Healthcare Management Ethics - Conflicts of Interest In Fund Development

March 1994

Not-for-profit healthcare facilities, given their mission of improving their communities' health status, have long been regarded as worthy beneficiaries of philanthropic organizations. The noble act of giving on behalf of the community's health needs, as well as the reputation of the healthcare profession, merits an ethically sensitive approach to fund development. Well-meaning but ill-considered solicitation and donation of funds could be a conflict of interest, compromising the integrity of the enterprise it is intended to benefit.

A conflict of interest does not in itself necessarily entail a breach of obligation. Rather, it is a situation in which a person, acting on behalf of an organization, may be influenced by personal gain or advantage, financial or otherwise.

One important issue is the propriety of soliciting vendors with whom an organization has or may have a business relationship. Organizations that have profited from healthcare — for example, financial organizations, pharmaceutical companies, and manufacturing firms — might be well disposed to dedicating at least some of their philanthropy to the healthcare sector. Furthermore, fund developers cannot be faulted for regarding the companies with whom their organizations do business as "naturals" for fund development. Nevertheless, such solicitations create situations that could inappropriately influence decisions of healthcare professionals, who are rightly held to the highest standards of conduct in both law and ethics.

The Dilemma
Fund developers might encounter a number of circumstances that deserve careful scrutiny to ensure the integrity of their solicitation. For instance, a fund developer might call on a vendor at the same time that vendor is bidding a job with the fund developer's organization, or just after such a bid has been accepted. Even more specifically, although there is no relevant prohibition in the American Institute of Certified Public Accountants Code of Professional Conduct, one might question the propriety of soliciting or receiving a substantial gift from one's auditor, given the special nature of that professional relationship.

I believe that certain conditions must prevail for fund developers to ethically solicit one of their organizations' vendors. Fund developers need to work carefully with their organizations' finance and operating divisions to ensure that they have in place good business practices and clear guidelines concerning conflict of interest. Otherwise, a vendor may interpret a solicitation as a "downpayment" for acceptance of a bid or as an indication that the healthcare organization might be less inclined to rigorously evaluate the vendor's performance.

Guidelines for Dealing with Conflict of Interest
The objective of fund development is to solicit money to serve an organization's mission. Contributors should be motivated by that mission, which ultimately is to improve the health status of the community, and they should not expect or receive anything tangible in return for their gift.

The following guidelines may allay vendors' suspicions that donations are related to past or future business with the healthcare organization:

  • All substantial contracts (the amount may vary with the organization's contracting entity) should be competitively bid, and the organization must have and use objective criteria in evaluating those bids and making its selection.
  • The organization must have and use objective methods of evaluating a vendor's performance.
  • Before soliciting a vendor, a fund developer should know what business his or her organization has done, is doing, or may do in the near future with that vendor.
  • The organization's board should be apprised of all solicitations in which there is a conflict of interest.
  • Strict criteria should be in place, indicating how a vendor's contribution can be used and how the organization will communicate this use to the vendor.
  • All of the healthcare organization's employees having any financial interest in a company that is doing business with the organization should sign a conflict-of-interest statement identifying their relationship with the company.
  • The healthcare organization should have a policy prohibiting employees from accepting any item of substantial value and favor or hospitality that might influence decisions or actions affecting their organization.

Even when the above conditions are met, internal auditors must carefully monitor each situation to be sure that solicitation and receipt of charitable donations do not influence the healthcare organization in the awarding, evaluation, and renegotiation of business with a vendor, and that a vendor does not misinterpret a solicitation and feel compelled to make a donation. Materiality is a relevant principle in this regard. When a vendor's contract is a small portion of its business (e.g., less than 5 percent) and the vendor's gift is not a substantial portion of the contributions the organization receives (e.g., less than 5 percent), undue influence is probably not an issue.

Fund developers, cognizant that their organizations' financial assets are really those of the community they serve and desirous of maintaining integrity in all dimensions of the giving process, should find potential benefactors appreciative of their vigilance in addressing and preventing conflicts of interest.

 

Dr. Neale is vice president, advocacy and corporate ethics, Franciscan Health System, Aston, PA. She is a member of CHA's Task Force on Healthcare Management Ethics.

 

Copyright © 1994 by the Catholic Health Association of the United States
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