GAO-06-907R Nonprofit Hospital Systems 

United States Government Accountability Office

Washington, DC 20548 

June 30, 2006

The Honorable William M. Thomas 

Chairman 

Committee on Ways and Means 

House of Representatives 

Subject: Nonprofit Hospital Systems: Survey on Executive Compensation Policies 

and Practices 

Dear Mr. Chairman: 

As a part of Congress’s continuing efforts to oversee the activities of the nonprofit 

sector, you asked us to review executive compensation issues at selected private, 

nonprofit hospital systems to gain an understanding of the policies and practices 

related to the salaries, benefits, travel, gifts, and entertainment expenses paid by 

these hospital systems. Our study’s key questions were as follows: 

• What corporate governance structure do selected hospital systems report as 

having in place over executive compensation? 

• What is the basis for the compensation and benefits earned by, awarded to, or 

paid to the executives as reported by selected hospital systems? 

• What internal controls do selected hospital systems report as having in place 

over the approval, payment, and monitoring of executive travel and 

entertainment expenses, gifts, and other perquisites? 

In answering our study’s key questions, we used the American Hospital Association’s 

AHA Guide (2005) to identify private, nonprofit hospital systems according to the 

number of staffed beds reported. We developed an electronic survey to gather 

information from selected hospital systems and administered the survey in two 

phases. In the first phase, we judgmentally selected 15 hospital systems considering 

geographic diversity. At least 1 hospital system was selected from each of the nine 

geographic regions, as defined by the Census Bureau. We briefed your staff on the 

results of our initial survey and, at your request, selected an additional 85 hospital 

systems to survey. The 15 and 85 hospital systems combined were the top 100 that 

we identified from the AHA Guide (2005). We revised our initial survey instrument 

based on responses received. We analyzed the survey responses to identify unusual, 

incomplete, or inconsistent responses and followed up with the hospital systems to 

the extent possible after considering any survey comments provided. We did not 

seek to validate the responses provided. 
Page 2 GAO-06-907R Nonprofit Hospital Systems

Our survey was not designed to draw any conclusions with respect to the adequacy 

or sufficiency of the policies, practices, or procedures of any individual hospital 

system or whether hospital systems are complying with applicable laws and 

regulations. Since we did not randomly sample from the entire population of private, 

nonprofit hospital systems, we could not generalize the results of our work to this 

population. We conducted our work from June 2005 through June 2006 in accordance 

with generally accepted government auditing standards. 

On June 5, 2006, we briefed your staff on the results of our work. This report 

transmits the briefing provided to your staff, as amended to reflect some additional 

observations (see Enclosure I). This report also includes a copy of the survey 

instrument with the number of responses to each question (see Enclosure II). 

Summary 

We received responses from 65 of the 100 hospital systems. The hospital systems 

reported similarities in certain governance and compensation policies and practices. 

For example, hospital systems commonly reported policies and practices such as 

• having an executive compensation committee or entire board with primary 

responsibility for approving executives’ base salary, bonuses, and perquisites; 

• having a conflict of interest policy that covers members of the executive 

compensation committee and compensation consultants; and 

• relying upon comparable market data of total compensation and benefits prior to 

making compensation determinations. 

With respect to perquisites and entertainment and travel expenses for their 

executives and the related internal control for these payments, the 65 hospital 

systems reported a range of practices. For example, hospital systems commonly 

reported that they provide for payment of automobile-related expenses as a 

perquisite to executives. They also commonly reported having written policies that 

cover business travel and entertainment expenses. However, hospital systems 

reported a mix of practices related to payment for other perquisites such as 

memberships in recreational and social clubs and audits of perquisites and 

entertainment expenses. 

_ _ _ _ _ _ _ _ _ _ _ 

As we agreed with your office, unless you publicly announce the contents of this 

report earlier, we plan no further distribution of it until 30 days from the date of this 

letter. At that time, we will send copies to the Ranking Minority Member of your 

Committee and other interested congressional committees. We will also make copies 

available to others upon request. In addition, the report will be available at no charge 

on GAO's Web site at http://www.gao.gov. 
Page 3 GAO-06-907R Nonprofit Hospital Systems 

If you have any questions about this report, please contact me at (206) 287-4809 or by 

e-mail at calboml@gao.gov. Contact points for our Offices of Congressional Relations 

and Public Affairs may be found on the last page of this report. Key contributors to 

this assignment include Kimberly Brooks (Assistant Director), Cindy Gilbert, Curtis 

Groves, Bret Kressin, Matt Michaels, Scott McNulty, and Terry Richardson. 

Sincerely yours, 

Linda M. Calbom 

Director 

Financial Management and Assurance 

Enclosures – 2 
Page 4 GAO-06-907R Nonprofit Hospital Systems

Enclosure I - Briefing on Survey Results 

1

Nonprofit Hospital Systems: Survey 

on Executive Compensation 

Policies and Practices

Briefing

Chairman, Committee on Ways and Means

House of Representatives
Page 5 GAO-06-907R Nonprofit Hospital Systems 

2

Contents

• Objectives, Scope, and Methodology

• Results in Brief

• Background

• Survey Results
Page 6 GAO-06-907R Nonprofit Hospital Systems

3

Objectives, Scope, and Methodology

The Chairman of the House Ways and Means Committee asked GAO to 

review executive compensation issues at selected private, nonprofit 

hospital systems, including the policies and practices related to the 

salaries, benefits, travel, gifts, and entertainment expenses paid by the 

hospital systems. The study’s key questions were as follows:

• What corporate governance structure do selected hospital systems

report as having in place over executive compensation?

• What is the basis for the compensation and benefits earned by, 

awarded to, or paid to executives as reported by selected hospital 

systems?

• What internal controls do selected hospital systems report as having in 

place over the approval, payment, and monitoring of executive travel 

and entertainment expenses, gifts, and other perquisites?
Page 7 GAO-06-907R Nonprofit Hospital Systems 

4

Objectives, Scope, and Methodology

• We used the American Hospital Association’s AHA Guide (2005) to 

identify private, nonprofit hospital systems according to the number of 

staffed beds reported. We identified 172 systems as private, nonprofit 

systems within the top 200 private or nonfederal governmental hospital 

systems (state or local) that we identified from the guide.

• We developed an electronic survey to gather information from selected 

hospital systems and administered the survey in two phases. Although 

the majority of survey questions were closed-ended, hospital systems 

were given the opportunity at the end of the survey to provide 

comments about any of the questions.
Page 8 GAO-06-907R Nonprofit Hospital Systems

5

Objectives, Scope, and Methodology

• In the first phase, we judgmentally selected 15 hospital systems from 

the list of 172 considering geographic diversity. At least 1 hospital 

system was selected from each of the nine geographic regions as 

defined by the Census Bureau.

• We briefed your staff on the results of our initial survey and, at your 

request, selected an additional 85 hospital systems to survey. The 15 

and 85 hospital systems combined were the top 100 from our list of 172 

systems. We revised our initial survey instrument based on responses 

received. 
Page 9 GAO-06-907R Nonprofit Hospital Systems 

6

Objectives, Scope, and Methodology

• We also followed up with the 13 hospital systems that responded during 

the first phase to obtain their responses to questions that were either 

added or modified from the initial survey. We provided an opportunity 

for the two hospital systems that did not respond during the first phase 

to respond during the second phase; one of these two ultimately did 

respond.

• We analyzed the survey responses to identify unusual, incomplete, or 

inconsistent responses and followed up with the hospital systems to the 

extent possible after considering any survey comments provided. We 

did not seek to validate the responses provided.
Page 10 GAO-06-907R Nonprofit Hospital Systems

7

Objectives, Scope, and Methodology

• Our survey was not designed to draw any conclusions with respect to 

the adequacy or sufficiency of the policies, practices, or procedures of 

any individual hospital system or whether hospital systems are 

complying with applicable laws and regulations.

• Since we did not randomly sample from the entire population of private, 

nonprofit hospital systems, we could not generalize the results of our 

work to this population.

• We conducted our work between June 2005 and June 2006 in 

accordance with generally accepted government auditing standards.
Page 11 GAO-06-907R Nonprofit Hospital Systems 

8

Results in Brief

We received responses from 65 of the 100 hospital systems. The hospital 

systems reported similarities in certain governance and compensation 

policies and practices. For example, hospital systems commonly reported 

policies and practices such as

• having an executive compensation committee or entire board with 

primary responsibility for approving executives’ base salary, bonuses, 

and perquisites;

• having a conflict of interest policy that covers members of the 

executive compensation committee and compensation consultants; 

and
Page 12 GAO-06-907R Nonprofit Hospital Systems

9

Results in Brief

• relying upon comparable market data of total compensation and 

benefits prior to making compensation determinations. 

With respect to perquisites, entertainment and travel expenses and 

related internal control for their executives, the 65 hospital systems 

reported a range of practices. For example, hospital systems commonly 

reported that they provide for payment of automobile-related expenses as 

a perquisite to executives. They also commonly reported having written 

policies that cover business travel and entertainment expenses. However, 

hospital systems reported a mix of practices related to payment for other 

perquisites, such as memberships in recreational and social clubs and 

audits of perquisites and entertainment expenses. 
Page 13 GAO-06-907R Nonprofit Hospital Systems 

10

Background

• The AHA Guide (2005) defines hospital systems as consisting of two or 

more hospitals owned, leased, sponsored, or contract-managed by a 

central organization, or consisting of a single, freestanding hospital that 

includes as members three or more owned or leased nonhospital health 

care organizations.

• Hospital systems are classified as “501(c)(3)” organizations exempt 

from taxation under 26 U.S.C. § 501(a) if (1) they serve a charitable 

purpose, (2) no part of their net earnings goes to the benefit of any 

private shareholder or individual, and (3) they do not participate in 

political campaigns for or against candidates or carry on propaganda or 

lobbying as a substantial part of their activities.
Page 14 GAO-06-907R Nonprofit Hospital Systems

11

Background

• The Internal Revenue Code (I.R.C.) and regulations provide a 

framework for nonprofit organizations regarding executive 

compensation and the travel and entertainment expenses paid for 

executives.

• I.R.C. prohibits the payment of excessive compensation and other

transactions that provide excessive economic benefit to executives

(I.R.C. § 4958).

• Regulations encourage organizations to have executive compensation 

arrangements approved in advance by members of an “authorized 

body” of the organization (such as the board), none of whom have a 

conflict of interest with respect to the transaction (Treas. Reg. § 

53.4958-6(a)).
Page 15 GAO-06-907R Nonprofit Hospital Systems 

12

Background

• Regulations also encourage but do not require organizations to take 

certain actions when determining compensation. Regulations provide 

that an organization has a “rebuttable presumption” that compensation 

is not an excess benefit transaction if an authorized body (1) approved 

the compensation arrangement in advance, (2) obtained and relied on 

appropriate data as to the comparability and reasonableness of the total 

compensation, and (3) documented the basis for its determination at the 

time it made its decisions (Treas. Reg. § 53.4958-6(a)).
Page 16 GAO-06-907R Nonprofit Hospital Systems

13

Background

• Recently, Congress has raised questions about the adequacy of 

oversight, reporting requirements, and overall governance of nonprofit 

and tax-exempt organizations.

• The Independent Sector, a group that represents nonprofit 

organizations, convened a Panel on the Nonprofit Sector and in 2005 

proposed actions to strengthen governance and accountability of 

nonprofit organizations. The panel made specific recommendations to 

promote better governance over executive compensation, including

proposals that encourage compliance with the “rebuttable presumption” 

regulations and better reporting on travel expenses.
Page 17 GAO-06-907R Nonprofit Hospital Systems 

14

Survey Results

The following pages summarize responses provided by the 65 hospital 

systems to selected survey questions.

• We did not obtain responses to every survey question from all 65

hospital systems either because the hospital systems did not provide a 

response and should have, or because the question did not apply to 

their circumstances. As a result, the response frequencies will not 

always total 65.
Page 18 GAO-06-907R Nonprofit Hospital Systems

15

Governance and Compensation Policies 

and Practices

Written Policies for the Executive Compensation Body

• 40 of the 65 hospital systems reported having written criteria for 

selecting members of the body that governs executive compensation; 

20 of the 40 reported that the criteria address the knowledge for 

members, 19 of the 40 reported that the criteria address the skills for 

members, and 21 of the 40 reported that the criteria address the

experience for members.

• All 65 of the hospital systems reported having a conflict of interest 

policy that covers members of the Executive Compensation Body, and 

they all reported that the policies require disclosure of potential 

conflicts.
Page 19 GAO-06-907R Nonprofit Hospital Systems 

16

Governance and Compensation Policies 

and Practices

Use of Outside Consultants to Advise on Compensation Matters

• All of the 65 hospital systems reported that the Executive 

Compensation Body can hire outside consultants to advise on 

compensation and benefit issues.

• 63 of the 65 hospital systems reported that the Executive 

Compensation Body has hired outside compensation and benefits 

consultants since January 1, 2004.

• 40 of the 65 hospital systems reported having a policy that requires 

compensation consultants to be free of any conflicts of interest.
Page 20 GAO-06-907R Nonprofit Hospital Systems

17

Governance and Compensation Policies 

and Practices

Practices Related to Compensation Determinations

• All of the 65 hospital systems reported that they rely upon comparable 

market data of total compensation and benefits prior to making 

compensation determinations for the CEO and 63 of the 65 hospital 

systems reported doing this for the other top four executives.1

• 64 of the 65 hospital systems reported that for the CEO, they 

documented the basis for compensation determinations at the same

time the determination was made, and 58 of the 64 responding hospital 

systems reported doing this for the other top four executives.

1The other top four executives are the four highest compensated executives other than the CEO.
Page 21 GAO-06-907R Nonprofit Hospital Systems 

18

Governance and Compensation Policies 

and Practices

Responsibility for Approving Top Executives’ Compensation

• Hospital systems reported that an Executive Compensation Committee 

or Entire Board is primarily responsible for:

• approving the CEO’s base salary—58 of the 65 hospital systems 

• approving the CEO’s bonuses—55 of the 65 hospital systems

• approving the CEO’s perquisites—59 of the 65 hospital systems
Page 22 GAO-06-907R Nonprofit Hospital Systems

19

Governance and Compensation Policies 

and Practices

Responsibility for Approving Top Executives’ Compensation

• Hospital systems reported that an Executive Compensation Committee 

or Entire Board is primarily responsible for:

• approving the other top four executives’ base salary—50 of the 65 

hospital systems 

• approving the other top four executives’ bonuses—50 of the 65 

hospital systems 

• approving the other top four executives’ perquisites—51 of the 65 

hospital systems
Page 23 GAO-06-907R Nonprofit Hospital Systems 

20

Governance and Compensation Policies 

and Practices

Deferred Compensation Provided to Top Executives

• 51 of the 65 hospital systems reported providing supplemental 

executive retirement plans (SERPs)2 to the CEO, and 50 of the 65

hospital systems reported providing SERPs to the other top four 

executives.

2SERPs are maintained by an employer primarily for the purpose of providing deferred compensation 

to a select group of management or highly compensated employees. For example, when an 

executive is limited to the amount that can be contributed to a 401(k) or similar plan because his or 

her salary exceeds the statutory limit for contributions, employers can add to SERPs, an amount 

equal to that which an executive would have contributed under the company’s 401(k) if not for the 

limits. SERP “accounts” are not funded in advance. When benefits are paid to an executive in the 

future, they are paid from the general assets of the employer.
Page 24 GAO-06-907R Nonprofit Hospital Systems

21

Governance and Compensation Policies 

and Practices

Deferred Compensation Provided to Top Executives

• 18 of the 65 hospital systems reported providing split-dollar life 

insurance3 plans to the CEO and to the other top four executives.

3In split-dollar life insurance policies, the employer and the covered executive ordinarily split the 

costs and benefits, sometimes unequally. In some cases, these policies can provide for death 

benefits up to four times base salary for survivor life insurance. Also, with split-dollar policies, the 

employer can pay close to 100 percent of the premiums, that earn interest and are not subject to tax. 

When an executive retires, the employer is repaid--without interest--for the amount it contributed in 

premiums. Treasury regulations provide guidance on, among other things, the taxation of these 

benefits.
Page 25 GAO-06-907R Nonprofit Hospital Systems 

22

Governance and Compensation Policies 

and Practices

Deferred Compensation Provided to Top Executives

• 55 and 54 of the 64 responding hospital systems reported providing 

457(b) plans for the CEO and the other top four executives, 

respectively.

• Hospital systems also reported providing 457(f) and 403(b) plans4:

• 33 of the 64 responding hospital systems reported 457(f) plans for 

the CEO, and 34 of the 65 for the other top four executives; and

• 45 of the 65 hospital systems reported 403(b) plans for the CEO,

and 46 of the 65 for the other top four executives.

4These plans are so named by the specific section of the Internal Revenue Code that provides 

guidance for the plans. These plans generally allow employees to defer wages for tax purposes. 

Each plan has its own features, including those related to contributions, distributions, loans, and 

rollovers.
Page 26 GAO-06-907R Nonprofit Hospital Systems

23

Governance and Compensation Policies 

and Practices

Severance Packages Provided to Top Executives

• 41 of the 65 hospital systems reported that since January 1, 2004, a 

person serving as CEO or in one of the top four executive positions 

has left the system.

• 2 of the 41 hospital systems reported that since January 1, 2004, 

they made a severance payment to a departing CEO who resigned, 

and 5 of the 41 hospital systems reported that they made a 

severance payment to one of the top four executives who resigned.

• 3 of the 41 hospital systems reported that since January 1, 2004, 

they made a severance payment to a departing CEO who was 

involuntarily terminated, and 20 of the 41 hospital systems reported 

that they made a severance payment to one of the top four 

executives who was involuntarily terminated.
Page 27 GAO-06-907R Nonprofit Hospital Systems 

24

Governance and Compensation Policies 

and Practices

Perquisites Provided to Top Executives and Related

Internal Control

• 55 of the 65 hospital systems reported that they provide for 

automobile-related expenses as a perquisite to the CEO.

• 21 of the 55 hospital systems reported having an internal audit since 

January 1, 2004 of automobile-related expenses for the CEO. Two 

other systems reported having an internal audit of automobilerelated expenses, but reported that they did not provide this 

perquisite to the CEO. These two systems provided an explanation

for this. See footnote “M” in the survey instrument (Enclosure II).
Page 28 GAO-06-907R Nonprofit Hospital Systems

25

Governance and Compensation Policies 

and Practices

Perquisites Provided to Top Executives and Related

Internal Control

• 52 of the 65 hospital systems reported that they provide for 

automobile-related expenses as a perquisite to the other top four 

executives.

• 21 of the 52 hospital systems reported having an internal audit since 

January 1, 2004 of automobile-related expenses for the other top 

four executives. Three other systems reported having an internal

audit of automobile-related expenses, but reported that they did not 

provide this as a perquisite to the other top four executives. Two of 

these systems provided an explanation for this; an explanation from 

the other system was not available. See footnote “M” in the survey 

instrument (Enclosure II).
Page 29 GAO-06-907R Nonprofit Hospital Systems 

26

Governance and Compensation Policies 

and Practices

Perquisites Provided to Top Executives and Related

Internal Control

• 45 of the 65 hospital systems reported that they provide for 

memberships in recreational or social clubs as a perquisite to the CEO.

• 19 of the 45 hospital systems reported having an internal audit since 

January 1, 2004 of memberships in recreational or social clubs for 

the CEO. Two other systems reported having an internal audit of 

these expenses for the CEO, but reported that they did not provide 

this as a perquisite to the CEO. One system provided an 

explanation for this; an explanation from the other system was not 

available. See footnote “N” in the survey instrument (Enclosure II).
Page 30 GAO-06-907R Nonprofit Hospital Systems

27

Governance and Compensation Policies 

and Practices

Perquisites Provided to Top Executives and Related

Internal Control

• 35 of the 65 hospital systems reported that they provide for 

memberships in recreational or social clubs as a perquisite to the 

other top four executives.

• 14 of the 35 hospital systems reported having an internal audit 

since January 1, 2004 of memberships in recreational or social 

clubs for the other top four executives. Three other systems 

reported having an internal audit of these expenses, but these 

three systems reported that they did not provide this as a perquisite 

to the other top four executives. One system provided an 

explanation for this; an explanation from the other two systems was 

not available. See footnote “N” in the survey instrument (Enclosure 

II).
Page 31 GAO-06-907R Nonprofit Hospital Systems 

28

Governance and Compensation Policies 

and Practices

Other Perquisites Provided to Top Executives

• 25 and 23 of the 65 hospital systems reported that they provide for 

financial or tax planning as a perquisite to the CEO and the other top 

four executives, respectively.

• 17 and 13 of the 65 hospital systems reported that they provide tax 

preparation as a perquisite to the CEO and the other top four 

executives, respectively.

• 7 of the 65 hospital systems reported that they provide for attorney 

fees as a perquisite to the CEO and the other top four executives.

• 13 and 8 of the 64 responding hospital systems reported that they 

provide for personal travel expenses for the spouse of the CEO and 

the other top four executives as a perquisite, respectively.
Page 32 GAO-06-907R Nonprofit Hospital Systems

29

Governance and Compensation Policies 

and Practices

Certain Perquisites Generally Not Provided to Top Executives

• 63 of the 65 hospital systems reported that they do not make loans or 

state law prohibits them from making loans to the CEO and the other 

top four executives; 2 systems reported that they make loans.

• 64 of the 65 hospital systems reported that they do not pay for 

automobile related expenses for spouses and family members of the 

CEO and the other top four executives; 1 system did not respond to the 

specific questions about paying for these expenses for spouses and 

family members.
Page 33 GAO-06-907R Nonprofit Hospital Systems 

30

Governance and Compensation Policies 

and Practices

Certain Perquisites Generally Not Provided to Top Executives

• 63 and 64 of 65 hospital systems reported that they do not pay for 

memberships in recreational or social clubs for spouses of the CEO 

and the other top four executives, respectively. Two systems did not 

respond to this question for the CEO, and 1 did not respond for the 

other top four executives.

• 64 of the 65 hospital systems reported that they do not pay for 

memberships in recreational or social clubs for family members of the 

CEO and other top four executives. One system did not respond to this 

question for the CEO, and 1 did not respond for the other top four 

executives.
Page 34 GAO-06-907R Nonprofit Hospital Systems

31

Governance and Compensation Policies 

and Practices

Entertainment Expenses for Top Executives

• 63 of the 65 hospital systems reported providing payment for 

entertainment expenses. Regarding sports events,

• 28 systems reported that they pay for the CEO to attend sports 

events, 34 reported that they do not pay, and 1 did not respond to 

the specific question about paying for sports events.

• 29 systems reported that they pay for the other top four executives 

to attend sports events, 33 reported that they do not pay, and 1 did 

not respond to the specific question about paying for sports events.
Page 35 GAO-06-907R Nonprofit Hospital Systems 

32

Governance and Compensation Policies 

and Practices

Entertainment Expenses for Top Executives

• 63 of the 65 hospital systems reported providing payment for 

entertainment expenses. Regarding holiday or other company parties, 

• 49 systems reported that they pay for the CEO and the other top 

four executives to attend holiday or other company parties, 13 

reported that they do not pay, and 1 did not respond to the specific 

question about paying for these expenses.
Page 36 GAO-06-907R Nonprofit Hospital Systems

33

Governance and Compensation Policies 

and Practices

Entertainment Expenses for Top Executives

• 63 of the 65 hospital systems reported providing payment for 

entertainment expenses. Regarding various off-site activities,

• 48 systems reported that they pay for the CEO to attend meetings, 

retreats, or other off-site activities involving trips to resort locations 

or private, exclusive clubs. Fourteen systems reported that they do 

not pay and 1 did not respond to the specific question about paying 

for these types of expenses. For the other top four executives, 46 

systems reported that they pay for these expenses, 16 reported they 

do not, and 1 did not respond to the specific questions about paying 

for these types of expenses.
Page 37 GAO-06-907R Nonprofit Hospital Systems 

34

Governance and Compensation Policies 

and Practices

Entertainment Expenses for Top Executives 

• 63 of the 65 hospital systems reported providing payment for 

entertainment expenses. Regarding theatre performances, 

• 17 systems reported that they pay for the CEO to attend theatre 

performances, 45 reported that they do not pay, and 1 did not 

respond to the specific question about paying for these types of

expenses.

• 16 systems reported that they pay for the other top four executives 

to attend theatre performances, 46 reported that they do not pay, 

and 1 did not respond to the specific question about paying for these 

types of expenses.
Page 38 GAO-06-907R Nonprofit Hospital Systems

35

Governance and Compensation Policies 

and Practices

Entertainment Expenses and Related Internal Control

• 63 of the 65 hospital systems reported providing payment for 

entertainment expenses. Of those 63 systems:

• 56 systems reported having a written policy covering entertainment 

expenses. 55 and 53 of the 56 reported that the policy describes the 

documentation necessary to support business entertainment 

expenses for the CEO and the other top four executives, 

respectively.
Page 39 GAO-06-907R Nonprofit Hospital Systems 

36

Governance and Compensation Policies 

and Practices

Entertainment Expenses and Related Internal Control

• 63 of the 65 hospital systems reported providing payment for 

entertainment expenses. Of those 63 systems:

• 60 systems reported that the CEO’s entertainment expenses are 

reviewed after being incurred, 1 reported that they are not reviewed, 

and 2 did not respond to the specific question about reviews of 

these expenses for the CEO.

• 59 systems reported that the other top four executives’ 

entertainment expenses are reviewed after being incurred, 2 

reported that they are not reviewed, and 2 did not respond to the 

specific question about reviews of these expenses for the other top 

four executives.
Page 40 GAO-06-907R Nonprofit Hospital Systems

37

Governance and Compensation Policies 

and Practices

Entertainment Expenses and Related Internal Control

• 63 of the 65 hospital systems reported providing payment for 

entertainment expenses. Of those 63 systems:

• 39 and 40 systems reported having an internal audit since January 

1, 2004, of entertainment expenses for the CEO and one or more of 

the other top four executives, respectively.

• 9 and 7 systems reported having an external audit (separate from

the annual financial statement audit) since January 1, 2004, of 

entertainment expenses for the CEO and one or more of the other 

top four executives, respectively.
Page 41 GAO-06-907R Nonprofit Hospital Systems 

38

Governance and Compensation Policies 

and Practices

Travel Expenses and Related Internal Control

• 62 of the 65 hospital systems reported having a written policy covering 

travel expenses for the CEO and other top four executives. Of those 62 

systems:

• 59 systems reported that their policy describes what are legitimate 

domestic business travel expenses for the CEO and the other top 

four executives, and 3 systems reported that their policy does not.

• 61 and 62 systems reported that their policy describes the 

documentation necessary to support domestic business travel 

expenses for the CEO and the other top four executives, 

respectively. One system did not respond to the question for the

CEO.
Page 42 GAO-06-907R Nonprofit Hospital Systems

39

Governance and Compensation Policies 

and Practices

Travel Expenses and Related Internal Control

• 64 of the 65 hospital systems reported that the CEO’s and other top 

four executives’ travel expenses are reviewed after being incurred. 

One system did not respond to the specific questions about reviews of 

these expenses.

• 40 and 41 of the 65 hospital systems reported having an internal audit 

since January 1, 2004, of travel expenses for the CEO and one or

more of the other top four executives, respectively.

• 10 and 9 of the 65 hospital systems reported having an external audit 

(separate from the annual financial statement audit) since January 1, 

2004, of travel expenses for the CEO and one or more of the other top 

four executives, respectively.
Page 43 GAO-06-907R Nonprofit Hospital Systems 

Enclosure II - Copy of Survey Instrument with Number of Responses for Each Question 

U.S. Government Accountability Office

Survey of Nonprofit Hospital Systems

1

Introduction 

The U.S. Government Accountability Office (GAO), an 

independent congressional agency, is examining issues 

related to executive compensation at tax-exempt hospital 

systems. We initiated this work based on a request from 

the Chairman of the Congress’s House Ways and Means 

Committee, who asked that we obtain information from 

some of the country’s largest nonprofit hospital systems 

regarding (1) the governance structure that exists at these 

hospital systems over executive compensation, (2) the 

basis for compensation and benefits earned by, awarded 

to, or paid to hospital system executives, and (3) the 

types of internal controls that exist at these hospital 

systems over the approval, payment, and monitoring of 

executive travel, entertainment, gifts, and related audits. 

This survey is not designed, and we do not intend, to 

draw any conclusions with respect to the adequacy or 

sufficiency of the policies, practices or procedures of any 

individual hospital system or whether these systems are 

complying with applicable laws and regulations. 

Frame of Reference 

All questions should be answered from the perspective 

of the hospital system and its executives, not any 

subsidiary. 

The hospital system refers to the separate legal entity 

that serves as a parent company for all of the entities that 

comprise the hospital (or health care) system. Therefore, 

the executives of any subsidiary are excluded unless an 

executive is also an executive of the system. Further, in 

the context of a survey question, hospital system means 

collectively the institution and members of the board and 

management who have responsibility or who have been 

delegated authority over matters addressed by the 

particular question. 

All questions that ask whether or not something occurred 

should reflect those events that have occurred since 

January 1, 2004. Unless otherwise stated, all other 

questions should reflect the conditions that exist at the 

time this survey is being completed. 

Instructions for Completing This Questionnaire 

Most of the questions in this survey can be answered 

easily by checking boxes F or filling in blanks, which 

are highlighted in yellow. Unless otherwise noted, 

please mark only one response for each question. A few 

questions require short narrative answers. Please note 

that these blanks expand to fit your answer. Additional 

comments may be written at the end of the 

questionnaire. 

3⁄4 Please use your mouse to navigate throughout the 

survey by clicking on the field or check box you 

wish to answer. Do not use the “Tab” or “Enter” 

keys as they may cause formatting problems. 

3⁄4 To select a check box, simply click on the center of 

the box. 

3⁄4 To change or deselect a response, simply click on 

the check box and the “X” will disappear. 

Deadline 

To assist us, we ask that you complete and return this 

survey by April 21, 2006. Please return the completed 

questionnaire via e-mail by simply saving this file to 

your computer desktop or hard drive and attaching the 

file as part of your e-mail message reply to Bret Kressin 

at kressinb@gao.gov.

If you or your staff have any questions, please contact: 

Kimberly Brooks, Assistant Director 

(202) 512-9038 

BrooksK@gao.gov

or

Scott McNulty, Analyst-in-Charge 

(202) 512-9184 

McnultyS@gao.gov

Respondent Information 

Please provide the following information for the 

individual coordinating the completion of this 

survey so we may contact them to clarify any 

responses, if necessary.

Name: 

Title: 

Hospital System: 

Taxpayer ID #: 

Telephone Number: ( ) - , Ext: 

E-mail Address: @ 
Page 44 GAO-06-907R Nonprofit Hospital Systems

Definitions for terms used in this survey:

Executive Compensation Body – refers to the hospital system’s board of directors, executive compensation

committee, finance committee, board or board committee chairperson, or other appropriate authorized body or person

of the hospital system with primary responsibility for compensation matters.

CEO - the Chief Executive Officer or one who has another title and who is the highest level person with executive

management responsibly.

Other Top Four Executives - the four most highly compensated executive officers of the hospital system other than

the CEO.

Salary –base cash salary earned and non-cash compensation awarded, earned or paid.

Incentive Bonus – all types of bonuses or awards (cash and non-cash) earned or paid based on company or individual

performance (short- or long-term).

Severance – amounts earned upon the resignation or any other termination of employment.

Other Compensation – all other forms of compensation and benefits, including such things as supplemental life

insurance premiums, earnings on deferred contributions, and long-term incentive awards.

Perquisites – all types of perquisites, such as automobile allowances and leases, personal use of company aircraft,

financial planning, tax planning and tax return preparation (including estate taxes), reimbursements for payment of 

taxes, attorney fees, personal travel expenses, memberships in recreational or social clubs or other.

Entertainment - activities that may occur at theaters, country clubs, athletic clubs, night clubs, restaurants, sporting

events, trips to resort locations, holiday or other company parties, and that may include meals and other activities as

defined in Section 1.274-2(b) of Chapter 26 of the Code of Federal Regulations.

Governance Policies and Practices

1. Are there written criteria for selecting members of the Executive Compensation Body?

40 Yes

25 No Æ If you do not use written criteria to select members of the Executive Compensation Body,

 what is used for selection? A Æ SKIP TO QUESTION #3 

A

 Hospital systems provided comments that (a) criteria exist for selection of Board members who are then assigned to

committees, (b) the Executive Committee of the Board serves as the Executive Compensation Body, and (c) the Executive

Compensation Committee is comprised of the Board Chair and either Board Chairs of member hospitals or Chairs of Board

committees.

2
Page 45 GAO-06-907R Nonprofit Hospital Systems 

2. Do the written criteria for selecting members of the Executive Compensation Body address the following

factors?

Yes

T

No

T

a) Knowledge? 20 20

b) Skills? 19 21

c) Experience? 21 19

3. Is either the CEO or one of the Other Top Four Executives a voting member of the Executive Compensation

Body?

11 Yes Æ Please list each person by name and title:

54 No

4. Since January 1, 2004, has the CEO attended Executive Compensation Body meetings when his or her own

compensation was being discussed? B

 0 Yes

65 No

5. Since January 1, 2004, have any of the Other Top Four Executives attended Executive Compensation Body

meetings when their own compensation was being discussed?

 1 Yes

64 No

6. Does your hospital system have a conflict of interest policy that covers members of the Executive

Compensation Body? Note: Such a policy could include one that exists specifically for the members or one that

exists for all Board Members who may serve on the Executive Compensation Body.

65 Yes

 0 No Æ SKIP TO QUESTION #8

B

 Hospital systems provided comments that the CEO may be present during Executive Compensation Body meetings to

provide input on such things as the performance of other executives, but the CEO is excused from a meeting when the

CEO's compensation is to be discussed. 

3
Page 46 GAO-06-907R Nonprofit Hospital Systems

7. Does your hospital system’s conflict of interest policy that covers members of the Executive Compensation

Body ...

Yes

T

No

T

a) require disclosures of potential conflicts of interest? 65 0

b) outline conditions when members must recuse themselves from particular discussions? 59 6

c) provide guidance on what may constitute a conflicting situation? 62 3

8. Within your hospital system, which entity or person has primary responsibility for reviewing and approving all

transactions between the hospital system and disqualified persons as defined by 26 USC § 4958(f) and related

regulations? Note: If multiple entities or persons have primary responsibility, please check the last item, list or 

describe. Mark one response _ for each subquestion.

12 Entire Board

18 Executive Compensation Committee

1 Chairperson of the Board

1 Chief Executive Officer

33 Other entities or persons Æ please list or describe: C

9. Can the Executive Compensation Body hire outside consultants to advise on compensation and benefit issues?

65 Yes

0 No

10. Since January 1, 2004, has the Executive Compensation Body hired outside compensation and benefits

consultants?

63 Yes

2 No

C

 Hospital systems cited various individual or multiple committees. These committees included Executive, Finance, Audit,

Ethics, Conflict of Interest, and Contract Approval. Hospital systems also cited individuals such as the Chief Compliance

Officer, Business Practices Officer, and executives in charge of various departments or functions.

4
Page 47 GAO-06-907R Nonprofit Hospital Systems 

11. To whom do the following entities report? Note: If multiple entities or persons have primary responsibility, please

check the box in the last column, list or describe. Mark one response _ for each subquestion.

Entire Board

T

Executive

Compensation

Committee

T

Chairperson

of the Board

T

Chief

Executive

Officer

T

Other Entities or Persons (list or

describe)

T

a) Outside

compensation and

benefits

consultants?

2 49 0 1 13Æ ( )

b) Outside legal

advisors? 4 24 0 5 32Æ ( )D

c) Other outside

advisors? 5 22 0 4 27Æ ( )E

12. Does your hospital system have a policy that requires compensation consultants to be free of any conflicts of

interest?

40 Yes

25 No

D

 Hospital systems cited the general counsel. E

 Hospital systems reported that it varied depending on the situation in which the advisor was engaged.

5
Page 48 GAO-06-907R Nonprofit Hospital Systems

Compensation Policies and Practices

REMINDER: All questions that ask whether or not something occurred should reflect those events that have occurred

since January 1, 2004. Unless otherwise stated, all other questions should reflect the conditions that exist at the time this

survey is being completed.

13. Within your hospital system, which entity or person has primary responsibility for each of the following

policies regarding executive compensation? Note: If multiple entities or persons have primary responsibility,

please check the box in the last column, list or describe. Mark one response _ for each subquestion.

Entire Board

T

Executive

Compensation

Committee

T

Chairperson

of the Board

T

Chief

Executive

Officer

T

Other Entities or Persons

(list or describe)

T

a) Developing

compensation

policies?

2 37 0 2 24Æ ( )F

b) Approving

compensation

policies?

18 40 1 0 6Æ ( )

c) Evaluating

compensation

policies?

4 49 0 1 11Æ ( )

d) Overseeing the 

application of

compensation

policies?

3 39 1 4 17Æ ( )

F

 Hospital systems cited the executive responsible for human resources in conjunction with either the CEO or the

Executive Compensation Body.

6
Page 49 GAO-06-907R Nonprofit Hospital Systems 

14. Within your hospital system, which entity or person has primary responsibility for the following roles

regarding the goals and objectives on which incentive bonuses are based? Note: If multiple entities or persons

have primary responsibility, please check the box in the last column, list or describe. Mark one response _ for each

subquestion.

Entire Board

T

Executive

Compensation

Committee

T

Chairperson

of the Board

T

Chief

Executive

Officer

T

Other Entities or Persons (list or

describe)

T

a) Developing goals

and objectives? 0 16 0 20 26Æ ( )G

b) Approving goals and

objectives? 12 37 1 3 10Æ ( )

c) Evaluating goals and 

objectives? 2 41 0 4 15Æ ( )

d) Overseeing the 

application of goals

and objectives?

4 29 0 9 21Æ ( )H

15. Which entity or person within your hospital system has primary responsibility for each of the following with

respect to the CEO? Note: If multiple entities or persons have primary responsibility, please check the box in the 

last column, list or describe. Mark one response _ for each subquestion.

Entire Board

T

Executive

Compensation

Committee

T

Chairperson

of the Board

T

Other Entities or Persons (list or

describe)

T

a) Approving the CEO’s salary 20 38 1 6Æ ( )

b) Approving the CEO’s bonuses 17 38 0 8Æ( )

c) Approving the CEO’s perquisites 19 40 0 5Æ( )

d) Approving the CEO’s severance

package 21 35 0 7Æ( )

e) Approving the CEO’s other

compensation 19 40 0 5Æ( )

G

 Hospital systems commonly cited multiple members of the executive management team, such as the CEO, Executive Vice

President, Chief Operating Officer, and the executive in charge of human resources. One hospital system reported that their

Strategic Planning Committee had this responsibility; another system reported that goals and objectives are developed by

the entire Board, the Executive Compensation Body and the senior executive team.

H

 Hospital systems reported that numerous committees and management share this responsibility.

7
Page 50 GAO-06-907R Nonprofit Hospital Systems

16. Which entity or person within your hospital system has primary responsibility for each of the following with

respect to the Other Top Four Executives? Note: If multiple entities or persons have primary responsibility, please

check the box in the last column, list or describe. Mark one response _ for each subquestion.

 Entire Board

T

Executive

Compensation

Committee

T

Chairperson

of the Board

T

Chief

Executive

Officer

T

Other Entities or Persons

(list or describe)

T

a) Approving the Other Top Four 

Executives’ salaries 7 43 0 11 4Æ ( )

b) Approving the Other Top Four 

Executives’ bonuses 7 43 0 9 4Æ ( )

c) Approving the Other Top Four 

Executives’ perquisites 10 41 0 11 3Æ ( )

d) Approving the Other Top Four 

Executives’ severance packages 11 40 1 11 2Æ ( )

e) Approving the Other Top Four 

Executives’ other compensation 8 44 0 9 4Æ( )

Note: Questions 17a through 17c pertain to when the CEO or Other Top Four Executives were either hired, or the

last time their employment contracts were renewed.

its CEO?

all of its Other Top Four

Executives?

17. With respect to compensation that was earned by,

awarded to, or paid to the CEO and the Other Top Four

Executives (regardless of when the initial compensation

determination was made), did the hospital system:

Yes

T

No

T

Yes

T

No

T

a) approve the compensation arrangement prior to the

effective date of employment contract or renewal for... 63 2 60 4

b) rely upon comparable market data of total compensation

and benefits prior to making its compensation

determinations for...

65 0 63 2

c) document the basis for its compensation determination at 

the same time as the determination was made for... 64 1 58 6

8
Page 51 GAO-06-907R Nonprofit Hospital Systems 

18. Which entity or person within your hospital system has primary responsibility for each of the following tasks

with respect to the CEO? Note: If multiple entities or persons have primary responsibility, please check the box in 

the last column, list or describe. Mark one response _ for each subquestion.

Entire Board

T

Executive

Compensation

Committee

T

Chairperson

of the Board

T

Other Entities or Persons (list or

describe)

T

a) Evaluating the CEO’s

performance 17 28 7 13Æ ( )

b) Recommending adjustments to

CEO’s salary based on their

evaluations

4 46 5 10Æ ( )

c) Recommending adjustments to

CEO’s incentive bonus based on 

their evaluations

3 47 3 10Æ ( )

d) Approving adjustments to CEO’s 

salary based on evaluations 21 37 2 5Æ ( )

e) Approving adjustments to the 

CEO’s incentive bonus based on 

evaluations

19 37 1 6Æ ( )

9
Page 52 GAO-06-907R Nonprofit Hospital Systems

19. Which entity or person within your hospital system has primary responsibility for each of the following tasks 

with respect to the Other Top Four Executives? Note: If multiple entities or persons have primary responsibility,

please check the box in the last column, list or describe. Mark one response _ for each subquestion.

Entire Board

T

Executive

Compensation

Committee

T

Chairperson

of the Board

T

Chief

Executive

Officer

T

Other Entities or

Persons (list or

describe)

T

a) Evaluating the Other Top Four 

Executives’ performance 0 6 0 58 1Æ ( )

b) Recommending adjustments to

Other Top Four Executives’

salary based on their evaluations

0 6 0 55 3Æ ( )

c) Recommending adjustments to

Other Top Four Executives’

incentive bonus based on their

evaluations

0 5 0 52 6Æ ( )

d) Approving adjustments to Other

Top Four Executives’ salary

based on evaluations

5 40 1 16 3Æ ( )

e) Approving adjustments to the 

Other Top Four Executives’

incentive bonus based on 

evaluations

6 40 0 11 6Æ ( )

CEO

Any of the Other Top

Four Executives

Yes

T

No

T

Yes

T

No

T

20. Since January 1, 2004, has the CEO or any of the Other

Top Four Executives received compensation from any

party related to either the hospital system or its

affiliates?

4 61 5 60

Incentive and Bonus Programs

CEO

Any of the Other Top

Four Executives

Yes

T

No

T

Yes

T

No

T

21. Does your hosptial system provide guaranteed bonuses

to the CEO or any of the Other Top Four Executives

regardless of their performance? 3 61 0 64

10
Page 53 GAO-06-907R Nonprofit Hospital Systems 

CEO

Any of the Other Top

Four Executives

Yes

T

No

T

Yes

T

No

T

22. Does your hospital system provide incentive bonuses that

reward the CEO or any of the Other Top Four

Executives for achieving certain performance goals or

objectives?

57 8 59 6

IF YOU ANSWERED “NO” TO BOTH PARTS OF

QUESTION #22, SKIP TO QUESTION #26;

otherwise, continue ...

CEO

Any of the Other Top Four

Executives

23. What is the method for calculating

incentive bonuses?

Yes

T

No

T

N/A

T

Yes

T

No

T

N/A

T

a) Percentage of salary only 40 6 3 42 6 1

b) Another method, please describe: 23 8 7 23 8 6

CEO

Any of the Other Top Four

Executives

Yes

T

No

T

N/A

T

Yes

T

No

T

N/A

T

24. Are minimum performance targets set

under which no incentive bonuses, 

regardless of how calculated, would be 

paid?

56 1 2 58 1 0

CEO

Any of the Other Top Four

Executives

Yes

T

No

T

N/A

T

Yes

T

No

T

N/A

T

25. Are maximum performance targets set

over which such incentive bonuses, 

regardless of how calculated, would be 

capped?

55 2 2 57 2 0

11
Page 54 GAO-06-907R Nonprofit Hospital Systems

Benefit Programs and Perquisites

CEO

Any of the Other Top

26. Does your hospital system provide the following Four Executives

nonqualified deferred compensation plans to its CEO or 

any of the Other Top Executives? Yes

T

No

T

Yes

T

No

T

a) Excess retirement benefit plan 15 50 15 50

b) Supplemental executive retirement plan (SERP) 51 14 50 15

c) Split-dollar life insurance plan 18 47 18 47

d) Section 457(b) plan 55 9 54 10

e) Section 457(f) plan 33 31 34 31

f) Section 403(b) plan 45 20 46 19

g) Other (please specify) 13 36 12 36

CEO

Any of the Other Top

27. Does your hospital system make severance payments to Four Executives

departing CEOs or any of the Other Top Four

Executives in the following situations?

Yes

T

No

T

Yes

T

No

T

a) Resignation (for any reason) 6 59 6 59

b) Involuntary termination 61 4 60 5

c) Change of corporate control events 41 24 37 28

d) Other (please specify) I 16 30 12 34

28. Has your hospital system had anyone in the CEO or Other Top Four Executive positions leave since January 1, 

2004?

41 Yes

24 No Æ SKIP TO QUESTION #30 

I

 The hospital systems cited numerous other situations when severance payments are made to executives, such as a

substantial change in duties, death, disability, and breach of compensation payment obligation.

12
Page 55 GAO-06-907R Nonprofit Hospital Systems 

Departing CEO

Any Departing Other

Top Four Executives

29. Since January 1, 2004, did your hospital system make

severance payments to departing CEOs or any of the

Other Top Four Executives in the following situations?

Yes

T

No

T

Yes

T

No

T

a) Resignation (for any reason) 2 38 5 35

b) Involuntary termination 3 37 20 21

c) Change of corporate control events 0 40 1 39

d) Other (please specify) 2 30 3 30

CEO?

Any of the Other Top

Four Executives?

Yes

T

No

T

State law

prohibits

T

Yes

T

No

T

State law

prohibits

T

30. Does your hospital system make loans to its

CEO or any of the Other Top Four Executives?

Note: Answer “State Law Prohibits” if state law

prohibits nonprofit organizations from making

loans to executives and the hospital system does not

make such loans.

2 53 10 2 54 9

IF YOU ANSWERED “NO” or “STATE LAW

PROHIBITS” TO BOTH PARTS OF QUESTION #30, 

SKIP TO QUESTION #36; 

otherwise, continue ... 

CEO

Any of the Other Top

31. Since January 1, 2004, has your hospital system Four Executives

made loans to its CEO or any of the Other Top

Four Executives for the following purposes?

Yes

T

No

T

N/A

T

Yes

T

No

T

N/A

T

a) Purchasing a home 020020

b) Purchasing investments or making equity

contributions in for profit entities affiliated with the

hospital system

020020

c) Purchasing investments in entities not affiliated with

the hospital system 020020

d) Other reasons, please list: 020020

13
Page 56 GAO-06-907R Nonprofit Hospital Systems

32. Which entity or person within your hospital system has primary responsibility for each of the following with

respect to the CEO? Note: If multiple entities or persons have primary responsibility, please check the box in the 

last column, list or describe. Mark one response _ for each subquestion.

Entire Board

T

Executive

Compensation

Committee

T

Chairperson

of the Board

T

Other Entities or Persons

T (please describe)

a) Approving loans to the CEO 001 1Æ( )

b) Monitoring the repayment of loans

made to the CEO to ensure

accountability

000 2Æ( )

c) Approving the forgiveness of loans

made to the CEO 011 0Æ( )

33. Which entity or person within your hospital system has primary responsibility for each of the following with

respect to the Other Top Four Executives? Note: If multiple entities or persons have primary responsibility, please

check the box in the last column, list or describe. Mark one response _ for each subquestion.

Entire Board

T

Executive

Compensation

Committee

T

Chairperson

of the Board

T

Chief

Executive

Officer

T

Other Entities or Persons

T (please describe)

a) Approving loans to the Other Top 

Four Executives 0101 0Æ ( )

b) Monitoring the repayment of loans

made to the Other Top Four

Executives to ensure

accountability

0001 1Æ ( )

c) Approving the forgiveness of loans

made to the Other Top Four

Executives

0101 0Æ ( )

the CEO?

any of the Other Top Four

Executives?

Yes

T

No

T

N/A

T

Yes

T

No

T

N/A

T

34. Since January 1, 2004, has your hospital

system forgiven any loans owed by ... 110110

35. Since January 1, 2004, has your hospital

system refused to accept any loan payments

owed by ... 020020

14
Page 57 GAO-06-907R Nonprofit Hospital Systems 

CEO

Any of the Other Top Four

Executives 36. Does your hospital system provide the

following perquisites to the CEO or any of the

Other Top Four Executives?

Yes

T

No

T

Yes

T

No

T

a) Personal travel expenses 3 62 2 62

b) Automobile-related expenses 55 10 52 12

c) Financial or tax planning 25 40 23 42

d) Tax preparation 17 48 13 52

e) Attorneys fees 7 58 7 58

f) Memberships in recreational or social clubs 45 20 35 30

g) Other, please specify: J 26 26 23 30

CEO

Any of the Other Top Four

Executives

37. Since January 1, 2004, has the CEO or any of

the Other Top Four Executives had the

following expenses paid for on their behalf (or

reimbursed) from any party related to either

the hospital system or its affiliates?

Yes

T

No

T

Yes

T

No

T

a) Personal travel expenses 3 62 2 63

b) Automobile-related expenses 10 55 10 55

c) Financial or tax planning 4 61 4 61

d) Tax preparation 5 60 4 61

e) Attorneys fees 1 64 1 64

f) Memberships in recreational or social clubs 11 54 10 55

g) Other, please specify: 2 47 2 47

J

 The other perquisites noted by the hospital systems included cellular telephones and Blackberrys, reimbursement of

professional dues and annual membership fees, fitness center membership or home fitness equipment, professional

development and continuing professional education programs, and allowances that can be used at the discretion of the

executive on a variety of perquisites.

15
Page 58 GAO-06-907R Nonprofit Hospital Systems

Spouse of CEO

Spouses of any of the Other

38. Does your hospital system provide the Top Four Executives

following perquisites to the spouses of the CEO

or any of the Other Top Four Executives?

Yes

T

No

T

Yes

T

No

T

a) Personal travel expenses K 13 51 8 56

b) Automobile-related expenses 0 64 0 64

c) Financial or tax planning 0 64 0 64

d) Tax preparation 0 64 0 64

e) Attorneys fees 0 64 0 64

f) Memberships in recreational or social clubs 0 63 0 64

g) Other perquisite, please list: 5 48 3 49

Family members

(other than spouse)

of the CEO

Family members

(other than spouse)

of any of the Other Top Four

Executives

39. Does your hospital system provide the

following perquisites to family members other

than spouses of the CEO or any of the Other

Top Four Executives?

Yes

T

No

T

Yes

T

No

T

a) Personal travel expenses 1 63 1 63

b) Automobile-related expenses 0 64 0 64

c) Financial or tax planning 0 64 0 64

d) Tax preparation 0 64 0 64

e) Attorneys fees 0 64 0 64

f) Memberships in recreational or social clubs 0 64 0 64

g) Other, please specify: 0 51 0 51

K

 Hospital systems reported that they may pay for the travel expenses of spouses when they are accompanying the top

executives to certain business events, retreats, or educational seminars.

16
Page 59 GAO-06-907R Nonprofit Hospital Systems 

Retired CEOs

Retired Other Top Four

Executives

40. Does your hospital system provide the

following perquisites to any retired CEOs or

Other Top Four Executives?

Yes

T

No

T

Yes

T

No

T

a) Personal travel expenses 0 65 0 64

b) Automobile-related expenses 2 63 0 64

c) Financial or tax planning 1 64 1 63

d) Tax preparation 1 64 1 63

e) Attorneys fees 1 64 1 63

f) Memberships in recreational or social clubs 2 63 0 64

g) Other, please specify: 10 46 6 50

Internal Control over Travel, Entertainment, Gifts and Related Audits

REMINDER: All questions that ask whether or not something occurred should reflect those events that have occurred

since January 1, 2004. Unless otherwise stated, all other questions should reflect the conditions that exist at the time this

survey is being completed.

41. Does your hospital system have a written policy covering travel expenses by the CEO and Other Top Four

Executives? L

62 Yes

3 No Æ SKIP TO QUESTION #46 

for the CEO?

for any of the Other

Top Four Executives?

Yes

T

No

T

Yes

T

No

T

42. Does the policy describe what is legitimate domestic

business travel expenses ... 59 3 59 3

43. Does the policy describe what is legitimate international

business travel expenses ... 46 16 46 16

44. Does the policy describe the documentation necessary to

support domestic business travel expenses ...

61 0 62 0

L

 Hospital systems commented that their travel policies do not differentiate between international and domestic travel.

17
Page 60 GAO-06-907R Nonprofit Hospital Systems

for the CEO?

for any of the Other

Top Four Executives?

Yes

T

No

T

Yes

T

No

T

45. Does the policy describe the documentation necessary to

support international business travel expenses ... l

50 12 49 12

1

CEO

Any of the Other Top

Four Executives

Yes

T

No

T

Yes

T

No

T

46. Since January 1, 2004, has the CEO or any of the Other

Top Four Executives had any international travel expenses

paid for on their behalf (or reimbursed) from any party

related to either the hospital system or its affiliates?

21 44 25 40

47. Are the CEO’s travel expenses ...

a) approved prior to being incurred? 6 Yes Æ

59 No 

What entity or person approves these

expenses? please specify:

b) reviewed after being incurred? 64 Yes Æ

 0 No 

What entity or person reviews these expenses?

please specify:

48. Are any of the Other Top Four Executives’

travel expenses ... 

a) approved prior to being incurred?

15 Yes Æ

50 No 

What entity or person approves these

expenses? please specify:

b) reviewed after being incurred?

64 Yes Æ

 0 No 

What entity or person reviews these expenses?

please specify:

49. Does your hospital system pay for entertainment expenses?

63 Yes 

2 No Æ SKIP TO QUESTION #56 

50. Does your hospital system have a written policy covering entertainment expenses?

56 Yes 

7 No Æ SKIP TO QUESTION #53 

18
Page 61 GAO-06-907R Nonprofit Hospital Systems 

for the CEO?

for any of the Other Top

Four Executives?

Yes

T

No

T

Yes

T

No

T

51. Does the policy describe what are legitimate business

entertainment expenses ... 53 2 52 2

52. Does the policy describe the documentation necessary to

support business entertainment expenses ...

55 0 53 1

53. Are the CEO’s entertainment expenses ...

a) approved prior to being incurred? 3 Yes Æ

59 No 

What entity or person approves these expenses?

please specify:

b) reviewed after being incurred? 60 Yes Æ

1 No 

What entity or person reviews these expenses?

please specify:

54. Are the Other Top Four Executives’

entertainment expenses ...

a) approved prior to being incurred? 7 Yes Æ

55 No 

What entity or person approves these expenses?

please specify:

b) reviewed after being incurred? 59 Yes Æ

2 No 

What entity or person reviews these expenses?

please specify:

CEO Any of the Other Top Four

Executives

55. Does your hospital system pay for the following

expenses for which its CEO or any of the Other

Top Four Executives can attend?

Yes

T

No

T

Yes

T

No

T

a) Sports events 28 34 29 33

b) Holiday or other company parties 49 13 49 13

c) Meetings, retreats, or other off-site activities

involving trips to resort locations or private,

exclusive clubs

48 14 46 16

d) Theatre performances 17 45 16 46

e) Other, please specify: 11 32 10 33

19
Page 62 GAO-06-907R Nonprofit Hospital Systems

the CEO?

any of the Other Top

Four Executives?

56. Does your hospital system have written policies:

Yes

T

No

T

Yes

T

No

T

a) regarding the purchase of gifts by the hospital system and 

given by... 38 26 37 27

b) regarding the purchase of gifts by the hospital system

for... 34 30 33 31

CEO

Any of the Other Top

Four Executives

57. Since January 1, 2004, has your hospital system had an 

internal audit of the following for the CEO or any of the

Other Top Four Executives? Note: If any of the following

is not offered or paid for by the hospital system, check the

corresponding response. Yes

T

No

T

Not

offered

or paid

T

Yes

T

No

T

Not

offered

or paid

T

a) Travel expenses 40 23 0 41 23 0

b) Automobile-related expensesM 23 32 7 24 31 7

c) Loans and loan repayments 0 13 51 0 13 51

d) Memberships in recreational or social clubsN 21 31 12 17 28 19

e) Entertainment expenses 39 22 3 40 20 4

f) Other perquisites, please specify: 9 31 14 10 30 14

g) Components of other compensation, please specify: 8 30 12 7 32 12

M Two systems reported having an audit of these expenses for the CEO and the other top four executives but reported that they did not provide this perquisite to the

CEO or other top four executives. One of the systems explained that their audits were of auto expenses as part of executives’ travel reimbursement and the other system

stated that audits were performed in 2004 when they used to explicitly pay for automobile expenses, but in 2005 they began granting executive business allowances that

covered various types of expenses, including auto expenses. Also, 1 other system reported having an audit of these expenses for the other top four executives but

reported that they did not provide this as a perquisite to the other top four executives. An explanation was not available from this system.

N One system reported having an audit of membership expenses for the CEO and the other top four executives but reported that they did not provide this as a perquisite

to the CEO and the other top four executives. This system stated that they had an audit in 2004 when they used to explicitly pay for membership expenses, but in 2005

they began granting executive business allowances that covered various expenses including membership expenses. Also, 1 system for the CEO, and 2 systems for the

other top four executives reported having an audit of these expenses but reported that they did not provide this as a perquisite. An explanation was not available for

these systems.

20
Page 63 GAO-06-907R Nonprofit Hospital Systems 

CEO

Any of the Other Top

Four Executives

58. Since January 1, 2004, has your hospital system had an 

external audit (separate from the annual financial

statement audits) of the following for the CEO and the

Other Top Four Executives? Note: If any of the following

is not offered or paid for by the hospital system, check the

corresponding response. Yes

T

No

T

Not

offered

or paid

T

Yes

T

No

T

Not

offered

or paid

T

a) Travel expenses 10 55 0 9 55 0

b) Automobile-related expenses 10 49 5 10 47 7

c) Loans and loan repayments 0 19 46 0 20 45

d) Memberships in recreational or social clubs 7 49 9 6 45 13

e) Entertainment expenses 9 53 3 7 54 4

f) Other perquisites, please specify: 2 41 13 2 41 12

g) Components of other compensation, please specify: 3 38 15 3 39 14

59. Do you have any other comments regarding this survey? If so, please type them here.

21

(190151) 
GAO’s Mission The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To

have GAO e-mail you a list of newly posted products every afternoon, go 

to www.gao.gov and select “Subscribe to Updates.” 

The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to: 

U.S. Government Accountability Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548 

Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

Obtaining Copies of 

GAO Reports and 

Testimony

Order by Mail or Phone 

To Report Fraud,

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

PRINTED ON RECYCLED PAPER
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately.