Pember used funds improperly: audit

B y Jaime Thomas

The Pember Library and Museum violated its agreement with the Pember Foundation by dipping into Foundation funds to cover operating expenses, a state audit shows.

The agreement allows the library and museum to use only the interest earned in the Foundation account, and not the principal, for operating purposes.

“We unknowingly violated the original agreement between the Pember and the Foundation and for that we are deeply sorry,” library officials said in a prepared statement. “We can only ask for the public’s forgiveness as we begin the process of correcting the mistake.”

Library Director Pat Wesner said the Pember board’s goal is “to fully repay the Foundation account using money raised privately.” The board has already reimbursed the Foundation $10,000 from a private donation, she said.

Wesner said she “felt the recommendations are very helpful and we actually began implementing their suggestions during the audit. For example; the auditors felt that we should have additional financial oversight. Since July we have a volunteer financial review officer. Each month, he and I review our financial statements and provide on-going recommendations to the Board of Trustees.”

Both Wesner and Marcia Klam, board president, said they were unaware of the Foundation’s fund-use requirement and immediately stopped using the Foundation principal when auditors made them aware of the situation.

“Following in the footsteps of past boards – which also didn’t know about the agreement with the Foundation – the board approved spending down the principal in order to balance our budget,” Wesner said. “We had to do this because we lack stable funding and are committed to keeping our doors open for the over 25,000 people who rely on the Pember each year.”

Over the past several years, the board drew about two-thirds of the funds from the principal balance, an amount totaling $144,027. The fund value stood at $210,398 in April 1999. The principal must be used for investment purposes only, according to the audit. Only the interest can be used to pay operating costs.

The State Comptroller’s Office prepared the report based on an audit last spring and conducted exit interviews with library officials.

The Comptroller said the audit’s objective was to examine whether the board established adequate internal controls and exercised sufficient oversight to ensure that library and museum moneys are safeguarded. Through the process, auditors found several problem areas.

“The internal controls currently in place and corresponding oversight by the board could be improved,” the report read. The board in turn thanked the Comptroller’s Office and said the process helped members better understand their obligations.

“I was glad that they reviewed all of our records and as noted in the audit, found payroll, payroll taxes and utilities were paid on time and reaffirmed that there has not been any financial mismanagement of any of our funds – including our capital campaign funds,” Wesner said in an email.

Mark Johnson, deputy press secretary for Comptroller Thomas DiNapoli’s office, said the findings were significant but not unusual.

“We find different things at different units, but they are not uncommon,” he said.

The Pember board was required to formulate a corrective action plan to address these and has done so, library officials said.

The audit also found three other main faults with the Board of Trustees’ oversight of the library.

First, though the board approved claims for payment at monthly meetings, the library and museum did not pay the claims in a timely manner because of lack of cash. The comptroller recommended the board require a monthly cash flow statement to assess the amount of cash available to pay expenditures, and the board has agreed to do so.

“The library will now alter its policy such that the board will not approve a bill for payment until sufficient cash is available to cover the check,” the plan read, and accountants will also provide formal cash flow reports.

Secondly, the comptroller recommended the board provide adequate oversight of the library and museum financial activities. The office cited the Pember for not formally adopting a budget for the past two fiscal years, a requirement of which Wesner and Klam said they were unaware.

Library officials wrote in their plan that they did adopt the unchanging budgets without formal vote. They said they will now formally adopt a budget for each fiscal year by board action.

The comptroller also said neither Wesner nor the board reviewed bank statements or canceled checks to check accountability. However, all disbursements were properly recorded and all costs related to the capital campaign were properly supported.

The Pember board has since appointed a volunteer financial review officer to review monthly financial statements.

The final issue the Comptroller’s Office found with Pember operations was mentioned to officials at the time of the audit: inadequate documentation of cash receipts. Though all the bank statements agreed with deposit information and the accounting firm correctly recorded the receipts, auditors recommended the library have numbered receipts for all transactions.

Library officials said they would purchase and use a cash register and would implement a two-person cash-counting process.

In the wake of the audit and the board’s new action plan, Johnson said the Pember could potentially be selected for a follow-up assessment on the corrective action.

Pember officials said the audit has opened the line of communication about the library’s insolvency with the public.

“This May, we will be asking the voters of the Granville Central School District to create a library district with stable funding. We are committed to educating the voters on what this means through a series of public presentations, mailings, a dedicated website and one-to-one meetings,” officials said.

“The voters will vote on the initial funding for the district and subsequent budgets as well as for the Pember’s Board of Trustees. Our goals here are three-fold: to stabilize our funding, to provide greater accountability and to give the community a greater sense of ownership over the direction and growth of the Pember.”

 

 

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