Bruning: Historical society's 'private' fund must be made public

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BY JOE DUGGAN / Lincoln Journal Star

A private account allegedly embezzled by a high-ranking Nebraska State Historical Society official should be considered public money from now on.

While Attorney General Jon Bruning found nothing illegal about the society’s practice of withholding gift shop profits and membership dues from the state treasury, he said they are still public funds.

The attorney general’s opinion, released Monday, means state Auditor Mike Foley will be able to audit the account and include it with a report of how the society manages its finances. The report could be ready for release within two weeks.

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Attorney General Jon Bruning (LJS File)

Attorney General Jon Bruning (LJS File)

Bruning released the findings in an opinion sought by Foley and Michael Smith, executive director of the historical society. They asked for the opinion after nearly $73,000 was discovered missing from the account earlier this year.

The Lancaster County attorney has charged Tony A. Schmitz, the society’s chief operating officer, with one felony count of theft by deception. Schmitz, on unpaid leave from the society, faces up to 20 years in prison if convicted.

Foley and Smith asked the attorney general to consider two questions. First, are the funds public or private, and, second, should the account be reviewed by the state’s accounting system?

Bruning found that the law allows the society to keep the gift shop and membership revenue in a separate account. The funds have been used to buy supplies for museum stores as well as paying for lobbying, alcoholic beverages and luncheons for the society’s board of trustees.

Since the mid-1990s, hundreds of thousands of dollars have flowed through the account. At the same time, the account has been audited by a privately hired certified public accountant.

But because the money is generated by state employees using state equipment, they are truly public funds, Bruning said. From now on, the society’s management of the funds must comply with state budgeting and accounting procedures.

Smith, the society’s director, has said an audit of the agency’s state budget accounts revealed no missing funds. Foley, however, has said his report will reveal “issues.”

“The tangled finances of the State Historical Society, involving transactions using commingled funds from various society accounts, will be unraveled in my forthcoming audit report,” Foley noted.

Reach Joe Duggan at 473-7239 or jduggan@journalstar.com.