Conflict of interest issues are even more pronounced in joint ventures. Unlike sale agreements, where the charitable assets are usually moved to a new foundation dedicated to a charitable health care purpose, the assets here remain tied up in the joint venture. Unless the nonprofit board maintains clear control over the joint venture, and therefore can ensure that the assets are being used to further the original charitable mission, the joint venture agreement may undermine the nonprofit's original mission and threaten its tax exempt status. The IRS recently released official guidelines for joint ventures that nonprofit hospitals must meet in order to retain their tax-exempt status. This board must maintain control over major corporate financial decisions and manage the partnership.
Joint ventures create a special conflict for the board of the nonprofit partner.
If the board assumes that its primary purpose is to maximize its revenue stream in order to give more grants, it may agree with its for-profit partners to cut back or eliminate unprofitable services that were once at the core of its mission. Suddenly the board, which once might have fought to retain expensive trauma care, neo-natal or burn facilities, is motivated to act more like a shareholder with an expectation of profit at all costs.