Cherry Foundation: Misguided & Misused
Updated November 21, 2008
The release of an internal report, including security camera footage showing the final hours of a patient who died after going more than 22 hours without food or water, shows that Cherry Hospital employees falsified records and lied to investigators about their care of the patient. The report, which was completed in June but was not made public until media outlets and the patient’s widow forced its release in November 2008, played a large role in the loss of federal Medicare and Medicaid funding for the Goldsboro-based hospital – a move that is costing North Carolina taxpayers $10 million annually as they pick up the slack.
Mission
The Cherry Foundation Inc. was established to provide enhanced assistance to those affected by mental illness while admitted at Cherry Hospital, located near Goldsboro. According to the corporate documents and to the Foundation’s own website, contributions to the foundation are utilized directly for the therapeutic care of patients while in the care of in Cherry Hospital. But the Foundation added an addendum to that mission on its 2007 IRS Form 990, stating that it also aims “to aid, strengthen and further in every proper and useful way the work and services of Cherry Hospital as it pertains to those mentally disabled citizens it serves.” Upon reviewing the spending of the Foundation, the purpose of that amendment quickly becomes apparent.
History
The Cherry Foundation was established on March 31, 1997, and according to the Division of Mental Health in the NC Department of Health & Human Services, it was formed primarily to support lifestyle enhancement activities for patients at Cherry Hospital for which state and federal funding was not available. The Foundation encourages private endowments, cash donations, participation in the State Employees Combined Campaign, and honorary/memorial contributions.
Background
First named the “Asylum for Colored Insane,” Cherry Hospital admitted its first patient in August of 1880. In 1959, the name was changed to Cherry Hospital in honor of former North Carolina Governor Gregg Cherry. While the hospital itself operates as a division of the North Carolina Department of Health & Human Services, receiving both state and federal taxpayer funding, the Cherry Foundation is a separate legal entity entirely.
Since the Cherry Foundation is a 501 C-3 public charity, it is not required to disclose the sources of its funding, but most appears to come primarily from grants by large pharmaceutical companies - some with direct sales contracts with the state for psychiatric drugs. Employees of Cherry Hospital also contribute through the State Employees Combined Campaign.
Potential Conflicts
Although donations to the foundation are made for the purpose of subsidizing subsidize patient care expenses at the hospital, the News & Observer reports that foundation funds are more often used to fund expenses for hospital employees traveling to conferences and seminars, including those in distant destinations both in the United States and abroad. Luxurious resort accommodations are the norm. The Foundation also paid for a Cherry Hospital staff retreat in Wrightsville Beach. This misguided pattern of spending continued until Jim Osberg, the state director of the mental hospital system, ordered that private charities affiliated with state mental hospitals cease all spending that benefits employees rather than patients. “Effective immediately and until further notice, monies from foundations associated with a state facility may not be used to fund activities for facility employees, including continuing education or continuing medical education travel, registration fees, per diems, or other related activities," wrote Osberg on October 15, 2008.
Foundation Staff
The Cherry Foundation reports no employee compensation. According to the Foundation’s website, the organization is managed by three Cherry Hospital staffers, each of whom volunteers five hours per week to manage the Foundation. According to the Division of Mental Health, limited volunteer activities like these are sanctioned for state employees.
The Foundation does not publish its Board of Directors’ list.
Foundation Assets
According to their most recent tax return, the Cherry Foundation ended 2007 with net assets totaling $49,195. But it’s operating at a deficit, with expenses exceeding revenues by $5,185, and the Foundation’s reported spending is attributed entirely as “aid to mentally disabled citizens,” though virtually all funds were used for Cherry Hospital staff travel and perks. The annual budget for the Foundation hovers at around $50,000 per annum.
Summary
In September, regulators warned that Cherry Hospital was in danger of losing its certification, including federal Medicare & Medicaid funding, due to failures in patient safety. It was the hospital’s second warning, and ultimately, that federal funding was lost – leaving North Carolina taxpayers to pick up an additional $10 million annually to cover the shortage. According to the Division of Mental Health, funds made available by public charities were sorely needed even before the hospital lost its federal funding, and those charitable funds are to be used for no purpose other than the enhancement of patient care. In this respect, the Cherry Foundation has failed miserably. Organizational leaders, at least some of whom volunteer their time at taxpayers' expense, would be wise to re-think their management practices, as grant-makers are likely to think twice before renewing their commitment to the Cherry Foundation.
Contact Information
Stefanie Bostic
Cherry Foundation
201 Stevens Mill Road
P.O. Box 1424
Goldsboro, NC 27533
Phone: (919) 731-3417
Website: http://www.cherryhospital.org/Cherry_Foundation.htm
For more on this issue, see the News & Observer special series Mental Disorder: The Failure of Reform.
