There are some nonprofit policies with extra importance because they relate to your organization’s 990 tax form—one of these is the conflict of interest policy. The 990 asks if your organization has a conflict of interest policy. It is good to be able to say, “Yes!” to this question. The 990 also asks how your organization manages any conflicts that arise or are disclosed.
A conflict of interest exists when a board member or key staff (or their family members) could benefit from a transaction or activity of the nonprofit. Your conflict of interest policy should provide for the detailed disclosure of such conflicts, signed and dated by the relevant party. This activity should be documented in board minutes. It is particularly important to have a process to revisit this policy annually. Your policy should prohibit voting by the member with a conflict and, this too, should be reflected in your board minutes.
Your conflict of interest policy should have two parts: 1) a requirement for board members to disclose conflicts of interest; and 2) the prohibition of voting for board members with conflicts relating to the vote.
In addition to the two basic parts of disclosure and prohibition from voting, there are other topics you may need to include, depending upon your organization’s individual needs. These topics are: benefits of interest (a board member who provides office space at a reduced rate, for example); board services on other nonprofits working in the same field; or conflicts of loyalties (such as a foundation or government representation who may be reporting on organizational activities).
Like most nonprofit policies, everyone has a role with the conflict of interest policy. First, of course, is disclosure of conflicts. Board members and relevant staff should do this. Usually, the executive director reminds the board when it’s time to review the policy. The board secretary ensures all discussions of conflicts are recorded. All board and staff should disclose conflicts as they arise, renewing all conflicts annually.
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