District of Columbia: Status of the New Convention Center Project (Letter
Report, 08/30/2000, GAO/AIMD-00-262).

Pursuant to a congressional request, GAO reviewed the status of the new
Washington Convention Center project, focusing on: (1) changes in the
Washington Convention Center Authority's (WCCA) estimated project costs
and financing plan since GAO's last report; and (2) actual expenditures
and collection of dedicated taxes.

GAO noted that: (1) while project costs continue to rise, construction
at the new convention center site is still scheduled to meet the
estimated completion date of March 2003, and WCCA's April 30, 2000,
estimated project costs are within the projected funding level stated in
its financing plan; (2) according to information provided by WCCA
officials, total estimated project costs increased $22.9 million (2.8
percent) from $791.1 million to $814 million from June 30, 1999, to
April 30, 2000; (3) the net changes include a $17.4 million increase in
total estimated construction costs, a $25.1 million increase in
estimated other costs, a $.3 million increase in additions to WCCA's
project budget, and a $19.9 million cost savings in financing-related
costs; (4) WCCA's records indicated that about $162.5 million had been
disbursed on the project with $404 million under contract as of April
30, 2000; (5) from June 30, 1999, through April 30, 2000, WCCA's
estimated total funding from sources listed in its financing plan
increased by $11.2 million; (6) with the $22.9 million increase in
estimated project costs, the excess of total estimated funds over
estimated project costs has been reduced to $8.3 million; (7) the
increase in WCCA's financing plan included more than $6 million of
additional committed federal grants and another $4.9 million of
administrative costs funded by WCCA's operating budget; (8) however,
WCCA's contingency (reserve funds) may be reduced if: (a) vendor
contracts do not fund the $10 million cost of certain equipment; or (b)
the $10 million included in the District of Columbia's capital budget
request for fiscal year (FY) 2001 is not approved; (9) WCCA's
contingency can absorb the $20 million if the capital budget funds and
equipment financing do not materialize; and (10) WCCA's records
indicated that $40.5 million of dedicated taxes were collected for the
first 9 months of FY 2000, which on an annualized basis is slightly
higher than the $51.8 million assumed in the District's Fiscal Year 2001
Proposed Operating Budget and Financial Plan.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-00-262
     TITLE:  District of Columbia: Status of the New Convention Center
	     Project
      DATE:  08/30/2000
   SUBJECT:  Convention facilities
	     Municipal taxes
	     Cost analysis
	     Facility construction
	     Construction costs
	     Future budget projections
	     Municipal budgets
	     Financial management
IDENTIFIER:  District of Columbia

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GAO/AIMD-00-262

Appendix I: Status of Prior Year's Recommendations

18

Appendix II: Comments From the District of Columbia

19

Appendix III: Comments From the Washington Convention Center Authority

20

Table 1: Comparison of WCCA's Unaudited Estimated Costs
for the New Convention Center as of June 30, 1999,
and April 30, 2000 10

Table 2: Comparison of WCCA's June 1999 and April 2000
Unaudited Financing Plans 13

Table 3: Status of Recommendations Contained in District of
Columbia: Status of the New Convention Center
Project (GAO/AIMD-99-258) 18

Accounting and Information
Management Division

B-285838

August 30, 2000

The Honorable Thomas M. Davis, III
Chairman, Subcommittee on the
District of Columbia
Committee on Government Reform
House of Representatives

Dear Mr. Chairman:

You requested that we provide periodic status reports on the construction of
the new Convention Center project. When we last reported to you on September
28, 1999,1 construction at the new convention center site was underway and
the guaranteed maximum price (GMP) construction contract was being
renegotiated between the Washington Convention Center Authority (WCCA) and
the construction manager (CM). This report highlights the status of the
convention center project, changes in WCCA's estimated project costs and
financing plan since our last report, and actual expenditures and collection
of dedicated taxes.

While project costs continue to rise, construction at the new convention
center site is still scheduled to meet the estimated completion date of
March 2003, and WCCA's April 30, 2000, estimated project costs are within
the projected funding level stated in its financing plan. According to
information provided by WCCA officials, total estimated project costs
increased $22.9 million (2.8 percent) from $791.1 million to $814 million
from June 30, 1999, to April 30, 2000. The net changes include a
$17.4 million increase in total estimated construction costs, a $25.1
million increase in estimated other costs, a $.3 million increase in
additions to WCCA's project budget, and a $19.9 million cost savings in
financing-related costs. WCCA's records indicated that about $162.5 million
had been disbursed on the project with $404 million under contract as of
April 30, 2000.

From June 30, 1999, through April 30, 2000, WCCA's estimated total funding
from sources listed in its financing plan increased by $11.2 million. With
the $22.9 million increase in estimated project costs, the excess of total
estimated funds over estimated project costs has been reduced to
$8.3 million. The increase in WCCA's financing plan included more than
$6 million of additional committed federal grants and another $4.9 million
of administrative costs funded by WCCA's operating budget. However, WCCA's
contingency (reserve funds) may be reduced if (1) vendor contracts do not
fund the $10 million cost of certain equipment or (2) the $10 million
included in the District of Columbia's capital budget request for fiscal
year 2001 is not approved. WCCA's contingency can absorb the
$20 million if the capital budget funds and equipment financing do not
materialize.

WCCA's records indicated that $40.5 million of dedicated taxes were
collected for the first 9 months of fiscal year 2000, which on an annualized
basis is slightly higher than the $51.8 million assumed in the District's
Fiscal Year 2001 Proposed Operating Budget and Financial Plan.

In our September 1999 report,2 we identified five issues related to the
District's lockbox operations. As of April 30, 2000, the District has
implemented corrective actions that appear sufficient to address all five
recommendations that we made to the District's Chief Financial Officer
(CFO). Appendix I lists our prior recommendations and the status of the
actions taken by the CFO to respond to them.

WCCA and the District, in general, agreed with this report's contents. The
District's Chief Financial Officer stated that they will continue to monitor
the Office of Tax and Revenue's operations to ensure continued compliance
with our recommendations.

The Washington Convention Center Authority Act of 1994 authorizes WCCA to
construct, maintain, and operate the new convention center as well as
maintain and operate the existing convention center.3 The WCCA Managing
Director/Development oversees the contract and the construction, which is
being performed by the CM. The construction of the new convention center is
ongoing at Mount Vernon Square.4

Plans for the new convention center call for a total of 2.3 million gross
square feet, including about 730,000 square feet of prime exhibit space.
This compares with 800,000 square feet for the existing convention center,
including 381,000 square feet of prime exhibit space. Based on the square
feet of prime exhibit space, the new convention center is projected to rank
sixth in the United States when completed. Its size is expected to make it
highly marketable far into the 21st century.

The new convention center is intended to allow the District to compete for
larger conventions and trade shows. A 1993 feasibility study by Deloitte &
Touche, commissioned by the local hospitality industry, stated that even
though the District is viewed as a desirable location, the existing
convention center is small and cannot handle the larger conventions and
trade shows.

To determine the status of the new convention center project and its
estimated costs and financing plan, we

ï¿½ held discussions with and obtained information from various officials of
WCCA and its representatives and the CM,

ï¿½ reviewed WCCA's and the CM's progress reports,

ï¿½ visited the construction site,

ï¿½ compared WCCA's April 30, 2000, unaudited cost estimates for the project
with the June 30, 1999, estimates that were included in our September 28,
1999, report to the Subcommittee, and

ï¿½ reviewed budget documents and held discussions with WCCA officials to
obtain reasons for variations from the previous estimates.

To review the dedicated tax collection procedures and ascertain whether the
proper amounts were calculated and transferred, we

ï¿½ reviewed financial records and lockbox agreements,

ï¿½ held discussions with officials of the District, WCCA, and the lockbox
bank,

ï¿½ compared the projections of the dedicated taxes for the period from July
1, 1999, through April 30, 2000, with actual collections reported for the
same period, and

ï¿½ reviewed WCCA's external auditors' fiscal year 1999 workpapers related to
their audit of the reported taxes collected and deposited for the convention
center project.

To determine that expenditures for the new convention center project were
valid, complete, and properly valued, we reviewed WCCA's external auditors'
workpapers for fiscal year 1999 and examined statistically selected
expenditures incurred for the period from April 1, 1999, through January 31,
2000.

We conducted our work from February 2000 through July 2000 in accordance
with generally accepted government auditing standards and considered the
results of our previous work, which were reported to you last year. We
requested comments on a draft of this report from the Chief Financial
Officer of the District of Columbia and the General Manager of WCCA or their
designees. The Chief Financial Officer of the District and the Chief
Financial Officer and Managing Director/Development of WCCA provided us with
written comments. These comments are discussed in the "District's Comments
and Our Evaluation" section and are reprinted in appendixes II and III,
respectively.

As of April 30, 2000, WCCA's records indicated that approximately
$162.5 million had been disbursed on the project. This includes $87.1
million in construction costs, $69.7 million in other costs, and $5.7
million in project administrative costs. As of April 30, 2000, WCCA had
obligated $404 million in contracts that were awarded and WCCA's
architectural and engineering team had issued fireproofing and doors, door
frames, and hardware bid packages. WCCA provided the following information
as of April 30, 2000, on the status of the site work:

ï¿½ Water and sewer utility relocation and slurry wall5 panel installation are
substantially complete. The CM is currently completing WCCA's punchlist6
items.

ï¿½ Excavation and contaminated soil removal is approximately 93 percent
complete with 1.3 million cubic yards of soil removed from the project. This
amount includes 550,000 tons of projected contaminated soil, of which
approximately 508,548 tons have actually been removed. No additional
contaminated soil has been found since April 2000.

ï¿½ Superstructure concrete work7 and foundation concrete work that needs to
be completed by the time the steel arrives on site is progressing on
schedule.

The critical path method (CPM) schedule illustrates the CM's plan and
identifies critical activities that must be completed in order for the
project to be finished within the GMP schedule. WCCA identified delays in
the processing of contracts and contract modifications that must be
addressed to ensure that the project's construction stays on schedule and
within budget. WCCA is awaiting the District of Columbia's Financial
Responsibility and Management Assistance Authority's approval of
approximately $18 million worth of construction contracts and the approval
of the awarded thermal energy provider agreement.8 Another critical activity
in the CPM schedule is the procurement of mechanical electrical and plumbing
(MEP) and building enclosure trades.9

The CPM schedule projects a potential 5-week delay in completing the
project. This delay is the result of the steel subcontractor requesting
additional time for WCCA's incorporation of unit price allowance work that
is currently in the subcontract. The subcontract contains unit price
allowances to cover changes resulting from finalizing design changes. The
subcontractor contended that the changes covered by the unit price allowance
work would increase the time duration of the contract. WCCA did not agree
with the additional time request because the allowance work was originally
included in (1) the CPM schedule, (2) the GMP, and (3) the CM's subcontract.
The CM, WCCA, and the steel subcontractor reevaluated the CPM schedule to
reach a solution that would be acceptable to everyone. In response to a
draft of this report, WCCA's Managing Director/Development stated that the
subcontractor has agreed to withdraw these time claims and that this
agreement will keep the project on schedule with the estimated completion
date of March 2003.

The metro station work is ongoing with the Washington Metropolitan Area
Transportation Authority (WMATA) overseeing the work using $25 million
appropriated by the Congress for that purpose. As of April 30, 2000, the
estimated cost of the metro station upgrade was approximately $30.1 million.
Of this amount, $28.2 million was reported as the metro station upgrade
project component of the "other costs" section and the other $1.9 million is
included in the additional estimated revisions project component not
included in the revised GMP agreement. Also, WMATA is in negotiations with a
subcontractor regarding the station entrance expansion contract. As of April
30, 2000, available funding for the metro station upgrade was $27 million,
including $2 million of interest earned on the federal funds. The
construction agreement specifies that WCCA is responsible for any costs in
excess of the available funds. As of April 2000, estimated costs exceeded
funds available for the metro station upgrade by $3.1 million. If actual
costs exceed the funds available, WCCA will have to offset any excess costs
by reallocating costs from other project components, reducing the project
contingency or reserved amounts, or using available funding sources.

As of April 2000, the original GMP was still in effect and under the terms
of the proposed revision to the GMP agreement, the GMP will be reset in
accordance with an agreed upon formula when 90 percent of the purchasing
activities have been completed.10 The proposed revision to the GMP agreement
would also incorporate the costs associated with Authority-approved and
pending change orders, and estimated revisions, as well as potential cost
decreases. The intent of the revised GMP agreement is to prevent future
claims or disputes between the CM and WCCA for those incorporated activities
that occurred from contract inception in August 1998 through December 1999.
The revised GMP agreement would also adjust the estimated cost of various
components of construction to reflect the actual cost of services provided
as of the date that purchasing was 90-percent complete.

On August 1, 2000, WCCA officials stated that once the GMP is revised, any
unallocated GMP costs will be combined into the newly established funded
owner's adjustment account (OAA) and buyout reserve and will increase the
CM's contingency funds within the GMP. The buyout reserve is an estimate of
the cost savings expected during construction. Once all of the construction
contracts have been let, the buyout reserve will be adjusted to reflect the
actual amount of money saved, if any. Any reserve that remains at the
completion of the construction will be shared between WCCA and the CM, with
WCCA getting 75 percent and the CM getting 25 percent. The newly established
OAA is for WCCA. If there are cost overruns or expansions in the project
scope, WCCA can use OAA to cover the shortfall. However, any cost savings
will increase the amount of OAA. The CM's contingency is for any unexpected
costs and is included within the GMP agreement.

From June 30, 1999, to April 30, 2000, estimated project costs increased by
a net amount of $22.9 million, to over $814 million. The construction and
other costs increased from $714 million to $756.8 million. The $42.8 million
increase included the $17.4 million in project construction costs that were
outside of the GMP, $25.1 million in other costs, and $.3 million in
additions to WCCA's project budget. Financing-related costs decreased from
$77.1 million to $57.2 million. The $19.9 million decrease resulted from the
use of the minimum balance requirements for the reserve funds (the actual
balance in the reserve accounts was $86.1 million)11 as per the bond
document instead of the higher amounts reported in the final pricing
information. In summary, offsetting the $42.8 million in construction cost
hikes against the projected lower financing costs ($19.9 million) shows a
net increase of $22.9 million since our September 1999 report.

Table 1 compares WCCA's cost estimates as of April 30, 2000, with its June
1999 estimates, which are presented in our September 28, 1999, report. The
last column of table 1 represents the difference in the estimated costs for
each project component and each project category and the total for the
project from June 30, 1999, through April 30, 2000. The project cost
components are (1) the GMP, which consists of the CM's construction costs,
(2) changes to the GMP amount and WCCA estimate of the cost of those
changes, which are the CM's construction costs outside of the GMP, (3)
WCCA's other costs, which are principally overhead except for utility
relocation and the metro station upgrade, (4) additions, which are
administrative costs for the project and equipment that are expected to be
funded by the vendor, and (5) financing costs related to the issuance of the
bond and the establishment of reserves in accordance with the bond.
Additional explanations of these estimates and the changes in the estimated
cost of project components appear after table 1.

       (Dollars in thousands)

         Project component           Estimate as  Estimate as    Increase
                                     of 6/30/1999 of 4/30/2000 (decrease)
 Guaranteed Maximum Price (GMP)      $500,600     $500,600    0
 Changes to GMP amount:
 Reserve for hazard materials
 removal (change order 1)            9,000        16,683      7,683
 Change orders                       473          1,895       1,422
 Subtotal changes to GMP amount      $9,473       $18,578     $9,105
 Subtotal GMP contract status        $510,073     $519,178    $9,105
 WCCA estimate of changes:
 Pending change orders               123          593         470
 Estimate revisions                  16,013       24,971      8,958
 Potential cost decreases            (15,558)     (16,657)    (1,099)
 Subtotal pending negotiation        $578         $8,907      $8,329
 Total WCCA-estimated construction
 costs                               $510,651     $528,085    $17,434
 Other costs:
 Land cost                           5,488        5,364       (124)
 Program management                  14,232       16,103      1,871
 Consulting and inspections          10,255       10,116      (139)
 Permits and fees                    1,799        1,649       (150)
 Environmental impact                1,550        1,550       0
 Legal                               5,177        6,188       1,011
 Insurance                           13,100       13,395      295
 Design fees                         39,748       43,035      3,287
 Site development                    200          200         0
 Fixtures/furnishings/equipment      22,305       22,305      0
 Other project costs                 14,497       15,195      698
 Portion of utilities relocation not
 included in building and site       10,000       7,200       (2,800)
 Metro station upgrade               21,972       28,208      6,236
 Project contingency                 14,026       28,924      14,898
 Subtotal other costs                $174,349     $199,432    $25,083
 Total WCCA project budget           $685,000     $727,517    $42,517
 Additions to WCCA project budget:
 Project administrative costs        5,000        9,942       4,942
 Vendor-provided equipment           24,000       19,350      (4,650)
 Total additions to WCCA budget      $29,000      $29,292     $292
 Total estimated construction costs  $714,000     $756,809    $42,809
 Financing-related costs:
 Bond issuance                       11,486       11,486      0
 Reserve funds                       65,633       45,769      (19,864)
 Subtotal financing-related costs    $77,119      $57,255     ($19,864)
 Total estimated project costs       $791,119     $814,064    $22,945

Source: WCCA records.

WCCA's total estimated construction costs increased by more than
$17 million from June 30, 1999, to April 30, 2000. WCCA changed its
estimates for the following construction costs of the CM that are outside of
the GMP.

ï¿½ Encountering more contaminated soil than anticipated increased the
estimate of hazardous material removal from $9 million to $16.6 million. The
projection of contaminated soil increased from about 300,000 tons to 550,000
tons, of which the actual amount removed as of April 30, 2000, was 508,548
tons.

ï¿½ The $9 million net increase in estimated revisions includes $2 million of
additional costs for the metro station upgrade, certain utility relocation
costs of $2.8 million, and food service equipment costs of $5 million that
were not included in the estimate as of June 30, 1999.

ï¿½ The $1.1 million decrease in the potential cost decreases represents
potential cost reductions to amounts originally estimated by WCCA.

WCCA also made a number of changes within the "other costs" category
totaling more than $25 million and increasing the total estimated "other
costs" category from $174.3 million to $199.4 million. WCCA increased the
project contingency amount from $14 million to $28.9 million. The
replenishment of almost the entire original contingency amount is based on
WCCA receiving commitments for the federal grant revenue. Additional changes
to WCCA's other costs that were not covered by the revised GMP agreement
include the following.

ï¿½ The $1.87 million increase in program management costs is due to more
traffic management, land use counsel, and WCCA staff costs than anticipated;
the hiring of a consultant to prepare a food service Request for Proposal;
and the review of third party mechanical electrical and plumbing permits.

ï¿½ The $1 million increase in legal costs is attributable to additional time
spent on legal issues to help reduce the risk of lawsuits and the processing
of the thermal energy provider agreement.

ï¿½ The $3.3 million net increase in design fees is due to additional costs
being estimated for an architect's contract. Also, additional costs have
been estimated for architects to carry out bid negotiation and redesign work
associated with the revised design scope.12 Design fees for the metro
station upgrade have been reclassified from the design fees cost component
to the metro station upgrade project component.

ï¿½ The $2.8 million decrease in utility relocation costs is due to WCCA
reclassifying these costs and putting them in the estimated revisions
project component of the estimated construction costs category.

ï¿½ The $6.2 million increase in metro station upgrade costs is due to
increased costs for station improvements, new elevators and escalators, and
slurry wall work.

In the "additions to WCCA's project budget" category are changes to project
administrative costs and vendor-provided equipment project components that
had a net effect of almost zero.

ï¿½ The $4.9 million increase in project administrative costs is due to
marketing, public affairs, and job-specific training for Shaw residents that
were not originally anticipated. Also, additional rental and utility costs
were incurred when the development staff, who were originally scheduled to
be located at the construction site, moved to the Carnegie library.

ï¿½ The $4.7 million decrease in vendor-provided equipment is due to the
transfer of food service equipment costs to the estimated revisions project
component of the construction cost category. WCCA is currently finalizing
the Request for Proposal for food-service-related issues.

Uncertainties

As of April 30, 2000, the bond proceeds of $519.5 million provided 64
percent of the $814 million estimated project costs. However, the financing
plan covering the remaining 36 percent of estimated project costs contains
uncertainties, including the equipment anticipated to be provided by vendors
without initial cost and the $10 million in capital budget funds to be
provided by the District. These uncertainties are discussed after table 2,
which compares the April 30, 2000, financing plan with the plan as of June
30, 1999.13

       Dollars in millions

         Funding sources          Financing plan as of Financing plan as of
                                        6/1999               4/2000
 Senior lien bonds               $519.5               $519.5
 Cash for preconstruction
 activities                      37.2                 37.2
 Cash for reserves or
 construction                    77.3                 77.3
 Construction fund earnings      53.1                 53.1
 Excess revenues through 2002    40.0                 40.0
 Federal funds                   55.0                 61.0
 Vendor participation            24.0                 24.3
 Funds for administrative costs  5.0                  9.9
 Subtotal                        $291.6               $302.8
 Total funding sources           $811.1               $822.3
 Total funding required          $791.1               $814.0
 Estimated surplus               $20.0                $8.3
 Interest rate                   5.2%                 5.2%
 Term of debt                    30                   30
 Dedicated annual revenues to
 back bonds                      $50.3                $50.3
 Revenue growth assumption       3.6-4.5%             3.6-4.5%
 Maximum annual debt service     $36.1                $36.1

Source: WCCA records.

From June 30, 1999, to April 30, 2000, the financing sources increased
$11.2 million from $811.1 million to $822.3 million. The increase is the
result of receiving commitments for federal grant revenue and additional
reimbursable administrative costs. WCCA reflects the reimbursable
administrative costs of WCCA staff whose time is dedicated to the proposed
new convention center and other dedicated costs, such as marketing and
public affairs. These costs are paid by WCCA from the operating budget it
receives through dedicated tax collections for the existing center.
Committed federal funds in the April 2000 financing plan were the $25
million appropriated by the Congress in fiscal year 1999,
$1.78 million of interest earned on it, and $24 million in federal highway
funds.

WCCA expects to receive an additional $10 million from the District's
Capital Budget Fund. The $10 million is included in the District's Fiscal
Year 2001 Proposed Operating Budget and Financial Plan, which is currently
with the Congress awaiting approval.

WCCA anticipates that vendors will provide or fund the costs of a central
heating and cooling plant, telecommunications, food service, and audiovisual
equipment estimated at $24.3 million. WCCA has negotiated a 20-year lease
agreement with a vendor to provide central heating and cooling plant
equipment estimated at $14.3 million. The agreement is at the Authority
waiting to be approved. WCCA still needs to solicit proposals from vendors
to provide telecommunications, audiovisual, and food service.

If the $10 million from the District's capital budget is not approved by the
Congress and the President and the remaining $10 million in equipment costs
is not completely funded by vendors, then total estimated funding sources
would decrease from $822.3 million to $802.3 million. This would reduce the
estimated funding sources to $11.8 million less than the current $814
million estimated project costs. While the funds expected from the
District's capital budget and the remaining unexecuted vendor contracts,
with equipment at no cost to WCCA, are included in WCCA's financing plan and
may be realized, they are treated as a reduction to WCCA's project
contingency reserve until they are finalized.

Certain District sales and use taxes (dedicated taxes) are to be transferred
to WCCA to construct and operate the convention center and redeem the bonds.
These taxes consist of a 4.45-percent hotel sales tax and a 1-percent
restaurant tax and rental vehicle tax.14 These taxes, along with several
other District sales and use taxes that are reported on the same tax form,
are collected through what is referred to as a lockbox arrangement. Under
this arrangement, the relevant District businesses file their tax returns
along with their tax payments directly with a designated local bank (lockbox
bank). Any such payments received by the District are forwarded directly to
the lockbox bank without further processing. The bank then makes appropriate
distribution of the tax payments.

The purpose of the lockbox is to provide bondholders with assurance that
dedicated taxes for the convention center are provided to WCCA for use as
specified in the bond agreements. The lockbox arrangement for collecting
dedicated taxes for WCCA, as well as other taxes for the District, operates
pursuant to the provisions of a number of agreements among the parties
involved. For a more detailed discussion of the lockbox process, please
refer to our September 1999 report.15

All five of the recommendations concerning the lockbox operations made to
the District's Chief Financial Officer in our September 1999 report have
been implemented. Appendix 1 lists our prior recommendations and the actions
taken by the District to respond to them.

Based on the analytical procedures performed, lockbox collections are
slightly higher than projections. Actual dedicated tax collections were
$40.5 million for the first 9 months of fiscal year 2000. If collections
continue at the same rate, actual fiscal year 2000 collections would be
about $54.1 million. The District of Columbia's Fiscal Year 2001 Proposed
Operating Budget and Financial Plan estimates restaurant sales and hotel
sales tax at $51.8 million for fiscal year 2000. Therefore, dedicated tax
collections would exceed projections by $2.3 million.

With the current level of estimated funding sources from WCCA's financing
plan, there would be sufficient amounts to fund the estimated project costs
as of April 30, 2000. In addition, WCCA has excess funding sources and funds
in its reserve accounts plus sufficient contingency reserves to cover the
District's capital budget funds not approved or equipment not funded by
vendors. Once the Authority approves pending contracts and the GMP is
revised, WCCA expects to complete the construction of the new convention
center on schedule. The District has implemented corrective actions to
address the five lockbox-related findings identified in our September 1999
report.

WCCA and District officials generally agreed with the contents of our
report. They also provided technical comments, which we have incorporated as
appropriate. The District's Chief Financial Officer stated that the Office
of Tax and Revenue has implemented the five recommendations and that his
office will continue to monitor operations to ensure continued compliance
with our recommendations. In addition, WCCA provided explanations of events
that occurred subsequent to our review and provided a more recent status of
issues that are included in this report.

We are sending copies of this report to Senator Robert Byrd, Senator Richard
J. Durbin, Senator Kay Bailey Hutchison, Senator Joseph I. Lieberman,
Senator Ted Stevens, Senator Fred Thompson, Senator George V. Voinovich,
Representative Dan Burton, Representative Ernest J. Istook, Jr.,
Representative James P. Moran, Delegate Eleanor Holmes Norton,
Representative David R. Obey, Representative Henry Waxman, and
Representative C. W. (Bill) Young in their capacities as Chair or Ranking
Minority Member of Senate and House Committees and Subcommittees. Copies
will be made available to others upon request.

If you have any questions regarding this report, please contact me at (202)
512-4476 or by e-mail at [email protected] or Steven R. Haughton,
Assistant Director, at (202) 512-5999 or by e-mail at
[email protected]. Key contributors to this assignment were Arkelga L.
Braxton and Jamie Sullivan.

Sincerely yours,

Gloria L. Jarmon
Director, Health, Education, and Human Services
Accounting and Financial Management Issues

Status of Prior Year's Recommendations

                                                        Did the District
    GAO recommendation         Action taken             respond to GAO's
                                                        recommendation?
                          Effective July 1999,
                          the District
                          discontinued processing
 Restrict further         transfers out of the
 transfers out of the     exceptions account to
 exceptions account on thethe District on the       Yes
 basis of estimates.      basis of estimates. All
                          transfers out of the
                          exceptions account to
                          the District are based
                          on calculated amounts.
                          The Office of Tax and
                          Revenue (OTR) computed
                          the actual amounts due
                          to the District and
 Determine actual amounts compared this number
 due to the District and  with the estimated
 make appropriate         transfers received by
 adjustments to the       the District as of June   Yes
 estimated amounts        1999 when the final
 transferred from the     estimated transfer was
 exceptions account.      made. The difference
                          was an overpayment that
                          was adjusted with a
                          subsequent transfer to
                          the District.
                          OTR calculated a
                          settlement of the
                          remaining older amounts
 Resolve the remaining    in the exceptions
 older amounts in the     account as of June 30,
 exceptions account and   1999. The District's
 make appropriate         and WCCA's share of the   Yes
 transfers to the Districtremaining older amounts
 and WCCA.                was calculated and the
                          transfers were made out
                          of the exceptions
                          account to the District
                          and WCCA.
                          Effective July 1999,
                          OTR calculates amounts
                          owed to both WCCA and
                          the District monthly
                          and submits the wire
 Establish and enforce    transfers to the Office
 procedures for clearing  of Financial Operations
 the exceptions account   and Systems (OFOS)
 and transferring funds tomonthly for approval.     Yes
 the appropriate accounts Once OFOS approves the
 monthly.                 wire transfers, it
                          submits the wire
                          transfers to the Office
                          of Finance and Treasury
                          to initiate the
                          payment.
                          OTR calculated the
                          interest earned on the
                          funds in the exceptions
 Determine the interest   account from inception
 income on the exceptions through June 1999.
 account to be allocated  WCCA's and the
 to the District and WCCA,District's share of the
 make appropriate         interest was calculated
 transfers of the interestand transferred out of    Yes
 previously earned, and   the exceptions account.
 make future transfers of Also, the interest
 interest no less often   earned and funds
 than monthly.            unidentified by tax
                          rate are allocated to
                          WCCA and the District
                          on a quarterly basis.

Comments From the District of Columbia

Comments From the Washington Convention Center Authority

The following is GAO's comment on the Washington Convention Center
Authority's letter dated August 7, 2000.

1. These reflect subsequent events and therefore no change to the report is
necessary.

(916334)

Table 1: Comparison of WCCA's Unaudited Estimated Costs
for the New Convention Center as of June 30, 1999,
and April 30, 2000 10

Table 2: Comparison of WCCA's June 1999 and April 2000
Unaudited Financing Plans 13

Table 3: Status of Recommendations Contained in District of
Columbia: Status of the New Convention Center
Project (GAO/AIMD-99-258) 18
  

1. District of Columbia: Status of the New Convention Center Project
(GAO/AIMD-99-258 , September 28, 1999).

2. GAO/AIMD-99-258, September 28, 1999.

3. WCCA was created by the Washington Convention Center Authority Act of
1994, DC Law 10-188, Sept. 28, 1994, D.C. Reg. 5333,6823, D.C. Code Ann.
Secs. 9-801 through 9-833, (1981, 2000 Supp.)

4. Located in the blocks between 7th and 9th Streets, NW, and N Street and
Mount Vernon Place, NW.

5. The slurry wall is a concrete wall around the construction site that
extends below the excavation and is a barrier to underground water flowing
into the site.

6. The punchlist is a list generated by WCCA to identify items not yet
completed.

7. The superstructure concrete work is required to secure the steel.

8. Under the terms of this agreement, a vendor leases the central plant area
from WCCA and agrees to finance, design, construct, operate, and maintain
the central plant for the convention center and provide all hot and chilled
water for convention center operations.

9. Building enclosure trades are exterior items such as brick, pre-cast, and
curtain wall. Pre-cast is concrete used on the exterior of the building and
curtain wall is a glass structure supported by steel.

10. WCCA officials stated that the purchasing activities are approximately
75 to 80 percent completed and that they expect to be 90 percent completed
by late November 2000, at which time the GMP will be reset.

11. As of April 30, 2000, the actual balance in the Operating and Marketing
Reserve account was $58.3 million, the Revenue Stabilization Reserve account
balance was $12.3 million, and the Capital Renewal and Replacement Reserve
account balance was $15.5 million.

12. The design process has become more extensive due to value engineering
performed on the exterior masonry, pre-cast concrete, and metal panels. As
of April 30, 2000, construction documents have been completed for 18 trade
packages.

13. See GAO/AIMD-99-258 , September 28, 1999.

14. The taxes identified for WCCA make up a portion of the District's
14.5-percent hotel sales and use tax and 10-percent tax on restaurant meals,
alcoholic beverages consumed on premises, and rental vehicle charges.

15. See GAO/AIMD-99-258 , September 28, 1999.
*** End of document. ***