More and more, non-profits are performing governmental functions. Be they volunteer fire departments, public housing authorities, tourism or economic development authorities, hospital authorities, etc., despite their incorporation as separate entities, non-profits can still be considered public agencies for the purposes of the Open Meetings, Public Records, and public personnel laws.
The leading case on this topic is News & Observer v. Wake County Hospital System (284 S.E.2d 542), a 1981 case championed by the late Bill Lassiter. The Wake County Board of Commissioners created the Wake County Hospital Authority in 1955. In 1965, the Wake Commissioners approved a resolution to convert the Hospital Authority into a non-profit corporation. Still, the County maintained a significant degree of governance, financial, fiscal, and audit controls.
Thereafter, the County and the non-profit hospital entered into various operating and lease agreements where the non-profit hospital leased, operated, and managed the County’s facilities.
In 1978, three different civil suits were brought against the non-profit hospital by medical practices alleging wrongful termination of agreement to provide professional services. After settling the cases, the N&O requested to inspect the settlement papers under the Public Records Law. The non-profit hospital refused. The N&O sued, and the trial court entered summary judgment in its favor, finding the non-profit remained a public agency.
On appeal, the Court of Appeals affirmed the trial judge’s ruling, citing nine factors that demonstrated the County retained sufficient supervisory powers and control over the non-profit hospital: the hospital’s articles of incorporation provided (1) that upon its dissolution, the hospital would transfer its assets to the County; and (2) that all vacancies on the board of directors would be subject to the County Commissioners' approval. The lease agreement provided (3) that the hospital occupy premises owned by the County under a lease for $1.00 a year; (4) that the County Commissioners review and approve the hospital’s annual budget; (5) that the County conduct a supervisory audit of the hospital’s books; and (6) that the hospital report its charges and rates to the County. The operating agreements also provided (7) that the hospital be financed by County bond orders; (8) that revenue collected pursuant to the bond orders be revenue of the County; and (9) that the hospital would not change its corporate existence nor amend its articles of incorporation without the County's written consent.
In 2005, the Court of Appeals applied these factors in Chatfield v. Wilmington Housing Finance & Development, Inc. (166 N.C. App. 703) and found that the Wilmington Housing Authority – which began its existence as a public agency non-profit – was no longer a public agency subject to the Open Meetings and Public Records laws. After its creation, the housing authority amended its charter to lessen the City of Wilmington’s and New Hanover County’s control and supervisory authority over it. The court, while acknowledging that the authority was founded for the public good and was previously a public body, determined that it was no longer “an agent or instrumentality of a local government.”
The lesson here is to gather as much information as possible about the governmentally functioning non-profit from which you would like to collect public records and the governmental body(ies) that created, governed, funded, audited, controlled and supervised it. It’s unclear that all nine factors need to be present to conclude that the non-profit is a public agency, but the more factors that favor openness and transparency, the better.