District Government:

Information on Its Fiscal Condition and the Authority's First Year of Operations

T-AIMD-96-126: Published: Jul 9, 1996. Publicly Released: Jul 9, 1996.

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GAO discussed the District of Columbia's financial condition, focusing on efforts to resolve its financial crisis. GAO found that: (1) the District's revenues decreased, from $2.9 billion in fiscal year (FY) 1993 to $2.7 billion in FY 1995, due to a one-time accounting change and a decrease in the assessment value of commercial and residential property; (2) over 75 percent of the District's operating grants go to Medicaid reimbursements; (3) the District's federal payment formula was discontinued in FY 1995 and replaced with a federal payment of $660 million; (4) this payment does not adequately compensate the District for the additional responsibility it assumes or the loss of revenue due to federally imposed restrictions; (5) the District's inability to tax nonresident wages results in a loss of revenue; (6) the District's overall expenditures increased from $5.5 billion in FY 1993 to $6 billion in FY 1994, and decreased to $5.4 billion in FY 1995 due to shifts in Medicaid and employee benefits expenditures; (7) the District's unfunded pension liability stands at $4.7 billion and is expected to increase to $7 billion by 2004; (8) the District has delayed pension, vendor, and Medicaid payments, borrowed internally from its capital projects fund, and borrowed short-term bonds from the Treasury to finance its operations; (9) the District Financial Responsibility and Management Assistance Authority has reviewed 1,562 contracts, developed a strategic plan and annual report, approved 10 privatization plans for FY 1996, and allocated reductions to several departments; and (10) the District needs a new financial management system.

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