The audit's release is part of the court case the cash-starved Barnes initiated in September when it proposed moving its multibillion-dollar art collection from Lower Merion to a more profitable location in Center City. What's unclear - and what may determine the outcome of the case - is whether the Barnes' financial problems resulted from an isolated series of events during the period covered by the audit or from ongoing problems with its governing structure.
The audit described budget deficits in each of the years 1993 through 1998, despite more than $16 million - plus $3.2 million in merchandising and other revenue - raised by a world tour of the foundation's French impressionist paintings. Most of that money had to be placed in a restricted account for renovations of a gallery that had fallen into such bad condition, it "endangered priceless art," the report said.
It also said there was no review procedure for Glanton's expenses, there were no regularly scheduled board meetings, and between late 1994 and late 1996, there were only four active board members instead of the five specified in the instructions left by founder Albert C. Barnes, who died in 1951.
The release of the audit, which the Barnes had fought to keep secret, was ordered Monday by Montgomery County Orphans' Court Judge Stanley Ott, who is hearing the Barnes' petition.
Other findings in the audit range from the odd to the flagrant. Some examples:
In 1997, when "Glanton had reason to believe he might be replaced as president," he spent $22,000 to redesign and print the brochure given to gallery visitors. The front of the old version had a quote by Albert Barnes, the collection's original owner; the new version replaced it with a Glanton quotation.
In 1994, Glanton approached Charles Frank, Mellon Bank's appointee to the Barnes board, offering an apparent deal to "stop the fighting" on the board in exchange for financial information and an agreement "to redirect to Mellon Bank $2.6 million in tour revenues." Glanton denied yesterday there was such an arrangement and said all tour revenue was to be kept at Mellon anyway.
For at least four months in 1996 and 1997, Glanton allowed two women to reside rent-free in a Barnes-owned house at 403 Haywood Rd. in Merion Station. Board members said Glanton did not tell them of the arrangement, according to the audit. Later, citing the commercial nature of the transaction, the township stripped the property of its tax-exempt status and sent the Barnes a tax bill for $4,464.56. The house has since been sold.
The audit said the women, Cheryl Beck and Theresa Sentel, moved in after Beck met Glanton during an attempt to obtain the Barnes as a client for a party and event management company. "The aggregate value of the unpaid rent and utilities was over $23,000," the audit said.
Glanton "wanted somebody in there that would help while they were redoing that place," Beck said yesterday. "The plan was to charge me rent. It was never meant for me to be there for free. . . . At the time, they did not tell me how much the rent would be. Once I found out what it would be, I couldn't afford that." Sentel could not be reached yesterday.
Glanton said others, including Barnes employees, had previously stayed in the house for free. He said he intended to rent it to the women, but when the rate quoted was too high - $4,000 a month - they moved out.
On his not consulting with the board on the arrangement, he said: "So what? Rental is an administrative decision. It's not policy. It's got nothing to do with the board."
Most of all, the report described Glanton as being consistently at odds with the rest of the board.
"During Mr. Glanton's tenure as president of the board, several trustees repeatedly commented that he withheld information necessary for the execution of their board responsibilities and often excluded them from the decision-making process," the report said.
In March 1994, the board adopted policies requiring their approval of any contract over $10,000, as well as other controls. But "Glanton at times did not comply with the March 1994 governance policies, and the board failed to invoke those policies," the report said.
Barnes' current chairman, Bernard C. Watson, and executive director, Kimberly Camp, say controls have been put in place to prevent a recurrence of previous problems.
Lincoln University had asked the judge to make the 2,000-page audit public, hoping it would help show that the university's role in governing the Barnes was not the cause of the foundation's problems.
Lincoln is fighting the Barnes' proposed changes because they would reduce the school's role in governing the foundation. Founder Albert Barnes granted Lincoln the right to nominate four of the five board members; the current proposal would expand the board to 15 members, with Lincoln continuing to nominate four.
Glanton was nominated for the Barnes board by Lincoln.
Even the origins of the audit, which Deloitte & Touche conducted in 1998 and 1999, are in dispute. The audit includes a photocopied page of Barnes board-meeting minutes from June 11, 1998, stating that all five board members voted unanimously to have an audit done. But Glanton said yesterday that "they falsified minutes. I never agreed to this audit."
Former Lincoln University president Niara Sudarkasa, who was a Barnes trustee at the time and who has had her own legal battles with Glanton, said yesterday that she could not remember if the vote was unanimous. "I am positive the Barnes board voted to have the forensic audit," she said.
In doing the so-called forensic audit - a deep investigation of money and management decisions that in the corporate world is usually launched to explore suspected wrongdoing - Deloitte interviewed dozens of people and reviewed bank statements, receipts, credit-card charges, wire transfers, canceled checks, contracts, personnel files, and other documents from January 1992 to June 1998. Many Barnes records were "spread through various offices, closets, and basement rooms," according to the report.
Glanton declined to answer the auditors' questions, so they relied on 2,000 pages of deposition transcripts from his various court cases "in order to obtain his views on matters relevant to this report." Formerly a powerful Philadelphia lawyer, Glanton recently became an executive vice president with Exelon Corp. in Chicago.
"There's no money missing anywhere," he said yesterday. "I don't really understand what this is all about."
Contact staff writer Don Steinberg at 215-854-4981 or email@example.com.
Staff writers Porus P. Cooper and Patricia Horn contributed to this article.
To read excerpts of the audit, go to http://go.philly.com/barnesaudit.
The Foundation's History
July 1951 Albert C. Barnes is killed in a car accident, leaving an art collection valued today in the billions of dollars. The Barnes Foundation is closed to the public.
March 1961 The foundation reopens to the general public.
July 1990 Richard H. Glanton is named president of the Barnes Foundation.
May 1993 to October 1995 A world tour of Barnes art raises $16.2 million to renovate the gallery.
January 1996 After renovation of the gallery, the Barnes Foundation sues Lower Merion, alleging racial discrimination, over township restrictions on parking and other regulations. An expensive legal battle ensues.
February 1998 Amid disputes with two other Barnes board members, Glanton steps down as Barnes president. He remains on the board until mid-1999.
August 1998 The Barnes retains auditor Deloitte & Touche to examine the foundations spending practices.
July 1999 Kimberly Camp, new executive director, says the Barnes has about $2 million left from its original $10 million endowment.
September 2000 The Barnes seeks emergency donations to remain afloat and says it will need $85 million to survive in the long term.
September 2002 Saying bankruptcy is imminent, the Barnes - backed by the Pew Charitable Trusts and Lenfest and Annenberg Foundations - proposes drastically rewriting its bylaws and moving to Center City. Lincoln University objects because its role in governing the Barnes would be reduced. A court case ensues.
June 2003 A Montgomery County judge orders the Deloitte & Touche audit be released to the public.