Muhlenberg Foundation Inc.

Review of 12/31/2008 & 12/31/2007 Forms 990

 

 

 

In 2007, the Muhlenberg Foundation made payments to the Muhlenberg Regional Medical Center of $5,571,490, which included the transfer of stock of the Midtown Shops Corporation, a firm that has extensive holdings of commercial real estate.  The Muhlenberg Foundation received the Midtown Shops stock as a pledge from the Harold B. & Dorothy A. Snyder Foundation in 2007 and valued it on their books at $4,712,976, which included $208,570 in cash.  Prior to the stock being controlled by the Muhlenberg Foundation, the Snyder Foundation received a yearly dividend of $109,000 from the Midtown Shops Corporation. The transfer resulted in 30.4 percent of the net assets of the Muhlenberg Foundation being transferred to the Muhlenberg Regional Medical Center. The purpose of this transaction needs to be questioned.  Was it done in good faith?  Why was Midtown Shops stock transferred from the Muhlenberg Foundation to the Muhlenberg Regional Medical Center within months after the Foundation received the total pledge, which was settled over a period of three years.  We question how the income from the Midtown Shops is reflected on the Muhlenberg Regional Medical Center Return for the years ending December 31, 2007 and December 31, 2008.   

 

The closing of the Muhlenberg Regional Medical Center (MRMC) acute care hospital by Solaris Health Systems in August of 2008 violated the original Articles of Incorporation, which clearly states that the sole purpose of the organization is “to provide a hospital for the residents of Plainfield, New Jersey.”  The Muhlenberg Foundation was formed to operate exclusively for the benefit of the Muhlenberg Hospital and was the principal fundraising arm of the hospital.  Thus, the closing of the hospital left the Muhlenberg Foundation without a hospital to support in Plainfield, New Jersey.  The statement of Program Service Accomplishments on the Muhlenberg Foundation Form 990 for 2008 now states the Foundation is “to engage in programs and activities for the benefit of Solaris Health Systems.” This is a drastic change from the purpose as stated in the Foundation’s Articles of Incorporation.  The change was made prior to a New Jersey Appellate Court hearing challenging the closing of the Muhlenberg Regional hospital.

 

The Attorney General under Governor Jon Corzine failed to protect the interests of the Muhlenberg Foundation and the 13 communities serviced by the Muhlenberg Regional Medical Center when it stood silent and allowed the Muhlenberg Hospital to close.  The closing of the hospital terminated the purpose of the Foundation.  Did Solaris Health Systems, the Muhlenberg Regional Medical Center, or the Muhlenberg Foundation notify the Attorney General or the Surrogate Court of the hospital’s closing or seek direction as to the disposition of its assets?  The net assets of the Muhlenberg Hospital were reduced by 1,026%!!   Net assets in the beginning of 2008 were $5,238,417 and at the end of the year they were (-$53,788,837).  The $55,808,594 loss from discontinued operations was charged against unrestricted net assets and needs to be verified by a complete audit of the return. (The discontinued operations loss was primarily the acute care hospital income and operating expenses for the period January 1, 2008 through August 2008).  However, included in net assets of the Muhlenberg Regional Medical Center was $1,875,325 in perpetual trusts. The health services rendered at the Muhlenberg Regional Medical Center have been reduced to a bare minimum, which resulted in the constructive closure of the hospital facility.  The remaining health services are:

a.      Home Health Care (Per 2008 Form 990 for MRMC, Home Health Care receives 45% of the revenue from non-acute care hospital sources of income)

b.      School of Radiology

c.      A small satellite Emergency Room that will close in 3.5 years

d.      minimal outpatient services

e.      A limited X-ray department that does CAT scans twice a week.

 

As of December 31, 2008, the net assets of the Muhlenberg Foundation were    $7,597,236.  This includes $2,950,583 in investments in publically traded securities and $1,767,663 in beneficial interest in perpetual trust. Included in this total was $1,640,356 in assets described on the Balance Sheet as “Assets whose use is Limited”?   A specific analysis needs to be completed in order to determine the nature and purpose of assets classified as “Assets whose use is Limited”.

 

Other Issues requiring resolution by independent review of the Forms 990 for the years ending 12/31/2007 and 12/31/2008 are as follows

:

1.      Why did the Investment Income on Form 990 of the Muhlenberg Foundation decrease from $330,625 in 2007 to $4,563 in 2008?

2.      Why did the investments in publicly traded securities on Form 990 of the Muhlenberg Foundation decline from $5,803,443 in 2007 to $2,950,583 in 2008?

3.      Determine reason(s) for the large decrease in net assets of the Muhlenberg Foundation from $9,760,931 in 2007 to $7,597,236 in 2008.

4.      Form 990 - Part 5, question 6a - Did the organization solicit any contributions that were not tax deductible? The “yes” box was checked.  From whom and for what reasons were these contributions solicited?

5.      Form 990 - Part 5, question 7a – Did the organization provide goods or services in exchange for any quid pro quo contribution on more than $75.00?  The “yes” box was checked.  What were the goods and services provided and why was it considered a quid pro quo transaction?

6.      Form 990 - Part 6, Section A, question 7a – Does the organization have members, stockholders, or other persons who may elect one or more members of the governing body?  The “yes” box was checked.  The Foundation was established to support a hospital in Plainfield, New Jersey, which is located in Union County.  If the control of the governing body is transferred outside of Plainfield and Union County, the community may have been harmed by decisions from a Board of Directors without ties to Plainfield, New Jersey or Union County.

7.      Form 990 - Part 6, Section A, question 7b – Are any decisions of the governing body subject to approval by members, stockholders or other persons? The “yes” box was checked.  The issue in item 7b is the same as in item 7a; were the decisions by the Board of Directors compromised by persons not living and associated with the Plainfield community and Union County?

8.      Why were $229,892 (2007) and $74,095 (2008) of net assets released from restrictions for use in operations on the Foundation’s Form 990? 

9.      What was the $464,370 unrealized gain from investments other than trading securities on the Foundation’s Form 990 for 2008?

10.  The issues as reflected in items 6 & 7 above are also present on the 2008 Form 990 of the Muhlenberg Regional Medical Center.

11.  What systems are in place in order to protect the Muhlenberg Foundation’s Perpetual Trusts of $1,767,633 and the Muhlenberg Regional Medical Center’s Perpetual Trusts of $1,875,325?  Are the terms of the trust instruments being followed?

12.  A review of the Forms 990 of the Plainfield Neighborhood Health Center shows that Muhlenberg Regional Medical Center loaned the PNHC $2,040,000 in 1997.  It also indicates that this loan was paid off in 2004; however, was this transaction ever recorded in the Union County, NJ County Clerk's office?  If not, why?

 

It appears that Solaris Health Systems has developed a corporate culture, led by    management and acquiesced to by the Trustees of the Muhlenberg Regional Medical Center and the Muhlenberg Foundation, Inc., that the delivery of health care is best left exclusively to the sole judgment of management.  This resulted in the acute care hospital being closed, assets being liquidated, and tangible personal property, such as beds and medical equipment being transferred to other related Solaris entities prior to the Appellant Court’s decision in a case challenging the Commissioner of Heath and Senior Services’ decision to terminate the Muhlenberg Hospital’s Certificate of Need.  It should have been the New Jersey Attorney General’s function to oversee the Muhlenberg institutions and protect its charitable assets.  In Connecticut, the Attorney General intervened in a situation involving an acute care hospital facility abandoning its historic core mission as an acute care facility to become an ambulatory care facility with an emergency room.  There, the hospital trustees voted to close in-patient care and lay off related medical support staff.  The Connecticut Attorney General’s Office contended that such a fundamental transformation required cy pres action, and the court agreed. In New Hampshire the Attorney General is a necessary party in any proceeding involving cy pres, or deviation or termination of charitable trusts.  Finally, we need the New Jersey Attorney General to oversee and protect the medical needs of Plainfield, a minority community.