320 



Annals of the Smithsonian Institution 1999 



FY 1999 Endowment and Similar Activities 

 Net Assets (S millions) 



Permanently 

 Restricted (65) 



Undesignated 

 Unrestricted 

 (258) 



Temporarily 

 Restricted (140) 



Designated 



Unrestricted 



(202) 



mends the annual payout for the consolidated 

 endowment. The Smithsonian's policies for manag- 

 ing 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. With this pay- 

 out policy, to achieve the endowment's objectives, 

 the investment policy targets a real rate of return of 

 5 percent. 



The market value of the endowment increased 

 from S580.9 million to $658.5 million during fiscal 

 year 1999. The total includes $1.0 million that is 

 not pooled with other endowment assets. The total 

 return for the endowment, net of fees, was $121.5 

 million, and transfers into the endowment totaled 

 $8.5 million. Offsetting these amounts was an 

 endowment payout of $21.0 million and a net trans- 

 fer out of the endowment of $31.4 million. The 

 transfer moved funds to a private operating founda- 

 tion that had been the recipient of the endowment 

 payout to perform research consistent with the 

 requirements of the endowment. 



The total return on the consolidated portfolio was 

 21.78 percent. At the end of the fiscal year, the Insti- 

 tution's portfolio was invested 71 percent in equi- 

 ties, 28 percent in bonds, and 1 percent in cash. The 

 portfolio had 23 percent in foreign stocks and bonds 

 and 77 percent in U.S. securities. 



Construction Funds 



In fiscal year 1999. federal appropriations for con- 

 struction were $60.4 million. This amount included 

 $40.0 million for general repair, restoration, and 

 code compliance projects throughout the Institution. 

 Funds earmarked for new construction, alterations, 

 and modifications totaled $20.4 million. Included in 

 this amount is $16.0 million for the Mall museum of 

 the National Museum of the American Indian and 

 $4.4 million for renovations, repairs, and master 

 plan projects at the National Zoological Park. 



Nonappropriated trust construction funds totaled 

 $5.9 million. Approximately $4.4 million supported 

 construction of facilities for the National Museum of 

 the American Indian; $1.0 million contributed to the 

 reinstallation of the Janet Annenberg Hooker Hall of 

 Geology, Gems, and Minerals at the National Museum 

 of Natural History; $0.3 million supported renovation 

 of the Cooper-Hewitt, National Design Museum; and 

 $0.2 million went to several smaller projects. 



Financial Position 



The Smithsonian Institution's Statement of Financial 

 Position presents the total assets, liabilities, and net 

 assets of the Institution. Total assets of $1.7 billion 

 far exceed total liabilities of $406 million and con- 

 tinue to be indicative of the financial strength of the 

 Institution. During fiscal year 1999, the most signifi- 

 cant increases in the Institution's financial position 

 included growth in investments of approximately 

 $92 million, an increase in net property and equip- 

 ment of $40 million, and the $60 million pledge 

 from Steven F. Udvar-Hazy. 



Financial Management 



During the year, the Institution devoted significant 

 resources to deal with the Year 2000 software prob- 

 lem. A final review by the Regents' Audit and Review 

 Committee found the steps taken to be satisfactory, 

 and all major systems were functioning effectively at 

 the beginning of 2000. 



Other financial management improvement initia- 

 tives undertaken in fiscal year 1999 included: 

 • An internal study that recommended implemen- 

 tation of an Enterprise Resource Planning (ERP) 

 System. Funding has yet to be identified for the 

 project, but it is hoped that implementation of 

 the first module — the financial system — can begin 

 in fiscal year 2001. 



