The remaining operating revenues come from the  Smithsonian’s private trust funds. Despite Some Improvements, Deteriorating Facilities Threaten Collections, and Security and Real Property Portfolio Management Efforts Have Strengths and Limitations

With regard to real property management, the Smithsonian has made a  number of facilities improvements since our 2005 report, but the  continued deterioration of many facilities has caused access restrictions  and threatened the collections, and the Smithsonian’s cost estimate for  facilities projects has increased. The Smithsonian follows many key  security practices to protect its assets but faces communication and  funding challenges. 2). 3). In our September 2007  report, we recommended that the Smithsonian increase awareness of  security issues. The Smithsonian concurred with this recommendation. The Smithsonian has omitted privately funded projects from its capital  plan and its estimate of $2.5 billion for facilities projects through 2013,  making it challenging for the Smithsonian and other stakeholders to  comprehensively assess the funding and scope of facilities projects. As a result, our  September 2007 report recommends that the Smithsonian include  privately funded projects in its capital plan. The Smithsonian Has Taken Some Steps to Address Our Recommendation Regarding Funding Strategies, but Its Evaluation of Funding Options Has Been Limited

Funding constraints are clearly a common denominator with regard to the  Smithsonian’s security and real property management, but while the Board  of Regents has taken some steps to address our 2005 recommendation to  develop a funding plan to address its facilities revitalization, construction,  and maintenance needs, its evaluation of funding options has been limited. In September 2005, an ad-hoc Committee on Facilities Revitalization  established by the Board of Regents reviewed nine funding options that  had been prepared by Smithsonian management for addressing this  estimated funding need. Our analysis of the Smithsonian’s evaluations of the eight other funding  options, including the potential benefits and drawbacks of each, showed  that the evaluations were limited in that they did not always include a  complete analysis, fully explain specific assumptions, or benchmark with  other organizations—items crucial to determining each option’s potential  viability. We recommended that the  Smithsonian Board of Regents perform a more comprehensive analysis of  alternative funding strategies beyond principally using federal funds to  support facilities and submit a report to Congress and the Office of  Management and Budget (OMB) describing a funding strategy for current  and future facilities needs. The Smithsonian concurred with this  recommendation. Preliminary Results Suggest that the Board of Regents Has Made Some Changes to Strengthen Governance, but Governance Challenges Remain

According to preliminary results of ongoing work, as of November 2007,  the Board of Regents had largely implemented 12 of the Governance  Committee’s 25 recommendations. The board is also conducting studies on whether changes to the  size and composition of the board would improve governance, how to  effectively engage the Smithsonian’s advisory boards, and executive  compensation. Governance experts and others we interviewed stated that  in general, the board appears to have taken some positive steps toward  governance reform. However, according to the literature we reviewed and  governance experts we interviewed, success will depend in part on how  Regents embrace their new responsibilities and on their level of  engagement, as good governance results from a board that consists of  active and deeply engaged members. Our testimony regarding the Smithsonian’s real property  management is based on our past report on the Smithsonian’s facilities,  including their condition, security, management, and funding, and  information provided by Smithsonian officials on steps taken to develop a  funding plan for facilities projects.
Why GAO Did This Study

The Smithsonian Institution (Smithsonian) is the world's largest museum complex. Its funding comes from its own private trust fund assets and federal appropriations, with the majority of funds for facilities coming from federal appropriations. In 2005, GAO reported that the Smithsonian's current funding would not be sufficient to cover its estimated $2.3 billion in facilities projects through 2013 and recommended that the Smithsonian Board of Regents, its governing body, develop and implement a funding plan. Recently, problems related to a lack of adequate oversight of executive compensation and other issues have raised concerns about governance at the Smithsonian. This testimony discusses GAO's recently issued work on the Smithsonian's real property management efforts and its efforts to develop and implement strategies to fund its facilities projects. In addition, it describes preliminary results of GAO's ongoing work on the Smithsonian's governance challenges. The work for this testimony is based on GAO's September 2007 report, Smithsonian Institution: Funding Challenges Affect Facilities' Conditions and Security, Endangering Collections, which included recommendations. For ongoing governance work, GAO reviewed Smithsonian documents and interviewed Smithsonian officials, academics, and representatives of nonprofit associations.

What GAO Found

While the Smithsonian has made some improvements to its real property management, the continued deterioration of many Smithsonian facilities has caused problems, and the Smithsonian's real property management efforts face challenges. The deterioration of facilities has caused access restrictions and threatened collections. In addition, the Smithsonian's estimate for facilities projects increased to $2.5 billion. While the Smithsonian follows key security practices, communication of security information and funding constraints pose challenges. The Smithsonian has made significant strides in improving its real property portfolio management. However, the Smithsonian omitted privately funded projects from its capital plan, making it challenging to assess the total funding and scope of projects. GAO's September 2007 report recommended that the Smithsonian increase awareness of security issues and include privately funded projects in its capital plan. The Smithsonian concurred. To address GAO's 2005 recommendation that the Smithsonian develop a funding plan for facilities projects, the Board of Regents created an ad-hoc committee that reviewed nine options and chose to request increased federal funding. Some of the Smithsonian's evaluations of the nine funding options were limited in that they did not always provide complete analysis, fully explain assumptions, benchmark with other organizations, or consider combining options to increase revenue. GAO's September 2007 report recommended that the Smithsonian more comprehensively analyze funding options and report to Congress and the Office of Management and Budget on a funding strategy. The Smithsonian concurred. The Board of Regents recently established a prioritized list of funding options. Preliminary results of GAO's ongoing work on broader governance issues indicate that the Board of Regents has made some changes to strengthen governance, such as more clearly defining the Regents' oversight responsibilities and improving access between the board and key members of senior management. The board is also studying whether changes to its size and composition would strengthen governance. GAO's preliminary work suggests that the Board appears to have taken some positive steps toward governance reform, but that success will depend in part on how Regents embrace their new responsibilities and on their level of engagement.