Smithsonian Institution: Funding for Real Property Needs Remains a Challenge
Published: 2007-04-11T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Smithsonian Institution (Smithsonian) is the world's largest museum complex and research organization. The age of the Smithsonian's structures, past inattention to maintenance needs, and high visitation levels have left its facilities in need of revitalization and repair. This testimony discusses our prior work on some effects of the condition of the Smithsonian's facilities and whether the Smithsonian has taken steps to maximize facility resources. It also discusses the current estimated costs of the Smithsonian's needed facilities projects. In addition, it describes preliminary results of GAO's ongoing work on the extent to which the Smithsonian developed and implemented strategies to fund these projects, as GAO recommended in prior work. The work for this testimony is based on GAO's 2005 report, Smithsonian Institution: Facilities Management Reorganization Is Progressing, but Funding Remains a Challenge; GAO's review of Smithsonian documents and other pertinent information; and interviews with Smithsonian officials.
section_title: What GAO Found
paragraphs: In 2005, GAO reported that facilities-related problems at the Smithsonian had resulted in a few building closures and posed a serious long-term threat to the collections. For example, the 1881 Arts and Industries Building on the National Mall was closed to the public in 2004 for an indefinite period over concern about its deteriorating roof structure. Currently, this building remains closed. GAO also found that the Smithsonian had taken steps to maximize the effectiveness of its existing resources for facilities. Preliminary results of GAO's ongoing work indicate that as of March 30, 2007, the Smithsonian estimated it would need about $2.5 billion for its revitalization, construction, and maintenance projects from fiscal year 2005 through fiscal year 2013, up from an estimate of $2.3 billion in 2005. In 2005, GAO recommended that the Smithsonian develop and implement a strategic funding plan to address its facilities needs. The Smithsonian Board of Regents--the Smithsonian's governing body--has taken some steps to address GAO's recommendation regarding a strategic funding plan. The board created an ad-hoc committee, which, after reviewing nine options, such as establishing a special exhibition fee, decided to request an additional $100 million annually in federal funds for facilities for the next 10 years, for a total of an additional $1 billion. The President's fiscal year 2008 budget proposal, however, proposes an increase of about $44 million over the Smithsonian's fiscal year 2007 appropriation. It is not clear how much of this proposed increase would be used to support facilities, and how Congress will respond to the President's budget request. Absent significant changes in the Smithsonian's funding strategy or significant increases in funding from Congress, the Smithsonian faces greater risk to its facilities and collections over time. GAO is continuing to evaluate the Smithsonian's efforts to strategically manage, fund, and secure its real property. We expect to publish a report on these issues later this year.

section_title: Letter
paragraphs: Thank you for the opportunity to testify before you today on our work  regarding the Smithsonian Institution’s (Smithsonian) facilities  management and funding challenges. Since its founding in 1846, the  Smithsonian, which is funded through its own private trust fund assets and  its federal appropriation, has evolved into the world’s largest museum  complex and research organization, with more than 660 owned and leased  buildings and other structures, with an estimated replacement value of  about $4.7 billion for owned space as of June 2004. The age of the  Smithsonian’s structures, past inattention to maintenance needs, and high  visitation levels have left its facilities in need of revitalization and repair.  Facilities problems include the structural deterioration of aging buildings;  heating, cooling, and electrical systems that are well past their normal life  expectancy; leaks from roofs and pipes that jeopardize the collections;  inadequate exhibition and storage space; and maintenance levels that have  not kept pace with the wear and tear from millions of visitors each year. In  2005, the Smithsonian estimated it would need about $2.3 billion through  fiscal year 2013 for its identified revitalization, construction, and  maintenance projects.
In my statement today, I will be focusing on the results of our 2005 study  of the Smithsonian’s facilities management and funding issues— Smithsonian Institution: Facilities Management Reorganization Is  Progressing, but Funding Remains a Challenge—as well as some  preliminary results from an ongoing study we have undertaken of the  Smithsonian’s real property management at the request of this committee  and the House of Representatives Committee on Appropriations,  Subcommittee on Interior, Environment, and Related Agencies. I will be  discussing our prior work on some effects of the condition of the  Smithsonian’s facilities and whether the Smithsonian has taken steps to  maximize the effects of its resources for facilities; current estimated costs  of the Smithsonian’s revitalization, construction, and maintenance  projects; and some preliminary results of our ongoing work on the extent  to which the Smithsonian developed and implemented strategies to fund  its revitalization, construction, and maintenance needs, as we  recommended in prior work.
In our 2005 report, we found that facilities-related problems at the  Smithsonian had resulted in a few building closures and access  restrictions and posed a serious long-term threat to the collections. For  example, the 1881 Arts and Industries Building on the National Mall was  closed to the public in 2004 for an indefinite period over concern about its  deteriorating roof structure and pending the repair or replacement of its  weakened roof panels and aging systems such as heating and cooling.  Currently, this building remains closed. In addition, we found that these  problems were indicative of a broad decline in the Smithsonian’s aging  facilities and that in some cases, items in the Smithsonian’s collections had  been damaged by water. We also found that the Smithsonian had taken  steps to maximize the effectiveness of its existing resources for facilities,  such as adopting a variety of recognized industry best practices for  managing facilities projects.
Preliminary results from our ongoing work show that as of March 30, 2007,  the Smithsonian estimates it will need about $2.5 billion for revitalization,  construction, and maintenance projects identified from fiscal year 2005  through fiscal year 2013, an increase of about $200 million from its 2005  estimate of about $2.3 billion for the same time period. Smithsonian  officials stated that to update this estimate, they identified changes that  had occurred to project cost figures used in the 2005 estimate and then  subtracted from the new total the appropriations the Smithsonian had  received for facilities revitalization, construction, and maintenance  projects for fiscal years 2005-2007. In our previous work, we  recommended that the Smithsonian develop and implement a strategic  funding plan to address its facilities needs.
Preliminary results also suggest that the Smithsonian has taken some steps  to address our recommendation to develop and implement a strategic  funding plan to address its facilities needs. In June 2005, the Smithsonian  Board of Regents—the Smithsonian’s governing body, which is comprised  of both private citizens and members of all three branches of the federal  government—established the ad-hoc Committee on Facilities  Revitalization to explore options to address the about $2.3 billion the  Smithsonian estimated it needed for facilities revitalization, construction,  and maintenance projects through fiscal year 2013. According to  Smithsonian officials, after reviewing nine options, such as establishing a  special exhibition fee, the ad-hoc committee decided in 2006 to request an  additional $100 million annually in federal funds for facilities over its  current appropriation for 10 years, starting in fiscal year 2008, to reach a  total of an additional $1 billion. In September 2006, according to  Smithsonian officials, several members of the Board of Regents and the  Secretary of the Smithsonian met with the President of the United States  to make this request. The President’s fiscal year 2008 budget proposal,  however, proposes an increase of about $44 million over the Smithsonian’s  fiscal year 2007 appropriation, and it is not clear how much of this  increase would be used to support facilities. Some of these funds could be  used to support research, collections, and exhibitions, among other things.  Moreover, Congress may choose to modify the President’s budget proposal  when funds are appropriated for the fiscal year.
The Smithsonian’s estimate for revitalization, construction, and  maintenance needs has increased at an average of about $100 million a  year over the past 2 years. Therefore, the Smithsonian’s request for an  additional $100 million a year may not actually reduce the Smithsonian’s  estimated revitalization, construction, and maintenance needs but only  offset the increase in its estimate. Absent significant changes in the  Smithsonian’s funding strategy or significant increases in funding from  Congress, the Smithsonian faces greater risk to its facilities and  collections over time.
We are continuing to evaluate the Smithsonian’s efforts to strategically  manage, fund, and secure its real property. Our objectives include  assessing (1) the extent to which the Smithsonian is strategically managing  its real property portfolio, (2) the extent to which the Smithsonian has  developed and implemented strategies to fund its revitalization,  construction, and maintenance needs, and (3) the Smithsonian’s security  cost trends and challenges, including the extent to which the Smithsonian  has followed key security practices to protect its assets. We are also  examining how other similar institutions, such as other museums and  university systems, strategically manage, fund, and secure their real  property. We expect to report on these issues later this year.
subsections: section_title: Past Work Showed that Smithsonian’s Aging Facilities and Systems Threaten Collections
paragraphs: In our 2005 report, we found that facilities-related problems at the  Smithsonian had resulted in a few building closures and access  restrictions and some cases of damage to the collections. A few facilities  had deteriorated to the point where access must be denied or limited. For  example, the 1881 Arts and Industries Building on the National Mall was  closed to the public in 2004 for an indefinite period, pending repair of its  weakened roof panels, renovation of its interior (which had been damaged  by water intrusion), and replacement of aging systems such as heating and  cooling. Currently, this building remains closed. Other facilities also faced  problems. We found that water leaks caused by deteriorated piping and  roofing elements, along with humidity and temperature problems in  buildings with aging systems, posed perhaps the most pervasive threats to  artifacts in the museums and storage facilities. For example, leaks have  damaged two historic aircraft at the National Air and Space Museum.  Additionally, Smithsonian Archives officials told us that they had had to  address 19 “water emergencies” since June 2002. These problems were  indicative of a broad decline in the Smithsonian’s aging facilities and  systems that posed a serious long-term threat to the collections.
We also found that the Smithsonian had taken steps to maximize the  effectiveness of its resources for facilities. These changes resulted from an  internal review and a 2001 report by the National Academy of Public  Administration, which recommended that the Smithsonian centralize its  then highly decentralized approach to facilities management and  budgeting in order to promote uniform policies and procedures, improve  accountability, and avoid duplication. The Smithsonian created the Office  of Facilities Engineering and Operations in 2003 to assume responsibility  for all facilities-related programs and budgets. At the time of our 2005  review, this office was adopting a variety of recognized industry best  practices for managing facilities projects, such as the use of benchmarking  and metrics recommended by the Construction Industry Institute and  leading capital decision-making practices.
section_title: Preliminary Data Show that the Smithsonian’s Estimated Costs for Facilities Projects through Fiscal Year 2013 Have Increased Since 2005
paragraphs: Preliminary results from our ongoing work show that as of March 30, 2007,  the Smithsonian estimates it will need about $2.5 billion for revitalization,  construction, and maintenance projects identified from fiscal year 2005  through fiscal year 2013, an increase of about $200 million from its 2005  estimate of about $2.3 billion for the same time period. Smithsonian  officials stated that to update this estimate, they identified changes that  had occurred to project cost figures used in the 2005 estimate and then  subtracted from the new total the appropriations the Smithsonian had  received for facilities revitalization, construction, and maintenance  projects for fiscal years 2005-2007.
According to Smithsonian officials, this estimate includes only costs for  which the Smithsonian expects to receive federal funds. Projects that have  been or are expected to be funded through the Smithsonian’s private trust  funds were not included as part of the estimate, although the Smithsonian  has used these trust funds to support some facilities projects. For  example, the Steven F. Udvar-Hazy Center was funded largely through  trust funds. According to Smithsonian officials, maintenance and capital  repair projects are not generally funded through trust funds.
At the time of our 2005 report, Smithsonian officials told us that the  Smithsonian’s estimate of about $2.3 billion could increase for a variety of  reasons. For example, the estimate was largely based on preliminary  assessments. Moreover, in our previous report, we found that recent  additions to the Smithsonian’s building inventory—the National Museum  of the American Indian and the Steven F. Udvar-Hazy Center—and the  reopening of the revitalized Donald W. Reynolds Center for American Art  and Portraiture on July 1, 2006 would add to the Smithsonian’s annual  maintenance costs.
According to Smithsonian officials, the increase in its estimated  revitalization, construction, and maintenance costs through fiscal year  2013 from about $2.3 billion in our 2005 report to about $2.5 billion as of  March 30, 2007, was due to several factors. For example, Smithsonian  officials said that major increases had occurred in projects for the  National Zoo and the National Museum of American History because the  two facilities had recently had master plans developed that identified  additional requirements. In addition, according to Smithsonian officials,  estimates for anti-terrorism projects had increased due to adjustments for  higher costs experienced and expected for security-related projects at the  National Air and Space Museum. According to Smithsonian officials, the  increase also reflects the effect of delaying corrective work in terms of  additional damage and escalation in construction costs.
According to Smithsonian officials, the Smithsonian’s March 30, 2007,  estimate of about $2.5 billion could also increase, as the about $2.3 billion  estimate was largely based on preliminary assessments, and therefore, as  the Smithsonian completes more master plans, more items will be  identified that need to be done. Moreover, this estimate does not include  the estimated cost of constructing the National Museum of African  American History and Culture, which was authorized by Congress and  which the Smithsonian notionally estimates may cost about $500 million,  half of which is to be funded by Congressional appropriations.
The Smithsonian’s annual operating and capital program revenues come  from its own private trust fund assets and its federal appropriation.  According to Smithsonian officials, the Smithsonian’s federal  appropriation totaled nearly $635 million in fiscal year 2007, with about  $99 million for facilities capital and about $536 million for salaries and  expenses, of which the facilities maintenance appropriation, which falls  within the salaries and expenses category, was about $51 million. In our  previous work, we found that the facilities projects planned for the next 9  years exceeded funding at this level. As a result, we recommended that  the Secretary of the Smithsonian establish a process for exploring options  for funding its facilities needs and engaging the key stakeholders—the  Smithsonian Board of Regents, the Administration, and Congress—in the  development and implementation of a strategic funding plan to address  the revitalization, construction, and maintenance projects identified by the  Smithsonian.
section_title: The Smithsonian Has Taken Some Steps to Address Our Recommendation to Develop and Implement a Funding Strategy
paragraphs: Smithsonian officials told us during our current review that the  Smithsonian Board of Regents —the Smithsonian’s governing body, which  is comprised of both private citizens and members of all three branches of  the federal government—has taken some steps to address our  recommendation. In June 2005, the Smithsonian Board of Regents  established the ad-hoc Committee on Facilities Revitalization to explore  options to address the about $2.3 billion the Smithsonian estimated it  needed for facilities revitalization, construction, and maintenance projects  through fiscal year 2013. In September 2005, the ad-hoc committee held its  first meeting, at which it reviewed nine funding options that had been  prepared by Smithsonian management for addressing the about $2.3  billion in revitalization, construction, and maintenance projects through  fiscal year 2013. These options included the following:    Federal income tax check off contribution, in which federal income tax  returns would include a check-off box to allow taxpayers to designate  some of their tax liability to a special fund for the Smithsonian’s facilities.
Heritage treasures excise tax, in which an excise tax would be created,  and possibly levied on local hotel bills, to generate funds for the  Smithsonian’s facilities.
National fundraising campaign, in which the Smithsonian would launch a  national campaign to raise funds for its facilities.
General admission fee program, in which the Smithsonian would institute  a general admission charge to raise funds for critical but unfunded  requirements.
Special exhibition fee program, in which the Smithsonian would charge  visitors to attend a select number of special exhibitions as a means to raise  funds to meet critical but unfunded requirements.
Smithsonian treasures pass program, in which the Smithsonian would  design a program through which visitors could purchase a Smithsonian  treasures pass with special benefits, such as no-wait entry into facilities or  behind-the-scenes tours, to raise funds to meet critical but unfunded  requirements.
Facilities revitalization bond, in which the Smithsonian would borrow  funds such as through a private or public debt bond for the Smithsonian’s  facilities.
Closing Smithsonian museums, in which the Smithsonian would  permanently or temporarily close museums to the public in order to  generate savings to help fund its facilities.  Increasing Smithsonian appropriations, in which the Board of Regents and  other friends of the Smithsonian would approach the Administration about  a dramatic appropriations increase to fund Smithsonian’s facilities.
According to Smithsonian officials, after considering these nine proposed  options, the ad-hoc committee decided to request an increase in the  Smithsonian’s annual federal appropriations, specifically deciding to  request an additional $100 million over the Smithsonian’s current  appropriation annually for 10 years, starting in fiscal year 2008, to reach a  total of an additional $1 billion.
In September 2006, according to Smithsonian officials, several members of  the Board of Regents and the Secretary of the Smithsonian met with the  President of the United States to discuss the issue of increased federal  funding for the Smithsonian’s facilities. According to Smithsonian officials,  during the meeting, among other things, the Regents discussed the  problem of aging facilities and the need for an additional $100 million in  federal funds annually for 10 years to address the institution’s facilities  revitalization, maintenance, and construction needs. According to  Smithsonian officials, the representatives of the Smithsonian at the  meeting told the President that they had no other options to obtain this  $100 million except the Smithsonian’s federal appropriation. According to  Smithsonian officials, these representatives said the Smithsonian had  made considerable expense cuts and raised substantial private funds, but  donors are unwilling to donate money to repair and maintain facilities.
The President’s fiscal year 2008 budget proposal, published in February  2007, proposed an increase of about $44 million over the Smithsonian’s  fiscal year 2007 appropriation. The Smithsonian’s appropriation is divided  into two categories. The about $44 million increase in the President’s  budget proposal represented an increase of about $9 million for facilities  capital and an increase of about $35 million for salaries and expenses,  which includes facilities maintenance.  However, funds in the salaries and  expenses category also support many other activities, such as research,  collections, and exhibitions, and it is not clear how much of the $35  million increase the Smithsonian would use for facilities maintenance.  Moreover, Congress may choose to adopt or modify the President’s budget  proposal when funds are appropriated for the fiscal year.
As part of our ongoing work, we are reviewing the Smithsonian’s analysis  of each funding option, including its potential for addressing its  revitalization, construction, and maintenance needs. We plan to report on  these issues later in the year.
section_title: Concluding Observations
paragraphs: The Smithsonian’s estimate for revitalization, construction, and  maintenance needs has increased at an average of about $100 million a  year over the past 2 years. Therefore, the Smithsonian’s request for an  additional $100 million a year may not actually reduce the Smithsonian’s  estimated revitalization, construction, and maintenance needs but only  offset the increase in this estimate. Absent significant changes in the  Smithsonian’s funding strategy or significant increases in funding from  Congress, the Smithsonian faces greater risk to its facilities and  collections over time. Since our work is still ongoing, it remains unclear  why the Smithsonian has only pursued one of its nine options for  increasing funds to support its significant facilities needs. At this time, we  still believe our recommendation that the Smithsonian explore a variety of  funding options is important to reducing risks to the Smithsonian’s  facilities and collections.
Madam Chairman, this concludes my prepared statement. I would be  happy to respond to any questions you or other Members of the  Committee may have at this time.
section_title: Scope and Methodology
paragraphs: We conducted our work for this testimony in March 2007 in accordance  with generally accepted government auditing standards. Our work is based  on our past report on the Smithsonian’s facilities management and  funding, our review of Smithsonian documents, and interviews with  Smithsonian officials. Specifically, we reviewed the Smithsonian’s revised  estimated costs for major revitalization projects from fiscal year 2005  through fiscal year 2013 and documents from the Board of Regents. We  also reviewed the President’s fiscal year 2008 proposed budget and the  Smithsonian’s federal appropriations from fiscal years 2005-2007.
We are continuing to evaluate the Smithsonian’s efforts to strategically  manage, fund, and secure its real property. Our objectives include  assessing (1) the extent to which the Smithsonian is strategically managing  its real property portfolio, (2) the extent to which the Smithsonian has  developed and implemented strategies to fund its revitalization,  construction, and maintenance needs, and (3) the Smithsonian’s security  cost trends and challenges, including the extent to which the Smithsonian  has followed key security practices to protect its assets. We are also  examining how similar institutions, such as other museums and university  systems, strategically manage, fund, and secure their real property. We  expect to report on these issues later this year.
section_title: GAO Contact
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to those named above, Colin Fallon, Brandon Haller, Carol  Henn, Susan Michal-Smith, Dave Sausville, Gary Stofko, Alwynne Wilbur,  Carrie Wilks, and Adam Yu made key contributions to this report.
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