What the public can and can’t know about Four Diamonds, beneficiary of Penn State THON’s fundraising

This story was produced by the State College regional bureau of Spotlight PA, an independent, nonpartisan newsroom dedicated to investigative and public-service journalism for Pennsylvania. Sign up for our regional newsletter, Talk of the Town.

STATE COLLEGE — For years, thousands of Penn State students have participated in a grueling philanthropic ritual: 46 hours of standing, dancing, and cheering to fundraise for children with cancer and their families.

The dance marathon, which takes place this weekend, and has received support from celebrities such as Khloé Kardashian, is the culmination of a yearlong effort by the student organization THON to solicit donations from across Pennsylvania and the United States.

The money students raise goes to Four Diamonds, a charity nested inside the Penn State system.

And while THON promotes the benefits for children and their families, Four Diamonds uses the majority of the money to fund research and related endowments.

Four Diamonds received criticism in the past for a lack of financial transparency, and began disclosing additional information in response. However, other parts of how the organization operates remain difficult to understand.

Four Diamonds funds Penn State endowments, but shares few details publicly about how it is managed. Gil Pak, operations director for Penn State Health Children’s Hospital Department of Pediatrics, told Spotlight PA the endowments are valued at $110 million.

In 2020, as part of its efforts to address allegations of “discriminatory practices,” THON pledged to release demographic information about who the charity helps. That effort has so far not materialized.

Because Four Diamonds is organized under the school, it does not file a 990 tax form. That means it does not have to disclose the salaries of top employees, total assets, liabilities, governance, and other information that would typically help the public understand how money is being used.

Penn State is already less transparent than other public universities due to a special exemption given to it by Pennsylvania’s open records law.

Todd Ely, an associate professor at the University of Colorado Denver who studies nonprofit financial management, told Spotlight PA that housing a charity within a public institution like a university can complicate the typical options for public transparency.

“That puts a bit of the responsibility on the organization itself to step up and make sure that they’re providing enough information that donors do have a clear picture of both how much money is being raised but also how those funds are being used,” he said.

Ahead of THON dancers standing all weekend, Spotlight PA sought to clarify the relationship between Four Diamonds and the university. The day before a scheduled interview with Spotlight PA, Four Diamonds and THON leaders canceled due to “changing schedules” and requested that questions be sent in writing. (You can read their full responses here.)

Spotlight PA analyzed Four Diamonds’ spending over the past 14 fiscal years, spoke with experts who study charitable finances, and sought information from Four Diamonds and THON about how they operate. Here’s what you need to know.

What is the relationship between Penn State, THON, and Four Diamonds?

Penn State students raise money throughout the year for THON, efforts that culminate in a 46-hour dance marathon held at the Bryce Jordan Center. During the event, THON announces how much money was raised for Four Diamonds, which THON says is the sole beneficiary of its efforts.

Last year, the group raised $14.5 million, according to a financial statement on its website. Donations provided to THON are routed through Penn State’s Office of University Development. The student-run organization does not pay wages or fees to the university or its employees to handle these gifts, the group said in a statement to Spotlight PA.

Penn State also handles donations sent directly to Four Diamonds, and oversees Four Diamonds’ finances.

What financial records are available for Four Diamonds?

Most charities file a 990 tax form, which publicly documents the salaries of top employees, total assets, liabilities, use of contractors, and more information about endowments.

Four Diamonds and THON self-report their financials each year. Four Diamonds often organizes this information under four categories: administrative costs, patient and family support, research, and endowments.

Four Diamonds does not disclose a list of donors. Suzanne Graney, the charity’s executive director, told Spotlight PA that university policy bars “the sale, rental or other public distribution of donor information.” However, with donor permission, some donors are listed on the donor wall at the children’s hospital, she said.

Pak said in a statement to Spotlight PA that Four Diamonds is included in annual financial audits conducted on Penn State and Penn State Health. The audits provide a broad look at finances and largely do not include details for individual programs such as Four Diamonds.

The CEO of Penn State Health and the dean of the Penn State College of Medicine have fiduciary and decision-making authority for Four Diamonds, Pak said.

Four Diamonds has an advisory board, consisting of donors and family representatives, but the board does not have decision-making powers, Graney told Spotlight PA.

Who is Four Diamonds helping?

To qualify for help from Four Diamonds, the children must live in Pennsylvania, receive cancer treatment at Penn State Health Children’s Hospital, and be younger than 22 years old, Graney said. Families do not have to make below a certain income threshold to receive funding. The charity has released information about the Pennsylvania counties where children reside.

In 2020, THON pledged to increase transparency around “the demographics of families and research that THON supports” as part of an effort to improve equity. Such information was not included in a subsequent transparency report from THON.

Four Diamonds does not track patient information, though the children’s hospital can provide anonymized data to Four Diamonds as part of research requests, Pak said. Pak declined to comment on why the organization releases information about primary residence counties but not other demographic information.

In a statement to Spotlight PA, THON said its leadership “has been in communication with our partners, Four Diamonds and Penn State Health Children’s Hospital, in hopes of sharing more broad demographic information about the families who THON supports.”

How is Four Diamonds spending the money?

From 2013 to 2022, Four Diamonds reported that between 85 and 95 cents of every dollar donated went to supporting its mission.

Spotlight PA analyzed Four Diamonds’ spending since fiscal year 2009 using impact reports on the Four Diamonds’ website, previous reports saved on the Internet Archive, and information provided by Four Diamonds.

In that time, Four Diamonds has spent $239.4 million. Spotlight PA’s analysis did not include money Four Diamonds marked as an annual reserve or emergency savings, which the organization twice reported in the spending category during the period reviewed.

From that $239.4 million, about 9% ($21.2 million) went to administrative costs; about 19% ($44.5 million) went to patients and families; about 33% ($80.4 million) went to research; and about 39% ($93.2 million) went to endowments.

“Thanks to the generosity of our community, our fundraising results have steadily increased year to year, making it possible for Four Diamonds to cover all patient costs and fund our researchers’ work into the search for cures,” Graney said.

Spotlight PA asked how Four Diamonds determines how much funding goes to long-term investments, like endowments, versus short-term spending, like providing money to families.

Pak said the organization follows an order of funding priorities — ensuring care for patients without them receiving a bill, maintaining access to resources beyond medical care, and funding research.

“The majority of gifts to Four Diamonds,” Graney added, “are unrestricted gifts, and we follow the written policy for an annual allocation process to direct the best use of those gifts.”

How does Four Diamonds fund endowments?

Endowments are assets, typically money, that an organization invests in order to use the income from that investment for a specific purpose. Organizations with endowments, especially those outside of higher education, are relatively uncommon, according to Ely, the professor who studies nonprofit financial management.

Four Diamonds funds endowments for Penn State Health’s Department of Pediatrics.

Pak said the endowments are valued at $110 million and that the dean of the College of Medicine makes spending decisions regarding them. Those investments generated $5.1 million in income in fiscal year 2022 and provide additional funding for Four Diamonds, Pak said.

The reported value of the endowments has more than doubled since 2014, when Four Diamonds told PennLive they were worth around $45 million.

Pak said that Penn State manages and makes investment decisions about the endowments. The Department of Pediatrics has one quasi-endowment, a designation that allows funds to be used for other purposes. In 2016, Four Diamonds replaced its annual reserve with the quasi-endowment, generating additional operational money and acting as a “financial safety net,” Pak said.

The remaining endowments are permanent restricted endowments, Pak said, which are funds that must be used in designated ways. The dean of the College of Medicine makes spending decisions for those endowments, according to Pak.

Four Diamonds did not answer Spotlight PA’s questions about the number, individual value, and names of the endowments it funds. Graney directed Spotlight PA to reports by Penn State’s Office of Investment Management, but such reports only report total figures of all of Penn State’s endowments. In Four Diamonds’ latest annual report, the organization did not specify the kind of endowment that was funded as it had in previous years, instead labeling the $2.1 million investment as “donor restricted.”

Based on Spotlight PA’s analysis, since fiscal year 2009, the charity has put money into at least eight endowments, such as nearly $22 million on an endowment for epigenetics — a strand of biology that studies how environmental factors affect genes — and a similar amount into an “Experimental Therapeutics” fund. A Four Diamonds impact report states the experimental fund helped recruit physician scientists to its research team.

THON is scheduled for Feb. 17-19 at the Bryce Jordan Center.

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