Private Nonprofits, Public Funding: What Disclosure Is Required?


January 31, 2013; Source: Austin American-Statesman

When does government money make a nonprofit service provider no longer quite a nonprofit? How much money does it take before a nonprofit agency is all but an arm or outpost of government? Does the receipt of government funding imply that a nonprofit contractor or grant recipient ought to have some extra duties regarding transparency and public access?

In Travis County, Texas, home to the state capital of Austin, Central Health (a public agency) and Seton Healthcare Family (a private nonprofit) are combining forces to operate the Community Care Collaborative, a nonprofit. Central Health is a bit of an odd duck in the health care arena in that it is structured as a political subdivision of the State of Texas, separate from the governments of Travis County or the city of Austin. It levies taxes to pay for providing public health services to Travis County residents, charging property owners 7.8946 cents per $100 of valuation. Its business model reportedly includes contracting with other healthcare providers for services, though it does own the University Medical Center Brackenridge, a trauma center. Seton Healthcare Family is a network of facilities including five major medical centers, three rural hospitals, two community hospitals, and other venues, making it the largest community service organization in Central Texas.

The Collaborative is meant to provide an integrated system of healthcare delivery for people at or below 200 percent of the federal poverty level. The Collaborative would receive substantial resources through Medicaid predicated on its ability to achieve “cooperation, cost efficiency and better patient outcomes,” in the words of the Texas Tribune’s Becca Aaronson.

In what might be considered a misstep coming out of the gate, the Collaborative announced that the Travis County attorney had issued an opinion that because the Collaborative would be a nonprofit (unlike Central Health), it would not need to open board meetings to the public. Perhaps sensing the problem, Central Health’s president and CEO, Patricia Young Brown, immediately pledged to commit the new collaborative to “maximum transparency without impeding [its] operations.” Even without having any bylaws or a master agreement on how it will operate, the board of the collaborative immediately proposed to make six meetings a year open to the public.

How many meetings will the board of the collaborative have in toto? It isn’t known. The American-Statesman suggests that the collaborative could have as many as one a week in its early stages. In any case, because the collaborative is legally not obligated to hold any open meetings, there doesn’t seem to be any requirement regarding the content of the open meetings versus closed meetings, though Central Health’s Young Brown said that the budget would be set at a public meeting and the Collaborative, 51 percent controlled by Central Health, would follow the open records law.

The merger of two health systems, one of which was entirely public, opened up the issue of public access to the Collaborative’s deliberations. But the broader questions is this: when does a nonprofit, due to its receipt of public funds, merit being treated more like a governmental entity under a state’s public meetings and open records laws? Is there a tipping point? Is it a judgment call based on the politics of the situation, or should nonprofits always project their nonprofit identities against potential subjugation to governmental disclosure requirements?—Rick Cohen

  • donviejo

    From my long-term perspective as both a leader and consultant on nonprofits, I have found that the best way to protect the private nature of a nonprofit organization is to function “as if” it were a public organization in matters of openness and transparency.

    This concept of acting public in order to protect the private is often in conflict with the desire of many board members to keep many, if not all, deliberations private. That’s the executive director’s job: to move the board not only into an acceptance of openness but to one of welcoming openness.

    Having once lost a bitter court fight over opening the records of a private nonprofit, I learned that the battle was not worth it. Not only did legal fees hurt our budget, the very concept of private deliberations had a terrible impact upon our giving constituencies and resulted in serious unresolvable issues over what is public and what is private.

    My only suggestion to nonprofit leaders is to act public but think private. Such a stance will help avoid a lot of future political and public problems.

  • BBOW

    A great many charitable nonprofits derive the majority of their funding from government contracts and grants. Receiving funds for services provided, whether Medicaid or another government funding stream should not subject a nonprofit to any different standards. It is vital that they be able to maintain their independence and not be forced into becoming pseudo-governmental agencies–after all, there are reasons some things are better provided by nonprofits. Besides, it is not as if nonprofits are not carefully monitored and audited to ensure government funds are being expended correctly–often by multiple entities.

    Is this ever even a question or concern when a for-profit has large government contracts?