Month: June 2015

Non-Profit Governance: The Fiduciary Duties of the Board of Directors

In any corporation, the Board of Directors plays a critical role in the success of the business. In nonprofit corporations, the Board of Directors takes on additional importance. Nonprofits, unlike their for-profit counterparts, do not have shareholders. Therefore, the Board of Directors, in addition to being responsible for making all the major policy decisions, is the primary body that holds the organization accountable for achieving its goals. For a nonprofit Board to do its job well, the directors need to have a firm understanding of their fiduciary duties to the organization. A fiduciary duty is the legal duty to act solely in another party’s interests – in this case, the interests of the corporation. Fiduciary duties are broadly divided into two distinct duties: the duty of care and the duty of loyalty. The duty of care requires a director to act in a reasonable and informed manner and to discharge his or her duties in good faith. A director must also exercise independent judgment when making decisions on behalf of the organization. In making their decisions, directors may rely on information and opinions provided by certain trusted advisors, but only if the directors believe the advisor is reliable and competent and their reliance is in good faith. The duty of loyalty requires a director to act in the interest of the organization, rather than in the director’s personal interest...

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Non-Profit News: The Walmart Foundation Under Fire

In a complaint filed with the IRS on Monday, a group of labor and community organizations allege that the Walmart Foundation has been behaving in ways that violate its tax-exempt status. Specifically, they allege that the Foundation has been channeling donations and grants into cities where, at the same time, Walmart is trying to gain approval to open stores. They argue that this pattern of donations amounted to a form of lobbying and that it created “more than an incidental benefit” for Walmart. The complaint cites Los Angeles as one example of this pattern: In 2008 and 2009, the Foundation donated around $200,000 to organizations in the LA area. In 2011, as Walmart was beginning plans to open a store in LA, donations totaled $1.4 million. In 2013, the year the store opened, donations returned to the $200,000 level. The complaint also alleges that the Foundation may have denied grants to organizations that opposed Walmart stores or encouraged grantees to support efforts to open Walmart stores. IRS rules prohibit 501(c)(3) non-profits from operating for the private benefit of individuals or companies. If the IRS finds the allegations to be true and determines that the Foundation’s activities substantially benefited its for-profit sibling, the Foundation’s tax-exempt status could be at risk. However, it may be a difficult case to make. Many large corporations have nonprofit foundations, and the charitable works of...

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Health Care Alphabet Soup: HIEs: Exchanging Information…or Insurance?

The world of health care is a veritable stew of acronyms and abbreviations. Two concepts that have been getting a lot of press coverage lately also, unfortunately, have the same acronym: HIE. HIE could be a Health Insurance Exchange… or a Health Information Exchange. So close, and yet so different. Health Insurance Exchanges This kind of HIE, also known as health exchanges or health insurance marketplaces, are familiar to most of us by now. The Patient Protection and Affordable Care Act of 2010 requires that most individuals have health insurance coverage or pay a penalty. The insurance exchanges were created to facilitate the purchase of health insurance plans for those individuals who don’t have health coverage through their jobs, Medicare, Medicaid, or another source. Individuals can also receive subsidies for their health insurance costs by purchasing the plans through the exchanges. Fourteen states established and run their own marketplaces, while individuals in the remaining states purchase their health insurance through the federally-run marketplace, healthcare.gov. Healthcare.gov made its infamous debut on October 1, 2013, and coverage under the marketplace plans began January 1, 2014. Health Information Exchanges The more complicated of the two HIEs is the Health Information Exchange. In simple terms, a health information exchange is a secure electronic method of exchanging patient medical records among health care providers. It allows providers to view a patient’s integrated medical history,...

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HIPAA Equality: Lawyers are Business Associates, Too

If you’re a covered entity or a business associate, then you’re aware (I hope) of the importance of the Business Associate Agreement (BAA) and you’re constantly monitoring your list of BAAs to make sure you have one with all the necessary parties. However, easily forgotten from the BAA list are the very people drafting the BAAs for you: the lawyers. As a refresher, all Covered Entities must have a BAA in place with each of their Business Associates – which, post-HITECH, is a lot more people. A Business Associate is any individual or entity that creates, receives, maintains or transmits PHI to provide services for a Covered Entity – regardless of whether the services are related to health care services or whether the Business Associate will actually view the PHI. For example, companies that transmit or store PHI, such as cloud storage providers and Internet service providers, are Business Associates. All Business Associates, in turn, must have a BAA in place with each of their subcontractors who create, receive, maintain or transmit PHI on their behalf. A subcontractor is any person to whom a Business Associate delegates a function, activity or service, other than as a member of the Business Associate’s workforce. Lawyers who represent Covered Entities and Business Associates are themselves either Business Associates or Subcontractor Business Associates, respectively, if they will have any access to PHI in...

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