"As a matter of recommended practice," page 10 of the final report of the Panel on the Nonprofit Sector states, "charitable organizations should adopt and enforce a conflict of interest policy consistent with ... state laws and organizational needs." If the results of the December 2005 Question of the Month are representative, then the sector is well on its way to achieving that goal.
The December Question of the Month asked, "Does your organization or company have a conflict of interest policy?" An impressive 80 percent of participants replied, "Yes." (Some 97 percent of all respondents were from nonprofits.)
Although having a conflict of interest policy appears to be the norm, several people commented that their organizations' statements were new. "Auditors put it as a point of notice in the management letter for the 2004 audit and we promptly drafted one in 2005," stated Larry Smith of the Carolinas Center for Hospice & End of Life Care. Monica Salgat reported that disAbility Connections, Inc.'s policy went into effect in September 2005, and Lee Murray noted that Housing Resources Group would implement its new policy on January 1, 2006.
Nonprofits that already had policies revamped theirs in 2005. "We revised ours this year," noted Barbara Jett of the Lyric Theatre of OK. Joi Brown wrote that the Community Foundation of the Central Blue Ridge had "always had a conflict of interest policy," but that in 2005, "we dramatically strengthened and clarified our policy. We believe it is extremely important to be completely above reproach."
Some policies applied only to board members. Others encompassed everyone associated with a particular nonprofit, including volunteers. A number of participants said that their respective organizations require persons covered by the policies to sign them annually.
Although details varied from organization to organization, numerous participants commented on the importance of having such a policy. "How could you run a business in this day and age and NOT have a conflict of interest policy?" asked Paul Miller of CANI. Vic Smith of the Denver Metro Chamber of Commerce and Elizabeth Lively of the Midwest Health Foundation each described a conflict of interest policy as "essential" for nonprofit organizations.
Susan A. Shear of Reliance House, Inc. spoke for many when she observed, "It's an excellent policy; all nonprofits should have one in place. It will only lend credibility to our industry and give our donors and funders one more assurance that their dollars are not being misused."
Resources for Developing a Conflict of Interest PolicyThe following sources may be useful if your organization is developing or revising a conflict of interest policy:
- Instructions for completing IRS Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Appendix A contains a sample conflict of interest policy.
- Council on Foundations, "Conflict of Interest: IRS Sample Policy Annotated for Grantmakers".
- Maryland Nonprofits, "Standards for Excellence: Guiding Principles" (scroll down to "Standards for Excellence: Conflict of Interest").
- Minnesota Attorney General's Office, "Conflict of Interest Policy".
- National Council of Nonprofit Associations (NCNA), "Conflict of Interest Policy and Disclosure Form" (under "Sample Policies").
Lauren Nicole Klapper-Lehman and Suzanne E. Coffman, January 2006
© 2006, Philanthropic Research, Inc. (GuideStar)
Lauren Klapper-Lehman is an undergraduate at the College of William and Mary. She was a communications intern at GuideStar during the fall 2005 semester. Suzanne Coffman is GuideStar's director of communications and editor of the Newsletter.