A Troubling Analysis of Laguna Honda Volunteers, Inc.'s Tax Returns


Following on the heels of the Laguna Honda Hospital patient gift fund scandal — and the San Francisco City Controller’s audit that ordered $350,000 be restored to LHH’s gift fund for patient benefit — a detailed analysis of Laguna Honda Volunteers, Inc.’s IRS tax returns for the eight-year period of 2002 – 2009 is just as shocking.

The analysis shows that in 2009, for the first time, Volunteers, Inc.’s proportion of funds spent on actual “Program Services” plummeted to just 56.9 percent of total expenditures, well below GuideStar.org and other charity watchdog group’s recommendations that, at minimum, at least 70 percent of non-profit organization expenditures should be spent for a charity’s tax-exempt purposes.

At the same time, Volunteers, Inc.’s portion of combined spending for “Management and General” + “Fundraising” has shot up to 43.1% of its total spending.

The analysis also documents that:

• Nichelle Lyons, the preferred fundraiser for Supervisor Sean Elsbernd, was paid a total of $53,000 to raise funds for LHH-related events, just in 2009.  She earned fully 28.3% — $42,998 — of the $151,650 raised at Supervisor Elsbernd’s February 2009 crab fest that was supposed to benefit Louise Renne’s separate Laguna Honda Foundation.  How much more she was paid in 2010 to conduct so-called “fundraising” is not yet known.
• Two separate $187,500 “grants” Volunteers, Inc. made to Laguna Honda Hospital in 2003 and 2004 may not have been publicly vetted by San Francisco’s Board of Supervisors, who under City rules must approve “Accept and Expend” resolutions to accept grants to the City.
• The two $187,500 grants appear to exceed the purposes for which Laguna Honda Volunteers, Inc. was itself granted tax exempt status, since Volunteers, Inc.’s own Charter stipulates that its purpose is to raise funds only to support LHH patients and volunteers at the hospital, not to fund administrative overhead expenses of other non-profit organizations.
• Volunteers, Inc. has suddenly announced (on March 24) that it is undertaking a “re-branding” campaign that will include changing its name — after 54 years of providing dedicated support to patients and volunteers at Laguna Honda Hospital under its current name — to “Friends of Laguna Honda.”

An upcoming article will explore in more detail the inter-relationships between Laguna Honda Hospital and Rehabilitation Center (a public agency); Volunteers, Inc.; and the separate Laguna Honda Foundation, since there are striking parallels to the co-mingling of public-private funds involved in the CSU scandal.

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