5 Areas Where Internal Controls Are Essential for Healthcare Grantmakers

An important part of building trust at a healthcare foundation is to create and sustain a culture that supports the effective, efficient, and ethical use of resources. The foundation earns the trust of hospital leadership by providing reliable information about what is going on with funds and charitable works. Healthcare grantmakers demonstrate trustworthiness to their communities by complying with all relevant laws and requirements. The good news is that all this trust-building activity is supported by strong internal controls. Internal controls are the documented processes, policies, and restrictions that make sure your organization adheres to those relevant laws. And they outline any repercussions if those processes or policies aren’t followed. Internal controls help healthcare foundations and community benefit organizations maintain the trust of their funders and more accurately prove their impact on communities. Here are five areas where internal controls are especially important for healthcare grantmakers.

1. Maintaining Confidentiality

Working in healthcare, you understand the importance of keeping personal information confidential, whether that is individual health information or the confidentiality of your grantees. You can establish role-based access to make sure only the people who need to see the information about a grantee or applicant can access those records. If you have multiple medical centers or hospitals that you oversee, you can create separate grantmaking environments to allow access to only applicable centers while you get a holistic view. This keeps data siloed to only the people who need to see it. Through your internal controls, you can make sure that all important information about grantees and applicants is in a secure location, like your grant management system—and not email or random folders on a shared drive. Your internal controls will show people where to store that information and have repercussions for people who don’t follow them. Confidentiality is also important with your whistle blower policies. These policies—backed by a culture of strong internal controls—are crucial to help mitigate risk. They should provide ways for individuals to come forward anonymously if they notice unethical behavior.

2. Adhering to Spending Requirements

Whether it’s funding from your hospital, from grants, or from individual donors, you need to show that funds were spent appropriately and based on their restrictions. A clear internal controls policy backed by strong fund accounting and grant management software ensures that each revenue stream was used for its intended purpose and in the specified timeframes. For example, if you have a grant for nutrition education, you can show that those grant funds were used as part of launching a community garden. With the right systems, you can implement spending controls, budget monitoring, and alert systems to prevent overspending and misallocation of funds. Your internal controls will outline what needs to happen if there are any deviations or exceptions from the spending requirements.

3. Proving Impact and Building Trust

You create and implement internal controls so you can maintain the trust of your stakeholders. This starts with establishing regular monitoring within the system to make sure funds are getting to the correct entities. Your controls may dictate that reports are run and emailed weekly to the CFO and Executive Director, or that leadership members have view-only access so they can review reports at any time. With a historical list of activities that take place in the system, you can verify that your internal controls are being followed. With strong internal controls and clear monitoring, you can detect errors or fraud quickly so it can be addressed immediately. You can always be “audit-ready” to demonstrate that your nonprofit hospital is performing a public benefit and earning your tax-exempt status. Your internal controls also apply to the organizations and programs you fund. The controls should outline the due diligence processes your reviewers follow to make sure grantees align to your mission. With all these controls in place, you can let people know about the great work you are doing. Create timely reports that showcase your transparency and integrity. Share these reports with stakeholders—both internal and external—quarterly, semi-annually, or annually.

4. Managing Conflicts of Interest

From your leadership to your board of directors, you want to make sure everyone is working towards the mission of the foundation. Conflicts of interest can call into question the work you are doing and the integrity of your organization. Your internal controls are key to recognizing and avoiding conflicts of interest. Use your controls to define what constitutes a conflict of interest and what should happen if a conflict arises. For example, is it a conflict of interest if one of your board members owns a PR firm and provides services at a below-market rate? Maybe not, if all members of leadership were aware of the decision and other organizations were considered as well. Strong internal controls will also establish separation of duties so no one person has undue influence on any of your processes. This includes the final say on grantees, as well as the person who signs checks and reconciles your general ledger.

5. Setting Clear Expectations

One of the most obvious benefits of strong internal control documentation is clear expectations. Your grantmaking staff know exactly what their role is and what to do if something doesn’t fit in with a traditional policy or procedure. Creating an accessible internal controls document and sharing it across the organization also enables you to have productive conversations about why these controls are in place. You can highlight the goals and mission of your healthcare foundation, and why the trust of your community is essential to your work. It allows you to lead with honesty and integrity to best improve the health of your community. It also helps you provide more efficient and effective delivery of the solutions that grantees value and makes their lives better.