Kennedy Center:

Progress Made on GAO Recommendations, but Oversight Challenges Still Exist

GAO-06-1025: Published: Sep 15, 2006. Publicly Released: Sep 21, 2006.

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In April 2005, GAO recommended that the John F. Kennedy Center for the Performing Arts (Kennedy Center) increase oversight of its management of federal funds, better comply with fire code, and conform to project management best practices. GAO was asked to evaluate (1) the progress the Kennedy Center has made in implementing GAO's April 2005 recommendations, (2) the status of federally funded capital projects and the planned spending of federal funds for capital projects as indicated by the Kennedy Center's most recent comprehensive building plan, and (3) the Kennedy Center Board of Trustees' responsibilities for federally funded capital projects and the extent to which the board fulfills these responsibilities. To fulfill these objectives, GAO examined Kennedy Center documents, visited other arts organizations, and interviewed affected parties.

The Kennedy Center has taken steps to implement GAO's oversight, fire safety, and capital project recommendations but more work remains. For example, to increase oversight of its management of federal funds, the Kennedy Center contracted with the Smithsonian Institution Office of the Inspector General for audits of federal funds used for capital projects. In addition, to better comply with fire safety code, the Kennedy Center has implemented GAO's recommendations to obtain a peer review of its fire-modeling study and manage the storage of combustible materials. As a result of the peer review, the center made changes to its fire-modeling study. Finally, to better align with project management best practices, the Kennedy Center has implemented GAO's recommendations to design and implement contract, financial, and project management policies and procedures and control cost and schedule changes in future projects. The Kennedy Center's 2005 comprehensive building plan (CBP)--or longterm renovation effort--shows that the center will not complete its capital renovations within the planned 2008 time frame and budgets. The estimated costs for the remaining CBP projects have increased from $48 million to $58 million since the 2004 CBP, and the center plans to defer most terrace-level renovations beyond 2008, the original completion date. The 2005 CBP shows that the Family Theater was completed on schedule in 2005 with limited cost growth. However, despite improved contracting practices, GAO found that the Kennedy Center did not fully comply with the Federal Acquisition Regulation (FAR) when it used an alternative contracting method. In addition, it increased the risk of cost overruns by authorizing Family Theater work to begin before establishing the contract's guaranteed maximum price. The Kennedy Center Board of Trustees has delegated to management most of its responsibilities for federally funded capital projects, which is a typical board action. However, GAO found that several factors limit the board's oversight of federally funded capital projects. The Kennedy Center Board of Trustees and its Operations Committee (1) lack procedures on how to carry out the board's responsibilities for federally funded projects (2) have experienced low attendance at meetings, and (3) lack information needed to evaluate the implementation of capital projects. In addition, the Operations Committee has met infrequently, which further limits oversight.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In September 2006, we found that the Kennedy Center Board of Trustees and its Operations Committee lack procedures on how to carry out the board's responsibilities for federally funded capital projects. We recommended that the Board of Trustees develop and implement procedures on how the board and its Operations Committee are to carry out their responsibilities for overseeing federal funds, including a clarification of the roles and responsibilities of the Operations Committee. The Board of Trustees partially implemented our recommendation by establishing procedures for the board's Operations Committee to carry out its responsibilities under the Kennedy Center Act which include, among other things, that the committee ensures that all construction projects are completed on time, on budget, according to plan, and in accordance with applicable regulations. In September 2008 and March 2009 the Operations Committee met under the revised procedures. As a result of the Board of Trustees' actions, its Operations Committee can carry out its responsibility under the Kennedy Center Act for federally funded capital projects and assess whether federal funds for capital projects have been spent efficiently, effectively, and legally.

    Recommendation: To strengthen the Kennedy Center Board of Trustees' role in overseeing federally funded capital projects and to improve the board's ability to carry out its responsibilities under the Kennedy Center Act, the Chairman and Trustees of the Board should develop and implement procedures on how the board and its Operations Committee are to carry out their duties under the Kennedy Center Act and their responsibilities for overseeing federal funds, including a clarification of the roles and responsibilities of the Operations Committee.

    Agency Affected: Smithsonian Institution: John F. Kennedy Center for the Performing Arts

  2. Status: Closed - Implemented

    Comments: In September 2006, we found that the Kennedy Center was deferring many of its terrace-level renovations causing the price of the Comprehensive Building Plan's (CBP) implementation to grow because of steep increases in the costs of some of its remaining projects. We also found that the 2005 CBP was better than previous versions because it provided information needed to evaluate the progress of federally funded capital projects. However, CBP's new project-by-project budget reconciliations failed to show how changes to individual projects have affected the overall CBP budget, making it difficult to determine the overall impact of the changes on the CBP budget through 2008. Specifically, the 2005 CBP did not describe the budget of the Roof Terrace Life Safe Project that was estimated in 2002, before the project's scope was set or any detailed planning or design work had been conducted. During our audit, the scope of the project had still not been set, making it difficult to evaluate the feasibility or adequacy of the project. We recommended that to improve the information the Kennedy Center provides to Congress and the Board of Trustees, the Kennedy Center should improve the CBP by clarifying which federally funded projects the center intends to complete as part of the plan and which ones will be deferred. In doing so, the Kennedy Center should establish clear scope and budget estimates for the Roof Terrace Life Safety project described in the 2006 Comprehensive Building Plan. In response, the Kennedy Center developed 2009 and 2010 CBPs that identified both the federally funded projects the center intended to complete as part of the CBP and the projects that would be deferred. Also, the 2009 and 2010 CBPs had clear scope and budget estimates for the Roof Terrace Life Safety project and indicated that the project would be completed in 2010. As a result, the Kennedy Center provides Congress and its board with the enhanced CBP information that they need to easily evaluate the center's federally funded capital projects.

    Recommendation: To improve the information the Kennedy Center provides to Congress and the Board of Trustees, the Chairman of the Board of Trustees should direct the President of the Kennedy Center to improve the Comprehensive Building Plan by clarifying which federally funded projects the Kennedy Center intends to complete as part of the plan and which ones will be deferred. In doing so, establish clear scope and budget estimates for the Roof Terrace Life Safety project for the 2006 update of the Comprehensive Building Plan.

    Agency Affected: Smithsonian Institution: John F. Kennedy Center for the Performing Arts

  3. Status: Closed - Implemented

    Comments: In September 2006, we found that the Kennedy Center's 2005 Comprehensive Building Plan (CBP) failed to calculate the sum of individual project cost changes, making it difficult to determine the overall impact of these changes. We recommended that to improve the information the Kennedy Center provides to Congress and the Board of Trustees, the Kennedy Center improve the CBP by clearly identifying the overall impact that changes to individual project budgets from the previous year will have on the overall plan's budget. In response, the Kennedy Center developed CBPs in 2009 and 2010 that implemented our recommendation. For example, the 2009 CBP describes the Heating Hot Water System Replacement project, among others, and clearly shows that the project's budget changed from the 2008 CBP to the 2009 CBP, and that the change had no impact on the project's overall budget. Similarly, the 2010 CBP shows that the project's budget changed again and clearly indicated that the changes also had no impact the project's overall budget. In addition, both CBPs showed how budget changes to individual projects impact the annual overall CBP budget. As a result, the improved CBP information that the Kennedy Center provides to Congress and its board will enable them to easily monitor the project cost changes and their impact on the overall CBP budget.

    Recommendation: To improve the information the Kennedy Center provides to Congress and the Board of Trustees, the Chairman of the Board of Trustees should direct the President of the Kennedy Center to improve the Comprehensive Building Plan by clearly identify the overall impact that changes to individual project budgets from the previous year will have on the overall plan's budget.

    Agency Affected: Smithsonian Institution: John F. Kennedy Center for the Performing Arts

  4. Status: Closed - Implemented

    Comments: In September 2006, we found that the Kennedy Center did not fully comply with the Federal Acquisition Regulation (FAR) when it used the construction manager at risk contracting method for the Family Theater renovations. We recommended that the Kennedy Center obtain the required FAR deviation when using the construction manager at risk contracting method. In response, on November 9, 2006, the Kennedy Center implemented our recommendation and obtained the required FAR deviation to utilize the construction manager at risk contracting method for the Eisenhower Theater renovations.

    Recommendation: To improve compliance with the Federal Acquisition Regulation (FAR), the Chairman of the Board of Trustees should direct the President of the Kennedy Center to properly obtain the required FAR deviation when using the construction manager at risk contracting method. In addition, the Kennedy Center should establish the guaranteed maximum government price for a capital project before proceeding with construction.

    Agency Affected: Smithsonian Institution: John F. Kennedy Center for the Performing Arts

  5. Status: Closed - Implemented

    Comments: In September 2006, we found that the Kennedy Center Board of Trustees and its Operations Committee lack information needed to monitor and evaluate whether all federally funded capital projects have been implemented efficiently and in accordance with the requirements in the Kennedy Center Act. We recommended that the Kennedy Center's Board of Trustees ensure that it receives detailed, transparent, and timely information on how federal funds for capital projects have been budgeted and spent on capital projects, such as information on original versus actual project budgets and schedule. In response, the Board of Trustees took action to ensure that it receives improved information on how federal funds have been used for capital projects. For example, at the September 2008 and April 2009 Operations Committee meetings, the Board of Trustees were provided detailed information on capital projects including schedule, scope, and project costs. At the May 2009 Board of Trustees meeting, the board was provided a summary of capital projects, including estimated costs or budgets, summary, and scope. In addition, at this May 2009 meeting, the Board of Trustees received a report from the Operations Committee on the fiscal year 2009 appropriation and detailed information on capital projects' schedule and scope. As a result, the Board of Trustees now receives the information that it needs to hold Kennedy Center managers accountable for completing federally funded capital projects on time and within budget estimates.

    Recommendation: To strengthen the Kennedy Center Board of Trustees' role in overseeing federally funded capital projects and to improve the board's ability to carry out its responsibilities under the Kennedy Center Act, the Chairman and Trustees of the Board should ensure that the board receives detailed, transparent, and timely information on how federal funds for capital projects have been budgeted and spent on capital projects, such as information on original versus actual project budgets and schedules.

    Agency Affected: Smithsonian Institution: John F. Kennedy Center for the Performing Arts

 

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