Treasurer’s Report
In fiscal year 2022, the National Gallery resumed a normal schedule of operations with a full calendar of public programs for the first time since the COVID-19 pandemic began in February 2020. Visitors responded enthusiastically, and attendance reached 3.2 million, approaching pre-pandemic levels. Online audiences also responded strongly, and website visitation increased by two-thirds to 13.2 million. This success contributed to a strong operating surplus in fiscal year 2022. However, the National Gallery was adversely impacted with the most severe global equity market downturn since 2008, resulting in a significant decline in the market value of the investment portfolio and net assets in fiscal year 2022. Despite these challenges, the National Gallery’s financial position remains strong due to prudent management of expenses, strong support from Congress and the administration, and the continued generosity of private citizens, foundations, and corporations.
The federal commitment to operate and maintain the National Gallery originates in the 1937 Joint Resolution of Congress that accepted Andrew W. Mellon’s unprecedented gift to the nation of his art collection, the funds to construct the West Building, and an endowment. The Joint Resolution pledged that the United States would provide funds for the upkeep, administrative expenses, and costs of operations, including the protection and care of the works of art given to the nation, so that the National Gallery would at all times be properly maintained and remain open to the public free of charge.
The National Gallery receives annual federal appropriations to support core programs and renovations of its buildings as part of the budget approved annually by Congress and signed by the president. Income from endowments as well as gifts and grants designated by donors for other specific purposes supplement the federal appropriations. Endowment support for expenditures is computed under the National Gallery’s spending policy and used in accordance with donor-imposed restrictions. The National Gallery is a nonprofit organization exempt from federal income taxes under the provisions of Section 501(c)(3) of the Internal Revenue Code.
Financial Position
The National Gallery’s net assets totaled $1.4 billion on September 30, 2022, decreasing by $322.0 million or 18.7 percent during the fiscal year. This result is mainly due to the performance of the investment portfolio, which ended the year at $1.0 billion, down $319.9 million net of new gifts, manager fees, and spending to support operations and art purchases. In fiscal year 2022, the investment portfolio returned -22.5 percent, giving back most of the gains achieved in the prior fiscal year. Global equities experienced the worst three-quarter decline since the 2008 global financial crisis, and global bonds continued their decline for the fifth straight quarter, fueled by sharply higher inflation caused by continuing pandemic disruptions and the war in Ukraine followed by rapid interest rate increases by the Federal Reserve. The broad market declines this year negatively impacted all asset classes in the National Gallery’s investment portfolio. The value of other investments and trusts held by others totaled $27.0 million, decreasing $9.6 million from the prior year due to distributions from charitable gift annuities and decreases in the market value of trusts held by others for the benefit of the National Gallery of Art. Cash balances were down $8.5 million from the prior year due primarily to vendor payments for completed renovation projects.
Property, plant, and equipment assets increased $14.5 million over the prior year, representing $30.9 million of investments in capital expenditures offset by $16.4 million of depreciation expense. The capital expenditures primarily funded the completion of East Building renovation projects included in the National Gallery’s comprehensive Master Facilities Plan. The Master Facilities Plan is a federally funded, long-term capital renewal program designed to address life safety, security, and infrastructure improvements necessary to maintain and protect the National Gallery’s buildings. Major East Building renovation projects completed in fiscal year 2022 included the replacement of the original East Building main atrium skylight dating to the opening of the building in 1978; major HVAC, electrical, and safety systems renovations; a new fire stair serving Tower 3; and replacement of the main entrance window wall. The installation and commissioning of six gas-fired hot water boilers, which supply all National Gallery heating and cooling, was completed, and work began on the West Building roof replacement and exterior stone restoration of the north and south porticos. In addition, design work was completed and a construction contract awarded for the joint art storage project with the Smithsonian Institution at its Museum Support Center in Suitland, Maryland. The new shared structure will provide over 145,000 square feet of collections storage and support space at an estimated cost of $173 million. The National Gallery’s share of the total space and costs are 61,000 square feet and $71.5 million, respectively. Completion is planned for fiscal year 2025 and is dependent on future federal appropriations.
Pledges receivable increased $3.5 million from the prior year due mainly to new donor gifts received for art acquisitions to diversify the permanent collection. Liabilities, including unexpended federal multiyear appropriations and environmental liabilities, totaled $130.4 million, an increase of $3.5 million over the prior year.
Operating Results
The National Gallery ended the fiscal year with an unrestricted operating surplus of $4.6 million before depreciation and amortization. Operating support and revenue totaled $181.2 million in fiscal year 2022, $12.7 million over fiscal year 2021. Federal support recognized for operations increased to $143.4 million compared to $139.8 million in the prior year. Operating gifts and grants from individuals, corporations, and foundations increased to $10.9 million compared to $4.5 million in the prior year due primarily to the receipt of unrestricted bequests. Funds appropriated for operations under the National Gallery’s investment spending policy totaled $25.3 million, compared to $22.3 million in fiscal year 2021, as a result of the resumption of a full schedule of public programs and special exhibitions. Royalties and other income totaled $1.5 million compared to $1.8 million in the prior year.
Fiscal year 2022 operating expenses totaled $176.6 million, increasing $8.7 million over the prior year. Expenses for special exhibitions, education, and other public programs increased as a result of a full year of programming in fiscal year 2022 following the prior year of ongoing pandemic-related closures.
The National Gallery’s collection was augmented by several major purchases in fiscal year 2022, including Faith Ringgold’s The American People Series #18: The Flag is Bleeding, 1967; Lavinia Fontana’s Lucia Bonasoni Garzoni, c. 1590; Luisa Roldán’s Virgin and Child, c. 1680/1686; Robert Longo’s Untitled (Insurrection at the U.S. Capitol; January 6th, 2021; Based on a photograph by Mark Peterson), 2021; and Carmen Herrera’s Untitled, 2013, and Untitled Estructura (Yellow), 1966/2016.
Auditors’ Report and Financial Statements
Summarized financial information is shown below. The National Gallery’s complete fiscal year 2022 audited financial statements, related notes, and the auditors’ reports thereon can be found on the National Gallery’s website. The National Gallery’s external auditors issued an unmodified opinion on the fiscal year 2022 financial statements and did not identify any material weaknesses, significant deficiencies, or areas of noncompliance with laws and regulations.
William W. McClure
Treasurer
