[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

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                   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:]

    
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    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:]
    
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    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:]
    
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    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.]
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