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A conflict of interest policy protects the organization by setting out how directors disclose competing interests and step back from decisions that affect them. The IRS Form 990 asks whether you have one and whether you enforce it, so this is both good governance and a question you'll answer publicly every year.
Form 990, Part VI asks whether the organization has a written conflict-of-interest policy, whether officers and directors are required to disclose annually, and whether the organization regularly monitors and enforces compliance. "Yes" answers signal a well-run board to funders and regulators. Beyond the form, the policy is what lets the board make a decision involving an insider defensibly — by documenting that the conflicted person disclosed, recused, and did not vote.
The mechanism is simple and should be routine: directors disclose known conflicts (and update as they arise), a conflicted director leaves the room for the discussion and vote on that matter, and the minutes record the disclosure and recusal. Collect a signed disclosure statement from every director and officer once a year, and keep the signed statements with the board records.
The template below follows the structure of the IRS sample policy, but conflict rules interact with your bylaws and state nonprofit law. Have counsel review your final version, and align the definitions with any existing bylaw provisions.
CONFLICT OF INTEREST POLICY [Organization name] ARTICLE I — PURPOSE This policy protects [Organization name]'s interest when it contemplates a transaction or arrangement that might benefit the private interest of an officer or director, and supplements applicable state and federal law. ARTICLE II — DEFINITIONS "Interested person" — any director, officer, or member of a committee with board-delegated powers who has a direct or indirect financial interest. "Financial interest" — an actual or potential ownership, investment, or compensation interest in any entity or individual the organization deals with. ARTICLE III — PROCEDURES 1. Duty to disclose. An interested person must disclose the existence and nature of any financial interest to the directors considering the matter. 2. Recusal. After disclosure and any questions, the interested person leaves the meeting during the discussion of, and vote on, the transaction. 3. Determining whether a conflict exists. The remaining board members decide. 4. Addressing the conflict. The board determines whether a more advantageous arrangement is reasonably attainable, and whether the transaction is fair and in the organization's best interest, before deciding by majority vote. ARTICLE IV — RECORDS The minutes shall record the disclosure, the recusal, and the board's decision, including who was present for discussion and the vote. ARTICLE V — ANNUAL STATEMENTS Each director, officer, and covered committee member signs a statement annually affirming they have received, read, understood, and agree to comply with this policy. ANNUAL DISCLOSURE STATEMENT Name: ______________________ Role: ______________________ [ ] I have no conflicts to disclose. [ ] I disclose the following interest(s): ______________________________ Signature: ______________________ Date: ____________ Sample language only — have legal counsel review before adoption.
This is sample language for general information, not legal advice. Adapt it to your bylaws and state law, and have counsel review your final version before adoption.
Nonprofit Liaison builds the agenda, assembles the packet, and drafts the minutes for you — so the template becomes the workflow.