Muhlenberg Foundation IRS 990 Financial Analysis

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Muhlenberg Foundation Inc.Review of 12/31/2008 & 12/31/2007 Forms 990

In 2007, the Muhlenberg Foundation made payments to the Muhlenberg RegionalMedical Center of $5,571,490, which included the transfer of stock of the MidtownShops Corporation, a firm that has extensive holdings of commercial real estate. TheMuhlenberg Foundation received the Midtown Shops stock as a pledge from the HaroldB. & 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 MuhlenbergFoundation, the Snyder Foundation received a yearly dividend of $109,000 from theMidtown Shops Corporation. The transfer resulted in 30.4 percent of the net assets ofthe Muhlenberg Foundation being transferred to the Muhlenberg Regional MedicalCenter. The purpose of this transaction needs to be questioned. Was it done in goodfaith? Why was Midtown Shops stock transferred from the Muhlenberg Foundation to

the Muhlenberg Regional Medical Center within months after the Foundation receivedthe total pledge, which was settled over a period of three years. We question how theincome from the Midtown Shops is reflected on the Muhlenberg Regional MedicalCenter Return for the years ending December 31, 2007 and December 31, 2008.

The closing of the Muhlenberg Regional Medical Center (MRMC) acute care hospital bySolaris 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 forthe residents of Plainfield, New Jersey. The Muhlenberg Foundation was formed tooperate exclusively for the benefit of the Muhlenberg Hospital and was the principalfundraising arm of the hospital. Thus, the closing of the hospital left the MuhlenbergFoundation without a hospital to support in Plainfield, New Jersey. The statement ofProgram Service Accomplishments on the Muhlenberg Foundation Form 990 for 2008nowstates the Foundation is to engage in programs and activities for the benefit ofSolaris Health Systems. This is a drastic change from the purpose as stated in theFoundations Articles of Incorporation. The change was made prior to a New JerseyAppellate Court hearing challenging the closing of the Muhlenberg Regional hospital.

The Attorney General under Governor Jon Corzine failed to protect the interests of theMuhlenberg Foundation and the 13 communities serviced by the Muhlenberg RegionalMedical Center when it stood silent and allowed the Muhlenberg Hospital to close. Theclosing of the hospital terminated the purpose of the Foundation. Did Solaris HealthSystems, the Muhlenberg Regional Medical Center, or the Muhlenberg Foundationnotify the Attorney General or the Surrogate Court of the hospital s closing or seekdirection as to the disposition of its assets? The net assets of the Muhlenberg Hospitalwere reduced by 1,026%!! Net assets in the beginning of 2008 were $5,238,417 and atthe end of the year they were (-$53,788,837). The $55,808,594 loss from discontinuedoperations was charged against unrestricted net assets and needs to be verified by acomplete audit of the return. (The discontinued operations loss was primarily the acutecare hospital income and operating expenses for the period January 1, 2008 through


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August 2008). However, included in net assets of the Muhlenberg Regional MedicalCenter was $1,875,325 in perpetual trusts. The health services rendered at theMuhlenberg Regional Medical Center have been reduced to a bareminimum, whichresulted in the constructive closure of the hospital facility. The remaining healthservices are:

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

b. School of Radiologyc. A small satellite Emergency Room that will close in 3.5 yearsd. minimal outpatient servicese. 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 specificanalysis needs to be completed in order to determine the nature and purpose of assetsclassified as Assets whose use is Limited.

Other Issuesrequiring resolution by independent review of the Forms 990 for the yearsending 12/31/2007 and 12/31/2008 are as follows:

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

2. Why did the investments in publicly traded securities on Form 990 of theMuhlenberg 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 MuhlenbergFoundation 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 forwhat reasons were these contributions solicited?

5. Form 990 - Part 5, question 7a Did the organization provide goods or servicesin exchange for any quid pro quo contribution on more than $75.00? The yesbox was checked. What were the goods and services provided and why was itconsidered a quid pro quo transaction?

6. Form 990 - Part 6, Section A, question 7a Does the organization havemembers, stockholders, or other persons who may elect one or more members

of the governing body? The yes box was checked. The Foundation wasestablished to support a hospital in Plainfield, New Jersey, which is located inUnion County. If the control of the governing body is transferred outside ofPlainfield and Union County, the community may have been harmed by decisionsfrom 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 governingbody subject to approval by members, stockholders or other persons?The yesbox was checked. The issue in item 7b is the same as in item 7a; were the


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decisions by the Board of Directors compromised by persons not living andassociated with the Plainfield community and Union County?

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

9. What was the $464,370 unrealized gain from investments other than trading

securities on the Foundations Form 990 for 2008?10. The issues as reflected in items 6 & 7 above are also present on the 2008 Form990 of the Muhlenberg Regional Medical Center.

11. What systems are in place in order to protect the Muhlenberg FoundationsPerpetual Trusts of $1,767,633 and the Muhlenberg Regional Medical CentersPerpetual Trusts of $1,875,325? Are the terms of the trust instruments beingfollowed?

12. A review of the Forms 990 of the Plainfield Neighborhood Health Center showsthat 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 transactionever 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 bymanagement and acquiesced to by the Trustees of the Muhlenberg Regional MedicalCenter and the Muhlenberg Foundation, Inc., that the delivery of health care is best leftexclusively to the sole judgment of management. This resulted in the acute carehospital being closed, assets being liquidated, and tangible personal property, such asbeds and medical equipment being transferred to other related Solaris entities prior tothe Appellant Courts decision in a case challenging the Commissioner of Heath andSenior Services decision to terminate the Muhlenberg Hospitals Certificate of Need. Itshould have been the New Jersey Attorney Generals function to oversee theMuhlenberg institutions and protect its charitable assets. In Connecticut, the Attorney

General intervened in a situation involving an acute care hospital facility abandoning itshistoric core mission as an acute care facility to become an ambulatory care facility withan emergency room. There, the hospital trustees voted to close in-patient care and layoff related medical support staff. The Connecticut Attorney Generals Office contendedthat such a fundamental transformation required cy pres action, and the court agreed. InNew Hampshire the Attorney General is a necessary party in anyproceeding involvingcy pres, or deviation or termination of charitable trusts. Finally, we need the NewJersey Attorney General to oversee and protect the medical needs of Plainfield, aminority community.

Documents

Muhlenberg Foundation IRS 990 Financial Analysis