their responsibilities  relating to maintenance, repair, and alteration of the Center. However, after  the parties were ultimately unable to agree on a methodology to enter into  the cooperative agreement, which would have been the foundation of a  capital improvement plan, legislation was enacted in 1994 that gave the  Board sole responsibility for carrying out capital improvement projects at  the Kennedy Center facility. A purpose of the legislation was to provide  autonomy for the overall management of the Kennedy Center, which  included better control over its capital projects and bringing the Kennedy  Center building from a state of deterioration to a condition of excellence.  The legislation further required the Board to develop and annually update a  comprehensive building needs plan.
In response to the legislation, the Kennedy Center developed a  Comprehensive Building Plan (Building Plan) in 1995 to detail the existing  condition of the Kennedy Center facility and planned renovations. The  goals of the renovations were to address accessibility and life safety code  deficiencies, such as the installation of sprinklers throughout the Center,  replace inefficient building systems, and improve visitor services. The  original Building Plan anticipated that the capital projects at the Kennedy  Center would be completed in two stages. Projects in the first stage—fiscal  years 1995 through 1999—would address critical issues to protect the  building from water intrusion, provide critical security and life safety  measures, and provide improved accessibility. Projects undertaken in the  second stage—fiscal years 2000 through 2009—would eliminate the  backlog of deferred capital repair projects. However, the Kennedy Center  changed its approach to renovating the Center. Rather than undertaking  broad-scale projects that could disrupt the entire Center, the Kennedy  Center has taken certain areas or theaters out of service and performed all  of the necessary renovations in a particular area at one time. For example,  rather than installing a new sprinkler system throughout the entire Center,  which would have closed multiple theaters simultaneously, the Center is  installing sprinklers in each theater as it is renovated. Thus, only one  theater is closed at a time. According to Center officials, this approach  minimizes the disruptions to ongoing operations in other areas of the  Kennedy Center. When the Opera House was renovated, for example, it was  closed for almost a year but performances continued in all of the other  theaters.
The Kennedy Center receives federal funding annually for capital  improvement projects based on its Building Plan. In fiscal year 2004, the  Kennedy Center received approximately $16 million in federal funds for  capital improvement projects. Revenue generated by performances at the  Center are used for costs associated with the performances and are not  used for capital projects in the Building Plan.
In addition to federally funded projects, the Building Plan also discusses  other major projects that are being funded with private donations or other  nonfederal funding sources, including the recent garage expansion and the  proposed plaza project adjacent to the Kennedy Center facility. The plaza  project, which will connect the Center to the National Mall, will relocate  roadways to improve transportation and pedestrian accessibility to and  from the Kennedy Center and surrounding streets. It will include a central  fountain that runs from 23rd Street NW to the Kennedy Center, a pedestrian walkway, and a connection to the waterfront. In addition, the plaza will  include two proposed buildings with about 200,000 gross square feet each,  located on opposite sides of the central fountain (see fig. 1). The Kennedy  Center plans for one building to house an exhibition devoted to the history  of performing arts in America, include office space for the Kennedy Center  staff, and be used as an education center for the performing arts. The other  building will be used as rehearsal space for the Washington National Opera  and the Kennedy Center and include some additional office space for  Kennedy Center staff. These buildings will be constructed with private  donations, and upon completion, the Kennedy Center Board will own,  operate, and maintain the buildings and green space established on the  plaza. In fiscal year 2003, the Center received a pledge of $100 million to be  used toward the construction of the planned plaza buildings. According to  Kennedy Center officials, they are in the preliminary stages of designing  and estimating the cost of the new buildings. Construction of the plaza  project is expected to begin in fiscal year 2010, pending federal funding,  and the Kennedy Center is expected to begin occupying the buildings in  fiscal year 2013.
The 1994 legislation that gave the Kennedy Center responsibility for capital  projects also authorized the Board to carry out the day-to-day operations  and maintenance activities for the Kennedy Center facility. Operations and  maintenance funds are used to cover expenses for utilities, security, daily  cleaning, and maintenance, among other things. In fiscal years 2003 and  2004, the Kennedy Center received about $16 million in federal  appropriations each year for the operations and maintenance of the current  facility. Federal appropriations are not used for performance-related  expenses. The Kennedy Center’s total operating expenses in fiscal year  2003 were about $118 million.  The Kennedy Center generates the majority  of its revenue from programs at the Center, contributions, and investments.
section_title: Kennedy Center Has Received Over $150 Million for Capital Projects
paragraphs: The Kennedy Center has received approximately $152 million in federal  appropriations for capital projects since it took responsibility for these  projects in fiscal year 1995. In every fiscal year since 1995, the Kennedy  Center has generally received the federal appropriations it requested. For  example, in fiscal year 2004, the Kennedy Center requested $16 million in  federal appropriations for capital projects and received $15.8 million after  rescissions to the budget authority were taken into account. (see table 1).
As shown in table 1, the Kennedy Center requested approximately $9  million annually for capital projects for fiscal year 1995 through fiscal year  1998. The Center generally received what it requested in each of these  years, but the actual funding available was reduced in some of these years  due to a rescission of budget authority. In fiscal year 1997, additional  appropriations were provided to the Kennedy Center to address  antiterrorism requirements. In fiscal year 1999, the Kennedy Center  requested and received $20 million in federal appropriations for capital  projects, an increase from the $9 million it originally anticipated receiving  in its initial 1995 Building Plan. This increase in funding was given to the  Kennedy Center to address several critical projects over a 3-year period.   Center officials requested the increased funding on the basis of studies  conducted by its architecture and engineering consultants, who concluded  an increase in “up front” funding could lead to overall cost savings on the  Kennedy Center renovation in the long term. For fiscal years 2002 through  2004, the Kennedy Center gradually reduced its annual funding request  from $20 million; however, the total requested funding for these years was  about $17 million more than was anticipated in the initial 1995 Building  Plan.
The Kennedy Center uses its Building Plan to communicate to Congress its  planned capital improvement projects and to provide budget estimates for  carrying out these projects. The Kennedy Center further describes its  planned capital projects and requests federal appropriations for these  projects in its annual budget justifications to Congress. Both the Building  Plan and budget justifications present budget estimates for broad  categories of projects, such as interior repair, accessibility, and egress, but  they do not include budget information for specific projects. Unlike the  General Services Administration, the Kennedy Center receives a lump sum  appropriation for capital projects, and the appropriations are not dedicated  to specific projects. The Kennedy Center has the flexibility to change the  projects or sequence of projects it plans to fund on the basis of such factors  as the need to minimize disruptions to the operations of the Center and  budget constraints.
The Kennedy Center has requested about $16 million for capital projects in  fiscal year 2005. The 2002 Building Plan anticipates the Kennedy Center  will receive another $41 million in appropriations through fiscal year 2008  to carry out its planned capital projects, for a total of $209 million. This is  consistent with the funding amounts anticipated in the 1997 Building Plan;  however, it is $44 million more than was anticipated in the initial 1995  Building Plan to accomplish the same goals.
section_title: It Is Unlikely That Building Plan Will be Fully Implemented by 2008, and More Project Information Is Needed in the Plan
paragraphs: The Kennedy Center has completed or has ongoing 100of the projects it  identified in its initial Building Plan and its updates, and has decided not to  implement or has postponed 15 of the identified projects. Seventeen  projects are planned for fiscal years 2005 through 2008 and include several  large projects with life safety components, such as the installation of  sprinklers. We believe it is unlikely that the Center will be able to complete  the planned projects by the end of fiscal year 2008 or within the  appropriation amounts anticipated in the current Building Plan. Several  large projects remain to be done because, in part, the Kennedy Center  changed the order of projects to minimize disruption to the operations of  the Center.  The budget estimates for the capital projects planned through  fiscal year 2008 are preliminary and will likely increase as the projects are  designed. Furthermore, the Comprehensive Building Plan has not been  updated annually as required, and it does not provide specific project  status and budget information. This limits the usefulness of the plan and  inhibits Congress’s ability to know the impact of funding decisions or judge  the performance and progress of the Center’s capital projects.
subsections: section_title: Status of Projects in Building Plan
paragraphs: Since the first Building Plan was developed in 1995, 132 capital projects  have been identified in the plan, and the updates to the plan, to address the  deterioration and backlog of capital repairs, and an additional 12 capital  projects that were not in the plan have been completed. (See app. II for a  list of the specific projects and their status.) The completed projects that  had not been identified in the Building Plan were relatively small projects  totaling $1.2 million, and include such projects as kitchen repairs and  engraving restoration. The Building Plan lacks individual project  information necessary to determine if projects are being completed within  the original budget estimates and on schedule. Table 2 shows the status of  all of the Kennedy Center’s projects since fiscal year 1995.
subsections: section_title: Completed Projects
paragraphs: Seventy-four capital projects have been completed at a total cost of about  $98 million. Examples of major projects completed include the  replacement of chillers; renovation and installation of sprinklers in the two  largest theaters—the Concert Hall and Opera House; and installation of a  new fire alarm system throughout the building. Figure 1 shows the Opera  House during and after the renovation. The Kennedy Center has also  completed many smaller projects ranging from the installation of safety  rails on the roof terrace to new directional signs in the Center.
Thirty-eight capital projects are currently ongoing at a total estimated cost  of $67.2 million. Many of these projects, originally planned to begin in  different fiscal years, have been combined into single projects for  implementation. For example, 15 projects reported in the Building Plan,  originally planned to begin as early as fiscal year 1998, have been combined  under the one current site improvements project, beginning in fiscal year  2003. Kennedy Center officials expect this project to be completed by the  end of calendar year 2004. The ongoing projects include elevator  modernization, the installation of sprinklers in areas outside of the  theaters, and a smoke evacuation system in the Grand Foyer and Halls of  State and Nations. According to Center officials, some of these projects are  in the design phase, and their actual costs could increase.
section_title: Planned Projects
paragraphs: Seventeen projects are planned for future years (through fiscal year 2008),  with initial budget estimates totaling over $38 million for 15 of the projects.  The Kennedy Center did not provide an estimate for 2 of these projects— design and restoration of the windows on the roof terrace level—because  officials expect the scope of the restoration project to change significantly  based on early design work for window restoration on other levels. Major  projects planned for the future include renovations of the Family Theater,  Eisenhower Theater, and the Terrace Theater. Kennedy Center officials  have cautioned that initial budget estimates are preliminary and are  expected to change as the projects are designed. In addition, project  estimates are based on the year the project is expected to start; as projects  are postponed, costs are expected to increase.
section_title: Not Implemented and Postponed Projects
paragraphs: Fifteen projects will not be implemented or have been postponed beyond  fiscal year 2008. Eleven of these projects, including the relocation of a  theater, will not be implemented because Center officials have determined  the projects were not financially viable or were no longer needed. The  Kennedy Center spent about $600,000 studying two of the projects it  decided not to implement. The other 4 projects, related to office  renovations and public space improvements, have been postponed because  other projects have higher priority. While the Kennedy Center decided to  postpone or not implement these 15 projects, the Building Plan did not  reflect any changes in the amount it reported as necessary to implement  the plan.
section_title: It is Unlikely the Building Plan Will be Fully Implemented by 2008
paragraphs: Given the number and size of the renovation projects that remain to be  done and the current likelihood that project estimates may increase, we  believe it is unlikely the Kennedy Center will be able to fully implement its  Building Plan with the anticipated future appropriations by the end of fiscal  year 2008.
Each year, the Kennedy Center receives federal funding for capital projects  at the Center that is not tied to specific projects. Although the Building Plan  includes a proposed construction order for the projects, the Kennedy  Center has the flexibility to change the sequence of projects or change  specific projects that will be done in any given year. According to Kennedy  Center officials, capital projects are prioritized according to a combination  of factors, including (1) life safety issues, (2) risk and impact to patrons and  staff, (3) needed upgrades to the building systems, (4) theater accessibility,  and (5) the need to minimize disruptions to the Center’s operations. As a  performing arts center, in fiscal year 2003, the Kennedy Center generated  about 70 percent of its income from performances and programs held at the  Center and from contributions. Center officials stated that it must continue  operations during renovations to the extent possible to continue generating  revenue.
The need to minimize disruptions to the Center’s operations appeared to be  the key consideration when determining the order of capital projects. To  minimize disruptions to the Center’s operations and patrons, the Kennedy  Center changed its original approach of doing critical life safety projects by  the end of fiscal year 1999 to renovating the Center a particular area at a  time. For example, the recent renovation of the Opera House included all  necessary projects in the theater, such as the removal of asbestos, the  installation of a sprinkler system, and the installation of new wall  coverings. This approach is less disruptive to the operations of the  Kennedy Center; however, many of the life safety projects that the initial  Building Plan anticipated would be completed by the late 1990s, although  currently ongoing, will not be completed until fiscal year 2006. In addition,  three theaters—Family, Eisenhower, and Terrace—still remain to be  renovated, including the installation of sprinklers.
The renovation of the Family Theater is currently being designed and the  Kennedy Center plans to complete this renovation in fiscal year 2005. The  Eisenhower Theater renovation is currently in the preliminary design  phase. The renovation of the Eisenhower Theater was originally planned  for fiscal year 2006, but according to Center officials, the actual renovation  has been postponed until fiscal year 2007 or 2008. Finally, the 2002 Building  Plan reports that the complete renovation of the Terrace Theater will not  be completed until after fiscal year 2008 but indicates complete sprinkler  coverage and accessible railings would be added to the theater by the end  of fiscal year 2008.
Finally, we believe the funding anticipated in the Building Plan may not be  sufficient to complete all of the planned projects. Since fiscal year 1995, the  Kennedy Center has received almost $152 million for capital projects, and  the Center anticipates another $57 million in appropriations for capital  projects, through fiscal year 2008, for a total of $209 million. As noted  earlier, this is $44 million more than was anticipated in the initial 1995  Building Plan to accomplish the same goals. As of February 29, 2004, the  Center has spent over $98 million since fiscal year 1995 on the capital  projects it has completed so far or studied but did not implement. It  estimates the remaining projects will cost almost another $106 million to  complete, for a total of about $204 million. Although the current project  budget estimates fall within the anticipated appropriations, many of these  estimates are based on preliminary or no design work and are expected to  change as the project design is refined and construction begins. According  to the Construction Industry Institute, actual project costs may vary by as much as 30 percent to 50 percent from project estimates developed in the  early stages of design.
section_title: The Comprehensive Building Plan Is of Limited Use in Understanding the Status of the Kennedy Center’s Renovations
paragraphs: The Building Plan is of limited use in understanding the Kennedy Center’s  progress in implementing its plan to renovate the Center because it does  not include the status of projects identified in prior plans or provide budget  information for individual projects. Instead, the plan includes a proposed  sequence of work that lists the projects expected to be implemented each  fiscal year through fiscal year 2008. In addition, budget information is  provided only at a summary level for seven broad categories and not for  individual projects. For example, the Building Plan shows that in fiscal year  2004 the Center planned to spend $7.4 million on life safety and security but  does not show the amounts budgeted to individual projects such as the  installation of smoke evacuation systems. Our 1998 Executive Guide on  Capital Planning highlights the importance of sound capital planning,  noting that clear communication and good data are essential to supporting  sound capital planning and decision making.
The Building Plan does not clearly explain how the Center prioritizes and  restructures capital projects. For example, the Kennedy Center combined  several life safety projects identified in the Building Plan into one project  that is currently under way and the Center expects to be completed in fiscal  year 2006. The Building Plan had originally identified some of these  projects to be started as early as 1996. While the Building Plan updates  state that projects may be combined, they do not clearly communicate the  decision to combine these projects and that this decision would delay the  Center’s progress in meeting life safety codes. In addition, Center officials  have said that the potential of future federal funding below the levels  identified in the Building Plan will require some projects to be delayed.  Without sufficient information in the Building Plan on the prioritization of  projects, congressional decision makers will not be able to gauge the  Center’s progress in implementing the Building Plan or the impact of  funding decisions on individual capital projects.
The Kennedy Center reports monthly to the Office of Management and  Budget (OMB) the status of individual projects and budget information for  ongoing projects. Specifically, for each project, it includes the estimated  budget, expenditures to date, and changes in project schedule, which could  be used to determine if these projects are on budget and on schedule.  However, the report does not include information for projects in future  years. Including information on planned projects as well as ongoing  projects in the Building Plan would ensure that the Kennedy Center is held  accountable for the cost and schedule of its capital projects and is  achieving the goals of the Building Plan. Such information could also help  the Kennedy Center Board support its requests for appropriations and  explain the potential effect on the implementation of the Building Plan if  lesser amounts are appropriated.
In addition to lacking sufficient information on which to gauge the Kennedy  Center’s progress in implementing the Building Plan, the Building Plan has  not been updated annually as required in the John F. Kennedy Center Act  Amendments of 1994. The Kennedy Center recognizes that annually  updating and implementing the Building Plan could help guard against a  recurrence of severe deterioration of the facility and over the long term  should ultimately reduce the public costs of operating and maintaining the  monument. According to a Kennedy Center official, the Center has  continued to implement the December 2002 Building Plan but has not  updated it because officials did not believe there had been significant  changes at the Center and the plan was still applicable. The Kennedy  Center has recently hired a new Director of Capital Projects, who expects  to issue an update to the Building Plan by the end of 2004.
section_title: Kennedy Center Will Likely Request Additional Operations and Maintenance Funding for Its New Plaza Project
paragraphs: In fiscal year 2004, the Kennedy Center received about $16 million for  operations and maintenance costs for the existing Center and will likely  need additional federal appropriations for O&M expenses when the new  plaza project is complete. We calculate that annual additional O&M costs  could range from $6 million to $11 million, in current dollars, for the  proposed new plaza and two buildings. However, this preliminary estimate  will likely change before fiscal year 2013, the first year annual O&M funds  may be needed. The plaza project is in the early planning phase, and  decisions made about the project through the design phase will affect  actual O&M costs. For example, the planning phase could result in smaller  buildings and a plaza with less square footage, reducing O&M costs.
subsections: section_title: O&M Costs for the Existing Center
paragraphs: The Kennedy Center currently receives federal appropriations for O&M  costs at the existing Center. O&M refers to activities that keep a facility  running on a daily basis and routine maintenance required based on the use  of the facility. Specifically, O&M includes costs for such items as utilities,  daily cleaning and maintenance for the building and grounds, minor repair  and maintenance, security, and salaries for support staff. In fiscal year  2004, the Kennedy Center received over $16 million in federal funds for  O&M related to the existing Center.
section_title: O&M Costs for the Proposed Plaza Project Could Range from $6 Million to $11 Million
paragraphs: On the basis of data from a survey of museum facility management  practices and Kennedy Center data, we calculate that the potential O&M  costs for the proposed plaza project could range from $6 million to $11  million, in current dollars. Kennedy Center officials said they have not  formally estimated O&M costs for the proposed plaza project because it is  in the early planning phase and decisions on the design of the buildings,  which can affect O&M costs, have not been finalized. They expect to  estimate O&M costs after the project is designed. However, for purposes of  our report, Kennedy Center officials used current O&M costs and O&M  cost data obtained from an existing survey of six museums in Washington,  D.C., to estimate that O&M costs for the proposed project could range from  $15 to $20 per gross square foot of space, in current dollars. Using a slightly  different set of assumptions, we estimated O&M costs for the proposed  project could be $28 per gross square foot of space.
O&M costs are usually estimated on the basis of cost per square foot; if the  size of the project changes, the O&M estimate is easily adjusted. O&M rates  also vary by type of space because different types of space have different  maintenance needs. For example, cleaning and maintaining private office  space is generally less expensive than cleaning and maintaining space open  to the public that gets more traffic and would require items such as  carpeting to be replaced more often. Building industry data is available for  the average O&M cost for office space. However, the current plaza project  plan indicates that a combination of office, museum quality exhibition  space, and rehearsal space will be included in the proposed buildings.  Given the combination of the different types of space in the proposed  buildings, we estimated potential O&M costs per square foot for the  proposed project on the basis of (1) O&M costs for the current Kennedy  Center building, (2) a 2002 museum benchmarking survey of facility  management practices, and (3) Kennedy Center officials’ estimates. Using  these sources, estimates for the potential O&M costs of the buildings were  developed as follows:  Kennedy Center officials determined that the minimum potential rate  for O&M would be based on the rate for the current building. The Center  currently pays about $15 a gross square foot for O&M, based on the size  of the current facility (1.1 million gross square feet).
Kennedy Center officials provided O&M data for six Washington, D.C.,  museums based on a 2002 museum benchmarking survey of facility  management practices conducted by Facility Management Services Ltd.,  a consulting practice specializing in facility management. The survey  obtained information on the costs per square foot of space for five  categories of O&M services—janitorial, utilities, building maintenance,  exterior grounds maintenance, and building security—for each of the  six museums. The O&M costs per square foot of space for each of these  categories varied widely among the museums. For example, building  maintenance costs ranged from $3.38 to $22.88 per square foot of space.  Building maintenance costs can vary depending on the type of building  materials used to construct the building and the type of equipment  inside the building. Similarly, building security costs ranged from $2.66  to $23.43 per square foot of space. Factors that could affect building  security costs include the value of the museum’s contents (e.g., fine art)  and the location of the facility. Because the proposed new plaza  buildings are still in the early planning phase and many factors,  including the size of the proposed buildings and the types of building  materials used, could change before designs are finalized, we estimated  the potential O&M rate for the proposed buildings by averaging the  aggregate O&M costs for the six museums. This resulted in an O&M rate  of $28 per gross square foot.
Kennedy Center officials also estimated the potential O&M rate for the  proposed buildings using the museum data described above, and  adjusted the data based on such factors as the size of the other  museums relative to the proposed new buildings and plaza, estimates  from the Kennedy Center’s current janitorial provider, and the difference  in security levels needed at the two proposed buildings. In addition,  Kennedy Center officials discounted the information from the museums  with the highest and lowest O&M costs and projected O&M costs on the  basis of data from the other four museums. As a result, Kennedy Center  officials estimated that the average O&M rate for the two buildings  could be $20 per gross square foot.
On the basis of the potential O&M rates—$15, $20, and $28 per gross square  foot—and the current proposed size of the two new buildings—a total of  about 402,000 gross square feet--we calculate that total O&M for the new  plaza and buildings could range from $6 million to $11 million annually, in  current dollars.
section_title: Many Factors Could Substantially Affect Actual O&M Costs
paragraphs: The plaza and buildings project is in the early stages of the planning phase,  and many factors could affect the actual O&M costs. Some of the factors  that will affect O&M costs are within the control of the Kennedy Center,  and others are not.
Examples of factors within the Kennedy Center’s control that may affect  O&M costs are as follows:   The current plaza proposal includes a large fountain located above a  roadway that connects the Kennedy Center to the National Mall.  Fountains are expensive to maintain, and locating the fountain above a  roadway could present additional security risks from the traffic below,  which may increase security costs.
The size of the plaza and buildings has not yet been finalized. A  reduction or increase in the size of the plaza and buildings would have a  direct affect on O&M costs.
The selection of building materials, such as the current plan to use a  large amount of glass on the outside of the buildings, will affect O&M  costs. Buildings with a large amount of glass on the outside are more  expensive to cool due to the heat that is absorbed by the glass. In  addition, glass is more expensive to clean than other materials, such as  brick.
The plaza and buildings project is not expected to be occupied until 2013,  and economic factors that are not within the Kennedy Center’s control may  affect actual O&M costs. For example, utility and labor rates have generally  increased at a higher rate than the rate of inflation. It is difficult to  anticipate these rates so far in the future. Furthermore, the actual O&M  costs may not be known until the buildings are in operation for at least one  annual cycle of using the plaza and for heating and cooling the new  buildings. At the end of that cycle, the Kennedy Center’s appropriations  request should be based on the actual O&M costs it incurred.
As discussed earlier in this report, Congress currently funds Kennedy  Center capital improvement projects not related to performances. Given  the current precedent of providing funding for capital improvement  projects at the Center, Congress may also be expected to provide additional  funds in the future for capital improvement costs associated with the plaza  project.
section_title: Conclusions
paragraphs: The requirement to develop and annually update a Comprehensive Building  Plan was intended to help improve management of the Kennedy Center’s  capital projects and, over the long term, help reduce the public costs of  operating and maintaining the facility. The current plan anticipated that  projects addressing life safety and accessibility issues—needed to meet  current codes—would be completed by the end of fiscal year 2008.  However, it is unlikely the Kennedy Center’s Building Plan will be fully  implemented by 2008, including life safety projects in some areas. This is  due, in part, to changes in the sequence of its planned projects.  Furthermore, the current Building Plan has not been updated since  December 2002, and it does not provide individual project budgets or  prioritize capital projects; thus, it is unclear which projects might be  delayed or not implemented due to budget constraints. It is also not  possible to determine from the Building Plan if individual projects are  completed within project budget estimates. Including this information in its  annual Building Plan, as well as the progress that has been made in  renovating the Center and in meeting life safety and accessibility codes,  would make the Kennedy Center’s use of federal funds to carry out its  capital renovations more transparent and make the Kennedy Center more  accountable for the use of federal funds. This information could also help  the Kennedy Center support its request for federal funding and  communicate more clearly the potential impact of federal funding  decisions on the day-to-day operations of the Kennedy Center facility.
section_title: Recommendation
paragraphs: To help congressional decision makers oversee the capital projects at the  Kennedy Center and make funding decisions, we recommend that the  President of the Kennedy Center, in conjunction with the Chairman of the  Board of Trustees, annually update the comprehensive building plan, as  required, and include (1) the prioritization of projects, (2) project status,  and (3) updated budget information for planned and ongoing projects.
section_title: Agency Comments
paragraphs: We provided a draft copy of this report to the President of the Kennedy  Center. On August 18, 2004, the Kennedy Center President provided us with  written comments on behalf of the trustees and staff (see app. III). The  President agreed with our recommendation and stated that Kennedy  Center staff will plan to implement it immediately. Kennedy Center officials  also provided technical comments that have been incorporated throughout  the report, as appropriate.
The letter also emphasized that the Comprehensive Building Plan is  primarily a management tool and that other reports are the vehicles for  keeping Congress informed of the Center’s progress in its renovation  program. As part of our work, we reviewed the reports to the Operations  Committee and a monthly report to OMB. While some of the information  we are recommending be included in the Comprehensive Building Plan is  provided in these reports, other recommended project information is not.  For example, neither report provides information on project prioritization  or projects planned for the future. The project information that is provided  is not presented in a format that allows stakeholders to easily track the  overall progress of the Kennedy Center renovations or specific capital  projects from the building plan. It also appears that this information is not  being conveyed to all congressional stakeholders. We believe that having  project specific information available in one document that is provided to  the stakeholders annually, as described in our recommendation, will help  congressional decision makers and other stakeholders oversee the capital  projects at the Kennedy Center.
In addition, the letter did not agree with how we counted the projects  identified in the Comprehensive Building Plan. However, it stated that the  Comprehensive Building Plan has not been consistent in how it has  identified projects and that the most recent plan lists design and  implementation as two separate projects, while the earlier plans listed  them as one project. As we noted in our report, the Comprehensive  Building Plan does not clearly explain how projects are restructured or  reported in different updates. Since our objective was to compare the  actual projects undertaken with those reported in the Comprehensive  Building Plan, we have identified and numbered the projects as listed in the  plan and its updates to the plan. We understand the Kennedy Center’s  concern that how the projects are counted can change the reported  percentage of projects completed. Thus, we have deleted the reference to  the percentage of projects completed as an indication of the Kennedy  Center’s progress in implementing the Comprehensive Building Plan and  only report actual numbers of projects. We believe that if the Kennedy  Center implements our recommendation and provides more clear project  information, this type of analysis should be possible in the future.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 5 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Chairman of the Kennedy Center Board of  Trustees, and the President of the Kennedy Center. We will also make  copies available to others on request. In addition, the report will be  available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff has any questions, please contact me on (202) 512-2834  or at guerrerop@gao.gov. See appendix IV for a list of the major  contributors to this report.
section_title: Scope and Methodology
paragraphs: To determine the amount of federal appropriations the John F. Kennedy  Center for the Performing Arts (Center) requested and received for capital  projects for fiscal years 1995 to 2004, we reviewed the Kennedy Center’s  annual budget justification to Congress and Comprehensive Building Plan  and its updates; federal authorization and appropriation laws; and the  Kennedy Center’s audited financial statements. The Kennedy Center’s  budget justifications to Congress contain the Kennedy Center’s request for  federal funding for its capital repairs and rehabilitation. We compared the  amount the Kennedy Center requested with the actual appropriations the  Kennedy Center received from fiscal year 1995 through 2004, taking into  account rescissions to budget authority. We also compared the amounts of  the appropriations identified in the law with the amounts identified in the  Kennedy Center’s audited financial statements and verified rescission  amounts with Kennedy Center officials. Finally, we relied on the Kennedy  Center’s 2002 Comprehensive Building Plan to determine the amount of  federal appropriations the Center expects to request through fiscal year  2008. We also reviewed the budget justifications and Building Plans to  determine why changes were made to the Kennedy Center’s funding  request.
To determine the status of the Kennedy Center’s Comprehensive Building  Plan and its updates, we reviewed the initial 1995 Comprehensive Building  Plan and subsequent updates to the plan. We developed a list of capital  projects the Kennedy Center reported it was planning to complete. We  discussed with Kennedy Center officials the project status and cost  information for these projects and other projects that it had completed  with federal funds appropriated for capital projects since fiscal year 1995.  We reviewed the Kennedy Center’s annual financial statements and  supporting capital project schedules. We determined that the information  provided for project costs appeared reasonable based on the annual capital  expenditures and capital projects in progress listed in the financial  statements. We toured the Kennedy Center and visually saw many of the  projects listed in the Building Plan. We also interviewed the Kennedy  Center’s external auditor to determine what testing was performed on  internal controls over federal expenditures. Thus, we determined that  project status and cost data were sufficiently reliable for the purpose of our  review. Finally, we compared the information the Kennedy Center provided  on the status of the capital projects in the Building Plan and its updates and  capital appropriations received since fiscal year 1995 to evaluate the  likelihood that the plan would be fully implemented as planned by the end  of fiscal year 2008. We did not evaluate whether individual capital projects  were completed within their original budgets or on schedule.
To determine the potential impact of the Center’s proposed plaza project on  the need for future federal funds, we calculated the potential operations  and maintenance (O&M) costs based on data from a survey of museum  facility management practices and the Kennedy Center’s projected O&M  rates. Kennedy Center officials provided data for five categories of O&M  expenses for six Washington, D.C., museums based on a 2002 museum  benchmarking survey of facility management practices conducted by  Facility Management Services Ltd. Since one of the buildings in the  proposed plaza project will contain space that the Center officials said  would be maintained at the same level as a museum, we agreed that it was  appropriate to use museums in Washington, D.C., to estimate the potential  O&M costs. We estimated the potential O&M rate for the proposed plaza  project by averaging the aggregate O&M costs for the six museums. We  used the average O&M costs to develop our estimate because the proposed  plaza project is still in the early planning phase and many factors, including  the size of the buildings, could change before designs are finalized. The  Kennedy Center officials’ projections were based on its current O&M costs  and the O&M cost data for six museums in Washington, D.C., described  above. Kennedy Center officials believe that the new buildings will cost at  least as much to maintain and operate per square foot as the current  Center. They could not identify any category of O&M expenses they  believed would be less expensive to operate than the current building. The  Center officials said they disregarded the information from the museums  with the highest and lowest O&M costs and projected O&M costs on the  basis of data from the other four museums. According to the officials, they  adjusted the rates for the different categories that make up the O&M costs,  based on a number of factors, such as the size of the other museums  relative to the proposed new plaza project. For example, the Center  officials said they increased the expected cost of grounds maintenance  over the other museums because the proposed plaza project includes a  large fountain, which will be expensive to maintain. In addition, because  the plaza will be suspended over a roadway, all of the plants will have to be  in containers, which will also increase operations and maintenance costs.  Since there are a wide variety of types of proposed space in the buildings,  ranging from museum space to rehearsal rooms, the Kennedy Center  officials said they averaged rates based on the different types of space. We  independently researched building industry groups’ rates, including the  Building Owners and Managers Association and the International Facility  Management Association, but did not identify any O&M rates that would  have been appropriate to use for the type of space planned for the  proposed plaza buildings. We discussed the methodology used in  conducting the museum survey with Facility Management Services Ltd and  discussed the measures incorporated into the survey to maximize accuracy  of the data. We determined that the data on O&M costs for the six  Washington, D.C., area museums is reliable for purposes of this report and  that the Kennedy Center’s estimated rates were rational given the currently  available information.
We conducted our work from January 2004 through July 2004 in  accordance with generally accepted government auditing standards.
section_title: Kennedy Center Capital Projects
paragraphs: The following tables show the cost or expected cost of the Kennedy  Center’s capital projects as identified in its Comprehensive Building Plan  and its updates. The tables show those projects that are completed,  ongoing, or planned for future years, and those that have not been  implemented or have been postponed.
section_title: Comments from the John F. Kennedy Center for the Performing Arts
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Omar Beyah, Maria Edelstein,  Brandon Haller, Nancy Lueke, Julie Phillips, and Susan Michal-Smith made  significant contributions to this report.
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