HCC Fiduciaries, Nonprofits & State Funding Models

HCC Fiduciaries, Nonprofits & State Funding Models

In an unprecedented move, the Assistant Secretary for Preparedness and Response (ASPR) has issued a directive that authorizes healthcare coalitions to use Hospital Preparedness Program (HPP) funds to legally establish nonprofit entities. The authorization gives healthcare coalition leaders the financial latitude to move away from reliance on fiscal sponsors, opening the door to sustainability strategies.

legal entity is a thing

Titled ASPR Grant Directive for setting Up a Separate Legal Entity, the directive explains that legal entities must set up as businesses and follow the standard business practices required in the state of incorporation. And should a coalition choose to seek tax-exempt 501(c)(3) designation from the IRS, all federal requirements must also be met. 

HCCs are a thing or they are not image


sub grantees are public entities or nonprofits

Interestingly, the Directive was issued the first week of March, but has an effective date of December 12, 2016. The effective date is worth noting as it makes Budget Period (BP) 5 funds eligible to get the business establishment and organizational development work started now. The message is consistent with what Awardees have received directly from ASPR leadership – use BP 5 funds to help get your houses in order – to help your healthcare coalitions lay the foundations necessary to hit the ground running when the new cooperative agreement takes effect July 1, 2017.

Switzerland image

And if there is still doubt in anyone's mind as to whether healthcare coalitions are here to stay, the directive makes it crystal clear that ASPR is all-in...

Things Change image

"All states that receive Hospital Preparedness Program (HPP) awards are required to support the development and operation of healthcare coalitions (HCCs)."

Things Not What They Seem Image

But they stop short of requiring healthcare coalitions to become independent legal entities...

A Thing Can Contract Image

"While allowable, establishment of HCCs as a separate legal entity is entirely voluntary."

Yes, voluntary. But, despite the official position, coalition leaders who participated in a recent national call hosted by ASPR came away with the unmistakable impression that they are being 'strongly encouraged' to establish legal entities for their coalitions.

HPP Fiduciaries Image

So, why is ASPR urging the nonprofit model? Three words – independence, sustainability and neutrality. I’ll peel that onion later. For now, let’s nail down exactly what they've authorized.

it's the state's call

If establishing legal entity(s) is on a state's preparedness director's radar, ASPR has served up two morsels for them to chew on. It's important to recognize that, regardless of what direction coalition leadership wants to go, the directors can implement or continue any number of models that do not require new legal entities to be established. The models authorized by ASPR are simply new options available to them.

Image: Using HPP funds to establish a nonprofit requires the approval of the State and ASPR

So, if your healthcare coalition is considering setting up a nonprofit, be sure that the State is on board and will recognize the organization as the HPP sub grantee. And if the coalition chairs from across a state decide collectively that incorporating a "central body" is the path forward, be sure the state preparedness director is on board.

You see, ASPR requires that prior approval be obtained before using HPP funds to support any costs required to set up a legal entity.

"Prior approval to use the State HPP funds to support any costs regarding the setup of the organization is required, regardless of the total requested amount."

And that means coalition leaders with vision must be actively engaged with the State preparedness office. It is ultimately the State's decision whether to seek ASPR's approval for the desired model.

option one

Option one authorizes States to allow or require their healthcare coalitions to use HPP funds to establish independent legal entities – nonprofit state corporations.

Image: States can deliver sub grants to individual nonprofit healthcare coalitions

Though it does not expressly state so, it's reasonable to believe that the additional costs associated with obtaining tax-exempt 501c3 status from the IRS would be appropriate to apply to the grant. With prior approval, costs that may be paid for with HPP funds include:

  • Incorporation fees
  • Brokers' fees
  • Organizers or management consultants
  • Fees to promoters
  • Attorneys
  • Accountants

option two

Option two authorizes States to support the development of a "central body" (a single legal entity) with each healthcare coalition serving as a "chapter" responsible for one of the State's preparedness regions.

The Directive explains that each chapter operating under the authority of a central body is considered to be "affiliated organizations." It goes on to use a university "foundation," a closely affiliated, but separately incorporated entity, as an example of an affiliated organization.

Image: States can deliver sub grants through a university foundation, central body

Now, the "central body" option is not limited to the university model used as an example in the directive. Again, the state preparedness director has the opportunity to work with all stakeholders to develop a "central body" model that meets the State's unique circumstances.

Image: States can deliver sub grants through a central body

That said, regardless of the model desired, ASPR must review and approve the proposal before funding can be allocated to make it happen.

It is strongly advised that you work with the HPP Program Officer and the Grants Management Specialist assigned to your state while developing the request. 

So, the question begs, why is ASPR urging a nonprofit model? Why the new directive? Well, as I alluded to earlier, it has something to do with sustainability and neutrality.

Image: HCC Sustainability Opportunities

Are you listening state preparedness directors? Do you see the awesome opportunity before you? Do you understand the awesome responsibility you have to get this right? This Friday, I'm gonna peel this onion and do my best to pry your eyes wide open, no matter how much it stings. I'm gonna clearly illustrate why the models many of you are considering have little hope for success; I'm gonna show you why – without an eye to healthcare coalition independence, sustainability and neutrality – the funding that keeps your offices afloat may go bye-bye much sooner than it will for those states that 'get it.' 

Now that would hurt a lot more than the 18% cap ASPR has put on State salaries, fringe benefits, and travel cost.

We're done for now, but we're not done. Looking forward to talking on Friday.

Karl Schmitt, MPA

Karl Schmitt, MPA

Karl is the Passionate Founder & CEO of bParati. He is on a mission to build a national network of effective, sustainable healthcare coalitions. More...

Recent Post

Related Post


we're on a mission

In all we do, we seek to reduce human suffering and loss of life caused by disasters.

We get it done by connecting the preparedness efforts of healthcare organizations, emergency management agencies, and public health departments through effective, financially self-sustaining healthcare coalitions.

Yes, we believe healthcare coalitions are the path forward.

Karl Schmitt, Passionate Founder & CEO, bParati

Karl SchmittPassionate Founder & CEO

(217) 953-0843
600 Wind Meadow Drive
Chatham, IL  62629

send message
bParati eNews logo
bParati logo

600 Wind Meadow Dr, Chatham, IL 62629 | (217) 622-0915 | Send Us A Message Here