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Audit questions Waukesha County Museum's future

Showed a decrease in net assets of $273,000 for fiscal year

The audit on the Waukesha County Museum shows a net loss of $273,000 for the fiscal year of July 1, 2012, to June 30, 2013.

The audit on the Waukesha County Museum shows a net loss of $273,000 for the fiscal year of July 1, 2012, to June 30, 2013. Photo By Chris Kuhagen

March 4, 2014

The long-awaited audit on the Waukesha County Museum revealed that the museum's board of directors did not have effective oversight of the organization's financial reporting and internal control over the last year.

It adds that the conditions the museum faces, which includes a loss in total net assets, creates an "uncertainty about the organization's ability to continue."

The audit, done by the Waukesha-based Walkowicz, Boczkiewicz & Co. S.C., was presented last week by the museum's board of directors to Waukesha County officials. It indicates that the museum, housed in the former Waukesha County Courthouse, had a decrease in net assets of about $273,000 during the fiscal year of July 1, 2012, to June 30, 2013.

"There's no question they have some work to do," said Norm Cummings, director of county administration. "But what they told us is that they are stable."

The losses included about $117,000 from writing off prior years' construction for the Les Paul exhibit, and $50,000 in unfulfilled pledges.

The audit concluded that "based upon the CEO's recommendations, the board of directors authorized the CEO of the organization to enter into construction contracts for the Les Paul exhibit but did not provide appropriate oversight as the project progressed. The board of directors did not verify that sufficient funds were available to cover the cost of the exhibit.

"The organization has not maintained an appropriate composition of assets (cash and marketable securities) to comply with donor restrictions."

Tom Constable, the museum board chairman, wrote in a letter back to the firm that "early in the audit period, funds were available to cover requested expenditures. However, as the Les Paul exhibit reached its completion in June 2013, the truth about whether or not adequate funds were available was obfuscated" by the former CEO, Kirsten Lee Villegas.

Constable added that "over 10 years ago we had a number of pledges that were never paid."

Moreover, the museum had to write off about $21,700 worth of "obsolete inventory" in its gift shop. The museum also had a shortage of $59,000 after money for restricted funds was used to cover expenses.

"There were a couple issues in that audit where our auditors thought we could have given more management and oversight, and in retrospect that is probably right," Constable said. "It is now understood that, as we move forward, more oversight is necessary and appropriate. This applies to regular museum activities, whether or not major construction is involved.

"The board's failure was it trusted but did not verify the validity of the assurances."

Constable said that to ensure that the problems don't happen again, the board of directors will increase its number of meetings from six to 12, place specific restrictions on an account that only the board chair or treasurer is authorized to withdraw funds from after board approval, and have the contract accountant report jointly to the executive director and the board treasurer.

"What happened shouldn't have happened, so we're putting more restrictive rules in place," Constable said.

Cummings and his staff said they will continue to review the audit.

In the meantime, the county will continue to give the museum monthly payments of $12,500. How the county provides taxpayer money to the museum was changed in January after preliminary reports of the audit indicated the museum was in financial trouble.

Cummings said the museum has been paid for January and February. He said if staff members feel the museum is in a better position, it could recommend adjusting how the museum receives its funds.

The Waukesha County Board voted last fall to cut funding for the museum by half ($300,000 to $150,000) for program and building expenses.

Constable said the museum has spent $25,000 on its heating system this winter and $7,200 on gas and electric just for February.

"It's an aging building, and the costs add up," Constable said. "And we have a failing heating system. Replacing that $150,000 is not an easy task."

Despite these difficulties and "cash flow problems," Constable said the museum is in a stable position.

To replace the lost revenue, the museum eliminated two full-time positions that resulted in an expense reduction of about $100,000.

Constable said his goals have now shifted.

"We're not focused on cutting more expenses," Constable said. "We're focused on increasing donor revenue. I don't know where else we can cut. This year fundraising is our main issue."

He's also focused on finding the museum's new chief executive officer. Constable said his goal is to have a new CEO hired by the end of the month.

Constable said interim CEO Dan Finley's last day was Feb. 28. Finley, a former Waukesha County executive, was brought on when Villegas resigned last fall.

"Dan was very helpful at opening doors for us and fundraising," Constable said. "Now, we need to solidify our issues and follow through on the opportunities that Dan created."

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