Conflict of Interest Policy Template

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Nonprofit Conflict of Interest Policy Template
Each nonprofit’s situation and needs are different, so conflict of interest policies should be
tailored according to each organization’s mission, structure, culture and organizational facts.
There are several considerations organizations should explore in drafting their conflict of
interest policy and in its implementation. The following outline addresses the most common
elements of a basic conflict of interest policy.
Section 1: Purpose
Generally, this section includes a brief statement of the policy’s intent to avoid conflicts and
potential conflicts of interest between the organization and those connected to the organization
and that the interest of the organization supersedes all other interests.
The purpose section may also include:


People the policy intends to cover (although this may also be found in a separate section).
o Examples:
 Statutory requirement to cover board members and officers
 990 suggestion to cover board, officers and key employees
 Some policies cover all employees, volunteers and vendors
The type of conflict addressed by the policy.
o Examples:
 Statutory requirement to address situations where there may be a “material
financial interest”
 The 990 does not specify which types of conflict to address
 Other common types of conflicts addressed include:
 “personal benefit”
 “private interest”
 “personal financial, professional or political gain
Some purpose statements include a statement that indicates that the policy is supplementary to
the current statute which controls.
Section 2: Definitions
Generally this section defines technical terms used in the document, gives parameters for the
scope of the policy's reach. Commonly defined terms in accordance with statutory language and
organization choice include interested person and financial interest. This section may conclude
with a statement that indicates that a financial interest or potential financial interest is not
necessarily a conflict of interest until determined as such by the board of directors
Section 3: Procedures
This section generally covers the way in which an organization will address a conflict or
potential conflict of interest situations. Some policies require that an interested person present the
potential conflict situation to an executive committee, some require presentation to the full
board. This section is generally broken up in sub-sections to cover different stages of the
procedure.
Sub-section A. The first sub-section is generally one that outlines a duty to disclose a
potential conflict by the interested person. Some policies require disclose of “material
facts” of a financial interest, some policies do not specify the level of disclosure required.
Sub-section B. The second sub-section generally outlines the process for determining
whether a conflict exists. This process may require a presentation by the interested party
or the board chair to either the executive committee or full board of the facts and
potential conflict situation. The interested person then is required to leave the
conversation, while the deciding body continues to discuss the situation and votes.
Sub-section C. The third sub-section deals with due diligence and the procedures for
addressing the conflict of interest. Particular questions and specific actions may be
necessary to determine whether an actual conflict, harmful to the organization exists.
These questions or actions may include:



an investigation into alternatives to the proposed transaction by a disinterested
person and whether it might be more advantageous;
deciding whether the organization can obtain a more advantageous transaction
with reasonable effort from someone without a conflict of interest; and
a discussion and decision whether the transaction is in the best interest of the
organization and whether the transaction is fair and reasonable to the
organization.
After this discussion and due diligence by the board or committee, disinterested members
usually vote on whether a conflict exists and the best interests of the organization.
Sub-section D. This sub-section generally deals with situations where the general
procedure outlined above is not followed and violations of the conflict of interest policy.
Some policies indicate that if a board finds out and has a reasonable belief that someone
may have a conflict of interest, the board chair will generally inform that person of their
belief and give them the opportunity to present the situation and failure to bring the
potential conflict forward earlier. If the board is not satisfied with the person’s
explanation, it can then take appropriate disciplinary action.
Section 4: Records of Proceedings
Most policies include provisions that require written records of the above outlined procedures,
persons involved, and votes taken.
Section 5: Review of Policy
This section generally requires periodic, usually annual, review of the policy by those subject to
the policy. Some policies may also include a supplementary disclosure form that those subject to
the policy are required to acknowledge and sign annually
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