    [House Hearing, 110 Congress]
    [From the U.S. Government Publishing Office]

                         THE SMITHSONIAN IN TRANSITION

    =======================================================================

                                    MEETING

                                   before the

                       COMMITTEE ON HOUSE ADMINISTRATION
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 FIRST SESSION

                                   __________

                 MEETING HELD IN WASHINGTON, DC, AUGUST 1, 2007

                                   __________

          Printed for the use of the Committee on House Administration

                         U.S. GOVERNMENT PRINTING OFFICE

    37-783 PDF                 WASHINGTON DC:  2007
    ---------------------------------------------------------------------
    For sale by the Superintendent of Documents, U.S. Government Printing
    Office  Internet: bookstore.gpo.gov Phone: toll free (866)512-1800
    DC area (202)512-1800  Fax: (202) 512-2250 Mail Stop SSOP,
    Washington, DC 20402-0001

                       COMMITTEE ON HOUSE ADMINISTRATION

                    ROBERT A. BRADY, PENNSYLVANIA, Chairman
    ZOE LOFGREN, California              VERNON J. EHLERS, Michigan
      Vice-Chairwoman                      Ranking Minority Member
    MICHAEL E. CAPUANO, Massachusetts    DANIEL E. LUNGREN, California
    CHARLES A. GONZALEZ, Texas           KEVIN McCARTHY, California
    SUSAN A. DAVIS, California
    ARTUR DAVIS, Alabama
                     S. Elizabeth Birnbaum, Staff Director
                     Will Plaster, Minority Staff Director

                         THE SMITHSONIAN IN TRANSITION

                                  ----------

                           WEDNESDAY, AUGUST 1, 2007

                      House of Representatives,
                             Committee on House Administration,
                                                        Washington, DC.
        The Committee met, pursuant to call, at 11:13 a.m., in room
    1310, Longworth House Office Building, Hon. Robert A. Brady
    (chairman of the Committee) presiding.
        Present: Representatives Brady, Capuano, Davis of
    California and Ehlers.
        Staff present: Liz Birnbaum, Staff Director; Matt Pinkus,
    Professional Staff/Parliamentarian; Diana Rodriguez,
    Professional Staff; Kristin McCowan, Chief Legislative Clerk;
    Ryan McClafferty, Intern; Bryan T. Dorsey, Minority
    Professional Staff; Fred Hay, Minority General Counsel.
        The Chairman. Good morning, everyone. Unfortunately, we
    have a vote on the floor. We will try to get this done as
    quickly as possible. I thank you, and I ask for your patience,
    and we will get through this. It may take some time, but we
    will get through this. Thank you again.
        We are in recess. Thank you.
        [Recess.]
        The Chairman. Thank you for your patience.
        I will call this hearing to order. I do have an opening
    statement, but for the sake of time factors, we do not know
    when we are going to run out; I am just going to ask unanimous
    consent to insert that into the record.
        [The statement of the Chairman follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. I do want to thank Mr. Bowsher and Ms. Doris
    Matsui for being here. I have had meetings with her, and we
    have had many discussions, and I thank you for your energetic
    participation and interest in the Smithsonian Institution. You
    have a good set of fresh eyes. You are there and are extremely
    knowledgeable, and I am extremely confident that, as long as
    you are there, we are there, and things will be on the right
    track. So I do appreciate your being here, and I appreciate
    your testifying with all of the other witnesses.
        With that, I will recognize the Ranking Member for whatever
    statement he would like to make.
        Mr. Ehlers. Thank you, Mr. Chairman. Thank you for holding
    this hearing. I have a written statement I will submit for the
    record. I will try to shorten it because we do not know what
    might happen to our schedule.
        I certainly appreciate your efforts, Mr. Chairman, to
    maintain vigorous oversight of the Smithsonian and of its
    operations. As you know, I have long been in support of
    conducting activities, such as today's proceeding, to assure
    the American public that the ``Nation's attic'' is not being
    looted by those who would put personal gain above the interests
    of the Institution. In the last Congress, this Committee
    conducted an oversight hearing into Smithsonian Business
    Ventures in what would turn out to be a prophetic concern about
    the museum's financial operations.
        I am most pleased to see that, although the gavel may have
    changed hands since that time, the committee remains steadfast
    in its resolve to increase its oversight of the Institution.
        While it would be easy to go through the laundry list of
    past excesses and abuses of power that were widely reported to
    have taken place within the museum, instead I would like to use
    today's hearing to begin refocusing on the future of the
    Smithsonian. We have already seen evidence of the positive
    steps being made toward a stronger governance by the Board of
    Regents into the museum's operations. The Board's increasingly
    ``hands-on'' role in these matters is an important line of
    defense in safeguarding the Institution and a crucial first
    step towards fully restoring the museum's health. I am just
    absolutely delighted with the efforts that the Board has made
    in the reexamination of itself and in the steps it has taken.
    That does not resolve all of my concerns, but I will get to
    that in just a moment. They are to be commended for the
    tremendous amount of work, and good work, that the Board has
    done in self-examination and in its examination of the role of
    the Institution.
        I also want to commend Congresswoman Matsui, who has done
    yeoman's work on this. When she reported to us informally last
    month, I was in complete accord with what she was saying
    because it is exactly what we had been finding out and saying
    last year. It is unfortunate that it had to come to that
    impasse before the period in the press when everyone got all
    excited about it and before everyone woke up, but we have made
    very good, strong, positive progress.
        In addition to the increased oversight activities of the
    Board, I have been pleased with the Smithsonian's Inspector
    General, Sprightley Ryan, who, I think, has again done yeoman's
    work or yeowoman's work in conducting a number of audits into
    various facets of the museum's operations. I appreciate that.
    This is a very good step forward and has been enormously
    effective in providing increased transparency.
        What I am interested in hearing today and what I would like
    to hear from our witnesses today is what part they believe this
    Committee may play in restoring public trust in the Smithsonian
    and in its leadership. In other words, you have done a good job
    to try to restore public trust. What can we do to help you?
    What role should we play in helping you restore that public
    trust? I think we are a long ways from being ready.
        Also, I want to make it very clear that I still have
    continuing concerns, not about the Board and its structure, but
    about the internal operations of the Smithsonian. In other
    words, if you regard the structure as a pyramid, which we
    frequently do in the government and in the corporate world, we
    have done a good job of taking care of the top and of the peak
    of the pyramid. The Board is perhaps the peak of the pyramid.
    There are a lot of operations below that, I think, need
    inspection and clarification. In particular, I hope the
    Inspector General will vigorously pursue those activities.
        There was a hearing last year and extensive study about the
    Smithsonian Business Ventures. One of the reasons given for the
    need for Smithsonian Business Ventures is that the Board and
    the management were too busy to deal with all of the details,
    so they needed something else to run it properly. I was very
    skeptical of that to begin with, particularly the way it was
    structured. It turned out that my misgivings were well placed
    because the Smithsonian Business Ventures did not really
    improve the operations at the lower levels as far as I could
    tell.
        So I hope that Ms. Ryan and the Board will continue to
    pursue all facets of the operations of the Smithsonian. We want
    a squeaky clean, shiny, well-running operation from the top of
    the pyramid to the bottom. I think a crucial part of that is
    that the Inspector General now reports directly to the
    administration and to the Board and works with them. That is a
    good step forward, so that the employees all the way up and
    down the chain know that the Inspector General speaks from the
    top level of the administration of the Smithsonian.
        So I commend you. Though I still have concern, and I am
    sure that factor will be addressed, but I am anxious to hear
    the remainder of the testimony.
        Thank you again, Mr. Chairman, for calling this hearing.
        [The statement of Mr. Ehlers follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you. You are welcome.
        Mrs. Davis, we thank you for being here. Do you have any
    opening remarks? Thank you.
        Today, we will start discussing the recommendation to
    reform committees and discussing where we go from here. I am
    pleased to have two of the prime movers in the Smithsonian
    reform with us today. Our colleague, Doris Matsui, is one of
    six Congressional Regents. She has taken a leading role with
    the Regents in recommending revisions to the Institution's
    governance procedures. I have spent time with Ms. Matsui,
    learning about these issues. She cares enormously about this
    Institution, and she has taken her work here very seriously,
    with good results. I am confident that the Smithsonian will be
    stronger because of her service.
        Charles Bowsher was Comptroller General of the United
    States from 1981 to 1996. He ran the GAO, Congress's chief
    investigative and auditing arm. He was asked by the Regents to
    form the Independent Review Committee. Their report reviewed
    the controversy surrounding former Secretary Small, and it also
    made numerous recommendations to reform the Institution.
        We welcome you both. The full text of your written
    testimony will be attached and inserted into the record. I
    thank you again.
        We will begin with Congresswoman Matsui.

      STATEMENT OF THE HON. DORIS O. MATSUI, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Ms. Matsui. Thank you, Mr. Chairman.
        Thank you, Ranking Member Ehlers and distinguished members
    of the Committee.
        It really is an honor for me to represent a historical
    institution such as the Smithsonian, often revered as a
    national treasure during this important phase of transition.
    This transition will result in a new secretary, an improved
    governance structure and a stronger relationship with Congress
    and the American people.
        I am pleased to serve as a representative of the Board of
    Regents in front of my colleagues. My fellow Regents and I have
    done an immense amount of work to ensure that the Institution
    operates as a public trust, following only the highest ethical
    standards, and conducts its business with an increased ethos of
    transparency. I know there is a lot to discuss, and I will make
    my remarks brief.
        Although I am a new member to the Smithsonian Board of
    Regents, I was asked to be a part of the newly formed
    Governance Committee because of my experience. I have served in
    the Federal Government as both an elected and as an appointed
    official. I also bring expertise from the nonprofit sector
    having served on numerous boards such as that of a public
    television station in Sacramento, California. Here in D.C., I
    have sat on the boards of Meridian International Center, the
    Woodrow Wilson Center and the Arena Stage.
        The Governance Committee was vigorous and thorough in its
    investigation. We reviewed the Smithsonian Institute's
    governance practices, compared them to best practices of
    similar institutions and provided recommendations based on the
    shortcomings we found. We were also informed by leaders and
    experts in the nonprofit sector.
        During 12 weeks of extensive factfinding, discussion and
    deliberation, the Governance Committee scrutinized the inner
    workings of the Regents and their oversight functions at the
    Smithsonian. In addition to weekly meetings, we spent countless
    hours reviewing documents and materials on best practices and
    landscape analysis of comparable institutions. We then compared
    these to the current Smithsonian policies.
        These 3 months of intense efforts culminated into 25
    recommendations that were adopted by the Board of Regents on
    June 18th. In our opinion, each is a critical part in
    revitalizing and reforming Smithsonian's Board as well as the
    senior management to ensure effective oversight, accountability
    and transparency. Let me take a moment to list several key
    proposals explicitly, most of which have already been
    implemented.
        Our report recommended a new policy that prohibits senior
    staff from serving on corporate boards. We have also
    recommended that Smithsonian formalize its observance of the
    Freedom of Information Act. Other changes included adopting a
    Smithsonian-wide leave policy and strengthening direct access
    to the Regents for the Institution's gatekeepers--the Inspector
    General, the General Counsel and the Chief Financial Officer.
        We have created a Web site, a real Web site, that makes
    available the Board's meetings, agendas and minutes. We have
    also recommended that the Smithsonian convene a public forum
    each year. The Board is also undertaking an audit of Mr.
    Small's expenses as well as analyzing criteria for making
    future nominations to the Board.
        Our report also recommends that the Board review its
    composition and size, executive compensation policies,
    committee structure and underlying charters by early 2008.
    Finally, we have recommended and the Acting Secretary has begun
    the process of reviewing the Smithsonian Business Ventures'
    charter structure and options for the future.
        These recommendations are but a start. We are working
    closely with the Smithsonian staff, Members of Congress and the
    public toward this goal. In fact, since our report was
    released, we have been working toward implementing our
    recommendations and have created a scorecard that is publicly
    available on our Web site. It outlines the work we have
    accomplished and the schedules of work that is in progress.
        In addition, at our most recent meeting, the Governance
    Committee adopted changes to our bylaws that will allow for the
    election of our first chair to the Board at the September 17
    Board meeting. This was both the recommendation from the
    Independent Review Committee and from the Governance Committee.
    The Independent Review Committee, headed by Chuck Bowsher, who
    is seated next to me, released their report on June 18, 2007.
    Both reports have since been used as momentum for future action
    to resolve governance problems at the Smithsonian and to
    restore the public's trust in this valuable institution.
        Mr. Chairman and Ranking Member Ehlers, allow me to close
    with the following quote from Helen Keller:
        ``character cannot be developed in ease and quiet. Only
    through experiences of trial and suffering can the soul be
    strengthened, vision cleared, ambition inspired, and success
    achieved.''
        While I do not think she was specifically speaking of an
    institution such as the Smithsonian, it is certainly fitting.
    The Smithsonian has a life of its own, replete with stories of
    America's past and visions for its future. This experience has
    strengthened the Board of Regents' resolve to preserve and to
    promote the mission of Smithsonian into the 21st Century, and I
    believe that we are actively moving in that direction.
        I thank you very much.
        [The statement of Ms. Matsui follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. I thank the gentlelady, and I thank you for
    your diligence and for your hard work, and I feel extremely
    safe that you are overseeing and that you are right there on
    that Board of Regents. Thank you.
        Ms. Matsui. Thank you.
        The Chairman. Mr. Charles Bowsher, we have a 10-minute call
    before we go for a vote. That gives you a good 5 minutes, if
    you think you can do that, and then we will come back for
    questions. If not, we will give you a full 10 minutes, whatever
    you think you want to do with it.
        Mr. Bowsher. You would like me to summarize in 5 minutes?
        The Chairman. That would be nice.
        Mr. Bowsher. Yes, I will do it.
        The Chairman. Thank you.

     STATEMENT OF CHARLES A. BOWSHER, CHAIRMAN, INDEPENDENT REVIEW
                   COMMITTEE, SMITHSONIAN INSTITUTION

        Mr. Bowsher. Okay. I just would like to say that I am
    pleased to be here. The Independent Review Committee came to
    its task with a deep affection for the Smithsonian Institution,
    and it is our hope that our report will help the leadership of
    the Smithsonian, both the management and the Board of Regents,
    to become more effective than they have been in the past.
        I think that the problems of Mr. Small's compensation and
    his expenses have been well-documented, and I am not going to
    go into a lot of detail, but they were actually quite
    excessive. We also found that Mr. Small and his deputy spent a
    lot of time away from the Institution. We certainly think the
    deputy was a very hardworking woman but you have to have some
    management people there when you need decisions to be made, and
    we really do believe that this was a problem.
        We think the oversight by the Board was antiquated. It was
    not up to what current organizations are expecting, but we
    think this can be improved. In other words, there is no reason
    why the problems in the oversight by the Board and also by the
    management cannot be changed, and we are very pleased by the
    positive reaction of the Board. We also had a meeting even just
    this morning with the Acting Secretary, and I think things are
    moving ahead.
        Adding to what Congresswoman Matsui has said here, I think
    things really are moving in the right direction, and they
    certainly accepted our recommendations as we presented them to
    the Board of Regents. So we are optimistic that things are
    going to move in the right direction.
        To go back to the issue that the ranking member raised, I
    think it is up to your Committee to periodically have hearings
    like this to find out how things are really going and to make
    sure that progress is being made on the recommendations of the
    Governance Committee and the Board of Regents and as the new
    management takes over and provide new leadership.
        So, with that, I will stop, and I would be willing to
    answer any questions.
        [The statement of Mr. Bowsher follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you so much.
        Again, we apologize, but we must go to the floor for a
    vote. If you can indulge us and stay a little while, we will
    have some questions when we return.
        Mr. Bowsher. Sure.
        The Chairman. With that, we will recess.
        [Recess.]
        The Chairman. I would like to call the hearing back to
    order. We will now proceed with questions for our panelists.
    Thank you again for being here.
        Congresswoman Matsui, in asking this Committee and the
    Congress to change the law to implement the recommendations of
    the Governance Committee and of the IRC and of any other
    reforms the Board of Regents wants to make, on which subjects
    and recommendations do you foresee coming back to us with in
    order to prepare us a little bit?
        Ms. Matsui. What I would like to tell you is that we are
    trying to move forward as quickly as possible, and of those
    recommendations that we have had out there that we can handle
    administratively, we are doing that, and we are changing some
    bylaws in order to accommodate some of this.
        I must say that a lot of the other things that we are
    talking about, such as Board composition structure, would take
    deeper study, consulting with constitutional people and
    historians about the real purpose of how the charter was
    developed. James Smithson endowed us with the money to create
    the Smithsonian Institution in 1829, and then, in 1846,
    Congress established the Smithsonian Institution and really
    designated the Board of Regents and the secretary to oversee
    it. So there is a lot of history and purpose that was developed
    here. So we are taking the time, not a lot of time, but enough
    time so that, by the end of the year, we can make
    recommendations.
        In order to do some of the changes that we believe are
    appropriate, we will need to change the charter, and that would
    mean like if we wanted to add a couple more Regents or to
    change, for instance, the size of committees, and we do not
    believe we should do that piecemeal. So, therefore, we believe
    what will happen is that we will go through our studies so
    that, by the end of the year, we can come back by the beginning
    of the year, perhaps with some recommendations to the Congress,
    so that would be, therefore, to your Committee.
        The Chairman. Thank you.
        One last question regarding the Smithsonian Business
    Ventures. What is your feeling on that?
        Ms. Matsui. Well, my feeling on that, as you will hear from
    the Inspector General, who is here, is it is something where we
    believe and where we have found that there were some gross
    problems there, and it was certainly--I would like to call it a
    ``misadventure'' to a certain degree, and it was allowed to
    operate on its own.
        What we have decided to do, as one of our recommendations,
    is to bring it back under the umbrella of the Smithsonian and
    to establish that they will have to adhere to our Smithsonian
    policies widely held. So, therefore--the Acting Secretary will
    be coming up and explaining what he will be doing here--we are
    taking a good, hard look at this, but we are not stopping at
    the same time. We have a new acting CEO who will be taking over
    as of today, who will be moving forward and will be working
    with the secretary on the changes that will have to be done.
        The Chairman. Thank you.
        Mr. Bowsher, thank you for all you have done in oversight.
    We need your help and your input.
        Are there any recommendations that you have received any
    resistance to?
        Mr. Bowsher. No. We were very pleased. We briefed the Board
    of Regents at a half-a-day meeting, and even at that initial
    meeting--and that was before we even released the report--we
    found a great deal of acceptance, and then when we saw the
    recommendations of their Governance Committee, we saw that it
    was moving in the same direction as many of ours were. So we
    have been very pleased with the acceptance of our
    recommendations by the Board of Regents and by the Acting
    Secretary. I think that is a big plus because, when you do a
    review like this, sometimes you do run into resistance, and we
    did not, not so far in this case.
        The Chairman. Thank you.
        Are there any skills that you think ought to be added to
    the Board that they may be lacking? Are there any people with
    certain skills that you think should be added to the Board?
        Mr. Bowsher. Yes. In other words, one of the things that we
    think is lacking is the fact that--you know, in the corporate
    world, one of the things that was lacking big time was that the
    people who were serving on the audit committees were not really
    qualified. The Sarbanes-Oxley legislation changed that by
    requiring that there be a financial management expert among the
    board members serving on the audit committee. That is the kind
    of expertise that we think is needed on the Board of Regents.
    Also, we do believe there are two or three areas, like in
    construction and areas like that, and background in museums is
    needed. You have got to get the right mix today on your Board
    of Regents just like in the corporate world. We think that, as
    the openings come to the Board, this is something that the
    remaining Board of Regents has to give a lot of consideration.
        The Chairman. Thank you. Thank you for your participation.
        Mr. Ehlers.
        Mr. Ehlers. Thank you. Yes, I have several questions.
        First, Representative Matsui, I thank you, again, as I did
    earlier, for your excellent service and for all of this work.
        You described a minute ago, in response to the chairman's
    question, the possible need for statutory changes. Are you
    proposing to prepare those and to present them to us, or do you
    want this to be a cooperative project where we work together
    with you to develop these statutory changes? What are you
    envisioning on that?
        Ms. Matsui. Mr. Ehlers, what I envision on this is that
    what we find today is a more transparent way of operating
    amongst the Board of Regents, certainly, and we feel it is
    really important to inform the Congress about the direction we
    feel we would like to go. Now, we are going to be reaching out
    to Congress, to our stakeholders and to experts in the
    nonprofit world to look forward to see what is necessary to
    change. So, definitely, these will not be recommendations that
    you will be surprised with at all. We will be consulting with
    you along the way also.
        Mr. Ehlers. All right. I think that will be good simply not
    because we are trying to run the show but because it will ease
    the legislative process if we simply work together on it.
        Do you have a timetable set up? Do you have any idea when
    you will be coming forward with some ideas?
        Ms. Matsui. Well, we feel that we will take the rest of the
    year to formulate our recommendations and to do our outreach on
    many of these tougher items, and we hope that, by the beginning
    of the year, we will be ready. In some of these cases, we
    believe we can handle them administratively with the bylaws
    process, but if, in fact, we do feel like we need to--we have
    17 members on the Board of Regents, for example. If we want to
    expand it by two or three more, we will have to come back to
    you. The executive committee right now is three people. We
    believe that is too small. Now, we can expand it informally,
    but we might feel that, if, in fact, we have to go and change
    the charter, we might look at everything that we may feel needs
    to be changed so we can do it in one fell swoop. So I believe
    that, by the beginning of next year, we will have some
    recommendations, and we will certainly work with you as we move
    forward if need be.
        Mr. Ehlers. Thank you. Thank you also for your emphasis on
    transparency, which is sort of a code word these days. Everyone
    is using it. I was appalled last year when I was chairing this
    Committee. I simply asked for a look at the SBV charter and
    contract, and they would not give it to us. We literally had to
    browbeat them just to get the parts of the contract and it was
    heavily redacted. In the government, everything has to be
    transparent.
        Ms. Matsui. That is exactly my message.
        Mr. Ehlers. That is the rule we work by. I could not begin
    to understand how the Smithsonian Secretary thought that he
    could avoid that.
        You mentioned the Smithsonian Business Ventures and a new
    role for them. My question is, why have them at all? I was very
    suspicious about the setup. When it was described to us and we
    saw the contract, it looked like it was being set up primarily
    to avoid government regulations. There were so many things they
    wanted to do and wanted to be able to pay the employees more
    than they normally would be paid in government positions. I
    could not find a useful purpose for this group that could not
    be accomplished by the Smithsonian itself running its business
    properly.
        I am not objecting to contracting out for concessions and
    things of that sort, but to set up a separate business arm
    seems, to me, as an unnecessary duplication. I am not aware of
    other government agencies that do that. For example, NASA, I do
    not think sets up a separate business for all of the ventures
    they have in the operation of the Space Center for tourists and
    things of that sort. These are things that can be contracted
    out.
        Can you make a good case for even keeping the Smithsonian
    Business Ventures?
        Ms. Matsui. Well, Mr. Ehlers, certainly the acting
    secretary is doing a very sensitive study about this.
        My feeling about this is that the Smithsonian is composed,
    as you know, of a wide number of institutions--museums, the zoo
    and research institutions--and I think it was an attempt to
    bring the revenue portion of the private side under one
    umbrella. Now, there are different ways to structure that, and
    I believe that there were mistakes made, and I have, certainly,
    heard much criticism from the Board of Regents, itself.
        So, therefore, I am not yet convinced of what needs to be
    done there at all. I do know, though, we need to look at it. We
    may have to pull it apart and put it together again in a much
    more reasonable way, and that is something that the Board of
    Regents is going to be very, very much involved with. The
    Smithsonian Business Ventures has been allowed to sort of
    operate on its own. No longer will that be true. We will have
    oversight over it.
        Mr. Ehlers. Well, at the very least, change the name. I do
    not want that heritage living with it.
        Ms. Matsui. Exactly.
        Mr. Ehlers. I would encourage the Board, as they go through
    this, to just start de novo and ask the simple question, Do we
    even need it? The even more important first question is, What
    do we need?
        Ms. Matsui. Right.
        Mr. Ehlers. So throw Smithsonian Business Ventures out the
    door and say we are going to start over. Maybe you will end up
    with something similar to it. Maybe you will end up with
    something quite different. Maybe you will end up with nothing
    like it. That is fine. Given all of the problems of its
    conception and its founding and its history, I would certainly
    think you would be well advised to just get rid of it and to do
    a study of what you really need there. Do that, and get away
    from another one of the many mistakes of the past.
        Mr. Bowsher, as I said to you earlier in the hallway, I
    deeply appreciate your interest, your time, and your
    willingness to work on this. I appreciate the contributions
    that you have made. I believe the Board has begun implementing
    all of the Governance Committee's report recommendations by
    Congressional hearings and so forth. It is a lot of activity, a
    lot of good activity.
        Do you think anything else needs to be done?
        Mr. Bowsher. No. As to the recommendations that we have in
    our report of what their Governance Committee has, I think if
    those are properly executed and implemented and done.
        So, by early next year, I hope there will be a lot of
    progress, and those are the issues that we have in the report.
    We did not hold anything back, when we issued this report.
        Mr. Ehlers. Well, I think it is a very good report, and I
    am pleased with the progress that has been made. I do not have
    any specific question. I have, perhaps, I guess, just one
    public relations question.
        Do you think that all of this activity--and do you have any
    evidence for this--has restored the public's trust?
        Mr. Bowsher. Do I think it will restore it?
        Mr. Ehlers. Or that it has.
        Mr. Bowsher. Oh, I think it has started to restore the
    public trust, but I think, in the final analysis, only if you
    successfully carry out the reforms will you be able to do it.
    So I think that we have to wait, and I think that is the role
    of the Congress, to hold hearings next January or February to
    just see how things have worked out.
        Mr. Ehlers. Okay.
        Mr. Bowsher. I am very hopeful at this point in time. Yes.
        Mr. Ehlers. Just another question. I commented earlier
    about the need to continue the investigation down the rest of
    the pyramid. You have been in the business for many years.
        Do you concur with that?
        Mr. Bowsher. Yes, I think there are areas, and I think the
    acting secretary, in some of our discussions with him, is
    thinking of that in certain other areas. There are certain
    areas that need further review, and we did not review the
    Smithsonian Business Ventures, but we did say in our report
    that we had heard that there were a lot of problems over there,
    that we thought there was a problem with the oversight. I think
    that the report that has just come out yesterday, it is a good
    area that, of course, is an illustration of an area that needs
    to be fixed.
        Mr. Ehlers. I truly think it was an attempt, and I do not
    normally assign ulterior motives to people, but I truly think
    there was an attempt to keep a lot of it away from the Board,
    and that it was set up specifically to do that. Just the fact
    that the Board was not even given a full opportunity to review
    and to approve the contract is evidence of that.
        Thank you very much. Both of you have done a marvelous job.
        I yield back.
        The Chairman. Thank you.
        Again, I thank both of you for your dedication, and I thank
    you for your participation on this important issue and
    important matter. Thank you.
        Ms. Matsui. Thank you.
        Mr. Bowsher. Thank you very much.
        The Chairman. This concludes our first panel.
        We would like to hear now from our second panel.

      STATEMENT OF CRISTIAN SAMPER, ACTING SECRETARY, SMITHSONIAN
       INSTITUTION; AND ANNE SPRIGHTLEY RYAN, INSPECTOR GENERAL,
                        SMITHSONIAN INSTITUTION

        The Chairman. Dr. Cristian Samper was appointed acting
    secretary in March of this year by the Board of Regents after 6
    years at the Smithsonian.
        Sprightley Ryan has worked at the Smithsonian since 2003.
    She was appointed Inspector General in 2007.
        We welcome you both. The full text of your written
    statements will be attached and will be inserted into the
    record.
        We would like to begin with Secretary Samper.

                          STATEMENT OF CRISTIAN SAMPER

        Mr. Samper. Thank you very much, Mr. Chairman and Mr.
    Ehlers. Thank you for the opportunity to testify before this
    committee.
        I want to assure the Committee and the public that the
    Smithsonian is moving forward with a thorough and a vigorous
    agenda, as you have heard, and in my sense, we have definitely
    turned a corner, and there is no turning back, and the
    transition, as the title of this hearing implies, is well
    underway.
        But we clearly have a lot of work ahead of us, so I would
    like to explain a few of the things that we are doing and
    reassure you that I am confident the Smithsonian will emerge as
    a stronger institution as a result of this process.
        Ever since I became acting secretary 4 months ago, I have
    focused on three main priorities. The first one is
    strengthening the public trust in the Institution, as Mr.
    Ehlers was suggesting. The second is working with our Regents
    to improve the governance, communications and accountability of
    the Smithsonian, including transparency. The third is making
    sure that we continue furthering our mission through our work
    and through our research and museums and education programs.
        As you just heard and as you know, the Board of Regents has
    adopted 25 recommendations for governance, and they are very
    much in sync with the recommendations of the Independent Review
    Committee. The majority of the work is well underway. Of the 25
    recommendations, we have already fully implemented 5. We
    estimate we will have completed about 17 by September and all
    but one of them by the end of the year, so we have a very
    aggressive movement forward. I have established a task force
    with Smithsonian staff from both central administration and
    from the museums to help us move forward and to make sure we
    get everything done. And we are keeping a public monthly
    scorecard of our progress on every one of those 25
    recommendations. That is available on our Web site.
        The Inspector General has also been working on issues
    relating to Smithsonian Business Ventures, and that is one of
    the areas that I have started to take a closer look at.
    Effective today, Smithsonian Business Ventures has a new
    leader, and I have appointed Tom Ott, who is the president and
    the publisher of the Smithsonian Magazine Group, as the acting
    CEO of Smithsonian Ventures. I am doing this in parallel with
    having established a task force that is reviewing the broader
    strategic issues about Smithsonian Business Ventures and its
    activities. We can discuss more about this.
        Our overall goal is much more than just to fix some of the
    past problems. Our goal is to make sure that we become a leader
    in good governance and that we have a stronger institution for
    the future for our children and for our grandchildren.
    Throughout this transition period, thanks to our dedicated
    staff and to our volunteers, the vital work, the mission of the
    Smithsonian, has continued forward. I just want to mention a
    few, Mr. Chairman, because it is important not to lose sight of
    them, with just three examples.
        The scientists at the National Zoo have been monitoring the
    populations of birds on the eastern coast of the United States
    and have identified, having long-term data, a sharp decline in
    populations of many of them. And we have now tied that with the
    introduction of the West Nile virus.
        The National Museum of Natural History has announced a
    partnership to launch an online Encyclopedia of Life, which
    will produce a Web page for every species we know on the planet
    that will be available for free to every student across America
    and to the world.
        The renovations at the National Museum of American History,
    including the glorious new home for the Star-Spangled Banner
    and the plans for the National Museum of African American
    History and Culture, are moving well ahead.
        Unfortunately, in this process, one of the problems that we
    have faced is the facilities maintenance problem, and this is
    one issue that we have clearly identified. And it is
    fundamental for us to look at our collections, our visitors and
    our research.
        The Smithsonian owns or leases more than 700 buildings or
    other structures. Some of these buildings are new, and some of
    them are 150 years old or many decades old, and both the
    National Academy of Public Administration and the GAO have
    looked into this matter and have underscored its seriousness.
    As you know from prior reports, the GAO has said that the
    current funding levels are insufficient to provide what we
    estimate to be a $2.5 billion backlog that is really required
    to fix and to maintain the Institution's facilities over the
    course of the next years. Given the current funding for
    facilities' upgrades and maintenance, which is about $150
    million a year, what we are looking for are ways to come up
    with an additional $100 million a year beyond the current base.
        As you know, we had to close the Arts and Industries
    building last year because of the decline in condition and
    because of the fact that it actually represented health hazards
    and safety hazards for some of our visitors and staff. We are
    working diligently in trying to explore options related to the
    Arts and Industries building, but we estimate it would cost
    somewhere on the order of $70 million just to upgrade the
    building, the roof and the systems to get it to where it should
    be.
        I would welcome your comments regarding the future of this,
    and as you and your committee know, one of the options that we
    are considering at this point is issuing a request for
    qualifications of a public-private partnership that would allow
    us to secure the funding to do this in a way that would be
    fully compatible with our mission.
        The Smithsonian tells the story of what it means to be an
    American, and it also provides a picture of America to the rest
    of the world. In cooperation with the Congress, the Smithsonian
    will move ahead with its ambitious plans and continue to
    safeguard America's treasures, to lead the pioneering research
    and to provide new educational experiences, and as we do, we
    must also look to the future and contemplate how this great
    institution will serve our country and the world and the
    generations ahead of us.
        Thank you very much, Mr. Chairman, and I look forward to
    answering your questions.
        [The statement of Mr. Samper follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you.
        Inspector General Ryan.

                       STATEMENT OF ANNE SPRIGHTLEY RYAN

        Ms. Ryan. Thank you. Good morning. I appreciate this
    opportunity to give you my views on the recommendations of the
    Smithsonian Board of Regents' Governance Committee and the
    Independent Review Committee, or IRC, as they affect the
    operations of my office.
        In April, I testified to your counterparts in the Senate
    about governance issues, including impediments to effective
    oversight and the need to improve accountability. I questioned
    whether the Regents had adequate information for meaningful
    oversight, and I questioned whether the Institution adequately
    considered its fiduciary duty when spending Smithsonian funds.
        Since that time, the Governance Committee and the IRC have
    explored these and other governance issues in-depth. We
    strongly endorse their conclusions and recommendations. Indeed,
    some of the IRC's report is based on data we generated and
    reported in our two audits of executive compensation and in our
    review of the secretary's expenses. I would also note that the
    Government Accountability Office has studied Smithsonian
    governance as well at the request of the Senate Rules
    Committee.
        The Smithsonian Regents and management have taken
    significant steps to address the critical weaknesses in
    oversight and accountability. While I think it is premature to
    judge this work in progress, I can report on the
    recommendations relating to my office, which cover access,
    compliance reviews and the level of our resources.
        In the first area, the Governance Committee's
    recommendations recognize the important role the Office of the
    Inspector General plays in oversight and accountability. The
    Regents have committed to strengthening our office, welcoming
    unfettered communication on any matter we deem appropriate. At
    the Regents' Audit and Review Committee meeting in early
    September, we will be working to formalize the reporting
    relationship of our office to the Board so that our role is
    embedded more firmly in the governance structure.
        I am pleased to report that our office will be moved back
    downtown, likely by year's end, easing our access not only to
    management but also to core facilities and employees.
        The recommendations also ask that we conduct regular
    reviews to monitor compliance with new policies such as those
    on executives' and Regents' travel and business expenses. We
    will also try to examine the policies themselves, which are
    still evolving, to make sure that they appropriately safeguard
    the Institution's limited resources and reflect its nonprofit
    status.
        Finally, the Governance Committee directed the Audit and
    Review Committee to determine whether our resources are
    adequate. As the IRC noted and as we have long maintained, they
    are not. Our staff, which is currently authorized at 16
    positions, has declined from a high of 24 in the mid-1990s,
    although the Institution's appropriations and number of museums
    has increased during that time.
        Currently, in addition to the new requests under the
    committee's recommendations, we are required to oversee the
    annual financial statement audits of the Institution and IT
    security reviews under the Federal Information Security
    Management Act. We are about to issue audit reports on retail
    operations at the zoo and how the Institution has handled
    employee relocation expenses, and we are working on an audit of
    revenue contracts with Smithsonian Business Ventures, and we
    are beginning one on workers' compensation at the Institution.
        There are additional high-risk areas that we need to
    address, such as the multi-million dollar capital projects that
    are going on, financial reporting systems and internal
    controls--and that goes back to what the ranking member was
    saying as to going below the top level of management--
    facilities maintenance, and following up on animal care issues
    at the zoo, to name a few, and that does not even include our
    investigative work.
        Nonetheless, we are more optimistic now that our resources
    will begin to match the Institution's oversight needs. Just
    last week, we learned that management had agreed to forward our
    request for five new positions for fiscal year 2009. Of course,
    much will depend on OMB and congressional appropriators.
        In sum, governance reform has begun in earnest, and the
    signs are encouraging. The real benefits will come with the
    comprehensive implementation of the committee's
    recommendations, as Mr. Bowsher noted. The strengthening of our
    office promises better oversight of and therefore more
    confidence in the Institution. We look forward to providing you
    with further updates on this progress.
        Thank you.
        [The statement of Ms. Ryan follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you.
        I have a question for the Secretary.
        As to the Arts and Industries building, you are currently
    considering entering a redevelopment with a private-public
    partnership. Who would occupy it? Who would be leasing it? What
    would happen when that lease is up?
        Mr. Samper. Well, that is precisely one of the issues that
    we want to look at, Mr. Chairman.
        There are a number of activities for which the building
    could be used, and it will depend on possible interest. One of
    the original designs was to strengthen the visitors' service
    for the whole Smithsonian and to expand some of the facilities.
    The question is, we could either do it entirely with Federal
    funding in getting it there, which will be a fairly expensive
    proposition, but it is one of the possibilities. The
    alternative is to see if there is some compatible partnership
    that would allow us to secure private funding to do it in a way
    that we could occupy and maybe enhance some of the visitor
    experiences. Our proposal specifically is to go ahead and, as
    discussed and approved by the Regents, to issue a request for
    qualifications, not a full request for proposal, but to see who
    is interested and what kind of projects will be most
    interesting and would be relevant and consistent with the
    mission.
        So that is our proposal. We have provided your staff with
    the full text of the proposal, and we would welcome any
    feedback you have in terms of that so that we could move ahead,
    and of course, we would be letting you know as we get the
    results of that before we proceed with any activities or
    partnerships.
        The Chairman. We would appreciate that very much.
        Mr. Samper. Absolutely.
        The Chairman. Fees. Where are your thoughts on fees? I
    think you know where mine are. I do not want to charge people
    to go to the Smithsonian.
        Mr. Samper. I think one of the things that makes the
    Smithsonian a great institution has been the fact that it
    belongs to every American. We acknowledge that it is supported
    by Federal taxes, and therefore, we have provided free
    admission. In my view, that is one of the things that makes the
    Smithsonian a very important institution. So, clearly, my
    preference is to have no fees.
        We have, on an occasional basis in the past, charged fees
    for particular special exhibitions, and that is something that
    we do sometimes regarding particular exhibitions that come from
    outside whose particular projects may have very high
    maintenance costs. So it is something that we are looking at,
    and unfortunately, we have had to look at some of those because
    of some of the constraints we have had on our budget for these
    exhibitions. That is where I am, Mr. Chairman, and I hope we
    are on the same page.
        The Chairman. When you say you will not charge anybody, we
    are on the same page.
        Mr. Samper. Okay.
        The Chairman. I appreciate that.
        Mr. Ehlers, any questions?
        Mr. Ehlers. Thank you. I am sorry that I had to step out
    for a moment. The first question relates to both of you.
        I appreciated your comment, Ms. Ryan, about your offices
    being relocated to the main administration building. I did not
    even know you were not. Obviously, there is an advantage to
    being there, not just administratively but for little clues you
    pick up from people you meet in the hallway.
        Now, the recommendations have been made. This is directed
    to you, Mr. Samper. The crucial part is how the information
    gets from the Inspector General to you and what you do with it.
    As you know, I have an academic background. I remember a
    college president who told me once that, when he took office,
    the first thing he did was walk over to the I.G.'s office and
    say, ``I do not care what you find. If it is wrong. Whatever it
    is, you come to me before you talk to anyone else.'' He wanted
    absolute, direct, immediate communication with the I.G. It
    served him well. It turned out, because one of the chief
    financial officers was doing some hanky-panky with the money,
    and the I.G. went right to him and addressed the whole issue.
    If they had not had that structure, it would have been in the
    newspapers for a week. I am not saying you have to do that, but
    it is very important for you to be in direct communication even
    though you are also under the spyglass as well.
        Also, I am wondering what you are going to set up to handle
    the recommendations of the Governance Committee, IRC, and the
    IG, because a lot of these things involve long-term
    recommendations and actions. What processes will you use to
    deal with that?
        Mr. Samper. Thank you, Mr. Ehlers.
        You are absolutely right, and I am happy to report that I
    am in regular communication with the Inspector General. We
    actually have a regular monthly meeting, and then, on
    particular studies, we will be in contact about how they are
    evolving. I certainly find that it has been helpful, and one of
    the things I decided when I became acting secretary was to go
    over to the Inspector General's office in Crystal City and meet
    with her and learn a little bit more about particular concerns
    I had with regard to Smithsonian Business Ventures and other
    areas. So I think we do have that communication. As you know,
    with the change in reporting, the Inspector General is
    reporting now directly to the Board of Regents, and she meets
    with them in executive session when any issues come up. So I
    think we have got that--that is my sense--and I will certainly
    look at that going forward.
        In terms of tracking the recommendations--because you are
    absolutely correct; some of the recommendations are fairly
    straightforward and simple to implement, and others will take
    longer to implement. We have a tracking system for all of the
    open recommendations that we monitor quarterly, and we see
    exactly where we are with those, and we have closed many of
    them, but some of them will be there for a number of years.
    Just to mention one I am familiar with from my previous role as
    director of the Natural History Museum, improving the
    collections care for the National Museum of Natural History is
    something that is contingent on the funding and will take many
    years to complete. Therefore, that recommendation will remain
    open for several years. So we are doing that. I think, overall,
    it is working well from my point of view.
        Mr. Ehlers. All right. I am very concerned about your $2.5
    billion facilities maintenance backlog. Unfortunately, that
    frequently happens in government. When I was in the State
    legislature, I was convinced that most of the universities did
    that deliberately when they wanted a new building. Of course,
    when the legislature did not want to give it to them, they
    would just stop maintaining the old one until it was ready to
    collapse. Then the government would come in and proclaim an
    emergency and give them $1 billion for a new building.
        I am not accusing you of that, but the pattern is too
    familiar. In the public sector, we tend not to take care of our
    properties and maintain them the way we should. I do not know
    how you are going to address that, but that is a crucial issue.
    Your board is going to have to be active in fundraising, and we
    are going to have to do our part, too.
        You have just completed a review of the compensation and
    expenses of the CEO of the Business Ventures. What are the
    findings? Can you put them into context for us with regard to
    your other work on this SBV operations?
        Mr. Samper. Mr. Ehlers, in terms of mentioning the finding
    and the report you are referring to, which was done by the
    Inspector General, maybe we could ask her to provide the
    report, and I would be happy to report the management response
    to that if that would work for you.
        Mr. Ehlers. That would be fine.
        Ms. Ryan. Thank you.
        We found, summarizing very quickly, as far as the numbers
    were concerned, that of the CEO's business expenses for the
    period of fiscal year 2001 to 2005--we are going to go back and
    do 2006 to the present later this fall--that almost 60 percent
    of his expenses did not have sufficient supporting
    documentation; 13 percent had virtually none; and 16 percent of
    his expenses were unauthorized; which leaves about 20 percent
    of his business expenses that were fully authorized and fully
    documented to the level required by the IRS to deduct those
    business expenses.
        So we made a number of recommendations, all of which with
    minor tweaking, that the Board of Regents through the Audit and
    Review Committee accepted. We asked that the CEO reimburse the
    Institution for certain expenses, about $26,000, that he be
    taxed on certain amounts for the last 3 years because expenses
    that are not supported have to be treated as taxable income
    under IRS rules. We also recommended that the Institution
    strengthen some of its policies regarding the use of car
    service, for example, and regarding the use of what is called
    ``actual expenses'' rather than ``per diem'' or ``traveling.''
    I would consider these to be sort of luxury travel expenses.
    The final thing is we asked that the CEO reimburse the
    Institution for some outstanding personal expenses on his card
    because he used his card for personal expenses when he should
    not have.
        Now, turning to more general issues, we made a number of
    observations about the internal controls, or the lack thereof,
    at SBV having to do with the business expenses of the CEO.
    There was terribly lax recordkeeping. There were no written
    policies and procedures until 2006 about business expenses at
    this business even though it had been founded in 1999 and even
    though you can pull a business expense policy off the Web very
    simply. There was a lack of compliance with travel card
    policies, and the Institution, itself, did not engage in
    sufficient oversight. People were aware that individuals in SBV
    were not using their travel cards properly, people in other
    parts of the Institution, but it was allowed to continue. So
    those were my final notes.
        Mr. Samper. Thank you, Congressman. We have read the report
    from the inspector general, and the report went to the Audit
    and Review Committee of the Regents, which held a meeting, a
    conference call, last Friday. Bottom line is, the Board of
    Regents has accepted the recommendations, as have I, and we are
    going ahead and following the recommendations in terms of
    reimbursements, in terms of taxable income and the others,
    immediately.
        But I do think that some of the broader issues and some of
    the problems that we have had in this area have had to do with
    policies and controls. So I have instructed the chief financial
    officer to review the existing travel handbook and the policies
    to make sure that the Smithsonian Business Venture's travel
    policies conform with the Smithsonian's policies.
        As you heard from Congresswoman Matsui, one of the things
    that has been challenging is that Smithsonian Business Ventures
    has had an independent set of policies since it was created in
    1999 that don't always match the ones of the Smithsonian; and
    we are taking steps to review all of them and to bring them in
    line with ours, and any exceptions will be approved by the
    Board of Regents directly. So we are moving ahead with that
    swiftly.
        I think what I would like to stress is that the good news
    in terms of the report is that we did not find that any of the
    expenditures violated the law or were used for personal gain--
    that is the good news--but it clearly revealed problems with
    the policies and problems with management. And I am confident
    now that with new leadership, with their recommendations and
    others', we will start gearing back to have a stronger activity
    in that area.
        Mr. Ehlers. Well, I guess my problem is, we keep talking
    about policies, et cetera. Virtually all of the offenses that
    you have described, in many of the institutions I have worked
    for, both public and private--and I suspect this is true of the
    chairman, that if he did that, those are immediate firing
    offenses. And, likely, some of them are illegal.
        That is part of my problem; by having an offshoot like that
    that can even go wild--where did this come from in the first
    place, and why in the world do we want it to continue? Why have
    an army that can set its own policies, and particularly if
    people are hired? I mean, it is just common sense that if you
    have a business expense, you keep the receipt. You keep your
    expenses small; you have limits on it. And if the director
    doesn't put that up, no employee is going to follow it either.
        It just blows me away that any agency like this could
    possibly have done that.
        Mr. Samper. I don't disagree, Mr. Chairman. And that is
    precisely why one of the first steps I took when I became
    Acting Secretary was to undertake a comprehensive review not
    just of the policies, but of the concept of Business Ventures.
    In my view, having a semiautonomous kind of organization within
    the Smithsonian has not worked as well as what was expected,
    based on what I can read throughout the documents.
        So what I have done is, I have appointed a task force,
    including several members from the advisory boards of the
    museums and some of our staff, to look at the fundamental
    questions about this, including what is the role of these
    business kinds of activities within the institution? Which of
    those makes sense to run directly or outsource? How do you deal
    with the revenue-sharing work in museums? And what kind of
    governance and oversight should they have?
        Our goal is to have that report by the Regents meeting in
    November, and it will ask exactly those kinds of fundamental
    questions in a way that will help us and guide us forward.
        Mr. Ehlers. Well, this seems to me--and I am not going to
    ask you to kill Ventures, or force you to do it, but it just
    seems to me exceedingly strange to have that type of setup.
        Again, my preference, if I were in charge, I would want the
    person running that to be in the office next to me so I knew
    exactly what was going on all the time. Hire a very capable
    business person to run it so that it is run like a business,
    but not something autonomous that can go wild as this one has
    done.
        I think, Mr. Chairman, that is the end of my sermons for
    today. Thank you very much for holding this hearing. And I
    yield back.
        The Chairman. Thank you.
        We will be issuing additional questions in writing, and we
    will hold the record open for your response. Thank you for
    being here.
        I know you have had a tough couple years behind you; and
    for lack of a better word, you were left with some residue that
    you have to clean up. We want you to know that we appreciate
    the work you are doing, and we will be here to help you do that
    and make sure that we can move forward and make this the gem it
    once was.
        And I think, and my family thinks, that I have a
    conversation with you, and you tell them it is the three
    generations--it is the children, the mothers; the grandchildren
    and then the grandfathers, you know. And I am reaching that
    stage. So we want to make this the gem that I know it is and it
    should continue to be.
        So I thank you.
        Mr. Ranking Member.
        Mr. Ehlers. Thanks.
        The Chairman. Thank you. This hearing is adjourned.
        [Whereupon, at 1:03 p.m., the committee was adjourned.]
        [Information follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]