Monday, May 23, 2011

Protecting Against Internal Theft at Museums and Cultural Institutions

Earlier this month a grand jury charged Laura Phillips, the former treasurer of the Alabama Museum Association, with felony theft. The indictment alleged that she stole from the association. In February, a grand jury also charged her with stealing over $57,504 from the Carnegie Visual Arts Center where she was director. Such allegations should remind institutions to maintain vigilance over their purse strings.

From my experience as a former prosecutor and as an attorney dealing with nonprofits, the vast majority of people who work in museums and cultural institutions are honest and hardworking. When there is a problem with theft of funds, the crime typically is committed by someone inside the organization. A person who works with cash and who remains unsupervised may be tempted to "borrow" funds to cover personal expenses. As time goes by, the amount of funds stolen can grow.
Some tips to reduce internal theft include:
  • ensuring board oversight of operations,
  • creating an audit committee,
  • involving at least two officers in money transactions,
  • watching unusual behavior of the person who handles money (e.g. frequently staying late at the office to perform money transactions),
  • imposing a term limit on the treasurer's position.
Good risk management involves taking time to review organizational best practices and policies that protect against internal theft.