In a Major Scandal, Where Was the Board?

To the Editor:

We would like to express concern about recent events surrounding the fiscal problems of the Milwaukee Public Museum (“Former Financial Officer Faces Charges in Museum Debt Crisis,” October 26.)

While there is no question that falsifying financial reports and illegally transferring assets are justifiably considered to be criminal activities, if proven to be true, we also ask the following question: What was the museum’s board doing?

The Web site of the Milwaukee Public Museum currently lists among its board members no fewer than five attorneys, as well as 13 members whose current or past employment descriptors contain the title vice president, president, or CEO of any number of private corporations. Why didn’t these business leaders insist on better reporting? Where did they think the operating support of the museum was coming from if there were drastic decreases in revenues?

This situation is also complicated by the fact that there was a committee overseeing the activities of the museum’s endowment, made up of members of the museum’s board as well as the board of the Friends of the Milwaukee Public Museum. The committee’s activities are even more questionable.

Why, for example, did it allow four years to pass without any authorized spending budget? Was there an independent outside audit? If not, why not? What kind of financial oversight — if any — were they exercising during the five years these activities were occurring?

While Terry A. Gaouette, if found guilty, should be held accountable for his actions as the museum’s chief financial officer, the museum’s board should also accept some responsibility for this situation.

It is clear, from other actions taken by this board, that they had no knowledge of their role in providing fiduciary oversight. Not only that, however. This same board also voted to take restricted capital funds donated for the construction of a specific exhibit and, rather than use the funds to create the exhibit, invested these restricted monies to generate revenue.

This same board also, according to your article, provided Mr. Gaouette the authority to make withdrawals from the endowment without a second signature. These are not the actions of a responsible board.

We feel that this case highlights a looming crisis in the third sector. Nonprofit board members have little or no sense of what their legal responsibilities for fiscal oversight really are, and nonprofit leaders — many of whom come from the private sector — are unwilling or unable to provide that information to their volunteer boards. Lack of understanding means lack of oversight.

Nonprofit leaders are obligated to inform board members of their role in the fiduciary oversight process. They are also obligated to encourage board involvement, not discourage involvement as interference. Nonprofit leaders must take the lead in this effort — or we will see many more fiascoes like that in Milwaukee, causing an inestimable waste of donor money, as well as the trust of the philanthropically minded donors upon whom we all depend.

Lisa W. Hoeschele
Michael J. Degenhart
Gift-Planning Department
Syracuse University
Syracuse, N.Y.