How Revenue is Spent at Hippocrates Health Institute (2023)

The Hippocrates Health Institute (HHI) is a tax-exempt, non-profit 501 (c) (3) that operates out of a 55-acre tropical setting in West Palm Beach, Florida that provides educational and instructional services to teach individuals how to live and eat healthier.  Specifically, HHI has been operating since 1987 and focuses on “transforming and optimizing health” through a vegan diet that emphasizes the benefits of raw food.  The cause is noble and commendable but the price to attend (estimated at about $5,000 per week) is not.

Key issues both historically and currently include the following:

• HHI has been managed by Brian and Anna Maria Clement, a husband and wife team who have historically taken large salaries (about $1.2 – $1.6 million collectively annually from 2015-2022).
• The board, according to the Form 990 has 6 directors, 3 of whom are independent.  The Form 990 (2023) also reports 7 board members, 4 of whom are related:  Brian Clement, Anna Maria Clement, Robert Clement, and Anna Helena Brigatta Brand.  The other board members are Solomon Gabbay, Shula Gabbay, and Julia Loggins.
• HHI has not historically had a CFO for an unknown reason and it is unclear if a CFO will be added to the organization.
• A glance at the balance sheet shows the organization had about $40 million in assets concentrated in real estate ($15 million:  the 55-acre property in West Palm Beach that HHI operates out of) and investments described as “other securities” ($15 million) which are primarily annuities, and other assets ($9 million) – primarily an asset referred to as “American National.”  American National is a company that offers annuities and insurance products.  It is important to point out that investing a large portion of a nonprofit’s assets in annuities is highly unusual and a high risk strategy as annuities generally do not align with the standard goals and fiduciary duties of a charitable organization.
• The Form 990 (2023) reports on Schedule O that the organization had previously made a financial investment, which it held for several years.  In 2024, it was discovered that the investment was part of a fraudulent scheme resulting in a $6.2 million loss.  HHI filed a suit against Principal Financial Group and Bank of America in June, 2024 alleging fraud.  According to public information, the suit(s) are still ongoing although the Form 990 reports HHI received a favorable judgement against the primary party involved although other suits are ongoing.  It is unclear if the fraudulent investment is the investments in other securities (the annuities) or the asset listed as American National.  No write down of assets was reported on the Form 990 in 2023 but will probably be reported on the Form 990 in 2024.
• Brian and Anna Marie Clement took a salary cut (from $800,000 each or $1.6 million collectively in 2022 to $200,000 each or $400,000 collectively in 2023).  However, the income statement reported a $1.9 million “contract labor” expense with no detail provided, that has not been on previous Form 990 expense statements.  It is unclear who received $1.9 million for contract labor services since any labor costs outside of employment should be reported under “Fees for Services” and “Independent Contractors.”
• On the Form 990, 3 separate line item expenses need to be addressed:

1. $900,000:  Fees for Services (Part IX, Statement of Functional Expenses): management fees of $550,000, accounting fees of $300,000, and legal fees of $50,000
2. $1,200,000:  Fees Paid to Independent Contractors (Part VII, Section B, Independent Contractors): 5 organizations received more than $100,000 in compensation:  $415,000 to Bioenergy Fields Foundation for contract services, $300,000 to Immunity IV for program services, $180,000 to Element 41 in Jackson, Wyoming for management (a search yielded no information on a company beyond that it is registered), $165,000 to Simplify of Lake Worth, FL for IT services, and $165,000 to Reliable Management Services, for maintenance and housekeeping).
3. $1,900,000:  Contract Labor (Part IX, Statement of Functional Expenses):  Contract labor costs are fees paid for labor outside of the organization or in other words independent contractors or fees for services.  No detail is provided for this expense.

• So, there is a discrepancy as Part IX reports $900,000 was used for Fees for Services  and $1.9 million for contract labor while Part VII reports $1.2 million was paid to 5 independent contractors.  Who received $1.9 million in contract labor fees? is the question that needs to be answered.

In 2023, the IRS Form 990 reported total revenue of $17 million (compared to $15 million in 2022, $17 million in 2021, $14 million in 2020 and $19 million in 2019), which came from 2 sources:

• $15  million:  Tuition and Services
• $ 2 million:  Government Grants (primarily), Inventory Sales, Other Income

Expenses totaled $16 million (including $800,000 in depreciation) which can be categorized in the following categories:

• $6.1 million (37% of revenue): Compensation
• $2.5 million (15% of revenue):  Office-Related Expenses
• $1.9 million (11% of revenue):  Contract Labor (no information provided)
• $1.5 million (9% of revenue):  Advertising and Promotion,
• $1,4 million (8% of revenue):  Travel, and Other Expenses
• $1.4 million (8% of revenue):  Supplies and Food
• $0.9 million (5% of revenue): Management, Legal, and Accounting Fees

At year-end the total net assets or fund balance was $34 million (note:  this may be adjusted downwards in 2024 by the investment loss).

As illustrated above, the largest expense ($6.1 million) is compensation for the 157 employees – compared to $7.5 million for 137 employees in 2022.  However, in 2023, $1.9 million in contract labor costs were reported  – and these are labor costs although it is unclear who these fees were paid to.

Based on the above information, every $100 in revenue was spent as follows:

 $100:  Revenue

-$ 37:  Compensation

-$ 11:  Contract Labor

-$  5:  Management, Bank, Legal, and Accounting Fees

-$  8:  Supplies and Food

-$  8:  Travel and Other Expenses

-$ 15:  Office-Related Expenses

-$  9:  Advertising and Promotion

-$ 93:  Total Expenses  

 $ 7:  Remaining Revenue:  To General Fund

For the client who paid $15,000 for a 3-week stay (or approximately $5,000 per week or $700 per day but the fees do vary depending on accommodations, programs, ,etc), the funds were spent as follows:

$15,000: Revenue

-$ 5,550: Compensation

-$ 1,650:  Contract Labor

-$   750: Management, Bank, Legal, and Accounting Fees

-$1,200: Supplies and Food

-$ 2,250: Office-Related Expenses

-$ 1,200:  Travel and Other Expenses

-$ 1,300: Advertising and Promotion

-$13,900:  Total Expenses

 $  1,100:  Revenue Remaining:  To General Fund

In summary, HHI is overseen by a Board of seven people, four of whom are related; 3 of whom are independent (although 2 appear to be married). The President (Brian Clement) and Vice President (Anna Maria Clement) are married and together received $1.2-$1.6 million in compensation annually from 2015-2022.  In 2023, their compensation was reduced to about $200,000 each but a $1.9 million expense for contract labor appeared on the income statement which is unexplained.  In addition, HHI reported a $6.2 million investment that was fraudulent and filed suit for fraud. HHI has not had a CFO.

An analysis of how each dollar is spent reveals that approximately $0.56 of every dollar is spent on staff, food and supplies, therapists and services. $0.37 of every dollar  is spent on administrative fees for services (management, bank, legal, and accounting), office-related expense , advertising, promotion, travel and other expenses.

To read the IRS Form 990 (2023), click here.