An Audit Report on State Appropriations for the American Airpower Heritage Museum
Report Number 15-013
The American Airpower Heritage Museum (Museum), which is not a state agency, received approximately $2.0 million in state appropriations during fiscal years 2010 through 2014 through Midland College. Because the state-appropriated funds were transferred from Midland College to a non-state entity, the funds were not subject to most General Appropriations Act or statutory restrictions. As a result, the Museum legitimately spent $60,297 of the state-appropriated funds in ways that would have been restricted by the General Appropriations Act or other statutory provisions, but that were not applicable to the Museum. Additionally, no state entity, including Midland College, monitored the Museum's use of the $2.0 million in state-appropriated funds.
The only authoritative guidance on the proper use of the state-appropriated funds by the Museum is a December 2009 memorandum of understanding (memorandum) between Midland College and the Museum. The terms of the memorandum are broad and allow the Museum a large amount of discretion in its use of state-appropriated funds.
For example, the Commemorative Air Force (CAF) provides assistance to the Museum. However, neither the CAF nor the Museum had a documented methodology to identify how shared costs should be allocated between the two entities. In some cases, the Museum did not allocate any of the costs for goods and services that also benefitted the CAF. In one instance, the Museum paid $444,515 to remodel its entrance areas, including the CAF's gift shop, with fiscal year 2010 and 2011 state-appropriated funds. The Museum did not allocate any of the remodeling costs to the CAF, even though the CAF receives all gift shop revenues.
The Museum effectively tracked the flow of the $2,001,041 in state-appropriated funds and complied with most terms in the memorandum. The Museum spent $1,710,481 of the state-appropriated funds from September 1, 2009, through May 31, 2014. Of those expenditures, a total of $966,838 was subject to the memorandum.
Auditors tested $952,885 of the Museum's state-funded expenditures that were subject to the memorandum. Only one expenditure, for $546 (0.1 percent), did not comply with the purposes allowed by the memorandum. In addition, 22 expenditures totaling $18,911 (2.0 percent) had insufficient documentation for auditors to determine whether they complied with the memorandum. For the remaining expenditures, auditors calculated the allocation of the Museum's expenditures by the three broad categories of allowable spending per the memorandum as follows:
- Enhance the educational value to and tourist appeal of Midland College, the Museum, the Permian Basin, or the visiting public: $361,958 (38.0 percent).
- Enhance the Museum's educational programming: $355,594 (37.3 percent).
- Renovate Museum exhibitions: $215,876 (22.6 percent).
In addition to the memorandum, the Museum also used its long-range plan to determine how it would spend its state-appropriated funds. Prior to each legislative session, the Museum submitted biennial funding plans to its board and the state representative in whose district the Museum was located. The plans detailed how the Museum planned to use state-appropriated funds to complete projects in its long-range plan. Those plans, which were for informational purposes, did not impose any restrictions on the use of the state-appropriated funds. The Museum partially completed the projects described in those funding plans.
Auditors communicated a less significant issue related to contractor payroll to the Museum separately in writing.
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