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[[underlined]] Financial Report [[/underlined]]

Mr. Hohenlohe, Treasurer, summarized the highlights of the Financial Report and provided an update of events occurring subsequent to its preparation.

In early January, the Office of Management and Budget approved the Institution's full FY 1981 pay supplemental request of $5,345,000 to cover the current year costs of the October, 1980 legislated pay increase. The program supplemental request of $175,000 needed to reimburse the Government Printing Office for increased costs associated with the international exchange of government publications, however, was rejected, requiring that funds for this purpose be reprogrammed from existing base resources.

The personnel freeze imposed by the President on Executive Branch employment will apply to Federal employees of the Institution, with exemptions permitted only for positions directly responsible for the safety of human life or the protection of property (primarily by Smithsonian guards and animal keepers). OMB has directed that lapse savings resulting from the freeze be applied to reducing the 1981 pay supplemental request previously approved and transmitted with the 1982 budget.

It is not known at this time whether the new administration will impose any budget amendments on the FY 1982 budget request currently before the Congress.

It was noted that although the trust fund gross revenues are projected to increase over the next year, net trust fund revenues to the Institution are not expected to increase substantially, and the eroding effects of inflation will undoubtedly reduce the purchasing power of those dollars. The Treasurer is undertaking an analysis of the inflation factors in the current budget and the [[underlined]] Five-Year Prospectus [[/underlined]]; preliminary results of this constant dollar study show little real growth and some actual decline in some portions of the budget.

The Financial Report follows: