A recent audit of Garden City's Cradle of Aviation Museum at Mitchel Field, which is operated under an agreement with the county by Museums at Mitchel (MAM), a not-for-profit organization, revealed a "distressing lack of financial controls and management oversight across the board," according to Comptroller Howard Weitzman, whose office scrutinized the museum's operations and finances between July 2003 and April 2006 at the request of Nassau County Presiding Officer Judy Jacobs and Craig Johnson, the Legislature's Finance Committee chair. The legislators sent letters to Weitzman's office last April expressing concerns about the museum's financial operations.

"The Cradle of Aviation celebrates Long Island's pivotal role in the development of air travel, from the first biplanes to man walking on the moon," Comptroller Weitzman said. "Unlike the marvelous vintage aircraft on exhibit there, however, the museum has barely gotten off the ground. Attendance is declining and deficits are growing. Our audit found that staff conflict contributes to the dysfunctional operation of the Cradle and impedes efforts at reform. Drastic operational changes must be implemented if the museum is to achieve viability."

In response, Cradle of Aviation board trustees July 19 directed Museum President Eric Ricioppo to address any recommendation not already implemented as outlined in the audit report. The board further directed Ricioppo to report his actions and recommendations within 30 days. Board Vice Chair Raymond Jansen said the report, "while helpful in detailing some operational deficiencies," didn't specifically cast the museum's shortfalls in a correct time frame.

"This audit affirmed the Legislature's Independent Budget Review Office's recent opinion of the Cradle's progress this past year - most notably the significant increase in attendance and new revenues and decrease in operating deficit," Jansen said. Cradle Board of Trustees Treasurer Ron Cooper added, "Many of the comptroller's findings have already been addressed and corrected."

The Cradle of Aviation Museum was built with a $40 million investment from Nassau County. Although a 2001 agreement obligated MAM to pay the county approximately $2.5 million, the Nassau Legislature has agreed to waive that debt if the museum meets certain fiscal targets, according to Comptroller Weitzman.

The museum's poor financial performance, Comptroller Weitzman noted, is directly attributable to its declining attendance and its lackluster fundraising. Pointing to a decline in annual visitors from 246,415 in fiscal year 2003 to 161,191 in fiscal year 2006, the comptroller's office projects that the museum will lose $113,000 this fiscal year. The red ink is predicted to grow to a loss of $1.4 million in fiscal year 2007, he added.

"While the board realizes we still have many challenges ahead, we are encouraged that the museum is in better fiscal shape today than it was a year ago," Jansen said.

Among the audit's numerous findings - the museum's ineffectiveness in fundraising, specifically, its failure to generate new pledges and pursue state or federal grant funding. During the audit period, Comptroller Weitzman discovered that the Cradle's fundraising was inadequate for its needs, raising an average of $136,000 per year from contributions and $167,000 per year from an annual gala.

Moreover, the report found that Cradle of Aviation board members and the president, who was hired specifically to lead fundraising efforts, did not participate substantially in fundraising for the museum and that the museum board's Development Committee, organized to develop plans for board participation in fundraising efforts, rarely met, and never met with the director of development or other top museum executives.

MAM trustees, however, disagree. During the audit period, the museum received six grants, including two at $250,000 each. Trustees further noted that the audit failed to identify grants the museum applied for that were not received or are currently pending. Specifically, trustees said, the Cradle applied for 17 grants between February 2003 and May 2006, requesting $1,704,944 in funding; $892,000 is still pending.

"The Cradle of Aviation Museum actively pursues public and private grants ... While the museum has not received any federal grants to date, it should be noted that the first ever federal appropriations grant for $750,000 was submitted March 2006. If successful, the grant will not be awarded until May 2007," trustees noted in a written statement. "Fundraising at this time is difficult, given the museum's financial state and the continued repercussion from recent negative publicity; however, the board recognizes its responsibility and will be working to broaden its fundraising efforts as soon as possible," trustees added.

The comptroller's audit also found that MAM has never sought American Association of Museums accreditation. The earliest a museum can consider applying for accreditation is two years after opening to the public; May 20, 2004 was the first eligible date the Cradle could apply.

"The Cradle is not ready to begin this lengthy and costly process," MAM trustees said. "In addition to the organizational issues requiring attention a major drawback involves the physical plant - particularly the lack of humidity control in Hangars 3 and 4, the main museum area."

The Cradle of Aviation's COO, who has served as a museum accreditation reviewer, added that curatorial climate control and storage is a critical component in the evaluation and this deficiency must be addressed prior to the accreditation application. Since this involves the physical plant, the board will meet with the county to evaluate the situation and determine the appropriate course of action. Once all the items have been addressed, the accreditation process expenses must then be budgeted; the total estimated expense is approximately $20,000 to $30,000.

Comptroller Weitzman also discovered numerous instances where contracts were awarded with no competition, including one agreement for over $300,000. "What was particularly surprising - and dismaying - was the lack of competitive procurement and controls over spending and cash receipts," he said. "The vice president of administration and finance - herself a part-time employee who works offsite from her home in Virginia - informed our auditors that some vendors were considered 'vendors of choice,' to be selected without competition because they were favored by members of the museum board. This kind of favoritism is unacceptable and is, in fact, a violation of MAM's own written policy."

MAM, however, is a separate non-profit organization that does not operate under the same guidelines as Nassau County. MAM trustees said that many of its accepted practices differ from the county, including the competitive bidding process. "It is important to note that the two contracts highlighted ... were for personal services, which do not require bidding," MAM trustees said. "The board believes it acted appropriately in awarding these contracts since the firms selected had particular expertise in providing the required services."

Comptroller Weitzman further noted that museum personnel spent approximately $45,000 on travel to conferences during the audit period. Until July 2005 there were no written policies governing such travel, Comptroller Weitzman said. The policies, once issued, were not followed, trips were made without written approval and expense guidelines were exceeded, he added.

The museum board has agreed to establish a policy addressing travel, business and meal expenses, all to be included in the Employee Handbook. The museum president has also been asked to review all previous submissions for travel and conference reimbursements and seek restitution from employees for expenditures he deems excessive or non-business related.

It was also discovered that the museum allowed employees to use credit and debit cards without supervision, approval or, in many cases, receipts. Approximately $178,000 was expended using such cards during the period audited, Comptroller Weitzman said. According to MAM trustees, all credit cards have since been eliminated. The museum president has been asked to review all expenditures during the audit period to determine if they were appropriate business expenses; he will then seek reimbursement from the respective employees for expenses he identifies as non-business related.

Further, the museum's vice president of administration and finance - hired as CFO at the beginning of MAM's operations - was not replaced when she moved to Virginia in January 2005 because of her "knowledge of the institution and expertise that was needed at a time of extreme financial pressure. She has proved invaluable in terms of her knowledge of the institution and ability to monitor cash flow, which is crucial to MAM's survival." Further, MAM's board treasurer added that the off-site location of the vice president for administration and finance does not "compromise greatly" the museum's system of internal controls.

The complete audit report may be read or downloaded from the comptroller's website, www.nassaucountyny.gov/agencies/comptroller/index.html.