> What about a situation where memebers of the
> museum's board are involved in leasing their
> personal equipment to the museum for
> operation and charging the museum for
> "work" their personal company does
> for the museum?

Jack, what you are describing could be a conflict of in interest in appearance-but maybe nothing more.

From an accounting perspective-in the private sector- these types of transactions are known as "related party transactions" and would be required to be disclosed in financial statements but would not necessarily be assumed to be improper in the absence of evidence to the contrary. Obviously, if there was such evidence an auditor would be required to perform additional audit procedures and it COULD affect the type of opinion provided on the financial statements.

If you are aware that the lease or labor rates are not "arms-length" transactions, that is-at regular or market rates, then the question of "prohibited inurement" arises. If a board knowlingly allowed such a situation to occur, they are in violation of their fiduciary duties-pecifically to safeguard corporate assets and operate the entity in the boundaries of its purpose and in compliance with the laws it is subject to.

From a legal perspective-If you were still a member, and knew something was "fishy"-you should see an attorney if you were a board member or officer since an issue of "co-fiduciary" liability might arise.

Assuming you are not in any position like that, a lawyer can also advise you (if you really wanted to expend the energy) what part of your state government enforces the law with regards to corporations that engage in "ultra vires" (outside their organizational purposes and documents) acts.

States are generally reluctant to take action against non-profits for fear of looking like a bully, unless something is really bad.

Additionally, non-profits that engage in "prohibited inurement" risk losing their federal tax exempt status under Sec. 501(c)(3) of the Internal evenue Code.

The IRS used to take the same dim view of going after 501(c)(3)'s until they ran into persistent compliance and "attitude" problems.

The problem with taking governmental action is that you have to expend a lot of time, energy and money to essentially blow up the organization.

If there's a problem, the best correction method is the ballot, if you can get a majority board that is diligent, capable and ethical.



Superheater@beer.com

Should curatorial responsibilities limit the personal collecting efforts of someone who, through practice and position (Curator, Collections officer, or Collections Committee Chairman) "sniffs out" artifacts for their institution?

wyld@sbcglobal.net

What is your definition of a "self-perpetuating board"?
It seems to me election of board members by regular members is part of a check-and-balance system against incompetence, abuse of position, lack of performance, and cronyism. Who are the real "shareholders" and "knowledge base" in a railroad museum? I think they are the paying members in most cases.
It also seems to me you assume the director of a museum is always competent and productive in terms other than his/her own. Not always true! The members through their elected board need to set the job standards of performance for the director and staff and ensure they are met and not just be satisfied with what actually gets done year after year. Otherwise, it's time to find replacement personnel who can meet the organizational goals and standards.
By the way, members or volunteers are not there for the benefit of the board and staff. It's the other way around.
I also challenge the notion that board members need to be influence peddlers ("movers and shakers"). Perhaps some of them, yes. They should get no special privileges or treatment over other board members and no immunity from being ousted if they don't perform. I think these type of board members can screw things up and have little or no effect on their reputation. Most railroad museums are low-profile organizations in that regard if these elite fail or don't produce.

> Other than what they learn by reading,
> keeping up, attending meetings, and in some
> cases following strong avocations, the
> members of most non-profit organization
> boards are not specialists in the subject
> matter that their museums focus on. This
> does not mean this is never the case, for
> quite often, well-known historians, writers,
> and others are included on such boards.

> Railway museums are not a special case. The
> board is not there to run the museum, it is
> there to make it possible for those who know
> how to run it to have the money, public
> support, and governmental support to
> accomplish their goals.

> The only reason railway museums are said to
> be a special case is a simple one: the
> railfans currently in charge of museums that
> do not have self-perpetuating boards are
> afraid that such boards will "take
> over" and throw them out of the museums
> they have been volunteering at up to now.
> That fear is not well founded. The movers
> and shakers that would be put on a rail
> museum board would lose face and suffer a
> great loss of prestige (and money) if they
> went in and screwed it up. They have more to
> lose than the railfans who are working their
> butts off down in the shop. The sooner
> everyone recognizes this, the sooner they
> will finally have enough money to do
> everything they want to do.

> Malcolm


denmeg_hogan@msn.com

> Jim, what do you mean by "taken over"? Has title transferred or have they "outsourced" operations?



Superheater@beer.com

> Hi,

> One aspect of the conflict of interest
> question (board members/officers collecting
> memorabilia) occurs when they go out and
> acquire stuff free, or at cheaper rates,
> under the guise of getting stuff for the
> museum when they really are getting it for
> themselves.

> People who are often willing to donate to
> museums so that their treasures can be
> enjoyed by the public, would not give
> officer/directors the same stuff if they
> knew it was going to end up on some shelves
> in the family room.

Malcolm, thats worse than conflict of interest. That's "fraud in the inducement" and if some poor guy is waiting for a donor receipt to meet the new charitable substantiation requirements-thats just rotten. If he gets it, then the IRS might be involved.


Superheater@beer.com

About a decade or so ago the San Diego Railroad Museum sought to establish itself in the same manner as the Balboa Park art, history, and science museums. To do so it copied the board set-up of these museums and the bylaws of these museums. In doing so it created a self-perpetuating board -- by desire or not. Recently we have all become aware that this separation of the board from the working volunteer membership staff has caused a real legal mess.

These art, etc. museums would be governed by a board, and managed and staffed by a paid personnel and any members were there just to contribute money and go to fund raisers. The bylaws that were copied provided for a nominating committee and if the number of nominees were the same as the number of vacancies the whole election would be waived. The provisions for nominations by the membership were through a nominating petition that required some large number of signatures. In effect that provision would keep nominations from the membership from occuring.

At the time that San Diego was making this change and I was concerned that this way of operating a musuem would not work with a involved and concerned membership of a railway museum.

Recently the Auto Club of Southern California (AAA affiliate) went through an involved election and re-vote because of petition nominations and the attempts of both the board and the outsiders to either retain or obtain control of the board.

Brian Norden

> What is your definition of a
> "self-perpetuating board"?
> It seems to me election of board members by
> regular members is part of a
> check-and-balance system against
> incompetence, abuse of position, lack of
> performance, and cronyism. Who are the real
> "shareholders" and "knowledge
> base" in a railroad museum? I think
> they are the paying members in most cases.
> It also seems to me you assume the director
> of a museum is always competent and
> productive in terms other than his/her own.
> Not always true! The members through their
> elected board need to set the job standards
> of performance for the director and staff
> and ensure they are met and not just be
> satisfied with what actually gets done year
> after year. Otherwise, it's time to find
> replacement personnel who can meet the
> organizational goals and standards.
> By the way, members or volunteers are not
> there for the benefit of the board and
> staff. It's the other way around.
> I also challenge the notion that board
> members need to be influence peddlers
> ("movers and shakers"). Perhaps
> some of them, yes. They should get no
> special privileges or treatment over other
> board members and no immunity from being
> ousted if they don't perform. I think these
> type of board members can screw things up
> and have little or no effect on their
> reputation. Most railroad museums are
> low-profile organizations in that regard if
> these elite fail or don't produce.


bnorden49@earthlink.net

> Should curatorial responsibilities limit the
> personal collecting efforts of someone who,
> through practice and position (Curator,
> Collections officer, or Collections
> Committee Chairman) "sniffs out"
> artifacts for their institution?

I think one of the earlier posts addressed this issue quite well. It said:

"I don't think that it matters what you collect as long as you do not use your position on the museum board to cause these item(s) to become your personal property. That is you cannot purchase or receive donated materials personally if you used your board position to cause the materials to be
available. You cannot receive materials under the guise of board affiliation then keep the item yourself

You can however, on any day of the week go out to pawn shops, swap meets or read publication that would have an item for sale and purchase it for
your own collection. That is not a conflict of interest."

I would agree with this response with a couple of additions. Also, I think that these guidelines apply to other than board members- no member must use museum affiliation to acquire objects personally.

As to the specific question, I think a conflict would arise if the person "sniffing out" artifacts for the museum might decline donation on behalf of the museum and then acquire the objects in question personally.

Most museums have made the types of objects they collect general knowledge. In many cases donations are sought, in other cases there may be a budget for acquiring materials. A director purchasing materials in conflict with a program by his/her museum to purchase similar materials would present an ethical problem. But in the case of a museum being willing to accept donations of a particular item (as opposed to actively spending money to do so) and a director purchasing the same type of item on the open market, I don't think so. Common sense would dictate exceptions to this statement, but I think you'd cut off a good portion of your potential candidate base if you expected people to never buy any of the same items that could potentially appear in the museum. Having said that, I do think an issue of perceived conflict could arise if the director was regularly selling the same types of materials collected by the museum. It could all be on the up and up, but could give the wrong appearance.

I was at a seminar once discussing Board ethics in which this issue came up. The response was framed from the perspective of an art museum. It was pointed out that there were advantages to having an art collector as an officer or board member, who better to understand collection issues? Needless to say, the same ethical caveats apply.

In general, a very good thread.

Railway Preservation Resources
jsmatlak@earthlink.net

> Jack, what you are describing could be a
> conflict of in interest in appearance-but
> maybe nothing more.

Agreed. Remember the old saying about avoiding even the appearance of impropriety; my position with the organization was that, if nothing else, the arrangements looked bad and could create problems in the future.

> From an accounting perspective-in the
> private sector- these types of transactions
> are known as "related party
> transactions" and would be required to
> be disclosed in financial statements but
> would not necessarily be assumed to be
> improper in the absence of evidence to the
> contrary. Obviously, if there was such
> evidence an auditor would be required to
> perform additional audit procedures and it
> COULD affect the type of opinion provided on
> the financial statements.

> If you are aware that the lease or labor
> rates are not "arms-length"
> transactions, that is-at regular or market
> rates, then the question of "prohibited
> inurement" arises. If a board
> knowlingly allowed such a situation to
> occur, they are in violation of their
> fiduciary duties-pecifically to safeguard
> corporate assets and operate the entity in
> the boundaries of its purpose and in
> compliance with the laws it is subject to.

Here's the problem: the members in question were "founding members" of the organization, with all the special privileges that brings (at least in their own minds). They own a passenger railcar repair company (which is only modestly successful at best) and offer themselves as "experts" at repairs. Since they are the only one who know what needs to be done, they browbeat.confuse others to the point of agreeing to let their company do certain work. Now, I will grant that sometimes they know what to do, but other times, they really do not. Even when they do, they are exceedingly slow and often purchase the wrong parts, overbuild, etc., which costs more in the long run that if the jobs were competitively bid and given to another group to complete. In my opinion, this makes the transactions not "arms-length". The second problem arises with their personal railcar - it is leased to the museum to carry passengers - but when one of the owners is taking ticket reservations, who can say whether that car is filled first or last?

> From a legal perspective-If you were still a
> member, and knew something was
> "fishy"-you should see an attorney
> if you were a board member or officer since
> an issue of "co-fiduciary"
> liability might arise.

I am a lawyer, and I was concerned about these problems - that is why I am no longer a member of the group. I was on the board for several years and despite continually raising these issues, people were too afraid that the "founding members" would take their toys and go home, leaving the museum in the lurch - although financially, my position was that we would have been better off.

> Assuming you are not in any position like
> that, a lawyer can also advise you (if you
> really wanted to expend the energy) what
> part of your state government enforces the
> law with regards to corporations that engage
> in "ultra vires" (outside their
> organizational purposes and documents) acts.

> States are generally reluctant to take
> action against non-profits for fear of
> looking like a bully, unless something is
> really bad.

> Additionally, non-profits that engage in
> "prohibited inurement" risk losing
> their federal tax exempt status under Sec.
> 501(c)(3) of the Internal evenue Code.

> The IRS used to take the same dim view of
> going after 501(c)(3)'s until they ran into
> persistent compliance and
> "attitude" problems.

> The problem with taking governmental action
> is that you have to expend a lot of time,
> energy and money to essentially blow up the
> organization.

I have no wish to destroy the group - in fact, I would like to return and be active again, as it is the only such opportunity in this area. However, I cannot in good conscience do so while this situation continues.

> If there's a problem, the best correction
> method is the ballot, if you can get a
> majority board that is diligent, capable and
> ethical.

Once again, the fear issue. Too many of the members are afraid that these guys know it all and that the group will fail without them, while those like myself who know otherwise grow frustrated after three or four years and leave the group, so there are never enough members to make the wholesale changes needed. I wish it were that simple, but in a small organization, there will always be a clique who beleive that they, by divine right (or founder's rights) can do whatever they want with such a group.

rrguy1225@yahoo.com

> Malcolm, thats worse than conflict of
> interest. That's "fraud in the
> inducement" and if some poor guy is
> waiting for a donor receipt to meet the new
> charitable substantiation requirements-thats
> just rotten. If he gets it, then the IRS
> might be involved.

Yes, it is fraud. And it appears that many conflict of interest policies are written (in part) to keep people from being tempted into these situations or into situations that may be innocent even tho they don't look innocent.



malcolmrcampbell@cs.com

>
> Here's the problem: the members in question
> were "founding members" of the
> organization, with all the special
> privileges that brings (at least in their
> own minds). They own a passenger railcar
> repair company (which is only modestly
> successful at best) and offer themselves as
> "experts" at repairs. Since they
> are the only one who know what needs to be
> done, they browbeat.confuse others to the
> point of agreeing to let their company do
> certain work.

To bad competitive bidding isn't just automatic, no? Wonder how much of their modest success comes from this business?

> but in a small organization, there will
> always be a clique who beleive that they, by
> divine right (or founder's rights) can do
> whatever they want with such a group.

Unfortunately, that is to often true.



Superheater@beer.com

Ah the power of the I-know-it-all founding members. How 'bout an "expert" on the FRA! For ten years you suffer under the complete mis-reading of the FRA regs and completely change your mission cause every body knows you can't operate that obsolete equipment. Hold the hammer over everybodies head that trying to work with the FRA will cause them to shut you down. Don't ever get informed enough to find out how other operations work. Finally do an end run around the "expert" and find out what the FRA really wants and how other similar operations work ... and now the "experts" tell us that the FRA is wrong! This coupled with absolutely NO experience in how real RR's work has made for a very sad ten years of operation.


lamontdc@adelphia.net

the current management has given over our Tecate trains to the for profit, and, has given over our depot parking lot, yard, shops, tools, support equipment and sold equipment (for much less than value) to the for profit group.

Alot of "stuff" to clean up assuming the right people are able to be lected.

JimLundquist55@yahoo.com

the current management has given over our Tecate trains to the for profit, and, has given over our depot parking lot, yard, shops, tools, support equipment and sold equipment (for much less than value) to the for profit group.

Alot of "stuff" to clean up assuming the right people are able to be elected.

JimLundquist55@yahoo.com

One thing that I do when I find something for sale that may be ofinterest to my museum is get the information about it and what the item will cost.

No one has mentioned that the AAM code says that if you offer it to your institution and they turn it down you can still buy it. As for me, I don't collect what my museum does. The Maritime world is a big place. And at for volunteering; my museum is electric, and I collect narrow gauge steam.

The reverse is not true. A board member should not buy from his own museum in any circumstance; that is a conflict of interest.

Many museums always sell at auction because it gives any buyer a fair shot at the object.

ted_miles@nps.gov