industry experts who have volunteered to share private sector 

 best practices and assist in the development oflonger-cerm 

 strategies. Recruitment efforts are also underway to hire a 

 senior business officer with strong marketing skills to better 

 coordinate Smithsonian business efforts. The most 

 problematic area in Institution business activities continues to 

 be the Smithsonian Institution Press. It sustained a major loss 

 for the second year in a row. Some recommendations from ex- 

 ternal reviews have been put in place with additional actions 

 to be taken in the near future. Unfortunately, these steps have 

 not had sufficient time to generate any significant improve- 

 ment to the bottom line. The Institution looks to significant- 

 ly improve performance for next fiscal year. 



The Smithsonian 150th Anniversary activities included the 

 mounting of an exhibition of unprecedented size and com- 

 plexity. Significant non-recurring costs were incurred in fiscal 

 year 1996 with additional costs that will be incurred in fiscal 

 year 1997 for future venues. Some of these costs have been 

 recovered through corporate sponsorship and other fund-rais- 

 ing activities. Additional revenue-generating strategies are 

 being developed to fully fund this activity. The Institution 

 recognizes that these 150th activities are an important invest- 

 ment in its future and is currently developing the optimal ap- 

 proach to capitalize on this investment. In fact, this planning 

 has already led to the identification of significant oppor- 

 tunities for bringing new funds into the Smithsonian. 



The Institution continues to look at a variety of ways to re- 

 engineer, downsize and streamline the organization. This past fis- 

 cal year Congress provided a special appropriation of S3 million, 

 which was supplemented by Smithsonian base funding, for 

 voluntary separation incentives of up to $25,000 for staff willing 

 to retire from Smithsonian service. That program was successful 

 in achieving a net reduction in the number of staff by ap- 

 proximately 140. 



The Smithsonian is prepared to meet the financial challenges 

 it faces by focusing on a wide variety of strategies tied to its 

 strategic vision, ics mission and ics core functions. Innovative and 

 creative approaches will be needed to respond to a new paradigm 

 for the Smithsonian and many public institutions — less reliance 

 on the government and more reliance on the private sector. 



Fiscal Year 1996 Results 



Revenues received by the Institution in fiscal year 1996 from 

 all sources totalled $702.6 million. Revenue from federal ap- 

 propriations accounted for $554.3 million, and nonap- 

 propriated trust funds provided an additional $348.5 million. 

 When adjusted to remove auxiliary- activity expenses of $185.9 

 million, net revenues totalled S516.7 million. The chart above 

 reflects revenues by source and broad purpose of use. 



amount appropriated of $311.2 million represented a decrease of 

 $2.1 million from the fiscal year 1995 level. The appropriation 

 provided for an increase of $.7 million for the Smithsonian 

 Astrophysical Observatory's submillimeter telescope array, $.2 

 million for the state of Iowa's participation in the 1996 Festival of 

 American Folklife and $3 million for a voluntary separation in- 

 centive program. Reductions and unfunded increases for infla- 

 tionary costs for salaries and benefits, rent and utilities were 

 absorbed within baseline resources through cost savings gained 

 from restructuring or reducing programs and activities. 



General trust revenue was $241.6 million. Most income 

 categories were generally consistent with last year. There was 

 a modest overall increase in revenue related to 150th Anniver- 

 sary activities. Auxiliary activity net revenue was down ap- 

 proximately 14% from 1995 levels. Several activities such as 

 the Smithsonian Magazine, The Smithsonian Associates, and 

 the Air & Space theaters showed increased net revenue. How- 

 ever, this was offset by a second year of unprecedented loss by 

 the Smithsonian Press/Smithsonian Productions. The Institution 

 conducted several major reviews of that activity during the year. 

 Several recommendations from those reviews have been imple- 

 mented with additional steps to be taken in early 1997. 



Revenue from donor/sponsor designated funds totalled $50.9 

 million. The Institution continues to intensify its fund-raising ac- 

 tivities and focus on new strategies. Major gifts and grants 

 received in fiscal year 1996 helped to support such projects as the 

 National Postal Museum's Duck Stamp Exhibition, the Florida 

 Everglades Project at the National Museum of Natural History, 

 and the Jerome and Dorothy Lemelson Center for the Study of In- 

 vention and Innovation at the National Museum of American 

 History. The Smithsonian is especially grateful to its many 

 friends in the private sector whose generosity contributed vi- 

 tally to its work. The names of major donors are listed in the 

 Benefactors section of this publication. 



In fiscal year 1996, the Institution received S55.9 million in 

 contracts and grants from government agencies, an increase of 

 S5.5 million over fiscal year 1995. Support from government agen- 

 cies constitutes an important source of research monies for the In- 

 stitution while also benefiting the granting agencies by 

 providing access to Smithsonian expertise and resources. As in 

 prior years, the majority of these funds were provided by the Na- 

 tional Aeronautics and Space Administration for research 

 programs at the Smithsonian Astrophysical Observatory. Other 

 projects funded included an exhibition on global change at the 

 National Museum of Natural History, support for the study of 

 the effect of rising atmospheric carbon dioxide concentration 

 being carried out by the Smithsonian Environmental Research 

 Center and the establishment of a system for monitoring the 

 natural resources of the Panama Canal watershed at the Smith- 

 sonian Tropical Research Institute. 



Operations 



Endowment 



Federal operating revenue of S310.7 million provided the core 

 funding for ongoing programs of the Institution. The actual 



The Institution pools its endowment funds for investment 

 purposes into a consolidated portfolio, with each endowment 



312 



