3354-2-10-06 Affiliated Entity

POLICIES AND PROCEDURES

Policy Number:	3354:2-10-06
Title:	Affiliated Entity Date Approved by the Board of Trustees: 12/06/2018 Updated & Approved:
Related Procedure

PURPOSE
1. The purpose of this policy is to establish a framework for the College to use in establishing, implementing, and monitoring its relationships with legally separate entities that support or complement the mission of the College. The College has a vital interest in and recognizes the valuable role played by each of its Affiliates in meeting the mission of the College. The College is committed to providing quality support for the efforts and activities of each Affiliate, while seeking to maintain the appropriate independence from its Affiliates.
SCOPE
1. The Policy covers all Affiliated Entities as defined herein. It does not cover a contractual relationship with external parties, clinical practice sites or partners.
DEFINITIONS
1. "Affiliated Entity" or "Affiliate" refers to an organization that has a legal existence separate from the College, which is formed or operated to support or complement the mission of the College, and:
  1. is controlled or strongly influenced by the College; or
  2. receives significant financial support from the College; or
  3. uses the College's resources, name, or identity.
2. There are three types of Affiliated Entities:
  1. "Arms‐Length Affiliate" refers to entities that use College resources but do so through a relationship that is defined by a contract/memorandum of understanding between the parties. The College may act as fiscal agent or have other financial or operational ties to an Arms‐Length Affiliate.
  2. "Regular Affiliate" refers to entities that have closer ties to the College than an Arms‐Length Affiliate, but the College does not have a Significant Interest in the entity.
  3. "Significant Interest Affiliate" refers to entities in which the College holds a Significant Interest.
3. "Approved Agreement" refers to a memorandum of agreement or memorandum of understanding properly executed between the College and its Affiliate.
4. "Significant Interest," for the purpose of this policy, refers to any of the following that apply to the Affiliate:
  1. the College holds a significant financial investment in the Affiliate, which is defined for this policy as an investment of $250,000 or more; or
  2. the Affiliate presents a significant compliance risk to the College; or
  3. the Affiliate provides essential services to the College.
POLICY STATEMENT
1. Propriety of Creating Affiliates and Affiliated Entities. The Board of Trustees and the President of the College, or his designee, have a responsibility to ensure that the College's activities with regard to Affiliates are conducted in a proper manner. To protect the College's interests, and as a condition of the Affiliate's use of the College's name and resources, the following principles shall apply:
  1. The formation, purpose and operations of Affiliates must promote, sponsor, or complement educational, scientific, research, charitable, health care, economic development or cultural activities for the benefit of the College, or one of its component units;
  2. The College's relationship with each Affiliate will be memorialized through a written Agreement;
  3. Affiliates shall provide for at least one College representative with full voting rights on its governing board;
  4. Affiliates must use sound fiscal and accounting procedures;
  5. Affiliates must be managed in a manner consistent with their own enabling documents and the College's purpose and mission;
  6. Affiliates must adhere to high ethical standards;
  7. Affiliates must abide by College policies unless otherwise specified in writing; and
  8. The College's relationship with an Affiliate is not necessarily intended to be perpetual. Relationships with Affiliates will be examined at least every ten years to determine whether the relationship will be continued or whether the triggering of a sunset provision is appropriate.
2. Process for Establishing an Affiliate or a Relationship between an Affiliate and an External Entity
  1. Affiliates may be established by the College or entities outside the College. The College unit or external entity desiring to establish an Affiliate or relationship with an Affiliate shall develop a detailed proposal which will include:
    1. Goals and objectives of establishing the Affiliate;
    2. Proposed organizational and governing board structures (the proposed governing board structure shall reserve at least one Board seat for a College representative) for the Affiliate;
    3. Projected budget and business plan for the next five years;
    4. Thorough risk assessment that defines and classifies risks inherent to both the proposed entity and the College, including potential conflicts of interest. The risk assessment must include mitigation strategies and metrics designed to quantify risk throughout the life of the Affiliate and the considerations set forth in Appendix A; and
    5. Draft Approved Agreement defining the Affiliate's relationship with the College.
  2. The proposal shall be reviewed, and if appropriate approved by, the appropriate Vice President, and the College General Counsel and then forwarded to the President of the College or his designee for signature. One Administrator of the College must be recommended by the President of the College or his designee to be assigned the oversight responsibilities for the Affiliate.
  3. Any Significant Interest Affiliate shall require the approval by the Board of Trustees before its creation.
  4. The President shall appoint representatives who will serve on Affiliate's governing board.
  5. Depending on the circumstances and the degree of separateness of the entity, legal representation with respect to the preparation of organizational documents may be provided by the College, the Office of the Attorney General, outside counsel to the College, or private counsel retained on behalf of the Affiliate.
3. Oversight of Affiliates. The College shall exercise oversight over established Affiliates through the following mechanisms:
  1. Inclusion of College representatives on the Affiliate's governing board;
  2. Provision for reserve powers on behalf of the College in the Affiliate's governing documents, if appropriate; and
  3. Execution of an Approved Agreement between the College and the Affiliate outlining expectations and responsibilities, including Affiliate governance requirements.
4. College Representatives on Affiliate Boards. Each Affiliate shall provide for at least one College representative with full voting rights on its governing Board. College representatives on Affiliate governing boards shall be appointed by the President and shall be required to follow the guidelines and expectations articulated by the College as conditions for their service. The guidelines and expectations will be memorialized in a letter of appointment for each College representative on an Affiliate board and shall include the following provisions, at a minimum:
  1. The College representative on the Affiliate governing board shall keep the President informed of the Affiliate's activities on a regular basis, as the President determines appropriate.
  2. The College representative shall consult with the President, as deemed appropriate, on any proposal to be presented the Affiliate governing board relating to the creation of new corporate subsidiaries or new lines of business. With respect to these matters, the College representatives shall exercise their votes as members of the Affiliate governing board in accordance with instructions they receive from the College through its President or designee.
  3. Any grant or loan of College funds, or any action that could reasonably be construed as a guarantee or inducement for any other grant or loan, to an Affiliate or any Affiliate subsidiary shall be subject to the prior written approval of the College's President or designee.
  4. These requirements shall apply to any renamed or reorganized corporate structure or organization that the Affiliate may create or authorize.
5. Policies of the College and Affiliated Entities. Unless otherwise specified in writing, policies of the College are binding upon its Affiliates.
6. Reserve Powers. Reserve powers are specific acts of the Affiliate that must be authorized by the College representatives on the Affiliate governing board to be effective, even if the College representatives are not in the majority on the governing board. As determined appropriate by the College, these reserve powers must be memorialized in the Affiliate's governing documents. Examples of acts that may be subject to reserve powers include dissolution, liquidation, merger, consolidation, and formation of subsidiaries. Reserve powers are not required of each Affiliate but will be an additional consideration when Affiliate relationships are established.
7. Approved Agreements. The College shall enter into an Approved Agreement with each Affiliate addressing the College/Affiliate relationship and expectations and governance requirements. The Approved Agreement may also address College services and financial contributions, use of College marks, and other support provided by the College. Each Approved Agreement will be tailored to the specific needs of each Affiliate. The Approved Agreement will specify that College policies are binding on the Affiliates unless otherwise specified in writing. Appendix B contains a list of potential issues to be addressed in the Approved Agreement.
8. Sunset Provisions. It is expected that some Affiliates will have finite life spans and that it will no longer be appropriate for an Affiliate to continue its relationship with the College or to continue to exist as a separate entity. At least every ten years, the College will assess existing Affiliates for the need for continued affiliation and separate entity status. If it is determined that there is no reason for an Affiliate's continued existence as a separate entity, the College may direct through its reserve powers, if applicable, or suggest to the Affiliate that the entity be dissolved. It will be determined on a case‐by‐case basis whether the College can assist the Affiliate in its dissolution and whether the remaining activities of the Affiliate, if any, can or should be assumed by the College. If it becomes evident during the incorporation process that the Affiliate will have a finite existence, the Affiliate governing board should consider inserting automatic sunset provisions into its governing documents.
9. Grandfathered Affiliates. Those Affiliates in existence on the effective date of this Policy are exempt from the requirements set forth in Section D (2) (a)‐(c) of this Policy.