June 14, 2008
U.S. Freezes Assets of Kuwait Charity
The AP reports that the Treasury Department has frozen the assets of the Revival of Islamic Heritage Society headquartered in Kuwait for allegedly supporting terrorists. Story here.
Provena-Covenant Oral Argument Set for Wednesday, June 18
On the heels of Senator Grassley's less-than-favorable comments regarding tax-exemption for nonprofit hospitals (blogged by Darryll Jones earlier this week here), the Illinois 4th District Court of Appeals will hear oral argument in Provena-Covenant Medical Center v. Dept. of Revenue this Wednesday, June 18 at 9:00 a.m. in Springfield, Illinois (the oral argument calendar is available here).
For those who haven't kept up with this saga, Provena-Covenant is a nonprofit hospital located in Urbana, IL whose state property tax exemption was revoked by the Illinois Department of Revenue in September, 2006. The case actually began two years earlier, with a recommendation in 2004 by the Champaign County Board of Review (a citizens' board that reviews property tax disputes) to revoke Provena's exemption. Prior to the Board of Review's recommendation, Provena had received national attention (ignominy?) for its widespread use of the quaint Illinois procedural device called a "body attachment" that permits creditors to have debtors thrown in jail for missing a court hearing on a debt collection case. After a series of internal appeals to the Department of Revenue, the Director of the Illinois DOR, Brian Hamer, issued a final opinion revoking Provena's tax exemption, primarily on the grounds that Provena provided inadequate charity care - according to Hamer, Provena's charity care expenditures during the tax year in question (2002) amounted to less than 7/10 of 1 percent (0.7 percent) of its revenues. Hamer's opinion is available here.
Provena then appealed the DOR's decision to circuit court, and in an oral decision delivered from the bench, Circuit Judge Patrick J. Londrigan reinstated Provena's exemption on July 20, 2007. The DOR then appealed to the 4th District court of appeals, which is where the case currently stands.
The Provena case is fascinating on a number of fronts. One of the fascinating aspects is that the main issues in the case are essentially the same ones that the Utah Supreme Court considered over 20 years ago in the famous Utah County v. Intermountain Health Care decision: should tax-exemption for nonprofit hospitals be tied solely to charity care? If so, how much charity care is necessary? And how do we even define what charity care is (for example, should Medicare and Medicaid "shortfalls" count as charity care)? The Provena case highlights how little progress we have made in addressing these issues from a policy perspective over the past two decades. Provena also raises some questions about how relationships between a nonprofit and various for-profit sibling entities should affect exempt status. One of the things that troubled both the Champaign County Board of Review and Brian Hamer was how much of the operation of Provena was "outsourced" to sibling nonprofit and for-profit entities, and the fact that Provena made substantial distributions of net revenues to its parent corporation, Provena Health. I reviewed most of these issues in an article I wrote a couple of years ago about the Provena case that was published in the Loyola University Chicago Law Journal, 37 Loy. U. Chi. L.J. 493, available from Lexis here. An edited version of this article, updated to consider the DOR's final disposition of the case, was published by the Exempt Organizations Tax Review and is available on Lexis here.
One final fascinating part of Provena: before the DOR and in the circuit court, Provena argued that even if it did not meet the standards for exemtion as a nonprofit hospital, it should be exempt as a religious organization (Provena is part of the Catholic Provena Health system). This argument basically was ignored by Brian Hamer in his opinion for the DOR, but Judge Londrigan stated in his opinion that the evidence established that Provena "satisfied the relevant factors used to determine qualification for charitable- and religious-exempt use for the real estate at issue in this proceeding.’’ It will be interesting to see how the 4th District handles this if it gets to that issue (I think that Rob Katz may be working on a research project that involves this very question).
If all goes well, I intend to attend the oral argument on Wednesday and will try to post a summary to the blog Wednesday afternoon.
2008 Charity Navigator Report: Big Salaries, Big Scandals and Reputational Value
The 2008 Charity Navigator Metro Report is out. It makes me think about what is most valuable to nonprofit organizations. Here is my conclusion (not at all earth-shattering, I admit): The most valuable asset charities have is their reputations. Reputations are so important that a Tampa, Florida nonprofit turned down a $300,000 grant from the Hillsborough County Housing Authority over concerns that a federal investigation of the county agency would have a negative impact on the Tampa nonprofit, according to a recent news report.
A local nonprofit housing group, seeking to distance itself from Hillsborough County's troubled Affordable Housing Office, will turn down a $300,000 grant from the office. Board members of Rebuilding Together Tampa Bay, which rehabilitates substandard housing for poor people, voted to decline the grant because of publicity surrounding a federal investigation of the Affordable Housing Office. "Our reputation is very important to us and we don't want to take the money under any kind of cloud because we haven't done anything wrong," said Jim Clark, president of the group's board of directors.
Reputations are so important and harm to reputations so damaging (to potential sources of funding) that sometimes nonprofit advisors should act like wise old litigators -- don't raise an objection (in front of the jury -- donors) to a "bad question" (e.g., private inurement or other stupid board or insider behavior) if being right will do more harm than good (like cause donors to withdraw support rather than patting you on the back for being right). New York charitiy reputations have been in the news recently. Last Sunday's New York Post, for example reports that Nonprofit CEO's in New York have the highest salaries amongst nonprofit CEO's in the nation even though NY charities raise, on average, nearly the least amount of money.
New York's nonprofits pay their CEOs more than any other city in the country - but don't raise the most money, a study shows. The median salary for running a New York nonprofit is about $169,000, putting the Big Apple nearly $15,000 ahead of second-place San Diego in CEO pay. But New York - which has 575 large charities - scored only fifth out of 30 major cities in median annual fund-raising. Groups here collected $4.8 million each, far behind the $6.2 million raised by charities in Detroit, according to the report by Charity Navigator.
Another New York Post story reported yesterday details the story of Big Apple's decision to "yank" 43 contracts to nonprofits, as the city investigates a City Council "slush fund" used to direct taxpayer money to city council members' favorite causes. Even clean nonprofits have been caught up in the scandal:
The city has yanked contracts to four nonprofit groups whose grants were frozen in April as part of a broader investigation into the City Council's slush-fund scandal, The Post has learned. Among the organizations rejected for council funding is the Metropolitan New York Coordinating Council on Jewish Poverty, a well-respected nonprofit that was given $600,000 from the council in fiscal year 2008.
On the other side of the coast, residents of San Diego generally approve of the work that nonprofit agencies do in their communities, according to a report in the San Union-Tribune.
Eighty-six percent of people surveyed in the University of San Diego analysis said they have a “great deal” or “fair amount” of confidence that the region's charities effectively provide quality services. The number far exceeds the findings of a national study released in April, which said 64 percent of Americans share that same level of confidence in nonprofits. Local experts were at a loss to explain the difference.
On the other hand, charities in Miami garnered the highest ratings this year according to a Charity Navigator report.
Miami has unseated San Diego to win the title of most charitable city in the United States, according to a new report. The Florida metropolis topped the list in the sixth annual report by charity evaluator Charity Navigator in New Jersey, which compared the median performance and size of the largest nonprofit organizations in 30 metropolitan markets. San Diego, Houston, Pittsburgh and Boston ranked among the top scorers, while Detroit, Indianapolis, Baltimore and Charlotte lagged at the bottom of the list. "It appears the strength of a charity reflects the local economy, and people in Miami are investing in charities right now because they're in a pattern of growth," researcher Sandra Miniutti said in an interview.
I guess the old statement is true even with respect to nonprofit: "all politics are local." The complete Charity Navigator Report is available online here. Here are the factors evaluated in the report (the topics below are not linked -- go to the full report to access the links):
June 13, 2008
More on Diversity, Civil Society, and Philanthropy
The idea of linking diversity requirements to nonprofit organizations is actually nothing new. The Rockefeller Foundation published a lengthy report on the topic a few months ago. Here is a brief excerpt:
Recently, some segments of the public have become critical of a tenuous relationship between private philanthropy and those populations that are most vulnerable – the poor, racial and ethnic minorities, and other marginalized communities. Because for the most part philanthropic funds are exempt from public taxation, some say it is only fair to expect that they serve the common good to justify this benefit, especially given the federal government’s changing role as the safety net for the poor and disenfranchised over the last decade. This has led to growing skepticism as to whether private values are an equal substitute for public values that have survived a democratic vetting process. Furthermore, there is growing pressure for foundations to be more effective in their service to these diverse communities and to be more responsive to their needs.
In September 2007, the U.S. House Committee on Ways and Means, Subcommittee on Oversight held hearings to examine whether public charities and private foundations serve the needs of diverse communities. In its testimony, the National Committee for Responsive Philanthropy criticized private foundations for “not doing as much as they could or should …,” noting that the portion of dollars allocated to racial minorities and the poor are disproportionately small, and that these allocations are not growing in pace with overall charitable giving. Julian Wolpert, Ph.D., of Princeton University argued that private philanthropy is not responsive to the needy, that “The poor and members of diverse communities and their needs are not prominent to donors…. decisions are largely made without rigorous analysis of social needs and priorities.” He also stated, “The losses in federal and state revenues from charitable deductions far exceed donor transfers to the needy.”
Hmmmmm. Maybe California's proposal is not such a bad idea. For more on this topic see David A. Brennen, RACE AND EQUALITY ACROSS THE LAW SCHOOL CURRICULUM: THE LAW OF TAX EXEMPTION, 54 J. Legal Educ. 336, 342 (2004):
Tax exempt law sometimes requires that a tax-exempt charity's board of directors represent a broad cross-section of the community served by the charity. This requirement is most exemplified in the context of the private foundation rules applicable to tax-exempt charitable organizations. A private foundation is a tax-exempt charity that either fails to serve certain specified charitable purposes or fails to demonstrate that it has appropriate levels of public financial support. Unless a charity serves certain educational, religious, medical, public safety, or governmental purposes, it must demonstrate that it receives substantial financial support from a wide array of public sources to *349 avoid private foundation status. To satisfy the substantial financial support requirement, a tax-exempt charity must show either that it receives more than one-third of its support from a variety of public sources or that it receives more than ten percent of its support from these sources and satisfies other factors. Among the other factors is that the board of directors represent a broad cross-section of the community.
June 12, 2008
Virginia Mosque Reaches Out to Immigrant Community
Today's Washington Post reports on an amazing transformation taking place in Falls Church, VA. According to the Post article,
[F]or years the Dar al Hijrah mosque was an isolated, slightly mysterious presence in Falls Church -- a stark stone building hidden behind a row of trees, rarely visited by non-Muslims in the multi-ethnic Culmore neighborhood, and known mostly for traffic jams on Leesburg Pike as worshipers arrived for Friday prayers.
In fact, in 2001 the mosque came under official suspicion amid reports that a man linked to the terror attacks of September 11 had visited there.
Today, things are different:
[T]he mosque bustles with visitors chattering in Spanish and Vietnamese as well as Persian and Urdu. Immigrants from a dozen countries gather there each Thursday, many with toddlers and baby strollers, to pick up donated chicken, bread, fruit and vegetables.
On weekends, the doors are thrown open for community blood drives or mental health fairs. At night, mosque officials often attend meetings at nearby churches, synagogues or social agencies, including a monthly brainstorming session called Culmore Partners.
Abdulkareem Jama, a network engineer from Somalia who serves as president of the mosque's board, is pleased with the transformation. "The average person here has had no interaction with Islam. They may even think we are the enemy, especially after September 11th," he says. "The more we open up and interact, the more we demystify things and seem normal to each other."
The Washington Post article sees an even deeper demystifying of the mosque -- and Islam in general -- and an acceptance of Muslims as part of the Falls Church community:
The mosque's coming out also reflects the growing cooperation between area Muslim institutions and the largely non-Muslim immigrant communities that surround them. In Culmore, the trend has brought many groups together to help immigrants who struggle with poverty, discrimination and legal problems.
Something good is happening in Falls Church, VA!
To read the entire article, see "Va. Mosque Reaches Out, Joining Immigrant Fabric" in the June 13, 2008, Washington Post.
School Vouchers in Louisiana?
On Wednesday, the Louisiana Senate voted 25 to 12 for a bill that would let up to 1,500 low- to middle-income students in New Orleans attend private schools at taxpayer expense.
The bill, which has already been approved by the House, now needs one more routine vote in that body on the Senate language changes before it goes to Governor Bobby Jindal for his signature.
The bill's supporters say it will help some New Orleans children escape a struggling school system that has for years been known for corruption, bad management and poor student performance.
Opponents point to improvements in the New Orleans public schools since the state and various charter organizations began running them after Hurricane Katrina in 2005. They say the money would be better spent on public schools.
To read the entire article, see "Louisiana Senate Passes School Plan" in the June 13, 2008, New York Times.
Charities Question FEMA's Distribution of Katrina Supplies
CNN ("FEMA Gives Away $85 Million of Supplies for Katrina Victims") is reporting that Louisiana nonprofit groups are wondering why they were never offered any of the $85-million in supplies for Hurricane Katrina victims that the Federal Emergency Management Agency (FEMA) stored for two years before giving them to federal and state agencies.
The supplies included buckets, boots, cleaning supplies, tents, camp stoves, clothing, plates, and utensils. According to the CNN report,
FEMA said some of the items were donations from companies after Katrina, but most were purchased in the field as "starter kits" for people living in trailers provided by the agency. And even though the stocks were offered to state agencies after FEMA decided to get rid of them, one of the states that passed was Louisiana.
John Medica, director of the Louisiana Federal Property Assistance Agency, sated that he was unaware that Katrina victims still had a need for the household supplies. "We didn't have anybody out there who told us they wanted it," Medica said.
But Martha Kegel, executive director of Unity of Greater New Orleans, said she was shocked to learn about the existence of the goods and the government giveaway. The CNN report quotes Kegel as saying: "These are exactly the items that we are desperately seeking donations of right now: basic kitchen household supplies. These are the very things that we are seeking right now. FEMA, in fact, refers homeless clients to us to house them. How can we house them if we don't have basic supplies?"
For its part,
FEMA confirmed that it had kept the merchandise in storage for the past two years and then gave it away to cities, schools, fire departments and nonprofit agencies such as food banks. In all, General Services Administration records show, FEMA gave away 121 truckloads of material.
IRS Exempt Organizations 2007 Databook Now Available
The IRS 2007 Databook is now available. Tables 22 - 25 note that there are now 1.1 million 501(c)(3) organizations registered with the IRS, an increase of just under 7% from last year and a 73% increase over the past four years.
Olmec Publishes "A Guide to Equality And Diversity In The Third Sector"
I'm getting old and everyone says as you grow older you get more conservative. I wonder if most people's collective repulsion of the California's proposed diversity mandate is just the result of us all getting old and conservative. After all, people interested in nonprofit stuff are usually sort of counter-culturalist and yet most us think the very idea of requiring the watchdogs to adhere to the same mandates they happily advocate for others is suddenly the worst idea ever. Maybe our age and our transition into the "establishment" has blinded us to things that need to be seen. Or maybe the California bill is just crazy. Anyway, Olmec, a UK nonprofit organization, recently published "A Guide To Equality and Diversity in The Third Sector." Here is an excerpt from the publication:
The legal context
Over the past forty years there have been moves to tackle discrimination and endemic inequality through legislation. In the 1970s, Britain implemented a range of equality laws, including the Equal Pay Act 1970, the Sex Discrimination Act 1975 and the Race Relations Act 1976. The first Disability Discrimination Act came into effect in 1995. However, these laws did not lead to rapid change that resulted in equality for everyone. In part, this was because few people understood how to bring about effective change that would eliminate unlawful discrimination.Amendments to equality legislation have helped to increase the impact of Britain’s equality laws. Statutory general and specific duties require over 43,000 UK public bodies and some third sector organisations to actively promote race, disability and gender equality. Legislation has continued to evolve and address areas previously not covered. For example, Parts 2 and 3 of the Equality Act 2006 came into force, which prohibit organisations from unlawful discrimination on grounds of religion and belief, and sexual orientation, when providing goods, facilities and services. Most recently, the Government is proposing a Single Equalities Act for Great Britain which it hopes will produce a more streamlined legislative framework. This should result in greater clarity and better outcomes for those experiencing discrimination. The third sector has played an active part in the consultation on the Discrimination Law Review, the Government’s consultation that will lead to the creation of a Single Equality Bill. Third sector organisations have come together to ensure that the provisions in the proposed Act are stronger than those proposed in the Discrimination Law Review. The equalities landscape has further changed since the setting up of the Equality and Human Rights Commission (EHRC) in 2007. This commission replaces the work of the legacy Commissions (Commission for Racial Equality, Equal Opportunities Commission and the Disability Rights Commission) and has responsibility for the other equality areas of human rights, sexual orientation, age, religion and belief. The third sector should make full use of the Equality and Human Rights Commission’s extensive online resources. The sector should also respond to all consultation, involvement, grant-making and other opportunities offered by the Commission.
Equality and diversity in the third sector
Alongside this there have been some exciting developments in equalities and diversity within the third sector itself. The National Equality Partnership was awarded funding by Capacitybuilders to deliver the National Support Service in Equalities. It aims to improve support to frontline equality organisations, run by people who experience discrimination and abuse, by supporting equality networks and increasing collaboration between equalities and generalist support providers. They also intend to improve support providers’ abilities to support all frontline organisations on equality, diversity and human rights. Their aim is to give equalities organisations a higher profile within the third sector. With the political, legal and social context relevant to the equalities and diversity agenda continually changing, third sector organisations are challenged with the requirement to keep up with these changes and to ensure that they are delivering best practice. There is no shortage of toolkits and resources that can assist the sector in embedding and delivering best practice in equalities and diversity. However, organisations will need to invest a considerable amount of time to access the plethora of information available.In Olmec’s research Total Equalities System Research Report (Lloyd & Ahmed, 2008) we found a high level of commitment to equalities and diversity in the sector. However, the key barriers to implementing good practice were time and resources. The research found that organisations did not want the production of any more toolkits, nor any other quality standards on equality. What was more important to organisations was assistance in selecting the most appropriate standard and toolkits for their areas of work. Organisations also required assistance in defining what equalities mean for them and how to set equalities targets and performance measurement frameworks. The sector wants better signposting to the available training, support and resources on equalities and diversity that are most relevant to them.
Grassley Slams Nonprofit Hospitals in Hearing Over Health Care Costs
In a Senate Finance Committee hearing held June 10 regarding the high cost of health care, Senator Chuck Grassley took time out to particularly slam the financial practices of nonprofit hospitals. He told the story of an acute lukemia patient who received care from a nonprofit hospital and then before and after receiving treatment became the "victim" of the hospital's collection efforts. In a remarkable bit of dicta (even if true), Grassley stated:
I guess I shouldn’t have been shocked given what was uncovered by my staff’s investigation of hospitals that purport to provide care for the neediest in society and receive significant tax benefits for doing so. In addition to not paying income taxes, non-profit hospitals receive tax-deductible contributions, issue tax-exempt bonds and receive exemptions from state and local property and sales taxes. This committee heard testimony that these hospitals receive benefits of more than $40 billion annually for the care they are supposed to provide. These benefits were granted to hospitals back at the turn of the last century when hospitals were the only places where the poor could go when they were sick. The enactment of Medicare in 1965 and the explosion of the insurance market since then has resulted in incentives for hospitals to treat only paying patients. The current environment is no different than where we were over a hundred years ago. Back then, people with money had private physicians who made home visits. The poor received treatment at alms houses supported by philanthropy. The only difference now is that many of those former “alms houses” have become rich institutions that believe they no longer need to serve the poor to reap all the benefits of their tax exempt status.
Whew. Hard to rebut, I'd say. As I used to tell my criminal clients, "sure its anecdotal, but it starts to be a problem when one has to continually explain anecdotes." Nonprofit hospitals are slowly but surely being villified as criminals, I think. Anyway, I wonder if this means that Grassley intends to start linking the health care crisis in this country to the practices of nonprofit hospitals. I suppose it would not be unfair to at least lay some of the blame on those who pose as charities. Indeed, the witness referred to in Grassley's statement could serve as a poster child for bad nonprofit hospitals, according to a Wall Street Journal article included in the hearing record:
An Ohio State University study found net income per bed nearly tripled at nonprofit hospitals to $146,273 in 2005 from $50,669 in 2000. According to the American Hospital irectory, 77% of nonprofit hospitals are in the black, compared with 61% of for-profit hospitals. Nonprofit hospitals are exempt from taxes and are supposed to channel the income they generate back into their operations. Many have used their growing surpluses to reward their executives with rich pay packages, build new wings and accumulate large cash reserves. M.D. Anderson, which is part of the University of Texas, is a nonprofit institution exempt from taxes. In 2007, it recorded net income of $310 million, bringing its cash, investments and endowment to nearly $1.9 billion. "When you have that much money in the till and that much profit, it's kind of hard to say no" to sick patients by asking for money upfront, says Uwe Reinhardt, a health-care economist at Princeton University, who thinks all hospitals should pay taxes. Nonprofit organizations "shouldn't behave this way," he says. It isn't clear how many of the nation's 2,033 nonprofit hospitals require upfront payments. A voluntary 2006 survey by the Internal Revenue Service found 14% of 481 nonprofit hospitals required patients to pay or make an arrangement to pay before being admitted. It was the first time the agency asked that question. Nataline Sarkisyan, a 17-year-old cancer patient who died in December waiting for a liver transplant, drew national attention when former presidential candidate John Edwards lambasted her health insurer for refusing to pay for the operation. But what went largely unnoticed is that Ms. Sarkisyan's hospital, UCLA Medical Center, a nonprofit hospital that is part of the University of California system, refused to do the procedure after the insurance denial unless the family paid it $75,000 upfront, according to the family's lawyer, Tamar Arminak. The family got that money together, but then the hospital demanded $300,000 to cover costs of caring for Nataline after surgery, Ms. Arminak says.
Not good. Not good at all.
June 11, 2008
New York Times: Zimbabwean Authorities Seize American Aid
A report published in today's New York Times states that Zimbabwean authorities have confiscated a truck loaded with 20 tons of food aid for poor school children and ordered that the food be handed out to supporters of President Robert Mugabe instead.
The seizure was first revealed by U.S. Ambassador James D. McGee in an interview in which he stated, "This government will stop at nothing, even starving the most defenseless people in the country — young children — to realize their political ambitions."
As we blogged on June 5 ("Zimbabwe Blocks Charitable Aid") and June 6 ("More on Zimbabwe's Blockade of Charitable Aid"), last week the government ordered all humanitarian aid groups to suspend their operations, charging that some of them were giving out food as bribes to win votes for opposition leader, Morgan Tsvangirai, in the upcoming June 27 presidential runoff election against President Mugabe.
However, according to the Times article,
political analysts, aid workers and human rights groups contend that it is, in fact, Zimbabwe's governing party that has ruthlessly used food to reward supporters and punish opponents in a country where agricultural production has collapsed over the past decade and millions of people would go hungry each year without emergency aid.
The seizure of the truck laden with food assistance occurred last Friday (June 6) in an area called Bambazonke near the town of Mutare in eastern Zimbabwe. According to the Times,
The truck was hired by one of three nongovernmental organizations — CARE, Catholic Relief Services and World Vision — that form a consortium and contract with the United States Agency for International Development to distribute food aid in Zimbabwe. Its cargo of wheat, beans and vegetable oil was intended for 26 primary schools, American officials said, part of a program that provides hungry children with one solid meal a day.
For the entire article, see "American Aid Is Seized in Zimbabwe" in the June 12, 2008, New York Times.
Texas Church Wins Seven-Year Land Use Struggle
Yesterday, Judge Royal Furgeson, a federal judge in San Antonio, Texas, issued a consent decree that ended seven years of litigation between Castle Hills First Baptist Church and the City of Castle Hills, Texas. The consent decree essentially handed victory to the church.
According to a release issued by the Becket Fund for Religious Liberty, in the late 1990s, Castle Hills, a San Antonio suburb,
repeatedly denied the church permission to expand its church and school buildings, as well as the use of its adjacent property it owned for parking. The city also went on a ... rampage against the church, calling the church a “cancer, feeding on homes in much the same way as a cancerous tumor feeds on healthy cells,” and enacting parking regulations that forbade parking near the church — but only on Sunday mornings.
Delighted with the outcome, Eric Rassbach, National Litigation Director at the Becket Fund reacted as follows: “Good things come to those who wait, but it sure would have been better for all concerned if the city had realized it was wrong to discriminate against the church in the first place. We’re pleased that our client was persistent enough to finally receive justice.”
Castle Hills First Baptist filed suit against the city in 2001. After seven years of litigation, yesterday's consent decree allows the church to add on the fourth floor it had requested permission to build and to use its adjacent property for overflow parking and other purposes.
To read consent decree, click here.
Red Cross Fined for Blood Violations
Yesterday's Washington Post reported that federal regulators have announced that they have fined the American Red Cross $1.7 million for continued failures to adequately manage the nation's blood supply.
According to a review by the Food and Drug Administration, the Red Cross, a charity based in the District of Columbia that administers nearly half the U.S. blood supply, washed six units of red blood cells using the wrong saline solution.
The blood cells, which measure about six pints, were transfused to three patients in 2006 and last year at chapters in the Northeast and Southeast. Red Cross executives said that the violations did not endanger patients and that no adverse effects have been reported.
Echoing that sentiment, FDA spokeswoman Peper Long said, "People shouldn't panic about the safety of the blood supply."
However, in light of the seriousness of violation, the FDA levied the $1.7 million fine.
The fine is the latest levied against the Red Cross under an agreement with federal regulators to eliminate chronic problems with blood safety. Since 1993, the charity has been under a court-supervised consent decree about its blood collection procedures. A 2003 agreement made the charity subject to federal fines for violations.
The Red Cross is congressionally chartered to provide relief during major disasters. Over the past five years, the organization has been fined more than $21 million for various safety lapses. However, according to Peper Long, "The organization certainly has made progress, but we are still seeing errors. And the problems are certainly serious, and they need to be addressed."
In the latest incident, the six units of red blood cells were washed in a "hypertonic saline" instead of a "sterile normal saline," the federal documents show.
Chris Hrouda, the Red Cross's executive vice president for biomedical services, said it was "done out of protocol" but posed no danger.
"These were perfectly acceptable units of blood," he said. "They were fully tested and distributable units."
Boston Foundation Urges Fund-Strapped Charities, Social Service Groups to Consolidate
Today's Boston Globe (Safety Nets Stretched Thin) previews the findings of a study set to be released today by the Boston Foundation, the largest funder of nonprofit organizations in Massachusetts. According to the newspaper,
The report is billed as the most comprehensive portrait yet of Massachusetts nonprofits, a sector made up of more than 36,000 organizations employing 447,000 people and ranging from giants like Harvard University and Massachusetts General Hospital to neighborhood Little League teams and volunteer groups.
The report is being released as state government and private donors are scaling back their support of nonprofit organizations, even as these organizations' operating costs are escalating. In light of these circumstances, the study is recommending that smaller nonprofits should pool their resources, forge alliances, and improve their financial stewardship to make their programs more sustainable.
The Boston Globe story continues:
Boston Foundation officials have quietly advocated in the past that nonprofits consolidate to reduce overhead and offset funding cuts, but today's report marks a more formal and public call to action. Some nonprofits already have heeded the call. In a high-profile 2006 merger, the Women's Union and Crittenton, two Boston charities that help at-risk women and families, joined to form the Crittenton Women's Union.
More such mergers might be necessary as the economy worsens. "We have not yet had the kind of draconian cuts we had early in the decade, but it could happen," warned Paul S. Grogan, the Boston Foundation president and chief executive. "That's all the more reason for nonprofits to do the hard work of becoming more efficient."
The truth is, though, that in Boston
Nonprofits have played a growing role both as economic pillars and providers of services to the poor and disadvantaged as dozens of Boston area companies have been acquired and the state government has transferred many community health and youth services to outside groups. At the same time, with the number of public charities in Massachusetts nearly doubling in recent years while the population of the state has stagnated, the foundation's study concludes there are too many nonprofits with too few resources and too short a focus.
The solution would be for the nonprofits to consolidate.
Another State Court Defines Charity to Require Free or "nearly free" goods or services
In In Re: Appeal of InterFaith Villa, L.P., (June 6, 2008) another state court has defined charity as a concept that requires the provision of free or "very nearly" free goods or services:
Our Supreme Court in Lutheran Home adopted a strict two-element definition of "charity" or "charitable purposes," as required by Article 11, § 1(b)(2) and K.S.A. 79-201. 211 Kan. at 277-78. K.S.A. 2007 Supp. 79-201 Second follows the language of the constitutional charitable purposes exemption by exempting "[a]ll real property, and all tangible personal property, actually and regularly used exclusively for literary, educational, scientific, religious, benevolent or charitable purposes . . . ." Under the first part of the definition for "charity" adopted in Lutheran Home, the services must be provided "free of charge, or, at least, so nearly free of charge as to make the charges nominal or negligible." 211 Kan. at 278. Second, the services must be rendered to "those who are unable to provide themselves with what the institution provides for them, that is, they are legitimate subjects of charity." 211 Kan. at 278.
Nonprofit scholars and stakeholders have tried (mostly in vain) to define "charity" for tax purposes, with some arguring that the concept of charity should be returned to its roots -- alms for the poor [the "original intentors" lets call them] -- and others arguing that "charity" is an elastic concept that should be adapted to the needs of contemporary society. Of course, its hard to justify applying the label "charity" to multi-million dollar hospitals, opera houses, and universities that serve primarily the wants (rather than needs) of humankind. It seems though that states -- particularly in cash strapped times -- are taking the former approach.
June 10, 2008
Food Banks Ask Gardeners to Grow Extra for the Hungry
The Baltimore Sun reports that sharp increases in food and fuel prices and the shaky economy are creating alarming shortages at food banks and pantries around the country at the same time that demand is surging. To address these shortages, food banks are now asking farmers to grow extra food that they may donate to the banks.
For example, in Langdon, NH, Mary Lou Huffling, pantry director of Fall Mountain Foodshelf, has begun asking local farmers to grow extra rows of produce to donate. "Almost everyone around here has a garden," said Huffling, who also runs a program that delivers meals to the hungry in this rural part of southwestern New Hampshire. "If they would grow a row for the food program and the Friendly Meals program [another program she runs], it would help so much."
At least 50 families have responded to Huffling's request. She believes about 100 will end up participating. In July, she expects to feed fresh vegetables to 100 to 130 families each week.
The Sun story cites other examples:
Programs like Plant a Row for the Hungry, a national campaign that encourages gardeners to grow extra produce for donation, and New Jersey-based Grow-a-Row, are similar to Huffling's.
"Because of the rising food costs and gas costs people are unable to buy what they need," said Carol Ledbetter, program administrator of the Virginia-based Garden Writers Association, which began sponsoring Plant a Row for the Hungry in 1995. "There's a greater need for the food and so our program is even more important."
Helene Meisser, director of the Northwest New Jersey Community Action Program Inc. in Phillipsburg, said that last year her food bank received about 70,000 pounds of produce from the New Jersey Grow-a-Row through a combination of volunteer farming and food gathering. The food was distributed to charitable agencies in three counties.
Hospices in Trouble -- Turn to Fundraising
According to a report published in this month's NonProfit Times, hospices across the country are being put on virtual life support as they face coming federal funding cuts (Michelle Donohue, Hospices Put on Life Support -- Fundraising Becoming More Important as Federal Cuts Loom). The report reveals that hospice services are currently at risk as 3,000 Medicare-licensed hospices face slashed reimbursements in President Bush's 2009 budget proposal.
The report continues:
The budget proposal seeks to eliminate the hospice market basket for three years and reduce the update in the following two years by 0.65 percent, affecting the Medicare Hospice benefit reimbursement by more than $5 billion in five years. Another rule that would change, which does not require Congressional approval, is the technical way market basket rates are read, additionally impacting reimbursement by more than $2 billion. The regulations would also increase the time between on-site surveys, from its current six to eight years to 10 to 12 years.
Hospice reimbursement cuts would hinder quality end-of-life care that saves the Medicare system more than $2,300 per patient in the last year of life, according to a Duke University study published in Social Science & Medicine, and come when hospices expect more patients as the Baby Boomers age.
Almost every hospice in the country would be affected by the cuts, with some being more affected than others.
To address the coming crisis, hospices are planning to engage in more fundraising activities. "If these cuts do happen, we're going to have to look at the community. We don't want patient care to suffer," says Patricia Morgan, Hospice Southeastern Connecticut's community development director, based in Norwich, CT. Morgan continues: "[The cuts] will definitely put a strain on all hospice programs. We'll have to do more fundraising."
Meanwhile, Jonathan Keyserling, public policy and council vice president of the National Hospice and Palliative Care Organization (NHPCO) in Alexandria, VA, states that his organization continues "to have conversations with supporters, urging them to take a more rational approach to meeting the needs of those providing services to the dying in this country." NHPCO estimates that 1.3 million people used hospice services during 2006 and the Medicare Hospice benefit covered more than 80 percent of patients.
Echoing the call for increased fundraising,Christine Stockley, development director for Attleboro, MA-based Community VNA, says that Memorial donations make up "a significant portion of gifts received overall" to hospices. "Many people will give an immediate gift. For on-going support you need to make the case of why this organization needs to be supported on an on-going basis."
Minnesota Law Requires Publicly Supported Nonprofits to Offer Voter Registration Services
Here is a little tidbit that Paul Harvey would be proud to report. It seems that in Minnesota a little known statute requires nonprofit organizations who receive state funding to offer voter registration services. According to a story at MinnPost.Com today:
Here's a surprising nugget from the pages of Minnesota election law. If a nonprofit organization receives state funding to provide services, it is required to help with voter registration. Joshua Winters, who coordinates the Minnesota Participation Project for the Minnesota Council of Nonprofits, gave me the citation: Statute 201.162.
I checked out the statute for myself and, just as the article states, the statute requires the following:
201.162 DUTIES OF STATE AGENCIES
The commissioner or chief administrative officer of each state agency or community-based public agency or nonprofit corporation that contracts with the state agency to carry out obligations of the state agency shall provide voter registration services for employees and the public. A person may complete a voter registration application or apply to change a voter registration name or address if the person has the proper qualifications on the date of application. Nonpartisan voter registration assistance, including routinely asking members of the public served by the agency whether they would like to register to vote and, if necessary, assisting them in preparing the registration forms must be part of the job of appropriate agency employees.
The article describes the high trust and confidence people place in nonprofit organizations and thus, the motivation for requiring nonprofits to serve as state voter registration agents. We all know that 501(c)(3) organizations must tread lightly with respect to voter registration/education activities but now (with apologies to Paul Harvey) . . . we know the rest of the story.
June 9, 2008
Miami Herald: Children's Healthcare in Florida Ranks Lowest in Nation
The story cites a recent study by the Commonwealth Fund which came to the same conclusion as other recent studies: "Healthcare for children in Florida is dreadful."
According to the Miami Herald, the "55-page report found that Florida's care for kids also ranked 37th for quality, 34th for costs, 43rd for equity and 38th for 'potential to lead healthy lives.'"
Yet, the problem with Florida's children is just part of an overall picture: About 3.8 million Floridians, more than one in every five residents, have no health insurance.
The newspaper continues:
Most of these people don't get regular care, which means they are likely to wait until they get extremely sick and go to an emergency room, where they run up a high bill they can't pay. Hospitals make up for that loss by passing on the costs to those who have insurance, driving up premiums, which causes more people to drop their coverage and accelerate the cycle.
When parents cannot afford health insurance, their children most likely end up on Florida Kidcare, a subsidized state-federal program in which parents pay a portion of the costs based on their income level. The program, which forms part of the federal-state State Children's Health Insurance Program (SCHIP), has four programs, each with different qualifying requirements. Most parents who sign up for the program have jobs. As their income levels change, or as their children grow older, they must shift from one program to another, re-applying each time and providing stacks of documents.
Alas, because of the complexities posed by the program's very nature, the Herald estimates that approximately 500,000 children in the state of Florida who are eligible for Kidcare are not enrolled in the program.
But all is not lost. According to the newspaper, at least two nonprofit entities are working to improve child healthcare in the state. In Miami-Dade, The Children's Trust is working to use healthcare professionals in schools to improve treatment for students. Meanwhile, the Health Foundation of South Florida has started an initiative to improve dental care for children. ''We have real issues here trying to provide oral health for children,'' says Steven Marcus of the foundation. "If you don't have good oral health, that leads to problems down the road.''
60 Minutes Report on Howard Hughes Medical Institute
CBS' 60 Minutes had an interesting report regarding the birth of the Howard Hughes Medical Institute last night. The report points out that the multi-billion dollar 501(c)(3) started out essentially as a tax shelter for Howard Hughes but is now funding over $450 million dollars in biomedical research per year. As I watched the report I couldn't figure out if the private inurement and benefits Hughes derived from his foundation proved or disproved the necessity for the private foundation excise taxes. Professor David Brennen wrote about the case recently:
"The presence of the private foundation rules is consistent with contextual diversity because the rules permit all sorts of purposes to be advanced by tax-exempt charitable status-not only purposes that many people agree are of benefit to the public or are willing to fund, but also purposes that very few believe might benefit the public or are willing to fund. To demonstrate the benefit of private foundations, consider the example of the Howard Hughes Medical Institute-a private foundation that, at nearly $ 11 billion, is the second richest private foundation in the country. 163 The foundation originated from the personal fortune of one man, Howard Hughes, who created the foundation in the early 1950's as a personal tax shelter to protect his fortune. The stated purpose of the foundation is to do medical research. Although the foundation did no research for a number of years, its research efforts have since resulted in discovery of the genes responsible for cystic fibrosis and muscular dystrophy, a non-invasive test for colon cancer, and a drug that fights leukemia. More recently, the Howard Hughes Medical Institute has created new stem cell lines for future medical research-something that the federal government is prohibited from doing due to a Presidential directive. Without this privately funded charity, these many valuable discoveries might not have occurred."
See Brennen, A Diversity Theory of Charitable Tax exemption, 4 Pitt. Tax Rev. 1, 39 (2006)