Noche de Gala: Big cost, big reward?
Published: Saturday, February 23, 2013 at 9:03 p.m.
Last Modified: Saturday, February 23, 2013 at 9:03 p.m.
Following the accidental death of their 3-year-old son, Sebastian, in October 2007, Horst and Luisa Ferrero received an $850,000 settlement from Shands HealthCare. In March 2008, the Ferreros announced that they would donate as much as $1 million to match donations for patient safety programs and to build a freestanding children's hospital at Shands that would bring pediatric services spread around campus under one roof.
After supporters held raffles, runs and other events to help raise the matching money, the Ferreros and board members decided to hold a gala event to raise the profile of the Sebastian Ferrero Foundation and its mission.
Noche de Gala quickly grew into the grandest and most elaborate event on Gainesville's social calendar, selling out that first fall of 2008 with 720 attendees under a large tent on the grounds of Tioga Town Center. The event was moved to the 642-acre Besilu Collection horse estate near Orange Lake the following year, where it has drawn more than 900 people each year to the black-tie event — last year costing $450 to $600 per ticket — with fine dining from Embers Wood Grill and national entertainment acts under a 24,000-square-foot main tent and other tents housing bars, a charity auction and a VIP section.
Since the gala's second year, Noche de Gala has cost the foundation between $440,000 and $515,000 per year, according to tax records, making it almost certainly the largest charity production in North Central Florida and among the largest in the state.
Those involved with the foundation say they have faced questions about the price and the pageantry of the gala — including from members of their own board — but to generate the level of support the foundation has received, they say they needed to make a big noise.
“We're not doing it for the pleasure of doing a big event. We're doing this to change the pediatric care for the next generations, for children, for families, for the next generation of doctors,” Horst Ferrero said in a recent interview. “Luisa and I started this as a legacy for Sebastian, but now it has become a project that has been fully supported throughout the state and throughout the community.”
That support has included both U.S. senators from Florida — Democrat Bill Nelson and Republican Marco Rubio — serving as honorary chairs, University of Florida President Bernie Machen and wife, Chris, serving as event chairs; and Benjamin and Silvia Leon, owners of medical centers and the horse farm, providing the venue and a substantial annual donation. UF basketball coach Billy Donovan selected the foundation for the Infiniti Coaches' Charity Challenge, with the foundation receiving $100,000 after Florida fans cast the most online votes in 2011, and again for the current challenge, with voting ending on Wednesday. Local media have provided hundreds of thousands of dollars worth of free advertising. About 200 people volunteer for the event every year, and 120 sponsors help fund the festivities.
The foundation's board includes Santa Fe College President Jackson Sasser, local business leaders such as John Spence and Richard Allen, radio personality Storm Roberts, doctors and Shands administrators.
“If we were doing a bake sale or something like that, we would not have the two senators from both parties working as honorary chairs,” Ferrero said.
“That's very powerful. Having two senators certainly has a big influence on decision-makers and a big influence on the perception of the effort, and the door has been opened for many other things.”
Shands created the Sebastian Ferrero Office of Clinical Quality and Patient Safety and hired a chief quality officer, but when the foundation began in 2008, Shands leadership said a freestanding children's hospital was not economically feasible at the time. After Dr. David Guzick arrived as president of the UF&Shands Health System in 2009, he led a process to bring scattered parts of various clinical programs together in the same facilities so that cardiovascular services — for instance — would be in one place, as would cancer, neurology, musculoskeletal and pediatrics.
That included plans to turn an existing facility into a 175-bed, four-story Shands Hospital for Children at UF. Shands started by renovating the pediatric cancer unit and has converted the former emergency room into a pediatric emergency department. It is starting renovations on the facade and lobby, to be followed by construction of an intensive care unit and a neonatal intensive care unit.
The project has an estimated cost of $130 million over five to seven years. And $50 million must come from private sources such as the Sebastian Ferrero Foundation. Ferrero said he hopes the foundation can provide about 20 percent of that, which would be $10 million.
The foundation has received more than $9 million from donations and proceeds from the gala and has donated $3 million to the children's hospital, with more pledged as Shands meets certain milestones.
The Ferreros — who own Tioga Town Center — have personally donated $2 million, with part of that to defray costs of the gala. The foundation also received a $5 million pledge from Gainesville native Craig Silverstein, who earned considerable wealth with Google. Silverstein was the first employee hired by Google's two founders and recently left the company after serving as its director of technology.
Silverstein's mother, Dr. Janet Silverstein, was the endocrinologist who ordered the test that set off a chain of events that led to Sebastian's death. The death was a result of a series of medical errors by Shands employees and a pharmacy. She serves on the foundation's board.
After announcing that the foundation was donating another $1 million to the children's hospital at the Sept. 29, 2012, gala, Luisa Ferrero said, “Tonight it's not about Noche de Gala or any one individual or any one foundation. Tonight serves simply as an annual reunion where we get together and enhance our commitment to children. The real work happens out there every day.”
Horst and Luisa Ferrero hail from Venezuela, where Horst worked as a corporate lawyer after earning a master's in international business law from American University in Washington, D.C. He later earned a master's of business administration from the University of Florida. Luisa — who is fluent in Italian, English, Spanish and French — studied international commerce in Venezuela and inherited a 62-store musical instrument family business. After she left the business, the Ferreros moved to Gainesville, where they partnered with the Diaz family in developing the Town of Tioga residential community and in particular the Tioga Town Center office and retail center.
Sebastian was born in 2004, the first of four boys.
In October 2007, while taking a test to see if he was a candidate for growth hormone therapy, he was given an overdose of the amino acid arginine and died within 48 hours. Shands later admitted to a series of medical errors in a news conference as part of the settlement.
“Instead of turning inward into our grief, we decided to launch an effort in his memory so our loss and our love for Sebastian will serve as a catalyst so no other child or family will have to ever suffer such a tragedy,” Horst Ferrero said. “We experienced back then firsthand how inadequate for families and children was the ER, which was then shared with adults, and how scattered were all the services around the campus.”
He said the easiest and cheapest thing to do would be to just write a check to Shands, “but it would not have created the impact and would not have served as the catalyst of the overall effort of advocacy and galvanizing the community.”
According to the foundation's Form 990 tax records, which are available for public inspection, the cost of the gala jumped from $59,000 during the first year at Tioga to $515,000 the next year, while gross receipts from cash contributions, ticket sales and a silent auction went from $316,441 in 2008 to $483,381 in 2009.
The cost dropped over subsequent years — $494,000 in 2010 and $492,000 in 2011, while gross receipts were $558,000 in 2010 and $505,000 in 2011.
The 2012 990 Form is not yet available, but according to the foundation, last year's event cost $440,000 and raised $1.2 million in revenue. However, the foundation counts non-cash in-kind contributions in its revenues. Subtracting the in-kind contributions of $380,000 would leave gross receipts of about $830,000 for the 2012 gala.
The vast majority of in-kind contributions — $350,000 — came from free advertising from local media, including $50,000 from The Gainesville Sun.
Although the IRS does not count in-kind contributions, Horst Ferrero said that is money the foundation did not have to spend on advertising to create awareness “that has been critical in moving us along in such a short period of time.”
According to the foundation, the costs of the 2012 event included $142,900 for production and decorations; $107,400 for rentals, mostly tents; $68,150 for food and beverages; $33,900 for the auction; $32,900 for marketing; $18,300 for entertainment; $17,000 for consultants; $11,455 for miscellaneous expenses; and $10,395 for sponsor benefits.
Of the $450 to $600 ticket price, $110 was considered the price of food and entertainment — a benefit received that is not tax deductible — while the rest was considered a tax-deductible donation.
Charity Navigator, a donor advocacy group, analyzed the foundation's latest available 990 report at the request of The Sun.
Sandra Miniutti, vice president of marketing, said Noche de Gala was woefully inefficient as of 2010 — as are many special events — but that the foundation overall was efficient.
“From what our research shows, special events, especially these kind of gala activities, tend to be woefully inefficient ways of raising money, at least on the face of it, but obviously charities still do them for a reason,” she said. “They do give them an opportunity to rub elbows with people who will perhaps make a substantial donation down the line.”
The foundation as a whole has sizable revenue for a young charity, with 71 percent spent on programs, 12 percent on administration and 17 percent on fundraising, Miniutti said.
“This is pretty good efficiency for a charity that is so young,” she said.
In 2010, the foundation commissioned a needs analysis of children's health care services conducted by SG-2 of Chicago at a cost of $118,000 to the foundation and consulting services by facility planners BDR Partners of Atlanta for $261,000, according to tax records.
Shands partnered with the foundation to split the costs of the needs analysis.
Guzick said in a recent interview that the study provided information Shands already had, but that it is not unusual for groups to want independent verification. He said the analysis also gave Shands and the foundation the opportunity to work together and discuss issues that confront a children's hospital.
The records also show that the foundation paid independent contractor Frankel Media Group between $244,000 and $284,000 per year for media services between 2009 and 2011 and paid event planner Keith Watson Productions $150,000 to $182,000 per year during the same time frame.
Frankel Media President Ryan Frankel said a lot of the expenses are pass-through costs to other vendors that Frankel Media handles for the foundation, such as printing brochures and producing videos.
Foundation accountant Bob Dale of Purvis, Gray and Company said the foundation paid what seems like a lot of money now for studies and consultants to raise awareness and create a basis for fundraising efforts and that those expenditures will become a small percentage of the overall effort over time.
He also cautioned that 990 forms provide information the IRS wants to know but does not provide a complete picture to the untrained eye.
For example, a requirement to subtract the value of food and entertainment from event gross receipts can make it look like events lost money, which he said causes a lot of heartburn for charities when the public reviews the records.
Overall gross receipts also include money that has been pledged but is not yet available to spend.
While Craig Silverstein pledged $5 million in 2009, that was contingent on Shands completing the pediatric ER, which was finished in 2011. And while a majority of the donation was recorded in the foundation's gross receipts for 2011, most of it was pledged to be spent over five years as Shands meets future milestones.
As a result, the 2011 tax form shows gross receipts of about $5.2 million, but the foundation reported that it took in about $1.8 million in revenue that year because that is all the cash it had on hand at that time.
Before pledging the donation, Silverstein commissioned Rockefeller Philanthropy Advisors to do a risk assessment of the children's hospital project. During this research, he decided not to donate the money directly to Shands but to the Sebastian Ferrero Foundation, according to a report from Rockefeller.
Since the pledge would not be enough to complete the hospital, “fundraising and planning to complete the project would take years and would require local knowledge and long-term commitment,” the report says. “In other words, he needed a passionate, competent local advocate who could sustain a campaign for the hospital.”
While most of the money was earmarked for the hospital, a portion was designated for foundation operating costs because “Mr. Silverstein believes that the ongoing performance of the Sebastian Ferrero Foundation is central to the success of the hospital campaign.”
Freddie Wehbe, who owns the Gator Domino's franchise, has served on the foundation board from the beginning. He said he hears all the time from people who disagree with the logic of spending so much money on the gala but said the awareness and brand recognition the foundation has raised for the children's hospital cannot be measured.
“I think the foundation needs to do a better job of explaining that,” he said.
“I think (the Ferreros) need to be commended, and I'll sit down with anyone who wants me to explain to them from a business standpoint what the returns are.”
He said a lot of people want to come to the gala to help the cause, while “half just want to have fun because it's become such a big event.”
Board member and businessman Rick Staab has the perspective of someone who also runs his own charity — Tyler's Hope for a Dystonia Cure, named for the first of two of his children diagnosed with the neuromuscular movement disorder.
Tyler's Hope holds a golf tournament and wine-tasting event to raise awareness and money for dystonia research while also benefiting from other organizations' fundraising efforts. Staab said he initially was one of those questioning the gala but has come to understand the enormity of what the Sebastian Ferrero Foundation is trying to achieve.
“You're not going to go after a children's hospital doing wine events and things like we do for fundraisers,” he said. “Otherwise it's elephant hunting with a BB gun.”
The Tyler's Hope golf tournament cost $47,452 in 2010 and raised $171,889.
A check of available 990 forms for other nonprofits in Alachua County showed that nothing quite compares to Noche de Gala.
Among the largest, Haven Hospice spent $120,840 for its Viva event in 2010 and raised $143,328. Stop Children's Cancer spent $77,712 for its 2011 Fantasy event and raised $223,629.
Among the more successful events, the UF Dance Marathon spent $46,648 in 2010 to raise $757,066 for Shands.
Events for local chapters of state or national organizations such as the American Heart Association Heart Ball, the Cystic Fibrosis Foundation Kickoff to a Cure or the Children's Home Society of Florida Puttin' On the Ritz were not among the top two fundraisers for the parent organizations and were not singled out in their 990 forms.
Around the state, several South Florida charities hold similar or larger events. The Miami Children's Hospital Foundation spent $385,416 on its Diamond Ball in 2011 and made $779,219. The New World Symphony spent $498,284 on its 2010 gala and took in $2.1 million.
The Boys & Girls Clubs of Broward County spent $929,409 and raised $3.9 million at its 2010 Concours D'Elegance in Boca Raton that included a dinner, hangar party, luxury car auction and car show over three days.
The Buoniconti Fund to Cure Paralysis in Miami spent $914,975 and raised $14.1 million at its 2010 sports dinner.
Even farther afield, the Robin Hood Foundation — the group that held the 12-12-12 Concert for Sandy Relief — spent $9.4 million and raised $39.4 million at its annual benefit dinner for New York poverty relief in 2011, an event that featured Lady Gaga, Tony Bennett and Kid Rock at Manhattan's Javits Convention Center.
Guzick said the Sebastian Ferrero Foundation is among several groups, individuals and events that have contributed to the children's hospital, including the Climb for Cancer Foundation, Stop Children's Cancer, the Dance Marathon and NASCAR. The biggest donor is the Children's Miracle Network, which has donated $17 million over five years.
Guzick said the Ferreros have been important advocates for the children's hospital and patient safety.
“I've been very appreciative in the way they've galvanized support for the vision,” Guzick said.
“There was a lot of skepticism,” Horst Ferrero said. “People couldn't believe that this was going to happen. They were not sure if they should dedicate their time and their money to this effort if it was just a dream. But we were able to demonstrate that that dream was possible and it was doable, but to do that we needed to create awareness and education, and we have to use tools like the media that we embrace, and we need to have platforms like Noche de Gala.”
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