Tuesday, October 9, 2007

The Smithsonian Institute has spent nearly $2 million in recent years to sweeten job offers to prospective employees through cash advances, relocation expenses and tuition, a government audit has found.

But the payments have come under scrutiny amid new findings that Smithsonian officials have failed to report some of the expenditures to the Internal Revenue Service.

“The underreporting of income … is troubling because it means that the Smithsonian did not report employees’ correct wages to the IRS and may not have withheld the proper tax amounts for employee pay,” Smithsonian Inspector General A. Sprightley Ryan wrote in a recent audit that reviewed hundreds of relocation and retention payments.

The payments, ranging from $250 to more than $100,000 per employee, are allowable under federal law. They are supposed to make it easier for the Smithsonian to attract prospective employees in tough-to-fill positions.

Mr. Ryan’s audit, sent to Smithsonian officials on Sept. 28, scrutinized relocation and recruitment expenses from 2002 to 2006 totaling about $1.9 million. Among the Smithsonian’s most generous payments went to employees in the Smithsonian Business Ventures (SBV). The division runs restaurants, gift shops and other money-making operations.

Twenty SBV employees received at least $353,926 in retention and relocation expenses, including one executive who got $105,800 for moving and temporary living expenses, according to the report.

In addition, two employees in the Smithsonian’s National Museum of African American History and Culture received $100,000 combined, and three employees in the Smithsonian’s office of external affairs were paid a total of $75,759. The report did not identify the employees’ names or job titles.

One executive hired in 2005 received more than $40,000 in connection with a planned move from Boston to the District, but the employee never relocated and left the job within months, according to the report. Still, the employee was never required to reimburse the Smithsonian.

The inspector general also found the Smithsonian failed to report about $184,000 in relocation and recruitment payments as taxable income to the IRS, including a $10,000 payment in 2003 to help an employee cover the closing costs on a new house.

Smithsonian officials say they noticed problems nearly two years ago and have undertaken a series of reforms.

Staring Oct. 1, for example, the Smithsonian no longer offers moving expenses to new employees “except in limited circumstances where justified,” according to a two-page letter the Smithsonian sent to Mr. Ryan last month in response to a draft copy of the audit.

The audit comes as the Smithsonian tries to move past a financial scandal that prompted the resignation of Smithsonian Director Lawrence Small in March.

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