Nonprofit Hospital Board Conflicts Give Bad Appearance

by Gary Snyder

Based on IRS data, it was found that nonprofit hospitals have representatives of corporations with which they do business on their boards of directors far more often than other nonprofits. In fact, in 2014, of the more than 2,300 nonprofit hospitals in the country, almost half (or 46 percent) had at least one trustee with business ties, direct or through a relative, to the hospital. This is a much higher proportion of trustees with potential conflicts of interest than in nonprofits as a whole—where the rate is seven percent.

The practice of doing business with board members is problematic for any number of reasons and should be avoided whenever possible. There is no absolute rule against such a setup, so long as there is proper disclosure and deals are at market rate, but the article points out that the potential for violating the public trust or creating the perception that there are private interests at play makes the practice far less than ideal.

At 270 of the hospitals reported on, the deals were worth at least $1 million each.

Some have banned engaging in business contracts with board members so that their community can have full confidence that the board was acting in the community’s best interest. The ban has posed no problem in recruiting the most qualified board members. (Wall Street Journal, (nonprofitquarterly.org)

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Charity Navigator, Vermont Public Radio, Miami Herald, National Public Radio (NPR), Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), “Betrayal”, (a movie), NBC (on Charity Fraud…TBD), FOX2, ABC Spotlight on the News, WWJ Radio, Marie Claire, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, Charity Navigator, The Chronicle of Philanthropy, St. Petersburg Times, Board Room Insider, USA Today Topics, Accountants News, Newsweek.com, Responsive Philanthropy Magazine, New York Times, Portfolio Magazine, The Virgin Islands Daily News, NANKAI (China) BUSINESS REVIEW, National Religious Broadcasters newsletter, The Charity Governance Blog, American Chronicle, Palm Beach Post, Detroit Free Press, Oakland Press, Nonprofit World, Socially Responsible Business Forum, PNNOnline, Ohio Nonprofit Resources, Nonprofit Good Practice Guide, Nonprofit Startup Guide, Nonprofit Blog, National Coalition of Homeless Newsletter, Finance and Administration Roundtable Newsletter, MichiganNonprofit.com, CORP! Magazine, Crain’s Michigan Nonprofit, ncrp.org, PhilanTopic, Nashville Free Press, Nonprofit Law Blog, Seniors World Chronicle, Carnegie Reporter, Assoc. of Certified Fraud Examiners Examiner, msnbc.com, Worchester (MA) Telegram and Gazette, Carnegie Corporation of America, EO Tax Journal, Wikipedia: Non-profit Organizations; Parent: Wise Austin, Accountants News, Veterans Today, Answers.com, Far-roundtable, #Nonprofit Report, nonprofithelpnews, nonprofit news; National Enquirer, Northwest Herald, The HelpWise Daily, The #Nonprofit Report, Wikipedia (Nonprofit Organization), Answers.com, Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)