The HRSA mandated board governance requirements, outlined in Chapters 13, 19, and 20 of the Compliance Manual (CM), provide structural guidance that health center governance boards must follow.  This guidance reflects the primary authority, oversight roles, and responsibilities that apply to all non-profits that receive the 501 (c) 3 designation.  It is understood that individuals who agree to serve as board members are volunteers who usually have full-time jobs and are not available to manage the daily operations of the non-profit organization.  This is the reason all non-profit governance boards hire the CEO as their only employee.   

Health center board members must navigate a delicate balance of power since they have ultimate authority over the health center while the CEO has authority for managing daily health center operations.  Successfully navigating this delicate balance of power requires that board members remain diligent in fulfilling their governance responsibilities.   

This due diligence comes down to three important things successful health centers do: 1) they are compliant with HRSA program requirements; 2) they understand how their board authority role helps to protect health center operations; and 3) they successfully navigate the power balance with the health center CEO.   Weaknesses in any one or more of these three areas can lead to fraud and possibly result in a health center closure.  Let’s look at a few examples! 

Conflict of Interest: 

Conflict of Interest (COI) is an area where non-compliance with HRSA requirements can lead to fraud. It is important to note that sometimes COI cannot be avoided if the service area is small and there is a reduced number of available options. That is why it is important to have a compliant COI policy.  A lot of fraudulent COI scenarios occur when board members prioritize individual financial interest to the detriment of the health center.  These scenarios can, and often do, include the participation of the health center’s CEO in developing fraudulent businesses and/or agreements.  

Organizational Charts: Personnel costs are the largest line-item expense in every organization’s budget and represents the single most vulnerable source of potential fraud.   Governance boards are not legally responsible for approving organizational charts.  However, it is considered good practice for the board to review and approve charts to ensure that personnel costs are not being inflated to include staff who do not exist. Inflating personnel costs is an effective way to obscure fraudulent activities that can sometimes be initiated by CEOs and their subordinate staff.  

Budget Approval: Governance board members are required to approve the HRSA Application Budget.  Approving the budget helps to prevent falsification of budget documents that are submitted to HRSA.  Approving the budget also helps board members to ensure that grant funds are only used for HRSA approved activities.  The reallocation of HRSA grant funds for non-HRSA approved activities constitutes fraud and could result in the loss of a health center’s grant.