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-43-      ATTACHMENT 2

Guidelines for the Use of Funds in Formulation  of the Budget

The following guidelines are applied in the formulation of the Institution's consolidated budget.

1. Federal appropriations are used as the primary source of support for basic research; the care, documentation, and exhibition of the national collections; education programs; maintenance, repair, renovation, and construction of facilities; utilities and communications services; protection services to buildings and their contents; and for the general administration and management of the Institution's programs.

2. The auxiliary activity staff and related operating expenses are funded from the earned income of these activities. Where losses are budgeted for certain of these activities, they are offset by the gains of others. Other activities such as the Smithsonian Press, usually included in the "auxiliary" category of the trust funds budget because they have earned income, also receive appropriated funds.

3. Management and administrative services units of the Institution, including legal counsel, accounting, payroll, personnel, supply, and others, are staffed and funded in part from Federal funds and in part from nonappropriated unrestricted trust funds, including funds resulting from overhead recovery on grants and contracts administered by the Smithsonian and from administrative fees charged to trust funded activities. This procedure produces a ratio of Federal and trust fund administrative support