In the first of two internal audits to be released by City Auditor Laura Doud, the Long Beach Museum of Art was shown to have insufficient funding to repay over $3 million in a tax exempt revenue bond, and that previous management forced the Museum into this hole with poor decisions and operations.
The bond was issued to the museum in 1999 to assist with an expansion and renovation project, and was to be paid back by the time it matures in September of 2009. With barely more than a year before the deadline, the City Auditor found that the Museum Foundation has just $388,000 available for the repayment.
More than $1.5 million of contributions to the Foundation that were meant for bond repayment were spent on day to day operations under the old management, and fundraising efforts came up short by $1.084 million.
The audit also found extensive evidence of irresponsible money management, including conflicts of interest, circumvention of signature policies, improper payroll advances, altered cash receipts and the use of business credit cards for personal expenses.
Doud now suggests that the city of Long Beach work with the Foundation to develop a real strategy for repayment of the bond, and that the Museum Foundation perform a thorough investigation of the mishandlings and recover as much as possible.
“I am very hopeful that the City and the Foundation can devise a plan to repay the bond debt that doesn’t require the use of City funds,” Doud said in a released statement. “Additionally, it is extremely important to note that the Foundation brought in new management in November 2006 and that controls are being put in place to ensure that the problems identified in this report do not happen again.”
By Ryan ZumMallen, Managing Editor
Disclosure: lbpost.com publisher Shaun Lumachi is under contract with the Office of the Long Beach City Auditor.