The New York legislature failed to pass legislation that would have prohibited the sale of portions of a museum’s collection and use the sales proceeds to fund operating expenses last August. This was reported in the New York Times this time last year and now a year later provides me the opportunity to discuss the dilemma of generally accepted accounting principles and the law.

In 1994 when the Financial Accounting Standards Board published the long-overdue standard of accounting principles for not-for-profit organizations, they addressed the specialized accounting for museums. In the process, they defined a museum’s collection in order to help distinguish it from other assets owned by the entity.

Collection items were identified as follows:

Collections- are works of art, historical treasures, or assets of a similar nature that meet all of the following criteria:

• Are held for exhibition to the public, for educational purposes, or for research in furtherance of public service and not financial gain
• Are protected, cared for, and preserved
• Are subject to a policy requiring any proceeds from the sale of collection items to be reinvested in other collection items

Notice the last bullet point. Any proceeds received from the sale of a collection item must be reinvested in other collection items. I believe, this means that if a collection item is sold, you cannot spend the money on operating expenses – not even to pay the annual audit fee!

As the spokesperson for the Metropolitan Museum of Art noted, it does not appear that this law is needed. Not-for-profit museums are governed by a volunteer board or directors and tightly monitored by the state Attorney General. In addition, general common sense should prevail. Museums hold our national treasures and these items do not exist to be sold to pay salaries or even audit fees. Do we really need a new law to clarify this?

Lawmakers, of course, believe the answer is “yes”. After all, they are law makers and this is what they do – they make laws. If they weren’t making laws they might begin to question their entire existence.

When I was a kid, there as a cartoon called “There Ought To Be A Law.” Each cartoon featured some egregious act such as a 250 pound man wearing a Speedo bathing suit to the beach. Unfortunately, today’s lawmakers take this cartoon too seriously and feel they should legislate everything. I suppose they are trying to remove the ambiguity from society and specify how to, and how not to, do everything. In their mind, 100 new laws results in a 100% improvement in society. I disagree.

The NY legislation had some other issues which the Times article discusses. It is clear that the failure to pass this legislation was a good thing. Of course, what really upsets me is that the legislations author, Assemblyman Richard L. Brodsky, is quoted at the end of the article as saying, “If we don’t act here, the bean counters will triumph, and we’ll see huge amounts of public art privatized.”

I have heard some people refer to accountants as “bean counters”, but obviously Brodsky couldn’t have been referring to us CPA’s since our generally accepted accounting principles have prohibited the sale of collection items (without restricting the proceeds to the purchase of new collection items), for over 16 years now.