Additional financial management improvement initiatives 

 planned to start in fiscal year 1998 and 1999 include the 

 following: 



• Electronic routing of documents and reports. 



• Streamlining of policies and procedures. 



Development and implementation of a new fixed asset system. 



• Development and implementation of a risk management 

 system. 



• Evaluation of the payroll system to determine whether it 

 meets current requirements efficiently and economically. 



Audit Activities 



The Institution's financial statements are audited annually by 

 KPMG Peat Marwick, an independent public accounting 



firm. The audit plan includes an indepth review of the 

 Institution's internal control structure. KPMG Peat 

 Marwick's Independent Auditors' Report for fiscal year 

 1997 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 Agen- 

 cy, the Smithsonian Office of Inspectot General, and KPMG 

 Peat Marwick coordinate the audit of grants and contracts 

 received from federal agencies. 



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