Category Archives: Not-for-profits

Sixty Percent of Slover Foundation Budget Goes Toward Administration

Paul Fraim. Photo credit: Virginian-Pilot

The Slover Literary Foundation, a tax-exempt charity set up to support Norfolk’s flagship Slover Library, plans to spend more on salaries next year than on direct aid to the library, the Virginian-Pilot reports today.

The Slover foundation will spend almost 60% of its fiscal 2018 budget on administrative costs including a $150,000 salary for former Norfolk Mayor Paul Fraim, according to figures Fraim provided the Pilot. The highest-rated charities on Charity Navigator tend to spend 10% or less on administration, the newspaper notes.

Foundation board members argue that the salary paid to the 67-year-old Fraim is worth it. The former mayor brings a vast network of relationships to the foundation and can make things happen. His skills and connections have helped bring high-profile events to the library such as a NATO panel and a “future of the Navy symposium as well as guest speakers, music, and youth programs.

Slover is one of 13 public libraries in Norfolk. The city has tried to make it a cultural destination with technology, architecture and events.

Bacon’s bottom line: Read the Pilot article on the pros and cons of paying Fraim a $150,000 salary. I can see both sides of the story. But I’m mainly interested in a different point: Whether the salary is justified or not, transparency is vital. If a charity or non-profit benefits from tax-exempt status, it owes an obligation to the public. Tax exemptions, after all, are an indirect subsidy from taxpayers.

Most charities report this data in 990 forms. But The Slover foundation did not release the data for four years. Reports Eric Hartley:

Until now, it had been difficult for donors or other outsiders to evaluate the Slover foundation’s spending. Founded in 2008 to raise money to build a downtown library, the organization did not make its finances public between 2013 and this year. Its outside accountants said it was not required to, unlike most charities, because it was a “supporting organization” to the city government.

The justification for not releasing the financial information is specious. If anything, its affiliation with the City of Norfolk means it should be held to the same Freedom of Information Act standards as Virginia government! Who could be blamed for suspecting that Fraim avoided so long releasing the information to avoid embarrassment of having it appear in the Pilot?

There’s a bigger point here: the lack of accountability of non-profit organizations generally. Nonprofits are required to basic financial information in 990 forms. But non-profits have minimal government regulatory oversight. They have no shareholders to answer to. They receive little press scrutiny. (The Pilot’s coverage of Slover is a rarity). And boards of directors are typically clubby conclaves of well-heeled members of the business and political elite who don’t want to rock the boat.

I’m reminded of a recent column by Walter Williams, an economics professor at George Mason University, who wrote of university trustees:

Every board of trustees has fiduciary responsibility for the governance of a university, shaping its broad policies. Unfortunately, most trustees are wealthy businessmen who are busy and aren’t interested in spending time on university matters. They become trustees for the prestige it brings, and as such, they are little more than yes men for the university president and provost.

The same critique extends to many government boards and nonprofit boards. There are always exceptions — in my coverage, I’ve seen a few individuals willing to ask tough questions — but they are rare. I sometimes wonder if the best way I could “give back” to the community when I retire is to convert Bacon’s Rebellion into a platform for covering governance of Virginia’s foundations, charities, universities and health systems. I’d be interested to know what readers think of the idea.

How Inova Hopes to Reinvent Health Care

Inova is betting that personalized medicine + big data can transform health care.

Inova is betting that personalized medicine + big data can transform health care. Illustration credit: Richmond Times-Dispatch

Published this morning in the Richmond Times-Dispatch.

As Republicans and Democrats brace for a battle royal over Obamacare and what might replace it, they would do well to pay heed to an important experiment south of the Potomac.

In Congress the debate centers on who pays for health care and how costs can be shifted to someone else — a zero-sum game. At Inova Health System, the dominant health-care provider in Northern Virginia, the focus is on improving peoples’ health at lower cost by practicing medicine differently. If Inova is successful, everyone wins.

The plan at Inova’s Center for Personalized Health, located across the road from Inova’s flagship hospital in Fairfax County, is to draw upon diverse data — electronic health records, user-generated data (such as fitness trackers and other wearable devices), family history, social milieu, and a patient’s genetic and biochemical make-up — to develop wellness and treatment strategies tailored to the individual.

“Take a cancer drug that’s effective 30 percent of the time,” says Todd Stottlemyer, CEO of the center. “A better way to understand it is that the drug is 100 percent effective for 30 percent of the people who possess certain genes or proteins.”

If physicians can target the treatment to the patient’s unique biochemistry, they can avoid giving drugs that don’t work. That leads to better health for the patient and saves society a lot of money.

***

Inova is building its Center for Personalized Medicine on the old Exxon-Mobil corporate campus, and adapting it for use as a medical research center. Construction is underway there for the Schar Cancer Institute, a multidisciplinary institute where precision medicine will be practiced.

The Inova Clinic will provide genomic testing and consultations. Other centers, institutes and incubators will conduct research, crunch data and, hopefully, spin off new business enterprises. Meanwhile, the Center has already begun recruiting national-caliber scientists.

Many other medical colleges and research centers around the country are doing similar things. What sets Inova apart is not just treating disease but keeping people well in the first place.

Let’s say a 48-year-old woman has breast cancer. Here’s how Stottlemyer sees things working: Physicians will want to understand her genetic make-up. They’ll want to know the biomarkers of the particular type of cancer she has. They will design a treatment, based upon the unique facts of her case, that will target the biomarkers and offer a higher probability of success than conventional approaches.

But the work doesn’t end there. What if the woman’s daughters have the same genetic markers? Should they screen more aggressively? Should they have mastectomies before getting the disease themselves? Inova will have genetic counselors trained in interpreting the scientific data and then walking patients through the complex decision-making process. Says Stottlemyer: “We want to empower good, informed choices.”

***

Inova will draw upon Northern Virginia’s strength in information technology. Harnessing so-called “Big Data” will help researchers and practitioners gain insight into not only individual patients but entire demographic groups.

The Center will cobble together health records, family histories, genome sequences, and sociodemographic statistics, and then compare the data against its database that houses more than 10,000 genome sequences from 134 countries of birth around the world.

The nonprofit health system is sinking hundreds of millions of dollars of its own money into the Center — acquiring the Exxon-Mobil building, funding venture capital, setting up the institutes and centers — and supplementing it with state dollars, philanthropic dollars, and funds from corporations and academic partners.

Late last year, Inova inked a $112 million deal with the University of Virginia School of Medicine allowing U.Va. medical students to participate in the discovery and commercialization of treatments for cancer and other diseases.

Stottlemyer sees the launch of a new center of research and innovation as a booster shot for Northern Virginia’s economy, which is still staggering under the impact of sequestration-related cuts in defense spending. Building bridges to U.Va., Virginia Tech, and Virginia Commonwealth University should provide a stimulus to downstate economic development, too, he says.

But the ultimate justification for a nonprofit enterprise like Inova to spend millions on an initiative like the Center for Personalized Health is to help the people of Northern Virginia and the commonwealth to enjoy better health at lower cost. When the center opens for business next year, health teams will disseminate insights from the center’s research to Inova hospitals throughout Northern Virginia.

The U.S. health care system is organized around treating people when they get sick, not keeping them well. “It’s a transactional system,” says Stottlemyer. Doctors and hospitals get paid only when they conduct a test or procedure or other service. “We’re trying to change the game.”

Bikes, Bees, Beauty

lowline2

by James A. Bacon

New York City has its High Line park built upon an abandoned, elevated freight rail line. The City of Richmond has its Low Line park, built underneath CSX Corp. railroad trestles.

In the seven years since opening to great fanfare, Manhattan’s High Line has attracted millions of visitors and inspired the construction of nearly 1,400 housing units along its two-mile route. By contrast, the opening of Richmond’s Low Line has been decidedly low key, and no one is expecting it to become a magnet for real estate development. But the Low Line could well become an integral part of Richmond’s park system and spur reclamation of the riverfront.

The vision for the $6 million project calls for flower plots with benches, covered walkways beneath the trestles, rain gardens along the Kanawha Canal, and trees shading HOW MANY?? hundred yards of bike path. Capital Trees, a not-for-profit organized to promote urban greening, has committed to fund the ongoing maintenance.

A year ago, the area was an overgrown ruin, neglected by CSX and the City of Richmond, which shared ownership of the land for more than a century. Located in the flood plain, the property had little value. No one had reason to invest in it or even care about it.

“There was no advocate for this area. It was blighted,” says Susan Robertson, co-chair of Capital Trees. “People would ride on the canal boats from the manicured, renovated canal walk [in Shockoe Bottom] and encounter a scene with invasive weeds and trees. From June through November, you couldn’t see the canal [from the land].”

When the Low Line is complete, it will knit together a cluster of recreational assets including the Richmond terminus of the 52-mile Capital Trail, the Great Shiplock Park, the Kanawha Canal, and Chapel Island with its trails and kayak launch. The Low Line also will provide an amenity for the 1,500 residents of Tobacco Row apartments and condominiums on the far side of the flood wall.

“It’s so great,” Victoria Hedegger, a Tobacco Row resident, said recently while walking her new-born in a stroller. “It was nice before. Now it’s even nicer. [The gardens] make the trail so much more attractive.”

Before Capital Trees got involved, this was the view from the Capital Trails bike path.

Before Capital Trees got involved, this was the view from the Capital Trails bike path.

Capital Trees originated as a collaboration between the Richmond region’s four garden clubs in the expectation that they could undertake projects with greater impact if they worked together. The new generation of garden club leaders aren’t content with traditional beautification projects. They are exploring the intersection of beautification, conservation, storm water management and urban place making.

In its early incarnation, the group worked with city officials to reform the urban tree-planting program. Then it spear-headed the building of rain gardens on 14th street in Richmond’s downtown to control storm water runoff. With each success, Capital Trees’ projects became more ambitious.

In 2011 Lynda Miller, head of New York City’s Central Park Conservancy, visited Richmond to describe how volunteers had reclaimed part of Central Park. “She told use we could tackle big, important projects that can make our lives better, recalls Clare Osdene Schapiro, a Richmond Times-Dispatch writer active in the organization. Continue reading

Another $100 Million for Venture Capital? Who Is Accountable at Inova?

Inova CEO J. Knox Singleton (left) with Governor Terry McAuliffe and George Mason University President Angel Cabrera announcing Inova-GMU strategic partnership. Photo credit: The Connection.

Inova CEO J. Knox Singleton (left) with Governor Terry McAuliffe and George Mason University President Angel Cabrera announcing Inova-GMU strategic partnership. Photo credit: The Connection.

by James A. Bacon

In February Inova Health System announced its intention to create a $100 million venture fund dedicated to precision medicine, an initiative timed to coincide with an Obama administration event highlighting the nascent science, and designed to support Inova’s own $300 million plan for a center for personalized health just outside Tysons Corner.

From an economic development perspective, such a fund is just what the doctor ordered for a Northern Virginia economy overly dependent upon defense, intelligence and homeland security funding. The giant health system has signaled its willingness to spend what it takes to build a nationally recognized medical R&D hub centered on preventing disease by understanding patients’ unique genetic make-up, and there are plenty of interests, from George Mason University and Virginia’s biotech industry to the McAuliffe administration and real estate companies hungry for the next development play, who want to see Inova succeed.

“We think it’s transformational, something that can really propel this region,” Josh Levi, vice president of policy for the Northern Virginia Technology Council told the Washington Business Journal. “It’s not just the money. It’s the acceleration, the incubation of partners. The thing they’re really bringing is the expertise.”

When questioned by the WBJ, Inova officials declined to provide the most basic details about the fund. Who will manage it? What kind of companies will Inova back? Most importantly, where will the money come from? The company says that it will share more information as it becomes available.

From what I’ve seen, it appears that the WBJ is the only Washington-area media entity asking questions. And the scope of its questions are very narrow, befitting the focus of a business publication.

But there are even bigger questions that no one is asking. Is this an appropriate business for Inova to be in? Is it appropriate for a health system to be allocating such a large sum to an enterprise (a) in which it has no experience, and (b) is so divorced from its mandate of delivering health care services to the citizens of Northern Virginia?

I am truly of two minds on this issue. On the one hand, I can see a great future for the Center for Personalized Health as a job and wealth creator. On the other hand, the initiative seems to be barreling ahead with no questions whatsoever. The only skepticism I’ve seen are in the comments section of this blog, when Reed Fawell has asked what massive commercial development in the Merrifield area of Fairfax County implies for traffic along the already congested Interstate 66. I’ll let Reed continue to examine the traffic/land use implications in the comments section. In the meantime, I will continue to ask how appropriate it is for Inova as a not-for-profit entity serving the community to undertake this initiative at all — not because I am adamantly opposed to what Inova is doing but because the enterprises seems to be making multi hundred-million dollar commitments without any pushback whatsoever, and somebody has to ask the questions.

As I observed in December:

The not-for-profit Inova, which exercises near monopoly dominance in the Northern Virginia health care market, generated operating income of $218 million in 2014 on $2.7 billion in operating revenue. That’s a profit margin of about 8%, more than twice the profitability that non-profits normally need to maintain healthy operations. That translates into about $109 million in what one could classify as excess profit.

Unlike a for-profit company, Inova is not obligated to maximize profits. To the contrary, insofar as the company is exempt from taxes and has a community mission, one could argue that it is morally obligated to (a) reduce charges to patients afflicted by ever-escalating medical bills or (b) provide more care to low-income patients not covered by Medicaid.

How has Inova been allowed to morph from a community hospital system into a budding underwriter of Northern Virginia economic development? Perhaps we can find some clues by examining the NoVa board, a Who’s Who of the Northern Virginia business and political establishment. Here is a list of the men and women who are, in Inova’s own words, “responsible for oversight of Inova’s finances, strategic planning and management”:

Continue reading

The Small Business Route out of Poverty

Raheim Watson grew up in Harlem, New York, surrounded by drugs and violence but decided he wanted a different life when his son was born. He moved to Richmond in 2014, where he has purchased a home, the first one in his family to do so, and started his own business. His window washing business is focused on the residential and small-commercial market.

Raheim Watson grew up in Harlem, New York, surrounded by drugs and violence but decided he wanted a different life when his son was born. He moved to Richmond in 2014, where he has purchased a home, the first one in his family to do so, and, with help from UnBoundRVA, started his own business. His window-washing business is focused on the residential and small-commercial market.

by James A. Bacon

UnBoundRVA is my kind of anti-poverty initiative! The organization identifies people in low-income neighborhoods who have the potential to succeed as small business owners, and then provides them a year of training, advice and networking support as they develop a business plan.

Once the business models are in place, each hopeful business owner makes a pitch for startup capital from a collective pool of $100,000 in low-interest loans. UnBoundRVA then connects the businesses with partners who provide pro bono services in areas such as legal, accounting, marketing and banking.

UnBoundRVA made it into the news recently when the Richmond Times-Dispatch highlighted a $20,000 donation to the group by Pat Hull, the entrepreneur behind logistics apps Getloaded.com and Scoopmonkey.com. “Your dream may not be the next Google. But who cares, if you are supporting your family and creating jobs?”

The not-for-profit enterprise was founded by Sarah Mullens and Richard Luck, who met while teaching in the inner city as part of the Teach for America program. They saw a large number of talented individuals who weren’t pursuing a college track for reasons that had nothing to do with ability or work ethic. “We believe that potential is restricted by the forces of the poverty cycle, and that the human capital of these individuals is our nation’s greatest underutilized asset,” states the UnBoundRVA website.

High-potential individuals in the current class, which will finish in June, are pursuing businesses in the following areas: clean-up services for construction projects, a mobile auto detailing service, a professional house organizing and redesign service, vegan cookies, and a mobile virtual reality gaming experience.

Bacon’s bottom line: Give a man a fish, you feed him for a day. Teach him how to fish, and you feed him for his life. In contrast to so many leftist-inspired “social justice” programs that don’t even feed a man for a day — they teach him to march and protest until someone gives him a fish — UnBoundRVA teaches people to fish. It may not provide a systemic cure for poverty, a goal that has eluded this nation despite the expenditure of trillions of dollars in public and philanthropic anti-poverty programs over the years, but it can make a tremendous difference to the people whose lives it touches.

If you want to address the “root causes” of poverty, you have to change the lives of people one individual at a time. UnBoundRVA does that.

That said, it’s not clear from the website if UnBoundRVA is a cost-effective way to address poverty. The program has an annual budget of $268,000, supporting a staff of four full-time employees and one part-time. How many people does it help with that annual investment? According to the website, UnBoundRVA collects the names of individuals interested in starting their own business, enrolls twelve candidates in a six-week workshop and selects the five most promising for a one-year program of business support. The website does not say how many times it runs through this cycle each year. If only once, not so good. If eight or nine times, helping 40 or more people, that’s more defensible. One thing I do believe: It’s a model worth trying.

Geography, Charity and Competitive Advantage

Source: "The State of the Region: Hampton Roads 2015"

Source: “The State of the Region: Hampton Roads 2015”

by James A. Bacon

I had always thought that Virginians were more charitably inclined on average than other Americans, but apparently that’s not the case. Data published in Old Dominion University’s “State of the Region: Hampton Roads 2015” report indicate that Virginians give a considerably smaller percentage of their income to charity (presumably as measured by itemized charitable deductions in tax filings) than do Americans overall. Hampton Roads residents buck the trend, contributing significantly more than the state average of 2.85% of income — though still below the national average of 3.7%.

“It is certainly notable that Portsmouth, a city whose residents are much less prosperous financially, nonetheless more than doubled Loudoun County in terms of the percentage of residents’ income given to charitable endeavors,” states the report, whose lead author is ODU President Emeritus James V. Koch. “This suggests a degree of anomie and lack of identification of Loudoun County residents with their surroundings.”

Koch raises an interesting point. I would go a step further and suggest a hypothesis that Koch, who has amassed an enormous database of local- and metropolitan-level statistics, perhaps could test: The longer people have lived in an area and the more they have sunk their roots there, the more likely they are to contribute philanthropically. Many of Loudoun County’s residents are newcomers who have yet to develop strong ties to their communities. To cast that statement in the form of a testable hypothesis, I would predict a strong correlation between the average length of residence and the rate of migration in and out of a locality and/or a metropolitan region and the proclivity of the population to give to charity. That is not the only factor influencing the rate of giving, but it would be an important one.

By this logic, the charity-mindedness of Hampton Roads actually may be understated. Because the region’s largest industry is the military, which rotates a significant percentage of the population in and out  with great regularity, the population of long-term residents has a lot of slack to take up.

The report also publishes a list of largest Virginia-based charitable organizations, ranked by 2012 grants. The largest are national in scope, such as the NRA Foundation and the Freddie Mac Foundation. But of those that are primarily local in scope, Hampton Roads leads the pack. Leading the way is the Batten family, associated with three different foundations that dispensed more than $30 million in 2012. All told, eight of the state’s 40 largest foundations are located in Hampton Roads.

“State of the Region” pays particular attention to the South Hampton Roads United Way and whether the multitude of programs it oversees could be more efficiently funded.

The United Way’s review of funding candidates is unquestionably laudable; however, the consensus in the charitable world is that analogous programs need to be in place to provide additional ongoing monitoring and guidance for existing charitable organizations that have long been around. Such organizations can get stuck in a rut operationally and lose their energy and efficiency. It is not easy to scrutinize existing charities, but it is an important task that directly affects the eventual impact of the United Way.

Bacon’s bottom line: More attention needs to be given to the role and influence of philanthropy and not-for-profits in the study of U.S. metropolitan areas — not just to their operational efficiency but to how well they advance a community’s strategic goals. To grow the economy, raise the standard of living, make the community attractive to newcomers, and address the needs of the less fortunate requires collective action over and above what government can do. From my observations of the Richmond area, there is a relatively stable “philanthropic capacity” — a sum of money that corporations and affluent individuals are willing to donate over the course of a year. How much money a community raises and how it dispenses that money — either to present-oriented projects such as supporting cultural institutions and helping the poor, or to future-oriented projects such as investing in universities, medical facilities and economic development — shapes the region for better or worse.