Conflict of interest policies are created by businesses and non-profits to make sure board members, employees, and managers do not seek personal gain while working for the organization.A board member with a side business could offer their services to the organization.Is the board member hiring themselves because it is in the organization's best interest or in their own best interests?A conflict of interest statement is required in most contracts and company policies.A conflict of interest policy should explain what qualifies as a conflict and the steps your organization will take to analyze it.Conflict disclosure forms should be created for employees.
Step 1: Look for sample policies.
Non-profits might lose their non-profit status if they don't have a conflict of interest policy.The sample policy was published by the IRS.You can still find copies of the IRS sample on the Internet.As you draft your own, you should find one and use it as a guide.
Step 2: The policy has a purpose.
The purpose for adopting the policy should be explained before you get to the details.A conflict of interest policy is usually adopted to maintain integrity and protect the interests of the organization.It is vital that the public be confident of our commitment and our organization strives to maintain the highest standards of integrity.Any appearance of a conflict should be avoided.The purpose of this policy is to protect the Organization's tax-exempt status when contemplating a transaction or arrangement that could benefit an officer.This policy is not intended to replace state and federal laws governing conflict of interest in non-profit organizations.
Step 3: Who has a duty to reveal?
It's a good idea to be clear about who is covered by the policy.You can write disclosure policies for your board of directors and employees.This person may be called an "interested person" throughout the policy.You could define an interested person in your definition section.
Step 4: They should include definitions.
There isn't any doubt as to what you are referring to, you need to clearly define certain terms that are used in your document.Any principal officer, director, or member of a committee with powers delegated by a governing board, who has a direct or indirect financial interest, as defined below, is an interested person.A person has a Financial Interest if they have, directly or indirectly, any potential or actual ownership, compensation arrangement, or investment in any entity with which the Organization has transactions or arrangements.You can define it more broadly.
Step 5: The duty to disclose needs to be created.
Conflicts of interest have a duty to be disclosed by interested persons.They have to tell who they have a potential conflict with.A sample language reads: "An Interested Person shall disclose the existence of a Financial Interest and all material facts to the directors."In an effort to aid the disclosure, each member shall complete a conflict-of-interest form as circumstances warrant, and no less frequently than annually.Someone might want to report a conflict.
Step 6: Discuss how a disclosure statement should be filed.
An annual disclosure statement should be filed by covered individuals.Any conflict that arises during the year should be disclosed.Give them a deadline.Each individual covered by this policy must file an annual disclosure, which the Executive Vice President will review.As soon as any covered individual learns of a potential conflict, they must promptly disclose the circumstances to the EVP within 30 days and disqualify him or herself until the matter is reviewed.
Step 7: If there is a conflict, describe how the organization decides.
The conflict is only one part of the battle.You have to say who will decide if there is a conflict.If a board member has a conflict, they can make a presentation to the other board members.The board votes on whether there is a conflict of interest after they leave.If an employee reports a conflict, the President or Vice President can review to see if the conflict is significant.They can refer the matter to the Board of Directors if they think there is a conflict.They can ask the employee to stop working.
Step 8: There are steps for managing a conflict.
When there is a conflict, your organization must protect itself.The board of a non-profit should determine if they can get a better arrangement or transaction.The disinterested directors will decide if the transaction or arrangement is fair and reasonable if they can't.A disinterest person can be appointed by the Chairperson of the Board.
Step 9: The penalties for failing to comply should be set.
A potential conflict might not be disclosed by an employee or board member.You may have to punish them.The board has the power to discipline the person.If the committee has reason to believe that an individual failed to disclose potential or actual conflicts, then it will inform the member.The member has a chance to explain.The committee will take corrective action if it still believes there is a conflict.
Step 10: There are craft policies for determining compensation.
Conflicts arise when you are setting salaries.When salary discussions come up, you need clear policies about who can vote.The governing board members who receive direct or indirect compensation cannot vote on matters related to their compensation.Compensation matters can't be voted on by members of the committee.Voting members who receive direct or indirect compensation can give information to any committee.
Step 11: The board's proceedings should be recorded.
You have to document the board's response to potential conflicts.A requirement that the minutes contain the name of the person with the disclosed interest, the nature of that interest and what action was taken to determine whether an actual conflict existed is included in your policy.The board decided if a conflict existed.A requirement that the minutes reflect the names of anyone present to discuss or vote on a transaction or arrangement, the content of the discussion, and the proposed alternatives.Also record the votes that were cast.
Step 12: You will periodically review your policy.
Non-profits are required by the IRS to periodically review their conflict of interest policy.You should explain when and how you will do it.Whether your compensation arrangements are the result of arm's-length bargaining, reasonable, and based on credible survey information should be covered in your periodic review.
Step 13: Further guidance on public activities is provided.
Employees should clarify if they are speaking for the organization or on their own behalf when speaking to the public.This will make it easier for people to know where the organization stands on issues.In order to avoid confusion, members who address the public should clarify if they are speaking as private individuals or speaking for the organization.Sometimes the organization is asked to speak publicly on issues.The Executive Vice President will review the requests in the Administrative Office.The President will be forwarded the information if appropriate.
Step 14: Show the lawyer your policy.
There is a conflict of interest policy.Different information might be needed by your organization.You should talk to an attorney who knows your organization.You can get a referral by contacting your local or state bar association.You can call and schedule a consultation.Ask how much the lawyer charges.
Step 15: Sample disclosure forms can be found.
Potential conflicts should be disclosed annually by affected employees and board members.They still have a duty to disclose any conflicts that arise throughout the year.You can use the form as a template for everyone.If they have a form you can look at, ask other businesses.It can be used as a guide when drafting.
Step 16: You should format your document.
Use 8.5x11 paper and set one-inch margins on all sides.Choose a style and size that is easy to read.Arial or Times 12 point is acceptable.It's possible to title your form "Conflict of Interest Disclosure Form."
Step 17: Discuss the purpose of the form.
You can remind the person of the importance of disclosing potential conflicts of interest by providing a paragraph of information.The reader won't miss this information if it's right at the top.A potential or actual conflict of interest arises when your obligations are likely to be compromised by other material interests or relationships, especially when those interests are not disclosed.Any business, personal, or volunteer affiliations that could give rise to real or apparent conflicts should be disclosed.
Step 18: There is space for identifying information.
The person's name, position and date should be blank.
Step 19: You can ask a series of questions.
It is possible to set up your form as a questionnaire.You can ask the person if they want to answer the questions.Do you serve as an officer of an organization that has a relationship or does business with us?Do you have any experience as a director of a business that our organization invests in?Does anyone in your family have a relationship with our business?Family relationships include: spouse, parent, child, grandparent, grandchild, great-grandchild, and siblings.A family relationship includes the spouse of a child, grandchild, great-grandchild, or sibling.Have you ever participated in a compensation relationship, employment agreement, investment opportunity, or other arrangement with a third-party vendor that could personally benefit you?Have you ever received any direct or indirect loans, gifts, payments, discounts, fees, or free services from any organization or person involved in a transaction with us?Do you own a business that we do business with?Voting power, beneficial interest in a trust, and profits interest are all related to ownership.
Step 20: A signature block should be inserted.
Line up the person's signature, printed name, and date.You should keep the form for at least a year after they sign it.You should not share this information with other people.You should keep the form as confidential as possible.