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forward for the Regents' final consideration at their May 7, 1990, meeting. The staff will also prepare a list of delegated authorities now in place within Smithsonian management.

[[underlined]] REPORT OF THE AUDIT AND REVIEW COMMITTEE [[/underlined]]

Meeting on October 3, the Audit and Review Committee reviewed with staff various corrective measures which have stemmed losses of inventory and cash in the Museum Shops.  Coopers & Lybrand indicated that the Smithsonian has a reliable accounting system and generally sounder inventory procedures than in years past; potential weaknesses in inventory belonging to selected activities stem primarily from utilizing commercial warehouse facilities.  In discussion the Committee suggested that management should deal with suboptimal warehousing services by changing contractors.  It was noted that the organization of auxiliary activities would be among the topics to be addressed in a management and organization review -- a study which the Committee will follow with interest.

The Acting Inspector General discussed with the Committee the draft of the Inspector General's first semi-annual report to the Board of Regents and the Congress.  As drafted it cites three significant findings in the last six months: needed improvements in selected collection inventories, museum shop losses of inventory and cash, and incidents of embezzlement.  In discussion, the Committee considered the staffing level for the Inspector General and the relationships between the Inspector General, the independent auditors, and the Committee.

The Committee reviewed the complexities and costs inherent in the renovation of the National Museum of Natural History, given the size, age and monumental qualities of the structure, the presence of asbestos, the precarious condition of its mechanical systems, and the desirability of continuing staff and public activities within the museum with minimum disruption.  After discussing alternative schemes, the Committee agreed with the approach recommended by staff, which incorporates the construction of a structure within the east court of the Museum to accommodate relocations of staff and add permanent space for the Museum.  The Committee noted that this work accounts for a major proportion of the Institution's backlog of repair and renovation projects; while it is expensive, the cost of not performing the tasks on this invaluable building would be unthinkable.

Reminded that the time for contract renewal with the independent auditors may precede the Committee's next meeting, the Committee authorized the Treasurer to contract with Coopers & Lybrand for an ensuing year's work in accordance with the resolution of the Board of Regents on January 30, 1989.

[[underlined]] REPORT OF THE PERSONNEL COMMITTEE [[/underlined]]

The Personnel Committee found no evidence of conflict of interest among the members of the Secretary's Management Committee, whose statements of financial interests were reviewed, and reported that the financial reporting procedures for those other key staff who must report have functioned in accordance with established guidelines. 

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