Smithsonian Investigating Its Sales Division's Salaries
Wednesday, April 19, 2006
The Smithsonian's Office of the Inspector General is looking into the executive compensation and accounting practices of Smithsonian Business Ventures, the division of the institution that operates its retail and publishing enterprises.
Inspector General Debra Ritt notified SBV Chief Executive Officer Gary M. Beer that she was starting an audit of how the salary and bonus levels of its managers are established and whether those payments met the agreements set by the Board of Regents.x
Since SBV was established in 1998 by the Smithsonian regents, the for-profit outfit has been the source of complaints and jealousy among many of the staff. The majority of Smithsonian employees are paid according to the federal civil service system. The 430 full-time employees of SBV follow a private-sector pay scale. Top executives and senior staff -- about 66 people -- draw salaries designed to be competitive with the business world. There also is a merit-based formula for increases and bonuses for SBV managers.
CEO Beer earned $525,000, according to the Smithsonian's 2003 tax return, the latest one available to the public. Lawrence Small, secretary of the Smithsonian, earned $813,000, according to the return, including a housing allowance. The top salary for civil service employees is $162,000.
Some staffers at individual museums are also displeased that SBV is not generating more income for the museums, which do not charge admission, and suggest that overhead and salaries may be too high.
"We are aware of some of the museums' displeasure with revenue sharing," said Stuart Metzger, the assistant inspector general for audits. "But right now we are sticking to our announced stated objectives. How much the road intersects, we don't know."
In an unrelated move, SBV is laying off nine employees because the National Museum of American History will close this fall for almost two years of renovations. The shutdown will reduce profits from two restaurants and six gift shops by $3 million. The design calls for reconfiguring the museum's central core and creating a new display for the Star-Spangled Banner.
While the number of SBV layoffs is small, the decision is another sign of strain in a unit created to improve the Smithsonian's for-profit ventures -- from the popular Smithsonian magazine to the 28 gift shops -- and brings much-needed unrestricted income to the Smithsonian. The stores generated sales of $49 million in fiscal 2005. The total for the retail cluster -- food and theaters as well as stores -- was $69 million.
From 2000 to 2005, according to the Smithsonian, SBV's profits contributed $155 million to the Smithsonian's unrestricted accounts.
In fiscal 2005, the unit provided $30 million, nearly half of the museum's unrestricted funds.
In fiscal 2004, the businesses grossed $156. 3 million and returned $26.7 million to the Smithsonian -- $6 million more than the previous year.
The financial relationship between the museums and SBV has raised some questions among museum staff. In general, 60 percent of the profit from gift shops and other business ventures goes to the central Smithsonian accounts and 40 percent goes back to the individual museums where the gift shops are housed.