A policy governing conflicts of interests is perhaps the most important policy a nonprofit board can adopt. To have the most impact, the policy should be in writing and the board (and staff) should review the policy regularly. Often people are unaware that their activities are in conflict with the best interests of the nonprofit so a goal for many organizations is to simply raise awareness and cultivate a “culture of candor.” It is helpful to take time at a board meeting annually to discuss the types of situations that could result in a conflict between the best interests of the nonprofit – and the self-interest of a staff member or board member.
A conflict of interest policy should (a) require those with a conflict (or who think they may have a conflict) to disclose the conflict/potential conflict, and (b) prohibit interested board members from voting on any matter that gives rise to a conflict between their personal interests and the nonprofit’s interests. Beyond those two basics, it is helpful for each nonprofit to determine how conflicts at the board and staff level will be managed. Keep in mind that 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 as well as how the nonprofit determines whether board members have a conflict of interest.
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