Nonprofit Conflict of Interest Policy - Template Form

Nonprofit Conflict of Interest Policy

Name of Organization: ________ (the "Organization")

Article 1 - INTRODUCTION:

The Organization is committed to observing the highest standards of ethical conduct in its operations and expects its directors, officers, and employees to do the same. The Board of Directors (the "Board," "Directors," or singularly, "Director") of the Organization has adopted this Nonprofit Conflict of Interest Policy (the "Policy") to ensure that the Organization remains committed to its charitable purpose.

Article 2 - PURPOSE:

The purpose of this Policy is to protect the Organization's interest when it is considering a transaction that might privately benefit a director, officer, or other senior decision-maker, as well as to avoid any excess benefit transactions.

This Policy is also intended to ensure that the Organization continues to operate in accordance with its tax-exempt purpose.

Article 3 - DUTY OF LOYALTY:

Directors, officers, governing committee members, and certain senior management, including those acting as principals for the Organization (referred to as "Interested Parties" or singularly, "Interested Party"), owe the Organization a duty of loyalty. Such duty of loyalty requires Interested Parties to avoid using their position with the Organization for personal advantage or gain. Interested Parties must also avoid any action, including voting, if applicable, where the Interested Party's personal interest, including financial interest, could conflict with the interests of the Organization.

Article 4 - DEFINITIONS:

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The following examples of potential conflicts of interest are to be considered illustrative, but non-exhaustive:

a. When an Interested Party stands to personally benefit financially through a transaction the Organization may be involved with;

b. When an Interested Party has an ownership interest, including through investment, in another entity with which the Organization intends to transact or do business;

c. When an Interested Party enters or maintains an agreement to be compensated by the Organization (for the purposes of this clause, Directors who are also employees of the Organization may have a conflict in certain situations, such as voting on 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 reason that is not related 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 for 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.

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Article 5 - CONFLICT DISCLOSURE:

a. 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.

b. 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.

c. 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.

d. 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.

e. 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.

f. 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, although the Interested Party may, if requested, provide factual information to the Board or committee prior to leaving.

g. 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 in good faith.

h. Determination of Conflict. The Board or committee, after disclosure has been made and the Interested Party has recused themselves, 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 below.

Article 6 - CONFLICT PROCEDURES:

a. Interested Parties shall disclosure potential conflicts of interest to the Board as soon as is practicable after becoming aware of the potential conflict, as described above. Interested Parties are also required to complete an annual disclosure form to describe any ongoing interest that may create a conflict.

b. 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. At this point, the Board will decide whether an actual conflict exists and whether it involves financial interest, material competition, self-dealing, or any other type of conflict. The Interested Party shall be screened from any discussions or voting regarding the conflict. The Board may fully determine the issue on a vote or may refer it to a specialized committee for additional investigation. Evaluation of conflicts is made on a case-by-case basis.

c. Factors for consideration. The Board may consider any factor it wishes in determining whether a conflict exists. Some of the factors for consideration may include:

- Whether the Interested Party's financial interest is minimal, in relation to the transaction

- How involved the Interested Party is with the other entity involved in any transaction with the Organization

- The degree to which the Interested Party could personally benefit from the transaction or relationship at issue

d. Determination of self-dealing. If the Board or committee determines that an actual conflict exists, the Board or committee must 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 greater vote than other Board actions. In other words, if the Board generally approves actions via a simple majority, a greater vote than this is needed to approve a self-dealing transaction. Approval of compensation for a director acting as director or officer shall not be considered a self-dealing transaction.

e. Determination of transactional conflict. If the Board or committee determines that an actual conflict exists involving a financial transaction or arrangement, but it is not self-dealing, the Board will consider alternative scenarios that would not present a conflict. If the Board determines an appropriate alternative exists, the Board shall pursue that avenue. If an appropriate alternative does not exist, the Board shall determine whether the original proposed course of action is in the Organization's best interest and take a vote on such issue, in which a majority is required.

f. Determination of other conflict. In any other scenario in which the Board or committee determines a conflict exists, the Board or committee shall recommend a reasonable and appropriate course of action to protect the Organization. The governing body shall discuss the issue and determine how best to proceed forward.

Article 7 - POLICY VIOLATIONS:

If an Interested Party fails to disclose any potential or actual conflict, the Board shall first request an explanation from the Interested Party. The Board may then determine appropriate action, including disciplinary action if required.

Article 8 - RECORDS:

The Board or relevant committee shall retain all records of discussions and votes regarding any presented conflict or potential conflict. The records must specifically include:

a. The name of the Interested Party or Parties;

b. How the conflict was brought to the attention of the Board (whether disclosed or found out);

c. The nature of the possible conflict, including financial interest involved;

d. The Board or committee's actions regarding fact-finding and investigation on the conflict or potential conflict;

e. The Board or committee's discussions, decision, and vote;

f. The names of all parties present for any discussion or votes.

Article 9 - ABSTENTION FROM VOTES ON COMPENSATION:

No Board member who is compensated for their services towards the Organization may vote on their own compensation.

Article 10 - ANNUAL STATEMENTS:

All individuals required to abide by this Policy must sign a statement each year attesting that they have received a copy of the Policy, they read and understand the Policy, they agree to comply with the Policy, and they understand the Organization's maintenance of its charitable activities and federal tax exemption depends on its undertaking primarily of activities that support its charitable purpose.

Any individual that believes they have ongoing relationships or interests that may present a conflict 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 - REVIEWS:

The Organization will periodically review certain subjects to maintain alignment with its charitable purposes. The review shall include at least:

a. Compensation and benefit arrangements, to ensure they are reasonable and formalized through arm's length bargaining;

b. Transactional arrangements, including partnerships or joint ventures, to ensure they are in line with the Organization's policies and do not confer a private benefit on any party or result in an excess benefit transaction; and

c. Compensation reviews of the President and Chief Financial Officer of the Organization.

The Organization may use outside advisors to conduct the above reviews, but responsibility for the reviews ultimately lies with the Board.

This Policy is intended to supplement but not replace any state and federal laws governing conflicts of interest applicable to nonprofit and charitable organizations.

Certification: ________, as President of ________ and ________, as Secretary, do certify this is a true and correct copy of the Organization's Conflict of Interest Policy and that this Policy was adopted by the Board on ________.

President Signature: __________________________________

Secretary Signature: __________________________________

ANNUAL CONFLICT OF INTEREST FORM

The undersigned, as _______________________________ (director, officer position, manager, principal, committee member, or key employee) of ________ acknowledges:

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 the Organization's maintenance of its charitable activities and federal tax exemption depends on its undertaking primarily of activities that support its charitable purpose; and

5. the following on-going relationships and interests may present a conflict of interest (please describe - if not applicable write "N/A" or leave blank):

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Signature: ________________________________

Name: ___________________________________

Title: ____________________________________

Date: ____________________________________