District of Columbia's Structural Imbalance and Management Issues
GAO-05-162R: Published: Nov 19, 2004. Publicly Released: Nov 19, 2004.
On June 22, 2004, GAO testified before the Subcommittee on the District of Columbia, Senate Committee on Appropriations on the District of Columbia's structural imbalance and management issues. This letter responds to a request from the subcommittee that GAO provide answers to follow-up questions from the Honorable Richard Durbin, United States Senate.
The District of Columbia has made progress in improving management and maintaining fiscal discipline. District officials have taken steps to balance their budgets for fiscal years 2004 and 2005. Also, the District's bond rating has been upgraded by all of the major rating agencies in part due to the region's improving economy and better financial management. Further, our recent mandated review of the District's performance and accountability plan for fiscal year 2003 found that the District complied with statutory reporting requirements and that the report provided a comprehensive review of the District's performance. Despite the progress that has been made, challenges still remain, as evidenced by several studies and investigations that have been released since the issuance of our May 2003 report. Ignoring the management challenges that we and others have identified is not acceptable; nonetheless, it is important to consider certain critical points regarding the District's management challenges and their relationship to the fiscal structural imbalance we confirmed in our report. By addressing the management challenges that GAO and others have identified over the years, the District could free up local funds and possibly gain additional federal funds for use in increasing the level of services to its residents and visitors. Due in part to its substantial structural deficit, the District is likely providing a below average level of services even though its tax burden is among the highest in the nation. If raising taxes or cutting services is to be avoided, an alternative option District officials might exercise would be to continue deferring improvements to its capital infrastructure. Federal policymakers are faced with difficult choices regarding what role they should play, if any, in addressing the District's structural imbalance. Federal policymakers could choose not to address the District's structural imbalance and require local officials to deal with the difficult choices it faces to meet its obligations. Alternatively, additional federal assistance for the District could compensate for its structural imbalance. No matter what form this assistance might take, it is important for Congress to have assurances that the funds would be spent efficiently and effectively and be used for any intended purposes. These safeguards should be written into any legislation. It is critical to have clear, transparent reporting and accountability mechanisms in place to ensure the proper use of federal funds. One option for Congress would be to require the District to develop and submit for review a set of capital planning and management policies and procedures that would be reliably followed by all District agencies. A key way to ensure that federal capital funds are spent effectively and efficiently is to have a clear capital decision-making and management system in place. Along these lines, GAO has developed an executive guide that identifies organizational attributes that are important to the capital decision-making process as a whole, as well as capital decision-making principles and practices used by leading state and local governments and private sector organizations. These principles and practices could be applied to any District agency or the District as a whole. Key elements of this guidance are to closely link any planned capital investments to a government's or organization's strategic goals and objectives, ensure that effective information systems are in place to support sound decision making and management, and ensure that city leaders to clearly communicate their vision and goals to project managers.