Conflict-of-interest policies are vital for nonprofit boards to maintain fairness and transparency in their operations. These policies address situations where board members or key personnel could potentially benefit personally from decisions made in their organizational roles.

A conflict of interest occurs when individuals in positions of authority – such as trustees, directors, or key employees have personal interests that could influence their decisions for the nonprofit. To successfully implement a conflict-of-interest policy, disclosure of the individual’s involvement with other entities must be provided to the nonprofit. Relationships such as involvement on other boards, employment status, or business ownership are examples of items to consider for required disclosure of nonprofit board members. These disclosures should be made and updated annually.

It is important to remember, a well-written conflict-of-interest policy does not preclude the nonprofit organization from transacting with related parties but ensures the organization (and the related party) are both transacting at “arms-length.” 

When crafting conflict-of-interest policies, the nonprofit organization should:

  • Tailor policies to fit their specific organizational structure and adhere to state laws.
  • Clearly define what constitutes a conflict of interest and who it applies to within the organization.
  • Utilize questionnaires to help identify potential conflicts.
  • Outline procedures for handling conflicts, including restrictions on involvement in decisions where a conflict exists.

Nonprofits can preserve their dedication to their mission and better support the community by implementing a conflict-of-interest policy and encouraging a transparent culture. These procedures not only protect the organization’s reputation but also foster confidence among volunteers, donors, and the public.

By handling conflicts of interest adequately, a nonprofit can ensure that every decision it makes advances objectives and supports its mission.