REVAMP AT OMC FOUNDATION: 'A lot of changes and improvements' in wake of criticism about expenses
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Peninsula Daily News
Karen Rogers, former Port Angeles mayor and president of the Olympic Medical Center Foundation board of directors.
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Peninsula Daily News
Olympic Medical Center CEO Eric Lewis

By Paul Gottlieb
Peninsula Daily News

PORT ANGELES — Sara Maloney was associate executive director of the Olympic Medical Center Foundation when she abruptly quit in July 2013.

She had analyzed the nonprofit's five-year fundraising history and discovered what she believed were “some alarming trends.”

“A declining or stagnant trend in revenue for certain events has been obvious with an apparent disregard for excessive overhead expenses,” she said in her resignation letter to OMC Foundation Executive Director Bruce Skinner.

“I do not see how we can continue to sustain our mission and seek donor/sponsor dollars with such poor results.

“I believe if this financial situation were exposed publicly, we would lose all credibility in the community.”

Maloney, a former financial manager for Barclays PLC, a London-based multinational banking and financial services company, examined overhead costs and wages and benefits of OMC Foundation personnel.

She said when they were factored into fundraising events, it appeared several were at best breaking even — and that others had been operating at a loss for several years.

OMC Foundation officials say things have improved in the 13 months since Maloney and nine other high-powered donors raised their concerns.

For 2014, expenses have been reduced, poorly performing events have been eliminated, revenues will be higher and oversight has been improved, they said.

“We've reinforced the structure,” Karen Rogers, president of the foundation's board of directors, said in a recent interview with the Peninsula Daily News.

OMC CEO Eric Lewis said the board's executive committee and Skinner “have really done a lot of changes and improvements and tried really hard to address the donors' concerns.”

The 10 donors had complained that it appeared that proceeds from some events were covering the expenses of other events in a way that masked their lack of success.

Last September, donors including Maloney, the wife of Brown Maloney, a Sequim real estate developer and former owner of the Sequim Gazette weekly newspaper, decided to speak “with one voice” in a letter to Rogers and Lewis.

Several of them also want Skinner to be fired, they said in subsequent interviews with the PDN.

“Since [Maloney's] resignation, we have met as a group, and we believe that the full extent of the financial situation she has uncovered is yet to be fully revealed, investigated and resolved,” the donors said in their letter.

They also demanded that overhead expenses be limited to 15 percent to 20 percent of annual revenue.

They sought a full audit of the previous five years, wanted a detailed review of the flow of contributions to the Olympic Medical Center since 2007, and recommended replacing the OMC Foundation with an office of development under Olympic Medical Center's purview.

Charity watchdog organizations like the Better Business Bureau and Charity Navigator have long said that low overhead — 25 percent (CN's benchmark) to 35 percent (BBB's) — is a good indicator of a worthwhile charity.

However, they recently rolled back a bit on this in a joint statement with GuideStar, which also monitors charities:

“In most cases, however, focusing on overhead [the percent that go to administrative and fundraising costs] without considering other critical dimensions of a charity's financial and organizational performance does more damage than good.

“We ask you to pay attention to other factors of nonprofit performance: transparency, governance, leadership and results . . .”

For the OMC Foundation, percentages of overhead expenditures as part of total revenue varied between 2006 and 2012, according to Form 990s and calculations verified by foundation board treasurer Duane Wolfe, a certified public accountant in Port Angeles.

In 2006, the percentages of expenditures to total revenue was 28 percent; in 2007, it was 30 percent; in 2008, 93 percent; in 2009, 34 percent; in 2010, 55 percent; in 2011, 60 percent, and 2012, 82 percent.

During the same period, the percentage of funds to OMC — which could include revenue from prior years — to total revenue was, in 2006, 21 percent; in 2007, 19 percent; in 2008, 93 percent, in 2009, 27 percent; in 2010, 58 percent; in 2011, 60 percent, and in 2012, 61 percent.

Annual donations to OMC include donations from prior years that would not be reflected in each year's annual revenue, Wolfe said.

Wolfe said that in 2013, according to unaudited totals, the foundation spent 45 percent of total revenue on overhead and administrative expenses, with 25 percent of revenue going to OMC.

Cash donations were 25 percent of revenue, with additional funds restricted for future donations to Olympic Medical Center.

The foundation projects more money to OMC this year — at least $360,000 vs. $149,713 in 2013.

Donations routed from the foundation to Olympic Medical Center in recent years include $350,000 toward the purchase of a digital mammography machine, $150,000 for new infusion bay centers for cancer patients and $52,000 for cardiac treadmills, Skinner said.

Funds from the OMC Foundation make their way to Olympic Medical Center either as a direct reimbursement for equipment, or the OMC Foundation pays vendors directly from an OMC wish list, Rogers said last week.

The OMC Foundation also donates $25,000 a year to the Patient Navigator program, while OMC picks up the cost of the program's staff position.

The patient navigator “works closely with patients and their families to determine what programs are available that can help ease the financial and emotional burdens that come with a cancer diagnosis,” according to OMC's website, www.olympicmedical.org.

Skinner said the foundation is exceeding revenue projections for 2014 and it has brought in more at the Duck Derby, the Sonny Sixkiller golf tournament, and the Red, Set, Go! Luncheon, which raises money for hearth health care and promotes heart health awareness.

OMC Foundation operating expenses for 2014 also are 17 percent lower than 2013 and 32 percent lower than 2012, according to Skinner.

Skinner said photos with Santa, and Team OMC, a group that competed in running and walking events, were eliminated after they performed poorly.

Team OMC athletes competed locally and in Seattle; Portland, Ore.; Phoenix, Ariz.; San Antonio, Texas — and France, where they raised enough in sponsorships to participate, Skinner said in an interview.

Rogers, a Port Angeles-based business consultant and former Port Angeles mayor, took office as OMC Foundation board president in July 2013.

She spearheaded formation of an executive committee that meets monthly and oversees day-to-day finances to supplement the work of the board of directors, which is mainly responsible for fundraising and meets three times a year.

Foundation officials also are reviewing the cost of administration and personnel for fundraising events from 2007-2013, Skinner said.

In past years, those costs have only been estimated.

Lewis said the donors' September letter was upsetting.

He criticized the foundation last year on its overhead costs after meeting with Maloney following her resignation.

He said he is pleased at the steps taken by the foundation, particularly the cutting of overhead by outsourcing day-to-day accounting.

“I feel good about the foundation,” Lewis said. “I am very confident the 2014 numbers will be better.

“All of us want to look at each event and develop a budget for revenue and expenses and make sure we think the event makes sense.

“I think the foundation board is doing that now, for sure.”

Board member Bill Littlejohn, a Sequim business leader and one of the 10 who signed the letter, said in a recent interview that he was satisfied at the new steps taken by the foundation.

Since signing the letter, he has become a member of the foundation's board of directors.

“The main thing was accountability issues,” he said.

The OMC Foundation's 2013 annual report, prepared in January, is available online at the foundation's website, www.omhf.org.

It was prepared at the board of directors' request “to show what actual income and actual event expenses are,” Skinner said.

But Skinner said some of the numbers are wrong, and new financials were provided to the PDN.

The annual report shows income including cash contributions and event revenue totalling $773,155, including $143,333 in cash contributions.

But an additional $100,000 was added to income after the financial report was published that accounts for a contribution that “should have been booked for 2013 but was not,” Skinner said.

That extra $100,000 brings the total cash contributions to $243,333.

The posted report also shows event expenses of $312,030 that Skinner said are covered by sponsorships and ticket sales, and administrative operating expenses of $275,291, including $230,644 for personnel.

Income over expenses was shown as $185,834.

That's wrong, too.

“A lot of expenses are in those event expenses that shouldn't be there, and [there is] some income that shouldn't be there,” Skinner said.

The foundation can subtract, for example, meal and entertainment costs from expenses “because it's not related to the fundraising part,” he said.

An accounting rule also “provides that certain direct costs of special fundraising events, referred to as direct benefits to donors, may be subtracted to 'lower the ratio of fundraising expenses,'” Skinner said in an email.

Wolfe said the annual report also does not reflect 2013 investment income, investment gains and losses, and charitable trust activities.

Skinner said the picture for 2013 will become clearer once the foundation's audit is completed.

A single year of the nonprofit's finances are usually audited every three years.

Donors have called for more frequent audits.

The foundation will file its Form 990 for 2013 following the expected completion of the audit by Aug. 30, Wolfe said.

Other improvements to the OMC Foundation's operations include a revision of the bylaws, Rogers said.

The bylaws were already on track for review when the donors expressed their concerns, she said.

However, she refused to give the new bylaws to the PDN.

Also in the works was formation of the nine-person executive committee, which was appointed by the board of directors.

The committee meets monthly to oversee the foundation's day-to-day operations and will review the upcoming audit.

An accounting firm also now handles the day-to-day accounting instead of the foundation crunching the numbers in-house.

That eliminated a position and saved the organization money.

Both donors and foundation officials have said the other side has refused to meet to resolve their differences.

Most of the 10 donors said they would meet if given the information to review before the meeting. Rogers' and Skinner's position is that they have provided enough information.

One of the donors, Andrea Alstrup of Sequim, said in an interview she was unaware of all the measures taken by the foundation to address the donors' concerns.

Rogers said she sent a Jan. 7 letter to the donors in which she said that following an independent financial review immediately after Maloney resigned that “we found no misappropriation of funds or donor requests.”

The financial review was conducted by BSG Enterprises Bookkeeping Services of Port Angeles.

Skinner said that review confirmed that all contributions to the foundation that were earmarked for a specific destination, such as the Olympic Medical Cancer Center — a major beneficiary of the foundation's efforts — went to that destination.

But Maloney and the other donors have insisted that the issue is expenditures, and how their donations are spent, not misappropriations.

In addition, a long-range “sustainability” committee that Maloney was a member of had already been formed when Maloney resigned, Rogers said in an interview.

“We needed to look at other things we need to do to grow events.”

The donors also had suggested that the foundation be replaced by “an Office of Development under the OMC umbrella.”

But Lewis, OMC's CEO, said fundraising lies outside of the public hospital district's mission of delivering medical services.

As for recommendations from the donors during interviews that Skinner be fired, Rogers said, “It's not happening, it's just not.”

Rogers and other executive committee members praised Skinner, a nationally known event consultant, for drawing millions in donations to OMC since he was hired in 1990.

Skinner also is proud of the foundation's donations to Olympic Medical Center during his tenure.

The foundation gave the Olympic Medical Center $2.4 million from 2006-2013 and $4.6 million since 1990, he said.

The OMC Foundation's target for 2014 is “$360,000 or more,” Skinner added — though no projections were contained in the 2013 annual report.

Skinner's and the executive committee's philosophy focuses on the revenue generated by event more than how much it costs to put them on as a percentage of what's generated overall.

“It's a lot more important what an event makes than what the percentage is,” Skinner said.

That view was echoed during a Peninsula Daily News interview with foundation executive committee members.

“If they made $1 net to the good that went to [Olympic Medical Center], it was a successful event,” executive board member and Clallam County Administrator Jim Jones said in the interview.

In addition, foundation officials believe fundraising is about more than funds raised.

The community goodwill that the events inspire is priceless, they said.

In various interviews during the course of the last several months, they referred to fundraising as “friend-raising.”

“Being a good ambassador for [Olympic Medical Center] through our events is another reason why we exist,” Skinner said in an email.

Before Skinner was hired, board members say, the foundation acted like a big-city charity, asking the wealthy for checks — and having little success.

“It's our business model to try to get money from as many people as possible,” executive board member Tom Curry said.

Skinner said event expenses for all events from 2009 to 2014 have been and will be covered by about 380 sponsors.

Ticket sales also help pay for the Festival of Trees weekend during the Christmas season.

It was a top money-maker for the foundation in 2013 followed closely by the Harvest of Hope Wine and Dinner Gala in the fall, which was organized by Maloney before her resignation.

In 2013, the festival netted $84,974 compared to Harvest of Hope's $82,366.

In 2012, the festival netted $87,948 compared to the Harvest of Hope's $124,679.

Not including administrative overhead, 2013 event expenditures for the festival were 53 percent of event income compared to 32 percent for Harvest of Hope.

Harvest of Hope is Oct. 13 this year.

Skinner said 2014 overall expenses will be reduced thanks to a donor who gave the foundation a onetime infusion of $20,000 to buy auction items for 2014's Festival of Trees, Harvest of Hope and the Sonny Sixkiller golf tournament.

Another $10,000 in expense cuts were allocated throughout the foundation's remaining five events, he said.

Also, more was raised at this year's “Red, Set, Go! ” Heart Luncheon than ever before — $62,000 this year compared to $46,000 in 2013, before overhead was added, Rogers said.

The six events this year include “Hog Wild — A Night of Games, Suds and Grub,” a new event that will include a pig roast and be held at Barhop Brewing in Port Angeles on Saturday.

Skinner estimated the donors who criticized the foundation were responsible for contributing slightly more than $200,000 to the foundation from 2007 to September 2013, when the donors wrote their letter.

“We can't confirm to a specific figure or even range without going through all transactions (several thousand) over that period, and we just don't have the time or money to do that,” Skinner said.

But even in that, they disagree.

Maloney said their contributions totaled much more than $200,000, with one donor alone contributing $190,000.

Skinner said the donors' money is missed, but that the foundation is trying to make up for the loss.

“You always miss money that you don't get, but we raised more money than we ever have before, so we're happy with that.”

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Senior Staff Writer Paul Gottlieb can be reached at 360-452-2345, ext. 5060, or at pgottlieb@peninsuladailynews.com.

Bertha Cooper, former administrator of planning and development for Olympic Medical Center and a monthly columnist for the Sequim Gazette, contributed to this report.

Last modified: August 16. 2014 8:27PM
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