SMITHSONIAN INSTITUTION 

Financial Statements
 

September 30, 2018
 

(With Independent Auditors’ Report Thereon) 
KPMG LLP is a Delaware limited liability partnership and the U.S. member

firm of the KPMG network of independent member firms affiliated with 

KPMG International Cooperative (“KPMG International”), a Swiss entity. 

KPMG LLP

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1801 K Street, NW

Washington, DC 20006

 

 

Independent Auditors’ Report 

The Office of the Inspector General, Audit and Review Committee 

of the Board of Regents, and Secretary Skorton 

Smithsonian Institution: 

We have audited the accompanying financial statements of Smithsonian Institution (Smithsonian), which 

comprise the statement of financial position as of September 30, 2018, and the related statements of activities 

and cash flows for the year then ended, and the related notes to the financial statements. 

Management’s Responsibility for the Financial Statements 

Management is responsible for the preparation and fair presentation of these financial statements in 

accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and 

maintenance of internal control relevant to the preparation and fair presentation of financial statements that are 

free from material misstatement, whether due to fraud or error. 

Auditors’ Responsibility 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our 

audit in accordance with auditing standards generally accepted in the United States of America. Those 

standards require that we plan and perform the audit to obtain reasonable assurance about whether the 

financial statements are free from material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the 

financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of 

the risks of material misstatement of the financial statements, whether due to fraud or error. In making those 

risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation 

of the financial statements in order to design audit procedures that are appropriate in the circumstances, but 

not for the purpose of expressing an opinion on the effectiveness of the Smithsonian’s internal control. 

Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting 

policies used and the reasonableness of significant accounting estimates made by management, as well as 

evaluating the overall presentation of the financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 

audit opinion. 

Opinion 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial 

position of Smithsonian Institution as of September 30, 2018, and the changes in its net assets and its cash 

flows for the year then ended in accordance with U.S. generally accepted accounting principles. 
 

 

 

 

 

Other Matters 

Fund Detail 

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The 

fund detail is presented for purposes of additional analysis and is not a required part of the financial statements. 

Such information is the responsibility of management and was derived from and relates directly to the 

underlying accounting and other records used to prepare the financial statements. The information has been 

subjected to the auditing procedures applied in the audit of the financial statements and certain additional 

procedures, including comparing and reconciling such information directly to the underlying accounting and 

other records used to prepare the financial statements or to the financial statements themselves, and other 

additional procedures in accordance with auditing standards generally accepted in the United States of 

America. In our opinion, the fund detail is fairly stated in all material respects in relation to the financial 

statements as a whole. 

Report on Summarized Comparative Information 

We have previously audited the Smithsonian’s 2017 financial statements, and we expressed an unmodified 

audit opinion on those audited financial statements in our report dated January 22, 2018. In our opinion, the 

summarized comparative information presented herein as of and for the year ended September 30, 2017 is 

consistent, in all material respects, with the audited financial statements from which it has been derived. 

Washington, District of Columbia 

January 8, 2019 

2 
SMITHSONIAN INSTITUTION 

Statement of Financial Position 

September 30, 2018
 

(with summarized financial information as of September 30, 2017)
 

(Dollars in millions)
 

Fund detail Total funds 

Trust Federal 2018 2017 

Assets: 

Cash, cash equivalents and 

U.S. Treasury balances $ 109.4 524.6 634.0 440.2 

Receivables and advances 250.9 3.1 254.0 282.1 

Inventories 12.8 0.3 13.1 13.5 

Deferred expenses and other assets 47.7 — 47.7 58.8 

Investments 1,880.6 — 1,880.6 1,752.9 

Property and equipment, net 746.2 1,600.9 2,347.1 2,342.3 

Total assets $ 3,047.6 2,128.9 5,176.5 4,889.8 

Liabilities: 

Accounts payable and accrued expenses $ 124.2 165.0 289.2 296.1 

Deferred revenue 59.2 — 59.2 59.1 

Unexpended federal appropriations — 461.1 461.1 289.0 

Deferred gain on sale of real estate 8.2 — 8.2 12.1 

Environmental remediation obligation — 49.8 49.8 49.9 

Long-term debt 148.0 — 148.0 199.6 

Total liabilities 339.6 675.9 1,015.5 905.8 

Net assets: 

Unrestricted 1,389.2 1,453.0 2,842.2 2,766.5 

Temporarily restricted 772.6 — 772.6 692.0 

Permanently restricted 546.2 — 546.2 525.5 

Total net assets 2,708.0 1,453.0 4,161.0 3,984.0 

Commitments and contingencies 

Total liabilities and net assets $ 3,047.6 2,128.9 5,176.5 4,889.8 

See accompanying notes to financial statements. 

3 
SMITHSONIAN INSTITUTION 

Statement of Activities 

Year ended September 30, 2018
 

(with summarized financial information for year ended September 30, 2017)
 

(Dollars in millions)
 

Temporarily Permanently 

Unrestricted fund detail restricted restricted Total funds 

Trust Federal Total trust funds trust funds 2018 2017 

Operating revenues and other additions: 

Government revenue: 

Federal appropriations $ — 870.4 870.4 — — 870.4 841.0 

Government grants and contracts 117.5 — 117.5 — — 117.5 113.7 

Total government revenue 117.5 870.4 987.9 — — 987.9 954.7 

Contributions 41.5 — 41.5 135.9 18.8 196.2 187.1 

Business activities and other: 

Business activities 183.2 — 183.2 — — 183.2 201.9 

Short-term investment income 4.0 — 4.0 — — 4.0 2.5 

Endowment payout 42.6 — 42.6 33.9 — 76.5 75.5 

Private grants 8.0 — 8.0 — — 8.0 6.7 

Rentals, fees, commissions, and other 22.1 10.4 32.5 — — 32.5 31.7 

Gain on sale of real estate 3.9 — 3.9 — — 3.9 3.9 

Imputed benefit revenue — 71.3 71.3 — — 71.3 50.7 

Total business activities and other 263.8 81.7 345.5 33.9 — 379.4 372.9 

Total operating revenues 422.8 952.1 1,374.9 169.8 18.8 1,563.5 1,514.7 

Net assets released from restrictions 144.4 — 144.4 (144.4) — — — 

Total operating revenues and other additions 567.2 952.1 1,519.3 25.4 18.8 1,563.5 1,514.7 

Expenses: 

Program activities: 

Research 142.5 160.2 302.7 — — 302.7 298.7 

Collections management 28.1 243.8 271.9 — — 271.9 239.6 

Education, public programs, and exhibitions 104.6 274.4 379.0 — — 379.0 381.6 

Business activities 156.4 — 156.4 — — 156.4 150.4 

Total program activities 431.6 678.4 1,110.0 — — 1,110.0 1,070.3 

Supporting activities: 

Administration: 

Centrally managed 20.6 104.1 124.7 — — 124.7 122.3 

Unit managed 63.5 133.6 197.1 — — 197.1 196.8 

Advancement 49.6 1.4 51.0 — — 51.0 64.0 

Total supporting activities 133.7 239.1 372.8 — — 372.8 383.1 

Total expenses 565.3 917.5 1,482.8 — — 1,482.8 1,453.4 

Change in net assets before nonoperating activitie 1.9 34.6 36.5 25.4 18.8 80.7 61.3 

Nonoperating activities: 

Environmental remediation costs — — — — — — 1.4 

Gain on partial sale of Smithsonian Network 12.4 — 12.4 — — 12.4 — 

Gain on note repayment 0.7 — 0.7 — — 0.7 — 

Nonoperating investment gains - Endowment 39.4 — 39.4 55.2 1.9 96.5 99.2 

Change in net assets of related organizations and other 3.6 — 3.6 — — 3.6 2.2 

Losses on disposition of assets — (0.5) (0.5) — — (0.5) (0.5) 

Collection items not capitalized: 

Proceeds from sales — — — — — — — 

Collection items purchased (14.1) (2.3) (16.4) — — (16.4) (10.4) 

Change in net assets 43.9 31.8 75.7 80.6 20.7 177.0 153.2 

Net assets, beginning of year 1,345.3 1,421.2 2,766.5 692.0 525.5 3,984.0 3,830.8 

Net assets, end of year $ 1,389.2 1,453.0 2,842.2 772.6 546.2 4,161.0 3,984.0 

See accompanying notes to financial statements. 

4 
SMITHSONIAN INSTITUTION 

Statement of Cash Flows 

Year ended September 30, 2018
 

(with summarized financial information for year ended September 30, 2017)
 

(Dollars in millions)
 

Fund detail Total funds 

Trust Federal 2018 2017 

Cash flows from operating activities: 

Change in net assets $ 145.2 31.8 177.0 153.2 

Adjustments to reconcile change in net assets to net cash 

(used in) provided by operating activities: 

Loss on disposition of assets — 0.5 0.5 — 

Collection items purchased 14.1 2.3 16.4 10.4 

Depreciation and amortization 53.3 109.8 163.1 153.6 

Present value discount and accretion (0.1) 0.9 0.8 0.6 

Contributions for permanent restricted purposes (18.8) — (18.8) (14.1) 

Contributions for construction of facilities (7.1) — (7.1) (13.3) 

Appropriations for repair, restoration, and construction — (136.6) (136.6) (121.5) 

Net investment gains (155.2) — (155.2) (161.0) 

Gain on partial sale of Smithsonian Network (12.4) — (12.4) — 

Gain on note repayment (0.7) — (0.7) — 

Decrease (increase) in assets: 

Receivables and advances (15.3) (0.8) (16.1) 33.4 

Inventories 0.4 — 0.4 (0.4) 

Deferred expenses and other assets (0.7) — (0.7) (1.6) 

Increase (decrease) in liabilities: 

Accounts payable and accrued expenses (11.2) 0.5 (10.7) 29.3 

Deferred revenue 0.1 — 0.1 (0.3) 

Unexpended federal appropriations — (3.8) (3.8) 9.4 

Deferred gain on sale of real estate (3.9) — (3.9) (3.9) 

Environmental remediation obligation — (1.0) (1.0) (2.2) 

Net cash (used in) provided by operating activities (12.3) 3.6 (8.7) 71.6 

Cash flows from investing activities: 

Collection items purchased (14.1) (2.3) (16.4) (10.4) 

Purchases of property and equipment (24.9) (139.3) (164.2) (183.4) 

Disposition of assets — (0.5) (0.5) — 

Purchases of investment securities (586.3) — (586.3) (472.3) 

Proceeds from sales/maturities of investment securities 613.9 — 613.9 445.9 

Proceeds from partial sale of Smithsonian Network 24.2 — 24.2 — 

Proceeds from loan receivable 2.7 — 2.7 — 

Net cash provided by (used in) investing activities 15.5 (142.1) (126.6) (220.2) 

Cash flows from financing activities: 

Contributions for permanent restricted purposes 24.2 — 24.2 27.3 

Contributions for construction of facilities 43.9 — 43.9 22.1 

Appropriations for repair, restoration, and construction — 312.5 312.5 133.3 

Principal payments on long-term debt (51.5) — (51.5) (1.5) 

Net cash provided by financing activities 16.6 312.5 329.1 181.2 

Net change in cash, cash equivalents and 

U.S. Treasury balances 19.8 174.0 193.8 32.6 

Cash, cash equivalents and U.S. Treasury balances: 

Beginning of year 89.6 350.6 440.2 407.6 

End of year $ 109.4 524.6 634.0 440.2 

Noncash investing activities: 

Construction cost accruals $ 2.2 14.0 16.2 12.5 

Cash paid for interest $ 4.2 — 4.2 3.8 

See accompanying notes to financial statements. 

5 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

(1) Organization 

The Smithsonian Institution (Smithsonian) was created by act of Congress in 1846 in accordance with the 

terms of the will of James Smithson of England, who, in 1826, bequeathed property to the United States of 

America “to found at Washington, under the name of the Smithsonian Institution, an establishment for the 

increase and diffusion of knowledge among men.” Congress established the Smithsonian as a trust of the 

United States of America and vested responsibility for its administration in the Smithsonian Board of 

Regents (Board). 

The Smithsonian is a museum and an education and research complex consisting of 17 museums and the 

National Zoological Park in Washington, DC, and two museums in New York City. Additional facilities and 

programs are operated in five states and Panama. Research is carried out in the museums and other 

facilities throughout the world. During fiscal year 2018, 28.8 million individuals visited Smithsonian 

museums and other facilities. 

As of September 30, 2018, the Smithsonian’s extensive collection contained approximately 155.1 million 

objects: 0.4 million works of art, 8.8 million historical artifacts, and 145.9 million natural and physical 

science specimens (living and nonliving). The Smithsonian also maintains 173,900 cubic feet and 0.7 

million items of archival holdings and 2.1 million library volumes. During fiscal year 2018, approximately 

105,600 natural and physical science specimens were disposed of. 

A substantial portion of the Smithsonian’s operations is funded by annual federal appropriations. Federal 

appropriations are also received for the construction or repair and restoration of its facilities. Construction of 

certain facilities has been funded entirely by federal appropriations, while others have been funded by a 

combination of federal and private funds. 

In addition to federal appropriations, the Smithsonian receives private support, government grants and 

contracts, and earns income from investments and its various business activities. Business activities 

include Smithsonian magazines, other publications, online catalogs, and theaters, shops and food services 

located in its museums and centers. 

(2) Summary of Significant Accounting Policies 

(a) Basis of Presentation 

The financial statements present the financial position, financial activities, and cash flows of the 

Smithsonian on the accrual basis of accounting. Funds received from direct federal appropriations and 

related transactions are reported as federal funds. All other funds and related transactions are reported 

as trust funds. 

These financial statements include certain fiscal year 2017 summarized, comparative information in 

total but not by net asset class. Such information does not include sufficient detail to constitute a 

presentation in conformity with U.S. generally accepted accounting principles. Accordingly, such 

information should be read in conjunction with the Smithsonian’s financial statements as of and for the 

year ended September 30, 2017, from which the summarized information was derived. 

These financial statements do not include the accounts of the National Gallery of Art, the John F. 

Kennedy Center for the Performing Arts, or the Woodrow Wilson International Center for Scholars, 

6 (Continued) 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

which were established by Congress within the Smithsonian, but are governed by independent boards 

of trustees and therefore not controlled by the Smithsonian. 

Expenses are presented on a functional basis in the statement of activities. Programs include research, 

collections management, education, public programs and exhibitions, and business activities. 

Supporting services include administration and advancement. Administration is reported as centrally 

managed, through the Office of Under Secretary for Finance and Administration, or unit managed, as 

part of an individual museum or center. Depreciation, security, and other general operating costs that 

benefit more than one program are allocated across programs and services based on relative square 

feet. 

(b) Use of Estimates 

The preparation of financial statements in conformity with U.S. generally accepted accounting 

principles requires management to make estimates and assumptions that affect the reported amounts 

of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial 

statements and the reported amounts of revenues and expenses during the reporting period. Actual 

results could differ from those estimates. The most significant estimates affecting the Smithsonian’s 

financial statements relate to the net asset value of nonmarketable investments, environmental
 

remediation obligations and other liabilities, and the allowance for contributions receivable.
 

(c) Federal Funds 

Federal appropriations revenues are classified as unrestricted and recognized as exchange
 

transactions as expenses are incurred. The net assets of federal funds consist primarily of the 

Smithsonian’s net investment in property and equipment purchased with or constructed using federal 

funds less unfunded liabilities for environmental remediation obligations and annual leave and 

estimated Federal Employee Compensation Act (FECA) liabilities for workers compensation claims. 

For fiscal 2018, the Smithsonian was appropriated $731.4 for operations and $311.9 for construction or 

repair and restoration of facilities. Federal appropriations for operations are generally available for two 

years. Federal appropriations for construction or repair and restoration of facilities are generally 

available for obligation until expended. Unexpended appropriation is shown in the liability section of 

the statement of financial position. 

In accordance with Public Law 110-161, appropriations for operations are maintained for five years 

following the year of appropriation, at which time the appropriation account is closed and any 

unexpended balance is returned to the U.S. Treasury. During fiscal year 2018, the unexpended 

balance of the fiscal 2012 appropriation, amounting to $0.8, was returned. 

(d) Trust Funds 

Trust net assets, revenues, expenses and gains and losses are classified and reported based on the 

existence or absence of donor-imposed restrictions as follows: 

(i) Unrestricted 

Unrestricted net assets are not subject to donor-imposed or other legal stipulations on the use of 

the funds. Funds functioning as endowment (board designated) in this category represent 

unrestricted net assets that have been designated by the Board for long-term investment. 

7 (Continued) 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

(ii) Temporarily Restricted 

Temporarily restricted net assets are subject to donor-imposed stipulations that may be met by 

actions of the Smithsonian and/or the passage of time. Donor restricted and board designated 

endowment funds in this category represent donor-restricted contributions and accumulated 

earnings from true endowments that have been designated for long-term investment, respectively. 

Once the temporary restriction has been met (i.e., the donor stipulation has been fulfilled, assets 

placed in service, and/or the stipulated time period has elapsed), net assets are reported as 

reclassifications from temporarily restricted net assets to unrestricted net assets. 

(iii) Permanently Restricted 

Permanently restricted net assets are subject to donor-imposed stipulations requiring the principal 

be maintained permanently by the Smithsonian. Generally, the donors of these assets permit the 

use of all or part of the income earned on investment of the assets for either general or donorspecified purposes. 

Trust fund revenues are reported as increases in unrestricted net assets unless the use of the 

related assets is limited by the donor. Expenses are reported as decreases in unrestricted net 

assets. Gains and losses on investments are reported as increases or decreases in unrestricted 

net assets unless their use is restricted by explicit donor stipulations or by law. Losses on 

investments that reduce the assets of donor-restricted endowment funds below the level required 

by donor stipulations or by law are generally classified as reductions of unrestricted net assets and 

reported as non-operating losses in the statement of activities. Subsequent gains that restore the 

fair value of the assets of the endowment fund to the required level are classified as increases in 

unrestricted net assets and reported as non-operating gains in the statement of activities. 

(e) Cash Equivalents 

The Smithsonian considers all highly liquid investments purchased with an average maturity of three 

months or less, including U.S. Treasury balances, to be cash equivalents. Cash equivalents for trust 

funds include funds held by the U.S. Treasury of $19.4 and $62.8 of institutional money market funds 

with maturity dates of three months or less. Cash and cash equivalents for federal funds consist 

entirely of U.S. Treasury balances of $524.6 for federal appropriation capital and operating expenses. 

(f) Working Capital 

The Smithsonian has adopted a working capital policy to meet immediate and long-term cash needs 

using high-quality investments. The working capital investment policy requires funds be invested in 

short-term instruments that will allow for required liquidity and provide a maximum interest return within 

defined risk constraints. As of September 30, 2018, the fund, totaling $275.0, is comprised of $62.8 in 

cash equivalents with maturity dates of three months or less and short-term investments of $212.2, all 

of which are included in investments (see note 5). 

(g) Trade Accounts Receivable 

Trade accounts receivable generally consists of accounts receivable related to magazine advertising 

and certain concession agreements and are stated at invoice amount. Allowances are recognized for 

uncollectible amounts based on past collection experience. 

8 (Continued) 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

(h) Contributions 

Contributions, including unconditional promises to give, are recognized as revenues in the appropriate 

category of net assets in the period received. Conditional promises to give are not recognized until the 

conditions on which they depend are substantially met. Contributions of assets other than cash are 

recorded at estimated fair value at the date of gift, except items that are contributed and held as part of 

the Smithsonian’s collections are not capitalized. Contributions restricted to the acquisition of long-lived 

assets are recorded as temporarily restricted revenue in the period received. Generally, the donor’s 

restrictions are considered met and the net assets are released from restriction when the related longlived asset is placed in service. 

Contributions receivable are reported net of management’s estimate of uncollectible amounts which is 

based on judgment and analyses of donors’ creditworthiness, past collection experience, and other 

relevant factors. Estimated collectible contributions scheduled to be received after one year are 

discounted using a risk-adjusted rate for the expected period of collection. Amortization of the discount 

is recorded as contribution revenue. 

In-kind contributions of goods and services totaling $13.3 were received in fiscal year 2018 and 

recognized as program support revenues and expenses in the statement of activities. In-kind 

contributions include donated space, equipment, and various other items. A substantial number of 

volunteers also make significant contributions of time to the Smithsonian, enhancing its activities and 

programs. Approximately 7,100 volunteers contributed about 532,400 hours of service to the 

Smithsonian during fiscal year 2018. In accordance with applicable guidance, the value of these 

contributions is not recognized in the financial statements. 

(i) Deferred Revenues and Expenses 

Revenues from magazine subscriptions and long-term contracts are deferred and recognized ratably 

over the period of the underlying agreement. 

Promotion production expenses are recognized when related advertising materials are released. 

Direct-response advertising relating to the magazines is deferred and amortized over one year. As of 

September 30, 2018, deferred expenses and other assets include $6.8 of deferred promotion costs, 

related primarily to the magazines. Advertising expense, including direct response advertising of $7.3, 

totaled $12.0 in fiscal year 2018 and is included in business activities expenses in the statement of 

activities. 

(j) Inventories 

Inventories are reported at the lower of cost or market, and consist primarily of merchandise and 

books. Cost is determined using the first-in, first-out method. 

(k) Investments 

Smithsonian employs an investment strategy that utilizes equities, marketable alternatives, fixed 

income, private equity and venture capital, natural resources and real estate, and cash and cash 

equivalents to fulfill its fiduciary responsibility to its donors and constituents. 

Investments in fixed income, certain global equities, publicly traded natural resources and cash and 

cash equivalents, including gift annuity program investments are reported at fair value, which are 

9 (Continued) 
 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

determined primarily based on quoted market prices. Investments in private equity and venture capital, 

certain real estate, natural resources, marketable alternatives, and public equities held through 

commingled funds (collectively, nonmarketable investments) are stated at estimated fair value based 

on the funds’ net asset values, or their equivalents (collectively, NAV) as a practical expedient, unless it 

is probable that all or a portion of the investment will be sold for an amount different from NAV. As of 

September 30, 2018, the Smithsonian had no plans or intentions to sell investments at amounts 

different from NAV. These estimated fair values may differ from the values that would have been used 

had a ready market existed for these investments, and the differences could be significant. 

Investments are exposed to various risks including business, interest rate, market, exchange rate, 

liquidity, and credit risks. Due to the level of risk associated with certain investments, it is at least 

reasonably possible that significant changes in the values of investments could occur in the near term. 

Changes in fair value are recognized in the statement of activities. Purchases and sales of investments 

are recorded on the trade date using average cost. Investment income is recorded when earned. 

(l) Split Interest Agreements and Perpetual Trusts 

Split interest agreements with donors consist primarily of irrevocable charitable remainder trusts, 

charitable gift annuities, and perpetual trusts. The assets for the charitable trusts are included in 

receivables and advances. Contribution revenues from charitable remainder trusts are recognized at 

the dates the trusts are established based on the net present value of the estimated future payments to 

be made to the donors and/or other beneficiaries. For the charitable gift annuities, assets are 

recognized at fair value at the dates of the annuity agreements and included in investments. An annuity 

liability is recognized for the present value of future cash flows expected to be paid to the donor and 

contribution revenues are recognized equal to the difference between the assets and the annuity 

liability. Liabilities are adjusted during the terms of the annuities for payments to donors, accretion of 

discounts, and changes in the life expectancies of the donors. 

The Smithsonian is also the beneficiary of certain perpetual trusts held and administered by others. 

The fair values of the trusts are recognized as assets and contribution revenues at the dates the trusts 

are established. Distributions from the trusts are recorded as investment income and the assets are 

adjusted for changes in the fair value of the trust assets. 

(m) Property and Equipment 

Property and equipment purchased with federal or trust funds are recorded at cost. Property and 

equipment acquired through transfers from government agencies are recorded at net book value or fair 

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SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

value at the date of transfer, whichever is more readily determinable. Property and equipment acquired 

through donation are recorded at estimated fair value at the date of the gift. 

Property and equipment assets are depreciated on a straight-line basis over their estimated useful lives 

as follows: 

Buildings 30 years

Major renovations 15 years

Equipment and software 3–7 years

Exhibit costs 10 years

Leasehold improvements are amortized over the shorter of the lease term or their useful lives. 

Rent expense under operating leases that provide for scheduled rent increases over their terms is 

recognized on a straight-line basis. 

Certain land occupied by Smithsonian buildings, located primarily in the District of Columbia, Maryland, 

and Virginia, were appropriated and reserved by Congress for the Smithsonian’s use. The Smithsonian 

serves as trustee of the land for as long as they are used to carry out its mission. The land are titled in 

the name of the U.S. government and are not included in the accompanying financial statements. 

(n) Collections – Stewardship Assets 

The Smithsonian acquires its collections by purchase (using federal or trust funds) or by donation. 

Collections are held for public exhibition, education, or research. The Smithsonian’s collections 

management policy includes guidance on the preservation, care, and maintenance of the collections 

and procedures relating to the accession/deaccession of collection items. 

In conformity with the practice generally followed by museums, no value is assigned to the collections 

in the statement of financial position. Purchases of collection items are recognized as reductions in 

unrestricted net assets in the period of acquisition. Proceeds from deaccessions or insurance 

recoveries for lost or destroyed collection items are recognized as increases in the appropriate net 

asset class and are designated for future collection acquisitions. 

Noncash deaccessions result from the exchange, donation, or destruction of collection items, and 

occur because objects deteriorate, are outside the scope of a museum’s mission, or are duplicative. 

During the fiscal year, noncash deaccessions included works of art, animals, historical objects, and 

natural specimens. 

Items that are acquired with the intent to sell, exchange, or otherwise be used for financial gain are not 

considered collection items and are recorded as other assets at their fair value at the date of 

acquisition. Contributed items held for sale, amounting to $0.9, are included in other assets. 

(o) Annual Leave 

The Smithsonian’s federal and trust employees earn annual leave in accordance with federal laws and 

regulations and internal policies, respectively. Annual leave for all employees is recognized as an 

expense when earned. The liability for unused annual leave is included in accounts payable and 

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SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

accrued expenses in the statement of financial position aggregated to $15.0 for trust and $28.9 for 

federal as of September 30, 2018. 

(p) Sponsored Projects 

The Smithsonian receives grants and enters into contracts with U.S. federal, state and local 

governments, which generally provide for reimbursement of costs. Revenues under these agreements 

are recognized as reimbursable expenditures are incurred as government grants and contracts. These 

revenues include recoveries of facilities and administrative costs that are generally based on a 

negotiated or agreed-upon percentage of direct costs, with certain exclusions. 

(q) Advancement 

The Smithsonian raises private financial support from individual donors, corporations, and foundations 

to fund programs and other initiatives. Financial support is also generated through numerous 

membership programs. Fund-raising costs are expensed as incurred and reported as advancement 

expenses in the statement of activities. 

(r) Non-operating Activities 

Non-operating activities include environmental remediation costs, non-operating investment income, 

changes in the net assets of related organizations, and changes in net assets related to collection 

items. 

Non-operating investment income is calculated as the difference between the total return on the 

endowment (i.e., dividends, interest and net gain or loss) and the annual payout of the endowment 

funds, used to support operations. 

The Smithsonian recognizes its interest in the net assets of organizations that are financially 

interrelated and the changes in its interest using a method similar to the equity method of accounting. 

The principal financially interrelated organizations are the Smithsonian Network and Friends of the 

National Zoo. During fiscal year 2018, the Smithsonian sold half of its interest in the Smithsonian 

Network recognizing a gain of $12.4. 

(s) Income Taxes 

The Smithsonian is recognized as exempt from income taxation under the provisions of Section 

501(c)(3) of the Internal Revenue Code. Organizations described in that Section are taxable only on 

their unrelated business income. Advertising sales are the principal source of unrelated business 

income for the Smithsonian. The provision for income taxes was not material for fiscal year 2018. The 

Smithsonian recognizes the effect of income tax positions only if those positions are more likely than 

not of being sustained. The Smithsonian does not believe its financial statements include any uncertain 

tax positions. 

12 (Continued) 
 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

(3) Receivables and Advances 

Receivables and advances consisted of the following as of September 30, 2018: 

Trust Federal Total

Contributions receivable, net $ 192.9 — 192.9 

Grants and contracts 21.5 — 21.5 

Charitable trusts 19.3 — 19.3 

Trade accounts, net of $0.5 allowances 15.1 3.1 18.2 

Accrued interest and dividends 1.8 — 1.8 

Advances and other 0.3 — 0.3 

Total receivables and

advances $ 250.9 3.1 254.0 

Contributions receivable consist of the following: 

Due within:

Less than 1 year $ 102.6 

1 to 5 years 100.3 

5 years or beyond 0.1 

203.0 

Less:

Allowance for uncollectible contributions (4.6) 

Unamortized discount (at rates ranging from 1.1% to 2.9%) (5.5) 

Contributions receivable, net $ 192.9 

(4) Federal Appropriations 

Fiscal year 2018 federal appropriation is reconciled to federal appropriation revenue as follows: 

Repair and

restoration

Salaries and and

expenses construction Total

Fiscal year 2018 federal appropriation $ 731.4 311.9 1,043.3 

Unexpended 2018 appropriation (93.1) (283.2) (376.3) 

Amounts expended from prior years’

appropriations 95.5 107.9 203.4 

Federal appropriation

revenue $ 733.8 136.6 870.4 

13 (Continued) 
 

 

 

 

 

 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

Fiscal year 2018 federal appropriation is reconciled to federal appropriation expenses as follows: 

Repair and

restoration

Salaries and

and expenses construction Total

Fiscal year 2018 federal appropriation $ 731.4 311.9 1,043.3 

Unexpended 2018 appropriation (93.1) (283.2) (376.3) 

Depreciation 12.1 97.7 109.8 

Imputed benefit costs 71.3 — 71.3 

Collection items purchased (2.3) — (2.3) 

Amounts expended from prior years’

appropriations 95.5 107.9 203.4 

Capital expenditures (2.6) (136.7) (139.3) 

Loss on disposition of assets 0.5 — 0.5 

Unfunded expenses – FECA, annual leave,

and actuarial adjustment (0.8) 9.2 8.4 

Other funding (1.3) — (1.3) 

Federal appropriation expense $ 810.7 106.8 917.5 

Unexpended appropriations for all fiscal years total $461.1 as of September 30, 2018 and consist of $132.0 

in unexpended operating funds and $329.1 in unexpended construction funds. Unexpended operating and 

construction funds represent amounts appropriated for Smithsonian’s operations and new facilities or 

renovations, respectively. 

(5) Investments and Fair Value Measurements 

The Smithsonian has adopted investment policies for its endowment, including board designated funds, 

which attempt to provide a predictable stream of funding in support of the operating budget, while seeking 

to preserve the real value of the endowment assets over time. The Smithsonian relies on a total return 

strategy in which investment returns are achieved through both capital appreciation (realized and 

unrealized) and current yield (interest and dividends), targeting a diversified asset allocation. The Board’s 

Investment Committee reviews the long-term asset allocation for the endowment. 

The three levels of the fair value hierarchy for recurring fair value measurements are prioritized based on 

the inputs to valuation techniques used to measure fair value and are as follows: 

Level 1 – Quoted prices in active markets for identical assets or liabilities, as of the reporting date. 

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or 

liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be 

corroborated by observable market data for substantially the full term of the assets or liabilities. 

14 (Continued) 
 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to 

the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments 

whose value is determined using pricing models, discounted cash flow methodologies or similar 

techniques, as well as instruments for which the determination of fair value requires significant 

management judgment or estimation. 

The following summarizes Smithsonian’s investments at fair value which are determined primarily based on 

quoted market prices as of September 30, 2018: 

Total Level 1 Level 3 NAV (1)

Fixed income $ 212.2 212.2 — —

Endowment investments:

Global equities:

Global markets 57.0 57.0 — —

Emerging markets 5.6 5.6 — —

Real assets:

Energy and natural resources 31.1 31.1 — —

Fixed income 69.9 69.9 — —

Cash and equivalents 16.3 16.3 — —

 P ooled inves t ment s 179.9 179.9 — —

 Investments at NAV 1,462.5 — — 1,462.5

Total pooled investments 1,642.4 179.9 — 1,462.5

Nonpooled investments:

 U.S. Treasury deposits 1.0 1.0 — —

Total endowment 1,643.4 180.9 — 1,462.5

Gift annuities, primarily equities 25.0 25.0 — —

Total investments 1,880.6 418.1 — 1,462.5

Charitable trusts 19.3 — 19.3 —

$ 1,899.9 418.1 19.3 1,462.5

(1) Investments held through limited partnerships and comingled funds for which fair value is estimated 

using the NAV’s reported by the investment managers as a practical expedient have not been 

categorized within the fair value hierarchy; however, these investments are included in the table above 

to permit reconciliation with the statement of financial position.

15 (Continued) 
 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

The following summarizes information relating to the investments, which are stated at NAV as practical 

expedient for fair value and includes information about the nature, strategies, and risks of these major 

classes of nonmarketable investments: 

Redemption Days of Unfunded

NAV terms notices commitments

Global equity:

 Developed markets $ 292.6 Weekly to annually 6-91 $ — 

 Emerging markets 106.7 Monthly to quarterly 10-90 — 

Marketable alternatives:

 Long/short equity 111.8 Monthly to annually 60 — 

 Credit and distressed 110.7 Annually to at maturity 90-n/a 41.6 

 Multistrategy 29.4 Quarterly 60 — 

 Global marco 58.3 Monthly to semi-annually 2-60 — 

Private equity:

 Private equity 149.5 Not applicable N/A 84.8 

 Venture capital 326.6 Not applicable N/A 87.1 

Real assets:

 Energy and natural resources 110.7 Quarterly to at maturity 45-n/a 27.9 

 Real estate funds 140.9 Quarterly to at maturity 60-n/a 90.2 

Fixed income 25.3 Quarterly to at maturity 90-n/a — 

$ 1,462.5 $ 331.6 

The following describes the nature, strategies, and risks of the major classes of the investments that 

are stated at NAV for fair value. 

(a) Global Equity 

Global equity is comprised of investments in funds and strategies invested in publicly listed equity 

securities in the global developed and emerging markets. Some of the funds are subject to lock-ups. 

(b) Marketable Alternatives 

Marketable alternatives consist of investments in a broad array of securities and strategies aimed to 

reduce volatility and enhance returns. Smithsonian’s marketable alternatives are broadly defined as 

long/short equity, credit and distressed, multi-strategy, and global macro funds. Long/short equity funds 

invest in long equity positions that are expected to increase in value and short equity positions in stocks 

that are expected to decrease in value. Credit and distressed funds generally invest in corporate fixed 

income and debt securities of companies that are experiencing financial or operational difficulties. 

Multi-strategy funds invest across different strategies to diversify risks and reduce volatility. Global 

macro funds invest in strategies to profit from macroeconomic events that may include changes in 

interest rates, currency movements and stock market performance. Some of the funds are subject to 

soft and hard lock-ups and other funds are not eligible for redemption. 

16 (Continued) 
 

 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

(c) Private Equity and Venture Capital 

Private equity consists of limited partnerships that are organized to invest primarily in shares of 

operating companies that are not listed on a publicly traded stock exchange. Private equity strategies 

include investments in leveraged buyouts, growth capital and distressed investments. Venture capital 

strategies invest in start-ups and small businesses with perceived long-term growth potential. 

Distributions to limited partners are made as soon as feasible and, in accordance with the limited 

partnership agreement, when realizations (sales of portfolio companies) are made, or when interest 

payments, dividends, or recapitalizations are received. 

(d) Real Assets 

Real assets include real estate and energy and natural resources investments that are made mostly in 

private limited partnerships as well as publicly traded securities funds. Distributions to limited partners 

are made as soon as feasible and, in accordance with the limited partnership agreement, when 

realizations (sales of portfolio companies) are made, or when interest payments, dividends, or 

recapitalizations are received. 

(e) Fixed Income 

Fixed income includes funds that invest in U.S. government, agency and municipal bonds, and other 

interest bearing products. 

The Smithsonian is obligated under the terms of certain limited partnership agreements to remit 

additional funding periodically as capital calls are exercised. As of September 30, 2018, the 

Smithsonian had uncalled commitments totaling approximately $331.6. Such commitments are callable 

over the fund investment period, generally the first five years of the funds. The standard life of 

Smithsonian’s investments in these private partnerships are between 8 to 10 years with possible one to 

two one-year extension periods and/or other termination clauses. 

Activity for charitable trusts measured at fair value on a recurring basis using significant unobservable 

inputs (Level 3) for fiscal year 2018: beginning balance $19.1; distribution $0.4; net gains $0.6; and 

ending balance $19.3. There are no transfers and reclassifications of assets between levels during 

fiscal year 2018. 

Investment return consisted of the following for fiscal year 2018: 

Dividend and interest income $ 23.7 

Net investment gains 155.2 

Investment management fees (1.9) 

$ 177.0 

17 (Continued) 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

Investment return is classified in the statement of activities as follows for fiscal year 2018: 

Short-term investment income $ 4.0 

Endowment payout 76.5 

Nonoperating investment gain 96.5 

Investment return $ 177.0 

(6) Endowment Funds 

The Smithsonian endowment consists of over 600 individual funds established for a variety of purposes. 

The endowment includes both donor-restricted endowment funds and funds designated by the Board to 

function as endowments (board designated). Net assets associated with endowment funds are classified 

and reported based on the existence or absence of donor-imposed restrictions. 

The Smithsonian’s management and investment of donor-restricted endowment funds follows the 

provisions of the Uniform Prudent Management of Institutional Funds Act (UPMIFA). Based on the 

Smithsonian’s interpretation of the provisions of UPMIFA, the organization is required to act prudently when 

making decisions to spend or accumulate donor-restricted endowment assets and in doing so to consider a 

number of factors including the duration and preservation of its donor restricted endowment funds. As a 

result of this interpretation, the Smithsonian classifies as permanently restricted net assets, the original 

value of gifts donated to the permanent endowment. The remaining portion of the endowment fund is 

classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the 

organization in a manner consistent with the standard of prudence prescribed by UPMIFA. 

The Smithsonian manages and invests the individual endowment funds considering UPMIFA standards. 

Substantially all of the investments of the endowment are pooled, with individual funds buying or disposing 

of units on the basis of the per unit market value at the beginning of the month in which the transaction 

takes place. As of September 30, 2018, the per unit market value of the pool, in whole dollars, was 

$950.58. 

Each fund participating in the investment pool receives an annual appropriation based on the number of 

units owned. The annual appropriation is determined in light of UPMIFA standards and the investment 

policy of the institution, which targets a long-term investment return assumption, an estimated inflation 

factor, and the investment policy of the institution that targets an appropriation to be 5% of the prior 

five years’ average value of the endowment. The per unit payout for fiscal year 2018, in whole dollars, was 

$41.12 or 5% of the average per unit market value of the endowment over the prior five years. An 

additional payout per eligible unit of $6.31 (in whole dollars) was authorized and made to support the 

fund-raising campaign. 

From time to time, the fair value of assets associated with individual donor-restricted endowment funds 

may fall below the original value of gifts donated to the permanent endowment. Deficiencies of this nature 

are reported in unrestricted net assets. Such deficiencies are generally the result of unfavorable market 

fluctuations and continuing the appropriations for various programs is generally deemed prudent by the 

Board. There were no such deficiencies at September 30, 2018. 

18 (Continued) 
 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

Endowment net assets, excluding contributions receivable, consist of the following as of September 30, 

2018: 

Temporarily Permanently

Unrestricted restricted restricted Total

Donor restricted $ — 409.4 511.0 920.4 

Board designated 707.7 17.2 — 724.9 

Total endowment net

assets $ 707.7 426.6 511.0 1,645.3 

Uninvested cash and receivables (2.9) 

Total endowment assets

under management $ 1,642.4 

Activity in endowment net assets is as follows for the year ended September 30, 2018: 

Temporarily Permanently

Unrestricted restricted restricted Total

Balance, September 30, 2017 $ 657.9 359.1 485.2 1,502.2 

Investment return:

Investment income 6.2 7.9 — 14.1 

Realized and unrealized gains, net 67.8 85.4 — 153.2 

Total investment

return 74.0 93.3 — 167.3 

Contributions, including board designated

transfers 18.4 8.1 25.8 52.3 

Appropriated for expenditure (42.6) (33.9) — (76.5) 

Balance, September 30, 2018 $ 707.7 426.6 511.0 1,645.3 

19 (Continued) 
 

 

 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

(7) Property and Equipment 

Property and equipment consists of the following as of September 30, 2018: 

Trust Federal Total

Land $ 12.6 — 12.6 

Buildings and capital improvements 1,017.0 3,071.7 4,088.7 

Equipment and software 178.0 242.5 420.5 

Leasehold improvements 105.6 35.0 140.6 

1,313.2 3,349.2 4,662.4 

Accumulated depreciation (567.0) (1,748.3) (2,315.3) 

Total property and equipment $ 746.2 1,600.9 2,347.1 

Buildings and capital improvements include $65.6 and $368.8 of construction in progress within trust and 

federal funds, respectively. Depreciation expense totaled $53.3 in trust funds and $109.8 in federal funds. 

The Smithsonian has an unfunded environmental remediation obligation that is estimated based on 

third-party studies, contractor bids and internal estimates derived from recently completed remediation 

projects for similar Smithsonian facilities and other information for similar projects. The present value of the 

obligation is calculated using an inflation rate of 2.4% and a discount rate of 2.0%. Each period the 

obligation is accreted to its present value. Because the related properties are fully depreciated, changes in 

the estimated obligation are expensed. Any difference between the estimated obligation and the actual cost 

of remediation is also expensed. Fiscal year 2018 activity in the unfunded environmental remediation 

obligation follows: 

Beginning balance, September 30, 2017 $ 49.9

Accretion 0.9

Liabilities incurred 0.2

Liabilities settled (0.2) 

Change in estimate (1.0) 

Ending balance, September 30, 2018 $ 49.8

In fiscal year 2006, the Smithsonian sold an office building in Washington, DC, and entered into short-term 

and long-term leases for approximately 32% of the building. As a result of the leaseback, the full gain of 

$62.9 was deferred at the date of sale and is being recognized over the term of the leases. In fiscal year 

2018, $3.9 of the deferred gain was recognized. 

20 (Continued) 
 

 

 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

(8) Accounts Payable and Accrued Expenses 

Accounts payable and accrued expenses consists of the following: 

Trust Federal Total

Accounts payable and other liabilities $ 28.8 68.7 97.5 

Accrued salaries and benefits 39.7 96.3 136.0 

Deferred rent liability 18.4 — 18.4 

Gift annuity liabilities 14.1 — 14.1 

Other liabilities 23.2 — 23.2 

Total accounts payable and

accrued expenses $ 124.2 165.0 289.2 

Accrued salaries and benefits include estimated FECA liabilities of $2.4 for trust employees and $43.5 for 

federal employees. 

(9) Long-term Debt 

The Smithsonian’s long-term debt are unsecured obligations and funded solely through unrestricted trust 

funds. Long-term debt is comprised of the following: 

Series 2013 Taxable Bonds, Series A:

Interest rate 3.434%, due September 1, 2023 $ 50.0

Series 2010 Revenue Bonds, serial, principal amounts ranging from $1.3 to

$1.7, interest rates 3.00% to 5.25%, due February 1, 2016 through 2021 4.9

Series 2010 Revenue Bonds, term, principal amounts ranging from $1.8 to

$2.4, interest rate 5.25%, due February 1, 2022 through 2028 14.6

Series 2003 Revenue Bonds, Series A:

Variable interest rate, due December 1, 2033 52.5

Series 2003 Revenue Bonds, Series B:

Variable interest rate, due December 1, 2033 25.0

147.0

Less unamortized bond issue cost (0.1)

Plus unamortized bond premium 1.1

Total long-term debt $ 148.0

(a) Series 2013 A and B Taxable Bonds 

The Series 2013 A and B taxable bonds were issued in November 2013 to finance capital and other 

projects. Interest on the Series A bonds is payable semiannually every March 1 and September 1 while 

interest on the Series B bonds was payable monthly at a variable interest rate determined in 

accordance with the Indenture. Series B bonds matured on September 1, 2018. Series A bonds have 

the final maturity date of September 1, 2023 (see note 14). 

21 (Continued) 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

(b) Series 2010 Revenue Bonds 

The tax-exempt Series 2010 Revenue Bonds were issued by the District of Columbia on behalf of the 

Smithsonian to finance capital and other projects. Interest is payable semiannually every August 1 and 

February 1. 

The serial bonds mature annually through February 1, 2021, with principal repayments ranging from 

$1.6 to $1.7 per year. The term bonds maturing on February 1, 2028 are subject to mandatory 

redemption by sinking fund installments, which begin on February 1, 2022 and range from $1.8 to $2.4 

per year through the maturity date. 

(c) Series 2003 Revenue Bonds 

The tax-exempt Series 2003 Revenue Bonds were issued by the Fairfax County Economic 

Development Authority (Virginia) on behalf of the Smithsonian to finance a portion of the Steven F. 

Udvar-Hazy Center, an extension of the National Air and Space Museum. The bonds are subject to 

early redemption at the option of the Smithsonian. Interest is payable monthly at a variable interest rate 

determined in accordance with the Indenture. Interest rates for Series A and Series B were 1.6%, as of 

September 30, 2018. 

The bonds are supported by a standby bond purchase agreement for both the Series A and Series B 

(collectively, the 2003 Liquidity Facility) with Wells Fargo (Trustee) and Northern Trust Company 

(Liquidity Facility provider). The 2003 Liquidity Facility provides liquidity support when the bonds are 

bearing interest at a daily or weekly rate and expires September 10, 2019. 

Interest expense was $4.2 in fiscal year 2018. 

Future annual maturities of long-term debt are as follows: 

2019 $ 1.6 

2020 1.6 

2021 1.7 

2022 1.8 

2023 51.9 

Thereafter 88.4 

$ 147.0 

22 (Continued) 
 

 

 

 

 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

(10) Net Assets 

Unrestricted net assets include $707.7 of funds functioning as endowments as of September 30, 2018. 

Temporarily restricted net assets are available for the following purposes as of September 30, 2018: 

Museums and general support $ 210.9 

Education, public programs and exhibitions 261.5 

Research 105.8 

Acquisitions and collections 84.0 

Facilities 110.4 

$ 772.6 

Net assets released from donor restrictions due to the passage of time, assets placed in service, or by 

incurring expenses satisfying the restricted purpose specified by the donors were as follows for fiscal 2018: 

Museums and general support $ 28.8 

Education, public programs and exhibitions 61.2 

Research 16.3 

Acquisitions and collections 9.4 

Facilities 28.7 

$ 144.4 

Permanently restricted net assets are restricted for the following purposes as of September 30, 2018: 

Museums and general support $ 140.4 

Education, public programs and exhibitions 264.0 

Research 88.4 

Acquisitions and collections 51.9 

Facilities 1.5 

$ 546.2 

(11) Employee Benefit Plans 

Federal employees of the Smithsonian are covered by either the Civil Service Retirement System (CSRS) 

or the Federal Employee Retirement System (FERS). The terms of these plans are defined in federal 

regulations. Under both systems, a specified percentage is withheld from each federal employee’s salary. 

The Smithsonian also contributes specified percentages of employees’ salaries. The fiscal year 2018 

expense for these plans was $40.2. Additional imputed costs associated with these plans are borne by the 

US government. The Smithsonian recognizes its share of such costs ($71.3 for fiscal year 2018) as 

imputed benefit revenue and expense in the financial statements. The Smithsonian is not responsible for 

and does not report CSRS or FERS assets, accumulated plan benefits, or liabilities applicable to its 

employees. The Office of Personnel Management (OPM) administers these plans and is responsible for the 

reporting of these amounts. 

23 (Continued) 
 

 

 

 

 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

Employees covered by CSRS and FERS are eligible to contribute to the U.S. government’s Thrift Savings 

Plan (TSP), which is administered by the Federal Retirement Thrift Investment Board. A TSP account is 

automatically established for FERS-covered employees and the Smithsonian makes mandatory and 

matching contributions of specified percentages of the basic pay for FERS-covered employees. The 

Smithsonian makes no matching contributions for CSRS-covered employees. 

Most federal employees are entitled to participate in the Federal Employees Group Life Insurance (FEGLI) 

Program. Participating employees can obtain basic term life insurance, with the employee paying two-thirds 

of the cost and the Smithsonian paying one-third. Additional coverage is optional, to be paid fully by the 

employee. The basic life coverage may be continued into retirement if certain requirements are met. OPM 

administers this program and is responsible for the reporting of liabilities. 

Trust fund employees are covered by a separate defined-contribution retirement plan for trust fund 

employees in which substantially all such employees are eligible to participate. Under the plan, the 

Smithsonian contributes specified percentages of employees’ salaries that are used to purchase individual 

annuities, the rights to which are immediately vested with the employees. Employees can make voluntary 

contributions, subject to certain limitations. The Smithsonian’s expense for this plan for fiscal year 2018 

was $20.4. 

In addition to the retirement plans, certain health care and life insurance benefits are made available to 

active and retired trust fund employees. The plan is contributory for retirees and requires payment of 

premiums and deductibles. Retiree contributions for premiums are established by an insurance carrier 

based on the average per capita cost of benefit coverage for all participants. As of September 30, 2018, the 

accrued benefit obligation under this plan was $14.1 and is included in accounts payable and accrued 

expenses in the statement of financial position. 

Most federal employees are eligible to enroll in the Federal Employees Health Benefit (FEHB) Program, 

which provides post-retirement health benefits if certain conditions are met. OPM administers this plan and 

Smithsonian is not obligated under this plan. 

(12) Business Activities 

A summary of business activities is as follows for fiscal year 2018: 

Revenues Expenses Net

Smithsonian business enterprises $ 159.6 (127.1) 32.5 

Unit auxiliary activities 23.6 (30.2) (6.6) 

Total business activities $ 183.2 (157.3) 25.9 

(13) Commitments and Contingencies 

(a) Leasing Activities 

The Smithsonian leases office and warehouse space under long-term operating leases expiring at 

various dates to 2032. These leases generally provide for rent escalations based on increases in the 

Consumer Price Index or changes in property taxes or operating expenses attributable to the leased 

24 (Continued) 
 

 

 

 

 

 

 

 

 

 

 

 

SMITHSONIAN INSTITUTION 

Notes to Financial Statements
 

September 30, 2018
 

(Dollars in millions)
 

properties. The Smithsonian has the authority to enter into leases for up to 30 years using federal 

funds. 

Annual minimum lease payments due under operating leases in effect as of September 30, 2018 are 

as follows: 

2019 $ 46.5 

2020 46.5 

2021 29.5 

2022 15.8 

2023 13.2 

Thereafter 9.7 

$ 161.2 

Rent expense under operating leases, including executory costs such as maintenance, insurance, and 

taxes, totaled $60.1 for fiscal year 2018, which includes $7.6 in office space received in-kind. 

(b) Government Awards 

The Smithsonian receives significant amounts of federal funding in the form of appropriations, grants, 

and contracts. These awards are subject to audit by federal agencies. Management is of the opinion 

that no material disallowances of costs or expenses are likely. 

(c)	 Construction 

As of September 30, 2018, the Smithsonian has commitments approximating $115.0 related to 

construction in process at a number of its locations. The most significant of these relate to projects at 

the National Air and Space Museum ($38.3), the National Zoological Park ($20.1), and the National 

Museum of Natural History ($38.4). 

(d) Litigation 

The Smithsonian is a party to various litigation arising out of the normal conduct of its operations. In the 

opinion of the Smithsonian’s general counsel, the ultimate resolution of these matters will not have a 

significant effect on the Smithsonian’s financial position or future results of operations. 

(14) Subsequent Events 

Management has evaluated subsequent events from September 30, 2018 through January 8, 2019, which 

is the date that the financial statements are available to be issued, and determined that there are no 

adjustments to or other items to disclose, except as follows: 

	 Subsequent to September 30, 2018, the Smithsonian committed capital of $22.5 to 4 funds. 

	 On October 25, 2018, the Smithsonian redeemed the remaining of its outstanding Series 2013 Taxable 

Bonds, Series A for $50.8, including accrued interest of $0.3. 

	 In October 2018, the Smithsonian established a $50.0 line of credit. 

25