Community Health Network Misspends $1.2 Million Meant for Rural Health

July 7, 2011; Source: The Courier | The story of the Community Health Network based in Savannah, Tenn., is replete with charges of really bad behavior by the organization’s CEO.  Allegedly, the former CEO and the former assistant director pocketed some $90,000 in “unauthorized salary and benefits” as part of a total of $1.2 million that a state comptroller investigation revealed as “lost or misspent” over a three-year period. 

The fact that the nonprofit’s purpose was to provide medical technology to rural communities is particularly galling, as medical care issues in rural America are serious business. CHN’s program involved “a network of computer and video equipment that allowed doctors and nurses in remote health care facilities to transmit scans, images and test results to medical specialists in major medical centers hundreds of miles away,” linking over 100 rural clinics to 17 hospitals and clinics capable of providing specialist assistance. Because of distances to hospitals and providers, the importance of technology is self-evident. 

The audit charges that the CEO had an improper relationship with software vendors, the two officials “falsified grant invoices and grant reports,” “misused proceeds from a state grant to purchase unauthorized software,” and overbilled the state on another software purchase. 

The board chair,Jeffrey Mckissack, said he and his governing board colleagues “deeply regret . . . the breach of trust that occurred through the actions of its former CEO and [have] worked to ensure that a full accounting of the organization’s finances and operations has been made.”  Mckissack acknowledged that the organization faces a few financial challenges going forward.

Sorry, but something is missing in this story.  he pattern of deception and misspending revealed in the Courier story seems hard for a board of directors to have overlooked. A good chunk of the money came from the Tennessee Health Foundation, which one might have expected to keep a close eye on the uses of its philanthropic largesse. What was the board doing during the past three years? 

So often, these stories suggest not only senior staff improprieties, but a board that might have been asleep at the switch.—Rick Cohen

  • Judi Patrick

    I would like to propose a novel idea … that some amount of tension between executive director and board is a healthy dynamic. While no director wants a board of directors that micro-manages daily operations, a skilled executive director should embrace a board that keeps a close perspective on the organization’s programs, services and finances. Additionally, no skilled executive director should want a board of directors that is uninformed or detached from the organization’s operations. Such a board provides little input into the organization and little opportunity for healthy output from the organization … in fact, such a board is merely a “rubber stamp”.

    It is natural for the director to want to lead his/her organization in the direction they feel is best. However, none of us is as smart as all of us (as the saying goes), and the perspective of the board is often less subjective and more objective.

    Again, micro-management is not the board’s purpose. However, direction and oversight certainly are within the purpose of the board. It should be a red flag to any board if and when a director (or any executive staff) is providing only selevtive information or fails to provide complete programmatic or financial reports.

    No … I’m not on a nonprofit borad of directors. (Admittedly, I have been on a nonprofit board in the past.) I am the associate director for a nonprofit that has a board of directors that is both challenging and engaged.

  • rick cohen

    Dear Judi: Great to hear from you. I agree with you that many boards don’t provide the oversight and direction they should, many executive directors feed selective information to their boards with eye-droppers. To have a board that asks the ED hard, sometimes uncomfortable questions is really important. Too many boards are reluctant to do that, sometimes fearing micro-management, but I think the real reason is that that takes some real work on the board’s part. In my last executive director stint, I had one board member who chaired the finance committee and constantly asked excruciatingly uncomfortable and pointed questions about the organization’s finances–and I’m so glad she did, she was in the end the most important board member we had. And trust me, she was smarter than I was and she educated me about things that in the end were positive for the organization.