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entitled 'Smithsonian Institution Board of Regents Has Implemented Many 
Governance Reforms, but Ensuring Accountability and Oversight Will 
Require Ongoing Action' which was released on May 15, 2008. 

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Report to the Chairman, Committee on Rules and Administration, U.S. 
Senate: 

United States Government Accountability Office: 

GAO: 

May 2008: 

Smithsonian Institution: 

Board of Regents Has Implemented Many Governance Reforms, but Ensuring 
Accountability and Oversight Will Require Ongoing Action: 

Smithsonian Governance: 

GAO-08-632: 

GAO Highlights: 

Highlights of GAO-08-632, a report to the Chairman, Committee on Rules 
and Administration, U.S. Senate. 

Why GAO Did This Study: 

The Smithsonian Institution’s governing body, the Board of Regents 
(Board), has developed a set of actions to address governance and 
accountability breakdowns that came to light in 2007. These actions 
were aimed at problems in three main areas: (1) executive compensation, 
benefits, ethics, and operational policies and controls; (2) flow of 
information to the Board, transparency of Board operations, and 
relationship with stakeholders; and (3) the Board’s responsibilities, 
structure, and performance. GAO was asked to assess the extent of the 
Board’s progress in each of these areas. GAO obtained information and 
data from the Board’s regents, Smithsonian executives, and other 
stakeholders and also analyzed other organizations whose boards had 
faced similar governance challenges. 

What GAO Found: 

The Board has implemented several reforms related to executive 
compensation and benefits, but the development of policies for broader 
operational matters such as travel, event expenses, and contracting is 
still under way. Actions implemented include a revised salary range for 
the Smithsonian’s Secretary-elect and a unified compensation policy for 
other executives. The Smithsonian is reviewing policies related to 
travel and other matters, including internal controls. Effectively 
implementing the new policies and procedures developed during these 
reviews is likely to depend on effectively training staff and 
establishing accountability, both of which may be challenging due to a 
level of standardization and requirements that did not exist before. 

The Board has completed the actions it proposed for improving its 
access to information and making its operations more transparent, but 
actions to improve communication and relationships with stakeholders 
are less far along. The Board now has avenues for obtaining information 
directly from senior officials rather than through the Office of the 
Secretary, and it has taken such steps as creating a Web page to better 
publicize its operations and decisions. The Board is studying how to 
improve links with its 30 advisory boards and has developed an overall 
strategy for communicating with the larger network of stakeholders, but 
neither action is far enough along to assess its potential for 
addressing past problems. 
 
The Board has largely completed the actions it proposed for clarifying 
regents’ responsibilities and studying possible changes in its size and 
structure, but actions for assessing Board performance are still being 
developed. The Board altered its committee structure but decided that 
more fundamental changes in its size and composition were unnecessary. 
To provide further expertise where necessary under the existing 
structure, the Board is encouraging the addition of nonregents to 
committees. Thus far, however, the Board has not developed a process 
for assuring transparency and accountability in selecting nonregents 
and using them to enhance governance. The Board is also developing a 
self-assessment process, but it remains to be seen how the Board will 
hold regents accountable if they neglect their duties. Given the 
extensiveness of actions taken and still under way, it is likely that 
the effectiveness of some changes will only be evident over a longer 
time. The Board does not currently have plans to conduct a broader 
evaluation of its governance reform actions after such time has passed 
to determine if the actions taken have addressed governance and 
accountability problems which led to its reform actions. 

What GAO Recommends: 

GAO recommends that the Board conduct a comprehensive evaluation of its 
reform actions once these actions are fully implemented. GAO also 
recommends that in the Board’s ongoing deliberations regarding reforms 
that have yet to be fully implemented, it develop mechanisms to 
consider and respond to concerns of key stakeholders, develop a clear 
policy regarding the selection and use of nonregents, and evaluate what 
actions it can take in the event of neglect of duties by any of its 
regents. The Board and the Smithsonian concurred with all of the 
recommendations. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-632]. For more 
information, contact Mark Goldstein, (202) 512-2834, or 
goldsteinm@gao.gov 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Board Has Implemented Some Executive and Ethics Reforms, and Has Begun 
a Review of Policies and Internal Controls, but Implementation 
Challenges Remain: 

Board Has Implemented Reforms to Improve Information and Transparency; 
Efforts to Enhance Communication Are Not Fully Implemented: 

Board Has Taken Actions to Clarify Roles and Responsibilities and 
Studied Possible Changes in Its Composition, but Establishing 
Accountability Remains a Challenge: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: GAO's Assessment of Governance Committee's Report 
Recommendations (as of May 2008): 

Appendix III: Comments from the Smithsonian Institution Board of 
Regents: 

Appendix IV: Comments from the Smithsonian Institution: 

Appendix V: GAO Contacts and Staff Acknowledgments: 

Tables: 

Table 1: Membership and Structure of the Board of Regents: 

Table 2: Comparison of the Board of Regents' Standing Committee 
Membership in January 2007 and May 2008: 

Figures: 

Figure 1: GAO's Assessment of Governance Committee's Recommendations 
Related to Executive Reforms, Ethics, Travel, and Broader Smithsonian 
Operations (as of May 2008): 

Figure 2: GAO's Assessment of Governance Committee's Recommendations 
Related to Information, Transparency, and Communication (as of May 
2008): 

Figure 3: GAO's Assessment of Governance Committee's Recommendations 
Related to Board's Roles and Responsibilities, Composition, and 
Performance Assessment (as of May 2008): 

Abbreviations: 

Board: Smithsonian Institution's Board of Regents: 

CFO: Chief Financial Officer: 

FAR: Federal Acquisition Regulation: 

FOIA: Freedom of Information Act: 

IRC: Independent Review Committee: 

SBV: Smithsonian Business Ventures: 

Smithsonian: Smithsonian Institution: 

United States Government Accountability Office: 

Washington, DC 20548: 

May 15, 2008: 

The Honorable Dianne Feinstein: 
Chairman: 
Committee on Rules and Administration: 
United States Senate: 

Dear Madam Chairman: 

The Smithsonian Institution (Smithsonian) has been referred to as 
America's museum, as its museums hold and provide access to 
irreplaceable national collections in American and natural history, 
art, and other areas. In addition to its 19 museums, the Smithsonian 
includes nine research centers, the National Zoological Park, and a 
number of other programs. Since its establishment in 1846, the 
Smithsonian has evolved into the world's largest museum complex and 
research organization; two of its museums, on the National Mall in 
Washington, D.C., are the most visited in the world. Congress 
established the Smithsonian in 1846. In fiscal year 2007, about 70 
percent of the Smithsonian's operating revenues of approximately $1 
billion came from federal sources, including direct appropriations and 
government grants and contracts. The rest of its operating revenues 
came from contributions, earnings from investments and business 
operations, and other private sources. The act establishing the 
Smithsonian in 1846 provided that, among other things, the business of 
the Smithsonian be conducted by a board of regents. Currently, the 
Board of Regents (Board) is comprised of 17 regents, including 2 ex- 
officio regents[Footnote 1]--the Chief Justice and the Vice President 
of the United States--6 congressional regents, and 9 citizen regents. 
As the Smithsonian's chief decision-making body, the Board is 
responsible for the long-term stewardship of the Smithsonian's mission. 

In 2007, serious governance challenges for the Board came to light. 
Following a report from the Smithsonian's Inspector General to the 
Board on the then-Secretary's compensation package and expenses, and 
related inquiries, that Secretary resigned. Two subsequent studies were 
published in June 2007, one by the Board's Governance Committee and the 
other by an Independent Review Committee (IRC) created at the Board's 
request, that identified such governance and accountability breakdowns 
as the following: 

* Policies and internal controls were inadequate in such areas as 
conflicts of interest, compensation, and travel. 

* The Board did not routinely receive or request information necessary 
to support vigorous deliberation, well-reasoned decision making, and 
adequate oversight. 

* The Board's roles and responsibilities were not clearly defined, 
leaving the role of the regents subject to interpretation. 

* The Board may have lacked sufficient expertise to conduct effective 
oversight in some areas, and the size and structure of the Board itself 
may be contributing to this problem. 

Both studies recommended changes to address these governance 
challenges. The Board adopted all 25 of the Governance Committee's 
recommendations and stated that the IRC's recommendations were, for the 
most part, encompassed by the Governance Committee's 
recommendations.[Footnote 2] The Board also created a scorecard to 
track the implementation status of the Governance Committee 
recommendations, which is posted on the Smithsonian's Web site and 
updated monthly. Several other senior Smithsonian executives resigned 
over the past year, including the Deputy Secretary and the Chief 
Executive Officer of Smithsonian Business Ventures, a centralized 
business entity responsible for the Smithsonian's various business 
activities. 

You asked us to assess the extent of the Board's progress in addressing 
the areas of concern identified in the Governance Committee and IRC 
reports. Specifically, we evaluated the Board's actions related to 
three broad areas of concern: (1) executive compensation, benefits, and 
expenses, ethics, and operational policies and internal controls; (2) 
the flow of information to the Board, the transparency of Board 
operations, and the Board's communication and relationships with 
stakeholders; and (3) the Board's responsibilities, composition, and 
performance. 

To address these objectives we reviewed relevant laws and regulations 
and Smithsonian policies, reports, and documents, including the new 
draft compensation policies; Board meeting minutes; reports regarding 
Smithsonian advisory boards; a recent consultant report on the size, 
composition, and structure of the Board; and draft Board assessment 
materials, among many other documents. To determine the adequacy of 
proposed changes in Smithsonian policies and practices, we compared the 
proposed changes to current governance practices in the private and 
nonprofit sectors and also used GAO's internal control standards and 
other GAO criteria as appropriate. We compiled current governance 
practices from several sources, including previous GAO work on 
governance challenges at several organizations, including the John F. 
Kennedy Center for the Performing Arts, the Legal Services Corporation, 
and the Federal Deposit Insurance Corporation; as well as organizations 
such as BoardSource, Independent Sector, Conference Board, the Museum 
Trustee Association, the American Association of Museums, and the 
Council on Foundations, that have compiled current practices in 
nonprofit governance, and museum governance in particular. We also 
looked at relevant governance documents and interviewed knowledgeable 
senior officials from organizations that have recently undergone 
similar governance reforms, including the American Red Cross, American 
University, J. Paul Getty Trust, and United Way of America. We chose 
these organizations because they have had similar governance problems, 
have conducted a governance review, and have changed their practices or 
structure; have a similar structure to the Smithsonian, such as 
consisting of a central or national governing body with multiple 
programming units and organizations; and face similar stewardship 
challenges. We did not assess the effectiveness of governance reform 
efforts at these organizations. We also collected and reviewed a 
variety of documentation in order to validate that the changes to 
Smithsonian policies and procedures were actually being carried out, 
such as reviewing Board meeting minutes to validate that certain senior 
officials were in attendance and provided input to the Board. 

In addition to reviewing relevant documentation, we interviewed current 
and former regents, senior Smithsonian officials, directors of 
Smithsonian museums, members of Smithsonian advisory boards, and 
selected governance experts to discuss their views on the Smithsonian's 
governance reforms and the appropriateness and potential effectiveness 
of those reforms. Specifically, we interviewed all of the current 
citizen regents, except the most recently appointed regent; three 
former citizen regents; four congressional regents; and the primary 
staff liaisons to the remaining two congressional regents. We also 
obtained a written response from the Chief Justice to questions we 
provided. We also interviewed senior Smithsonian officials--such as the 
Acting Secretary, the Chief Financial Officer (CFO), the General 
Counsel, and the Inspector General, as well as several other members of 
Smithsonian's central management. We interviewed the directors of all 
of the Smithsonian's museums, including the National Zoological Park, 
as well as the chairpersons of the advisory boards of several of these 
institutions. Finally, we interviewed selected experts in nonprofit 
governance, including those experts that were advisors to the Board in 
the governance reform process, and others that we identified through a 
literature search or were referred to us by other experts in the field. 

We conducted this performance audit from May 2007 to May 2008 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. Appendix I contains more 
information about our scope and methodology. 

Results in Brief: 

The Board has implemented several executive reforms to address concerns 
about executive compensation, benefits, and expenses, but development 
of policies and internal controls for broader operational issues such 
as travel, event expenses, and contracting is still underway, and 
training and establishing accountability remain challenges. To address 
concerns about the level of the former Secretary's compensation, the 
Board set the Secretary-elect's compensation significantly lower than 
that of the former Secretary, using a revised compensation process to 
do so. Among other actions, the Board also developed a unified 
compensation policy for all senior officials in the Smithsonian, 
standardized the leave system for these officials, and developed an 
overarching code of ethics. The Board has begun a review of policies 
and internal controls governing various Smithsonian activities. For 
example, the Board has established some new policies related to travel 
and event expenses, and the Smithsonian has initiated reviews to 
consider how to strengthen and improve the Smithsonian's travel and 
event expense policies and contracting policies, including for 
Smithsonian Business Ventures. Effectively implementing the new 
policies and procedures developed during these reviews is likely to 
depend on effectively training staff and establishing accountability, 
both of which may be challenging due to a level of standardization and 
requirements that did not previously exist, among other things. 

The Board has completed the actions it proposed for improving its 
access to information and making its operations more transparent, but 
actions to improve communication and relationships with stakeholders 
are not fully implemented. To improve the information it receives, the 
Board amended its bylaws to require attendance of the General Counsel 
and Chief Financial Officer at Board meetings, and the Inspector 
General now has direct access to the Board. The Board also has improved 
the transparency of information it provides to the public--for example, 
by creating and regularly updating a governance Web page. By contrast, 
the Board has not fully implemented its plans to improve communication 
with its stakeholders, including staff, advisory boards, and the 
public. For example, the Board currently is studying how to improve its 
relationship with the Smithsonian's 30 advisory boards. Some museum 
directors or advisory board chairs indicated that the Board's lack of 
engagement with advisory boards limited its ability to effectively 
prioritize, strategize, or fundraise due to a lack of understanding of 
the priorities of the Smithsonian's museums, research centers, and 
programs. To make more information available to interested stakeholders 
and to provide transparency into the working of the Board, the Board 
plans to hold an annual public meeting. In addition, the Smithsonian is 
in the process of developing an institution-wide communication 
strategy. These actions are not far enough along to assess their 
potential for addressing past problems. Going forward, a challenge for 
the Board will be to ensure that all actions taken to improve the 
engagement of advisory boards and other stakeholders include a 
mechanism by which the Board can--on a regular basis--receive and 
consider unfiltered, needed information; take appropriate actions in 
response; and report its progress. 

The Board has largely completed the actions it proposed for clarifying 
regents' responsibilities and studying possible changes in its size and 
structure, but actions for assessing Board performance are still being 
developed. The Board has clarified regents' roles and responsibilities 
and has changed its committee structure. Beyond these clarifications, 
the Board has studied its size, composition, and structure and does not 
plan to recommend significant structural changes at this time. To 
address issues related to the lack of diversity of skills and 
expertise, the Board will seek to encourage the use of nonregent 
expertise on committees. The Board has not yet developed a process for 
assuring transparency and accountability in selecting nonregents and 
using them to enhance governance. The Board is developing a self- 
assessment process to examine its performance, but it is not clear how 
the Board will hold regents accountable in the event of performance 
problems, as the assessment process has yet to be implemented, and the 
Board has no authority to remove regents in the event of persistent 
neglect of duties. Given the extensiveness of the reforms, as well as 
other changes at the Smithsonian, including the hiring of a new 
Secretary, it is likely that some governance reforms will not be 
completely implemented in 2008, and the effectiveness of some reforms 
will only be evident over a longer period. The Board currently does not 
have plans to conduct a broader evaluation of its governance reform 
efforts after a suitable period of implementation to determine if they 
have been effective in addressing the governance and accountability 
breakdowns that occurred. However, the Board has indicated that a 
future evaluation is a good idea. 

To address challenges associated with ongoing implementation of 
multiple governance reforms, we are recommending that the Board of 
Regents conduct a comprehensive evaluation of its reform actions once 
they are fully implemented after a suitable period has passed. We also 
are recommending that in the Board's ongoing deliberations regarding 
reforms that have yet to be fully implemented, it (1) develop 
mechanisms to ensure that it is considering and responding to concerns 
of key stakeholders; (2) develop a clear policy regarding the selection 
and use of nonregents; and (3) evaluate what actions it can take in the 
event of persistent neglect of duties by any of its members. The Board 
and the Smithsonian concurred with our recommendations. 

Background: 

The Smithsonian Institution is a unique and complex organization. 
Congress created the Smithsonian in 1846 as an independent trust 
establishment of the United States.[Footnote 3] Congress did not 
establish the Smithsonian within any branch of the federal government, 
and it is not a federal agency unless Congress designates it as such 
for purposes of a particular law or a federal court determines it to 
be.[Footnote 4] The Smithsonian Act provided that the business of the 
Smithsonian be conducted by a board of regents, and that the Board be 
drawn from all three branches of government and the private sector. The 
Act delineates the structure and composition of the Board. Table 1 
provides more information on the structure and current membership of 
the Board. 

Table 1: Membership and Structure of the Board of Regents: 

Type of regent: Ex Officio - Chief Justice; 
Appointment process: Duty of the office; 
Term limit: Term limit of the office (possibly life term); 
Current regents: Chief Justice John G. Roberts, Jr. (Chancellor); 
Year of appointment to the Board: 2005. 

Type of regent: Ex Officio - Vice President; 
Appointment process: Duty of the office; 
Term limit: Term limit of the office; 
Current regents: Vice President Richard B. Cheney; 
Year of appointment to the Board: 2001. 

Type of regent: Congressional Regents - three Members of U.S. House of 
Representatives; 
Appointment process: Appointed by Speaker of the U.S. House of 
Representatives; 
Term limit: Coterminous with the terms for which they were elected to 
the House, and upon reelection, they may be reappointed[A]; 
Current regents: Representative Xavier Becerra; 
Year of appointment to the Board: 2005. 

Type of regent: Congressional Regents - three Members of U.S. House of 
Representatives; 
Appointment process: Appointed by Speaker of the U.S. House of 
Representatives; 
Term limit: Coterminous with the terms for which they were elected to 
the House, and upon reelection, they may be reappointed[A]; 
Current regents: Representative Sam Johnson; 
Year of appointment to the Board: 1995. 

Type of regent: Congressional Regents - three Members of U.S. House of 
Representatives; 
Appointment process: Appointed by Speaker of the U.S. House of 
Representatives; 
Term limit: Coterminous with the terms for which they were elected to 
the House, and upon reelection, they may be reappointed[A]; 
Current regents: Representative Doris Matsui; 
Year of appointment to the Board: 2007. 

Type of regent: Congressional Regents - three U.S. Senators; 
Appointment process: Appointed by President Pro Tempore of the U.S. 
Senate; 
Term limit: Coterminous with the terms for which they were elected to 
the Senate, and upon reelection, they may be reappointed[A]; 
Current regents: Senator Thad Cochran; 
Year of appointment to the Board: 1995. 

Type of regent: Congressional Regents - three U.S. Senators; 
Appointment process: Appointed by President Pro Tempore of the U.S. 
Senate; 
Term limit: Coterminous with the terms for which they were elected to 
the Senate, and upon reelection, they may be reappointed[A]; 
Current regents: Senator Christopher J. Dodd; 
Year of appointment to the Board: 2007. 

Type of regent: Congressional Regents - three U.S. Senators; 
Appointment process: Appointed by President Pro Tempore of the U.S. 
Senate; 
Term limit: Coterminous with the terms for which they were elected to 
the Senate, and upon reelection, they may be reappointed[A]; 
Current regents: Senator Patrick J. Leahy; 
Year of appointment to the Board: 2001. 

Type of regent: Citizen Regents - two from Washington, D.C., and seven 
from the states; 
Appointment process: Approved by the Board of Regents and appointed by 
joint resolution of Congress; 
Term limit: Six years with option to renew another term; 
Current regents: Eli Broad; 
Year of appointment to the Board: 2004. 

Type of regent: Citizen Regents - two from Washington, D.C., and seven 
from the states; 
Appointment process: Approved by the Board of Regents and appointed by 
joint resolution of Congress; 
Term limit: Six years with option to renew another term; 
Current regents: Phillip Frost; 
Year of appointment to the Board: 2006. 

Type of regent: Citizen Regents - two from Washington, D.C., and seven 
from the states; 
Appointment process: Approved by the Board of Regents and appointed by 
joint resolution of Congress; 
Term limit: Six years with option to renew another term; 
Current regents: Shirley Ann Jackson; 
Year of appointment to the Board: 2005. 

Type of regent: Citizen Regents - two from Washington, D.C., and seven 
from the states; 
Appointment process: Approved by the Board of Regents and appointed by 
joint resolution of Congress; 
Term limit: Six years with option to renew another term; 
Current regents: Robert P. Kogod; 
Year of appointment to the Board: 2005. 

Type of regent: Citizen Regents - two from Washington, D.C., and seven 
from the states; 
Appointment process: Approved by the Board of Regents and appointed by 
joint resolution of Congress; 
Term limit: Six years with option to renew another term; 
Current regents: John W. McCarter; 
Year of appointment to the Board: 2008. 

Type of regent: Citizen Regents - two from Washington, D.C., and seven 
from the states; 
Appointment process: Approved by the Board of Regents and appointed by 
joint resolution of Congress; 
Term limit: Six years with option to renew another term; 
Current regents: Roger W. Sant (Chair); 
Year of appointment to the Board: 2001. 

Type of regent: Citizen Regents - two from Washington, D.C., and seven 
from the states; 
Appointment process: Approved by the Board of Regents and appointed by 
joint resolution of Congress; 
Term limit: Six years with option to renew another term; 
Current regents: Alan G. Spoon; 
Year of appointment to the Board: 2000. 

Type of regent: Citizen Regents - two from Washington, D.C., and seven 
from the states; 
Appointment process: Approved by the Board of Regents and appointed by 
joint resolution of Congress; 
Term limit: Six years with option to renew another term; 
Current regents: Patricia Q. Stonesifer; 
Year of appointment to the Board: 2001. 

Type of regent: Citizen Regents - two from Washington, D.C., and seven 
from the states; 
Appointment process: Approved by the Board of Regents and appointed by 
joint resolution of Congress; 
Term limit: Six years with option to renew another term; 
Current regents: Vacant; 
Year of appointment to the Board: [Empty]. 

Source: GAO presentation of Smithsonian Institution data. 

[A] By tradition, two of the three regents apportioned for each chamber 
of Congress are members of the majority party of that chamber. When the 
majority of a chamber changes, one regent from the minority party is 
removed and one regent from the majority party is appointed. 

[End of table] 

The Board traditionally has elected the Chief Justice of the United 
States to be the Chancellor of the Board. The Chancellor presides over 
Board meetings and selected ceremonial occasions, and until recent 
changes to the role of the Chancellor, had several other leadership 
responsibilities. 

The Board is vested with governing authorities over the 
Smithsonian[Footnote 5] and considers matters such as the Smithsonian's 
budgets and planning documents, new programs and construction 
proposals, appointments to Smithsonian advisory boards, and a variety 
of other issues facing the Smithsonian. The Board also has stewardship 
responsibilities, including ensuring that the Smithsonian's facilities 
and collections are maintained, and ensuring that the Smithsonian has a 
funding strategy that provides sufficient funds to support these 
activities. In recent years, the National Academy of Public 
Administration, the Smithsonian, and we have reported on the 
deterioration of the Smithsonian's facilities and the threat posed by 
this deterioration. For example, in September 2007, we reported that 
funding challenges at the Smithsonian were affecting facilities' 
conditions and security, and endangering collections, and that the 
Smithsonian's cost estimate for facilities projects had increased to 
$2.5 billion from $2.3 billion in April 2005.[Footnote 6] In that 
report, we recommended that the Board perform a comprehensive analysis 
of alternative funding strategies beyond principally using federal 
funds to support facilities and submit a report to Congress and the 
Office of Management and Budget describing a funding strategy for 
current and future facilities needs. 

The Smithsonian manages two different types of funds--federal 
appropriations and trust funds--which include revenue from donations, 
grants, revenue-generating activities, interest on investments, and 
other sources. In some cases, the Smithsonian's policies related to 
activities involving the expenditure of federal funds has differed from 
its policies related to the expenditure of trust funds. For example, in 
2006, we reported that the Smithsonian had elected to follow the 
Federal Acquisition Regulation (FAR) provisions for contracts involving 
the expenditure of federal funds, while for business contracts that 
involved neither the expenditure nor receipt of federal funds and for 
which the FAR is inapplicable, the Smithsonian had elected to follow 
commercial business practices. About two-thirds of Smithsonian 
employees, including executives, are paid with federal funds, while 
other employees are paid with trust funds. Federal employees are 
subject to the laws, regulations, and policies for federal employment, 
while trust employees are covered by Smithsonian policies for trust 
fund employment. 

Adding to the complexity of the organization, in 1998, the Board 
authorized the Secretary of the Smithsonian to reorganize the various 
business activities within the Smithsonian into a centralized business 
entity, Smithsonian Business Ventures (SBV). SBV's mission is to 
generate revenue from business activities to support the Smithsonian's 
mission. The Smithsonian's business activities include a magazine and 
museum retail operations. 

The governance reform currently under way at the Smithsonian is not 
unique among nonprofit organizations, or among other major arts and 
educational institutions. In light of the Sarbanes-Oxley Act of 2002 
and governance reform in the corporate world, awareness has grown 
regarding the need for improving governance practices in the nonprofit 
sector.[Footnote 7] Several major nonprofit organizations, such as the 
American Red Cross, the J. Paul Getty Trust, and the United Way of 
America, have recently undergone major governance reform. These efforts 
were initiated in response to similar problems that were identified at 
the Smithsonian regarding controls over executive compensation and 
expenses, and insufficient oversight and leadership by the boards of 
those institutions. For example, the J. Paul Getty Trust initiated its 
governance reform in response to similar criticism regarding executive 
compensation and expenses, limited board oversight of those expenses, 
and similar issues regarding weaknesses in conflicts-of-interest 
policies. We have found that governance and accountability breakdowns 
can result in a lack of trust from donors, grantors, and appropriators, 
which could ultimately put funding and the organization's credibility 
at risk. 

Both the Smithsonian's Governance Committee report, and the IRC's 
report highlighted several issues and areas of concern related to 
governance of the Smithsonian and oversight of Smithsonian management. 
While the Board accepted the IRC's report, it did not concur with all 
of the report's findings. Both reports laid out recommendations to 
improve governance which were adopted by the Board in June 
2007.[Footnote 8] Specifically, these reports highlighted: 

* inadequate policies in place and insufficient oversight of and 
knowledge among regents concerning executive compensation, trust and 
federal pay systems, leave for senior executives, conflicts of interest 
regarding service on for-profit boards, travel expenses, event 
expenses, activities of SBV, and internal financial controls; 

* a lack of critical information and relationships necessary to bring 
forward important issues and concerns and to support vigorous 
deliberation and well-reasoned decision making on the part of the 
Board, such as lack of access for senior management to the Board, too 
much control within the Secretary's office regarding the information 
available to the Board and the Board's agenda, and a lack of 
transparency and connection to stakeholders within the Smithsonian 
(such as museum directors and advisory boards) and to the public at 
large; and: 

* IRC's finding that there was insufficient action on the part of the 
Board to demand critical information needed to conduct adequate 
oversight of the Smithsonian, which was linked to a number of issues, 
such as unclear roles and expectations for citizen, congressional, and 
ex-officio regents; a lack of engagement and participation by some 
regents; unclear responsibilities of Board committees and a lack of 
critical committees; a lack of diversity of skills and expertise needed 
to conduct adequate oversight; inflexible size and structure of the 
Board; and a lack of accountability of regents with regard to their 
performance and to fulfilling their fiduciary duties. 

Board Has Implemented Some Executive and Ethics Reforms, and Has Begun 
a Review of Policies and Internal Controls, but Implementation 
Challenges Remain: 

The Board has implemented several executive reforms to address concerns 
about executive compensation, benefits, and expenses, and has 
established an overarching code of ethics applicable to everyone 
associated with the Smithsonian, but development of policies and 
internal controls for broader operational matters such as travel, event 
expenses, and contracting is still under way. Training and establishing 
accountability remain challenges. The recommendations covered in this 
section are shown in figure 1. Appendix II provides information on the 
status of all of the Governance Committee's report recommendations. 

Figure 1: GAO's Assessment of Governance Committee's Recommendations 
Related to Executive Reforms, Ethics, Travel, and Broader Smithsonian 
Operations (as of May 2008): 

This figure is a chart of GAO's assessment of governance committee's 
recommendations relation to executive reforms, ethics, travel, and 
broader Smithsonian operations (as of May 2008). 

[See PDF for image] 

Source: GAO presentation and analysis of Smithsonian data. 

[A] We confirmed that the executive compensation process that was 
followed to set the salary range for the next Secretary's compensation 
package was refined to address many of the IRC's concerns about the 
previous compensation process, but we did not validate the extent to 
which this process follows best practices. 

[End of figure] 

The Board Has Implemented Several Executive and Ethics Reforms: 

The Board has implemented reforms related to the Secretary's 
compensation, executives' compensation, executive leave policies, and 
conflict-of-interest policies. Regarding the Secretary's compensation, 
the Board revised the process it used to establish compensation for the 
Secretary-elect (scheduled to assume office in July 2008). This reform 
was implemented to address concerns about the former Secretary's 
compensation. According to the IRC, the former Secretary's total 
compensation equaled $915,698 in 2007 and was troubling for two 
reasons. First, it included a housing allowance that reached $193,000 
in 2007, which the IRC concluded did not in fact serve as a housing 
allowance but as a "packaging device" to provide the Secretary with 
additional salary. Second, the former Secretary's starting base salary 
of $330,000 in 2000 was increased significantly in 2001--and reached 
$617,672 in 2007--based in part on compensation studies that the IRC 
concluded were not objective and were used primarily as a method of 
justifying substantial compensation increases. 

On March 15, 2008, the Board announced that it had selected a new 
Secretary of the Smithsonian. According to Smithsonian officials, the 
Secretary-elect's base salary will be $490,000 as compared to the 
former Secretary's 2007 base salary of $617,672. The Secretary-elect's 
total compensation, including base salary and employer pension 
contributions, will be $524,000, considerably lower than the former 
Secretary's 2007 total compensation of $915,698.[Footnote 9] According 
to a Smithsonian official, the new Secretary will not receive a housing 
allowance or any additional benefits beyond those provided to all 
senior trust Smithsonian employees. In setting this salary, the Board 
was guided by a compensation study that used a methodology that 
addressed many of the concerns the IRC had had about the previous 
compensation studies used to set the former Secretary's 
salary.[Footnote 10] 

The Board also has reformed the Smithsonian's executive compensation 
system by implementing what it refers to as a unified compensation 
philosophy. This effort involved establishing clear criteria to 
determine whether the compensation of each trust executive is market 
based or equivalent to the federal system. This reform grew out of 
concerns that the Smithsonian had separate employment systems governing 
its federal, trust, and SBV employees, and that the trust salaries for 
some positions--in areas such as finance and administration--were 
unnecessarily higher than those paid in much larger federal agencies. 

The Board determined that the Smithsonian should follow the federal 
guidelines for pay for senior-level positions except for limited 
instances where the job functions do not exist in the federal sector or 
there is not a candidate pool in the federal sector--in which case, 
compensation for the position should be market based. The Board also 
approved a plan to address the effects of applying the criteria. After 
applying the criteria, the Smithsonian determined that 38 of its 
executives were in positions that should follow a federal compensation 
approach. Of those 38, 19 had salaries above the federal pay cap. 
According to the plan, the salaries for these 19 positions will be 
brought in line with the federal pay cap within 5 years.[Footnote 11] A 
Smithsonian official stated that the implementation of this 
recommendation was extensively debated. According to a Smithsonian 
official, the 5-year transition plan was chosen to avoid the risk of 
having all of the affected executives leave immediately, which could 
hurt the Smithsonian; however, a Smithsonian official predicted that 
some of the affected executives may leave the Smithsonian due to the 
change in their salaries. 

The Board also implemented a recommendation to place all Smithsonian 
executives on the Smithsonian's existing leave policy. This effectively 
addressed a concern that some Smithsonian executives were exempt from 
the generally applicable leave accrual system, and that as a result, 
the former Secretary and former Deputy Secretary were absent from the 
Smithsonian for about 400 and 550 workdays, respectively, between 2000 
and 2006. On September 30, 2007, the Smithsonian transitioned all these 
executives to the existing trust leave policy that is equivalent to the 
federal leave policy for senior executives. The affected executives 
were provided with opening leave balances for annual and sick leave 
according to a formula. According to National Finance Center data, 
since the leave policy went into effect on September 30, 2007, 33 of 
the 34 executives had recorded some leave by February 16, 2008. 

The Board strengthened its policies related to conflicts of interest by 
prohibiting for-profit board service by its senior executives and 
requiring prior approval for service on nonprofit boards by any senior 
executives. The previous policy resulted in two senior executives, 
including the former Secretary, serving on for-profit boards, one of 
which had a contract with the Smithsonian; some regents were unaware of 
this board service. The Board took action on this issue by creating a 
conflicts-of-interest policy applicable to senior executives. In 
addition, the General Counsel now reports to the Board's Audit and 
Review Committee on senior executives' outside activities. Also, 
although the Smithsonian has individual codes of ethics for employees, 
volunteers, regents, and advisory board members, until the governance 
reform, it had no overarching code for the entire institution. The 
Board approved a Statement of Values and Code of Ethics in January 
2008, which applies to everyone in the Smithsonian community. A few 
additional efforts to improve the ethics policy are planned, but not 
yet complete--for example, the creation of a conflicts database. 
However, after reviewing the new policies and ethics code and comparing 
them to current industry practices, we believe that the new policies 
and ethics code follow current industry practices. 

Smithsonian Established Some New Policies and Initiated Reviews of 
Policies and Internal Controls, but Implementation of These Efforts Is 
Likely to Include Challenges: 

The Board has established some new policies related to travel and event 
expenses, and has initiated reviews to consider how to strengthen and 
improve the Smithsonian's travel and event expense policies and 
contracting policies, including for SBV. The Board has also initiated a 
separate review of its internal controls in these areas and on an 
overall basis. In some cases, new policies have been established in the 
interim while the final policy is under development. The Smithsonian's 
CFO stated that the teams addressing the Governance Committee's 
recommendations in these areas have generally expanded the scope of 
work beyond what would be required to implement the recommendation to 
think about what else needs to be done, and the Board has been 
supportive of this approach. As a result, the implementation of some of 
these reforms has not yet been completed. Successfully implementing 
these reforms is likely to include challenges related to training and 
establishing accountability. 

Review of Travel Policies: 

The ongoing effort to reform the Smithsonian's travel policies is in 
response to concerns about the former Secretary's travel practices and 
expenses, including a provision in his employment agreement that 
authorized first-class air travel--and which he and the Board 
interpreted to include premium travel in other regards as well. In 
addition, the IRC pointed out that the former Secretary's expenses were 
not reviewed for reasonableness and raised concerns about his 
chartering of a private jet, at a cost of $14,000, to travel to San 
Antonio, Texas, to receive an award and return to Washington, D.C., the 
next day to attend a Board committee meeting. 

The Board adopted interim policies on travel expenses in April 2007 and 
adopted them as standing policies in June 2007. Among other things, the 
standing policies subject all Smithsonian officials and employees to a 
single Smithsonian-wide policy that is compliant with federal travel 
regulations--whether the travel is paid for with trust or federal 
funds--and established that the Smithsonian should not pay or reimburse 
the cost of travel on chartered aircraft in the absence of demonstrated 
business necessity. In addition, according to Smithsonian officials, 
the Acting Secretary's travel expenses are now approved by the CFO's 
office prior to his travel. A team also is reviewing the Smithsonian's 
travel policies, with a focus on clarifying the policies and procedures 
to make it easier for Smithsonian employees to understand and follow 
them. The effort also is focusing on establishing review and audit 
processes for travel and expense reimbursement to strengthen internal 
controls in this area. 

Review of Event Expense Policies: 

The Board also adopted some new policies on event expenses, while a 
team is undertaking a broad review of event expense policies. The Board 
undertook these actions in response to findings in the Inspector 
General's report related to the former Secretary's entertainment 
expenses. The issue of event expenses also was raised in late 2007 and 
early 2008, when the media and some members of Congress expressed 
concern about the reasonableness of the event expenses surrounding the 
departure of the former Director of the National Museum of the American 
Indian. The Board adopted policies that attempted to clarify this issue 
by stating that Smithsonian funds, including for trust events, should 
only be used for reasonable expenses in accordance with Smithsonian 
policies. 

In its ongoing review, a Smithsonian team has developed an approach to 
event expense policies that will divide Smithsonian events into three 
categories, from the most formal to the least formal, with clearly 
identified requirements for approvals and authorizations. The new 
policy will cover both regent events and other Smithsonian events. The 
team also decided that given the variation in size and mission of 
different Smithsonian museums, research centers, and programs, each may 
supplement the policy with additional expenditure and approval 
guidelines specific to their organization. The details of this 
framework, scheduled to be reviewed by the Audit and Review Committee 
in May 2008, have yet to be finalized. 

Review of Contracting Policies: 

Under the leadership of the Board, the Smithsonian also is reviewing 
its contracting policies. This effort stemmed from concerns that the 
Smithsonian had entered into confidential business contracts that 
appeared to have been awarded in a manner not consistent with 
contracting standards generally applicable in the public sector. For 
the contracting review, a team has worked to formally document 
Smithsonian contracting policies and procedures, and is clarifying any 
exceptions to following the FAR. The team has drafted a contracting 
policy and is working to develop a set of handbooks to further 
explicate specific areas of contracting. 

Review of SBV Policies: 

Regarding SBV's policies, a team has reviewed Smithsonian and SBV 
policies to determine which Smithsonian-wide policies are applicable to 
SBV and under which circumstances SBV should deviate from Smithsonian 
policies. This effort came out of concerns about the propriety of SBV 
policies and activities. When SBV was created in 1999 to consolidate 
and improve Smithsonian business activities, it was not subject to all 
Smithsonian policies. According to the CFO, the team that examined 
SBV's policies found only three SBV policies that are not consistent 
with relevant Smithsonian-wide policies and they all involve financial 
or payroll systems SBV uses that differ from Smithsonian 
systems.[Footnote 12] The team has drafted a new process by which SBV 
can request an exception to Smithsonian policies that was scheduled to 
be implemented in April 2008. In addition, the Acting Secretary created 
a task force that recommended significant changes to SBV, such as 
restructuring and the creation of a uniform revenue-sharing formula. 
The Board approved these recommendations in January 2008. 

Review of Internal Controls: 

Another team, at the direction of the Board, is examining the 
appropriateness of Smithsonian internal controls across the 
Smithsonian's operations. This reform effort relates to concerns about 
whether the Smithsonian had appropriate policies and an effective 
process for enforcing and monitoring compliance with its policies. 
Furthermore, a management letter from the Smithsonian's external 
auditor based on the Smithsonian's fiscal year 2006 financial statement 
audit cited inadequate accounting resources and staff as a "reportable 
condition," an internal control weakness. The Smithsonian has defined 
internal control as a process designed to provide reasonable assurance 
of the Smithsonian's ability to achieve and sustain effective and 
efficient operations, reliable financial reporting, and compliance with 
applicable laws, regulations, and policies.[Footnote 13] To implement 
this review of internal controls, the team identified a core set of 16 
critical processes where there is financial risk--including processes 
related to travel and event expenses, contracting, SBV, and other areas 
such as financial reporting and federal and trust funds control--and 
developed a framework with which to analyze each process. The internal 
control framework for these reviews is closely aligned with the 
framework established by our Standards for Internal Control in Federal 
Government.[Footnote 14] In response to the outside auditor's concerns 
about the CFO's resources, the Smithsonian is in the process of a 
phased hiring of 10 additional accountants. According to the CFO, 
funding has been attained for 8 of the 10 positions and has been 
requested for the last 2 positions for fiscal year 2009. 

Implementation of New Policies and Procedures Will Be Challenging: 

Effectively implementing the new policies and procedures developed 
during these review efforts is likely to depend on effectively training 
Smithsonian staff at all levels and on effectively establishing 
accountability, both of which may be challenging for the Smithsonian. 
The implementation of some of these reforms is scheduled to stretch 
beyond 2008; Smithsonian officials estimated that reforms related to 
travel expenses and SBV policies would be fully implemented in the 
third quarter of 2008, which will provide an important basis for taking 
further action to strengthen the Smithsonian's internal controls. 
According to Smithsonian officials, the event expense policy and 
contracting reforms are scheduled to be fully implemented by the end of 
2008. The internal control recommendations are scheduled to be approved 
by the end of 2008, with the implementation of the approved 
recommendations scheduled to take place in 2009. 

Several of these efforts are likely to lead to a level of 
standardization or requirements that did not exist before, which must 
be implemented by staff at many levels and throughout many of the 
Smithsonian's museums, research centers, programs, and central offices. 
Smithsonian officials acknowledged that effectively training staff on 
some of the new policies is important and likely to be challenging. For 
example, according to Smithsonian officials, new requirements and 
standardization related to the changes in the Smithsonian's events 
policy may cause confusion and resistance from some Smithsonian staff, 
which could make training challenging. According to a Smithsonian 
official, training is also important to the success of the travel 
policy reforms. This official stated that while the vast majority of 
Smithsonian staff are trying to follow the rules regarding travel, the 
rules are complicated, and Smithsonian staff who are creating travel 
requests at museums, research centers, or programs may not understand 
the complexity of the rules as they apply to specific situations. 

Establishing accountability mechanisms to monitor whether new policies 
are followed is also important for the success of these efforts--and 
likely to be an ongoing challenge. Accountability represents the 
processes, mechanisms, and other means by which an entity's management 
carries out its stewardship and responsibility for resources and 
performance. Smithsonian officials emphasized that the teams 
undertaking the reviews of Smithsonian policies are considering how to 
best establish accountability processes and mechanisms to ensure 
compliance with new policies. However, the Smithsonian's ongoing 
efforts to establish accountability for travel expenses illustrate 
challenges related to determining how to monitor the compliance of top 
executives and how to effectively establish audit processes given 
limited resources. 

To monitor the compliance of top executives, the CFO now approves the 
Secretary's travel spending in advance, which did not happen before, 
and the undersecretaries' offices review the appropriate directors' 
travel in advance, as was always the case. Prior to the reforms, the 
Secretary's anticipated travel expenses were not reviewed prior to 
travel. Under this change, the Secretary's travel is being approved by 
a subordinate--the CFO. According Smithsonian officials, the 
Smithsonian decided on this policy because the CFO has direct access to 
the Board, and through informal benchmarking it found that some other 
federal agencies either provided the agency head with blanket travel 
authorizations, which the Smithsonian did not want to do, or had the 
agency head's travel approved by the executive secretary, a position 
that does not exist at the Smithsonian. The CFO stated that to 
supplement this process, she is planning to hire someone to support 
posttravel audits of the Secretary, executives, and the entire 
Smithsonian. 

The Smithsonian has not yet determined the extent to which the Board 
will review the travel expenses of the Secretary and other executives. 
Although the Governance Committee's recommendation in this area calls 
for the Audit and Review Committee to review the Secretary's travel 
expenses and to report to the full Board at least annually on these 
expenses, the process by which this will occur on an ongoing basis has 
not yet been established. According to Smithsonian officials, the Board 
did review the Secretary's travel in January 2008, and a team is 
considering a posttravel audit approach that would include 100 percent 
travel voucher audits for all senior executives with vouchers greater 
than $2,500. The team working on this issue also will recommend how 
much information from travel reviews or audits is to be provided to the 
Audit and Review Committee. The new processes are scheduled to be 
implemented by the end of the third quarter of 2008. According to 
officials at the J. Paul Getty Trust, who told us that the Trust faced 
some similar governance issues over the expenses of a previous chief 
executive officer, the Chair of the J. Paul Getty Trust's Board now 
reviews the chief executive officer's travel expenses on a quarterly 
basis. In addition, its audit committee receives quarterly reports on 
the travel expenses of the chief executive officer and nine senior 
directors. 

Another ongoing challenge for the Smithsonian is implementing effective 
accountability measures within limited resources. For example, the CFO 
stated that while the Smithsonian had a long-standing practice of 
quarterly posttravel compliance reviews of a sample of travel activity, 
the Smithsonian has not been able to complete these reviews on a 
quarterly basis since the second quarter of 2004--well prior to the 
governance problems identified by the Governance Committee. While the 
Smithsonian has completed assorted travel-related reviews, including 
checks for duplicative payments and senior executive travel reviews, it 
has not renewed its post-travel voucher audits. As described above, the 
outside auditor's management letter that accompanied the Smithsonian's 
fiscal year 2006 financial statement audit cited inadequate accounting 
resources and staff as a reportable condition, and a team is working to 
address this through hiring more accountants. Establishing 
accountability is especially important because among the governance 
problems identified by the IRC were that the Smithsonian did not comply 
with its existing policies and procedures with respect to accounting 
for expenses, and the former Smithsonian Secretary interpreted a 
Smithsonian policy authorizing his first-class air travel to qualify 
him for first class accommodations as well--despite Smithsonian 
policies to the contrary. The fact that the Inspector General found 
that the former Director of the Smithsonian's Latino Center had 
violated Smithsonian policies related to contracting, acceptance of 
gifts from outside sources, and travel expenses, among other things, 
also illustrates the importance of establishing effective 
accountability mechanisms in these and other areas. 

Board Has Implemented Reforms to Improve Information and Transparency; 
Efforts to Enhance Communication Are Not Fully Implemented: 

The Board has completed the actions it proposed for improving its 
access to information and making its operations more transparent, but 
actions to improve communication and relationships with stakeholders 
are not fully implemented. Going forward, a challenge for the Board 
will be to ensure that all actions taken to improve the engagement of 
advisory boards and other stakeholders include a mechanism by which the 
Board can--on a regular basis--receive and consider unfiltered, needed 
information; take appropriate actions in response; and report its 
progress. The recommendations covered in this section are shown in 
figure 2. Appendix II provides the status of all of the Governance 
Committee's report recommendations. 

Figure 2: GAO's Assessment of Governance Committee's Recommendations 
Related to Information, Transparency, and Communication (as of May 
2008): 

This figure is a chart of GAO's assessment of Governance Committee's 
recommendations related to information, transparency, and communication 
(as of May 2008). 

[See PDF for image] 

Source: GAO presentation and analysis of Smithsonian data. 

[End of figure] 

Board Has Taken Actions to Improve Information Available to It, and the 
Transparency of Its Activities: 

The Board formally amended its bylaws to require attendance of the 
General Counsel and the CFO, or their designees, at Board meetings. 
Also, the reporting relationship for the Inspector General was changed 
from the Secretary to the Board, and the Audit and Review Committee's 
charter was amended to reflect this change. These changes were in 
response to concerns that the Board was not developing relationships 
necessary to allow Smithsonian senior officials or staff to bring 
forward information of concern to them. Our review of Board meeting 
minutes shows that the General Counsel, CFO, and Inspector General have 
attended all full Board meetings since the changes were made and have 
provided information and raised concerns to the Board. Based on our 
interviews with the General Counsel, CFO, and Inspector General, as 
well as regents and other officials both before and after the changes 
were initiated, the changes have generally improved access and 
communication and strengthened reporting relationships and governance 
reform efforts. For example, the General Counsel and CFO have been 
working with the Board's committees in carrying out governance reforms 
related to ethics and contracting policies, respectively. 

The Board also created an independent Office of the Regents with staff 
dedicated and reporting to the Board in order to better control the 
agenda of the Board and the level of information available to the 
Board. The regents now have a greater role in determining which matters 
warrant the Board's time and attention, decisions that were previously 
largely made within the office of the former Secretary. This is an 
important change in the Board's practice because it will serve to help 
prevent any future Secretary from attempting to control the level of 
information provided to the Board as the Governance Committee's and 
IRC's reports indicated the previous Secretary had done. 

The Acting Secretary designated the General Counsel as corporate 
secretary who, among other duties, officially records the minutes of 
all Board meetings--similar to practices of other nonprofit 
organizations. Since November 2007, minutes of most Board meetings, 
including committees, have generally been recorded by the corporate 
secretary or his staff and are more thorough than they were previously 
and include more context about information presented to the Board 
during the meeting.[Footnote 15] For example, the reports of Board 
committees are more detailed than previously. We also found that Board 
meeting minutes have been improved to capture more deliberation than 
they did previously, which will likely serve to help improve 
transparency of the Board's actions. 

Although the Smithsonian is not subject to the Freedom of Information 
Act (FOIA), Smithsonian officials told us they follow the principles of 
FOIA when fielding the public's requests for access to records. The 
Smithsonian created a FOIA policy in November 2007 to formalize and 
clarify its records access policy. This change came about in response 
to criticism that there was confusion as to which FOIA principles 
applied to the Smithsonian. According to the General Counsel, the Board 
adopted a FOIA policy to formally articulate and clarify the 
Smithsonian's policy on public access to Smithsonian records. We 
compared the Smithsonian's FOIA policy with FOIA itself and found that 
the Smithsonian's policy is consistent. The Smithsonian articulates its 
public records' policy and establishes exceptions or cases in which 
documentation would likely not be provided, for example, certain 
commercial or personal data. According to the General Counsel, 
contracts negotiated since this policy was created no longer contain 
blanket confidentiality provisions. Furthermore, the Smithsonian 
intends to remove its FOIA policy provision authorizing the Secretary 
to carve out additional exceptions. The formulation of this policy 
should result in less confusion regarding the public's access to 
records and provide greater transparency. 

Finally, the Board created a Web page dedicated to governance to 
increase the public's access to information and improve transparency. 
Information posted by the Board relates to its structure, membership, 
and functions. For example, the Board has posted minutes, committee 
assignments, reports to the Board, and a document tracking the 
governance reform efforts, which is updated monthly. These changes were 
made in response to criticisms about the lack of transparency regarding 
governance at the Smithsonian following the recent governance problems. 
The Smithsonian has improved the amount of governance information 
available to the public, and by comparison, generally has more 
governance content available to the public than some other nonprofit 
organizations' Web sites. The Board also is planning to post additional 
information in an effort to improve the transparency of the Board's 
policies and actions. For example, according to a Smithsonian official, 
the executive compensation study which describes the benchmarking used 
to determine the salary range for the new Secretary, committee meeting 
minutes, and information regarding criteria for regent nomination, 
eventually will be posted to the Web page. 

The Board Has a Study Under Way on How to Improve Its Relationship with 
Advisory Boards: 

In one effort to improve governance through strengthened stakeholder 
relationships, the Board is studying how to improve the link between 
the Board and the Smithsonian's 30 advisory boards, which include a 
national advisory board as well as advisory boards that focus on 
individual museums, research centers, or programs. As the Board's study 
and recommendations on this issue have not yet occurred, it is too soon 
to fully evaluate the Board's efforts or conclusions. Past efforts to 
enhance this relationship have been limited, and some directors and 
advisory board chairs expressed ongoing concerns about the 
relationship. 

Most advisory boards (except for those with mandated statutory 
authority) have no independent governance function, and all are subject 
to the authority of the Board.[Footnote 16] There is considerable 
variability among advisory boards, reflecting the differences in how 
the boards came into being, their missions, their bylaws, and the 
entities they serve. Their primary purpose is to provide advice, 
support, and expertise to the directors of museums, research centers, 
and programs, as well as to the Board and Secretary. For example, some 
advisory board chairs we spoke with assist their museums, research 
centers, or programs with acquisitions, program development, strategic 
planning, or fundraising, among other things. According to the 
Governance Committee's report, the advisory boards provide a key link 
between the Board and the public and a direct connection to the 
museums. Some advisory boards include a regent, while most do not. 

The Board has not always fully implemented past recommendations to 
enhance the relationship between the Board and advisory boards. A 2002 
internal Smithsonian study found that the advisory boards were an 
underutilized asset and recommended, among other things, that each 
advisory board should submit a report to the regents every 3 years on 
its museum or facility on a rotating basis, and the Board should 
respond in writing to these reports. In response to this 
recommendation, the Smithsonian implemented the practice of having a 
subset of advisory boards submit a paper to the Board for its meetings 
starting in September 2003, with the idea that each advisory board 
would report every 3 years. However, the second half of the internal 
recommendation, that the regents should respond in writing to the 
papers, was never implemented. The practice was discontinued after 
January 2007. 

Our work suggests a continued broad level of concern over the lack of 
engagement of the regents with advisory boards. Nine of the 10 advisory 
board chairs we spoke with stated that they had had little to no direct 
contact with the Board. Although 2 of the 10 advisory board chairs we 
spoke with were generally satisfied with the current level of 
interaction between the Board of Regents and the advisory boards, 6 of 
the advisory board chairs we spoke with were not.[Footnote 17] Some of 
the museum directors with whom we spoke also raised concerns about the 
current relationship between the advisory boards and the Board, and the 
majority of the museum directors see additional value in enhancing the 
relationship between the Board and the advisory boards. Negative 
effects of the current relationship described by several advisory board 
chairs or museum directors included concerns that the Board's lack of 
understanding of individual museums, research centers, and programs 
reduces the Board's ability to effectively oversee the prioritizing of 
the Smithsonian's budget, limits the effectiveness of the Smithsonian's 
fundraising efforts, and limits the Board's ability to articulate a 
unifying vision for the Smithsonian to strengthen its mission and 
better leverage its future potential. According to Smithsonian 
officials, the Chair of Smithsonian's National Board, which is a 
Smithsonian-wide advisory board, attends all Board meetings and to the 
extent that advisory boards interact with the National Board, is 
therefore an existing vehicle for communication between advisory boards 
and regents. However, most of the advisory board chairs we spoke with 
did not think that the National Board Chair served as a liaison between 
the advisory boards and the Board of Regents. 

The Smithsonian has taken some steps to rethink this relationship. In 
January 2008, the National Board changed the agenda of an annual 
meeting to which it invites all advisory board chairs to include 
roundtable discussions, a luncheon with the Acting Secretary, and a 
presentation by a regent. According to Smithsonian officials and the 
two advisory board chairs we spoke with about this meeting, the meeting 
was positive. However, the two advisory board chairs we spoke to stated 
that the meeting focused on enhancing the relationship among advisory 
boards rather than on what they saw as a remaining need to enhance the 
engagement of the regents with the advisory boards and the museums, 
research centers, or programs they represent. Going forward, according 
to a Smithsonian official, Office of the Regents' staff will attend 
business meetings of the advisory boards to serve as direct liaisons to 
those boards and the regents. 

Four organizations we spoke with that have undergone governance reforms 
and that, like the Smithsonian, have a structure that includes a number 
of units, described to us various models they have developed to engage 
their advisory boards and obtain their input. For example, the United 
Way of America, which in reforming its governance in 2000 moved away 
from having members of a number of local affiliates as board members, 
now has a council of its chapter boards that provides advice to the 
chief executive officer and whose concerns are communicated to the 
board at an annual meeting. The American Red Cross holds an annual 
convention at which its chapter boards may interact with its governing 
board. American University has representatives from different 
constituents provide input to board committees. These representatives 
also may attend board meetings. After its governance reforms, the J. 
Paul Getty Trust, a much smaller organization, increased communication 
between its board and the four unit heads by inviting them to attend 
and participate in board meetings. A noticeable similarity of the way 
that these four organizations engage and obtain input from their 
constituent parts is that they all have a mechanism whereby the 
governing board engages in personal interaction with these constituent 
representatives on a regular basis. 

Directors and advisory board chairs we spoke with had a variety of 
suggestions for improving the relationship between the advisory boards 
and the Board. Some suggestions sought to help regents thoroughly 
understand each museum, research center, or program--for example, by 
having a regent serve on each advisory board or having a regent hold 
regular discussions with the director or advisory board chair. Other 
suggestions included inviting advisory board chairs to the Board's 
meetings or having advisory board representation on the Board. Any 
actions taken to improve the relationship between the Board and the 
advisory boards will involve balancing the regents' time demands with 
ensuring that the Board has a strong enough understanding and 
relationship with the museums, research facilities, and programs it 
governs to effectively prioritize the Smithsonian's budget, encourage 
fundraising efforts, and strengthen the Smithsonian's mission. 

Plans for Annual Public Meeting and Communication Strategy Are Not 
Fully Implemented: 

The Board is currently developing a plan for an annual public meeting 
to enable interested stakeholders to address information and make 
inquiries directly to the Board. This change is being considered in 
response to criticisms about the lack of transparency regarding 
governance at the Smithsonian following the recent incidents of 
governance and accountability breakdowns. According to the Governance 
Committee's report, this annual meeting should be an opportunity for 
the Board not only to disseminate information, but also for the Board 
to receive information and input from interested stakeholders including 
the public, Smithsonian staff, and others to help inform the Board's 
decision making. Originally planned for June 2008, the Board's Chief of 
Staff told us that, as of May 2008, plans have not yet been fully 
developed and, because the new Secretary's term begins on July 1, the 
Board plans to hold the public meeting after the new Secretary has 
begun his service, at either the Board's September 2008 or November 
2008 meeting.[Footnote 18] The Board has enlisted a governance 
consultant to provide technical assistance in developing the meeting 
agenda and is planning for the meeting to focus on specific topics well-
suited for stakeholder input, for example, strategic planning or the 
future of the Arts and Industries Building. 

Also in response to criticisms regarding a lack of communication and 
transparency at the Smithsonian, the Smithsonian's Director of 
Communication and Public Affairs led a team to develop a strategy to 
increase available information about the Board's and Smithsonian 
activities and operations to identified stakeholders, such as senior 
management, staff, and the public. The Governance Committee's report 
directed that the communication strategy be modeled after best 
practices in the federal government, nonprofit organizations, and 
universities. The Governance Committee's recommendations for the 
communication strategy appear to be in line with practices we have 
identified for federal agencies undergoing major 
transformations.[Footnote 19] For example, the Governance Committee 
recommended that the strategy include (1) mechanisms to foster 
communication between and among senior management and regents, staff, 
and other stakeholders; (2) a framework to ensure effective 
congressional outreach and information; and (3) a plan to ensure all 
stakeholder constituencies are routinely informed of important 
decisions and have opportunity to provide comments or information to 
the Board and management. Our work similarly suggests that an effective 
communication plan should reach out to all employees, customers, and 
stakeholders and seek to genuinely engage them; communication should 
facilitate a two-way exchange of information; and it is important for 
feedback from stakeholders to be considered, and appropriate actions 
made in response and progress reported.[Footnote 20] 

Originally scheduled to be complete in December 2007, the Smithsonian's 
communication strategy was finalized and approved by the Board on May 
5, 2008. Because this effort is not yet fully implemented, we were not 
able to assess the communication strategy in its entirety, and it 
remains to be seen how effective the communication strategy will be. 
However, the team has taken a number of steps thus far. For example, 
the team has defined stakeholders, analyzed existing communication 
processes, performed broad stakeholder surveys and analyses, and 
developed a communication plan. Officials told us that among issues the 
team is still considering is what information stakeholders most need. 
The team also is seeking to avoid duplication of efforts; for example, 
where there are already multiple avenues for receiving information, the 
team will consider whether tools such as a hotline or a public 
ombudsman are necessary. A challenge going forward will be to ensure 
that actions taken to improve communication with stakeholders include a 
mechanism by which the Board can--on a regular basis--receive and 
consider unfiltered, needed information; take appropriate actions in 
response; and report its progress. 

Board Has Taken Actions to Clarify Roles and Responsibilities and 
Studied Possible Changes in Its Composition, but Establishing 
Accountability Remains a Challenge: 

The Board has largely completed the actions it proposed for clarifying 
regents' responsibilities and studying possible changes in its size and 
structure, but actions for assessing Board performance are still being 
developed. The Board has not yet developed a process for assuring 
transparency and accountability in selecting nonregents and using them 
to enhance governance. The Board is developing a self-assessment 
process to examine its performance, but it is not clear how the Board 
will hold regents accountable in the event of performance problems. The 
Board does not currently have plans to conduct a broader evaluation of 
its governance reform efforts after a suitable period of implementation 
to determine if they have been effective in addressing the governance 
and accountability breakdowns that occurred. The recommendations 
covered in this section are shown in figure 3. Appendix II provides the 
status of all of the Governance Committee's report recommendations. 

Figure 3: GAO's Assessment of Governance Committee's Recommendations 
Related to Board's Roles and Responsibilities, Composition, and 
Performance Assessment (as of May 2008): 

This figure is a chart of GAO's assessment of Governance Committee's 
recommendations related to board's roles and responsibilities, 
composition, and performance assessment (as of May 2008). 

[See PDF for image] 

Source: GAO presentation and analysis of Smithsonian data. 

[End of figure] 

Actions to Clarify Roles and Responsibilities for All Regents, and 
Leadership of the Board Are Largely Completed: 

As part of its governance reform efforts, the Board adopted a specific 
set of duties and expectations for all regents, which is a key step in 
governance reform. Previously, the roles and responsibilities of 
regents were not clearly and explicitly defined, which, in part, led to 
the lack of oversight and awareness evidenced in recent problems at the 
institution. Elements of the regents' written duties and 
responsibilities, such as engaging in forthright discussions about the 
Smithsonian's strategic and operational issues, are in accordance with 
current board duties of comparable organizations with established 
practices. While we did not evaluate the effectiveness of governance 
reforms at comparable organizations, many have highlighted the 
importance of clearly delineating roles and expectations of regents and 
of holding regents accountable for their individual performance. For 
instance, American Red Cross emphasized how this process of 
clarification has helped to create a culture of accountability among 
its board members, resulting in greater vigilance in their oversight 
activities. Through our interviews with regents and senior Smithsonian 
officials, these clarifications appear to have contributed to a greater 
awareness of the regents' roles and responsibilities in overseeing the 
institution. 

While the initial set of written roles and responsibilities applied to 
all regents, in practice there have been differing expectations in the 
level of participation and involvement of citizen, congressional, and 
ex-officio regents. Previously, citizen regents were expected to chair 
committees and have historically had greater involvement on committees, 
and have often participated on multiple committees. Congressional 
regents have not been expected to chair committees, and some have not 
served on committees in the past. Furthermore, the Vice President, an 
ex-officio regent, has not participated in any Board meetings.[Footnote 
21] However, according to the General Counsel, the regents are charged 
with a sole trust responsibility: to increase and diffuse knowledge 
among mankind. In discharging that responsibility, all regents are 
subject to the same fiduciary duties as other trustees: loyalty, 
prudence, and due care.[Footnote 22] The IRC recommended that 
congressional and citizen regents should accept a fiduciary 
relationship with the institution and devote the requisite time to 
carry out those duties. The IRC also recommended that the ex-officio 
regents continue to serve on the Board, but in an advisory role, 
without fiduciary duties to the institution. 

The Board has recently decided to expand the expectations regarding the 
duties and responsibilities of congressional regents--including 
expectations for them to serve on at least two committees and serve as 
committee chairs when needed, and equally carry the workload as that of 
citizen regents. Given their other duties as members of Congress and in 
order to fulfill their expanded roles and responsibilities, the Board 
envisions the regent liaisons playing a larger role in assisting the 
congressional regents in fulfilling their duties. In creating this 
expanded role for liaisons in the functioning of the Board, it will be 
important for the Board to clearly delineate what is expected of regent 
liaisons. The Board has not changed the role or expectations of the 
Vice President as a member of the Board, but sees value in retaining 
representation from the executive branch. 

Once the Board finalizes the expectations regarding the duties and 
responsibilities of its regents, a revised set of written roles and 
responsibilities will be included in the orientation program that is 
still under development. According to the Chief of Staff to the Board, 
implementation of the orientation program was not completed in time for 
the new regent, who began his term in March 2008.[Footnote 23] 

The Board also has clarified the duties of the Chancellor, who by 
tradition has been the Chief Justice, and created a Chair position to 
recognize that the Chair of the Board has more leadership 
responsibilities. Previously, the Smithsonian bylaws established the 
Chancellor as the Chair of the Board, although the Chair of the 
Executive Committee in practice performed many duties that would 
otherwise be expected of the Chair of the Board. The lack of clarity 
and specificity with regard to leadership on the Board and the limited 
engagement in Board activities that can reasonably be expected from the 
Chief Justice were factors that both the Governance Committee and IRC 
reported were associated with the Board's lack of oversight. To further 
strengthen leadership, the Board also has recently decided to create a 
Vice Chair position. 

Although it is not yet clear how these changes will affect Board 
leadership, regents we interviewed expressed the belief that this 
structure would retain the value they perceived in having the Chief 
Justice's involvement and also address the limitations on his 
involvement. The Chair, who was recently elected by the Board, is now 
expected to play a greater leadership and oversight role in the 
governance of the Board, including being the chief spokesperson for the 
Board, working with senior Smithsonian officials to communicate and 
oversee implementation of policies adopted and approved by the Board, 
and leading the Board in its annual evaluation of the Secretary's 
performance and compensation. The Chancellor's role includes presiding 
over Board meetings and selected official ceremonies. According to 
several regents we interviewed, the skill with which the current Chief 
Justice has led Board meetings was perceived to add tremendous value to 
the proceedings. According to some governance experts, this structure 
retains the potential for the magnitude of the Chief Justice's office 
to suppress and discourage honest and candid deliberation due to the 
deference individuals may give the Chief Justice, which can hinder 
Board performance; although according to regents we interviewed, there 
is no indication that this has occurred. 

Board Has Taken Steps to Strengthen its Committee Structure, but Issues 
Regarding the Executive Committee and Use of Nonregents Remain: 

The Board has taken a number of steps to strengthen its committee 
structure, such as creating new committees, appointing new committee 
chairs, and directing all committees to review their charters. 
Previously, committees were not consistently examining their roles, 
responsibilities, and jurisdiction, and the June 2007 Governance 
Committee report raised concerns that some committees were not 
effectively carrying out their proper oversight functions as a result. 
Most committees have now completed this review. However, the review of 
the Executive Committee's charter has not yet been finalized. The IRC's 
report criticized the Executive Committee for taking certain actions 
independently of the Board as a whole, such as approving the 
compensation of the former Secretary, and then seeking approval of the 
full Board after the fact. While it is not unique for an executive 
committee to take certain actions or make decisions outside of the full 
board, experts we spoke with cited concerns when too much authority to 
make decisions is placed in the hands of just a few board 
members.[Footnote 24] Moreover, a January 2008 BoardSource 
report[Footnote 25] cited similar concerns and provided several options 
for reforming the committee, including increasing the size to avoid the 
risk of delegating decision-making powers to too small a group. 
Nonetheless, the Board has decided to maintain the current size and 
scope of responsibilities of the Executive Committee, but may recommend 
reconsideration at another time.[Footnote 26] The Board also has 
decided that the newly created Vice Chair of the Board will be a member 
of the committee, and the Board has made it a responsibility of the 
Governance and Nominating Committee to closely monitor the activities 
of the Executive Committee. It remains to be seen whether these steps 
will be sufficient to ensure that the Executive Committee does not 
begin to act in lieu of the full Board when it should and could be 
engaged. 

At the onset of its governance reform effort, the Board created new 
standing committees on governance and facilities that previously did 
not exist; however, the Board noted in the Governance Committee's 
report that significant areas of Smithsonian activities were not within 
the oversight of any of the Board's committees, including fundraising 
and development, most programmatic activities, and strategic 
planning.[Footnote 27] The BoardSource report also noted the need and 
potential for adding additional committees, and suggested enhancing the 
current committee structure by creating a committee on resource 
development to demonstrate the Board's commitment to obtaining 
appropriate resources beyond federal allocations.[Footnote 28] The 
report also suggested establishing a strategic planning committee to 
lead the Smithsonian through the strategic planning process that would 
identify programmatic and fundraising goals. In addition, the report 
from the SBV task force that was issued in January 2008 also 
recommended creating a committee or subcommittee to focus on increased 
oversight of SBV programs. 

As a result of these reports, the Board has decided to create new 
committees on strategic planning and programs, and 
advancement.[Footnote 29] Since these committees have just been 
created, it remains to be seen how they will improve the Board's 
engagement in the Smithsonian's strategic planning and budget 
formulation processes and change its role in raising funds for 
advancement and development. 

The Board has addressed issues regarding the need for additional 
expertise by increasing the use of nonregents[Footnote 30] on 
committees, though some issues are still under consideration regarding 
the appropriate selection and use of nonregents. The IRC's report noted 
concern that the Board may have needed expertise in some areas--such as 
financial or accounting expertise--and that this contributed to the 
lack of oversight of executive compensation and expenses. According to 
some governance experts and the BoardSource report, bringing in 
nonregents with specific expertise to be part of Board committees can 
be effective in providing an independent and different perspective and 
in "doing the work" of the committee. Comparable organizations also 
recruit nonboard committee members to provide advice and different 
perspectives. For instance, officials from the United Way of America 
stated that half of its board's committees have nonboard members in 
addition to board members. Table 2 shows the increase in the use of 
nonregents on the Board of Regents' committees as well as the relative 
workload changes for citizen and congressional regents. 

Table 2: Comparison of the Board of Regents' Standing Committee 
Membership in January 2007 and May 2008: 

Board Standing Committees: Advancement[A]; 
Committee Membership (January 2007): Did not exist; 
Committee Membership (May 2008): * 3 citizen regents; 
* 1 nonregent. 

Board Standing Committees: Audit and Review; 
Committee Membership (January 2007): * 4 citizen regents; 
Committee Membership (May 2008): * 3 citizen regents; 
* 1 congressional regent. 

Board Standing Committees: Compensation and Human Resources; 
Committee Membership (January 2007): * 4 citizen regents; 
* 1 congressional regent; 
Committee Membership (May 2008): * 3 citizen regents; 
* 2 congressional regents. 

Board Standing Committees: Executive; 
Committee Membership (January 2007): * 1 ex-officio regent; 
* 2 citizen regents; 
Committee Membership (May 2008): * 3 citizen regents. 

Board Standing Committees: Facilities Revitalization[B]; 
Committee Membership (January 2007): * 3 citizen regents; 
* 4 congressional regents; 
Committee Membership (May 2008): * 1 citizen regent; 
* 3 congressional regents. 

Board Standing Committees: Finance and Investment (now just 
Finance)[A]; 
Committee Membership (January 2007): * 2 citizen regents; 
* 2 congressional regents; 
* 2 nonregents; 
Committee Membership (May 2008): * 2 citizen regents; 
* 1 congressional regent; 
* 1 nonregent. 

Board Standing Committees: Governance and Nominating[C]; 
Committee Membership (January 2007): Did not exist; 
Committee Membership (May 2008): * 3 citizen regents; 
* 2 congressional regents; 
* 1 nonregent. 

Board Standing Committees: Investment[D]; 
Committee Membership (January 2007): * Previously a subcommittee of 
Finance and Investment; 
Committee Membership (May 2008): * 2 citizen regents; 
* 3 nonregents. 

Board Standing Committees: Nominating[E]; 
Committee Membership (January 2007): * 4 citizen regents; 
* 1 congressional regent; 
Committee Membership (May 2008): * Merged with Governance Committee. 

Board Standing Committees: Strategic Planning and Programs[A]; 
Committee Membership (January 2007): Did not exist; 
Committee Membership (May 2008): * 2 citizen regents; 
* 3 congressional regents. 

Source: GAO analysis of Smithsonian data. 

Note: As of May 5, 2008, the Chair of the Board of Regents is an ex- 
officio member of all committees except those on which he serves as a 
full committee member or chair. 

[A] At the May 5, 2008, Board meeting, the Board approved creation of 
two new committees: Advancement, and Strategic Planning and Programs. 

[B] Facilities Revitalization Committee was an ad hoc committee prior 
to June 2007. 

[C] Board established Governance Committee as standing committee in 
March 2007 and then combined committee function with Nominating 
Committee in June 2007. 

[D] As of the May 5, 2008, Board meeting, the Finance and Investment 
Committee was split into two committees--a Finance Committee and an 
Investment Committee. 

[E] Board combined Nominating Committee with Governance Committee to 
create Governance and Nominating Committee in June 2007. 

[End of table] 

While using nonregents permits the Board to increase its knowledge base 
without changing its size or structure, no formal process exists for 
the identification and selection of nonregents, and certain policies 
regarding the appropriate role of nonregents are still under 
development. Nonregents are currently recruited and vetted through 
informal channels. For example, regents may reach out within their 
particular field or professional network for recommendations or 
referrals for experts in a particular discipline. The full Board then 
approves the appointment of nonregents. According to the Chief of Staff 
to the Board, the Governance and Nominating Committee is considering 
policies and processes regarding the use of nonregents. For example, 
one option under consideration is to look to first recruit nonregent 
expertise from the advisory boards within the Smithsonian before 
looking outside the institution. In addition, the Governance and 
Nominating Committee is still considering whether and how nonregents 
should take on leadership roles in the committees. 

Board Does Not Plan to Make Major Structural Changes to Its 
Composition: 

The Board has decided that no major structural changes should be made 
to the Board's composition. Many have suggested that the Board's 
composition contributed to governance breakdowns because of concerns 
about a lack of engagement of some regents and concerns of whether the 
Board is large enough to house the diversity of skills and expertise 
needed to effectively carry out its oversight activities. The 
BoardSource report reinforced these concerns and found that the 
statutorily required structure and composition of the Board can, in 
fact, create limitations for the Board with regard to evenly spreading 
its workload, and adding a diversity of skills and expertise. 
Furthermore, the Board has no authority in recruiting and appointing 
congressional and ex-officio regents, which can limit its ability to 
add needed expertise within its current structure. Our analysis of the 
criteria developed for citizen regents finds that the criteria are 
consistent with current accepted practices, and include such things as 
whether individuals can serve in leadership roles, whether they have 
well-rounded experience in multiple fields, and whether they have 
specific expertise needed on the Board and are appropriate for the 
Smithsonian's specific needs. However, in selecting congressional 
regents, it is unclear whether the President Pro Tempore of the Senate 
and the Speaker of the House--who appoint congressional members-- 
consider such criteria when selecting congressional regents. 

The BoardSource report suggested four options for the Board to consider 
that included making no major structural changes to the Board and a 
range of increases in the size of the Board either through adding more 
citizen regents, decreasing the number of congressional regents, or 
both. The report noted that any changes to the Board's composition 
regarding its size or representation would require legislative action. 
All four options would maintain representation from all three branches 
of government, and thus retain different expectations for citizen, 
congressional, and ex-officio regents. 

Literature we reviewed and governance experts we spoke with indicated 
that it is not necessarily the particular size or structure of the 
board, but rather a board's high level of engagement and participation, 
and a broad diversity of skills and expertise that seem to drive 
effective governance. Experts we spoke with pointed to examples of 
successful boards of many sizes and structures. In theory, boards with 
ex-officio and other governmental members can still be effective, but 
their effectiveness depends on having clear and specific expectations 
of the level of commitment and contribution board members can 
realistically make. Moreover, some experts we interviewed held the view 
that major structural changes may not be the most effective approach 
when considering governance reform, and that there is some evidence-- 
though not conclusive--that reforms aimed at changing the "culture" of 
a board to be more participatory and accountable are ultimately more 
effective at improving governance. The J. Paul Getty Trust, which, 
according to officials, faced many of the same issues regarding 
inadequate oversight of executive compensation and expenses, did not 
make significant structural changes to its board, but rather focused on 
instilling a culture of accountability. Although we did not assess the 
effectiveness of their reforms, officials involved with the board 
indicated that these changes resulted in major improvements from their 
perspective with regard to their board's engagement and accountability. 

According to the Chief of Staff to the Board, the Board expects that 
further clarification of duties and expectations of all regents--such 
as increasing the participation level of congressional regents in 
committees and distributing the workload equally among the citizen and 
congressional regents--and increased use of nonregents to address the 
need for diverse expertise and skills in committees will adequately 
address the major governance issues regarding size and structure facing 
the Board. Furthermore, as previously mentioned in this report, staff 
liaisons for congressional regents--who, according to the BoardSource 
report and to regents we interviewed, have been viewed as an important 
conduit for the congressional regents to keep them abreast of the 
activities of the Board--also are envisioned to play a greater role in 
assisting congressional members in taking on more responsibilities. 
However, these changes have just been instituted, and thus it remains 
to be seen whether the Board's actions will be sufficient to ensure 
that all regents are fully engaged and held accountable for fulfilling 
their roles and expectations. 

Performance Assessment Process Needed to Ensure Accountability of Board 
Members and Committees Is Under Development: 

The Board is in the process of developing a self-assessment process to 
examine its performance, which is not expected to be finalized and 
implemented until June 2008. Previously, the Board lacked a formal and 
regular assessment of its performance to determine its effectiveness in 
governance and oversight of Smithsonian management.[Footnote 31] Our 
review of standards of practice for nonprofit boards indicates that 
implementing a regular and consistent self-assessment process is 
critical to improving individual performance and contribution to a 
governing board. If a board does not assess its performance, it is 
missing a key opportunity for input from its own members for improving 
its operations and governance policies. A self-assessment of the board, 
committees, and individual members enables a board to identify areas 
for improvement in the board's operating procedures, its committee 
structure, and its governance practices. 

The Board has drafted a self-assessment questionnaire to facilitate the 
evaluation process and help the Board understand what it does well and 
what needs to improve. However, the draft questionnaire does not fully 
address evaluation of performance against the full range of regent 
expectations, such as the Board's role in the Smithsonian's strategic 
planning process. The self-assessment process will need to be further 
developed to reflect changes to expectations for congressional regents 
and their liaisons. According to the Chief of Staff to the Board, the 
Board is currently considering changes to the draft assessment tool to 
reflect these concerns. 

Other organizations go beyond self-assessments and can remove board 
members whose performance is inadequate or not up to expectations. For 
instance, American University told us that its Board of Trustees 
conducts an individual and peer assessment every 3 years (board members 
have 3-year terms), at the conclusion of a member's term, before 
reappointment. Board members whose terms are up for renewal complete a 
self-assessment form, and their colleagues on the board also assess the 
board members' performance, using a different assessment form. If a 
board member has not performed up to expectations, he or she will not 
be nominated for re-election. A similar practice was instituted at the 
United Way of America in its governance reform, where officials told us 
there have been cases where a board member was removed because the 
member was not attending meetings and fulfilling board duties and 
obligations. In other organizations, boards retain the authority to 
remove board members for cause. For example, the board of the Legal 
Services Corporation, which is a federally chartered nonprofit 
organization consisting of 11 bipartisan board members, has the 
authority to remove its members for cause, such as persistent neglect 
of duties, by a vote of at least 7 members. While board members are 
appointed by the President with the advice and consent of the Senate, 
neither the President nor the Senate has the power to remove the Legal 
Services Corporation board members. 

Although the Smithsonian Governance and Nominating Committee can 
examine and determine the level of interest of a regent in continuing 
his or her service and weigh the interest of other regents before 
calling on a vote for the regent's renomination, the Board has no 
authority to remove regents for cause, such as persistent neglect of 
duties during a regent's term. The Smithsonian's General Counsel told 
us that the Board itself cannot remove regents--only Congress can take 
action to remove a regent. In our interviews with Smithsonian 
officials, it is unclear what actions the Board could or would take in 
the event of persistent neglect of duties by any of its regents. 
Removal of a regent has occurred at least once in the history of the 
Smithsonian, but not in recent memory. It remains to be seen how the 
Board will proceed with its self-assessment process, and a key 
challenge for the Board will be how to hold all regents accountable for 
individual performance. Moreover, no mechanism is planned to evaluate 
the implementation and effectiveness of the governance reforms after 
enough time has passed for the Smithsonian to operate in a fully 
reformed environment. 

Literature we reviewed indicated that while self assessments are 
valuable and important, they are limited to the views of those being 
surveyed, and a governing board should occasionally solicit the 
viewpoints of stakeholders and others close to the governance process 
to continuously search for ways to improve. Another approach to 
performance assessment is bringing in outside consultants to interview 
board members and present results. Current practices include appointing 
an independent task force or commission to interview board officers and 
others in an institution every few years concerning the board's 
strengths and weaknesses, and what the board could do to empower staff 
and advisory boards to fulfill their responsibilities more effectively. 
One governance expert we interviewed commented that boards undergoing 
governance reform should undertake a thorough, independent, 
postgovernance reform review to evaluate the effectiveness of 
governance changes. Although most of the organizations we spoke with 
that have recently undergone governance reform have not yet performed a 
comprehensive, postgovernance reform assessment, American University 
officials told us that the university is planning to conduct a review 
of its governance reform in a 5-year period to assess whether its 
governance practices and structure are effective. Given the extent and 
pace of changes occurring at the Smithsonian, as well as other 
transformations of the institution, including the hiring of a new 
Secretary and significant reforms to SBV, among other things, it is 
likely that many governance reforms will not be completely implemented 
for some time, and the effectiveness of some reforms will only be 
evident over a longer period of implementation. 

Conclusions: 

The Smithsonian Institution relies significantly on funding from 
taxpayers and donors, and as such, effective governance and 
accountability are key to maintaining trust and credibility. Governance 
and accountability breakdowns can result in a lack of trust from 
donors, grantors, and appropriators, which could ultimately put funding 
and the organization's credibility at risk. The Smithsonian's Board of 
Regents has taken many steps to implement governance reforms since June 
2007 to address several of the problems that led to the incidents that 
caused concern about governance and accountability. The Board has 
reformed executive compensation and benefits, initiated reviews of the 
Smithsonian's policies and internal controls, enhanced the access of 
key stakeholders to the Board, increased transparency, and clarified 
the roles and responsibilities of regents. 

We acknowledge and recognize the efforts that have been made by the 
Board and Smithsonian staff in confronting these governance issues. 
However, we also note that there are some areas where reforms have yet 
to be developed, or where improvements to the transparency and 
accountability mechanisms of the Board could be taken further. For 
example, reforms related to enhancing the Board's relationships with 
important stakeholders, including museum advisory boards and the 
public, remain under consideration, and current efforts have yet to 
fully develop mechanisms by which the Board can receive and consider 
unfiltered, needed information from these stakeholders on a regular 
basis. Without such mechanisms, these efforts may not have the desired 
impact of creating an environment for governance that is inclusive of 
the broad diversity of activities and viewpoints of stakeholders within 
and outside of the Smithsonian. Furthermore, while the Board is still 
considering how it can best recruit and use nonregent experts-- 
potentially using advisory board members--there is currently little 
transparency as to how nonregent experts on committees are to be 
selected, used, or evaluated. Moreover, while the Board has made 
strides in defining and refining the roles and responsibilities of 
regents, it remains unclear what actions the Board can take to hold its 
regents and their liaisons accountable in the event that they do not 
fulfill their roles and expectations. Finally, while the Board and the 
Smithsonian as a whole are currently focused on extensive governance 
reforms, and the Board is tracking the implementation of these reforms 
through a scorecard that is posted on the Smithsonian's Web site and 
updated monthly, no mechanism is planned to evaluate the implementation 
and effectiveness of these reforms after enough time has passed for the 
Smithsonian to operate in a fully reformed environment. Over the long 
term, focusing on regular and continuous improvements in these areas 
could help to enhance the credibility of and the public's trust in the 
Board, as well as its current governance reform efforts. 

Recommendations for Executive Action: 

We are making the following four recommendations to the Board of 
Regents to strengthen its governance reform efforts: 

* In implementing the Governance Committee's recommendations related to 
stakeholder relationships, the Board of Regents should develop a 
regularly occurring mechanism that ensures an understanding of and 
meaningful consideration by the Board of the key concerns of advisory 
boards and other stakeholders, and a formal means by which the Board 
follows up on those concerns. 

* To provide more transparency into the use of nonregents, the Board 
should clarify and make public the process used to select nonregents 
for service on its committees, the roles and expectations for 
nonregents, and how nonregents' performance will be evaluated. 

* To improve the accountability of regents in fulfilling their newly 
clarified roles and responsibilities, the Board should evaluate what 
actions it can take in the event of persistent neglect of duties by any 
regents or their liaisons. 

* To ensure that the multiple governance and management reform efforts 
underway are effective in addressing the issues that led to governance 
and accountability breakdowns, and also to ensure that the Board is 
focused on continuous improvement of the governance and management 
practices at the Smithsonian, the Board should plan to have an 
evaluation of its comprehensive governance reform efforts conducted 
after a suitable period of operation in the reformed environment. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Smithsonian Board of Regents 
and the Smithsonian Institution for their official review and comment. 
Both the Board and the Smithsonian concurred with all our 
recommendations. In addition, they provided technical clarifications to 
the draft which we incorporated into the final report, where 
appropriate. 

Regarding our recommendations, both the Board and the Smithsonian 
stressed the importance of enhancing relationships with stakeholders 
and agreed that these relationships and related communication can be 
improved. The Board and the Smithsonian underscored that they are 
working together to enhance these relationships and communication-- 
particularly with advisory boards. In addition, the Smithsonian 
provided examples of recent efforts to enhance communication with 
stakeholders. Although all recommendations are directed at the Board, 
the Smithsonian noted its role in helping the Board implement the 
recommendations related to improving stakeholder relationships and 
ensuring that sound governance is a priority in Smithsonian operations. 
The Board highlighted the importance of making the selection process 
for nonregents transparent and holding all regents accountable for 
their performance. The Board's comments to our report can be found in 
appendix III and the Smithsonian's comments to our report can be found 
in appendix IV. 

We are sending copies of this report to the appropriate congressional 
committee. We are also sending this report to the Chair of the 
Smithsonian Institution's Board of Regents and the Acting Secretary of 
the Smithsonian Institution. We will make copies available upon 
request. In addition, this report will be available at no cost on the 
GAO Web site at [hyperlink, http://www.gao.gov]. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. 

If you or your staff have any questions about this report, you may 
contact me at (202) 512-2834 or at goldsteinm@gao.gov. Major 
contributors to this report are listed in appendix V. 

Sincerely, 

Signed by: 

Mark L. Goldstein: 

Director, Physical Infrastructure Issues: 

[End of section] 

Appendix I: Scope and Methodology: 

To determine the extent to which the Smithsonian Institution's Board of 
Regents' (Board) actions have addressed issues related to executive 
compensation, travel, and internal control and other policies, we 
interviewed senior Smithsonian Institution (Smithsonian) management 
officials and regents and reviewed Smithsonian and other documents. 
Specifically, we met with regents, the Acting Secretary, the Chief 
Financial Officer, Director of Government Relations, Chief of Staff to 
the Board of Regents, Director of Human Resources, and other senior 
officials and staff to obtain the implementation status of the 
recommendations relating to these areas. We also reviewed Smithsonian 
and other supporting documents, including the report from the 
Smithsonian Business Ventures Task (SBV) Force, the 
PricewaterhouseCoopers unified executive compensation study, and the 
Mercer Human Resource Consulting executive compensation study that was 
used in the search process for the new Secretary. We reviewed the 
Smithsonian worksheets used to create leave balances for all executives 
transitioning to a leave policy and National Finance Center records to 
validate that all these executives are now recording leave. We reviewed 
internal Smithsonian documents describing ongoing efforts related to 
reviewing travel and event expenses, contracting policies, SBV's 
policies, and its internal control review, and we reviewed Smithsonian 
directives relevant to each of these areas. We met with the Inspector 
General to discuss ongoing efforts of this office to review the travel 
expenses of Smithsonian executives and reviewed Inspector General 
reports in this area. Furthermore, we also reviewed GAO's prior work on 
these issues, including travel expenses, contracting, and internal 
controls, and we reviewed the policies of the comparable organizations 
described below in relation to these activities. 

To determine whether the Board has addressed issues related to 
improving information available to the Board, and transparency and 
communication concerning the Board and Smithsonian operations, we 
reviewed Smithsonian laws, policy directives, and other documentation. 
We interviewed senior Smithsonian management officials, including three 
undersecretaries or acting undersecretaries, directors of all 
Smithsonian's museums, including the Director of the National 
Zoological Park, and one research center director, to discuss issues 
related to their understanding of Board functions and their level of 
communication with the Board. To assess how the Board has improved 
transparency, we reviewed the Board's Web page and policies and 
procedures related to providing information to the public, including 
its Freedom of Information Act policy, and compared it to the Act. We 
interviewed key Smithsonian officials, including the Chief of Staff to 
the Board of Regents, Acting Secretary, the Director of External 
Affairs, and the Director of Communications and Public Affairs to learn 
the status of the Board's plans to improve transparency. We also met 
with the General Counsel, the Chief Financial Officer, and the 
Inspector General to assess the level of communication and access 
between the Board and key Smithsonian officials, before and after 
governance changes. We reviewed the Board's meeting minutes and 
supporting documents, including revised bylaws and position 
descriptions to determine the extent to which information regarding the 
Board's decisions was made available to the public. We met with chairs 
of selected advisory boards to obtain their perspective of the Board's 
interaction and communication with them. We interviewed 10 science, 
arts, history and culture, and research-oriented advisory boards to 
obtain a nongeneralizable representation. To assess the Board's efforts 
at improving communication with other stakeholders, we reviewed GAO's 
work on federal agency communication strategies. 

To determine the extent to which the Board has addressed issues related 
to roles and responsibilities, size and structure, and performance of 
the Board, we reviewed Smithsonian and other documents to assess 
current board practices and the Board's progress towards implementing 
governance reform efforts. To examine the roles and responsibilities of 
the Board, we looked at relevant laws pertaining to the creation and 
operation of the Smithsonian Board of Regents and reviewed Smithsonian 
documents, including Board bylaws and written set of the Board's and 
its committees' duties and responsibilities. To assess the size, 
composition, and structure of the Board, we reviewed a recent 
BoardSource report that was commissioned by the Board to examine 
possible options for the Board's size and structure. To assess the 
extent the Board has addressed issues related to its performance 
assessment, we examined relevant Smithsonian documents, including a 
draft board assessment instrument, compiled current governance 
practices from several sources, and interviewed key Smithsonian 
officials. We interviewed all of the current citizen regents, except 
the most recently appointed regent, three former citizen regents, and 
four congressional regents and the primary staff liaisons to the 
remaining two congressional regents. We also obtained a written 
response from the Chief Justice to questions we provided. We 
interviewed senior Smithsonian officials, including the Chief of Staff 
to the Board of Regents and General Counsel to obtain their perspective 
and information on the status of the governance reform efforts. To 
identify current nonprofit governance practices, we reviewed literature 
on corporate and nonprofit governance, including literature from 
organizations such as the American Association of Museums, BoardSource, 
Council on Foundations, Independent Sector, the Museum Trustee 
Association, and The Conference Board. We also reviewed GAO's work on 
governance of several organizations, including the John F. Kennedy 
Center for the Performing Arts, Legal Services Corporation, and Federal 
Deposit Insurance Corporation. We identified and interviewed governance 
experts on nonprofit governance, including academics, to obtain 
independent views on the Smithsonian's governance problems and whether 
recent governance changes will address those problems. The governance 
experts we interviewed included four governance or museum experts who 
advised the Smithsonian during its governance review, as well as six 
that we identified through a literature search or were referred to us 
by other experts in the field. 

To perform all of our work on all of the above objectives, we also met 
with officials from several institutions that had some similarity to 
the Smithsonian and that had recently undergone governance reforms. We 
focused on organizations that had had similar governance problems, 
conducted a governance review, and changed their practices or 
structure; organizations that had a structure that consisted of a 
central or national governing body with multiple programming units; and 
organizations with similar missions and stewardship challenges. We met 
with officials from American University, American National Red Cross, 
J. Paul Getty Trust, and United Way of America, who had in-depth 
knowledge and contributed to governance reform efforts at the 
respective organizations. We also met with officials from the National 
Trust for Historic Preservation, an organization that, according to 
officials, initiated governance reform without having experienced 
similar governance challenges. We reviewed recently enacted legislation 
relating to governance for one of the organizations. While we did not 
evaluate the effectiveness of the governance reforms efforts at these 
comparable organizations, we reviewed and analyzed documents from these 
organizations relevant to their governance reform efforts. 

We conducted this performance audit from May 2007 to May 2008 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

[End of section] 

Appendix II GAO's Assessment of Governance Committee's Report 
Recommendations (as of May 2008): 

Figure: 

This figure is a chart showing GAO's assessment of Governance 
Committee's report recommendations (as of May 2008). 

[See PDF for image] 

[A] We confirmed that the executive compensation process that was 
followed to set the salary range for the next Secretary's compensation 
package was refined to address many of the IRC's concerns about the 
previous compensation process, but we did not validate the extent to 
which this process follows best practices. 

Source: GAO presentation and analysis of Smithsonian data. 

[End of section] 

Appendix III: Comments from the Smithsonian Institution Board of 
Regents: 

Smithsonian Institution: 
SI Building: 
Room 207:  
1000 Jefferson Drive: 
SW Washington DC 20560-0040: 

The Board of Regents: 

Chancellor: 
The Chief of the United States: 

Chair: 
Roger W. Sant,:  
Washington, D.C.: 

The Honorable:  
Thad Cochran,: 
Mississippi: 

The Honorable: 
Patrick J. Leahy,: 
Vermont: 

The Honorable: 
Xavier Becerra,: 
California: 

The Honorable: 
Sam Johnson,: 
Texas: 

The Honorable: 
Doris Matsui,: 
California: 

Eli Broad: 
California: 

Philip Frost: 
Florida: 

Shirley Ann Jackson: 
New York: 

Robert P. Kogod:
C. Spoon,: 

John W. Carter, Jr.: 
Massachusetts,: 

Patricia W. Stonesifer: 
Washington: 

May 7, 2008: 

Mark L. Goldstein: 
Director, Physical Infrastructure Issues: 
Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Goldstein: 

On behalf of the Board of Regents of the Smithsonian Institution, I 
would like to express our sincere gratitude to you and the staff of the 
Government Accountability Office (GAO) for this comprehensive review of 
our governance reform effort. The past year has been tumultuous for the 
Smithsonian and we appreciate the fair, balanced, and productive 
approach of the report. The Regents have been advised of your findings 
and recommendations and, as Chair and on behalf of the Board, I can 
represent that we embrace the recommendations. As I discuss in more 
detail below, we are confident that these recommendations complement 
our efforts to become a more effective governing board and a leader in 
21" Century nonprofit governance. 

I address each recommendation separately below to underscore our 
understanding and note many of the efforts already underway to 
implement them. 

Ensuring an understanding of key stakeholder concerns, including the 
advisory boards: 

We strongly agree that our efforts must now focus on improving the 
relationship between the Board of Regents and our many stakeholders, in 
particular the more than 600 dedicated members of the advisory boards. 
The Acting Secretary, in his response, described the efforts to improve 
communication with the Congress, Smithsonian staff and volunteers, and 
the public. The Board supports those efforts and is partnering with 
senior management to facilitate communications with, and to disseminate 
information about, the Regents. 

Over the next few months, we will focus on establishing mechanisms to 
improve our communications and partnership with the advisory boards. In 
my conversations with the chairs of these boards, and as I reported to 
the Regents at our May 5 meeting, Smithsonian advisory boards are an 
underutilized asset. Most of the boards work closely with their museum 
directors and staff and understand best the pressing issues facing 
their museums and programs. Effective oversight of a diverse and 
complex organization such as the Smithsonian must reflect the 
perspective and expertise of these groups. 

At our September 2008 board meeting, we expect the Governance and 
Nominating Committee to bring to the full Board a series of 
recommendations to strengthen this critical partnership. In the 
meantime, we will continue our outreach. Beginning immediately, staff 
reporting directly to the Regents will attend the meetings of advisory 
board, allowing the Regents to better understand the business of each 
group and to create a formal vehicle for direct communication to the 
Regents and to help to ensure that issues raised by the boards to the 
Regents are appropriately addressed. 

Clarifying the process to select, and the roles of, non-Regents on 
committees: 

The Regents believe that the aggressive, but prudent, supplementation 
of the Board with non-Regent members on committees will broaden our 
capacity and expertise. We recognize that non-Regent members can 
greatly enhance the work of the committees by providing specific 
expertise in areas. However, to be productive, we believe that non- 
Regent members should also possess significant ties to the Institution 
beyond their committee assignment. Again, we believe that greater 
involvement from the advisory board leaders will help address this 
issue. The 600 members boast a wide variety of relevant expertise and 
skills and have already demonstrated a strong commitment to the 
Institution. 

This reliance, however, is founded in our commitment to consider non-
Regent members as full and equal colleagues. All committee members --- 
Regents and non-Regents—have the same roles and responsibilities. 
Assessment of a committee member's performance will not distinguish 
expectations based on status. We agree with your recommendation that 
the process to select non-Regent committee members should be 
transparent and clear and we will consult with the advisory boards and 
other stakeholders on effective ways to identify qualified candidates. 

In this regard, I am very pleased to note that at the Board's May 5 
meeting, we created a standing Investments Committee, chaired by a non-
Regent and with a majority of non- Regent members. This step not only 
acknowledges the importance placed by the Board on managing the 
endowment, but also the role non-Regents will begin playing in 
governing the Smithsonian, and the trust we have placed in them. 
Indeed, Diana Aviv, President and Chief Executive Officer of 
Independent Sector, and a non-Regent member of the Governance and 
Nominating Committee, played a key role in the development and 
implementation of our reform agenda. 

Evaluate potential actions to address non-performance by Board members: 

The Regents share a strong expectation that all members will be equally 
engaged and active. As part of our governance reforms, we clearly set 
forth the duties and expectations of each Regent. Service as a Regent 
is a great honor, but with that honor conies significant 
responsibilities. Accepting membership now requires a promise by each 
Regent to be active, engaged, and productive. We are committed to 
working together, equally sharing our oversight and governing duties. 
All Congressional and Citizen Regents are expected to serve on at least 
two committees and each of us pledged to do so without hesitation. 

We strongly believe that by clearly articulating Regents' roles and 
responsibilities accompanied by an informed and explicit acceptance by 
each member will help ensure a committed Board. We are also 
implementing an annual assessment process that will help identify 
weaknesses in the performance of individual members or the Board as a 
whole. We anticipate that these critical improvements —concrete 
commitments and expectations and routine evaluations — will ensure the 
productivity of all members of the Board. However, we agree that the 
Board, in consultation with the Congress, should identify potential 
remedies to cure persistent neglect of duties by a Regent. Evaluate the 
efficacy of the Board's governance reform efforts 

Over the past year, we have learned that good governance evolves and 
that complacency is a symptom of a disengaged board. We fully agree 
with your conclusion that the Board must focus on the continuous 
improvement of the Smithsonian's governance and management practices by 
reviewing the efficacy of our reforms after a suitable period of time. 
At our May 5 meeting, the Board committed itself, through the 
Governance and Nominating Committee, to a review of our governance 
practices every three years. We also recognize that the foundation for 
long-term governance is not complete. As noted above, we must still 
strengthen the partnership between the Regents and the advisory boards 
and challenges remain in establishing robust financial and internal 
controls. 

Over the past year, we believe that the Smithsonian has become a leader 
in non-profit governance. The process was not easy, the problems we 
found were challenging, and many choices made were painful. In the end, 
we believe that the Board, the Institution, and those who share our 
passion for what the Smithsonian does, are better for it.

Sincerely, 

Signed by: 

Roger W. Sant: 

[End of section] 

Appendix IV: Comments from the Smithsonian Institution: 

Smithsonian Institution: 
Smithsonian Institution Building: 
1000 Jefferson Drive SW: 
Washington DC 20560-0016: 
202.633.1846 Telephone: 
202.736.2515 Fax: 

Cristian Semper: 
Acting Secretary: 

May 6, 2008: 

Mr. Mark L. Goldstein: 
Director, Physical Infrastructure Issues: 
Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Goldstein:

On behalf of the senior management of the Smithsonian Institution, I 
want to thank the Government Accountability Office (GAO) for its 
thorough. and. thoughtful review of governance reform at the 
Smithsonian. Over the last year, GAO staff members have devoted 
considerable time and energy to .understanding the complex nature of 
the Smithsonian, the challenges it faces, and the improvements we have 
made. We appreciate the fair and detailed inquiry you have conducted 
and are pleased to join the Board of Regents in accepting the 
recommendations made by this report. While all four of the report's 
recommendations are directed to the Board, the senior leadership of the 
Smithsonian will play a role in the implementation of two of those 
directives, specifically by improving communications with stakeholders 
and by ensuring that sound governance remains a priority in our 
operations. 

Communications: 

One area of the report on which we would like to add more detail is the 
great progress we have made in improving communication with our 
internal and external stakeholders during the past year. We have 
greatly increased the frequency and depth of information that is shared 
with staff, Congress, advisory board members and the public. More 
importantly, we have created more opportunities to listen to our 
stakeholders and have actively solicited their input on important 
issues. We have also collaborated with the members of the Board of 
Regents to increase their visibility and accessibility by the members 
of the press, and the public. We work together to ensure coordination 
of announcements, preparations for public meetings, and dissemination. 
of important information to staff and. key stakeholders, such as 
Congress. The implementation of our new communications strategic plan 
in the coming months will build upon and enhance these improvements 
even further. One of my proudest accomplishments in the year I have 
spent as Acting Secretary is having laid the foundation for an open 
dialogue between the senior management and the entire Smithsonian 
staff. Internal communication will take on added importance in the next 
few years as the Smithsonian embarks on an active new chapter by 
welcoming a new Secretary, initiating an Institution-wide strategic. 
plan, and launching a national fundraising campaign. Through 
Smithsonian-wide email communications, articles in staff publications, 
all-staff meetings, and webcasts we have updated employees more 
regularly on major decisions and events with Institution-wide impact. 
More frequent and more candid meetings with directors and managers have 
also improved the flow of information between the senior leadership and 
the units they serve. To ensure the dialogue with staff continues and 
evolves as needed, we have named a new Director of Internal 
Communications who will be dedicated to this important effort. 

We have also improved the type and quantity of information that we make 
available to Congress and the public. Through additional meetings and 
communications with our Congressional committees and their staffs and 
more frequent consultations on key issues, we hope that Congress has 
the thorough and timely information it needs to make funding decisions 
and exercise its oversight role. The policy that governs how the 
Institution. responds to requests for information is now contained in a 
new directive and we have enhanced the contents of our website to offer 
timely and relevant information. We work with the Office of the Regents 
to ensure materials are posted quickly and are comprehensive enough to 
meet public expectations of transparency. 

Another significant priority is engaging and communicating 'with the 
hundreds of devoted volunteers who give of their time and expertise by 
serving on one of the Smithsonian's advisory boards. Although the 
relationships between these boards and the individual museums, research 
centers and programs they serve has always been strong, it is clear 
that we can do more to involve them in the guidance of the Institution. 
overall. As the Regents consider ways to reach out to the advisory 
boards, the senior management is doing the same by seeking out advisory 
board members for advice, requesting their participation in pan-
Institutional initiatives, and by attending and participating in board 
meetings more frequently also convened a meeting with the chairs of all 
our advisory boards last January to share information and experience 
across boards. 

Governance: 

While many of the governance reforms recommended by the Board of 
Regents last June were directed to the Board itself, the majority of 
these actions were the responsibility of Smithsonian management to 
implement. In some cases, as GAO points out, we deliberately revised 
the deadlines on some of the recommendations to be sure we were 
generating sound, workable policies and procedures. Reforms in the 
areas of financial, contracting, travel and spending policies in 
particular presented challenges because of the decentralized nature of 
Smithsonian practices in these areas. Adequately anticipating the 
implications of a new requirement, training staff to carry it out, and 
installing controls to ensure it is properly enforced are all 
worthwhile but necessarily time-consuming exercises. In addition, many 
of these reform efforts presented the opportunity to revise and improve 
outdated or inefficient rules and practices which extended the time 
necessary to complete them. Only with the assistance and guidance from 
staff around the Institution — many of whom participated on the teams 
that were tasked with leading this effort — was it possible to meet the 
deadlines that were established by the Regents. In those cases where 
deadlines were revised, it was done so to ensure the end result was 
stronger and more likely to succeed. 

In closing, the Smithsonian has taken this opportunity to strengthen 
its governance and improve itself in ways not necessarily anticipated 
by the Regents' 25 recommendations. We think this has made us a 
stronger Institution, and we look forward to working with the Board of 
Regents in the months and years ahead to assess whether we have 
achieved this goal. We appreciate your insights and will work to ensure 
the recommendations outlined in this report are successfully 
implemented. 

Sincerely,

Signed by: 

Cristian Semper: 

[End of section] 

Appendix V: GAO Contacts and Staff Acknowledgments: 

GAO Contact: 

Mark Goldstein, Director (202) 512-2834 or goldsteinm@gao.gov: 

Acknowledgments: 

In addition Andrew Von Ah, Assistant Director; Shane Bechtold; Seth 
Dykes; Delwen Jones; Jennifer Kim; Margaret McDavid; Kim McGatlin; 
Susan Michal-Smith; Amanda Miller; Sara Ann Moessbauer; Stanley 
Stenersen; and Alwynne Wilbur made key contributions to this report. 

[End of section] 

Footnotes: 

[1] An ex-officio regent is a regent not by appointment but by virtue 
of holding a certain office. 

[2] According to the Board's staff, two IRC recommendations were not 
encompassed by the Governance Committee's recommendations: a 
recommendation to audit the former Secretary's and senior management's 
expenses (although the Smithsonian did separately decide to address 
this recommendation) and a recommendation not clearly directed to the 
Board, which stated that achieving effective oversight and governance 
at nonprofit organizations may ultimately require legislative action. 

[3] The Act of August 10, 1846, to establish the Smithsonian 
Institution for the Increase and Diffusion of Knowledge Among Men, as 
amended, is codified at 20 U.S.C. §§ 41-70. 

[4] For example, in the Inspector General Act of 1978, as amended, the 
Smithsonian is listed as a designated federal agency and accordingly, 
under the Act the Smithsonian is required to establish an Office of 
Inspector General and conduct and supervise audits and investigations 
relating to programs and operations. See 5 U.S.C. App. 3 § 8G(a)(2). 
Also, the Court held the Smithsonian was a federal agency for the 
purposes of the Federal Tort Claims Act and therefore subject to its 
provisions. See Expeditions Unlimited Aquatic Enterprises, Inc. v. 
Smithsonian Institution, et al., 566 F.2d 289 (D.C. Cir. 1977). 

[5] For example, 20 U.S.C. §42 establishes the Board's responsibility 
to conduct the business of the Smithsonian, and 20 U.S.C. §50 provides 
for the Board to accept specimens and objects of art and for these 
items to be appropriately classed and arranged. 

[6] GAO, Smithsonian Institution: Funding Challenges Affect Facilities' 
Conditions and Security, Endangering Collections, GAO-07-1127 
(Washington, D.C.: Sept. 28, 2007). 

[7] While the Smithsonian, like other nonprofit organizations, is not 
subject to Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 
745 ( 2002), it has adopted certain requirements of the Act; for 
example, the Board's Audit and Review Committee engages in and oversees 
the services of external, independent auditors and the Board holds 
executive sessions. 

[8] Two IRC recommendations were not encompassed by the Governance 
Committee's recommendations. 

[9] These figures for the former Secretary and the Secretary-elect's 
total compensation do not include employer contributions to life 
insurance and long-term disability, which are provided at a salary- 
based rate to all eligible trust employees--and are the same amounts 
for the previous Secretary and the Secretary-elect--or the employer 
contribution to health and dental plans, which are offered to all 
eligible trust employees. 

[10] For example, three of the IRC's specific concerns about the 
compensation studies used to set the former Secretary's salary were (1) 
Smithsonian management, rather than the Board, hired the firm that 
conducted the compensation study; (2) Smithsonian management, rather 
than the compensation consultants, chose the comparable organizations 
to be used in the studies; and (3) the comparable organizations used 
included only a relatively small percentage of public universities--20 
percent in one study and 8 percent in a later study--which the IRC 
considered a more appropriate comparison group to the Smithsonian due 
to its reliance on public funding. In contrast, the compensation study 
performed to guide the regents in setting the new Secretary's salary 
was performed at the request of the Board, the comparable organizations 
used in the study were chosen by the consultant, and the comparable 
organizations were made up of 50 percent public universities (with the 
other 50 percent being museums). 

[11] Some of these executive positions are deemed Secretary-designated 
positions and are hired at the will of the Secretary. Since these 
positions do not have similar protections as federal positions, they 
will be eligible for a 9 percent differential above the federal salary 
caps reflecting that lack of protections. 

[12] According to the CFO, SBV's travel policy had always been 
generally aligned with Smithsonian and federal travel policies, except 
for minor divergences, and SBV already has changed its travel policy so 
that it is now fully in line with federal travel regulations. According 
to Smithsonian officials, in addition to the work done by the CFO team, 
the Compensation and Human Resources Committee asked for a review of 
SBV's human resources practices. To avoid duplication of work, that 
area was not reviewed by the CFO team. The findings of that review were 
that SBV conformed to established policies except in the areas of 
positions classification, pay administration, hours of duty for Sunday 
pay, and employee conduct. According to Smithsonian officials, the 
latter two are minor differences, while the first two represent the 
cornerstones of the pay banding system in place in SBV. The Committee 
determined that these variances were permissible. 

[13] This definition is very similar to the definition we have 
established, which states that internal control is an integral 
component of an organization's management that provides reasonable 
assurance that the following objectives are being achieved: 
effectiveness and efficiency of operations, reliability of financial 
reporting, and compliance with applicable laws and regulations. See 
GAO, Standards for Internal Control in the Federal Government, GAO/ 
AIMD-00-21.3.1. (Washington, D.C.: November 1999). 

[14] The Smithsonian's five activities are described as establishing a 
proper control environment; assessing risks to the achievement of the 
Smithsonian's objectives; practicing preventive and detective control 
activities; communicating up, down, and across the organization; and 
monitoring internal control performance over time to determine its 
effectiveness. Our five standards for internal control include control 
environment, risk assessment, control activities, information and 
communications, and monitoring. See GAO/AIMD-00-21.3.1. 

[15] The CFO attends all meetings of the Audit and Review and Finance 
and Investment Committees' meetings and records those meetings' 
minutes. 

[16] The Smithsonian is not subject to the Federal Advisory Committee 
Act, which requires federal agencies that sponsor federal advisory 
committees and have at least one member that is not a federal employee 
to comply with requirements for establishing and managing advisory 
committees. See 5 U.S.C. App. 2. 

[17] The other two advisory board chairs we spoke with did not comment 
on this issue. 

[18] The Board rescheduled its June 2008 meeting to November 2008. 

[19] GAO, Highlights of a GAO Forum: Mergers and Transformations: 
Lessons Learned for a Department of Homeland Security and Other Federal 
Agencies, GAO-03-293SP (Washington, D.C.: Nov. 14, 2002). 

[20] GAO, Architect of the Capital: Committed, Sustained Leadership 
Needed to Continue Progress, GAO-07-407 (Washington, D.C.: Feb. 28, 
2007). 

[21] While the Vice President has not attended any meetings, his regent 
liaison has attended most Board meetings. Congressional and ex-officio 
regents each have a regent liaison, who supports them in their service 
as regents and attends Board meetings and serves as their "eyes and 
ears." 

[22] Fiduciary duty is a duty imposed by law on a person in a position 
of trust to act for someone else's benefit and not to further one's 
personal interests. As Board members, this means a duty to use a high 
level of care to manage the Smithsonian to best promote the 
institution's interests. GAO, Legal Services Corporation: Governance 
and Accountability Practices Need to Be Modernized and Strengthened, 
GAO-07-993 (Washington, D.C. :Aug. 15, 2007). 

[23] On March 14, 2008, John McCarter was officially appointed to be a 
citizen regent of the Board. 

[24] The Smithsonian's Executive Committee consists of only three 
members--one of whom was formerly the Chancellor, an ex-officio, who 
chose not to exercise his voting powers. Recently, the Chancellor 
removed himself from the Board's Executive Committee and a citizen 
regent was added to the Committee. 

[25] In January 26, 2008, BoardSource issued a report that was 
commissioned by the Governance and Nominating Committee to examine the 
composition and structure of the Board. 

[26] According to the Chief of Staff to the Board, the Executive 
Committee also will meet periodically with the Chancellor of the Board. 

[27] For example, the Board was previously involved to varying degrees 
in budgetary and planning events, including annually dedicating one of 
its meetings to strategic planning issues and formally approving the 
Secretary's organizational goals. However, the Board has not 
participated directly in developing, reviewing, or formally approving 
the Smithsonian's strategic plan. The Board tasked the Finance and 
Investment Committee to review the Smithsonian federal and trust budget 
formulation process to identify key budgetary events and strategic 
planning activities that would benefit from or require the Board's 
direct involvement in the process. This review was completed and its 
recommendations to expand the role of the Board in the budget and 
strategic planning process were approved at the May 5, 2008, Board 
meeting. 

[28] The BoardSource report also suggested creating an ad hoc campaign 
committee as an alternative to supporting the Board on its major 
capital campaign. 

[29] The Board also created a separate Investment Committee, which was 
previously a subcommittee of the Finance and Investment Committee. 

[30] Nonregents are individuals who are members of and contribute to 
the work of Board committees, but are not members of the Smithsonian 
Board of Regents. 

[31] Two Board committees--the Audit and Review and Finance and 
Investment Committees--conducted performance assessments in the past. 
However, the results of those assessments were not reported to the full 
Board. 

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