board members usually receive little or no training concerning their fi- nancial responsibilities.
Even if trustees are interested in matters of financial control, there is often little guidance available to them. The standard reference and train- ing materials for trustees such as the ALA Trustee Association mono- graphs deal mainly with budgetary and fund-raising duties and condense financial control into a single paragraph.
A second, related problem is that board members often simply do not consider the possibility of financial misconduct by a library director or another board member. As one board member put it, “We trusted the director or we wouldn’t have hired her in the first place. Besides, what do I know about accounting?” Another observed, “Who do you think trains board members in their duties? The librarian they’re supervising.”
WHAT ELSE CAN WE DO TO CORRECT
In an ideal world, every library board would include an accountant and an attorney. In reality, it may not be practical to find people with this much expertise who are willing to serve. Remember, however, that the aim is to make board members better aware of their responsibilities rather than turn them into auditors. Most of the oversight is a matter of common sense. What exactly are we paying for? Do the amounts seem too large? Are they going to places that seem unusual? My experience with boards has been that most people who sign checks don’t realize that they should also be reviewing the documentation. Once someone tells them this, it makes complete sense to them and they have no trouble ex- ercising oversight.
Keep in mind that libraries and other nonprofits may eventually have no choice in the matter. The Sarbanes-Oxley Act of 2002 deals with some of the lapses in corporate governance that took place at Enron and other corporations. Among other rules, it mandates that at least one member of the board for publicly traded companies be knowledgeable in ac- counting. The law doesn’t apply to nonprofits, but increasingly it’s being seen as the template for all organizational governance, even in the non- profit world.
Examine Employee Job Duties Periodically
Employees and their jobs change over time. Corresponding internal con- trols will also need to change if they are to remain effective. Many of the most successful frauds in libraries have been carried out because no one in management thought to examine what employees really did, as op- posed to what the job descriptions said.
Remember, the most common duties that need to be separated are the following:
• Opening mail and sorting bills
• Writing purchase orders and approving purchase orders
• Approving invoices and writing checks
• Writing checks
Take the time to walk through an employee’s job and see how many of these duties fall under the control of the same individual.
Cultivate Some Distance
Boards and directors often get along so well and trust each other so much that they don’t follow proper procedures. Need a few blank checks to
COMMONWEAKNESSES 37
take care of purchases Monday morning? No problem, we trust you. The purchase order isn’t attached? I don’t want to cause you bother, so I’ll just sign off this time. The real difficulty here is that our natural inclina- tion to be friends sometimes interferes with good business practices.
Keep in mind, however, that if the board and the director both do their jobs competently, there will be friction at times. For example, asking the commonsense questions that I mentioned earlier may require more work from the library staff to provide better documentation.
Effective oversight, however, means work and responsibility from both the board and the library staff. Board members need to have the courage to insist on proper documentation, but they must also be pre- pared to do the extra work to review what they’ve asked for. This may mean a longer review time or an extra trip to sign checks that weren’t documented properly the first time. Conversely, library staff members need to insist that board members take the additional time to review the checks they’re signing and be willing to do the extra work needed to properly document expenses.
All of this may sound onerous, and it’s possible it may be for the first few times. But my experience has been that once both parties get used to the idea of proper documentation, it becomes the norm and requires rel- atively little extra work. Board members understand their responsibilities and take the time to perform them, and library staff members aren’t left with unsigned checks because none are presented for signing without proper documentation. In the end the library (or any other organization) has better-managed assets and obtains better service value for its money, which is why you’re all there in the first place.
38 COMMONWEAKNESSES
adisonville Public Library (MPL) had just won over the voters in its county. (MPL is an actual library. The name and some of the details have been changed.) After years of shrinking budgets and a deteri- orating building, MPL was about to receive $12 million over the next twenty-four months. Even more exciting was the chance to leverage this tax windfall into another $4–5 million in matching grants. The only problem was that the library was missing $600,000. An unscrupulous bookkeeper with too much responsibility had simply stolen it all. The scams were simple—multiple or inflated salary checks, payment of per- sonal expenses with library funds, and payment of phantom invoices from a shell company owned by her boyfriend. Moreover, the signs of fraud were there for anyone to see. She drove an expensive Lexus, had an ex- tensive wardrobe, and had recently undergone cosmetic surgery that wasn’t covered by her medical plan. How did she manage this in a library that had successfully negotiated an increase in funding and was flour- ishing? The answer, ironically, is that the library was a victim of its own success. It had simply outgrown its control mechanisms.