Most Board members understand that it is their responsibility to provide fiscal and programmatic oversight and guidance for the organization they govern; however, they are not always aware of some of the other areas that Board members should be involved with in order to properly oversee the organization they are involved in. These responsibilities can be performed at the Board level, or through a committee of the Board, such as a compliance committee, audit committee, or finance committee, as described earlier.
Corporate/ Medicaid Compliance
If your organization receives $500,000 or more in Medicaid funding, it is required to have in place a formal Medicaid Compliance Program. Even if you don’t receive Medicaid funding, but you receive funding from other government sources, you should still consider having in place a compliance program to ensure that the organization is properly complying with contract terms and regulations. This goes beyond a quality insurance function, and includes:
- Appointing a Medicaid/ Corporate Compliance Officer to oversee the Compliance Program;
- Educating the organization’s staff, Board members, and others regarding appropriate behavior and compliance;
- Providing staff members with the ability to report instances of non- compliance or fraud without fear of reciprocation;
- Developing a formal risk assessment and testing strategy; and
- Monitoring areas of non-compliance, developing corrective action plans, and self-reporting where necessary.
There should be regular (at least quarterly) reporting to the Board as to the status of the Compliance Program and findings, if any.
Pension Compliance
The U.S. Department of Labor (“DOL”) is stepping up the number of audits it is performing, it has added new rules increasing the fiduciary responsibility of plan sponsors, and the number of employee suits of plan sponsors is on the rise. It is important for the Board to understand the organization’s fiduciary responsibility and ensure compliance with DOL regulations. As part of its responsibilities, Boards should:
- Review with its investment advisors the investment choices to determine if investments are underperforming;
- Have the plan benchmarked to determine if fees paid by the plan are appropriate;
- Meet with your plan auditors (if your plan requires an audit) to determine if the plan is in compliance with DOL regulations; and
- Meet with your human resources staff to determine how plan compliance is being monitored.
Internal Controls
Most Boards believe that the internal control environment is the responsibility of management. While management is responsible for designing and implementing an effective control environment, it is the Board’s responsibility to ensure that the control environment is operating effectively. This can be accomplished by the Board reviewing controls (documentation of the control environment), hiring an internal auditor to test the control environment, and through discussion with external auditors.
Risk Analysis
Most organizations utilize insurance as a way to mitigate risk. Too often, however, no one is reviewing the organization’s insurance policies to determine if they are effectively mitigating risk for the organization. The Board should ensure that a proper evaluation of the organization’s insurances is properly being performed.
Executive Compensation
It is the Board’s responsibility to hire and evaluate the performance of the Chief Executive Officer, and in many instances, other key members of the management team. Formal evaluations should be performed, and compensation should be linked to such evaluation. Furthermore, in setting executive compensation, it is important to perform a salary study to determine if compensation is reasonable and supportable, given the compensation of other similar organizations in your marketplace. This is especially important, since many New York State funded agencies are subject to Executive Order 38, which puts certain limitations on how much executives can potentially earn.
These are just some of the main issues that should be of concern to Board members and discussed at Board meetings. The key is to understand how the organization you’re involved with operates and the issues that are impacting it and its industry. This will help ensure that you are making proper decisions in helping to mitigate risks and concerns and help move the organization forward.
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