Financial Statement Audit for the Library of Congress for Fiscal Year
1995 i Executive Summary of Reports of Independent Accountants

We have audited the Consolidated Statement of Financial Position of the
Library of Congress as of September 30, 1995, and have examined
assertions by Library management concerning the effectiveness of internal
controls over financial reporting and over safeguarding the Library s
Collections as of that date. Our work represents the first financial
statement audit of the Library since GAO issued its 1991 report on its
efforts to audit the Library s fiscal 1988 financial statements. We were
engaged to conduct this audit one year ahead of the schedule set forth in
the Library s financial management improvement plan.

This Executive Summary presents an overview of our key findings on the
Library s financial statements and financial management and on the
safeguarding of its collections. Our full reports are presented in
Section 6, and should be read in their entirety to understand the context
of our findings and related recommendations, as well as the objectives
and scope of our work.

In our audit of the Library of Congress for fiscal year 1995, we found:

Except for the effects of such adjustments, if any, as might have been
determined to be necessary had we been able to examine evidence regarding
property and equipment balances, the Consolidated Statement of Financial
Position presents fairly, in all material respects, the Library s
financial position as of September 30, 1995, in conformity with the basis
of accounting described in Note 1 to the Consolidated Statement of
Financial Position;

Management fairly stated that it cannot provide reasonable assurance that
internal controls in place at September 30, 1995, met two objectives
(that assets are safeguarded against loss from unauthorized acquisition,
use, or disposition and that transactions are properly recorded,
processed, and summarized to permit the preparation of reliable financial
statements and to maintain accountability for assets), but that internal
controls were effective in assuring material compliance with relevant
laws and regulations;

Reportable noncompliance with certain laws and regulations we tested
concerning the Library s revolving fund operations and investment of gift
securities that were not material to the Consolidated Statement of
Financial Position; and

Management fairly stated that it cannot provide reasonable assurance that
the internal control structure over safeguarding of collection assets
against unauthorized acquisition, use, or disposition was generally
effective at September 30, 1995.

Executive Summary of Reports of Independent Accountants

Financial Statement Audit for the Library of Congress for Fiscal Year
1995 ii Financial Statements and Financial Management

The Library has had mixed results in implementing recommendations GAO
made in its 1991 report. Improvements include resolution of significant
compliance and control problems in the FEDLINK program and implementation
of a new financial management system in fiscal 1995. However, the Library
has not supplemented that system with the processes necessary to generate
complete, auditable financial statements. For example:

The system has not been configured to generate detail trial balances
necessary for an audit. Significant account balances, including property
and equipment and advances from others, were not tracked in the system
during the year. Significant accounting entries, including those
converting balances from the old system, were not recorded in sufficient
detail to permit effective audit analysis of the accounts. This, together
with the lack of comparable prior year information and of audited opening
balances, precluded us from auditing the Library s fiscal 1995 operating
statement, and, accordingly we express no opinion on it.

The Library had made limited progress in correcting weaknesses in its
controls over property and equipment, and these weaknesses led us to
qualify our opinion on the Consolidated Statement of Financial Position.
Also, the Library had not kept current its reconciliations of cash
accounts with the Department of the Treasury, nor of its general ledger
balances with those in subsidiary records. The Library also needs to
improve its controls over access to its Electronic Data Processing (EDP)
systems and establish a continuity plan in case its systems or data are
damaged; take full advantage of controls in its new financial management
system that can prevent individuals from both entering and approving
transactions; improve controls over handling of cash receipts; and
increase oversight of trust fund accounting and investing.

We found that the Library continues to accumulate surpluses in the gift
funds that it operates as revolving funds, even though it does not have
the statutory authority to do so. We also found that it violated 2 U.S.C.
158a, which prohibits the Library from investing or reinvesting a gift of
securities offered to the Library until acceptance of the gift has been
approved by the Joint Committee on the Library.

We have made a number of recommendations that the Library should
implement before the end of fiscal 1996 if it is to fulfill its plan of
having a full set of audited financial statements for this year. These
recommendations concern the financial reporting preparation process,
reconciliations of accounting records, accounting for property and
equipment, EDP security practices, enhancing the meaningfulness of
information provided to management, financial services staffing, controls
over the new financial management system application security, internal
self-assessment of internal controls, computer operations disaster
recovery plan, controls over cash handling and check processing, and
trust fund accounting. With current financial management staffing, the
Library will be challenged in

Executive Summary of Reports of Independent Accountants

Financial Statement Audit for the Library of Congress for Fiscal Year
1995 iii doing all the things necessary to get ready for an audit of its
1996 financial statements, as well as staying current with its
reconciliations and establishing control over property and equipment.

Preparing auditable annual financial statements is a critical part of
having effective financial management. A major component of the process
is being able to provide reliable information about the costs of the
Library s programs, projects, outputs, and outcomes. This requires the
Library s financial managers to be involved with operating managers in
developing meaningful performance measures for the Library and
associating costs with these measures. The Library s new financial
management system has the capability to track these costs, but it will
require additional programming to tap that capability and additional
financial management staff with the right skills to take advantage of it.
Without these additional staff, the Library will not be able to move to
the more sophisticated level of financial management necessary for senior
management and the Congress to make fully informed decisions about the
Library s priorities.

Safeguarding the Library s Collections

Since the GAO audit, the Library has taken a number of significant steps
to improve the security over its collections, including closing the book
stacks to the public, installing cameras in many reading rooms,
installing theft detection devices in many books, and continuing to
reduce its arrearage of uncatalogued items. However, the Library has not
completed a comprehensive risk assessment and collection security plan to
identify the risks to its collections, the proposed or established
control activities to address the risks, the required management
information it needs to carry out its responsibilities, and the methods
by which management will monitor the effectiveness of control procedures.
Until it has performed a risk assessment, implemented a comprehensive
security plan, and established mechanisms to monitor the implementation
of that plan, Library management will not have reasonable assurance that
the risk of unanticipated loss (theft, mutilation, destruction, or
misplacement) of collection items of significant market value, cultural
or historical importance, or with significant information content is
reduced to an acceptable level. In addition, the Library has acknowledged
that it has a number of significant weaknesses in preservation controls,
inventory controls, and physical security controls over collection assets
as of September 30, 1995.

In establishing a comprehensive plan for safeguarding its collections, we
are recommending the Library weigh the costs and potential benefits of
safeguarding controls. The Library should define and apply specific
standards of care (in terms of risks that are acceptable and costs of
mitigating them) to reasonably assure itself that risks from the
following sources are reduced to an acceptable level:

Risks from users would be effectively controlled when the Library can
tell what it served to them and what they gave back; when reading rooms
are under reasonable level of surveillance and users know they are being
watched; when the Library knows who its

Executive Summary of Reports of Independent Accountants

Financial Statement Audit for the Library of Congress for Fiscal Year
1995 iv users are; when the Library limits what users bring into the
reading rooms and knows what they take out.

Risks from staff would be effectively controlled when the Library can be
sure that only those with need to be there have access to the
collections; when the Library has identified its most at risk collections
and has secured them in a way that it knows who went in and out of its
secured areas; when it has established procedures for periodic counting
of key items in the collections; when staff are precluded from bringing
bags and other personal items into storage areas; when it has reduced the
number of non-emergency exits from collection areas; when it has regular
reporting, tracking, and follow up of missing items; when it has
established a coordinated approach to access by its own maintenance
personnel and those of the Architect of the Capitol; and when it has
sufficient surveillance cameras in areas where high value items are
stored.

Risks from environment would be effectively controlled when the Library
has determined that high value, irreplaceable, items have been placed out
of harm s way from fire and water damage in the building, and that its
preservation program is targeting and treating its highest priority items
in a timely fashion.

Library s Comments on Our Draft Report

In response to a draft of our report, which was provided to the Library
on April 19, 1996, the Library prepared written comments, which are
presented beginning on page 6-65. These comments express general
agreement with the findings and recommendations resulting from our
financial statement audit. In its separate response to a draft Management
Review of the Library of Congress, prepared by a management consulting
firm engaged by the GAO, the Library stated that critical data from a
study by the Library s security consultants, due to be reported on June
7, 1996, will enable the Library to proceed with risk assessment and
overall formulation of a complete policy on the safeguarding of the
Library s collections. Library management has advised us that this
response also applies to the recommendations resulting from our
examination of the Library s assertion about internal controls over the
safeguarding of its collections.

Subsequent to the issuance of our draft report, the Library amended its
assertions about the effectiveness of internal controls to state that it
cannot provide reasonable assurance that its internal controls in place
at September 30, 1995, met certain objectives. As a result of those
revisions, we updated our reports to express opinions that those
assertions are fairly stated. Where appropriate, we have made other
revisions to our report based on oral comments from the Library.

T H E L I B R A R Y O F C O N G R E S S

FINANCIAL STATEMENTS FOR FISCAL YEAR 1995

T A B L E O F C O N T E N T S

PAGE

i OVERVIEW OF THE LIBRARY OF CONGRESS 1

Agency Mission 1-1

Strategic Plan and Priorities 1-1

Brief History 1-1

Financial Resources and Results of Operations 1-2

Key Performance Measures 1-10

Major Accomplishments in Fiscal Year 1995 1-11

Stewardship Reporting 1-17

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND NOTES 2

Consolidated Statement of Financial Position 2-1

Notes to the Consolidated Statement of Financial Position 2-2

SUPPLEMENTAL SCHEDULES 3

Statement of Financial Position by Fund Type 3-1

Consolidated Operating Statement and Changes in Net Position (Unaudited)
3-3

Statement of Operations and Changes in Net Position by Fund Type
(Unaudited) 3-4

T H E L I B R A R Y O F C O N G R E S S

FINANCIAL STATEMENTS FOR FISCAL YEAR 1995

T A B L E O F C O N T E N T S

PAGE

ii STEWARDSHIP REPORT 4

Library Collections 4-1

Collections Policy 4-1

Preservation and Conservation 4-3

Service 4-6

Collections Security 4-6

Arrearage Reduction 4-8

Financial Reporting 4-8

Additions to the Collections 4-10

MANAGEMENT REPORTS 5

Management Report on Financial Controls 5-1

Management Assertion on Controls for the Collections 5-4

REPORT OF INDEPENDENT ACCOUNTANTS 6

1-1 THE LIBRARY OF CONGRESS FINANCIAL STATEMENTS Fiscal Year Ended
September 30, 1995

Overview of Operations and Financial Management

THE LIBRARY OF CONGRESS AND ITS MISSION

The Library of Congress, a part of the Legislative branch of the
government, is the world's largest and most comprehensive library
maintaining a collection of over 108 million items -- many of them unique
and irreplaceable -- in more than 450 languages.

The Library's mission is to make its resources available and useful to
the Congress and the American people and to sustain and preserve a
universal collection of knowledge and creativity for future generations.

STRATEGIC PLAN AND PRIORITIES

The Library of Congress faces the fundamental challenge of sustaining and
making more efficient its basic services to the Congress and the nation
while effecting a transition into the new electronic services required
for the information age. The Library developed a broad strategic plan in
December 1992 which assigned top priority for 1993-96 to certain
longstanding core needs of the traditional library -- arrearage reduction
(in cataloging), collections security, and infrastructure improvements.
The second phase (1997-2000) adds the need for planning, testing, and
then developing the "electronic Library" to serve Congress and the nation
in the 21st Century. A recent restatement of the Library's mission and
strategic priorities will help to guide implementation of the plan. The
Library's strategic priorities are:

1. to serve the information and research needs of the United States
Congress;

2. to preserve, secure, and sustain for the present and future of the
Congress and the nation a universal collection of human knowledge
including a comprehensive record of American history and creativity;

3. to make its collections maximally accessible to the Congress, the U.
S. Government, and the public; and

4. to add interpretive and educational value to the basic resources of
the Library.

BRIEF HISTORY

The Library of Congress is a living monument to the remarkable wisdom of
the Founding Fathers who saw access to an ever-expanding body of
knowledge as essential to a dynamic democracy. Its three buildings are
named for Thomas Jefferson, John Adams, and James Madison. With their
support, the Congress established the Library in 1800 as it prepared to
move to the new capital city of Washington and created the Joint
Committee on the Library as the first Joint Committee of the Congress in
1802.

1-2 Thomas Jefferson, in particular, took a keen interest in the new
institution. After the British burned the Capitol and the Library during
the War of 1812, Congress accepted Jefferson's offer to "recommence" the
Library with his own 6,487-volume collection (then the finest in America)
at a price of $23,950. It contained volumes on everything from
architecture to geography and the sciences. Anticipating the argument
that his collection might seem too comprehensive for Congress, Jefferson
said that there was "no subject to which a Member of Congress might not
have occasion to refer."

Jefferson's ideals of a "universal" collection and of sharing knowledge
as widely as possible still guide the Library. With Congressional
blessing, it has grown to serve the Congress and the nation -- largely as
a result of four milestone laws: (1) the copyright law of 1870, which
stipulated that two copies of every book, pamphlet, map, print,
photograph, and piece of music registered for copyright in the United
States be deposited with the Library; (2) the 1886 authorization of a
separate Library building that contained book stacks, public reading
rooms, and exhibition space to serve and house the large collections
accumulated through copyright deposits; (3) a 1902 law which authorized
the Library to sell its cataloging records inexpensively to the nation's
libraries; and (4) a law in 1931 that established a program that creates
and supplies free library materials to blind and physically handicapped
readers throughout the country. Congress thereby established the basis
both for the continued growth of the collections and for the extension of
the Library's services to citizens everywhere.

As the Library evolved into a national institution, Congress decided to
create a separate entity in 1914: the Legislative Reference Service
(LRS), which was authorized to provide specialized services to "Congress
and committees and Members thereof." In 1946, the Congress granted LRS
permanent status as a separate department of the Library and directed it
to employ specialists to cover several broad subject areas. Finally, in
the Legislative Reorganization Act of 1970, Congress renamed the LRS the
Congressional Research Service (CRS) and enhanced its analytical research
capabilities by adding additional staff and placing more emphasis on
research support to the committees of Congress.

More recently, laws creating the American Folklife Center (1976), the
American Television and Radio Archives (1976), the National Center for
the Book (1977), and the National Film Preservation Board (1988), have
further extended the Library of Congress' national role.

FINANCIAL RESOURCES AND RESULTS OF OPERATIONS

In 1990, the Library developed a strategic plan for financial management
which called for improved policies and procedures, improved professional
staffing, and an integrated financial management system which conforms to
the systems requirements of the Joint Financial Management Improvement
Program (JFMIP) and other Federal financial system standards. The
Library's agency-wide strategic plan, developed in 1992, provided for the
continued implementation of the financial management improvement plan.
The Library purchased the Federal Financial System (FFS), an off-the-
shelf software package, on December 1, 1993. The new system, a major
element of the Library's strategic plan, became operational on October 1,
1994.

1-3 To permit complete implementation and refinement of the new system,
the financial management strategic plan called for formal audited
financial statements for fiscal year 1996, prepared in fiscal year 1997.
However, the Congress has requested that the Library prepare and have
audited the fiscal year 1995 financial statements in fiscal year 1996, a
year earlier than originally planned. The Library began preparing fiscal
1995 financial statements in November 1995; the independent auditors also
initiated audit steps in late November 1995. The Congress requested that
the audit be completed by March 31, 1996. As a result of the audit's late
start, the lack of prior planning for the preparation of the financial
statements and for the audit, and the fact that fiscal year 1995 marked
both the initial audit of and the first operating year for the Library's
new financial system, the auditors, Price Waterhouse, were only able to
express an opinion on the Library's Statement of Financial Position. The
Library prepared a Statement of Operations and Changes in Net Position
which is included as an unaudited supplemental schedule to the financial
statements.

The assets, as reported on the Statement of Financial Position, total
nearly $700 million. Non-entity assets (e.g., funds held and invested for
future distribution to copyright owners) comprise 60 percent of all
assets. The fund balance with the Department of the Treasury is the
Library's largest entity asset and primarily represents the balance of
unexpended appropriations. The largest class of property totaling $37.3
million (net), is talking book machines on loan to blind and physically
handicapped individuals. The largest liabilities relate to custodial and
deposit account activities (e.g., funds held for future distribution to
copyright owners). Other large liabilities include funds advanced from
other governmental agencies for the FEDLINK program and accounts payable
for various operating expenses. The accompanying Statement of Financial
Position does not include the acquisition and improvement costs of the
Library's buildings and grounds. By law, these buildings and grounds are
owned and maintained by the Architect of the Capitol.

For reporting purposes, Library operations have been divided into five
fund groups: Appropriated and General Funds; Reimbursable Funds;
Revolving Funds; Gift and Trust Funds; and Custodial Funds. Funding
sources of Library functions for fiscal year 1995, excluding custodial
activity, total approximately $437.8 million. Appropriations from the
Congress accounted for 80.6 percent. The remainder came from gift, trust,
and revolving funds and reimbursements for services provided to other
entities.

MAJOR CATEGORIES OF FUNDING:

Total All Sources - $437.8 Million

1-4 APPROPRIATED AND GENERAL FUNDS - Appropriations account for $353.2
million (80.6 percent) of Library available funding and include both
annual and no-year funds. The annual appropriations are: Library of
Congress Salaries and Expenses (LC S&E), Congressional Research Service
(CRS S&E), Copyright Office (CO S&E), National Library Service for the
Blind and Physically Handicapped (NLS/BPH S&E), and Furniture and
Furnishings (F&F). The LC S&E appropriation includes no-year funds for
library materials, deacidification preservation projects, and secondary
storage. The NLS/BPH appropriation includes a no-year account for the NLS
program machines, and the Furniture and Furnishings appropriation has a
no-year account for restoration and renovation.

Total Appropriations Used - $353.2 Million

* Includes $6.5 million of offsetting collections ** Includes $17.5
million of offsetting collections

Library of Congress (LC S&E) - This appropriation funds the
infrastructure support (i.e., agency management, Human Resources,
Information Technology Services, Financial Services, Integrated Support
Services) for the Library's three other salaries and expenses (S&E)
appropriations -- Congressional Research Service, Copyright Office, and
the National Library Service for the Blind and Physically Handicapped.

This appropriation also funds a wide range of National Library and
Congressional Services including:

Cataloging - The Library produces bibliographic records and related
products for libraries and bibliographic utilities in all 50 states and
territories -- cataloging that saves America's libraries in excess of
$268 million annually, the money it would cost them if they had to
catalog the materials themselves.

1-5 Research and Reference - The Library makes available to scholars and
other researchers vast information resources, many of which are unique,
covering almost all formats, subjects, and languages -- each year serving
over 750,000 readers in the 20 reading rooms in Washington, D.C. open to
the public and responding to nearly 1.1 million information requests a
year from all over the nation. In addition, the Library responds to more
than 38,000 free interlibrary loan requests a year from every state in
the nation and to over 30,000 requests for book loans to Congress each
year.

On-line Services - The Library provides on-line, free access, via
Internet, to its automated information files which contain more than 40
million records -- to Congressional offices, Federal agencies, libraries,
and the public. Through THOMAS, the user-friendly and searchable World-
Wide Web site supporting Internet access to the Congress, the Library
freely provides the full text of Congressional bills, the Congressional
Record, and other legislative information.

American Creativity - The Library manages the nation's most important
archival collections of motion pictures, sound recordings, maps, prints,
photographs, manuscripts, music, and folklore covering a wide range of
ethnic and geographic communities; provides reference assistance to
researchers and the general public; conducts field research and promotes
the preservation of American culture throughout the United States.

Preservation - The Library manages a preservation program that covers the
many materials and formats in the Library - including preservation
treatment for over 300,000 items a year, assuring that staff are trained
and equipped to handle emergencies; conducts research on new preservation
technologies (e.g., mass deacidification of paper); develops preservation
standards for American libraries; administers the National Film
Preservation Board; and runs the only full-time film restoration
laboratory in the country, reconstructing two-thirds of the archival-
quality restorations in the United States.

Legal Information - The Law Library of Congress supplies law research
covering over 200 foreign jurisdictions to Congress, the Judiciary,
Federal agencies, and the public -- serving 100,000 users annually

Reading Promotion and Outreach - The Library promotes books, reading, and
literacy through the Library's Center for the Book and its 30 affiliated
State Centers for the Book and its 121 national organizational partners -
- and encourages knowledge and use of the collections through other
Library outreach programs (cable TV programs, traveling exhibits,
publications, conferences and symposia, poetry readings, electronic
information dissemination), often with private funding. The Library also
gives some 69,000 surplus books and serials annually to qualified
libraries through a nation-wide donation program.

1-6 Congressional Research Service (CRS S&E) - This appropriation funds
the exclusive and impartial, on-demand analytical research and
information to all Members and committees of Congress. CRS works directly
for Congress in support of its legislative, oversight, and representative
functions. CRS maintains a cost-effective shared pool of expertise to
provide timely, balanced analyses of public policy issues and legislative
proposals, tailored confidential memoranda, personal consultations, and
briefings; and is a source of information and resource materials on
almost any subject. During the past year, CRS delivered nearly 600,000
research responses and services; of these, about 235,000 were responses
to requests for analysis, information, and research. CRS delivered to
Congress upon request almost 785,000 copies of CRS reports and other CRS
general distribution products.

CRS S&E also supports the Parliamentary Assistance Programs, non-
expenditure transfer programs undertaken by the Congress to provide
assistance to emerging democratic legislatures in Eastern Europe, the
former Soviet Union and Egypt through the use of research, information,
and modern equipment. The programs, totaling $3.8 million in fiscal year
1995, are funded by the Agency for International Development (USAID) and
conducted through CRS under the auspices of the House Special Task Force
on the Development of Parliamentary Institutions in Eastern Europe or the
Joint Committee on the Library. All Parliamentary Assistance Programs
will be completed by December 1996.

Copyright Office (CO S&E) - The Library administers the U.S. copyright
laws and actively promotes international protection for intellectual
property created by U.S. citizens -- processing more than 600,000 claims
for copyright registration and 500,000 requests for information annually.
Most of the Copyright Office is funded by registration fees and
authorized deductions from royalty receipts. The copyright deposits form
the core of the Library's Americana collections.

National Library Service for the Blind and Physically Handicapped (Books
for the Blind and Physically Handicapped S&E) - The Library manages a
free national reading program for blind and physically handicapped people
-- circulating at no cost to users approximately 23 million items a year;
audio and braille books and magazines through regional and subregional
libraries and two multistate centers. This program consists of three
segments:

1. The Library of Congress, with the cooperation of authors and
publishers who grant permission to use copyrighted works, selects and
produces full-length books and magazines in braille and on recorded disc
and cassette and contracts for the production of talking book machines.

2. A cooperating network of over 140 regional and subregional (local)
libraries distribute the machines and library materials provided by the
Library of Congress.

3. The U.S. Postal Service receives an appropriation to support postage-
free mail for magazines, books, and machines which are sent directly to
readers. Reading materials (books and magazines) and playback machines
are sent to a readership of over 770,000.

1-7 REIMBURSABLE FUNDS - Reimbursable programs accounted for $55.1
million (12.6 percent) of Library funding in fiscal 1995. Intra-Library
revenue of $2.7 million was eliminated for consolidation purposes. Two
major reimbursable programs make up the major portion of the reimbursable
revenues: the Federal Library and Information Network (FEDLINK) and the
Federal Research Division (FRD). The Library also provides accounting
services for four Legislative agencies under cross-servicing agreements
(i.e., the Congressional Budget Office, the Office of Technology
Assessment, the John C. Stennis Center, and the Capitol Preservation
Commission).

Reimbursable Funds - $55.1 Million

FEDLINK - FEDLINK is a program which was designed to support the Federal
Library and Information Center Community (FLICC) in the cost-effective
procurement of books, serials, and computer-based information retrieval
services. Under this program, the consolidated purchasing power of more
than 1,300 Federal libraries across the government permit the Library to
negotiate economical contracts with some 80 vendors resulting in savings
to Federal agencies of an estimated $15 million annually. Most of the
funds transferred from agencies participating in the program are for
services provided by these vendors.

Federal Research Division (FRD) - The Federal Research Division provides
customized research services that the Library is uniquely able to perform
as a result of its collections and subject and language expertise of its
staff. A popular FRD product, available on-line via the Library's World
Wide Web (WWW) homepage, is the country study series of books. These
books are produced as a result of a reimbursable agreement with the
Department of Defense.

GIFT AND TRUST FUNDS - Under the authority of 2 U.S.C. 175; 20 U.S.C.
2106; and the Trust Fund Board Act of 1925, as amended (2 U.S.C. 154-
163), the Library operates 230 Gift and Trust Funds which made up
approximately 5.8 percent of the Library's funding in fiscal 1995. Gifts
to the Library for immediate use may be accepted by the Librarian of
Congress. The Trust Fund Board receives, administers, and invests gifts,
bequests, and devises of property for the benefit of the Library, its
collections, or its services. The Trust Fund Board consists of thirteen
members: three ex-officio members, the Librarian of Congress, the
Secretary of Treasury, and the Chairman of the Joint Committee on the
Library; two members appointed by the President of the United States;
four members appointed by the House of Representatives; and four
appointed by the Senate.

1-8 Activities supported by gift and trust funds include:

acquisition of library materials, including obtaining hard-to-acquire
research materials on behalf of participating U.S. research libraries and
the maintenance and development of a Japan Documentation Center to
increase knowledge of and access to current Japanese public policy
information;

research, reader and reference services, including the Library's National
Digital Library, the Film Preservation Program, and activities related to
acquisition and maintenance of research materials from Korea;

organization (e.g., cataloging) of the collections, including the
centralized services of Documents Expediting Project, Dewey Decimal
classification, and maintenance and development of the Caroline and Erwin
Swann Collections and the Charles and Ray Eames Collections; and

public programs, including Library exhibitions, music programs and
performances, and public outreach presentations through lectures,
symposia, publications, special events and electronic distribution of
information.

Gift and Trust Funds - $25.6 Million

Major trust funds include: the Madison Council Fund, the National Digital
Library (see Major Accomplishments), the Carolyn R. Just Fund, and the
Leonora J. McKim Fund. Gift and trust fund revenue for fiscal 1995
totaled $25.6 million which includes $6.7 million in pledges.

James Madison Council Fund - The James Madison National Council is an
advisory body of public spirited individuals that contributes ideas,
expertise, and financial support to promote the Library's collections and
programs. The Fund was begun in 1989 by Dr. James Billington, the
Librarian of Congress, to encourage donations and counsel. Since the
initial contribution from the Encyclopedia Britannica, the Fund has
benefitted from the many donations of the Council members. The money is
used for special programs of the Library. At the end of fiscal year 1995,
the value of the Fund was $2 million and revenue for the year, including
donations and interest, was $1.2 million.

1-9 Carolyn R. Just Fund - The purpose of the Carolyn R. Just Fund is for
performances or broadcasting of concerts of classical chamber music at
the Library of Congress in the Coolidge Auditorium. The value of the Fund
at September 30, 1995, was $2.7 million. Leonora Jackson McKim Fund - The
McKim Fund's purpose is for furtherance of original violin compositions
with piano accompaniment, composed by American students of the violin,
and to advance student studies in the United States and abroad through
payment of tuition and travel. The value of the Fund was $3 million at
September 30, 1995.

REVOLVING FUNDS - Under the authority of 2 U.S.C. 160, the Library of
Congress operates eleven gift revolving fund activities to provide, in
various formats, duplication and preservation services, exhibits and
other special programs, and retail marketing, to other Government
agencies, libraries, other institutions, and the general public. Through
these activities, the Library is able to further its programs dealing
with the acquisition of library materials, reader and reference services,
and support for public programs.

Although these funds were created by gifts which donors designated to be
used for self-sustaining activities, the General Accounting Office (GAO)
believes that the Library has exceeded its authority by operating
revolving funds with gift monies which generate revenues exceeding the
original gifts. Therefore, as recommended by GAO, the Library has
requested specific statutory authority to operate the gift revolving
funds. The revolving fund legislation has been submitted to the Congress
annually since 1991.

After eliminating intra-Library transactions, revolving fund activities
accounted for $3.9 million (1 percent) of the funding in fiscal 1995. The
major funds are: Photoduplication Service, Recording Laboratory, and the
Constance Green Fund.

Gift Revolving Funds - $3.9 Million

Photoduplication Service - The Photoduplication Service provides
preservation microfilming services for the Library's collections and
reprographic services to other libraries, research institutions,
government agencies, and individuals in the United States and abroad.
Revenues were $5.9 million in fiscal year 1995 and intra-Library
transactions of $3.4 million were eliminated during consolidation.

1-10 Recording Laboratory - The Recording Laboratory provides
preservation services for the Library's collections and audio and video
duplication services for the general public. Audio and video products are
also produced for sale to the general public. Revenue for fiscal year
1995 was $501 thousand of which $312 thousand was for intra-Library
transactions which were eliminated in the consolidated statements.

Constance Green Fund - The Constance Green Fund supports the Library's
retail marketing sales shop activities. Revenue for fiscal year 1995 was
$867 thousand before elimination of intra-Library revenues of
approximately $5 thousand.

CUSTODIAL FUND - The Library administers the national compulsory and
statutory licensing provisions in the Copyright Act (Title 17 of the
United States Code). These are:

Compulsory license for secondary transmissions by cable systems (section
111);

Compulsory license for making and distributing phonorecords (section
115);

Compulsory license for the use of certain works in connection with
noncommercial broadcasting (section 118);

Statutory license for secondary transmissions by satellite carriers for
private home viewing (section 119);

Compulsory license for public performances on coin-operated phonorecord
players (section 116, [1978-1989, 1993-], section 116A (1990-1993);

Statutory obligation for distribution of digital audio tape recorders and
media (chapter 10).

The Library's Copyright Office Licensing Division collects royalty fees
from cable operators for retransmitting television and radio broadcasts
(section 111), from satellite carriers for retransmitting "superstation"
and network signals (section 119), and from importers or manufacturers
for distributing digital audio recording products. The Library deducts
its full operating costs from the royalties (as appropriated by Congress
as offsetting collections), and invests the balance in interest-bearing
securities with the U.S. Treasury for later distribution to copyright
owners. The Library of Congress held $420 million at September 30, 1995,
for distribution to copyright owners.

KEY PERFORMANCE MEASURES

In the 15 years since fiscal 1980, the Library has increased: (1) the
number of Congressional requests annually answered by the Congressional
Research Service (CRS) from some 340,000 to almost 600,000; (2) the
number of print materials cataloged annually for the nation's libraries
from 206,000 to 276,000; (3) the annual number of registrations in the
Copyright Office from some 465,000 to nearly 610,000 and the number of
copyright inquiries answered from 170,000 to over 500,000; and (4) the
number of free reading materials delivered across the country each year
to the blind and physically handicapped from 16.9 million to nearly 23
million.

1-11 The Library's electronic transactions have grown from almost zero in
fiscal 1980, to eight million a month in fiscal 1992, to 21 million a
month in fiscal 1995. This rapid growth is the result of putting large
portions of the Library's card catalog and copyright records online,
along with Congressional information through the THOMAS system, and the
contents of all the major exhibits since 1991. These numbers will almost
certainly continue to increase. The Library has just begun to put online
American history collections as the core of a National Digital Library.
This program seeks to make five million items from these unique
collections locally available in electronic form throughout the country
by the year 2000.

To have accomplished so much despite a steadily downsized work force is a
good example of doing more with less in a public agency. The Library has
dramatically increased private-sector support for funding outreach
projects and other areas not covered fully by federal appropriations
(e.g., exhibits, leadership training). The additional appropriated
support of $3 million approved for fiscal year 1996 by the Congress for
the National Digital Library Program has provided an incentive for
private-sector support which now stands at $19 million of the $45 million
needed by the year 2000 to complete the initial project.

MAJOR ACCOMPLISHMENTS IN FISCAL YEAR 1995

During fiscal 1995, the Library radically improved services to the
Congress and the nation through technology, succeeded in gaining
permission to microfilm the hitherto inaccessible papers of the Marquis
de Lafayette, reduced the backlog of uncataloged items by another 2.9
million, continued to implement elements of its Plan for Enhancing
Collections Security , trained all managers and supervisors in diversity
awareness, and implemented a modern financial management system.
Consistent with the Library's mission, the major achievements are listed
below:

1-12 CRS Legislative Support to Congress - The congressional agenda
during fiscal year 1995 was fast-paced and characterized by complex and
controversial domestic legislative proposals concerning reform of the
welfare system and health care, food and agriculture policy, regulatory
reform, environmental protection programs, and the federal government's
role in education. Equally challenging were foreign policy debates in
Congress regarding Bosnia, possible NATO expansion, the Israeli-
Palestinian Agreement, changes in Russia, aid to Africa, and Mexico's
financial crisis. CRS attorneys, analysts, and information specialists
provided Congress with assistance on, among other issues, the balanced
budget constitutional amendment, the legislative line-item veto,
congressional term limits, election law, and immigration, as well as
banking and securities laws, changes in R&D funding and organization,
transportation and energy concerns, and telecommunications reform
legislation.

Copyright Office Legislative Support to Congress - Congress faced a
number of significant copyright challenges during fiscal 1995 including
the effect of the National Information Infrastructure (NII) on copyright
law and policy. The Office began a series of conferences for
congressional staff to provide background information on proposed
legislation on copyright and the NII and explore the future of copyright
policy in a digital information and technology age. The Office also
advised Congress on a bill that created a performance right in digital
transmissions of sound recordings, a proposal to extend the copyright
term, and a number of other bills that would amend existing provisions.

CRS Legislative Alert Service - The Legislative Alert, a new CRS service,
was created early in fiscal 1995 to assist congressional staff in quickly
identifying CRS products that directly relate to legislation up for
immediate floor consideration in the House and Senate. The Alert is
available in printed copy at the beginning of the week to every
congressional office while Congress is in session and is accessible
through the CRS World Wide Web Home Page (available to congressional
offices only), CRS Reference Centers, the Product Distribution Center,
and selectively through the fax-on-demand system.

Budget and Appropriations Report Series - To respond to congressional
work on federal budget and appropriations issues, CRS inaugurated a
series of reports specifically covering each of the thirteen annual
appropriations bills as well as a special report covering issues in the
reconciliation deliberations. The objective for developing the
appropriations and budget reconciliation reports was to ensure the timely
and systematic availability to Members of comprehensive summaries of
appropriations legislation at each stage of the legislative process.
Approximately 7000 copies of these reports have been distributed to
congressional offices in response to their requests. After assessing this
pilot, CRS concluded that, while some reports met the needs of
congressional requests, others were not useful. Therefore, the series
will not be continued for the fiscal year 1997 cycle, and CRS will
continue to analyze budget and appropriations issues as they affect
federal programs and activities.

Providing Better Services to the Congress and the Nation Through
Technology:

THOMAS Internet System - In January 1995, at the request of the House

1-13 Congressional Leadership, the Library of Congress implemented
THOMAS, a world-wide- web (WWW) site that provides searching and access
to the full-text of bills and the Congressional Record for the 103rd and
104th Congresses. THOMAS is available free of charge, 24 hours a day, to
Internet users throughout the world. Work is continuing to expand and
improve this system. By October 31, 1995, nearly 11 million transactions
had been processed by the THOMAS system.

CRS Innovations in Service Delivery - In fiscal 1995, CRS expanded use of
new technology-based information systems to improve congressional access
to CRS services, such as a fax-on-demand system and an on-line system
that provides access to the full text of selected CRS products, and the
development of a CRS Home Page on the secure Capitol Hill Internet
network. These efforts continue to enable the Library to provide more
effective service to Congress.

Internet Access - The Library is providing more information to the
Congress and the public via its Internet-based systems including three
world-wide-web services (THOMAS, LC-Web, and CRS-Web), gopher services
(LC-MARVEL), the Library of Congress Information System (LOCIS), and
various file transfer options. Public LC-Web transactions have grown from
391,000 per month in October 1994 to over 3 million per month in October
1995.

National Digital Library - A major priority of the Library of Congress is
to make parts of its historical collections maximally accessible to the
general public through the creation of a National Digital Library. The
Library's goal is to digitize a critical mass of five million items from
its core American history collections by the year 2000 -- the Library's
bicentennial. A private-public partnership is the key strategy for
raising the $60 million to cover the five-year period needed to achieve
the goal -- $45 million from the private sector and $15 million from
additional Federal appropriations. During fiscal 1995, the Congress
approved the first of five installments of $3 million (starting in fiscal
1996) to meet the public commitment to this initiative, and the private
sector made gifts and pledges totalling $19 million as of December 20,
1995.

ACCESS System - The Library's ACCESS system, a user-friendly way for
patrons visiting a reading room to access the Library's information files
electronically without training and without assistance, was expanded to
include the Bill Digest for the 104th Congress. ACCESS now operates in 14
locations at the Library and at several House and Senate locations.
Future development of ACCESS will focus on an Internet model.

Geographic Information System - The Geography and Map (G&M) Division
established itself as a leader in the cartographic and geographic
communities through its work in geographic information systems (GIS).
Through G&M's initiative, the Center for Geographic Information was
founded with the support of private sector firms. Under the auspices of
the Center, G&M received donations of funds, hardware, and software, in
fiscal year 1996, valued in excess of $670,000 for scanning National
Digital Library materials.

1-14 Projects in Test Status:

The Copyright Office Electronic Registration, Recordation and Deposit
System (CORDS), a project sponsored by the Advanced Research Projects
Agency (ARPA) and the U.S. Copyright Office at the Library, in
cooperation with the Corporation for National Research Initiatives, will
allow the electronic registration and deposit of works and provide
electronic access to copyright ownership information. Status: in fiscal
year 1995, the software programming for the registration testbed system
neared completion, and the initial testing of the system will begin early
in calendar year 1996. Planning began for development of the system for
recording documents concerning ownership and licensing of copyright
works.

The Electronic Cataloging in Publication (CIP) project is testing the
feasibility of the electronic transmission of manuscripts for cataloging
via the Internet in lieu of mailing them. At the end of fiscal year 1995,
26 publishers were participating in the test phase. This project will
improve the timeliness, cost, and efficiency of cataloging by sharply
limiting the number of keystrokes required to create a record, by
eliminating mail time and postage costs, and by improving the quality of
cataloging. Status: the number of participants increased in fiscal year
1995 from six to 26; and the Library processed 375 manuscripts
electronically. A survey was distributed to all CIP publishers to
determine their interest and capability in joining Electronic CIP; the
responses were decidedly favorable.

The Global Legal Information Network (GLIN) is a cooperative
international network in which nations are contributing the full text of
statutes and regulations to a database hosted by the Law Library of
Congress. Status: the prototype is complete and there are eleven partners
participating via the Internet. The Library projects that GLIN membership
will increase to 15-20 nations in the near future. A satellite
uplink/downlink capability to upgrade telecommunications capabilities of
GLIN members that have no direct access to Internet is being implemented.

Security of Staff and Collections - The Library engaged experts at the
end of fiscal 1995 to assess its collections security program and began
to centralize security policy oversight to improve accountability and to
ensure that elements of the Library's Plan for Enhancing Collections
Security continue to be implemented in an effective manner. Major
accomplishments during fiscal year 1995 include the following:

heightened perimeter security was implemented consistent with that for
other Capitol Hill buildings;

all book stacks in the John Adams and Thomas Jefferson buildings are
controlled by an electronic access system;

police patrols of the book stacks have been intensified;

1-15 the number of people authorized access to the general collection
stacks has been reduced by more than 50 percent;

anti-theft devices were placed in an additional 1.8 million books
bringing the number of targeted volumes to more than 3 million; and

an additional 250,000 volumes were barcoded and linked to the automated
Collections Control Facility system and a contract awarded for another
600,000 volumes.

In the test stage are pilots to use a theft detection gate at the exit of
the Newspaper and Current Periodical reading room and an automated reader
registration system which issues patron photo-identification cards upon
verification of name and address to control access to the collections in
any of the Library's 20 public reading rooms. The system also maintains a
database of patron information to facilitate follow up or investigation
requirements.

Arrearage Reduction/Cataloging - The Library continues to reduce its
arrearage of unprocessed materials as demonstrated by another cut of 2.9
million items during fiscal 1995--achieving a cumulative 43 percent
decrease since the unprocessed items were counted and totalled in
September 1989. Selected arrearages such as the Altshuler Jazz Collection
were reduced by over half by the end of fiscal year 1995. As arrearage
goals for 1996-2000 are pursued, the Library continues to implement
changes in procedures and technology that will increase productivity and
throughput. Replacing dumb terminals used by cataloging staff with
intelligent PC-based workstations has bolstered output and enabled
additional automation enhancements in support of more efficient
cataloging. Major progress was achieved in processing print materials,
including cataloging 276,348 titles, a near record.

Off-Capitol Hill Collections Storage - During fiscal 1995, the Architect
of the Capitol (AOC) initiated site development of the approximately 100
acres of land and improvements, located at Fort Meade, Maryland, that
were transferred from the Department of the Army in 1994. The Library and
the AOC are now completing plans for the construction of the first
collections storage facility to be ready for occupancy by mid-1998.

Important New Acquisitions - The Library receives millions of pieces each
year, from copyright deposits, from Federal agencies, and from purchases,
exchanges, and gifts. Notable acquisitions during fiscal 1995 include:
the archives of Gordon Parks, noted photographer and creative artist; the
music, papers, and photographs of jazz musicians by William Gottlieb, the
gift of architectural drawings and maps from the Engineering Societies
Library; the Lafayette papers from LaGrange, microfilmed on site in
France; and a collection assembled by William Gladstone of nearly 800
manuscripts, photographs, and other original documents relating primarily
to the African-American participation in the United States Military from
the Revolutionary War until the turn of the century. Other important
acquisitions included rare books, films, and other audio visual items.
Recovered by the Library after a disappearance of fifty years, four
notebooks of Walt Whitman and a cardboard butterfly produced great
excitement for Whitman scholars.

1-16 Preservation Improvements - The Library took action during 1995 to
improve the preservation of its vast and diverse collections by (1)
contracting for a new audio system that will significantly improve
capability for preservation reformatting and creation of preservation
masters of audio materials; (2) protecting the Top Treasures by designing
and constructing oxygen-free, closed system display and housing cases and
an environmentally stable room in which to store them; (3) developing an
emergency preparedness and rapid-response plan for stabilizing and
recovering collections in the event of disaster; (4) continuing the
testing of the Bookkeeper mass deacidification process and initiating a
pilot project that will treat 36,000 books in the general collections in
fiscal 1996; (5) increasing the capacity to produce protective book boxes
by installing a computer-operated automated box-making machine; (6)
contributing to the National Digital Library by initiating procedures for
the preparation, treatment, and scanning of fragile rare materials; and
(7) publishing research results that contribute to the electronic
preservation of visual materials.

Copyright Arbitration Royalty Panels (CARPs) - The Copyright Office
completed the absorption of the functions of the former Copyright Royalty
Tribunal (CRT) by publishing final regulations governing all CARP royalty
distribution and rate adjustment proceedings. With the new rules in
place, the Office initiated distribution proceedings for royalties
collected under the cable compulsory license and the digital audio
recording (DART) license. On March 21, 1995, the Office published a
notice consolidating the distribution of the 1990, 1991 and 1992 cable
royalty funds and setting the precontroversy discovery schedule. The
Copyright Office also administered distribution of the 1992, 1993, and
1994 DART royalty funds, and a partial distribution of 1992 and 1993
cable royalty funds.

National Library Service for the Blind and Physically Handicapped (NLS) -
During 1995, NLS published its 10,000th numbered braille book -- Brother
Eagle, Sister Sky: A Message from Chief Seattle . NLS also revised its
standards used to evaluate network library activities and determine how
well each library is meeting common goals for providing special-format
reading materials to patrons. The standards list thirteen principles of
service, followed by specific standards for meeting the goals in areas
such as resource development and management, public education,
volunteers, and policies and procedures.

Bringing Treasures to the People - The Library's collections were shared
with tens of thousands of Americans through exhibitions, tours, special
events, symposia, traveling exhibits, poetry readings, and major
publications. The Library continues to lead the Nation in the
presentation of on-line exhibitions which now number ten. Major
exhibitions in fiscal year 1995 included:

Creating French Culture: Treasures from the Bibliotheque nationale de
France , a major international event and the second in a series of
unprecedented exhibits on the great libraries of the world;

In the Beginning Was the Word: the Russian Church and Native American
Cultures , which was jointly opened by Presidents Clinton and Yeltsin;

1-17 The Gettysburg Address , shown in conjunction with the National
Archives' exhibition of the Emancipation Proclamation;

Temple of Liberty: Building the Capitol for a New Nation , which examined
the Capitol's architectural form from the 1790s to the 1820s;

Declaring Independence: Drafting the Documents , featuring Thomas
Jefferson's first draft of the Declaration of Independence; and

Women Come to the Front , the female journalists of World War II.

Restoration and Renovation of the Thomas Jefferson and John Adams
Buildings - The Library is in the process of executing a multi-year plan
to outfit and occupy renovated spaces in the Jefferson and Adams
Buildings. The Great Hall of the Jefferson Building has been open for the
last year to visitors taking guided tours and starting in September 1995
the west front entrance was opened to the public.

Human Resources Improvement - The Library is implementing key
recommendations of a Librarywide task force to streamline competitive
selection procedures without jeopardizing the objectivity of the revamped
system. Other improvements include a pilot program to select library
technicians through the Office of Personnel Management's Microcomputer
Assisted Rating System (MARS) and the establishment and enforcement of
performance standards for personnel managers and staff. In September
1995, U.S. District Court Judge Norma Holloway Johnson approved a final
settlement agreement of the Cook class action suit that originated as an
EEO complaint in 1975. Appeals are pending in the United States Court of
Appeals for the District of Columbia circuit. In conjunction with this
settlement agreement, the Library trained all managers and supervisors in
diversity awareness.

Financial Management Improvement Project - The Library processed over one
million general ledger postings during the first year's operation of its
new and modern financial system. For the first time in the Library's
history, FFS integrates and links the budget, procurement, accounting,
and disbursing functions, which improves accountability to the Congress.

STEWARDSHIP REPORTING

In accordance with new Federal Accounting Standards Advisory Board
(FASAB) standards, the Library's collections have been classified as
heritage assets, and, as such, their value is not reported in the
financial statements. Consistent with the guidance provided by FASAB, the
Library has prepared a stewardship report on its collections which
provides the suggested relevant information concerning asset description,
acquisition, preservation, security, use, and estimated number of items.
The Stewardship Report is included in Section 5 of this report.

THE LIBRARY OF CONGRESS Consolidated Statement of Financial Position As
of September 30, 1995 (In Dollars)

ASSETS ASSETS Entity Assets: Fund Balance With Treasury (Note 2)
$180,691,549 Investments, Treasury Securities (Note 4) 12,545,930
Investments, Governmental Securities (Note 4) 12,917,822 Accounts
Receivable, Net - Intragovernmental (Note 5) 7,193,192 Accounts
Receivable, Net - Public (Note 5) 461,319 Interest Receivable (Note 5)
152,912 Advances and Prepayments 37,967 Pledges Receivable - Donations
(Note 5) 9,125,315 Cash and Other Monetary Assets 66,062 Inventory
274,526 Operating Materials and Supplies 1,875,788 Property and
Equipment, Net (Note 6) 49,499,220 Library Collections (Note 1.M.) Total
Entity Assets $274,841,602

Non-Entity Assets: Fund Balance With Treasury (Note 2) 385,511
Investments, Treasury Securities (Note 4) 419,665,140 Accounts
Receivable, Net - Intragovernmental (Note 5) 4,998 Accounts Receivable,
Net - Public (Note 5) 2,902 Interest Receivable (Note 5) 540,292 Total
Non-Entity Assets 420,598,843

Total Assets $695,440,445

LIABILITIES Liabilities Covered by Budgetary Resources: (Note 8) Accounts
Payable $20,512,007 Accrued Funded Payroll, Benefits 9,957,998 Total
Liabilities Covered by Budgetary Resources $30,470,005

Liabilities not Covered by Budgetary Resources: (Note 8) Accounts Payable
253,093 Advances from Others - Intragovernmental 33,205,327 Advances from
Others - Public 1,240,336 Custodial and Deposit Account Liability
424,152,003 Misc. Receipts Held for Treasury 76,843 Disbursing Officer's
Accountability 14,677 Accrued Unfunded Annual Leave 15,224,877 Accrued
Unfunded Workers' Compensation (Note 9) 11,271,423 Total Liabilities not
Covered by Budgetary Resources 485,438,579

Total Liabilities $515,908,584

NET POSITION (Note 11) Balances: Unexpended Appropriations 98,317,148
Invested Capital 49,042,547 Unrealized Gain on Investments, Governmental
Securities (Note 4) 560,345 Cumulative Results of Operations 44,038,874
Donations - Restricted 14,069,248 Future Funding Requirements
(26,496,301)

Total Net Position 179,531,861

Total Liabilities and Net Position $695,440,445

2-1

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-2 Note 1. Significant Accounting Policies

A. Reporting Entity

The Library of Congress is a legislative branch agency of the federal
government. It was established in 1800 primarily to provide information
and policy analyses to the members and committees of the Congress. Since
then, the Library has been assigned other major missions such as
administering the U. S. copyright laws, providing cataloging records to
the Nation's libraries, and coordinating a national program to provide
reading material for blind and physically handicapped residents of the U.
S. and its territories and for U. S. citizens residing abroad. The
Library also provides services to other federal agencies and administers
various gift and trust funds.

The Library's programs and operations are subject to oversight by the
Joint Committee on the Library which comprises members of the U. S. House
of Representatives and Senate. The Library relies primarily on
appropriated funds to support its programs and operations. Budget
requests are subject to review by the House and Senate Appropriations
Committees' Subcommittees on Legislative Branch Appropriations. The
Library also receives funds from other agencies for services provided
under the Economy Act and other statutes. In addition, the Library
receives donations from the public in the form of gifts and trusts. The
trust funds are controlled by the Library of Congress Trust Fund Board,
which consists of the Librarian of Congress (who is Chairman and
Secretary of the Trust Fund Board), the Chairman of the Joint Committee
on the Library, the Secretary of the Treasury (or an assistant secretary
designated in writing by the Secretary of the Treasury), and ten
additional members appointed by the President (2), the U.S. House of
Representatives (4), and the U. S. Senate (4).

B. Basis of Presentation

The accompanying consolidated statement reports the financial position of
the Library of Congress for the fiscal year 1995. It was prepared from
the Library's financial management system (FFS) in accordance with the
form and content for entity financial statements specified by the
Library's Financial Management Regulations and Directives and the
accounting policies summarized in this note.

As a legislative branch agency, the Library is not required to follow the
executive agency accounting principles established by the Comptroller
General under 31 U.S.C. 3511 or the new standards now being developed by
the Federal Accounting Standards Advisory Board (FASAB). However, the
Library maintains its fund balances with the Department of the Treasury
and submits information required to incorporate its financial and budget
data into the overall federal government structure. For purposes of
financial management and reporting, the Library has issued a regulation
(LCR 1510) which adopts the executive branch reporting requirements in a
manner consistent with a legislative agency.

For this reporting period, year ended September 30, 1995, the Library
prepared two consolidated financial statements: (1) Consolidated
Statement of Financial Position (audited), and (2) Consolidated Operating
Statement and Changes in Net Position (unaudited).

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-3 C. Basis of Accounting

The General Accounting Office (GAO), Office of Management and Budget
(OMB), and Department of the Treasury established the Federal Accounting
Standards Advisory Board (FASAB) for the purpose of considering and
recommending accounting principles, standards, and requirements to GAO,
Treasury, and OMB. The three principals of FASAB, the Comptroller
General, the Secretary of the Treasury, and the Director of OMB, will
decide upon new principles, standards, and requirements after considering
FASAB's recommendations. The resulting standards are concurrently issued
by GAO and OMB. Pending issuance of a sufficiently comprehensive set of
accounting standards, and in accordance with interim guidance agreed to
by the three principals, the accompanying Consolidated Statement of
Financial Position has been prepared in accordance with the following
hierarchy of accounting principles and standards:

Individual standards agreed to and published by the Joint Financial
Management Improvement Program (JFMIP) Principals, GAO, OMB, and the
Department of Treasury;

Form and content requirements included in OMB Bulletin 94-01, dated
November 16, 1993, and subsequent issuances;

Library of Congress Regulations and Financial Services Directives; and

Accounting principles published by authoritative standard setting bodies
and other authoritative sources (1) in the absence of other guidance in
the first three parts of this hierarchy, and (2) if the use of such
accounting standards improve the meaningfulness of the financial
statements.

The Consolidated Statement of Financial Position was prepared using the
accrual basis of accounting. All significant intra-agency balances and
transactions have been eliminated in consolidation. The statement
includes five general fund accounts; eleven gift revolving funds;
reimbursable funds (including 4 major programs); 84 trust funds; and 146
gift funds. The supplemental schedules display the funds in five
groupings: appropriated; reimbursable; gift and trust; revolving; and
custodial.

D. Revenues and Other Financing Sources

The Library receives the majority of its funding to support its programs
through appropriations. The Library receives both annual and multiyear
appropriations that may be used, within statutory limits, for operating
and capital expenditures including equipment, furniture and furnishings.
Additional amounts are obtained through reimbursements from services
performed for other federal agencies as authorized by the Economy Act and
the Library's annual appropriation legislation. Also, the Library
receives gifts from donors and interest on invested funds. In addition,
the Library operates several self-sustaining gift revolving funds which
generate revenues from sale of various products and services to the
public and federal customers.

Appropriations are recognized as revenues at the time they are used to
pay expenses. Other revenues are recognized when earned. A future
financing source is recognized for unfunded expenses such as annual leave
earned but not taken and the liability for future workers' compensation.

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-4 E. Gift and Trust Funds

During fiscal 1995, the Library administered 230 gift and trust funds
with combined asset value of approximately $52 million. All the funds are
restricted as to their use which must be in accordance with the terms of
the gift agreement. In general, funds are either temporarily restricted
(principal may be spent) or permanently restricted (principal may not be
spent). Additional restrictions may be imposed on the trust funds by the
terms of a trust agreement or donor's will. Library fund managers
administer and oversee the gift and trust funds to ensure they are used
as directed by the donor and in accordance with Library policy.

F. Funds with the U. S. Treasury

The amount shown as Funds with the U.S. Treasury represents the balances
of the appropriated, reimbursable, gift and trust, revolving, and
custodial funds that are on deposit with the U. S. Treasury.

G. Translation of Foreign Currencies

The Library of Congress receives and utilizes foreign currencies in
carrying out operations abroad. It conducts business through six overseas
offices and uses local currencies. Additionally, the Library administers
two U.S. Treasury foreign currency accounts (Indian rupees and Japanese
yen). At year-end, account balances remaining in foreign currencies are
translated to U.S. dollar equivalents at the uniform government-wide
Treasury reporting rates.

H. Receivables (Net)

Receivables consist of accounts receivable for various programs, interest
accrued on investments in market-based Treasury securities and on various
other trust fund investments, and travel advances. Most of the accounts
receivable resulted from billings to other federal agencies under
reimbursable interagency agreements for data base retrieval and other
library services. The Library has established an allowance for doubtful
accounts based on three percent of the receivables from federal agencies.

I. Pledges Receivable

Pledges of contributions to the Library and the Library of Congress Trust
Fund Board which the Library believes will be received in the next future
are recorded as receivables and as revenue based on their present value
at the time the promise is made.

J. Inventories and Operating Materials and Supplies

The Library's inventories are comprised, primarily, of unissued supplies
that will be consumed in future operations, materials used to reproduce
printed materials, sound recordings for both internal and external sales,
and sales shop merchandise for resale. Consumable operating supplies are
valued at cost using a first-in first-out (FIFO) method of valuation.

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-5 K. Investments (Net)

Investments in U.S. Government securities consist of non-marketable
market-based Treasury securities. The Treasury securities are valued at
cost less unamortized discounts and premiums. Interest is computed by the
straight-line method which approximates the effective interest method.
Most of these Treasury securities were purchased with the Copyright
royalties collected by the Copyright Office on behalf of copyright
owners. These investments will be held in trust until distributions are
made to copyright owners. The investments purchased with copyright
royalties are held in a custodial capacity and income does not accrue to
the Library's benefit.

The remainder of the Treasury securities are obtained and held by the
trust funds under conditions set forth in the respective trust
instruments.

Other investments of trust funds are held by a commercial bank and
managed by an investment management company. These securities consist of
common stocks, and other agency and corporate obligations and are carried
at cost value.

L. Property and Equipment (Net)

Furniture and equipment are capitalized at cost if the initial
acquisition cost is $10,000 or more. Depreciation is computed on a
straight-line basis using estimated useful lives. The largest category of
equipment is for the National Library Service for the Blind and
Physically Handicapped lending program which is capitalized although each
individual item of equipment is not valued at $10,000 or more. This
unique specially designed equipment is purchased from the manufacturer in
large lots usually valued at $1 million or more. The equipment has an
estimated life of ten years.

The next largest category, office equipment, is depreciated over a five
to fifteen year period. Software is capitalized if the initial cost of an
individual item is $10,000 or more and the useful life is 3 years or
longer.

The Library occasionally acquires property and equipment by direct gift
or by purchase from funds donated for a specific purpose or project.
Because it is the Library's policy that property accounts are not
maintained in the gift and trust funds, property and equipment acquired
through gifts are transferred to the Library's general fund as donated
capital and captured on the Library's automated inventory system.

Land, buildings, and improvements have been excluded from the Library's
property and equipment accounts because they are under the custody and
control of the Architect of the Capitol. This arrangement encompasses
four Capitol Hill buildings (the Thomas Jefferson, James Madison, John
Adams Buildings, and the Special Facilities Center) and a secondary
storage facility at Fort Meade, Maryland. Costs associated with the
acquisition and maintenance of these buildings are accounted for by the
Architect. In fiscal year 1995, the Architect received an appropriation
totalling $12.5 million to fund the structural and mechanical care of
these buildings.

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-6 M. Library Collections

The Library's collections are classified as Heritage Assets in accordance
with new FASAB standards, and as such, are not valued and presented on
the financial statements. However, as recommended by FASAB, the
collections are described in a supplementary Stewardship Report.

N. Accounts Payable

Accounts Payable represent the amounts payable by the Library at the end
of the fiscal year as a result of a transaction or event that has already
occurred.

O. Accrued Payroll and Benefits

Employee accrued payroll and benefits consist of unpaid personnel
compensation and employee benefits accrued to Library employees as of
September 30, 1995.

P. Accrued Annual, Sick, and Other Leave, and Workers' Compensation

Accrued annual leave is adjusted at the end of each fiscal year based on
annual leave earned and taken. Each year, the balance in the accrued
annual leave account is adjusted to reflect current pay rates. Sick leave
and other types of nonvested leave are expensed as taken. The accrued
costs and estimated liability related to future workers' compensation
claims have been recognized as an unfunded liability.

Q. Retirement Plans

Approximately 56 percent of the Library's employees participate in the
Civil Service Retirement System (CSRS), to which the Library makes
matching contributions equal to seven percent of pay. Forty-four percent
are covered by the Federal Employees Retirement System (FERS) to which
the Library makes employer contributions equal to the agency's share of
the normal costs of benefits; automatically contributes one percent of
pay for the Thrift Savings Plan (TSP) and matches any employee
contribution to the TSP up to an additional four percent of pay. Under
FERS, the employee is also covered by social security to which the
Library contributes the employer's matching share. The accrued amounts
due for the contributions at the end of the fiscal year are reported as
current liabilities.

R. Accounting for Intergovernmental Activities

The financial activities of the Library of Congress interact with and
depend on other federal government agencies. Thus, the Library's
Consolidated Statement of Financial Position does not reflect all
financial decisions and activities applicable to it as if it were a stand
-alone entity.

1. The Library's Consolidated Statement of Financial Position and
Statement of Operations and Changes in Net Position are not intended to
report the agency's share of the federal deficit or of public borrowings,
including interest thereon.

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-7 2. The Library does not report retirement (CSRS or FERS), health
benefits, or life insurance assets, accumulated plan benefits, or
unfunded liabilities, if any, applicable to its employees. Reporting such
amounts is the responsibility of the Office of Personnel Management.

3. The Library's program for the blind and physically handicapped
participates in the U.S. Postal Service's "Matter for blind and other
handicapped persons" program (39 U.S.C. 3403 - 3406). This Postal Service
program receives an appropriation from Congress to provide free postage
for qualifying organizations, programs, and individuals such as mail from
war zones, letters from blind people to anyone, and organizations which
work for the blind. The Library's National Library Service for the Blind
and Physically Handicapped uses this free matter program for mailing all
books and equipment to its participating lending libraries and patrons.

4. Certain legal actions to which the Library may be a named party are
administered and, in some instances, litigated by other federal agencies.
Generally, amounts (over $2,500 for Federal Tort Claims Act cases) to be
paid under any decision, settlement, or award pertaining to these
litigations are paid from the Treasury's Claims, Judgments, and Relief
Acts Fund. Since the Library, except for contract dispute payments, is
not required to reimburse this fund for payments made on its behalf, the
decision to make such payments is not reflected in the Library's
statement of financial position.

5. Governmental Services:

a. The Library of Congress is authorized to provide to other federal
libraries and agencies services such as automated library information and
other data base retrieval services through data base vendors and in-house
research studies. These services are provided on a cost reimbursement
basis and are billed in advance of providing the services. At year-end
the Library estimates the amount received in advance (Advances From
Others -Intragovernmental), and the amount to be received for services
provided (Accounts Receivable - Intragovernmental).

b. Three government agencies provide administrative services to the
Library on a reimbursable basis:

The Department of Agriculture's National Finance Center (NFC) processes
the Library's personnel, payroll, and employee benefits accounting
transactions. In fiscal year 1995, the Library paid $485,813 for these
services.

The Library utilizes the services of the Department of State as
documented by the Foreign Affairs Administrative Support (FAAS) system to
support the Library's six overseas field offices. The Library paid
$391,703 for these support services in fiscal year 1995.

The General Services Administration (GSA) provides building and vehicle
leasing services for the Library. (See Note 7)

c. As noted under Note 1.L, the Architect of the Capitol provides the
structural and

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-8 mechanical care of the Library's capitol hill facilities and remote
storage site at Fort Meade, Maryland.

S. Related Party Organizations

The Library lends support to several related organizations, projects, and
programs from which it receives benefits in various forms. The following
is a list of these organizations or programs:

1. Civilization Magazine - Civilization, a bimonthly magazine published
under license from the Library by a partnership controlled by L.O.C.
Management Corporation based in New York City, was launched in November
1994. The enterprise was approved by the Joint Committee on the Library
in the fall of 1993. Under the licensing agreement, the Library may
receive donations and must approve all promotional, editorial, and
advertising material using the Library name. Twelve hundred federal
depository libraries and the Congress received free subscriptions in
fiscal 1995. In connection with Civilization, the Library formed the
Library of Congress Associates Program. By subscribing to Civilization, a
person becomes an Associate entitled to special tours and discounts on
food and gift shop merchandise sold at the Library. By the end of 1995,
Civilization had a circulation of more than 200,000.

2. Telephone Pioneers of America - The Telephone Pioneers is a large
industry-related organization which voluntarily repairs playback machines
for the blind and physically handicapped program.

3. Library of Congress Child Care Association (LCCCA) - The LCCCA is a
nonprofit corporation under the District of Columbia's Nonprofit
Corporation Act. It was granted 501(c)(3) status by the Internal Revenue
Service on August 31, 1992, and currently operates as the "Little
Scholars Child Development Center." The center is located on the ground
floor of the Library's Special Facilities Center, 601 East Capitol Street
in the District of Columbia. The center provides child care for Library
employees and other legislative branch employees. Its operations,
management, and employees are the responsibility of the corporation and
not the Library of Congress. However, the Library and the Architect of
the Capitol support the center with equipment, free space, cleaning and
maintenance of grounds and building, utilities, local telephone service,
and security. The Library provides an official who is a non-voting
representative on the center's Board of Directors and who acts as a
liaison with the Library.

4. Ira and Leonore Gershwin Trust Fund and Related Charitable Trust -
Under the will of Mrs. Leonore Gershwin, the Library of Congress Trust
Fund Board is the beneficiary of 37.5 percent of Mrs. Gershwin's "1987
Trust." The will established the "Library Charitable Trust" which was
accepted by the Library of Congress Trust Fund Board in January 1992. The
primary purpose of the Trust is to perpetuate the name and works of
George and Ira Gershwin through all resources of the Library. The
Charitable Trust does not belong to the Library but is a separate entity
administered by trustees. The net income of the Charitable Trust is
distributed to the Library's Ira and Leonore Gershwin Trust Fund monthly
or in installments after the Library submits project requests. The
balance or principal of the Charitable Trust will be distributed to the
Library in 2033, fifty years after the date of death of Ira Gershwin. As
of September 30, 1995, the charitable trust income account

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-9 had a balance of $1,038,643 which was available for activities
following the development of project requests by the Library.

5. "Friends" Organizations" - Three organizations exist which lend
support to Library programs through gifts of money and other property but
are incorporated as independent entities under the Internal Revenue
Service Code, Section 501 (c)(3).

a. Millennium Foundation, Inc. - The foundation operates for charitable,
educational and literary purposes solely to benefit, support, and carry
out the purposes of the Library of Congress. The Library allows the
Foundation to use its name in connection with the performance of
activities approved by the Library. This right exists only so long as
Millennium is engaged in activities that directly or indirectly support
the mission and objectives of the Library.

b. Friends of the Law Library - The non-profit organization's purpose is
to stimulate interest in the Law Library among lawyers, librarians, and
legal scholars worldwide; to acquire additional legal materials and to
sponsor legal research. Among other projects supported by the Friends in
fiscal year 1995, the Law Library received $7,730 to cosponsor a lecture
with the Supreme Court Historical Society.

c. Friends of Libraries for the Blind - The non-profit organization's
purpose is to heighten awareness and visibility of national library
services for blind and physically handicapped individuals in the United
States and Canada and assist and promote library services, provide
cultural enrichment programs and create and issue periodic communications
on topics related to blind and physically handicapped individuals.

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-10 Note 2. Fund Balance With Treasury

A. Fund Balances:

1. ENTITY Obligated Unobligated/Available Unobligated/Restricted Total

Appropriated Funds $ 85,712,265 $ 34,694,178 $120,406,443

Reimbursable Funds 32,653,859 981,186 33,635,045

Gift and Trust Funds 3,417,490 9,417,681 $ 5,330,224 (2) 18,165,395 (1)

Gift Revolving Funds 1,351,003 3,595,948 4,946,951

Other 3,537,715 (3) 3,537,715

Total Entity $123,134,617 $ 52,226,708 $ 5,330,224 $180,691,549

2. NON-ENTITY

Custodial Funds $ 385,511 $ 385,511

Total Non-Entity $ 385,511 $ 385,511

(1) Includes permanent loan to U.S. Treasury in amount of $9,999,999. (2)
Permanent loan principal amount restricted - $5,330,224. (3) Balances in
deposit, suspense, clearing and other accounts which are included in
Appropriated Fund Balance.

B. Permanent Loan to U.S. Treasury:

Under 2 U.S.C. 158, up to $10,000,000 of the Library's trust funds may be
invested with the U.S. Treasury as a perpetual loan, at a floating rate
of interest, adjusted monthly, but no less than four percent per annum.
At September 30, 1995, the gift and trust fund balance included $9.99
million invested in the permanent loan at an interest rate of 6.5
percent.

C. Fund Balance with Treasury Includes Foreign Currency Translated:

Japanese Yen - Y22,587,345 @ 96.69 = $233,606 Indian Rupees - Rs3,211,349
@ Rs31.81/1 = $100,954

The exchange rate is of August 31, 1995, taken from the Treasury
Reporting Rates of Exchange Report, as of September 30, 1995. To ensure
all reports are translated at uniform exchange rates, all agencies are
directed to use the current quarterly Treasury exchange rate report for
the period reported on.

Note 3. Custodial Funds

The Library of Congress Copyright Office Licensing Division administers
the compulsory and statutory licenses covered by the Copyright Act (17
U.S.C.). The Licensing Division receives royalty fees from the cable
television operators for retransmitting television and radio broadcasts,
from satellite carriers for

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-11 retransmitting "superstation" and network signals, and from
importers and manufacturers for distributing digital audio recording
products (DART). Refunds may arise when a cable, satellite, or DART
remitter inadvertently overpays or is otherwise entitled to a refund. The
Licensing Division invests the licensing royalty fees in market-based
U.S. Treasury notes and bills. Because these investments are held in a
custodial capacity, income does not accrue to the Library's benefit.

The Copyright Royalty Tribunal Reform Act of 1993, Public Law 103-198,
eliminated the Copyright Royalty Tribunal (CRT) and transferred its duty
to distribute copyright royalties to the Copyright Office, Library of
Congress. If disputes arise regarding the disposition of the royalties,
the Copyright Office recommends that the Librarian convene a copyright
royalty arbitration panel (CARP). The panel consists of two arbitrators
selected from three recommended by the Register of Copyrights. The three
recommended arbitrators are selected from a list of professional
arbitrators nominated by professional arbitration associations. The two
selected arbitrators select a third who acts as the chairperson of the
panel. The Librarian of Congress reviews the panel's decisions and has 60
days to adopt or reject the panel's decision. Decisions may be appealed
in the Federal court.

Note 4. Investments (Net)

1. ENTITY ASSETS - TRUST FUNDS Cost Premium Discount Net Unamortized
Unrealized Investments, Market Value

A. Intragovernmental Securities Non-Marketable, Market-Based $12,608,000
$ 29,597 $( 91,667) $12,545,930 $12,590,295

B. Governmental Securities Private Sector 12,357,477 12,357,477
12,917,822

Sub-total - Entity $24,965,477 $ 29,597 $( 91,667) $24,903,407
$25,508,117

II. NON-ENTITY ASSETS- Custodial Unamortized Unrealized Investments,
(Copyright Royalties) Premium Discount Net Cost Market Value

A. Intragovernmental Securities Non-Marketable, Market-Based $423,745,000
$233,042 $(4,312,902) $419,665,140 $420,473,820

Sub-total - Custodial 423,745,000 233,042 (4,312,902) 419,665,140
420,473,820

Total Entity and Non-Entity Assets $448,710,477 $262,639 $(4,404,569)
$444,568,547 $445,981,937

A. Intragovernmental Securities

Non-marketable, market-based securities are Treasury securities issued to
governmental accounts that are not traded on any securities exchange, but
mirror the prices of marketable securities with similar terms. At the
direction of the Trust Fund Board, or as specified by donors, trust funds
are invested in U.S. Treasury securities, the U.S. Treasury permanent
loan, and private sector securities.

Copyright royalties are invested by the Library in U.S. Treasury
securities as directed by the Copyright Office until the distributions
are made to the copyright owners.

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-12 Intragovernmental securities are intended to be held until maturity.

B. Governmental Securities

Governmental securities are the Library's investments that are held in
trust by a commercial bank and are managed by a private investment
management company. These investments consist of various financial
instruments such as money market funds and mutual funds that own common
stocks, agency and corporate obligations and preferred stock. Cost value
was derived from the investments made, plus gains, dividends, income or
additional investments and less any losses, fees or distributions.
Governmental investments are intended to be available for sale. (See Note
12.)

C. Portfolio Summary for all Trust Fund Private Sector Investments

Type of Investment Cost Basis Market Value Unrealized Gains

Cash and Cash Equivalents $ 975,127 $ 975,127 $ -0-

Equities 4,731,708 5,113,297 381,589

Fixed Income: Treasury Securities 2,673,464 2,719,356 Other 3,977,178
4,110,042 45,892 132,864

Total $ 12,357,477 $ 12,917,822 $ 560,345

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-13 Note 5. Receivables (Net)

A. Accounts Receivables, Advances, and Interest Receivable as of
September 30, 1995

Fund mental Public Advances Trust Royalties Receivables Intra- Receivable
Receivable govern- Travel Gift & Copyright Total Interest Interest

1. ENTITY

Appropriated $ 217,785 $ 236,073 $ 23,183 $ 477,041

Reimbursable 7,186,514* 2,671 927 7,190,112

Gift & Trust 2,961 13,857 $ 152,912 169,730

Revolving 19,468 270,907 290,375

Total Entity $7,423,767 $ 512,612 $ 37,967 $ 152,912 $8,127,258

Less: Allowance for Losses 230,575 51,293 281,868

Total Net Entity Receivables $7,193,192 $ 461,319 $ 37,967 $ 152,912
$7,845,390

2. NON-ENTITY

Appropriated $ 4,998 $ 2,902 $ 7,900

Custodial $ 540,292 540,292

Total Non-Entity $ 4,998 $ 2,902 $ 540,292 $ 548,192

Total Entity and Non-Entity Receivables $7,198,190 $ 464,221 $ 37,967 $
152,912 $ 540,292 $8,393,582

* Intragovernmental Accounts Receivable - The major portion of the
Library's accounts receivable are in the FEDLINK program. The balances
are due from Federal agencies which use the FEDLINK services under
interagency agreements.

B. Pledges Receivable - At the end of fiscal year 1995, the Library had
pledges of contributions totaling $9.8 million. Of this total, $8.6
million is pledged to support the National Digital Library. For fiscal
1995, an accrual was made for the present value of the pledges,
$9,125,315 of which $6.7 million is fiscal year 1995 revenue and $2.4
million is prior year revenue. Of this amount, $2.4 million is pledged
for fiscal 1996; $3.7 million for fiscal 1997; $1.4 million for fiscal
1998; $1.4 million for fiscal 1999; and $228 thousand for fiscal 2000.

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-14 Note 6. Property and Equipment (Net)

Operating property and equipment consists of equipment, furniture and
furnishings, equipment on loan to the public for the National Library
Service for the Blind and Physically Handicapped program, and automated
data processing (ADP) software. Operating equipment includes document
imaging systems, valued at $200,000, on loan from the Library to the
Appropriations Committees of the U.S. House of Representatives and the
U.S. Senate.

Capitalized equipment is serialized equipment (containing manufacturer's
serial number) such as computers, printers, and other equipment which has
an acquisition cost of $10,000 or greater.

Furniture and furnishings for the Library's use in its operations are
capitalized if the acquisitions or appraised value is $10,000 or more.

Equipment on loan to the public includes cassette players, talking books,
and other specialized equipment specifically developed for use by the
blind and physically handicapped. This equipment is distributed through a
network of participating libraries that loan the equipment to blind and
physically handicapped individuals. Inventory records of the equipment
are maintained by the Library of Congress, and on-site physical
inventories are performed periodically by contracted auditors. The value
of the capitalized items range from $100 to $500 each; however, the
equipment is manufactured and shipped in large lots valued at more than
$1 million each. The equipment inventory is capitalized at invoice price
which does not include any freight or postage costs. These shipping costs
are covered by the U.S. Postal Service's "free matter for the blind and
handicapped." The value of this free service, which ordinarily would be
included in the inventory value, is undetermined.

ADP software consists of software purchased from outside vendors with a
value of $10,000 or more per item and an estimated useful life of three
years or more. It does not include internally developed or leased
software.

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-15 The following table shows property and equipment which was
capitalized at September 30, 1995.

Classes of Property Value Depreciation Value Acquisition Accumulated Net
Book

Appropriated: Operating equipment $ 30,182,888 $ 19,974,942 $ 10,207,946

ADP software 2,546,400 1,537,760 1,008,640

Furniture & Furnishings 609,600 70,440 539,160

NLS/BPH Equipment - loan to public 81,060,479 43,773,679 37,286,800

Total Appropriated 114,399,367 65,356,821 49,042,546

Revolving Funds: Equipment 1,037,896 581,222 456,674

Total Property $115,437,263 $ 65,938,043 $ 49,499,220

Note 7. Leases

The Library leases office space and vehicles from the General Services
Administration and has entered into other operating leases for various
types of equipment. Additionally, the Library's overseas field offices
lease operating space from the Department of State. Lease costs for
office space, vehicles and equipment for fiscal year 1995 amounted to
$6,833,205. Estimated future minimum lease payments through fiscal year
2006 are as follow:

Fiscal Year Ended September 30

1996 $ 6,120,169

1997 2,241,812

1998 2,131,811

1999 2,132,512

2000 2,111,472

Thereafter 12,622,080

Total Estimated Future Lease Payments $27,359,856

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-16 Note 8. Liabilities

Liabilities represent the amounts that are likely to be paid by the
Library as a result of transactions that have already occurred.
Liabilities for which an appropriation has not been enacted, or are the
result of custodial and deposit account activities, are classified as
liabilities not covered by budgetary resources. For accrued unfunded
annual leave and workers' compensation liabilities, it is not certain
that appropriations will be enacted to fund these amounts.

Accounts Payable are amounts due to vendors and other agencies for goods
and services received prior to the end of the fiscal year.

Accrued Payroll and Benefits, Unfunded Annual Leave, and Unfunded
Workers' Compensation are amounts earned or due as of the end of the
fiscal year plus an unfunded future liability for workers' compensation.

Advances and Deferred Credits are funds received for the reimbursable
programs and the Photoduplication Service that have not yet been earned.
An additional deferred credit in the amount of $438,600 represents a
trust fund receipt which was received but remained unprocessed at
September 30, 1995, pending final acceptance by the Joint Committee on
the Library.

Deposit Liabilities are customer funds on deposit for Copyright and
Cataloging Distribution products and services. This category also
includes the custodial funds for Copyright royalties.

Liabilities Covered by Budgetary Resources:

Governmental:

Appropriated Reimbursable Gift & Trust Revolving Custodial Combined
Eliminations Consolidated

Accounts Payable $ 12,994,934 $ 7,359,725 $ 747,278 $ 352,888 $
21,454,825 $ (942,818) $ 20,512,007

Accrued Funded 9,388,172 316,983 100,845 151,998 $ 9,957,998 9,957,998
Payroll and Benefits

Total Liabilities Covered by Budgetary Resources $ 22,383,106 $ 7,676,708
$ 848,123 $ 504,886 $ 31,412,823 $ (942,818) $ 30,470,005

Liabilities not Covered by Budgetary Resources:

IntraGovernmental

Appropriated Reimbursabl Gift & Revolving Custodial Combined Eliminations
Consolidated e Trust

Accounts Payable $ 5,528 $ 5,528 $ (5,528) -0-

Other 91,520 91,520 91,520

Advances/Deferred Credits 33,205,327 33,205,327 33,205,327

Total: Intra-Governmental $ 91,520 $ 33,205,327 $ 5,528 $33,302,375 $
(5,528) $ 33,296,847

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-17 Governmental

Accounts Payable 253,093 253,093 253,093

Accrued Unfunded Annual Leave 14,558,525 374,495 107,962 183,895
15,224,877 15,224,877

Accrued Unfunded Workers' Compensation 11,271,423 11,271,423 11,271,423

Deposit Liability 3,814,153 420,337,850 424,152,003 424,152,003

Deferred Credits 438,600 801,736 1,240,336 1,240,336

Total Governmental $ 29,644,101 $ 374,495 $ 546,562 $ 985,631
$420,590,943 $452,141,732 $452,141,732

Total Liabilities Not Covered by Budgetary Resources $ 29,735,621 $
33,579,822 $ 552,090 $ 985,631 $420,590,943 $485,444,107 $ (5,528)
$485,438,579

Note 9. Workers' Compensation

The Federal Employees' Compensation Act (FECA) provides income and
medical cost protection to covered federal civilian employees injured on
the job, employees who have incurred a work-related occupational disease
and beneficiaries of employees whose death is attributable to a job-
related injury or occupational disease. Claims incurred for benefits for
Library employees under FECA are administered by the Department of Labor
(DOL) and later billed to the Library.

The Library accrued its workers' compensation costs that were unbilled or
unpaid as of September 30, 1995 ($2,206,433), and established an unfunded
liability for future costs. An analysis of the claims for the past six
years indicated that 95.2 percent of the claims filed by employees were
paid within ten years. Therefore, the estimated future unfunded liability
of $9,064,990 was based on a ten year projection.

Note 10. Contingent Liabilities

The Library does not have any pending material lawsuits or claims in
which the amounts are estimable and will probably result in payment by
the Library. When claims are expected to result in payments, and the
payment amounts can be reasonably estimated, appropriate provisions are
included in the principal statements.

However, a liability of $8.5 million plus legal fees exists in the Cook
vs. Billington case now pending in the United States Court of Appeals.
This settlement will be made from the Treasury's Claims, Judgments, and
Relief Act Fund.

In the opinion of management and legal counsel, the resolution of other
claims and lawsuits will not materially affect the financial position or
operations of the Library.

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-18 Note 11. Net Position

Consolidated

A. Unexpended Appropriations: Undelivered Orders Unobligated Prior Years'
Obligations Adjusted (Net)

Sub-total $ 65,450,186 34,947,342 ( 2,080,380)

$ 98,317,148

B. Invested Capital 49,042,547

C. Unrealized Gain on Governmental Securities 560,345

D. Cumulative Results of Operations 44,038,874

E. Other: Donations Restricted 14,069,248

F. Future Funding Requirements ( 26,496,301)

G. Total $179,531,861

A. Unexpended Appropriations

Unexpended appropriations consist of unobligated balances and undelivered
orders. Unobligated balances represent amounts appropriated which are
unobligated and have not lapsed, been rescinded, or withdrawn.
Undelivered orders represent obligations the Library had incurred as of
September 30, 1995, for goods and services which were ordered but had not
been received by that date.

Unobligated balances - 91-95 years: $ 18,072,722 No-Year: 16,874,620

Prior Years' Obligations Adjusted (Net) - represent upward and downward
adjustments for various transactions.

B. Invested Capital

Invested capital represents U.S. Government resources invested in certain
Library assets. This balance consists of the undepreciated value of
property and equipment that is financed by appropriations. This balance
also includes the undepreciated value of property and equipment donated
to the Library, which is transferred to the appropriated fund upon
acquisition of the capital asset. These assets are available for the

THE LIBRARY OF CONGRESS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year Ended September 30, 1995

2-19 general use of the Library of Congress. Revolving fund property and
equipment balances are not included since they are not purchased from
appropriated funds.

C. Unrealized Gain on Governmental Securities

Unrealized gain represents the difference between the cost and market
value of trust funds invested with the private sector in governmental
securities.

D. Cumulative Results of Operations

Cumulative Results of Operations represent the net difference between
expenses and losses and financing sources, including appropriations,
revenue and gains, since the inception of the activity.

E. Other - Donations Restricted

Donations Restricted represent the total trust fund balance from current
and prior years that is permanently restricted (principal may not be
spent).

F. Future Funding Requirements

Future Funding Requirements represent liabilities reported in the
Statement of Financial Position which are not covered by available
resources. This amount consists of the Accrued Unfunded Annual Leave and
Workers' Compensation Liability balances.

Note 12. Subsequent Events - Governmental Securities

On December 4, 1995, the Library of Congress Trust Fund Board directed
the Library to terminate its investment contracts with a commercial bank
and increase its percentage of equity investments by placing the funds
with five new investment managers. In March 1996, the commercial bank
liquidated a total of $503,000 from ten accounts and remitted the funds
to the Library. On April 4, 1996, the bank remitted $12.17 million to the
Library. The final portion of the proceeds of approximately $40,000,
consisting of dividends and interest, will be remitted to the Library by
the end of April 1996. The proceeds received as of April 4, 1996, were
invested in U.S. Treasury bills maturing on May 2, 1996, at which time
the Library will invest the funds with each of the five new managers in
accordance with percentages prescribed by the Trust Fund Board.

THE LIBRARY OF CONGRESS Statement of Financial Position by Fund Type As
of September 30, 1995 (In Dollars)

APPROPRIATION REIMBURSABLE GIFT AND TRUST REVOLVING CUSTODIAL COMBINED
ELIMINATION'S CONSOLIDATED

ASSETS APPROPRIATION REIMBURSABLE GIFT AND TRUST REVOLVING CUSTODIAL
COMBINED ELIMINATION'S CONSOLIDATED

ASSETS

Entity Assets:

Fund Balance With Treasury $123,944,158 $33,635,045 $18,165,395
$4,946,951 $180,691,549 $180,691,549

Investments, Treasury Securities 12,545,930 12,545,930 12,545,930

Investments, Governmental Securities 12,917,822 12,917,822 12,917,822

Accounts Receivable, Net - Intragovernmental 347,007 6,974,583 15,845
735,161 8,072,596 (879,404) 7,193,192

Accounts Receivable, Net - Public 230,290 2,671 2,961 225,397 461,319
461,319

Interest Receivable 152,912 152,912 152,912

Advances and Prepayments 23,183 927 13,857 37,967 37,967

Pledges Receivable - Donations 9,125,315 9,125,315 9,125,315

Cash and Other Monetary Assets 66,062 66,062 66,062

Inventory 274,526 274,526 274,526

Operating Materials and Supplies 1,502,411 373,377 1,875,788 1,875,788

Property and Equipment, Net 49,042,546 456,674 49,499,220 49,499,220

Library Collections

Total Entity Assets 175,155,657 40,613,226 52,940,037 7,012,086
275,721,006 (879,404) 274,841,602

Non-Entity Assets:

Fund Balance With Treasury 385,511 385,511 385,511

Investments, Treasury Securities 419,665,140 419,665,140 419,665,140

Accounts Receivable, Net - Intragovernmental 73,940 73,940 (68,942) 4,998

Accounts Receivable, Net - Public 2,902 2,902 2,902

Interest Receivable 540,292 540,292 540,292

Total Non-Entity Assets 76,842 420,590,943 420,667,785 (68,942)
420,598,843

Total Assets $175,232,499 $40,613,226 $52,940,037 $7,012,086 $420,590,943
$696,388,791 ($948,346) $695,440,445

3-3

THE LIBRARY OF CONGRESS Statement of Financial Position by Fund Type As
of September 30, 1995 (In Dollars)

APPROPRIATION REIMBURSABLE GIFT AND TRUST REVOLVING CUSTODIAL COMBINED
ELIMINATION'S CONSOLIDATED

ASSETS LIABILITIES

Liabilities Covered by Budgetary Resources:

Accounts Payable $12,994,934 $7,359,725 $747,278 $352,888 $21,454,825
($942,818) $20,512,007

Accrued Funded Payroll, Benefits 9,388,172 316,983 100,845 151,998
9,957,998 9,957,998

Total Liabilities Covered by Budgetary

Resources 22,383,106 7,676,708 848,123 504,886 31,412,823 (942,818)
30,470,005

Liabilities not Covered by Budgetary Resources:

Accounts Payable 5,528 253,093 258,621 (5,528) 253,093

Advances From Others - Intragovernmental 33,205,327 33,205,327 33,205,327

Advances From Others - Public 438,600 801,736 1,240,336 1,240,336

Custodial and Deposit Account Liability 3,814,153 420,337,850 424,152,003
424,152,003

Misc. Receipts Held for Treasury 76,843 76,843 76,843

Disbursing Officer's Accountability 14,677 14,677 14,677

Accrued Unfunded Annual Leave 14,558,525 374,495 107,962 183,895
15,224,877 15,224,877

Accrued Unfunded Workers' Compensation 11,271,423 11,271,423 11,271,423

Total Liabilities not Covered by Budgetary

Resources 29,735,621 33,579,822 552,090 985,631 420,590,943 485,444,107
(5,528) 485,438,579

Total Liabilities 52,118,727 41,256,530 1,400,213 1,490,517 420,590,943
516,856,930 (948,346) 515,908,584

NET POSITION

Balances:

Unexpended Appropriations 98,317,148 98,317,148 98,317,148

Invested Capital 49,042,547 49,042,547 49,042,547

Unrealized Gain on Investments,

Governmental Securities (Note 4) 560,345 560,345 560,345

Cumulative Results of Operations 1,584,026 (268,809) 37,018,193 5,705,464
44,038,874 44,038,874

Donations - Restricted 14,069,248 14,069,248 14,069,248

Future Funding Requirements (25,829,949) (374,495) (107,962) (183,895)
(26,496,301) (26,496,301)

Total Net Position 123,113,772 (643,304) 51,539,824 5,521,569 179,531,861
179,531,861

Total Liabilities and Net Position $175,232,499 $40,613,226 $52,940,037
$7,012,086 $420,590,943 $696,388,791 ($948,346) $695,440,445

3-3

THE LIBRARY OF CONGRESS Consolidated Operating Statement And Changes In
Net Position (Unaudited)

For the Year Ended September 30, 1995 (In Dollars)

Revenues and Financing Sources Appropriated Capital Used $353,181,759
Revenue from Sales of Goods 994,768 Revenue from Services Provided
57,848,550 Donations 23,454,077 Interest Earned 1,703,816 Other Revenues
and Financing Sources 4,107,924 Less: Receipts Transferred to Treasury
(3,532,029) Total Revenues and Financing Sources $437,758,865

Expenses Program/Operating Expenses: Salaries and Benefits 244,935,912
Program/Operating Expenses: Non-Personal 143,730,042 Depreciation
18,236,440 Bad Debts and Write-offs 131,244 Other Expenses 1,868,346
Total Expenses 408,901,984

Excess of Revenues and Financing Sources over Total Expenses $28,856,881

Changes in Net Position Net Position, Beginning Balance (Adjusted)
$143,040,069 Excess of Revenues and Financing Sources over Total Expenses
28,856,881 Plus: Non-Operating Changes 7,634,911 Net Position, Ending
Balance $179,531,861

3-3

THE LIBRARY OF CONGRESS Statement of Operations and Changes in Net
Position (By Fund Type - Unaudited) For the Year Ended September 30, 1995
(In Dollars)

APPROPRIATION REIMBURSABLE GIFT AND TRUST REVOLVING CUSTODIAL COMBINED
ELIMINATION'S CONSOLIDATED

Revenues and Financing Sources

Appropriated Capital Used $353,181,759 $353,181,759 $353,181,759

Revenue from Sales of Goods $3,644 $1,018,333 1,021,977 ($27,209) 994,768

Revenue from Services Provided $57,774,631 (4,268) 3,339,144 61,109,507
(3,260,957) 57,848,550

Donations 23,286,680 167,397 23,454,077 23,454,077

Interest Earned 1,703,816 1,703,816 1,703,816

Other Revenues and Financing Sources 3,532,029 659,366 3,112,441
7,303,836 (3,195,912) 4,107,924

Less: Receipts Transferred to Treasury (3,532,029) (3,532,029)
(3,532,029)

Total Revenues and Financing Sources 353,181,759 57,774,631 25,649,238
7,637,315 444,242,943 (6,484,078) 437,758,865

Expenses

Program/Operating Expenses: Salaries and Benefits 231,109,304 7,396,238
2,599,128 3,914,713 245,019,383 (83,471) 244,935,912

Program/Operating Expenses: Non-Personal 88,890,699 52,807,096 6,560,264
1,872,590 150,130,649 (6,400,607) 143,730,042

Depreciation 18,029,959 206,481 18,236,440 18,236,440

Bad Debts and Write-offs 2,985 128,259 131,244 131,244

Other Expenses 1,735,423 33,111 83,858 15,954 1,868,346 1,868,346

Total Expenses 339,768,370 60,364,704 9,243,250 6,009,738 415,386,062
(6,484,078) 408,901,984

Excess (shortage) of Revenues and

Financing Sources over Total Expenses $13,413,389 ($2,590,073)
$16,405,988 $1,627,577 $28,856,881 $28,856,881

Changes in Net Position

Net Position, Beginning Balance (Adjusted) $102,625,817 $1,946,769
$34,573,491 $3,893,992 $143,040,069 $143,040,069

Excess (shortage) of Revenues and

Financing Sources over Total Expenses 13,413,389 (2,590,073) 16,405,988
1,627,577 28,856,881 28,856,881

Plus: Non-Operating Changes 7,074,566 560,345 7,634,911 7,634,911

Net Position, Ending Balance $123,113,772 ($643,304) $51,539,824
$5,521,569 $179,531,861 $179,531,861

3-3

4-1 THE LIBRARY OF CONGRESS

Stewardship Report HERITAGE ASSETS

September 30, 1995

Library Collections

The Library of Congress has the world's largest library collection
comprising over 108 million items including research materials in over
450 languages and various media. The collections include approximately
twenty-six million books and other printed materials, forty-six million
manuscripts, thirteen million photographs, four million maps, three
million pieces of music, two million audio recordings, and seven hundred
thousand motion pictures. The collection of incunabula (books printed
before 1500) is the largest in the Western Hemisphere, and the
collections of maps, atlases, newspapers, music, motion pictures,
photographs, and microforms are probably the largest in the world. Other
collections include drawings, posters, prints, technical reports and
other printed materials; computer programs, videotapes and disks, talking
books, and other audio and visual materials.

The Library has the papers of 23 presidents of the United States as well
as papers of people from many diverse arenas -- Susan B. Anthony, Sigmund
Freud, Averell Harriman, Henry Kissinger, Thurgood Marshall, Irving
Berlin, and many others. The Library's treasures include one of three
perfect copies in the world of the three-volume Gutenberg Bible printed
on vellum, two of the five known copies of the Gettysburg address, Thomas
Jefferson's handwritten draft of the Declaration of Independence, and
many other rare books and manuscripts including the oldest example of
printing in the world.

The collections are organized into two major categories: the print
collections which include classified books, serials, and pamphlets; and
the special format collections such as maps, motion pictures, music,
manuscripts, photographs, sound recordings, and prints.

Collections Policy

The Library's collections are universal in scope; however, the Library
does not collect everything or keep everything it receives. The
collections development policy has evolved over the years and follows the
concept of "universality" as stated by Thomas Jefferson. In 1814,
Jefferson offered to sell his personal library to the Library Committee
of Congress in order to "recommence" the Congressional library after the
British burned the U. S. Capitol destroying the Library of Congress.
Jefferson stated: " I do not know that it contains any branch of science
which Congress would wish to exclude from their collection; there is, in
fact, no subject to which a Member of Congress may not have occasion to
refer." In 1815, President James Madison approved an Act of Congress
appropriating $23,950 for the acquisition of Jefferson's library of 6,487
volumes.

4-2 As set forth in the Library's Collections Policy Statements, the
Library's collections development policies are directed towards its
responsibilities to serve (1) the Congress and United States Government
as a whole, (2) the scholarly and library community, and (3) the general
public. The Library's mission is "to make its resources available and
useful to the Congress and the American people and to sustain and
preserve a universal collection of knowledge and creativity for future
generations." Written collections policy statements assure that every
effort is made to possess all books and library materials necessary to
the Congress and various offices of the United States Government to
perform their duties; a comprehensive record, in all formats, documenting
the life and achievement of the American people; and a universal
collection of human knowledge (except clinical medicine and technical
agriculture, which are the responsibility of the National Library of
Medicine and National Agricultural Library respectively) embodying
primarily in print form the records of other societies, past and present.

The major source of the Library's collections of Americana is the
copyright deposit program. The copyright law of 1870 for the first time
combined the registration and deposit functions in the Library of
Congress and required that two copies of everything registered be
deposited in the Library.

The Cataloging in Publication (CIP) Program is the other principal source
of U.S. published books that the Library acquires. A mainstay of U.S.
library service for more than twenty years, the program provides
cataloging data, based on prepublication galleys, to participating
publishers who include the data in their published books. As
participants, these publishers are required to submit a copy of the
published book to the Library. This copy is in addition to the two copies
mandated under the copyright law. In fiscal year 1995, the Library
obtained 49,201 books through the CIP program. These additional titles
are either added to the collections or used as part of the Library's
exchange program.

The Library also acquires materials by purchase (essential publications
not available though copyright deposit or the CIP program), transfer from
other federal agencies, gift, domestic and international exchange, or by
provisions of state and federal law. Many of these materials are foreign
publications. The Library maintains six overseas offices and has
arrangements with book dealers, agents, and publishers to ensure
efficient and prompt acquisition of current foreign publications of
research value on a world-wide basis.

The following are brief descriptions of the Library's International
Exchange and Federal transfer programs:

Of its 15,000 exchange agreements, the Library of Congress maintains
fewer than one hundred "official" exchanges with major national and
parliamentary libraries around the world. These exchanges were instituted
and are overseen by the Library; however, the Government Printing Office
has the responsibility to ensure that this select group of exchange
partners receives U.S. Government publications. Pursuant to 44 U.S.C.
1719, the Superintendent of Documents distributes U.S. government
publications "to those foreign governments which agree, as indicated by
the Library of Congress, to send to the United States similar
publications of their governments

4-3 for delivery to the Library of Congress." The Government Printing
Office pays for the cost of this program from funds appropriated for the
Superintendent of Documents. In fiscal year 1995, the Exchange and Gift
Division (E&G) received 162,000 items, or 45 percent of its exchange
receipts, from these official central sources.

Pursuant to 36 C.F.R. 701.33, Federal libraries send their surplus
materials to the Exchange & Gift Division for addition to the Library's
own acquisitions to use in the exchange and surplus books program. In
fiscal year 1995, the Library received more than two million items from
Federal agencies, and, although only a very small number were selected
for the collections, several thousand were used in exchanges with other
libraries for materials needed by the Library of Congress. Many thousands
of other Federal transfers were used in the Library's surplus books
programs.

The primary resources for recent acquisitions are as follow:

1992 1993 1994 1995

Annual Appropriations Authorized $ 7,636,000 $ 7,669,000 $ 8,127,000 $
8,458,000

Estimated Value of Copyright Deposits Transferred to the $12,134,000
$13,547,000 $15,711,000 $20,158,594 Library

Government Printing Office Appropriation (part of Superintendent of
Documents) for $ 750,000 $ 637,000 $ 712,000 $ 462,000 International
Exchange

4-4 Acquisitions by source:

Source Pieces 1992 Pieces 1993 Pieces 1994 Pieces 1995

Purchases: Appropriated GENPAC 930,747 914,742 799,110 714,127
Appropriated Other 230,213 202,853 197,970 146,828 Special Foreign
Currency 101,304 78,108 66,081 65,827 Gift and Trust Funds 5,774 20,318
5,541 3,712

Total Purchases 1,268,038 1,216,021 1,068,702 930,494

Non-Purchases: Exchange 473,394 529,125 558,327 453,857 Government -
Transfers 992,694 720,925 727,874 732,087 Gifts 1,439,056 650,282
1,246,809 744,860 Cataloging in Publication 53,016 46,048 56,345 49,201
Copyright Deposits 827,173 833,929 757,082 855,022

Total Non-Purchases 3,785,333 2,780,309 3,346,437 2,835,027

Total All Acquisitions 5,053,371 3,996,330 4,415,139 3,765,521

Preservation and Conservation

The collections are maintained and preserved through an extensive and
diverse preservation program. The preservation of Library materials
budget element totaled $10.6 million in fiscal year 1995. Recent
preservation projects include:

use of a new book deacidification technology to ensure uniform, effective
deacidification of 72,000 books over the next two years;

a project to improve in-house reformatting capabilities for audio
preservation in either analog or digital form;

a pilot digitization program to explore the possibilities of transferring
motion picture film to digital formats for preservation and access and
for securing the digitized collections;

extensive study of a broad range of scanning schemes for conversion of
visual images or documents to a digital format for preservation
recording;

4-5 cleaning, relabeling, and rehousing of documents (see statistics
below); and

installation of a cold temperature vault with a multi-layered security
system and an ozone friendly non-aqueous fire suppression system for 18
of the Library's top treasures.

Preservation statistics for fiscal year 1995 are as follow:

Treatment: Volumes treated 3,982 Unbound items treated, paper-based 8,619
Non-paper-based items treated 135 Commercial library binding, volumes
235,070

Housing/Rehousing: Protective boxes constructed, for paper-based
materials 17,469 Items rehoused, paper-based 6,583 Discs, film (reels),
magnetic tape (reels/cassettes) 67,913 (58,963 discs; 7,500 reels;
cleaned, packaged 1,450 reels/cassettes)

Copying/Reformatting: Paper-based materials converted to microfilm, items
11,477 (2,873,433 feet microfilm) Audio materials converted to magnetic
tape, titles Video 2,656 materials converted to magnetic tape, titles
Motion 1,694 picture films converted, reels 2,240 (1,066,000 feet)

General Preservation of the Collections Items surveyed, paper-based
12,977

Deacidification of Printed Materials - One of the most serious
preservation issues facing the Library of Congress, and all libraries, is
the problem of brittle, deteriorating books caused by acid introduced
during the paper manufacturing process. The Library of Congress has an
estimated 15 million books that require deacidification treatment at an
estimated cost of $11.00 - $15.00 per book (1995 estimate). Recognizing
the limited resources and technical capacity to deacidify all of these
books, the Library sets priorities so that books of the greatest value
and which are most at-risk receive treatment first.

The acidic books issue began in the mid-1800's when acidic wood pulp was
substituted for rags in the manufacture of paper. This manufacturing
change has resulted in the natural deterioration of printed books and
other Library materials made from the acidic paper. The pages of the
books and materials become so brittle within a few decades that they
virtually self-destruct.

4-6 The Library of Congress is providing the leadership in a research
effort to solve the acidic book problem. Library chemists invented the
diethyl zinc (DEZ) mass deacidification process in the mid-1970's and
have evaluated and tested other deacidification processes. In 1984,
Congress appropriated $11.5 million in no-year funding for
deacidification research and a deacidification test facility. However, in
1994, the primary contractor for the DEZ process withdrew from the
deacidification business and terminated its license with the U. S.
Government, temporarily halting the DEZ phase of the deacidification
effort. As of January 1995, $5.8 million remained in the appropriated no-
year fund.

In 1995, Congress approved a Library preservation plan that proposed a
pilot project using a new deacidification technology. As a result, the
Library awarded a two-year contract to Preservation Technologies, Inc.
(PTI) that will use the Bookkeeper III deacidification process on
approximately 72,000 books at a cost of $1.062 million. If the project is
successful, the Library will continue to use this process for the
deacidification of its collections. The Library has also advertised the
availability of technical evaluation and testing services aimed at
encouraging other companies with mass treatment capability to come
forward.

Preservation of Audio/Video Materials - Another serious issue facing the
Library is the preservation of its magnetic media materials (audio,
video, and data). As magnetic materials age they can develop any one of a
number of conditions, all of which eventually result in an inability to
play them, which means that the data they contain can never be retrieved.
The physical life span of these materials is generally considered to be
20-30 years, under good conditions. The Motion Picture, Broadcasting, and
Recorded Sound Division (M/B/RS) alone has 650,000 tapes (approximately
500,000 hours of sound or video), some dating from the 1940s. Conversion
rates for these materials are shown on the Preservation Statistics chart.
Ancillary to the deterioration of magnetic materials is the difficulty of
maintaining appropriate play-back systems for them. For example, video
tape can be played back only on the system that created it. Since over
200 record and playback systems have been produced since the invention of
video tape, the Library cannot maintain them all. At present the Library
uses 12 of the most common systems -- 6 playback and record systems and 6
playback only systems. As part of its preservation approach to magnetic
materials, the Library is conducting a condition survey to estimate the
environmental, housing, and physical condition of its holdings. Studies
to determine the nature and requirements for preservation transfer media
and equipment are in progress.

The National Film Preservation Board and Nitrate Film Preservation - The
National Film Preservation Board, originally established by the National
Film Preservation Act of 1988 (2 U.S.C. 179b et seq.), serves as a public
advisory group to the Librarian of Congress. The Board consists of 36
members and alternates representing the film industry, archives,
scholars, film makers and others who make up the diverse American motion
picture community. As its primary mission, the Board works to ensure the
survival, conservation and increased public availability of America's
film heritage, including: advising the Librarian on the annual selection
of 25 films to the National Film Registry, and counseling the Librarian
on development and implementation of the national film preservation plan.
As of September 30, 1995, 175 films had been selected to the

4-7 National Film Registry.

In May 1995, legislation was introduced to reauthorize the Board and
establish a National Film Preservation Foundation. The Foundation would
work with the Library and other film archives throughout the United
States to raise funds from private sources to benefit national film
preservation efforts. The request for appropriations is up to $2 million
on a one-for-one matching basis annually over the ten-year authorization
period.

The nitrate base used by the commercial film industry between 1893 and
1951 was inherently unstable. The rate of deterioration is unpredictable
but is significantly influenced by previous and current storage
conditions. Materials kept at a low constant level of temperature and
humidity since the time of manufacture could conceivably last for 100
years.

The Library has 120 million feet of nitrate film in its collection of
which between 40 and 60 million still need to be preserved. The Library's
Motion Picture Conservation Center in Dayton, Ohio, is specifically
staffed and equipped to undertake the copying of nitrate film onto 35mm
acetate film which, if stored correctly immediately after duplication,
will not suffer significant decomposition. At present, staffing levels
permit the Library to copy just over one million feet per year. This rate
will not present a long-term problem if the Library can update its
existing nitrate storage facilities to meet the generally accepted
archival environmental recommendations of 37 degrees fahrenheit and 25
percent relative humidity. The Library is in the early stages of planning
for such facilities at the remote storage site to be built at Ft. Meade,
Maryland.

Service

The Library of Congress is a public institution that is open to everyone
over high school age, with limited exceptions. Its collections are
available to users in numerous public reading rooms located in three
Library buildings on Capitol Hill. The Library's first service priority
is to the Congress; second, to other branches of the Federal government;
and third, to scholars, other libraries and the general public. The
Library is not a lending library. Only members of Congress and other
statutory borrowers are authorized to remove materials from the Library.
For selected other users--primarily other libraries--the Library is
considered a "library of last resort," which means that they may borrow
certain materials through interlibrary loan if the needed materials are
not otherwise available in the United States.

To use Library collections, researchers identify the items they want
through card and on-line catalogs, finding aids, and bibliographies. They
request the items, showing photo-identification, by submitting call slips
to the staff, who retrieve the items from the secured collections storage
areas and deliver them to the reader. In addition, the Loan Division is
responsible for retrieving, packaging, and preparing loan charge records
for materials that circulate outside the Library. In fiscal year 1995,
the Library served over 2 million items in the Library. It also
circulated over 36,000 items to Congressional borrowers and nearly 45,000
items to other agencies and libraries. At the end of fiscal year 1995,
16,100 external loans were outstanding.

4-8 Collections Security

In 1992, following evidence of theft and mutilation of the collections,
the Librarian of Congress closed the stacks to the public and all Library
staff except