The Venice Foundation Coimbra Sirica

 

On September 1, 1995, The Venice Foundation opened its doors in Venice, Florida, with $104 million in assets from the sale of the hospital across the street. Some people opposed the sale of Venice Hospital and resented the secrecy that surrounded it, and others questioned how the proceeds would be used. Controversy dogged the Foundation in its first year, as board members and staff struggled to set a course for the new institution. Despite the bumpy start, "the perception is that The Venice Foundation is a wonderful gift," says Beth Dilley, senior vice president of NationsBank and president of the Venice Area Chamber of Commerce.

In the Foundation's early days, the history of the area and its hospital set the stage for much of the debate that played out in the local newspapers. Sarasota, the county seat, is in northern Sarasota County, and residents of southern Sarasota County felt that they had never been given their due in terms of attention or resources. The community hospital in Venice was therefore a source of great civic pride.

The first $10,000 raised to build the hospital came in 1951 from a businessman whose niece had fallen ill and had had to travel to a hospital 25 miles away in Sarasota. One year later, the four founders, all physicians, opened the 14-bed hospital in a small apartment house on Tamiami Trail. Most of the $100,000 that allowed the hospital to open came from donations solicited door-to-door in the community.

In 1956, construction began on a four-story, block-long building that was built over and around the original apartment house. By 1995, the hospital was a modern facility, with 342 beds and more than 1,200 employees, a freestanding nursing home, and a 65,000-square-foot outpatient facility. Nonetheless, there were still those who remembered with affection the hospital's modest beginnings, people who had watched it grow with the city.

"We loved that hospital, and that was why we were so upset when we heard they were going to sell it," says Douglas Murphy, an internist and one of the hospital's founders.

The forces that threatened the hospital were not obvious to the untrained eye. When the possibility of selling Venice Hospital was first raised in early 1995, the boards of the hospital and of the hospital's parent holding company reacted with shock to the idea. The community thought well of the hospital. The hospital was operating in the black, thanks to sound management and a number of wise investments, and every physician was board-certified or board-eligible. There seemed no reason to change. But Joseph Thro, a urologist and chief of staff at Venice Hospital, and hospital CEO Jack Norman realized that changes in the health care environment were placing the survival of their hospital at risk. Representatives from large for-profit companies had begun calling Norman to discuss the hospital's plans for the future, and it became clear that Medicare would no longer provide the funds that had helped make the hospital a financially sound institution.

The parent board of the hospital, Gulf Area Medical Programs, Inc. (GAMP), hired a consultant to conduct an analysis of the hospital's position and to propose ways the hospital could address changes in the health care environment. The consultant's report led the GAMP and hospital boards to decide that the hospital should either be sold or become part of a joint venture with a larger corporate partner.

"We were weathering the storm because of the favorable investment market, but we saw that as a short-term strategy," says Michael Rolph, the hospital's former chief financial officer. "In all likelihood we were going to go negative relatively soon––my guess was 1998––unless we got a strong corporate partner who could provide us with the economic support we needed." Rolph cites the following four factors in particular that influenced the board's decision to consider changing the status of the hospital:

• In recent months, federal legislation had been passed that reduced reimbursement rates and made it harder for Medicare-dependent Venice Hospital to bill for capital and other costs that had traditionally underwritten many of the hospital's expenses. About 85 percent of the hospital's patients were covered by Medicare.
• The hospital found itself in an increasingly competitive environment. Both for-profit and not-for-profit companies were buying local hospitals, physician practices, and home health companies. Columbia/HCA Healthcare Corporation, for example, had acquired four hospitals within 25 miles of Venice Hospital and had an aggressive strategy for competing in the Venice service area.
• Health care in the Venice area was increasingly dominated by managed care, which meant decreased hospital utilization and a downward pressure on profits.
• Sarasota Memorial Hospital had announced that it would expand into Venice with two off-campus medical services centers, and it was negotiating to purchase the practices of several primary care physicians in the area.

Over a two-month period in February and March 1995, Norman and members of the GAMP board held numerous meetings with community members who they thought should be told the reason for selling the hospital. It was difficult to explain why a financially solvent institution should be facing such a dire future.

"Many people became adversarial and upset," recalls Norman. "But it was interesting that during all that time, there was no talk about what we were going to do with the money."

Murphy bitterly contested the sale of the hospital. He and his supporters wrote letters to the editor opposing both the sale and the mission of the Foundation, which they thought should have been dedicated to health care. Murphy was also upset because the corporation that eventually bought the hospital was run by an order of Catholic nuns. "It's hard to accept that the hospital's not going to be nondenominational anymore," Murphy said.

Stephen Reed, a local journalist with the Sarasota Herald Tribune, noted that there were few opponents to the sale, but the issues raised by those few were important enough to merit front-page coverage in the two local newspapers. For example, the sales price and details of the negotiations were kept secret for more than six months after the sale.

"Aside from hospital administrators and the board, it was pretty much an inside job," Reed says. "Our feeling was that the community did have a right to know this. That's why we pushed the point so hard. I don't think the board ever understood our reasoning."

Nonetheless, GAMP board members say they continue to have no regrets about the way the decisions were made. Many of them had been either successful business executives or physicians with high-level administrative duties, and they believed that they alone had the expertise to determine the future of the hospital.

"This is sort of patronizing, but we felt we had information the community did not have," says Judy Wilcox, who was chairman of the hospital board and a member of the GAMP board at the time of the sale. "That attitude got us into trouble, but not as much trouble as other places that have taken the issue to the community."

On June 23, 1995, following a presentation by the Sarasota Memorial Hospital, two for-profit companies, and the Maryland-based Bon Secours Health System, the board accepted an offer from Bon Secours, a not-for-profit hospital system operated by an order of Catholic sisters. Bon Secours paid $85.5 million for the hospital, but net proceeds from the sale, including the assets retained by the Foundation, added up to about $104.5 million, a sum that then became the Foundation's endowment.

"We were looking for a buyer with a culture that was close to ours," Norman says. "Then we knew that with the Foundation, we'd be adding a great asset to the community."

Although the decision to sell the hospital and the choice of the buyer were approved by the hospital board, it was the six-member GAMP board that made all the decisions relating to the sale. The GAMP board members describe their decision as an agonizing process.

The background of several of the players in the decision-making process influenced the board's choice of a buyer. Norman had worked as an administrator for both for-profit and nonprofit hospital systems. He disliked intensely the "bottom-line" orientation of the for-profit companies, particularly that of Columbia/HCA, a company that was not even selected to make a presentation.

"In 10 years of working for [for-profit companies], I never had a senior executive tell me to focus on quality," says Norman. "There was an overwhelming focus on the bottom line."

With respect to another bidder, Sarasota Memorial Hospital, Norman and the physicians at the hospital felt that their hospital had been treated shabbily in prior negotiations that involved setting up a cooperative system between the two hospitals.

"We knew the community would be upset if we sold to Sarasota," says Wilcox. "And it was not much money, and we would lose total control of the hospital."

The physicians on staff at Venice Hospital played an important role in the sale process. They were invited to make site visits to hospitals operated by the organizations that were bidding on Venice Hospital. Their positive report on the Bon Secours institutions weighed heavily in the decision to accept the offer from the Maryland-based company.

The GAMP and hospital boards had requested that the purchaser agree to a number of conditions in purchasing the hospital, and on August 24, 1995, Bon Secours wrote a letter agreeing to the following:

• To continue to provide the services offered by Venice Hospital before the sale, except when they were "inconsistent" with the views of the Roman Catholic Church
• To remodel the hospital's physical plant according to existing plans, replacing equipment and acquiring new technology, and expanding an off-campus surgery center
• To enter into an exclusive agreement with the Gulf Area Regional Blood Bank, to which the Foundation had retained title. (The blood bank has since been sold to the hospital for about $700,000.)
• To maintain existing levels of charity care––about $3 million at the time of the sale
• To retain the hospital's medical staff bylaws as written, except where they would conflict with the views of the Catholic Church
• To follow an existing medical staff development plan
• To include "significant medical staff representation" on the hospital board

Criticism of the sale, reported in the local newspapers, seems to have focused on three issues: the "secrecy" of the sale process, the Catholic ownership of Bon Secours, and the Foundation's broad-based mission. Because the hospital had no obstetrics department, the issue of abortion was not addressed. But the media reported that the hospital pharmacy had stopped selling condoms and other methods of birth control after the sale of the hospital. Also, the hospital publicized its position on advance medical directives after some community residents complained that Catholic doctrine might prevent physicians from obeying the wishes of dying patients.

A New Foundation Emerges

A foundation transition committee was set up in the months leading up to the opening of The Venice Foundation. The committee, which consisted of members of the hospital and GAMP boards, worked with a consultant to determine the mission and structure of the Foundation. The local Community Foundation of Sarasota County made overtures to the GAMP board, suggesting that proceeds from the sale might be directed into a supporting organization for that foundation. The community foundation argued for the efficiency and cost-effectiveness of combining forces, but the GAMP board argued that the Sarasota-based foundation did not understand the needs of south county residents.

The Foundation's mission began as a "rewrite" of the hospital's mission. By the end of 1997, however, the board had decided on a new mission statement that reflected the board's desire to emphasize its independence from the hospital:

The mission of The Venice Foundation is to enrich the quality of life in perpetuity in South Sarasota County, North Port, Englewood, Boca Grande, and environs. This will be accomplished by preserving its legacy, providing effective grantmaking and donor services, and being a catalyst for positive community change in the areas of Education, Health and Human Services, Civic Affairs, and Arts and Culture.

Unlike many similar foundations, The Venice Foundation did not limit its purpose to funding health-related programs. Rather, its mission broadly defines health and well-being to encompass the funding of arts and culture for the entire community as well as education, civic affairs, and health and human services for the poor.

However, not everyone agreed with the decision to fund projects not related to health care services. "My concept was that the Foundation would be a powerful force for medical care in the community," says Thro, the former chief of staff and GAMP board member. "Instead, not a penny has gone to the hospital, and very little to health care. I'm disappointed in how it worked out, and I wish I had been paying more attention to how the Foundation was set up."

Jack Meyerhoff, another former GAMP board member, explains that the board was making an effort to avoid the appearance of giving kickbacks to the hospital. "We worked so hard that we went to an extreme," Meyerhoff says. "We should have made sure there would be more of a relationship to health care."

Because the hospital had been sold to a nonprofit organization with a mission that complemented that of the original hospital, the GAMP board members who served on the transition committee did not feel obligated to make health care the focus of the new foundation's mission. In support of the Foundation's broad mission, they also point to data that show a region with a relatively low rate of poverty and a relatively small percentage of people without insurance. Foundation CEO Jon Preiksat notes, for example, that more than 85 percent of the hospital's patients are covered by Medicare.

"Given the needs of our community, we felt that we could help create a healthy community by spending money on all four of these areas, including health care," says Preiksat.

To address questions about how its mission had been determined, the Foundation board held community meetings to explain their choices and hoped that the grant-making process would eventually quiet the critics. Most of the criticism appeared in letters to the editor and in unsigned messages that the local newspaper published in a weekly "Let 'Em Have It" column. "I feel all the money should have gone for health because it came from the sale of our hospital," read one message. "What [the Foundation] covers for the elderly is transportation, nutrition, and for children, transportation and day care. This is not help for health and human services. What about the regular working man around here who doesn't have insurance?"

With the advice of an attorney and a foundation consultant, the transition board members decided to structure The Venice Foundation as a public charity or a community foundation, which gave it a great deal of flexibility in how it defined its mission and in how it distributed its funds. For example, in support of the Foundation's broad mission, the board's attorney cites the fact that public charities are allowed to adapt to the changing needs of a community. A common-law doctrine known as cy pres has been used in some states to ensure that charitable dollars are dedicated to purposes as similar to those of the original organization as possible. Mark Fitzgerald, the Washington, D.C., attorney who helped set up the Foundation, argues that "there is some question whether the cy pres doctrine applies in this case." He notes that Florida has no statute requiring court approval or review by the attorney general of the sale of a nonprofit hospital. Florida's attorney general has prepared sample legislation that would govern conversions and is seeking a legislator to sponsor it. Attorneys general in several states have used the cy pres doctrine to challenge and direct the sales of nonprofit health care entities.

Foundation consultant Helen Monroe also encouraged board members to consider a community foundation, pointing to the Venice area as fertile ground for such an organization. "The profile of the area showed that a community foundation was an attractive option," says Monroe, who is based in San Diego. "It had an affluent population and people with deep roots and a strong commitment to the community."

A group of committed, affluent people is important to a community foundation because it must raise one-third of its income from individual donors. But this burden to The Venice Foundation was considerably lightened when all but $1.2 million of the proceeds from the hospital sale were placed in The Venice Endowment, Inc., a separate supporting organization that was formed from Venice Hospital, Inc., to hold The Venice Foundation's funds. The Venice Endowment is classified by the Internal Revenue Service as a 509(a)(1) supporting organization, which is not required to meet the public support test.

A community foundation must show that it is open to the community, but some board members initially resisted the prospect of encouraging public participation. "They were thunderstruck," Monroe recalls. "'We can't possibly do that,' they said. 'We'd be overwhelmed.' I told them they should invite anyone who wants to be involved to participate, otherwise it will appear that this is a little clique that moved out of the hospital and into the community foundation. And this was not the case."

So in August and September 1995, the Foundation advertised in local newspapers, inviting people to apply for membership on the board and to join the committees that would conduct community assessments and review grant applications. Every newspaper article about the Foundation ended with a telephone number and an invitation to help establish the new institution. One hundred fifty people signed up.

The activities of the volunteers on the committees improved the image of The Venice Foundation and gave it visibility. Monroe credits the needs assessment process for the $11 million in grant requests received by the Foundation in its first grant cycle. In 1996, the first year it awarded grants, the Foundation distributed $4.7 million to 131 nonprofit organizations.

The needs assessments compiled by the volunteers helped guide the grants committee and the board in deciding which proposals to fund.

"We had a general idea of what the needs were, but we wanted to make sure the grant dollars would address those needs properly," Preiksat says. "The entire process was an eye-opener. We had no idea what was going on right under our noses."

The Foundation board and staff were making decisions about strategy and structure against a backdrop of administrative difficulties that received extensive coverage in the local media. Through February 1996, The Venice Foundation appeared in a number of newspaper articles that gave the impression that its affairs were in disarray.

In addition to Preiksat, the board had hired four people who had worked either for the hospital or for its fund-raising arm, The Venice Hospital Foundation. Former employees of the hospital or its fund-raising arm took the following positions at The Venice Foundation: managing director of programs, director of finance, and administrative assistant. To serve as president of The Venice Foundation, the board hired Michael Cummins, who concurrently retained his job as CEO of The Venice Hospital Foundation. Shortly after The Venice Foundation was established, a power struggle developed between Preiksat and Cummins. Cummins quit as president of The Venice Foundation in November 1995, two months after his hiring and shortly after Preiksat had employed a new fund-raiser who was also the wife of one of the board members. This too became the subject of news stories.

"Maybe we could have gone out from the beginning and advertised for a new CEO," says former GAMP member Robert Miles. "But speed was important and we wanted to get [the Foundation] going. And from a human point of view, this was an effort to keep people on."

Preiksat says that questions were also raised about his own lack of foundation experience. Prior to becoming CEO of The Venice Foundation, he had been a health care attorney. Wilcox notes, however, that Preiksat had a contract with the hospital that guaranteed him employment until December 31, 1997, and that his legal background and familiarity with the hospital's affairs had saved the Foundation hundreds of thousands of dollars in legal fees.

In February 1996, to address some of the controversy over staffing as well as questions raised by the press regarding the sale of the hospital, The Venice Foundation published full-page advertisements in two local newspapers. The ads revealed the sale price of the hospital and the salaries of all the Foundation's employees.

At the same time that the staffing imbroglios were plaguing the Foundation, it became clear that the public was confusing the new Venice Foundation with the hospital's fund-raising arm, The Venice Hospital Foundation.

"Our first year was awful," recalls Wilcox. "The first thing we should have done was got rid of the hospital foundation CEO, and then we should probably have had a different name to avoid the confusion with the hospital and its foundation."

The Venice Hospital Foundation removed the word Venice from its name and asked to be associated with Bon Secours-Venice Hospital, rather than with The Venice Foundation. In 1997, The Venice Foundation board agreed, with the understanding that the hospital foundation's original $14 million in assets, and the income from them, would revert to The Venice Foundation if the hospital were ever sold, merged, leased, or closed.

There are still links between the Foundation and Bon Secours-Venice Hospital, although some of them are only a matter of public perception. The chairman of the Foundation board, for example, is an attorney for the hospital. Until recently, another board member's husband was chief medical officer at the hospital.

The Venice Foundation continues to contend with the public's seeming failure to understand where the hospital ends and the Foundation begins. A recent survey of grantees, which the Foundation commissioned earlier this year, indicates that many people mistakenly believe that the hospital directs the grants program for the Foundation.

These perceptions also colored the response to a recent proposal from the hospital for a $1 million grant for a new open-heart surgery program, underlining mixed feelings toward the hospital among board members as well as local residents. The request was withdrawn after several regional hospitals contested the state's approval of the surgery program, but the request had sparked a number of letters to the editor and unsigned messages in the local newspaper's "Let 'Em Have It" column. Most writers were critical of the Foundation; one chastised it for considering a proposal that would send "money to Baltimore," a reference to Bon Secours' home base in Maryland. Other responses raised the issue of the hospital's religious affiliation. One local resident decried "particular religious ownership of health care." Another, though, referred to critics as "a small but vocal group of dissidents who appear to be using the hospital as a scapegoat for their anti-Catholic sentiment."

Because the hospital's proposal was withdrawn, it had not been voted on, but some board members were not enthusiastic about funding a project for the hospital. "My perspective is that we were being overly concerned and cautious in our dealings with the hospital, and did not view the request favorably," says restaurateur Stephen Harner, whose final term on The Venice Foundation board expired in October 1998. "It's the Catholic thing, too. I think some people in the community think the money is going to go to the Pope."

Former Foundation and GAMP board member David Voight notes that the Foundation's founding board had wanted to avoid the appearance of kickbacks to the hospital, but that the nonprofit hospital had always been thought of as a possible grantee. "We knew that one day the hospital would need a major medical project," Voight says. "We looked forward to the day when we could do that for them."

Vital Facts and Figures

Before discussing The Venice Foundation's history as a grantmaker, it might be interesting to review its finances, its corporate structure and policies, and the funding environment in which it operates.

At the time of the sale, the hospital had a $130 million debt related to a series of tax-exempt bonds issued between 1988 and 1994. The GAMP board was able to defease the bonds using the proceeds from the sale of the hospital's $127 million investment portfolio, most of which had been set aside to cover the costs of capital improvements. The hospital had also retained a number of other assets, including accounts receivable worth about $10 million and a trust fund of $6 million that had been set aside to cover the costs of any judgments of malpractice.

For $85.5 million, Bon Secours bought the hospital's buildings and equipment, its inventory, and the value of its prepaid insurance. After paying off its debt and liquidating the other assets, the Foundation's endowment came to $104,512,278.

Shortly after the Foundation was established, its new board set up an investment committee to determine how best to invest the endowment. In November 1995, a consultant was hired to help the group select seven or eight of the best money managers in the country. More than 20 money managers made presentations to the committee; the committee members voted to hire the seven whose experience matched or exceeded the guidelines established by the committee. None of the seven had roots in the surrounding community, and several of the local banks and brokerage firms complained because their firms had not been chosen.

"They were all given the opportunity to apply––nine or 10 were local banks," says Voight. "When I'm working with $100 million of the community's money, I'm going to pick the best, not my best friend."

The board decided on an investment strategy early in 1996 and slightly revised it one year later. In 1997, 53.31 percent of the Foundation's endowment was invested in domestic equities, 13.9 percent in international equities, 31.2 percent in fixed income securities, and 2.4 percent in cash. Each investment manager is evaluated quarterly by examining performance in the previous quarter and over one-, three-, and five-year periods. The investment manager's performance is compared to "a universe" of other managers with similar portfolios. The Foundation's assets are now worth about $140 million, which includes approximately $1 million in endowments held and managed for smaller nonprofit organizations and about $2 million in designated and donor-advised funds. In 1998, the Foundation received almost $362,000 in contributions.

The investment committee meets at least four times a year to review investment performance and investment strategies. The Foundation employs a consulting firm that oversees and reports on the performance of the investment managers. The consultant also conducts research to propose new investment strategies, if necessary.

The original committee, whose members included a local banker as well as a stockbroker, proposed that 4 percent of the Foundation's assets should be distributed annually. In the long run, they said, with the help of compound interest, the community would benefit more from a policy of fiscal prudence. Private foundations are required to disburse 5 percent a year, and questions were raised about why more money was not given out in grants, but board members say they are committed to their conservative approach.

"There are people in the community who say, why don't you spend this money?" says Thomas Slattery, a member of the Foundation board and chairman of The Venice Endowment. "But you have to take the long-term view . . . the principal will grow if you limit your spending, and, over time, you will find you will be giving more to the community."

Like all members of the Foundation board, Slattery is a resident of the Foundation's service area, one of the only conditions for membership. Term limits for board members have varied over the life of the organization. At one time, terms were set at 12 years (four three-year terms), but they are now set at staggered terms of three years, with a maximum of six years allowed. Board members changed the term limits in order to keep the board tied to the community and to prevent a sense of entitlement from settling in.

"This way the community will not think that this is a closed shop," says former board member Harner, who had also served on the hospital board.

The number of board members can range from 16 to 25, according to the bylaws. The board is currently made up of 19 people, including five women, one of whom is African American. A total of six former members of the GAMP and hospital boards became members of the Foundation board. The three GAMP board members, who had also served on the transition board before the formal opening of The Venice Foundation, served for only one year on the board of the new foundation.

"Every dog has its day, and people should come on the board and they should go," says Wilcox. "The community was seeing us as a good old boys club––we sell the hospital and move ourselves across the street to the Foundation. Now we're fat and happy."

The Venice Foundation has a formal policy on conflict of interest, and every year, board and staff members must sign a new statement that reveals any potential conflict of interest. Preiksat notes that when conflicts of interest arise, they are immediately recognized and disclosed to the full board, and board members for whom a conflict exists agree not to vote or take any other action that affects the person or organization concerned.

"It would be hard to hide a conflict of interest in a town of 19,000 residents," says Preiksat.

The bylaws also establish a number of committees, each of which must include two board members. Among them are an investment committee, an executive committee, a community needs assessment committee, a grant steering committee, a donor services committee, an audit committee, and a nominating committee. The executive committee has the power to conduct the regular business of the board between board meetings. But it is expressly prohibited from behaving in a way that would threaten the integrity of the Foundation. It cannot, for example, change the bylaws in any way, authorize the sale or lease of any Foundation property, or "alter, amend, or repeal any resolution of the Board of Directors."

Board members note that other than submitting a 990 Form to the Internal Revenue Service and sending information on the Foundation's fund-raising activities to the Florida Division of Consumer Services, there are no accountability requirements to which the Foundation must adhere. Nonetheless, every year the board holds an annual meeting to discuss the grants it has made, the status of the endowment, and any changes in its priorities. The meetings, which are usually well attended, give the public the opportunity to ask questions and to address any issues that have been appearing in the local press. In addition, the Foundation publishes an annual report and offers the public easy access to its 990 Forms and its audited financial statements.

In 1997, the Foundation was criticized for not including more detailed information on its operating costs in its annual report. Reporters were invited to review the organization's 990 Forms and audited financial reports, and, Preiksat says, the controversy died down.

The Foundation also has worked to build its identity as a resource for people interested in becoming philanthropists. The director of donor services organizes workshops on topics such as "deferred compensation and charitable giving" and "gifts of real estate." The Venice Foundation Institute of Philanthropy was formed to disseminate information about philanthropy to local residents, including community leaders, attorneys, accountants, and financial planners.

Besides The Venice Foundation, Sarasota County has two other major funders that award grants in health and human services, education, and arts and culture. Both are located in Sarasota. The William G. and Marie Selby Foundation is a 44-year-old private foundation that was established to fund future capital projects in Sarasota and three surrounding counties. The Selby Foundation has more than $90 million in assets and distributes $3.5 million a year, most of it for educational purposes.

The Community Foundation of Sarasota County awards approximately $2 million a year in grants, with a particular focus on education and health and human services. Because the community foundation has few unrestricted funds under its control, most of its grants are for $10,000 or less. At least one-third of its grants benefit southern Sarasota County, primarily from a fund that was established by a south county resident.

Nonprofit organizations that provide programs in health and human services to Sarasota County residents also receive about $5 million a year in grants from the county government.

The Venice Foundation as Grantmaker

A region of beaches and flatlands situated along the Gulf of Mexico, South Sarasota County is overwhelmingly dependent on retirees and winter tourists for its economic well-being. The Sarasota County Health Systems Network estimates that the south county area has about 120,000 permanent residents, compared to about 318,000 in the entire county. According to the 1990 U.S. Census, almost 40 percent of the adult population of Sarasota County is 65 or older, and children 18 and under make up only 10 percent of the population. In the eight-zip-code region covered by the Foundation's programs, the percentage of residents living below the poverty line averages about 6 percent, ranging as high as 8.6 percent in several communities. The unemployment rate is 2.5 in Sarasota County. Nationwide, 17 percent of the population has no health insurance, compared to less than 9 percent in south Sarasota County. But a large number of children live in poverty––in the Foundation's service area, 53 percent of the children qualify for federal free and reduced lunch programs.

In addition to the data provided by government sources, the Foundation's board and its grant committees relied on the needs assessments compiled by its volunteer committees.

"The volunteers went out and interviewed people in the community, and we also had experts come in and speak to the needs assessment committees," says Denise Roberts, the Foundation's managing director of programs.

Based on data and information obtained by the needs assessment committees, the following areas were identified as primary funding targets in the Foundation's four fields of interest:

• Civic affairs: activities that provide youth with positive experiences.
• Health and human services: projects that help families, particularly the children.
• Education: projects that focus on early childhood education, primarily for children ranging in age from birth to 18 months. They also fund programs for children 18 months through their last year of high school.
• Arts and culture: activities that make cultural programs accessible to underserved populations.

The Foundation's largest grant awards have benefited young children and their families through preschool and child-care programs, counseling and parenting education, and enrichment programs in the arts. The second most important funding area provided funds for health care and wellness programs. Among these were grants awarded to a health and human services resource center, local YMCAs, a community-based AIDS program, a local hospice, and a nursing home. Grants to the local food bank and the Salvation Army helped address basic human needs.

In the area of education, middle school, and high school, children benefited from grants to the local community theater group, which taught children to write plays, and to a local middle school for developing a program to link school children to the world of work. The Foundation has also given away bicycle helmets to children who qualify for free lunches, and trigger locks for children to give their fathers on Father's Day. The Foundation board has increasingly begun to provide matching funds in order to encourage programs to attract additional resources that might help ensure a program's continued success.

In interviews with representatives of grantee organizations, Foundation staff are described as hardworking and committed to helping applicants through the grant-making process.

"The Foundation and its staff is proactive and interested in quality and in funding something that will make a difference––not the same old stuff," says Wendy Katz, principal of Laurel Nokomis School, which received a $26,000 grant for string instruments. "They want lasting value for their investment, and if they put money into the school, they are looking for something tangible in return."

The work of the board and staff is supplemented by the volunteers who serve on grants committees, a role that requires them to review applications and accompany staff and board members on site visits.

The following are descriptions of a handful of programs the Foundation funded in 1998.

Health and Human Services

• Loveland Center: A program that provides services and activities for the handicapped. The center was awarded $7,500 to pay for the architectural design of a new facility.
• Beacon House: A mental health services community center. The organization received $50,000 toward the purchase and renovation of its Venice headquarters.
• South County Family YMCA: Program aimed at children, youth, and family services. The YMCA was awarded $60,000 to cover the cost of a computerized information management system.
• South County Resource Center: A grant of $600,000 to establish a single location for counseling, welfare, and health care services.

Education

• Gator Wilderness Camp School: A program to help at-risk youth. The school received $72,400 in start-up funds for a facility that will be open year-round.
• Sarasota County School Board: In cooperation with Manatee Community College and the Sarasota County Technical Institute, the Foundation awarded the school board $50,000 for a graphic arts training program at Venice High School.
• Argus Foundation: The foundation received a $10,000 grant for an ongoing audit of the effectiveness of the Sarasota County school system.

Civic Affairs

• Miss Venice Fast Pitch: A softball program for girls. The organization received $65,000 to add a concession stand and an equipment building at a playing field.
• Sarasota County Sheriff's Office Hazardous Devices Unit: The county sheriff's office was awarded $78,514 for the purchase of a dual-articulated tracked robot to handle explosives, bombs, and other dangerous matter.
• Community Presbyterian Church of Englewood: The church received $20,800 for a van to transport children to cultural and recreational activities.

Arts and Culture

• Lemon Bay High School Band Boosters: The school's marching, symphonic, and jazz bands received $30,000 to purchase new instruments.
• Venice Art Center: The community arts center was awarded $36,522 to cover the final cost of renovating and expanding the center.
• Sarasota Ballet of Florida: The Sarasota-based company received $36,250 to produce two performances in Venice and to provide educational programs to students in all the south county schools.

In determining its geographic focus, the Foundation's board at first limited its grantmaking to southern Sarasota County and to communities in neighboring counties served by Venice Hospital. Board members describe as tense the relationship between the communities in northern and southern Sarasota County. South county residents have traditionally felt ignored by public and private organizations in the north, and these feelings affected the entire process––from the GAMP board's refusal to sell to a hospital in northern Sarasota County to the geographic focus of the Foundation's grantmaking. The needs assessments revealed, however, that many nonprofit groups in northern Sarasota County benefited residents in the south county area, so the Foundation began to encourage grant applications from those organizations.

"The (groups) were physically in the north, but they were interfacing with the local schools and with residents in south county," says Preiksat. "That's why we became more flexible, and I think we are contributing to breaking down the traditional rivalry between the two communities."

Changes in Focus and Policy

In 1997, faced with relatively few high-quality proposals, the Foundation gave away only $3.2 million to 106 organizations, compared to $4.7 million to 131 nonprofit organizations in 1996. Consequently, the board became somewhat disillusioned.

"We were told that it would be hard to spend the money, and it has been," says Harner.

During a retreat in May of 1997, board members voted to have the board represented on every committee, and to create a proactive needs and initiatives committee that would explore new program areas the Foundation could address in its grantmaking. Eventually, it is hoped that a significant number of the grants awarded will have been solicited through requests for proposals (RFPs).

The new committee has identified three areas of interest––transportation, education, and substance abuse, all of which seem to have an impact on many of the people served by the programs the Foundation supports. In two and a half years, for example, the Foundation has either funded or helped to fund the purchase of 33 vans and buses.

"Problems of transportation and drug and alcohol abuse are so huge, we have to think in terms of what has the highest probability of success," says board member Slattery. "We could go to an agency, for example, that could solve a problem we identify, and we could ask them to respond with a request."

Denise Roberts, the Foundation's managing director of programs, points out that the board has since learned that grantmaking is subject to cycles and that the quality of applications will not remain low. "It's a peaks and valley kind of thing," Roberts says. "I'm not sure the board believed that at first, but they do now because we just had a July 15 deadline, and the applications were much better."

Adding board members to the four grant review committees also addressed the board members' discomfort with merely approving grants that had been reviewed and recommended by volunteer committee members. "We felt like rubber stamps," Harner says. "We are now making an effort to get the board more actively involved in grantmaking."

As part of the process of looking more broadly at its role in the community, the board has begun to lead the Foundation into partnerships with other funders and with state and local officials. The Foundation has taken a leadership role in three county-wide initiatives to address problems in education, transportation, and substance abuse.

One of these initiatives, Partners in Effective Education, is geared toward improving the performance of students, teachers, and school administrators throughout the county school system. A second initiative will fund a 12-phase transportation study to help public and private funders in making decisions about where to invest funds. "This is going to give us an understanding of how to have a systemic impact on transportation, particularly for the disadvantaged," says Foundation program assistant Michael Bigner. The third initiative, which will target the prevention of substance abuse among the county's adolescents, is still in the planning stage.

New information from a recent survey supported in part by the Foundation may give the arts some increased visibility among funders. The survey demonstrates that 60-70 percent of the local population, regardless of age or income, has a great interest in the arts. The survey also projected the capital needs of local arts organizations and suggested that the Venice area had the potential to become an important center of cultural activity.

Lessons Learned

In retrospect, Norman wonders if he and his fellow GAMP and hospital board members had overestimated Bon Secours' ability to rescue the hospital. "[Bon Secours] is facing a tough environment all over the country," he notes. For example, the hospital is facing a political and legal battle in its bid to establish an open-heart surgery center. Recently, the hospital's CEO was demoted to chief operating officer. Bon Secours is currently recruiting a new CEO.

Norman also thinks he and his colleagues may have underestimated the pain it would cause local residents to have "outsiders" running their hospital. "It was more traumatic to the Venice area than we thought it would be," Norman says. "Bon Secours has some homework to do. They need to be a good corporate neighbor, and the more they do that, the more likely they are to receive help from their own board members."

The Foundation has succeeded dramatically in its efforts to become part of the community, but its success has become the source of an unexpected weakness, according to Roberts. To evaluate its funding process and its image in the community, the Foundation commissioned a survey in the spring of all the nonprofit organizations that had ever submitted a grant application to the Foundation. The results showed a high rate of satisfaction with the grant-making process and with the Foundation staff. But the quality of the volunteers who participate in the site visits with grantees was a source of dissatisfaction. For example, only 38 percent of the respondents to the survey were impressed with the knowledge of the volunteers who make the site visits. As a result of the survey findings, volunteers are being trained in how to conduct site visits and must demonstrate that they have become familiar with the project before making the visit. Also, volunteers are always paired during site visits with either a board or a staff member, and each of the four grant review committees includes at least two members of the board.

"We're not giving up on community volunteers," says Roberts. "We just hope to make them work a little harder, and to make the applicant feel the board is involved the whole way through."

The survey that led to changes in the use of volunteers also revealed that applicants found the application process time-consuming and burdensome. "As a result, we're simplifying the process," says Roberts. "Everything can now be done on a personal computer. It requires 18 answers and attachments, and it looks easier and it is easier."

And applications for grants for $5,000 or less will no longer require the filling out of an application. "The applicant can just write a letter explaining why they need the money, and attach proof of tax-exempt status. That's it," says Roberts.

Summary

The Venice Foundation was created from the sale of Venice Hospital to the Bon Secours Health System on August 31, 1995. The Foundation initially received $85.5 million from the proceeds of the sale, but after paying off the hospital's debt and liquidating other assets, the Foundation opened for business with a total endowment of $104,512,278.

After the decision to sell the hospital had been made in June 1995, the parent board of the hospital set up a transition board that was charged with deciding the mission of the new foundation and how its funds should be spent. The transition board, which comprised members of the parent board and the hospital board, hired a consultant to guide them in their decision making.

The consultant took the hospital's mission and changed it just enough to make it applicable to a community foundation, and this became the Foundation's first mission statement. Board members decided on the Foundation's grant-making policies, choosing not to limit its funding to health care. They focused instead on the idea of a healthy community as one with a strong educational system, a vibrant cultural life, and a positive sense of self. Board members report feeling comfortable with this decision because they had sold the hospital to a nonprofit organization with a mission similar to that of Venice Hospital, and because of the region's relatively high standard of living. Four program areas were therefore chosen for funding: health and human services, arts and culture, education, and civic affairs. Although the program areas have not changed, the mission statement has been rewritten to reflect the Foundation's status as an independent organization. Also, the board has created a needs and initiatives committee that reflects a more proactive stance. The three areas identified for targeted grantmaking are substance abuse, education, and transportation. They were identified in needs assessments and from recurring themes that have appeared in a large number of grant proposals.

The transition board adopted bylaws for the Foundation that set the number of board members at between 16 and 25 and established a number of committees with assignments that included assessing community needs, reviewing grants, and managing the endowment. The bylaws also established a policy on conflict of interest and required staff and board members to sign a new form every year that reports any possible conflicts.

When the Foundation was first set up, it had a number of links to the original institution. The hospital's in-house attorney became the Foundation CEO; the CEO of the hospital's fund-raising arm was named Foundation president; two hospital staff members were given jobs at the Foundation; and six members of the hospital's two boards began as members of the board of the new foundation. The former members of the GAMP board stepped down within one year of the establishment of the Foundation.

The decisions about selling the hospital and setting up the Foundation were made by a relatively small group of people associated with the hospital boards and the hospital administration. There are no state regulations that would have required decision makers to obtain legislative approval or public comment. But early in the life of the Foundation, members of the community were invited to take part in an ambitious needs assessment to determine which grants should be funded. About 150 people volunteered, and many of them were sent out into the community to gather information that would inform the Foundation's grant-making activities. At the same time, this process raised the Foundation's image in Venice and in the surrounding area.

The state of Florida requires only that foundations report their fund-raising and grant-making activities every year to the state Department of Agriculture's Division of Consumer Affairs. Unless there are reports of fraud or misuse of funds, the attorney general's office does not intervene in the sale of nonprofit hospitals or in the affairs of the foundations that result from such sales. In accordance with federal regulations, The Venice Foundation also files a 990 Form annually with the IRS. Although it is not required to do so, the Foundation invites the community to an annual meeting at which it reports on its grant-making activities and financial dealings.

Looking back at their actions, board members say they do not regret the way they handled the sale of Venice Hospital. Despite criticism from the press and some members of the public, board members believe such transactions are best made by a small group of honest and intelligent leaders who understand both the institution and the community it serves. There were difficulties associated with having hired hospital staff to work at the Foundation, but there were also benefits. So while some board members might in retrospect have advocated a clean break with the hospital, others point to the money saved by having the former hospital attorney in charge of disentangling the two institutions.

There were also tremendous benefits that accrued from opening up the Foundation to a large number of volunteers. Nonetheless, the board has since had to place limits on the role of volunteers in helping to conduct site visits and review grant proposals. Surveys of grant applicants had revealed that some volunteers lacked professionalism in their interactions with people seeking funds for local nonprofits.