The Smithsonian Institution has created two private corporations to convert millions of dollars of U.S. funds into "private money," which it then spends without regard to federal restrictions, according to a General Accounting Office audit report released yesterday.
The GAO report recommends that the two corporations be disbanded and that the money and programs they administer be integrated into the Smithsonian's overall structure.
The audit of the Smithsonian's finances was requested last summer by a Senate subcommittee after several senators voived suspicions that the Smithsonian has been pooling public and private money and otherwise circumventing restrictions that normally would apply to federal agencies.
The Smithsonian, which was given an opportunity to comment on the report before its release, vigorously disagreed with the GAO's conclusions and recommendations concerning the two private corporations.
The Smithsonian also disagreed with another GAO finding pertaining to one of the corporations, the Smithsonian Reasearch Foundation. The GAO documented that Smithsonian officials had failed to mention the foundation at congressional budget hearings after the foundation at congressional budget hearings after the foundation was incorporated in 1966.
In its comments, the Smithsonian said that because three senators and three representatives sit as regents (directors) of the institution and approved setting up the foundation, the Smithsonian felt Congress had been notified about the foundation.
"While this is true, we do not equate approval by the board of regents with approval by Congress," the GAO report said.
"The Smithsonian never adequately informed Congress of the creation of the foundation or of its intent to operate independent of fiscal year and civil service requirements, although it (the Smithsonian) had the opportunity to do so during appropriation hearings," the GAO said.
According to GAO auditors, the Smithsonian incorporated both the Smithsonian aResearch Foundation and the Smithsonian Science Information Exchange (SSIE) to avoid having to return u.S. funds not spent - as required - during a given fiscal year and to avoid civil service hiring and firing regulations.
The Smithsonian converted more than $9.9 million in federal funds into "private money" in fiscal year 1976 through the corporations, according to the GAO. The auditors said they found no evidence that the money was used for anything other than purposes for which it was appropriated by Congress.
While the GAO report makes no general statements about overall financial management of the Smithsonian, the report does draw a picture of inadequate oversight by Congress of the Smithsonian's finances and a reluctance by Smithsonian officials to inform Congress of the institutions decisions and plans.
"The committees of the Congress have never requested and are not furnished with information on the planned used of Smithsonian private funds when considering appropriations requests," the report said.
"The Smithsonian has a long tradition of private financing and independence," the GAO report said. "The Congress has not reviewed the private funds budget in the past.
"In our view, the mixture of federal and private funding in so many Smithsonian activities makes a review of the Smithsonian's federal budget of and by itself inadequate.
"Simply stated, there can be no assurance under the present set up that congressional budget actions will have the intended effect," the report said.
In this regard, and at the request of the Senate Appropriations Subcommittee on the Interior and Related Agencies, which requested the audit, the GAO examined how the Smithsonian has used its endowment funds and other legitimate sources of private income to begin projects that then require federal funds to maintain.
The auditors found that the Smithsonian had committer itself to both the Cooper-Hewitt Museum of Decorative Arts and Design in New York City and the Chesapeake Bay Center for Environmental Studies near Annapolis without telling Congress until years after making the original commitments.
Hundreds of thousands of dollars in federal funds are required annually to maintain the Cooper-Hewitt and the bay center.
According to the GAO report, Smithsonian Secretary S. Dillon Ripley said he is fully agreeable to developing guidelines for determining how the Smithsonian should spend its private money.
Ripley also is agreeable to providing Congress with complete information on how the Smithsonian plans to spend its private money in advance of congressional hearings on the Smithsonian's yearly federal appropriation, the report said.
The GAO auditors said they did not have enough time to examine the Smithsonians use of private banks to deposit both its legitimately private money and federal money hanneled through the two private foundations.
The auditors were asked to look into this aspect of the Smithsonian's finances after Senate subcommittee staff members were told that the Smithsonian was depositing large sums of money in the American Security & trust Co., of which Ripley was a director until his resignation last December.
The auditors also reported that Ripley has spent from one-third to two-thirds of each of the last three years traveling outside Washington.
In fiscal year 1976 and the transition quarter of August through October, 1976, for example, Ripley spent 90 full working days out of Washington on official business as well as 130 days at his litchfield, Conn., estate. That translated into 44 weeks outside Washington during a period of approximately 64 weeks.
Ripley explained to the auditors that his duties as secretary of the Smithsonian require his attendance at a wide variety of meetings and conferences throughout the world, thus accounting for his official travel.
The Smithsonian also told the auditors that Ripley considers Litchfield "a regular place of duty . . . as arranged with the board of regents, where he maintains a rsidence, office, library and waterfowl preserve. While there, he conducts research, writes official reports, reveives and sends official correspondence, receives official vistors and maintains daily contact with the Washington office by telephone and exchange of correspondence."
Most of Riley's travel - as well as his salary - is paid for with private smithsonian funds, according to the audit report.
The Smithsonian's budget for the 1976 fiscal year and the three-month transition quarter totaled $153.6 million. Of this, $121 million came from direct federal appropriations, $15.5 million from federal research grants and other federal contracts and $17 million from private endownment funds, donors and fund-raising activities, the audit said.
The audit report says part of the controversy about the Smithsonian's use of its public and private money stems from its unusual constitution. It is neither a U.S. agency nor a fully private museum and research complex.
Instead, the Smithsonian Institution was created by congress in 1836 after an Englishman, James Smithson, left his fortune to the United States for the purpose of creating "an establishment for the increase and diffusion of knowledge among men."
The Smithsonian is separate from, but under the care of the U.S. government. Its board of regents is comment. its board of regents is composed of members of the executive, legislative and judicial branches of the government and private citizens.
Under Ripley's tenure, the Smithsonian has grown from a somewhat sleepy collection of museums into what generally is viewed as an exciting and innovative research and museum complex. At the same time, Ripley's personal style - aloof and sometimes arrogant - has won him a number of influential enemies as well as friends in Washington.