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Museum audit shows bigger deficit; net worth slips into red

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Nov. 29--Milwaukee Public Museum officials reviewed new financial figures today that show that the institution's overall net worth slipped into the red at the end of its 2005 fiscal year. Archived Coverage Section: Previous coverage of Milwaukee Public Museum financial problems

The surprising news was contained in a just-completed internal audit that shows a substantially higher deficit in fiscal-year 2005 than was forecast two months ago. Sources familiar with the audit said preliminary estimates showed a deficit for 2005 of $10 million to $11 million.

In September, the museum's board of directors was told that fiscal 2005, which ended Aug. 31, would show a $6.2 million loss, leaving the museum's overall net assets still slightly in the black.

But the new audit, by Virchow Krause & Company, shows a substantially higher loss for 2005. Museum President Dan Finley declined to identify the precise amount of the loss or release the audit, saying that members of the museum's full board of directors had a right to see the audit before it was publicly released.

If the $10 million to $11 million figures are accurate, the museum would be reporting a negative net worth of more than $3 million instead of a small positive net worth.

In August 2003, the museum's situation looked considerably brighter, when its assets exceeded its liabilities for a positive net worth of $12.8 million. But an aggressive expansion plan and subpar fund raising in recent years has created a budget crisis at the institution.

The full museum board meets Thursday. Finley sat in on most of this morning's two-hour closed-session discussion of the audit by the museum's Audit and Finance Committee. The committee recommended approval of the audit with minor, unspecified modifications.

The loss in 2005 came despite an emergency reduction of museum staff, mostly in the last quarter of the fiscal year. Some 44 percent of museum staffers, 118 workers, left through layoffs and voluntary departures between January and September 2005.

The museum has spent $4.1 million of an emergency $6 million, county-guaranteed bank loan it received this summer after the museum's financial crisis went public.

Finley called the new 2005 deficit figure disappointing and surprising. He said auditors had blamed it on legal but "very aggressive" accounting practices by former museum officials.

He declined to discuss the specific issues involved in the higher deficit number but said they involved the museum's endowment and museum borrowing practices.

The news does not mean that the museum will have more difficulty getting credit, Finley said. Prospective donors and banks should be reassured that the museum is coming totally clean about its accounting practices, he said.


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