What Can We Do to Avoid Fraud?

Added to Medium, February 22, 2018

Fraud is a scary topic especially within the museum field. It is a topic not often talked about, and it should be discussed more among museum professionals. Maybe we think that it might not happen but it could happen at any point in any time frame if we are not careful. I do not recall being in a situation that led to fraud in the museum, and while I am thankful that I have not faced something like this I do feel that it is important that all of us in the field especially myself need to know what to do under these circumstances. Since this week is known by the American Association for State and Local History (AASLH) as “Nightmare at the Museum Week”, the webinars and articles they are sharing discussing deaccessioning and fraud inspired this week’s discussion on my blog. The more we talk about fraud, and learn from one another, the more we are able to be more aware of fraud and maybe we will be able to do our best to avoid fraud.

This topic captured my attention more now as a museum professional since I have become more involved in the financial realm of running a museum. I had some experience in keeping track of finances during college when I was a treasurer of two clubs for all four years. Since starting at the Maritime Explorium, I have been asked to be the manager of finances to make sure admissions and other income are adequately recorded and supported to keep the children’s science museum running. The more I get a closer look at the record keeping, the more I knew that the need for accurate record keeping is essential.

I notice more human counting errors when I began reviewing the daily and monthly reports. It is a challenge to go through a lot of previous records and make sure it is accurate, but it is necessary to make sure we have accurate information. If our organizations are not careful, we can be open to more issues down the road.

I reiterate that we should do our best to avoid fraud because if we do not prepare for it by updating our policies and evaluating our museum ethics fraud can sneak up before one realizes it happened. We can take a look at journal articles, magazine articles, and books that discuss fraud to see what would work best for our organizations.

Hugh H. Genoways and Lynne M. Ireland pointed out in their book Museum Administration 2.0 that museums need to keep in mind their professional codes and ethics when running the museum. By doing so, I believe museum professionals have the ability to have the tools they need for fraud prevention. According to Genoways and Ireland, a museum ethics statement is an important moral compass that guide staff and board to fulfill their museums’ missions. When we set up a code of standards for board and staff, we set an expectation that we will run the museum with the public’s interest and trust in mind.

Our museums should take care of our fraud prevention practices so we can maintain our visitors trust in our organizations. One of the examples of resources we can use on fraud and fraud prevention is an article that focuses on embezzlement.

AASLH published an article in their Winter 2017 edition of the magazine AASLH History News about embezzlement written by Max A. van Balgooy. He not only briefly described examples of museums, historic sites, and historical societies that had to face embezzlement, but also went into detail about what embezzlement is and how to detect fraud.

Van Balgooy revealed there was a study done by the Association for Certified Fraud Examiners (ACFE) called the 2016 Global Fraud Study. The study showed that the typical organization loses 5 percent of its revenues to fraud each year. Also, it stated frauds last an average of eighteen months before being detected, and losses rose the longer the schemes continued. Therefore, the faster an organization acts the smaller the losses will be for that organization.

He stated in the article that state and local history organizations can reduce losses and recover more quickly if boards and staff are more informed about the techniques used by criminals and adopt practices that provide obstacles and create transparency. I agree because we would be better prepared if we knew how criminals perform these crimes so we will be able to catch it as soon as possible.

One of the statements that stood out to me in the article was “Don’t Assume an Independent Audit Will Catch Fraud”. It stood out to me because when I thought about it, this makes sense because museum professionals are more aware of the finances and the financial history of their organization. It is the auditor’s job to detect any weaknesses in the financial management system and report that so the staff and board can work on improving this system. When we strengthen our system, we would be able to detect when a fraud may occur.

The most important thing I got out this article was we need to be talking about fraud more often. It is an embarrassing feeling and we do feel betrayed but we need to figure out how to deal with the situation. If we do not involve the authorities or overlook it, we would be letting the criminal(s) free to embezzle other organizations. Discussing it more will help museums and museum professionals feel more comfortable seek help and advice to best prevent from another fraud happening again. AASLH has recently followed this example of discussing the topic more often.

This afternoon, AASLH had a webinar called Fraud at the Museum: Protecting Your Organization from a Devastating Event. According to their webinar description,

Financial fraud can happen to any size history organization, from the very large to the smallest of the small. But it’s only after they become a victim that the vast majority of organizations take steps to protect themselves against fraud.

It is exactly the point that has to come across to museum professionals of all institutions, no matter what type or size of the museum. In the webinar, the guest speaker, Kelly Paxton, discussed how fraud is committed and discovered then proceeded with recommendations for policies and procedures to help prevent financial loss and protect its staff and board members.

I plan on looking at #AASLH Twitter Chat this Friday which discusses deaccessioning and fraud prevention. A few of the questions they will ask participants are:

What are your experiences with fraud or fraud prevention?
What policies do you have in place to deal with potential fraud?
What are your favorite resources for preparing your institution in this and other tricky areas?

These questions will hopefully let museum professionals be comfortable to discuss their experiences and resources they use to deal with fraud or work on fraud prevention.

If more museum professionals become more open to discussing fraud we would be able to help our organizations run better and maintain our visitors’ trust in our ability we can serve as educational institutions.

Have you heard of a situation in which fraud has taken place within an organization? What resources have you read that discussed fraud prevention?

Genoways, Hugh H., Lynne M. Ireland, Cinnamon Catlin-Legutko, Museum Administration 2.0, Lanham, MD: Rowman & Littlefield, 2017.
van Balgooy, Max A. “Embezzlement”, AASLH History News, Winter 2017, Vol. 72, #1, 20-25.

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