Every organization should have in place a conflict of interest policy to guide how disclosures will be made and decisions made when a potential conflict is present. At a minimum, the policy should cover board members, officers, and key employees, though some broader policies have components that apply to all staff.

A conflict of interests exists when someone in your organization has an outside interest or relationship, from which he/she could gain financially based on how your organization makes a decision. The outside interest could be ownership of a business, or being on staff or on the board of another organization. An example is owning a business that your organization could buy products or services from. If your organization gives out grants, and a member of your organization holds a significant role in a potential recipient organization, that would also be a conflict.

If employees or board members do side work that might compete with your organization, you may want to include a clause requiring senior management to review it. It’s not necessarily an inappropriate gain being made off of your organization, but could result in your organization losing business.

The IRS Form 990 asks 3 things about your conflict of interest policy:

  1. Do you have a written policy in place?
  2. Are officers, directors, trustees, and key employees required to annually disclose any interests that could cause a conflict? These parties should disclose their own interests, plus those of family members.
  3. If and how your organization monitors and enforces compliance with the policy.

In addition to requiring people to disclose conflicts, interested parties should be prohibited from voting on or making decisions in which there is a conflict. The parties should recuse themselves from the discussion leading up to the vote and return after the decision has been made.

For examples of policies that you can adapt to your organization:

Hurwitz & Associates

Minnesota Attorney General, Charities Division

American Institute of CPAs