Conflict of Interest for a Board of Directors

When personal gain comes from organizational relationships, a conflict arises.

The IRS requires a conflict of interest policy for non-profit organizations. This helps the organization's board of directors avoid a conflict between personal agendas and non-profit goals.

Identification

A conflict exists when a board member stands to personally gain from a business relationship. For example, if a board member owns a copy machine business and the non-profit purchases or leases copiers from that business, a conflict exists.

Policy

Organizations write up a conflict of interest policy to address conflicts. The policy defines clearly what a conflict of interest is and advises board members how to avoid a conflict and what to do if a conflict arises. The policy may also require board members to annually declare their business interests and any other potential conflicts of interest.

IRS Rules

The IRS requires organizations have a conflict of interest policy. Often, the board of directors develops this policy and votes on changes. The board must submit the policy to the IRS to maintain status as a tax-exempt organization.

References

• Idealist: What Goes in a Conflict of Interest Policy
• IRS: Instructions for Form 1023