audits and the audits for fiscal year 1994 would not have a material effect on 

 the Institution's financial statements. 



(8) Long-term Debt 



As of September 30, 1994, long term debt consists of an unsecured note 

 payable to Signet Bank totaling $3,103,000. The note bears interest at 

 1 percent in excess of the Federal Funds Rate, which was 4.75 percent at 

 September 30, 1994. Interest is payable quarterly; principal is payable 

 quarterly in installments of $63,333. Remaining unpaid principal balance is 

 due December 31, 1996. 



The proceeds of the note with Signet Bank financed a warehouse facility 

 for Institution museum shops. During the fiscal year 1994, $152,000 was 

 recorded as interest expense in the auxiliary activities funds related to the 

 note with Signet Bank. 



The aggregate amount due to Signet Bank for years ending September 30, 

 are as follows: 



1995 

 1996 



1997 



( $000s ) 



$ 253 



253 



2.597 



$ 3,103 



During fiscal year 1994, the Institution paid off a note payable and accrued 

 interest to Riggs National Bank totaling $7,410,000. The Institution was as- 

 sessed a $200,000 prepayment penalty included in the payoff amount. Dur- 

 ing the fiscal year 1994, $632,000 was recorded as interest expense in the 

 auxiliary activities funds related to this note. 



(9) Availability of Prior Years' Appropriations 



On November 5, 1990, the U.S. Congress enacted Public Law 101-510, the 

 Defense Authorization Act (the Act) which prescribes the rules for determin- 

 ing the availability of appropriation balances and establishes the procedures 

 for closing appropriation accounts. 



The maior purpose of the Act is to restructure annual appropriation 

 accounts. Beginning with the fiscal year 1989 appropriations, recipients are 

 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. 



(10) Accessions and Deaccessions 



For fiscal year 1994, $5,305,000 of trust funds and $1,085,000 of federal 

 funds were expended for the acquisition of collections items. Proceeds from 

 trust funds deaccessions were $1,178,000. There were no deaccessions of 

 collections purchased with federal funds in fiscal year 1994. 



( 1 1) Transfers Among Trust Funds 



The following transfers increased (decreased) trust funds for fiscal 

 year 1994: 



($000s) 







Current funds 



Endowment and 



Plant 





Unrestricted 



Restricted 



similar funds 



funds 



Interest in excess 













of payout 



$ 



(483) 



(585) 



1,068 



- 



Quasi-endowment 













reallocated to 













restricted and 













unrestricted 





1,331 



2,202 



(3,533) 



- 



Designated as 













quasi-endowment 





(382) 



(6,467) 



7,250 



(401) 



Other, net 



$ 



109 

 575 



11.493) 

 (6,343) 



_ 



1.384 



Total transfers 



4,785 



983 



( 12) Employee Benefit Plans 



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

 vice Retirement System (CSRS) or the Federal Employee Retirement System 

 (FERS). The features of both of these systems are defined in published gov- 

 ernment documents. Under both systems, the Institution withholds from the 

 salary of each federal employee the percentage of salary required. The Institu- 

 tion also contributes specified percentages. The Institution's cost of the pro- 

 grams for fiscal year 1994 was $16,399,000. 



The Institution has a separate defined contribution retirement plan for 

 trust employees, in which substantially all employees of the trust funds are 

 eligible to participate. Under the plan, the Institution contributes stipulated 

 percentages of salary which are used to purchase individual annuities, the 

 rights to which are immediately vested with the employees. Employees can 

 make voluntary contributions, sub|ect to certain limitations. The Institution's 

 cost of the plan for fiscal year 1994 was $8,426,000. 



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

 currently. 



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

 able certain health care and life insurance benefits for active and retired em- 

 ployees. The plan is contributory for retirees and requires payment of premi- 

 ums and deductibles. Retiree contributions for premiums are established by 

 an insurance carrier based on the average per capita cost of benefit coverage 

 for all participants, active and retired, in the Institution's plan. The inclusion 

 of retirees in the calculation of average per capita cost results in a higher av- 

 erage 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 State- 

 ment of Financial Accounting Standards No. 106, Employers' Accounting for 

 Postretirement Benefits Other Than Pensions, during fiscal year 1 994 and 

 elected to record the October 1, 1993, accumulated postretirement benefit 

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



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

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

 September 30, 1994: 



($000s) 



Accumulated postretirement 







benefit obligation (APBO): 







Retirees 



$ 



(2,477) 



Eligible active plan participants 





(3.890) 



Total APBO 





(6,367) 



Plan assets at fair value 





190 



Accumulated postretirement 

 benefit obligation in excess 

 of plan assets 



Unrecognized prior service costs 

 Unrecognized net gain 

 Unrecognized transition obligation 



Accrued postretirement 

 benefit cost 



(6,177) 



(1,132) 

 6.195 



(1,114) 



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

 1994 includes the following components: 



Service costs 

 Interest costs 



Amortization of transition 

 obligation over 20 years 



Net periodic postretirement 

 benefit cost 



($000s) 



453 

 481 



326 



1,260 



339 



