The General Accounting Office, responding to a controversy over the Smithsonian Institution's banking practices, has concluded that the Smithsonian maintains "adequate procedures" for managing its money.
The newly released GAO report, nevertheless, left uncertain whether it was permissible or improper for Smithsonian Secretary S. Dillon Ripley to serve as a director of the American Security and Trust Co. at the same time the Smithsonian was depositing hundreds of the thousands of dollars a year in non-interest-bearing accounts at the banks.
"We don't conclude one way or the other whether it's proper or not," Calvin Cookfair, a GAO auditor who drafted the report, said yesterday. GAO did not seek to evaluate the propriety of Ripley's bank ties, Cookfair said, because Congress had not specifically asked GAO to weight the issue. GAO is Congress' auditing arm.
Cookfair's statement was immediately disputed by a Senate aide. Dwight Dyer, staff chief for the Senate Appropriations Subcommittee on the Interior, said the subcommittee had specifically asked GAO to determine whether any "conflict of interest" existed in a memo Sept. 15, 1976.
A spokesman for the Smithsonian hailed the GAO report as evidence that the Smithsonian follows "sound and proper financial practices" and that there had been "no conflict" between Ripley's position with the Smithsonian and the bank. Lawrence Taylor, the Smithsonian's public information coordinator, asserted that GAO usually "is not shy" in pointing to ethical conflicts and would not have overlooked questionable practices by Ripley or the Smithsonian if it had found any.
The Smithsonian - a huge, quasigovernmental research and museum complex - has been the center of a controversy over its financial and other practices for more than a year.
An earlier GAO report, made public March 31, concluded that the Smithsonian had created two private corporations to convert millions of dollars of U.S. government funds into "private money," which it then spent without regard to federal restrictions. GAO recommended changes in the institution.
The Smithsonian's regents themselves set up a special committee in April to examine the institution's financial parties. The committee has hired an outside consultant to study the Smithsonian. No findings have yet been made public.
The newly released GAO report, dated Tuesday, focused on only one aspect of the Smithsonian's finances - a series of accounts it has maintained at American Security and Trust and Riggs National Bank, along with one U.S. Treasury accodunt.
A central question examined in the report was whether the Smithsonian had earned adequate interest on the money channeled through these accounts on whether it had, instead, allowed too much money to remain in these accounts while failing to earn interest. The report concluded that the institution had, generally, obtained adequate interest on these funds.
"In our view, the Smithsonian has established adequate procedures to keep noninterest-bearing checking account balances at minimum levels sufficient to serve its needs," the report said. It noted that the Smithsonian had followed several methods of earning interest on "excess" funds in these accounts and in short-term securities, such as Treasury bills and notes.
The GAO report outlined Ripley's relationship with American Security without drawing any conclusion about it. Ripley, who has been the Smithsonian's secretary since 1964, became a member of American Security's board of directors in February, 1967. He resigned from the bank's board last December and, according to the GAO report, he not longer holds stock in the bank. The Washington Post had previously reported that Ripley owned 150 shares of bank stock - an amount close to the minimum a director is required by law to own.
In an interview last February, Ripley said his resignation from the bank board was unrelated to the GAO examination of the Smithsonian's bank accounts. He also denied that any conflict of interest existed.
In describing Ripley's relationship with American Security, the GAO report noted several factors that could be construed to cast doubt on whether an ethical conflict existed.
The report said that the Smithsonian opened accounts at American Security in March, 1966 - almost a year before Riley joined the bank's board. It noted that Ripley's bank board membership was approved by the Smithsonian regents' executive committee. The report said the Smithsonian had previously had other accounts at American Security, dating back to 1927. It also pointed out that Ripley was not present at a board meeting when Smithsonian's research foundation decided to open an account at American Security.
The GAO report noted elsewhere, however, that the Smithsonian's account at American Security became its "primary operating account" in 1968 - a time when Ripley was a member of the bank's board. This function had previously been performed, the report said, by a U.S. Treasury account.
Nevertheless, the GAO report added, "The change was made because the Smithsonian treasurer believed that the private bank provided more timely service and information on the operating transactions flowing through the account."
According to figures cited in the GAO report, the Smithsonian maintained a noninterest-bearing checking account at American Security with average daily balances ranging from $269,000 to $850,000 in recent years. In addition, the Smithsonian, according to the report, has had a savings account at American Security with a balance that totaled $2.4 million at one point this year.
It was not clear yesterday whether the Senate subcommittee that has examined the Smithsonian's financial practices would seek a further study of the institution's banking practices and Ripley's bank ties. Key senators and aids said they had not yet reviewed the GAO report.