Comments made by Attorney General Marc Dann regarding Ohio’s nonprofit corporations at the annual conference of the Ohio Grantmakers Forum Friday October 19, 2007, were highlighted in Friday’s The Hannah Report.

It was reported that the Attorney General expressed concern with nonprofit hospitals regarding: (1) executive compensation, (2) travel reimbursement, (3) conflicts of interest, and (4) billing and collection practices.

The Hannah Report stated:

…Attorney General Dann said that holding nonprofits that abuse their status accountable through aggressive enforcement of Ohio laws governing charities' wise use of their assets, their following their fiduciary duties and their meeting their charitable goals is the best way to increase and enhance the public's trust and confidence in the nonprofit sector as a whole. … He said that, at this point, he is not yet sure whether current Ohio law is adequate to oversee the state's nonprofits.

"Regarding hospitals, The Hannah Report stated that the Attorney General noted that the IRS has begun to increase its oversight, however:"

…Dann said he has “specific regulator concern” about executive compensation and travel reimbursement and about whether tax exemption is appropriate - noting particularly those involved in health care and other economic activities. “The landscape has change dramatically since the current [regulatory] scheme was devised.”

Other concerns he mentioned were conflicts of interest and fair billing and collection practices for hospitals and health care agencies. He said he was looking at a way that "all charities could provide a 'community benefit report.'"

Additionally, The Hannah Report noted:

Over and over [Attorney General Dann] repeated the necessity for charity trustees and staff to understand their fiduciary duties including "duty of care;" whether there are policies in place addressing conflicts of interest of the members and disclosure; financial controls; hiring procedures; appropriate spending, investment and asset allocation; the conduct of meetings; and protection for whistleblowers.

Dann said there is also the duty to keep accurate financial records, develop an annual budget, establish internal accounting systems and finally, to comply with federal and state laws. This latter includes the tax laws and the portions of Sarbanes-Oxley that apply to charities.

These comments reinforce the continued increased scrutiny of nonprofit hospitals from both federal and state sources. Nonprofit hospitals should continue to review their corporate and governance activities to ensure compliance with applicable laws and work towards best practices when possible.

Information cited from The Hannah Report Vol. 127, No. 207, October 19, 2007, reproduced with permission.