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OMC Foundation Under Fire: Part Two

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(Editor’s Note: This is the second in a two-part examination of the Olympic Medical Center Foundation. Read Part one here.)

When former Associate Executive Director Sara Maloney resigned after 7 1/2 years with the Olympic Medical Center Foundation, she left behind a scathing resignation letter alleging a number of issues in foundation management, including excessive operating expenses and salaries, and a lack of transparency with donors.

 

Since then a number of donors have expressed their own concerns regarding Olympic Medical Center Foundation management.

 

In a wide-ranging interview with the Sequim Gazette, OMCF Executive Director Bruce Skinner, new board president Karen Rogers and foundation board treasurer Duane Wolfe, a Port Angeles-based certified public accountant, discussed the concerns brought up by Maloney and by the donors.

 

The issues included those contained in a Sept. 17 letter to the foundation signed by 10 of the foundation’s more prominent donors, including Andrea Alstrup, Jack and Terri Harmon, David and Patsy Mattingley, Michael and Lynn McAleer, Bill Littlejohn and Brown and Sara Maloney. (Brown Maloney is the former owner of the Gazette.)

 

In the letter they asked the foundation to confirm “all contributions since 2007 have been used for the purpose for which they were donated.” They further requested a full audit and operational analysis of the past five years “by a reputable accounting firm.”

 

Perhaps most surprisingly, they suggested shutting down the foundation “as a separate entity” and placing it instead in OMC’s development office.

 

Barring that, they said OMC officials should regularly examine the foundation’s financials and operations, “with the results documented and reported to donors annually.”

 

They also asked foundation officials to “Set a goal to limit overhead expenses for the foundation to 15-20 percent of annual revenue.”

 

Rogers, a former Port Angeles mayor, responded in a letter to the donors, saying, “a thorough and rigorous review of all the items listed in your letter is under way. In fact, this review commenced immediately after the Harvest of Hope Gala committee meeting of Aug. 9, when Mrs. Sara Maloney brought forth her concerns, which are mirrored in your joint letter.”

 

“Every organization can improve and the OMC Foundation is very amenable to constructive review and change. As such, as board president I appointed an Oversight Committee to review the concerns brought forth.”

 

(Rogers has since declined requests from donors and the Gazette to provide the names of those on the Oversight Committee.)

 

“Additionally, subcommittees were formed as follows: Board Operations, Bylaws and Finance.”

Rogers told the Gazette foundation officials “have responded multiple times” to the concerns of the donors.

 

“We’ve offered to meet and some have chosen to meet,” she said.

 

Skinner said he would continue to provide donors with additional information.

 

Bottom lines

David Mattingley said he is very concerned about the foundation’s “990s” — the IRS tax return forms used by nonprofits.

 

“When I donate or support an organization, I review their 990. You’ll note that the last four or five report negative valuations. In fact their revenues versus expenses have been rising as their net assets have been declining. I’ve looked at others. I haven’t found a single 990 that reflects negative values other than this one. That gives me concern, a concern I’d like to have addressed.”

 

Skinner says the foundation has “never lost money in a year.”

 

He points to the bottom line in 2006 and 2007 when the foundation’s receipts far exceeded its donations, with $803,721 in revenues and just $309,233 in donations to OMC.

 

Giving away those funds in later years shows up as losses, he said.

 

“Add up 2006 through 2013 we show a gain of $111,000 and that includes giving $2.1 million to the hospital.”

 

Maloney said she’s never disputed the amount of money that has been donated, only the amount that should remain. She believes much of that has been “eroded by excessive event expenses and high operating costs, meaning less money remains to benefit patients.”

 

Rogers added by holding on to funds the foundation could show gains, but that is contrary to the foundation’s purpose.

 

“We’re money in, money out,” she said. “We wouldn’t be doing our patients any good if we were sitting on a million dollars.”

 

Sometimes that’s unavoidable, Rogers said. Skinner noted that in the past two years the Harvest of Hope Gala has raised $109,000 for integrated medicine at the Olympic Medical Cancer Center in Sequim.

However, the center hasn’t requested the funds, so the funds remain in a foundation account.

 

Rogers, Skinner and Wolfe also explained that the funds are treated differently. At the end of 2009, the foundation had $699,000 in the “fund balance.” Of that, $551,000 was reserved — it was set aside for specific purposes. Just $148,000 was available “to do what we wanted to do with it,” Skinner said.

 

Cutting expenses

The expenses for fundraising events were a subject of concern in Maloney’s resignation letter and in the comments of others. OMC Commissioner Jim Cammack sought out assistance in managing the expenses, sending an Oct. 24 e-mail to Leanne Kaiser Carlson, a consultant at the Kaiser Institute. He wrote, “Since our foundation has such a high percentage of expense on events, I would like to share your ideas with the full hospital board and foundation board.”

 

A review of the financials for recent events, also obtained by the Gazette, confirms that several of the events are showing declining revenues. The Duck Derby, perhaps the most public of the events, brought in $130,115 in 2013. Five year earlier, in 2008, it grossed $171,765.

 

The figures show the net profit also has declined, from $73,047 to $66,000.

 

These net figures don’t reflect the office overhead and salaries, including foundation contract worker George Hill’s estimated pay. Hill, whose work duties largely consist of running the Duck Derby, is paid an estimated $24,000 a year.

 

Rogers acknowledged the revenues are down, saying the 2013 event would have performed better, but the Safeway Corporation declared on the last day they would not allow volunteers to sell ducks at their area stores. That alone was worth $25,000-$30,000.

 

She added that the number of volunteers has declined as well.

 

“Volunteers are down across the country,” she said. “Donations are down.”

 

Wolfe agreed the economy isn’t helping. The Duck Derby “is one of those events that raises money from Joe Blow. And in the past five years Joe Blow hasn’t had five bucks.”

 

Rogers also said the Duck Derby contributes much more than just a check.

 

“The spirit of what that does for the community is invaluable,” Rogers said. “You can’t put a price on that community experience.”

 

Skinner, Rogers and Wolfe all agreed that most of those who paid $5 for a duck would be satisfied that $2.50 was going to the hospital patients.

 

On the other hand

Maloney takes issue with the figures, saying that proper accounting also would show the expenses for overhead, including salaries for those in the office. That means even less than $2.50 — perhaps much less — is reaching patients.

 

She said that adding the additional costs would throw all of the event financial income and expense reports into a different light.

 

In its first year, 2011, the Sonny Sixkiller Golf Tournament grossed $89,762.26. After expenses, it netted $7,786.59. The expenses included $15,741 in “Giveaways and Gifts” for those participating in the tournament, $2,840 for “Celebrity Travel Expenses,” $3,012 for “Wives’ Expenses,” $17,006 for “Food/Bar” and $8,786 for “Rooms/Lodging.”

 

The 2012 profit and loss shows similar figures, with a bottom line of $4,475.57. The foundation website, however, says, “over $89,000 was raised to benefit the Olympic Medical Center Foundation.”

Skinner agreed that if the office overhead and salaries were added, both events would have shown a loss.

 

“If they continued to perform that way, we would cancel it,” he said.

 

But, he said, in 2013 the golf tournament had additional sponsors and produced a better financial performance. That reflects its maturation, Rogers said.

 

The preliminary figures compiled by the foundation suggest the 2013 tournament netted $76,461, but in a Dec. 20 letter to Rogers and Skinner, Maloney noted that figure is likely inflated because it doesn’t include the approximately $13,000 the foundation pays annually for cart rental and greens fees. She added that it also doesn’t include “the giveaways, food/beverage and advertising/printing.”

 

“In past years those items have totaled $50,000-$60,000 per year.This is a significant expense amount to have been not included or estimated for accounting purposes.”

 

Maloney says there are significant opportunities to cut expenses, particularly by asking for donated “premiums” — the trips, power tools, jewelry and other gifts won by those who purchase a chance through raffles and other means.

 

While many foundation event participants believe these premiums are donated, many are purchased by the foundation. In the past five years, for example, the foundation paid more than $75,000 for premiums given away during the Festival of Trees.

 

Additional thousands are spent on meetings, which often include dinner. In the past five years the foundation has spent more than $20,000 for “committee meetings” for the Festival of Trees.

 

The events managed by Maloney show rising gross revenues and much lower expenses as a percentage of gross. In 2013 Red, Set, Go! grossed $57,118, with a net of $49,940.

 

The Harvest of Hope is easily the foundation’s biggest fundraising event of the year. In 2007, it grossed $111,923, with a net of $80,542.

 

By 2012 that had risen to $152,255 and $124,732 respectively.

 

Maloney said that’s why she’s concerned that the profits from the events she managed have been used to support other events and may not have been fully set aside for the purposes for which they were given.

 

Bright sides

Skinner says the tough times are likely over, saying the Festival of Trees’ financial performance has improved, as has the Duck Derby’s.

The financial statements of the past five years don’t reflect that. The 2013 Duck Derby, for example, showed another decline in revenues and net. They also show that in the past five years (2008-2012) $44,450 has been spent on “prizes,” with another $20,361 for committee meetings.

 

Skinner said in the future the foundation’s financial statements for each event also will include the management costs. “It needs to be done,” he said.

 

Rogers said that it’s important to remember there is no single formula for fundraisers.

 

“There are events that have a higher percentage of production costs,” she said. “Some cost more because they’re high-quality, labor-intensive events to put on. You wouldn’t make a rash judgment of an event if you’ve exposed the foundation to 500 people. There’s more to be gained. Part of it is fundraising, part is friend-raising.”

 

Wolfe noted that for the first six years, the foundation simply had asked for donations.

 

“We donated zero to the hospital,” Wolfe said. “Then you start doing the events and raising money that way and you start getting donations.”

 

Skinner noted the foundation recently received a $50,000 donation from someone who had attended the Festival of Trees and enjoyed it.

 

Rogers said that after the 2013 Harvest of Hope, “Bruce and I prepared a complete report of where all the money has gone — everything that’s been funded — everything that’s been reviewed. The same for Festival of Trees. We’re trying to do more disclosure, more transparency. I call it education.”

 

Rising tide
Rising salaries, along with declining revenues, also were cited as a matter of concern by Maloney.

The foundation’s 990s reflect that. In 2009, the foundation brought in $801,812, with salaries and benefits at $223,563. By 2012 income had declined to $467,030, with salary and benefits of $284,030.

 

Skinner said the foundation has in recent months cut its expenses and salaries by more than 40 percent.

Part of the cuts came as the result of a search for “greater efficiencies,” Rogers said.

 

Maloney’s $12,000 annual salary also has been cut, as has the salary of the foundation’s financial manager, Madeleine Burns, who left her position on Dec. 13. Her employment package was estimated at about $68,000 per year.

 

Skinner said Burns was hired to carry out state-mandated accounting for the foundation’s gift annuities, a business the foundation is no longer in.

 

Rogers and Skinner declined to provide Skinner’s salary, but the foundation’s 990s show that in 2011 he was paid $72,735. With benefits, the package was worth approximately $85,000.

 

Skinner said he has taken a 5 percent cut in his salary and is now on Medicare rather than foundation insurance.

 

Skinner also said he spent “75 percent” of his work days at the foundation office in Port Angeles, but two foundation workers, who both asked not to be named, confirmed that Skinner had made an appearance at the foundation office no more than 50 days in either 2012 or 2013.

 

Wolfe said the expenses and salaries are reasonable, with just two remaining full-time employees.

 

“This place is generating $700,000 to $800,000 a year,” Wolfe said. “That’s a pretty skimpy staff. I don’t have many $800,000 clients doing that.”

 

The foundation’s 990 for 2012 indicates the foundation’s total revenues in that year were just $467,030.

 

On the record

Maloney says she came forward with her complaints after 7 1/2 years as associate executive director because she only recently was made privy to the foundation’s financial records. “The title implies a leadership position with managerial authority. In fact I worked as a part-time employee with no written contract— no staff reported to me.”

 

Because she was a part-time employee, Maloney said, “I wasn’t privy to the financial reports for events I wasn’t involved in. Because all events were publicly declared to be successful I never thought to request income and expense reports.”

 

She added, “I realize, with the benefit of hindsight, that it seems unbelievably naive that I wasn’t asking more questions. “I’m embarrassed to admit that I simply trusted that the executive director … was increasing the income and controlling the expenses for the events he was responsible for and that the board in turn was providing the appropriate financial oversight.”

 

She said in March 2013 foundation staff members were asked for suggestions of ways to raise revenues and cut expenses for Port Angles events.

 

Maloney requested a five-year record of event revenues and expenses. “I was shocked.”

 

After receiving the report in July, Maloney says she reported her findings to Eric Lewis and resigned.

 

Adequate feedback?

Several of the donors contacted by the Gazette say they’ve been disappointed by the lack of specifics in Rogers’ response. They say she has avoided answering the questions they posed.

 

Alstrup said, “I don’t feel like they’ve been responsive and responsible. They’ve tried to brush off and ignore my concerns.”

 

Alstrup said she wants confirmation that the funds she’s provided through her participation in the Harvest of Hope Galas are reaching the cancer center and aren’t being used to shore up the finances of the Port Angeles events.

 

“My late husband had to travel back and forth to Seattle (for treatment),” she said. “I thought having a center in Sequim was wonderful.”

 

Alstrup said she repeatedly asked for additional financial records, but received little of substance. “It kept getting worse,” she said.

 

“So a group of us thought if we asked collectively, we would get some attention,” Alstrup said. “So far that hasn’t happened to my satisfaction.”

 

“We never wanted this to go public. But I think these are simple requests, so to have months go by with without a (satisfactory) response is discouraging,” Alstrup said. “I’m disappointed. I want it reconfirmed that the money is where it needs to be. All we want is for the foundation to be a success.”

 

David Mattingley echoed Alstrup’s comments, saying, “I think their response was incomplete. I think they could have been more forthcoming. Organizations that are charitable in nature have a fiduciary responsibility to the public and more particularly to those who support the organization with their time and their funds.”

 

Mattingley said he’s been asked to meet with foundation officials, but added, “If they’re not going to show me the documentation, then I don’t see the purpose of meeting with them.”

 

Port Angeles donor Jack Harmon sent a separate e-mail to OMC CEO Eric Lewis, saying, “Until we again feel comfortable that funds are being used appropriately and the mudslinging and backbiting goes away, we are reluctant to donate further. There needs to be some kind of accountability for every dime the foundation has raised and for every dime spent, as well as a method of communicating and sharing financial information with the board (or at least a board committee) ….”

 

Lewis responded the next day, saying he was working with Skinner and the foundation toward better management. He added, “I am working with Bruce to re-calculate the overhead distributions to the Gala and Red, Set, Go.”

 

In another e-mail obtained by the Gazette, Olympic Medical Center board commissioner John Beitzel described his own reaction to an early August phone call from Rogers, saying it was “designed to reassure me that there are no problems with the foundation. She was very upbeat and quite dismissive of Sara’s concerns. She seems to be systematically attempting to erase the whole unpleasant scenario presented by Sara ….”

 


Reach Mark Couhig at mcouhig@sequimgazette.com.

 

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