Date: January 24, 2020

To: Audit and Review Committee, Board of Regents

Lonnie G. Bunch III, Secretary

Cc: Mike McCarthy, Acting Chief Operating Officer and Under Secretary for Finance and 

Administration 

Martha Newton, Acting Director, Office of Finance and Accounting

Porter Wilkinson, Chief of Staff to the Board of Regents

Greg Bettwy, Chief of Staff, Office of the Secretary

From: Cathy L. Helm, Inspector General

Subject: Independent Auditor’s Report on the Smithsonian Institution’s Fiscal Year 2019

Financial Statements (OIG-A-20-02)

This memorandum transmits the fiscal year 2019 financial statement audits of the 

Smithsonian Institution (Smithsonian) performed by the independent public accounting 

firm of KPMG LLP (KPMG). On January 24, 2020, KPMG issued its independent 

auditor’s report on the statement of the Smithsonian Institution’s financial position as of 

September 30, 2019, and the related statements of financial activity and cash flows. 

KPMG expressed an unmodified opinion that concluded the financial statements were 

presented fairly, in all material respects, in accordance with the applicable financial 

reporting standards. 

As part of our oversight activities, we reviewed KPMG’s audit documentation and 

interviewed its representatives. Our review of KPMG’s fiscal year 2019 audit procedures 

disclosed no instances where KPMG did not comply, in all material respects, with the 

applicable auditing standards.

Our oversight of KPMG’s audit was not intended to enable us to express, and we do not 

express, an opinion about the Smithsonian’s financial statements, internal controls over 

financial reporting, or compliance with laws and regulations. KPMG is responsible for 

its audit report and the conclusions therein.

If you have any questions, please do not hesitate to contact me or Joan T. Mockeridge, 

Assistant Inspector General for Audits, at (202) 633-7050.

Attachment
SMITHSONIAN INSTITUTION 

Financial Statements 

September 30, 2019 
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

Suite 12000

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 Bunch 

Smithsonian Institution: 

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

comprise the statement of financial position as of September 30, 2019, 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 entity’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, 2019, 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. 
2 

Emphasis of Matters 

As discussed in Note 2(t) to the financial statements, in fiscal year 2019, Smithsonian Institution adopted 

Accounting Standards Update (ASU) 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial 

Statements of Not-for-Profit Entities, ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), 

as amended, and ASU No. 2018-08, Clarifying the Scope and the Accounting Guidance for Contributions 

Received and Contributions Made. Our opinion is not modified with respect to these matters. 

Report on Summarized Comparative Information 

We have previously audited Smithsonian’s 2018 financial statements, and we expressed an unmodified audit 

opinion on those audited financial statements in our report dated January 8, 2019. In our opinion, the 

summarized comparative information presented herein as of and for the year ended September 30, 2018 is 

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

the adjustments to adopt ASU 2016-14. As part of our audit of the 2019 financial statements, we also audited 

the adjustments described in Note 2(t) that were applied to adopt ASU 2016-14 retrospectively in the 2018 

financial statements. In our opinion, such adjustments are appropriate and have been properly applied. 

Other Matter 

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

supplemental schedule of federal appropriated activities 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 information is fairly stated in all material respects 

in relation to the financial statements as a whole. 

Washington, District of Columbia 

January 24, 2020 
3

SMITHSONIAN INSTITUTION

Statement of Financial Position

September 30, 2019

(with summarized financial information as of September 30, 2018)

(Dollars in millions)

2019 2018

Assets:

Cash, cash equivalents, and U.S. Treasury balances $ 785.2 634.0

Accounts receivable and other assets, net 80.5 102.6

Pledges receivable, net 167.9 212.2

Investments 1,946.2 1,880.6

Property and equipment, net 2,440.9 2,347.1

Collections — —

Total assets $ 5,420.7 5,176.5

Liabilities:

Accounts payable and accrued expenses $ 338.1 289.2

Deferred revenue 60.1 67.4

Unexpended federal appropriations 530.5 461.1

Environmental remediation obligation 61.4 49.8

Long-term debt 96.4 148.0

Total liabilities 1,086.5 1,015.5

Net assets:

Without donor restriction:

Board designated 717.4 707.7

Undesignated 1,881.8 1,883.3

Net assets without donor restriction 2,599.2 2,591.0

With donor restriction:

Purpose and time restrictions 1,159.1 1,023.8

Endowments at historical cost 575.9 546.2

Net assets with donor restriction 1,735.0 1,570.0

Total net assets 4,334.2 4,161.0

Commitments and contingencies

Total liabilities and net assets $ 5,420.7 5,176.5

See accompanying notes to financial statements.
4

SMITHSONIAN INSTITUTION

Statement of Financial Activities

Year ended September 30, 2019

(with summarized financial information for year ended September 30, 2018)

(Dollars in millions)

Without With 

Donor Donor

Restriction Restriction 2019 2018

Operating:

Support and revenue:

Appropriations for salaries and expenses $ 734.2 — 734.2 733.8

Contributions and grants 126.0 145.7 271.7 272.3

Business activities 167.3 — 167.3 183.2

Endowment payout 40.4 35.5 75.9 76.5

Imputed benefit revenue 86.3 — 86.3 71.3

Short-term investment income and other revenue 39.8 0.5 40.3 36.5

Total operation revenues 1,194.0 181.7 1,375.7 1,373.6

Net assets released from restrictions 192.6 (192.6) — — 

Total support and revenue 1,386.6 (10.9) 1,375.7 1,373.6

Expenses:

Program activities:

Research 350.7 — 350.7 342.4

Collections management 314.0 — 314.0 291.9

Education, public programs, and exhibitions 428.8 — 428.8 410.9

Business activities 127.8 — 127.8 141.7

Total program activities 1,221.3 — 1,221.3 1,186.9

Supporting activities:

Administration 230.4 — 230.4 221.5

Development 68.2 — 68.2 70.3

Total supporting activities 298.6 — 298.6 291.8

Total expenses 1,519.9 — 1,519.9 1,478.7

Change in net assets from operating activities (133.3) (10.9) (144.2) (105.1) 

Nonoperating activities:

Appropriations for repair, restoration, and construction — 239.1 239.1 136.6

Contributions for endowments — 29.2 29.2 18.8

Contributions for construction — 17.6 17.6 30.6

Investment return, net of endowment payout 10.6 26.1 36.7 93.3

Gain on sale of Smithsonian Network 9.9 — 9.9 12.4

Other, net 4.1 — 4.1 6.8

Collection items purchased, not capitalized (12.4) — (12.4) (16.4) 

Net assets released from restrictions 136.1 (136.1) — — 

Change in net assets from nonoperating activities 148.3 175.9 324.2 282.1

Increase in net assets 15.0 165.0 180.0 177.0

Net assets, beginning of year 2,591.0 1,570.0 4,161.0 3,984.0

Cumulative effect of accounting change (6.8) — (6.8) — 

Net assets, end of year $ 2,599.2 1,735.0 4,334.2 4,161.0

See accompanying notes to financial statements.

Total
5

SMITHSONIAN INSTITUTION

Statement of Cash Flows

Year ended September 30, 2019

(with summarized financial information for year ended September 30, 2018)

(Dollars in millions)

2019 2018

Cash flows from operating activities:

Change in net assets $ 180.0 177.0

Adjustments to reconcile change in net assets to net cash

provided by (used in) operating activities:

Depreciation and amortization 176.8 162.1

Net investment gains (105.4) (155.2) 

Gain on sale of Smithsonian Network (9.9) (12.4) 

Present value discount and accretion (0.5) 0.8

Gain/loss on disposition of assets 0.2 (0.2) 

Collection items purchased 12.4 16.4

Appropriations for repair, restoration, and construction (239.1) (136.6) 

Contributions for endowments (29.2) (18.8) 

Contributions for construction (17.6) (7.1) 

Decrease (increase) in assets:

Accounts receivable and other assets, net 1.1 (2.3) 

Pledges receivable, net 47.8 (14.1) 

Increase (decrease) in liabilities:

Accounts payable and accrued expenses (6.4) (10.7) 

Deferred revenue (7.3) (3.8) 

Unexpended federal appropriations 4.9 (3.8) 

Net cash provided by (used in) operating activities 7.8 (8.7) 

Cash flows from investing activities:

Purchases of property and equipment (204.9) (164.7) 

Purchases of investment securities (557.7) (586.3) 

Proceeds from sales/maturities of investment securities 597.5 613.9

Proceeds from sale of Smithsonian Network 25.5 24.2

Collection items purchased (12.4) (16.4) 

Proceeds from loan receivable — 2.7

Net cash used in investing activities (152.0) (126.6) 

Cash flows from financing activities:

Appropriations for repair, restoration, and construction 303.6 312.5

Contributions for endowments 28.8 24.2

Contributions for construction 14.4 43.9

Principal payments on long-term debt (51.4) (51.5) 

Net cash provided by financing activities 295.4 329.1

Net change in cash and cash equivalents 151.2 193.8

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

Beginning of year 634.0 440.2

End of year $ 785.2 634.0

Noncash investing activities:

Construction cost accruals $ 71.5 16.2

Cash paid for interest $ 2.9 4.2

See accompanying notes to financial statements.
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

6 (Continued)

(1) Organization

The Smithsonian Institution (Smithsonian) was created by an 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 at nine research centers, in the 

museums and other facilities throughout the world. During fiscal year 2019, 23.2 million individuals visited 

Smithsonian museums and other facilities.

As of September 30, 2019, the Smithsonian’s extensive collection contained approximately 155.5 million

objects: 0.4 million works of arts, 8.8 million historical artifacts, and 146.3 million natural and physical 

science specimens (living and nonliving). The Smithsonian also maintained 164,593 cubic feet and 

0.7 million items of archival materials and 2.3 million library volumes. During fiscal year 2019, 123,301 

collection items were acquired and 3,788 items were deaccessioned.

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

Smithsonian also receives federal appropriations for the construction or repair and restoration of its 

facilities. Certain facilities have been constructed entirely by federal appropriations, while others have 

constructed with a combination of federal and private funds.

In addition to federal appropriations, the Smithsonian receives private support in the form of contributions, 

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

activities include Smithsonian magazines, other publications, online catalogs, and retail operations located 

in its museums and centers.

(2) Summary of Significant Accounting Policies

(a) General

The financial statements are prepared on the accrual basis of accounting in accordance with U.S. 

generally accepted accounting principles (U.S. GAAP) under FASB ASC 958, Not-For-Profit 

Presentation of Financial Statements. 

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, 

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

of trustees and not controlled by the Smithsonian.
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

7 (Continued)

The Smithsonian receives annual federal appropriations to cover its core programs and renovation of 

its facilities as part of the budget approved annually by Congress and signed by the President. This is 

supplemented with income generated by business activities and endowment income designated for 

current operating expenditures as well as gifts and grants designated by donors for other specific 

expenditures. All monies, related activities, and balances from federal appropriations are referred to 

herein as “federal.” While all other monies, related activities, and balances are referred to as “trust.”

(b) Measure of Operations

The Smithsonian includes in its measure of operations federal and trust support and revenue and 

expenses that are integral to its core programs services: research; collections management; education, 

public programs, and exhibitions; and business activities. The measure of operations excludes certain 

nonoperating activities, including grants and contributions (federal capital appropriations, gifts for 

capital projects, and endowment gifts), investment return in excess of amounts designated for 

operations, collection proceeds and acquisitions, and other nonrecurring items. 

The Board appropriates a portion of the Smithsonian’s cumulative investment return for support of 

current operations. The remainder is retained to support operations in future years and to offset 

potential market declines. The amount appropriated is computed under the Smithsonian’s spending 

policy and is appropriated for use based on the underlying donor-imposed restrictions (see notes 11, 

12 and 13). The annual appropriation is referred to as the “endowment payout.”

(c) Summarized Financial Information

The financial statements include certain summarized prior-year information in total only. Such 

information does not include sufficient detail to constitute a presentation in conformity with U.S. GAAP. 

Accordingly, such information should be read in conjunction with the Smithsonian’s financial statements

as of and for the year ended September 30, 2018, from which the summarized information was 

derived, before the adjustments to adopt Accounting Standards Update (ASU) 2016-14, Presentation of 

Financial Statements of Not-For-Profit Entities. 

(d) Net Assets

The Smithsonian’s net assets, support and revenue, expenses, and gains and losses are classified and 

reported based on the existence or absence of donor-imposed restrictions as follows:

Without donor restrictions – Net assets without donor restrictions consist of the Smithsonian’s net 

investment in completed property and equipment less any unfunded liabilities and all other sources 

which are not subject to donor-imposed restrictions or other legal stipulations. At the discretion of 

the Smithsonian’s Board of Regents, trust funds which are not expended for operating activities 

may be set aside for designated purposes. 

With donor restrictions – Net assets with donor restrictions carry specific donor-imposed 

stipulations on the use of the contributed funds, including federal appropriations received for 

specific capital projects. Donor-imposed restrictions may expire by the passage of time or as a 

result of fulfillment of the donor’s stipulations. Unconditional contributions restricted to the 

acquisition or construction of long-lived assets are recorded as non-operating revenue with donor 
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

8 (Continued)

restrictions in the period received. Donor restrictions are generally considered met and the net 

assets released from restriction when the related long-lived asset is placed in service.

Other net assets with donor restrictions include net assets with stipulations that require the corpus of 

the gift be maintained with only the income to be used to support operations or other specified purpose. 

(e) Cash, Cash Equivalents and U.S. Treasury Balances

Cash, cash equivalents, and U.S. Treasury balances include interest-bearing demand deposits and 

appropriated amounts yet to be disbursed remaining on deposit with the U.S. Department of Treasury 

(U.S. Treasury). The Smithsonian considers all highly liquid investments with an original maturity of 

three months or less at the date of purchase to be cash equivalents, except where such cash is held as 

part of a long-term investment strategy (see note 6).

U.S. Treasury balances of $645.3 at September 30, 2019 consist of appropriated funds that are 

available to pay current liabilities and finance authorized purchase commitments of the Smithsonian. 

U.S. Treasury balances are carried forward until such time as goods or services are received and 

payments made, or until the funds are returned to the U.S. Treasury. 

(f) Contracts with Customers and Accounts Receivable

Business activities, including advertising, subscriptions, licensing, and other revenues are generally 

recognized as the services are provided over the period of performance. Revenues from magazines 

and long-term contracts are deferred and recognized ratably over the period of the underlying 

agreement. Concessions and retail sales are recognized when goods or services are sold at a point in 

time. 

Customer receivables are invoiced based upon contractual terms. The Smithsonian maintains 

allowances for doubtful accounts to reflect management’s best estimate of probable losses inherent in 

receivable balances. Management determines the allowances for doubtful accounts based on known 

troubled accounts, historical experience, and other currently available evidence.

(g) Contributions, including Government Grants and Contracts, and Pledges Receivable

Contributions, including unconditional promises to give, are recognized as revenue in the period 

received. Unconditional promises to give are recognized initially at fair value giving consideration to 

anticipated future cash receipts and discounting such amounts at a risk-adjusted rate. Amortization of 

the discount is included in contributions revenue. Conditional promises to give are not recognized until 

they become unconditional, that is, when the barriers on which they depend are substantially met. 

Contributions of assets other than cash are recorded at their estimated fair value. 

Allowance is made, if necessary, for uncollectible contributions receivable based upon management’s 

judgment and analysis of the creditworthiness of the donors, past collection experience, and other 

relevant factors. 

The Smithsonian conducts sponsored program activity with various sponsors, including agencies and 

departments of the federal government, local government entities, and foundations. Such grants and 

contracts revenue are recognized as the related qualifying expenses are incurred.
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

9 (Continued)

(h) Investments and Trusts Held by Others

Smithsonian employs an investment strategy that is designed to achieve returns that support 

Smithsonian’s mission and fulfill its fiduciary responsibility to its donors and constituents.

Investments are generally reported at fair value. Publicly traded fixed income, global equities, natural 

resources and cash and cash equivalents, including gift annuity program investments are reported and

valued using readily determinable market prices. Nearly all of the valuations reported by marketable 

alternative investments and public equities held in commingled funds rely upon third party 

administrators to objectively value positions and calculate net asset value (NAV) as a practical 

expedient. Investments in private equity structured funds (private equity, venture capital, real estate, 

natural resources) (collectively, nonmarketable investments) are valued at estimated fair value based 

on the funds’ net asset values or their equivalents, 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, 2019, 

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. 

Purchases and sales of investments are reflected on the trade-date basis using average historical cost. 

Dividend and interest income is recorded when earned on an accrual basis. In accordance with the 

policy of stating investments at fair value, the net change in unrealized appreciation or depreciation for 

the year is reflected in the statement of activities (see note 6).

The Smithsonian is also party to various split interest agreements with donors consisting primarily of 

irrevocable charitable remainder trusts and gift annuities.

Charitable remainder trusts held by others – Assets are reflected in pledges receivable and other 

assets with contribution revenues recognized at the date the trust is established based on the net 

present value of the estimated future payments to be made to the donors and/or other 

beneficiaries. Income distributions from these trusts are recorded as investment income and 

changes in the fair value of these trusts are recorded as unrealized gains or losses in the statement 

of activities.

Charitable gift annuities – Assets are included in investments and recognized at fair value at the 

date of the annuity agreement. An annuity liability is also recognized for the present value of future 

cash flows expected to be paid to the donor. Contribution revenue recognized is equal to the 

difference between the assets and the annuity liability. The annuity liabilities are adjusted during 

the term of the annuity for payments to donors, accretion of discounts, and changes in the life 

expectancies of the donors.

(i) Property and Equipment

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 no value has been assigned in the accompanying financial 

statements.
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

10 (Continued)

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 

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.

(j) Collections – Stewardship Assets

The Smithsonian acquires its collections by purchase 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 the 

appropriate net asset class in the period of acquisition. Proceeds from deaccessions or insurance 

recoveries for lost or destroyed collection items are recognized as increases in net assets without 

donor restrictions and designated for future collection acquisitions.

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

deterioration, a lack of mission relation, or duplicate other objects. 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.

(k) Federal Appropriations and Funds

Federal appropriations are provided by the U.S. Federal Government to support the general operations 

of the Smithsonian and the construction, repair and restoration of its facilities. Funds are to be spent in 

accordance with applicable law and revenue is recognized ratably over the fiscal year as the qualifying 

expenses are incurred and funds are expended. Unexpended appropriation balances are classified as 

a liability on the statement of financial position.
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

11 (Continued)

Federal appropriations for general operations are recognized as operating revenue without donor 

restrictions, as qualifying expenses are incurred, and generally available for two years. The portion of 

these appropriations which are not obligated or expended are retained by the Smithsonian in 

accordance with federal guidelines and returned to the U.S. Department of Treasury five years after the 

expiration of the obligation period. During the fiscal year, $0.9 related to the fiscal 2013 appropriation 

was returned.

Amounts appropriated for construction or repair and restoration of facilities are recognized as nonoperating revenues with donor restrictions as capital is expended and generally available for obligation 

until expended. Such amounts remain purpose restricted until the capital project is completed and 

placed in service, at which time the net assets are released from restrictions.

Net assets of federal funds without donor restrictions consist primarily of cash held at U.S. Treasury

and net investment in property and equipment acquired or constructed with federal funds less unfunded 

liabilities for environmental remediation obligations, annual leave, and estimated Federal Employees 

Compensation Act liabilities for workers compensation claims. Net assets of federal funds with donor

restrictions consist of U.S. Treasury cash balances and construction in progress.

(l) Annual Leave

Annual leave is accrued as it is earned by employees and is included in personnel compensation and 

benefit costs. The liability for unused annual leave totaling $45.9 as of September 30, 2019 is included 

in accounts payable and accrued expenses.

(m) Employee Benefit Plans 

The Smithsonian offers its employees a comprehensive set of benefits including pension, health and 

life insurance, and workers compensation for injuries sustained on the job. The Smithsonian’s current 

year contributions to the retirement, health, and life insurance plans described below are recognized in 

the statement of activities. 

Federal funded pension, health and life insurance benefits, including imputed benefits:

Federal employees hired subsequent to January 1, 1984, participate in the Federal Employees’ 

Retirement System (FERS). Federal employees hired prior to January 1, 1984, had the option of 

remaining under the Civil Service Retirement System (CSRS) or electing FERS. The terms of both 

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. Additional costs associated with these plans are borne by the U.S. government. 

The Smithsonian recognizes its share of these additional costs as imputed benefits revenue and 

expense in the financial statements. Imputed benefits totaled $86.3 in fiscal 2019. Smithsonian’s direct 

expense for these plans amounted to $40.8 for fiscal 2019. 
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

12 (Continued)

The Smithsonian’s current year contributions to the pension plans are recognized in the statement of 

activities using rates established by the Office of Personnel Management (OPM), the agency with U.S. 

government-wide responsibility for the oversight and administration of the plans. Consistent with 

reporting under multi-employer pension plans, the Smithsonian does not report CFRS and FERS 

assets, accumulated plan benefits, or future liabilities, if any, applicable to its covered employees. This 

data is reported for plan participants by OPM. 

Federal employees covered by CSRS or FERS are eligible to contribute to the Thrift Savings Plan 

(TSP), a defined contribution plan similar to a 401(k). The TSP is administered by the Federal 

Retirement Thrift Investment Board, an independent agency of the U.S. government. For FERScovered employees, the Smithsonian is required to match contributions of specified percentages of 

base pay. No matching contributions are made for CSRS-covered employees.

Most federal employees are also eligible 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.

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.

Trust funded pension, health and life insurance benefits:

Substantially all trust fund employees are eligible to participate in defined contribution retirement plan 

under which the Smithsonian contributes specified percentages of employees’ salaries. Such 

contributions are used to purchase individual annuities, the rights to which are immediately vested with 

the employees. Employees may also make voluntary contributions, subject to certain limitations. The 

Smithsonian’s expense for this plan was $21.0 for fiscal 2019.

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. At September 30, 2019, 

the accrued benefit obligation under this plan was $16.1 and is included in accounts payable and 

accrued expenses in the statement of financial position.

Workers compensation;

The Federal Employees Compensation Act (FECA) provides income and medical cost protection to 

Smithsonian employees injured on the job, who have incurred work-related occupational diseases, and 

to beneficiaries of employees whose deaths are attributable to job-related or occupational diseases. 

The FECA program is administered by the U.S. Department of Labor (DOL) which pays claims and 

subsequently seeks reimbursement from the Smithsonian.
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

13 (Continued)

FECA expense is recognized based on amounts invoiced or expected to be invoiced by DOL and 

changes in the actuarially determined value of expected future benefits. The actuarially determined

FECA liability represents the liability for expected future benefits for death, disability, medical, and 

miscellaneous costs for approved cases. The actuarial liability is determined by DOL and evaluated by 

Smithsonian management annually, as of September 30, using a method utilizing historical benefit 

patterns related to specific incurred period, wage inflation factors, medical inflation factors and other 

variables. This liability constitutes an extended future estimate of cost which will not be obligated 

against budgetary resources until the fiscal year in which DOL bills the cost to the Smithsonian. The 

payment associated with this liability cannot be met by the Smithsonian without continued annual 

federal appropriation. 

(n) Contributed Services and Donated Assets

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

programs. During fiscal 2019, about 6,900 volunteers contributed around 508,700 hours of service and 

another 13,600 digital volunteers transcribed about 91,300 pages during fiscal year 2019. The services 

provided do not meet the criteria for recognition of contributed services, and accordingly, are not 

reflected in the statement of financial activities.

Donated assets, other than donations of cash or collection items, are recorded at estimated fair value 

at the date of gift.

In kind contributions such as donated space, equipment, services, and various other items totaled

$11.6 in fiscal year 2019 and recognized as program support revenues (within other revenues) and 

program activity expenses in the statement of activities. 

(o) Functional Allocation of Expenses

The cost of providing various programs and other activities summarized on a functional and natural 

basis is shown in note 16. 

 Included in research are personnel, travel, and other costs associated with the Smithsonian’s 

world-wide research programs. 

 Collections management includes the care, storage, transportation, digitization, and other costs. 

 Education, public programs and exhibits includes the cost of providing a wide array of programing 

and outreach to academia and the general public as well as costs to display, manage, and 

transport exhibits. 

 Business activities includes the cost of goods sold and related expenses. 

 General and administrative expenses include costs for executive management, financial 

administration, human resources, and legal services. 

 Development expenses include those costs associated with individual and corporate gifts and 

grants, annual appeals and other fund-raising efforts.
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

14 (Continued)

Costs that benefit more than one program, such as security, facilities, and depreciation, are allocated 

across programs based on relative square footage, or direct costs as a percentage of total costs, 

before allocations.

(p) Related Organizations

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

interrelated and the changes in its interest as other non-operating activities. Such organizations 

included the Smithsonian Network and Friends of the National Zoo. During fiscal year 2019, the 

Smithsonian sold its remaining interest in the Smithsonian Network recognizing a nonoperating gain of 

$9.9.

(q) Income Taxes

The Smithsonian is a tax-exempt organization as described in Section 501(c)(3) of the Internal 

Revenue Code of 1986, as amended (the Code). As such, the Smithsonian is generally exempt from 

Federal income taxes to the extent provided under Section 501 of the Code, except for unrelated 

business income, principally advertising sales.

The Tax Cuts and Jobs Act (the Act) was enacted in December 2017. Among other things, the Act 

imposes new taxes and establishes new rules for calculating unrelated business taxable income. The 

Smithsonian has reflected an estimate in its statements for unrelated trade or business income tax 

using the current proposed regulatory guidance and will continue to evaluate the impact of the Act on 

current and future tax positions. 

The Smithsonian accounts for uncertain tax positions, when applicable. The tax years that remain 

subject to examination by the major tax jurisdictions under the statute are from the year 2015 and 

forward.

(r) 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.

(s) Risks and Uncertainties

The Smithsonian invests in a variety of investment securities. Investment securities are exposed to 

such risks as interest rate, market, and credit risks. As a result, changes in the values of investment 

securities may occur that could materially affect the value of the Smithsonian’s investments and its 

financial position. 
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

15 (Continued)

(t) Recently Adopted Accounting Pronouncements

Not-for-Profit Financial Statement Presentation

During 2019 the Smithsonian retroactively adopted ASU 2016-14, Not-for-Profit Entities (Topic 958): 

Presentation of Financial Statements for Not-for-Profit Entities. ASU 2016-14 reduces the number of

net asset categories to two: net assets without donor restrictions, previously reported as unrestricted 

net assets, and net assets with donor restrictions, previously reported as temporarily restricted net 

assets and permanently restricted net assets. The ASU also requires that net assets with donor 

restrictions associated with capital projects (including capital appropriations) be released upon placing 

the related capital asset into service. Previously the Smithsonian accounted for its federal capital 

appropriations as unrestricted. Accordingly, the Smithsonian reclassified $251.2 of net assets from 

previously reported unrestricted net assets to net assets with donor restrictions as of the beginning of 

fiscal 2019. The guidance also requires enhanced disclosures for board designated amounts, 

composition of net assets without donor restrictions (note 11), liquidity (note 3), and the presentation of 

expenses by both their natural and functional classification (note 16).

Revenue Recognition 

In May 2014, FASB ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which, 

along with related amendments, replaces existing revenue recognition requirements. The core principle 

of Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or 

services to customers in an amount that reflects the consideration it expects to be entitled in exchange. 

In addition, Topic 606 requires disclosures about the nature, amount, timing, and uncertainty of 

revenue and cash flows arising from contracts with customers.

In June 2018, FASB issued ASU No. 2018-08, Clarifying the Scope and Accounting Guidance for 

Contributions Received and Contributions Made. The FASB issued this ASU to reduce diversity in 

reporting by clarifying (1) whether transactions should be accounted for as contributions or as 

exchange transactions subject to other guidance and (2) whether a contribution is conditional.

The Smithsonian implemented ASU 2014-09, as amended, and ASU 2018-08 (Standards) effective 

October 1, 2018, on a modified retrospective basis. As a result of the application of the new standards, 

the Smithsonian elected to combine government grants and contracts with contributions on its 

statement of financial activities in fiscal year 2019 and conformed fiscal year 2018 presentation. Other 

revenue reclassifications required by the Standards were not significant.

The Standards also require that costs associated with the preparation of long-lived materials, such as 

catalogs and campaigns to secure new subscribers be expensed at the date such materials are first 

issued. Previously, the Smithsonian amortized such costs over the estimated useful life of such items. 

This resulted in a cumulative effect adjustment to reduce beginning net assets without donor 

restrictions by $6.8.
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

16 (Continued)

Summary impact

The following summarizes the impact on beginning net assets of adopting ASU 2016-14 and the 

Standards.

Without

As Previously Donor With Donor

Presented Restriction Restriction Total

Net assets:

Unrestricted $ 2,842.2 $ 2,842.2 — 2,842.2

Temporarily restricted 772.6 — 772.6 772.6

Permanently restricted 546.2 — 546.2 546.2

Total net assets $ 4,161.0 2,842.2 1,318.8 4,161.0

Federal capital appropriations,

ASU 2018-08 (251.2) 251.2 —

Net assets as of September 30, 

2018 under ASU 2016-14 2,591.0 1,570.0 4,161.0

Cumulative effect of Topic 606 (6.8) — (6.8)

Net assets as of October 1, 2018,

as presented $ 2,584.2 1,570.0 4,154.2

(u) Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-02, Leases 

(Topic 842). ASU 2016-02 requires the recognition of right-of-use assets and lease liabilities by lessees 

for those leases classified as operating leases under the Accounting Standards Codification (ASC) 

Topic 840 – Leases. The accounting applied by the lessor under ASU 2016-02 is largely unchanged 

from that applied under ASC Topic 840. ASU 2016-02 is effective for the Smithsonian in fiscal year 

2020.

In March 2019, the FASB issued ASU No. 2019-03, Updating the Definition of Collections, Not-ForProfit Entities (Topic 958). This ASU modifies the term “Collections” which in turn may change 

collection recognition policies and add certain disclosure requirements. ASU 2019-03 is effective for the 

Smithsonian in fiscal year 2021.

(3) Financial Assets and Liquidity Resources

Federal appropriations provide a significant funding for the Smithsonian’s various programs and general 

operating costs, in addition to capital support for the repair, renovation and construction of its facilities. At 

the date of appropriation, an equal amount of cash is deposited and held by the U.S. Treasury on 

Smithsonian’s behalf until expended. As of September 30, 2019, the U.S. Treasury held cash of $645.3

which represents the balance of the operating and capital appropriations not yet expended. 
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

17 (Continued)

Private donor gifts and grants, government grants and contracts, and other revenue sources, such as 

business activities and rentals, provide funding for non-appropriated program and operating activities as 

well as for the repair, renovation, and construction of facilities not funded through appropriation. 

To meet immediate and longer term cash needs, the Smithsonian has a working capital investment policy. 

The policy requires excess funds be invested in short term, high quality instruments allowing for required 

liquidity and providing a maximum return within defined risk constraints. As of September 30, 2019, the 

working capital investment fund totals $260.3 and is comprised of cash equivalents of $50.5 and short-term 

investments of $209.8. 

The Smithsonian also has available a $50.0 line of credit available to provide additional resources if 

necessary. Borrowings under the line bear annual interest at LIBOR (London Interbank Offered Rate) Daily 

Floating Rate plus 0.55%. Beginning in fiscal year 2020, an annual availability fee of 0.04% on the unused 

balance is required. The line is due to expire October 31, 2020.

The following reconciles total financial assets at September 30, 2019 to financial assets available to meet

cash needs for general expenditures (operating expenses, capital, and debt service) with one year.

Trust Federal Total

Financial assets:

Cash, cash equivalents, and U.S. 

Treasury balances $ 139.9 645.3 785.2

Accounts receivable and other assets 77.3 3.2 80.5

Pledges receivable, net 167.9 — 167.9

Investments 1,946.2 — 1,946.2

Total financial assets at year end 2,331.3 648.5 2,979.8

Plus endowment payout appropriated for

fiscal year 2020 69.6 — 69.6

Less financial assets unavailable for general

expenditures within one year:

Endowment investments (1,713.2) — (1,713.2) 

Pledges due beyond one year (59.7) — (59.7) 

Charitable remainder trusts (17.9) — (17.9) 

Gift annuity assets (23.2) — (23.2) 

Inventory (13.1) — (13.1) 

Deferred expenses (8.6) — (8.6) 

Other assets (18.1) — (18.1) 

$ 547.1 648.5 1,195.6
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

18 (Continued)

Quasi endowment assets include funds without donor restrictions designated by the Board to function as 

endowment funds supporting the Smithsonian’s programs and operations, including the directors of certain 

museums and centers and various operating costs. Although the Smithsonian does not intend to spend 

from its board designated endowment funds, other than amounts appropriated, these funds could be made 

available, if necessary (see note 12).

(4) Accounts Receivable and Other Assets

Accounts receivable and other assets consist of the following:

Grants and contracts $ 20.6

Trade accounts, net of $0.3 allowance 18.0

Inventory 13.1

Deferred expenses 8.6

Accrued interest and dividend receivable 2.1

Other assets 18.1

Total receivables and other assets $ 80.5

(5) Pledges Receivable

Pledges receivable consist of the following:

Due within:

Less than 1 year $ 90.3

1 to 5 years 66.9

5 years or beyond 0.3

157.5

Less:

Allowance for uncollectible contributions (3.4) 

Unamortized discount (at rates ranging from 1.1% to 2.9%) (4.1) 

Contributions receivable, net 150.0

Charitable remainder trust 17.9

Pledges receivable, net $ 167.9
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

19 (Continued)

(6) Investments and Fair Value Measurements

Investments are comprised of the following:

Endowment investments, including Board designated funds $ 1,713.2

Working capital short-term investments 209.8

Charitable gift annuity investments 23.2

Total investments $ 1,946.2

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 or published 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.

 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.
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

20 (Continued)

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

quoted market prices as of September 30, 2019:

Total Level 1 Level 3 NAV (1)

Endowment investments:

Global equities:

Global markets $ 313.7 54.8 — 258.9

Emerging markets 114.4 2.9 — 111.5

Marketable alternatives 273.9 — — 273.9

Private equity:

Private equity 159.1 — — 159.1

Venture capital 420.7 2.9 — 417.8

Real assets:

Energy and natural resources 110.8 9.8 — 101.0

Real estate funds 134.8 — — 134.8

Fixed income 82.7 53.9 — 28.8

Cash and equivalents 102.1 102.1 — —

 P ooled inves t ment s 1,712.2 226.4 — 1,485.8

 U.S. Treasury deposits 1.0 1.0 — —

Total endowment 1,713.2 227.4 — 1,485.8

Fixed income (working capital fund) 209.8 209.8 — —

Gift annuities, primarily equities 23.2 23.2 — —

Total investments 1,946.2 460.4 — 1,485.8

Charitable trusts 17.9 — 17.9 —

$ 1,964.1 460.4 17.9 1,485.8

(1) Certain investments that are measured at fair value using the net asset value per share (or its 

equivalent) as a practical expedient have not been categorized within the fair value hierarchy. The fair 

value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to 

the amounts presented in the statement of financial position. 

The following table summarizes the changes in Level 3 assets, Charitable trusts held by other, measured at 

fair value on a recurring basis:

Fair value of Level 3 assets, beginning of the year $ 19.3

Unrealized losses (1.1) 

Proceeds from distributions (0.3) 

Fair value of Level 3 assets, end of the year $ 17.9
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

21 (Continued)

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:

Unfunded Redemption Days of

NAV Commitments terms notices

Global equity: (a)

 Developed markets $ 258.9 - Weekly to annually 6 - 91

 Emerging markets 111.5 2.0 Monthly to semi-annually 14 - 90

Marketable alternatives: (b) 273.9 39.9 Monthly to at maturity 30 - N/A

Private equity: (c)

 Private equity 159.1 85.2 N/A N/A

 Venture capital 417.8 76.5 N/A N/A

Real assets: (d)

 Energy and natural resources 101.0 36.6 N/A N/A

 Real estate funds 134.8 108.9 Quarterly to at maturity 60 - N/A

Fixed income (e) 28.8 - Quarterly to at maturity 90 - N/A

$ 1,485.8 349.1

(a) 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 consist of investments in a broad array of securities and strategies aimed to 

reduce volatility and enhance returns. Smithsonian’s marketable alternatives managers may follow 

certain investment strategies including, but not limited to, such as long/short equity, credit and 

distressed, multi-strategy, and global macro funds. Some of the funds are subject to soft and hard 

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

(c) 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 generated.

(d) 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 generated.
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

22 (Continued)

(e) 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, 2019, the Smithsonian had uncalled 

commitments totaling approximately $349.1. 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 and 10 years with possible one to two one-year extension periods 

and/or other termination clauses.

The following summarizes the investment return, net of expenses, and its classification in the statement of 

activities: 

Dividend and interest, net of expenses $ 15.1 

Net realized and unrealized gains 105.4 

Total investment return 120.5 

Endowment payout appropriated for operations (75.9) 

Short term investment income (7.9) 

Nonoperating investment return $ 36.7 

(7) Property and Equipment

Property and equipment consists of the following:

Land $ 12.6 

Construction in progress 414.1 

Buildings and capital improvements 3,906.1 

Equipment and software 442.0 

Leasehold improvements 143.4 

4,918.2 

Accumulated depreciation (2,477.3) 

Total property and equipment $ 2,440.9 

Depreciation expense $ 166.2 
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

23 (Continued)

(8) Accounts Payable and Accrued Expenses 

Accounts payable and accrued expenses consists of the following:

Trust Federal Total

Accounts payable $ 31.8 101.7 133.5 

Accrued salaries 12.4 18.7 31.1 

Accrued annual leave 15.6 30.3 45.9 

Workers' compensation (FECA) 2.7 43.7 46.4 

Post retirement benefits 16.1 — 16.1 

Other accrued personnel benefits 0.3 6.7 7.0 

Deferred rent 14.3 — 14.3 

Charitable gift annuity liabilities 13.4 — 13.4 

Other accrued liabilities 17.0 13.4 30.4 

Total accounts payable and accrued expenses $ 123.6 214.5 338.1 

Accrued federal accrued annual leave, FECA, and other accrued liabilities are unfunded and cannot be met 

by the Smithsonian without continued annual federal appropriation. 

(9) Environmental Remediation Obligations

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

calculated using an inflation rate of 1.9% and a discount rate of 2.3%. 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 2019 activity in the unfunded environmental remediation obligation follows:

Balance, beginning of the year $ 49.8

Accretion 1.0

Change in estimate 10.6

Balance, end of the year $ 61.4
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

24 (Continued)

(10) Long-term Debt

The Smithsonian’s long-term debt are unsecured obligations and funded solely through trust funds without 

donor restrictions. Long-term debt is comprised of the following:

Series 2010 Revenue Bonds, serial, principal amounts ranging from $1.6 to

$1.7, interest rates 5.00% to 5.25%, due February 1, 2020 through 2021 $ 3.3

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

$2.4, interest rate 5.25%, due February 1, 2022 through 2028 14.7

Series 2003 Revenue Bonds, variable interest rate, due December 1, 2033:

Series A 52.5

Series B 25.0

 95.5

Plus unamortized bond premium 0.9

Total long-term debt $ 96.4

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 on 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.

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 1.5%, at September 30, 2019.

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 8, 2020.

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.

Interest expense was $2.6 in fiscal year 2019.
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

25 (Continued)

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

2020 $ 1.6 

2021 1.7 

2022 1.8 

2023 1.9 

2024 2.0 

Thereafter 86.5 

$ 95.5 

(11) Net Assets 

Net assets consist of the following:

Without With

Donor Donor

Restrictions Restrictions Total

Endowment investment fund $ — 1,002.2 1,002.2

Board designated quasi endowment funds 717.4 — 717.4

Total net assets subject to payout 

spending policy 717.4 1,002.2 1,719.6

Net assets with donor restrictions available for:

Programs and operations — 191.9 191.9

Capital repairs, renovation, and construction — 114.2 114.2

Endowment contributions receivable and other — 28.9 28.9

Net investment in property and equipment 1,954.6 389.9 2,344.5

Unfunded federal liabilities (148.8) — (148.8)

Undesignated, including time restrictions 76.0 7.9 83.9

$ 2,599.2 1,735.0 4,334.2

Donor restricted endowment funds include accumulated appreciation of $416.0. Future-funded federal 

liabilities include environmental remediation obligations and accrued annual leave, workers compensation, 

and litigation liabilities. 
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

26 (Continued)

Net assets with donor restrictions are available for the following purposes:

Subject to

Endowments purpose

at historical restriction

cost and time Total

Museums and general support $ 146.1 219.2 365.3 

Education, public programs and exhibitions 276.6 231.4 508.0 

Research 93.9 114.0 207.9 

Acquisitions and collections 57.7 88.6 146.3 

Facilities and capital 1.6 505.9 507.5 

$ 575.9 1,159.1 1,735.0 

(12) Endowment Funds 

The Smithsonian endowment consists of over 660 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 supporting the Smithsonian’s programs and operations. Net assets associated 

with endowment funds, including funds designated by the Board to function as endowments, are classified 

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

Interpretation of Relevant Law

Management has resolved to be guided by the standards of the Uniform Prudent Management of 

Institutional Funds Act (UPMIFA) in the management, investment, and expenditure of endowment funds 

although it is not required to do so as a matter of law. Management has interpreted UPMIFA, as allowing 

the Smithsonian to appropriate for expenditure or accumulate so much of an endowment fund as it 

determines to be prudent for the uses, purposes, and durations for which the endowment fund is 

established, subject to the intent of the donor as expressed in the gift instrument. Unless otherwise stated 

in the gift instrument, the assets in an endowment fund shall be donor-restricted assets until appropriated 

for expenditure. The corpus of the Smithsonian’s endowment funds consist of (a) the original vale of gifts 

donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent 

endowment and (c) changes to the permanent endowment made in accordance with the direction of the 

donor gift instrument. Earnings and accumulated appreciation of the endowment fund remain restricted 

until appropriated for expenditure in a manner consistent with the standard of prudence prescribed by 

UPMIFA. In accordance with UPMIFA the following factors are considered when making a determination to 

appropriate or accumulate donor-restricted funds:

 Duration and preservation of the fund

 Purpose of board designated or donor-restricted fund

 General economic conditions
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

27 (Continued)

 Possible impact of inflation and deflation

 Expected return from income and appreciation of investments

 Other available resources

 The Smithsonian’s investment policies 

The Smithsonian has adopted investment and spending policies for endowment assets that are intended to 

provide a predictable stream of funding for programs and operations while maintaining the purchasing 

power of the endowment. Under the investment policy, as approved by the Board, endowment assets are 

invested in a manner that reduces risk through diversification while obtaining a competitive rate of return. 

To satisfy its long-term rate-of-return, 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 that utilizes fixed income and equity-based 

investments to achieve its long-term objectives within prudent risk constraints. The Board’s Investment 

Committee reviews the long-term asset allocation for the investment pool.

Substantially all of the assets of individual endowment funds are pooled and invested. 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. Each fund participating in the investment pool receives an annual appropriation 

based on the number of units owned. The Smithsonian’s spending policy is based on an annual 

endowment spending rate of 5% of the prior five years’ average endowment value This spending rate 

constitutes the Board’s annual appropriation for spending endowment earnings to support programs and 

operations. The Board authorized an additional allocation of up to 0.75% for eligible funds to support the 

fund-raising campaign.

The following summarizes certain per endowment unit information, in whole dollars.

Market value of fund per unit:

Beginning of the year $ 974.68

End of the year $ 996.12

Payout per unit

Program and operations support $ 42.53

Development $ 4.53
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

28 (Continued)

The following table summarizes the change in endowment funds during fiscal year 2019:

Without 

donor 

restrictions

With donor 

restrictions Total

Endowment net assets at beginning of the year $ 707.7 937.6 1,645.3

Additional designation of quasi endowment funds* 1.7 5.4 7.1

Contributions received — 29.2 29.2

Investment return 48.4 65.5 113.9

Appropriation of endowment assts for expenditure (40.4) (35.5) (75.9)

Endowment net assets at end of year $ 717.4 1,002.2 1,719.6

Uninvested cash and receivables (6.4)

Endowment investments (Note 6) $ 1,713.2

* Includes transfers to quasi endowments with donor restrictions

Endowment funds with deficiencies

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

fall below the level required to be maintained in perpetuity or the applicable donor gift document, creating 

an “underwater” endowment fund. Such deficiencies are generally the result of unfavorable market 

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

Board. At September 30, 2019 there are no significant underwater endowment funds.
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

29 (Continued)

(13) Net Assets Released From Restriction

Net assets are 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 2019:

Operating releases:

Purpose restricted gifts released for:

Museums and general support $ 34.3 

Education, public programs and exhibitions 72.3 

Research 48.7 

Acquisitions and collections 10.7 

Facilities 26.6 

Total operating releases 192.6 

Non-operating releases:

Assets placed in service and released from:

Capital appropriation 100.2 

Capital contributons 35.9 

Total nonoperating releases 136.1 

Total releases $ 328.7 

(14) Federal Appropriations

A substantial portion of the Smithsonian is funded primarily by two Congressional appropriations: one 

appropriation covers salaries, benefits and expenses and the second appropriation provides funding for the 

repair, restoration, and construction of Smithsonian properties. The appropriation for salaries, benefits, and 

expenses is a two year appropriation that must be obligated by the end of the second fiscal year. The 

appropriation for repair, restoration, and construction is available until expended. 
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

30 (Continued)

The federal appropriation received in fiscal year 2019 is reconciled to federal appropriation revenue 

recognized as follows:

Repair,

Salaries restoration,

and and

expenses construction Total

Federal appropriations received $ 740.0 303.5 1,043.5 

Unexpended appropriations (96.3) (278.1) (374.4) 

Amounts expended from prior years’ appropriations 90.5 213.7 304.2 

Federal appropriation revenue $ 734.2 239.1 973.3 

Without donor restrictions (operating) $ 734.2 — 734.2 

With donor restrictions (nonoperating) — 239.1 239.1 

Federal appropriation revenue $ 734.2 239.1 973.3 

(15) Business Activities

The following summarizes business activities for fiscal year 2019.

Operating Net

Revenues expenses operating gain

Smithsonian Enterprises $ 147.5 114.8 32.7 

Unit activities 19.8 13.0 6.8 

$ 167.3 127.8 39.5 

Revenue is further detailed as follows for fiscal year 2019.

Merchandise sales $ 60.1 

Media 38.6 

Concessions, licensing, and other 68.6 

$ 167.3 
SMITHSONIAN INSTITUTION

Notes to Financial Statements

September 30, 2019

(Dollars in millions)

31 (Continued)

(16) Functional Classification of Expenses

Expenses by functional and natural classification are shown below for the year ended September 30, 2019:

Education,

public

programs General

Collections and Business and

Research management exhibitions activities administrative Development Total

Compensation $ 195.6 168.4 211.1 57.8 132.1 36.4 801.4

Occupancy 120.6 80.2 143.4 18.8 63.6 27.5 454.1

Cost of sales — — 0.4 58.7 0.1 1.6 60.8

Travel and transportation 9.2 2.5 7.5 0.5 1.1 1.8 22.6

Depreciation and

amortization 20.2 61.3 64.0 1.8 29.2 0.3 176.8

Other 5.1 1.6 2.4 (9.8) 4.3 0.6 4.2

Total operating 

expenses $ 350.7 314.0 428.8 127.8 230.4 68.2 1,519.9

Program Activities Supporting Activities

Collections items purchased, not capitalized included in nonoperating activities are collections 

management activities.

(17) 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 

properties. The Smithsonian currently limits leases using federal funds to five years under the five-year 

contracting authority of the Federal Acquisition Streamlining Act. The Smithsonian still has legacy 

leases exceeding the current five-year authority. 

Annual minimum lease payments due under operating leases in effect as of September 30, 2019 are 

as follows:

2020 $ 50.2 

2021 35.5 

2022 24.0 

2023 22.9 

2024 13.4 

Thereafter 23.9 

$ 169.9 

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

taxes, totaled $62.3 for fiscal year 2019, which includes $7.6 in office space received in-kind.
SMITHSONIAN INSTITUTION 

Notes to Financial Statements 

September 30, 2019 

(Dollars in millions)

32

(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, 2019, the Smithsonian has commitments approximating $420.7 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 ($301.4) and the National Zoological Park ($18.3).

(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.

(e) Subsequent Events

Subsequent to September 30, 2019, the Smithsonian committed capital of $11.1 to 5 funds.

Management has evaluated subsequent events from September 30, 2019 through January 24, 2020,

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.
SMITHSONIAN INSTITUTION

Supplemental Schedule

September 30, 2019
SMITHSONIAN INSTITUTION

Federal Appropriated Activities

(Dollars in millions)

33

September 30, 

Statement of Financial Position 2019

Assets:

Cash and cash equivalents $ 645.3

Accounts receivable and other assets 3.2

Property and equipment, net 1,710.3

Total assets 2,358.8

Less liabilities:

Accounts payable and accrued liabilities (214.5)

Unexpended federal appropriations (530.5)

Environmental remediation obligation (61.4)

Total liabilities (806.4)

Net assets 1,552.4

Fiscal Year

Statement of Financial Activities 2019

Support and revenue:

Federal appropriations $ 734.2

Imputed benefits revenue 86.3

Other 10.6

Total operating revenue 831.1

Expenses:

Research 190.2

Collections management 280.0

Education, public programs, and exhibitions 305.7

Total program actvities 775.9

Administration 190.1

Development 1.1

Total operating expenses 967.1

Change in net assets from operating activities (136.0)

Nonoperating activities:

Federal capital appropriations 239.1

Collection items purchased, not capitalized (3.5)

Other, net (0.2)

Change in net assets from nonoperating activities 235.4

Increase in net assets 99.4

Net assets at beginning of year 1,453.0

Net assets at end of year $ 1,552.4