When deciding whether to support expenses related to research, education and other business meetings, including direct payment or reimbursement for meals and refreshments, an NPC must consider multiple issues.

To assist NPC boards of directors and executive directors, NAVREF offers the following overarching guidance: First determine whether the purpose of the meeting makes it appropriate for NPC support. Then determine whether it is appropriate for the NPC to pay for or reimburse the associated costs, including meals or refreshments served during the meeting. Food must be incidental to the primary purpose of the occasion. All food expenditures should meet the test of what a reasonably prudent person would expect to spend for food commensurate with the occasion.

Background: NPCs looking for guidance on paying for meetings must navigate complex statutes and regulations to arrive at a coherent policy. In developing a policy, NPCs may wish to include review of the following:

• As private corporations exempt from taxation under IRC section 501(c)(3), NPCs are held accountable by the IRS regulations governing expenditures.

• OMB Circular A-122 governs whether certain costs are allowable for reimbursement under  federal grants to nonprofits.

• Subject to federal conflicts of interest regulations by statute, and working in close concert with VA and the VA employees who are the recipients, NPCs must be sensitive to the Standards of Ethical Conduct for Employees of the Executive Branch (5 CFR 2635)

• 38 USC 7361-7368 authorizes the NPCs to facilitate research and education at the affiliated VA medical center.

Briefly:

• The IRS allows nonprofits broad latitude in determining appropriate meeting expenditures. The primary considerations are that expenditures should be “reasonable” and properly documented. Additionally, the event must further the nonprofit’s tax-exempt purpose or must be directly related to its business operations. “Directly related” encompasses a broad range of activities from meetings and conferences to fundraising, and public relations. However, proper documentation of the business purpose of every event is essential. For IRS purposes, documentation should detail who participated, what the event was, where the event took place, why the event occurred and how much the event cost. IRS policy provides that such documentation must include receipts for any expenditure of $75 or more, but an organization may establish its own lower threshold.
  

• OMB Circular A-122 Cost Principles for Non-Profit Organizations establishes principles for determining reimbursable indirect and direct costs pursuant to federal grants, contracts and other agreements with non-profit organizations and identifies those that are “allowable” for reimbursement.  Although not all NPCs administer federal grants, the A-122 cost principles and “Selected Items of Cost” provide useful guidance on what the federal government considers appropriate event and meal expenditures involving federal funds.

In regard to meetings, the circular allows expenses for:

• Some, but not all costs associated with public relations events.

• Improvement of employee morale and performance consistent with the organization’s established practices.

• Meetings and conferences when the primary purpose is dissemination of technical information, or the general administration of the organization, provided that the costs are reasonable, consistent and documented.

• Employee recruitment.

Expenses for the following are not allowable on federal grants: Alcohol and “entertainment” including amusements, social activities and ceremonials. Whether an expense is allowable for reimbursement under a federal grant does not alone determine its propriety for an NPC.

• Federal ethics standards (5 CFR 2635) consider acceptance of food to be the same as receipt of a “gift” so the regulations pertaining to acceptance of gifts from outside sources apply to food as well (5 CFR 2635.201). The basic rule is that federal employees may not solicit or accept a gift that is given because of their official position or that is given by a prohibited source. A prohibited source is a person or organization that seeks official action by the employee’s agency; does business or seeks to do business with the agency; has activities that are regulated by the agency; or has interests that may be affected by the employee in the course of official duties.

The ethics standards provide a few exceptions for acceptance of gifts from prohibited sources. One provides that federal employees may accept gifts/meals with a value of $20 or less on a single occasion, but not more than $50 per year per prohibited source. This exception provides a safe harbor if there is any question whether the payer is a prohibited source. A second exception is that federal employees may accept meals offered in conjunction with “widely attended gatherings;” that is, meetings or conferences that are conducted for, and attended by, a mix of VA and non-VA personnel [5 CFR 2635.204(g)].

Meals are considered gifts, but refreshments that are not part of a meal have so little intrinsic value that they may be accepted without undue concern about who is giving them or why. As a result, federal employees generally may accept refreshments. However, gifts/meals should not be accepted from the same or different sources so frequently that a reasonable person may believe that employees are using their public offices for personal gain.  [The Office of Government Ethics web site at http://www.usoge.gov provides guidance about acceptance of meals and refreshments by federal employees.  A pamphlet called "Gifts from Outside Sources" provides concise information.]

VA General Counsel has determined that “there is a complementary, reciprocal relationship between the VA research corporation and the VA.“ As a result, generally “a statutory VA research corporation that is making a gift which is within its statutory power is not a prohibited source.” (UO61893 Acceptance of gifts from VA Research Corporations)

• 38 USC 7361-7368 authorizes the NPCs to facilitate research and education at the affiliated VA medical center. That is, funds may be expended to further VA's research and education missions generally. The only constraint on NPC expenditures included in the NPC authorizing statute is that an NPC may not expend funds for research projects or education activities unless they have been reviewed and approved by the facility R&D Committee or the Education Committee respectively.  Otherwise, by statute NPCs are subject only to those laws and regulations that apply generally to other private nonprofit corporations and regulations prescribed by the secretary of the Department of Veterans Affairs.

NPCs may support events that foster VA education and research in general as well as the business operations of the NPC itself. A documented research, education or business justification should be provided for all expenditures. In addition, when possible, expenditures also should be associated with specific research projects or education activities. However, many acceptable expenditures will be in support of research or education generally, or the overall management of the NPC.

At this writing, NPC support for meals and refreshments associated with business meetings and conferences is under unprecedented scrutiny. All NPCs are encouraged to review their policies and procedures in this area. NPCs should take immediate steps to ensure that such expenditures are consistent with the statutory purpose of the NPCs and applicable regulations.

Background

In early February, the IG informed DVA Secretary Anthony J. Principi about the results of an investigation of one NPC’s alleged misuse of funds. The secretary’s response was strongly worded, and he immediately convened a “review group” composed of his most senior officials to advise him on the steps needed to ensure that all NPC expenditures are proper. At this writing, we understand that everything is being considered, from IG audits of every NPC to development of explicit guidance on expenditures.

The IG investigation was prompted by a hotline call alleging misuse of funds by an NPC and resulted in IG review of two years of expenditures. The IG concluded that a number of expenditures were improper even though most nonprofits would consider many of them to be normal business expenses. NAVREF takes exception to three issues in the report:

1. Throughout, the IG holds that NPCs “exist solely to facilitate research projects and education activities (emphasis added).” This is an overstatement not supported by the NPC authorizing statute or the December 15, 2003 VHA memo which states, “Funds may also be expended to generally further VA’s research and education missions and/or to administer the corporation.” Consequently, some of the expenses the IG found improper were consistent with the broader statutory purposes of the NPCs.
   

2. The report maintains that OMB Circulars are not applicable to NPCs because in the IG’s view, the circulars are inconsistent with the “federal law specifically addressing VA nonprofit corporations.” In fact, the circulars are applicable as the basis for reimbursement under federal grants and OMB A-133 audits. However, circulars are not the only controlling regulations, and whether an expense is allowable for reimbursement under a federal grant does not alone determine its propriety for an NPC. In evaluating expenditures, NPCs must also consider the NPC statute, IRS regulations, federal ethics regulations and state laws. The narrowest guidance applicable to the situation should be applied.
   

3. The IG held the medical center director individually responsible for not ensuring that the NPC “furthered the interests of the Department” and recommended administrative action against the director. However, the principle of collective board responsibility is supported by federal and state law and it is inappropriate to single out a single individual for culpability.

NAVREF has discussed the IG report with senior VHA management, and is participating in efforts to persuade the secretary and others at the highest levels of VA management that IG audits of all the NPCs would not be productive. However, we expect that VHA guidance on appropriate expenditures and some audits may be forthcoming. In the meantime, NPCs are encouraged to consider the following recommendations.

NAVREF Recommendations

1. All NPCs should have explicit business meeting policies and enforce them rigorously. The executive director or designee should review all requests for reimbursement on the basis of policy and guidance established by the board.
   

2. NAVREF strongly advises against NPC support for:

• Entertainment in any form

• Holiday or retirement parties involving meals

• Anything that could be deemed social

• Meals for routine VAMC staff, committee or department meetings

• Meals for a single person or group of persons on such a frequent basis that it could create the appearance of using their official VA positions to derive a personal benefit

3. Even though a meeting with a research, education or NPC business purpose may be appropriate for NPC support, federal ethics regulations or local policy may make it inappropriate for VAMC employees to accept a meal offered in conjunction with the meeting. Consequently, there may be times when the NPC could pay for speaker expenses, AV and refreshments, but perhaps not for meals.
   

4. NPCs generally may pay for, and VA employees may accept, meals offered in conjunction with “widely attended gatherings” that are otherwise appropriate for NPC support; that is, research, education or NPC business meetings or conferences that are conducted for, and attended by, a mix of VA and non-VA personnel (5 CFR 2635.204(g).
   

5. The type of account that is the source of payment (project funds, residual funds or the NPC’s administrative overhead account) is irrelevant in evaluating the appropriateness of supporting a business meeting that may or may not involve paying for meals.
   

6. The argument “but the university would pay for this” is not in itself valid justification for NPC payment/reimbursement.
   

7. NPCs must ensure that the facility Education Committee reviews and approves all purely educational activities supported by NPC funds.

NAVREF is confident that the vast majority of NPC meeting and conference expenditures are reasonable and proper. However, now is the time for all NPCs to review local policies and ensure that expenditures fulfill the purposes for which NPCs are established - supporting VA research and education.

NAVREF encourages NPCs to assess their operations and suggests using the following as the basis for developing their own policy on meeting support.  This sample should be regarded as the minimum standard.  Individual NPCs may wish to add additional restrictions consistent with  local policy or the board's views on appropriate business meeting requirements.

ZZZ Support for Meetings and Conferences

Meetings, conferences, workshops, seminars, grand rounds, town halls, symposia, and other similar meetings are accepted features of conducting research and education. Additionally, certain events, such as retreats and board meetings as well as fundraising and public relations, are necessary for the conduct of business. Incidental to the business purpose of such meetings, it may be appropriate to serve meals or refreshments.

Various regulations, the federal ethics standards and the statute that authorizes ZZZ influence whether expenditures related to such events are appropriate for ZZZ support. Consequently, in order to be considered for ZZZ support by direct payment or reimbursement, ZZZ has established the following policy.

1. In order to be eligible for ZZZ support, a meeting must have a documented research, education or ZZZ business purpose. ZZZ will not support “entertainment” expenses such as social activities, parties, ceremonial occasions or those that provide amusement.

• For a research related meeting: A request for ZZZ support must include an explicit statement about the research rationale for the event; that is, its research related purpose and how it will further VA research. Accompanying documentation should include the program, agenda or topic of discussion and a roster of attendees. When appropriate, the request should tie the meeting to an approved research project.

• For an educational program not related to research: The education activity itself must first be approved by the VAMC Education Committee. Documentation should include an explicit statement of the purpose and how the program will further the VAMC’s and/or VA’s education and training mission, the agenda, program or topic of discussion, and a roster of attendees.

• For other ZZZ business events: A request must include an explicit statement of how the meeting will further the ZZZ’s ability to facilitate research and education. Appropriate events include, but are not limited to retreats and board, annual membership and investigator meetings as well as fundraising, and public relations. Documentation should include the purpose, agenda, program or topic of discussion and a roster of attendees.

2. The types of meetings that may be eligible for ZZZ support are too numerous to list and the characteristics of appropriate meetings may vary. However, factors that ZZZ will consider when evaluating a meeting for support include:

• Whether at least one speaker makes a research presentation or presents educational instruction.

• Whether there is a non-VAMC speaker and/or non-VAMC personnel are among the expected attendees. 

• The frequency of similar meetings that may involve the same personnel. Irregularly scheduled meetings and/or those that occur no more than monthly may be eligible for support; weekly meetings generally will not.

• Whether support is requested for routine VAMC staff, committee or department meetings.  Generally, ZZZ will not support meal expenses for such meetings.

• Whether the meeting involves at least one individual who is being recruited to conduct research or education at the VAMC.

• Whether the meeting lasts more than two hours or extends through a normal mealtime.

Regardless of the type of meeting, the documentation required in #1 above is a prerequisite for ZZZ support.

3. Requests for ZZZ support will be reviewed and approved by the individual designated by the board, generally the executive director or the executive director’s designee. ZZZ will provide direct payment or reimbursement for reasonable meeting costs based on submission of original receipts. In the event of disagreement, the request will be referred to a designated member of the board of directors or to the full board as appropriate.

4. ZZZ encourages meeting organizers to obtain pre-approval of ZZZ support for meetings. Such approval is not mandatory, but events lacking pre-approval may be denied support or may receive only partial support.