MDH POLICY NUMBER: 02.02.09
TITLE: POLICY ON THE
RAISING OF NON-BUDGETED AND NON-STATE FUNDS BY FACILITIES OR ANCILLARY
ORGANIZATIONS OPERATING FOR THE BENEFIT OF MDH FACILITIES
I. EXECUTIVE SUMMARY
The purpose of this
policy is to provide guidelines for MDH facilities and/or ancillary
organizations to receive grants, to sell merchandise and/or to engage in other
profit making activities.
organizations, with the approval of the respective MDH facility Superintendent,
may accept grant funds, services and/or merchandise if the grant is not
available to, or if available, was refused by the facility. These grants shall
be used as outlined in the grant conditions and as accepted by the ancillary
organizations with the approval of the facility Superintendent or designee, and
the Secretary, MDH or designee.
The profits from the
sale of merchandise or from the engagement in activities shall be used for the
benefit of patients who receive services from the facility. Emphasis for these
benefits shall be placed on services over and above those which the State
provides to the clients. Facilities must have prior approval of the Secretary, MDH,
to provide said services. Profits may also be used for legitimate expenses of
the ancillary organization.
This policy also
provides operating guidelines for canteens and other activities . If possible,
canteen and profit making activities shall be under the charge of the ancillary
organization but may be under the charge of the facility if an ancillary
organization is not at that location. If the canteen is operated by the
facility, all income must be handled in accordance with the State Finance and
Procurement Article of the Annotated Code of Maryland. If the canteen is
operated by the ancillary organization, all income must be under the control of
the organization. When profits of the canteen or other activities are used to
purchase items for patients, wards and/or clients, the purchases must be
approved by the facility Superintendent or designee. No state or patient funds
may be used to supply merchandise for the canteens, and articles sold in the
canteen must be purchased independently of state supplies. No state property is
to be sold in the canteen, but the canteen may sell crafts and art work of the
patients, wards and/or clients.
Business practices for
operating the canteens are further defined in this policy. Acceptable
bookkeeping systems shall be administered and maintained by those in charge.
Guidelines for the disposition of funds are provided, and certain
responsibilities of employees of the ancillary organization or facility are
Sales tax must be
collected on all taxable sales made by canteens. Ancillary organizations can
apply for tax exemptions for items purchased for the benefit of facilities,
patients and/or wards.
The methods of
requesting funds, services and items from ancillary organizations are included
in this policy. Written requests must be submitted to the facility Superintendent,
or designee, who shall forward approved requests to the ancillary organization.
facilities of the Maryland Department of Health have enjoyed the profits of
canteens, vending machines, fairs, dances and other profit making activities
which have usually been supervised and run by ancillary organizations. These
funds are over and above those budgeted by the Legislature and provide benefits
to residents not ordinarily provided by the State.
MDH Policy 02.02.09
supersedes and replaces MDH 7341- Policy on the Raising of Non-budgeted and
Non-State Funds by Facilities or Ancillary Organizations Operating for the
Benefit of Facilities of the Maryland Department of Health which was issued
January 23, 1984 to provide rules for the raising and use of these funds, to
define methods for operating these activities, and to establish business
This new policy adds
specific guidelines for the acceptance of grants by ancillary organizations,
updates operating procedures, and reflects current interpretations of
regulations pertaining to the ancillary organizations' exemptions from the
payment of State sales tax.
III. POLICY STATEMENTS
1. The phrase "to
sell merchandise" for the purposes of this policy shall mean to
operate any canteen, gift shop, store, vending machine, etc., on a regular
ongoing routine business basis on the grounds of a facility.
2. All such canteens,
gift ships, stores, vending machines, etc., shall be covered under the general
term "canteen," and the income accruing from the operation of
such canteens shall be called the "canteen fund."
3. The phrase "engage
in such other activities for profit" for the purposes of this policy
shall mean to hold and conduct bazaars, dances, fairs, etc., collect dues,
etc., but not the receipt of grant funds.
4. All such bazaars,
dances, fairs, etc., dues, etc., shall be covered under the general term "other
activities," and the income accruing from the operation of such other
activities shall be called "other activity funds."
5. The phrase "ancillary
organization," for purposes of this policy, shall mean any group,
incorporated or non-incorporated , which is directed to the interest of a
patient(s), ward(s), and/or client(s) and is acceptable to the governing body
of the facility. (It is recommended that all ancillary organizations, for the
protection of their members, be incorporated.)
B. GENERAL PROVISIONS
1. All MDH facilities
may permit ancillary organizations to sell merchandise and engage in such other
activities for profit as may be authorized by the facility Superintendent, or
designee, and approved by the Secretary, MDH or designee. The facility
Superintendent shall make every effort to facilitate the operation of the
canteen and other activities by the ancillary organization, but where this is
not possible, the facility may sell merchandise and/or engage in other
activities for profit, if approved by the Secretary or designee.
2. Local, State, Federal
government and private grant funds, services and/or merchandise may be accepted
by an ancillary organization, provided each grant is specifically approved by
the facility superintendent or designee and the Secretary, MDH or designee, and
that grant conditions meet one of the following criteria:
a. The grant is only
available to private organizations and not to facilities and/or MDH, or
b. The grant was
offered to and refused by the facility and MDH.
3. The profit raised
from the sale of merchandise and/or from engagement in such other activities
for profit by a facility or an ancillary organization shall be used for the
benefit of patients, wards and/or clients domiciled, treated, rehabilitated
and/or supervised at the facility, regardless of disease, treatment, race, sex,
age, handicap, impairment, religion or national origin of the patient, ward
4. The internal
functioning of the ancillary organization is the sole responsibility of its
Officers, Board of Directors, and members; however, it is authoritatively
subject to the general policies, rules and regulations of the facility at which
it is operating and the Department.
C. OPERATION OF THE
CANTEEN AND OTHER ACTIVITIES
1. The operating of a
canteen and other activities shall be under the charge of an ancillary
organization of the facility wherever possible.
2. In those facilities
where, because of their location, their function or other reasons, it is not
prudent or possible to have an ancillary organization, the canteen and other
activities may be under the charge of the facilities' staff.
3. The operation of a
canteen and/or other activities under the charge of an ancillary organization
and all income derived from the operation shall remain under the actual control
of the ancillary organization. However, all purchases made for patient, ward(of
the State) and/or client areas or for patient, ward, and/or client use must be
approved by the facility Superintendent or designee.
4. All income from the
operation of a canteen and/or other activities under the charge of the facility
staff and not under the charge of an ancillary organization must be handled in
accordance with the State Finance and Procurement Article of the Annotate Code
of Maryland and the rules, regulations, and policies of MDH.
5. No funds of the
State or funds of the patients, wards, and/or clients of the facility shall be
available to provide merchandise to be sold in any canteen.
6. No merchandise or
property belonging to the State is to be sold in the canteen. However, the
canteen, as a convenience to the facilities' patients, wards, and/or clients,
may act as a selling agent for handicraft, art work, etc., that are produced by
patients, wards and/or clients. The money realized from the sale of such
handicraft, art work, etc., shall be placed in the patients', wards', and/or
clients' welfare fund or placed in the account of the individual patient, ward
7. Articles to be sold
in the canteen must be purchased independently of supplies purchased for the
D. BUSINESS PRACTICES
1. A system for
acceptable bookkeeping shall be installed in the canteen. The system of
bookkeeping is to be maintained and administered by those in charge of running
the canteen. A volunteer or paid accounting service shall be retained when the
canteen and/or other activities are under the control of an ancillary
organization. When the canteen and/or other activities are under the charge of
an ancillary organization, no employee of the respective facility shall be
retained or used for bookkeeping or accounting work during normal work hours.
2. The accounting
service shall be responsible for all accounting functions and shall keep the
accounts in accordance with normal and accepted accounting principles. However,
in the case of an ancillary organization, all checks should be signed by two
responsible officers of the organization. It is recommended that these
signatures be that of a President, Vice President, and Treasurer, any two of
the three signatures being acceptable to the bank handling the account.
3. The annual
Auxiliary Presidents' Reports along with the organization's Treasurer's Reports
may be submitted instead of an annual auditors' report, with copies to the
Secretary, MDH, and the facility Superintendent.
4. All funds under the
control of an ancillary organization shall be deposited in a State or Federally
insured bank or savings and loan association, or licensed brokerage account
5. There shall be a
minimum of two accounts for the accounting of monies by an ancillary
organization that operates a canteen. These accounts shall be a "Canteen
Fund Account" for operation of a canteen, and a "General
Account" for the operation of other activities. Both accounts may be used
to pay the legitimate expense of the ancillary organization.
6. The working fund of
an ancillary organization should be a checking account and the balance in the
account should approximate two months' operating expense.
7. Any monies in
excess of approximately two months' operating expenses may be deposited in the
organization's name in a State or Federally insured savings account. Monies in
excess of two year's operating expenses may also be invested in stocks, bonds,
or mutual funds in a licensed brokerage account. All investments must be
closely monitored by the organization's Treasurer, with all changes approved by
the Board of Directors.
8. The facilities'
accounting personnel may not be made responsible for the accountability of
funds of the ancillary organization. Facility personnel are not bonded for this
purpose and have no jurisdiction over ancillary funds. There is no objection to
the facility accountant rendering supporting service, e.g., transporting canteen
funds to and from the bank at the same time he does similar work for the
facility. (It is recommended that all ancillary organizations carry insurance
to cover all contingencies in regards to money.)
9. Any paid employees
of the ancillary organization shall be bonded.
10. All sales shall be
on a cash basis unless the ancillary organization and the facility
administration choose to use some form of prepaid credit system, i.e., canteen
11. The facility
Superintendent or designee, and the officers of the ancillary organization may
enter into further negotiations and devise methods of procedure not in conflict
with this policy.
E. USE OF PROFIT AND
1. Any local, State,
Federal government and private grant funds, services and/or merchandise shall
be used by the ancillary organization as outlined in the grant conditions, and
as accepted by the ancillary organization, with the approval of the
Superintendent of the facility or designee, and the Secretary, MDH or designee.
2. Profits from the
canteen or other activities may only be used for the following:
a. The benefit of
patients, wards and/or clients, with the approval of the facility
Superintendent, or designee. Emphasis shall be placed on benefits over and
above those which the State ordinarily provides, and will constitute largely
projects which add to the comfort, entertainment, rehabilitation and
self-respect of patients, wards and/or clients. Any project which will make a
substantial physical change or addition to any of the facilities must have
prior approval of the Secretary, MDH or designee, the facility Superintendent,
and other agencies of the State and locality, as required.
b. The legitimate
expenses of the ancillary organization, e.g., appropriate bonds for any paid
person handling funds; convention expenses of individuals authorized by the
Board of the respective ancillary organization to attend a regional or national
meeting of the nationally-recognized parent organization of which the ancillary
organization is a legitimate member; membership dues to recognized cooperating
organizations, and accounting or other expenses incidental to operation, etc.
3. Any equipment given
by an ancillary organization to a facility for the general use of patients,
wards and/or clients shall become the property of the State of Maryland before
F. SALES TAX
1. In accordance with
Maryland law, State sales tax must be collected on all taxable sales made by
the canteen and other activities. All reports required by law must be filed. An
exemption from the collection of sales tax is allowed to gift shops at mental
hospitals operated by MDH.. (Article 81, Section 326, Annotated Code of
2. Items purchased by
ancillary organization for the benefit of the facility, patients, wards or
clients may be State sales tax exempt. To qualify for the exemption, the
ancillary organization must apply for an exemption certificate.
G. REQUEST FOR FUNDS,
SERVICES OR ITEMS FROM ANCILLARY ORGANIZATIONS
1. The request for funds,
services or items from an ancillary organization shall be submitted in writing
to the facility Superintendent, or designee, from the requesting party or
parties. After due consideration, the Superintendent shall approve or
disapprove these requests in the order of their importance to the welfare of
the patients, wards and/or clients, and the facility. The approved requests
shall then be submitted to the ancillary organization(s) for their action.
2. No request may be sent
to an ancillary organization without the knowledge and approval of the facility
Superintendent or designee.
Article 81, Section 326,
Annotated Code of Maryland
State Finance and
Procurement Article, Annotated Code of Maryland
MDH 02.02.05 - Policy on
the Administration of Funds
APPROVED: Martin P. Wasserman, M.D., J.D.
Signature on File Effective Date: March 22, 1999
201 W. Preston Street, Baltimore, MD 21201-2399
(410) 767-6500 or 1-877-463-3464