    Kennedy Center: Stronger Oversight of Fire Safety Issues,
    Construction Projects, and Financial Management Needed
    (06-APR-05, GAO-05-516T).

    Since fiscal year 1995, the John F. Kennedy Center for the
    Performing Arts (Kennedy Center) has received nearly $203 million
    in federal funds to complete capital projects and intends to
    request an additional $43 million in appropriations through
    fiscal year 2008. The Kennedy Center's Comprehensive Building
    Plan identifies these capital projects as necessary to renovate
    the Center and to meet or exceed relevant life safety and
    disabled access regulations. GAO was asked to examine (1) the
    progress the Center has made in completing key capital projects
    within estimated costs and the information it has communicated
    about this progress to key stakeholders; and (2) the status of
    the Center's plans to address fire life safety and disabled
    access requirements.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-05-516T
        ACCNO:   A20957
      TITLE:     Kennedy Center: Stronger Oversight of Fire Safety Issues,
    Construction Projects, and Financial Management Needed
         DATE:   04/06/2005
      SUBJECT:   Kennedy Center

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    GAO-05-516T

    United States Government Accountability Office

    GAO Testimony

    Before the Chairman, Subcommittee on Interior, Environment, and Related
    Agencies, Committee on Appropriations, House of Representatives

    For Release on Delivery

    Expected at 10:00 a.m. EDT KENNEDY CENTER

    Wednesday, April 6, 2005

     Stronger Oversight of Fire Safety Issues, Construction Projects, and Financial
                                   Management Needed

    Statement of Mark L. Goldstein, Director Physical Infrastructure Issues

    GAO-05-516T

    Highlights of GAO-05-516T, a testimony before the Subcommittee on
    Interior, Environment, and Related Agencies, Committee on Appropriations,
    House of Representatives.

    Since fiscal year 1995, the John F. Kennedy Center for the Performing Arts
    (Kennedy Center) has received nearly $203 million in federal funds to
    complete capital projects and intends to request an additional $43 million
    in appropriations through fiscal year 2008. The Kennedy Center's
    Comprehensive Building Plan identifies these capital projects as necessary
    to renovate the Center and to meet or exceed relevant life safety and
    disabled access regulations. GAO was asked to examine (1) the progress the
    Center has made in completing key capital projects within estimated costs
    and the information it has communicated about this progress to key
    stakeholders; and (2) the status of the Center's plans to address fire
    life safety and disabled access requirements.

    GAO makes recommendations to the Chairman of the Kennedy Center Board of
    Trustees including increasing oversight and better complying with fire
    safety code. The Kennedy Center agrees that more oversight would be
    useful, but it is unsure what the best mechanism would be for providing
    such oversight. Furthermore, the Kennedy Center believes that it is in
    compliance with fire code, but agrees to seek third party review of its
    approach in addressing certain fire code deficiencies.

    www.gao.gov/cgi-bin/getrpt?GAO-05-516T.

    To view the full product, including the scope and methodology, click on
    the link above. For more information, contact Mark L. Goldstein at (202)
    512-2834 or goldsteinm@gao.gov.

    April 2005

    KENNEDY CENTER

    Stronger Oversight of Fire Safety Issues, Construction Projects, and Financial
    Management Needed

    The Kennedy Center has achieved its goal of renovating the Opera House,
    Concert Hall, and plaza-level public spaces, and installed a building wide
    fire alarm system, but each of these projects exceeded its budget
    estimates, sometimes by substantial amounts. Project cost growth resulted
    from modifications made during the renovation process, due, in part, to
    the Kennedy Center's lack of knowledge of the building's site conditions.
    Unexpected site conditions and related challenges make renovation
    projects, like those undertaken by the Kennedy Center, difficult to
    complete. Modifications led to overtime charges paid to meet tight
    construction schedules. Also, the Center may have paid higher costs than
    necessary by negotiating the value of contract modifications after work
    was completed. The Kennedy Center lacks comprehensive policies and
    procedures related to capital improvements that could impact its ability
    to safeguard federal funds. Furthermore, our review of communication
    documents showed that Kennedy Center management did not always provide
    timely or accurate information on project cost growth and delays to its
    Board of Trustees or Congress.

    Cost Over Initial Budgets for Selected Kennedy Center Projects

    Projects

    Concert Hall renovation

    Opera House renovation

    50%Fire alarm system increase

    Public space

    modifications

    0 1020304050

    Percentage cost increase

    Source: GAO analysis of Kennedy Center data.

    The Kennedy Center has worked to address fire life safety deficiencies,
    and improvements are ongoing, but after requesting and obtaining funds
    from Congress the Kennedy Center decided against its plan to meet fire
    safety code requirements by installing sprinklers and smoke evacuation
    systems in the Grand Foyer, the Hall of States, and the Hall of Nations.
    Furthermore, the Kennedy Center did not have its decisions independently
    reviewed nor did it clearly inform its Board or Congress that it was not
    spending the funds as planned. Two additional areas of concern are (1)
    doors in critical areas do not provide adequate protection from fire, and
    (2) the Millennium Stages have exit deficiencies and lack sprinkler and
    smoke evacuation systems required by code. The Kennedy Center has complied
    with disabled access

    requirements in renovated areas of the Center.

    Mr. Chairman, Ranking Minority Member, and Members of the Subcommittee:

    Thank you for the opportunity to testify before you today on our work
    related to the management and oversight of capital projects at the John F.
    Kennedy Center for the Performing Arts (Kennedy Center). Since fiscal year
    1995, the Kennedy Center has received almost $203 million1 in federal
    funds for capital repairs and alterations included in its comprehensive
    building plans (CBP). Kennedy Center officials said that additional
    appropriations totaling $43 million through fiscal year 2008 are needed to
    complete the planned projects. For more than a decade, we have identified
    shortcomings in, and made recommendations to improve, the Kennedy Center's
    construction, planning, and management processes. In the 1990s, we
    reported that the Kennedy Center did not have sufficient staff capability
    to effectively manage its planned capital improvements.2 In 2003, we
    reported that the Kennedy Center needed to strengthen the management and
    oversight of large construction projects, such as the garage expansion and
    renovation project.3 In 2004, we reported that the Kennedy Center had
    implemented most of the projects in its CBP but would likely not complete
    its plan by 2008, given the number and size of the renovation projects
    that remained to be done, anticipated future appropriations, and the
    likelihood that project budgets may increase as designs are completed.4

    Today my testimony will discuss (1) the progress the Kennedy Center has
    made in completing key capital projects-such as the renovation of the
    Opera House, Concert Hall, and its plaza-level public spaces, and
    installation of a building wide fire alarm system-within estimated costs
    and how it has communicated the information about this progress to its

    1This includes a $35.3 million beginning balance, the value of transfers
    from the National Park Service and Smithsonian Institution, and
    approximately $167.6 million in federal appropriations.

    2GAO, Kennedy Center: Information on the Capital Improvement Program,
    GAO/GGD-93-46 (Washington, D.C.: February 1993) and GAO, Kennedy Center:
    Information on Facility Management Capability, GAO/GGD-98-56 (Washington,
    D.C.: March 25, 1998).

    3GAO, Kennedy Center: Improvements Needed to Strengthen the Management and
    Oversight of the Construction Process, GAO-03-823 (Washington, D.C.: Sept.
    5, 2003).

    4GAO, Kennedy Center: More Information on Project Status and Budgets
    Needed to Understand the Impact of Future Funding Decisions, GAO-04-933
    (Washington, D.C.: Sept. 15, 2004).

    Board of Trustees and Congress, and (2) the Kennedy Center's status with
    regard to fire life safety and disabled access requirements. My statement
    is based on our report that we will issue later this month. Our report
    will include additional information on best practices for project
    management that could help the Kennedy Center improve its capital projects
    planning and management process. In summary, we found the following:

    o  	Although the Kennedy Center has achieved its goal of renovating the
    Opera House, Concert Hall, and its plaza-level public spaces, and
    installed a building wide fire alarm system, each of these projects
    exceeded its budget estimates by amounts ranging from 13 to 50 percent,
    and it does not appear that Kennedy Center officials always timely or
    accurately communicated the cost growth and delays to its Board of
    Trustees or Congress. Cost growth in these projects resulted from
    unanticipated modifications made during the renovation process and
    condensed schedules. Such modifications were necessary, in part, because
    the Kennedy Center lacked knowledge of the building's site conditions. The
    project modifications, in turn, led to overtime charges paid to meet tight
    construction schedules. For example, the Kennedy Center paid $560,000 in
    overtime charges during the Opera House renovation to complete the work on
    schedule. The Kennedy Center also may have paid higher costs to
    contractors than necessary by routinely negotiating the value of project
    modifications after contractors had already completed the work. In
    addition, the absence of comprehensive policies and procedures across the
    project management, contracting, and finance departments has impeded
    effective project management and diminished the oversight of federal
    funds. Finally, our review of the communications documentation showed that
    the Kennedy Center management did not always timely or accurately
    communicate cost overruns and schedule changes to its Board of Trustees or
    Congress. For example, the Concert Hall renovation resulted in cost growth
    of $6.2 million, or 41 percent, over the original budget; however, Kennedy
    Center officials repeatedly testified before Congress, several years after
    renovations were complete, that the project was completed within budget
    estimates.

    o  	The Kennedy Center does not appear to meet some fire safety code
    requirements but has complied with, and exceeded in some instances,
    disabled access requirements in renovated areas of the Center. After
    requesting and obtaining funds from Congress to address fire code
    deficiencies, such as the need for fire suppression systems, the Kennedy
    Center decided against its plan to meet fire safety code requirements by
    installing sprinklers and smoke evacuation systems in the Grand Foyer, the
    Hall of States, and the Hall of Nations. The Kennedy Center reversed its
    decision to install these systems without having its decision

    independently reviewed or clearly informing its Board or Congress that it

    was not spending the funds as planned.5 To identify and mitigate fire
    protection issues concerning exit paths through the Grand Foyer, the Hall
    of States, and the Hall of Nations, the Kennedy Center commissioned and
    used the results of a fire-modeling study. The Kennedy Center has not
    implemented some of the study's recommendations, nor did it seek peer
    review of the study even though the fire code provides for third party
    validation and support for a study's assumptions and conditions.
    Thirdparty validation is particularly important in this instance because
    the Kennedy Center's fire safety decisions are not subject to external
    review. In addition, we identified two deficiencies, based on fire code,
    that are of immediate concern. First, the doors in critical areas such as
    the fire pump room and the Fire Command Center do not provide adequate
    separation from fire as outlined in the fire safety code. Second,
    fire-safety related problems exist with the Millennium Stages. The stages
    located at the ends of the Grand Foyer could pose exit problems in the
    event of fire (see fig. 8).6 Furthermore, the Millennium Stages do not
    have sprinkler and smoke control systems as required by fire code.
    Officials from the Kennedy Center said that they believe that all fire
    safety code requirements are being met but agreed to add fire protective
    doors and document their key decisions. Regarding disabled access
    projects, we concluded that the Kennedy Center meets or exceeds the
    requirements outlined in the Americans with Disabilities Act7 (ADA) based
    on our independent expert's

    review. For example, disabled patrons can now access all tiers of the
    Concert Hall and Opera House and ushers receive special training for
    assisting disabled patrons.

    The Kennedy Center has begun to take steps to improve its management of
    capital projects, such as the hiring of new staff, updating its CBP, and
    drafting a policies and procedures manual. However, we were unable to

    5In accordance with fire code, the Kennedy Center conducted an egress and
    fire modeling study to determine if occupants could safely exit the
    building in the event of a fire. The modeling study predicted that patrons
    would be able to escape the Center safely in the event of a fire before
    conditions became untenable provided that the Kennedy Center took steps to
    minimize evacuation delays and limit storage of combustible materials. The
    study also recommended that the Kennedy Center install sprinklers in the
    Millennium Stages for added protection.

    6Fire code defines means of egress as a continuous and unobstructed way of
    travel from any point in a building to a public way consisting of three
    separate and distinct parts: (1) the exit access, (2) the exit, and (3)
    the exit discharge.

    742 U.S.C. S: 12101 et. seq.

    gauge the impact of some of these changes as they are relatively recent in
    nature or still in development.

    GAO makes recommendations to the Chairman of the Kennedy Center Board of
    Trustees including increasing oversight and better complying with fire
    safety code. The Kennedy Center agrees that more oversight would be
    useful, but it is unsure what the best mechanism would be for providing
    such oversight. Furthermore, the Kennedy Center believes that it is in
    compliance with fire code, but agrees to seek third party review of its
    approach in addressing certain fire code deficiencies.

    We conducted our review from August 2004 through March 2005 in accordance
    with generally accepted government auditing standards.

    Background 	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 plaza level, which is the
    primary focus for patrons and tourists, includes three main theaters, the
    Grand Foyer, the Hall of States, and the Hall of Nations. Access to other
    areas, such as the roof terrace level, is provided through the Grand
    Foyer, the Hall of States, and the Hall of Nations. Figure 1 provides a
    diagram of the Kennedy Center's plaza level.

    Figure 1: Kennedy Center's Plaza-Level Public Spaces and Theaters

    In 1994, legislation was enacted that gave the Kennedy Center's Board of
    Trustees sole responsibility for carrying out capital improvements at the
    Kennedy Center.8 One purpose of the legislation was to provide autonomy

    8The Kennedy Center's Board of Trustees currently consists of 23
    government positions, including congressional members, as well as 36
    general trustees appointed by the President of the United States. Each
    general trustee serves a term of 6 years.

    for the overall management of the Kennedy Center, including better control
    over its capital projects, and to renovate the Center. The legislation
    further required the Board of Trustees to develop and annually update a
    CBP.9

    In response to the 1994 legislation, the Center published its first CBP in
    1995 describing the goals of the renovation, including addressing
    deficiencies in fire life safety and disabled access codes, through
    actions such as installing sprinklers throughout the Center, replacing
    inefficient building systems, and improving visitor services. The law the
    Kennedy Center follows with regard to facility construction or alteration
    requires that the Center be in compliance with nationally recognized model
    building codes and other applicable nationally recognized fire safety
    codes to the maximum extent feasible.10 As in the case of other federal
    agencies, the Kennedy Center is the authority having jurisdiction for
    making a final determination on whether the Center is complying with fire
    safety code.11 The Kennedy Center's policy on building codes states that,
    where feasible, the Center will comply with the International Building
    Code (2003),12 International Fire Code (2003),13 and selected provisions
    of NFPA 101 (2003).14 In 1995, the Kennedy Center anticipated undertaking
    critical fire life safety projects by the end of fiscal year 1999.
    However, to minimize disruption to performances, the Kennedy Center
    changed its approach to making capital improvements. Rather than
    undertaking broad-scale projects that could disrupt the entire Center, the
    Kennedy Center chose to implement renovations incrementally while keeping
    the rest of the Center open and operating. For example, rather than
    installing a new sprinkler system for fire suppression 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

    920 U.S.C. S: 76j(a)(1)(F).

    1040 U.S.C. S: 3312.

    11For purposes of certain laws, the Kennedy Center is treated as a federal
    agency.

    12International Code Council, International Building Code 2003.

    13International Code Council, International Fire Code 2003.

    14National Fire Protection Association, Life Safety Code 101 (Quincy,
    Massachusetts: 2003).

    that could result in lost revenue. 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 is a bureau of the Smithsonian Institution. The John F.
    Kennedy Center Act Amendments of 1994 (Kennedy Center Act) designates the
    Kennedy Center as a "federal entity" for purposes of the Inspector General
    Act of 1978, as amended, (IG Act).15 The Kennedy Center Act states that
    only federally appropriated funds are subject to the requirements of a
    federal entity under the IG Act. The Kennedy Center Act authorizes the
    Smithsonian Institution's Office of the Inspector General (Smithsonian
    OIG) to audit and investigate activities of the Kennedy Center involving
    federally appropriated funds, on a reimbursable basis, if requested by the
    Kennedy Center Board of Trustees. To date, the Kennedy Center has not
    requested the Smithsonian OIG to conduct an audit or investigation of its
    activities.

    The Kennedy Center conducts capital projects primarily through three
    offices-Project Management, Contracts, and Finance. Figure 2 illustrates
    the organization of these three offices within the Kennedy Center. The
    Kennedy Center receives federal appropriations annually for capital repair
    and restoration to implement its CBP and for the operations, maintenance,
    and security of the facility. In fiscal year 2005, the Kennedy Center
    received approximately $16.1 million in federal funds for capital
    improvement projects, and $16.9 million for operations, maintenance, and
    security of the facility.16 The Kennedy Center receives appropriated funds
    to support its CBP as a lump sum and not on an individual project by
    project basis. In addition, the Kennedy Center's appropriated funds for
    capital projects remain available until expended. Federal appropriations
    represent less than half of the Kennedy Center's total revenue. The
    Kennedy Center generates the majority of its revenues from performances

    1520 U.S.C. S: 76l (d).

    16The Kennedy Center's appropriation for fiscal year 2005 is contained in
    the Consolidated Appropriations Act of 2005, P.L. 108-447, 118 Stat. 2809
    (2004). P.L. 108-447 appropriated to the Kennedy Center $16,334,000 for
    capital improvements and $17,152,000 for operations and maintenance. There
    are two rescissions in the 2005 appropriations act that reduced the final
    amount provided to the Kennedy Center for capital improvements and
    operations and maintenance. The first is an across-the-board rescission of
    0.594 percent for Interior and Other Related Agencies, which applied to
    the Kennedy Center. The second is an additional across-the-board
    rescission of 0.8 percent for most agencies, which also applied to the
    Kennedy Center.

    at the Center, contributions, and investments. Federal funds, not the
    Kennedy Center's private funds, are used for capital improvements in the
    CBP. Federal appropriations are not used for performance-related expenses.
    The Kennedy Center's total operating expenses in fiscal year 2003 were
    about $118 million.

        Figure 2: Kennedy Center Organization of Selected Positions and Offices

      Key Capital Projects Completed, but Costs Exceeded Budget Estimates and Were
      Not Always Reported Timely or Accurately

    The Kennedy Center has completed many renovation projects (see fig. 3),
    but each of the projects we reviewed exceeded its budget due to contract
    modifications that added work to projects. Many changes were necessary
    because the Kennedy Center did not have good knowledge of the building's
    site conditions. Additionally, the absence of comprehensive policies and
    procedures has impeded effective management of federal funds. Finally, the
    information on cost growth and delays has not always been timely or
    accurately communicated to the Kennedy Center Board of Trustees or
    Congress.

                 Figure 3: Scope of Key Kennedy Center Capital Projects

    Kennedy Center Has Completed Many Renovations, but Contract Modifications
    Increased Project Costs

    The Kennedy Center has completed renovations to the Opera House, Concert
    Hall, and its plaza-level public spaces and installed a building wide fire
    alarm system, but the actual costs of the projects we reviewed exceeded
    the original budgeted costs. Specifically, costs exceeded budget estimates
    by about 41 percent for the Concert Hall renovation, 21 percent for the
    Opera House renovation, 50 percent for the fire alarm system renovation,
    and 13 percent for the plaza-level public space renovations (see fig. 4).
    These findings are consistent with our finding, reported in 2003, that the
    costs of the Kennedy Center's garage expansion and site improvements
    projects greatly exceeded the estimates.17

    Figure 4: Budgeted and Actual Costs for Selected Kennedy Center Capital
    Projects

    Renovation projects like those undertaken by the Kennedy Center are
    difficult to complete due to associated challenges with refurbishing as
    opposed to new construction. For example, according to the Kennedy

    17GAO-03-823.

    Center, renovation projects are susceptible to cost increases stemming
    from unexpected site conditions. This is consistent with our finding that
    a primary cause of cost growth in the projects we evaluated were contract
    modifications resulting from the Kennedy Center's lack of knowledge of the
    building's existing conditions. The Kennedy Center lacked knowledge of
    site conditions because (1) it does not have as-built drawings18 that show
    how building components were originally constructed and (2) schedule and
    building conditions at times limited the Center's ability to conduct
    detailed investigations during project design stages. According to a
    Kennedy Center official, given the nature of construction, installed work
    often differs from what is indicated on the original architectural plans,
    sometimes in significant ways. Without accurate drawings, designers could
    not ascertain certain current building conditions, and inaccuracies were
    inadvertently built into project plans and designs.

    Architects and engineers additionally lacked sufficient access to the
    project sites during the design phase. According to Kennedy Center
    officials, because the Kennedy Center focused on maximizing its theaters'
    operating time, designers were at times limited in their ability to survey
    the project site and document its condition. This type of exploration
    often requires the removal of some portion of the existing finishes to see
    what is behind them. Because invasive surveys were not completed,
    designers did not identify utilities and structural components shielded
    behind walls, floors, and ceilings. In cases where the unforeseen
    conditions affected construction, contract modifications were needed.
    Kennedy Center officials said that they did not allow exploratory design
    work in order to preserve the building's aesthetics. Kennedy Center
    officials indicated that they are working to improve the design of future
    projects by using noninvasive exploratory methods, such as X-ray
    technology, to better ascertain site conditions.

    According to the Kennedy Center, about $1 million of the Concert Hall's
    contract modifications and $1.5 million of the Opera House's contract
    modifications were the result of actual conditions that differed from
    those shown on design drawings. In the Opera House renovation, the Kennedy
    Center attributed the following unexpected site conditions to absent
    asbuilt drawings and resulting in contract modifications: (1) the ceiling
    crawl space was not as large as the drawings indicated, (2) steel
    reinforcement

    18As-built or record drawings show the work as it was actually installed,
    which is often different from how it was designed to be installed or
    built.

    that was not shown on the drawings existed in the balconies, and (3) a
    large steel-reinforced concrete beam in the orchestra floor was not
    depicted on existing drawings. Figure 5 provides a description of the
    concrete beam and shows how it contributed to cost growth on the Opera
    House renovation project.

                    Figure 5: Opera House Unforeseen Site Condition

    In attempting to maintain its construction schedule while minimizing the
    impact on its performance schedules, the Kennedy Center incurred a
    considerable amount of overtime charges. As the Kennedy Center relies on
    proceeds from ticket sales, programs, and contributions, Center managers
    sought to limit the disruption to major performance venues, such as the
    Opera House and Concert Hall. In planning the Opera House renovation, for
    example, the Kennedy Center set a firm goal of completing work by December
    2003 to ensure that the work would be completed in time to host the annual
    Kennedy Center Honors.19 Over $560,000 of the $4 million cost growth for
    the Opera House renovation resulted from overtime pay to contractors
    completing the renovations.

    The Kennedy Center also may have paid contractors more than necessary
    because it routinely negotiated the value of project modifications after
    contractors had already completed the work. For example, contractors
    performed about $2.2 million worth of work in the Concert Hall renovation
    and about $2.1 million worth of work in the Opera House rehabilitation
    without negotiating the value of the modifications with the Kennedy Center
    beforehand. Kennedy Center officials said that this was necessary to
    maintain tight schedules. The practice of establishing cost after work has
    been completed is discouraged in federal contracting regulations. Our
    previous work has shown that contractors have limited incentive to control
    costs until firm prices are negotiated for contract changes, and the
    government does not have an opportunity to consider more efficient
    construction methods or management controls if work is completed before
    the price is established.20

    In an attempt to reduce risk to the Kennedy Center, it has entered into a
    contract for theater renovation work that shifts much of the project's
    risk to the contractor. Under this "construction manager at-risk"
    arrangement, a construction management contractor will be hired to
    participate in the design process and will then be responsible for hiring
    contractors to do the construction. The construction management contractor
    will be at risk from the standpoint of being responsible to the Kennedy
    Center for managing the construction according to the established cost,
    schedule,

    19Begun in 1978, the Kennedy Center Honors is an annual ceremony that
    recognizes artists with lifetime achievement awards. The ceremony also
    serves as a major fundraising event.

    20GAO, NASA Procurement: Challenges Remain in Implementing Improvement
    Reforms, GAO/NSIAD-94-179 (Washington, D.C.: Aug. 18, 1994).

    and scope. However, this method may not reduce costs because contractors
    will increase their price to cover the risk shifted to them.

    Lack of Clearly Designed, Comprehensive Policies and Procedures Undermined
    Effective Project Management

    While it was beyond the scope of this engagement to conduct a
    comprehensive financial review of the Kennedy Center's procurement
    process, we found some deficiencies in procurement operations for capital
    improvement projects. During a review of a limited selection of the
    Kennedy Center's capital expenditures, we found that the Center did not
    maintain complete and accurate financial records which could impact
    safeguarding of federal funds. These deficiencies can be attributed, in
    part, to the Center's lack of a comprehensive set of documented policies
    and procedures to guide the various activities related to the acquisition
    of goods and services for its capital improvements program. As a result,
    the Kennedy Center may not be able to properly account for or report
    financial transactions to Congress and other interested parties.

    According to the guidance for federal agencies21 contained in the Joint
    Financial Management Improvement Program's (JFMIP) Framework for Federal
    Financial Management Systems and Office of Management and Budget (OMB)
    Circular No. A-127, Financial Management Systems, effective financial
    management depends on appropriate control of financial transactions and
    timely recording of financial information in a manner that satisfies
    multiple users. Requirements for internal controls over financial
    operations can be found in both OMB Circular No. A-123,

    Management Accountability and Control, and GAO's Standards for Internal
    Controls in the Federal Government.22 Federal agencies are required to
    establish financial controls; ensure reliable and timely information is
    obtained and maintained; and produce accurate, consistent, and complete
    financial data to enable cost-effective mission achievement and risk
    mitigation. The Kennedy Center's policy is to rely on contractor invoices
    to establish the dates the services were performed and make specific
    reference to the invoices in its receipt certifications. Because the
    Center does not record the date or period that services were performed at
    the time of occurrence, it is unable to establish and maintain reliable up
    to date accounting records. This lack of real-time data hampers the
    Center's

    21The Kennedy Center is an independent establishment of the executive
    branch of government as defined in OMB Circular A-127 and, as such, is
    subject to OMB guidance regarding financial management and internal
    controls.

    22GAO/AIMD-00-21.3.1, Nov. 1999.

    ability to prepare reliable quarterly financial reports regarding the
    status of funds and budget execution and to manage project costs. When
    status reports are required, construction costs could be recognized before
    invoices are received by recording an estimate of costs incurred based on
    a percentage of completion of the projects that are in progress, or some
    other systematic process that approximates actual up to date costs.

    OMB guidance and GAO standards for internal controls state that agencies
    need to properly document their transactions. The documentation should be
    clear and complete and show sufficient information to adequately account
    for the disbursement. During our review of a selection of 224 Kennedy
    Center capital expenditures-dating from September 2000 to September
    2004-we found that 63 of the contractor invoices (28 percent) paid by the
    Center did not contain enough detailed information to support their
    accuracy and validity. Furthermore, without current and accurate
    information to substantiate payments, the Kennedy Center may be hampered
    in its ability to detect erroneous or improper payments. For example, we
    found a duplicate payment that may have been prevented if the Center had
    better information available.

    Of the invoices that lacked sufficient detail, nearly all were related to
    services the Center received from the U.S. Army Corps of Engineers. The
    Center's transactions with the U.S. Army Corps of Engineers are governed
    by the Economy Act (31 U.S.C. 1535 and 1536), which authorizes an agency
    acquiring goods or services from another agency to reimburse the
    performing agency only for its actual costs of providing the goods or
    services. The Kennedy Center did not have sufficient procedures in place
    to ensure that it was being charged for costs consistent with its Economy
    Act agreement. We found, for example, that invoices from the U.S. Army
    Corps of Engineers generally identified separate total amounts for the
    agreed-upon services (as billed by the Corps' contractors) and overhead
    and labor costs incurred by the Corps, but that the invoices did not
    provide any details regarding the basis for the claimed costs, such as
    overhead rates. We were unable to determine, from either the Corps
    invoices submitted to the Kennedy Center for reimbursement or the
    information accompanying them, whether the costs being claimed for work
    performed were for actual costs consistent with the Economy Act agreement.
    This lack of detail on invoices subjects the Kennedy Center to risk of
    paying the Corps amounts inconsistent with the Corps' actual costs, as
    agreed to.

    In response to a GAO recommendation,23 the Project Management Office
    initiated the development of a policy and procedure manual that is
    currently in draft form. The manual begins the process of outlining roles
    and responsibilities for the project management staff and defining
    standard operating procedures for managing projects. However, the Kennedy
    Center has not completed this manual, nor has it formalized its
    contractual and financial management policies and procedures. This makes
    it difficult for people in the different Kennedy Center departments to
    understand their role and requirements in the oversight of federal funds.
    In working to improve its management capabilities, the Kennedy Center
    hired a Contracts Chief in March 2003, and is seeking an additional
    contracting officer. Also, in March 2004 the Kennedy Center hired a
    Director of Capital Projects to lead the Project Management Office.

    The Kennedy Center Did Not Always Timely or Accurately Communicate Cost
    Growth and Schedule Delays to Its Board or Congress

    The Kennedy Center uses several communication methods, both internal and
    external to the organization, to convey information about its capital
    projects, and we found that the Center sometimes provided untimely or
    inaccurate information on projects. Figure 6 illustrates the main
    mechanisms the Kennedy Center uses to communicate information about
    project schedules, costs, and status to Congress, its Board of Trustees,
    and the public. The legislation that authorized the Kennedy Center Board
    of Trustees to carry out capital improvement projects required the Board
    to develop and annually update a CBP. However, the Kennedy Center has not
    consistently updated the CBP on an annual basis. The Kennedy Center
    provides budget justifications and receives federal funding annually for
    capital improvement projects based on its CBP, and testifies before
    various congressional committees when requested. According to the Kennedy
    Center, the Center's Board of Trustees oversees the President of the
    Kennedy Center on the overall management and direction of the Center.
    Within the Board of Trustees, the Operations Committee is responsible for
    ensuring the appropriate use of federal funds for capital projects and
    efficient management of the operations and maintenance of the Center. In
    doing that, it reviews plans for capital expenditures identified in the
    CBP and receives status reports on projects as they are planned and
    implemented.

    23GAO-03-823.

    Figure 6: Kennedy Center Communication Methods

    aMembers of Congress serve on the Kennedy Center Board of Trustees and the
    Operations Subcommittee.

    Our analysis of officially documented communication using these mechanisms
    showed certain inconsistencies in the information the Kennedy Center
    presented. For example, in its fiscal year 2001 budget request, which
    according to a Kennedy Center official was prepared in 1999, the Kennedy
    Center management reported that it planned to obligate $23.3 million for
    capital repairs. Operations Committee meetings held over the course of
    fiscal year 2001 reported revised obligation amounts ranging between $41.6
    and $44.4 million. The amount actually obligated was $36.4 million. While
    planned obligations can change over time, the reasons for these
    differences are not clear because the Kennedy Center did not include
    sufficient project-level budget information in its budget justifications
    to Congress. Rather, as we reported in September 2004, projects are
    grouped into broad budget categories, which do not include budget
    information for specific projects.24 As a result, it is difficult to
    understand or have stakeholders hold the Kennedy Center accountable for
    true project costs and schedules, compare the data presented through the
    various communications mechanisms, or determine if funds were used as
    intended.

    24GAO-04-933. Page 19 GAO-05-516T

    The following examples illustrate untimely and inaccurate communication on
    the projects we reviewed:

    o  	Concert Hall. Kennedy Center officials testified to Congress in 1999,
    2000, and 2001, that the Concert Hall rehabilitation-completed in 1997-was
    "on time and on budget." However, this is inconsistent with a September
    1997 Operations Committee Meeting status report that states the project
    experienced extraordinary interior design changes, all of which were
    unbudgeted and contributed to a cost increase of almost $1.2 million.
    Also, our analysis of Kennedy Center project documents shows that the
    project cost $6.2 million more than its initial budget of $15.1 million.

    o  	Fire suppression sprinklers. The Fiscal Year 2005 Budget Justification
    and the 2004 CBP continue to emphasize that the Kennedy Center intends to
    install sprinkler systems throughout the entire facility. However, we
    determined as part of our review, and verified through interviews with
    Kennedy Center officials, that the Center does not intend to install
    sprinklers in the large parts of the Kennedy Center, specifically, the
    Grand Foyer, the Hall of States, and the Hall of Nations.

    o  	Fire Alarm system. References to improving the building fire alarm
    system are included in Kennedy Center Budget Justifications for fiscal
    years 1995 through 2005. Language in these budget justifications refers to
    project phases, but start and completion dates change from year to year
    without explanation. For example, the completion date for the project was
    reported as being scheduled in fiscal year 2002 in the Kennedy Center's
    Fiscal Year 2003 Budget Justification, but the Center's 2005 Budget
    Justification listed the project as being scheduled for completion in
    fiscal year 2004.25 Reasons for the project's delay were not evident in
    the records that we reviewed.

    Poor Record Retention Makes It Impossible to Determine How Much the
    Building Plan Has Changed Since 1995

    According to a Kennedy Center official, the Center does not have a formal
    records retention policy, and the Kennedy Center did not retain complete
    project budget information previous to the 2002 CBP. CBP updates also do
    not provide historical data, such as budget information for past projects
    or how changes to those budgets affected the overall plan. Because the
    Kennedy Center lacks records, GAO could not determine how any cost and
    schedule changes affected the overall implementation of the 1995 CBP or if
    federal funds were used as originally anticipated. However, our

    25Fire alarm system installation was substantially completed in February
    2004.

    finding that several of the major projects from that time went over their
    budget estimates suggests that funds must have been reallocated.
    Information on reallocations, reconciliation of estimates to actual
    spending, and other project-level accounting of federal funds is not
    routinely reported to the Board or Congress. In addition, project records
    for the Concert Hall renovation were incomplete and the as-built drawings
    for the Kennedy Center were missing.

      Kennedy Center Does Not Appear to Meet Some Fire Safety Code Requirements but
      Exceeds Access Requirements

    Based on an independent expert's assessment, we determined that the
    Kennedy Center does not appear to meet some fire safety code requirements.
    After requesting and obtaining funds from Congress to meet fire code
    deficiencies, such as a lack of fire suppression sprinklers, as well as
    other needs, the Kennedy Center decided against its plan to meet fire
    safety code requirements and chose not to install sprinklers and smoke
    evacuation systems in the Grand Foyer, the Hall of States, and the Hall of
    Nations. The Kennedy Center reversed its decision to install these systems
    without having its decisions independently reviewed or clearly informing
    its Board or Congress that it was not spending the funds as planned.
    According to our independent expert, the Kennedy Center has met or
    exceeded disabled access requirements as part of its renovation.

    The Kennedy Center Does Not Appear to Comply with Fire Safety Code

    While the Kennedy Center has worked to address fire life safety
    deficiencies, and improvements are ongoing, based on an assessment
    performed by an independent expert hired by GAO, we found that the Kennedy
    Center does not appear to meet some fire life safety requirements.26 Over
    the past decade, several internal Kennedy Center reports have also
    identified other fire life safety deficiencies-such as exit paths that
    might not protect occupants from fire-in the Grand Foyer, the Hall of
    States, and the Hall of Nations (see fig. 7).

    26UNICCO Government Services, Inc., Life Safety, Fire Alarm System and ADA
    Assessment of the John F. Kennedy Center For The Performing Arts
    (Centreville, VA: 2005).

    Figure 7: Exit Routes from the Kennedy Center's Major Theaters

    NFPA 101 allows two approaches for dealing with fire safety issues: an
    entity can adhere directly to the fire safety code (also called a
    prescriptive approach), such as installing sprinklers or smoke evacuation
    systems, or it can provide an alternative that allows people to exit the
    building safely in case of fire (also called a performance-based
    approach). The Kennedy Center chose the second approach and commissioned
    an egress and fire

    modeling study in 2003 to address the exit issue, specifically as it
    pertained to the discharge of occupants from the facility. 27 Due to the
    results of this study, the Kennedy Center did not implement its earlier
    plan of installing a fire suppression system and smoke evacuation system
    in the Grand Foyer, the Hall of States, and the Hall of Nations.

    The modeling study indicates that, in the event of a fire, the time needed
    for evacuation would be less than the time it would take for these exit
    pathways to become untenable, provided certain steps are taken. These
    steps include (1) installing sprinklers at the Millennium Stages and (2)
    developing and implementing a program to manage the storage of scenery,
    props, and other combustible materials. With input from our independent
    expert, we concluded that the above steps have not been taken and thereby
    invalidate the study's assumptions. Since the Kennedy Center does not meet
    the conditions upon which the study was based, it appears to fall short of
    providing the level of protection intended by the code. Furthermore,
    Kennedy Center stakeholders, such as the Board of Trustees, have not
    accepted and adopted the terms of the study as described in NFPA 101. The
    Kennedy Center has not documented these determinations, but Kennedy Center
    officials said that the key decisions would be documented at the end of
    the fire life safety improvements at the Center.

    We also identified two additional deficiencies, based on NFPA 101, that
    are of immediate concern. First, there are no fire rated doors in some
    areas, such as the fire pump room and the Fire Command Center. These
    locations contain key emergency systems that would need protection in the
    event of a fire. Second, several fire-safety related problems were evident
    with the Millennium Stages. The stages are located at the ends of the
    Grand Foyer, a configuration that poses an exit deficiency because it does
    not provide two different, marked exit routes for occupants (see fig. 8).
    Additionally, NFPA 101 indicates that the stages must have a smoke control
    system that is integrated with a sprinkler system and smoke detectors over
    the stage area. These systems have not been installed.

    Officials from the Kennedy Center said that they believe that all fire
    safety code requirements are being met but agreed to make some changes.
    For example, the Kennedy Center said that it would install fire protective
    doors on the fire pump room and the Fire Command Center, and that it

    27Ehrenkrantz Eckstut & Kuhn Architects, PC, Egress and Fire Modeling
    Study of the Grand Foyer, Hall of States, and Hall of Nations (Washington,
    D.C., 2003).

    would document its key decisions once its Life Safety Improvement Program
    was completed.

    Figure 8: Millennium Stage Located at the End of the Grand Foyer Outside of the
                                   Eisenhower Theater

    The curtains along the side of the Millennium Stage obscure emergency
    exits when closed.

    The Kennedy Center Chose Not To Install Sprinklers Throughout the Center,
    But Did Not Consult Independent Experts or Clearly Inform Key Stakeholders

    After requesting the necessary funds from Congress to meet fire code
    deficiencies, the Kennedy Center decided not to install sprinklers and
    smoke evacuation systems in the plaza-level public spaces as initially
    planned based on the findings of the modeling study. In an October 2002
    meeting with its Trustees, the Kennedy Center reported that design and
    first stages of construction of the sprinkler and smoke evacuation systems
    would be completed in 2003. The Kennedy Center no longer plans to install
    sprinklers in the Grand Foyer, the Hall of Nations, the Hall of States, or
    at the Millennium Stages. Recent Kennedy Center documents continue to
    state that the funds will be spent to install sprinkler systems throughout
    the Center.

    Furthermore, in deciding not to install sprinklers and smoke evacuation
    systems in the plaza-level public spaces, the Kennedy Center did not
    consult any independent experts, such as the General Services
    Administration's (GSA) Fire Protection Engineer for the National Capital
    Region, or any other recognized expert about whether this was an
    appropriate choice. In contrast, NFPA 101 provides for peer review of
    modeling studies of this nature. In addition, our independent expert and
    GSA officials also stated that it is prevailing professional practice to
    seek external peer review of a modeling study of this nature. GSA
    officials said that other federal entities occasionally consult with them
    regarding how to approach difficult code issues, but that the Kennedy
    Center has not done so about this exit deficiency.

    Peer review may be particularly important for the Kennedy Center for two
    reasons. First, the Center lacks sufficient on-staff expertise to
    adequately interpret and evaluate this type of modeling study. The Kennedy
    Center official who is principally responsible for making fire life safety
    code compliance decisions said that he does not have formal training or
    certification in engineering or fire protection planning and that he is
    not qualified to evaluate modeling studies. Second, the Kennedy Center's
    fire safety decisions are not subject to external review. In contrast, GSA
    requires a registered fire protection engineer to be heavily involved in
    fire safety code compliance decisions for its federal properties, and its
    Office of Inspector General (OIG) has the authority to review GSA's
    approach to fire safety issues and policies. A GSA Fire Protection
    Engineer said that the OIG has provided useful guidance on these issues.
    Specifically, a 1999 GSA OIG report concluded that the National Capital
    Region Safety, Environment and Fire Protection Branch generally has taken
    adequate

    measures to meet the mission and goals of its fire safety program, but
    made a recommendation for improving building fire safety assessments.28 As
    previously mentioned, the Smithsonian OIG has authority to conduct reviews
    at the Kennedy Center relating to the expenditure of federal funds, but
    the Kennedy Center has not requested assistance from the Smithsonian OIG
    or any other federal accountability office in gaining assurance that the
    Center is taking prudent steps relating to fire safety decisions. Private
    sector entities are accountable to the local fire marshal's assessment of
    their compliance with fire safety code. In addition, the Kennedy Center
    Act authorizes the Kennedy Center Board of Trustees to utilize or employ
    the services of any agency or instrumentality of the federal government or
    the District of Columbia on a reimbursable basis. The Kennedy Center has
    not sought assistance, as authorized by law, from relevant federal or
    District of Columbia officials on fire safety code compliance.

    The Kennedy Center Has Improved Disabled Access to Fully Renovated
    Theaters and Public Spaces

    Our independent expert concluded that the Kennedy Center's compliance with
    regulations outlined in ADA has generally met or exceeded the requirements
    of the act in the theaters and public spaces that have been renovated. The
    Kennedy Center has added numerous ramps, improved signage, and renovated
    several bathrooms and elevators to meet ADA requirements (see fig. 9). In
    an attempt to make the Center as accessible as possible to disabled
    patrons, visitors, and employees, the Kennedy Center has made all levels
    of the renovated Concert Hall and Opera House accessible to wheelchairs.

    Additionally, the Kennedy Center has hired and trained specialized
    personnel to assist patrons and visitors with disabilities. An
    Accessibility Manager position is staffed and the Kennedy Center provides
    special training to numerous "access" ushers, who help patrons navigate
    their way to their seats. In addition, the Kennedy Center's Office of
    Accessibility provides details of its special access services over the
    phone, and the Kennedy Center's Web site provides access information and
    maps showing entrances, restrooms, and other services for the disabled.

    28General Services Administration National Capital Region Office of
    Inspector General, Audit of National Capitol Region Fire Safety Program,
    Report Number: A995174/P/W/R99530 (Washington, D.C.: Sept. 10, 1999).

    Figure 9: Selected Access for the Disabled Improvements to the Kennedy
    Center as Part of the Comprehensive Building Plan

    ADA improvements at the Kennedy Center include (clockwise from top)
    disabled access ramp in the Grand Foyer leading to the Opera House,
    disabled access ramp in passageway, ADA-compliant signage, and wheelchair
    lift.

    The areas that the Kennedy Center has not yet renovated have fewer ADA
    improvements. For example, the Eisenhower and Terrace Theaters have
    limited wheelchair access. The Kennedy Center plans to make additional ADA
    improvements Center-wide as part of its CBP, but the Terrace Theater
    upgrades have been deferred until after fiscal year 2008.

    External Oversight of Kennedy Center Is Limited

      Conclusions

    Oversight of the Kennedy Center's management of capital projects is
    limited in that the Kennedy Center has not requested the Smithsonian OIG
    to conduct audits and has not fully complied with the requirements of the
    IG Act. The Smithsonian Inspector General said that his office would
    respond to an audit request by the Kennedy Center and has conducted
    similar audit work for other external organizations. While the IG Act does
    not require the Kennedy Center to establish an OIG, the Center is required
    to report annually to Congress and OMB on its audit and investigative
    activities.29 However, Kennedy Center officials said that they were
    unaware of this requirement but plan to start complying with it this year.
    As previously discussed, the Kennedy Center Act authorizes the Kennedy
    Center Board of Trustees to utilize or employ the services of any agency
    or instrumentality of the federal government or the District of Columbia
    on a reimbursable basis. To date, the Kennedy Center has not sought such
    external assistance.

    In summary, Mr. Chairman, the Kennedy Center has made major capital
    improvements to the Center since taking over management control in 1995,
    but inadequate management and oversight have at times undermined assurance
    over processes and programs for fire safety, construction, and financial
    management. Of immediate concern are questions about the Kennedy Center's
    compliance with some fire safety codes. Taking steps to better address
    fire life safety issues can only heighten confidence of the Kennedy Center
    and Congress that visitors are enjoying world-class performances in a safe
    facility. Questions also remain about the management of construction costs
    and accounting procedures associated with recording and paying for the
    renovations. Overtime charges resulting in part from aggressive schedules,
    a lack of comprehensive information about the construction sites, and a
    practice of negotiating the value of contract changes after the completion
    of contract work, helped drive the cost of each project we reviewed over
    budget.

    Although the Kennedy Center has taken steps to improve project management,
    key mechanisms to ensure accountability and sound financial management
    practices in spending federal funds remain absent or only partially
    implemented. Specifically, without more detailed, transparent, and timely
    information on how funds have been budgeted and

    29See Inspector General Act of 1978, as amended, 5 U.S.C. S: App. 3,
    section 8G, and 2004 List of Federal Entities, 70 Fed. Reg. 4157 (Jan. 28,
    2005).

    spent, the Kennedy Center's Board and Congress will lack timely and
    accurate information on projects and thus will lack reasonable assurance
    that the Kennedy Center is deploying its resources as intended. In
    addition, the Kennedy Center has never made use of any other federal
    accountability office-the Smithsonian OIG or another qualified entity-to
    review the management of programs employing federal funds. Establishing a
    continuing relationship with an OIG and a federal fire safety expert could
    help the center to minimize risks that future capital projects will
    encounter planning problems, budget overruns, or fire safety code
    deficiencies.

                                    Recommendations

    1. 	We recommend that the Chairman of the Board of Trustees for the
    Kennedy Center exercise greater oversight of the Center's management
    through the Board of Trustees. The Kennedy Center should work with the
    Smithsonian OIG, or another independent federal government oversight
    organization, to provide strategic and annual audit plans for ongoing
    oversight of the Kennedy Center's use of federal funds based on an
    analysis of risk, safety, and vulnerability to internal control
    weaknesses. These plans should also specify the audits to be provided on a
    reimbursable basis by the Smithsonian OIG or another independent federal
    government oversight organization.

    2. 	To ensure the safety of the Kennedy Center, we recommend that the
    Chairman of the Board of Trustees direct the President of the Kennedy
    Center to implement the following two recommendations:

    a.

    b.

    Take steps to better comply with the fire safety code. At a minimum, these
    steps should include fully implementing the conditions of the modeling
    study, ensuring that doors in key areas provide adequate separation from
    fire, and addressing the code deficiencies at the Millennium Stages.

    Promptly seek peer review by a knowledgeable third party of the egress and
    fire modeling study used as a substitute for prescriptive code solutions
    and implement any recommendations. Additionally, consult with recognized
    experts, such as GSA, to determine whether the Kennedy Center is fully
    adhering to prevailing professional practices regarding fire life safety
    issues.

    3. 	To improve the Kennedy Center's management of capital projects, we
    recommend that the Chairman of the Board of Trustees direct the

    President of the Kennedy Center to implement the following five
    recommendations:

    a. 	Provide more timely and accurate information about capital projects by
    detailing their budget, scope, cost, and schedule, and providing to
    stakeholders an annual reconciliation of the status of all planned,
    delayed, eliminated, and actual projects.

    b. 	Take steps to control cost growth and schedule changes in future
    capital projects by setting more flexible schedules and improving its
    management of contract modifications.

    c. 	Strengthen the Kennedy Center's financial management controls by
    designing and implementing comprehensive contract, financial, and project
    management policies and procedures in accordance with prescribed federal
    guidance. These policies and procedures should ensure that

    o  	the Project Management Office prepares inspection reports, or similar
    documents, when services are performed that include a description of the
    services performed and the date(s) or period of performance and use this
    information to verify the validity of contractors' invoices;

    o  	complete, up to date costs for construction and other services are
    recognized and used to prepare quarterly financial reports and manage
    project costs;

    o  	reasonable efforts are made to match invoices with inspection reports
    and previously paid invoices to prevent or detect duplicate payments;

    o  	contractors' invoices meet minimum requirements and contain sufficient
    detailed information to clearly support the accuracy and validity of
    invoices; and

    o  	for Economy Act transactions, payments to other federal agencies are
    for actual costs consistent with the Economy Act agreement.

    d. 	Establish and enforce a documents retention policy that allows for
    accountability of the Kennedy Center's federal funds;

      Agency Comments

    e. 	Have relevant Kennedy Center offices develop as-built drawings and
    better track future changes to the Center.

    We provided these findings and recommendations in a draft of our upcoming
    report to the Kennedy Center for its review and comment. The Kennedy
    Center disagreed with several of our recommendations and agreed with
    others. The Kennedy Center agrees that more oversight would be useful, but
    it is unsure what the best mechanism would be for providing such
    oversight. The Kennedy Center also believes that it is in compliance with
    fire code, but agreed to seek a third-party review of its approach to
    addressing certain fire code deficiencies. The Kennedy Center agreed that
    it should improve its information about capital projects, its document
    retention practices, and its knowledge of site conditions at the Center.
    However, it disagreed that it needed to strengthen its financial controls
    in some of the ways that we have recommended. For example, it believes
    that its information is up to date and plans to fully comply with the
    Economy Act. We carefully reviewed the Kennedy Center's concerns and
    overall we still believe that the Center needs to better comply with fire
    safety code and strengthen its management controls. The Kennedy Center
    also provided technical comments that we incorporated as appropriate.

      Scope and Methodology

    We conducted our review from August 2004 through March 2005 in accordance
    with generally accepted government auditing standards. During our work, we
    reviewed files for five of the largest projects-the renovation of the
    Concert Hall, Opera House, Eisenhower Theater, Plaza-Level Public Spaces,
    and installation of a new Fire Alarm system-to the extent that they
    existed. These projects represent the three largest theaters at the
    Kennedy Center, the largest public spaces, and the most expensive fire
    life safety improvement completed to date. Files that we reviewed included
    the Kennedy Center's audited financial statements, federal authorization
    and appropriation laws; other related laws, contractor invoices; project,
    contracting, and finance files; minutes from the Board of Trustees
    meetings; minutes and agendas of the Board's Operations Subcommittee
    meetings; the CBP's published since 1995; annual Kennedy Center budget
    justifications to Congress since 1995; and testimonies before Congress
    over this same period. We also interviewed numerous Kennedy Center senior
    managers and officials in the Project Management, Contracts, Finance, and
    President's Offices, and officials from the Smithsonian OIG, GSA National
    Capital Region, and the D.C. Fire Marshal. Furthermore, our staff of
    licensed professional engineers toured the site, and we contracted with an
    independent expert to assess the

    Kennedy Center's compliance with applicable fire life safety code and
    disabled access requirements.30 For our analysis of the Kennedy Center's
    compliance with the fire life safety code, we took the Center's ongoing
    and planned fire life safety upgrades into consideration when identifying
    deficiencies, and we did not identify deficiencies where upgrades or
    improvements were planned.

    Mr. Chairman, this concludes my prepared statement. I would be pleased to
    respond to any questions that you or the other Members of the Subcommittee
    may have.

    For further information about this testimony, please contact me at (202)
    512-2834 or goldsteinm@gao.gov. Michael Armes, Lindsay Bach, Chris Bonham,
    Matt Cail, Keith Cunningham, John Davis, George Depaoli, Tim Dinapoli,
    Terrell Dorn, Edda Emmanuelli-Perez, Colin Fallon, Susan Fleming, Brandon
    Haller, John Krump, Julie Phillips, Theresa Patrizio, Robert Preshlock,
    Susan Michal-Smith, and Carrie Wilks also made key contributions to this
    statement.

      GAO Contacts and Staff Acknowledgments

    30UNICCO Government Services, Inc., Life Safety, Fire Alarm System and ADA
    Assessment of the John F. Kennedy Center For The Performing Arts
    (Centreville, VA: 2005).

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