IMPROVING REGENTS’ OVERSIGHT OF THE SMITHSONIAN BUDGET:

STEPS REQUIRED TO IMPLEMENT GOVERNANCE RECOMMENDATION 22 

Recommendation 22: The Finance and Investment Committee, working with the Secretary and 

the Chief Financial Officer, will review the Smithsonian federal and trust budget formulation and 

monitoring process to ensure that the Committee and the Board have adequate opportunities to 

provide strategic direction in the development of budget priorities and meaningful oversight of 

the Smithsonian budget and financial resources. The Committee will report to the Board on its 

findings and recommendations in 2008. 

Recommendation 22 focuses on implementing budget formulation and monitoring processes and 

procedures that ensure the Regents are fully engaged in establishing the Institution’s strategic 

plans, budget priorities, and program goals; in approving budgets that align resources against 

these priorities and goals; and in monitoring resources’ usage against the approved budgets. 

BACKGROUND 

On August 21, 2007, the Finance and Investment Committee met to discuss the implementation 

of Recommendation 22 and to provide guidance to the team examining the budget and related 

business practices. The Committee asked the team to complete three tasks, following a three-step 

approach: 

Task One Identify the key budgetary events and activities that would benefit from or 

require the Regents’ direct involvement 

Task Two Determine whether the time frames for conducting budgetary and related 

activities would need to be modified to accommodate increased involvement 

and participation by the Regents 

Task Three Recommend changes to existing processes to ensure the Regents are provided 

appropriate opportunity to influence, guide, and monitor the Institution’s 

budget and performance management functions 

This paper addresses all three tasks: identifying key budgetary events and activities; determining 

time frames for engaging the Regents on Smithsonian budget events; and proposing changes 

necessary to achieve the appropriate Regents’ oversight of the Smithsonian budget. 

TASK ONE 

The Institution’s budgetary process consists of five distinct components: strategic and annual 

planning, formulation of the Federal budget, formulation of the Trust budget, approval of the 

integrated (Federal/Trust) budget plan, and monitoring funds’ usage against plan during the year 

of execution. The key events and activities that comprise these budget processes are listed in 

Table 1. This table also identifies the critical stakeholder roles associated with each event and 

activity. The role definitions are provided following the table. 
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Table 1. Smithsonian Budget and Planning Events/Activities and Roles 

Key Stakeholder Roles 

Event/Activity Regents Secretary US/F&A 

Direct 

Reports/SI 

Directors 

STRATEGIC AND ANNUAL PLANNING

 Develop/revise/approve five-year strategic plan Approve Recommend Lead Participate 

 Develop/approve facilities master plans Affirm Approve Lead Participate 

 Develop/approve annual budget priorities Approve Lead Participate Participate 

 Identify/approve major program initiatives and 

major facilities projects Approve Recommend Participate Lead 

 Develop/approve annual performance plan 

(Federal) Affirm Approve Lead Participate 

 Develop/approve multi-year Smithsonian 

Business Ventures’ (SBV) business plan Affirm Approve Participate Lead 

Recommend 

 Develop/approve annual Smithsonian goals Affirm Lead 

Approve Participate Participate 

FEDERAL BUDGET FORMULATION

 Develop/submit/approve FY+2 OMB budget 

request Approve Recommend Lead Participate 

 Negotiate budget settlement with OMB Participate Lead Participate Participate 

 Prepare/submit FY+2 budget to Congress Approve Recommend Lead Participate 

 Defend FY+2 Federal budget request Participate Lead Participate Participate 

TRUST BUDGET FORMULATION

 Develop/approve FY+1 central Trust budget N/A Approve Lead Participate 

 Develop/approve FY+1 SBV budget N/A Approve Participate Lead 

Recommend 

 Develop FY+1 non-allocated Trust budget N/A Affirm Lead Participate 

Approve 

INTEGRATED BUDGET APPROVAL

 Develop/approve FY+1 Integrated Budget 

Plan1 Approve Recommend Lead Participate 

BUDGET EXECUTION

 Develop/approve monthly expense budgets N/A N/A Lead 

Affirm Approve 

 Monitor spending against integrated budget 

plan Participate Participate Lead Participate 

 Monitor spending against approved monthly 

expense budgets N/A Participate Lead Participate 

 

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 The annual Integrated Budget Plan (IBP) is the budgetary document that establishes the Institution’s overall budget 

for the upcoming fiscal year. The IBP consists of the following budget components: Federal Salaries and Expenses, 

Federal Facilities Capital, central Trust, non-allocated Trust, and SBV’s annual budget. The IBP is presented to the 

Regents by the CFO at the September meeting and approved by the Regents. Actual financial performance is 

measured against this plan, and variances explained, at succeeding Regents’ meetings as part of the CFO’s Financial 

Position report. In approving the Integrated Budget Plan, the Regents also are approving the central Trust, nonallocated Trust, and SBV business budgets approved by the Secretary. 
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Role Definitions 

Affirm: validates or endorses another stakeholder’s decision or approval 

Approve: makes final decision 

Lead: oversees or guides conduct of an activity, including other participation 

Participate: assists in gathering, providing, or reviewing data and information; providing 

 advice; evaluating issues; and making decisions 

Recommend: makes recommendation to final approving authority 

The Regents are currently involved, to varying degrees, in the budgetary and planning events in 

which they have identified roles, except for approval of the Institution’s Strategic Plan, approval 

of the Smithsonian Business Ventures’ (SBV) multi-year business plan, and affirmation of 

facilities’ Master Plans and the annual Federal performance plan. The Regents’ involvement and 

exceptions are detailed below: 

 There is no recent record that the Regents have participated directly in developing, 

reviewing, or approving the Institution’s strategic plan. 

 The Regents have not been involved in reviewing or affirming the Institution’s myriad 

long-term facilities Master Plans or the Institution’s Federal annual performance plan. 

 For the past several years, the Regents have endorsed the Institution’s budget priorities 

when they approved the Federal budget request to the Office of Management and Budget 

(OMB) at their September meeting. 

 The Regents have not always been involved in the front end when decisions are made to 

initiate, enhance, curtail, or eliminate major scientific, research, public engagement, or 

educational programs. Rather, the Regents’ opportunity to engage on these actions and 

the associated budgetary adjustments is embedded at the back end of the Federal budget 

request approval process. 

 Approval to proceed with major facilities construction and revitalization projects has 

been sought from the Regents when the project requires specific Congressional 

authorization and when the project’s financing requires an internal advance of $1 million 

or more, along with accompanying external debt. 

 The Regents’ Executive Committee has approved all new facility lease agreements with a 

net present value exceeding $5 million, and the full Board of Regents has approved leases 

with net present value exceeding $10 million. 

 The requirement for the Regents to approve a multi-year business plan for Smithsonian 

Business Ventures is new and was recommended by the SBV Task Force in its January 

28, 2008, report. 

 The Regents formally approved the former Secretary’s 2007 goals at their September 

2006 meeting, and they were provided the opportunity to review the Acting Secretary’s 

2008 goals in November 2007. 

 The Regents approve the Institution’s Federal budget request to OMB and the Federal 

and Trust integrated budget plan for the upcoming year, at their regularly scheduled 

September meeting. However, many times this approval came after the Federal budget 

had been submitted to OMB (to meet OMB’s early September deadline). 
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 The Regents often are consulted by the Secretary during OMB negotiations on the 

Federal budget request, which consists of preparing the Institution’s appeal to OMB’s 

budget guidance “passbacks” and responding to OMB’s proposed settlement. 

 Finally, as part of their May, September, and November meetings during the past seven 

years, the Regents have been provided the opportunity to review and discuss execution of 

the current year budget (both Federal and Trust) in the context of the Institution’s annual 

integrated budget plan. 

In assessing the appropriate level of Regent involvement in the Institution’s budgetary and 

planning processes, consideration must be given to overall roles and responsibilities for the 

Regents and the Secretary. The Regents, with consultation from the Secretary, should establish 

the Institution’s Strategic Plan and approve its overarching budget priorities and major 

investments. Detailed budget and planning decisions, however, should be within the Secretary’s 

purview. The budget the Secretary builds and presents to the Regents for approval should match 

the Regents’ goals and priorities. The main purpose of the Regents’ budget review therefore 

would be to ensure that it accurately reflects their guidance and direction. 

TASK TWO

The time frames for developing the Institution’s strategic plan and establishing the budget are 

tied to OMB’s deadline for submitting the Federal budget request (the second Tuesday in 

September each year) and to the start of the fiscal year (October 1 of each year) for establishing 

the integrated (Federal and Trust) budget plan and approving the central Trust budget. The 

Institution uses an overarching schedule to manage the various interrelated activities and events. 

The current time frames, the ideal time frames, and an illustrative schedule for the fiscal year 

2009/2010 planning and budget cycle are detailed in Table 2. The events and activities noted in 

bold italic and underlined type represent proposed changes in timing from current practices. 

Table 2. Time Frames for Key Events and Activities 

Generic Schedule Specific “Ideal” Schedule 

Key events and activities Current Ideal Fiscal Years 2009/2010 

Planning and Budget Cycle

STRATEGIC AND ANNUAL PLANNING

 Develop/revise/approve 

five-year strategic plan 

Every three-to-five 

years Every three years Feb. 2009 

Regents approve 

Strategic Plan for fiscal 

years 2009–14 

TBD 

2008 

Regents affirm revised 

Smithsonian Environmental 

Research Center and 

 Develop/approve National Zoo master plans 

facilities master plans Every 10–15 years Every 5–10 years 

TBD 

2009 

Regents affirm revised 

Smithsonian Tropical 

Research Institute master 

plan 

 Develop/approve annual 

budget priorities 

Final approval midto-late September for 

fiscal year starting in 

one year 

Final approval 

early March for 

fiscal year starting 

in one year and six 

months 

Mar. 

2008 

Regents approve Federal

fiscal year 2010 budget 

priorities (This approval will 

occur in May/June 2008) 
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Table 2. Time Frames for Key Events and Activities 

Generic Schedule Specific “Ideal” Schedule 

Key events and activities Current Ideal Fiscal Years 2009/2010 

Planning and Budget Cycle

 Identify/approve major 

program initiatives 

In September 

concurrent with 

Regent approval of 

the budget 

In conjunction with 

setting budget 

priorities 

Mar. 

2008 

Regents approve major 

program initiatives for 

fiscal year 2009 (Trust) and 

fiscal year 2010 (Federal)

 Approve major facilities 

projects As required As required TBD 

There are no major projects 

requiring front-end Regent 

approval at this time 

 Develop/approve annual 

performance plan 

Annually, no specific 

date 

Annually, in 

February 

Feb. 

2008 

Smithsonian posts fiscal 

year 2009 Plan on public 

website 

 Develop/approve multiyear SBV business plan 

No established 

process Annually, in June June 2008 

Regents approve plan for 

fiscal years 2009 through 

2013, prior to completion of 

annual budget process

 Develop/approve annual 

Institution’s goals 

Quarter 1 of current 

fiscal year 

August, prior to 

start of new fiscal 

year 

Aug. 

2008 

Regents affirm Institution’s 

goals for fiscal year 2009

FEDERAL BUDGET FORMULATION

Aug. 

2008 

Regents approve 

fiscal year 2010 OMB 

budget  Develop/submit FY+2 

OMB budget request 

Begins in March; 

concludes in midSeptember 

Complete by late 

August Sept.

2008 

Institution submits fiscal 

year 2010 budget to OMB 

 Negotiate budget 

settlement with OMB 

Late November to 

mid December No change Dec. 2008 

Institution reaches 

settlement with OMB on 

fiscal year 2010 budget 

Jan. 

2009 

Regents approve fiscal year 

2010 President’s budget  Prepare/submit FY+2 

budget to Congress Early February No change Feb. 

2009 

Institution submits fiscal 

year 2010 budget to 

Congress 

 Defend Federal budget 

request 

February through 

September No change Mar. 2008 

Secretary and Regents 

testify as required to defend 

fiscal year 2009 request 

TRUST BUDGET FORMULATION

 Develop/approve FY+1 

central Trust budget 

Begins in April, 

concludes in late 

September 

Complete process 

by August 

(dependent on 

approval of SBV 

budget)

Aug. 

2008 

Secretary recommends his 

approved fiscal year 2009 

central Trust budget. The 

Regents are not involved in 

the formulation phase. 

 Develop/approve FY+1 

SBV budget 

Begins in April, 

concludes in 

September 

Complete process 

by mid-July (SBV 

budget is required to 

complete central trust 

budget) 

July 

2008 

Secretary approves SBV’s 

fiscal year 2009 operating 

and capital budget 
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Table 2. Time Frames for Key Events and Activities 

Generic Schedule Specific “Ideal” Schedule 

Key events and activities Current Ideal Fiscal Years 2009/2010 

Planning and Budget Cycle

 Develop FY+1 nonallocated Trust budget 

Begins in April, 

concludes in midJuly No change required July 

2008 

Institution collects, affirms, 

and consolidates unitapproved fiscal year 2009 

budgets 

INTEGRATED BUDGET APPROVAL 

 Develop/approve FY+1 

integrated budget plan 

Begins in July, 

concludes in 

September 

No change required Sept. 

2008 

Regents approve fiscal year 

2009 Federal and Trust 

integrated budget plan 

BUDGET EXECUTION

 Develop/approve 

monthly expense 

budgets 

By end of Quarter 1 

By mid-November, 

but dependent upon 

timing of 

appropriation bill 

Nov. 

2008 

Institution reviews and 

affirms unit-approved fiscal 

year 2009 monthly budgets 

May 

2009 

Sept. 

2009 

Institution documents 

variances from fiscal year 

2009 plan and forecasts 

year-end results  Monitor spending 

against annual integrated 

budget plan 

Three times per year: 

May, September, 

January 

No change required 

Jan. 

2010 

Institution documents actual 

fiscal year 2009 results and 

provides variance 

explanations 

April 

2009 

Aug. 

2009 

 Monitor spending 

against approved 

monthly expense 

budgets 

Three times per year: 

April, August, 

November 

No change required 

Nov. 

2009 

Institution reviews fiscal 

year 2009 spending against 

plan at Operational Reviews 

To achieve the ideal schedule, the Institution will need to modify the timing for eight of its key 

budgetary and planning events and activities to: 

 provide the Regents the opportunity to affirm facility master plans before they are 

published 

 ensure that the Regents’ involvement in the setting of budget priorities occurs early 

enough in the planning and budgeting process to affect the Institution’s internal budget 

formulation process 

 provide the Regents the opportunity to approve all “major program initiatives” as part 

of the Institution’s planning process 

 incorporate the new requirement for the Regents to approve SBV’s multi-year business 

plan
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 accelerate the establishment of the Institution’s annual goals so that the Regents can 

affirm the Secretary’s plan prior to the start of the fiscal year 

 provide the Regents the opportunity to review, discuss, and approve the Federal budget 

submission at least two-to-three weeks prior to the OMB deadline so that any questions 

or concerns can be addressed prior to submitting the budget 

 accelerate completion of SBV’s annual budget for the upcoming fiscal year so that 

SBV’s approved budget can be incorporated into the Institution’s central Trust budget 

formulation process 

 complete formulation of the allocated (central) Trust budget prior to requesting 

Regents’ approval of the Institution’s integrated budget plan 

TASK THREE

To ensure the Regents are provided appropriate opportunities to influence, guide, and monitor 

the Institution’s planning and budget processes, there are several changes that should be adopted 

by the Institution and the Regents. The details of nine proposed changes follow. 

Recommended Changes to the Smithsonian Planning and Budgetary Processes 

1. The Regents should be directly involved in establishing and approving the Institution’s 

Strategic Plan. This plan should reflect the combined vision of both the Regents and the 

Secretary. 

a. By a time to be determined, the Regents and the Secretary should complete 

development of the Smithsonian Institution’s Strategic Plan for fiscal years 2009 

to 2014. 

b. The Regents should decide which of its committees will oversee the Institution’s 

strategic planning process. 

c. Thereafter, the Strategic Plan should be revised and updated at least every three 

years. 

2. To ensure the Institution’s Master Plans are consistent with the Strategic Plan and to help 

guide future Strategic Plan revisions, the Secretary should present to the Regents for their 

information and affirmation each revised (or newly developed) Facility Master Plan prior 

to the Plan being published. 

a. The Regents should consider delegating oversight authority for the Institution’s 

facilities master planning process to the Facilities Revitalization Committee. 

3. The Secretary, along with his leadership team, should accelerate establishment of the 

Institution’s annual budget priorities so that these priorities can guide formulation of the 

Institution’s next Federal budget submission (FY+2). The Regents’ approval should be 

obtained prior to March of each year. 

a. Put in place a set of budget priorities by early March of each year to ensure that 

unit directors and Smithsonian leadership appropriately reflect the Regents’ 

priorities as the Federal and Trust budgets are being formulated and final 

recommendations are made during senior leadership decision meetings. 
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b. Once approved, the budget priorities should be posted on the Regents’ and the 

Smithsonian’s public websites. 

4. At the front-end of the budget formulation process, the Secretary should establish a 

formal process to identify, review, vet, and recommend major program initiatives (MPIs), 

similar to the process now used by the Capital Planning Board to approve major facility 

and information technology (IT) investments and long-term operating leases. 

a. By January 2009, the Secretary should propose to the Regents the criteria for 

categorizing an initiative as an MPI and a proposed review process. 

i. This new process should be in place in time for the fiscal year 2011 

Federal budget process. 

ii. The Regents should approve all MPIs by March of each year. 

b. The Regents should decide which of its committees will be responsible for 

oversight of the MPI process. 

5. No later than January each year, and before it is posted concurrently on the Institution’s 

public website with the Federal budget each February, a copy of the Institution’s Annual 

FY+2 Federal Performance Plan (which is prepared to comply with Government 

Planning and Results Act requirements) should be provided by the Secretary to the 

Regents for their affirmation. 

6. The Secretary should require the Smithsonian Business Ventures to prepare a five-year 

business plan, in conjunction with the Institution’s strategic planning process, to establish 

long-term assumptions, strategies, investments, and performance metrics for the business 

enterprise. 

a. The five-year business plan should be submitted to the Regents for review and 

approval in June of each year. 

b. The Regents should decide which of its committees will provide oversight of the 

business activity planning process. 

7. The Secretary should complete development of his goals for the upcoming fiscal year by 

August of each year so that the Regents can review and affirm these goals prior to the 

start of each fiscal year. These goals are important because they focus Smithsonian 

resources on achieving the Institution’s strategic goals and performance objectives. 

Additionally, these goals are the basis for tracking organizational performance 

achievements and are integrated into every Smithsonian employee’s individual 

performance plan. 

8. The Secretary should provide the proposed FY+2 Federal budget to the Regents no later 

than early August of each year to ensure the Regents have adequate time to review and 

influence the Federal budget submission before they are asked to approve it. 

a. The Regents should consider delegating approval of the Federal budget to the 

Finance and Investment Committee and the Executive Committee. 

b. Special meetings of these committees will need to be conducted no later than late 

August of each year for the purpose of approving the budget request to OMB. 
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9. The Secretary should accelerate completion of the central Trust budget formulation 

process so that the Regents can affirm the Secretary’s decisions when they review and 

approve the overall integrated budget plan at their annual September meeting. 

a. This will require that SBV completes its FY+1 budget build process by July of 

each year. 

SUMMARY 

The Regents’ Governance Recommendation 22 is focused on ensuring that the Regents are fully 

engaged in establishing the Institution’s strategic goals and budget priorities, and in approving 

budgets and management plans that align resources against these goals and priorities. The 

process changes proposed in this paper will enhance the Regents’ involvement in the 

Institution’s budgetary and planning activities by providing them with adequate and appropriate 

opportunities to influence resource decisions and monitor resource utilization as it relates to 

program performance. 

Implementation of the changes presented in this paper will need to be phased and synchronized 

with the arrival of the new Secretary, as necessary. Upon approval of Recommendation 22 

changes by the Regents, the Secretary should provide a detailed implementation plan to the 

Regents within 60 days to show how these changes can be implemented most effectively. 

However, the Regents should encourage the Secretary to implement approved changes as soon as 

possible, and not wait for their final approval of the Recommendation 22 detailed 

implementation plan. 

BEYOND RECOMMENDATION 22

Two appropriate and necessary follow-up steps related to this recommendation are described 

below: 

1. The Finance and Investment Committee and the Regents’ Chief of Staff should work 

with the Secretary, the Under Secretary for Finance and Administration, and the CFO to 

determine the adequacy of planning and budgetary information currently provided to the 

Regents to perform their strategic planning, budgetary, and financial monitoring 

responsibilities. 

b. The Committee should identify gaps in the amount, scope, and level of budgetary 

information provided to it so that the Institution can modify its budget processes, 

documents, and deliverables to further enhance and improve its fiduciary 

partnership with the Regents. 

c. In particular, the Regents should determine if they need supporting narrative 

justification to accompany the non-allocated Trust budget. About 93 percent of 

the non-allocated Trust budget is restricted in nature and the use of funds must 

comply with donor and sponsor restrictions. Therefore, the Institution has very 

little flexibility in utilizing these funds for other purposes. The remaining 

7 percent of the non-allocated Trust budget represents unrestricted funds earned 

and controlled by the Smithsonian units. 
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2. The Under Secretary for Finance and Administration should develop appropriate material 

to educate existing and incoming Regents members on their budgetary and planning roles 

and responsibilities. 

MOTIONS FOR THE FINANCE AND INVESTMENT COMMITTEE’S APPROVAL 

On May 1, 2008, the Finance and Investment Committee will meet to review its 

recommendations on changes to the Institution’s strategic planning and budgetary processes. 

These changes are necessary to ensure the Committee and the Board of Regents have adequate 

opportunities to provide strategic direction and meaningful oversight of the Smithsonian’s 

budget and financial resources. The Finance and Investment Committee will consider and be 

asked to approve the following motions: 

VOTED that the Finance and Investment Committee approves the nine recommendations 

detailed under Task Three of this paper. These recommendations reflect the findings of 

the Committee from its review of the Smithsonian budget processes as required by the 

Regents’ Governance Committee Report Recommendation 22. The Committee authorizes 

the Secretary to begin implementing the necessary changes to fully implement each 

recommendation. The Committee shall also work with the Board of Regents’ Chair to 

incorporate the Board’s new and expanded fiduciary and planning duties into appropriate 

committees and procedures. 

VOTED that the Finance and Investment Committee requires the Secretary to submit a 

plan, with proposed milestones and deliverables, to fully implement the nine 

recommendations by the end of 2010; and to report annually to the Committee on the 

Institution’s progress in implementing the recommendations, until each recommendation 

has been implemented.