Nonprofit Board Crisis

Nonprofit Board Membership #NonprofitBoards

There is wisdom to be learned from those with lived board experience.  Such was the basis for bringing together reps from a number of nonprofits for a panel to discuss their experiences and offer their insights.  I'm posting the article that chronicled this discussion and have, of course, inserted my own thoughts (in lilac) on some of the statements.

From The Pilot (North Carolina):

 

Rooted in Service Nonprofit Board Members Provide Foundation for Work

• Laura Douglass, Staff Writer
 
• Feb 27, 2019

It’s been said that Moore County has more nonprofits per capita than any other county in North Carolina. Name the need or a cause and you’ll probably find a local organization that is trying to make a positive difference.

To maintain their tax-exempt status with the IRS, every nonprofit is required to have a board of directors. Typically smaller organizations have a volunteer working board while a larger nonprofit board serves in more of an advisory role.

Sandhills Community College recently sponsored a free discussion at the Sunrise Theater in downtown Southern Pines for current and prospective nonprofit board members. Panelists included Carolina Eddy, development director of St. Joseph of the Pines; Amie Fraley, executive director of Habitat for Humanity of the NC Sandhills; Paul Murphy, pastor of Trinity AME Zion Church and Southern Pines councilman; Craig Pryor, past board chair of Sunrise Preservation Group; and David Woronoff, publisher of The Pilot and SCC Board of Trustees member. SCC president John Dempsey moderatorated the discussion.

“Board membership is a tremendous way to be involved in the betterment of our community. But with that honor and privilege of service comes some responsibilities,” Dempsey said.

He emphasized one of the fundamental roles for a board is to hire — and occasionally fire — the organization’s CEO. In turn it is the CEO’s responsibility to develop the vision for the organization to follow. I would pose that 'yes' to hire but equally important, set clear annual goals, conduct an annual performance assessment, and after every board meeting, take time for an executive session to "check-in" on how folks think all is coming along). 

For smaller organizations without a CEO, it is essential for the board to pick up much of the day-to-day operational demands in addition to providing fiduciary support and controls. This reality is not about size but about stage of development.  It's true that smaller "resourced" organizations will have additional if not different demands on members but # of resources is not the single determinant of how much non-governance engagement will be conducted by board members.

“When you join a board, it is sort of like joining a family,” said Woronoff, noting they sometimes can be dysfunctional. “All boards that are really effective have two things in common: every person on the board has bought-in on the mission and, secondly, they all believe in the collective vision for the organization.”  This MAY be true, that is what is in common, but this reality of newbies speaks more importantly to the responsibility by the members to fully "on-board" newbies and ensure a smooth introduction to the culture, norms, policies and procedures and expectations.

Murphy agreed, and said while some boards have term limits he believes it is important to have flexibility, particularly with smaller nonprofits or in church leadership positions. Not 100% certain what was meant here and why smaller nonprofits or church leadership positions should be singled out - I would pose that limits should be a universal rule.

“Getting buy-in on the mission is the best common denominator,” he said. “But sometimes you have that one person who can keep the vision alive for the entire board.”  Uh, if only 1 is keeping it alive, there's a problem.  That one and all need to ensure that one and all are on the same ship together.

Fraley said the board can also provide a unique role of support for the CEO, especially when it comes to larger nonprofits where there may be different committees and places where service is ongoing.  Uh yes and no?

“I favor term limits because the theory is you want to grow the pool of people involved in your organization. If you only have the one group of cool kids then no one can come. I think it is a healthy thing to have new board members,” she said.  Absolutely!

Pryor said it would not be wise for an organization to have a “wholesale turnover” of board membership, but agreed with Fraley that some portion of new blood is a good thing.  Yes, this is why terms are staggered to preserve institutional memory and ensure newbies are connected to or at least understand that history..

“It’s the same as bringing in a new CEO. It gives you the opportunity for a new set of strengths,” he said.

Dempsey noted one key difference between a CEO and the organization’s board is how they approach decision-making. The CEO is responsible for day-to-day management and by necessity focuses on short term goals; whereas the board has more latitude to look at long-term sustainability of the mission.  Not just latitude but responsibility.

“You (board members) are responsible for the fiscal sanity of the organization. You need to make sure the organization can pay its light bill. You have to be a bit of a watchdog,” he said.  Sure.

Pryor said one of the reasons that Sunrise Theater has succeeded is because the finances were overseen by a capable treasurer.  But ALL members bear this responsibility.

“A strong treasurer is invaluable for keeping your organization out of difficult situations. They are not easy to find but they are invaluable,” he said.  Perhaps, but those who would be treasurers with little experience can be trained.  

Importantly, serving on a board usually involves some level of fiscal responsibility to the organization.

“There are many ways to serve a community organization as a volunteer. But when you accept a board role, you accept responsibility to help that organization raise private philanthropic donations,” Dempsey said. “Boards bear the vast brunt of fundraising or the organization cannot operate.”  IF MEMBERS AGREE!

Eddy agreed and said it was important for an organization to have 100 percent participation in giving from its board, and she encourages her trustees to give “at a level that is meaningful to them.”  This is certainly what funders state.

The panel also encouraged prospective board members to check the organization’s indemnity insurance to ensure they will be protected from liability, and to seek out an orientation program to acquaint themselves with their new role and the nonprofit’s mission and goals.  Again, on-boarding.

“It takes awhile to understand the nuance of each board. If you are new, you should immerse yourself in that organization. It is incumbent that board members bring energy and enthusiasm to support the cause,” said Woronoff. “And this is volunteer work, so it should be fun too.”  Again, starting with on-boarding.  Newbies should not be left on their own to have to immerse.  Give them a buddy/mentor.  Take time at every meeting for a mission moment.  Orient, orient, orient......

 

 

Contact Laura Douglass at (910) 693-2474 or [email protected].​

Nonprofit Board Recruitment #NonprofitBoards

When talk about recruiting folks to nonprofit boards arises there is often the "whew, that's a tough topic" expression.  And for many boards this is indeed a challenge but maybe one of the reasons for the challenge is the failure of those doing the recruiting to consider what reasons folks who might appear as good candidates really want from a board membership.  The following advice from Laura Newpoff from the Business Journals offers some insights about how those who might be candidates are being instructed in what should be their thinking.

 

What are some best practices you've seen that could serve as guideposts for a female executive who wants to be on a corporate board?

An important thing to remember is that professional success doesn’t automatically qualify one for – or put someone on the radar for – a board candidacy. An executive must be a stand-out leader in her professional field, of course, but there are some additional steps to take to move toward a corporate board position:

• Think about fit: Be clear about what kind of boards align with your background, experience and interest.
• Develop your “board résumé:” Create a professional profile that highlights strengths and experience particularly suited to serving on a board. This is different from the typical bio or résumé.
• Educate yourself around board issues: Explore organizations that assist with board readiness. Our BoardNext events, programs and speakers seek to prepare C-suite and high-level executives to be the next generation of board members, for example. Look for these and similar opportunities to become board-ready.
• Serve on nonprofit and smaller boards first: Serving on the boards of nonprofits about which you are passionate and moving into leadership positions – such as chairing a committee – can lay good groundwork for corporate board service, as does serving on smaller private company boards. The key is taking the step and gaining experience.
• Network, network, network: Let people know you are interested, including search firms.

Legislation to Mandate Nonprofit Board Training? #NonprofitBoards

 

About nonprofit boards Utah legislators have two beliefs: boards aren't doing their job (at governing) and board members need to be forced to be trained.  I suppose a third belief is that if trained, boards will do their jobs.  This is my takeaway based on an opinion piece by Holly Richardson in the Salt Lake Tribune.

For sure there is evidence that Utah nonprofit boards have failed to do their jobs.  This article highlights this reality.  But there is also evidence throughout the country (and survey results the Alliance for Nonprofit Management Governance Affinity Group is currently completing) that no matter the amount of literature and other resources, board folks are just not that eager for training.  They either believe they have enough experience or will "catch-up" on-the-job.  So, the question then remains: if required to do training, will board members do their jobs better?  The Utah legislature thinks so.  What about you?

Here is the article

      There is a bill on Utah’s Capitol Hill that is generating some interest - and some turmoil in the nonprofit community. Senate Bill 26  “Governmental                 Nonprofit Corporation Act Amendments,” requires board members for governmental nonprofits to be trained in best practices                                        for financial controls and         for board governance.

Seems pretty straight-forward: Make sure that organizations spending taxpayer dollars actually have board members with some training on financial controls, including fraud prevention.

This bill came as a response to a report by the Legislative Auditor General in May 2018, looking at internal controls of “nonprofits associated with governments.” They found more than 1,000 nonprofits potentially related to government. That list includes organizations receiving state retirement benefits, nonprofits located at State of Utah locations, nonprofits already reporting to the state auditor and 677 nonprofits receiving $25,000 or more of taxpayer dollars.

In an effort to learn more about best practices and what controls were already in place, they conducted surveys with a variety of nonprofits. What they found was a disturbing lack of financial controls. Almost half on the nonprofits surveyed failed to segregate financial duties, an important safeguard in avoiding fraud. About a third did not have conflict of interest or ethics policies in place and 40 percent did not have procurement policies in place. The audit also identified three Utah nonprofits receiving taxpayer dollars that self-reported losing $850,000 between 2007 and 2011. They called it “diversion of assets.” You could also call it theft.

The legislative auditor ended up with a list of 26 recommendations for governmental nonprofits, including that “board members recognize their role is to be more than a ceremonial body,” that staff duties be segregated so that no one person has control over all parts of financial transactions and that board members of governmental nonprofits “regularly receive training” in board governance and other matters. Training not specific to nonprofits is already available on the State Auditor’s website. It will be a small matter for the auditor’s office to create a nonprofit-specific training.

The Utah Nonprofit Association is having some heartburn over this bill, sending out a call-to-action email opposing this bill. They list a number of questions that are leading them to oppose the bill. I sent an email asking for clarification but got no response. However, I found the questions relatively easy to answer.

Here they are:

If a board member serves on multiple boards will they have to attend training each time for each organization? No. 

Does the training have to be repeated each year? No. Once per term.

When does the training certificate expire? At the end of the board member’s term.

How will rural entities cover travel and business costs for training that may be held outside their community? The trainings are all online and are offered for free.

Will this be an online training? Yes

Who do we call if we have questions about this training? The State Auditor’s Office.

How will the State of Utah track who is serving on boards, who needs to go through the training, and who has lapsed in their training? This is already a requirement of boards receiving taxpayer dollars. The board is responsible for complying with state law. The Lieutenant Governor’s Office assures compliance. 

Are "other entities" (as defined in the bill language) held to the requirement of board members being eliminated from nonprofit boards? What governing body in the State of Utah is going to enforce board expulsion? Yes. Enforcement is done by the LG’s office.

What parameters will the State Auditor use when choosing "other entities" that will be required to go through the training? State law already specifies which entities are required to report to the State Auditor. This free training will be available on the Auditor’s website and available to any organization that wants or needs to access better board training. 

Members of nonprofit boards — including governmental nonprofit boards — have a fiduciary duty to their donors. It seems a small thing to expect a basic level of training in board governance, financial best-practices and fraud prevention.

 

 

Nonprofit Board Recruitment #NonprofitBoards

From the Urbana Citizen I found an article by the Ohio Attorney General that describes the fiduciary duties of nonprofit boards and their members and added the following advice to those who would be nonprofit board members:

Before agreeing to serve on a board, you should ask how the board operates, whether job descriptions are available and what you will be expected to do. Examine past board meeting minutes, financial reports, by-laws and policies. Find out whether the charity carries liability insurance for its directors and board members. Ask to see the organization’s annual filings with the IRS and the Ohio Attorney General’s Office. The contents of these documents — or the lack of documentation — could signal potential problems or indicate how much work must be undertaken to properly establish and operate a governance structure for the organization.

While I appreciate the advice I must say it is both the rare candidate and the rare board that shares all of these items in the recruitment stage and dare I say, oftentimes, during the onboarding staged.  In my experience, most members, once accepted, are left to their own devices to acquire, review, understand and use many of these tools.  Of course I don't mean to slight the nonprofits who have indeed embraced tell-all and show-all recruiting/orientation and onboarding process but let's be serious, the majority - I think not.  And alas, I fear that having an Attorney General's office reinforce what should be is heartening but there is little if any way to enforce these practices.  Bottom line, caveat emptor!

Nonprofit Board Failed Duty of Loyalty #NonprofitBoards

Just how culpable can a board be for everything that goes wrong in a nonprofit?  And, just how much can a board's duty of loyalty (making decisions in the best interest of the nonprofit over the interests of members) contribute to what goes wrong?  These are two of the questions resulting from the following Arizona Republic investigation that chronicles what went on behind the rape of this health center's patient.  The direct correlation between the documented failure of the duty of loyalty and the rape is not certain but at minimum, there was a failure of this duty and likely, a failure of the duty of care and ultimately a failure of the duty of obedience (commitment to mission).  All three failures represent that the board failed in its fiduciary duty and that, is an offense borne wholly (by the whole board) and severally (by each board member.  

The Republic does a nice piece of investigative journalism and the case serves as an excellent reminder as to what is involved when referring to a board's fiduciary duty.  Board members should read and be forewarned!

Rape at health-care facility reveals questionable deals, nepotism by board leaders

Robert Anglen, Arizona RepublicPublished 6:00 a.m. MT Feb. 19, 2019 | Updated 7:29 a.m. MT Feb. 19, 2019

Republic investigation finds Hacienda HealthCare board leaders used the nonprofit to boost their businesses; 4 of their children got jobs as well

 

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Exterior of Hacienda HealthCare, 1402 E. South Mountain Drive in Phoenix. (Photo11: Tom Tingle/The Republic)

 

Board members who oversee the Phoenix care facility where an incapacitated patient was raped have a long record of self-dealing and nepotism.

An investigation by The Arizona Republic found Hacienda HealthCare board members and their relatives benefited financially from their positions.

Some board members do business directly with Hacienda, and some board members have business dealings with each other. Some of their children were hired at Hacienda.

The issues raise questions about the non-profit board's independence and ability to police itself. 

Hacienda's board chairman, for example, brokered health insurance for roughly 800 Hacienda employees through his private company for decades, reaping lucrative commissions on the contracts.

And at least four children of board members got jobs at Hacienda, including one who serves as a manager and another who works as a vice president.

Board members got contracts, kids got jobs 

Hacienda board members describe their positions as voluntary and say they follow strict conflict-of-interest policiesthat require them to abstain from voting on issues involving their businesses and relatives.

Under those policies, board membersgave the green light to contracts benefiting their colleagues. And they left hiring decisions to Bill Timmons, the chief executive officer — the one person they were directly responsible for overseeing.

THE FIRST REPORT: Officials investigate after patient in nursing facility gives birth

 

Of the current eight-member board, two have private businesses that deal directly with Hacienda and three have children who have obtained employment there.

Some members served together for years. Current and past board members also worked with one anotherin private businesses outside of Hacienda, records and interviews show.

The board members' actions came to light in a Republic investigation after a patient with intellectual disabilities delivered a baby boy.

Staff members at Hacienda's intermediate-care facility called 911 in panic on Dec. 29. Nurses said a patient was giving birth and they had no idea she was pregnant.

The 5-minute, 11-second 911 call details the minutes after a woman at Hacienda HealthCare gave birth. Staff can be heard trying to resuscitate the baby. Phoenix Police Department

Hacienda operates two non-profit facilities for children and adults with specialized medical needs near South Mountain. Many patients are unable to breathe or eat on their own and require 24-hour-care. At last count, the facility had 37 patients from ages 16 to 68, with most listed as "non-ambulatory."

Under its non-profit arm, Hacienda also runs two small children's hospitals, several group homes and immunization clinics in the Valley.

It also owns two for-profit companies that sell medical equipment and provide home-health care.

Non-profit watchdogs said self-enrichment by board members raises red flags and can be illegal in some cases.

Boards of directors are supposed to serve as fiduciaries for an organization. That role becomes murky when members have longstanding personal relationships, conduct outside business with one another or use their positions for financial gain.

 

"My biggest concern is if they had business decisions between the policymakers and the organization itself," said Brenda Blunt, an accountant specializing in non-profit taxes with the firm Eide Bailly. "What does that say about the organization?"

Blunt said non-profits typically detail potential conflicts of interests in tax forms as a matter of transparency and due diligence. She noted Hacienda's recent tax forms do not document any conflicts of interest involving board members.

"If they are not being diligent about that, what else are they not being diligent about?" she said.

Gov. Doug Ducey last month called for the ouster of the Hacienda board, saying he had lost faith in its leadership after troubling accounts of financial mismanagement and employee harassment.

"The governor has already made it clear — the board needs to go," Ducey spokesman Patrick Ptak said Monday.

Chair brokered employee health plans 

Board Chairman Tom Pomeroy said he always acted in the best interests of employees while working as Hacienda's insurance broker on and off for the past 30 years.

Pomeroy joined the board in 1981. He said his company, Pomeroy & Associates, negotiated superior health benefits at lower costs than employees would have gotten elsewhere. Employees saw no premium increases on medical coverage in four of the past six years, he said.

Pomeroy said he received "normal broker compensation," which ranged from 4 percent to 7 percent annually. But he denied taking advantage of his position.

"There are no excess benefits received by me," he said in an interview with The Republic. "Hacienda receives excellent and above-standard service in their account negotiations ... and this has resulted in substantially lower-than-marketplace premiums."

Pomeroy acknowledged the potential for a conflict of interest. However, he said as a Hacienda board member he didn't participate in any vote relating to his company.

He also said the board periodically sought bids from other health-care insurance vendors and sometimes opted to go with other companies.

"There is, therefore, no actual conflict of interest," Pomeroy said. 

"On any matters which might in any way be related to my business involvement, I make a presentation to management and the board of directors and abstain from any votes involving my presentations," he said.

At least two Hacienda board members were connected to Pomeroy's insurance company outside of Hacienda. 

One board member worked for a private company that also got its health insurance through Pomeroy & Associates. A former board member was named with Pomeroy in a 2012 civil lawsuit filed by the Las Vegas Metropolitan Police Department over allegations of insurance fraud and kickbacks. 

Records were unavailable about whether either voted on Pomeroy's bids to supply Hacienda's insurance.

Pomeroy said he was unaware of any board member ever raising objections to his company. He also pointed to an IRS audit two years ago that he said "confirmed there were no conflicts of interest." 

Member privately treats Hacienda patients

No doctor in Dr. Kevin Berger’s practice group makes rounds at Hacienda. But "a small number" of Hacienda patients use the board member's private practice for primary-care office visits, he said.

Berger, who is a pediatrician and hospice and palliative medicine physician, said in a statement the arrangement is not unusual, especially given that few pediatricians in the Phoenix area treat young people with the complicated medical conditions of Hacienda's patients, he said.

Berger's practice "has been a leading Medical Home for Children with Special Health Care Needs for over 40 years and has been a staunch advocate for this population," he said in the statement.

Berger said the arrangement allowing him to see patients existed long before he joined the Hacienda board in 2012.

Berger said he has no relatives employed by Hacienda and has no financial interest in Hacienda. He said he receives no compensation for his service. 

His only prior experience working at Hacienda was in 2006, when he worked for four months as interim medical director.

'Does it pass the public-trust test?'

Robert Ashcraft, professor of non-profit leadership and management at Arizona State University, said even the appearance of conflicts raises questions about a non-profit board's ability to govern.

"Does it pass the public-trust test?" Ashcraft said. "Even on legal parameters, it might pass. But it just doesn't look good."

“Does it pass the public-trust test? Even on legal parameters, it might pass. But it just doesn't look good.”

Robert Ashcraft, professor of non-profit leadership and management at ASU

The purpose of a non-profit board is to make sure the organization follows its mission and lives up to its tax-exempt status. Members aren't typically involved in day-to-day operations. But they are responsible for hiring a chief executive officer and setting financial and legal policies. 

Ashcraft would not speak about Hacienda. He said the best non-profits adopt "clear firewalls" that prohibit board members from doing business with the non-profit. He said many impose term limits to prevent boards from becoming insular and to avoid acting out of self-interest.

Non-profits often adopt rules against "private inurement" so members can't benefit financially from their service, he said.

That includes nepotism. Even when board members aren't involved in hiring relatives, the perception of favoritism can be damaging, Ashcraft said.

It becomes a question of transparency, he said. Was there an open employment process? Was the job posted? Was candidate recruited and vetted? Were other qualified candidates considered?

Self-enrichment among non-profit boards is illegal in many states. Self-dealing and nepotism can lead to sanctions, including fines and revocation of tax-exemption. Ashcraft said dozens of states have specific agencies tasked with overseeing and investigating non-profits. 

Arizona is not one of them, Ashcraft said: "We just don't have that here."

Board members deny influencing hires

Three board members whose children got jobs at Hacienda say they were not involved in hiring decisions.

They said their children were qualified for their positions and received high marks from supervisors once they got their jobs and advanced up the personnel ladder.

Members said they are not aware of any policies or bylaws restricting relatives from being hired. In statements to The Republic, three members said they abstained from votes that might affect their children.

But that didn't stop them from putting their children's names and resumes in front of Timmons, Hacienda's long-time chief executive officer, who was responsible for hiring.

Ralph Wallwork, who joined the board in 1994, said he mentioned his daughter as a potential job candidate after Timmons expressed frustration at filling a vacant marketing position.

Wallwork said he told Timmons his daughter had a degree in marketing from Arizona State University; Timmons asked to see her resume. 

"That was the sum total of his involvement in her hiring," Wallwork said in his statement.

Wallwork's daughter, Sierra Kamela, was hired in 2011. He confirmed that she makes more than $90,000 as vice president of marketing and public relations. He said her salary is typical of marketing directors in Phoenix.

“I do not believe Sierra’s position in marketing poses a conflict of interest on my part," Wallwork said, adding she does not have a role in controlling operations at Hacienda. "Of course, if our attorneys advise me to the contrary, I will recuse myself or resign from the Board.”

Children worked their way up 

Longtime board member Thom Niemiec said his son and daughter both volunteered at Hacienda before graduating from college and applying for jobs there. He said they didn't need his help to get hired.

Niemiec said his daughter, Michelle, first worked as an administrative assistant and was paid "less than the starting rate for graduates at the time."  Working at Hacienda inspired her to become a respiratory therapist, he said.   

"(She) cared so much for Hacienda’s clients that she chose to go back to school for respiratory therapist certification," Niemiec said in his statement. "She joined Hacienda’s RT department at the entry level after being licensed by the State of Arizona.”

Niemiec said his son, Thomas, was hired in 2014 after graduating from the University of Advancing Technology in Scottsdale. Thomas chose Hacienda because it had launched a "first-of-its-kind program" teaching technology skills to autistic clients, Niemiec said.

Thomas in January was promoted to technology program manager. Niemiec said neither of his children made anywhere near $90,000.

Niemiec said both of his children have proven qualifications and "have received very complimentary feedback from superiors, peers and clients.”

Gary Orman, who joined the board in 1991, said his son worked at Hacienda for a year in the early 1990s.

“He earned about $8.50 per hour – and was a bargain," Orman said in a statement. "He set up and trained the staff on computerized medical records for Hacienda.”

Orman said his son, James, is a certified plastic surgeon and now chief of reconstructive surgery at Kaiser Permanente in Santa Clara, Calif.

Orman said he has never received compensation for his work at Hacienda, which actually costs him money.

“Each year I have had non-reimbursed costs that I have not taken as charitable deductions,” he said.

MORE: Parents of Hacienda HealthCare patients disagree on quality of care

Orman said he was drawn to Hacienda and helping children in part because he was misdiagnosed with rheumatic fever as a boy and remembers the impact his sickness had on his parents, who thought he would not live to see adulthood.

“I continue to serve out of love for our caring staff, needy clients and our honorable board members," he said.

Orman said he is determined to restore Hacienda's reputation after the rape.

"I am committed to never letting anything like the horrible and inexcusable abuse that took place ever happen again," he said.

Rape puts Hacienda under intense scrutiny

The rape victim, a 29-year-old member of the San Carlos Apache tribe, had literally grown up at Hacienda.

She was admitted when she was three with seizure disorders. The 112-pound woman is described in court documents "unable to make any decisions or give consent due to her disability." She is reliant on feeding and breathing tubes and needs a "maximum level of care." 

Phoenix police on Jan. 23 arrested one of her caregivers. Nathan Sutherland, a 36-year-old licensed practical nurse, was booked into a Maricopa County jail on suspicion of sexual assault and vulnerable-adult abuse. He has pleaded not guilty to raping and impregnating his former patient.

Nathan Sutherland, who has been accused of raping and impregnating a patient at Hacienda HealthCare, is arraigned in Maricopa County Superior Court on Feb. 5, 2019. (Photo11: Tom Tingle/The Republic)

 

The birth set off a cascade of events at Hacienda, beginning with Timmons' resignation as chief executive officer after 28 years.

The woman and her newborn son were transferred to another facility. 

Hacienda's board hired former Maricopa County Attorney Rick Romley to conduct an internal investigation to assess the facility's policies and procedures.

The doctors responsible for the victim's care no longer work at the facility. One resigned and the other was suspended.

The state's social-welfare agency, which places patients at Hacienda and reimburses the facility for their care, first suspended new-patient admissions, then ordered the board to hire an independent company to take over operations. 

When the third party backed out, the Arizona Department of Health Services opted to keep Hacienda open. State officials said "the high medical risks associated with transferring" medically fragile patients made closing the facility a last resort.

Officials said they still need to work out an operating agreement with Hacienda's board.

The rape prompted two Arizona senators to introduce a bill this session to end legislation that allowed Hacienda to operate without a state license since 1997. 

Ducey this month asked for the Arizona Attorney General's Office to launch an investigation into patient care, financial fraud and sexual-harassment claims at Hacienda HealthCare.

Here's what we know about the 36-year-old nurse accused of raping and impregnating an incapacitated patient under his care. William Flannigan, azcentral

Investigations reveal simmering problems

Pomeroy did not minimize the rape, which he called tragic and terrible. But he said the incident has unwound years of successful service to Hacienda's patients and their families.

He said Hacienda operated without any public scandals, then almost overnight, faced calls for shutdowns, government investigations and media scrutiny.

But personnel and financial problems simmered for years at Hacienda without much intervention from the board. 

TIMELINE: Key moments in company's 52-year history

Ducey cited two Republic investigations in his letter to the attorney general. The stories detailed years of sexual harassment by Timmonsand allegations of financial fraud that dogged his administration.

Hacienda employees for years filed complaints accusing Timmons of sexual harassment and other questionable behavior that often went unchecked by the hospital's board of directors. 

Timmons also failed to tell board members the state launched a criminal investigationand threatened to remove patients from Hacienda in 2016 over allegations it billed the state more than $4 million in bogus charges.

The criminal case was dropped in 2017, and no charges were filed. The state's Medicaid agency later sought an order to force Hacienda to turn over financial records – a battle that continues in the courts.

Tim Jeffries talks about the rape of a comatose patient at a Phoenix facility that was under a criminal fraud investigation two years ago. Arizona Republic

Pomeroy denied turning a blind eye to Timmons' behavior. He said the board ordered Timmons to get counseling, attend training sessions and docked his pay. But financial records show the board continued awarding Timmons raises and bonuses. By 2015, Timmons was making $609,000 annually.

Pomeroy said any discipline had to be weighed against Timmons' record of service. He said Timmons was responsible for turning around Hacienda, which faced a bleak financial future when he was hired in 1989.

 "Bill had a style of management that presented itself early on, it worked," Pomeroy said. "He was effective ... I have no doubt that the board, certainly, did not see the day-to-day actions that occurred. But I don't think at any point there was anything that was incredibly out of line."

MORE: Hacienda's ex-CEO faced sexual-harassment, bullying complaints

Pomeroy said he worked alongside Timmons for years. He said when Timmons got the job he promised to turn Hacienda around with a $50,000 advance from the board. Over the next three decades, Pomeroy said they increased revenue to $50 million from $3 million with more than 44 programs.

Pomeroy said both he and Timmons received several commendations for service. He pointed to letters and certificates from senators John McCain and Jon Kyl marking his 25th year on the board.

"Your passion for helping others turned Hacienda HealthCare from a small social service organization into a major health-care provider," Kyl wrote in the 2006 letter. 

Pomeroy's company faced censure, lawsuit

Even as Pomeroy brokered Hacienda's health plans, insurance regulators found he engaged in fraudulent practices unrelated to Hacienda HealthCare.

The Arizona Department of Insurance in 2012 fined Pomeroy $15,000 and suspended his license for 60 days over a forged document that allowed his company to generate inflated premium payments totaling $97,292 over three years.

Regulators said Pomeroy used "fraudulent, coercive or dishonest practices" or demonstrated "incompetence, untrustworthiness or financial irresponsibility in the conduct of business."

The state accused Pomeroy of altering a document that allowed his company to collect higher rates on medical indemnity insurance for Dawson Management Group, which owns Scottsdale Plaza Resort. Pomeroy's company forwarded an inflated rate sheet to the health plan administrator, according to the state.

Pomeroy said last week he was not involved in tampering the document and only learned about it when Dawson brought it to his attention. He said the fraud was committed by a former employee. As owner of the company, he took full responsibility and made a full refund to Dawson, he said.

MORE: Two more bills related to Hacienda HealthCare rape introduced in Legislature

That was the second time Pomeroy had been accused of fraud. A year earlier, the Las Vegas Metropolitan Police Department Health and Welfare Trust sued Pomeroy and former Hacienda board member Peter Ranke, who is an accountant.

The Metro Trust, which administers health plans for Las Vegas employees, said Pomeroy and Ranke were involved in hiking monthly premiums from 2002-2010. The trust claimed Pomeroy forged a renewal agreement to prevent other brokers from offering their services.

According to the Metro Trust, Pomeroy signed an agreement limiting a consulting fee to $2 per employee. The trust accused Pomeroy of hiking the fee by adding costs that were passed through Ranke's company.

The trust claimed it was overcharged $1.1 million over eight years and said Pomeroy took a portion of the overpayment from Ranke's company in direct violation of his contract.

Pomeroy denied any wrongdoing and said the lawsuit was settled through arbitration. Pomeroy said he and Ranke were "vindicated" and the charges were proven untrue. He described it asa contract dispute and said there were no proven charges of fraud.

"It was probably the only blemish I've had in a 44-year career," Pomeroy said. 

 

'Highest quality, service, and pricing'

Pomeroy said the board was fully briefed on the Las Vegas lawsuit and Ranke's involvement.

"Yes, of course," he said. "Other past and present board members have utilized his services on occasion, as well. Absolutely no conflict."

Board member Mike Wade defended Pomeroy. Wade said Pomeroy for years handled insurance for Tech Mold, the company where Wade worked before retiring in 2013.

"Every year, Tom Pomeroy provided the highest quality, service, and pricing of anyone, and by a substantial amount," Wade said, adding he has known Pomeroy for about 25 years. "I always felt that we lucked into a great relationship with (him).”

Wade said Pomeroy got insurance rates for Tech Mold as much as 25 percent lower than the national average. 

Pomeroy said he provided other important services for Hacienda at no cost, including setting up the company's profit-sharing plan 23 years ago, which is the non-profit equivalent of a 401(k) plan. His company also created a salary savings plan for Hacienda employees in 2002.

Neither he nor his companies received "compensation on this plan or any of the investments in this plan," Pomeroy said.

MORE: Hacienda rape case could be catalyst for change, report says

Pomeroy said his company insures more than 600 groups across the United States, and has leveraged its size to keep Hacienda's rates down. Hacienda has a current loss ratio of 121 percent above the premium paid, which typically calls for a minimum 33.6 percent rate increase. 

Pomeroy said he used part of his broker's commission to buy down the rate and negotiated a 9.8 percent increase this year.

Which is why Hacienda continues to use him as its insurance broker, he said.

But don't take just his word for it. Pomeroy provided a statement last week from the board backing him up: 

"In the opinion of the management of Hacienda HealthCare and the board of directors, Mr, Pomeroy provides the best service at the most reasonable cost."

What Goes Around.... #NonprofitBoards

The adage, "what goes around comes around" is best demonstrated with a recent announcement by the Knight Foundation, wait for it, that it will be doubling the giving it makes to local journalism.  History lovers should realize that the source of Knight's riches and philanthropy, newspapers, should by all rights, be poured back into what is now a dying field.  It is just common sense and the board that has committed to this understanding of both its roots and core values, freedom of the press and the correlated link to championing democracy, deserves its undying attention.  What is sad is that the Foundation board didn't recognize the importance of this giving direction from the beginning.  Hopefully, better late than never.

Here's the New York TImes story:

Knight Foundation Doubling Spending to Boost Local News

By The Associated Press

• Feb. 19, 2019
• •  

NEW YORK — The Knight Foundation says it will invest $300 million in local journalism over the next five years, seeding several programs designed to kick-start an industry decimated by layoffs and newspaper closures over the last 15 years.

The plans, announced Tuesday, will double the amount of spending the foundation started by newspaper publisher brothers John S. and James L. Knight has been making in this area over the past few years.

Among the beneficiaries are the American Journalism Project, which provides grants to local nonprofit news organizations; the investigative site ProPublica; Report for America, a service organization that pays for the hiring of local journalists; and PBS' "Frontline," the documentary program that's making its first foray into local news.

"What this initiative aims to do is really help build a future for local news," said Jennifer Preston, vice president for journalism at the Knight Foundation.

A spate of philanthropic efforts, including a $300 million initiative announced by Facebook last month, has drawn attention to how declining profits and readership has bled local journalism. Nearly 1,800 weekly and daily newspapers have closed since 2004, and the number of working journalists has been cut in half during that period, according to a University of North Carolina study.

Until 2005, Knight had focused much of its journalism philanthropy on education. But it began focusing on helping news organizations weather the technological changes to the industry and, since 2015, has funded more local projects. They include supporting an effort by 17 news organizations in the Philadelphia area for a report on the impact of mass incarceration.

Preston said Knight hoped its commitment would spur other funding sources to join in support of local news.

While PBS' "Frontline" primarily reports on national and international topics, it frequently works with local journalists to bolster its understanding of issues, said Raney Aronson-Rath, the show's executive producer. She cited the work of New Orleans-based reporters for a story about the aftermath of Hurricane Katrina.

With what is happening in the industry, it's getting harder to find those knowledgeable journalists, she said.

Editors’ Picks

‘With a $3 million grant from Knight, "Frontline" will hire an editor and reporters in up to five communities to work specifically on agreed-upon topics like housing, education, law enforcement and access to voting. Some of the work may result in a "Frontline" story, but the primary purpose is local reporting on those issues that will appear within the affected communities, she said.

Many believe that a breakdown in trust about journalism, for all the time that it is fanned by national politicians, begins at the local level when people realize what they are missing by not having reporters seeking out news and holding officials accountable.

"This is a democracy problem," Aronson-Rath said.

The American Journalism Project, which is getting $20 million from Knight, is a venture philanthropy firm started by the founders of two successful news sites, the Texas Tribune and Chalkbeat. Their idea is to raise money to start as many similar local journalism projects as they can.

Knight has also supported the Documenters Program, started by the City Bureau in Chicago, where citizens are trained by journalists and dispatched to cover local government meetings. The project is expanding to other cities.

That effort, however, illustrates the challenges faced by philanthropists. Funding specific investigative projects has its worth, but the impact of cutbacks is seen — or, more accurately, not seen — in the thousands of state, city and town government organizations whose meetings are no longer attended by reporters on a regular basis.

Recovering what has been lost by the thousands of journalists no longer on the beat requires fundamental changes in the business of local journalism. Preston said Knight recognizes this and is funding efforts designed to develop more sustainable business models.

"We are at a critical juncture at this moment in time to make these investments at a local level to help rebuild trust in journalism, one community at a time," she said.

Nonprofit from For-Profit #NonprofitBoards

There is some perception in the for-profit world that should all else fail, becoming a nonprofit can offer salvation.

This fallacy is proven as such whereby Dream Center purchased a number of  for-profit educational institutions that had been economically failing.  According to the Washington Post, 

Dream Center Education Holdings, a Los Angeles-based nonprofit organization, has struggled for two years to transform the flagging for-profit colleges  Argosy, South University and 31 Art Institutes, into thriving nonprofit schools. Dream Center has spent months trying to close and sell some campuses, but could not meet its financial obligations and in January entered into receivership -- a form of bankruptcy.

But with apparent failure at this effort, one should wonder what on earth made the board at Dream Center undergo this effort.  According to "advocacy" groups:

        Dream Center’s purchase of Argosy, South University and 31 Art Institutes campuses was met with skepticism who derided the sale as a means to avoid                 regulations aimed at for-profit colleges. Turning the schools into nonprofit entities meant they were no longer subject to what’s known as the 90/10                    rule, which bars for-profit colleges from getting more than 90 percent of their operating revenue from federal financial aid.

Interesting enough but perhaps not surprising, a visit to Guidestar reveals that no information is available on the nonprofit.  This of course should affirm that something was fishy to begin with.  Was this whole transaction a ruse just to get the original owners out of huge lawsuits?  And how many of the original owners are currently board members?  While I certainly can't find more details, the old adage that one should be suspicious of wolves in sheep clothing tolls gently in my mind.  

 

A Nonprofit Board Story #NonprofitBoards

There were four people in the Body family. Their names were Everybody, Somebody,
Anybody, and Nobody. There was an important job to be done and Everybody was sure that
Somebody would do it. Anybody could have done it, but Nobody did it. Somebody got angry
about that, because it was Everybody’s job. Everybody thought Anybody could do it, but Nobody
realized that Everybody wouldn’t do it. It ended up that Everybody blamed Somebody when
Nobody did what Anybody could have done. – Source Unknown (Graham, 2014).

Nonprofit Execs: The Great! #NonprofitBoards

Following my missive earlier this week about "unhappy" execs and how much nonprofit boards have a responsibility to make them happy, I want to offer the following praise offered by Steven Kast's OpEd in the LA Times.  Perhaps boards can include some of the merits as elements of their dashboard and annual appraisal.

                Steven Kast OpEd: the life of nonprofit executives

 

By STEVEN S. KAST

DEC 08, 2018 | 4:00 PM

  

 

 

 

Heather Livingston, Kasia Grzelkowski, Sanu Dieng, Bill Massey, Audrey Smith, Lynne Finding, and Arlene Armentor are a few examples of the executive directors or CEOs of United Way of the Virginia Peninsula’s 40 partner agencies who are my heroes.

During this holiday season and building upon the kindness initiative promoted by United Way, I want to highlight and thank this group of often unsung heroes in our community.

CEO (chief executive officer) is a fancy title but it doesn’t change the fact that these not-for-profit CEOs are ultimately responsible for whatever happens in their organizations.

For local nonprofit boards hiring and retaining the right CEO is a strategic move, and with the right leader, it provides credibility that the private sector can relate to. It helps raise the level of consciousness needed in the private sector, among board members, donors and the community in general.

 

The point being made is that our nonprofit executives are a necessary, highly organized and skilled leaders. But our not-for-profit CEOs motivate staff and volunteers to be all they can be, inspire board members to give and get dollars for the organization and promote the good work being done every day. They must also earn the respect of various neighborhood groups, and, time permitting, have a life.

A personal life is something our Not for Profit CEOs must work hard to achieve. Recognizing the importance of positive role models in the human services field and their impact on others’ lives, these execs are caught in a long-running dilemma — balancing the needs of family with the needs of clients impacted in large numbers by their organizations.

Their jobs get particularly tough because they feel responsible for hundreds, if not thousands, of lives every day, and in most cases all day. If they keep the job long enough, they will get those late night calls from staff — or even worse, from the police — declaring that one of their kids is missing, their client has frozen to death just yards from a shelter or a client died at their facility.

They receive word of their facilities having been broken into, or damaged by bad weather. They fear receiving word of a bus or van accident, and news of domestic violence, or the loss of people they work with and care for. A feeling of always being on call and always responsible stays with them 24 hours a day and seven days a week which is the toughest part of their job.

For the CEOs, it can be challenging to inspire a board of directors who are tackling their own personal and professional challenges to share the same level of commitment — giving, getting, and influencing others to raise funds. These resources are needed not only to operate but to endow the future needs or ensure reserves are available when needed. They manage multiple board members who all serve as leaders and in a few cases struggle to find their appropriate role with their organizations.

And by the way, let’s not forget about them being accountable and responsible for compliance, legal process, financial statements, fleets of vehicles, multiple service centers, satellite/outreach sites, collaborative partnerships and all the day-to-day functions that take up time and energy. Our not-for-profit CEO’s skillsets comprise of the compassion of a clergy, the financial acumen of an accountant, the judgment of an attorney and communication skills suited for varied and diverse audiences.

Our local heroes or nonprofit executives are accountable to a full board of directors, and ultimately responsible for raising the organization’s entire budget, as well as working within its parameters without the luxury of a full contingent of staff with degrees and appropriate skills more common in the private sector. Given the work they do, our CEOs often feel compelled to plan for succession by hiring and inspiring young talent in hopes they will someday carry the torch. If asked, most would not change their careers in any way.

They have my utmost respect and deserve the same from our community. Be kind and reach out to your favorite nonprofit executive today. If you are a nonprofit exec, thank you for leaping tall buildings for our community. The rewards are visible.

Unhappy Exec #NonprofitBoards

THE guy says he's "not happy" about what the Legislature has decided is the most effective approach to securing the border.  The concept of "not happy" moves me to ask aloud the question: just what is the responsibility of a nonprofit board to make their executive "happy".  And, is a board supposed to do EVERYTHING the exec says?  

When asked this way I hope you, as a board member, would answer "absolutely not!"  Sure, governing is not about making an executive unhappy but governing is about representing the best interests of the public or at least the consumers who are to benefit from what the nonprofit has to offer.  And, while the exec may have a variety of resources as well as skill and knowledge to advise direction, a board too brings multiple levels of knowledge and skills to the table to ensure that directions are meant to accomplish mission.  And yes, a board can disagree with an exec for multiple prudent and common sense reasons.  

Should the exec not be "happy" about their board's decisions they have options.  They can do what is asked voicing their disagreement.  They can provide evidence that the decision should be modified.  They can walk away - get another job.  

Making the exec "happy" is not the job of a nonprofit board.  Tending to mission is.