Preventing Conflicts of Interest in Nonprofit Organizations

  

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A conflict of interest arises when an individual's or organization's professional duties conflict with personal interests. For public companies, a conflict of interest can definitely cause some serious problems to arise, problems that can even lead to job termination. Nonprofits along with private individuals must be especially weary of these mishaps and protect themselves at all cost. The Internal Revenue Service is the entity that strictly regulates conflicts of interest pertaining to nonprofits.

The revised 990 asks not only about whether the nonprofit has a written conflict of interest policy, but also about the process that a nonprofit uses to manage conflicts and how the nonprofit determines whether board members have a conflict of interest.

• Minutes of board meetings should reflect when a board member discloses that s/he has a conflict of interests and how the conflict was managed, such as that there was a discussion on the matter without the board member in the room, and that a vote was taken but that the “interested” board member abstained (board members with a conflict are “interested” – board members without a conflict are “disinterested”).
• A process used by many nonprofits to find out whether any board member (or staff member) has a conflict of interests, is to circulate an annual “conflict disclosure questionnaire” that asks board and staff members to disclose existing conflicts and reminds them to disclose any that may evolve in the future.

 Sample Conflict of Interest Policy from www.execusite.com