(Editor's Note: This is the first in a two-part examination of the Olympic Medical Center Foundation. Read part two here .)
When former Associate Executive Director Sara Maloney resigned from the Olympic Medical Center Foundation in July, she didn't leave quietly.
Her letter of resignation, acquired by the Sequim Gazette through a Public Information Act request filed with the Olympic Medical Center, details a number of concerns with foundation policies and procedures that Maloney said should receive immediate attention.
Other critics have since chimed in, including several significant donors to the foundation who are seeking greater foundation transparency.
While publicly downplaying or denying the magnitude of the issues, foundation officials, including board president Karen Rogers, have taken action, establishing new foundation policies and committees. They also have rewritten the organization's bylaws and cut expenses and salaries.
In her letter of resignation, Maloney specified a number of "alarming trends" that "have been ignored too long."
Among them: "A declining or stagnant trend in revenue for certain events has been obvious, with an apparent disregard for excessive overhead expenses — particularly personnel costs — which have increased $95,000 in the past five years."
The foundation, a 501©3 non-profit, had four full-time employees prior to Maloney's departure.
Maloney, who worked for the foundation for 7 1/2 years, said a review of the limited number of financial documents foundation officials had been willing to release to her revealed some disturbing possibilities.
"In fact it would appear that when personnel and overhead costs are factored in that several of our events are at best covering expenses and others have been operating at a loss for multiple years. I do not see how we can continue to sustain our mission and seek donor/sponsor dollars with such poor results."
Maloney managed two annual events on behalf of the foundation — the "Red, Set, Go" heart benefit luncheon and the Harvest of Hope Gala. She said she was concerned the funds raised by those functions weren't going where they were intended. At one time, she said, "I was confident that the money raised in Sequim was designated to Sequim exclusively for the cancer center and the cardiac services department and was therefore 'protected' in appropriate restricted fund accounts at the bank."
The documents she received indicated otherwise, suggesting that in fact the receipts may have been used to cover losses incurred by the other foundation events.
She called on the foundation leaders to be more transparent, particularly in regard to reporting monies netted, rather than "raised."
"It is a travesty that with so many of our events so few dollars are going to help patients and this is a direct contradiction of our mission."
How to fix it
Maloney, the wife of former Gazette owner Brown Maloney, also provided specific recommendations for improving the performance of the foundation, calling for a new system for better tracking funds that have been donated for a specific purpose "so that these may be monitored and allocated correctly."
She also asked for a review of income and expense reports for each individual event. In order to provide more accurate figures, the reviews should include overhead and personnel costs "to confirm all events are satisfactorily profitable."
She asked for an evaluation of "all staff members to include analysis of salary/benefits package, duties performed, hours worked per week, etc. to establish we are efficient and effective with personnel costs."
She also asked for an evaluation of the 50 foundation board members to determine their participation and their contributions to the foundation.
And finally, she called on the leadership to establish committees to better oversee the operations of the foundation: "At a minimum, finance/audit committee, personnel committee and executive committee."
Responding to the charges
Karen Rogers, the new president of the Olympic Medical Center Foundation and the former mayor of Port Angeles, says until Maloney's letter was made public, "everyone was happy" with the foundation.
Regarding the foundation's operations, she said, "there has never been a question until that resignation."
"We meet regularly with our donors. And they're happy," she said.
Nevertheless, Rogers has spent the past six months implementing many of the recommendations Maloney provided in her letter, in the process rewriting the foundation's bylaws and policies and establishing several new committees, including a new Executive Committee that will oversee the operations of the foundation.
She may have been under pressure to do so.
While the foundation and Olympic Medical Center vigorously state that the two organizations are completely independent, Maloney's resignation letter caught the attention of officials at the medical center.
In an Aug. 22 e-mail to the Board of Commissioners, OMC CEO Eric Lewis discussed Maloney's recommendations. He said foundation Executive Director Bruce Skinner "agrees with all of them and he is in the process of implementing them."
In a separate e-mail to board member John Beitzel, he wrote, "(Foundation Executive Director) Bruce (Skinner) said he agrees with Sara's recommendations for the foundation and he agrees the foundation needs major changes. He has already implemented a 21 percent cut in wages and benefit reduction for all employees."
"We agreed that this was only a beginning as overhead costs need to be reduced much more."
Lewis also referred to a suggestion that the medical center take over accounting for the foundation.
The plan was later dropped, which pleased Lewis, who was concerned about the accuracy of the records.
Rogers said the foundation made the call because in the medical center's hands, all of the information would be public, including the names of donors and the amount of their donations.
Going over the records
Rogers, who took over the reins of the board in July 2013, said she spent the first months of her term going over foundation records with a fine-tooth comb. She said she was largely satisfied with what she found. "There has never been a misappropriation of funds, no missing funds, no misuse of funds.
Everything has been done for the betterment of this community and I'm proud of that. And I've had it independently confirmed when I needed it. There's no substance to these allegations," she said.
Maloney countered, saying she never indicated funds had been stolen or misappropriated, but rather that there had been excessive expenses and inflated salaries, and that "much of the money that has been raised didn't benefit the patients."
Rogers said based on her findings the foundation has in recent months instituted a number of changes. She declined to use the term corrective actions, saying "improvements" is more suitable.
"We've looked at everything to be efficient. I understand people could get confused or misread something. But I've spent four months — when I could have been looking at getting money for us — to see if everything is in order."
"Did we take steps to make things even better? Yes."
"It's the old story in business — every five years you should look at your organization and update your manuals and policies. We're in update mode."
The updates will result in "more oversight and improved governance," Rogers said. That included rewriting the foundation's bylaws, which hadn't been revised in more than two decades. The board approved the new bylaws on Nov. 26.
According to the bylaws, the board of directors of the foundation can have up to 50 members. Prior to the recent re-write, just 10 percent of the membership constituted a quorum: five members were able to make the important decisions reached by the foundation board during its bi-monthly meetings.
The September 2013 meeting, for example, had six board members in attendance.
Skinner said the board was largely uninvolved because much of the work was done at the "committee level."
He pointed to the recent Festival of Trees as an example. "There was nothing for the board to do. That's why they weren't showing up. And that's why we changed it."
The full board also was in charge of overseeing the foundation's finances. That mostly consisted of having the board treasurer, Duane Wolfe, look over the records and occasionally report to the board, Rogers said.
The rewritten bylaws created an executive committee, which is now charged with managing the operations of the foundation, including fundraising, staff oversight and the financial management of the corporation.
The new executive committee includes up to nine members: the board president, past president, vice president, secretary, treasurer and four at-large members. They will meet monthly, with the larger board to be called into session just three times a year.
Under the new bylaws, Wolfe will bring the financials to the executive committee every month.
The bylaws formerly limited Skinner's ability to make purchases up to $500. That, he said, had been superseded by a board policy change that allowed him to spend up to $5,000 on his own — which he often did. The new bylaws now conform to the policy, saying Skinner can spend up to $5,000, "as long as it's a budgeted expense," said Rogers.
The new bylaws also remove a requirement that several members of the OMC medical staff were to serve as board members. One member from the hospital will now serve on the board in an ex officio capacity.
The bylaws also said the executive director "may also be an employee of the hospital, and shall be designated to the hospital to this position …."
Skinner said the phrasing was a direct reference to his predecessor "24 years ago."
"Now can you appreciate why we did a comprehensive review and updating of the bylaws?" Rogers asked.
Rogers said she plans to serve as a "benevolent dictator."
While the previous bylaws called for an annual review of the performance of the executive director, Skinner said he's never had a written review.
That's going to change, Rogers said. "There can always be better formality."
In addition, the board will receive further training in their responsibilities. "There is a commitment to update all policies continuously," Rogers said.
A new, permanent Board Operations committee also has been formed to provide board members with a greater understanding of their responsibilities.
"You should always have ongoing training," Rogers said. For example, changes in IRS rules. You want to make sure board members are updated."
Rogers said she and others on the board recently had completed an analysis of the benefits and salaries of those on the foundation staff, including duties performed and number of hours worked per week.