Financial Report 



327 



SMITHSONIAN INSTITUTION 

 Notes to the Financial Statement 



September 30, 1999 

 (in thousands) 



(1) Organization 



The Smithsonian Institution (Smithsonian) 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 Smith- 

 sonian Institution, an establishment for the increase and 

 diffusion of knowledge among men." After receiving the 

 property and accepting the trust, Congress vested responsi- 

 bility in the Smithsonian Board of Regents (Board) to 

 administer the trust. 



The Smithsonian is a museum, education and research 

 complex consisting 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 exten- 

 sive collections number over 140 million objects. During 

 fiscal year 1999, 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. Business activities include Smithsonian maga- 

 zines and other publications, a mail-order catalogue, 

 museum shops, and concession income from food services. 



A substantial portion of the Smithsonian's annual oper- 

 ating 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 appropriations process, and 

 therefore the potential exists for reductions in approved 

 federal funding that would significantly impact the Smith- 

 sonian'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 Interna- 

 tional Center for Scholars, which were established by Con- 

 gress 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 fed- 

 eral appropriations are reported as Federal Funds in the 

 financial statements. All other funds are reported as Trust 

 Funds. 



(a) Trust Funds 



Trust funds revenues arise primarily from contributions, 

 grants and contracts, net investment income, and business 



activities. Trust funds 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 manage- 

 ment or the Board for long-term investment. 



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 Smith- 

 sonian 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 long-term investment. Donor contribu- 

 tions 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 rec- 

 ognized as an exchange transaction as expenditures are 

 incurred. The liability reported as unexpended appropria- 

 tions represents amounts received either ( 1 ) which have 

 not yet been obligated, or (2) for which goods or services 

 have been ordered but not yet received. 



The Smithsonian was appropriated 5351,344 for opera- 

 tions and 560,400 for construction or repair and restora- 

 tion in fiscal year 1999. Federal appropriations for opera- 

 tions 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 unex- 

 pended balances are returned to the U.S. Treasury. During 

 fiscal year 1999, the Smithsonian returned 51.644 to the 

 U.S. Treasury which represents the unexpended balance for 

 fiscal year 1994. 



Federal appropriations for construction or repair and 

 restoration of facilities and construction are generally avail- 

 able for obligation until expended. 



(c) Use of Estimates 



The preparation of financial statements in conformity with 

 generally accepted accounting principles requires manage- 

 ment to make estimates and assumptions that affect the 



