Risk Management In Mid-Sized and Small Museums

By Eden Burgess

If you are involved with a mid-sized or small museum, risk management likely doesn’t occupy a lot of your time. Everyday tasks like handling your flooded email inbox, making sure the heat and A/C work, and updating the website and Facebook page occupy all your attention.

Over the long-term, however, ignoring risk issues can really hurt.

Money management

Museums tend to focus most of their energies on raising money. Board members are selected not only for their personal interest in the museum, but also for their connections to private donors and corporate sponsors.

Managing money at a museum, however, goes far beyond collecting checks. If your museum has a gift shop or café, tax issues must be handled with caution. Federal, state and local forms must be filed. The museum must acknowledge donations in a timely manner, in writing, and with the information required by the IRS. Perhaps most importantly, donated funds must be used for a proper purpose – generally, to further the museum’s mission.

Improper use of funds often gets museums into serious trouble. Petaluma Wildlife & Natural Science Museum, a small but innovative student-run museum in California, found out in 2010 that its director was embezzling funds to the extent of overdrawing the museum’s bank account. Public outcry from the community, students and donors led to the director’s ouster, but it took a year for the museum to begin to recover its reputation and financial health, which is still an ongoing effort.

Board member education

Being an active member and responsible museum board member takes work. Do you know the mission of the museum? Do you review programs and activities to ensure the mission is being followed? What about museum policies – such as conflict of interest, whistleblower, and gift acceptance – are these updated, reviewed and followed? How are new board members educated about the museum’s policies and procedures?

An uninformed board can lead to a museum’s collapse. Earlier this year, the Texas Attorney General sued the Texas Highway Patrol Museum, accusing several board members of squandering donations. The attorney general said in a court filing that the museum’s board members asked few questions about improper expenditures by staff. The board voted to relinquish the museum’s $1.2M in assets, which a judge ordered to be transferred to a court-ordered receiver. The charity that formed the museum dissolved in August pursuant to a settlement. Museums of all sizes suffer from inadequate board member education: in 2010, the California’s Attorney General ordered the board of the Museum of Contemporary Art in Los Angeles to undergo special fiduciary training due to budget mismanagement that violated state law.

Collections issues

Does your museum have gift acceptance guidelines? For example, will your museum accept an object with a condition that it never be deaccessioned? What provenance research must your institution do before an object is accessioned into the collection? How are loaned objects treated? What about copyright – how does your museum ensure that it has permission to make posters, mugs and mouse pads from the image of a loaned object?

A recent story about a Renoir purchased in a $7 box of junk at a West Virginia flea market garnered a lot of press. The Baltimore Museum of Art has documentation that the painting was loaned to it 1937, then stolen in 1951. Unfortunately, for reasons unknown, the museum never reported the theft to any registries of stolen art, such as the Art Loss Register or INTERPOL. In a similar story of discovery, this past spring, the Evansville Museum of Arts, History & Science discovered a valuable Picasso work in storage, where it had languished for 50 years after being donated. Maintaining and updating records of all objects in the collection is critically important to museums of all sizes.

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If you think your museum needs help in these areas – or if you want to conduct a risk assessment to find out – please contact us.