IDHS Related Party Transactions
Related party and less-than-arms-length transactions must be disclosed and have written approval prior to the transaction. (89 IL Admin Code 509)
Related Party Transaction
A related organization is any company doing business with the Grantee that meets any of the following criteria:
- A member of the Grantee's Board of Directors or an immediate family member thereof, that has ownership interest or holds a position of potential gain from doing business with the Grantee.
- Any employee of the Grantee or family member thereof, that has ownership interest or holds a position of potential gain from doing business with the Grantee.
- Any organization that has a right to appoint or approve members of the Grantee's Board of Directors.
- Any company that shares common management or majority common Board members also would be considered related for FAR purposes.
- Consideration should be given, but not limited to NFP Foundations, organizational ownership of related entities with real property sale-lease back agreements, and/or owner/management lease relationships.
Each of these would be considered a related organization and must be disclosed to IDHS.
Note: An organization doing business with a provider is not considered related just because it is doing business with the provider, such as vendors and independent contractors.
Less-Than-Arms-Length Transaction
A less-than-arms-length transaction is one under which the parties involved are related. Relationship can be defined as, but are not limited to, those between:
- Divisions of an organization
- Organizations under common control through common officers, directors or members
- An organization and a director, trustee, officer, key employee of the organization or such a person's immediate family, either directly or through corporations, trusts or similar arrangements in which a controlling interest is held. For example, the organization may establish a separate corporation for the sole purpose of owning property and leasing it back to the organization. Such transactions also may be referred to as related party transactions.
Rental/lease costs under all less-than-arms-length transactions are allowable only up to the amount that would be allowed if the organization owned the property. This amount is limited to expenses such as depreciation, maintenance, taxes, and insurance.
These transactions are reviewed to ensure there is no conflict of interest and appropriate costs are claimed.
