As a nonprofit organization, your board officers, directors, trustees and key employees have a duty to avoid conflicts of interest. 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.

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?

If you answered “no” to any of these questions, Doeren Mayhew’s dedicated Governmental and Non-Profit Group can help you make sure that you have an adequate conflict-of-interest policy in place and a full set of procedures to support it. For more information, contact our Michigan CPAs, Houston CPAs or Ft. Lauderdale CPAs.