MAC exec violated state laws, auditor says

OLYMPIA – The Northwest Museum of Arts and Culture’s former executive director “violated multiple state laws and gifted public funds,” a report by the state auditor’s office said Thursday morning.

An investigation into a whistle-blower complaint concluded that former MAC Executive Director Forrest Rodgers didn’t follow state and federal rules on contracting, was improperly reimbursed for travel expenses and violated ethics laws that apply to a state agency.

In his response to the draft audit, Rodgers countered that he took over a museum that believed itself to be a nonprofit, not a state agency. He made some changes in the way the museum managed its finances, despite what he called “strenuous resistance” from its Board of Trustees.

“The historic lack of legislative or executive branch oversight of the agency’s self-elected governing board, mission delivery and financial management enabled the agency’s belief that it was not subject to the same requirements as other state agencies,” he wrote.

Auditors said the museum’s Board of Trustees should have had policies and procedures to prevent those problems. Board President Toni Pessemier said some changes have been made, and others are in the works with advice from state personnel and budgeting agencies.

The museum board fired Rodgers in February for reasons it wouldn’t reveal, claiming it was a personnel matter that members couldn’t discuss. Pessemier said Thursday the board was aware of the complaints when Rodgers was terminated, but said they were unrelated to the decision. Rodgers was an at-will employee who was terminated without cause, she said.

That was the second time Rodgers was dismissed from the leadership of the Browne’s Addition museum. He was fired in April 2012 but rehired three months later after public outcry and the filing of a lawsuit that claimed the board violated state termination and open-records laws.

After he returned to the job, Rodgers was given a bonus in 2014 of $13,900 by the Eastern Washington Museum Foundation, a nonprofit organization. But Rodgers was an employee of the Eastern Washington State Historical Society, which is a state agency. As a state employee he was not allowed to receive compensation from another organization for performing his official duties.

Members of the foundation board were unable to answer questions about the bonus, the auditor’s report said, with the board president saying Rodgers would have been responsible for paying the taxes on the $13,900 but the museum’s fiscal analyst saying that was the net amount after deductions had been made.

Rodgers said in his response that the board approved the bonus from the foundation, and the executive director of the museum also serves as executive director of the foundation.

Also in 2014, Rodgers approved a $100,000 short-term loan from the foundation to the museum, to cover payments the museum had missed to the state Department of Enterprise Services and the Office of Financial Management. Records showed the loan was repaid three months later.

But state law does not allow a state agency like the museum to incur debt, and Rodgers told auditors he didn’t know of any legal authority to allow the museum to accept the loan from the foundation.

Auditors also said Rodgers did not follow state laws for the use of public funds, which the museum receives as a state agency. Payments totaling $48,000 may have been made in violation of state law, including some $30,000 to people and businesses that provided services to various museum events.

The payments varied, and in one instance a person who was listed as giving demonstrations in clay on 11 different occasions received different honoraria ranging from $140 to $280.

“The museum has no policies or procedures regarding how these payments should be approved, processed, and monitored,” auditors said. There were no written agreements between the museum and the performers.

Rodgers said the museum believed it could use personal service contracts for those activities because it was a nonprofit, but oversight of the contracts was hampered by staff turnover.

State funds were also improperly used, including $1,200 in museum funds that were used to pay for expenses of the separate nonprofit foundation that ranged from mailing supplies to a foundation employee’s professional membership fees, auditors said.

As executive director, Rodgers was ultimately responsible for the museum’s internal controls, auditors said. “We found reasonable cause to believe the subject was negligent when he failed to establish internal controls, policies and procedures, which led to improper use of state funds,” they said.

Rodgers said the agency’s financial mismanagement had been “systemic” for years, and he had taken steps to correct the problems. But for years the board and museum management did not consider money generated locally, which was about 45 percent of its annual budget, to be public funds and the board did not believe it was required to meet certain state requirements for financial management and reporting.

An arrangement Rodgers made with a vendor who operated the museum’s cafe to subsidize the vendor’s losses through an incentive described as a management fee also was an illegal “gifting” of state funds to a private business that amounted to about $9,000 between March 2014 and September 2015, auditors said.

Rodgers called that a business decision that “allowed the agency to continue to offer a critical visitor amenity.”

When traveling, Rodgers spent more for airfare by booking flights only a few days in advance, even when he knew about trip long enough to have bought tickets at a cheaper rate. He spent more than necessary on car rental and had inadequate documentation for meal reimbursements.

“We found the subject violated required state policies when he failed to obtain the most economical price for travel and incurred additional expenses for his personal convenience,” auditors concluded.

Rodgers said his responsibilities in Spokane made it difficult to plan 14 days in advance to get the best rates, especially when trying to schedule meetings during legislative sessions.

With Rodgers gone, auditors said the museum board must make sure his replacement implements proper controls over public funds, ensure employment contracts follow state law, scrutinize travel expenses and establish better rules. It should also update its agreement with the foundation, to clearly define each entity’s responsibilities.

“At the time we started hearing concerns, we took them seriously,” Pessemier said. “We made some changes along the way. We’re going to continue making changes.”

The museum board, which saw a draft of the audit report last month, is working with its assigned assistant attorney general to adopt rules, evaluating staffing and updating the agreement with the foundation. It also updated polices on the use of public funds and travel. The interim director, John Moredo-Burich, did complete state contract training and must receive approval from the board president for travel.

The board is in the middle of a nationwide search for a permanent replacement and is accepting applications through Aug. 1, Pessemier said.

The lease with the cafe operator was terminated and the museum is working with state agencies to draft a lease with a new food service provider. The cafe is currently closed.