Kennedy Center's Financial Problems Are Serious

Legislation requires that GAO regularly audit the John F. Kennedy Center for the Performing Arts' accounts to determine the Center's ability to pay its share of the operating costs and to assure that the cost sharing formula between the National Park Service and the Center fairly and accurately reflects the use of the building. The Center's financial statements, accounting and operating records, and records of the National Park Service which relate to the cost sharing formula were reviewed. Tests were made of the records maintained by the Center's restaurant and parking garage concessionaires. Three other performing arts centers in the United States and two perfoming arts theater facilities in the Washington, D.C., were visited to enable comparisons to be made.

The Kennedy Center cannot pay the interest on, or provide payment for, bonds issued to the U.S. Treasury and still meet its statutory performing arts and public service responsibilities. The Center is not paying its full share of building operation costs because the cost sharing arrangement with the Park Service has not been updated and does not accurately reflect how the building is being used. The Center receives sizeable payments from the garage and restaurant concessionaires for utilities. Although the Park Service pays for the utilities, it is reimbursed only at the cost sharing formula rate because its agreement with the Center makes no provision for utility reimbursements received by the Center. Like the Kennedy Center, the other centers visited had high attendance levels, but required varying forms of public and private support to offset shortfalls in box office and other revenues. The two Washington area theater facilities visited are fully maintained by the Park Service. By contrast, the Kennedy Center maintains its five theaters, provides backstage support, and shares the overall maintenance costs. Currently, two bills and an Administration proposal intended to resolve the Center's financial problems are under consideration by congressional committees. All would substantially alter the Center's repayment obligations for bond principal and interest and the cost sharing arrangement with the Park Service.

Recommendations

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