Market Value of Endowment and Similar Funds 

 (in S millions) 



(S millions) 



S450 ^Restricted. Freer 

 ■Restricted, Othei 



■Unrestricted 



$435 



1991 



1992 



1993 

 Fiscal Year 



1994 



1995 



Construction and Plant Funds (Table 6) 



In fiscal year 1995, the Smithsonian received federal appropria- 

 tions for construction netting $44.7 million after a rescission 

 affecting both fiscal year 1995 and balances from prior years. 

 Net funds provided in fiscal year 1995 included $24 million 

 for general repair, restoration, and code compliance projects 

 throughout the Institution. Although the repair amount is a 

 substantial sum, it is less than half the estimated $50.0 million 

 per year required to keep up with the rate of deterioration in the 

 physical plant. Net funds earmarked for new construction, al- 

 terations, and modifications totaled $20.8 million. Included in 

 this amount is $19.5 million to continue development of a 

 collections, study, reference, and support facility in Suitland, 

 Maryland, and the Mall facility for the National Museum of the 

 American Indian; $3.0 million for renovations, repairs, and mas- 

 ter plan projects at the National Zoological Park, including con- 

 struction of the African Grasslands exhibit; and $2.4 million in 

 rescissions related to prior years. 



Additions and transfers to nonappropriated trust construc- 

 tion funds, termed plant funds, totaled $10.2 million. Approxi- 

 mately $5.4 million was for construction of facilities for the 

 National Museum of the American Indian, $1.6 million was for 

 renovation of the Cooper-Hewitt, National Design Museum, 

 and $2.2 million was for reinstallation of the Gem Hall at the 

 National Museum of Natural Historv. 



Financial Condition 



The Smithsonian Institution's Statement of Financial Condition 

 represents the total assets, liabilities, and fund balances of the 

 Institution. Total assets of $1.2 billion far exceed total liabilities 

 of $187.0 million and are indicative of the financial strength of 

 the Institution. In fact, only $3.4 million of the $187.0 million in 

 liabilities represents long-term debt. The Smithsonian Institu- 

 tion's assets increased by $96.0 million since the end of fiscal 

 year 1994, while liabilities increased by just $37.0 million for 

 the same period. 



Financial Management 



The Institution's overall effectiveness in utilizing its newly imple- 

 mented purchasing and payables system accelerated during fiscal 

 year 1995. It began to use newly available data from the system, 

 such as transaction status, purchase volume by type of product, 

 individual staff output, etc., to generate efficiencies in procure- 

 ment and document processing. Significant progress was also 

 made on the second phase of a new accounting system that in- 

 cludes replacement of the Institution's general ledger, financial 

 reporting, and management information system. A new coding 

 structure has been developed that will provide new opportunities 

 to report on and analyze programmatic activities and to increase 

 the utility of financial reports for management decision-making. 

 Other financial management improvement initiatives under- 

 taken in 1995 include: 



• Finance units routinely make use of internal and external cus- 

 tomer feedback, strategic and operational planning, performance 

 measurement, and process reengineering to continually improve. 



• New approaches have been developed to increase procure- 

 ments from minority and small business contractors. 



• Teams developed the policies and procedures necessary to 

 implement new not-for-profit accounting standards for contribu- 

 tions (SFAS No. 116) and financial statement presentation (SFAS 

 No. 117) effective in 1996. 



• Procurement efficiencies and improved customer service 

 were achieved through limited use of electronic data interchange 

 strategies and expanded delegations of authority while maintain- 

 ing effective internal controls. 



• New systems, processes, and procedures were developed so 

 that the Institution could shift to Office of Management and 

 Budget Circular A- 122, Cost Principles for Nonprofit Organiza- 

 tions, which covers federal grants and contracts received by the 

 Institution. Previously, the Smithsonian followed cost principles 

 for educational institutions. 



• Work began on an initiative that will automate the plan- 

 ning and budget formulation process. 



Audit Activities 



The Institution's financial statements are audited annually by 

 KPMG Peat Marwick, an independent public accounting firm. 

 The audit plan includes an in-depth review of the Institution's 

 internal control structure. KPMG Peat Marwick's Independent 

 Auditors' Report for fiscal year 1995 and the accompanying fi- 

 nancial 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 In- 

 stitution's various programs, activities, and internal control sys- 

 tems. 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 co- 

 ordinated audit teams, the Defense Contract Audit Agency, the Smith- 

 sonian Office of Inspector General, and KPMG Peat Marwick coor- 

 dinate the audit of grants and contracts received from federal agencies. 



315 



