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Mr. Bartko reviewed Coopers and Lybrand's "Report to Management," and stated that it contained nothing of great significance that the Audit and Review Committee need be concerned about. Recommendations were made for improvements in six basic areas (general accounting, investments, cash and cash receipts, accounts payable, payroll, and data processing operations), and management has been receptive and has taken corrective actions.  Completion of the corrective actions should be apparent in the next year's audit. Coopers and Lybrand observed no major weaknesses nor any apparent fraud.

III. [[underlined]] The Income, Budgeting, and Expenditure of General Unrestricted Trust Funds [[/underlined]]

Mr. Hohenlohe, the Treasurer, reviewed a chart showing the general unrestricted trust funds of the Institution.  These funds derive from three sources:  investment income, proceeds of auxiliary activities, and unrestricted gifts, bequests, etc.  The funds are expended for administrative costs; allotments to various programs (such as Cooper-Hewitt, television, etc.); the $2 million per year program for acquisitions, educational outreach, and scholarly studies; transfers to unrestricted endowment; and plant funds, such as land acquisition or construction projects.

Mr. Jameson, Assistant Secretary for Administration, presented an overview of the budget process.  The objective is to formulate a consolidated budget incorporating both Federal and trust funds for some 60 organization units, representing nearly 5,000 employees, with overall funding approximating $175 million.  The process