A starter draft from the existing Policy Library template. Replace [Organization name], confirm who is covered, and adapt the process with your board and appropriate advisers before adoption. Download the text to edit in your preferred document tool.
1. Purpose
[Organization name] protects its charitable mission by identifying and managing interests that could influence organizational decisions or create improper private benefit. This policy supplements applicable law and the organization's governing documents.
2. Who is covered
This policy covers directors or trustees, officers, key employees, and members of committees with board-delegated powers. It also covers other staff and volunteers designated in the policy details. Each covered person must act in the organization's interests.
3. Interests and conflicts
An interest may arise directly or indirectly through a person's business, investments, compensation, gifts, or family relationships. Examples include an ownership interest in a vendor, compensation from a party doing business with the organization, or a potential interest in a proposed transaction. An interest is not automatically a conflict; disinterested board or authorized committee members determine whether a conflict exists.
4. Prompt disclosure
Before a related decision or transaction, a covered person must disclose any actual or potential conflict and all relevant facts to the board chair or designated disinterested committee chair. If that chair is involved, disclosure goes to another disinterested board officer. Disclosures must be updated promptly when circumstances change.
5. Independent determination and recusal
The interested person may provide relevant information and answer questions. They must then leave the meeting while disinterested board or authorized committee members determine whether a conflict exists. When a conflict is found, the interested person must not participate in deliberation or voting on the affected matter or attempt to influence the decision. Recusal and the determination must be recorded.
6. Considering a transaction
Disinterested decision-makers investigate reasonable alternatives, appointing an independent person or committee when helpful. They determine whether a more advantageous arrangement without a conflict is reasonably available. If it is not, a transaction may proceed only when disinterested decision-makers find it fair, reasonable, in the organization's best interests, and for its benefit, and approve it by a majority of disinterested directors or authorized committee members, subject to applicable voting and quorum rules. The basis for the decision must be documented.
7. Compensation decisions
A voting board or committee member receiving compensation from the organization may not vote on their own compensation. A member with a conflicting interest must also recuse from deliberation and voting as described above. Disinterested decision-makers use appropriate comparison information and document their reasoning. A compensated person may provide requested factual information before leaving the deliberation.
8. Meeting records
Minutes identify the person and nature of the disclosed interest, the conflict determination, who attended the discussion and vote, recusals, alternatives considered, the decision and its basis, and the votes taken. Written disclosures and supporting materials are maintained securely under the organization's records policy, with access limited to authorized people.
9. Annual statements and ongoing monitoring
At least annually, each covered person signs a statement confirming that they received, read, understood, and agree to follow this policy, and understand the organization's charitable purpose and the need to operate primarily for its tax-exempt purposes. They submit a written disclosure of relevant personal and family interests or confirm that they have none. The policy owner collects statements and refers potential conflicts for independent review. Disclosures are revisited when relationships or proposed transactions change; annual disclosure does not replace prompt disclosure.
10. Failure to disclose
When there is reasonable cause to believe someone failed to disclose an interest, the board or authorized committee explains the concern and gives the person an opportunity to respond. Disinterested decision-makers investigate as needed and determine appropriate corrective or disciplinary action consistent with governing documents and applicable law.
11. Periodic oversight
The board or authorized committee periodically reviews compensation, partnerships, joint ventures, and other arrangements to confirm that they remain reasonable, support the charitable mission, and avoid improper private benefit. Outside advisers may assist, but the governing body retains responsibility. The policy owner coordinates policy review at the interval recorded in the policy details and whenever significant circumstances change.
Adapted in this project from the IRS Form 1023 Appendix A sample; consult the original instructions and appropriate advisers. View source