Viewing page 19 of 129

This transcription has been completed. Contact us with corrections.

-17-

It is notable that throughout the period up to 1970 the [[underline]]unrestricted purpose[[/underline]] portion of Smithsonian Trust Funds was very small, as shown on Table 2.  Up to 1950, for example, such funds averaged only around $100,000 per year.  Even through FY 1971, unrestricted funds on a net basis (i.e., after deducting losses of various activities) rarely exceeded $400,000 per year.  The portion of the administrative costs of the Institution borne by its Trust Funds, at that time equaling around $2,700,000 per year, were financed--as they are now--by charges ("overhead") against expenditures for our trust fund activities (i.e., research and other projects funded by restricted purpose endowment fund income, or by grants, contracts and gifts, plus auxiliary activities).  The result of this low level of unrestricted-purpose income was that, despite austerity measures, the expansion of the Institution plus inflationary cost increases caused a series of five operating deficits in the years 1965-1971.  These deficits eroded the balance of unrestricted Trust Funds from $3,226,000 previously accumulated to a totally inadequate operating level of $1,720,000.  If continued this would have meant the drawing down of the very small unrestricted endowment funds, and eventually posing a threat to the basic independent nature of the Smithsonian itself.