Kennedy Center: Preventing Audit Duplication and Developing Facility
Management Capability (Testimony, 03/25/98, GAO/T-GGD-98-86).

GAO discussed two audit reports on the operations of the John F. Kennedy
Center for the Performing Arts, focusing on: (1) preventing audit
duplication; and (2) developing facility management capability.

GAO noted that: (1) as a part of the audit, tests of the Center's
compliance with certain provisions of laws, regulations, contracts, and
grants are made to identify instances of noncompliance that could have a
direct and material effect on the financial statement amounts; (2) as
GAO did the work necessary to plan its own audit, the information and
documentation obtained from the Center and from the Center's auditor
demonstrated that GAO's audit, if done, would have duplicated those
portions of the auditor's work involving: (a) testing of internal
controls; (b) sampling of expenditures; and (c) testing for compliance
with the limitation on the use of appropriated funds; (3) GAO concluded
that efficient use of its audit resources would be best achieved by the
Center's continued contracting for a single, annual audit of its
financial statement and that this annual audit should include both the
use of appropriated funds and compliance with the limitation on the use
of those funds; (4) GAO issued its report on the Kennedy Center's
progress in defining and implementing a facility management organization
since enactment, in 1994, of Public Law 103-279; (5) in addition to
authorizing appropriations for the Center, Public Law 103-279
transferred complete operating responsibility for the Center, previously
divided between the National Park Service and the Center's Board of
Trustees, to the Board; (6) in a February 1993 report, GAO noted that
while the Center did not then have individuals on staff with certain
professional and technical skills that would be associated with managing
capital projects, there appeared to be no reason that the Center could
not acquire the necessary management capability; (7) the Center has
developed its facility management organization under the premise that
the organization would include a small in-house staff supported by
contractor technical staff; (8) accordingly, the Center established
about 55 in-house facility management staff positions, including 6
managerial positions; (9) to provide facility-related operating
information to managers, the Center staff has developed a series of
reports for use in tracking and managing appropriated funds usage; (10)
in addition, the Center has purchased and is implementing four modules
of a computer-integrated facility management system; (11) the Center is
in the process of evaluating and implementing computerized scheduling
software for use in preparing a comprehensive schedule/calendar; and
(12) Center officials told GAO that they expect these systems to become
operational during the next few months.

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

 REPORTNUM:  T-GGD-98-86
     TITLE:  Kennedy Center: Preventing Audit Duplication and Developing 
             Facility Management Capability
      DATE:  03/25/98
   SUBJECT:  Financial statement audits
             Internal controls
             Human resources utilization
             Audit oversight
             Auditing standards
             Accounting procedures
             Facility repairs
             Federal facilities
             Facility maintenance
             Management information systems

             
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Cover
================================================================ COVER


Before the Subcommittee on Public Buildings and Economic Development,
Committee on Transportation and Infrastructure, House of
Representatives

For Release
on Delivery
Expected at
10:30 a.m.  EST
Wednesday, March 25, 1998

KENNEDY CENTER - PREVENTING AUDIT
DUPLICATION
AND DEVELOPING FACILITY
MANAGEMENT CAPABILITY

Statement of Bernard L.  Ungar
Director, Government Business Operations Issues
General Government Division

GAO/T-GGD-98-86

GAO/GGD-98-86T


(240297)


Abbreviations
=============================================================== ABBREV


KENNEDY CENTER:  PREVENTING AUDIT
DUPLICATION AND DEVELOPING
FACILITY MANAGEMENT CAPABILITY
==================================================== Chapter Statement

Mr.  Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss two audit reports we have
issued within the last year on the operations of the John F.  Kennedy
Center for the Performing Arts.  In August 1997, we issued a report
addressing the need to prevent duplication of audit efforts involving
the Kennedy Center's appropriated funds.\1 Today, we are issuing a
report addressing the Kennedy Center's efforts to define and
implement a facility management organization.\2 My statement
summarizes the two issues discussed in these reports--preventing
audit duplication and developing facility management capability. 


--------------------
\1 Kennedy Center:  Audit Duplication Can Be Prevented
(GAO/GGD-97-161, Aug.  19, 1997). 

\2 Kennedy Center:  Information on Facility Management Capability
(GAO/GGD-98-56, Mar.  25, 1998). 


   PREVENTING AUDIT DUPLICATION
-------------------------------------------------- Chapter Statement:1

In August 1997, we issued our initial report in response to a
provision contained in Public Law 103-279.\3 In 1994, Public Law
103-279, which authorized Kennedy Center (Center) appropriations,
provided that we audit, not less than once every 3 years, the
expenditures of funds appropriated for the Kennedy Center and that
our audit include testing for compliance with the act's limitation\4
on the use of any of those appropriated funds for performing arts
functions. 

Since its inception, the Center has annually contracted with a public
accounting firm to audit its financial statements and provide a
report on whether those statements present fairly the financial
position of the Center.  As part of the audit, tests of the Center's
compliance with certain provisions of laws, regulations, contracts,
and grants are made to identify instances of noncompliance that could
have a direct and material effect on the financial statement amounts. 
As we did the work necessary to plan our own audit, the information
and documentation that we obtained from the Center and from the
Center's auditor demonstrated that our audit, if done, would have
duplicated those portions of the auditor's work involving

  -- testing of internal controls,

  -- sampling of expenditures, and

  -- testing for compliance with the limitation on the use of the
     appropriated funds. 

Further, the auditor planned and executed the audit under the
Government Auditing Standards, which govern our audit work as well. 

In our August 1997 report, we concluded that efficient use of our
audit resources would be best achieved by the Center's continued
contracting for a single, annual audit of its financial statements
and that this annual audit should include both the use of
appropriated funds and compliance with the limitation on the use of
those funds.  We recommended that Congress delete the requirement
that we audit the funds appropriated to the Center, and we also
stated that Congress may wish to consider imposing a statutory
requirement that the Center continue to contract for annual financial
statement audits and communicate the results to Congress. 

Regarding compliance with the limitation on the use of appropriated
funds, we suggested that Center managers include a requirement in
future financial statement audit engagement letters that the auditor
include in its report (1) information about the specific tests for
compliance with the limitation on the use of funds that it had
undertaken and (2) the results of those tests.  Center officials
agreed and included, in their fiscal year 1997 audit engagement
letter, a contractual requirement that the results of the funds
limitation compliance tests be reflected in the auditor's report\5 to
the Center's Board of Trustees.  The audit report for fiscal year
1997 included a Report of Independent Public Accountants on
Compliance and Internal Controls that described the compliance
testing performed by the auditor to determine any direct and material
effect of the compliance with the limitation on the Center's
financial statement amounts.  Further, the results of the auditor's
tests were reflected in the November 25, 1997, auditor's opinion,\6
which stated that the financial statements of the Center for the
period audited present fairly, in all material respects, the
financial position of the Center. 


--------------------
\3 Section 5(d) of the John F.  Kennedy Center Act Amendments of
1994, Public Law 103-279, 108 Stat.  1409, 1415-1416 (1994), which
amended section 6 of the John F.  Kennedy Center Act, 20 U.S.C.  76l. 

\4 Section 12(c) of the John F.  Kennedy Center Act Amendments of
1994, Public Law 103- 279, 108 Stat.  1409, 1416 (1994), 20 U.S.C. 
76r. 

\5 The John F.  Kennedy Center for the Performing Arts and the
National Symphony Orchestra, OMB Circular A-133 Supplemental
Financial Report As of Sept.  28, 1997 Together with Auditors'
Report, Nov.  25, 1997. 

\6 The John F.  Kennedy Center for the Performing Arts Financial
Statements As of Sept.  28, 1997, and Sept.  29, 1996 Together With
Auditors' Report, Nov.  25, 1997. 


   DEVELOPING FACILITY MANAGEMENT
   CAPABILITY
-------------------------------------------------- Chapter Statement:2

Today, we issued our report on the Kennedy Center's progress in
defining and implementing a facility management organization since
enactment, in 1994, of Public Law 103-279.  In addition to
authorizing appropriations for the Center, Public Law 103-279
transferred complete operating responsibility for the Center,
previously divided between the National Park Service and the Center's
Board of Trustees, to the Board.  In response, the Center managers
began the process of creating a facility management organization to
operate the facility. 

In a February 1993 report,\7 we noted that while the Center did not
then have individuals on staff with certain professional and
technical skills that would be associated with managing capital
projects, there appeared to be no reason that--given sufficient time
and funding--the Center could not acquire the necessary management
capability.  Other reports, ours and one by a consultant retained by
the Center, pointed out the need for an organizational structure that
would clearly define and assign roles and responsibilities related to
facility operations. 

The Center has developed its facility management organization under
the premise that the organization would include a small in-house
staff supported by contractor technical staff.  Accordingly, the
Center established about 55 in-house facility management staff
positions, including 6 managerial positions.  These managerial
positions have responsibility for specified areas and include the
Vice President for Facilities; the Directors of Contracting,
Facilities, Security, and Auxiliary Services; and the Project
Executive.  With the exception of the Vice President for Facilities,
these positions use contractors to support operations.  While the six
positions function within a single, formal, facilities management
organizational structure, several committees bring together facility
managers; managers of other functions, such as performance
production; and staff to coordinate facility operations with
performing arts schedules and to resolve various facility issues and
problems. 

To provide facility-related operating information to managers, the
Center staff has developed a series of reports for use in tracking
and managing appropriated funds usage.  In addition, the Center has
purchased and is implementing four modules of a computer-integrated
facility management system.  Three modules assist in managing the
Center's inventory of assets and Center maintenance functions,
including preventive maintenance, demand maintenance, and scheduled
maintenance projects.  The fourth module is a database in which data
from all other modules are to be maintained.  In addition, the Center
is in the process of evaluating and implementing computerized
scheduling software for use in preparing a comprehensive facility
utilization schedule/calendar.  Center officials told us that they
expect these systems to become operational during the next few
months. 


--------------------
\7 Kennedy Center:  Information on the Capital Improvement Program
(GAO/GGD-93-46, Feb.  9, 1993). 


------------------------------------------------ Chapter Statement:2.1

Mr.  Chairman that concludes my statement.  At this time I will be
pleased to respond to any questions the Subcommittee might have. 


*** End of document. ***