Smithsonian Institution: Status of Efforts to Address a Range of
Funding and Governance Challenges (12-DEC-07, GAO-08-250T).
The Smithsonian Institution (Smithsonian) is the world's largest
museum complex. Its funding comes from its own private trust fund
assets and federal appropriations, with the majority of funds for
facilities coming from federal appropriations. In 2005, GAO
reported that the Smithsonian's current funding would not be
sufficient to cover its estimated $2.3 billion in facilities
projects through 2013 and recommended that the Smithsonian Board
of Regents, its governing body, develop and implement a funding
plan. Recently, problems related to a lack of adequate oversight
of executive compensation and other issues have raised concerns
about governance at the Smithsonian. This testimony discusses
GAO's recently issued work on the Smithsonian's real property
management efforts and its efforts to develop and implement
strategies to fund its facilities projects. In addition, it
describes preliminary results of GAO's ongoing work on the
Smithsonian's governance challenges. The work for this testimony
is based on GAO's September 2007 report, Smithsonian Institution:
Funding Challenges Affect Facilities' Conditions and Security,
Endangering Collections, which included recommendations. For
ongoing governance work, GAO reviewed Smithsonian documents and
interviewed Smithsonian officials, academics, and representatives
of nonprofit associations.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-08-250T
ACCNO: A78829
TITLE: Smithsonian Institution: Status of Efforts to Address a
Range of Funding and Governance Challenges
DATE: 12/12/2007
SUBJECT: Cost analysis
Facility construction
Facility maintenance
Facility management
Facility repairs
Facility security
Federal facilities
Federal funds
Fund audits
Funds management
Museums
National historic sites
Performance measures
Physical security
Real property
Strategic planning
Cost estimates
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GAO-08-250T
* [1]Summary
* [2]Background
* [3]Despite Some Improvements, Deteriorating Facilities Threaten
* [4]Some Facilities Improvements Have Occurred, but Deterioratin
* [5]Security Efforts Include Following Key Security Practices bu
* [6]Real Property Portfolio Management Efforts Include Improveme
* [7]The Smithsonian Has Taken Some Steps to Address Our Recommen
* [8]Preliminary Results Suggest that the Board of Regents Has Ma
* [9]The Board Has Implemented Several Changes to Improve Governa
* [10]Some Recommendations Have Yet to Be Implemented, and Other G
* [11]GAO Contact and Acknowledgements
* [12]GAO's Mission
* [13]Obtaining Copies of GAO Reports and Testimony
* [14]Order by Mail or Phone
* [15]To Report Fraud, Waste, and Abuse in Federal Programs
* [16]Congressional Relations
* [17]Public Affairs
Testimony
Before the Senate Committee on Rules and Administration
United States Government Accountability Office
GAO
For Release on Delivery
Expected at 10:00 a.m. EST
Wednesday, December 12, 2007
SMITHSONIAN INSTITUTION
Status of Efforts to Address a Range of Funding and Governance Challenges
Statement of Mark L. Goldstein, Director
Physical Infrastructure Issues
GAO-08-250T
Madam Chairman and Members of the Committee:
Thank you for the opportunity to testify before you today on our work on
the Smithsonian Institution (Smithsonian). The Smithsonian has been
referred to as America's museum, as its museums hold and provide access to
irreplaceable national collections in American and natural history, art,
and other areas. Since its beginning, the Smithsonian has evolved into the
world's largest museum complex and research organization; two of its
museums on the National Mall in Washington, D.C., are the most visited in
the world. The act establishing the Smithsonian in 1846 provided, among
other things, that the business of the Smithsonian be conducted by a Board
of Regents.
In recent years, the National Academy of Public Administration (NAPA), the
Smithsonian, and we have reported on the deterioration of the
Smithsonian's facilities and the threat posed by this deterioration to the
Smithsonian's collections. For example, in April 2005, we reported that
the failing condition and closure of the Smithsonian's 1881 Arts and
Industries building on the National Mall was the most significant example
of a broad decline in the condition of the Smithsonian's facilities
portfolio.^1 Moreover, we reported that structural deterioration and
failing systems in Smithsonian museums and other facilities presented
serious long-term risks to the Smithsonian's collections. The
Smithsonian's annual operating and capital program revenues come from its
own private trust fund assets and federal appropriations; however, the
majority of funds for facilities come from the Smithsonian's federal
appropriations.
As the Smithsonian's chief decision-making body, the Smithsonian Board of
Regents is responsible for the long-term stewardship of the Smithsonian's
mission, which includes maintaining the Smithsonian's facilities and
collections, as well as ensuring that the Smithsonian has a funding
strategy that provides sufficient funds to support these activities. In
April 2005, we reported that the Smithsonian's current funding would not
be sufficient to cover its estimated $2.3 billion in facilities projects
through 2013 and recommended that the Smithsonian Board of Regents develop
and implement a funding plan to address the Smithsonian's facilities
projects. In April 2007, we testified before this committee that the
Smithsonian's estimate for facilities' projects had increased.^2
1GAO, Smithsonian Institution: Facilities Management Reorganization Is
Progressing, but Funding Remains a Challenge, [18]GAO-05-369 (Washington,
D.C.: Apr. 25, 2005).
Recently, it has come to light that in addition to the challenge of
addressing the Smithsonian's facilities needs, the Board of Regents faces
other governance challenges. In the past year, following a report from the
Smithsonian's Inspector General to the Board of Regents on the
Smithsonian's former Secretary's compensation package and expenses, the
former Secretary resigned. In response to concerns about the Smithsonian's
governance raised by the former Secretary's compensation and expenses, as
well as other issues, two studies were conducted, one by the Board of
Regents' Governance Committee and the other by an Independent Review
Committee (IRC) created at the request of the Board of Regents. Among the
findings of these studies were that the roles and responsibilities of
Regents were not clearly defined; under the former Secretary of the
Smithsonian, key senior officials such as the General Counsel, Inspector
General, and Chief Financial Officer were isolated from the board; and the
Regents did not routinely receive or request information necessary to
support vigorous deliberation, well-reasoned decision making, and adequate
oversight. Both studies included recommendations. The Board of Regents
adopted all 25 of the Governance Committee's recommendations and stated
that the IRC recommendations were for the most part encompassed by the
Governance Committee recommendations.^3
In my statement today, I will be focusing on the results of our recent
study--Smithsonian Institution: Funding Challenges Affect Facilities'
Conditions and Security, Endangering Collections^4--and on preliminary
results of our ongoing work on governance issues facing the Smithsonian.
My statement focuses on three topics: (1) the Smithsonian's real property
management efforts, including the condition of the Smithsonian's
facilities, costs of facilities' projects, and efforts to improve real
property security and portfolio management; (2) the extent to which the
Smithsonian has developed and implemented strategies to fund its
revitalization, construction, and maintenance projects as we recommended
in 2005; and (3) some preliminary results of our ongoing work on
governance changes being made by the Smithsonian's Board of Regents to
address recent governance problems.
^2GAO, Smithsonian Institution: Funding for Real Property Needs Remains a
Challenge, [19]GAO-07-725T (Washington, D.C.: Apr. 11, 2007).
^3According to the Board of Regents' staff, two IRC recommendations were
not encompassed by the governance committee recommendations: a
recommendation to audit the former Secretary's and senior management's
expenses (although the Smithsonian did separately decide to address this
recommendation) and a recommendation not clearly directed to the Board of
Regents, which stated that achieving effective oversight and governance at
nonprofit organizations may ultimately require legislative action.
^4GAO, Smithsonian Institution: Funding Challenges Affect Facilities'
Conditions and Security, Endangering Collections, [20]GAO-07-1127
(Washington, D.C.: Sept. 28, 2007).
We conducted our work for this testimony from October to December 2007 in
accordance with generally accepted government auditing standards. Our
testimony regarding the Smithsonian's real property management is based on
our September 2007 report on the Smithsonian's facilities and information
provided by Smithsonian officials on steps taken to develop a funding plan
for facilities projects. Our testimony regarding preliminary results of
our ongoing work on the Smithsonian's governance changes is based on our
review of Smithsonian and other documents, and interviews with Smithsonian
Regents and officials, including all museum directors. In addition, we
conducted a literature search to help identify governance experts and
organizations that had recently undergone governance reforms. We
identified and interviewed ten specialists on nonprofit or museum
governance, including academics and representatives of associations
dedicated to nonprofit governance. We also reviewed literature on
nonprofit governance to identify common nonprofit governance practices,
and we met with several organizations that had some characteristics
similar to those of the Smithsonian and that had recently undergone
governance reforms. For more information on the scope and methodology of
this testimony and our ongoing work on governance issues, see Appendix 1.
Summary
o While the Smithsonian has made some improvements to its real
property management, the continued deterioration of many
facilities has caused problems, the cost estimate for facilities
projects has increased, and the Smithsonian's security and real
property portfolio management efforts face challenges. The
Smithsonian has made a number of improvements to its facilities,
but the deterioration of many facilities has resulted in access
restrictions and continued to threaten collections and cause other
problems, according to museum and facility directors. For example,
a lack of temperature and humidity control at National Air and
Space Museum storage facilities has caused corrosion to historic
airplanes and increased the cost of restoring these items for
exhibit. In another example, leaks in the National Zoological
Park's sea lion and seal pools as of July 2007 were causing an
average daily water loss of 110,000 gallons, with a water
replacement cost of $297,000 annually. The Smithsonian's cost
estimate for facilities projects from fiscal year 2005 through
fiscal year 2013 has increased since April 2005 from about $2.3
billion to about $2.5 billion for the same time period. Regarding
security efforts, the Smithsonian follows key security practices
but faces challenges related to ensuring that museum and facility
directors are aware of important security information and funding
constraints. Some museum and facility directors cited an
insufficient number of security guards to protect assets due to
funding constraints and stated that in the absence of more guards,
some cases of vandalism and theft have occurred. In another area,
the Smithsonian has made significant strides in its real property
portfolio management efforts. However, the Smithsonian omitted
privately funded projects from its capital plan, making it
challenging to comprehensively assess the funding and scope of
projects. In our September 2007 report, we recommended that the
Smithsonian increase awareness of security issues and include
privately funded projects in its capital plan. The Smithsonian
concurred with these recommendations.
o Funding constraints are clearly a common denominator with regard
to the Smithsonian's security and real property management, but
while the Board of Regents has taken some steps to address our
2005 recommendation to develop a funding plan for the
Smithsonian's facilities projects, its evaluation of funding
options has been limited. In 2005, the Board of Regents created an
ad-hoc Committee on Facilities Revitalization, which, after
reviewing nine options developed by Smithsonian management,
requested increased federal funding. We found that some of the
Smithsonian's evaluations of the nine funding options were limited
in that they did not always provide complete analysis, fully
explain specific assumptions, or benchmark with other
organizations. Also, some options were dismissed because
independently they would not generate enough revenue, but the
evaluations did not consider combining options to increase
revenue. In our September 2007 report, we concluded that if the
Smithsonian does not develop a viable strategy to address its
estimated $2.5 billion in facilities projects, its facilities and
collections face increased risk, and the ability of the
Smithsonian to meet its mission will likely decline. We therefore
recommended that the Smithsonian Board of Regents perform a more
comprehensive analysis of alternative funding strategies beyond
principally using federal funds to support facilities and submit a
report to Congress and the Office of Management and Budget
describing a funding strategy for current and future facilities
needs. The Smithsonian concurred with the report's
recommendations. Recently, the Smithsonian Board of Regents has
taken some additional step towards developing a funding plan for
facilities' projects. According to a Smithsonian official, at the
Board of Regents' November 19, 2007, meeting, the chair of the
Committee on Facilities Revitalization, which became a standing
committee in June 2007, reported to the board on the committee's
activities. The Regents then concurred with a prioritized list of
funding options presented by the committee, which includes
establishing a national campaign to raise private sector funds for
Smithsonian programs and facilities, among other things.
o Preliminary results of our ongoing work indicate that the Board
of Regents has made some changes to strengthen governance, but
governance challenges remain. As of December 2007, the Board of
Regents or the Acting Secretary had largely implemented 12 of the
Governance Committee's 25 recommendations. The board had taken
steps towards implementing the other 13 recommendations,
including, among other things, arranging for the implementation of
some recommendations to be studied further and establishing target
dates for implementation that range from December 2007 to mid
2008. The 12 recommendations implemented by the board include, for
example, more clearly defining the roles and responsibilities of
Regents and regent committees, improving access between the board
and key members of senior management, and strengthening management
policies regarding conflicts of interest. The board is also
studying whether changes to the size and composition of the board
would strengthen governance and how to effectively engage the
Smithsonian's advisory boards. Governance experts and others we
spoke with said that, in general, the board appears to have taken
some positive steps toward governance reform. However, according
to the literature we reviewed and governance experts we
interviewed, success will depend in part on how Regents embrace
their new responsibilities and on their level of engagement, as
good governance results from a board that consists of active and
deeply engaged members. We will continue to address these issues
in our ongoing work, in which we are assessing the Board of
Regents' governance changes and how the board is addressing
long-term governance challenges facing the Smithsonian. We expect
to report on these issues in 2008.
Background
Congress established the Smithsonian in 1846 to administer a large bequest
left to the United States by James Smithson, an English scientist, for the
purpose of establishing, in Washington, D.C., an institution "for the
increase and diffusion of knowledge among men." In accepting Smithson's
bequest on behalf of the nation, Congress pledged the "faith of the United
States" to carry out the purpose of the trust.^5 To that end, the act
establishing the Smithsonian provided for the administration of the trust,
independent of the government itself, by a Board of Regents and a
Secretary, who were given broad discretion in the use of the trust funds.
The Board of Regents currently consists of nine private citizens as well
as members of all three branches of the federal government, including the
Chief Justice of the United States, the Vice President, and six
congressional members, three from the Senate, and three from the House of
Representatives.^6
Over the last 160 years, the Smithsonian's facilities inventory has
expanded to include 19 museums and galleries, 9 research centers, a zoo,
and other facilities--most located in or near Washington, D.C. The major
buildings owned by the Smithsonian range in age from about 160 years old
to less than 1 year old, with most of the facilities' growth occurring
since the 1960s. (See figure 1.) The Smithsonian's growth will continue
with the construction of an aircraft restoration area--phase 2 of the
National Air and Space Museum Steven F. Udvar-Hazy Center^7--and the
design and construction of a National Museum of African American History
and Culture, authorized by Congress in 2003. Beyond this, there has been
Congressional interest in developing a National Museum of the American
Latino.^8
^5A trust is a fiduciary relationship involving a right of property held by
the trustee for the benefit of another.
^6The three senators are appointed by the President of the Senate, the
three representatives are appointed by the Speaker of the House, and nine
citizens are appointed by joint resolution of Congress--two from the
District of Columbia and seven from the states.
^7The National Air and Space Museum Steven F. Udvar-Hazy Center near
Washington Dulles International Airport is the companion facility to the
National Air and Space Museum on the Mall and is being built in two
phases. Phase 1 opened in December 2003 and provides enough space for the
Smithsonian to display thousands of aviation and space artifacts. Phase 2
will include a restoration hangar, archives, collections processing unit,
conservation laboratory, and collections storage facility.
^8Several bills have been introduced in the 110th Congress to study the
potential creation of a National Museum of the American Latino and whether
the museum should be located within the Smithsonian. See S. 500, 110th
Cong. (2007); and H.R. 512, 110th Cong. (2007).
Figure 1: Growth in Major Facilities Owned by the Smithsonian Institution,
in Square Feet
Note: This figure tracks the square footage for all owned and leased
buildings as they were added to the inventory over time. Only the major
facilities are named in the figure, although the square footage of smaller
buildings is included. Also, in November 2005, the Smithsonian Institution
sold the Victor Building.
Although the Smithsonian is a trust instrumentality with a private
endowment, it is largely funded by federal appropriations. In fiscal year
2006, the Smithsonian's operating revenues were about $947 million, of
which about 65 percent came from federal appropriations. The facilities
capital appropriation, which was about $98.5 million in fiscal year 2006,
provides funds for construction and revitalization projects. The salaries
and expenses appropriation, which was about $516.6 million in fiscal year
2006, includes funding for the program activities of each museum and
research center; rents; utilities; and facilities' operations,
maintenance, and security costs. The remaining operating revenues come
from the Smithsonian's private trust funds. These are of two types:
o Restricted trust funds--which made up 29 percent of the
Smithsonian's operating revenue in fiscal year 2006--include such
items as gifts from individuals and corporations that specify the
purpose of the funds. Restricted funds have been provided for some
facilities' construction projects and enhancements related to
revitalization projects.
o Unrestricted trust funds--which made up 6 percent of the
Smithsonian's operating revenue in fiscal year 2006--include
income from investment earnings and net proceeds from business
activities, and can be used to support any Smithsonian activity.
The Smithsonian typically has used unrestricted trust funds for
fundraising, some salary costs, and central administration costs.
Although the Smithsonian can use unrestricted trust funds for any
purpose consistent with the Smithson Trust and therefore could use
them for facilities revitalization and maintenance, it has not
done so. Smithsonian officials stated that the unrestricted trust
fund budget is small and that if these salary and central
administration costs were not paid for with unrestricted trust
funds, they would have to use federal funds or eliminate positions
or programs to cover these expenses.
Despite Some Improvements, Deteriorating Facilities Threaten Collections, and
Security and Real Property Portfolio Management Efforts Have Strengths and
Limitations
With regard to real property management, the Smithsonian has made a number
of facilities improvements since our 2005 report, but the continued
deterioration of many facilities has caused access restrictions and
threatened the collections, and the Smithsonian's cost estimate for
facilities projects has increased. The Smithsonian follows many key
security practices to protect its assets but faces communication and
funding challenges. The Smithsonian has taken steps to improve its real
property portfolio management but faces challenges related to funding
constraints and its capital plan.
Some Facilities Improvements Have Occurred, but Deteriorating Facilities Have
Caused Problems and the Cost Estimate for Facilities Projects Has Increased
The Smithsonian improved the condition of a number of facilities since our
2005 report. For example, the Smithsonian completed its revitalization of
the Donald W. Reynolds Center for American Art and Portraiture, which
houses the Smithsonian American Art Museum and the National Portrait
Gallery. The Smithsonian also completed the construction of Pod 5, a
fire-code-compliant space, to store alcohol-preserved specimens of the
National Museum of Natural History. Many of these specimens are currently
stored within the museum building on the National Mall in Washington,
D.C., in spaces that do not meet fire-code standards. Collections are
scheduled to be moved to Pod 5 over the next 2 years.
At the same time, problems with the Smithsonian's facilities have resulted
in additional access restrictions and damage and have continued to
threaten collections and cause other problems, according to museum and
facility directors:
o At the National Air and Space Museum, power capacity issues
caused by inadequate electrical systems have forced the museum to
occasionally close galleries to visitors.
o A lack of temperature and humidity control at storage facilities
belonging to the National Air and Space Museum has caused
corrosion to historic airplanes and increased the cost of
restoring these items for exhibit.
o Chronic leaks in the roof of the Cultural Resources Center at
Suitland, Maryland, which was completed in 1998 and opened in 1999
to hold collections of the National Museum of the American Indian,
have forced staff to place plastic over several shelving units
used to store collections, such as a set of wooden boats that
includes an Eskimo kayak from Greenland and a rare Yahgan dugout
canoe from Tierra del Fuego, according to officials at this
facility (see fig. 2).^9 The plastic sheeting limits visitors'
visual access to the boats during open houses, which provide
Native Americans and other groups with access to the collections.
^9In addition to significant collections from the United States, the
National Museum of the American Indian also contains items from throughout
the Western Hemisphere.
Figure 2: Plastic Sheeting Covering Native American Boats to Prevent Water
Damage at the Smithsonian Institution's Cultural Resources Center
o Leaks in a skylight since 2005 have at times forced the National
Museum of African Art to cover the skylight with plastic to
protect the building and its collections (see fig. 3).
Figure 3: Leaking Skylight Over the National Museum of African Art
o Leaks in the National Zoological Park's sea lion and seal pools
as of July 2007 were causing an average daily water loss of
110,000 gallons, with a water replacement cost of $297,000
annually (see fig. 4).
Figure 4: Sea Lion Pool at the National Zoological Park
According to Smithsonian officials, repairs to some of these problems are
scheduled to take place over the next several years.
The Smithsonian's cost estimate for facilities projects from fiscal year
2005 through fiscal year 2013 has increased since April 2005 from about
$2.3 billion to about $2.5 billion for the same time period. According to
Smithsonian officials, this estimate includes only costs for which the
Smithsonian expects to receive federal funds, and it could increase
further. According to Smithsonian officials, the increase in this cost
estimate was due to several factors. For example, Smithsonian officials
said that major increases had occurred in projects for the National
Zoological Park and the National Museum of American History because the
two facilities had recently developed master plans that identified
additional requirements.^10 In addition, according to Smithsonian
officials, estimates for antiterrorism projects had increased due to
adjustments for higher costs for security-related projects at the National
Air and Space Museum, and the increase in the cost estimate also reflects
the effect of delaying corrective work in terms of additional damage and
escalation in construction costs.
^10A master plan is a proposal of a comprehensive renovation or expansion
of a complex that aligns the physical plant with the organization's
strategic goals. It includes proposals to make the complex conform to
current codes and meet technology and security requirements, and can also
involve upgrading and replacing major building systems, among other
things.
Security Efforts Include Following Key Security Practices but Face Challenges
The Smithsonian follows key security practices to protect its assets, but
it faces two key challenges, one related to ensuring that museum and
facility directors are aware of important security information and the
other related to funding constraints. The Smithsonian follows key security
practices we have identified in prior work,^11 such as allocating
resources to manage risk by contracting for a risk assessment report. This
report, which includes individual assessments for over 30 Smithsonian
facilities, was completed in 2005. The Smithsonian performs risk
assessments for its facilities every 3 to 5 years to determine the need
for security enhancements.
Despite these efforts, we found that nine museum and facility directors we
spoke with were unaware of the contents of the Smithsonian's risk
assessment report. The Smithsonian's Office of Protection Services (OPS)
is responsible for operating programs for security management at
Smithsonian facilities. However, some museum and facility directors' lack
of awareness of the risk assessment report limits their ability to work
with OPS to identify, monitor, and respond to changes in the security of
their facilities.
Furthermore, some museum and facility directors cited an insufficient
number of security officers to protect assets due to funding constraints.
We found that the overall number of security officers had decreased since
2003, at a time when the Smithsonian's square footage had increased. Some
of the Smithsonian's museum and facility directors said that in the
absence of more security officers, some cases of vandalism and theft have
occurred. In addition, two museum directors stated that it has become more
difficult for them to acquire collections on loan because lenders have
expressed concern with the lack of protection. In our September 2007
report, we recommended that the Smithsonian increase awareness of security
issues. The Smithsonian concurred with this recommendation.
^11GAO, Homeland Security: Further Actions Needed to Coordinate Federal
Agencies' Facility Protection Efforts and Promote Key Practices,
[21]GAO-05-49 (Washington, D.C.: Nov. 30, 2004).
Real Property Portfolio Management Efforts Include Improvements but Face
Challenges
Faced with deteriorating facilities and an increased cost estimate for
facilities projects, the Smithsonian has taken steps to improve the
management of its real property portfolio but faces challenges related to
funding constraints and its capital plan. The Smithsonian's centralized
office for real property management, known as the Office of Facilities
Engineering and Operations (OFEO), has made significant strides in several
areas related to real property portfolio management, including improving
real property data, developing performance metrics, and refining its
capital planning process.
At the same time, however, funding constraints have presented considerable
challenges to OFEO's efforts. For example, while a majority of museum and
facility directors stated that OFEO does a good job of prioritizing and
addressing problems with the amount of funds available, several museum and
facility directors expressed frustration that projects at their facilities
had been delayed. In addition, OFEO officials stated that a lack of
sufficient funds for maintenance has limited their ability to optimally
maintain equipment, leading to more expensive failures later on.
The Smithsonian has omitted privately funded projects from its capital
plan and its estimate of $2.5 billion for facilities projects through
2013, making it challenging for the Smithsonian and other stakeholders to
comprehensively assess the funding and scope of facilities projects. In
recent years, private funds have played an important role in funding some
of the Smithsonian's highest-priority construction and revitalization
projects, making up 39 percent of the Smithsonian's capital funds for
facilities projects for fiscal years 2002 through 2007. Smithsonian
officials noted that the majority of these private funds were donated for
the construction of new facilities--namely, the National Museum of the
American Indian and the National Air and Space Museum Steven F. Udvar-Hazy
Center--and said there is no assurance that private funds would make up a
similar percentage of the Smithsonian's funds for capital projects in
future years. However, other organizations we visited during our review
include both private and public investments in their capital plans to
inform their stakeholders about the scope of projects and the extent of
such partnerships used to fund capital needs. As a result, our September
2007 report recommends that the Smithsonian include privately funded
projects in its capital plan. The Smithsonian concurred with this
recommendation.
The Smithsonian Has Taken Some Steps to Address Our Recommendation Regarding
Funding Strategies, but Its Evaluation of Funding Options Has Been Limited
Funding constraints are clearly a common denominator with regard to the
Smithsonian's security and real property management, but while the Board
of Regents has taken some steps to address our 2005 recommendation to
develop a funding plan to address its facilities revitalization,
construction, and maintenance needs, its evaluation of funding options has
been limited. In September 2005, an ad-hoc Committee on Facilities
Revitalization established by the Board of Regents reviewed nine funding
options that had been prepared by Smithsonian management for addressing
this estimated funding need. The nine options are briefly described in
Table 1.
Table 1: Nine Funding Options Evaluated by the Ad-Hoc Committee on
Facilities Revitalization
Funding option Description
Federal income tax Federal income tax returns would include a
check-off contribution check-off box to allow taxpayers to designate
funds to the Smithsonian's facilities.
Heritage treasures excise An excise tax would be created, and possibly
tax levied on local hotel bills, to generate funds
for the Smithsonian's facilities.
National fund-raising The Smithsonian would launch a national
campaign campaign to raise funds for its facilities.
General admission fee The Smithsonian would institute a general
program admission charge to raise funds for critical
but unfunded requirements.
Special exhibition fee The Smithsonian would charge visitors to attend
program a select number of special exhibitions as a
means to raise funds to meet critical but
unfunded requirements.
Smithsonian treasures pass The Smithsonian would design a program through
program which visitors could purchase a Smithsonian
treasures pass with special benefits, such as
no-wait entry into facilities or
behind-the-scenes tours, to raise funds to meet
critical but unfunded requirements.
Facilities revitalization The Smithsonian would borrow funds such as
bond through a private or public debt bond for the
Smithsonian's facilities.
Closing Smithsonian The Smithsonian would permanently or
museums temporarily close museums to the public in
order to generate savings to help fund its
facilities.
Increasing Smithsonian The Board of Regents and other friends of the
appropriations Smithsonian would approach the Administration
about a dramatic appropriations increase to
fund Smithsonian's facilities.
Source: Smithsonian Institution.
After reviewing materials on these nine options prepared by Smithsonian
management, the ad-hoc committee decided to request an additional $100
million annually in federal funds for facilities over its current
appropriation for 10 years, starting in 2008, for a total of an additional
$1 billion. To implement this recommendation, in September 2006, several
members of the Board of Regents and the Secretary of the Smithsonian met
with the President to discuss the issue of increased federal funding for
the Smithsonian's facilities. According to two members of the Board of
Regents, this option was selected because the board believed that the
revitalization, construction, and maintenance of Smithsonian facilities
are federal responsibilities. According to Smithsonian officials, it is
the position of the Smithsonian, based on an historical understanding,
that the maintenance and revitalization of facilities are a federal
responsibility. Smithsonian officials pointed out that as early as the
1850s, the federal government has provided appropriations to the
Smithsonian for the care and presentation of objects belonging to the
United States. The President's fiscal year 2008 budget proposal included
an increase of about $44 million over the Smithsonian's fiscal year 2007
appropriation, far short of what the Smithsonian requested, and it is not
clear how much of this proposed increase would be used to support
facilities.
Our analysis of the Smithsonian's evaluations of the eight other funding
options, including the potential benefits and drawbacks of each, showed
that the evaluations were limited in that they did not always include a
complete analysis, fully explain specific assumptions, or benchmark with
other organizations--items crucial to determining each option's potential
viability. For example, the Smithsonian's analysis of a general admission
fee option included an adjustment of annual net gains to account for
losses in revenue at restaurants and stores. However, the Smithsonian's
materials did not discuss whether other museums had experienced such
losses after establishing admission fees. We spoke with six other museums
and a zoological park that stated that instituting or increasing admission
fees did not decrease the amount of money visitors spent in restaurants
and stores. In addition, although several of the nine options were
dismissed because independently the options would not generate the amount
of revenue required to address the Smithsonian's facilities projects, the
evaluation did not consider the potential of combining options to generate
more revenue.
In our September 2007 report, we concluded that if the Smithsonian does
not develop a viable strategy to address its growing cost estimate for
facilities projects, its facilities and collections face increased risk,
and the ability of the Smithsonian to meet its mission will likely
decline. We therefore concluded that the Board of Regents' stewardship
role obligates it to consider providing more private funds to meet the
funding requirements of its overall mission. We recommended that the
Smithsonian Board of Regents perform a more comprehensive analysis of
alternative funding strategies beyond principally using federal funds to
support facilities and submit a report to Congress and the Office of
Management and Budget (OMB) describing a funding strategy for current and
future facilities needs. The Smithsonian concurred with this
recommendation.
Recently, the Smithsonian Board of Regents has taken some additional steps
towards developing a funding plan for facilities' projects. According to a
Smithsonian official, at the Board of Regents' November 19, 2007, meeting,
the Chair of the Committee on Facilities Revitalization, which became a
standing committee in June 2007, reported to the board on the committee's
activities. These activities included several meetings and conversations,
including some with Smithsonian management, and the consideration of some
new papers on funding options. The papers contained information on some
previously identified options as well as on some new options. A
Smithsonian official acknowledged, however, that these papers did not
provide comprehensive analysis and that many were not significantly
different from the previous materials. According to a Smithsonian
official, the Smithsonian determined that it did not wish to spend
resources further analyzing all options but instead will analyze those the
board has decided to pursue. According to a Smithsonian official, at this
November 19 meeting of the Board of Regents, the Regents concurred with a
prioritized list of funding options that was presented by the committee.
This list includes establishing a national campaign to raise private
sector funds for Smithsonian programs and facilities, a request that
Congress match funds raised in the national campaign with additional
appropriations, and several other options.^12
^12According to a Smithsonian official, the other funding options the Board
of Regents established as priorities at the November 19, 2007, meeting
include a "gift maintenance fee" specifically devoted to facilities,
admission fees for selected special exhibitions, additional energy savings
performance contracts, public/private partnerships to rehabilitate
buildings, and to expand and improve the existing program of voluntary
donation boxes in museums.
Preliminary Results Suggest that the Board of Regents Has Made Some Changes to
Strengthen Governance, but Governance Challenges Remain
According to preliminary results of ongoing work, as of November 2007, the
Board of Regents had largely implemented 12 of the Governance Committee's
25 recommendations. The board had taken steps towards implementing the
other 13 recommendations, including, among other things, arranging for the
implementation of some recommendations to be studied further and
establishing target dates for implementation that range from December 2007
to mid 2008. The 12 recommendations implemented by the board include, for
example, more clearly defining the roles and responsibilities of Regents
and regent committees, improving access between the board and key members
of senior management, and strengthening some policies regarding conflicts
of interest and executive expenses. The board is also conducting studies
on whether changes to the size and composition of the board would improve
governance, how to effectively engage the Smithsonian's advisory boards,
and executive compensation. Governance experts and others we interviewed
stated that in general, the board appears to have taken some positive
steps toward governance reform. However, according to the literature we
reviewed and governance experts we interviewed, success will depend in
part on how Regents embrace their new responsibilities and on their level
of engagement, as good governance results from a board that consists of
active and deeply engaged members.
The Board Has Implemented Several Changes to Improve Governance
The board reports that it has largely implemented 12 of the 25
recommendations of the Governance Committee. Appendices II and III provide
summaries of the implementation status of the Governance Committee and IRC
recommendations. The following are descriptions of some of the key
recommendations that have been implemented.
o Duties and responsibilities of Regents and regent committees
have been clarified. Previously, the roles and responsibilities of
Regents and regent committees were not clearly and explicitly
stated. The Governance Committee found that without a formal job
description, the role of a regent was subject to individual
interpretation, and it determined that adopting a clear statement
of regent duties and responsibilities would reaffirm that the
board is the Smithsonian's ultimate governing authority.
Accordingly, the board has taken several actions to clarify these
responsibilities, including 1) adopting specific written
responsibilities and expectations for all Regents, including that
all Regents should participate in committees; 2) clarifying the
duties of the Chancellor^13 (who by tradition is the Chief
Justice) and creating a new board Chair position to play a
leadership role in guiding the board in the exercise of its
oversight functions; and 3) appointing new leadership for all
committees. These changes are now being put into practice and it
is therefore too soon to evaluate whether they will be effective
in improving governance at the Smithsonian.
o Access of key management to the board and information available
have been improved. Several of the recent governance problems
reported at the Smithsonian have been attributed to the isolation
of certain members of senior management from the board and the
office of the former Secretary's tight control of information
available to the board. The board has taken a number of steps to
address these issues, including 1) amending its bylaws to require
the attendance of the General Counsel and Chief Financial Officer,
or their designees, at all meetings of the board and relevant
board committees, 2) strengthening the relationship between the
Inspector General's office and the board, and 3) establishing an
independent Office of the Regents that is responsible for, among
other things, setting the agenda for the board in concert with the
Secretary and through consultation with Smithsonian museum
directors and others. While we have not independently validated
these changes to assess whether they will be effective in
improving oversight, both senior management and the Board of
Regents' staff told us that communication between the Regents and
senior management has improved. For example, the General Counsel
and Chief Financial Officer both told us that they are now
directly reporting to the Regents and are available at board
meetings to discuss details and answer questions about information
they bring to the Regents.
o Management policies have been strengthened. The Governance
Committee found that previous policies regarding expense
reimbursement (including travel) and conflict-of-interest policies
were not well-defined, which contributed to the lack of oversight
of certain practices of the former Secretary as well as the
failure to actively manage apparent conflicts of interest at the
Smithsonian. The board has clarified management policies on travel
and expense reimbursement, and created new ones, such as
prohibiting senior executives from serving on the boards of
for-profit companies. We have not independently validated these
changes to assess whether they will be effective in improving
oversight, and it is not yet clear how these policies will improve
the governance of the institution in practice.
o A compensation range to guide the search for a new secretary has
been established. In response to concerns about the compensation
of the former Secretary (which included, among other things, a
housing allowance that some Regents were unaware of), the board
contracted for a study to identify a compensation range to guide
the search for a new secretary, with the goals of making the
secretary's compensation transparent and balancing the
Smithsonian's public trust status with the need to attract the
best leader. According to a Board of Regents' staff member, the
study included benchmarking with about 30 comparable
organizations. In October, the Board of Regents approved the range
recommended by the study to be used in the recruitment process. We
have not independently validated this recommended range.
^13The Smithsonian charter provides for a presiding officer called the
chancellor, who is elected by the Regents. By tradition, the Regents have
selected the Chief Justice of the United States as chancellor. The Board
of Regents' Bylaws provided that the Chancellor is also the Chair of the
Board. Recently, the Board of Regents amended the bylaws to separate the
position of chancellor and chair of the board. The Governance Committee's
report stated that the roles of the chancellor and chair may be further
refined as a result of the review of the board structure and functions.
Some Recommendations Have Yet to Be Implemented, and Other Governance Issues Are
Still Being Studied
Several recommendations have not yet been fully implemented but are
actively being considered and debated. For example, at the direction of
the Regents, the Smithsonian is examining the extent to which Smithsonian
Business Ventures (SBV), a centralized business entity responsible for the
Smithsonian's various business activities, should follow Smithsonian-wide
policies for areas such as contracting and travel. Previously, SBV adopted
its own policies and was not subject to all Smithsonian policies. The
efforts underway are preliminary and final actions have not yet been
taken, but the Regents report them as being on track toward
implementation. In addition, in August 2007, the Acting Secretary
established a task force to review the entirety of SBV and make
recommendations on its governance, structure, and the role of
revenue-generating activities within the Smithsonian. Those
recommendations will be presented to the Acting Secretary by the end of
the year and to the Regents at their January 2008 meeting.
The Board of Regents is continuing to study other important issues related
to improving governance at the Smithsonian. In particular, some observers
have suggested that the size and composition of the board contributed to
the lack of oversight of management practices, and in response, the Board
of Regents, with the assistance of outside consultants, is evaluating
potential structural changes to the board. The report is due in January
2008. Any changes to the size and composition of the board would require
legislative action. Currently, the Board of Regents consists of 17
members--9 citizen Regents, 6 Congressional Regents, and 2 ex-officio
Regents (the Vice President and the Chief Justice)--which is the average
size for boards of nonprofit organizations. However, much of the work of
the Board of Regents is conducted at the committee level, and in the past,
not all Regents have served on committees, suggesting that in practice,
the "working" size of the board has been somewhat smaller than 17.
Nonetheless, based on our review of common non-profit governance
practices, and according to governance experts and others we consulted,
there is no "right" number of board members. A board that is small will
have fewer members to serve on committees, whereas having too many board
members can lead to increased difficulty in making decisions and can
stifle the effectiveness of the board. Determining the appropriate size
for a board entails balancing the need for a board that is of a manageable
size with such things as ensuring the board has the expertise necessary to
achieve its mission and achieving an appropriate diversity of values and
perspectives among board members.
Beyond the size and structure of the board, several governance experts we
interviewed stressed that having board members who actively participate
and are engaged is central to good governance, and some nonprofit
organizations we met with stated that they focused on changing the
governance culture at their organization. For example, representatives
from one nonprofit organization we spoke with--which recently had similar
issues related to executive compensation and expenses--stated that they
have focused on creating a culture of accountability and transparency in
the board's activities. They told us that they did not change the size or
structure of the board, but rather clarified roles and responsibilities,
improved communication throughout the various divisions of the
organization, and took other actions aimed at improving the accountability
and transparency of the board.
In order to address other governance recommendations, the Board of Regents
has planned another longer term study, due in May 2008, aimed at
establishing a stronger link between the board and the Smithsonian's 30
advisory boards. These boards include the Smithsonian National Board as
well as advisory boards that focus on individual museums or research
centers. According to the Governance Committee, the advisory boards
provide a key link between the Regents and the public and a direct
connection to the museums. Based on preliminary findings of our ongoing
work, the Regents generally have had limited interaction with the advisory
boards, although the advisory boards serve important functions in the
operations of the individual museums and other facilities across the
Smithsonian. Preliminary results from our ongoing work indicate that
several museum directors are concerned about the Regents' level of
interaction with advisory boards and most museum directors see additional
value from having a more direct relationship between the Board of Regents
and the various museums, research facilities, and other institutions
within the Smithsonian.
Governance experts and others we spoke with said that, in general, the
board appears to have taken some positive steps toward governance reform.
However, according to the literature we reviewed and governance experts we
interviewed, success will depend in part on how Regents embrace their new
responsibilities and on their level of engagement, as good governance
results from a board that consists of active and deeply engaged members.
In our ongoing work, we will continue to assess the Board of Regents'
governance changes and how the board is addressing long-term governance
challenges facing the Smithsonian. We expect to report on these issues in
2008.
Madam Chairman, this concludes my prepared statement. I would be happy to
respond to any questions you or other Members of the Committee may have at
this time.
GAO Contact and Acknowledgements
For further information on this testimony, please contact Mark L.
Goldstein at (202) 512-2834 or [22][email protected] . Individuals making
key contributions to this testimony include Brandon Haller, Carol Henn,
Jennifer Kim, Margaret McDavid, Susan Michal-Smith, Amanda Miller, Sara
Ann Moessbauer, Dave Sausville, Stanley Stenerson, Andrew Von Ah, and
Alwynne Wilbur.
Appendix 1: Scope and Methodology
We conducted our work for this testimony from October to December 2007 in
accordance with generally accepted government auditing standards. Our
testimony regarding the Smithsonian's real property management is based on
our past report on the Smithsonian's facilities, including their
condition, security, management, and funding, and information provided by
Smithsonian officials on steps taken to develop a funding plan for
facilities projects. Our testimony regarding preliminary results of our
ongoing work on the Smithsonian's governance changes is based on our
review of Smithsonian and other documents, and interviews with Smithsonian
Regents and officials and others. Specifically, we reviewed laws relating
to the Smithsonian, the Independent Review Committee report, and the
Smithsonian's Governance Committee Report, and spoke to Smithsonian
Regents and officials on their progress towards implementing governance
recommendations. We also interviewed all Smithsonian museum directors. We
conducted a literature search to help identify governance experts and
organizations that had recently undergone governance reforms. We
identified and interviewed ten specialists on nonprofit or museum
governance, including academics and representatives of associations
dedicated to nonprofit governance. This included four governance or museum
experts who had advised or consulted with the Smithsonian during its
governance review, as well as six that we identified through a literature
search or were referred to us by other experts in the field.
We also reviewed literature on nonprofit governance to identify common
nonprofit governance practices, including literature from organizations
such as the American Association of Museums, BoardSource, Council on
Foundations, and Independent Sector. In addition, we met with several
organizations that had characteristics similar to those of the Smithsonian
and that had recently undergone governance reforms. We focused on
organizations that had had similar governance problems, conducted a
governance review, and changed their practice or structure; organizations
that had a structure that consisted of a central or national governing
body with multiple programming units; and organizations with similar
missions and stewardship challenges. As of December 5, 2007, we had met
with officials from American University, American National Red Cross,
Getty Trust, National Trust for Historic Preservation, and United Way of
America.
In ongoing work, we are continuing to evaluate the Smithsonian Board of
Regents' governance reforms. Our objectives for this ongoing work include
assessing (1) how governance changes being made by the Board of Regents
address recent governance problems and how changes will be implemented and
evaluated, and (2) how the Board of Regents is addressing other long-term
governance challenges facing the Smithsonian, such as funding, strategic
planning, facilities, collections and museum management, and what, if any,
additional oversight activities would be beneficial to the board in
achieving its mission. We are also continuing to interview recognized
experts in nonprofit governance selected through the process described
above to obtain their independent views on the Smithsonian's governance
problems and whether recent governance changes will address those
problems; and we are conducting interviews and reviewing documents from
organizations selected through the process described above that have
recently changed their governance structure and practice. We expect to
report on these issues in 2008.
Appendix II: Implementation Status of Governance Committee Recommendations
According to Smithsonian Institution (Smithsonian) officials, the
Smithsonian Board of Regents has largely implemented 12 of the 25
recommendations made by the Board of Regents' Governance Committee based
on its internal study, and has taken steps towards implementing the other
recommendations. The implementation of some of these recommendations is
under further study by the board. Figure 5 provides a summary of the
board's efforts towards implementing these recommendations, as described
by Smithsonian officials.
Figure 5: Status of Smithsonian Institution's Implementation of Governance
Committee Recommendations at-a-Glance
Appendix III: Implementation Status of Independent Review Committee
Recommendations
The Smithsonian Institution (Smithsonian) Board of Regents has stated that
the Governance Committee's 25 recommendations generally encompass the
recommendations made by the Independent Review Committee (IRC) as part of
its study to address governance problems at the Smithsonian.^1 As such,
the Smithsonian is not tracking its implementation of these
recommendations individually, except that it notes which IRC
recommendations are relevant to each Governance Committee recommendation.
Based on information provided to us by Smithsonian officials, the board
has implemented 3 of the IRC's 12 recommendations, and has taken steps
towards implementing the others, with the exception of one recommendation
(IRC recommendation number 12) that was not issued directly to the board.
Several of these recommendations are being considered as part of ongoing
studies undertaken by the board to address the Governance Committee
recommendations. Figure 6 provides a summary of the board's efforts
towards implementing the IRC recommendations, as described by Smithsonian
officials.
^1According to the Board of Regents' staff, two IRC recommendations were
not encompassed by the Governance Committee recommendations: IRC
recommendation number 2, to audit the former Secretary's and senior
management's expenses, and IRC recommendation number 12, which stated that
achieving effective oversight and governance at nonprofit organizations
may ultimately require legislative action. The board considered these
topics outside its charge; however, the board did adopt IRC recommendation
2 in addition to the Governance Committee recommendations.
Figure 6: Status of Smithsonian Institution's Implementation of
Independent Review Committee Recommendations at-a-Glance
Note: The implementation status of IRC recommendation 12 was designated
"no basis to judge" because the recommendation is not clearly addressed to
the Smithsonian Board of Regents.
(543195)
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Highlights of [30]GAO-08-250T , a testimony to the Senate Committee on
Rules and Administration
December 12, 2007
SMITHSONIAN INSTITUTION
Status of Efforts to Address a Range of Funding and Governance Challenges
The Smithsonian Institution (Smithsonian) is the world's largest museum
complex. Its funding comes from its own private trust fund assets and
federal appropriations, with the majority of funds for facilities coming
from federal appropriations. In 2005, GAO reported that the Smithsonian's
current funding would not be sufficient to cover its estimated $2.3
billion in facilities projects through 2013 and recommended that the
Smithsonian Board of Regents, its governing body, develop and implement a
funding plan. Recently, problems related to a lack of adequate oversight
of executive compensation and other issues have raised concerns about
governance at the Smithsonian.
This testimony discusses GAO's recently issued work on the Smithsonian's
real property management efforts and its efforts to develop and implement
strategies to fund its facilities projects. In addition, it describes
preliminary results of GAO's ongoing work on the Smithsonian's governance
challenges.
The work for this testimony is based on GAO's September 2007 report,
Smithsonian Institution: Funding Challenges Affect Facilities' Conditions
and Security, Endangering Collections, which included recommendations. For
ongoing governance work, GAO reviewed Smithsonian documents and
interviewed Smithsonian officials, academics, and representatives of
nonprofit associations.
While the Smithsonian has made some improvements to its real property
management, the continued deterioration of many Smithsonian facilities has
caused problems, and the Smithsonian's real property management efforts
face challenges. The deterioration of facilities has caused access
restrictions and threatened collections. In addition, the Smithsonian's
estimate for facilities projects increased to $2.5 billion. While the
Smithsonian follows key security practices, communication of security
information and funding constraints pose challenges. The Smithsonian has
made significant strides in improving its real property portfolio
management. However, the Smithsonian omitted privately funded projects
from its capital plan, making it challenging to assess the total funding
and scope of projects. GAO's September 2007 report recommended that the
Smithsonian increase awareness of security issues and include privately
funded projects in its capital plan. The Smithsonian concurred.
To address GAO's 2005 recommendation that the Smithsonian develop a
funding plan for facilities projects, the Board of Regents created an
ad-hoc committee that reviewed nine options and chose to request increased
federal funding. Some of the Smithsonian's evaluations of the nine funding
options were limited in that they did not always provide complete
analysis, fully explain assumptions, benchmark with other organizations,
or consider combining options to increase revenue. GAO's September 2007
report recommended that the Smithsonian more comprehensively analyze
funding options and report to Congress and the Office of Management and
Budget on a funding strategy. The Smithsonian concurred. The Board of
Regents recently established a prioritized list of funding options.
Preliminary results of GAO's ongoing work on broader governance issues
indicate that the Board of Regents has made some changes to strengthen
governance, such as more clearly defining the Regents' oversight
responsibilities and improving access between the board and key members of
senior management. The board is also studying whether changes to its size
and composition would strengthen governance. GAO's preliminary work
suggests that the Board appears to have taken some positive steps toward
governance reform, but that success will depend in part on how Regents
embrace their new responsibilities and on their level of engagement.
Facilities Problems Include Leaks in the National Zoological Park's Sea
Lion Pool and the Roof of the National Museum of African Art
References
Visible links
18. http://www.gao.gov/cgi-bin/getrpt?GAO-05-369
19. http://www.gao.gov/cgi-bin/getrpt?GAO-07-725T
20. http://www.gao.gov/cgi-bin/getrpt?GAO-07-1127
21. http://www.gao.gov/cgi-bin/getrpt?GAO-05-49
22. mailto:[email protected]
23. http://www.gao.gov/
24. http://www.gao.gov/
25. http://www.gao.gov/fraudnet/fraudnet.htm
26. mailto:[email protected]
27. mailto:[email protected]
28. mailto:[email protected]
29. http://www.gao.gov/cgi-bin/getrpt?GAO-08-250T
30. http://www.gao.gov/cgi-bin/getrpt?GAO-08-250T
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