Nonprofit Conflict of Interest Policy - Template Form Pro · US-law
✓ Valid in United States · drafted to comply with local law
Create your Nonprofit Conflict of Interest Policy - Template Form for use in United States. Answer a few plain-English questions and the document fills in automatically as you go — then download it in Word and PDF, ready to sign or share. This version has been professionally rewritten to comply with local law.
- Answer 15 simple questions — the document fills in as you go
- Live preview: watch your document update in real time
- Download as Word (.docx) and PDF
- Edit your answers and re-download anytime
Fill in the details
0/15Type below — the document on the right updates as you go.
CONFLICT OF INTEREST POLICY
Name of Organization: ________ (the "Organization")
A nonprofit corporation organized under the laws of the State of ________
ARTICLE 1 — INTRODUCTION
§ 1.1. The Organization is committed to observing the highest standards of ethical conduct in the management of its affairs and expects its directors, officers, employees, and other representatives to do the same. The Board of Directors (the "Board," the "Directors," or singularly, a "Director") of the Organization has adopted this Conflict of Interest Policy (the "Policy") to ensure that the Organization remains faithful to its charitable purpose and complies with applicable federal and state law.
§ 1.2. This Policy is adopted in furtherance of, and is intended to be consistent with, Section 4958 of the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations promulgated thereunder governing excess benefit transactions, the requirements applicable to organizations described in Section 501(c)(3) of the Code, and the nonprofit corporation law of the State of ________ (the "State").
ARTICLE 2 — PURPOSE
§ 2.1. The purpose of this Policy is to protect the Organization's interest when it is contemplating entering into a transaction or arrangement that might benefit the private interest of a director, officer, or other senior decision-maker of the Organization, or that might result in a possible excess benefit transaction within the meaning of Section 4958 of the Code.
§ 2.2. This Policy is also intended to ensure that the Organization continues to operate exclusively in furtherance of its tax-exempt purpose and in a manner that does not jeopardize its tax-exempt status under Section 501(c)(3) of the Code.
§ 2.3. This Policy is intended to supplement, but not to replace, any applicable state and federal laws governing conflicts of interest applicable to nonprofit and charitable organizations.
ARTICLE 3 — DUTY OF LOYALTY
§ 3.1. Directors, officers, governing committee members, and certain members of senior management, including those acting as principals for the Organization (collectively, "Interested Parties," or singularly, an "Interested Party"), owe the Organization a fiduciary duty of loyalty.
§ 3.2. Such duty of loyalty requires each Interested Party to avoid using their position with the Organization for personal advantage or gain. Each Interested Party must also refrain from any action, including voting where applicable, in which the Interested Party's personal interest, including any financial interest, could conflict with the interests of the Organization.
ARTICLE 4 — DEFINITIONS
§ 4.2. The following examples of potential conflicts of interest are illustrative but non-exhaustive:
a. when an Interested Party stands to benefit financially through a transaction in which the Organization may be involved;
b. when an Interested Party has an ownership or investment interest in another entity with which the Organization intends to transact or do business;
c. when an Interested Party enters into or maintains an agreement to be compensated by the Organization (provided that, for purposes of this clause, Directors who are also employees of the Organization may have a conflict in certain situations, such as voting on their own compensation);
d. when an Interested Party joins or creates a competing organization;
e. when an Interested Party, or an entity in which an Interested Party has an ownership interest, competes with the Organization in a purchase, sale, contract bid, or other interest or service;
f. when an Interested Party utilizes confidential information belonging to the Organization for any purpose unrelated to the Interested Party's work for the Organization, such as personal profit or for the benefit of another entity;
g. when an Interested Party uses the Organization's resources for any competing interest; or
h. when an Interested Party participates in decision-making or negotiations on behalf of the Organization in a matter in which the Interested Party, a person related to the Interested Party, or an entity in which the Interested Party has an ownership interest is also involved.
§ 4.3. Potential Conflict of Interest. A potential conflict of interest occurs when an Interested Party recognizes that a conflict of interest may arise if ameliorating action is not taken. Potential conflicts of interest do not always ripen into actual conflicts of interest. An Interested Party with a potential conflict of interest must follow the procedures set forth in Article 5 below. Because the Organization seeks to avoid even the appearance of impropriety, all potential conflicts of interest must be treated with due care and disclosed in accordance with the procedures set forth in this Policy.
§ 4.4. Financial Interest. A person has a financial interest if the person has, directly or indirectly, through business, investment, or family: (a) an ownership or investment interest in any entity with which the Organization has a transaction or arrangement; (b) a compensation arrangement with the Organization or with any entity or individual with which the Organization has a transaction or arrangement; or (c) a potential ownership or investment interest in, or compensation arrangement with, any entity or individual with which the Organization is negotiating a transaction or arrangement.
ARTICLE 5 — CONFLICT DISCLOSURE
§ 5.1. Duty to Disclose. In connection with any actual or potential conflict of interest, an Interested Party must disclose the existence of the conflict or potential conflict and all material facts related to it to the Board or to any committee charged with reviewing such matters.
§ 5.2. Timing of Disclosure. Disclosure must be made as soon as is reasonably practicable after the Interested Party becomes aware of the actual or potential conflict of interest, and in any event prior to the Board or committee taking any action on the matter giving rise to the conflict.
§ 5.3. Manner of Disclosure. Disclosure should be made in writing where practicable and should include a description of the nature of the conflict or potential conflict, the parties and entities involved, and the financial or personal interest at issue.
§ 5.4. Ongoing Disclosure. An Interested Party must promptly update any prior disclosure upon the occurrence of any material change to the circumstances giving rise to the conflict or potential conflict.
§ 5.5. Confidentiality. All disclosures made under this Policy shall be treated as confidential and shall be shared only with those individuals who have a legitimate need to review the matter in order to evaluate and address the conflict.
§ 5.6. Recusal. After making the required disclosure, the Interested Party shall leave the meeting during any discussion of, and shall not participate in any vote on, the matter giving rise to the conflict or potential conflict; provided, however, that the Interested Party may, if requested, provide factual information to the Board or committee prior to leaving the meeting.
§ 5.7. Good Faith Disclosure. Interested Parties are encouraged to disclose any matter that may reasonably be perceived as a conflict of interest, even if the Interested Party is uncertain whether an actual conflict exists. No Interested Party shall be penalized for disclosing a potential conflict of interest in good faith.
§ 5.8. Determination of Conflict. After disclosure has been made and the Interested Party has recused themselves, the Board or committee shall determine, by majority vote of the disinterested Directors, whether a conflict of interest exists, and shall proceed in accordance with the procedures set forth in Article 6 below.
ARTICLE 6 — CONFLICT PROCEDURES
§ 6.1. Disclosure. Interested Parties shall disclose potential conflicts of interest to the Board as soon as is practicable after becoming aware of the potential conflict, as described in Article 5. Interested Parties are also required to complete an annual disclosure form describing any ongoing interest that may create a conflict.
§ 6.2. Evaluation. After the Board receives any potential conflict or conflict disclosure from an Interested Party, the Board may request follow-up discussions or additional information. The Board shall then determine whether an actual conflict exists and whether it involves a financial interest, material competition, self-dealing, or any other type of conflict. The Interested Party shall be screened from all discussions and voting regarding the conflict. The Board may determine the matter by vote or may refer it to a specialized committee for additional investigation. Evaluation of conflicts shall be made on a case-by-case basis.
§ 6.3. Factors for Consideration. The Board may consider any factor it deems relevant in determining whether a conflict exists, including, without limitation:
a. whether the Interested Party's financial interest is minimal in relation to the transaction;
b. the degree of the Interested Party's involvement with the other entity participating in any transaction with the Organization; and
c. the degree to which the Interested Party could personally benefit from the transaction or relationship at issue.
§ 6.5. Determination of Self-Dealing. If the Board or committee determines that an actual conflict exists, it shall also determine whether a self-dealing transaction is at issue. If so, the entirety of the Board must vote on whether to approve the transaction, and the transaction must be approved by a vote greater than that required for other Board actions. Accordingly, if the Board generally approves actions by simple majority, a greater vote shall be required to approve a self-dealing transaction. Approval of reasonable compensation for a Director acting as a director or officer shall not be considered a self-dealing transaction.
§ 6.6. Determination of Transactional Conflict. If the Board or committee determines that an actual conflict exists involving a financial transaction or arrangement that does not constitute self-dealing, the Board shall consider alternative arrangements that would not present a conflict. If the Board determines that an appropriate alternative exists, the Board shall pursue that alternative. If no appropriate alternative exists, the Board shall determine whether the originally proposed course of action is in the Organization's best interest and shall take a vote on the matter, requiring a majority for approval.
§ 6.7. Determination of Other Conflict. In any other scenario in which the Board or committee determines that a conflict exists, the Board or committee shall recommend a reasonable and appropriate course of action to protect the Organization, and the governing body shall discuss the matter and determine how best to proceed.
ARTICLE 7 — POLICY VIOLATIONS
§ 7.1. If the Board has reasonable cause to believe that an Interested Party has failed to disclose any actual or potential conflict of interest, the Board shall first inform the Interested Party of the basis for such belief and afford the Interested Party an opportunity to explain the alleged failure to disclose.
§ 7.2. If, after hearing the Interested Party's response and after making such further investigation as may be warranted under the circumstances, the Board determines that the Interested Party has in fact failed to disclose an actual or potential conflict of interest, the Board may take appropriate corrective and disciplinary action, up to and including removal from office or termination, to the extent permitted by the Organization's governing documents and applicable law.
ARTICLE 8 — RECORDS OF PROCEEDINGS
§ 8.1. The Board or relevant committee shall retain in the Organization's minutes all records of discussions and votes regarding any conflict or potential conflict presented. Such records must specifically include:
a. the name of the Interested Party or Parties;
b. the manner in which the conflict was brought to the attention of the Board (whether disclosed by the Interested Party or otherwise discovered);
c. the nature of the conflict or potential conflict, including any financial interest involved;
d. the Board's or committee's actions regarding fact-finding and investigation of the conflict or potential conflict;
e. the Board's or committee's discussions, decision, and the vote taken; and
f. the names of all persons present for any discussion or vote.
ARTICLE 9 — ABSTENTION FROM VOTES ON COMPENSATION
§ 9.1. No member of the Board who receives compensation, directly or indirectly, from the Organization for services may vote on matters pertaining to that member's own compensation.
§ 9.2. No voting member of any committee whose jurisdiction includes compensation matters and who receives compensation, directly or indirectly, from the Organization for services may vote on matters pertaining to that member's own compensation.
§ 9.3. Notwithstanding §§ 9.1 and 9.2, any such person may provide information to the Board or any committee regarding compensation.
ARTICLE 10 — ANNUAL STATEMENTS
§ 10.1. Each person required to abide by this Policy must sign a statement each year affirming that the person: (a) has received a copy of this Policy; (b) has read and understands this Policy; (c) has agreed to comply with this Policy; and (d) understands that the Organization is a charitable organization and that, in order to maintain its federal tax exemption, it must engage primarily in activities that accomplish one or more of its tax-exempt purposes.
§ 10.2. Any person who believes they have an ongoing relationship or interest that may present a conflict of interest must also make an annual disclosure, as described above, and is responsible for updating such disclosure upon the occurrence of any material change.
ARTICLE 11 — PERIODIC REVIEWS
§ 11.1. To ensure that the Organization operates in a manner consistent with its charitable purposes and does not engage in activities that could jeopardize its tax-exempt status, the Board shall conduct periodic reviews, which shall include at a minimum:
a. whether compensation and benefit arrangements are reasonable, based on competent survey information, and the result of arm's-length bargaining;
b. whether partnerships, joint ventures, and arrangements with management organizations and similar transactional arrangements conform to the Organization's written policies, are properly recorded, reflect reasonable investment or payments for goods and services, further the Organization's charitable purposes, and do not result in inurement, impermissible private benefit, or an excess benefit transaction; and
c. a review of the compensation of the President and Chief Financial Officer of the Organization.
§ 11.2. When conducting the periodic reviews provided for in § 11.1, the Organization may, but need not, use outside advisors. The use of outside advisors shall not relieve the Board of its responsibility for ensuring that the periodic reviews are conducted.
ARTICLE 12 — GOVERNING LAW
§ 12.1. This Policy shall be governed by and construed in accordance with the laws of the State of ________ and applicable federal law, without regard to its conflict of laws principles. This Policy supplements, and does not replace, any applicable state and federal laws governing conflicts of interest applicable to nonprofit and charitable organizations.
CERTIFICATION
The undersigned, ________, as President of ________, and ________, as Secretary, hereby certify that this is a true and correct copy of the Organization's Conflict of Interest Policy and that this Policy was duly adopted by the Board of Directors on ________.
President Signature: __________________________________
Printed Name: ________
Date: ________
Secretary Signature: __________________________________
Printed Name: ________
Date: ________
ANNUAL CONFLICT OF INTEREST DISCLOSURE FORM
The undersigned, as ________ (director, officer, manager, principal, committee member, or key employee) of ________, hereby acknowledges that:
1. he or she has received a copy of the Organization's Conflict of Interest Policy;
2. he or she has read and understands the Policy;
3. he or she has agreed to comply with the Policy;
4. he or she understands that the maintenance of the Organization's charitable activities and federal tax exemption depends upon its engaging primarily in activities that support its charitable purpose; and
5. the following ongoing relationships and interests may present a conflict of interest (please describe; if not applicable, write "N/A" or leave blank):
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Signature: ________________________________
Name: ________
Title: ________
Date: ________
Fields you complete are inserted into the document live. This template is general guidance only — not legal advice.