Avoiding Conflicts-of-Interest

by Amanda Meko, CPA | Partner, Team Leader of the Not-for-Profit Services Group

When the Form 990 was redesigned in 2008, not-for-profit organizations rushed to get a number of policies in place so they could “check the box”. As a result, most organizations have a conflict of interest policy. However, organizations may not be regularly following or enforcing their policies. Or the policy drafted may not address all areas it should. Here’s a quick checklist to gauge whether your not-for-profit is doing what it takes to avoid conflicts of interest:

• Do you have a conflict-of-interest policy in place that specifies what constitutes a conflict and lists exceptions? Is this policy reviewed regularly?
• Do you require board officers, directors, trustees and key employees to annually pledge to disclose interests, relationships and financial holdings that could result in a conflict of interest? Do they sign a statement once a year that discloses any interests that could give rise to conflict?
• Do they understand that they must speak up if issues arise that could pose a possible conflict?
• Do you provide training in conflicts of interest? For example, do you include it in your annual board retreat?
• Do you have procedures in place that outline the steps you’ll take when a possible conflict of interest arises to determine whether the transaction is reasonable and in the best interest of your organization? Are outside experts consulted when appropriate?
• In regard to the transaction in question, is the individual with the possible conflict asked to make a presentation of only the facts, and then to remove himself or herself from the discussion, so as not to influence other board members or employees?
• And is the individual required to abstain from voting on these issues?
• Do you keep minutes of the meetings where the conflict of interest is discussed, noting those members present and voting, and indicating the final decision reached?
• Do you put projects out for bid with identical specifications to a number of vendors?
• Do you supply a written contract to each vendor that details the service the company will provide, specific deliverables, cost estimates and a time frame for delivering all materials or services?

Board officers, directors, trustees and key employees must avoid conflicts of interest, because it’s their duty to do so. Any direct or indirect financial interest in a transaction or arrangement that might benefit the individual personally could result in the loss of your organization’s tax-exempt status and its reputation.

Contact information:

Amanda Meko, CPA | Partner, Team Leader of the Not-for-Profit Services Group
317.260.4436 | ameko@greenwaltcpas.com