The above VERY SHORT video on PILOT (payment in lieu of taxes) gives a balanced view of of how cities and non-profits reconcile their somewhat conflicting financial needs. It must be remembered that government officials do possess the coercive power of PILOT and SILOT (service in lieu of taxes) programs. It is common practice to put people on Boards of Directors to help institutions make their way in the world, to safely navigate the turbulent seas of local politics. BUT, a quid quo pro is not acceptable. The extra staff that $500,000 could enable a hospital to hire might prevent someone's grandmother from falling out of bed and fracturing her hip or lying in bed in a pool of excrement, getting a massive decubitus ulcer
A March 25th 2019 article in the Baltimore Sun article in the Baltimore Sun points out that the University of Maryland medical system spent $500,000 for a hundred thousand copies of Mayor Catherine Pugh's self-published Healthy Holly book series. This is an unprecedented number of such self-published books and incredibly suggestive of private inurement and self-dealing to a member of the medical system's own board of directors. The fact that she returned $100,000 for the last twenty thousand books which had not yet been written is more an admission of guilt to my mind then a mitigating factor. The worst part of the scandal is that the books we're supposed to be distributed to the Baltimore schools and at least 50,000 copies are unaccounted for. By approving this expense, the Board of Directors seems to have failed in one if not all three of its fiduciary See our slide deck on Board Duties
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An article in the Baltimore Brew briefly outlines a seeming failure in corporate governance by the University of Maryland Medical System (UMMS). Baltimore is a city with many positives and challenges and UMMS is a great institution with many brilliant surgeons and physicians and smart, dedicated nurses, and other associates. Nevertheless, its Board of Directors seemed to have failed in its fiduciary responsibility. In 1984, it declared itself no longer a state agency but the Board is apparently still appointed by the Governor, creating patronage opportunities. It is a Nonprofit Tax Code Designation: 501(c)(3)
Boards of directors have a fiduciary responsibility of care, loyalty, and obedience. Care means they must prepare themselves (do their due diligence) to make decisions on behalf of the corporation. Loyalty means that they must avoid conflict of interest and put the corporations needs over their own. Obedience means that they must follow all ethical and legal requirements as well as the firm’s Articles of Incorporation, bylaws, policies, and procedures. With regard to the duty of care , questions arise about whether buying these books for $500,000 was based on a needs assessment and did it fit in with the institution's strategic plan, was there a bidding process, and were there internal controls to insure that the books got into the hands of the children. Was there a process to evaluate the programs efficacy. Did it change behavior? With regard to the duty of loyalty, was conflict of interest avoided, was the institution's well being given paramount consideration over that of the board members? We would say not, even if the mayor had recused herself. This infusion of such a large amount of cash into the hands of the mayor at the time she was reportedly buying a house could have been anticipated to pose a reputational risk to the institution.
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