The D.C. Department of Health has dropped efforts to fine the Smithsonian Institution for pesticide violations at the National Zoo in exchange for an agreement that broadens the city's oversight of toxic substances.

The Smithsonian, in the event of an impasse on resolving compliance disputes, still has the final say about what happens on its museum properties.

The agreement stems from the accidental deaths last year of two red pandas that ate rat poison buried in their zoo yard by a pest control contractor. The Health Department fined the zoo $650 in connection with the January 2003 incident because the contractor was not licensed by the city.

Smithsonian officials challenged the fine, contending that special status under a congressional charter renders the institution immune from local and federal regulations or enforcement. The matter had been pending since December before an administrative law judge at the D.C. Office of Adjudication and Hearings.

Under terms of the agreement, reached earlier this month, the Smithsonian will abide by the District's pest control regulations, including making sure that its pesticide contractors are licensed. City health inspectors may enter any Smithsonian facility to inspect it, conduct tests or copy records. The city can deny or revoke Smithsonian pesticide licenses for violations, enforce heath and safety regulations for Smithsonian contractors and seek criminal penalties for any Smithsonian employee who commits fraud.

The agreement also includes guidelines for when the city can stop pesticides from being used and has a detailed framework for resolving instances in which the Smithsonian is found to be in noncompliance with city regulations. However, if the two parties cannot resolve the dispute, the secretary of the Smithsonian would decide the course of action "incorporating to the extent practicable" the recommendations of the Health Department.

Marie Sansone, attorney adviser for the Health Department's Bureau of Hazardous Material and Toxic Substances enforcement division, said the agreement protects public safety and resolves what had been "a legally complex" standoff between the two parties.

"If the District felt the Smithsonian was not operating safely, we could revoke a pesticide license," Sansone said. "Ultimately, we could terminate this agreement and return to our original position that we do have regulatory authority" over the institution.

A separate agreement covering only the zoo requires zoo officials to give the Health Department copies of all reports about its pest control activities. The zoo also must prepare and share with the city its overall plan for pest control management, addressing specific elements required by the city.

Zoo spokeswoman Peper Long said the agreement "shows we are more than happy to comply with city law and highlights how we will comply in the future." She said the Smithsonian and the zoo "were already complying with the regulations except for the infraction" involving the private pesticide contractor.

That contractor, Piedmont Pest Control, based in suburban Maryland, received two citations from the Health Department for using a toxic substance without a D.C. license. The fines, which a department spokeswoman said total about $2,100, have been challenged by the contractor.