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Slide 1: FINANCIAL REPORT RICK JOHNSON, CHIEF FINANCIAL OFFICER The Smithsonian Institution receives funding from both federal appropriations and nonappropriated trust sources. Nonappropriated trust funds include all funds received from sources other than direct federal appropriations. These other sources include gifts and grants from individuals, corporations, and foundations; grants and contracts from federal, state, or local government agencies; earnings from short- and long-term investments; revenue from membership programs; and revenue from sales activities, such as Smithsonian magazine, museum shops and restaurants, mail order catalogues, and licensed products. Federal appropriations provide funding for the Institution’s core functions: caring for and conserving the national collections, sustaining basic research on the collections and in selected areas of traditional and unique strength, and educating the public about the collections and research findings through exhibitions and other public programs. Federal appropriations also fund a majority of the activities associated with maintaining and securing the facilities and with various administrative and support services. Smithsonian trust funds allow the Institution to undertake new ventures and enrich existing programs in ways that would not otherwise be possible. These funds provide the critical margin of excellence for innovative research, building and strengthening the national collections, constructing and presenting effective and up-to-date exhibitions, and reaching out to new and under-represented audiences. In recent years, the Smithsonian has also begun to rely in part on trust funds for the funding of major new construction projects. The following sections describe the external environmental factors affecting the Institution’s general financial condition, its financial status, and its planned response to changing conditions; financial results for fiscal year 1998; and organizational and financial measures being taken to ensure the continued fiscal health of the Institution. Financial Status and Prospects In fiscal year 1998, the Smithsonian took major steps to address the increasing financial needs of the Institution. Congress has been very supportive of the Institution in its provision of federal appropriations for core functions and the maintenance of facilities. This support, however generous, cannot be expected to sustain the growing costs of new exhibitions and programs that allow the Institution to continue as a world-class center for research and education. Consequently, in fiscal year 1998, the Institution focused on restoring and strengthening its revenue-generating activities, as well as on its fund-raising efforts. Over the past several years, income from the Institution’s business activities has remained relatively static. In response, the Institution made two critical decisions. The first 93
Slide 2: was to discontinue the commercial activities of Smithsonian Press/Smithsonian Productions, transferring the profitable ventures to Smithsonian Retail and establishing the University Press division as a programmatic function of the Institution under the auspices of the Provost with the name Smithsonian Institution Press. As an important step to promote the long-term growth of the Institution’s business activities and ensure its financial health, the Board of Regents approved a new approach for managing those ventures. Major elements of this new approach include the creation of a separate organization within the Institution to increase the Smithsonian’s major business activities, the creation of a separate board of directors to help guide the new organization and the recruitment of a senior level business executive to be the new organization’s chief executive officer. The goal of the new approach is to double the annual level of business-generated trust dollars available for the Institution within the next five years. Fund raising received continuing attention as a critical element in the improvement of the Institution’s financial position. Work was begun in earnest on the Smithsonian’s capital campaign. An overarching strategy has been developed and a budget established to fund the campaign. Currently in its “quiet phase,” the campaign has already achieved substantial results. In fiscal year 1998, donor and sponsor support was at its highest level in the Institution’s history. Fiscal Year 1998 Results Revenues received by the Institution in fiscal year 1998 from all sources totaled $774.5 million. Revenue from federal appropriations accounted for $393.0 million, and nonappropriated trust funds provided an additional $381.5 million. When adjusted to remove auxiliary activity expenses of $197.0 million, net revenues totaled $577.5 million. The chart on page 95 reflects revenues by source and broad purpose of use. Operations (Tables 1 and 2) Federal operating revenue of $331.5 million provided the core funding for ongoing programs of the Institution. The fiscal year 1998 operating appropriation of $333.4 million represented an increase of $14.9 mil- FY 1998 Sources of Net Revenues Federal Appropriations 68.1% General Trust 6.9% Donor/Sponsor 15.1% Gov’t Grants & Contracts 9.9% lion from the fiscal year 1997 level. Total increases were $15.7 million, with $.8 million in one-time funding being returned. Increases to cover certain uncontrollable costs included $6.6 million to cover the cost of mandated pay and benefit increases, $2.7 million for utility costs, and $.3 million for inflation for library materials. In addition, the following program increases were provided: $1.2 million to fund operation of the Smithsonian Astrophysical Observatory Submillimeter Telescope Array, $3.0 million for the National Museum of Natural History’s East Court project, $1.0 million for collections information systems, and $.9 million for other projects. General trust revenue was $270.6 million. Overall revenue levels in this category were up 3 percent over the prior year. Donor/sponsor revenue was up 8 percent, sales and membership revenue was up 5 percent, and other revenue was down 41 percent, primarily as a result of the closedown of 150th anniversary activities. Overall net revenue for auxiliary activities declined 9 percent. Major increases in net revenue for museum shops/mail order and concessions were offset by a loss for Smithsonian Press/ Smithsonian Productions related to discontinuation of major portions of that operation. Revenue from donor/sponsor designated funds totaled $53.5 million. Donor/sponsor revenue in this category increased by 123 percent over the prior year as a result of intensified fund-raising activities and the development of and focus on new strategies. In addition, 150th anniversary activities had a positive impact on overall giving. Major gifts and grants in- 94
Slide 3: Fiscal Year 1998 Sources of Gross/Net Revenues Gross Revenues ($thousands) Operations Federal Appropriations General Trust** Donor/Sponsor** Gov’t Grants & Contracts Total Sources for Operations 393,032 237,026 87,081 57,320 774,459 393,032 40,036 87,081 57,320 577,469 68.1 6.9 15.1 9.9 100.0 Net* Revenues ($thousands) Percent Net Revenues (%) *Net of expenses related to revenue-generating activities, e.g., museum shops, restaurants, publications, etc. **General trust is reduced from Table 1 by the Donor/Sponsored Contributions. cluded $20 million from the Kenneth E. Behring family to support exhibitions, public programs and related activities at the National Museum of Natural History, $5 million from the Pew Charitable Trusts to the National Museum of American History for the Star-Spangled Banner Preservation Project and $1.3 million from the Nippon Foundation to the National Museum of Natural History for the “Ainu: Spirit of a Northern People” project. The Smithsonian is especially grateful to its many friends in the private sector whose generosity contributed vitally to its work. The names of major donors are listed in the Benefactors section of this annual report. In fiscal year 1998, the Institution recorded $57.3 million in income from contracts and grants from government agencies, an increase of $.6 million over fiscal year 1997. Support from government agencies constitutes an important source of research monies for the Institution while also providing the granting agencies access to Smithsonian expertise and resources. As in prior years, the majority of these funds were provided by the National Aeronautics and Space Administration for research programs at the Smithsonian Astrophysical Observatory. Other awards included $1 million from the National Science Foundation for a program in science education developed by the National Science Resources Center and $.5 million from the Department of Energy for a study of carbon dioxide levels in selected ecosystems at the Smithsonian Tropical Research Institute. Endowment (Tables 3, 4, and 5) The Institution pools its endowment funds for investment purposes into a consolidated portfolio, with each endowment purchasing shares in a manner sim- ilar to shares purchased by an investor in a mutual fund. The Investment Policy Committee of the Smithsonian’s Board of Regents establishes investment policy and recommends the annual payout for the consolidated endowment. The Smithsonian’s policies for managing the endowment are designed to achieve two objectives: to provide a stable, growing stream of payouts for current expenditures and to protect the value of the endowment against inflation and maintain its purchasing power. Current policy calls for an average payout of 4.5 percent of the average market value over the prior five years. The investment policy targets a real rate of return of 5 percent. As depicted in the chart on page 96, the market value of the endowment decreased from $600 million to $580.9 million during fiscal year 1998, reflecting the market downturn in the last quarter of the fiscal year. New gifts and internal transfers totaled $11.5 million, while the payout was $19.7 million and fees were $1.5 million. The total return on the consolidated portfolio was (8.16) percent, reflecting the market downturn in the last quarter of the fiscal year. Returns rose again substantially as the market rebounded in the last months of calendar year 1998. At year’s end, the Institution’s portfolio was invested 64 percent in equities, 33 percent in bonds, and 3 percent in cash. The portfolio had 22 percent in foreign stocks and bonds and 78 percent in U.S. securities. Construction and Plant Funds (Table 6) In fiscal year 1998, the federal appropriations for construction were $68.8 million. This amount included $32.0 million for general repair, restoration, and code 95
Slide 4: compliance projects throughout the Institution. With the support of Congress, the Institution continues to seek the $50 million per year required to maintain systematic renewal of its physical plant. Funds earmarked for new construction, alterations, and modifications totaled $36.8 million. Included in this amount is $29.0 million for the Mall museum for the National Museum of the American Indian; $3.8 million for renovations, repairs, and master plan projects at the National Zoological Park; and $4.0 million for planning and design of the National Air and Space Museum Dulles Center. Nonappropriated trust construction funds, also termed plant funds, totaled $5.2 million. Approximately $3.5 million supported construction of facilities for the National Museum of the American Indian; $1.4 million supported renovation of the Cooper-Hewitt, National Design Museum; and $0.3 million contributed to the reinstallation of the Janet Annenberg Hooker Hall of Geology, Gems, and Minerals at the National Museum of Natural History. Financial Position The Smithsonian Institution’s Statement of Financial Position presents the total assets, liabilities, and net assets of the Institution. Total assets of $1.5 billion far exceed total liabilities of $394.0 million and are indicative of the financial strength of the Institution. During fiscal year 1998, the most significant change in the Institution’s financial position was a $41 million increase in debt to finance the Discovery Center at the National Museum of Natural History and a $37 million increase in investments levels. Financial Management During the year, the Smithsonian’s Office of Information Technology conducted an analysis of the Year 2000 software problem. That analysis indicated that for all major critical systems the Institution will be Year 2000 compliant. In one instance, software cannot be made compliant, but an alternative solution will be employed to solve the problem. At present, all major financial system software is warranted to be Year 2000 compliant. Nevertheless, the Institution will continue to conduct testing during fiscal year 1999 to confirm these findings. Market Value of Endowment and Similar Funds (in $ millions) 600 600 500 400 300 200 100 0 1994 1995 1996 1997 1998 379 435 483 581 Other financial management improvement initiatives undertaken in fiscal year 1998 included: • A new database for sponsored project data that will increase the efficiency and effectiveness of managing sponsored projects. This database is also the source of critical financial measures for sponsored project activity that is distributed to senior management in weekly and monthly reports. • Additional application modules for the Institution’s Budget Management, Planning, and Policy System. This improvement has further automated the budget and planning process, eliminating duplication of data entry and reducing error rates. • A system to facilitate use of a new travel credit card for employees. The system includes an enhanced ability for tracking and reporting activity. Use of the travel card will be greatly increased over use of the previous card. • A new electronic fund transfer system for vendor payments and employee reimbursements. Most paychecks are already sent electronically. The system was scheduled to be launched on January 1, 1999. • A major training effort for unit staff in procurement and contracting. This training is required to support the delegation of greater procurement and contracting authority to program units and to implement other changes to the procurement and contracting process. Additional financial management improvement initiatives planned to start in fiscal year 1999 include the following: • Electronic routing of monthly financial reports • Updating and streamlining of financial policies 96
Slide 5: and procedures • Automation of payroll data entry at the unit level • Implementation of software to facilitate accurate preparation of travel authorization and voucher forms Audit Activities The Institution’s financial statements are audited annually by KPMG LLP, an independent public accounting firm. The audit plan includes an in-depth review of the Institution’s internal control structure. KPMG LLP Independent Auditors’ Report for fiscal year 1998 and the accompanying financial statements are presented on the following pages. The Smithsonian’s internal audit staff, part of the Office of Inspector General, assists the external auditors and regularly audits the Institution’s various programs, activities, and internal control systems. The Audit and Review Committee of the Board of Regents provides an additional level of financial oversight and review. In accordance with the government requirement for the use of coordinated audit teams, the Defense Contract Audit Agency, the Smithsonian Office of Inspector General, and KPMG LLP coordinate the audit of grants and contracts received from federal agencies. 97
Slide 6: Table 1. Source and Application of Institutional Resources for the Year Ended September 30, 1998 (in $000s) Trust Funds Federal Funds REVENUE & GAINS: Federal Appropriations (see Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . Endowment Payout & Investment Income. . . . . . . . . . . . . . . . . . . . Government Grants and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . Donor / Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sales and Membership Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TOTAL REVENUE & GAINS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXPENSES: Museums & Research Institutes: Anacostia Museum and Center for African American History and Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Archives of American Art . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Arthur M. Sackler Gallery/Freer Gallery of Art . . . . . . . . . . . . Center for Folklife Programs & Cultural Studies . . . . . . . . . . . Center for Materials Research and Education . . . . . . . . . . . . . Cooper-Hewitt, National Design Museum. . . . . . . . . . . . . . . . Hirshhorn Museum & Sculpture Garden . . . . . . . . . . . . . . . . . National Air and Space Museum . . . . . . . . . . . . . . . . . . . . . . . . National Museum of African Art . . . . . . . . . . . . . . . . . . . . . . . . National Museum of American Art (incl. Renwick) . . . . . . . . National Museum of American History . . . . . . . . . . . . . . . . . . — National Postal Museum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Museum of the American Indian. . . . . . . . . . . . . . . . National Museum of Natural History . . . . . . . . . . . . . . . . . . . . — Museum Support Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Portrait Gallery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Zoological Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Smithsonian Astrophysical Observatory . . . . . . . . . . . . . . . . . Smithsonian Environment Research Center . . . . . . . . . . . . . . Smithsonian Tropical Research Institute . . . . . . . . . . . . . . . . . Total Museums & Research Institutes . . . . . . . . . . . . . . . . . . . . 331,484 — — — — 61,548 — 393,032 General Trust — 15,582 — 33,570 213,109 — 8,335 270,596 Donor/ Sponsor Designated — 6,524 — 46,987 — — — 53,511 Government Grants & Contracts — — 57,320 — — — — 57,320 Total Trust Funds — 22,106 57,320 80,557 213,109 — 8,335 381,427 Total FY 1998 331,484 22,106 57,320 80,557 213,109 61,548 8,335 774,459 1,752 1,587 5,711 1,861 2,770 2,829 4,272 12,340 4,318 7,339 18,654 512 13,313 38,324 3,170 4,592 18,914 24,352 3,123 9,208 178,941 1,005 733 2,079 221 2,051 216 1,709 1,330 5,889 2,862 — 18,095 1,564 — 10,647 209,247 106,766 316,013 — — — — — — 702 123 5,664 1,080 111 2,795 1,827 2,742 520 1,699 2,154 93 1,494 6,391 — 452 1,349 6,439 359 2,152 38,146 113 486 86 1,512 380 602 1,875 139 981 599 940 7,713 101 1,611 — 47,571 4,780 52,351 17,061 57,581 32,866 67,211 22,271 196,990 632 677 1,679 548 11 992 358 2,843 4 1,439 3,800 4,972 3,242 2,509 1 396 1,110 1,599 232 1,112 28,156 3 154 37 82 46 141 1,369 59 177 904 — 2,972 171 708 — 32,007 — 32,007 — — — — — — — — — — 7 86 — 532 — — 16 — (8) 1,784 — — 710 49,450 1,805 1,508 55,890 — 66 — — 63 1,130 173 — — — — 1,432 — — — 57,322 — 57,322 — — — — — — 1,334 800 7,343 1,628 129 3,873 2,185 6,117 524 3,138 5,970 5,065 4,728 10,684 1 848 3,169 57,488 2,396 4,772 122,192 116 706 123 1,594 489 1,873 3,417 198 1,158 1,503 940 12,117 272 2,319 — 136,900 4,780 141,680 17,061 57,581 32,866 67,211 22,271 196,990 3,086 2,387 13,054 3,489 2,899 6,702 6,457 18,457 4,842 10,477 24,624 5,577 18,041 49,008 3,171 5,440 22,083 81,840 5,519 13,980 301,133 1,121 1,439 2,202 1,815 2,540 2,089 5,126 1,528 7,047 4,365 940 30,212 1,836 2,319 10,647 346,147 111,546 457,693 17,061 57,581 32,866 67,211 22,271 196,990 Education, Museum & Scholarly Services: Center for Museum Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibits Central . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fellowships and Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Science Resources Center . . . . . . . . . . . . . . . . . . . . . . The Provost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Smithsonian Institution Archives . . . . . . . . . . . . . . . . . . . . . . . Smithsonian Institution Libraries . . . . . . . . . . . . . . . . . . . . . . . Smithsonian Institution Traveling Exhibition Service . . . . . . Sponsored Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Education, Museum & Scholarly Services . . . . . . . . . Auxiliary Activities (Programmatic) . . . . . . . . . . . . . . . . . . . . . . . . . America’s Smithsonian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prior Year Annual Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allocation of Facilities and Depreciation Expense . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Auxiliary Activities: Smithsonian Press / Smithsonian Productions. . . . . . . . . . . . . . Smithsonian Magazines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Smithsonian Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SI Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unit Auxiliary Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Auxiliary Activities (including Overhead) . . . . . . . . . . . . . . . 98
Slide 7: Table 1. Source and Application of Institutional Resources for the Year Ended September 30, 1998 (in $000s)—(continued) Trust Funds Federal Funds Administration: Membership and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . Administrative Offices (Net of Overhead Recovery) . . . . . . . . . . . . General Trust Donor/ Sponsor Designated Government Grants & Contracts Total Trust Funds Total FY 1998 — 31,085 31,085 15,855 46,940 2,494 5,748 8,242 360 8,602 841 4,299 (5,140) — 257,943 (21,207) 737 (7,817) — — 16 239 255 — 255 — — — — 32,262 (9,618) — 11,631 — — — (2) (2) — (2) — — — — 57,320 — — — — — 2,510 5,985 8,495 360 8,855 841 4,299 (5,140) — 347,525 (30,825) 737 3,814 714,618 718,432 2,510 37,070 39,580 16,215 55,795 92,271 35,490 (127,761) — 710,478 (30,825) 737 33,893 1,110,810 1,144,703 Total Administration before Allocation of Facilities and Depreciation Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allocation of Facilities and Depreciation Expense . . . . . . . . . . . . . Total Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Facilities Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,430 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,191 Allocation of Facilities Services and Depreciation to Functions . . (122,621) Total Facilities Services and Depreciation . . . . . . . . . . . . . . . . TOTAL EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 362,953 — — 30,079 396,192 426,271 Endowment Return Reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . . Net assets, beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . Net assets, end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note 1: Includes $363 thousand revenue recognized as a permanent indefinite appropriation for the Canal Zone Biological Area Fund. Also, includes $1,594 thousand revenue recognized in foreign currency for research projects in India. Table 2. Auxiliary Activities, Fiscal Year 1998 (in $000s) Sales and Membership Revenue FY 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gifts Expenses Net Revenue (Loss) 202,467 856 183,369 19,954 FY 1998: Central Auxiliary Activities Magazines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Smithsonian Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Museum Shops/Mail Order* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Concessions* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Product Development and Licensing* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Smithsonian Press/Smithsonian Productions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,083 32,527 70,999 4,707 1,417 9,734 5,160 1,229 722 16,531 213,109 4 — — — — — — 4 — 2,037 2,045 57,581 32,868 64,656 1,688 865 17,061 3,302 776 727 17,466 196,990 12,506 (341) 6,343 3,019 552 (7,327) 1,858 457 (5) 1,102 18,164 Unit Auxiliary Activities Air and Space Theater and Einstein Planetarium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cooper-Hewitt, National Design Museum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Traveling Exhibition Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other .................................................................. TOTAL FY 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *The Business Management Office expenses were allocated to Museum Shops/Mail Order, Concessions, and Product Development and Licensing. 99
Slide 8: Table 3. Endowment and Similar Activities September 30, 1998 (in $000s) Market Value ASSETS: Pooled Consolidated Endowment: Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . US Government and Quasi-Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate Bonds and Other Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common and Preferred Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Receivable for Securities Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Pooled Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nonpooled Endowment and Similar Activities: Loan to U.S. Treasury in Perpetuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Promises to Give - Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Promises to Give - Charitable Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gift Annuity Program Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Nonpooled Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LIABILITIES AND NET ASSETS: LIABILITIES: Payables for securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred Revenue—Charitable Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annuity Payment Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NET ASSETS Unrestricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrestricted Designated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Temporarily Restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permanently Restricted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Liabilities and Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,865 25 247 41,137 5,270 836 55,731 169,779 373,146 15,902 620,664 1,050 7,387 2,565 245 447 11,694 632,358 215,094 172,514 138,686 64,927 591,221 632,358 Table 4. Changes in Market Value of Endowment and Similar Activities September 30, 1998 (in $000s) Unrestricted Market Value Endowment - 10/1/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes: Gifts ...................................................... Internal Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Interest and Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market Value Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payout . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manager’s Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market Value Endowment - 9/30/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Promises to Give . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charitable Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gift Annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market Value Endowment and Similar Activities - 9/30/98 . . . . . . . . . . . 226,026 — 524 7,614 (10,093) (7,508) (1,469) 215,094 — — — — 215,094 Unrestricted Designated 177,979 — 4,061 4,568 (8,394) (5,700) — 172,514 — — — — 172,514 Temporarily Restricted 148,759 — (1,929) 4,914 (8,477) (6,059) — 137,208 920 558 — — 138,686 Permanently Restricted 47,196 4,822 4,058 459 — (459) — 56,076 6,467 1,955 184 245 64,927 Total 599,960 4,822 6,714 17,555 (26,964) (19,726) (1,469) 580,892 7,387 2,513 184 245 591,221 100
Slide 9: Table 5. Endowment and Similar Activities September 30, 1998 Market Values Unrestricted UNDESIGNATED PURPOSE - TRUE: Avery Fund (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dodge, Patricia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fund for the Future-Unrestricted (See Note 1) . . . . . . . . . . . . . . . . . . Fund for the Future-Glass, Gilbert W. (See Note 1) . . . . . . . . . . . . . . . Fund for the Future-Schermer, Lloyd G. and Betty (See Note 1) . . . . Fund for the Future-Holmberg, Ruth S. (See Note 1) . . . . . . . . . . . . . Higbee, Harry, Memorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hodgkins Fund (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Morgan, Gilbert B. and Betty J., Memorial . . . . . . . . . . . . . . . . . . . . . . Morrow, Dwight W. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mussinan, Alfred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Olmsted, Helen A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Poore, Lucy T. and George W. (See Note 1) . . . . . . . . . . . . . . . . . . . . . Porter, Henry Kirke, Memorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sanford, George H. (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Smithson, James (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Smithson Society, James (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . UNDESIGNATED PURPOSE - QUASI: Dodge, Patricia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ettl, Charles H. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ferguson, Frances B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forrest, Robert Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fund for the Future-Unrestricted (See Note 1) . . . . . . . . . . . . . . . . . . General Endowment (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goddard, Robert H. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Habel, Dr. S. (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hart, Gustavus E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Henry, Caroline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Henry, Joseph and Harriet A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Heys, Maude C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hinton, Carrie Susan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Koteen, Dorothy B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lambert, Paula C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Medinus, Grace L. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . O’Dea , Laura I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Phillips, Roy R., Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rhees, William Jones (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Safford, Clara Louise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Smithsonian Bequest Fund (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . Sultner, Donald H. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taggard, Ganson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Winterer, Alice I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Undesignated Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DONOR DESIGNATED PURPOSE - TRUE: Aitken, Annie Laurie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Arthur, James . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Axelrod, Dr. Herbert R. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Axelrod, Herbert R. & Evelyn, Music . . . . . . . . . . . . . . . . . . . . . . . . . . Axelrod, Herbert R. & Evelyn, Revolving Chair . . . . . . . . . . . . . . . . . . Baird, Spencer Fullerton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Barney, Alice Pike, Memorial (See Note 1) . . . . . . . . . . . . . . . . . . . . . . Batchelor, Emma E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Beauregard, Catherine, Memorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bergen, Charlotte V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brown, Roland W. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Burch, George E. Fellowship in Theoretic Medicine and Affiliated Theoretic Sciences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Camel Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — — — — — — — — — — 359,051 — — — — 364,151 317,301 — — — 216,593 — 37,439 — 409,128 49,124 — — — — 283,729 412,832 24,319 69,041 1,449,751 76 325,000 54,587 120,000 950,000 1,460,000 50,362 828,445 60,000 141,227 10,000 70,295 1,668,889 100,800 684,051 463,715 169,124 950,000 1,460,000 414,513 1,145,746 343,729 554,059 34,319 355,929 3,118,640 138,315 282,583 2,077,841 1,014,681 10,302,634 820,537 181,752,962 81,590 972 6,106 15,059 602,309 1,002,501 293,264 349,823 538,031 9,978 342,568 1,473,414 6,988 468,259 4,317,371 1,277,331 5,706 215,622 207,258,130 215,093,927 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 20,000 — — — — — — — — — — — — — — — 57,368 — — — 77,368 77,368 — — — — — — — — — — — — — — — — — — — — — — — — — 5,756,026 282,583 2,077,841 1,014,681 10,302,634 840,537 181,752,962 81,590 972 6,106 15,059 602,309 1,002,501 293,264 349,823 538,031 9,978 342,568 1,473,414 6,988 468,259 4,374,739 1,277,331 5,706 215,622 207,335,498 220,927,321 450,207 218,246 169,683 — — — 146,768 394,017 35,075 825,823 231,760 8,451 1,736,562 3,128,562 10,051 203,425 277,167 — 7,835,797 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 49,334 960,518 931,677 64,778 414,040 900,590 30,672 202,927 35,000 100,000 38,990 1,000 288,941 290,162 2,706 229,831 1,214,860 — 5,756,026 499,541 1,178,764 1,101,360 64,778 414,040 900,590 177,440 596,944 70,075 925,823 270,750 9,451 2,025,503 3,418,724 12,757 433,256 1,492,027 — 13,591,823 Unrestricted Designated Temporarily Restricted Permanently Restricted Total Market Value 101
Slide 10: Table 5. Endowment and Similar Activities September 30, 1998 (continued) Market Values Unrestricted DONOR DESIGNATED PURPOSE - TRUE: (Continued) Canfield, Fredrick A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Casey, Thomas Lincoln . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chamberlain, Francis Lea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chinese Art Research (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cooper Fund for Paleobiology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cuatrecasas, Jose, Botanical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cullman, Joseph F. III (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Davis Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . deSalle, Albert and Peggy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deibel, Charles P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discovery Communications, Inc. (See Note 1) . . . . . . . . . . . . . . . . . . Division of Mammals Curators Fund . . . . . . . . . . . . . . . . . . . . . . . . . . Dodge, Gary and Rosalind, Memorial . . . . . . . . . . . . . . . . . . . . . . . . . Drake Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Drouet, Francis and Louderback, Harold B. . . . . . . . . . . . . . . . . . . . . . Dykes, Charles, Bequest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eaton, Harriet Phillips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eickemeyer, Florence Brevoort . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eppley Memorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forbes, Edward Waldo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Freer, Charles L. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fund for the Future-Samuel C. Johnson Theater . . . . . . . . . . . . . . . . Fund for the Future-Mary L. Ripley Garden . . . . . . . . . . . . . . . . . . . . . Fund for the Future-Ethel Niki Kominik . . . . . . . . . . . . . . . . . . . . . . . Fund for the Future-Vincent Wilkinson . . . . . . . . . . . . . . . . . . . . . . . Fund for the Future-Jerome and Dorothy Lemelson (See Note 1) . . . Fund for the Future-Smithsonian Luncheon Group (See Note 1) . . . Fund for the Future-Frank J. Lukowski ( See Note 1) . . . . . . . . . . . . . Fund for the Future-National Postal Museum . . . . . . . . . . . . . . . . . . . Fund for the Future-Craveri/Giamporcaro (See Note 1) . . . . . . . . . . . Fund for the Future-Dutton, William C. (See Note 1) . . . . . . . . . . . . Fund for the Future-Konze, Alice Stockton (See Note 1) . . . . . . . . . . FSG Education Program Fund (See Note 1) . . . . . . . . . . . . . . . . . . . . . Global Environmental Endowment Fund . . . . . . . . . . . . . . . . . . . . . . Grimm, Sergei N. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Groom, Barrick W. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Guggenheim, Daniel and Florence . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hamilton, James (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Haupt, Enid A. Garden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Henderson, Edward and Rebecca R., Meteorite Fund . . . . . . . . . . . . . Herman, Lloyd E. (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hewitt, Eleanor G., Repair Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hewitt, Sarah Cooper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hillyer, Virgil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hirayama Fund (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hitchcock, Albert S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hodgkins Fund (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hotung, Sir Joseph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hrdlicka, Ales and Marie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hughes, Bruce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Huntington Publication Fund (See Note 1) . . . . . . . . . . . . . . . . . . . . . Johnson, Seward, Trust Fund for Oceanography . . . . . . . . . . . . . . . . Kellogg, Remington and Marguerite, Memorial . . . . . . . . . . . . . . . . . Kottler, Howard, Endowment for Ceramic Art . . . . . . . . . . . . . . . . . . Kramar, Nada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Krombein, Karl V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lang, Hank and Ru . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lang, Hank and Ru, Educational . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lichtenberg, William R. & Nora H. . . . . . . . . . . . . . . . . . . . . . . . . . . . Mandil, Harry and Beverly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mashantucket Pequot Nation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maxwell, Mary E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mellon Foundation-Advanced Studies in Plant Science Research . . . Mellon Foundation Challenge Grant/Endowment . . . . . . . . . . . . . . . Mellon Publications Endowment Fund . . . . . . . . . . . . . . . . . . . . . . . . Milliken, H. Oothout, Memorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mineral Endowment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mitchell, William A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 14,307 — — — 332,494 33,000 — — 4,147 45,288 235,278 21,661 — — — — 49,425 — 23,187 1,073,891 7,468,936 358,191 6,880 43,591 5,557 — 25,942 — — — — — — 2,311 221,849 195,659 — 5,731 — — — 66,525 377,230 — — — 48,398 — 394,325 — 205,345 — 364,911 3,463 21,030 8,709 — 30,605 — — — 163,368 — 613,372 288,155 2,379 — 115,694 450,369 147,874 291,277 — 13,574 — — 26,188 16,640 — — — 2,845 1,586,475 412,243 599,925 — 115,392 — — 84,318,008 — 26,147 — 14,212 322,771 — — 2,358 475 — — — — — — 948,380 — 1,303,698 206,186 — — — 71,070 85,311 17,376 — 3,982 111,982 212,684 — 35,574,549 — 18,882 7,974 14,653 5,708 — — 62,969 89,253 44,128 — — 285,933 — 844,834 — 46,233 1,000 35,000 500,000 247,580 72,124 100,000 125,000 65,000 100,000 2,402,262 8,901 25,000 448,355 254,072 131,978 64,403 10,500 30,214 818,912 1,958,591 1,003,120 129,516 100,000 144,526 4,943,307 128,751 134,868 25,000 500,000 10,013 46,840 1,000,000 3,000 71,863 100,000 251,108 4,150 3,106,978 257,256 79,347 15,003 88,633 7,000 2,583,247 1,200 146,012 100,000 71,000 9,352 508,960 3,415,606 223,178 75,000 12,103 52,180 200,000 117,723 50,000 100,000 500,000 20,000 1,150,000 655,465 900,000 443 179,008 24,072 510,909 148,874 326,277 500,000 593,648 105,124 100,000 151,188 85,787 145,288 2,637,540 30,562 27,845 2,034,830 666,315 731,903 113,828 125,892 53,401 1,892,803 93,745,535 1,361,311 162,543 143,591 164,295 5,266,078 154,693 134,868 27,358 500,475 10,013 46,840 1,000,000 5,311 293,712 295,659 1,199,488 9,881 4,410,676 463,442 79,347 81,528 465,863 78,070 2,668,558 18,576 194,410 103,982 577,307 222,036 714,305 38,990,155 588,089 97,345 41,107 75,542 205,708 148,328 50,000 162,969 589,253 227,496 1,150,000 1,268,837 1,474,088 2,822 1,023,842 139,766 Unrestricted Designated Temporarily Restricted Permanently Restricted Total Market Value
Slide 11: Table 5. Endowment and Similar Activities September 30, 1998 (continued) Market Values Unrestricted DONOR DESIGNATED PURPOSE - TRUE: (Continued) Moynihan, Elizabeth Brennan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Museum of the American Indian-Heye Foundation . . . . . . . . . . . . . . NMAI Educational Endowment Fund (See Note 1) . . . . . . . . . . . . . . . NMAI George Heye Center (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . Nelms, Henning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nelson, Edward William . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nesbitt, Lowell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Petrocelli, Joseph, Memorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reid, Addison T. (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ripley, S. Dillion and Mary Livingston . . . . . . . . . . . . . . . . . . . . . . . . Roebling Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rollins, Miriam and William . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sackler, Else, Flower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sackler Public Affairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schmitt, John J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Sichel Family, Endowment for Research at the NZP . . . . . . . . . . Sims, George W. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sisley, George J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sprague Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Springer, Frank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Star Spangled Banner (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stern, Harold P., Memorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stevenson, John A., Mycological Library . . . . . . . . . . . . . . . . . . . . . . . Stuart, Mary Horner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tupper, Earl S. (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Walcott, Charles D.and Mary Vaux, Research . . . . . . . . . . . . . . . . . . . Walcott Research Fund, Botanical Publications . . . . . . . . . . . . . . . . . Wells, Dr. John W. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wetmore, Alexander, Fund for Ornithology (See Note 1) . . . . . . . . . Williams, Blair and Elsie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Williston, Samuel Wendell, Diptera Research . . . . . . . . . . . . . . . . . . . Wineland Research Library . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Woolfenden, William J. (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . Wood, Elizabeth B. and Laurence I. (See Note 1) . . . . . . . . . . . . . . . . Zerbee, Frances Brinckle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Zirkle, Nancy Behrend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DONOR DESIGNATED PURPOSE - QUASI: Abbott, Marie Bohrn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Archives of American Art . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Armstrong, Edwin James . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Au Panier Fleuri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bacon, Virginia Purdy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bateman, Robert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Becker, George F. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Cafritz Foundation Fund (See Note 1) . . . . . . . . . . . . . . . . . . . . . Compton, Bertita E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Compton, Bertita E., Memorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cooper Hewitt Acquisition Endowment Fund . . . . . . . . . . . . . . . . . . Daniziger, Richard (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Davis, Gene, Memorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Denghausen, Luisita L. and Franz H. . . . . . . . . . . . . . . . . . . . . . . . . . . Desautels, Paul E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Evans, Richard T. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friends of Music Endowment Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . Gaver, Gordon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Haas, Gloria, Fellowship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hachenbergh, George P. and Caroline . . . . . . . . . . . . . . . . . . . . . . . . . Hagen, Karl (See Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hammond, John Performance Series Fund . . . . . . . . . . . . . . . . . . . . Hanson, Martin Gustav and Caroline R. . . . . . . . . . . . . . . . . . . . . . . . Hirshhorn Collections Endowment Fund . . . . . . . . . . . . . . . . . . . . . . Hirshhorn, Joseph H., Bequest Fund . . . . . . . . . . . . . . . . . . . . . . . . . . The Holenia Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Holenia Trust Fund II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — — — — — — — — — — — — — — — — — — — — — — — — 282,895 505,552 52,651 199,797 964,435 71,003 1,669,257 494 25,020 3,642 828,028 — 411,322 18,358,871 30,642 (6,160) 200,490 27,543 13,227 50,740 — 536,993 105,530 14,029,723 2,683,656 8,964,344 3,838,335 — — — — — 91,248 — 500,000 286,820 32,000 — 500,000 — 308,906 — 68,137 — — 26,329 — 240,655 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 282,895 505,552 52,651 199,797 964,435 162,251 1,669,257 500,494 311,840 35,642 828,028 500,000 411,322 18,667,777 30,642 61,977 200,490 27,543 39,556 50,740 240,655 536,993 105,530 14,029,723 2,683,656 8,964,344 3,838,335 103 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 706,499 50,630 — 173,743 177,648 — — — 223,044 — 2,401,213 — — 14,442 8,334 193,515 22,782 13,539,840 137,383 — 1,140,304 35,677 — 1,439,423 1,521,134 622,274 — — 30,408 26,887 — — — 7,801 30,014 36,668,364 16,598 — — — — 49,971 8,863 76,291 211,950 63,491 1,241,647 — 37,146 1,293,826 — 33,749 — 154,980 — 40,281 — 384,662 11,005 429,426 — — — 2,211 — — 12,895 123 — — 2,118 — 135,025,558 50,161 920,587 273,047 533,500 218,001 30,000 20,000 10,000 20,561 197,080 150,000 691,493 398,237 2,856,875 18,817 400,000 110,000 926,650 4,949,996 30,000 100,000 458,101 10,053 291,426 6,725,650 574,743 80,124 4,577 448,868 39,622 32,942 41,160 126,127 209,685 1,000 117,868 58,596,509 66,759 1,627,086 323,677 533,500 391,744 257,619 28,863 86,291 232,511 483,615 1,391,647 3,092,706 435,383 4,150,701 33,259 442,083 303,515 1,104,412 18,489,836 207,664 100,000 1,983,067 56,735 720,852 8,165,073 2,095,877 702,398 6,788 448,868 70,030 72,724 41,283 126,127 209,685 10,919 147,882 230,290,431 Unrestricted Designated Temporarily Restricted Permanently Restricted Total Market Value
Slide 12: Table 5. Endowment and Similar Activities September 30, 1998 (continued) Market Values Unrestricted DONOR DESIGNATED PURPOSE - QUASI: (Continued) The Holenia Trust Fund III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Houchins, Lee and Chang-Su (See Note 1) . . . . . . . . . . . . . . . . . . . . . Hunterdon Endowment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Johnson, E.R. Fenimore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Johnson, Janet W. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Keyzer-Andre, Henri, Conservation Internship . . . . . . . . . . . . . . . . . . Krieg Drawings & Prints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lane, Robert and Mildred Katchmar . . . . . . . . . . . . . . . . . . . . . . . . . . Leob, Morris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long, Annette E. and Edith C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Louie, Richard Memorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . McGovern, John P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . McLaughlan, Thomas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Merrell, Elinor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Myer, Catherine Walden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noyes, Frank B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noyes, Pauline Riggs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Orth, Edward J., Memorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pell, Cornelia Livingston . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plumb, Henry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ramsey, Adm. and Mrs. Dewitt Clinton . . . . . . . . . . . . . . . . . . . . . . . . Rathbun, Richard, Memorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reeves, Douglas F. and Sanae Iida (See Note 1) . . . . . . . . . . . . . . . . . . Ripley, S. Dillon Library . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Roebling Solar Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ross, Arthur Garden and Terrace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ruef, Bertha M. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schultz, Leonard P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seidell, Atherton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Smithsonian Institution Libraries . . . . . . . . . . . . . . . . . . . . . . . . . . . . Strong, Julia D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Witherspoon, Thomas A., Memorial . . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Donor Designated Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BOARD DESIGNATED PURPOSE - TRUE: Walcott, Charles D. and Mary Vaux, Research . . . . . . . . . . . . . . . . . . . Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BOARD DESIGNATED PURPOSE - QUASI: Abbott, William L. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Barstow, Fredric D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cooper Hewitt Masters Program for Education . . . . . . . . . . . . . . . . . . Heckscher, August, Exhibition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hirshhorn Museum Acquisition Fund . . . . . . . . . . . . . . . . . . . . . . . . . Jackson, Charles Bremner Hogg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lindbergh Chair of Aerospace History . . . . . . . . . . . . . . . . . . . . . . . . . Lindbergh, Charles A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lyon, Marcus Ward, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Martin Marietta Internship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NMNH Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NZP Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SAO Directors Endowment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Smithsonian Institution Libraries General Support . . . . . . . . . . . . . . Smithsonian Press Scholarly Books Fund . . . . . . . . . . . . . . . . . . . . . . Webb, James E., Fellowship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Women’s Committee Fellowship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Board Designated Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TOTAL ENDOWMENT AND SIMILAR ACTIVITIES . . . . . . . . . . . . . . . . . — — — — — — — — — — — — — — — — — — — 215,093,927 1,415,752 11,833 238,118 165,087 4,003,883 2,166,918 4,903,372 78,944 53,703 352,345 232,662 4,619,930 247,236 29,158 3,436,092 2,283,094 492,924 24,731,051 29,485,042 172,513,817 — — — — — — — — — — — — — — — — — — — 138,686,129 — — — — — — — — — — — — — — — — — — 574,182 64,926,717 1,415,752 11,833 238,118 165,087 4,003,883 2,166,918 4,903,372 78,944 53,703 352,345 232,662 4,619,930 247,236 29,158 3,436,092 2,283,094 492,924 24,731,051 30,059,224 591,220,590 — — 4,753,991 4,753,991 — — 574,182 574,182 5,328,173 5,328,173 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1,288,711 — 36,110,132 78,135 (9,847) 4,477 714 392,035 1,046,621 6,464 99,317 25,101 137,855 544,968 239,871 12,090 98,066 2,523 88,553 221,470 1,868,548 126,881 — 243,788 272,797 293,870 304,493 250,334 6,594,930 520,421 119,227 1,529,836 106,360,411 143,028,775 — 74,017 — — 125,000 144,893 25,000 — — — — 87,798 — 60,469 — — — 23,354 — — — — 186,258 168,218 — 618,474 — — — 15,627 — — 3,583,203 138,608,761 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 58,596,509 1,288,711 74,017 36,110,132 78,135 115,153 149,370 25,714 392,035 1,046,621 6,464 99,317 112,899 137,855 605,437 239,871 12,090 98,066 25,877 88,553 221,470 1,868,548 126,881 186,258 412,006 272,797 912,344 304,493 250,334 6,594,930 536,048 119,227 1,529,836 109,943,614 340,234,045 Unrestricted Designated Temporarily Restricted Permanently Restricted Total Market Value Note 1: Invested all or in part in nonpooled investments 104
Slide 13: Table 6. Construction and Plant Funds, Fiscal Years 1998 and 1997 (in $000s) FY 1998 FUNDS PROVIDED Federal Construction Appropriations: National Zoological Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repair and Restoration of Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction Planning and Minor Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Museum of the American Indian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Air and Space Museum Dulles Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Federal Construction Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nonappropriated Trust Plant Funds: Income - Gift and Other Cooper - Hewitt, National Design Museum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Museum of the American Indian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Museum of Natural History - Gem Hall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Air and Space Museum Dulles Extension. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Trust Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Funds Provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FY 1997 3,850 32,000 — 29,000 4,000 68,850 3,850 39,000 3,000 4,000 3,000 52,850 1,400 3,477 359 — 10 5,246 74,096 1,670 4,629 963 500 13 7,775 60,625 105
Slide 14: Independent Auditors’ Report B OA R D O F R E G E N T S SMITHSONIAN INSTITUTION: We have audited the accompanying statement of financial position of the Smithsonian Institution (Smithsonian) as of September 30, 1998, and the related statements of financial activity and cash flows for the year then ended. These financial statements are the responsibility of the Smithsonian’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Smithsonian Institution as of September 30, 1998, and its changes in net assets and its cash flows for the year then ended, in conformity with generally accepted accounting principles. Washington, D.C.KPMG LLP January 13, 1999 SMITHSONIAN INSTITUTION Statement of Financial Position September 30, 1998 (in thousands) Total Funds Trust Funds Assets: Cash and balances with the U.S. Treasury Receivables and advances (note 3) Prepaid and deferred expenses (note 2) Other assets (note 5) Inventory Investments (note 6) Property and equipment, net (note 9) Collections (note 5) Total assets Liabilities: Accounts payable and accrued expenses Net payable for investment securities purchased Deferred revenue Debt (note 10) Deposits held for affiliates (note 11) Accrued annual leave Unexpended federal appropriations Total liabilities Net assets: Unrestricted: Funds functioning as endowments (note 7) Operational balances Total unrestricted net assets Temporarily restricted: Funds functioning as endowments (note 7) Donor contributions for ongoing programs Total temporarily restricted net assets Permanently restricted: True endowment (note 7) Interest in perpetual and other trusts Total permanently restricted net assets Total net assets Commitments and contingencies (note 12) Total liabilities and net assets See accompanying notes to the financial statements. $ 5,193 69,460 15,663 4,300 20,254 646,455 119,739 — Federal Funds 200,636 16,066 — — 921 — 440,103 — 657,726 34,080 — — — — 14,752 182,623 231,455 1998 205,829 85,526 15,663 4,300 21,175 646,455 559,842 — 1,538,790 69,870 24,963 50,505 41,526 4,864 19,736 182,623 394,087 1997 197,048 69,529 16,956 4,300 18,959 609,660 516,496 — 1,432,948 69,512 1,001 53,602 1,000 3,933 19,290 173,800 322,138 $ 881,064 $ 35,790 24,963 50,505 41,526 4,864 4,984 — 162,632 387,608 63,673 451,281 138,686 63,538 202,224 62,972 1,955 64,927 718,432 $ 881,064 — 426,271 426,271 — — — — — — 426,271 657,726 387,608 489,944 877,552 138,686 63,538 202,224 62,972 1,955 64,927 1,144,703 1,538,790 404,005 471,377 875,382 149,089 29,877 178,966 54,560 1,902 56,462 111,0810 1,432,948 106
Slide 15: SMITHSONIAN INSTITUTION Statement of Financial Activity For the Year Ended September 30, 1998 (In thousands) Unrestricted Trust Funds Operating revenue: Government funding and other revenue: Federal appropriations Government grants and contracts Short-term investment income (note 8) Endowment payout (note 8) Private grants Rentals, fees, and commissions Auxiliary activities (note 15) Total government funding and other revenue Contributions: Program support Construction of facilities Total contributions Total operating revenue and support Net assets released from restrictions Total operating revenue, support and other additions Expenses: Research Collections management Education, public programs, and exhibitions Auxiliary activities (note 15) Administration Advancement Total expenses Increase (decrease) in net assets from operations Endowment return in excess of (less than) payout (note 8) Change in net assets related to collection items not capitalized (note 5): Proceeds from sale Collection items purchased Increase (decrease) in net assets Net assets, beginning of the year Net assets, end of the year See accompanying notes to the financial statements. 73,953 2,729 30,506 196,990 25,950 10,459 340,587 (501) (21,207) 127,644 57,128 77,304 — 98,984 — 361,060 31,972 — 201,597 59,857 107,810 196,990 124,934 10,459 701,647 31,471 (21,207) — — — — — — — 32,879 (9,621) — — — — — — — 8,462 3 201,597 59,857 107,810 196,990 124,934 10,459 701,647 72,812 (30,825) 190,042 56,545 130,158 183,369 122,471 9,353 691,938 36,907 109,283 Federal Funds Total Temporarily Restricted Trust Funds Permanently Restricted Trust Funds Total 1998 1997 $ — 57,320 2,374 13,208 5,682 8,335 213,109 393,032 — — — — — — 393,032 — — — 393,032 — 393,032 393,032 57,320 2,374 13,208 5,682 8,335 213,109 693,060 27,888 — 27,888 720,948 12,170 733,118 — — 6 6,059 7,318 — — 13,383 27,851 3,815 31,666 45,049 (12,170) 32,879 — — — 459 — — — 459 8,003 — 8,003 8,462 — 8,462 393,032 57,320 2,380 19,726 13,000 8,335 213,109 706,902 63,742 3,815 67,557 774,459 — 774,459 383,468 56,703 1,924 18,174 7,708 14,055 202,467 684,499 37,924 6,422 44,346 728,845 — 728,845 300,028 27,888 — 27,888 327,916 12,170 340,086 737 (6,938) (27,909) 479,190 $ 451,281 — (1,893) 30,079 396,192 426,271 737 (8,831) 2,170 875,382 877,552 — — 23,258 178,966 202,224 — — 8,465 56,462 64,927 737 (8,831) 33,893 1,110,810 1,144,703 2,719 (9,358) 139,551 971,259 1,110,810 SMITHSONIAN INSTITUTION Statement of Cash Flows For the Year ended September 30, 1998 (In thousands) Total Funds Trust Funds Cash flows from operating activities: Increase in net assets Adjustments to reconcile increase in net assets to net cash provided by operating activities: Proceeds from sales of collections Collection items purchased Depreciation Loss on disposition of assets Contributions for increases in endowment Contributions for construction of property Appropriations for repair, restoration and construction Investment income restricted for long-term investment Provision for doubtful accounts Net realized and unrealized loss (gain) on investments Decrease (increase) in assets: Receivables and advances Prepaid and deferred expenses Other assets Inventory $ 3,814 (737) 6,938 7,388 364 (4,822) (3,815) — (462) 277 26,505 (18,325) 1,293 — (2,133) Federal Funds 30,079 — 1,893 38,493 219 — — (68,850) — — — (1,698) — — (83) 1998 33,893 (737) 8,831 45,881 583 (4,822) (3,815) (68,850) (462) 277 26,505 (20,023) 1,293 — (2,216) 1997 139,551 (2,719) 9,358 37,938 1,339 (2,916) (6,422) (52,850) (419) 792 (107,160) (9,564) 6,603 (300) 1,268 107
Slide 16: SMITHSONIAN INSTITUTION Statement of Cash Flows For the Year ended September 30, 1998 (In thousands) Total Funds Trust Funds Adjustments to reconcile net increase in net assets to net cash provided by operating activities: (continued) Increase (decrease) in liabilities: Accounts payable and accrued expenses Net payable for investment securities purchased Deferred revenue Deposits held for others Accrued annual leave Unexpended federal appropriations Net cash provided from operating activities Cash flows from investing activities: Proceeds from sales of collections Collection items purchased Purchase of property and equipment Purchases of investment securities Proceeds from the sales of investment securities Net cash used in investing activities Cash flows from financing activities: Contributions for increases in endowment Contributions for construction of property Appropriations for repair, restoration and construction Investment income restricted for long-term purpose Proceeds from issuance of debt Repayments of debt Net cash provided from financing activities Net increase (decrease) in cash and balances with the U.S. Treasury Cash and balances with the U.S. Treasury: Beginning of the year End of the year $ Federal Funds 1998 1997 (299) 23,962 (3,097) 931 169 — 37,951 657 — — — 277 8,823 9,810 358 23,962 (3,097) 931 446 8,823 47,761 5,586 (16,635) 2,555 (2,950) (1,489) (9,920) (8,354) 737 (6,938) (20,824) (750,907) 687,607 (90,325) — (1,893) (68,986) — — (70,879) 737 (8,831) (89,810) (750,907) 687,607 (161,204) 2,719 (9,358) (90,789) (865,439) 901,596 (61,271) $ 8,571 3,815 — 462 40,526 — 53,374 1,000 4,193 5,193 — — 68,850 — — — 68,850 7,781 192,855 200,636 8,571 3,815 68,850 462 40,526 — 122,224 8,781 197,048 205,829 7,605 6,422 52,850 419 500 (2,597) 65,199 (4,426) 201,474 197,048 Cash paid for interest during fiscal years 1998 and 1997 was $1,332,000 and $58,000, respectively. See accompanying notes to the financial statements. (1) Organization The Smithsonian Institution was created by act of Congress in 1846 in accordance with the terms of the will of James Smithson of England, who, in 1826, bequeathed his property to the United States of America “to found at Washington, under the name of the Smithsonian Institution, an establishment for the increase and diffusion of knowledge among men.” After receiving the property and accepting the trust, Congress vested responsibility in the Smithsonian Board of Regents (Board) to administer the trust. The Smithsonian Institution (Smithsonian) is a museum, education and research complex of 16 museums and galleries, the National Zoological Park, and other research facilities. Research is carried out in the Smithsonian’s museums and facilities throughout the world. The Smithsonian’s extensive collections number over 140 million objects. During fiscal year 1998, over 28 million individuals visited the Smithsonian museums and other facilities. The Smithsonian receives its funding from federal appropriations, private gifts and grants, government grants and contracts, investment income, and various business activities, including the Smithsonian magazines and other publications, a mailorder catalogue, museum shops, and food services. A substantial portion of the Smithsonian’s annual operating budget is funded from annual federal appropriations. Certain construction projects have been completely funded from federal appropriations, while others are funded using amounts raised from private sources, or by a combination of federal and private funds. Federal operating and construction funding are both subject to the annual federal ap- propriations process, and therefore the potential exists for reductions in approved federal funding that would significantly impact the Smithsonian’s operations. These financial statements do not include the accounts of the National Gallery of Art, the John F. Kennedy Center for the Performing Arts, or the Woodrow Wilson International Center for Scholars, which were established by Congress within the Smithsonian, but are administered by independent boards of trustees. (2) Summary of Significant Accounting Policies These financial statements present the financial position, financial activity, and cash flows of the Smithsonian on the accrual basis of accounting. Funds received from direct federal appropriations are reported as Federal Funds in the financial statements. All other funds are reported as Trust Funds. (a) Trust Funds All non-appropriated activities are classified as trust funds, income from which arises primarily from contributions, grants and contracts, net investment income, and auxiliary activities. Trust net assets are classified and reported as follows: Unrestricted net assets Net assets that are not subject to any donor-imposed or other legal stipulations on the use of the funds. Funds functioning as endowments in this category represent unrestricted assets which have been designated by management or the Board for longterm investment. 108
Slide 17: Temporarily restricted net assets Net assets subject to donor-imposed stipulations on the use of the assets that may be met by actions of the Smithsonian and/or the passage of time. Funds functioning as endowments in this category represent donor-restricted contributions that have been designated by management or the Board for longterm investment. Donor contributions represent unspent gifts and promises-to-give of cash and securities subject to donor-imposed restrictions which have not yet been met. Permanently restricted net assets Net assets subject to donor-imposed stipulations that the principal be maintained permanently by the Smithsonian. Generally, the donors of these assets permit the Smithsonian to use all or part of the income earned on investment of the assets for either general or donor-specified purposes. (b) Federal Funds The Smithsonian receives federal appropriations to support the Smithsonian’s operating salaries and expenses, repair and restoration of facilities, and construction. Federal appropriation revenue is classified as unrestricted and recognized as an exchange transaction as expenditures are incurred. The liability reported as unexpended appropriations represent either goods and services that have been ordered but not yet received or appropriated funds that have not yet been obligated. The Smithsonian received appropriations for operations of $333,408,000 in fiscal year 1998. Federal appropriations for operations are generally available for obligation only in the year received. In accordance with Public Law 101-510, these annual appropriations are maintained by the Smithsonian for five years following the year of appropriation, after which the appropriation account is closed and any unexpended balances are returned to the U.S. Treasury. During fiscal year 1998, the Smithsonian returned $2,193,000 to the U.S. Treasury which represents the unexpended balance for fiscal year 1993. Federal appropriations for repair and restoration of facilities and construction are generally available for obligation until expended. (c) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, however, management does not believe that actual results will be materially different from those estimates. (d) Fair Value of Financial Instruments The carrying value of financial instruments in the financial statements approximates fair value. (e) Cash and Balances with U.S. Treasury Amounts represent cash deposited with financial institutions, balances held by the U.S. Treasury that are available for disbursement, and a repurchase agreement totaling $7,810,000 at September 30, 1998. (f ) Investments The Smithsonian’s marketable equity and debt securities are reported at fair value based on quoted market prices. Changes in fair value are recognized in the statement of financial activity. Purchases and sales of investments are recorded on the trade date. Investment income is recorded when earned, and realized gains and losses on the sale of investments are recognized on the trade date basis using the average cost method. As mandated by Congress, the Smithsonian maintains two $500,000 Treasury investments relating to the original James Smithson gift. (g) Contributions Receivable Contributions receivable that are expected to be collected within one year are reported net of any estimated uncollectible amounts. Contributions expected to be collected beyond one year are also discounted to present value. Conditional contributions receivable are not recorded until material conditions have been met. (h) Inventories Inventories are reported at the lower of cost or market, and consist primarily of merchandise inventory, books, recordings, and office supplies. Cost is determined using the first-in, first-out method. (i) Deferred Revenue and Expense Revenue from subscriptions to Smithsonian magazine and Air & Space/Smithsonian magazine is recognized over the period of the subscription, generally one year. Promotion production expenses are recognized when related advertising materials are released. Direct-response advertising relating to the magazines is deferred and amortized over one year. At September 30, 1998, prepaid and deferred expenses include $5,403,000 of deferred promotion costs, mostly related to the Smithsonian magazine. Promotion expense totaled $15,475,000 in fiscal year 1998. (j) Split Interest Agreements and Perpetual Trusts Split interest agreements with donors consist primarily of irrevocable charitable remainder trusts and charitable gift annuities. For the charitable remainder trusts, contribution revenue and assets are recognized at fair value on the date the trusts are established. Assets are adjusted during the term of the trusts for changes in the value of the assets, accretion of discounts, and other changes in the estimated future benefits. For the charitable gift annuities, assets are recognized at fair value on the date the annuity agreements are established. An annuity liability is recognized at the present value of future cash flows expected to be paid to the donor and contribution revenue is recognized as the difference between the assets and liability. Liabilities are adjusted during the term of the annuities for payments to donors, accretion of discounts and changes in the life expectancy of the donor. The Smithsonian is also the beneficiary of certain perpetual trusts held and administered by others. The present values of the estimated future cash receipts from the trusts are recognized as assets and contribution revenue at the dates the trusts are established. Distributions from the trusts are recorded as contributions and the carrying value of the assets is adjusted for changes in the estimates of future receipts. (k) Property and Equipment Property and equipment purchased with federal or trust funds are capitalized at cost. Property and equipment acquired through transfer from government agencies are capitalized at net book value or fair value, whichever is more readily determinable. Property and equipment acquired through donation are capitalized at appraised value at the date of the gift. These assets are depreciated on a straight-line basis over their estimated useful lives as follows: Buildings Major renovations 15 years Equipment 30 years 3–10 years Certain lands occupied by the Smithsonian’s buildings, primarily located in the District of Columbia, Maryland and Virginia, were appropriated and reserved by Congress for the Smithsonian’s use. The Smithsonian serves as trustee of these lands for as long as they are used to carry out the Smithsonian’s mission. These lands are titled in the name of the U.S. government and are not reflected in the accompanying financial statements. (l) Collections The Smithsonian acquires its collections, which include works of art, library books, photographic archives, objects and specimens, by purchase using federal or trust funds or by donation. All collections are held for public exhibition, education, or research, furthering the Smithsonian’s mission to increase and diffuse knowledge to the public. The Smithsonian protects and preserves its collections, which total more than 140 million items. The Smithsonian’s Collections Management policy includes guidance on the preservation, care and maintenance of the collections and procedures relating to the accession/deaccession of items within the collections. The Smithsonian’s policy is to not capitalize its collections, therefore, no value is assigned to the collections on the statement of financial position. Purchases of collection items are recorded as expense in the year in which the items are acquired. Contributed collection items are not reflected in the financial statements. Proceeds from deaccessions or insurance recoveries from lost or destroyed collection items are reflected as increases in the appropriate net asset class, and are designated for future collection acquisitions. Items that are acquired with the intent at the time of acquisition not to add them to the collections but rather to sell, exchange, or otherwise use them for financial gain are not considered collection items, and are recorded at fair market value at date of acquisition as other assets in the statement of financial position. (m) Annual Leave The Smithsonian’s civil service employees earn annual leave in accordance with federal laws and regulations. Separate rules apply for trust employees. Annual leave for all employees is recognized as expense when earned. (n) Government Grants and Contracts The Smithsonian receives grants and enters into contracts with the U.S. government and state and local governments, which primarily provide for cost reimbursement to the Smithsonian. Revenue from governmental grants and contracts is classified as unrestricted and is recognized as reimbursable expenditures are incurred. (o) Contributions The Smithsonian recognizes revenue from all contributions as revenue in the period unconditional promises are received. Unrestricted contributions with payments due in future periods are initially recorded as temporarily restricted support, and are reclassified to unrestricted net assets when payments become due. When donor restrictions are met on temporarily restricted contributions, the related net assets are reclassified as released from restrictions in the accompanying statement of financial activity. Gifts of long-lived assets are recorded as unrestricted revenue in the period received. Contributions of cash and other assets restricted to the acquisition of longlived assets are 109
Slide 18: recorded as temporarily restricted revenue in the period received. The donor’s restrictions expire and the related net assets are released from restriction when the long-lived asset is placed in service by the Smithsonian. In-kind contributions of goods and services totaling $6,310,000 were received in fiscal year 1998 and recorded as program support in the accompanying statement of financial activity. The nature of the in-kind contributions primarily includes donated space and interactive multimedia software programs. A substantial number of volunteers also make significant contributions of time to the Smithsonian, enhancing its activities and programs. In fiscal year 1998, more than 5,600 volunteers contributed over 496,000 hours of service to the Smithsonian. The value of these contributions is not recognized in the financial statements. ($000s) Salaries and Salariesand Expenses Expenses Repair and Repair and Restoration and Restorationand Construction Construction 61,548 68,850 (61,548) — 68,850 Total Total Federal appropriation revenue Unexpended 1998 appropriation Amounts expended from prior years Other funding Fiscal year 1998 federal appropriations $ 331,484 49,723 (46,724) (1,075) 333,408 393,032 118,573 (108,272) (1,075) 402,258 $ (p) Advancement The Smithsonian raises private financial support from individual donors, corporations and foundations to fund programs and other initiatives. Funds are also generated through numerous membership programs. Fund-raising costs are expensed as incurred and reported as advancement expense in the statement of financial activity. Membership program costs are amortized over membership terms, typically one year, and are also reported as Advancement expenses. (q) Comparative Financial Statements The statement of financial activity includes certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Smithsonian’s financial statements for the year ended September 30, 1997, from which the summarized information was derived. (r) Reclassifications Certain amounts have been reclassified in prior year to conform with the current year presentation. (3) Receivables and Advances Receivables and advances consisted of the following at September 30, 1998: Federal expenses recognized in fiscal year 1998 can be reconciled to the federal appropriations received in fiscal year 1998 as follows: ($000s) Salaries and Salariesand Expenses Expenses R eRepairnand pair a d Restoration and Restorationand Construction Construction Total Total Federal expenses Unexpended 1998 appropriation Depreciation Supplies consumption Loss on disposition of assets Unfunded annual leave Amounts expended from prior years Capital expenditures Other funding Fiscal year 1998 federal appropriations $ 331,426 49,723 (6,966) 82 (219) (277) (46,724) 7,438 (1,075) 333,408 31,527 68,850 (31,527) — — — (61,548) 61,548 — 68,850 362,953 118,573 (38,493) 82 (219) (277) (108,272) 68,986 (1,075) 402,258 $ ($000s) Trust Trust Federal Federal Total Total Auxiliary activities, net of $1,590,000 in allowances $ Contributions receivable, net Grants and contracts Interest and dividends due Advance payments Charitable trust Total receivables and advances $ 18,011 33,789 13,264 660 1,171 2,565 69,460 — — — — 16,066 — 16,066 18,011 33,789 13,264 660 17,237 2,565 85,526 Federal unrestricted net assets primarily represent the Smithsonian’s net investment in property, plant and equipment purchased with or constructed using federal appropriated funds. Unexpended appropriations for all fiscal years total $182,623,000 at September 30, 1998, and consist of $73,332,000 in unexpended operating funds and $109,291,000 in unexpended repair and restoration and construction funds. Unexpended operating funds include amounts for the Museum Support Center move and the National Museum of the American Indian. Unexpended repair and restoration funds represent amounts available for on-going major repair and restoration of the Smithsonian’s museums and facilities. Unexpended construction funds represent amounts appropriated but not yet expended for construction of new facilities. (5) Accessions and Deaccessions (a) Contributions Receivable Contributions receivable (pledges) are recorded as revenue when received. Pledges for which payment is not due within one year are discounted based on United States Treasury risk-free obligation rates according to their corresponding terms. As of September 30, 1998, the aggregate discounted contributions receivable was as follows: ($000s) ($000s) Due within: Less than 1 year 1 to 5 years More than 5 years For fiscal year 1998, $6,938,000 of trust funds and $1,893,000 of federal funds were spent to acquire collection items. Proceeds from trust fund deaccessions were $737,000. There were no deaccessions of collection items purchased with federal funds in fiscal year 1998. At September 30, 1998, accumulated proceeds and related earnings from deaccessions of $16,269,000 were designated for collections acquisition in the trust funds. Non-cash deaccessions result from the exchange, donation, or destruction of collection items, and occur because objects deteriorate, are beyond the scope of a museum’s mission, or are duplicative. During fiscal year 1998, the Smithsonian’s noncash deaccessions included works of art, animals, historical objects, and natural specimens. Contributed items held for sale total $4,300,000 and are reported as other assets in the statement of financial position. (6) Investments $ 14,079 21,596 5,964 41,639 At September 30, 1998, investments consisted of the following: Less: Allowance for uncollectible pledges Discount to present value Contributions receivable, net $ (4,356) (3,494) 33,789 ($000s) ($000s) Short-term investments: Cash equivalents U.S. Government obligations Endowment and similar investments: Pooled investments: Cash equivalents U.S. Government and quasi-government obligations Corporate bonds and other obligations Common and preferred stocks Total pooled investments Nonpooled investments: Deposits with U.S. Treasury Total endowment and similar investments Gift annuity program investments: Corporate bonds and other obligations Common and preferred stock Total investments $ 16,407 24,625 41,032 5,270 55,731 169,779 373,146 603,926 1,050 604,976 140 307 447 646,455 At September 30, 1998, the Smithsonian has outstanding conditional contributions totaling $14,000,000 which will be recognized when the specific conditions are met. (b) Advance Payments At September 30, 1998, federal advance payments of $16,066,000 represent prepayments made to government agencies, educational institutions, firms and individuals for services to be rendered, or property or materials to be furnished. At September 30, 1998, Smithsonian advance payments included amounts paid to the General Services Administration of $8,512,000 for equipment purchases for the Museum Support Center and other projects to be completed in future years. (4) Reconciliation of Federal Appropriations Federal appropriation revenue recognized in fiscal year 1998 can be reconciled to the federal appropriations received in fiscal year 1998 as follows: $ 110
Slide 19: (7) True Endowment and Funds Functioning as Endowments The Smithsonian uses the “total return” approach to investment management of pooled true endowment funds and quasi-endowment funds, referred to collectively as the endowment. Each year, the endowment pays out an amount for current expenditures based upon a number of factors evaluated and approved by the Board of Regents. The payout for 1998 was 4.5 percent of the average market value of the endowment over the prior five years. The difference between the total return (i.e., dividends, interest and net gains), and the payout is reinvested when there is an excess of total return over payout, or withdrawn from previously accumulated returns when there is a deficiency of total return to payout. The payout amount exceeded the total return in fiscal year 1998 and the deficit was withdrawn from the endowment asset pool. The withdrawal is reported as a non-operating loss in the accompanying statement of financial activity (see note 8). Substantially all of the investments of the endowment are pooled on a market value basis, with individual funds subscribing to or disposing of units on the basis of the per unit market value at the beginning of the month in which the transaction takes place. At September 30, 1998, each unit had a market value of $614. The market value of the pool’s net assets at September 30, 1998, was $579,444,000. This represents all pooled investments plus net receivables and payables related to investment transactions. Each fund participating in the investment pool receives an annual payout equal to the number of units owned times the annual payout amount per unit. The payout for fiscal year 1998 was $21.00 per unit. Based on approved Board policy, if the market value of any endowment fund is less than 110 percent of the historical value, the current payout is limited to the actual interest and dividends allocable to that fund. Net asset balances of the endowment consisted of the following at September 30, 1998: preciation expense for fiscal year 1998 totaled $38,493,000 in the federal funds and $7,388,000 in the trust funds. (10) Debt In January 1998, the District of Columbia issued $41.3 million of tax-exempt revenue bonds on behalf of the Smithsonian. The Smithsonian is obligated under these bonds as follows: ($000s) ($000s) Series 1997 Revenue Bonds, Serial, with principal amounts ranging from $800,000 to $1,225,000 interest rates ranging from 4.10% to 4.75%, maturing at various points from February 1, 2002 through 2012 Series 1997 Revenue Bonds, Term: Interest rate 5.00% due February 1, 2017 Interest rate 4.75% due February 1, 2018 Interest rate 5.00% due February 1, 2028 Total bonds at face value Less – unamortized bond discount Total bonds payable $ 10,950 7,105 1,640 21,625 41,320 (794) $ 40,526 ($000s) ($000s) Unrestricted Unrestricted-designated Total unrestricted Temporarily restricted Permanently restricted Total endowment net assets (8) Composition of Total Return from Investments $ 215,094 172,514 387,608 138,686 62,972 $ 589,266 Total return from investments consisted of the following for the year ended September 30, 1998: Composition of Endowment Return: ($000s) ($000s) Endowment payout Payout in excess of investment income Total investment income Less - investment fees Net investment income Net realized and unrealized loss on investments Endowment total return $ 19,726 (2,171) 17,555 (1,469) 16,086 (27,185) The serial and term bonds represent an unsecured general obligation of the Smithsonian. Proceeds from the sale of the bonds will finance certain renovations of and improvements to the National Museum of Natural History, fund capitalized interest, and pay certain costs of issuing the bonds. Interest on the bonds is payable semiannually on August 1 and February 1, beginning on August 1, 1998. Principal and interest payments will be funded solely through unrestricted Trust funds. The term bonds maturing on February 1, 2017 and 2028 are subject to mandatory redemption by operations of sinking fund installments. Installment payments for the term bond maturing February 1, 2017, begin on February 1, 2013 and range from $1,285,000 to $1,565,000 per year through the maturity date. Installment payments for the term bond maturing February 1, 2028 begin on February 1, 2019 and range from $1,720,000 to $2,665,000 per year through the maturity date. Interest expense on bonds payable for fiscal year 1998 totaled $1,332,000, net of capitalized interest of $173,000. At September 30, 1998, the Smithsonian also had an interest-free loan from the Virginia Department of Aviation totaling $1,000,000. The Virginia Department of Aviation agreed, in fiscal year 1995, to make available to the Smithsonian an interest-free loan facility totaling $3 million, of which $500,000 was drawn in fiscal years 1996 and 1997. This loan facility is intended to assist in the financing of the planning, marketing, fund-raising, and design of the proposed National Air and Space Museum extension at Washington Dulles International Airport. The Smithsonian is scheduled to repay the outstanding loan not later than June 30, 2000. (11) Affiliate Relationships The Smithsonian provides certain fiscal, procurement, facilities and administrative services to several separately incorporated affiliated organizations for which certain officials of the Smithsonian serve on the governing boards. The amounts paid to the Smithsonian by these organizations for the above services totaled $164,000 of trust funds and $70,000 of federal funds for fiscal year 1998. Deposits held in custody for these organizations at September 30, 1998, were $4,864,000 and were recorded in the trust funds. The Friends of the National Zoo (FONZ), an independent 501(c)(3) organization, raises funds for the benefit of the Smithsonian’s National Zoological Park. Funds received by the Smithsonian from FONZ are recorded as unrestricted revenue and totaled $548,000 in fiscal year 1998. (12) Commitments and Contingencies $ (11,099) Endowment total return is reported as $19,726,000 in operating revenue and ($30,825,000) in nonoperating endowment return in the statement of financial activity. Composition of Short-Term Investment Total Return: ($000s) ($000s) Interest and dividends Net realized and unrealized gain on investments Short-term investment total return (9) Property and Equipment $ $ 1,700 680 2,380 Property and equipment consisted of the following at September 30, 1998: Trust Trust Federal Federal ($000s) — 818,325 49,283 — Total Total (a) Leasing Activities Leases for Smithsonian warehouse and office spaces provide for rent escalations to coincide with increases in property taxes, operating expenses attributable to the leased property and the Consumer Price Index. The Smithsonian has the authority to enter into leases for up to 30 years using federal funds. The Smithsonian’s operating leases for the warehouse and office spaces require future minimum lease payments as follows: ($000s) ($000s) Land Buildings and capital improvements Equipment Leashold improvements Accumulated depreciation Total property and equipment $ 2,387 159,668 25,295 2,290 189,640 (69,901) 2,387 977,993 74,578 2,290 1,057,248 (497,406) 559,842 867,608 (427,505) 440,103 $ 119,739 1999 2000 2001 2002 2003 Thereafter Total $ 13,066 9,550 9,291 9,119 8,240 29,549 78,815 At September 30, 1998, buildings and capital improvements included $28,135,000 and $125,296,000 of construction in progress within Trust and Federal funds, respectively. De- $ Rental expense for these operating leases totaled $15,516,000 for fiscal year 1998. 111
Slide 20: (b) Government Grants and Contracts The Smithsonian receives funding or reimbursement from governmental agencies for various activities which are subject to audit. Audits of these activities have been completed through fiscal year 1997, however, fiscal year 1997 has not been closed with the cognizant federal audit agency. Management believes that any adjustments which may result from this audit and the audit for fiscal year 1998 will not have a materially adverse effect on the Smithsonian’s financial statements. (c) Litigation The Smithsonian is a party to various litigation arising out of the normal conduct of its operations. In the opinion of the Smithsonian’s General Counsel, the ultimate resolution of these matters will not have a materially adverse effect on the Smithsonian’s financial statements. (13) Employee Benefit Plans The federal employees of the Smithsonian are covered by either the Civil Service Retirement System (CSRS) or the Federal Employee Retirement System (FERS). The terms of these plans are defined in federal regulations. Under both systems, the Smithsonian withholds from each federal employee’s salary the required salary percentage. The Smithsonian also contributes specified percentages. The Smithsonian’s expense for these plans for fiscal year 1998 was $15,959,000. The Smithsonian has a separate defined contribution retirement plan for trust fund employees, in which substantially all such employees are eligible to participate. Under the plan, the Smithsonian contributes stipulated percentages of salary which are used to purchase individual annuities, the rights to which are immediately vested with the employees. Employees can make voluntary contributions, subject to certain limitations. The Smithsonian’s cost of the plan for fiscal year 1998 was $9,365,000. In addition to the Smithsonian’s retirement plans, the Smithsonian makes available certain health care and life insurance benefits to active and retired trust fund employees. The plan is contributory for retirees and requires payment of premiums and deductibles. Retiree contributions for premiums are established by an insurance carrier based on the average per capita cost of benefit coverage for all participants, active and retired, in the Smithsonian’s plan. The inclusion of retirees in the calculation of average per capita cost results in a higher average per capita cost than would result if only active employees were covered by the plan. Therefore, the Smithsonian has a postretirement benefit obligation totaling $6,097,000 at September 30, 1998, for the portion of the expected future cost of the retiree benefits that is not recovered through retiree contributions. The Smithsonian’s policy is to fund the cost of these benefits on the pay-as-you-go-basis. (14) Income Taxes The Smithsonian is recognized as exempt from income taxation under the provisions of Section 501(c)(3) of the Internal Revenue Code (the Code). Organizations described in that section are taxable only on their unrelated business income. Periodical advertising sales is the main source of unrelated business income. An IRS determination letter has been received supporting the Smithsonian’s taxexempt status. No provision for income taxes was required for fiscal year 1998. It is the opinion of the Smithsonian’s management that the Smithsonian is also exempt from taxation as an instrumentality of the United States as defined in Section 501(c)(1) of the Code. Organizations described in that section are exempt from all income taxation. The Smithsonian has not yet formally sought such dual status. (15) Restructuring of Smithsonian Press / Smithsonian Productions Divisions During fiscal year 1998, the Board voted to discontinue operations of three divisions of the Smithsonian Press/Smithsonian Productions auxiliary activity, including Smithsonian Books, Smithsonian Collection of Recordings, and Smithsonian Videos, effective April 1, 1998. Costs associated with the closure, include write-offs of inventory and accounts receivable, accruals for contractual product and fulfillment contract guarantees, guaranteed royalties and commissions, potential merchandise returns, litigation claims and severance costs. In fiscal year 1998, the total loss from operations and closure of the three divisions was $4,791,000, the net effect of which is reported within auxiliary activities in the statement of financial activity. 112