Fox in the Hen House

The love of money, it is said, is the root of all evil. I think we can all agree, given the recent financial unpleasantness, the statement conveys a universal truth. As an executive director of a non-profit historical organization, I think about money more than I really care to, but it comes with the job. I know of no one in my position who would tell you she or he has all the fiduciary resources they need. But we work with what we have, find places to get funding for particular projects and delay, redesign or abandon when necessary.

When I read stories about the embezzlement of funds from AASLH or the mismanagement (to put it kindly) of funds at the Missouri History Museum, it is disheartening. Not because it happened. Human nature expresses itself in different ways and dishonesty is one of them. But because when it happens in our small world of historical non-profits, it hurts us all. We are challenged on a regular basis from many quarters by things unrelated to money. We are challenged to reach the public with our historical message, we are challenged to help the same public understand what we do (e.g. an exhibit isn’t just a display of a bunch of old stuff, we don’t know the answer to every random history query off the top of our heads, no you cannot borrow an object from our museum or archive to display in your home/business) and we are challenged to make a case for the value of our institution, our work, and our services to the community.

Preventing financial misdeeds is one reason why we have policies and procedures, codes of ethics, conflict of interest agreements, etc. But a bunch of polices do not enforce themselves and it is not until something goes wrong that the finger pointing starts. Ultimately, the responsibility lies with the board of directors. The non-profit executive serves at the pleasure of the governing body which is the board. The executive is to provide the specialized professional expertise to run the organization within the best practices accepted by the field. The board is responsible for ensuring the fiduciary well-being of the organization and for supervising the executive. That means, along with making sure the organization has enough funds to operate, members of the board need to make sure there are checks on the power of the executive. For example, limits on discretionary spending and arranging for an audit by a certified individual or firm on a regular basis. Audits, when done right, do not just look into the financial records of a non-profit but also examine procedures for handling money and expenditures, and looks at the relationship between the board and the executive staff. One issue the AASLH auditors brought up before the embezzlement became known was their concern about the fact only one person in the organization had authority over funds.

From my point of view, when a board abdicates responsibility through apathy, inaction or disregard of policy, it creates an atmosphere conducive to misdeeds. I’ve seen more than one organization that, but for the high ethical standards of its executive and staff, could end up in a mess like the Missouri History Museum or worse. In another post, I’ll talk about what happens when the board oversteps its bounds, which can be just as bad.