How to Prevent Conflicts of Interest in Your Nonprofit Organization
The board of your nonprofit organization probably consists of well-intentioned individuals who volunteer their time and talent to your organization's mission and governance. Most people who make a commitment to a nonprofit organization do not do so for the purpose of personal gain. Occasionally, however, board members may find themselves making decisions for your organization that could benefit themselves, their business associates, friends, or family members. A situation where personal and organizational benefits overlap creates a potential conflict of interest.
Your board and staff can establish an environment that helps to prevent conflicts of interest. In the ideal scenario, a board member who is teetering on impropriety will be reined in by a brief informal comment. Your organization can also institute a few simple safeguards in the form of board policies and practices.
Create a Conflict of Interest Policy
One common way to prevent conflicts of interest is to create a conflict of interest policy. This policy is agreed upon by all board members when they join the organization. Conflicts of interest are often (but not always) financial in nature. An example of a nonfinancial conflict of interest might be the selection of a board member's son or daughter as an unpaid intern over more qualified candidates.
Depending on the nature of your organization's mission, your conflict of interest policy may be relatively simple or it may require board members to provide detailed financial information with potential conflicts. Here is an example of a conflict of interest policy excerpted from BoardCafe.org:
The standard of behavior at (your nonprofit here) is that all staff, volunteers, and board members scrupulously avoid any conflict of interest between (your organization) on one hand, and personal, professional, and business interests on the other. This includes avoiding actual conflicts of interest as well as perceptions of conflicts of interest.
I understand that the purposes of this policy are: to protect the integrity of (this organization's) decision-making process, to enable our constituencies to have confidence in our integrity, and to protect the integrity and reputation of volunteers, staff and board members.
Upon or before election, hiring or appointment, I will make a full, written disclosure of interests, relationships, and holdings that could potentially result in a conflict of interest. This written disclosure will be kept on file and I will update it as appropriate.
In the course of meetings or activities, I will disclose any interests in a transaction or decision where I (including my business or other nonprofit affiliation), my family and/or my significant other, employer, or close associates will receive a benefit or gain. After disclosure, I understand that I will be asked to leave the room for the discussion and will not be permitted to vote on the question.
I understand that this policy is meant to be a supplement to good judgment, and I will respect its spirit as well as its wording.
Signed: __________________ Date: ____________________
Establish Disclosure as a Policy
Another solution to conflicts of interest is to establish disclosure as a regular practice. For instance, a developer who also serves on your preservation advocacy board may have a financial stake in a particular property of interest. This member must identify the conflict and remove him/herself from discussions of that property. This removal must be entered into your meeting minutes.
Seek Competitive Bids
Your organization should also follow a standard in your purchasing practices. If your organization is considering a major purchase that may benefit a board member financially, you should seek written (not verbal) competitive bids from at least three vendors. This practice will ensure that all prices and products are comparable and competitive.
Learn More
Historic Preservation Advocacy Guide
Find more how-to articles about historic preservation advocacy.
Nonprofit Management Education Center
You can learn more about nonprofit operations from the Nonprofit Management Education Center offered by the Center for Community and Economic Development, which is part of the University of Wisconsin Division of Cooperative Extension. This resource includes a library of articles and an Organizational Assessment Tool.