(10) Availability of Prior Years' Appropriations 



The U.S. Congress enacted Public Law 101-510, the Defense Authorization 

 Act (the Act) which determined prior year appropriations are only available 

 for a five-year period. Beginning with the fiscal year 1989 appropriations, 

 recipients were required to maintain annual appropriations for a five-year 

 period following the year of appropriation. At the end of this six-year life, 

 the appropriation account is closed and any unobligated balances are 

 returned to the U.S. Treasury. During fiscal year 1995, the Institution 

 returned $1,657,000 to the U.S. Treasury which represented the unobligated 

 balance for fiscal year 1990. 



(11) Accessions and Deaccessions 



For fiscal year 1995, $4,224,000 of trust funds and $2,160,000 of federal 

 funds were spent to acquire collection items. Proceeds from trust fund deac- 

 cessions were $601,000. There were no collection deaccessions purchased 

 with federal funds in fiscal year 1995. At September 30, 1995, proceeds from 

 deaccessions of $10,138,000 were designated for collections acquisitions and 

 preservation in the trust funds as quasi-endowment. 



(12) Transfers Among Trust Funds 



The following transfers were made among trust fund groups for fiscal year 

 1995: 



The following table presents the Plan's funded status reconciled with 

 amounts recognized in the Institution's statement of financial condition at 

 September 30, 1995: 





(1000s) 



Accumulated postretiremenl benefit obligation (APBO) 

 Retirees 

 Eligible active plan participants 



S (2.542) 

 (4.664) 



Tolal APBO 



Plan assets al lair value 



(7.2061 

 190 



Accumulated postretiremen! benefit obligation in excess of plan assets 



Unrecognized pnor service costs 



Unrecognized net gain 



Unrecognized transition obligation 



Accrued 



povirei 



nrement benefit cost 



(1.167) 

 5,869 



5 (2.314) 



Net periodic postretirement benefit cost for the year ended September 30, 

 1995 includes: 







Current 



funds 



End. 



and 



>wmen! 

 similar 



!i;n,:- 



Plant 





Unrestricted 



Restricted 



r -u n c! ■- 



Investment return in excess of payout 

 Quasi-endowment funds relumed 

 Designated as quasi-endowment 

 Other transfers, net 



S 



(1.032) 

 872 

 (6291 



585 



(1.309) 

 1 . 1 70 

 (3.143) 

 (3.125i 





2.341 

 (2.042) 



3.772 



2,540 



Total transters 



5 



(204] 



(6.407) 





4.07 1 



2.540 



,S'»»ls 



(13) Employee Benefit Plans 



The federal employees of the Institution are covered by either the Civil 

 Service Retirement System (CSRS) or the Federal Employee Retirement 

 System (FERS). The features of both of these systems are defined in pub- 

 lished government documents. Under both systems, the Institution withholds 

 from each federal employee's salary the required salary percentage. The 

 Institution also contributes specified percentages. The Institution's program 

 costs for fiscal year 1995 was approximately $14,450,000. 

 The Institution has a separate defined contribution retirement plan for trust 

 employees, in which substantially all trust fund employees are eligible to par- 

 ticipate. Under the plan, the Institution contributes stipulated percentages of 

 salarv 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 institution's cost of the plan 

 for fiscal year 1995 was approximately $8,267,000. 



It is the policy of the Institution to pay the accrued costs of all plans cur- 

 rently. 



In addition to the Institution's retirement plans, the Institution makes 

 available certain health care and life insurance benefits for active and retired 

 employees. The plan is contributory for retirees and requires payment of pre- 

 miums and deductibles. Retiree contributions for premiums are established 

 by an insurance carrier based on the average per capita cost of benefit cover- 

 age for all participants, active and retired, in the Institution's plan. The inclu- 

 sion of retirees in the calculation of average per capita cost results in a high- 

 er average per capita cost than would result if only active employees were 

 covered by the plan. Therefore, the Institution has a postretirement benefit 

 obligation for the portion of the expected future cost of the retiree benefits 

 that are not recovered through retiree contributions. The Institution's policy- 

 is to fund the cost of these benefits on the pay-as-you-go basis. 



The Institution adopted the Financial Accounting Standards Board's 

 Statement of Financial Accounting Standards No. 106, Employers' 

 Accounting for Postretirement Benefits Other Than Pensions, during fiscal 

 year 1994 and elected to record the October 1, 1993. accumulated postre- 

 tirement benefit obligation (APBO) using the 20-year amortization option. 



Service costs 

 Interest costs 

 Amortization ol transition obligation over 20 years 



490 

 519 

 326 



Net 



periodic postretirement benefit cosl 



The discount rate used to determine the APBO was 8.25 percent. A 

 10 percent health care cost trend rate was assumed for fiscal year 1995 with 

 this rate decreasing .5 percent each year to an ultimate rate of 5 percent in 

 fiscal year 2005 and thereafter. If the assumed health care cost trend rate 

 was increased by 1 percentage point in each year, the net periodic postretire- 

 ment benefit cost would be higher by $158,000 and the APBO higher by 

 $1,004,000 as of September 30, 1995. 



(14) Voluntary Separation Costs 



During fiscal year 1994, the Institution announced the Voluntary Separation 

 Incentive Program. This program was offered to meet employee restructuring 

 requirements of the Federal Workforce Restructuring Act. The Institution 

 accepted 209 federal funds employees and 23 trust funds employees into the 

 program. Voluntary separation costs totaling $5,109,000 and $434,000 were 

 recorded in the federal and trust funds, respectively. This program had no 

 carryover into fiscal year 1995 expenses and no similar programs were 

 announced in fiscal year 1995. 



(15) Income Taxes 



The Institution is 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. 



No provision for income taxes was required for fiscal year 1995. 



It is the opinion of the Institution's management that it 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 Institution has not yet formally sought 



such dual status. 



(16) Current Trust Funds Financial Activity 



Current unrestricted funds are comprised of three distinct subfunds. These 

 subfunds include the auxiliary activities fund that represents primarily the 

 revenue and expenditures of the Smithsonian Associates, Smithsonian and 

 Air & Space/Smithsonian magazines, and museum shops, concessions and 

 mail order sales. The special purpose fund represents funds internally desig- 

 nated for specific purposes and the general purpose fund consists of all other 

 unrestricted activirv in the current funds. 



328 



