By Jacqueline Trescott
Washington Post Staff Writer
Wednesday, January 31, 2007

Nineteen top-tier executives at the Smithsonian Institution earned more than Vice President Cheney last year and three earned more than President Bush.

That is possible because the Smithsonian has a two-tier pay system. Most of its 6,000 employees are paid through federal appropriations. But about 90 executives and top scientists are paid from money raised privately for a special trust fund. Those salaries were scrutinized in a special report issued yesterday by the Smithsonian's acting inspector general, A. Sprightley Ryan.

The report noted, "The Smithsonian paid 42 of the 90 trust executives (or 46 percent) more than the maximum basic federal pay rate of $165,200 in fiscal year 2006, and 19 of these trust executives (or 21 percent) were paid salaries greater than the $212,000 salary paid to the Vice President of the United States."

The salaries caused an uproar in the House Appropriations Committee last year. Some members of Congress argued that no one at the Smithsonian should earn more than the president: $400,000 a year.

Smithsonian Secretary Lawrence M. Small earned $884,733 in 2006, according to the report. Ned Rifkin, undersecretary for art, earned $440,000. Sheila P. Burke, deputy secretary and chief operating officer, earned $400,000. Undersecretary for Science David L. Evans is listed at $315,000.

The inspector general yesterday also released a separate review of the Smithsonian's moneymaking division. The report said the income from Smithsonian Business Ventures was "disappointing," but found that salaries in that division, though sometimes higher than the federal norm, were in line with the business world.

SBV oversees Smithsonian Magazine and museum gift shops and restaurants. SBV has also developed newer enterprises, such as the fledging cable television programming unit, a collaboration between the Smithsonian and Showtime Networks Inc.

The report said SBV CEO Gary M. Beer earned $570,317 in 2005, when SBV had revenues of $172 million. By comparison, the president of the Harvard Business School Publishing Corp. earned $788,380 while managing revenues of $93 million.

While concluding that SBV executive pay was "within the range" of similar companies, the inspector general's report faulted the division for not having tighter accounting and administrative practices.

"A small percentage of the individuals we sampled received incentive awards despite not meeting performance goals, although the total sums awarded were relatively small," the report found. It cited four examples of mangers who received bonuses without meeting goals.

Last year SBV returned $23.9 million to the Smithsonian's general, unrestricted funds.

"The dollar value of SBV's contribution to the Smithsonian is lower, in real dollars, than the amount Smithsonian businesses contributed in 1999," the report said. It concluded that the SBV target of $25.3 million in 2007 is equivalent to $20 million in 1999 dollars, but in that year businesses actually had a profit of $27.9 million. Over the same period, executive compensation has risen.

SBV disputed some of the findings and said the report didn't take into account the drop in museum visitation and magazine advertising. The report said the inspector general would continue to look into SBV's financial performance and urged Secretary Small to review its compensation policy. Burke said the Smithsonian would not review the practice in all SBV departments, but only in the museum retail operation.

The report on non-SBV executive compensation did not have any recommendations. It did note, however, that executives in the top pay tier got more than their federal counterparts, even when they had smaller staffs and budgets. In 2005, the report said, three trust executives were paid "73 to 130 percent more than their federal counterparts."

Burke said that Smithsonian leaders generally agreed with the report but made some exceptions. Burke said it was "inappropriate" to compare the salaries of the Smithsonian's privately funded employees to their counterparts in federal service because they had different systems. For example, she said, federal employees have certain job protections, especially against being fired. Smithsonian employees paid with private funds have no such protections, she said, and "trust employees may receive higher compensation to make up for this lack of job security." The Smithsonian executives also have broader responsibilities, such as fundraising.

Small reported in a briefing yesterday that the Smithsonian had raised $1 billion from the private sector since 2000, more than the institution had raised in its previous 153 years.

Burke also criticized the report for not looking closer at salaries in the academic and nonprofit sector, where the Smithsonian does a lot of recruiting. She cited an outside 2006 review that said "the Smithsonian's compensation of its museum directors was 12.9 percent below the market rate."

The report did raise concerns about relocation bonuses and expense reimbursements, saying the standards were inconsistent. In some cases, the report found relocation expenses processed as purchase orders or contained in travel vouchers.

"Payments processed in this manner are unlikely to be reported as income," the report said. The inspector general said a separate audit on relocation payments is planned.

The report also raised questions about the revolving door of some federal employees who left the Smithsonian and returned as private employees with hefty pay raises. Burke defended the practice by saying it was the only way to keep those people from leaving for more lucrative jobs: "Offering a higher-paying trust position to these retiring federal employees was necessary to prevent them from offering their experience and talent to a private or nonprofit sector employer capable of paying far more than the federal pay system would allow."